AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CABLETRON SYSTEMS, INC.
CABLETRON SYSTEM OF MICHIGAN, INC.
and
NETWORK EXPRESS, INC.
Dated as of May 21, 1996
TABLE OF CONTENTS
ARTICLE I THE MERGER 1
SECTION 1.1 The Merger 1
SECTION 1.2 Effective Time 2
SECTION 1.3 Effect of the Merger 2
SECTION 1.4 Articles of Incorporation, By-Laws 2
SECTION 1.5 Directors and Officers 3
SECTION 1.6 Effect on Capital Stock 3
SECTION 1.7 Exchange of Certificates 5
SECTION 1.8 Stock Transfer Books 7
SECTION 1.9 No Further Ownership Rights in Company
Common Stock 7
SECTION 1.10 Lost, Stolen or Destroyed Certificates 7
SECTION 1.11 Tax and Accounting Consequences 7
SECTION 1.12 Taking of Necessary Action; Further Action 7
SECTION 1.13 Material Adverse Effect 8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY 8
SECTION 2.1 Organization and Qualification; Subsidiaries 8
SECTION 2.2 Certificate of Incorporation and By-Laws 9
SECTION 2.3 Capitalization 9
SECTION 2.4 Authority Relative to this Agreement 10
SECTION 2.5 No Conflict; Required Filings and Consents 10
SECTION 2.6 Compliance, Permits 12
SECTION 2.7 SEC Filings; Financial Statements 12
SECTION 2.8 Absence of Certain Changes or Events 13
SECTION 2.9 No Undisclosed Liabilities 13
SECTION 2.10 Absence of Litigation 14
SECTION 2.11 Employee Benefit Plans, Employment Agreements 14
SECTION 2.12 Labor Matters 15
SECTION 2.13 Registration Statement, Joint Proxy
Statement/Prospectus 16
SECTION 2.14 Restrictions on Business Activities 16
SECTION 2.15 Title to Property 17
SECTION 2.16 Taxes 17
SECTION 2.17 Environmental Matters 18
SECTION 2.18 Intellectual Property 19
SECTION 2.19 Interested Party Transactions 21
SECTION 2.20 Insurance 21
SECTION 2.21 Pooling Matters 21
SECTION 2.22 Opinion of Financial Advisor 21
SECTION 2.23 Brokers 21
SECTION 2.24 Change in Control Payments 21
SECTION 2.25 Expenses 22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB 22
SECTION 3.1 Organization and Qualification; Subsidiaries 22
SECTION 3.2 Charter and By-Laws 22
SECTION 3.3 Capitalization 22
SECTION 3.4 Authority Relative to this Agreement 23
SECTION 3.5 No Conflict, Required Filings and Consents 23
SECTION 3.6 Compliance; Permits 25
SECTION 3.7 SEC Filings; Financial Statements 25
SECTION 3.8 Absence of Certain Changes or Events 26
SECTION 3.9 No Undisclosed Liabilities 26
SECTION 3.10 Absence of Litigation 26
SECTION 3.11 Employee Benefit Plans; Employment
Agreements 27
SECTION 3.12 Labor Matters 28
SECTION 3.13 Registration Statement; Joint Proxy
Statement/Prospectus 28
SECTION 3.14 Restrictions on Business Activities 28
SECTION 3.15 Title to Property 29
SECTION 3.16 Insurance 29
SECTION 3.17 Pooling Matters 29
SECTION 3.21 Brokers 30
SECTION 3.22 Interested Party Transactions 31
SECTION 3.23 Ownership of Merger Sub; No Prior Activities 31
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER 31
SECTION 4.1 Conduct of Business by the Company Pending
the Merger 31
SECTION 4.2 No Solicitation 33
SECTION 4.3 Conduct of Business by Parent Pending the
Merger 35
ARTICLE V ADDITIONAL AGREEMENTS 35
SECTION 5.1 HSR Act 35
SECTION 5.2 Joint Proxy, Statement Prospectus;
Registration Statement 35
SECTION 5.3 Stockholder Meeting 36
SECTION 5.4 Access to Information; Confidentiality 36
SECTION 5.5 Consents; Approvals 36
SECTION 5.6 Agreements with Respect to Affiliates 37
SECTION 5.7 Indemnification and Insurance 37
SECTION 5.8 Notification of Certain Matters 38
SECTION 5.9 Further Action/Tax Treatment 38
SECTION 5.10 Public Announcements 39
SECTION 5.11 Conveyance Taxes 39
SECTION 5.12 Accountants' Letters 39
SECTION 5.13 Pooling Accounting Treatment 39
SECTION 5.14 Nasdaq Listing 40
SECTION 5.15 Listing of Parent Shares 40
ARTICLE VI CONDITIONS TO THE MERGER 40
SECTION 6.1 Conditions to Obligation of Each Party
to Effect the Merger 40
SECTION 6.2 Additional Conditions to Obligations of
Parent and Merger Sub 41
SECTION 6.3 Additional Conditions to Obligation of
the Company 42
ARTICLE VII TERMINATION 43
SECTION 7.1 Termination 43
SECTION 7.2 Effect of Termination 45
SECTION 7.3 Fees and Expenses 45
ARTICLE VIII GENERAL PROVISIONS 46
SECTION 8.1 Effectiveness of Representations,
Warranties and Agreements;
Knowledge, Etc 46
SECTION 8.2 Notices 47
SECTION 8.3 Certain Definitions 48
SECTION 8.4 Amendment 49
SECTION 8.5 Waiver 49
SECTION 8.6 Headings 49
SECTION 8.7 Severability 49
SECTION 8.8 Entire Agreement 50
SECTION 8.9 Assignment; Guarantee of Merger Sub 50
SECTION 8.10 Parties in Interest 50
SECTION 8.11 Failure or Indulgence Not Waiver; Remedies
Cumulative 50
SECTION 8.12 Governing Law 50
SECTION 8.13 Counterparts 50
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 21, 1996 (this
"Agreement"), among Cabletron Systems, Inc., a Delaware corporation
("Parent"), Cabletron Systems of Michigan, Inc., a Michigan corporation and
a wholly owned subsidiary of Parent ("Merger Sub"), and Network Express,
Inc., a Michigan corporation (the "Company").
WITNESSETH:
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 enter into a business
combination with the Company upon the terms and subject to the conditions
set forth herein;
WHEREAS, in furtherance of such combination, the Boards of Directors
of Parent and Merger Sub have each approved the merger of Merger Sub with
and into the Company (the "Merger") in accordance with the applicable
provisions of the Michigan Business Corporation Act (the "MBCA") and the
Board of Directors of the Company has approved the Merger in accordance with
the applicable provisions of the MBCA, and upon the terms and subject to the
conditions set forth herein;
WHEREAS, Parent, Merger Sub and the Company intend, by approving
resolutions authorizing this Agreement, to adopt this Agreement as a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the regulations promulgated
thereunder; and
WHEREAS, pursuant to the Merger, each outstanding share (a "Share")
of the Company's common stock, without par value (the "Company Common
Stock"), shall be converted into the right to receive the Merger
Consideration (as defined in Section 1.7(b)), upon the terms and subject to
the conditions set forth herein;
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 MERGER
Section 1.1 The Merger.
(a) Effective Time. At the Effective Time (as defined in
Section 1.2), and subject to and upon the terms and conditions of this
Agreement, and the MBCA, Merger Sub shall be
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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."
(b) Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant
to Section 7.1 and subject to the satisfaction or waiver of the conditions
set forth in Article VI, the consummation of the Merger will take place as
promptly as practicable (and in any event within two business days) after
satisfaction or waiver of the conditions set forth in Article VI, at the
offices of Ropes & Gray, One International Place, Boston, Massachusetts,
unless another date, time or place is agreed to in writing by the parties
hereto.
Section 1.2 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 a
certificate of merger as contemplated by the MBCA (the "Certificates of
Merger"), together with any required related certificates, with the
Department of Commerce of the State of Michigan, in such form as required
by, and executed in accordance with the relevant provisions of the MBCA (the
time of such filing being the "Effective Time").
Section 1.3 Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in this Agreement, the Certificate
of Merger and the applicable provisions of the MBCA. 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 1.4 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 the Company, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended in accordance with the MBCA and such
Articles of Incorporation.
(b) By-Laws. Unless otherwise determined by Parent prior to the
Effective Time, the By-Laws of the Company, as in effect immediately prior
to the Effective Time, shall be the By-Laws of the Surviving Corporation
until thereafter amended in accordance with the MBCA, the Articles of
Incorporation of the Surviving Corporation and such By-Laws.
2
Section 1.5 Directors and Officers. The Board of Directors of
Merger Sub immediately prior to the Effective Time shall be the initial
Board of Directors of the Surviving Corporation, each member 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 1.6 Effect on Capital Stock. At the Effective Time,
by virtue of the Merger and without any action on the part of the Parent,
Merger Sub, the Company or the holders of any of the following securities:
Conversion of Securities. Each Share issued and outstanding immediately
prior to the Effective Time (excluding any Shares to be canceled pursuant to
Section 1.6(b)) shall be converted, subject to Section 1.6(f), into the
right to receive 0.1388 shares (the "Exchange Ratio") of validly issued,
fully paid and nonassessable shares ("Parent Shares") of the Common Stock,
$.01 par value, of Parent ("Parent Common Stock").
(b) Cancellation. Each Share held in the treasury of the
Company and each Share owned by Parent, Merger Sub or any direct or indirect
wholly owned subsidiary of the Company or Parent 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.
(c) Stock Options; Employee Stock Purchase Plan.
(i) At the Effective Time, each outstanding option to
purchase Company Common Stock (a "Stock Option") granted under (A) the
Company's 1995 Omnibus Equity Plan, (B) the Company's 1991 Stock Option
Plan or (C) the individual stock option granted by the Company to Mr.
Kalkhoven, in July 1995 (collectively, the "Company Stock Option Plans"),
whether vested or unvested, shall be deemed assumed by Parent and deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such Stock Option prior to the Effective Time, the number
(rounded down to the nearest whole number) of Parent Shares as the holder of
such Stock Option would have been entitled to receive pursuant to the Merger
had such holder exercised such option in full immediately prior to the
Effective Time (not taking into account whether or not such option was in
fact exercisable), at a price per share equal to (x) the aggregate exercise
price for Company Common Stock otherwise purchasable pursuant to such Stock
Option divided by (y) the number of Parent Shares deemed purchasable
pursuant to such Stock Option. The Company shall not commence any "Purchase
Periods" under its Employee Stock Purchase Plan ("ESPP") after February 1,
1996, shall apply all amounts deducted and withheld thereunder to purchase
shares of the Company Common Stock in accordance with the provisions
thereof, and shall terminate the ESPP as of the Effective Time. Parent
shall have no
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duty or obligation in respect of the ESPP or the rights granted thereunder.
In the event the Effective Time occurs prior to the end of the "Purchase
Period" which commenced February 1, 1996, each Stock Option granted to an
individual under the ESPP shall be deemed assumed by Parent and deemed to
constitute an option to acquire, on the same terms and conditions (except as
hereinafter set forth) as were applicable under such Stock Option
immediately prior to the Effective Time, the number (rounded down to the
nearest whole number) of Parent Shares purchasable by applying the amount of
plan-related payroll deductions standing to the credit of the individual on
the last business day of the Purchase Period (as that term is defined in the
ESPP) in which the Effective Time occurs (the "purchase date") toward the
purchase of Parent Shares on the purchase date at a per-share price equal to
the lesser of (I) 85% of the fair market value of a share of Company Common
Stock at the beginning of such Purchase Period divided by the Exchange Ratio
and (II) 85% of the fair market value of a Parent Share on the purchase
date.
(ii) As soon as practicable after the Effective Time,
Parent shall deliver to each holder of an outstanding Stock Option an
appropriate notice setting forth such holder's rights pursuant thereto, and
such Stock Option shall continue in effect on the same terms and conditions.
(iii) Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of Parent Shares for delivery
pursuant to the terms set forth in this Section 1.6(c).
(iv) Subject to any applicable limitations under the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act"), Parent shall either (A) file a Registration
Statement on Form S-8 (or any successor form), effective as of the Effective
Time, with respect to the shares of Parent Common Stock issuable upon
exercise of the Stock Options, or (B) file any necessary amendments to the
Company's previously-filed Registration Statement on Form S-8 in order that
the Parent will be deemed a "successor registrant" thereunder, and, in
either event the Parent shall use all reasonable efforts to maintain the
effectiveness of such registration statement (and maintain the current
status of the prospectus or prospectuses relating thereto) for so long as
such options shall remain outstanding.
(d) Capital Stock of Merger Sub. Each share of common stock,
without 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, without par
value, of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
equitably adjusted to reflect fully the effect of any reclassification,
stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Parent Common Stock),
4
reorganization, recapitalization or other like change with respect to Parent
Common Stock occurring after the date hereof and prior to the Effective
Time.
(f) Fractional Shares. No certificates or scrip representing
less than one Parent Share shall be issued upon the surrender for exchange
of a certificate or certificates which immediately prior to the Effective
Time represented outstanding Shares (the "Certificates"). In lieu of any
such fractional share, each holder of Shares who would otherwise have been
entitled to a fraction of a Parent Share upon surrender of Certificates for
exchange shall be paid, upon such surrender, cash (without interest)
determined by multiplying (i) the per share closing price on the New York
Stock Exchange of Parent Common Stock on the date of the Effective Time by
(ii) the fractional interest of Parent Common Stock to which such holder
would otherwise be entitled. As soon as practicable after determining the
amount of cash, if any, to be paid to former holders of Company Common Stock
with respect to any fractional shares of Parent Common Stock, the Exchange
Agent shall promptly pay such amounts to such holders in accordance with
Article I. Parent will make available to the Exchange Agent the cash
necessary for this purpose.
Section 1.7 Exchange of Certificates.
(a) Exchange Agent. Parent shall supply, or shall cause to be
supplied, to or for the account of Boston Equiserve, or such other bank or
trust company as shall be designated by Parent and reasonably satisfactory
to the Company (the "Exchange Agent"), in trust for the benefit of the
holders of Company Common Stock, for exchange in accordance with this
Section 1.7, through the Exchange Agent, certificates evidencing the Parent
Shares issuable pursuant to Section 1.6 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 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 and the Company may reasonably specify), and (ii)
instructions to effect the surrender of the Certificates in exchange for the
certificates evidencing Parent Shares. 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 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 1.7(c), and (C) cash in
respect of fractional shares as provided in Section 1.6(f) (the Parent
Shares, dividends, distributions and cash being, collectively, the "Merger
Consideration"), and the Certificate so surrendered shall forthwith be
canceled. In the event
5
of a transfer of ownership of Shares which is not registered in the transfer
records of the Company as of the Effective Time, the Merger Consideration
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 1.7(b) and by evidence that any applicable stock
transfer taxes have been paid. Until so surrendered, each outstanding
Certificate that, prior to the Effective Time, represented Shares of Company
Common Stock will be deemed from and after the Effective Time, for all
corporate purposes, other than the payment of dividends and subject to
Section 1.6(f), to evidence the ownership of the number of full Parent
Shares into which such shares of Company Common Stock shall have been so
converted. Parent Shares issued in the Merger shall be issued as of and
deemed to be outstanding as of the Effective Time. Parent shall cause all
such Parent Shares issued in accordance with the Merger to be duly
authorized, validly issued, fully paid and nonassessable.
(c) Distributions With Respect to Unexchanged Parent Shares. No
dividends or other distributions declared or made after the Effective Time
with respect to Parent Shares with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to
the Parent Shares they are entitled to receive 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 Parent Shares issued in
exchange therefor, without interest, (i) 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 Parent Shares and
(ii) at the appropriate payment date, the amount of dividend or other
distributions with a record date after the Effective Time and a payment date
subsequent to such surrender.
(d) Transfers of Ownership. If any certificate for Parent
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 to
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 agent designated by
it any transfer or other taxes required by reason of the issuance of a
certificate for Parent Shares in any name other than that of the registered
holder of the certificate surrendered, or have 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 delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) Withholding Rights. Parent or the Exchange Agent shall be
entitled to deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any
6
holder of Company Common Stock such amounts as Parent or the Exchange Agent
is required to deduct and withhold with respect to the making of such
payment under the Code, or any provision of state, local or foreign tax law.
To the extent that amounts are so withheld by Parent or the Exchange Agent,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Shares in respect of which such
deduction and withholding was made by Parent or the Exchange Agent.
Section 1.8 Stock Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed, and there shall be no
further registration of transfers of Company Common Stock thereafter on the
records of the Company.
Section 1.9 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 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 Parent Shares as may be required pursuant to Section 1.6 as
well as the other Merger Consideration as provided in this Article;
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 shall (i) constitute a reorganization
within the meaning of Section 368 of the Code and (ii) qualify for
accounting treatment as a pooling of interests. 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 practicable, unless
in the case of the Company, in the opinion of the Board of Directors of the
Company, refraining from the taking of such action is required in the
discharge of its fiduciary duties under applicable law (after receiving
advice from its independent legal counsel to such effect) . 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
7
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 immediately prior to
the Effective Time are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and
necessary action.
Section 1.13 Material Adverse Effect. When used in connection
with the Company or any of its subsidiaries, or Parent or any of its
subsidiaries, as the case may be, the term "Material Adverse Effect" means
any change, effect or circumstance that, individually or when taken together
with all other such changes, effects or circumstances that have occurred
prior to the date of determination of the occurrence of the Material Adverse
Effect, (a) 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 or Parent and its
subsidiaries, as the case may be, in each case taken as a whole, or (b) is
or is reasonably likely to prevent the consummation of the transactions
contemplated hereby.
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 delivered on or
prior to the date hereof by the Company to Parent that is arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained
in this Article II (the "Company Disclosure Schedule"):
Section 2.1 Organization and Qualification; Subsidiaries. Each
of the Company and each of its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation and has the requisite corporate power and authority
necessary to own, lease and operate the properties it purports to own,
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 could not reasonably be
expected to have a Material Adverse Effect. Each of the Company and each of
its subsidiaries is duly qualified or licensed as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the
character of 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
could not reasonably be expected to have a Material Adverse Effect. A true
and complete list of all of the Company's subsidiaries, together with the
jurisdiction of incorporation of each subsidiary, the authorized
capitalization of each subsidiary, and the percentage of each subsidiary's
outstanding capital stock owned by the Company or another subsidiary, is set
forth in Section 2.1 of the Company Disclosure Schedule. Except as set
forth in Section 2.1 of the Company Disclosure Schedule, the Company does
not directly or indirectly own any equity or similar interest in, or any
interest convertible into or
8
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or
entity, with respect to which interest the Company has invested or is
required to invest $100,000 or more, excluding securities in any publicly
traded company held for investment by the Company and comprising less than
five percent of the outstanding stock of such company.
Section 2.2 Certificate 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 has
furnished or made available to Parent the Articles of Incorporation and
By-Laws (or equivalent organizational documents) of each of its subsidiaries
(the "Subsidiary Documents"). Such Articles of Incorporation, By-Laws and
Subsidiary Documents 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 Subsidiary Documents, except for
immaterial violations of the Subsidiary Documents which may exist.
Section 2.3 Capitalization. The authorized capital stock of
the Company consists of (1) 20,000,000 shares of Company Common Stock and
(2) 100,000 shares of preferred stock, without par value, none of which is
issued and outstanding and none of which is held in treasury. As of March
31, 1996, (i) 10,230,089 shares of Company Common Stock were issued and
outstanding, all of which are validly issued, fully paid and nonassessable,
and no shares were held in treasury, (ii) no shares of Company Common Stock
were held by subsidiaries of the Company, and (iii) 1,061,050 shares of
Company Common Stock were reserved for future issuance pursuant to
outstanding stock options granted under the Company Stock Option Plans. No
material change in such capitalization has occurred between March 31, 1996
and the date hereof. Except as set forth in Section 2.3 or Section 2.11 of
the Company 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 the Company or any of its
subsidiaries or obligating the Company or any of its subsidiaries to issue
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. Except as
disclosed in Section 2.3 of the Company Disclosure Schedule, 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, guaranty or otherwise) in any such subsidiary or any other
entity. Except as set forth in Sections 2.1 and 2.3 of the Company
Disclosure Schedule, all of the outstanding shares of capital stock of each
of the Company's subsidiaries is duly authorized, validly issued, fully paid
and nonassessable, and all such shares are owned by the Company or another
subsidiary of the Company 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 (collectively,
"Liens"). There are no outstanding
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options under the Company's 1991 Stock Option Plan for Non-Employee
Directors and Consultants. There are no vested options outstanding under
the Company's 1995 Non-Employee Stock Option Plan, and no outstanding
options are scheduled to vest prior to May 14, 1997. Upon the Effective
Time pursuant to the terms of the Agreement, the service of all current
directors of the Company who are not directors of Merger Sub will terminate
and all outstanding options under the 1995 Non-Employee Stock Option Plan
granted to such directors will terminate pursuant to the terms of such plan
without further action by the Company.
Section 2.4 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 of this
Agreement by the holders of at least a majority of the outstanding shares of
Company Common Stock entitled to vote in accordance with the MBCA and the
Company's Articles of Incorporation and By-Laws). The Board of Directors of
the Company has determined that it is advisable and in the best interest of
the Company's Shareholders for the Company to enter into a business
combination with Parent upon the terms and subject to the conditions of this
Agreement, and has unanimously recommended that the Company's Shareholders
approve and adopt this Agreement and the Merger. 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, as
applicable, constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
Section 2.5 No Conflict; Required Filings and Consents.
(a) Section 2.5(a) of the Company Disclosure Schedule includes a
list of (i) all loan agreements, indentures, mortgages, pledges, conditional
sale or title retention agreements, security agreements, guaranties,
standby letters of credit, equipment leases or lease purchase agreements to
which the Company or any of its subsidiaries is a party or by which any of
them is bound, other than office equipment and vehicle leases in an
aggregate amount not exceeding $200,000; (ii) all contracts, agreements,
commitments or other understandings or arrangements to which the Company or
any of its subsidiaries is a party or by which any of them or any of their
respective properties or assets are bound or affected, but excluding
contracts, agreements, commitments or other understandings or arrangements
entered into in the ordinary course of business and involving, in each case,
payments or receipts by the Company or any of its subsidiaries of less than
$100,000 in any single instance; and (iii) all agreements which, as of the
date hereof, are required to be filed as "material contracts" with the
Securities Exchange Commission ("SEC") pursuant to the requirements of the
Securities
10
Exchange Act of 1934, as amended, and the SEC's rules and regulations
thereunder (the "Exchange Act").
(b) Except as disclosed in Section 2.5(b) of the Company
Disclosure Schedule, (i) neither the Company nor any of its subsidiaries has
breached, is in default under, or has received written notice of any breach
of or default under, any of the agreements, contracts or other instruments
referred to in clauses (i), (ii) or (iii) of Section 2.5(a), (ii) to the
best knowledge of the Company, no other party to any of the agreements,
contracts or other instrument referred to in clauses (i), (ii) or (iii) of
Section 2.5 (a) has breached or is in default of any of its obligations
thereunder, and (iii) each of the agreements, contracts and other
instruments referred to in clauses (i), (ii) or (iii) of Section 2.5(a) is
in full force and effect, except in any such case under clauses (i), (ii) or
(iii) of this Section 2.5(b) for breaches, defaults or failures to be in
full force and effect that has not had and could not reasonably be expected
to have a Material Adverse Effect.
(c) Except as set forth in Section 2.5(c) of the Company
Disclosure Schedule, the execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by the Company and
the consummation of the transactions contemplated hereby will not, (i)
conflict with or violate the Articles of Incorporation or By-Laws of the
Company, (ii) conflict with or violate any federal, foreign, state or
provincial law, rule, regulation, order, judgment or decree (collectively,
"Laws") 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 under), or impair the Company's
or any of its subsidiaries' rights or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any
of the properties or assets of the Company or any of its subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
the Company or any of its subsidiaries is a party or by which the Company or
any of its subsidiaries or its or any of their respective properties is
bound or affected, except in any such case under clauses (i), (ii) or (iii)
of this Section 2.5(c) for any such conflicts, violations, breaches,
defaults or other occurrences that could not reasonably be expected to have
a Material Adverse Effect.
(d) The execution and delivery of this Agreement by the Company
does not, and the performance of this Agreement by the Company will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any federal, foreign, state or provincial governmental or
regulatory authority except (i) for applicable requirements, if any, of the
Securities Act, 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"), any required foreign
anti-trust or similar filings and the filing and recordation of appropriate
merger or other documents as required by the MBCA, and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
11
make such filings or notifications, would not prevent consummation of the
Merger, or otherwise prevent the Company from performing its obligations
under this Agreement, or would not otherwise have a Material Adverse Effect.
As provided by Section 762(2)(b) of the MBCA, no shareholder is entitled to
dissent from the Merger. Neither the Articles of Incorporation or Bylaws
provide the shareholders with, nor has the board provided, pursuant to
resolution or otherwise, the shareholders with, a right to dissent from the
Merger in accordance with the provisions of Section 762 of the MBCA.
Section 2.6 Compliance, Permits.
(a) Except as disclosed in Section 2.6(a) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries is in
conflict with, or in default or violation of, (i) any Law 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, 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 in any such case
under clauses (i) or (ii) of this Section 2.6(a) for any such conflicts,
defaults or violations which could not reasonably be expected to have a
Material Adverse Effect.
(b) Except as disclosed in Section 2.6(b) of the Company
Disclosure Schedule, 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 could not reasonably
be expected to have a Material Adverse Effect.
Section 2.7 SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports and documents
required to be filed with the SEC and has made available to Parent (i) its
Annual Reports on Form 10-KSB for the fiscal years ended December 31, 1995
and 1994, (ii) its Quarterly Reports on Form 10-QSB for the periods ended
September 30, 1994, March 31, 1995, June 30, 1995, September 30, 1995, and
March 31, 1996 and (iii) its Registration Statement on Form SB-2, No. 33-
77694 as declared effective by the SEC on May 13, 1994, its Registration
Statement on Form SB-2, No. 33-83552 as declared effective by the SEC on
October 14, 1994 and its Registration Statement on Form S-1, No. 33-91140 as
declared effective by the SEC on May 17, 1995, (iv) all proxy statements
relating to the Company's meetings of Shareholders (whether annual or
special) since January 1, 1994 (v) all other reports or registration
statements filed by the Company with the SEC, 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"). Except as
disclosed in Section 2.7 of the Company Disclosure Schedule, the Company SEC
12
Reports (i) were prepared in all material respects 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 generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except as may
be indicated in the notes thereto), and each fairly presents in all material
respects 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 and stockholder equity for the periods
indicated, except that the unaudited interim financial statements may not
include footnotes and were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount.
Section 2.8 Absence of Certain Changes or Events. Except as
set forth in Section 2.8 of the Company Disclosure Schedule or the Company
SEC Reports, since January 1, 1996, the Company has conducted its business
in the ordinary course and there has not occurred: (a) any Material Adverse
Effect; (b) any amendments or changes in the Articles of Incorporation or
Bylaws of the Company; (c) any damage to, destruction or loss of any asset
of the Company (whether or not covered by insurance) that could reasonably
be expected to have a Material Adverse Effect; (d) any material change by
the Company in its accounting methods, principles or practices; (e) any
material revaluation by the Company of any of its assets, including, without
limitation, writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business; (f) any
other action or event that would have required the consent of Parent
pursuant to Section 4.1 had such action or event occurred after the date of
this Agreement; or (g) any sale of a material amount of property or assets
of the Company or any of its subsidiaries, except in the ordinary course of
business.
Section 2.9 No Undisclosed Liabilities. Except as is disclosed
in Section 2.9 of the Company Disclosure Schedule or the Company's SEC
Reports, neither the Company nor any of its subsidiaries has any liabilities
required to be disclosed or provided for in a balance sheet (or in the notes
thereto) prepared in accordance with generally accepted accounting
principles (absolute, accrued, contingent or otherwise), except liabilities
(a) in the aggregate adequately provided for in the Company's audited
balance sheet (including any related notes thereto) for the fiscal year
ended December 31, 1995 contained in the Company's Annual Report on Form 10-
KSB (the "1995 Company Balance Sheet"), (b) incurred since December 31, 1995
in the ordinary course of business consistent with past practice, (c)
13
incurred in connection with this Agreement, or (d) which could not
reasonably be expected to have a Material Adverse Effect.
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 federal, foreign, state or provincial court, arbitrator or
administrative, governmental or regulatory authority or body that could
reasonably be expected to have a Material Adverse Effect.
Section 2.11 Employee Benefit Plans, Employment Agreements.
(a) Section 2.11 (a) of the Company Disclosure Schedule lists
all employee pension plans (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), all employee
welfare plans (as defined in Section 3(1) of ERISA, and all other material
bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar fringe or employee
benefit plans, programs or arrangements, and any employment, executive
compensation, consulting or severance agreements, written or otherwise, for
the benefit of, or relating to, any current or former employee (including
any beneficiary of any such employee) of, or any current or former
consultant (including any beneficiary of any such consultant) to, the
Company, any trade or business (whether or not incorporated) which is a
member of a controlled group including the Company 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 under which the
Company currently has a liability, as well as each plan with respect to
which the Company or an ERISA Affiliate could incur liability under Section
4069 (if such plan has been or were terminated) or Section 4212(c) of ERISA
(all such plans, practices and programs are referred to as the "Company
Employee Plans"). There have been made available to Parent copies of (i)
each such written Company Employee Plan (other than those referred to in
Section 4(b)(4) of ERISA), and (ii) the most recent annual report on Form
5500 series, with accompanying schedules and attachments, filed with respect
to each Company Employee Plan required to make such a filing.
(b)(i) Except in each case as set forth in Section 2.11(b) of the
Company Disclosure Schedule, none of the Company Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person,
and neither the Company nor any ERISA Affiliate has ever maintained,
contributed to, or been required to contribute to, any plan that is or was a
"multi-employer plan" as such term is defined in Section 3(37) of ERISA, a
pension plan subject to Title IV of ERISA or a plan subject to Part 3 of
Title I of ERISA; (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 Company Employee Plan, which could result in any material
liability of the Company or any of its subsidiaries; (iii) all Company
Employee Plans
14
are in compliance in all material respects with the requirements prescribed
by any and all Laws (including ERISA and the Code), currently in effect with
respect thereto (including all applicable requirements for notification to
participants or the Department of Labor, Internal Revenue Service (the
"IRS") 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 Company Employee Plans; (iv) each Company 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 is the subject of a favorable
determination letter from the IRS, and nothing has occurred which may
reasonably be expected to impair such determination; (v) there are no
lawsuits or other claims (other than claims for benefits in the ordinary
course) pending or, to the best knowledge of the Company, threatened with
respect to any Company Employee Plan.
(c) Section 2.3 or 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 (i) any option to purchase Company Common Stock as of the date hereof,
together with the number of shares of Company Common Stock subject to such
option, the option price of such option (to the extent determined as of the
date hereof), 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; (ii) any other right, directly or
indirectly, to acquire Company Common Stock, together with the number of
shares of Company Common Stock subject to such right. Section 2.3 or
Section 2.11(c) of the Company Disclosure Schedule also sets forth the total
number of such ISOs, such nonqualified options and such other rights.
(d) Section 2.11(d) of the Company Disclosure Schedule sets
forth a true and complete list of: (i) all employment agreements with
officers of the Company or any of its subsidiaries; (ii) all agreements with
consultants who are individuals obligating the Company or any of its
subsidiaries to make annual cash payments in an amount exceeding $150,000;
(iii) all employees of, or consultants to, the Company or any of its
subsidiaries who have executed a non-competition agreement with the Company
or any of its subsidiaries; (iv) all severance agreements, programs and
policies of the Company or any of its subsidiaries with or relating to its
employees, in each case with outstanding commitments exceeding $150,000,
excluding programs and policies required to be maintained by law; and (v)
all plans, programs, agreements and other arrangements of the Company or any
of its subsidiaries 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 could reasonably be expected to have
a Material Adverse Effect; (ii) neither the Company nor any of
15
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, Joint Proxy
Statement/Prospectus. Subject to the accuracy of the representations of
Parent in Section 3.13, the information supplied by the Company for
inclusion in the Registration Statement (as defined in Section 3.13) 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 joint proxy statement/prospectus to be sent to the
Shareholders of the Company in connection with the meeting of the
Shareholders of the Company to consider the Merger (the "Stockholder
Meeting") (such joint proxy statement/prospectus as amended or supplemented
is referred to herein as the "Joint Proxy Statement/Prospectus"), will not,
on the date the Joint Proxy Statement/Prospectus (or any amendment thereof
or supplement thereto) is first mailed to Shareholders, at the time of the
Stockholder 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. 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 Joint Proxy Statement/Prospectus, the Company shall promptly inform
Parent and Merger Sub. The Joint Proxy Statement/ Prospectus shall comply
in all material respects as to form with the requirements of the Securities
Act, the Exchange Act and the rules and regulations thereunder.
Notwithstanding the foregoing, the Company makes no representation or
warranty with respect to any information supplied by Parent or Merger Sub
which is contained in any of the foregoing documents.
Section 2.14 Restrictions on Business Activities. Except for
this Agreement or as set forth in Section 2.14 of the Company Disclosure
Schedule, to the best of the Company's knowledge, there is no agreement,
judgement, 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 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, except for any prohibition or impairment as could not reasonably be
expected to have a Material Adverse Effect.
16
Section 2.15 Title to Property. Except as set forth in Section
2.15 of the Company Disclosure Schedule, 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 could not
reasonably be expected to have a Material Adverse Effect; and, except as set
forth in Section 2.15 of the Company Disclosure Schedule 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, to the knowledge of the Company, 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), except where the lack of such good standing, validity and
effectiveness or the existence of such default or event of default could not
reasonably be expected to 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, special
assessments, 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, additional
taxes 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 federal, foreign, state
or provincial taxing authority, domestic or foreign, including, without
limitation, consolidated, combined and unitary tax returns.
(b) Other than as disclosed in Section 2.16(b) of the Company
Disclosure Schedule, (i) the Company and its subsidiaries have timely filed
all Tax Returns required to be filed by them, (ii) the Company and its
subsidiaries have paid and discharged all Taxes due and have withheld all
Taxes required to be withheld with respect to employees in connection with
or with respect to the periods or transactions covered by such 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 that any such
proceedings are required) and with respect to which the Company is
maintaining adequate reserves, and (iii) there are no other Taxes that would
be due if asserted by a taxing authority, except with respect to which the
Company is maintaining reserves to the extent currently required unless the
failure to do so could not reasonably be expected to have a Material Adverse
Effect. Except as does not involve or would not result in liability to the
Company or any of its subsidiaries that could reasonably be expected to have
a Material Adverse Effect: (i) there are no tax liens on any assets of the
Company or any
17
subsidiary thereof; (ii) neither the Company nor any of its subsidiaries
has granted any waiver of any statute of limitations with respect to, or any
extension of a period for the assessment of, any Tax; (iii) neither the
Company nor any of its subsidiaries has received any written notice of any
Tax deficiency outstanding, proposed or assessed against the Company or any
of its subsidiaries, or of any audit or other examination threatened,
proposed or currently in progress of any Tax Return of the Company or any of
its subsidiaries; (iv) there is no contract, agreement plan or arrangement,
including but not limited to the provisions of the Agreement, covering any
employee or former employee of the Company or any of its subsidiaries that,
individually or collectively, could give rise to the payment of any amount
that would not be deductible pursuant to Section 280G or subject to the
excise tax pursuant to Section 4999 of the Code; (v) neither the Company nor
any of its subsidiaries is a party to or bound by any tax indemnity, tax
sharing or tax allocation agreements; (vi) neither the Company nor any of
its subsidiaries has filed any consent agreement under Section 341(f) of the
Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company; and (vii) except for the group of which the
Company and its subsidiaries are now presently members, neither the Company
nor any of its subsidiaries has ever been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code. The accruals
and reserves for Taxes (including deferred taxes) reflected in the 1995
Company Balance Sheet are adequate to cover all Taxes required to be accrued
through the date thereof (including interest and penalties, if any, thereon
and Taxes being contested) in accordance with generally accepted accounting
principles.
(c) Neither the Company nor any of its subsidiaries is, or has
been, a United States real property holding corporation (as defined in
Section 897(c)(2) of the Code) during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code. To the best knowledge of the Company,
neither the Company nor any of its subsidiaries owns any property of a
character, the indirect transfer of which, pursuant to this Agreement, would
give rise to any material documentary, stamp or other transfer tax.
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: (i)
have obtained all Approvals which are required to be obtained under all
applicable federal, state, foreign or local laws or any regulation, code,
plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder 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 ("Environmental Laws"); (ii) are in
compliance with all terms and conditions of such required Approvals, and
also are in compliance with all other limitations, restrictions, conditions,
standards, prohibitions,
18
requirements, obligations, schedules and timetables contained in applicable
Environmental Laws; (iii) as of the date hereof, are not aware of nor have
received notice of any past or present violations of Environmental Laws or
any event, condition, circumstance, activity, practice, incident, action or
plan which is reasonably likely to interfere with or prevent continued
compliance with or which would give rise to any common law or statutory
liability, or otherwise form the basis of any claim, action, suit or
proceeding, against the Company or any of its subsidiaries based on or
resulting from the 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 Environmental Laws 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 Intellectual Property.
(a) Subject to 2.18(d), the Company, directly or indirectly,
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 (excluding Commercial Software as defined in paragraph (e) below)
that are material to the business of the Company and its subsidiaries as
currently conducted or as proposed to be conducted by the Company or its
subsidiaries (the "Company Intellectual Property Rights").
(b) Section 2.18(b) of the Company Disclosure Schedule sets
forth a complete list of all patents, trademarks, registered copyrights,
trade names and service marks, and any applications therefor, included in
the Company Intellectual Property Rights, and specifies, where applicable,
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.
(c) Section 2.18(c) of the Company Disclosure Schedule sets
forth a complete list of all material licenses, sublicenses and other
agreements as to which the Company or any of its subsidiaries is a party and
pursuant to which the Company, any of its subsidiaries or any other person
is authorized to use any Company Intellectual Property Right (excluding
object code end-user licenses granted to end-users in the ordinary course of
business that permit use of software products without a right to modify,
distribute or sublicense the same ("End-User Licenses")) or other trade
secret material to the Company or any of its subsidiaries, and includes the
identity of all parties thereto, a description of the nature and subject
matter thereof, the applicable royalty (if any) and the term thereof. None
of the Company or any of its subsidiaries is in violation of any license,
sublicense or agreement described on such list except such violations as do
not materially impair the Company's or such subsidiary's rights
19
under such license, sublicense or agreement. The execution and delivery of
this Agreement by the Company, and the consummation of the transactions
contemplated hereby, will neither cause the Company or any of its
subsidiaries to be in violation or default under any such license,
sublicense or agreement, nor entitle any other party to any such license,
sublicense or agreement to terminate or modify such license, sublicense or
agreement, except in any such case where the foregoing would not reasonably
be expected to have a Material Adverse Effect.
(d) Either the Company or one of its subsidiaries is the sole
and exclusive owner or licensee of, with all right, title and interest in
and to (free and clear of any liens or encumbrances) the Company
Intellectual Property Rights, and has sole and exclusive rights (and, except
as set forth in Section 2.18(c) of the Company Disclosure Schedule, is not
contractually obligated to pay any compensation to any third party in
respect thereof) to the use thereof or the material covered thereby in
connection with the services or products in respect of which the Company
Intellectual Property Rights are being used. Except as set forth in Section
2.18(d) of the Company Disclosure Schedule, no claims with respect to the
Company Intellectual Property Rights have been asserted or, to the knowledge
of the Company, are threatened by any person nor are there any valid
grounds, to the knowledge of the Company, for any bona fide claims (i) to
the effect that the manufacture, sale, licensings or use of any of the
products of the Company or any of its subsidiaries as now manufactured, sold
or licensed or used or proposed for manufacture, use, sale or licensing by
the Company or any of its subsidiaries infringes on any copyright, patent,
trade mark, service mark or trade secret, (ii) against the use by the
Company or any of its subsidiaries of any trademarks, service marks, trade
names, trade secrets, copyrights, patents, technology, know-how or computer
software programs and applications used in the business of the Company and
its subsidiaries as currently conducted or as proposed to be conducted, or
(iii) challenging the ownership by the Company of any of its subsidiaries,
validity or effectiveness of any of the Company Intellectual Property
Rights. All registered trademarks, service marks and copyrights held by the
Company are valid and subsisting. To the knowledge of the Company, there is
no unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property Rights by any third party, including any employee or
former employee of the Company or any of its subsidiaries. No Company
Intellectual Property Right or product of the Company or any of its
subsidiaries is subject to any outstanding decree, order, judgment, or
stipulation restricting in any manner the licensing thereof by the Company
or any of its subsidiaries. Neither the Company nor any of its subsidiaries
has entered into any agreement under which the Company or its subsidiaries
is restricted from selling, licensing or otherwise distributing any of its
products to any class of customers, in any geographic area, during any
period of time or in any segment of the market. The Company and its
subsidiaries have a policy requiring each employee to execute a
confidentiality agreement substantially in the form previously delivered to
Parent.
(e) "Commercial Software" means packaged commercially available
software programs generally available to the public through retail dealers
in computer software which have been licensed to the Company or any of its
subsidiaries pursuant to end-user licenses and
20
which are used in the Company's or its subsidiaries' business but are in no
way a component of or incorporated in or specifically required to develop or
support any of the Company's or its subsidiaries' products and related
trademarks, technology and know-how.
Section 2.19 Interested Party Transactions. Except as set forth
in Section 2.19 of the Company Disclosure Schedule, since December 31, 1995,
no event has occurred that would be required to be reported as a Certain
Relationship or Related Transaction, pursuant to Item 404 of Regulation S-K
promulgated by the SEC.
Section 2.20 Insurance. All material fire and casualty, general
liability, business interruption, product liability, professional liability
and sprinkler and water damage insurance policies maintained by the Company
or any of its subsidiaries are in character and amount at least equivalent
to that carried by persons engaged in similar businesses and subject to the
same or similar perils or hazards, except as could not reasonably be
expected to have a Material Adverse Effect, and all such policies are with
reputable insurance carriers, provide full and adequate coverage for all
normal risks incident to the business of the Company and its subsidiaries
and their respective properties and assets.
Section 2.21 Pooling Matters. Neither the Company nor any of
its affiliates has, to the best of the Company's knowledge and based upon
consultation with its independent accountants, taken or agreed to take any
action that could affect the ability of Parent to account for the business
combination to be effected by the Merger as a pooling of interests.
Section 2.22 Opinion of Financial Advisor. The Company has been
advised by its financial advisor, Unterberg Harris, that in its opinion, as
of the date hereof, the Exchange Ratio set forth herein is fair to the
holders of Shares from a financial point of view.
Section 2.23 Brokers. No broker, finder or investment banker
(other than Unterberg Harris, the fees and expenses of whom will be paid by
the Company) 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 or its
subsidiaries or affiliates. The Company has heretofore furnished to Parent
a complete and correct copy of all agreements between the Company and
Unterberg Harris pursuant to which such firm would be entitled to any
payment relating to the transactions contemplated hereunder.
Section 2.24 Change in Control Payments. Except as set forth on
Section 2.11(d) or Section 2.25 of the Company Disclosure Schedule, neither
the Company nor any of its subsidiaries have any plans, programs or
agreements to which they are parties, or to which they are subject, pursuant
to which payments may be required or acceleration of benefits may be
required upon a change of control of the Company.
21
Section 2.25 Expenses. Section 2.26 of the Company Disclosure
Schedule attached hereto sets forth a description of the expenses of the
Company and its subsidiaries which the Company expects to incur, or has
incurred, in connection with the transactions contemplated by this
Agreement.
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 delivered on or prior to the date hereof by Parent to the Company
that is arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this Article III (the "Parent Disclosure Schedule"):
Section 3.1 Organization and Qualification; Subsidiaries. Each
of Parent 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 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 could not reasonably be expected to have a Material
Adverse Effect. 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 could not reasonably be
expected to have a Material Adverse Effect. A true and complete list as of
the date hereof 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 3.1 of the Parent Disclosure Schedule.
Section 3.2 Charter and By-Laws. Parent has heretofore
furnished to the Company a complete and correct copy of its Certificate of
Incorporation and By-Laws, as amended to date. Such Certificate of
Incorporation and By-Laws are in full force and effect. Neither Parent nor
Merger Sub is in violation of any of the provisions of its Certificate of
Incorporation or Articles of Incorporation, respectively, or By-Laws.
Section 3.3 Capitalization. As of March 31, 1996, the
authorized capital stock of Parent consisted of (i) 240,000,000 shares of
Parent Common Stock of which 72,253,751 shares were issued and outstanding,
all of which are validly issued, fully paid and non-assessable, none of
which were held in treasury, 6,501,269 shares were reserved for future
issuance under Parent's equity incentive plan, directors option plan and
employee stock
22
purchase plan and (ii) 2,000,000 shares of preferred stock, $1.00 par value
per share, none of which was issued and outstanding and none of which was
held in treasury. No material change in such capitalization has occurred
between March 31, 1996 and the date hereof. The authorized capital stock of
Merger Sub consists of 60,000 shares of common stock without par value of
which 1,000 shares are issued and outstanding. Except as set forth in
Section 3.3 of the Parent Disclosure Schedule, as of the date hereof 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. All shares of
Parent 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. Except as set forth in Section 3.3 or Section 3.11 of the
Parent Disclosure Schedule as of the date hereof, there are no obligations,
contingent or otherwise, of Parent or any of its subsidiaries to repurchase,
redeem or otherwise acquire any shares of Parent 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. Except as set forth in Section 3.1 or 3.3
of the Parent Disclosure Schedule, all of the outstanding shares of capital
stock of each of Parent's subsidiaries is duly authorized, validly issued,
fully paid and nonassessable and all such shares are owned by Parent or
another subsidiary of Parent free and clear of all security interests,
liens, claims, pledges, agreements, limitations in Parent's voting rights,
charges or other encumbrances of any nature whatsoever.
Section 3.4 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 contemplated thereby. 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
enforceable against each of them in accordance with its terms.
Section 3.5 No Conflict, Required Filings and Consents.
(a) Except as disclosed in Section 3.5(a) of the Parent
Disclosure Schedule, (i) neither the Parent nor any of its subsidiaries has
breached, or is in default under or has received written notice of any
breach of or default under, any loan agreements, indentures, mortgages,
pledges, conditional sale or title retention agreements, security
agreements, equipment obligations, guaranties, standby letters of credit,
equipment leases or lease purchase
23
agreements to which Parent or any of its subsidiaries is a party or by which
any of them is bound, each in an amount equal to or exceeding $1,000,000,
but excluding any such agreement between Parent and its wholly-owned
subsidiaries or between two or more wholly-owned subsidiaries of Parent or
all agreements which, as of the date hereof, are required to be filed with
the SEC pursuant to the requirements of the Exchange Act as "material
contracts," (collectively, the "Material Agreements"), (ii) to the best
knowledge of Parent, no party to any of the Material Agreements has breached
or is in default of any of its obligations thereunder, and (iii) each of the
Material Agreements is in full force and effect, except in any such case
under clause (i), (ii) or (iii) of this Section 3.5(a) for breaches,
defaults or failures to be in full force and effect that could not
reasonably be expected to have a Material Adverse Effect.
(b) Except as set forth in Section 3.5(b) of the Parent
Disclosure Schedule, 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 will not, (i) conflict with or violate the Certificate of
Incorporation or By-Laws of Parent or Merger Sub, (ii) conflict with or
violate any Law applicable to Parent or any of its 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 or
any of its subsidiaries' rights or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any
of the properties or assets of Parent or any of its subsidiaries pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent
or any of its subsidiaries is a party or by which Parent or any of its
subsidiaries or its or any of their respective properties are bound or
affected, except in any such case under clause (i), (ii) or (iii) of this
Section 3.5(b) for any such conflicts, violations, breaches, defaults or
other occurrences that could not reasonably be expected to have a Material
Adverse Effect.
(c) The execution and delivery of this Agreement by Parent and
Merger Sub does not, and the performance of this Agreement by Parent and
Merger Sub will not, require any consent, approval, authorization or permit
of, or filing with or notification to, any governmental or regulatory
authority, domestic or foreign, except (i) for applicable requirements, if
any, of the Securities Act, the Exchange Act, the Blue Sky Laws, the pre-
merger notification requirements of the HSR Act, or any foreign antitrust or
similar filings and the filing and recordation of appropriate merger or
other documents as required by the MBCA, and (ii) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent 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.
24
Section 3.6 Compliance; Permits.
(a) Except as disclosed in Section 3.6 of the Parent Disclosure
Schedule, neither Parent nor any of its subsidiaries is in conflict with, or
in default or violation of, (i) any Law applicable to Parent 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, license, permit, franchise or other instrument or
obligation to which Parent or any of its subsidiaries is a party or by which
Parent or any of its subsidiaries or its or any of their respective
properties is bound or affected, except in any such case under clauses (i)
or (ii) of this Section 3.6(a) for any such conflicts, defaults or
violations which could not reasonably be expected to have a Material Adverse
Effect.
(b) Except as disclosed in Section 3.6 of the Parent Disclosure
Schedule, Parent 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 Parent and its subsidiaries taken as a whole as it is now being
conducted (collectively, the "Parent Permits"). Parent and its subsidiaries
are in compliance with the terms of the Parent Permits, except where the
failure to so comply could not reasonably be expected to have a Material
Adverse Effect.
Section 3.7 SEC Filings; Financial Statements.
(a) Parent has filed all forms, reports and documents required
to be filed with the SEC 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 February 29, 1996 and February 28, 1995, (ii) Reports on Form
10-Q for the quarters ended November 30, 1995, August 31, 1995 and May 31,
1995, (iii) all proxy statements relating to Parent's meetings of
Shareholders (whether annual or special) since January 1, 1994, (iv) all
other reports or registration statements (other than Reports on Form 10-Q)
filed by Parent with the SEC, 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 all material respects 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 generally accepted accounting
principles applied on a consistent basis throughout the periods
25
involved (except as may be indicated in the notes thereto) and each fairly
presents in all material respects 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 may not
include footnotes and were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount.
Section 3.8 Absence of Certain Changes or Events. Except as
set forth in Section 3.8 of the Parent Disclosure Schedule or in the Parent
SEC Reports, since February 29, 1996, 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 Certificate 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; (iv) any material change by Parent in its
accounting methods, principles or practices; (v) any material revaluation by
Parent of any of its assets, including without limitation, writing down the
value of inventory or writing off notes or accounts receivable other than in
the ordinary course of business; (vi) any other action or event that would
have required the consent of the Company pursuant to Section 4.3 had such
action or event occurred after the date of this Agreement; or (vii) any sale
of a material amount of assets of Parent or any of its subsidiaries except
in the ordinary course of business.
Section 3.9 No Undisclosed Liabilities. Except as is disclosed
in Section 3.9 of the Parent Disclosure Schedule or in the Parent SEC
Reports, neither Parent nor any of its subsidiaries has any liabilities
required to be disclosed or provided for in a balance sheet (or in the notes
thereto) (absolute, accrued, contingent or otherwise), except liabilities
(i) adequately provided for in Parent's balance sheet (including any related
notes thereto) as of February 29, 1996 included in the Parent's 1996 Annual
Report on Form 10-K (the "Parent Balance Sheet"), (ii) incurred in the
ordinary course of business and not required under generally accepted
accounting principles to be reflected on the Parent Balance Sheet, (iii)
incurred since February 29, 1996 in the ordinary course of business and
consistent with past practice, (iv) incurred in connection with this
Agreement, or (v) which could not reasonably be expected to have a Material
Adverse Effect.
Section 3.10 Absence of Litigation. Except as set forth in
Section 3.10 of the Parent Disclosure Schedule, there are no claims,
actions, suits, proceedings or investigations pending or, to the knowledge
of the Parent, threatened against the Parent or any of its subsidiaries, or
any properties or rights of the Parent or any of its subsidiaries, before
any court, arbitrator or administrative, governmental or regulatory
authority or body, domestic or foreign, that could reasonably be expected to
have a Material Adverse Effect.
26
Section 3.11 Employee Benefit Plans; Employment Agreements.
(a) Except as set forth in Section 3.11(a) of the Parent
Disclosure Schedule, none of the employee pension plans (as defined in
Section 3(2) of ERISA), employee welfare plans, (as defined in Section 3(1)
of ERISA) and other bonus, stock option, stock purchase, incentive, deferred
compensation, supplemental retirement, severance and other similar fringe or
employee benefit plans, programs or arrangements, or any current or former
employment, executive compensation or severance agreements, written or
otherwise, for the benefit of, or relating to, any employee of or consultant
to Parent, any trade or business (whether or not incorporated) which is a
member of a controlled group including Parent or which is under common
control with Parent (a "Parent ERISA Affiliate") within the meaning of
Section 414 of the Code, or any subsidiary of Parent, or other plan with
respect to which Parent or a Parent ERISA Affiliate could incur liability
under Section 4069 (if such plan has been or were terminated) or Section
4212(c) of ERISA (all such plans, practices, and programs are referred to
herein as the "Parent Employee Plans") promises or provides retiree welfare
benefits to any person, and neither the Parent nor any Parent ERISA
Affiliate has ever maintained, contributed to, or been required to
contribute to, any plan that is or was a "multiemployer plan" as such term
is defined in Section 3(37) of ERISA; (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 Parent Employee Plan, which could
result in any material liability of Parent or any of its subsidiaries; (iii)
all Parent 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, IRS, Pension Benefit Guaranty
Corporation ("PBGC") or Secretary of the Treasury), and Parent 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 Parent Employee Plans; (iv) each Parent 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 is the subject of a favorable
determination letter from the IRS, and nothing has occurred which may
reasonably be expected to impair such determination; (v) all contributions
required to be made to any Parent Employee Plan pursuant to Section 412 of
the Code, or the terms of the Parent Employee Plan or any collective
bargaining agreement, have been made on or before their due dates; (vi) with
respect to each Parent Employee Plan, no "reportable event" within the
meaning of Section 4043 of ERISA (excluding any such event for which the 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) neither Parent nor any Parent ERISA Affiliate has
incurred, nor reasonably expects to incur, any liability under Title IV of
ERISA (other than liability for premium payments to the PBGC arising in the
ordinary course).
27
Section 3.12 Labor Matters. Except as set forth in Section 3.12
of the Parent Disclosure Schedule: (i) there are no controversies pending
or, to the knowledge of Parent or any of its subsidiaries, threatened,
between Parent or any of its subsidiaries and any of their respective
employees, which controversies have or could reasonably be expected to have
a Material Adverse Effect; (ii) neither Parent nor any of its subsidiaries
is a party to any collective bargaining agreement or other labor union
contract applicable to persons employed by Parent or its subsidiaries, nor
does Parent or any of its subsidiaries know of any activities or proceedings
of any labor union to organize any such employees; and (iii) neither Parent
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 Parent or any of its subsidiaries which could reasonably be
expected to have a Material Adverse Effect.
Section 3.13 Registration Statement; Joint 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 Stock 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 Joint Proxy Statement/Prospectus will not, on the date the Joint
Proxy Statement/Prospectus (or any amendment or supplement thereto) is first
mailed to Shareholders of the Company, at the time of the 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 will omit to state any
material fact necessary in order to make the statements therein not 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
Joint 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 Joint Proxy Statement/Prospectus shall comply in
all material respects as to form with the requirements of the Securities
Act, the Exchange Act and the rules and regulations thereunder.
Notwithstanding the foregoing, Parent makes no representation or warranty
with respect to any information supplied by the Company which is contained
in, or furnished in connection with the preparation of, the Registration
Statement.
Section 3.14 Restrictions on Business Activities. Except for
this Agreement or as set forth in Section 3.14 of the Parent Disclosure
Schedule, to the best of Parent's knowledge, there is no agreement,
judgment, injunction, order or decree binding upon Parent or any of its
subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of Parent or any
of its subsidiaries, any acquisition
28
of property by Parent or any of its subsidiaries or the conduct of business
by Parent or any of its subsidiaries as currently conducted or as proposed
to be conducted by Parent, except for any prohibition or impairment as could
not reasonably be expected to have a Material Adverse Effect.
Section 3.15 Title to Property. Except as disclosed in Section
3.15 of the Parent Disclosure Schedule, 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 could not reasonably be
expected to have a Material Adverse Effect; and, to Parent's knowledge, all
leases pursuant to which Parent or any of its subsidiaries lease from other
material amounts of real or personal property are in good standing, valid
and effective in accordance with their respective terms, and there is not,
to the knowledge of Parent, 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) except where the lack of such
good standing, validity and effectiveness, or the existence of such default
or event of default could not reasonably be expected to have a Material
Adverse Effect.
Section 3.16 Insurance. All material fire and casualty, general
liability, business interruption, product liability, professional liability
and sprinkler and water damage insurance policies maintained by Parent or
any of its subsidiaries are with reputable insurance carriers, provide full
and adequate coverage for all normal risks incident to the business of
Parent and its subsidiaries and their respective properties and assets and
are in character and amount at least equivalent to that carried by entities
engaged in similar businesses and subject to the same or similar perils or
hazards, except as could not reasonably be expected to have a Material
Adverse Effect.
Section 3.17 Pooling Matters. Neither Parent nor any of its
affiliates has, to Parent's knowledge and based upon consultation with its
independent accountants, taken or agreed to take any action that could
affect the ability of Parent to account for the business combination to be
effected by the Merger as a pooling of interests.
Section 3.18 Share Ownership. Neither Parent, Merger Sub nor
any of their affiliates own any shares of Company Common Stock.
Section 3.19 Intellectual Property. Except as disclosed in
Section 3.19 of the Parent Disclosure Schedule, the Parent and its
subsidiaries own are licensed to use or otherwise possess, or can acquire on
reasonable terms, legally enforceable rights to use the patents, patent
rights, inventions, licenses, copyrights, know-how (including trade secrets
and other unpatented/unpatentable proprietary or confidential information,
systems or procedures), trademarks, servicemarks and tradenames presently
employed by them in connection with the business of the Parent as presently
conducted, and neither the Parent nor any of its subsidiaries
29
has knowledge of any infringement of or conflict with asserted rights of
others with respect to any of the foregoing, which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a Material Adverse Effect.
Section 3.20 Taxes. Other than as disclosed in Section 3.20 of
the Parent Disclosure Schedule, (i) Parent and its subsidiaries have timely
filed all Tax Returns required to be filed by them, (ii) Parent and its
subsidiaries have paid and discharged all Taxes due and have withheld all
Taxes required to be withheld with respect to employees in connection with
or with respect to the periods or transactions covered by such 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 that any such
proceedings are required) and with respect to which Parent is maintaining
adequate reserves, and (iii) there are no other Taxes that would be due if
asserted by a taxing authority, except with respect to which Parent is
maintaining reserves to the extent currently required unless the failure to
do so could not reasonably be expected to have a Material Adverse Effect.
Except as does not involve or would not result in liability to Parent or any
of its subsidiaries that could reasonably be expected to have a Material
Adverse Effect: (i) there are no tax liens on any assets of Parent or any
subsidiary thereof; (ii) neither Parent nor any of its subsidiaries has
granted any waiver of any statute of limitations with respect to, or any
extension of a period for the assessment of, any Tax; (iii) neither Parent
nor any of its subsidiaries has received any written notice of any Tax
deficiency outstanding, proposed or assessed against Parent or any of its
subsidiaries, or of any audit or other examination threatened, proposed or
currently in progress of any Tax Return of Parent or any of its
subsidiaries; (iv) there is no contract, agreement, plan or arrangement,
including but not limited to the provisions of the Agreement, covering any
employee or former employee of Parent or any of its subsidiaries that,
individually or collectively, could give rise to the payment of any amount
that would not be deductible pursuant to Section 280G or subject to the
excise tax pursuant to Section 4999 of the Code; (v) neither Parent nor any
of its subsidiaries is a party to or bound by any tax indemnity, tax sharing
or tax allocation agreements; (vi) neither Parent nor any of its
subsidiaries has filed any consent agreement under Section 341(f) of the
Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as defined in Section 341 (f)(4) of
the Code) owned by Parent; and (vii) except for the group of which Parent
and its subsidiaries are now presently members, neither Parent nor any of
its subsidiaries has ever been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code. The accruals
and reserves for Taxes (including deferred taxes) reflected in the Parent
Balance Sheet are adequate to cover all Taxes required to be accrued through
the date thereon (including interest and penalties, if any, thereon and
Taxes being contested) in accordance with generally accepted accounting
principles.
Section 3.21 Brokers. No broker, finder or investment banker
(other than Robertson Stephens & Company, the fees and expenses of which
will be paid by Parent) is entitled to any brokerage, finder's or other fee
or commission in connection with the
30
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent or Merger Sub.
Section 3.22 Interested Party Transactions. Except as set forth
in Section 3.22 of the Parent Disclosure Schedule, since February 28, 1995,
no event has occurred that would be required to be reported as a Certain
Relationship or Related Transaction, pursuant to Item 404 of Regulation S-K
promulgated by the SEC.
Section 3.23 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 of any type or kind
whatsoever or entered into any agreements or arrangements with any person.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
Section 4.1 Conduct of Business by the Company Pending the
Merger. The Company covenants and agrees that, during the period from the
date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, unless Parent shall otherwise agree
in writing, the Company shall conduct its business and shall cause the
businesses of its subsidiaries to be conducted only in, and the Company and
its subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice other than actions
taken by the Company or its subsidiaries in contemplation of the Merger; and
the Company shall use all 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:
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(a) amend or otherwise change the Articles of Incorporation or
By-Laws of the Company or any of its subsidiaries;
(b) issue, sell, pledge, dispose of or encumber, or authorize
the issuance, sale, pledge, disposition or encumbrance of, any shares of
capital stock of any class, or any options, warrants, convertible securities
or other rights of any kind to acquire any shares of capital stock, or any
other ownership interest (including, without limitation, any phantom
interest) in the Company, any of its subsidiaries or affiliates (except for
the issuance of shares of Company Common Stock issuable pursuant to Stock
Options which were granted under either the Company Stock Option Plans, the
Director Option Plans, or the ESPP and are outstanding on the date hereof).
(c) 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,
(ii) dispositions of obsolete or worthless assets, and (iii) sales of
immaterial assets not in excess of $150,000 in the aggregate);
(d)(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof)
in respect of any of its capital stock, except that a wholly owned
subsidiary of the Company may declare and pay a dividend to its parent, (ii)
split, combine or reclassify any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or (iii) amend the terms or
change the period of exercisability of, purchase, repurchase, redeem or
otherwise acquire, or permit any subsidiary to purchase, repurchase, redeem
or otherwise acquire, any of its securities or any securities of its
subsidiaries, including, without limitation, shares of Company Common Stock
or any option, warrant or right, directly or indirectly, to acquire shares
of Company Common Stock, or propose to do any of the foregoing;
(e)(i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof, except as described in Section 2.8 of the Company
Disclosure Schedule; (ii) incur any indebtedness for borrowed money or issue
any debt securities or assume, guarantee or endorse or otherwise as an
accommodation become responsible for, the obligations of any person or,
except in the ordinary course of business consistent with past practice,
make any loans or advances; (iii) enter into or amend any material contract
or agreement calling for aggregate payments in excess of $100,000; (iv)
authorize any capital expenditures or purchase of fixed assets which are, in
the aggregate, in excess of $150,000 (other than for office furnishings in
an amount in the aggregate not to exceed $200,000) for the Company and its
subsidiaries taken as a whole; or (v) enter into or amend any contract,
agreement, commitment or arrangement to effect any of the matters prohibited
by this Section 4.1(e);
32
(d) increase the compensation payable or to become payable to
its officers or employees, or grant any severance or termination pay to, or
enter into any employment or severance agreement with any director, officer
or other employee 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, except, in each case, as may be
required by law, provided the Company may increase wages in the ordinary
course of business consistent with the Company's past practice;
(g) take any action to change accounting policies or procedures
(including, without limitation, procedures with respect to revenue
recognition, payments of accounts payable and collection of accounts
receivable);
(h) make any material tax election inconsistent with past
practice or settle or compromise any material federal, state, local or
foreign tax liability or agree to an extension of a statute of limitations;
(i) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities
reflected or reserved against in the financial statements contained in the
Company SEC Reports filed prior to the date of this Agreement or incurred in
the ordinary course of business and consistent with past practice; or
(j) take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1 (a) through (i) above, or any action which
would make any of the representations or warranties of the Company contained
in this Agreement untrue or incorrect or prevent the Company from performing
or cause the Company not to perform its covenants hereunder.
Section 4.2 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, (i) solicit, initiate or encourage the initiation of
any inquiries or proposals regarding any merger, sale of substantial assets,
sale of shares of capital stock (including without limitation by way of a
tender offer) or similar transactions involving the Company or any
subsidiaries of the Company other than the Merger (any of the foregoing
inquiries or proposals being referred to herein as an "Acquisition
Proposal"), (ii) engage in negotiations or discussions concerning, or
provide any nonpublic information to any person relating to, any Acquisition
Proposal or (iii) agree to, approve or recommend any Acquisition Proposal.
Notwithstanding the foregoing, the Board of Directors of the Company may
furnish or provide such information or consider, negotiate, agree to,
approve or recommend to the Shareholders of the Company an Acquisition
33
Proposal not solicited in violation of this Agreement if, in the opinion of
the Board of Directors of the Company, it is required in the discharge of
its fiduciary duties under applicable law to furnish or provide such
information or to consider, negotiate, agree to, approve or recommend such
an Acquisition Proposal (after receiving advice from its independent legal
counsel to such effect).
(b) The Company shall notify Parent as soon as practical after
receipt of any Acquisition Proposal, or any modification of or amendment to
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 whether the Company is providing or
intends to provide the person making the Acquisition Proposal with access to
information concerning the Company as provided in Section 4.2(c).
(c) Notwithstanding anything to the contrary in this Agreement,
the Company may provide access and furnish information (but not encourage
the request for such information) pursuant to a confidentiality agreement at
least as restrictive as the one then in effect between Company and Parent
concerning its business, properties or assets to any person which has (i)
requested such access and information in connection with an Acquisition
Proposal, or (ii) stated in writing that it has a serious intention to make
such an Acquisition Proposal, in any such case of (i) or (ii) if in the
opinion of the Board of Directors of the Company, it is required in the
discharge of its fiduciary duties under applicable law to provide such
access or furnish such information (after receiving advice from its
independent legal counsel to such effect). The Company may not provide any
nonpublic information to such person if it has not prior to the date thereof
or simultaneously provided such information to Parent.
(d) The Company shall immediately cease and cause to be
terminated any existing discussions or negotiations with any persons (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 the
confidentiality provisions of any confidentiality agreement to which the
Company is a party.
(e) Nothing contained in this Section 4.2 shall prohibit the
Company from (i) taking and disclosing to the Company's Shareholders a
position with respect to a tender offer by a third party pursuant to Rule
14d-9 and Rule 14e-2 promulgated under the Exchange Act, or (ii) making such
disclosure to the Company's Shareholders which, in the opinion of the Board
of Directors of the Company, after consultation with independent legal
counsel to the Company, may be required under applicable law.
34
(f) The Company shall 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 4.2.
Section 4.3 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, 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 Certificate or By-Laws;
(b) 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; or
(c) 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 5.1 HSR Act. As promptly as practicable after the date
of the execution of this Agreement, the Company and Parent shall file
notifications under and in accordance with the HSR Act and any applicable
antitrust or similar acts in connection with the Merger and the transactions
contemplated hereby and to respond as promptly as practicable to any
inquiries received from the Federal Trade Commission (the "FTC"), the
Antitrust Division of the Department of Justice (the "Antitrust Division"),
and any applicable foreign agencies or authorities having jurisdiction for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other governmental authority in connection with antitrust
matters.
Section 5.2 Joint 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 Joint Proxy
Statement/Prospectus and the Registration Statement of the Parent with
respect to the Parent Common Stock to be issued in connection with the
Merger and shall use all reasonable
35
efforts to cause the Registration Statement to become effective as soon as
practicable, and to mail the Joint Proxy Statement/Prospectus to Company
shareholders, as soon thereafter as practicable. The Joint Proxy
Statement/Prospectus shall include the recommendation of the Boards of
Directors of the Company and Parent in favor of the Merger; provided, that
the Board of Directors of the Company may, at any time prior to the
Effective Time, withdraw, modify or change such recommendation if, in the
opinion of the Board of Directors of the Company, it is required to
withdraw, modify or change such recommendation in the discharge of its
fiduciary duties under applicable law (after receiving advice from its
independent legal counsel to such effect).
Section 5.3 Stockholder Meeting. The Company shall call and
hold the Stockholder Meeting as promptly as practicable and in accordance
with applicable laws for the purpose of voting upon the approval of the
Merger and as soon as practicable after the date on which the Registration
Statement becomes effective. The Company shall use all reasonable efforts
to solicit from its Shareholders proxies in favor of adoption of this
Agreement and approval of the transactions contemplated hereby and shall
take all other action necessary or advisable to secure the vote or consent
of Shareholders to obtain such approvals, provided, that the Company shall
not be obligated to hold the Stockholder Meeting or to take any other action
under this Section 5.3 if the Board of Directors of the Company has
withdrawn, modified or changed its recommendation as set forth in Section
5.2.
Section 5.4 Access to Information; Confidentiality. 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 shall each (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 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 shall make available to the other the appropriate
individuals (including attorneys, accountants and other professionals) for
discussion of the other's business, properties and personnel as either
Parent or the Company may reasonably request. Each party shall keep such
information confidential in accordance with the terms of the respective
confidentiality letters, dated May 17, 1996 and May 17, 1996 (the
"Confidentiality Letters"), between Parent and the Company.
Section 5.5 Consents; Approvals. The Company and Parent shall
each use their reasonable 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,
36
in each case as promptly as practicable. The Company and Parent shall
furnish promptly all information required to be included in the Joint Proxy
Statement/Prospectus 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 5.6 Agreements with Respect to 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, at the time of the Company
Shareholders Meeting, "affiliates" of the Company for purposes of Rule 145
under the Securities Act ("Rule 145"). The Company shall use its reasonable
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 connection with restrictions
on affiliates under Rule 145 and pooling of interests accounting treatment,
in substantially the form of Exhibit 5.6.
Section 5.7 Indemnification and Insurance.
(a) The Bylaws of the Surviving Corporation shall contain the
provisions with respect to indemnification set forth in the By-laws 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, By-laws or
any applicable indemnification agreements and regardless of whether the
Merger becomes effective, indemnify, defend and hold harmless, and, after
the Effective Time, the Parent shall, and shall cause the Surviving
Corporation, to the fullest extent permitted under applicable law, to
indemnify, defend and hold harmless, each present and former director,
officer or employee 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, (x) arising out of or pertaining to the transactions
contemplated by this Agreement or (y) otherwise with respect to any acts or
omissions occurring at or prior to the Effective Time. Any determination
required to made with respect to whether an Indemnified Party's conduct
complied with the standards set forth under Michigan law, the Company's
Articles of Incorporation, By-laws or indemnification agreements, as the
case may be, shall be made by independent counsel mutually acceptable to
Parent and the Indemnified Party.
37
(c) Parent shall and shall cause the Surviving Corporation to
honor and fulfill in all respects the obligations of the Company pursuant to
indemnification agreements with the Company's directors and officers
existing at or before the Effective Time.
(d) For a period of not less than three year after the Effective
Time, Parent shall, or shall cause the Surviving Corporation 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 made
available to Parent) on terms substantially comparable to those now
applicable to directors and officers of the Company; provided, however, that
in no event shall Parent or the Surviving Corporation be required to expend
in excess of 200% 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 200% of the annual
premium.
(e) This Section shall survive the consummation of the Merger at
the Effective Time, is intended to benefit the Company, the Surviving
Corporation and the Indemnified Parties, shall be binding on all successors
and assigns of the Surviving Corporation and shall be enforceable by the
Indemnified Parties.
Section 5.8 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 nonoccurrence of any event the occurrence
or nonoccurrence of which would be likely to cause any representation or
warranty contained in this Agreement to become materially untrue or
inaccurate, or (ii) any failure of the Company, Parent or Merger Sub, as the
case may be, materially 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; and provided further that failure to give such notice
shall not be treated as a breach of covenant for the purposes of Sections
6.2(a) or 6.3(a) unless the failure to give such notice results in material
prejudice to the other party.
Section 5.9 Further Action/Tax Treatment. 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 otherwise to satisfy or cause to be satisfied all
conditions precedent to its obligations under this Agreement; provided,
however, that none of the parties shall be obligated to use all reasonable
efforts to take, or cause to be taken, any actions pursuant to this Section
5.9 if, in the opinion of its Board of Directors, refraining from using such
efforts or taking such actions would be required in the discharge of its
fiduciary duties under applicable law (after receiving advice of its
independent legal counsel to
38
such effect). The foregoing covenant shall not include any obligation by
Parent or the Company to agree to divest, abandon, license or take similar
action with respect to any assets (tangible or intangible) of Parent or the
Company. Each of Parent, Merger Sub and the Company shall use its best
efforts to cause the Merger to qualify, and will not (both before and after
consummation of the Merger) take any actions which to its knowledge could
reasonably be expected to prevent the Merger from qualifying, as a
reorganization under the provisions of Section 368 of the Code.
Section 5.10 Public Announcements. Parent and the Company shall
consult with each other before issuing any press release with respect to the
Merger or this Agreement and shall not issue any such press release or make
any such public statement without the prior 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 rules and regulations of the New York Stock Exchange or the
Nasdaq Stock Market National Market ("Nasdaq"), if it has used all
reasonable efforts to consult with the other party prior thereto.
Section 5.11 Conveyance Taxes. Parent and the Company shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications, or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and
stamp taxes, any transfer, recording, registration and other fees, and any
similar taxes which become payable in connection with the transactions
contemplated hereby that are required or permitted to be filed at or before
the Effective Time.
Section 5.12 Accountants' Letters. Upon reasonable notice from
the other, the Company or Parent shall use their respective best efforts to
cause Arthur Andersen LLP or KPMG Peat Marwick L.L.P, respectively, to
deliver to Parent or the Company, as the case may be, a letter, dated within
2 business days of the Effective Date of the Registration Statement covering
such matters as are requested by Parent or the Company, as the case may be,
and as are customarily addressed in accountant's "comfort" letters.
Section 5.13 Pooling Accounting Treatment. Each of Parent and
the Company agrees not to take any action that to its knowledge could
reasonably be expected to adversely affect the ability of Parent to treat
the Merger as a pooling of interests, and each of Parent and the Company
agrees to take such action as may be reasonably required to negate the
impact of any past actions which to its knowledge could reasonably be
expected to adversely impact the ability of Parent to treat the Merger as a
pooling of interests, unless the Board of Directors of the Company has
withdrawn, modified or changed its recommendation as set forth in Section
5.2. The taking by Parent or the Company of any action prohibited by the
previous sentence, or the failure of Parent or the Company to take any
action required by the previous sentence, shall, if the Merger is not able
to be accounted for as a pooling of interests, constitute a breach of this
Agreement by Parent or the Company, as the case may be, for the purposes of
Section 7.1(f).
39
Section 5.14 Nasdaq Listing. The Company shall use its best
efforts to continue the quotation of the Company Common Stock on the Nasdaq
National Market during the term of this Agreement.
Section 5.15 Listing of Parent Shares. Parent shall use its
best efforts to cause the Parent Shares to be issued in the Merger to be
approved for quotation, upon official notice of issuance, on the New York
Stock Exchange.
Section 5.16 Benefit Plans. All welfare benefit plans of Parent
or the Surviving Corporation in which the Company's employees participate
after the Effective Time shall (i) recognize expenses and claims that were
incurred by the Company's employees in the year in which the Effective Time
occurs and recognize for purposes of computing deductible amounts and
copayments under the Company's plans as of the Effective Time and (ii)
provide coverage for pre-existing health conditions to the extent covered
under the applicable plans or programs of the Company as of the Effective
Time. In addition, employees of the Surviving Corporation shall receive
credit for their prior service with the Company and its subsidiaries for
eligibility and vesting purposes and for vacation accrual purposes.
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.1 Conditions to Obligation of Each Party to Effect
the Merger. The respective obligations of each party to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of
the following conditions:
(a) Effectiveness of the Registration Statement. The
Registration Statement shall have been declared effective by the SEC under
the Securities Act. No stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC and no proceedings
for that purpose and no similar proceeding in respect of the Joint Proxy
Statement/Prospectus shall have been initiated or threatened by the SEC;
(b) Stockholder 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 waiting period applicable to the consummation
of the Merger under the HSR Act and any applicable foreign antitrust or
similar acts 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 preventing the consummation of the Merger
40
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; and
(e) 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 (including the
Surviving Corporation and its subsidiaries), as a result of the Merger or
the transactions contemplated by this Agreement.
Sectopm 6.2 Additional Conditions to Obligations of Parent and
Merger Sub. The obligations of Parent and Merger Sub to effect the Merger
are also subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true and
correct in all respects at and as of the Effective Time as if made at and as
of such time, except for (i) changes contemplated by this Agreement, (ii)
those representations and warranties which address matters only as of a
particular date (which shall have been true and correct as of such date,
subject to clause (iii)), and (iii) where the failure to be true and correct
could not reasonably be expected to have a Material Adverse Effect, with the
same force and effect as if made at and as of the Effective Time, and Parent
and Merger Sub shall have received a certificate to such effect signed by
the President and the 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 at or
prior to the Effective Time, and Parent and Merger Sub shall have received a
certificate to such effect signed by the President and the Chief Financial
Officer of the Company;
(c) Consents Obtained. All consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made, by the Company for the due authorization, execution and delivery
of this Agreement and the consummation by it of the
41
transactions contemplated hereby shall have been obtained and made by the
Company, except where the failure to receive such consents, etc. could not
reasonably be expected to have a Material Adverse Effect on the Company or
Parent;
(d) Opinion of Counsel. Parent shall have received a written
opinion from Ropes & Gray, in form and substance reasonably satisfactory to
Parent, to the effect that the Merger will constitute a reorganization
within the meaning of Section 368 of the Code;
(e) Opinion of Accountant. Parent shall have received an
opinion of each of KPMG Peat Marwick LLP and Arthur Andersen LLP,
independent certified public accountants, to the effect that the Merger
qualifies for pooling of interests accounting treatment if consummated in
accordance with this Agreement;
(f) 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;
(g) Registration Rights. All existing registration rights of
holders of Company securities shall have been terminated; and
(h) Employment Agreements. All of the persons listed on Exhibit
6.2(i)(1) and at least four of the persons listed on Exhibit 6.2(i)(2) shall
have entered into employment agreements with Parent on mutually acceptable
terms, such agreements shall be in full force and effect as of the Effective
Time and such persons shall be in the employ of the Company immediately
prior to the Effective Time.
Section 6.3 Additional Conditions to Obligation of the Company.
The obligation of the Company to effect the Merger is also subject to the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be
true and correct in all respects on and as of the Effective Time, except for
(i) changes contemplated by this Agreement, (ii) those representations and
warranties which address matters only as of a particular date (which shall
have been true and correct as of such date, subject to clause (iii)), and
(iii) where the failure to be true and correct could not reasonably be
expected to have a Material Adverse Effect, with the same force and effect
as if made on and as of the Effective Time, and the Company shall have
received a certificate to such effect signed by the Chairman and the Chief
Financial Officer 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
42
the Company shall have received a certificate to such effect signed by the
Chairman and the Chief Financial Officer of Parent;
(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, except where the failure to receive such consents, etc.
could not reasonably be expected to have a Material Adverse Effect on the
Company or Parent;
(d) Tax Opinions. The Company shall have received a written
opinion of Dykema Gossett, PLLC in form and substance reasonably
satisfactory to the Company, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code;
(e) Opinion of Accountant. The Company shall have received a
copy of the opinions referred to in Section 6.2(e) above;
(f) Fairness Opinion. The fairness opinion referred to in
Section 2.22 shall not have been withdrawn, amended or modified; and
(g) Listing of Parent Shares. The Parent Shares to be issued in
the Merger and such other shares required to be reserved for issuance in
connection with the Merger shall have been authorized for listing on the New
York Stock Exchange, subject to notice of official issuance.
ARTICLE VII
TERMINATION
Sectopm 7.1 Termination. This Agreement may be terminated at
any time prior to the Effective Time, notwithstanding approval thereof by
the Shareholders of the Company or Parent:
(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 September 30, 1996 (provided that the right to terminate
this Agreement under this Section 7.1(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before such
date); or
43
(c) by either Parent or the Company if a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued a nonappealable final order, decree or ruling
or taken any other action having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger (provided that the right to
terminate this Agreement under this Section 7.1(c) shall not be available to
any party who has not complied with its obligations under Section 5.9 and
such noncompliance materially contributed to the issuance of any such order,
decree or ruling or the taking of such action); or
(d) by Parent or the Company, if the requisite vote of the
Shareholders of the Company, shall not have been obtained by September 30,
1996; or
(e) by Parent or the Company, if: (i) the Board of Directors of
the Company shall withdraw, modify or change its approval or recommendation
of this Agreement or the Merger in a manner adverse to Parent or shall have
resolved to do so; (ii) the Board of Directors of the Company shall have
recommended to the Shareholders of the Company an Alternative Transaction
(as defined below); or (iii) a tender offer or exchange offer for 25% or
more of the outstanding shares of Company Common Stock is commenced (other
than by Parent or an affiliate of Parent) and the Board of Directors of the
Company recommends that the Shareholders of the Company tender their shares
in such tender or exchange offer; or
(f) by Parent or the Company, respectively (i) if any
representation or warranty of the Company or Parent, respectively, set forth
in this Agreement shall be untrue when made, or (ii) upon a breach of any
covenant or agreement on the part of the Company or Parent, respectively,
set forth in this Agreement, such that in either case of (i) or (ii) above
the conditions set forth in Section 6.2(a) or 6.2(b), or Section 6.3(a) or
6.3(b), as the case may be, would not be satisfied (either (i) or (ii) above
being a "Terminating Breach"), provided, that, if such Terminating Breach is
curable prior to September 30, 1996 by the Company or Parent, as the case
may be, through the exercise of its reasonable best efforts and for so long
as the Company or Parent, as the case may be, continues to exercise such
reasonable best efforts, neither Parent nor the Company, respectively, may
terminate this Agreement under this Section 7.1(f); or
(g) by Parent, if any representation or warranty of the Company
shall have become untrue such that the condition set forth in Section 6.2(a)
would not be satisfied, or by the Company, if any representation or warranty
of Parent shall have become untrue such that the condition set forth in
Section 6.3(a) would not be satisfied, in either case other than by reason
of a Terminating Breach;
(h) by Parent, if any person (or "group", as defined in Section
13(d)(3) of the Exchange Act) other than Parent or its affiliates is or
becomes the beneficial owner of 25% or more of the outstanding Shares; or
44
(f) by Parent or the Company, if the Company enters into a
definitive agreement relating to an Alternative Transaction.
As used herein, "Alternative Transaction" means any of (i) a
transaction pursuant to which any person (or group of persons) other than
Parent or its affiliates (a "Third Party") acquires or would acquire more
than 25% 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 25% 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 or would
acquire control of assets (including for this purpose the outstanding equity
securities of subsidiaries of the Company, and the entity surviving any
merger or business combination including any of them) 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 25% of the
fair market value of all the assets of the Company and its subsidiaries,
taken as a whole, immediately prior to such transaction.
Section 7.2 Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 7.1, this Agreement shall
forthwith become void and there shall be no liability on the part of any
party hereto or any of its affiliates, directors, officers or Shareholders
except (i) as set forth in Section 7.3 and Section 8.1 hereof, and (ii)
nothing herein shall relieve any party from liability for any breach hereof.
Section 7.3 Fees and Expenses.
(a) Except as set forth in this Section 7.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses,
whether or not the Merger is consummated; provided, however, that Parent and
the Company shall share equally all fees and expenses, other than
accountants' and attorneys' fees, incurred in connection with the printing
and filing of the Joint Proxy Statement/Prospectus (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 $4,400,000 (the "Fee")
plus actual, documented and reasonable out-of-pocket expenses of Parent
relating to the transactions contemplated by this Agreement (including, but
not limited to, fees and expenses of Parent's counsel, accountants and
financial advisers) (collectively, "Parent Expenses") upon the first to
occur of the following events:
(i) the termination of this Agreement by Parent or the
Company pursuant to Section 7.1(d) as a result of the failure to receive the
requisite vote for approval and adoption of the Merger Agreement by the
Shareholders of the Company by September
45
30, 1996; provided, however, that Parent shall be entitled only to be paid
the Parent Expenses under this Section 7.3(b)(i) if the Board of Directors
of the Company has not withdrawn, modified or changed its recommendation of
the Merger in a manner adverse to Parent; or
(ii) the termination of this Agreement by Parent or the
Company pursuant to Section 7.1(e); or
(iii) the termination of this Agreement by Parent
pursuant to Section 7.1(f) on account of a Terminating Breach by the
Company; or
(iv) the termination of this Agreement by Parent
pursuant to Section 7.1(h) provided, however, that Parent shall not be
entitled to the Fee or the Parent Expenses under this Section 7.3(b)(v)
unless the Company shall have opted out of chapter 7A, Sections 775 through
784 of the MBCA, or chapter 7B, Sections 790 through 799 of the MBCA; or
(v) the termination of this Agreement by the Parent or
the Company pursuant to Section 7.1(i).
(c) The Fee and expenses payable pursuant to Section 7.3(b)
shall be paid within one business day after the first to occur of any of the
events described in Section 7.3(b)(i), (ii), (iii), (iv) or (v).
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Effectiveness of Representations, Warranties and
Agreements; Knowledge, Etc.
(a) Except as otherwise provided in this Section 8.1, 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 7.1, as the case may be,
except that the agreements set forth in this Section 8.1 shall survive
independently and Article I and Sections 5.7 and 5.16 shall survive the
Effective Time indefinitely and those set forth in Section 7.3 shall survive
such termination indefinitely. The Confidentiality Letters shall survive
termination of this Agreement as provided therein.
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(b) Notwithstanding anything to the contrary contained in this
Agreement, any of the Exhibits, the Company Disclosure Schedule or the
Parent Disclosure Schedule, any information disclosed in one section of this
Agreement, an Exhibit, the Company Disclosure Schedule or the Parent
Disclosure Schedule shall be deemed to be disclosed with respect to this
Agreement, the Exhibits and all sections of the Company Disclosure Schedule
or the Parent Disclosure Schedule, as the case may be, into which they are
specifically incorporated by reference.
Section 8.2 Notices. All notices and other communications
given or made pursuant hereto shall be in writing and shall be deemed to
have been duly given or made if and when delivered personally or by
overnight courier to the parties at the following addresses or sent by
electronic transmission, with confirmation received, to the telecopy numbers
specified below (or at such other address or telecopy number for a party as
shall be specified by like notice):
(a) If to Parent or Merger Sub:
Cabletron Systems, Inc.
35 Industrial Way
Rochester, NH
Telecopier No.: (603) 332-4616
Telephone No.: (603) 332-9400
Attention: David Kirkpatrick
With a copy to:
Douglass N. Ellis, Esq.
Ropes & Gray
One International Place
Boston, MA 02110
Telecopier No.: (617) 951-7050
Telephone No.: (617) 951-7374
47
(b) If to the Company:
Network Express, Inc.
4251 Plymouth Road
Ann Arbor, MI 48105
Telecopier No.: (313) 995-1114
Telephone No.: (313) 761-5005
Attention: President
With a copy to:
Fredrick M. Miller, Esq.
Dykema Gossett PLLC
400 Renaissance Center
Detroit, Michigan 48243-1668
Telecopier No.: (313) 568-6975
Telephone No.: (313) 568-6915
Section 8.3 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 first mentioned
person (either alone, or through or together with any other subsidiary) has,
directly or indirectly, an interest of 5% or more;
(b) "beneficial owner" with respect to any shares of Company
Common Stock means a person who shall be deemed to be the beneficial owner
of such shares (i) which such person or any of its affiliates or associates
(as such term is defined in Rule 12b-2 of the Exchange Act) beneficially
owns, directly or indirectly, (ii) which such person or any of its
affiliates or associates has, directly or indirectly, (A) the right to
acquire (whether such right is exercisable immediately or subject only to
the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (B) the right to vote pursuant to any
agreement, arrangement or understanding, or (iii) which are beneficially
owned, directly or indirectly, by any other persons with whom such person or
any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of
any shares;
48
(c) "business day" means any day other than a day on which banks
in The Commonwealth of Massachusetts are required or authorized to be
closed;
(d) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a person, whether through the ownership of stock,
as trustee or executor, by contract or credit arrangement or otherwise;
(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, 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 8.4 Amendment. This Agreement may be amended by the
parties hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time; provided, however, that,
after approval of the 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.
Section 8.5 Waiver. At any time prior to the Effective Time,
any party hereto may with respect to any other party hereto (a) extend the
time for the performance of any of the obligations or other acts, (b) waive
any inaccuracies in the representations and warranties contained herein or
in any document delivered pursuant hereto, or (c) waive compliance with any
of the agreements or conditions contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed
by the party or parties to be bound thereby.
Section 8.6 Headings. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement.
Sectoion 8.7 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any
rule of law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner adverse to any party. Upon such determination that
any term or other
49
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the fullest extent possible.
Section 8.8 Entire Agreement. This Agreement constitutes the
entire agreement and supersedes all prior agreements and undertakings (other
than the Confidentiality Letters), both written and oral, among the parties,
or any of them, with respect to the subject matter hereof.
Section 8.9 Assignment; Guarantee of Merger Sub Obligations.
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 subsidiary thereof provided that no such assignment shall
relieve the assigning party of its obligations hereunder. Parent guarantees
the full and punctual performance by Merger Sub of all the obligations
hereunder of Merger Sub or any such assignees.
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, including, without
limitation, by way of subrogation, other than Sections 5.7 and 5.16 (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 any other or further exercise thereof or of any
other right. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.
Section 8.12 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the internal laws of the State of
Delaware applicable to contracts executed and fully performed within the
State of Delaware.
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.
[This space intentionally left blank.]
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
CABLETRON SYSTEMS, INC.
By:................................
Name: Craig R. Benson
Title: Chairman and Chief
Operating Officer
CABLETRON SYSTEMS OF
MICHIGAN, INC.
By:................................
Name: Craig R. Benson
Title: President
NETWORK EXPRESS, INC.
By:................................
Name: Richard P. Eidswick
Title: President and Chief
Executive Officer