EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
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(Any exhibits or schedules that are omitted, are omitted pursuant to Item
601(b)(2) of Regulation S-K. The Registrant agrees, however, to furnish
supplementary a copy of such omitted items to the Commission upon request).
AGREEMENT AND PLAN OF MERGER
AMONG
LERNOUT & HAUSPIE SPEECH PRODUCTS N.V.
L&H HOLDINGS USA, INC.
DRAGON SYSTEMS, INC.
AND CERTAIN PRINCIPAL STOCKHOLDERS OF DRAGON SYSTEMS, INC.
March 27, 2000
TABLE OF CONTENTS
ARTICLE I. THE MERGER........................................................................ 5
Section 1.1 Effective Time of the Merger.................................................... 5
Section 1.2 Closing......................................................................... 5
Section 1.3 Effects of the Merger........................................................... 5
Section 1.4 Directors and Officers.......................................................... 5
Section 1.5 Actions Prior to Closing........................................................ 6
Section 1.6 Stock Options................................................................... 6
Section 1.7 Alternative Merger Structure.................................................... 6
ARTICLE II. CONVERSION OF SECURITIES.......................................................... 7
Section 2.1 Conversion of Capital Stock..................................................... 7
Section 2.2 Exchange of Certificates........................................................ 8
Section 2.3 Optional Adjustment to Merger Consideration for Indebtedness.................... 10
Section 2.4 Escrow Shares................................................................... 11
Section 2.5 Transfer of Principal Stockholders' Merger Shares............................... 12
Section 2.6 Stockholders' Representatives................................................... 12
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF COMPANY......................................... 12
Section 3.1 Organization of Company......................................................... 12
Section 3.2 Company Capital Structure....................................................... 13
Section 3.3 Authority; No Conflict; Required Filings and Consents........................... 14
Section 3.4 Financial Statements............................................................ 15
Section 3.5 No Undisclosed Liabilities...................................................... 15
Section 3.6 Absence of Certain Changes or Events............................................ 15
Section 3.7 Taxes........................................................................... 16
Section 3.8 Title to Properties............................................................. 17
Section 3.9 Intellectual Property........................................................... 18
Section 3.10 Agreements, Contracts and Commitments........................................... 20
Section 3.11 Litigation...................................................................... 21
Section 3.12 Environmental Matters........................................................... 21
Section 3.13 ERISA and Employee Benefit Plans................................................ 23
Section 3.14 Compliance With Laws............................................................ 25
Section 3.15 Permits......................................................................... 25
Section 3.16 Registration Statement; Proxy Statement/Prospectus.............................. 26
Section 3.17 Labor Matters................................................................... 26
Section 3.18 Insurance....................................................................... 26
Section 3.19 Government Contracts............................................................ 26
Section 3.20 Year 2000....................................................................... 27
Section 3.21 Product Returns................................................................. 27
Section 3.22 Customers and Suppliers......................................................... 27
Section 3.23 Section 203 of the DGCL Not Applicable.......................................... 28
Section 3.24 Transactions with Interested Persons............................................ 28
Section 3.25 Absence of Sensitive Payments................................................... 28
Section 3.26 Indebtedness.................................................................... 28
Section 3.27 Tax Representation Letter....................................................... 29
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB................................... 29
Section 4.1 Organization of Buyer and Sub................................................... 29
Section 4.2 Capitalization.................................................................. 29
Section 4.3 Authority; No Conflict; Required Filings and Consents........................... 30
Section 4.4 Public Filings; Financial Statements............................................ 31
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Section 4.5 No Undisclosed Liabilities...................................................... 32
Section 4.6 Absence of Certain Changes or Events............................................ 32
Section 4.7 Information Supplied............................................................ 32
Section 4.8 Active Trade or Business of Buyer............................................... 33
Section 4.9 Tax Representation Letter....................................................... 33
ARTICLE V. CONDUCT OF BUSINESS............................................................... 33
Section 5.1 Covenants of Company............................................................ 33
Section 5.2 Options......................................................................... 36
Section 5.3 Covenants of Buyer.............................................................. 36
Section 5.4 Cooperation..................................................................... 37
Section 5.5 Confidentiality................................................................. 37
Section 5.6 Post-Closing Transactions....................................................... 37
ARTICLE VI. ADDITIONAL AGREEMENTS............................................................. 38
Section 6.1 Exclusivity..................................................................... 38
Section 6.2 Tender for Shares; Placement Memorandum/Proxy Statement; Registration Statement. 38
Section 6.3 Stockholder Documents........................................................... 40
Section 6.4 Access to Information........................................................... 40
Section 6.5 Legal Conditions to Merger...................................................... 41
Section 6.6 Employee Benefit Plans.......................................................... 42
Section 6.7 Public Disclosure............................................................... 42
Section 6.8 Tax-Free Reorganization......................................................... 43
Section 6.9 Affiliate Agreements............................................................ 43
Section 6.10 Nasdaq Listing.................................................................. 43
Section 6.11 Notification of Certain Matters................................................. 43
Section 6.12 Special Stockholders' Meeting................................................... 44
Section 6.13 Special Board Meeting of Buyer.................................................. 44
Section 6.14 Company Stock Options........................................................... 44
Section 6.15 Indemnification................................................................. 45
Section 6.16 Tax Filings..................................................................... 46
Section 6.17 Guaranty by Buyer............................................................... 46
Section 6.18 Release......................................................................... 46
Section 6.19 Regulation D.................................................................... 47
Section 6.20 Post-Closing Warrants........................................................... 47
Section 6.21 UK Subsidiary Optionholders..................................................... 47
Section 6.22 Shelf Registration Statement.................................................... 47
Section 6.23 Substitution of Warrants for Options............................................ 48
ARTICLE VII. CONDITIONS TO MERGER.............................................................. 48
Section 7.1 Conditions to Each Party's Obligation To Effect the Merger...................... 48
Section 7.2 Additional Conditions to Obligations of Buyer and Sub........................... 49
Section 7.3 Additional Conditions to Obligations of Company................................. 50
ARTICLE VIII. INDEMNIFICATION................................................................... 51
Section 8.1 Definitions..................................................................... 51
Section 8.2 Indemnification by the Principal Stockholders................................... 52
Section 8.3 Defense of Third Party Actions.................................................. 53
Section 8.4 Stockholder Representatives..................................................... 54
Section 8.5 Other Indemnification Provisions................................................ 54
ARTICLE IX. TERMINATION AND AMENDMENT......................................................... 55
Section 9.1 Termination..................................................................... 55
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Section 9.2 Effect of Termination........................................................... 55
Section 9.3 Fees and Expenses............................................................... 56
Section 9.4 Amendment....................................................................... 56
Section 9.5 Extension; Waiver............................................................... 56
ARTICLE X. MISCELLANEOUS..................................................................... 56
Section 10.1 Survival of Representations, Warranties and Agreements.......................... 56
Section 10.2 Notices......................................................................... 56
Section 10.3 Brokers or Finders.............................................................. 58
Section 10.4 Interpretation.................................................................. 59
Section 10.5 Counterparts.................................................................... 59
Section 10.6 Entire Agreement; No Third Party Beneficiaries.................................. 59
Section 10.7 Governing Law and Venue......................................................... 59
Section 10.8 Waiver of Jury Trial............................................................ 60
Section 10.9 Assignment...................................................................... 60
Section 10.10 Severability.................................................................... 60
Section 10.11 Other Remedies; Specific Performance............................................ 60
EXHIBITS
Exhibit A Form of Voting Agreement and Waiver
Exhibit B Form of Exchange Agent Agreement
Exhibit C Form of Indemnity Escrow Agreement
Exhibit D Form of Limited Liability Company Agreement
Exhibit E Form of Company Tax Representation Letter
Exhibit F Form of Buyer and Sub Tax Representation Letter
Exhibit G Form of Affiliate Agreement
Exhibit H Form of Stockholders' Agreement
Exhibit I Principal Terms of Registration Rights Agreement
SCHEDULES
Company Disclosure Schedule
Buyer Disclosure Schedule
Schedule 6.2(a) Further Assurances Regarding the Disposition of Certain Options
Schedule 7.2(l) Terminations
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TABLE OF DEFINED TERMS
TERM CROSS REFERENCE
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1999 Financial Statements..................................................................... Section 3.4
Affiliate..................................................................................... Section 3.13
Agreement..................................................................................... Preamble
Alternative Transaction....................................................................... Section 1.7
Antitrust Laws................................................................................ Section 6.5
Benefit Plan.................................................................................. Section 3.13
Buyer......................................................................................... Preamble
Buyer Ancillary Agreements.................................................................... Section 4.3
Buyer Balance Sheet........................................................................... Section 4.4
Buyer Common Stock............................................................................ Section 2.1
Buyer Disclosure Schedule..................................................................... Article IV
Buyer Material Adverse Effect................................................................. Section 4.1
Buyer Preferred Stock......................................................................... Section 4.2
Buyer SEC Reports............................................................................. Section 4.4
Buyer Unaudited Financial Statements.......................................................... Section 4.4
Buyer's Indemnified Persons................................................................... Section 8.1
Cap........................................................................................... Section 8.2
CERCLA........................................................................................ Section 3.12
Certificate of Merger......................................................................... Section 1.1
Certificates.................................................................................. Section 2.2
Claims........................................................................................ Section 6.18
Closing....................................................................................... Section 1.2
Closing Date.................................................................................. Section 1.2
Closing Indebtedness.......................................................................... Section 2.3
Closing Indebtedness Statement................................................................ Section 2.3
Code.......................................................................................... Preamble
Company....................................................................................... Preamble
Company Ancillary Agreements.................................................................. Section 3.3
Company Balance Sheet......................................................................... Section 3.4
Company Common Stock.......................................................................... Section 1.5
Company Disclosure Schedule................................................................... Article III
Company Intellectual Property Rights.......................................................... Section 3.9
Company Material Adverse Effect............................................................... Section 3.1
Company Material Contracts.................................................................... Section 3.10
Company Permits............................................................................... Section 3.15
Company Preferred Stock....................................................................... Section 1.5
Company Stock Option Notices.................................................................. Section 6.14
Company Stock Plans........................................................................... Section 1.6
Company Third Party Intellectual Property Rights.............................................. Section 3.9
Company's Indemnified Persons................................................................. Section 8.1
Confidentiality Agreement..................................................................... Section 5.5
Continuing Employee........................................................................... Section 6.6
Deductible.................................................................................... Section 8.2
Deemed Total Consideration.................................................................... Section 2.3
Designated Group.............................................................................. Section 10.1
DGCL.......................................................................................... Section 1.1
Disposition................................................................................... Section 5.6
Dissenting Shares................................................................................. Section 2.1
Effective Time.................................................................................... Section 1.1
Environmental Laws................................................................................ Section 3.12
ERISA............................................................................................. Section 3.13
ERISA Benefit Plan................................................................................ Section 3.13
Escrow............................................................................................ Section 2.4
Escrow Period..................................................................................... Section 8.2
Escrow Shares..................................................................................... Section 2.4
Exchange Act...................................................................................... Section 4.4
Exchange Agent.................................................................................... Section 2.2
Exchange Fund..................................................................................... Section 2.2
Exchange Ratio.................................................................................... Section 2.1
Fleet............................................................................................. Section 2.3
Governmental Entity............................................................................... Section 3.3
Guaranty.......................................................................................... Section 6.17
Hazardous Materials............................................................................... Section 3.12
HSR Act........................................................................................... Section 3.3
Indebtedness...................................................................................... Section 3.26
Indemnified Party................................................................................. Section 6.15
Indemnified Person................................................................................ Section 8.1
Indemnifying Person............................................................................... Section 8.1
Indemnity Escrow Agreement........................................................................ Section 2.4
Independent Accounting Firm....................................................................... Section 2.3
Leases............................................................................................ Section 3.8
Letter of Transmittal............................................................................. Section 2.2
LLC............................................................................................... Preamble
LLC Agreement..................................................................................... Section 2.5
Loan.............................................................................................. Section 6.17
Loan Documents.................................................................................... Section 3.26
Losses............................................................................................ Section 8.1
Material Customer................................................................................. Section 3.22
Maximum Premium................................................................................... Section 6.15
Merger............................................................................................ Preamble
Merger Shares..................................................................................... Section 2.1
Net Cash Amount................................................................................... Section 2.3
Options........................................................................................... Section 1.6
Order............................................................................................. Section 7.1
Outside Date...................................................................................... Section 9.1
Patents........................................................................................... Section 3.9
PBGC.............................................................................................. Section 3.13
Placement Memorandum/Proxy Statement.............................................................. Section 6.2
Principal Stockholders............................................................................ Preamble
Proxy Statement................................................................................... Section 6.2
RCRA.............................................................................................. Section 3.12
Registration Rights Agreement..................................................................... Section 7.3
Regulation D...................................................................................... Section 6.2
Releasees................................................................................... Section 6.18
Rule 145.................................................................................... Section 6.9
Rule 145 Affiliate.......................................................................... Section 6.9
Seagate..................................................................................... Section 5.1
Second Request.............................................................................. Section 6.5
Securities Act.............................................................................. Section 4.4
Securities Act.............................................................................. Section 6.2
Shelf Registration Statement................................................................ Section 6.22
Site........................................................................................ Section 3.12
Special Stockholders' Meeting............................................................... Section 6.2
Stockholder Representatives................................................................. Section 8.4
Stockholders................................................................................ Section 2.2
Sub......................................................................................... Preamble
Subsidiary.................................................................................. Section 3.1
Surviving Corporation....................................................................... Section 1.3
Tax Returns................................................................................. Section 3.7
Taxes....................................................................................... Section 3.7
Third Party Acquisition..................................................................... Section 6.1
Third Party Action.......................................................................... Section 8.1
U.S. GAAP................................................................................... Section 3.4
Voting Agreement............................................................................ Preamble
Warrants.................................................................................... Section 1.6
Year 2000 Compliant......................................................................... Section 3.20
AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of March 27, 2000,
by and among Lernout & Hauspie Speech Products N.V., a Belgian corporation
("Buyer"), L&H Holdings USA, Inc., a Delaware corporation and a direct, wholly
owned subsidiary of Buyer ("Sub"), Dragon Systems, Inc., a Delaware corporation
("Company"), and the principal stockholders of Company listed on the signature
page hereof (the "Principal Stockholders").
WHEREAS, the Boards of Directors of Buyer and Company deem it advisable and
in the best interests of each corporation and its respective stockholders that
Buyer and Company combine in order to advance the long-term business interests
of Buyer and Company;
WHEREAS, the combination of Buyer and Company shall be effected by the
terms of this Agreement through a merger of Company into Sub, as a result of
which the stockholders of Company will become stockholders of Buyer (the
"Merger");
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Buyer's willingness to enter into this
Agreement, the Principal Stockholders have entered into a Voting Agreement dated
as of the date of this Agreement in the form attached as Exhibit A hereto (the
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"Voting Agreement"), pursuant to which the Principal Stockholders have granted
to Sub an irrevocable proxy to vote all of the shares of capital stock of
Company that such stockholders own; and
WHEREAS, each of the Principal Stockholders has agreed with Buyer to
transfer the shares of Buyer Common Stock (as defined in Section 2.1(c) hereof)
that such Principal Stockholder will receive pursuant to the Merger to a newly-
formed limited liability company (the "LLC") of which he, she or it will be the
sole member with an interest for U.S. federal income tax purposes; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I. THE MERGER
Section 1.1 Effective Time of the Merger.
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Subject to the provisions of this Agreement, a certificate of merger in
such form as is required by the relevant provisions of the Delaware General
Corporation Law ("DGCL") (the "Certificate of Merger") shall be duly executed
and acknowledged by the Surviving Corporation (as defined in Section 1.3) and
thereafter delivered to the Secretary of State of the State of Delaware for
filing, as soon as practicable on the Closing Date (as defined in Section 1.2).
The Merger shall become effective upon the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware (the "Effective Time") or
at such later time as is established by Buyer and Company and set forth in the
Certificate of Merger.
Section 1.2 Closing.
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The closing of the Merger (the "Closing") will take place at 10:00 a.m.,
Boston time, on a date to be specified by Buyer and Company (the "Closing
Date"), which shall be no later than the second business day after satisfaction
or waiver of the conditions set forth in Article VII (other than delivery of
items to be delivered at Closing), at the offices of Brown, Rudnick, Freed &
Gesmer, P.C., One Financial Center, Boston, Massachusetts, unless another date,
place or time is agreed to in writing by Buyer and Company.
Section 1.3 Effects of the Merger.
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At the Effective Time (i) the separate existence of Company shall cease and
Company shall be merged with and into Sub (Sub following the Merger is sometimes
referred to below as the "Surviving Corporation"), and (ii) the Certificate of
Incorporation of Sub in effect immediately prior to the Closing shall be the
Certificate of Incorporation of the Surviving Corporation, and (iii) the Bylaws
of Sub in effect immediately prior to the Closing shall be the Bylaws of the
Surviving Corporation. The Merger shall have the effects set forth in Section
251 of the DGCL.
Section 1.4 Directors and Officers.
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The individuals serving as directors of Sub at the Effective Time shall be
the directors of the Surviving Corporation as of the Effective Time, each to
serve as a director until his or her successor
is duly elected or appointed. The individuals serving as officers of Sub at the
Effective Time shall be the officers of the Surviving Corporation as of the
Effective Time, each to hold office until his or her successor is duly elected
or appointed.
Section 1.5 Actions Prior to Closing.
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Effective as of the Closing Date, the holders of shares of Company's
Preferred Stock, $.04 par value per share ( "Company Preferred Stock"), shall
have converted such shares into shares of common stock, $.04 par value per
share, of Company (the "Company Common Stock") and all rights of such holders
with respect thereto shall cease upon such conversion. As a result of the
foregoing action, at the time of Closing, the issued and outstanding capital
stock of Company shall consist solely of shares of Company Common Stock or
options exercisable for shares of Company Common Stock.
Section 1.6 Stock Options.
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Subject to Section 6.14 hereof, at the Effective Time, Buyer shall
substitute substantially equivalent warrants (the "Warrants") to purchase Buyer
Common Stock (as defined in Section 2.1(c)) for all vested and unvested options
(the "Options") outstanding under Company's employee stock option plans (the
"Company Stock Plans") at the Effective Time to the extent permitted by the
terms thereof or agreed to by the holder thereof. Subject to the foregoing,
immediately after the Effective Time, each such Option shall be deemed to
constitute a Warrant to acquire such number of shares of Buyer Common Stock as
is equal to the number of shares of Company Common Stock subject to the
unexercised portion of the Option multiplied by the Exchange Ratio (rounded down
to the nearest whole share). The exercise price per share of each such Warrant
shall be equal to the exercise price of the Option at the Effective Time,
divided by the Exchange Ratio (rounded up to the nearest whole cent). The terms
of Warrants otherwise shall be substantially in the form of Buyer's standard
form of warrant agreement with such changes thereto as are reasonably requested
by Company. Without limiting the foregoing, for the purposes of determining
vesting of the Warrants and otherwise, employees of Company will be treated as
if they had been employed by Buyer during the full term during which they were
employed by Company.
Section 1.7 Alternative Merger Structure.
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While it is currently contemplated that the Merger shall be effected
through the merger of Company with and into Sub, Buyer may, upon delivery of
written notice to Company at least ten (10) days prior to Closing, propose an
alternative transaction structure whereby Buyer or an alternative Subsidiary of
Buyer or Company may be the acquiror or the Surviving Corporation (the
"Alternative Transaction"). Within five (5) days of the receipt of such notice,
Company shall notify Buyer whether Company consents to the Alternative
Transaction, which consent shall not be unreasonably withheld. If Company fails
to so timely notify Buyer, Company shall be deemed to have consented to the
Alternative Transaction. For purposes of this Section 1.7, Company's consent to
an Alternative Transaction shall not be considered to be unreasonably withheld
if Company reasonably determines that the Alternative Transaction would
adversely affect the Merger consideration or the tax-free nature of the Merger.
If Company consents (or is deemed to have consented) to the Alternative
Transaction, the appropriate technical provisions of this Agreement and the
related agreements shall be deemed to be amended as necessary in order to effect
the Alternative Transaction. If Company timely notifies Buyer that Company does
not consent to the
Alternative Transaction, all provisions of this Agreement and the related
agreements shall continue to apply.
ARTICLE II. CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock.
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As of the Effective Time, by virtue of the Merger and without any action on
the part of the holder of any shares of capital stock of Company or capital
stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of the
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capital stock of Sub shall remain issued and outstanding.
(b) Cancellation of Treasury Stock. All shares of Company Common
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Stock that are owned by Company as treasury stock or by any wholly owned
Subsidiary (as defined in Section 3.1) of Company shall be canceled and retired
and shall cease to exist and no stock of Buyer or other consideration shall be
delivered in exchange therefor.
(c) Merger Shares. Subject to the provisions of Section 2.2 hereof,
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each issued and outstanding share of Company Common Stock (other than shares to
be canceled in accordance with Section 2.1(b)) shall be converted into the right
to receive .15979 (the "Exchange Ratio") shares of the Common Stock, BEF 21.54
fractional value per share, of Buyer ("Buyer Common Stock") (subject to
reduction to account for fractional shares and further adjustment in accordance
with Section 2.3 hereof) (collectively, the "Merger Shares"). All such shares of
Company Common Stock, when so converted, shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive the Merger Shares and
any cash in lieu of fractional Merger Shares to be issued or paid in
consideration therefor upon the surrender of such certificate in accordance with
Section 2.2(d) hereof, without interest.
(d) Adjustments to Merger Shares. The number of Merger Shares to
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be paid or issued in the Merger shall be equitably adjusted (i) as set out in
Section 2.3 hereof and (ii) to reflect fully the effect of any stock split,
reverse split, reclassification, stock dividend (including any dividend or
distribution of securities convertible into Buyer Common Stock), reorganization,
recapitalization or other like change with respect to Buyer Common Stock
occurring after the date hereof and prior to the Effective Time.
(e) Dissenting Shares. Notwithstanding any provision of this
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Agreement to the contrary, shares of Company Common Stock that are outstanding
immediately prior to the Effective Time and that are held by Stockholders (as
defined in Section 2.2(a)) who shall not have voted in favor of the Merger or
consented thereto in writing and who shall have demanded properly in writing
appraisal for such shares in accordance with Section 262 of the DGCL
(collectively, the "Dissenting Shares") shall not be converted into or represent
the right to receive Merger Shares. Such Stockholders shall be entitled to
receive payment of the appraised value of such shares held by them in accordance
with the provisions of such section 262, except that all Dissenting Shares held
by Stockholders who shall have failed to perfect or who effectively shall have
withdrawn or lost their rights to appraisal of such shares under such Section
262 shall thereupon be deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, the right to
receive Merger Shares, without any interest thereon, upon surrender, in the
manner provided in Section 2.2(b), of the certificate or certificates that
formerly evidenced such shares. Company shall give Buyer (i) prompt notice of
any demands for appraisal received by Company, withdrawals of such demands, and
any other instruments served pursuant to the DGCL and received by Company and
(ii) the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. Company shall not, except with the prior
written consent of Buyer, make any payment with respect to any demands for
appraisal or offer to settle or settle any such demands.
Section 2.2 Exchange of Certificates.
---------------------------------------
The procedures for exchanging outstanding shares of Company Common Stock
for Buyer Common Stock pursuant to the Merger are as follows:
(a) Exchange Fund. As of the Effective Time, Buyer shall
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cause to be delivered to ChaseMellon Shareholder Services L.L.C. ("Exchange
Agent") on behalf of all holders of Company Common Stock (the "Stockholders")
who have not exercised their dissenter's right under Section 262 of the DGCL,
for exchange in accordance with this Section 2.2, (i) certificates representing
the shares of Buyer Common Stock issuable pursuant to Section 2.1 (less the
Escrow Shares, as defined in Section 2.4) in exchange for outstanding shares of
Company Common Stock, and (ii) cash in an amount sufficient to make the payments
required pursuant to Section 2.2(d) (such cash and shares of Buyer Common Stock,
together with any dividends or other distributions thereon as described in
Section 2.2(h), being hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures. Each holder of record of a
-------------------
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates")
whose shares were converted pursuant to Section 2.1 into the right to receive
Merger Shares shall deliver to the Exchange Agent at the Closing, a letter of
transmittal ("Letter of Transmittal") in the form appended to the Exchange Agent
Agreement attached as Exhibit B hereto, together with such Stockholder's
---------
certificates and such other documents as may be required pursuant to the Letter
of Transmittal. Upon surrender of a Certificate for cancellation to Exchange
Agent, together with such Letter of Transmittal, duly executed, the holder of
such certificate shall be entitled to receive in exchange therefor, and Buyer
shall cause Exchange Agent to promptly deliver to such holder certificates
representing that number of whole shares of duly authorized, validly issued,
fully paid and nonassessable shares of Buyer Common Stock which such holder has
the right to receive pursuant to the provisions of this Article II (less such
Stockholder's share, if any, of the Escrow Shares) plus cash in lieu of
fractional shares pursuant to Section 2.2(d) and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.2(h), and
the Certificate so surrendered shall immediately be canceled. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
transfer records of Company, a certificate representing the proper number of
shares of Buyer Common Stock plus cash in lieu of fractional shares pursuant to
Section 2.2(d) may be issued to a transferee if the Certificate representing
such Company Common Stock is presented to Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.2, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the certificate representing shares of Buyer Common Stock
plus cash in lieu of fractional shares pursuant to Section 2.2(d) and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.2(h).
(c) No Further Ownership Rights in Company Common Stock. All shares
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of Buyer Common Stock issued upon the surrender for exchange of certificates in
accordance with the terms hereof (including any cash distributions paid pursuant
to subsection (d) of this Section 2.2) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of Company Common
Stock, and from and after the Effective Time there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock 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 Section 2.2.
(d) No Fractional Shares. No certificate or scrip representing
--------------------
fractional shares of Buyer Common Stock shall be issued upon the surrender for
exchange of certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any other rights of a stockholder of Buyer.
Notwithstanding any other provision of this Agreement, each holder of shares of
Company Common Stock exchanged pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of Buyer Common Stock (after
taking into account all certificates delivered by such holder but after
reduction by such Stockholder's share of the Escrow Shares) shall receive, in
lieu thereof, cash (without interest) in an amount equal to such fractional part
of a share of Buyer Common Stock multiplied by $107.50.
(e) No Liability. Promptly following the close of business on the
------------
earlier of (i) the date which is thirty (30) days after the completion of the
audit of Buyer's financial statements for the year ended December 31, 2000 and
(ii) June 30, 2001, Buyer shall instruct Exchange Agent to return all shares of
Buyer Common Stock included in the Exchange Fund then in its possession and not
theretofore claimed by a holder of Company Common Stock to the Belgium Caisse
des depots et Consignations or any similar institution. Thereafter, each holder
of a Certificate may surrender such Certificate to Buyer and, subject to
applicable abandoned property, escheat and similar laws, receive in exchange
therefore the Buyer Common Stock with any cash in lieu of fractional shares of
Buyer Common Stock to which they are entitled pursuant to Section 2.2(d), and
any dividends or other distributions with respect to the Buyer Common Stock to
which they are entitled pursuant to Section 2.2(h), to be provided by Buyer and
the Buyer Common Stock portion of such consideration to be provided by the
Belgium Caisse des depots et Consignations or such other institution that holds
such shares of Buyer Common Stock, without interest.
(f) Withholding Rights. Each of Buyer and the Surviving
------------------
Corporation shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Company
Common Stock such amounts as it 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 the Surviving
Corporation or Buyer, as the case may be, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Company Common Stock in respect of which such deduction and
withholding was made by the Surviving Corporation or Buyer, as the case may be.
(g) Lost Certificates. If any Certificate shall have been lost,
-----------------
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, Buyer
will cause the Exchange Agent to issue in exchange for such lost, stolen or
destroyed Certificate the shares of Buyer Common Stock and any cash in lieu of
fractional shares of Buyer Common Stock deliverable in respect thereof pursuant
to this Agreement.
(h) Distributions with Respect to Unexchanged Buyer Common Stock.
------------------------------------------------------------
No dividends or other distributions declared or made after the Effective Time
with respect to the Buyer Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the Buyer Common Stock represented thereby, and no cash payment in lieu of
any fractional shares of Buyer Common Stock shall be paid to any such holder
pursuant to Section 2.2(d), until the holder of such Certificate shall surrender
such Certificate as provided in Section 2.2(b). Subject to the effect of
escheat, tax or other applicable laws and Section 2.2(e), following surrender of
any such Certificate, there shall be paid to the holder of the certificates
representing whole shares of Buyer Common Stock issued in exchange therefor,
without interest, (i) within five (5) business days after such surrender, the
amount of any cash payable with respect to a fractional share of Buyer Common
Stock to which such holder is entitled pursuant to Section 2.2(d) and the amount
of dividends or other distributions with a record date after the Effective Time
and theretofore payable with respect to such whole shares of Buyer Common Stock,
and (ii) at the appropriate payment date, the amount of dividends or other
distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to
such whole shares of Buyer Common Stock.
Section 2.3 Optional Adjustment to Merger Consideration for Indebtedness.
------------------------------------------------------------
(a) At least five (5) business days prior to the scheduled Closing
Date, Company will deliver to Buyer a statement (the "Closing Indebtedness
Statement") of the amount of the (i) Closing Indebtedness of Company and its
Subsidiaries as of the Closing Date, and (ii) Company's cash or cash equivalents
on hand as of the Closing Date. For the purpose of this Agreement, "Closing
Indebtedness" shall mean (i) all obligations of Company and its Subsidiaries
created, issued or incurred for borrowed money, including, without limitation,
all of Company's indebtedness to Fleet Bank, N.A. ("Fleet"), inclusive of
accrued interest, if any, on any of such obligations, (ii) all payment
obligations of Company under capital leases that are outstanding as of the
Closing Date, and (iii) all transaction costs (including without limitation all
of Company's legal and financial advisors' fees) incurred by Company in
connection with the Merger that are outstanding as of the Closing Date. Company
will cooperate fully with Buyer and will afford full access to the books,
records and work papers of Company from the date of this Agreement to the
Closing Date to enable Buyer to review the information presented on the Closing
Indebtedness Statement. The Closing Indebtedness Statement shall be based on
pay-off letters received from the holders of the Closing Indebtedness to the
extent available.
(b) If, and only if, the Net Cash Amount (as hereinafter defined) on
the Closing Date is less than negative $10,545,500 (i.e., the Net Cash Amount is
----
negative $10,545,501 or a more negative number), then the Exchange Ratio shall
----
be adjusted in accordance with the formula described in this Section 2.3(b).
If the Buyer so elects pursuant to the preceding paragraph, the
Exchange Ratio shall be adjusted to equal:
(A) the Deemed Total Consideration (as defined below) divided by
$107.50 divided by
(B) 35,298,107.
The "Deemed Total Consideration" shall equal the sum of (A)
$613,879,747, (B) the amount of any commitment or closing fees, if any, paid by
the Company to Fleet Bank, N.A., in connection with the credit facility
contemplated by Section 6.17 below (or to any lender in connection with an
alternate credit facility to the Company in lieu of such Fleet Bank credit
facility), and (C) the Net Cash Amount (as defined below).
The "Net Cash Amount" shall equal the amount of the Company's cash and
cash equivalents as of the Effective Date minus the sum of (x) all obligations
of Company and its subsidiaries created, issued or incurred for borrowed money,
including, without limitation, all of the Company's indebtedness to Fleet Bank,
N.A., inclusive of accrued interest, if any, on any of such obligations, (y) all
payment obligations of the Company under capital leases that are outstanding as
of the Closing Date, and (z) all transaction costs (including without limitation
all of Company's legal and financial advisors' fees) incurred by Company in
connection with the Merger that are outstanding as of the Closing Date. The Net
Cash Amount may be a negative number.
(c) (i) Prior to the Closing Date, Buyer may dispute in good faith
any amounts reflected or required to be reflected on the Closing Indebtedness
Statement; provided, however, that Buyer shall have notified Company in writing
-------- -------
of each disputed item, specifying the amount thereof in dispute and setting
forth, in reasonable detail, the basis for such dispute, within two business
days of Company's delivery of the Closing Indebtedness Statement to Buyer. In
the event of such a dispute, Buyer and Company shall attempt to reconcile their
differences. If Buyer and Company are unable to resolve any such dispute within
one (1) business day of Buyer's written notification to Company of any such
disputed amounts, Company and Buyer shall submit the items remaining in dispute
for resolution to an independent accounting firm of international reputation
mutually acceptable to Buyer and Company (such accounting firm being referred to
herein as the "Independent Accounting Firm"), and shall postpone the Closing
Date until resolution of such dispute in accordance with this Section 2.3. Such
Independent Accounting Firm shall, within five (5) business days after such
submission, determine and report to Buyer and Company upon such remaining
disputed items. The fees and disbursements of the Independent Accounting Firm
shall be allocated equally between Buyer and Company.
(ii) In acting under this Section 2.3, the Independent Accounting Firm
shall be entitled to the privileges and immunities of arbitrators.
(d) At the Closing, Buyer shall either (i) pay off all of Company's
outstanding obligations to Fleet, or (ii) obtain a complete and unconditional
release from Seagate of its Guaranty of certain of Company's Indebtedness dated
December 10, 1999
Section 2.4 Escrow Shares.
----------------------------
At the Effective Time, Buyer shall deliver into escrow (the "Escrow") to
State Street Bank and Trust Company, as escrow agent, on behalf of the Principal
Stockholders such number of shares of Buyer Common Stock (or such other escrow
agent as Buyer and Stockholder Representatives (as defined in Section 8.4 below)
shall agree) as is equal to seven and five-tenths percent (7.5%) of the total
number of Merger Shares ("Escrow Shares"), pursuant to the Indemnity Escrow
Agreement in the form of Exhibit C attached hereto (the "Indemnity Escrow
---------
Agreement"), as security for the indemnification obligations of the Principal
Stockholders described in Article VIII hereof.
Section 2.5 Transfer of Principal Stockholders' Merger Shares.
----------------------------------------------------------------
Immediately following the Effective Time, in accordance with stock powers
to be executed by each of the Principal Stockholders in connection with the
execution of his, her or its Letter of Transmittal, each of the Principal
Stockholders shall transfer to his, her or its respective LLC the Merger Shares
received by him, her or it pursuant to the Merger and such Merger Shares shall
be held by each such LLC pursuant to a Limited Liability Company Agreement
substantially in the form of Exhibit D hereto ("LLC Agreement").
---------
Section 2.6 Stockholders' Representatives.
--------------------------------------------
The adoption of this Agreement and the approval of the Merger by the
Stockholders shall constitute (i) approval by the Principal Stockholders of the
Indemnity Escrow Agreement, and of all of the arrangements relating thereto,
including the deposit of the Escrow Shares into the escrow and the appointment
of the Stockholder Representatives (as defined in Section 8.4 below) pursuant to
this Agreement and the Indemnity Escrow Agreement, and (ii) approval by all
persons receiving Merger Shares of the Registration Rights Agreement (as defined
in Section 7.3 below) and of all of the arrangements relating thereto, including
without limitation the appointment of the Stockholder Representatives pursuant
to such agreement.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to Buyer and Sub that the statements
contained in this Article III are true and correct, except as set forth herein
or in the disclosure schedule delivered by Company to Buyer on or before the
date of this Agreement (the "Company Disclosure Schedule"). The Company
Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article III and the
disclosure in any paragraph shall qualify other paragraphs in this Article III
only to the extent that it is readily apparent from a reading of such disclosure
that it also qualifies or applies to such other paragraphs.
Section 3.1 Organization of Company.
--------------------------------------
Each of Company and its Subsidiaries (as defined below) is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power to own,
lease and operate its property and to carry on its business as now being
conducted, and is duly qualified to do business and, to the extent such concept
applies, is in good standing as a foreign corporation in each jurisdiction
(which jurisdictions are listed in Section 3.1 of the Company Disclosure
Schedule) in which the failure to be so qualified would be
reasonably likely to have a material adverse effect on the business, properties,
financial condition, or results of operations of Company and its Subsidiaries,
taken as a whole, or to have a material adverse effect on the ability of Company
to consummate the transactions contemplated by this Agreement (a "Company
Material Adverse Effect"), provided that "Company Material Adverse Effect" shall
not include any change in or effect on the business, properties, financial
condition or results of operations of Company, that results from (a) the
announcement or pendency of the Merger, (b) general economic conditions, or (c)
business and economic conditions generally affecting the speech recognition
industry. Neither Company nor any of its Subsidiaries directly or indirectly
owns any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any corporation, partnership, joint venture or
other business association or entity, excluding securities in any publicly
traded company held for investment by Company and comprising less than five
percent (5%) of the outstanding stock of such company. As used in this
Agreement, the word "Subsidiary" means, with respect to a party, any corporation
or other organization, whether incorporated or unincorporated, of which (i) such
party or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting interest in
such partnership) or (ii) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
Board of Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party or by any one or more of its Subsidiaries, or by such party and
one or more of its Subsidiaries.
Section 3.2 Company Capital Structure.
----------------------------------------
(a) The authorized capital stock of Company consists of 45,000,000
shares of Company Common Stock and 5,000,000 shares of Company Preferred Stock.
As of the date of this Agreement, (i) 13,863,694 shares of Company Common Stock
are issued and outstanding, all of which are duly authorized, validly issued,
fully paid and nonassessable, (ii) no shares of Company Common Stock are held in
the treasury of Company or by Subsidiaries of Company, and (iii) 3,238,951
shares of Preferred Stock are issued and outstanding, all of which are duly
authorized, validly issued, fully paid and nonassessable and none of which have
been issued in violation of any preemptive or similar rights, and all of which
are, on the date hereof, and will be on the Closing Date after consummation of
the transaction contemplated by Section 1.5 hereof, owned beneficially and of
record by the persons and in the amounts as set forth in Section 3.2 of the
Company Disclosure Schedule. The Options constitute all options to purchase
stock of Company which are outstanding as of the date of this Agreement and
which will be outstanding on the Closing Date under the Company Stock Plans,
except to the extent any of such Options are exercised or by their terms expire
prior to Closing and except for Options granted after the date hereof (subject
to the limitations set forth in Section 5.2(b) and (c) hereof). Set forth on
Section 3.2 of the Company Disclosure Schedule is a complete and accurate list
of all holders of Options, indicating the number of Options, the number of
shares of Company Common Stock subject to each Option and the exercise price
therefor. All shares of Company Common Stock subject to issuance as specified
above are duly authorized and reserved and the shares of Company Common Stock,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, shall be validly issued, fully paid and
nonassessable. There are no obligations, contingent or otherwise, of Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
Company Common Stock or any other capital stock of Company or any of its
Subsidiaries or to provide funds to or make any material investment (in the form
of a loan, capital contribution or
otherwise) in any Subsidiary of Company or any other entity other than
guarantees of bank obligations of Subsidiaries of Company entered into in the
ordinary course of business. All of the outstanding shares of capital stock of
each of Company's Subsidiaries are duly authorized, validly issued, fully paid
and nonassessable and none of such shares have been issued in violation of any
preemptive or similar rights and all such shares are owned by Company or another
Subsidiary of Company free and clear of all security interests, liens, claims,
pledges, agreements, limitations in Company's voting rights, charges or other
encumbrances of any nature.
(b) Except for the Company Stock Plans, and shares of capital stock
of Company issuable pursuant thereto, (i) there are no equity securities of
Company or any of its Subsidiaries, or any security exchangeable into or
exercisable for such equity securities, issued, reserved for issuance or
outstanding and (ii) there are no other options, warrants, equity securities,
calls, rights, commitments or agreements of any character to which Company or
any of its Subsidiaries is a party or by which it or any of its Subsidiaries is
bound obligating Company or any of its Subsidiaries to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital stock of
Company or any of its Subsidiaries or obligating Company or any of its
Subsidiaries to grant, extend, accelerate the vesting of, otherwise modify or
amend or enter into any such option, warrant, equity security, call, right,
commitment or agreement. There are no voting trusts, proxies or other voting
agreements or understandings with respect to the shares of capital stock of
Company or any of its Subsidiaries.
Section 3.3 Authority; No Conflict; Required Filings and Consents.
-----------------------------------------------------
(a) Company has all requisite corporate power and authority to
enter into this Agreement and each of the agreements and documents contemplated
hereby to which Company is a party (the "Company Ancillary Agreements") and to
consummate the transactions contemplated by this Agreement and the Company
Ancillary Agreements. The execution and delivery of this Agreement and the
Company Ancillary Agreements and the consummation of the transactions
contemplated by this Agreement and the Company Ancillary Agreements by Company
have been duly authorized by all necessary corporate action on the part of
Company other than, with respect to the Merger, the approval and adoption of
this Agreement and the Merger by the affirmative vote of a majority of the
voting power of the then outstanding shares of Company Common Stock and Company
Preferred Stock, and the filing of the Certificate of Merger with the Secretary
of State of Delaware as required by the DGCL. This Agreement has been and each
of the Company Ancillary Agreements has been or will be duly executed and
delivered by Company and (assuming the due execution and delivery of such
agreements by the other parties thereto) constitutes or, with respect to the
Company Ancillary Agreements, constitutes or will constitute the valid and
binding obligations of Company, enforceable in accordance with their terms. The
Board of Directors of Company has not taken any action to accelerate any Options
granted under the Company Stock Plans (other than as provided in Options
heretofore granted by Company) and has approved the treatment of the Options set
forth in Section 1.6 of this Agreement.
(b) The execution and delivery of this Agreement and each of the
Company Ancillary Agreements by Company does not, and the consummation of the
transactions contemplated by this Agreement and the Company Ancillary Agreements
will not, (i) conflict with, or result in any violation or breach of, any
provision of the Certificate of Incorporation or Bylaws of Company or the
charter, by-laws, or other organizational document of any Subsidiary of Company,
(ii) result in any violation or breach of, or constitute (with or without notice
or lapse of time, or
both) a default (or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any material benefit) under, or
require a consent or waiver under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, lease, contract or other agreement,
instrument or obligation to which Company or any of its Subsidiaries is a party
or by which any of them or any of their properties or assets may be bound, or
(iii) except as provided in clauses (i), (ii), (iii) and (iv) in paragraph (c)
below, conflict with or violate any permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Company or any of its Subsidiaries or any of its or their properties or
assets, except in the case of (ii) and (iii) for any such conflicts, violations,
defaults, terminations, cancellations or accelerations which are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any domestic or foreign, federal, state, county or
municipal government, or any department, agency, bureau, commission or other
similar type body obtaining authority therefrom, or created pursuant to any law,
(including without limitation, Environmental Laws, as defined in Section 3.12)
or any court or arbitration body ("Governmental Entity"), is required by or with
respect to Company or any of its Subsidiaries in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby and thereby, except for (i) the filing of the pre-merger
notification report under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, ("HSR Act"), (ii) the filing of the Certificate of Merger with
the Delaware Secretary of State, (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable Federal or state securities laws and the laws of any foreign country
and (iv) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not be reasonably likely to
have a Company Material Adverse Effect.
Section 3.4 Financial Statements.
--------------------
Company has provided Buyer with audited consolidated financial statements
as of, and for, the year ended December 31, 1999 (the "1999 Financial
Statements"). The audited balance sheet of Company as of December 31, 1999 is
referred to herein as the "Company Balance Sheet." The 1999 Financial
Statements were prepared in accordance with United States generally accepted
accounting principles ("U.S. GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements) and fairly present in all material respects the consolidated
financial position of Company and its Subsidiaries as of the dates and the
consolidated results of its operations and cash flows for the periods indicated,
consistent in all material respects with the books and records of Company and
its Subsidiaries.
Section 3.5 No Undisclosed Liabilities.
----------- -----------------------------
Except (i) as disclosed in the 1999 Financial Statements, (ii) for
liabilities or obligations not required under U.S. GAAP to be reflected in such
financial statements (or in the notes thereto) and (iii) except for customary or
recurring liabilities incurred since December 31, 1999 in the ordinary course of
business consistent with past practices, Company and its Subsidiaries do not
have any liabilities, either accrued, contingent or otherwise and whether due or
to become due, which individually or in the aggregate are reasonably likely to
have a Company Material Adverse Effect.
Section 3.6 Absence of Certain Changes or Events.
------------------------------------
Except as disclosed in the 1999 Financial Statements, since December 31,
1999, Company and its Subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice and, since such
date, there has not been (i) any change in the financial condition, results of
operations, business, or properties of Company and its Subsidiaries, taken as a
whole, that has had, or is reasonably likely to have, a Company Material Adverse
Effect; (ii) any damage, destruction or loss (whether or not covered by
insurance) with respect to Company or any of its Subsidiaries having a Company
Material Adverse Effect; (iii) any material change by Company in its accounting
methods or principles not required pursuant to U.S. GAAP; (iv) any revaluation
by Company of any of its assets having a Company Material Adverse Effect; or (v)
any other action or event that would have required the consent of Buyer pursuant
to Section 5.1 of this Agreement had such action or event occurred after the
date of this Agreement.
Section 3.7 Taxes.
-----
(a) Company and each of its Subsidiaries have filed all Tax Returns
(as defined below) that they were required to file, and all such Tax Returns
were correct and complete except for any failure to file, error or omission
that, individually or in the aggregate, is not reasonably likely to have a
Company Material Adverse Effect. Company and each of its Subsidiaries have paid,
or made adequate provisions in accordance with U.S. GAAP for the payment of, all
Taxes (as defined below) owed (whether or not shown on any Tax Returns). Neither
Company nor any of its Subsidiaries currently is the beneficiary of any
extension of time within which to file any Tax Return. All Taxes that Company or
any of its Subsidiaries is or was required by law to withhold or collect have
been duly withheld or collected and, to the extent required, have been paid to
the proper Governmental Entity, except for any such Taxes with respect to which
the failure to withhold, collect or pay, individually or in the aggregate, is
not reasonably likely to have a Company Material Adverse Effect. For purposes of
this Agreement, "Taxes" means all taxes, and all charges, fees, levies or other
similar assessments or liabilities in the nature of a tax, including without
limitation income, gross receipts, ad valorem, premium, value added, excise,
real property, personal property, sales, use, services, transfer, withholding,
employment, payroll and franchise taxes imposed by the United States of America
or any state, local or foreign government, or any agency thereof, or other
political subdivision of the United States or any such government, and any
interest, fines, penalties, assessments or additions to tax resulting from,
attributable to or incurred in connection with any tax or any contest or dispute
thereof. For purposes of this Agreement, "Tax Returns" means all reports,
returns, declarations, statements or other information required to be supplied
to a taxing authority in any jurisdiction in connection with Taxes.
(b) Company has delivered to Buyer correct and complete copies of all
federal income Tax Returns, examination reports and statements of deficiencies
assessed against or agreed to by any of Company or any of its Subsidiaries since
December 31, 1996. The federal income Tax Returns of Company and each of its
Subsidiaries have never been audited by the Internal Revenue Service. Company
has delivered or made available to Buyer correct and complete copies of all
other material Tax Returns of Company and its Subsidiaries together with all
related examination reports and statements of deficiency for all periods from
and after December 31, 1996. No examination or audit of any Tax Return of
Company or any of its Subsidiaries by any Governmental Entity is currently in
progress or, to the knowledge of Company and Stockholders, threatened or
contemplated. Neither Company nor any of its Subsidiaries has been informed by
any jurisdiction
that the jurisdiction believes that Company or any of its Subsidiaries was
required to file any Tax Return that was not filed, except for any Tax Return
with respect to which the failure to file, individually or in the aggregate, is
not reasonably likely to have a Company Material Adverse Effect.
(c) Neither Company nor any of its Subsidiaries has waived any
statute of limitations with respect to Taxes or agreed to an extension of time
with respect to a Tax assessment or deficiency, which waiver or extension of
time remains currently in effect.
(d) Neither Company nor any of its Subsidiaries is a "consenting
corporation" within the meaning of Section 341(f) of the Code, and none of the
assets of Company or its Subsidiaries are subject to an election under Section
341(f) of the Code.
(e) Neither Company nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
(f) Neither Company nor any of its Subsidiaries has made any payment,
is obligated to make any payment, or is a party to any agreement that under
certain circumstances could obligate it to make any payment that will be an
"excess parachute payment" under Section 280G of the Code.
(g) Neither Company nor any of its Subsidiaries has any actual or
potential liability for any Taxes of any person (other than Company and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of federal, state, local, or foreign law), or as a transferee or
successor, by contract, or otherwise.
(h) Neither Company nor any of its Subsidiaries is or has ever been a
member of a group of corporations with which it has filed (or been required to
file) consolidated, combined or unitary Tax Returns, other than a group of which
only Company and its Subsidiaries are or were members.
(i) The unpaid Taxes of Company and its Subsidiaries did not, as of
December 31, 1999, exceed the reserve for Tax liability (rather than any reserve
for deferred Taxes established to reflect timing differences between book and
Tax income) set forth on the face of the Company Balance Sheet (rather than in
any notes thereto), and will not exceed that reserve as adjusted for operations
and transactions through the Closing Date in accordance with the past custom and
practice of Company and its Subsidiaries in filing their Tax Returns.
Section 3.8 Title to Properties.
-------------------
(a) Section 3.8 of the Company Disclosure Schedule sets forth a list
of all real property leased by Company or its Subsidiaries and the location of
the premises. Company has provided true and complete copies of all real property
leases ("Leases") to Buyer. Neither Company nor Subsidiary is in default, nor,
to the knowledge of Company, is any other party in default under any of the
Leases, except where the existence of such defaults, individually or in the
aggregate, is not reasonably likely to have a Company Material Adverse Effect.
(b) Neither the Company nor its Subsidiaries owns any interests in
real property other than as described on Section 3.8 of the Disclosure Schedule.
(c) None of the real or personal property owned or used by Company or
any Subsidiary is subject to any mortgage, pledge, deed of trust, lien (other
than for taxes not yet due and payable), conditional sale agreement, security
title, encumbrance, or other adverse claim or interest of any kind.
Section 3.9 Intellectual Property.
---------------------
(a) Section 3.9(a) of the Company Disclosure Schedule contains a list
of (i) patents and patent applications ("Patents"), (ii) trademark registrations
and applications and (iii) copyright registrations and applications of Company
and its Subsidiaries (collectively, the "Company Intellectual Property Rights").
To Company's knowledge, Company and the Subsidiaries own, or are licensed or
otherwise possess legally enforceable rights to use the Patents, the Company
Intellectual Property Rights and all computer software programs or applications
(in both source code and object code form) that are used by Company or any
Subsidiary in the business of Company or any Subsidiary as currently conducted.
Except as would not have a Company Material Adverse Effect, Company and the
Subsidiaries are not aware of any basis for invalidity, unenforceability or
other infirmity of any licenses, sublicenses and other agreements to which
Company or any Subsidiary is a party and pursuant to which Company or any
Subsidiary is authorized to use (i) any third party patents, trademarks, trade
secrets, mask works, or copyrights, including software which are incorporated
in, are, or are used to form a part of, any Company product (the "Company Third
Party Intellectual Property Rights"), or (ii) any trade secret of a third party
in or as to any product of Company or any Subsidiary. To the knowledge of
Company and Subsidiaries, Company Third Party Intellectual Property Rights have
been properly and validly licensed to Company or Subsidiaries by the licensor of
such rights.
(b) Except as would not have a Company Material Adverse Effect,
neither Company nor any Subsidiary is, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
hereunder, in breach or violation of any license, sublicense or agreement. No
written claims or demands with respect to the Company Intellectual Property
Rights, Patents, any trade secret, or Company Third Party Intellectual Property
Rights (to the extent arising out of any use, reproduction or distribution of
such Company Third Party Intellectual Rights by or through Company), have been
received by Company or to the knowledge of Company and Subsidiaries, are
threatened by any person other than those which have been settled or otherwise
fully resolved. Neither Company nor any Subsidiary has any knowledge of any
valid grounds for any bona fide claims: (i) against Company to the effect that
the manufacture, sale, licensing or use of any product as now used, sold,
offered for sale, or licensed by Company or any Subsidiary infringes on any
copyright, patent, trademark, service mark or trade secret; (ii) against the use
of any trademarks, tradenames, trade secrets, copyrights, patents or computer
software programs and applications used in Company's or any Subsidiary's
business as currently conducted by Company or any Subsidiary; (iii) challenging
the ownership, validity, enforceability or effectiveness of any of the Patents
or Company Intellectual Property Rights of Company or any Subsidiary; or (iv)
challenging Company's or any Subsidiary's license or legally enforceable right
to use, or the validity, enforceability or effectiveness of, Company Third Party
Intellectual Property Rights.
(c) To the knowledge of Company, all registered trademarks, service
marks, patents, and copyrights owned by Company are valid and subsisting and
have been properly maintained and renewed in accordance with all applicable laws
and regulations in the U.S. and foreign countries where applicable. To the
knowledge of Company and Subsidiaries, there has been and is no unauthorized
use, disclosure, infringement or misappropriation of any of the Company
Intellectual Property Rights material to Company or any Subsidiary.
(d) No Company Intellectual Property Right is subject to any
outstanding order, judgment, decree, or stipulation restricting in any manner
the licensing thereof by Company. To the knowledge of Company and Subsidiaries,
no Company Third Party Intellectual Property Right is subject to any outstanding
order, judgment, decree, or stipulation restricting in any manner the licensed
use thereof by Company or any Subsidiary. Except for contracts licensing
Company's or any Subsidiary's products executed in the ordinary course of
business and in accordance with Company's past practices, neither Company nor
any Subsidiary has entered into any agreement to indemnify any other person
against any charge of infringement of any Company Third Party Intellectual
Property Right.
(e) Company and the Subsidiaries have taken reasonable measures to
protect and preserve (i) the validity and enforceability of trademarks included
in the Company Intellectual Property Rights, and (ii) the confidentiality and
enforceability of its trade secrets and other confidential information. All
employees, contractors, agents and consultants of Company and Subsidiaries have
executed a nondisclosure and assignment of inventions agreement substantially in
the form as attached to the Company Disclosure Schedule to protect the
confidentiality and to vest in Company or the Subsidiaries exclusive ownership
of such intellectual property rights. To the knowledge of Company and
Subsidiaries, no trade secret or confidential information material to the
business of Company or any Subsidiary has been misappropriated for the benefit
of any person other than Company and the Subsidiaries. Except as set forth on
Schedule 3.9 of the Company Disclosure Schedule, neither Company nor any
Subsidiary has any written or oral agreements with employees, contractors,
agents or consultants with respect to the ownership of inventions, trade secrets
or other works created by them as a result of which any such employee,
contractor, agent or consultant may have nonexclusive rights to the portions of
Company's Intellectual Property Rights so created by such individual.
(f) To the knowledge of Company and Subsidiaries, no officer,
employee, contractor, agent or consultant of Company or any Subsidiary is, or is
now expected to be, in violation of any term of any employment contract, patent
disclosure agreement, proprietary information agreement, noncompetition
agreement, nonsolicitation agreement, confidentiality agreement, or any other
similar contract or agreement or any restrictive covenant relating to the right
of any such officer, employee, contractor, agent or consultant to be employed or
engaged by Company or any Subsidiary because of the nature of the business
conducted or to be conducted by Company or any Subsidiary or relating to the use
of trade secrets or proprietary information of others. No director, officer or
employee of Company or any Subsidiary owns, directly or indirectly, in whole or
in part, any Company Intellectual Property Right which Company has used, is
presently using, or the use of which is reasonably necessary to its business as
now conducted or presently contemplated to be conducted.
(g) Neither Company nor any Subsidiary has deposited, or is obligated
to deposit, any source code regarding its products into any source code escrows
or similar
arrangements and neither Company nor any Subsidiary is under any contractual or
other obligation to disclose the source code or any other material proprietary
information included in or relating to its products.
(h) To the knowledge of Company, all copyrightable works of
authorship were developed and authored as original works of authorship either by
full-time employees of Company or its Stockholders within the normal scope of
their duties as works for hire, or by third persons as works for hire under an
express written agreement so stating or under a written agreement expressly
transferring and assigning all rights to Company or its Subsidiaries.
Section 3.10 Agreements, Contracts and Commitments.
-------------------------------------
(a) Section 3.10 of the Disclosure Schedule sets forth a correct and
complete list of the following (hereinafter referred to as the "Company Material
Contracts"):
(i) all bonds, debentures, notes, mortgage, indentures or guarantees
(excluding intercompany guarantees among Company and any of the Subsidiaries) to
which Company or any of the Subsidiaries is a party or by which any of them or
their respective properties or assets (real, personal or mixed, tangible or
intangible) are bound;
(ii) all existing contracts, commitments and agreements to which
Company or any of the Subsidiaries is a party or by which any of them or their
respective properties or assets may be bound involving an annual commitment or
annual payment by Company or any Subsidiary thereto of more than $100,000
individually, or which have a fixed term extending more than twelve months from
the date hereof and which involve an annual commitment or annual payment by any
party thereto of more than $50,000 or cumulative rental payments in excess of
$100,000, in each case individually, or which are otherwise material to the
business and operations of Company and the Subsidiaries taken as a whole; and
(iii) all loans and credit commitments to Company or any of the
Subsidiaries which are outstanding, together with a brief description of such
commitments and the name of each financial institution granting the same.
Each Company Material Contract has not expired by its terms and is in
full force and effect against Company and, to the knowledge of Company, against
the other party or parties thereto. Neither Company nor any of its
Subsidiaries, nor to the knowledge of Company, any other party thereto, is in
violation of or in default under (nor does there exist any condition which, upon
the passage of time, the giving of notice or both, would cause such a violation
of or default under) any lease, permit, concession, franchise, license or other
contract or agreement to which it is a party or by which it or any of its
properties or assets is bound, except for violations or defaults that,
individually or in the aggregate, have not resulted in and are not reasonably
likely to result in a Company Material Adverse Effect.
(b) Section 3.10 of the Company Disclosure Schedule sets forth a
complete list of each lease, permit, concession, franchise, license or other
contract or agreement to which Company or any of its Subsidiaries is a party or
bound (i) with any Affiliate (as defined in Section 3.13 hereof) of Company
(other than any Subsidiary which is a direct or indirect wholly owned subsidiary
of Company), other than any agreements which are or have been fully performed
and
under which neither Company nor any Subsidiary of Company has any continuing
rights, liability or obligation, or (ii) that includes any non-competition, most
favored nation, prepayment penalty, exclusivity, semi-exclusivity, right of
first refusal or similar provision imposing any restrictions or undertakings on
Company or any Subsidiary of Company, other than any agreements under which
neither Company nor any Subsidiary of Company has any continuing rights,
liability or obligation or is subject to any restriction or undertaking, in each
case identifying or summarizing in the description of such agreement on the
Company Disclosure Schedule (i) any such restrictive provision, (ii) any
Affiliate that is a party to such agreement, and (iii) such other information as
is reasonably necessary for Buyer to ascertain the basis for Company's
determination that such agreement is material to Company. Copies of all the
agreements, contracts and arrangements set forth in Section 3.10 of the Company
Disclosure Schedule have heretofore been made available to Buyer and such copies
are accurate and complete in all material respects.
Section 3.11 Litigation.
----------
There is no action, suit or proceeding, claim, arbitration or investigation
thereto, against Company or any of its Subsidiaries pending or as to which
Company or any of its Subsidiaries has received any written notice of assertion,
which, if determined adversely, individually or in the aggregate, is reasonably
likely to have a Company Material Adverse Effect.
Section 3.12 Environmental Matters.
---------------------
The parties agree that the provisions of Sections 3.11, 3.14 and 3.15 shall
not apply to the matters addressed in this Section 3.12. To the knowledge of
Company or any Subsidiary, except as is not reasonably expected to have a
Company Material Adverse Effect:
(a) Any and all oil, petroleum products, chemicals, waste oil,
hazardous waste, hazardous substances, toxic substances or materials, PCBs,
asbestos, pollutants or contaminants, or hazardous materials, in each case
regulated by any Environmental Law as hereafter defined (hereafter, "Hazardous
Materials") used or generated, stored, treated or disposed of by Company or any
Subsidiary since January 1, 1995 on and at any of the properties or facilities
owned or leased by Company or any Subsidiary (for the purposes of this Section,
a "Site") have been so used, stored, treated or disposed of in material
compliance with all applicable laws, court orders, and legally binding
government authorizations related to the protection of public health or worker
safety as related to Hazardous Materials, the environment or the management of
pollution or Hazardous Materials (collectively "Environmental Laws") and Company
and each Subsidiary is in material compliance with all Environmental Laws. For
purposes of this Agreement, "Environmental Laws" include all then applicable
federal, state and local laws, statutes, ordinances, rules, regulations, orders,
or legally binding requirements of any Governmental Entity pertaining to health
or safety as related to Hazardous Materials and protection of the environment,
natural resources, conservation, wildlife, and waste management including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), the Resource Conservation and Recovery Act ("RCRA"),
the Clean Air Act, the Solid Waste Disposal Act, the Water Pollution Control
Act, the Clean Water Act, the Toxic Substances Control Act, the Emergency
Planning and Community Right-to-Know Act of 1986, the Hazardous Materials
Transportation Act, and any corresponding state and local statutes, ordinances
and amendments or successor legislation to such acts, the common law and any
similar laws, rules, or regulations promulgated thereunder.
(b) Neither Company nor any Subsidiary has received any written
correspondence, claim, notice, complaint, court order, administrative order or
request for information from any Governmental Entity or private party (i)
alleging violation or potential violation of, or asserting any noncompliance
with, any Environmental Laws, (ii) asserting potential liability under
Environmental Laws, or (iii) requesting investigation or clean-up of any Site
under any Environmental Laws.
(c) No Hazardous Materials used or generated by Company or any
Subsidiary are being, or are threatened with being spilled, released,
discharged, disposed, placed, leaked, or otherwise caused to become located in
the air, soil or water in, under or upon a Site or any land adjacent thereto due
to the acts or omissions of Company or any Subsidiary except in material
compliance with Environmental Law. No material correspondence, notices or other
documents have been filed or received by Company or any Subsidiary since January
1, 1995 pursuant to any Environmental Laws.
(d) Neither Company nor any Subsidiary has received any written
notice that any sites, locations or facilities to which any Hazardous Materials
have been shipped or sent to by any of them are subject to or threaten to become
subject to any governmental investigation, response action or clean up order.
Company has represented to Buyer that no manifests, bills of lading and other
receipts or evidence documenting Company's disposal or recycling of Hazardous
Materials offsite since January 1, 1995 exist and, accordingly, no such
documents have been provided to Buyer by Company.
(e) All underground tanks and other storage facilities for Hazardous
Materials located at any Site of which Company or any Subsidiary have knowledge
are disclosed in Section 3.12 of the Company Disclosure Schedule. No other
underground tanks for Hazardous Materials have been located on a Site during the
period of any ownership or lease of any Site by Company or any Subsidiary.
Company has represented to Buyer that it has not received any or made any
notifications to any Governmental Entity since January 1, 1995 pursuant to
Environmental Laws relating to underground storage tanks and, accordingly, no
such documents have been provided to Buyer. Any underground tanks or storage
facilities that have been removed and had their contents disposed of by Company
or any Subsidiary have been removed and the contents disposed of in material
compliance with all Environmental Laws.
(f) Company and each of its Subsidiaries has: (i) all material
governmental permits, authorizations, or approvals required under all
Environmental Laws to conduct the business operations of Company at any Site;
(ii) Company and its Subsidiaries are in material compliance with all such
permits, authorizations or approvals, and (iii) Company and its Subsidiaries
have provided copies of all such permits, authorizations or approvals to Buyer.
(g) There are no asbestos-containing materials, or capacitors,
transformers or other equipment or fixtures containing PCBs located at any Site
owned by or operated by Company or any Subsidiary.
(h) There are no liens under Environmental Laws on any Site owned or
leased by Company or any Subsidiary or any assets of Company or any Subsidiary,
and no government actions have been taken or are in process which could subject
any Site or any such assets to such
liens, and Company is not required to place any notice or restriction relating
to Hazardous Materials in any deed to such Site.
(i) Company has represented to Buyer that there are no environmental
reports, audits, assessments or studies conducted since January 1, 1995 within
the possession of Company or any Subsidiary with respect to Company's or any
Subsidiary's facilities or any Site or the environs of any Site and,
accordingly, has not provided Buyer with any such documents.
(j) Company and each Subsidiary is in compliance with all Federal
and state worker safety laws and requirements, including, but not limited to
requirements under the Occupational Safety and Health Act.
Section 3.13 ERISA and Employee Benefit Plans.
--------------------------------
(a) Section 3.13 of the Company Disclosure Schedule lists every
material plan, arrangement or policy, written or oral, relating to current or
former employees of Company or of any member of a controlled group or affiliated
service group (as defined in Internal Revenue Code Section 414(b), (c), (m) and
(o)) which includes Company (an "Affiliate"), which is:
(i) an employee benefit plan within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"); or
(ii) a compensation, stock purchase, stock option, stock bonus, stock
appreciation, VEBA (as defined in Code Section 501(c)(9)) severance, health,
welfare, life, disability or other benefit plan, fund, program, arrangement or
practice which is not covered by clause (i) above (including policies related to
vacation pay, holiday time, moving expense reimbursement programs, sick leave
and salary reduction agreements, charge-in-control agreements, and severance
agreements); or
(iii) any statutory or non-statutory benefits, benefit plans or
arrangements offered to Company's non-US based workforce.
(Hereinafter, "ERISA Benefit Plan" refers to plans or arrangements under clause
(i) above and "Benefit Plan" refers to plans or arrangements under clauses (i)-
(iii) above). Neither Company nor any Subsidiary has ever been obligated to
contribute to any multiemployer plan within the meaning of Section 3(37) or
4001(a)(3) of ERISA.
(b) There are no agreements or commitments of Company or any
Affiliate, whether or not legally binding, to create any additional Benefit Plan
not listed on Section 3.13 of the Company Disclosure Schedule.
(c) With respect to each Benefit Plan, Company has furnished to Buyer
complete and accurate copies of each Benefit Plan described in Section 3.13 of
the Company Disclosure Schedule, including all amendments thereto. With respect
to each ERISA Benefit Plan, Company has also furnished the three most recent
Form 5500s and the most recent Internal Revenue Service determination letter (if
any), plan actuarial report, summary plan description, summary annual report and
employee manual, as well as summaries of material modifications, material
employee communications, and all reports of the Benefit Plan required by ERISA
and the regulations thereunder. For each health plan offered to current or
former employees, attached to Section 3.13 of
the Company Disclosure Schedule is a listing showing participants, coverage
type, COBRA participants and beneficiaries. Company has also furnished Buyer
copies of any insurance contracts or trust agreements through which any ERISA
Benefit Plan is funded, any custodial or investment contracts relating to assets
or benefits under the Benefit Plan, any contracts relating to record keeping or
administration for the Benefit Plan, and notice of any material adverse change
occurring with respect to any Benefit Plan since the date of the most recently
completed and filed annual report.
(d) With respect to each ERISA Benefit Plan which is a pension plan
within the meaning of Section 3(2) of ERISA:
(i) As of the and of the most recent plan year, the value of the
ERISA Benefit Plan's assets equals or exceeds the total value of all vested and
unvested employee benefits under such Plan, whether determined on an ongoing
basis or termination basis;
(ii) there is no "accumulated funding deficiency" and, to the
knowledge of Company, no "prohibited transaction" which could reasonably be
expected to result in a material liability to Company has occurred (as such
terms are defined in ERISA), and the funding method and actuarial assumptions
are reasonable and acceptable under ERISA;
(iii) Company has incurred no liability to the Pension Benefit
Guaranty Corporation ("PBGC") with respect to the ERISA Benefit Plan (other than
any liability for premiums in the ordinary course);
(iv) To the knowledge of Company, any Plan meant to be a qualified
plan meets all applicable requirements of Section 401(a) of the Internal Revenue
Code;
(v) Company has properly and timely made all governmental filings
with respect to ERISA Benefit Plans except where any failure to make any such
filing would not reasonably be expected to have a Company Material Adverse
Effect;
(vi) the Company Balance Sheet reflects all accrued but unpaid
liabilities with respect to such ERISA Benefit Plans in accordance with U.S.
GAAP;
(vii) there has been no termination or partial termination of any
ERISA Plan; there has been no filing with the PBGC of an intent to terminate any
ERISA Benefit Plan, nor has the PBGC instituted any proceedings to terminate any
ERISA Benefit Plan; and neither Company nor any Affiliate has received a notice
of deficiency or liability or a demand for payment from the PBGC.
(e) With respect to each Benefit Plan:
(i) each Benefit Plan complies currently and has complied in the
past, as to form and operation, in all material respects with the provisions of
all applicable Federal and state laws, such as ERISA and the Internal Revenue
Code; and, to the knowledge of Company, no nonexempt "prohibited transaction"
(as defined in Section 4975 of the Code or enumerated in Section 406(a) or (b)
of ERISA) has occurred which could reasonably be expected to result in material
liability to Company;
(ii) all required government filings, reports, and notices have been
properly and timely made, except where any failure to make any such filing would
not reasonably be expected to have a Company Material Adverse Effect;
(iii) to the knowledge of Company, no such Benefit Plan is currently
under audit or investigation by any governmental agency or body and no
correction procedures have been initiated or completed with the Internal Revenue
Service for any ERISA Benefit Plan meant to be qualified under Section 401 of
the Code or with the Department of Labor for any ERISA Benefit Plan;
(iv) there are no actions, suits or claims (other than routine claims
for benefits) pending or, to the knowledge of Company, threatened against any of
the Benefit Plans or against the assets of any Benefit Plan;
(v) all material premiums due in connection with the Benefit Plan,
including without limitation premiums due the PBGC and material premiums for
life and health insurance and annuity contracts, have been paid in full when due
and, except as specifically disclosed on Section 3.13 of the Company Disclosure
Schedule, there are no such premiums that are attributable to any period of time
before the Closing that will not have been paid or accrued for on or before the
Closing; and
(vi) all reports and filings made by Company pursuant to ERISA,
including without limitation all Form 5500 and attachments, summary annual
reports, and participant reports, and any other documents reasonably necessary
to enable Buyer to perform its material responsibilities with respect to any
Benefit Plan subsequent to the Closing, are and shall be available at the
offices of Company on and immediately after the Closing.
(f) Except as required by COBRA, the Family Medical Leave Act or any
other applicable law, no Benefit Plan provides, and neither Company nor any
Affiliate has made any promises or incurred any obligation to provide any health
or other welfare benefits to any retirees, former employees, or their
dependents.
Section 3.14 Compliance With Laws.
--------------------
Company and each of its Subsidiaries has complied with, is not in violation
of, and has not received any written notice alleging any violation with respect
to, any foreign, federal, state or local statute, law or regulation with respect
to the conduct of its business, or the ownership or operation of its properties
or assets, except for failures to comply or violations which, individually or in
the aggregate, have not had and are not reasonably likely to have a Company
Material Adverse Effect.
Section 3.15 Permits.
-------
Company and each of its Subsidiaries have all permits, licenses and
franchises from Governmental Entities required to conduct their businesses as
now being conducted (the "Company Permits"), except for such permits, licenses
and franchises the absence of which, individually or in the aggregate, have not
resulted in, and are not reasonably likely to result in, a Company Material
Adverse Effect. Company and its Subsidiaries are in compliance with the terms
of the Company Permits, except where the failure to so comply, individually or
in the aggregate, is not reasonably likely to have a Company Material Adverse
Effect.
Section 3.16 Registration Statement; Placement Memorandum/Proxy
--------------------------------------------------
Statement.
- ---------
The information to be supplied by Company for inclusion in (x) the
Placement Memorandum/Proxy Statement (as defined in Section 6.2(b) hereto) or
(y) the Registration Statement to be prepared by Buyer pursuant to Section 6.2
or Section 6.22 hereof, as the case may be, at the time of the Special
Stockholders' Meeting (as defined in Section 6.2(b)hereof) and at the Effective
Time, will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made in the Placement Memorandum/Proxy Statement or the
Registration Statement, in light of the circumstances under which they were
made, not misleading; or omits to state any material fact necessary to correct
any statement in any earlier communication with respect to the solicitation of
proxies for the Special Stockholders' Meeting which has become misleading. If
any time prior to the Effective Time any event relating to Company or any of its
Rule 145 Affiliates (as defined in Section 6.9 hereof), officers or directors
should be discovered by Company which should be set forth in an amendment to the
Registration Statement or a supplement to the Placement Memorandum/Proxy
Statement, Company shall promptly so inform Buyer.
Section 3.17 Labor Matters.
-------------
Neither Company nor any of its Subsidiaries is a party to or otherwise
bound by any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization. To the knowledge of
Company, neither Company nor any of its Subsidiaries is the subject of any
proceeding asserting that Company or any of its Subsidiaries has committed an
unfair labor practice or is seeking to compel it to bargain with any labor union
or labor organization that, individually or in the aggregate, is reasonably
likely to have a Company Material Adverse Effect, nor is there pending or, to
the knowledge of Company and Stockholders, threatened, any labor strike,
dispute, walkout, work stoppage or lockout involving Company or any of its
Subsidiaries that, individually or in the aggregate, is reasonably likely to
have a Company Material Adverse Effect.
Section 3.18 Insurance.
---------
Section 3.18 of the Disclosure Schedule sets forth a list (including the
name of the insurer, the name of the policyholder, the name of each insured, the
periods of coverage and the scope of coverage) of all policies of fire, theft,
casualty, liability, burglary, fidelity, workers compensation, business
interruption, environmental, product liability, fidelity, workers compensation,
product warranty, automobile and other forms of insurance of Company and any of
its Subsidiaries. All such insurance policies are with reputable insurance
carriers, provide customary coverage for all normal risks incident to the
business, of Company and its Subsidiaries and their respective properties and
assets, and 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. None of such policies are subject to any retrospective adjustment.
Section 3.19 Government Contracts.
--------------------
To the knowledge of Company, neither Company nor any of its Subsidiaries is
or has been suspended or debarred (within the meaning of 48 C.F.R. Ch. 1,
Section 52 or any similar foreign
law, statute or regulation) from bidding on contracts or subcontracts with any
Governmental Entity; no such suspension or debarment has been initiated or
threatened; and the consummation of the transactions contemplated by this
Agreement will not result in any such suspension or debarment that, individually
or in the aggregate, is reasonably likely to have a Company Material Adverse
Effect. Neither Company nor any of its Subsidiaries has since January 1, 1993
been audited or investigated or is now being audited or, to Company's knowledge,
investigated by the U.S. Government Accounting Office, the U.S. Department of
Defense or any of its agencies, the Defense Contract Audit Agency, the U.S.
Department of Justice, the Inspector General of any U.S. Governmental Entity,
any similar agencies or instrumentalities of any foreign Governmental Entity, or
any prime contractor with a Governmental Entity nor, to Company's knowledge, has
any such audit or investigation been threatened that is reasonably likely,
individually or in the aggregate, to have a Company Material Adverse Effect. To
Company's knowledge, there is no valid basis for (a) the suspension or debarment
of Company or any of its Subsidiaries from bidding on contracts or subcontracts
with any Governmental Entity or (b) any claim pursuant to an audit or
investigation by any of the entities named in the foregoing sentence that is
reasonably likely, individually or in the aggregate, to have a Company Material
Adverse Effect. Neither Company nor any of its Subsidiaries has any agreements,
contracts or commitments which require it to obtain or maintain a security
clearance with any Governmental Entity.
Section 3.20 Year 2000.
---------
Company is not aware of any failure of Company's or any Subsidiary's
computer hardware or software systems or products to be Year 2000 Compliant,
which failure, individually or in the aggregate, is reasonably likely to have a
Company Material Adverse Effect. For purposes of this Agreement, "Year 2000
Compliant" means, with respect to each system referred to in the prior sentence
that is intended to perform date-related functions, that such system, when used
properly in accordance with its documentation, is capable of correctly
receiving, processing and providing date data on and between December 31, 1999
and January 1, 2000; provided that all applications, hardware and other systems
used in conjunction with such system correctly exchange date data with or
provide data to such system.
Section 3.21 Product Returns.
---------------
Company and its Subsidiaries' experience with returns of products sold by
Company and Subsidiary for fiscal year 1999 or during the current year have not
materially and adversely deviated from Company's prior experience.
Section 3.22 Customers and Suppliers.
-----------------------
No customer of Company or any of its Subsidiaries that represented five
percent (5%) or more of Company's consolidated revenues in the fiscal year ended
December 31, 1999 (a "Material Customer"), has indicated to Company or any of
its Subsidiaries in writing or, to Company's knowledge, orally, that it will
stop, or decrease the rate of buying materials, products or services from
Company or such Subsidiary, which cessation or decrease is reasonably likely,
individually or in the aggregate, to have a Company Material Adverse Effect. No
material supplier of Company or any of its Subsidiaries has indicated to Company
or any of its Subsidiaries in writing or, to Company's knowledge, orally, that
it will stop, or decrease the rate of, supplying materials, products
or services to them, which cessation or decrease is reasonably likely,
individually or in the aggregate, to have a Company Material Adverse Effect.
Section 3.23 Section 203 of the DGCL Not Applicable.
--------------------------------------
The Board of Directors of Company has taken all actions so that the
restrictions contained in Section 203 of the DGCL applicable to a "business
combination" (as defined in Section 203) will not apply to the execution,
delivery or performance of this Agreement, or the consummation of the Merger or
the other transactions contemplated by this Agreement.
Section 3.24 Transactions with Interested Persons.
------------------------------------
No officer, director or 5% stockholder of Company or any Subsidiary, or
their respective spouses or children, (i) owns, directly or indirectly, on an
individual or joint basis, any material interest in, or serves as an officer or
director of, any customer, competitor or supplier of Company or any Subsidiary
or any organization which has a material contract or arrangement with Company or
any Subsidiary, or (ii) has any material contract or agreement with Company or
any Subsidiary other than as disclosed on a schedule hereto, and all such
agreements are, except as noted on such schedule, on arms-length terms.
Section 3.25 Absence of Sensitive Payments.
-----------------------------
Neither Company, any Subsidiary, nor, to the knowledge of Company, any of
Company's or any Subsidiary's directors, officers, agents, stockholders or
employees, on behalf of Company or any Subsidiary:
(a) has made or has agreed to make any contributions, payments or
gifts of funds or property to any governmental official, employee or agent where
either the payment or the purpose of such contribution, payment or gift was or
is illegal under the laws of the United States, any state thereof, or any other
jurisdiction (foreign or domestic);
(b) has established or maintained any unrecorded fund or asset for
any purpose, or has made any false or artificial entries on any of its books or
records for any reason; or
(c) has made or has agreed to make any contribution or expenditure,
or has reimbursed any political gift or contribution or expenditure made by any
other person to candidates for public office, whether Federal, state or local
(foreign or domestic) where such contributions were a violation of applicable
law.
Section 3.26 Indebtedness.
------------
Set forth in Section 3.26 of the Company Disclosure Schedule is a true,
complete and correct list of the Indebtedness (as hereinafter defined),
together with the original principal balance, the outstanding principal balance
and the accrued but unpaid interest as of a recent date. Company shall deliver
to Buyer at the Closing an updated list of the Indebtedness and of the Net Cash
Amount (as defined in Section 2.3(b)), each at and as of the Closing Date, which
list shall be true, complete and correct at and as of the Closing Date. Company
has furnished to Buyer copies of all documentation related to the Indebtedness
(the "Loan Documents"). For the purpose of this
Agreement, "Indebtedness" shall mean (i) all obligations of Company and its
Subsidiaries created, issued or incurred for borrowed money, including, without
limitation, all of the Company's indebtedness to Fleet, inclusive of accrued
interest, if any, on any of such obligations.
Section 3.27 Tax Representation Letter.
-------------------------
The representations contained in the letter to be delivered at the Closing
to Hale and Dorr LLP and to Brown, Rudnick, Freed & Gesmer by Company containing
certain representations of Company relevant to the Merger, which letter shall be
in the form attached hereto as Exhibit E, will be true and accurate as of the
---------
Effective Time.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB
Buyer and Sub jointly and severally represent and warrant to Company that
the statements contained in this Article IV are true and correct, except as set
forth herein or in the disclosure schedule delivered by Buyer to Company on or
before the date of this Agreement (the "Buyer Disclosure Schedule"). The Buyer
Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article IV and the disclosure
in any paragraph shall qualify other paragraphs in this Article IV only to the
extent that it is readily apparent from a reading of such document that it also
qualifies or applies to such other paragraphs.
Section 4.1 Organization of Buyer and Sub.
-----------------------------
Each of Buyer and Sub is a corporation duly organized, validly existing and
to the extent such concept applies, in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power to own,
lease and operate its property and to carry on its business as now being
conducted, and is duly qualified to do business and, to the extent such concept
applies, is in good standing as a foreign corporation in each jurisdiction in
which the failure to be so qualified would be reasonably likely to have a
material adverse effect on the business, properties, financial condition, or
results of operations of Buyer and its Subsidiaries, taken as a whole, or to
have a material adverse effect on the ability of Buyer to consummate the
transactions contemplated by this Agreement (a "Buyer Material Adverse Effect");
provided that "Buyer Material Adverse Effect" shall not include any change in or
effect on the business, properties, financial conditions or results of
operations of Company or any of its Subsidiaries that results from (a) the
announcement or pendency of the Merger, (b) general economic conditions, or (c)
business and economic conditions generally affecting the speech recognition
industry.
Section 4.2 Capitalization.
--------------
(a) As of the date of this Agreement, the issued capital of Buyer
consists of 1,282,380,872 Belgian Francs, represented by (i) 58,626,737 shares
of Buyer Common Stock and (ii) 895,932 shares of preferred stock (the "Buyer
Preferred Stock"), which are automatically convertible into a maximum of
1,194,576 shares of Buyer Common Stock, all of which are duly authorized,
validly issued, fully paid and nonassessable and none of which have been issued
in violation of any preemptive or similar rights. The board of directors of
Buyer has authority to increase the issued capital by 1,065,165,893 Belgian
Francs. Except for options granted pursuant to employee or director equity plans
of Buyer or as set forth on Section 4.2 of the Buyer Disclosure
Schedule, there are no shares of Buyer Common Stock suspensively issued for
future issuance pursuant to options, warrants, equity securities, calls, rights,
commitments or agreements to which Buyer is a party or bound as of the date of
this Agreement. All shares of Buyer Common Stock subject to issuance as
specified above, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be validly issued, fully
paid and nonassessable. There are no obligations, contingent or otherwise, of
Buyer to repurchase, redeem or otherwise acquire any shares of Buyer Common
Stock or any other capital stock of Buyer. All of the outstanding shares of
capital stock of Sub are duly authorized, validly issued, fully paid and
nonassessable, none of such shares have been issued in violation of any
preemptive or similar rights, and all such shares are owned beneficially and of
record by Buyer free and clear of all security interests, liens, claims,
pledges, agreements, limitations in Buyer's voting rights, charges or other
encumbrances of any nature, except for security interests granted in favor of
Buyer's lenders as disclosed in Buyer's audited financial statements for the
year ended December 31, 1998.
(b) All of the Merger Shares will be, when issued in accordance
with this Agreement, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive or similar rights created by
statute, the Memorandum and Articles of Association of Buyer or any agreement to
which Buyer is a party or is bound.
Section 4.3 Authority; No Conflict; Required Filings and Consents.
-----------------------------------------------------
(a) Each of Buyer and Sub has all requisite corporate power and
authority to enter into this Agreement and each of the agreements and documents
contemplated hereby to which Buyer and Company is a party (the "Buyer Ancillary
Agreements") and to consummate the transactions contemplated by this Agreement
and the Buyer Ancillary Agreements. The execution and delivery of this Agreement
and the Buyer Ancillary Agreements and the consummation of the transactions
contemplated by this Agreement and the Buyer Ancillary Agreements have been or
will be duly authorized by all necessary corporate action on the part of each of
Buyer and Sub (including the approval of the Merger by Buyer as the sole
stockholder of Sub) other than with respect to the Merger, the filing of the
Certificate of Merger with the Secretary of State of Delaware as required by the
DGCL and the approval of Buyer's shareholders is not required to consummate any
of the transactions contemplated by this Agreement. This Agreement has been and
the Buyer Ancillary Agreements have been or will be duly executed and delivered
by each of Buyer and Sub and (assuming the due authorization and execution by
the other party hereto) constitutes or will constitute the valid and binding
obligations of each of Buyer and Sub, enforceable in accordance with their
terms.
(b) The execution and delivery of this Agreement and each of the
Buyer Ancillary Agreements by each of Buyer and Sub does not, and the
consummation of the transactions contemplated by this Agreement and each of the
Buyer Ancillary Agreements will not, (i) conflict with, or result in any
violation or breach of, any provision of the Memorandum or Articles of
Organization of Buyer or the Certificate of Incorporation or Bylaws of Sub, (ii)
result in any violation or breach of, or constitute (with or without notice or
lapse of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any material benefit)
under, or require a consent or waiver under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, contract or other
agreement, instrument or obligation to which Buyer or any of its Subsidiaries is
a party or by which any of them or any of their properties or assets may be
bound, or (iii) except as provided in clauses (i), (ii), (iii), (iv) and
(v) in paragraph (c) below, conflict with or violate any permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Buyer or any of its Subsidiaries or any of its or their
respective properties or assets, except in the case of (ii) and (iii) for any
such conflicts, violations, defaults, terminations, cancellations or
accelerations which are not, individually or in the aggregate, reasonably likely
to have a Buyer Material Adverse Effect.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Buyer or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the pre-merger notification
report under the HSR Act, (ii) the filing of the Certificate of Merger with the
Delaware Secretary of State, (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable Federal or state securities laws and the laws of any foreign country,
(iv) the approval by Nasdaq of the listing of the shares of Buyer Common Stock
to be issued in the Merger, and (v) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
be reasonably likely to have a Buyer Material Adverse Effect.
Section 4.4 Public Filings; Financial Statements.
------------------------------------
(a) Since January 1, 1998, Buyer has filed with the SEC all
required reports, schedules, forms, statements and other documents (including
exhibits and all other information incorporated therein) required under the
Securities Act of 1933, as amended (the "Securities Act") and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), (together with all other
required reports, schedules, forms, statements and other such documents filed
after the date hereof (the "Buyer SEC Reports")). On January 7, 2000, Buyer
filed a Registration Statement on Form F-3 (File No. 333-11324) (such
Registration Statement including all documents incorporated therein by
reference, as amended, is hereinafter referred to as the "January Registration
Statement"). As of their respective dates, the Buyer SEC Reports and the January
Registration Statement complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Buyer SEC
Reports and the January Registration Statement, and, except to the extent that
information contained in any Buyer SEC Report has been revised or superseded by
a later filed Buyer SEC Report, none of the Buyer SEC Reports or the January
Registration Statement, when filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(b) The financial statements of Buyer included in the Buyer SEC
Reports and the January Registration Statement, comply as to form, as of their
respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with U.S. GAAP
(except, in the case of unaudited statements, as permitted by Form 6-K of the
SEC) applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all material respects the
consolidated financial position of Buyer and its consolidated Subsidiaries as of
the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal
recurring year-end audit adjustments) and are consistent in all material
respects with the books and records of Buyer.
(c) Buyer has provided Company with unaudited consolidated
financial statements as of, and for, the year ended December 31, 1999 (the
"Buyer Unaudited Financial Statements"). The unaudited balance sheet of Buyer as
of December 31, 1999 is referred to herein as the "Buyer Balance Sheet." The
Buyer Unaudited Financial Statements were prepared in accordance with U.S. GAAP
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements) and fairly present in all
material respects the consolidated financial position of Buyer and its
subsidiaries as of the dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, consistent in all material
respects with the books and records of Buyer and its subsidiaries, except that
the Buyer Unaudited Financial Statements are subject to normal and recurring
year-end adjustments, which are not expected to be material in amount, and for
the absence of complete footnotes.
Section 4.5 No Undisclosed Liabilities.
--------------------------
Except (i) as disclosed in the Buyer Unaudited Financial Statements or the
Buyer SEC Reports filed prior to the date hereof or in Buyer press releases,
(ii) for liabilities or obligations not required under U.S. GAAP to be reflected
in the Buyer Unaudited Financial Statements (or in the notes thereto) or such
Buyer SEC Reports or Buyer, press releases, and (iii) except for customary or
recurring liabilities incurred since January 1, 1999 in the ordinary course of
business consistent with past practices, as of the date of this Agreement Buyer
and its Subsidiaries do not have any liabilities, either accrued, contingent or
otherwise, and whether due or to become due, which individually or in the
aggregate are reasonably likely to have a Buyer Material Adverse Effect.
Section 4.6 Absence of Certain Changes or Events.
------------------------------------
Except as expressly contemplated by this Agreement or as disclosed in the
Buyer SEC Reports filed prior to the date hereof or in Company press releases
issued prior to the date hereof, since September 30, 1999, there has not been
(i) any change in the financial condition, results of operations, business, or
properties of Buyer and its Subsidiaries, taken as a whole, that has had, or is
reasonably likely to have, a Buyer Material Adverse Effect; (ii) any damage,
destruction or loss (whether or not covered by insurance) with respect to Buyer
or any of its Subsidiaries having a Buyer Material Adverse Effect; (iii) any
material change by Buyer in its accounting methods or principles not required
pursuant to U.S. GAAP (except for such changes that could not reasonably be
expected to have a Buyer Material Adverse Effect); (iv) except as a result of
the transactions contemplated by this Agreement or in connection with the
acquisition by Buyer or any of its Subsidiaries of all or substantially all the
capital stock or all or substantially all the assets of another person or
entity, any revaluation by Buyer of any of its assets having a Buyer Material
Adverse Effect, exclusive of any revaluations (including write-downs or write-
offs) of goodwill; or (v) any other action or event that would have required the
consent of Company pursuant to Section 5.3 of this Agreement had such action or
event occurred after the date of this Agreement.
Section 4.7 Information Supplied.
--------------------
None of the information supplied or to be supplied by Buyer for inclusion
or incorporated by reference in (x) the Placement Memorandum/Proxy Statement to
be prepared by Buyer and
Company, at the date of such Placement Memorandum/Proxy Statement, or (y) the
Registration Statement to be prepared by Buyer pursuant to Section 6.2, at the
time the Registration Statement becomes effective under the Securities Act, or
(z) the Registration Statement to be filed by Buyer pursuant to Section 6.22 at
any time after its effective date, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. No representation or warranty is made by
Buyer with respect to statements made or incorporated by reference in the
Registration Statement based on information supplied by Company specifically for
inclusion in the Registration Statement.
Section 4.8 Active Trade or Business of Buyer.
---------------------------------
Buyer will have been engaged in an active trade or business outside of the
United States, within the meaning of Treasury Regulation Section 1.367(a)-
2T(b)(2) and (3), for the entire 36-month period immediately before the
Effective Time. Buyer satisfies the substantiality test contained in Treasury
Regulation Section 1.367(a)-3(c)(3). Buyer does not have any intention, and will
not have an intention at the Effective Time, to substantially dispose of or
discontinue such trade or business.
Section 4.9 Tax Representation Letter.
-------------------------
The representations contained in the letter to be delivered at the Closing
to Hale and Dorr LLP and to Brown, Rudnick, Freed & Gesmer by Buyer and Sub
containing certain representations of Buyer and Sub relevant to the Merger,
which letter shall be in the form attached hereto as Exhibit F, will be true and
---------
accurate as of the Effective Time.
ARTICLE V. CONDUCT OF BUSINESS
Section 5.1 Covenants of Company.
--------------------
Except as expressly contemplated hereby, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Company agrees as to itself and its
Subsidiaries (except to the extent that Buyer shall otherwise consent in
writing), to carry on its business in the ordinary course in substantially the
same manner as previously conducted, to pay its debts and Taxes and perform
other obligations when due, subject to good faith disputes over such debts,
Taxes or obligations, and use commercially reasonable efforts consistent with
past practices and policies to preserve intact its present business
organization, keep available the services of its present officers and key
employees (subject to the Company's right to terminate its employees consistent
with past practices, and acknowledging that the persons currently serving as the
Company's CEO and CFO are occupying such positions on an interim basis), and to
preserve its relationships with customers, suppliers, distributors, and others
having business dealings with it. Except as expressly contemplated by this
Agreement or set forth in the Company Disclosure Schedule, Company shall not
(and shall not permit any of its Subsidiaries to), without the written consent
of Buyer:
(a) Accelerate, amend or, except as contemplated by Schedule
6.2(a) hereof, change the period of exercisability of any outstanding Option or
restricted stock granted under any Company Stock Plan or any other employee
stock plan of Company or authorize cash payments in
exchange for any Option granted under any of such plans except (i) as
contemplated by Section 1.6 of this Agreement and (ii) for vesting or
acceleration provided for by the terms of existing Options;
(b) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock ;
(c) Issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or securities convertible
into shares of its capital stock, or subscriptions, rights, warrants or options
to acquire, or other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities, other than (i) the
issuance of shares of Company Common Stock pursuant to the conversion of the
Preferred Stock outstanding on the date of this Agreement or upon exercise of
outstanding Options, (ii) the issuance of shares of Common Stock upon conversion
by Seagate Technology, Inc. ("Seagate") of all or a portion of its Convertible
Promissory Note dated December 10, 1999 from Company, (iii) Options granted in
accordance with Section 5.2(b) or (c) below;
(d) Acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership
or other business organization or division, or otherwise acquire or agree to
acquire any assets (other than inventory, supplies and other items, in each
case, in the ordinary course of business consistent with past practice);
(e) Sell, lease, license or otherwise dispose of any of its
properties or assets having a value in excess of $100,000, except for sales of
inventory or products, in each case, in the ordinary course of business
consistent with past practice provided Buyer will not unreasonably withhold its
consent to Company's request for a waiver of this covenant;
(f) (i) Increase or agree to increase the compensation (including
salary, bonus, benefits or other remuneration) payable or to become payable to
its officers or employees except for increases in accordance with existing
contractual commitments, all of which are disclosed on the Company Disclosure
Schedule, and customary annual salary increases (provided that the consent of
Buyer shall be required for any proposed salary increase to any employee
occupying the position of Vice President or any higher ranking position), (ii)
grant any severance or termination pay to, or enter into or amend any employment
or severance agreements with, any employees or officers, other than (x) the
payment of severance or termination pay in accordance with any existing
contractual commitments or consistent with past practices (unless such
contractual commitments are being modified or terminated at or prior to the
Closing) or the terms of any Benefit Plan and (y) subject to Section 5.2(b) and
(c) below, entering into employment agreements with new employees in the
ordinary course of business consistent with past practice, (iii) enter into any
collective bargaining agreement, (iv) establish, adopt, enter into or amend
(except as may be required by law) any bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination or severance or other plan, trust, fund,
policy or arrangement for the benefit of any directors, officers or employees,
or (v) forgive any indebtedness of any employee to Company or any of its
Subsidiaries;
(g) Amend or propose to amend its certificate of incorporation or
bylaws;
(h) Make any loans to any person or entity or guarantee any debt
securities of others (other than as a result of the endorsement of checks for
collection and for advances for employee reimbursable expenses, in each case in
the ordinary course of business consistent with past practice);
(i) Initiate, compromise, or settle any material litigation or
arbitration proceeding;
(j) Materially modify, amend or terminate any Company Material
Contract (other than any immaterial modification or amendment to a purchase
order in the ordinary course of business consistent with past practice), or
waive, release or assign any material rights or claims, including any write-off
or other compromise of any accounts receivable of Company or any of its
Subsidiaries (provided that (x) Company may renew any existing Company Material
Contract if no material amendment or modification is made thereto and (y)
Company may extend, through a date not later than March 31, 2001 (provided that
Company shall use commercially reasonable efforts not to extend such date beyond
December 31, 2000), the exclusivity provision contained in that certain
agreement dated December 12, 1997 between Company and Ford Motor Company;
(k) Make or rescind any Tax election, settle or compromise any
material Tax liability or amend any Tax return;
(l) Change its methods of accounting as in effect at December 31,
1999 except as required by US GAAP;
(m) Make or commit to make any capital expenditures in any fiscal
period that exceed by more than ten percent (10%) Company's cumulative capital
budget through the end of such fiscal period, which budget was furnished by
Company and previously approved by Buyer;
(n) Enter into any new license for any intellectual property
rights to or from any third party other than in the ordinary course of business
consistent with past practice; provided that any source code license agreement
--------
or exclusive or semi-exclusive license agreement shall not be deemed to be "in
the ordinary course of business" and shall not be permitted hereby;
(o) Revalue any of the significant assets of Company or any of its
Subsidiaries, including the writing down of inventory other than in the ordinary
course of business consistent with past practice;
(p) Close any material facility or office;
(q) Invest funds in debt securities or other instruments maturing
more than 90 days after the date of investment;
(r) Fail to pay accounts payable and other obligations in the
ordinary course of business in a manner consistent with past practice or
accelerate the payment of any accounts receivable other than in the ordinary
course of business in a manner consistent with past practice;
(s) Mortgage or pledge any of its property or assets or subject
any such assets to any material security interest, lien or other encumbrance
(other than in connection with a possible secured loan from Seagate in a
principal amount not to exceed $5,000,000);
(t) Make any payment or other distribution to any Affiliate of
Company except for normal employment compensation consistent with past
practices;
(u) Materially amend or alter in any way the employee Benefit
Plans identified in Section 3.13 of the Company Disclosure Schedule, except as
may be required by applicable law; or
(v) Take, or agree in writing or otherwise to take, any of the
actions described in paragraphs (a) through (u) above.
Notwithstanding the foregoing, upon prior notice to, but without the prior
consent of, Buyer or Sub, Company shall be permitted to take any and all actions
which may be reasonably necessary or appropriate to eliminate the application of
Code Section 280G to the transactions contemplated by this Agreement, including,
without limitation, amending Options and amending compensation arrangements to
eliminate any accelerated vesting or severance provisions.
Section 5.2 Options.
-------
Company shall not during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time:
(a) take any action to or permit any Options to purchase its
capital stock (issued by Company pursuant to its Stock Option Plan or otherwise)
to become vested or exercisable (or to otherwise accelerate) as a result of this
Agreement or the consummation of the Merger, provided that nothing herein shall
affect the rights of holders of Options previously granted which provide or such
vesting or acceleration; or
(b) grant any Options, except (x) (i) with an exercise price equal
to not less than the fair market value of the shares of Company Common Stock, as
reasonably determined by the Board of Company; (ii) that the vesting and
exercisability of such Options shall be consistent with the terms of the Company
Stock Plans in effect immediately before the Effective Time, except that such
Options shall in no event be permitted to accelerate upon the Effective Time;
and (iii) to employees hired by Company on or after March 20, 2000, in an
aggregate amount not to exceed 150,000 shares; or (y) pursuant to Section 5.2(c)
below.
(c) Notwithstanding Sections 5.2(a) and (b) above, Company shall
be permitted to grant between the date hereof and the Effective Time Options
with respect to not more than an aggregate of 312,911 shares of Company Common
Stock, to the employees mutually designated by Company and Buyer, which Options
shall be in addition to, and not in lieu of, the Options which Company may grant
pursuant to Section 5.2(b) hereof. Such Options shall provide for an exercise
price at least equal to thirty percent (30%) of the fair market value of the
underlying Company Common Stock on the date of their grant, shall be exercisable
for a period of not less than ten (10) years, and shall become exercisable by
the holders thereof immediately prior to the Closing.
Section 5.3 Covenants of Buyer.
------------------
Except as expressly contemplated hereby, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Buyer agrees as to itself and its Subsidiaries
(except to the extent that Company shall otherwise consent in writing) not to
do, or propose to do, any of the following:
(a) Declare or pay any dividends (other than stock dividends) on
or make any other distributions (other than in stock) in respect of its capital
stock;
(b) Amend or propose to amend its Memorandum or Articles of
Association in a manner reasonably likely to prevent the consummation of the
transactions contemplated hereby;
(c) Adopt a plan of complete or partial liquidation or dissolution
of Buyer; or
(d) Take, or agree in writing or otherwise to take, any of the
actions described in paragraphs (a) through (c) above.
Section 5.4 Cooperation.
-----------
Subject to compliance with applicable law, from the date hereof until the
Effective Time, each of Company and Buyer shall (and shall cause each of their
respective Subsidiaries to) make their respective officers available to confer
on a regular and frequent basis with one or more representatives of the other
party at reasonable times and upon reasonable advance notice to report on the
general status of ongoing operations (without disclosure of commercially or
competitively sensitive information) and shall promptly provide or make
available to each other or its counsel copies of all filings made by such party
with any Governmental Entity in connection with this Agreement, the Merger and
the transactions contemplated hereby and thereby. Any materials or documents
relating to filings under the HSR Act may be provided only to outside counsel of
the non-filing party, provided that such counsel shall first have entered into a
joint defense and confidentiality agreement reasonably acceptable to the filing
party. Neither Company nor Buyer shall be required to provide the other with
copies of submissions and communications to governmental or regulatory bodies or
other persons to the extent that such submissions and communications contain
information that is commercially sensitive to Company or Buyer, as the case may
be, and neither Company nor Buyer shall be required to permit the other to
attend any part of a meeting at which information that is commercially sensitive
to Company or Buyer, as the case may be, is likely to be discussed.
Section 5.5 Confidentiality.
---------------
The parties acknowledge that Buyer and Company have previously executed a
Confidentiality Agreement, dated as of October 29, 1999 (the "Confidentiality
Agreement"), which Confidentiality Agreement will continue in full force and
effect in accordance with its terms, except as expressly modified herein.
Section 5.6 Post-Closing Transactions.
----------------------------
For a period of at least two (2) years after the Effective Time, Buyer
shall not liquidate Surviving Corporation; merge Surviving Corporation with or
into another corporation or entity,
including Buyer or its affiliates; sell, distribute, contribute to another
entity, including Buyer or its affiliates, or otherwise dispose of the stock of
Surviving Corporation; cause Surviving Corporation to sell, distribute, or
otherwise dispose of the stock of Surviving Corporation; or cause Surviving
Corporation to sell or otherwise dispose of any of its assets or of any of the
assets acquired from Company in the Merger (collectively, a "Disposition"),
except for transfers of assets made in the ordinary course of business, or
transfers of assets described in Section 368(a)(2)(C) of the Code and Treasury
Regulation Section 1.368-2(k) or unless Buyer first obtains a revenue ruling
from the Internal Revenue Service to the effect that the Disposition can be
effected without disqualifying the Merger as a reorganization within the meaning
of Section 368(a) of the Code.
ARTICLE VI. ADDITIONAL AGREEMENTS
Section 6.1 Exclusivity.
-----------
Neither Company or any Subsidiary, nor any stockholders, agent, officer,
director, trustee or representative of any of the foregoing will, during the
period commencing on the date of this Agreement and ending with the earlier to
occur of the Closing Date or the termination of this Agreement in accordance
with its terms, directly or indirectly:
(i) solicit, encourage or initiate the submission of proposals or
offers from any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than Buyer or its
authorized agents relating to
any acquisition or purchase of all or a material amount of the assets, business
or operations of, or any equity interest in, Company or any Subsidiary of
Company or any merger, consolidation or other business combination involving
Company or any Subsidiary (a "Third Party Acquisition"). In the event Company
consummates a Third Party Acquisition before or any time after the termination
of this Agreement based in whole or in part upon, or as a result of, its breach
of its obligations pursuant to the provisions of this Section 6.1, Company shall
pay to Buyer (on the first business day after consummation of the Third Party
Acquisition) Seventeen Million Four Hundred Fifteen Thousand Dollars
($17,415,000) as a break-up fee to compensate Buyer for the loss of the business
opportunity, in immediately available funds, and receipt of such amount shall be
Buyer's exclusive remedy for any such breach.
Section 6.2 Tender for Shares; Placement Memorandum/Proxy Statement;
--------------------------------------------------------
Registration Statement.
- ----------------------
(a) Buyer shall, between the date of this Agreement and the date
on which the Proxy Statement to be prepared by Buyer and Company in connection
with obtaining the approval of the Merger by the Stockholders (the "Proxy
Statement") is mailed to the Stockholders, make an offer to purchase from
certain of the Stockholders (which Stockholders shall be identified jointly by
Company and Buyer) their shares of Company Common Stock, with a view towards
reducing the number of holders of Company Common Stock who are not "Accredited
Investors" (as defined in Regulation D ("Regulation D") promulgated under the
Securities Act of 1933, as amended (the
"Securities Act")) to fewer than 35, in order enable Buyer to issue the Merger
Shares in a manner intended to comply with the private placement exemption under
Regulation D. Company shall use its best efforts to assist Buyer in connection
with Buyer's efforts to reduce the number of nonaccredited investors to fewer
than 35, including without limitation as set forth on Schedule 6.2(a) hereto.
---------------
(b) In the event Buyer determines that it is able to purchase
shares from a sufficient number of the Stockholders to consummate the Merger
under such private placement exemption, then as promptly as practicable after
Buyer makes such determination, Buyer and Company shall jointly prepare proxy
materials (in accordance with the disclosure requirements of Regulation D) for
the purpose of soliciting proxies from the Stockholders to vote in favor of the
adoption of this Agreement and the approval of the Merger at a meeting of the
Stockholders to be called and held for such purpose (the "Special Stockholders'
Meeting'"). Such proxy materials shall be in the form of a placement
memorandum/proxy statement to be used for the purpose of offering the Merger
Shares to the Stockholders and soliciting such proxies from the Stockholders
(such placement memorandum/proxy statement, together with any accompanying
letter to Stockholders, notice of meeting and form of proxy, shall be referred
to herein as the "Placement Memorandum/Proxy Statement"). Each party shall
furnish all information reasonably requested in connection with the preparation
of the Placement Memorandum/Proxy Statement.
(c) If, on or before May 1, 2000, Buyer is unable to purchase
shares from a sufficient number of the Stockholders to consummate the Merger
under such private placement exemption, as provided above, then as promptly as
practicable after Buyer makes such determination, Buyer and Company shall
prepare and Buyer shall file with the SEC a Registration Statement on Form F-4
(or any successor registration statement involving a similar amount of
disclosure, or if not then ineligible to use any such form, then any other
available form of registration statement) in which the Proxy Statement for the
Special Stockholders Meeting will be included as a prospectus. Buyer and Company
shall use all reasonable efforts to cause the Registration Statement to become
effective as soon after such filing as practicable. Each of Buyer and Company
will respond to any comments of the SEC and will use its respective commercially
reasonable efforts to have the Proxy Statement cleared by the SEC and the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filings and Company will cause the Proxy Statement and
the prospectus contained within the Registration Statement to be mailed to the
Stockholders at the earliest practicable time after both the Proxy Statement is
cleared by the SEC and the Registration Statement is declared effective under
the Securities Act. Each of Buyer and Company will notify the other promptly
upon the receipt of any comments from the SEC or its staff or any other
government officials and of any request by the SEC or its staff or any other
government officials for amendments or supplements to the Registration
Statement, the Proxy Statement or any filing pursuant to Section 6.2(d) hereof
or for additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Registration Statement, the Proxy Statement, the
Merger or any filing pursuant to Section 6.2(d) hereof. Each of Buyer and
Company will cause all documents that it is responsible for filing with the SEC
or other regulatory authorities under this Section 6.2 to comply in all material
respects with all applicable requirements of law and the rules and regulations
promulgated thereunder. Whenever any event occurs which is required to be set
forth in an amendment or supplement to the Proxy Statement, the Registration
Statement or any filing pursuant to Section 6.2(d) hereof, Buyer and Company, as
the case may be, will promptly
inform the other of such occurrence and cooperate in filing with the SEC or its
staff or any other government officials, and/or mailing to the Stockholders,
such amendment or supplement. In the event that, as a result of this Section
6.2(c), Buyer is required to file the Registration Statement on Form F-4 (or any
successor registration statement involving a similar amount of disclosure, or if
not then ineligible to use any such form, then any other available form of
registration statement), the Outside Date (as defined in Section 9.1(b) below)
shall automatically be extended for a period of ninety (90) days from the date
(which shall not be later than May 1, 2000) on which Buyer reasonably determines
that it will be unable to consummate the Merger as a private placement under
Regulation D.
(d) Buyer and Company shall make all necessary filings with
respect to the Merger under the Securities Act, the Securities Exchange Act of
1934, as amended (the "Exchange Act"), applicable state blue sky laws and the
rules and regulations thereunder.
Section 6.3 Stockholder Documents.
----------------------
Company shall use its best efforts to obtain and deliver the following to
Buyer as soon as practicable after the date hereof (each in form and substance
satisfactory to Buyer in its sole discretion):
(a) a questionnaire to be executed by each Stockholder as to
personal wealth and financial sophistication (each a "Company Stockholder
Questionnaire"); and
(b) with respect to each Stockholder reasonably deemed by Buyer
not to be an "Accredited Investor" as defined in Rule 501 of Regulation D, (i)
written certification from such Stockholder that such Stockholder has such
knowledge and experience in financial and business matters that such Stockholder
is capable of evaluating the merits and risks of a prospective investment in
Buyer Common Stock (within the meaning of Rule 506 of Regulation D) (each a
"Sophistication Certification") or (ii) written agreement from such Stockholder
regarding the representation of such Stockholder in connection with this
Agreement and the transactions contemplated hereby by a purchaser representative
acceptable to Buyer in its sole discretion, together with such other
representations and agreements pursuant to the provisions of Regulation D as
Buyer shall reasonably request.
Section 6.4 Access to Information.
---------------------
Upon reasonable notice, Company shall (and shall cause each of its
Subsidiaries to) afford to Buyer's officers, employees, accountants, counsel and
other representatives, reasonable access, during normal business hours during
the period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, and Company shall furnish
promptly to Buyer (and shall cause each its Subsidiaries to) furnish promptly to
the other party a copy of each report, schedule, registration statement and
other document filed or received by it during such period pursuant to the
requirements of federal securities laws and Company shall furnish promptly to
Buyer all information concerning its business, properties and personnel as the
other party may reasonably request. Unless otherwise required by law, each of
Buyer and Company will and shall cause its stockholders, officers, employees,
accountants, counsel and other representatives or persons who have access to
such information to hold any such information which is non-public in confidence
in accordance with the Confidentiality Agreement. No information or
knowledge obtained in any investigation pursuant to this Section 6.4 or
otherwise shall affect or be deemed to modify any representation or warranty
contained in this Agreement or the conditions to the obligations of the parties
to consummate the Merger.
Section 6.5 Legal Conditions to Merger.
--------------------------
(a) Subject to the terms hereof, Company, Buyer and Principal
Stockholders shall use their respective reasonable efforts to (i) take, or cause
to be taken, all appropriate action, and do, or cause to be done, all things
necessary and proper under applicable law to consummate and make effective the
transactions contemplated hereby as promptly as practicable, (ii) obtain from
any Governmental Entity or any other third party any consents, licenses,
permits, waivers, approvals, authorizations, or orders required to be obtained
or made by Company or Buyer or any of their Subsidiaries in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby including, without limitation, the Merger,
(iii) as promptly as practicable, make all necessary filings, and thereafter
make any other required submissions, with respect to this Agreement and the
Merger required under (A) the Securities Act and the Exchange Act, and any other
applicable federal or state securities laws, (B) the HSR Act and any related
governmental request thereunder, and (C) any other applicable law, and (i)
execute or deliver any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement, including without limitation the Voting Agreement and Waiver and the
Noncompetition Agreement. Company and Buyer shall cooperate with each other in
connection with the making of all such filings, including providing or making
available copies of all such documents to the non-filing party and its advisors
(or, in connection with information relating to filings under the HSR Act, to
the advisors of the non-filing party) prior to filing and, if requested,
consider in good faith all reasonable additions, deletions or changes suggested
in connection therewith. Company and Buyer shall use their respective
commercially reasonable efforts to furnish to each other all information
required for any application or other filing to be made by the other party
pursuant to the rules and regulations of any applicable law in connection with
the transactions contemplated by this Agreement.
(b) Subject to the terms hereof, Buyer and Company agree, and
shall cause each of their respective Subsidiaries, to cooperate and to use their
respective commercially reasonable efforts to obtain any government clearances
or approvals required for Closing under the HSR Act, the Sherman Act, as
amended, the Clayton Act, as amended, the Federal Trade Commission Act, as
amended, and any other federal, state or foreign law or, regulation or decree
designed to prohibit, restrict or regulate actions for the purpose or effect of
monopolization or restraint of trade (collectively, the "Antitrust Laws"). In
the event of a Second Request (as defined below), Company and Buyer shall
cooperate in all reasonable respects to respond to any government requests for
information under any Antitrust Law, and to contest and resist any action,
including any legislative, administrative or judicial action, and to have
vacated, lifted, reversed or overturned any Order (as defined in Section 7.1(d)
below) (whether temporary, preliminary or permanent) that restricts, prevents or
prohibits the consummation of the Merger or any other transactions contemplated
by this Agreement under any Antitrust Law. As used herein, "Second Request"
shall mean any formal request for additional information or documentary material
made by the Federal Trade Commission or the Antitrust Division of the U.S.
Department of Justice pursuant to 16 C.F.R. 803.20 under the HSR Act. The
parties hereto will consult and cooperate with one another, and consider in good
faith the views of one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any
party hereto in connection with proceedings under or relating to any Antitrust
Law. Notwithstanding anything to the contrary in this Section 6.5, neither Buyer
nor any of its Subsidiaries shall be required to (i) divest any of their
respective businesses, product lines or assets, or to take or agree to take any
other action or agree to any limitation, that could reasonably be expected to
have a Buyer Material Adverse Effect or a material adverse effect on Buyer,
combined with Company, after the Effective Time and (ii) none of Buyer, its
Subsidiaries or Company shall be required to take any action under this Section
6.5 if the United States Department of Justice or the United States Federal
Trade Commission authorizes its staff to seek a preliminary injunction or
restraining order to enjoin consummation of the Merger.
(c) Each of Company and Buyer shall give (or shall cause their
respective Subsidiaries to give) any notices to third parties, and use, and
cause their respective Subsidiaries to use, their commercially reasonable
efforts to obtain any third party consents related to or required in connection
with the Merger that are (A) necessary to consummate the transactions
contemplated hereby, (B) disclosed or required to be disclosed in the Company
Disclosure Schedule or the Buyer Disclosure Schedule, as the case may be, or (C)
required to prevent a Company Material Adverse Effect or a Buyer Material
Adverse Effect from occurring prior to or after the Effective Time.
Section 6.6 Employee Benefit Plans.
----------------------
(a) Buyer shall cause the Surviving Corporation to adopt all
employee Benefit Plans of Company identified in Section 3.13 of the Company
Disclosure Schedule as of the Closing Date; provided, however, Surviving
Corporation shall retain the sole discretion to amend, restate, merge or
terminate any such Employee Benefit Plan at any time after December 31, 2000,
subject to ERISA and the Code; further provided that if Buyer elects to amend,
restate, merge or terminate any or all of such Employee Benefit Plans it shall,
at a minimum, continue to provide employees of Company who become employees of
Buyer or the Surviving Corporation after the Closing Date benefits equivalent to
those provided to similarly situated employees of Buyer or Surviving
Corporation, or a combination thereof.
(b) For purposes of eligibility, vesting and, except with respect
to any pension benefit plan or retiree medical plan, calculation of benefits
(except to the extent crediting such service would result in the duplication of
benefits) under each of Buyer's or the Surviving Corporation's employee benefit
plans, programs and arrangements in which an employee of Company who is employed
as of the Closing Date and who becomes an employee of Buyer or the Surviving
Corporation immediately following the Closing (each a "Continuing Employee")
participates, Buyer shall grant, or shall cause the Surviving Corporation to
grant, each Continuing Employee with credit for all service with Company to the
extent permitted by law, and Buyer shall waive any provisions of its medical
benefits plan which may preclude coverage for any preexisting condition of
Company employees.
(c) It is expressly agreed that the provisions of this Section 6.6
are not intended to be for the benefit of or otherwise enforceable by any third
person, except for any employee of Company.
Section 6.7 Public Disclosure.
-------------------------------
Prior to the Effective Date, Buyer and Company shall consult with each
other before issuing any press release or otherwise making any public statement
with respect to the Merger or this Agreement and except as required by
applicable law or the rules or regulations of the applicable stock exchange,
neither shall issue any such press release or make any such public statement
prior to such consultation, except as may be required by law. The initial press
release relating to this Agreement shall be in a form that was heretofore agreed
by the parties.
Section 6.8 Tax-Free Reorganization.
-----------------------
Buyer, Company and Stockholders shall each use its commercially reasonable
efforts to cause the Merger to be treated as a reorganization within the meaning
of Section 368(a) of the Code. The parties hereto hereby adopt this Agreement
as a plan of reorganization.
Section 6.9 Affiliate Agreements.
--------------------
Upon the execution of this Agreement, Company will provide Buyer with a
list of those persons who are, in Company's reasonable judgement, "affiliates"
of Company, within the meaning of Rule 145 (each such person who is an
"affiliate" of Company within the meaning of Rule 145 is referred to as a "Rule
145 Affiliate") promulgated under the Securities Act ("Rule 145"). Company
shall provide such information and documents as Buyer shall reasonably request
for purposes of reviewing such list and shall notify Buyer in writing regarding
any change in the identity of its Rule 145 Affiliates prior to the Closing Date.
Company shall use its commercially reasonable efforts to deliver or cause to be
delivered to Buyer by April 7, 2000 (and in any case prior to the mailing of the
Proxy Statement) from each of its Rule 145 Affiliates, an executed Affiliate
Agreement, in substantially the form appended hereto as Exhibit G. Buyer shall
---------
be entitled to place appropriate legends on the certificates evidencing any
Buyer Common Stock to be received by Rule 145 Affiliates of Company pursuant to
the terms of this Agreement, and to issue appropriate stop transfer instructions
to the Exchange Agent for the Buyer Common Stock (provided that such legends or
stop transfer instructions shall be removed, two (2) years after the Effective
Date, upon the request of any stockholder that is not then a Rule 145 Affiliate
of Buyer).
Section 6.10 Nasdaq Listing.
--------------
Buyer shall cause the shares of Buyer Common Stock to be issued in the
Merger to be listed on the Nasdaq National Market, subject to official notice of
issuance, on or prior to the Closing Date.
Section 6.11 Notification of Certain Matters.
- ------------ -------------------------------
Buyer will give prompt notice to Company, and Company will give prompt
notice to Buyer, of the occurrence, or failure to occur, of any event, which
occurrence or failure to occur would be reasonably likely to cause (a) any
representation or warranty of such party contained in this Agreement to be
untrue or inaccurate in any material respect at any time from the date of this
Agreement to the Effective Time, or (b) any material failure of Buyer and Sub or
Company, as the case may be, or of any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement.
Notwithstanding the above, the delivery of any notice pursuant to this section
will not limit or otherwise affect the remedies available hereunder to the party
receiving such notice or the conditions to such party's obligation to consummate
the Merger.
Section 6.12 Special Stockholders' Meeting.
-----------------------------
Company, acting through its Board of Directors, shall, in accordance with
applicable law and Company's certificate of incorporation and bylaws, duly call,
give notice of, convene and hold the Special Stockholders' Meeting as soon as
practicable following the date of this Agreement (taking into account Buyer's
desire to purchase from certain Stockholders their shares of Company Common
Stock prior to such notice and call and the other provisions of Section 6.2) for
the purpose of approving the Merger and this Agreement. The Board of Directors
of Company shall (i) recommend approval of the Merger and the Agreement by the
Stockholders and (ii) take all reasonable and lawful action to solicit and
obtain such approval; provided, however, that the Board of Directors of Company
may withdraw such recommendation if (but only if) (i) the Board of Directors of
Company upon advice of its outside legal counsel determines that it is required,
in order to comply with its fiduciary duties under applicable law, to recommend
a Third-Party Acquisition to the Stockholders and (ii) Company has complied with
the provisions of Section 6.1 hereof. Company shall provide to the Stockholders,
together with the applicable notice of the Special Stockholders' Meeting, the
Placement Memorandum/Proxy Statement or the Registration Statement, as the case
may be, and shall use its commercially reasonable efforts to obtain such
approval.
Section 6.13 Special Board Meeting of Buyer.
------------------------------
For the purpose of Belgian law, at the Effective Time, Stockholders shall
be deemed to have transferred and delivered the shares of Company Common Stock
to Buyer through (a) a contribution in kind in return for the Merger Shares
(which shall be issued to the Stockholders in accordance with Section 2.2
hereof) and (b) a sale of the remaining number of shares of Company Common Stock
corresponding to fractions of shares of Buyer Common Stock which Stockholders
are entitled to receive under this Agreement. Buyer shall convene a board
meeting to be held in front of a notary public in Belgium at which Buyer's board
shall authorize, inter alia, (i) an increase the capital of Buyer upon the
contribution in kind by the Stockholders of all outstanding shares of Company
Common Stock other than Dissenting Shares, (ii) the issuance of the Merger
Shares to the Stockholders and (iii) the payment of cash to the Stockholders in
respect of fractional shares in accordance with this Agreement, followed by a
replacement of the Shares of Company Common Stock by shares of Sub, pursuant to
the Merger.
Section 6.14 Company Stock Options.
---------------------
(a) As soon as practicable following the date of this Agreement,
the Board of Directors of Company shall adopt such resolutions or take such
other actions as may be required to effect the following:
(i) Adjust the terms of all outstanding Options as necessary to
provide that, at the Effective Time, each Option outstanding immediately prior
to the Effective Time shall be amended and converted into a Warrant to acquire,
on substantially the same terms and conditions as were applicable under such
Option (including, without limitation, its status as an "incentive stock
option" under Section 422 of the Code, if applicable, its term, exercisability,
vesting schedule and acceleration provisions, if any), the number of shares of
Buyer Common Stock determined in accordance with Section 1.6 hereof; and
(ii) Make such other changes to the Company Stock Plans as Company
and Buyer may agree are appropriate to give effect to the Merger.
(b) As soon as practicable after the Effective Time, Buyer shall
deliver to the holders of Options appropriate notices (the "Company Stock Option
Notices") setting forth (i) such holders' rights pursuant to the Company Stock
Plans and the agreements evidencing the grants of such Company Options and that
such Company Options and agreements shall be assumed by Buyer and shall continue
in effect on substantially the same terms and conditions (subject to the
adjustments required by this Section 6.14 after giving effect to the Merger) and
(ii) the procedures for the exercise of the Warrants. The term, exercisability,
vesting schedule (including any acceleration provisions therein), status as an
"incentive stock option," if applicable, and all of the other terms of the
Company Options shall otherwise remain unchanged in all material respects.
(c) A holder of a Warrant may exercise such Warrant in whole or
in part by (i) following the exercise procedures to be delivered by Buyer as set
forth in the Company Stock Option Notice and (ii) concurrently delivering to
Buyer the consideration therefor and the federal withholding tax information, if
any, required in accordance with the related Company Stock Plan.
(d) Except as otherwise contemplated by this Section 6.14 and
except to the extent required under the respective terms of the Options, all
restrictions or limitations on transfer and vesting with respect to the Options,
to the extent that such restrictions or limitations shall not have already
lapsed, shall remain in full force and effect with respect to such Options after
giving effect to the Merger and the assumption of the Company Stock Plans by
Buyer as set forth above.
(e) No later than thirty (30) days after the Effective Time,
Buyer shall prepare and file with the SEC a registration statement on Form S-8
registering the number of shares subject to the Warrants. Such registration
statement shall be kept effective (and the current status of the prospectus
required thereby shall be maintained in accordance with the relevant
requirements of the Securities Act and the Exchange Act) for at least as long as
any Warrants remain outstanding. Buyer shall promptly take such actions as may
be required to obtain the approval by Nasdaq of the shares of Buyer Common Stock
which are issuable upon exercise of the Warrants.
Section 6.15 Indemnification.
---------------
(a) From and after the Effective Time, Buyer shall, or shall
cause the Surviving Corporation to, fulfill and honor in all respects the
obligations of Company to indemnify each Person who is or was a director or
officer (an "Indemnified Party") of Company or any of its Subsidiaries pursuant
to any indemnification provision of the Certificate of Incorporation or By-laws
or equivalent constituent documents of Company or any of its Subsidiaries as
each is in effect on the date hereof.
(b) For a period of six (6) years after the Effective Time, Buyer
shall cause to be maintained (to the extent available in the market) in effect
an officers' and directors' liability insurance policy with respect to each
Indemnified Party of Company or any of its Subsidiaries covering acts or
omissions by such persons occurring prior to the Effective Time, which policy
shall
be on terms and conditions not less favorable than those Buyer maintains
for its officers and directors; provided, that in no event shall Buyer or the
--------
Surviving Corporation be required to make annual premium payments to the extent
such premiums exceed an amount equal to 175% of the annual premium paid by
Company for such coverage as of the date of this Agreement (the "Maximum
Premium"); provided further, that if such premiums exceed the Maximum Premium
----------------
the Surviving Corporation shall purchase insurance policies in such amounts and
with such coverage as reasonably can be purchased for the Maximum Premium. This
Section 6.15 shall survive the closing of all the transactions contemplated
hereby and, is intended to benefit the Indemnified Parties and their respective
heirs and personal representatives (each of which shall be entitled to enforce
this Section 6.15 against Buyer and the Surviving Corporation, as the case may
be, as a third-party beneficiary of this Agreement).
Section 6.16 Tax Filings.
-----------
From and after the Effective Time, Buyer will cause Company to comply with
all applicable reporting requirements set forth in Treasury Regulations under
Section 367 of the Code, including without limitation, Regulation Section
1.367(a)-3(c)(6).
Section 6.17 Guaranty by Buyer.
-----------------
Effective April 1, 2000 (or such other date as Buyer and Company shall
reasonably agree), Buyer shall guarantee (the "Guaranty") Company's outstanding
indebtedness to Fleet or to another commercial lender of good reputation whom
Buyer shall reasonably assist Company in locating and from whom Buyer shall
reasonably assist Company in facilitating an extension of credit in an amount
not to exceed $10,000,000 (exclusive of Company's current indebtedness to Fleet)
(the "Loan"); provided, that such Guaranty shall expire on the earlier of (i)
the date that is six (6) months after the effectiveness of the Guaranty, and
(ii) the date of termination of the Agreement by Buyer pursuant to Section
9.1(e) hereof; and further provided that, in the event the Agreement terminates
for any reason other than by Buyer pursuant to Section 9.1(e), Buyer shall
either refinance the Loan itself or cause an extension of the Loan until the
date that is eighteen (18) months after the effectiveness of the Guaranty. All
commitment fees and related expenses payable to the lender in connection with
the Loan shall be the responsibility of Company; provided that Company's cash at
Closing shall be credited in an amount equal to the aggregate amount of all such
fees and expenses actually incurred by Company for purposes of calculating the
Net Cash Amount pursuant to Section 2.3(b) hereof.
Section 6.18 Release.
-------
(a) Each Principal Stockholder hereby releases, remises and
forever discharges Company and each of its subsidiaries and their respective
successors and assigns (collectively, the "Releasees"), from any and all debts,
demands, actions, causes of action, suits, dues, sums and sums of money,
accounts reckonings, bonds, specialties, covenants, contracts, controversies,
agreements, promises, acts, omissions, variances, executions, damages and any
and all other claims, demands and liabilities whatsoever, of every name and
nature, both in law and equity, whether known or unknown and whether or not in
litigation (collectively, the "Claims"), against any of the Releasees, which the
undersigned may have or which could be asserted by another on his, her or its
behalf now or from the beginning of the world to the Effective Time, based on
any action, omission or event whatsoever, and more particularly, but not by way
of limitation, based upon, relating to or arising
from his, her or its rights as a holder of any of the Company Common Stock,
claims for diversion of opportunity, conflict of interest, breach of fiduciary
duty, or breach of duty of loyalty; claims relating to any employment and/or
consulting relationships, any express or implied contract or breach of contract,
tortious or wrongful conduct, breach of a covenant of good faith and fair
dealing, or the intentional or negligent infliction of emotional or mental
distress; claims arising under Federal, state or local law, order of regulation,
or under the Securities Act, the Securities Exchange Act of 1934, as amended, or
any other Federal, state, blue sky or local law dealing with any securities; and
any and all other claims or causes of action against or with respect to the
Releasees; except that, (i) if the undersigned is an employee of Company, this
release does not release Company from any employment benefits or obligations
that accrued to or are due to the undersigned from Company in connection with
such employment and (ii) the Principal Stockholders are not hereby releasing the
Releasees from any Claims which may arise under or relate to this Agreement or
the other agreements and transactions contemplated hereby.
(b) Each Principal Stockholder hereby forever covenants with the
Releasees not to sue, assert any claim against, or otherwise seek any recovery
from any Releasee in respect of any of the claims or causes of action that are
being released hereunder, whether for tort, fraud, contract or otherwise, based
upon any act or occurrence or failure to act occurring before the Effective
Time.
Section 6.19 Regulation D.
------------
Company and Principal Stockholders shall use all reasonable efforts to
cause the Merger Shares to be issued in accordance with the applicable
provisions of Regulation D, shall cooperate in all filings required pursuant to
Regulation D and shall not knowingly take or omit to take any action which
action or failure to act would jeopardize the issuance of the Merger Shares in
accordance with Regulation D.
Section 6.20 Post-Closing Warrants.
---------------------
As soon as practicable after the Closing Date, Buyer shall grant Warrants
to purchase 200,000 shares of Buyer Common Stock at an exercise price equal to
the fair market value of the underlying Buyer Common Stock on the date of their
grant, which shall be exercisable for a period of not less than ten (10) years,
and which shall have such other terms (including without limitation vesting
schedules) as Buyer and Company shall reasonably agree. The Warrants shall be
allocated among employees of Company as reasonably agreed by Buyer and Company.
Section 6.21 UK Subsidiary Optionholders.
---------------------------
Buyer and Company shall use commercially reasonable efforts (x) to cause
the Options held by Company's UK Subsidiary optionholders to convert into
Warrants or (y) to cause such Options to be cashed out or otherwise terminated
prior to the Effective Time.
Section 6.22 Shelf Registration Statement.
-------------------------------
If the issuance of the Merger Shares is exempt from registration under the
Securities Act, by not later than the later to occur of (i) five (5) business
days after the Closing, and (ii) May 31, 2000, Buyer shall have filed a
registration statement under the Securities Act on Form F-3 (or any successor
short form registration statement involving a similar amount of disclosure; or
if then ineligible to use any such form, then any other available form of
registration statement) for a public
offering of the Merger Shares to be made on a continuous basis pursuant to Rule
415 of the Securities Act (the "Shelf Registration Statement"); provided that
Buyer may exclude from the Shelf Registration Statement the Shares of any
Stockholder who has failed to provide Buyer with any information reasonably
requested of such Stockholder in writing by Buyer in connection with the
preparation of the Shelf Registration Statement.
Section 6.23 Substitution of Warrants for Options.
------------------------------------
Prior to the Effective Time, Buyer shall take all actions reasonably
necessary for the substitution of the Warrants for all outstanding Options and
the assumption of the Company Stock Plans.
ARTICLE VII. CONDITIONS TO MERGER
Section 7.1 Conditions to Each Party's Obligation To Effect the Merger.
---------------------------------------------------------
The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the satisfaction prior to the Closing Date of the
following conditions:
(a) HSR Act. The applicable waiting period shall be terminated or
-------
shall expire without a request for further information under such Act, or in the
event of such a request for further information, the waiting period following
delivery of such information shall have expired without the objection of either
the Federal Trade Commission or the U.S. Department of Justice .
(b) Governmental Approvals. Each of the parties shall have
----------------------
obtained authorizations, consents, orders or approvals of, or declarations or
filings with, or expirations of waiting periods imposed by, any Governmental
Entity, the failure of which to file, obtain or occur is reasonably likely to
have a Buyer Material Adverse Effect or a Company Material Adverse Effect shall
have been filed, been obtained or occurred.
(c) Registration Statement. If a Registration Statement is filed
----------------------
pursuant to Section 6.2(c), the Registration Statement shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceedings seeking a stop order.
(d) No Injunctions. No court or Governmental Entity of competent
--------------
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
order, executive order, stay, decree, judgment or injunction (each an "Order")
or statute, rule or regulation which is in effect and which has the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger.
(e) Nasdaq Listing. The shares of Buyer Common Stock to be issued
--------------
in the Merger shall have been approved for listing on the Nasdaq National
Market, subject only to official notice of issuance.
(f) Stockholders' Approval. This Agreement and the Merger shall
----------------------
have been approved and adopted by the affirmative vote of the holders of a
majority of the shares of each of (i) the Company Common Stock and (ii) the
Company Preferred Stock outstanding on the record date for the Special
Shareholders' Meeting.
Section 7.2 Additional Conditions to Obligations of Buyer and Sub.
-----------------------------------------------------
The obligations of Buyer and Sub to effect the Merger are subject to the
satisfaction of each of the following conditions, any of which may be waived in
writing exclusively by Buyer and Sub:
(a) Representations and Warranties.
------------------------------
(i) The representations and warranties of Company set forth in
this Agreement that are not qualified as to materiality or Company Material
Adverse Effect shall be true and correct in all material respects as of the
Closing Date and the Effective Time, as though made at and as of the Effective
Time, except that those representations and warranties that address matters only
as of a particular date shall remain true and correct in all material respects
as of such date;
(ii) The representations and warranties of Company set forth in
this Agreement that are qualified as to materiality or Company Material Adverse
Effect shall be true and correct in all respects as of the Closing Date and the
Effective Time as though made at and as of the Effective Time, except that those
representations and warranties that address matters only as of a particular date
shall remain true and correct in all respects as of such date;
Buyer shall have received a certificate signed on behalf of Company by the
chief executive officer and the chief financial officer of Company to the effect
that each of the conditions specified in paragraphs (i) and (ii) of this
paragraph (a) is satisfied in all respects.
(b) Performance of Obligations of Company. Company and
-------------------------------------
Stockholders shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the Closing
Date; and Buyer shall have received a certificate signed on behalf of Company by
the chief executive officer and the chief financial officer of Company and by
Stockholders to such effect.
(c) Conversion of Preferred Stock. The conversion of the Preferred
-----------------------------
Stock described in Section 1.5 shall have occurred and Company shall have
obtained and delivered to Buyer and Sub copies of all consents, conversion
notices or agreements from each holder of the Preferred Stock necessary to
convert the Preferred Stock into shares of Buyer Common Stock pursuant to
Section 1.5 hereof.
(d) Consents. Company shall have obtained and delivered to Buyer
--------
and Sub all material waivers, permits, consents, approvals or other
authorizations necessary to be obtained by it to consummate the Merger, and
effected all material registrations, filings and notices necessary to be
affected by it to consummate the Merger.
(e) Indemnity Escrow Agreement. The Principal Stockholders shall
--------------------------
have executed and delivered to Buyer the Indemnity Escrow Agreement.
(f) Tax Opinion. Buyer shall have received the opinion of Brown,
-----------
Rudnick, Freed & Gesmer, to the effect that the Merger will be treated for
federal income tax purposes as a tax-free reorganization within the meaning of
Section 368(a) of the Code (it being agreed that Buyer and Company shall each
provide reasonable cooperation, including making reasonable representations, to
Brown, Rudnick, Freed & Gesmer to enable it to render such opinion).
(g) Legal Opinion. Buyer shall have received an opinion of Hale
-------------
and Dorr LLP in form and substance satisfactory to Buyer and its counsel.
(h) Appraisal Rights. Stockholders representing not more than ten
----------------
percent (10%) of the Company Common Stock (on a Common Stock equivalent basis)
of Company shall have exercised appraisal rights in connection with the Merger .
(i) Stockholders' Agreement. Principal Stockholders shall have
-----------------------
executed and delivered to Buyer the Stockholders' Agreement in substantially the
form of Exhibit H hereto.
---------
(j) LLC Agreement. Principal Stockholders shall have executed and
-------------
delivered to Buyer their respective LLC Agreements.
(k) Letters of Transmittal; Stock Powers. All Principal
------------------------------------
Stockholders or their designated affiliates shall have delivered to Buyer (i)
duly executed and complete stock powers in favor of the Escrow Agent in respect
of the Escrow Shares, and (ii) duly executed and complete Letters of
Transmittal.
(l) Terminations. The agreements of the Company described in
------------
Schedule 7.2(l) hereof shall be terminated on or prior to the Closing Date.
- ---------------
Section 7.3 Additional Conditions to Obligations of Company.
-----------------------------------------------
The obligation of Company to effect the Merger is subject to the
satisfaction of each of the following conditions, any of which may be waived, in
writing, exclusively by Company:
(a) Representations and Warranties.
------------------------------
(i) The representations and warranties of Buyer and Sub set forth
in this Agreement that are not qualified as to materiality or Company Material
Adverse Effect shall be true and correct in all material respects as of the
Closing Date and the Effective Time, as though made at and as of the Effective
Time, except that those representations and warranties that address matters only
as of a particular date shall remain true and correct in all material respects
as of such date;
( ii) The representations and warranties of Buyer and Sub set forth
in this e Agreement that are qualified as to materiality or Buyer Material
Adverse Effect shall be true and correct in all respects as of the Closing Date
and the Effective Time, as though made at and as of the Effective Time, except
that those representations and warranties that address matters only as of a
particular date shall remain true and correct in all material respects as of
such date;
Company shall have received a certificate signed on behalf of Buyer by the
chief executive officer or the chief financial officer of Buyer to the effect
that each of the conditions specified in paragraphs (i) and (ii) of this
paragraph (a) is satisfied in all respects.
(b) Performance of Obligations of Buyer and Sub. Buyer and Sub shall have
-------------------------------------------
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date, and Stockholders
shall have received a certificate signed on behalf of Buyer by the chief
executive officer or the chief financial officer of Buyer to such effect .
(c) Tax Opinion. Stockholders shall have received the opinion of
-----------
Hale and Dorr LLP, to the effect that the Merger will be treated for federal
income tax purposes as a tax-free reorganization within the meaning of Section
368(a) of the Code (it being agreed that Buyer and Company shall each provide
reasonable cooperation, including making reasonable representations, to Hale and
Dorr LLP to enable it to render such opinion).
(d) Legal Opinion. Company shall have received opinions of Loeff
-------------
Claey s Verbeke (as to Buyer) and Brown Rudnick Freed & Gesmer (as to Sub) in
form and substance satisfactory to Company and its counsel.
(e) Consents. Buyer and Sub shall have obtained and delivered to
--------
Company all material waivers, permits, consents, approvals or other
authorizations necessary to be obtained by them to consummate the Merger, and
effected all material registrations, filings and notices necessary to be
affected by them to consummate the Merger.
(f) Stockholders' Agreement. Buyer and certain of Buyer's
-----------------------
stockholders shall have executed and delivered to Principal Stockholders the
Stockholders' Agreement.
(g) Indemnity Escrow Agreement. Buyer shall have executed and
--------------------------
delivered to Principal Stockholders the Indemnity Escrow Agreement.
---------
(h) Buyer shall have executed and delivered to the Stockholder
Representatives a Registration Rights Agreement containing principal terms
substantially as set forth in Exhibit I hereto (the "Registration Rights
---------
Agreement").
(i) Shelf Registration Statement. If the Merger Shares are to be
issued without registration under the Securities Act and the Closing Date is
after May 31, 2000, Buyer shall have prepared in file ready form a registration
statement under the Securities Act on Form F-3 (or any successor short form
registration involving a similar amount of disclosure; or if then ineligible to
use any such form, then any other available form of registration statement) for
a public offering of the Merger Shares to be made on a continuous basis pursuant
to Rule 415 of the Securities Act (the "Shelf Registration Statement"); provided
that Buyer may exclude from the Shelf Registration Statement the Shares of any
Stockholder who has failed to provide Buyer with any information reasonably
requested of such Stockholder in writing by Buyer in connection with the
preparation of the Shelf Registration Statement.
ARTICLE VIII. INDEMNIFICATION
Section 8.1 Definitions.
------------
For purposes of this Article VIII:
"Losses" means all losses, damages (excluding punitive and
consequential damages), fines, penalties, liabilities, payments and obligations,
and all expenses related thereto. Losses shall include any reasonable legal fees
and costs reasonably incurred by any of the Indemnified Persons subsequent to
the Closing in defense of or in connection with any alleged or asserted
liability, payment or obligation, whether or not any liability or payment,
obligation or judgment is ultimately imposed against the Indemnified Persons and
whether or not the Indemnified Persons are made or become parties to any such
action.
"Buyer's Indemnified Persons" means Buyer, its parent, subsidiary
and affiliated corporations (including Sub), their respective directors,
officers, employees, stockholders and agents, Company after the Closing, and any
person serving as a director, officer, employee or agent of Company at Buyer's
request after the Closing.
"Company's Indemnified Persons'" means each stockholder of Company.
"Indemnified Person" means any person entitled to be indemnified
under this Article VIII.
"Indemnifying Person" means any person obligated to indemnify
another person under this Article VIII.
"Third Party Action" means any written assertion of a claim, or the
commencement of any action, suit, or proceeding, by a third party as to which
any person believes it may be an Indemnified Person hereunder.
Section 8.2 Indemnification by the Principal Stockholders.
---------------------------------------------
(a) Subject to the limitations in paragraph (b) below, the
Principal Stockholders, jointly and severally shall defend, indemnify and hold
- ----------------------
harmless Buyer's Indemnified Persons from and against all Losses directly or
indirectly incurred by or sought to be imposed upon any of them:
(i) resulting from or arising out of any breach of any of the
representations or warranties made by Company in or pursuant to this Agreement
or in any agreement, document or instrument executed and delivered pursuant
hereto or in connection with the Closing;
(ii) resulting from or arising out of any breach of any covenant
or agreement made by Company in or pursuant to this Agreement; or
(iii) resulting from or arising out of any Third Party Action that
is instituted or threatened against any of Buyer's Indemnified Persons with
respect to the matters identified in clauses (i) or (ii).
(b) The right to indemnification under paragraph (a) above is
subject to the following limitations:
(i) The Principal Stockholders shall have no liability under
paragraph (a) unless one or more of Buyer's Indemnified Persons gives written
notice to the Principal Stockholders asserting a claim for Losses, including
reasonably detailed facts and circumstances pertaining thereto, before the
expiration of the period beginning on the Closing Date and ending on the earlier
of (a) June 30, 2001 and (b) the date which is thirty (30) days after completion
of the financial audit of Buyer for 2000 by Buyer's independent certified public
accountants (the "Escrow Period"). Notwithstanding the foregoing, with respect
to any claim based upon a covenant or undertaking which by its terms is to be
performed after the Closing, the period above shall commence on the date when
such covenant or agreement should have been performed.
(f) Any person who has not assumed control of the defense of any
Third Party Action shall have the duty to cooperate with the party which assumed
such defense .
Section 8.4 Stockholder Representatives.
---------------------------
(a) Janet M. Baker and a designee of Seagate Technology, Inc., who
shall initially be Donald L. Waite, are hereby appointed as representatives (the
"Stockholder Representatives") for and on behalf of the Principal Stockholders
to take all actions necessary or appropriate in the judgment of the Stockholder
Representatives for the accomplishment of the terms of this Agreement and the
Escrow Agreement. The holders of a majority in interest of the shares of Buyer
Common Stock held in the Escrow Fund may replace the Stockholder Representatives
upon not less than ten (10) days' prior written notice to Buyer. No bond shall
be required of the Stockholder Representatives and the Stockholder
Representatives shall receive no compensation for their services. Notices of
communications to or from the Stockholder Representatives shall constitute
notice to or from each of the Principal Stockholders. If either of the
Stockholder Representatives dies or is otherwise no longer able or willing to
serve as a Stockholder Representative, a new Stockholder Representative shall be
chosen by the Principal Stockholders holding a majority of the shares of Buyer
Common Stock held in the Escrow Fund. It is understood that the Stockholder
Representatives shall not have any voting rights with respect to the Buyer
Common Stock.
(b) The Stockholder Representatives shall not be liable for any
act done or omitted in such capacity while acting in good faith and in the
exercise of reasonable judgment, and any act done or omitted pursuant to the
advice of counsel shall be conclusive evidence of such good faith. The Principal
Stockholders shall severally indemnify the Stockholder Representatives and hold
them harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Stockholder Representatives and
arising out of or in connection with the acceptance or administration of their
duties. The Stockholder Representatives may use funds included as part of the
Escrow Fund to pay any expenses or costs incurred by them in performing their
duties and responsibilities as the Stockholder Representatives.
(c) Any decision, act, consent or instruction of the Stockholder
Representatives shall constitute a decision of all Principal Stockholders and
shall be final, binding and conclusive upon every Principal Stockholder, and the
Escrow Agent and Buyer may rely upon any decision, act, consent or instruction
of each and every Stockholder Representative.
Section 8.5 Other Indemnification Provisions.
--------------------------------
(a) Except as otherwise provided herein, the Escrow Fund shall be
the sole and exclusive source available to compensate Buyer's Indemnified
Persons for the indemnification obligations of each Principal Stockholder
hereunder.
(b) The limitations on the Indemnifying Person's obligations under
this Article VIII shall not apply to any claim by any party hereto against any
other party hereto (i) for fraud, or (ii) resulting from or arising out of any
intentional misrepresentation or intentional breach of warranty, or any
intentional failure to perform or comply with any covenant or agreement by any
party.
(c) The provisions of this Article VIII shall not apply to any
claim of any nature whatsoever by any person against the Buyer or Sub.
ARTICLE IX. TERMINATION AND AMENDMENT
Section 9.1 Termination.
-----------
This Agreement may be terminated at any time prior to the Effective Time
(with respect to Sections 9.1(b) through 9.1(e), by written notice by the
terminating party to the other party), whether before or after approval of the
Merger by the stockholders of Company:
(a) by mutual written consent of Buyer and Company; or
(b) by either Buyer or Company if the Merger shall not have been
consummated by June 30, 2000, which date shall be subject to extension (i)
pursuant to and in accordance with Section 6.2(c) hereof; and (ii) until July
31, 2000, in the event of a Second Request (the "Outside Date"); and provided
--------
further that the right to terminate this Agreement under this Section 9.1(b)
- -------
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been a principal cause of or resulted in the failure of
the Merger to occur on or before such date; or
(c) by either Buyer or Company if a Governmental Entity of
competent jurisdiction shall have issued a nonappealable final order, decree or
ruling or taken any other nonappealable final action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger; or
(d) by either Buyer or Company, if the United States Department of
Justice or the United States Federal Trade Commission (i) authorizes its staff
to seek a preliminary injunction or restraining order to restrain, enjoin or
otherwise prohibit the Merger, or (ii) has made a formal request for additional
information or documentary material pursuant to 16 C.F.R. 803.20 under the HSR
Act, and HSR clearance has not been received within ninety (90) days of the date
of such request; or
(e) by either Buyer or Company, if there has been a breach of any
representation, warranty, covenant or agreement on the part of the other party
set forth in this Agreement, which breach causes the conditions set forth in
Section 7.2(a) or (b) (in the case of termination by Buyer) or 7.3(a) or (b) (in
the case of termination by Company) to be incapable of being satisfied.
Section 9.2 Effect of Termination.
---------------------
In the event of termination of this Agreement as provided in Section 9.1,
this Agreement shall immediately become void and there shall be no liability or
obligation on the part of Buyer, Company, Sub or their respective officers,
directors, stockholders or Affiliates, except as set forth in Sections 5.5,
10.3, and Article IX; provided that any such termination shall not relieve any
party from liability for any willful breach of this Agreement (which includes
without limitation the making of any representation or warranty by a party in
this Agreement that the party knew was not true and accurate when made) and the
provisions of Sections 5.5, 10.3, and Article IX of this Agreement and the
Confidentiality Agreement shall remain in full force and effect and survive any
termination of this Agreement.
Section 9.3 Fees and Expenses.
-----------------
Except as otherwise set forth in this Agreement, all fees and expenses
incurred in connection with this Agreement (including without limitation
pursuant to Section 6.5 hereof) and the transactions contemplated hereby shall
be paid by the party incurring such expenses, whether or not the Merger is
consummated.
Section 9.4 Amendment.
---------
This Agreement may not be amended except by an instrument in writing signed
on behalf of each of the parties hereto.
Section 9.5 Extension; Waiver.
-----------------
At any time prior to the Effective Time, the parties hereto may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party.
ARTICLE X. MISCELLANEOUS
Section 10.1 Survival of Representations, Warranties and Agreements.
------------------------------------------------------
All representations, warranties, agreements, covenants and obligations
herein or in any schedule, certificate or financial statement delivered by any
party to another party incident to the transactions contemplated hereby shall be
deemed to have been relied upon by the other party and shall survive the Closing
for the applicable periods set forth in Article VIII and shall be further
actionable subject to the limitations set forth therein, regardless of any
investigation and shall not merge in the performance of any obligation by either
party hereto provided, however, that all representations, warranties,
--------
agreements, covenants and obligations of Buyer or Sub herein or therein shall
terminate upon the expiration of the Escrow Period, except with respect to (i)
any claims based upon Buyer's or Sub's fraud or failure to authorize the Merger,
this Agreement or the transactions contemplated hereby, and (ii) any covenants,
agreements or obligations of Buyer or Sub that by their terms continue in effect
beyond such expiration. For purposes of this Agreement, the words "knowledge"
or "aware of" or variations thereof, in respect of any representation or
warranty of Company set forth in this Agreement shall mean the actual and
constructive knowledge of Janet M. Baker, James K. Baker, Donald L. Waite, Ellen
Chamberlain, John Shagoury and Paul Cohen (collectively, the "Designated
Group"), to the extent such knowledge would have been obtained by due inquiry of
the officers and directors of Company and employees charged with the
responsibility for the particular matter which is the subject of such
representation and warranty; provided that, with respect to Patents, such terms
shall only mean the actual knowledge of the Designated Group.
Section 10.2 Notices.
-------
All notices, requests, demands, claims and other communications hereunder
shall be in writing. Any notice, request, demand, claim or other communication
hereunder shall be deemed
duly delivered (i) five business days after it is sent by registered or
certified mail, return receipt requested, postage prepaid, (ii) one business day
after it is sent by telecopy (with receipt confirmation) or two business days
via a reputable international overnight courier service for next business day
delivery, or (iii) on the date of delivery if sent by hand, in each case to the
intended recipient as set forth below:
(a) if to Buyer or Sub, to
Lernout & Hauspie Speech Products N.V.
Flanders Language Valley 50
B-8900 Ieper, Belgium
Attention: Legal Department and Chief Financial Officer
Telephone: 011 32 57 228 888
Facsimile: 011 32 57 208 489
with copies to:
Lernout & Hauspie Speech Products N.V.
c/o Lernout & Hauspie Speech Products USA, Inc.
52 Third Avenue
Burlington, MA 01803-4414
Attention: Legal Department and Chief Financial Officer
Telephone: (781) 203-5000
Facsimile (781) 238-0986
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, MA 02111
Attention: Philip J. Flink
Telephone: (617) 826-8200
(b) if to Company, to
Dragon Systems, Inc.
320 Nevada Street
Newton, MA 02160
Attention: General Counsel
Telephone: (617) 965-5200
with copies to:
Janet M. Baker
173 Highland Street
West Newton, MA 02465
and
Seagate Technology, Inc.
920 Disc Drive
Scotts Valley, CA 05006
Attention: Donald L. Waite
and
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: Sarah Rothermel
Telephone: (617) 526-6000
(c) if to the Stockholder Representatives, to
Janet M. Baker
173 Highland Street
West Newton, MA 02465
Seagate Technology, Inc.
920 Disc Drive
Scotts Valley, CA 05006
Attention: Donald L. Waite
Any party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
Section 10.3 Brokers or Finders.
------------------
Each of Buyer and Company represents, as to itself, its Subsidiaries and
its affiliates, that no agent, broker, investment banker, financial advisor or
other firm or person is or will be entitled to any broker's or finder's fee or
any other commission or similar fee in connection with any of the transactions
contemplated by this Agreement, except, in the case of Buyer, S.G. Cowen
Securities, whose fees and expenses will be paid by Buyer in accordance with
Buyer's agreement with such firm and, in the case of Company, Goldman Sachs &
Co., whose fees and expenses shall be taken into account in calculating the
Exchange Ratio in accordance with Section 2.1(c) and 2.3 hereof.
Section 10.4 Interpretation.
--------------
When a reference is made in this Agreement to Articles or Sections, such
reference shall be to an Article or Section of this Agreement unless otherwise
indicated. The table of contents, table of defined terms and headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. The phrases "the date of
this Agreement," "the date hereof," and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to March 27, 2000. The
words "include," "includes" and "including" when used herein shall be deemed in
each case to be following by the words "without limitation."
Section 10.5 Counterparts.
------------
This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
two or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
Section 10.6 Entire Agreement; No Third Party Beneficiaries.
----------------------------------------------
This Agreement (including the documents and the instruments referred to
herein) (a) constitute the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as expressly set forth in Sections 6.6 and
6.15 hereof, are not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder; provided that the Confidentiality
Agreement shall remain in full force and effect until the Effective Time.
Section 10.7 Governing Law and Venue.
-----------------------
EXCEPT WITH RESPECT TO MATTERS RELATING TO THE ISSUANCE OF THE MERGER SHARES,
WHICH ARE GOVERNED BY BELGIAN LAW, THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN,
AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (OTHER THAN CHOICE OF LAW
PRINCIPLES THEREOF) APPLICABLE TO CONTRACTS TO BE PERFORMED WHOLLY IN SUCH
STATE. The parties hereby (a) irrevocably submit to the jurisdiction of the
Chancery Court of the State of Delaware and the federal courts of the United
States of America located in the State of Delaware solely in respect of the
interpretation and enforcement of the provisions of this Agreement and in
respect of the transactions contemplated hereby and thereby and (b) waive, and
agree not to assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof, that it is not subject to such
jurisdiction or that such action, suit or proceeding may not be brought or is
not maintainable in said courts or that the venue thereof may not be appropriate
or that this Agreement may not be enforced in or by such courts, and the parties
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in such courts. The parties hereby consent to and
grant any such court's jurisdiction over the person of such parties and over the
subject matter of such dispute and agree that mailing of process or other papers
in connection with any such action or proceeding in the manner provided in
Section 10.2, or in such other manner as may be permitted by law, shall be valid
and sufficient service thereof.
Section 10.8 Waiver of Jury Trial.
--------------------
EACH OF BUYER, SUB, AND COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
ACTIONS OF BUYER, SUB, OR COMPANY IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT HEREOF OR THEREOF.
Section 10.9 Assignment.
----------
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.
Section 10.10 Severability.
------------
In the event that any provision of this Agreement or the application
thereof, becomes or is declared by a court of competent jurisdiction to be
illegal, void or unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.
Section 10.11 Other Remedies; Specific Performance.
------------------------------------
Except as otherwise provided in this Agreement, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
[Remainder of page intentionally blank]
IN WITNESS WHEREOF, Buyer, Sub, Company and Principal Stockholders have
caused this Agreement to be signed by their respective officers thereunto duly
authorized, as of the date first written above.
LERNOUT & HAUSPIE SPEECH PRODUCTS N.V.
By: /s/ Jo Lernout
------------------------------------
Name: Jo Lernout
Title: Managing Director
By: /s/Pol Hauspie
------------------------------------
Name: Pol Hauspie
Title: Managing Director
DRAGON SYSTEMS, INC.
By: /s/ Janet M. Baker
------------------------------------------
Janet M. Baker
Chairman
L&H HOLDINGS USA, INC.
By: /s/ Gaston Bastiaens
------------------------------------------
Gaston Bastiaens
President and Chief Executive Officer
PRINCIPAL STOCKHOLDERS:
/s/ James K. Baker
----------------------------------------------------
James K. Baker
/s/ Janet M. Baker
----------------------------------------------------
Janet M. Baker
/s/ Robert Roth
----------------------------------------------------
Robert Roth
SEAGATE TECHNOLOGY, INC.
By: /s/ Donald L. Waite
--------------------------------------------
Name: Donald L. Waite
Title: Executive Vice President
PAUL G. BAMBERG AND DONALD B. FLETCHER, JR., AS
TRUSTEES OF THE PAUL G. BAMBERG TRUST U/A DATED
8/18/89, AS AMENDED 10/20/93
/s/ Paul G. Bamberg
------------------------------------------------
Paul G. Bamberg
/s/ Donald B. Fletcher, Jr.
------------------------------------------------
Donald B. Fletcher, Jr.
CHERRY F. BAMBERG AND DONALD B. FLETCHER, JR., AS
TRUSTEES OF THE CHERRY F. BAMBERG TRUST U/A DATED
8/18/89, AS AMENDED 10/20/93
/s/ Cherry F. Bamberg
------------------------------------------------
Cherry F. Bamberg
/s/ Donald B. Fletcher Jr.
------------------------------------------------
Donald B. Fletcher, Jr.