EXHIBIT 2.3
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AGREEMENT AND PLAN OF MERGER
among
STERLING SOFTWARE, INC.
STERLING SOFTWARE (SOUTHERN), INC.
and
CAYENNE SOFTWARE, INC.
dated as of August 27, 1998
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TABLE OF CONTENTS
Page
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AGREEMENT AND PLAN OF MERGER......................................................................................1
ARTICLE I - THE MERGER............................................................................................1
Section 1.1 The Merger.............................................................................1
Section 1.2 Closing................................................................................2
Section 1.3 Effective Time.........................................................................2
Section 1.4 Effects of the Merger..................................................................2
Section 1.5 Certificate of Incorporation; Bylaws...................................................2
Section 1.6 Directors; Officers....................................................................2
ARTICLE II - EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS.............................................................................3
Section 2.1 Effect on Capital Stock................................................................3
Section 2.2 Stock Options and Warrants.............................................................4
ARTICLE III - PAYMENT FOR SHARES..................................................................................5
Section 3.1 Payment for Shares.....................................................................5
ARTICLE IV - REPRESENTATIONS AND WARRANTIES.......................................................................7
Section 4.1 Representations and Warranties of Company..............................................7
Section 4.2 Representations and Warranties of Parent and Merger Sub...............................21
ARTICLE V - CONDUCT OF BUSINESS OF COMPANY.......................................................................22
Section 5.1 Conduct of Business of Company........................................................22
ARTICLE VI - ADDITIONAL COVENANTS................................................................................24
Section 6.1 Preparation of the Proxy Statement....................................................24
Section 6.2 Stockholders Meeting..................................................................24
Section 6.3 Access to Information; Confidentiality................................................25
Section 6.4 Reasonable Best Efforts...............................................................25
Section 6.5 Public Announcements..................................................................25
Section 6.6 No Solicitation; Acquisition Proposals................................................26
Section 6.7 Consents, Approvals and Filings.......................................................27
Section 6.8 Board Action Relating to Stock Option Plans...........................................28
Section 6.9 Employee Benefit Matters..............................................................28
Section 6.10 Indemnification; Directors' and Officers' Insurance...................................28
Section 6.11 Credit Arrangements...................................................................29
ARTICLE VII - CONDITIONS PRECEDENT...............................................................................31
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger............................31
Section 7.2 Conditions to Obligations of Parent and Merger Sub....................................31
Section 7.3 Conditions to Obligation of Company...................................................32
(i)
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ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER.................................................................33
Section 8.1 Termination...........................................................................35
Section 8.2 Effect of Termination.................................................................35
Section 8.3 Amendment.............................................................................35
Section 8.4 Extension; Waiver.....................................................................35
Section 8.5 Procedure for Termination, Amendment, Extension or Waiver.............................35
ARTICLE IX - GENERAL PROVISIONS..................................................................................35
Section 9.1 Nonsurvival of Representations and Warranties.........................................35
Section 9.2 Fees and Expenses.....................................................................36
Section 9.3 Definitions...........................................................................36
Section 9.4 Notices...............................................................................39
Section 9.5 Interpretation........................................................................39
Section 9.6 Entire Agreement; Third-Party Beneficiaries...........................................39
Section 9.7 Governing Law.........................................................................39
Section 9.8 Assignment............................................................................39
Section 9.9 Enforcement...........................................................................40
Section 9.10 Severability..........................................................................40
Section 9.11 Counterparts..........................................................................40
(ii)
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of August 27, 1998 (this
"Agreement"), is made and entered into among Sterling Software, Inc., a Delaware
corporation ("Parent"), Sterling Software (Southern), Inc., a Georgia
corporation and wholly owned subsidiary of Parent ("Merger Sub"), and Cayenne
Software, Inc., a Massachusetts corporation ("Company").
RECITALS:
A. The Executive Committee of the Board of Directors of Parent and the
respective Boards of Directors of Merger Sub and Company have determined that it
would be advisable and in the best interests of their respective stockholders
for Parent to acquire Company, by means of a merger of Company with and into
Merger Sub (the "Merger"), on the terms and subject to the conditions set forth
in this Agreement.
B. Concurrently with the execution and delivery of this Agreement and as
a condition to Parent's and Merger Sub's willingness to enter into this
Agreement, (i) Parent and Company have entered into a Stock Option Agreement,
dated as of the date hereof (the "Stock Option Agreement"), pursuant to which
Company has granted to Parent an option to purchase certain shares of capital
stock of Company under certain circumstances and (ii) Parent has entered into a
Stockholder Agreement, dated as of the date hereof (the "Stockholder
Agreement"), with each of the Preferred Stockholders (as hereinafter defined),
pursuant to which each Preferred Stockholder has (x) agreed, among other things,
to vote all shares of capital stock of Company owned by such Preferred
Stockholder in favor of the approval of this Agreement and (y) granted to Parent
an option to purchase all shares of capital stock of Company owned by such
Preferred Stockholder.
C. Parent, Merger Sub and Company desire to make certain representations,
warranties and covenants in connection with the Merger and to prescribe various
conditions to the consummation of the Merger.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained in this Agreement, the parties hereto hereby agree as
follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. On the terms and subject to the conditions set
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forth in this Agreement, and in accordance with the Massachusetts Business
Corporation Law (the "MBCL") and the Georgia Business Corporation Code (the
"GBCC"), the Merger shall be effected and Company shall be merged with and into
Merger Sub at the Effective Time (as hereinafter defined). At the Effective
Time, the separate existence of Company shall cease and Merger Sub shall
continue as the surviving corporation (sometimes hereinafter referred to as the
"Surviving Corporation").
Section 1.2 Closing. Unless this Agreement shall have been terminated
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and the transactions herein contemplated shall have been abandoned pursuant to
Article VIII, and subject to the satisfaction or waiver of all of the conditions
set forth in Article VII, the closing of the Merger (the "Closing") will take
place as soon as practicable, but in no event later than 10:00 a.m. on the
second business day (the "Closing Date") following satisfaction or waiver of all
of the conditions set forth in Article VII, other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the fulfillment
or waiver of those conditions, at the offices of Jones, Day, Reavis & Pogue,
2300 Trammell Crow Center, 2001 Ross Avenue, Dallas, Texas, unless another date,
time or place is agreed to in writing by the parties hereto.
Section 1.3 Effective Time. On the Closing Date (or on such other date
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as Parent and Company may agree), the parties hereto shall file with the
Secretary of State of The Commonwealth of Massachusetts (the "Massachusetts
State Secretary") articles of merger (the "Massachusetts Articles of Merger")
and any other appropriate documents, executed in accordance with the relevant
provisions of the MBCL, shall file with the Secretary of State of the State of
Georgia (the "Georgia State Secretary") a certificate of merger (the "Georgia
Certificate of Merger") and any other appropriate documents, executed in
accordance with the relevant provisions of the GBCC, and shall make all other
filings or recordings required under the MBCL and GBCC in connection with the
Merger. The Merger shall become effective upon the later of the filing of the
Massachusetts Articles of Merger and the filing of the Georgia Certificate of
Merger, or at such later time as may be specified in the Massachusetts Articles
of Merger or the Georgia Certificate of Merger (the "Effective Time").
Section 1.4 Effects of the Merger. The Merger shall have the effects
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set forth in the applicable provisions of the MBCL and the GBCC. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all property of Company and Merger Sub shall vest in the Surviving
Corporation, and all liabilities of Company and Merger Sub shall become the
liabilities of the Surviving Corporation.
Section 1.5 Certificate of Incorporation; Bylaws At the Effective Time,
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(a) the certificate of incorporation of Merger Sub as in effect at the Effective
Time shall, from and after the Effective Time, be the certificate of
incorporation of the Surviving Corporation until thereafter changed or amended
in accordance with the provisions thereof and applicable law and (b) the bylaws
of Merger Sub as in effect at the Effective Time shall, from and after the
Effective Time, be the bylaws of the Surviving Corporation until thereafter
changed or amended in accordance with the provisions thereof and applicable law.
Section 1.6 Directors; Officers. From and after the Effective Time, (a)
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the directors of Merger Sub shall be the directors of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be, and (b) the
officers of Merger Sub shall be the officers of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
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ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS
Section 2.1 Effect on Capital Stock. At the Effective Time, by virtue
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of the Merger and without any action on the part of any holder of shares of
Company's common stock, par value $0.01 per share (the "Common Shares"), or
shares of Company's Series D Convertible Preferred Stock, par value $1.00 per
share (the "Preferred Shares" and, together with the Common Shares, the
"Shares"), or any other capital stock of Company or any shares of capital stock
of Merger Sub:
(a) Common Stock of Merger Sub. Each share of common stock, par value
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$0.10 per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall remain outstanding and shall not be affected in any way by
the effectiveness of the Merger.
(b) Cancellation of Treasury Shares and Parent-Owned Shares. Each
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Share issued and outstanding immediately prior to the Effective Time that is
owned by Company or any Subsidiary (as hereinafter defined) of Company or by
Parent, Merger Sub or any other Subsidiary of Parent (other than shares in trust
accounts, managed accounts, custodial accounts and the like that are
beneficially owned by third parties) shall automatically be canceled and retired
and shall cease to exist, and no cash or other consideration shall be delivered
or deliverable in exchange therefor.
(c) Conversion of Shares. Each Share issued and outstanding
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immediately prior to the Effective Time (other than Shares to be canceled and
retired in accordance with Section 2.1(b) and any Dissenting Shares (as
hereinafter defined)) shall be converted into the right to receive the
applicable amount of cash specified in this Section 2.1(c) (the "Merger
Consideration"), which (i) in the case of each Common Share, is $0.375, and (ii)
in the case of each Preferred Share, is $20.00, upon surrender of the
certificate formerly representing such Share in accordance with this Agreement;
provided, however, that in the event that there shall be outstanding at the
Effective Time any Advances (as hereinafter defined), the Merger Consideration
shall be reduced, in the case of each Common Share, by an amount (rounded to the
nearest one-tenth of a cent) equal to the quotient obtained by dividing (1) the
aggregate amount of such outstanding Advances by (2) 21,333,398.
(d) Dissenting Shares. Notwithstanding anything in this Agreement to
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the contrary, any Shares issued and outstanding immediately prior to the
Effective Time held by a holder who has the right to demand, and who properly
demands, payment for such Shares ("Dissenting Shares") in accordance with
Sections 85 through 98 of the MBCL (together with any successor provisions, the
"Appraisal Provisions") shall not be converted into a right to receive the
applicable Merger Consideration, unless such holder fails to perfect or
otherwise loses such holder's right to payment in accordance with the Appraisal
Provisions. If, after the Effective Time, such holder fails to perfect or loses
any such right, each such Share of such holder shall be treated as a Share that
had been converted as of the Effective Time into the right to receive the
applicable Merger Consideration in accordance with Section 2.1(c). At the
Effective Time, any
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holder of Dissenting Shares shall cease to have any rights with respect thereto,
except the rights provided in the Appraisal Provisions and as provided in the
immediately preceding sentence. Company shall give prompt notice to Parent of
any demands received by Company for payment in accordance with the Appraisal
Provisions, and Parent shall have the right to participate in and direct all
negotiations and proceedings with respect to such demands. Company shall not,
except with the prior written consent of Parent, make any payment with respect
to, or settle or offer to settle, any such demands.
Section 2.2 Stock Options and Warrants.
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(a) At the Effective Time, each then-outstanding option to purchase
Common Shares (collectively, the "Options") granted under the Bachman
Information Systems, Inc. Amended and Restated 1986 Incentive and Nonqualified
Stock Option Plan, the Cayenne Software, Inc. Amended 1996 Incentive and
Nonqualified Stock Option Plan, the Cayenne Software, Inc. 1998 Nonqualified
Stock Option Plan, the Cadre Technologies, Inc. 1988 Incentive and Non-Statutory
Stock Option Plan, the Cadre Technologies, Inc. 1989 Non-Statutory Stock Option
Plan and the Stock Option Agreements, dated December 29, 1997, between Company
and each of Massood Zarrabian and Frederick Phillips (collectively, the "Stock
Option Plans"), whether or not then exercisable or fully vested, shall be
assumed by Parent and shall constitute an option (a "Substitute Option") to
acquire, on substantially the same terms and subject to substantially the same
conditions as were applicable under such Option, including without limitation
term, vesting, exercisability, status as an "incentive stock option" under
Section 422 of the Code (if applicable) or as an employee stock purchase plan
option under Section 423 of the Code (if applicable), and termination
provisions, the number of shares of common stock, par value $0.10 per share
("Parent Common Stock"), of Parent, rounded down to the nearest whole share (it
being understood that the portion, if any, of an Option that would otherwise
have resulted in a Substitute Option being exercisable to purchase a fractional
share of Parent Common Stock shall be extinguished as a result of such
rounding), determined by multiplying the number of Common Shares subject to such
Option immediately prior to the Effective Time by the Conversion Factor, at an
exercise price per share of Parent Common Stock (increased to the nearest whole
cent) equal to the exercise price per share of Common Shares subject to such
Option divided by the Conversion Factor; provided, however, that in the case of
any Option to which Section 421 of the Code applies by reason of its
qualification as an incentive stock option under Section 422 of the Code or as
an employee stock purchase plan option under Section 423 of the Code, the
conversion formula shall be adjusted if necessary to comply with Section 424(a)
of the Code.
(b) Company shall use its best efforts to obtain all necessary
waivers, consents or releases from holders of Options granted under the Stock
Option Plans and take any such other action as may be reasonably necessary to
give effect to the transactions contemplated by Section 2.2(a).
(c) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery upon
exercise of Substitute Options pursuant to the terms set forth in Section
2.2(a). At such time (if any) as such action may be required under the
Securities Act (as hereinafter defined), Parent will cause the shares of
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Parent Common Stock subject to all then-outstanding Substitute Options to be
covered by an effective registration statement on Form S-8 (or any successor
form) or another appropriate form and Parent shall use its reasonable best
efforts to maintain the effectiveness of such registration statement for so long
as such Substitute Options remain outstanding. In addition, at such time (if
any) as such action may be required under the rules and policies of the NYSE (as
hereinafter defined) or any other exchange upon which shares of Parent Common
Stock may be listed, Parent shall use all reasonable efforts to cause the shares
of Parent Common Stock subject to all then-outstanding Substitute Options to be
listed on the NYSE or such other exchange, as the case may be.
(d) At the Effective Time, each then-outstanding warrant to purchase
Common Shares (collectively, the "Warrants") issued under or evidenced by the
Warrant Agreement, dated December 20, 1996, between Company and Silicon Valley
Bank, the Convertible Preferred Stock Purchase Agreement, dated January 2, 1997,
between Company and Southbrook International Investments, Ltd. ("Southbrook"),
the Convertible Preferred Stock Purchase Agreement, dated July 18, 1997, between
Company and Southbrook, the Convertible Preferred Stock Purchase Agreement,
dated August 28, 1997, between Company, the Preferred Stockholders and certain
other persons named therein, the Warrant Certificate, dated November 1995,
executed by Cadre Technologies, Inc. ("Cadre Technologies") in favor of First
Portland Corporation (dba First Portland Leasing Corp.), the Share Purchase
Agreement, dated April 13, 1995, between Cadre Technologies and Stichting
Administratiekantoor Cadmount, and the Warrant Certificate, dated January 1997,
executed by Company in favor of Rene de Vleeschauver (collectively, the "Warrant
Documents") shall be canceled and retired and shall cease to exist, and no cash
or other consideration shall be delivered or deliverable in exchange therefor.
(e) Company shall use its best efforts to obtain all necessary
waivers, consents or releases from holders of Warrants issued under or evidenced
by the Warrant Documents and take such other action as may be reasonably
necessary to give effect to the transactions contemplated by Section 2.2(d).
ARTICLE III
PAYMENT FOR SHARES
Section 3.1 Payment for Shares.
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(a) Payment Fund. Concurrently with the Effective Time, Parent shall
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deposit, or shall cause to be deposited, with or for the account of a bank or
trust company designated by Parent, which shall be reasonably satisfactory to
Company (the "Paying Agent"), for the benefit of the holders of Shares, cash in
an amount sufficient to pay the aggregate Merger Consideration payable upon the
conversion of Shares pursuant to Section 2.1(c) (the "Payment Fund").
(b) Letters of Transmittal; Surrender of Certificates. As soon as
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reasonably practicable after the Effective Time, Parent shall instruct the
Exchange Agent to mail to each holder of record (other than Company or any of
its Subsidiaries or Parent, Merger Sub or any
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other Subsidiary of Parent) of a certificate or certificates that, immediately
prior to the Effective Time, evidenced outstanding Shares (the "Certificates"),
(i) a form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent, and shall be in such
form and have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the applicable Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed, and such other customary documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor cash in an amount equal to the product of (i) the number of
Shares theretofore represented by such Certificate and (ii) the applicable
Merger Consideration, and the Certificate so surrendered shall forthwith be
canceled. No interest shall be paid or accrued on any cash payable upon the
surrender of any Certificate. If payment is to be made to a person other than
the person in whose name the surrendered Certificate is registered, it shall be
a condition of payment that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the person requesting
such payment shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of the surrendered
Certificate or established to the satisfaction of Parent and the Surviving
Corporation that such taxes have been paid or are not applicable.
(c) Cancellation and Retirement of Shares; No Further Rights. As of
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the Effective Time, all Shares (other than Shares to be canceled in accordance
with Section 2.1(b)) issued and outstanding immediately prior to the Effective
Time shall cease to be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of any such Shares shall cease
to have any rights with respect thereto or arising therefrom (including without
limitation the right to vote), except the right to receive the applicable Merger
Consideration, without interest, upon surrender of such Certificate in
accordance with Section 3.1(b), and until so surrendered, each such Certificate
shall represent for all purposes only the right to receive the applicable Merger
Consideration, without interest. The Merger Consideration paid upon the
surrender for exchange of Certificates in accordance with the terms of this
Article III shall be deemed to have been paid in full satisfaction of all rights
pertaining to the Shares theretofore represented by such Certificates.
(d) Investment of Payment Fund. The Paying Agent shall invest the
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Payment Fund, as directed by Parent, in (i) direct obligations of the United
States of America, (ii) obligations for which the full faith and credit of the
United States of America is pledged to provide for the payment of principal and
interest, (iii) commercial paper rated the highest quality by either Moody's
Investors Services, Inc. or Standard & Poor's Corporation, or (iv) certificates
of deposit, bank repurchase agreements or bankers' acceptances of commercial
banks with capital exceeding $500 million. Any net earnings with respect to the
Payment Fund shall be the property of and paid over to Parent as and when
requested by Parent.
(e) Termination of Payment Fund. Any portion of the Payment Fund
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which remains undistributed to the holders of Certificates for 180 days after
the Effective Time shall be delivered to Parent, upon demand, and any holders of
Certificates that have not theretofore
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complied with this Article III shall thereafter look only to Parent, and only as
general creditors thereof, for payment of their claim for any Merger
Consideration.
(f) No Liability. None of Parent, Merger Sub, the Surviving
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Corporation or the Paying Agent shall be liable to any person in respect of any
payments or distributions payable from the Payment Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificates shall not have been surrendered prior to five years after
the Effective Time (or immediately prior to such earlier date on which any
Merger Consideration in respect of such Certificate would otherwise escheat to
or become the property of any Governmental Entity (as hereinafter defined)), any
amounts payable in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
(g) Withholding Rights. Parent shall be entitled to deduct and
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withhold, or cause to be deducted or withheld, from the consideration otherwise
payable pursuant to this Agreement to any holder of Shares, Options or
Certificates such amounts as are required to be deducted and withheld with
respect to the making of such payment under the Code, or any provision of
applicable state, local or foreign tax law. To the extent that amounts are so
deducted and withheld, such deducted and withheld amounts shall be treated for
all purposes of this Agreement as having been paid to such holders in respect of
which such deduction and withholding was made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of Company. Company
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represents and warrants to Parent and Merger Sub as follows:
(a) Organization, Standing and Corporate Power. Each of Company and
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each Subsidiary of Company is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is incorporated
and has the requisite corporate power and authority to carry on its business as
now being conducted. Each of Company and each Subsidiary of Company is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect (as hereinafter defined) on Company. Company has delivered to
Parent true, complete and correct copies of the articles of organization and by-
laws or comparable governing documents of Company and each Subsidiary of
Company, in each case as amended to the date of this Agreement. A true, correct
and complete list of all Subsidiaries of Company, together with the jurisdiction
of incorporation of each such Subsidiary and the percentage of each such
Subsidiary's capital stock owned by Company or another Subsidiary, is set forth
in Section 4.1(a) of the Disclosure Schedule (as hereinafter defined).
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(b) Authority; Noncontravention. Company has the requisite corporate
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power and authority to enter into this Agreement and the Stock Option Agreement
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Stock Option Agreement by
Company and the consummation by Company of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of Company, subject, in the case of the Merger, to the approval of this
Agreement by its stockholders as contemplated by Section 6.2. Each of this
Agreement and the Stock Option Agreement has been duly executed and delivered by
Company and, assuming that this Agreement or the Stock Option Agreement, as
applicable, constitutes a valid and binding obligation of Parent and Merger Sub,
constitutes a valid and binding obligation of Company, enforceable against
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and to general principles of
equity. Except as specified in Section 4.1(b) of the Disclosure Schedule, the
execution and delivery of this Agreement and the Stock Option Agreement do not,
and the consummation of the transactions contemplated hereby or thereby and
compliance with the provisions hereof or thereof will not, (i) conflict with any
of the provisions of the articles of organization or by-laws of Company or the
comparable governing documents of any Subsidiary of Company, in each case as
amended to the date of this Agreement, (ii) subject to the governmental filings
and other matters referred to in Section 4.1(c), conflict with, result in a
breach of or default (with or without notice or lapse of time, or both) under,
or give rise to a material obligation, a right of termination, cancellation or
acceleration of any obligation or a loss of a material benefit under, or require
the consent of any person under, any indenture or other agreement, permit,
concession, franchise, license or similar instrument or undertaking to which
Company or any of its Subsidiaries is a party or by which Company or any of its
Subsidiaries or any of their respective assets is bound or affected, or (iii)
subject to the governmental filings and other matters referred to in Section
4.1(c), contravene any domestic or foreign law, rule or regulation or any order,
writ, judgment, injunction, decree, determination or award currently in effect,
which, in the case of clauses (ii) and (iii) above could reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on Company.
(c) Consents and Approvals. No consent, approval or authorization of,
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or declaration or filing with, or notice to, any domestic or foreign
governmental agency or regulatory authority (a "Governmental Entity") which has
not been received or made 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 Stock Option Agreement by Company or the consummation by Company of the
transactions contemplated hereby or thereby, except for (i) the filing of
premerger notification and report forms under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), with respect to the
Merger, (ii) the filing with the Securities and Exchange Commission (the "SEC")
of (A) the Proxy Statement (as hereinafter defined), and (B) such reports under
the Exchange Act (as hereinafter defined) as may be required in connection with
this Agreement or the Stock Option Agreement and the transactions contemplated
hereby or thereby, (iii) the filing of the Massachusetts Articles of Merger with
the Massachusetts State Secretary and the filing of the Georgia Certificate of
Merger with the Georgia State Secretary, and appropriate documents with the
relevant authorities of other states in which Company is qualified to do
business, (iv) such other consents, approvals, authorizations, filings or
notices as
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are specified in Section 4.1(c) of the Disclosure Schedule, and (v) any other
consents, approvals, authorizations, filings or notices the failure to make or
obtain which could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Company.
(d) Capital Structure. The authorized capital stock of Company
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consists solely of 52,400,000 Common Shares and 1,600,000 shares of preferred
stock, par value $1.00 per share, of Company. As of the date hereof: (i)
21,333,398 Common Shares were issued and outstanding; (ii) 170,000 Preferred
Shares were issued and outstanding; (iii) 2,578,762 Common Shares were reserved
for issuance pursuant to outstanding Options granted under the Stock Option
Plans; (iv) 5,200,000 Common Shares were reserved for issuance upon conversion
of Preferred Shares; (v) 1,407,973 Common Shares were reserved for issuance
pursuant to outstanding Warrants issued under or evidenced by the Warrant
Documents; and (vi) no Common Shares were held by Company in its treasury.
Except as set forth in the immediately preceding sentence, as of the date
hereof, no shares of capital stock or other equity securities of Company were
issued, reserved for issuance or outstanding. All outstanding shares of capital
stock of Company are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. Except as specified above
or in Section 4.1(d) of the Disclosure Schedule, and except for the Stock Option
Agreement, neither Company nor any Subsidiary of Company has or is subject to or
bound by or, at or after the Effective Time will have or be subject to or bound
by, any outstanding option, warrant, call, subscription or other right
(including any preemptive right), agreement or commitment which (i) obligates
Company or any Subsidiary of Company to issue, sell or transfer, or repurchase,
redeem or otherwise acquire, any shares of the capital stock of Company or any
Subsidiary of Company, (ii) restricts the transfer of any shares of capital
stock of Company or any of its Subsidiaries, or (iii) relates to the voting of
any shares of capital stock of Company or any of its Subsidiaries. No bonds,
debentures, notes or other indebtedness of Company or any Subsidiary of Company
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which the stockholders of Company or
any Subsidiary of Company may vote are issued or outstanding. Except as
specified in Section 4.1(d) of the Disclosure Schedule, all of the outstanding
shares of capital stock of each Subsidiary of Company have been duly authorized,
validly issued, fully paid and nonassessable and are owned by Company, by one or
more Subsidiaries of Company, by Company and one or more such Subsidiaries, or
by persons who are designees of Company or a Subsidiary of Company in the case
of foreign qualifying shares held by such persons in accordance with the laws of
the jurisdiction of organization of certain foreign Subsidiaries of Company,
free and clear of Liens (as hereinafter defined). Company has taken all
necessary corporate action to authorize, reserve for issuance and permit the
issuance of, and at all times from the date hereof until the Stock Option
Agreement terminates will keep reserved for issuance upon exercise of the option
granted to Parent pursuant to the Stock Option Agreement, all Common Shares or
other securities which may be issuable pursuant to the Stock Option Agreement.
All Common Shares or other securities which may be issuable pursuant to the
Stock Option Agreement, upon issuance pursuant thereto, will be duly authorized,
validly issued, fully paid and nonassessable, and will be delivered free and
clear of all Liens. All Common Shares held pursuant to the Escrow Agreement,
dated as of July 18, 1996, by and among Bachman Information Systems, Inc., James
P. Lally, as agent for the former stockholders of Cadre Technologies, and State
Street Bank and Trust Company, as escrow agent, have been distributed in
accordance with the terms thereof.
9
(e) SEC Documents. Company has filed all reports, schedules, forms,
-------------
statements and other documents required to be filed with the SEC pursuant to the
Securities Act or the Exchange Act since December 31, 1994 (such reports,
schedules, forms, statements and other documents are hereinafter referred to as
the "SEC Documents"). As of their respective dates, the SEC Documents 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 SEC Documents, and none of (i) the SEC
Documents as of such dates or (ii) any press release or other public statement
issued or made by Company (with any statement pertaining to the Company made by
an executive officer of Company being deemed for purposes of this Section 4.1(e)
to have been made by Company) since December 31, 1994, as of their respective
dates of issuance, contained any untrue statements 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. The consolidated financial statements of Company included
in the SEC Documents comply as to form 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 generally accepted
accounting principles (except, in the case of unaudited consolidated quarterly
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may otherwise be indicated in the notes
thereto) and fairly present the consolidated financial position of Company 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 quarterly statements, to normal year-end audit
adjustments).
(f) Absence of Certain Changes or Events; No Undisclosed Material
-------------------------------------------------------------
Liabilities.
- -----------
(i) Except as disclosed in the SEC Documents filed and publicly
available prior to the date of this Agreement (the "Filed SEC Documents") or
specified in Section 4.1(f) of the Disclosure Schedule, since the date of the
most recent audited financial statements included in the Filed SEC Documents,
Company and its Subsidiaries have conducted their businesses only in the
ordinary course, and there has not been: (A) any Material Adverse Change; (B)
any declaration, setting aside or payment of any dividend or other distribution
in respect of shares of Company's capital stock, or any redemption or other
acquisition by Company of any shares of its capital stock; (C) any increase in
the rate or terms of compensation payable or to become payable by Company or its
Subsidiaries to their directors, officers or key employees, except increases
occurring in the ordinary course of business consistent with past practice; (D)
any entry into, or increase in the rate or terms of, any bonus, insurance,
severance, pension or other employee or retiree benefit plan, payment or
arrangement made to, for or with any such directors, officers or key employees,
except increases occurring in the ordinary course of business consistent with
past practices or as required by applicable law; (E) any entry into any
agreement, commitment or transaction by Company or any of its Subsidiaries which
is material to Company and its Subsidiaries taken as a whole, except for
agreements, commitments or transactions entered into in the ordinary course of
business consistent with past practice; (F) any change by Company in accounting
methods, principles or practices, except as required or permitted by generally
accepted accounting principles; (G) any write-off or write-down of, or any
determination to write-off or write-down, any asset of Company or any of its
Subsidiaries or any portion thereof
10
which write-off, write-down or determination exceeds $50,000 individually or
$250,000 in the aggregate; (H) any announcement or implementation of any
reduction in force, lay-off, early retirement program, severance program or
other program or effort concerning the termination of employment of employees of
Company or its Subsidiaries; or (I) any announcement of or entry into any
agreement, commitment or transaction by Company or any of its Subsidiaries to do
any of the things described in the preceding clauses (A) through (H) otherwise
than as expressly provided for herein.
(ii) Except as disclosed in the Filed SEC Documents or specified
in Section 4.1(f) of the Disclosure Schedule and liabilities incurred in the
ordinary course of business consistent with past practice since the date of the
most recent financial statements included in the Filed SEC Documents, there are
no liabilities of Company or its Subsidiaries of any kind whatsoever, whether
accrued, contingent, absolute, due, to become due, determined, determinable or
otherwise, having or which could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Company.
(g) Certain Information. The Proxy Statement will, at the time it is
-------------------
filed with the SEC, at any time that it is amended or supplemented, at the time
it is mailed to the stockholders of Company and at the time of the Stockholders
Meeting referred to in Section 6.2, (i) comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
thereunder and (ii) 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 therein, in light of the circumstances under which they
are made, not misleading; provided, however, that no representation or warranty
is made by Company with respect to statements made therein based on information
supplied by Parent or Merger Sub specifically for inclusion therein.
(h) Real Property; Other Assets.
---------------------------
(i) Section 4.1(h)(i) of the Disclosure Schedule sets forth all
of the real property owned in fee by Company and its Subsidiaries (the "Owned
Real Property").
(ii) Company or one of its Subsidiaries has good and marketable
title to each parcel of Owned Real Property and to each other asset reflected in
the latest balance sheet of Company included in the Filed SEC Documents (other
than any such other asset disposed of or consumed in the ordinary course of
business or as specified in Section 4.1(h)(ii) of the Disclosure Schedule) free
and clear of all Liens except (A) those reflected or reserved against in the
latest balance sheet of Company included in the Filed SEC Documents, (B) taxes
and general and special assessments not in default and payable without penalty
and interest, and (C) other Liens that individually or in the aggregate would
not have a Material Adverse Effect on Company.
(ii) Company has heretofore made available to Parent true,
correct and complete copies of all leases, subleases and other agreements (the
"Real Property Leases") under which Company or any of its Subsidiaries uses or
occupies or has the right to use or occupy, now or in the future, any real
property or facility (the "Leased Real Property"), including all modifications,
amendments and supplements thereto. Except in each case where the failure could
11
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Company: (A) Company or one of its Subsidiaries has a valid
and subsisting leasehold interest in each parcel of Leased Real Property free
and clear of all Liens and each Real Property Lease is in full force and effect,
(B) all rent and other sums and charges payable by Company or its Subsidiaries
as tenants thereunder are current in all material respects, (C) no termination
event or condition or uncured default of a material nature on the part of
Company or any such Subsidiary or, to Company's knowledge, the landlord, exists
under any Real Property Lease, and (D) Company or one of its Subsidiaries is the
sole undisputed lessee of each Leased Real Property, is in actual possession
thereof and is entitled to quiet enjoyment thereof in accordance with the terms
of the applicable Real Property Lease.
(i) Software.
--------
(i) Section 4.1(i)(i) of the Disclosure Schedule sets forth
under the caption "Owned Software" a true, correct and complete list of all
computer programs (source code or object code) owned by Company or any
Subsidiary of Company, including without limitation any computer programs in the
development or testing phase (collectively, the "Owned Software"), and Section
4.1(i)(i) of the Disclosure Schedule sets forth under the caption "Licensed
Software" a true, correct and complete list of all computer programs (source
code or object code) licensed to Company or any Subsidiary of Company by another
person (other than any off-the-shelf computer program that is so licensed under
a shrink wrap license) (collectively, the "Licensed Software" and, together with
the Owned Software, the "Software").
(ii) Except as specified in Section 4.1(i)(ii) of the Disclosure
Schedule, Company, directly or through its Subsidiaries, has good, marketable
and exclusive title to, and the valid and enforceable power and unqualified
right to sell, license, lease, transfer, use or otherwise exploit, all versions
and releases of the Owned Software and all copyrights thereof, free and clear of
all Liens. Company, directly or through its Subsidiaries, is in actual
possession of the source code and object code for each computer program included
in the Owned Software, and Company, directly or through its Subsidiaries, is in
possession of all other documentation (including without limitation all related
engineering specifications, program flow charts, installation and user manuals)
and know-how required for the effective use of the Software as currently used in
Company's business or as offered or represented to Company's customers or
potential customers. Company, directly or through its Subsidiaries, is in actual
possession of the object code and user manuals for each computer program
included in the Licensed Software. The Software constitutes all of the computer
programs necessary to conduct Company's business as now conducted, and includes
all of the computer programs used in the development, marketing, licensing, sale
or support of the products and the services presently offered by Company.
Except as specified in Section 4.1(i)(ii) of the Disclosure Schedule, no person
other than Company and its Subsidiaries has any right or interest of any kind or
nature in or with respect to the Owned Software or any portion thereof or any
rights to sell, license, lease, transfer, use or otherwise exploit the Owned
Software or any portion thereof.
(iii) Section 4.1(i)(iii) of the Disclosure Schedule sets forth a
true, correct and complete list, by computer program, of (A) all persons other
than Company and its Subsidiaries that have been provided with the source code
or have a right to be provided with the
12
source code (including any such right that may arise after the occurrence of any
specified event or circumstance, either with or without the giving of notice or
passage of time or both) for any of the Owned Software, and (B) all source code
escrow agreements relating to any of the Owned Software (setting forth as to any
such escrow agreement the source code subject thereto and the names of the
escrow agent and all other persons who are actual or potential beneficiaries of
such escrow agreement), and identifies with specificity all agreements and
arrangements pursuant to which the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby would
entitle any third party or parties to receive possession of the source code for
any of the Owned Software or any related technical documentation. Except as
specified in Section 4.1(i)(iii) of the Disclosure Schedule, no person (other
than Company and its Subsidiaries and any person that is a party to a contract
referred to in clause (v) of the first sentence of Section 4.1(l) that restricts
such person from disclosing any information concerning such source code) is in
possession of, or has or has had access to, any source code for any computer
program included in the Owned Software.
(iv) There are no defects in any computer program included in
the Software that would adversely affect the functioning thereof in accordance
with any published specifications therefor or which would cause the Owned
Software or, to Company's knowledge, the Licensed Software, to fail to be Year
2000 compliant in all material respects. Without limiting the generality of the
foregoing, all of the Owned Software and, to Company's knowledge, all of the
Licensed Software has the following properties and capabilities: (A) the
capability to correctly recognize and accurately process dates expressed as a
four-digit number (or the binary equivalent or other machine readable iteration
thereof) (collectively, the "Four-Digit Dates"); (B) the capability to
accurately execute calculations using Four-Digit Dates; (C) the functionality
(both on-line and batch), including entry, inquiry, maintenance and update, to
support processing involving Four-Digit Dates; (D) the capability to generate
interfaces and reports that support processing involving Four-Digit Dates; (E)
the capability to generate and successfully transition, without human
intervention, into the year 2000 using the correct system date and to thereafter
continue processing with Four-Digit Dates; and (F) the capability to provide
correct results in forward and backward data calculations spanning century
boundaries, including the conversion of pre-2000 dates currently stored as two-
digit dates; provided, however, that no representation or warranty is made as to
the effect that defects in computer programs, hardware or systems provided by
third parties (or the inability of any such programs, hardware or systems, other
than those contemplated by the documentation for the Software to be used in
conjunction with the Software, to properly exchange date data with the Software)
may, when used in conjunction with the Software, have on the foregoing
capabilities. Each computer program included in the Software is in machine
readable form and contains all current revisions. Section 4.1(i)(iv) of the
Disclosure Schedule sets forth a true, correct and complete list of any current
developments or maintenance efforts with respect to the Owned Software,
including without limitation the development of new computer programs,
enhancements or revisions to existing computer programs included in the Owned
Software.
(v) Except as specified in Section 4.1(i)(v) of the Disclosure
Schedule, none of the sale, license, lease, transfer, use, reproduction,
distribution, modification or other exploitation by Company, any Subsidiary of
Company or any of their respective successors or assigns of any version or
release of any computer program included in the Software obligates or
13
will obligate Company, any Subsidiary of Company or any of their respective
successors or assigns to pay any royalty, fee or other compensation to any other
person.
(vi) Neither Company nor any of its Subsidiaries markets, or has
marketed, and none of them has supported or is obligated to support, any
Licensed Software.
(vii) Except as specified in Section 4.1(i)(vii) of the
Disclosure Schedule, no agreement, license or other arrangement pertaining to
any of the Software (including without limitation any development, distribution,
marketing, user or maintenance agreement, license or arrangement) to which
Company or any Subsidiary of Company is a party will terminate or become
terminable by any party thereto as a result of the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby.
(j) Intellectual Property.
---------------------
(i) Section 4.1(j)(i) of the Disclosure Schedule sets forth a
true, correct and complete list (including, to the extent applicable,
registration, application or file numbers) of all patents, trademarks, trade
names, service marks, domain names and registered copyrights used by Company or
any Subsidiary of Company in connection with the conduct of Company's business,
and all registrations of or applications for registration of any of the
foregoing, including any additions thereto or extensions, continuations,
renewals or divisions thereof (setting forth the registration, issue or serial
number and a description of the same) (collectively, together with all trade
dress, trade secrets, processes, formulae, designs, know-how and other
intellectual property rights that are so used, the "Intellectual Property").
Parent has heretofore been furnished with true, correct and complete copies of
each U.S. registration or application for U.S. registration covering any of the
Intellectual Property which is registered with, or in respect of which any
application for registration has been filed with, any U.S. Governmental Entity.
(ii) The Intellectual Property includes all of the intellectual
property rights owned or licensed by Company and its Subsidiaries that are
reasonably necessary to conduct Company's business as it is now conducted, and
includes all of the intellectual property rights owned or licensed by Company
and its Subsidiaries that are used in the development, marketing, licensing or
support of the Software. Except as specified in Section 4.1(j)(ii) of the
Disclosure Schedule, (A) Company, directly or through its Subsidiaries, has
good, marketable and exclusive title to, and the valid and enforceable power and
unqualified right to use, the Intellectual Property free and clear of all Liens
and (B) no person or entity other than Company and its Subsidiaries has any
right or interest of any kind or nature in or with respect to the Intellectual
Property or any portion thereof or any rights to use, market or exploit the
Intellectual Property or any portion thereof.
(k) No Infringement. Except as specified in Section 4.1(k) of the
---------------
Disclosure Schedule, neither the existence nor the sale, license, lease,
transfer, use, reproduction, distribution, modification or other exploitation by
Company, any Subsidiary of Company or any of their respective successors or
assigns of any Software or Intellectual Property, as such Software or
Intellectual Property, as the case may be, is or was, or is currently
contemplated to be, sold,
14
licensed, leased, transferred, used or otherwise exploited by such persons,
does, did or will (i) infringe on any patent, trademark, copyright or other
right of any other person, (ii) constitute a misuse or misappropriation of any
trade secret, know-how, process, proprietary information or other right of any
other person, or (iii) entitle any other person to any interest therein, or
right to compensation from Company, any Subsidiary of Company or any of their
respective successors or assigns, by reason thereof. Except as specified in
Section 4.1(k) of the Disclosure Schedule, neither Company nor any of its
Subsidiaries has received any complaint, assertion, threat or allegation or
otherwise has notice of any lawsuit, claim, demand, proceeding or investigation
involving matters of the type contemplated by the immediately preceding sentence
or is aware of any facts or circumstances that could reasonably be expected to
give rise to any such lawsuit, claim, demand, proceeding or investigation.
Except as specified in Section 4.1(k) of the Disclosure Schedule, there are no
restrictions on the ability of Company, any Subsidiary of Company or any of
their respective successors or assigns to sell, license, lease, transfer, use,
reproduce, distribute, modify or otherwise exploit any Software or Intellectual
Property.
(l) Material Contracts. There have been made available to Parent and
------------------
its representatives true, correct and complete copies of all of the following
contracts to which Company or any of its Subsidiaries is a party or by which any
of them is bound (collectively, the "Material Contracts"): (i) contracts with
any current officer or director of Company or any of its Subsidiaries; (ii)
contracts pursuant to which Company or any of its Subsidiaries licenses other
persons to use the Software and pursuant to which other persons license Company
or any of its Subsidiaries to use the Licensed Software; (iii) contracts (A) for
the sale of any of the assets of Company or any of its Subsidiaries, other than
contracts entered into in the ordinary course of business or (B) for the grant
to any person of any preferential rights to purchase any of its assets; (iv)
contracts which restrict Company or any of its Subsidiaries from competing in
any line of business or with any person in any geographical area or which
restrict any other person from competing with Company or any of its Subsidiaries
in any line of business or in any geographical area; (v) contracts which
restrict Company or any of its Subsidiaries from disclosing any information
concerning or obtained from any other person or which restrict any other person
from disclosing any information concerning or obtained from Company or any of
its Subsidiaries; (vi) indentures, credit agreements, security agreements,
mortgages, guarantees, promissory notes and other contracts relating to the
borrowing of money; and (vii) all other agreements, contracts or instruments
entered into outside of the ordinary course of business or which are material to
Company. Except as specified in Section 4.1(l) of the Disclosure Schedule, all
of the Material Contracts are in full force and effect and are the legal, valid
and binding obligation of Company and/or its Subsidiaries, enforceable against
them in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). Except as specified in Section 4.1(l) of the
Disclosure Schedule, neither Company nor any of its Subsidiaries is in breach or
default in any material respect under any Material Contract nor, to the
knowledge of Company, is any other party to any Material Contract in breach or
default thereunder in any material respect.
15
(m) Litigation, etc. As of the date hereof, except as specified in
---------------
Section 4.1(m) of the Disclosure Schedule, (i) there is no suit, claim, action,
proceeding (at law or in equity) or investigation pending or, to the knowledge
of Company, threatened against Company or any of its Subsidiaries before any
court or other Governmental Entity, and (ii) neither Company nor any of its
Subsidiaries is subject to any outstanding order, writ, judgement, injunction,
decree or arbitration order or award that, in any such case described in clauses
(i) and (ii), has had or could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Company. As of the date hereof,
there are no suits, claims, actions, proceedings or investigations pending or,
to the knowledge of Company, threatened, seeking to prevent, hinder, modify or
challenge the transactions contemplated by this Agreement.
(n) Compliance with Applicable Laws. All federal, state, local and
-------------------------------
foreign governmental approvals, authorizations, certificates, filings,
franchises, licenses, notices, permits and rights ("Permits") necessary for each
of Company and its Subsidiaries to own, lease or operate its properties and
assets and to carry on its business as now conducted have been obtained or made,
and there has occurred no default under any such Permit, except for the lack of
Permits and for defaults under Permits which lack or default could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Company. Except as disclosed in the Filed SEC Documents or in
Section 4.1(n) of the Disclosure Schedule, Company and its Subsidiaries are in
compliance with all applicable statutes, laws, ordinances, rules, orders and
regulations of any Governmental Entity, except for non-compliance which could
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Company.
(o) Environmental Laws. Except as specified in Section 4.1(o) of the
------------------
Disclosure Schedule and as could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company: (A)
neither Company nor any of its Subsidiaries has violated or is in violation of
any Environmental Law; (B) none of the Owned Real Property or Leased Real
Property (including without limitation soils and surface and ground waters) are
contaminated with any Hazardous Substance in quantities which require
investigation or remediation under Environmental Laws; (C) neither Company nor
any of its Subsidiaries is liable for any off-site contamination; (D) neither
Company nor any of its Subsidiaries has any liability or remediation obligation
under any Environmental Law; (E) no assets of Company or any of its Subsidiaries
are subject to pending or threatened Liens under any Environmental Law; (F)
Company and its Subsidiaries have all Permits required under any Environmental
Law ("Environmental Permits"); and (G) Company and its Subsidiaries are in
compliance with their respective Environmental Permits.
(p) Taxes. Except as specified in Section 4.1(p) of the Disclosure
-----
Schedule:
(i) Except where the failure to do so could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Company, each of Company and each Subsidiary of Company (and any affiliated or
unitary group of which any such person was a member) has (A) timely filed all
federal, state, local and foreign returns, declarations, reports, estimates,
information returns and statements ("Returns") required to be filed by or for it
in respect of any Taxes (as hereinafter defined) and has caused such Returns as
so filed to be true, correct and complete, (B) established reserves that are
reflected in Company's
16
most recent financial statements included in the Filed SEC Documents and that as
so reflected are adequate for the payment of all Taxes not yet due and payable
with respect to the results of operations of Company and its Subsidiaries
through the date hereof, and (C) timely withheld and paid over to the proper
taxing authorities all Taxes and other amounts required to be so withheld and
paid over. Each of Company and each Subsidiary of Company (and any affiliated or
unitary group of which any such person was a member) has timely paid all Taxes
that are shown as being due on the Returns referred to in the immediately
preceding sentence.
(ii) (A) There has been no taxable period since 1991 for which
a Return of Company or any of its Subsidiaries has been examined by the Internal
Revenue Service (the "IRS"), (B) all examinations described in clause (A) have
been completed without the assertion of material deficiencies, and (C) except
for alleged deficiencies which have been finally and irrevocably resolved,
Company has not received formal or informal notification that any deficiency for
any Taxes, the amount of which could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company, has been
or will be proposed, asserted or assessed against Company or any of its
Subsidiaries by any federal, state, local or foreign taxing authority or court
with respect to any period.
(iii) Neither Company nor any of its Subsidiaries has (A)
executed or entered into with the IRS or any other taxing authority any
agreement or other document that continues in force and effect beyond the
Effective Time and that extends or has the effect of extending the period for
assessments or collection of any federal, state, local or foreign Taxes, (B)
executed or entered into with the IRS or any other taxing authority any closing
agreement or other similar agreement (nor has Company or any of its Subsidiaries
received any ruling, technical advice memorandum or similar determination)
affecting the determination of Taxes required to be shown on any Return not yet
filed, or (C) requested any extension of time to be granted to file after the
Effective Time any Return required by applicable law to be filed by it.
(iv) Neither Company nor any of its Subsidiaries has made an
election under Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by Company or any of its
Subsidiaries. None of the assets of Company or any of its Subsidiaries is
required to be treated as being owned by any other person pursuant to the "safe
harbor" leasing provisions of Section 168(f)(8) of the Internal Revenue Code of
1954 as formerly in effect.
(v) Neither Company nor any of its Subsidiaries is a party to,
is bound by or has any obligation under any tax sharing agreement or similar
agreement or arrangement.
(vi) Company has not agreed to make, nor is it required to
make, any material adjustment under Section 481(a) of the Code by reason of a
change in accounting method or otherwise.
(vii) Neither Company nor any of its Subsidiaries is, or 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.
17
(viii) Except for the group of which Company is presently a
member, Company has never been a member of an affiliated group of corporations,
within the meaning of Section 1504 of the Code, other than as a common parent
corporation, and each of Company's Subsidiaries has never been a member of an
affiliated group of corporations, within the meaning of Section 1504 of the
Code, except where Company was the common parent of such affiliated group.
(ix) Neither Company nor any Subsidiary is a party to any
agreement, contract, arrangement or plan that has resulted, or would result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code.
For purposes of this Agreement, "Taxes" shall mean all federal, state,
local, foreign income, property, sales, excise, employment, payroll, franchise,
withholding and other taxes, tariffs, charges, fees, levies, imposts, duties,
licenses or other assessments of every kind and description, together with any
interest and any penalties, additions to tax or additional amounts imposed by
any taxing authority.
(q) Benefit Plans. Section 4.1(q) of the Disclosure Schedule sets
-------------
forth a true, correct and complete list of all the employee benefit plans (as
that phrase is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) maintained or contributed to (or to
which Company has any obligation to contribute) for the benefit of any current
or former employee, officer or director of the Company or any of its
Subsidiaries ("Company ERISA Plans") and any other benefit or compensation plan,
program or arrangement maintained or contributed to (or to which Company has any
obligation to contribute) for the benefit of any current or former employee,
officer or director of the Company or any of its Subsidiaries (Company ERISA
Plans and such other plans being referred to as "Company Plans"). Company has
furnished or made available to Parent and its representatives a true, correct
and complete copy of every document pursuant to which each Company Plan is
established or operated (including any summary plan descriptions), a written
description of any Company Plan for which there is no written document, and the
three most recent annual reports, financial statements and actuarial valuations
with respect to each Company Plan. Except as specified in Section 4.1(q) of the
Disclosure Schedule:
(i) none of the Company ERISA Plans is a "multiemployer plan"
within the meaning of ERISA;
(ii) none of the Company Plans promises or provides retiree
health benefits or retiree life insurance benefits to any person;
(iii) none of the Company Plans provides for payment of a
benefit, the increase of a benefit amount, the payment of a contingent benefit
or the acceleration of the payment or vesting of a benefit by reason of the
execution of this Agreement or the consummation of the transactions contemplated
by this Agreement;
18
(iv) neither Company nor any of its Subsidiaries has an
obligation to adopt, or is considering the adoption of, any new benefit or
compensation plan, program or arrangement or, except as required by law, the
amendment of an existing Company Plan;
(v) each Company ERISA Plan intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the IRS that it is so qualified and nothing has occurred since the date of such
letter that could reasonably be expected to affect the qualified status of such
Company ERISA Plan;
(vi) each Company Plan has been operated in accordance with its
terms and the requirements of all applicable law, and no prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Code has occurred with
respect to any Company ERISA Plan;
(vii) neither Company nor any of its Subsidiaries or members of
their "controlled group" has incurred any direct or indirect liability under
ERISA or the Code in connection with the termination of, withdrawal from or
failure to fund, any Company ERISA Plan or other retirement plan or arrangement,
and no fact or event exists that could reasonably be expected to give rise to
any such liability;
(viii) the aggregate accumulated benefit obligations of each
Company ERISA Plan subject to Title IV of ERISA (as of the date of the most
recent actuarial valuation prepared for such Company ERISA Plan and based on the
discount rate and other actuarial assumptions used in such valuation) do not
exceed the fair market value of the assets of such Company ERISA Plan (as of the
date of such valuation);
(ix) Company is not aware of any claims relating to the Company
Plans, other than routine claims for benefits; and
(x) None of the Company Plans provides for benefits or other
participation therein, and Company has received no claims or demands for
participation in or benefits under any Company Plan, by any individual
classified or treated by the Company as an independent contractor;
provided, however, that the failure of the representations set forth in clauses
(v), (vi), (vii), (ix) and (x) to be true and correct shall not be deemed to be
a breach of any such representation unless such failures could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Company.
(r) Absence of Changes in Benefit Plans. Except as disclosed in the
-----------------------------------
Filed SEC Documents or in Section 4.1(r) of the Disclosure Schedule, since the
date of the most recent audited financial statements included in the Filed SEC
Documents, neither Company nor any of its Subsidiaries has adopted or agreed to
adopt any collective bargaining agreement or any Company Plan.
19
(s) Labor Matters.
-------------
(i) Except as specified in Section 4.1(s)(i) of the Disclosure
Schedule, neither Company nor any of its Subsidiaries is a party to any
employment, labor or collective bargaining agreement, and there are no
employment, labor or collective bargaining agreements which pertain to employees
of Company or any of its Subsidiaries. Company has heretofore made available to
Parent true, complete and correct copies of the agreements set forth in Section
4.1(s)(i) of the Disclosure Schedule, together with all amendments,
modifications, supplements or side letters affecting the duties, rights and
obligations of any party thereunder.
(ii) No employees of Company or any of its Subsidiaries are
represented by any labor organization and, to the knowledge of Company, no labor
organization or group of employees of Company or any of its Subsidiaries has
made a pending demand for recognition or certification. There are no
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened in writing to be
brought or filed with the National Labor Relations Board or any other labor
relations tribunal or authority and, to the knowledge of Company, there are no
organizing activities involving Company or any of its Subsidiaries pending with
any labor organization or group of employees of Company or any of its
Subsidiaries.
(iii) Except as specified in Section 4.1(s)(iii) of the
Disclosure Schedule, there are no (A) unfair labor practice charges, grievances
or complaints pending or threatened in writing by or on behalf of any employee
or group of employees of Company or any of its Subsidiaries, or (B) complaints,
charges or claims against Company or any of its Subsidiaries pending, or
threatened in writing to be brought or filed, with any Governmental Entity or
arbitrator based on, arising out of, in connection with, or otherwise relating
to the employment or termination of employment of any individual by Company or
any of its Subsidiaries.
(t) Brokers. No broker, investment banker, financial advisor or
-------
other person, other than Adams, Harkness & Hill, the fees and expenses of which
will be paid by Company, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Company.
(u) Written Opinion of Financial Advisor. Company has received the
------------------------------------
written opinion of Adams, Harkness & Hill, dated August 26, 1998 (a true,
correct and complete copy of which has been delivered to Parent by Company), to
the effect that, based upon and subject to the matters set forth therein and as
of the date thereof, the Merger Consideration is fair to the holders of Shares
from a financial point of view, and such opinion has not been withdrawn or
modified.
(v) Voting Requirements. The affirmative votes of each of (i) the
-------------------
holders of two-thirds of the outstanding Shares entitled to vote at the
Stockholders Meeting with respect to the approval of this Agreement, taken as a
whole, (ii) the affirmative vote of the holders of two-thirds of the outstanding
Common Shares entitled to vote at the Stockholders Meeting with respect to the
approval of this Agreement, taken separately, and (iii) the affirmative vote of
the holders of two-thirds of the outstanding Preferred Shares entitled to vote
at the Stockholders
20
Meeting with respect to the approval of this Agreement, taken separately, are
the only votes of the holders of any class or series of Company's capital stock
or other securities required in connection with the consummation by Company of
the Merger and the other transactions contemplated hereby to be consummated by
Company. The restrictions contained in Chapters 110C, 110D, 110E and 110F of the
Massachusetts General Laws are not applicable to the transactions contemplated
hereby, including the transactions contemplated by the Stock Option Agreement
and the Stockholder Agreement.
Section 4.2 Representations and Warranties of Parent and Merger Sub.
-------------------------------------------------------
Parent and Merger Sub represent and warrant to Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent and
------------------------------------------
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated.
(b) Authority; Noncontravention. Parent and Merger Sub have the
---------------------------
requisite corporate power and authority to enter into this Agreement. The
execution and delivery of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the transactions contemplated hereby
have been duly authorized by the Executive Committee of the Board of Directors
of Parent and the Board of Directors of Merger Sub and have been duly approved
by Parent as sole stockholder of Merger Sub, and no other corporate proceedings
on the part of Parent or Merger Sub are necessary to authorize this Agreement or
to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Merger Sub and, assuming this
Agreement constitutes a valid and binding obligation of Company, constitutes a
valid and binding obligation of each of Parent and Merger Sub, enforceable
against each such party in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and to general
principals of equity. The execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby and compliance with the
provisions of this Agreement will not (i) conflict with any of the provisions of
the certificate of incorporation or bylaws of Parent or Merger Sub, in each case
as amended to the date of this Agreement, (ii) subject to the governmental
filings and other matters referred to in Section 4.2(c), conflict with, result
in a breach of or default (with or without notice or lapse of time, or both)
under, or give rise to a material obligation, a right of termination,
cancellation or acceleration of any obligation or loss of a material benefit
under, or require the consent of any person under, any indenture, or other
agreement, permit, concession, franchise, license or similar instrument or
undertaking to which Parent or Merger Sub is a party or by which Parent or
Merger Sub or any of their respective assets is bound or affected, or (iii)
subject to the governmental filings and other matters referred to in Section
4.2(c), contravene any law, rule or regulation, or any order, writ, judgment,
injunction, decree, determination or award currently in effect, which, in the
case of clauses (ii) and (iii) above, could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent.
(c) Consents and Approvals. No consent, approval or authorization
----------------------
of, or declaration or filing with, or notice to, any Governmental Entity which
has not been received or made is required by or with respect to Parent or Merger
Sub in connection with the execution and
21
delivery of this Agreement by Parent or Merger Sub or the consummation by Parent
or Merger Sub, as the case may be, of any of the transactions contemplated
hereby, except for (i) the filing of premerger notification and report forms
under the HSR Act with respect to the Merger, (ii) the filing with the SEC of
such reports under the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated hereby, (iii) the filing of the
Massachusetts Articles of Merger with the Massachusetts State Secretary and the
filing of the Georgia Certificate of Merger with the Georgia State Secretary and
appropriate documents with the relevant authorities of other states in which
Company is qualified to do business, and (iv) any other consents, approvals,
authorizations, filings or notices the failure to make or obtain which could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent.
(d) Certain Information. None of the information supplied or to be
-------------------
supplied by Parent or Merger Sub specifically for inclusion in the Proxy
Statement will, at the time it is so supplied, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
(e) Financing. Parent and Merger Sub collectively have cash on hand
---------
or financing commitments from financially responsible third parties, or a
combination thereof, in an aggregate amount sufficient to enable Parent and
Merger Sub to (i) pay in full the Merger Consideration and all fees and expenses
payable by Parent and Merger Sub in connection with this Agreement and the
transactions contemplated thereby and (ii) satisfy and discharge such of
Company's existing indebtedness as, pursuant to its terms, will become due and
payable prior to its stated maturity as a result of the consummation of the
transactions contemplated hereby.
ARTICLE V
CONDUCT OF BUSINESS OF COMPANY
Section 5.1 Conduct of Business of Company. Except as expressly
------------------------------
provided for herein, during the period from the date of this Agreement to the
Effective Time, Company shall, and shall cause each of its Subsidiaries to, act
and carry on its business only in the ordinary course of business consistent
with past practice and, to the extent consistent therewith, use reasonable
efforts to preserve intact its current business organizations, keep available
the services of its current key officers and employees and preserve the goodwill
of those engaged in material business relationships with Company, and to that
end, without limiting the generality of the foregoing, Company shall not, and
shall not permit any of its Subsidiaries to, without the prior consent of
Parent:
(i) (A) declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, securities or other property) in
respect of, any of its outstanding capital stock (other than, with respect to a
Subsidiary of Company, to its corporate parent), (B) split, combine or
reclassify any of its outstanding 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
22
outstanding capital stock, or (C) purchase, redeem or otherwise acquire any
shares of outstanding capital stock or any rights, warrants or options to
acquire any such shares, except, in the case of this clause (C), for the
acquisition of Shares from holders of Options in full or partial payment of the
exercise price payable by such holder upon exercise of Options;
(ii) issue, sell, grant, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into or exchangeable for, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible or exchangeable
securities, other than upon the exercise of Options outstanding on the date of
this Agreement;
(iii) amend its articles of organization, by-laws or other
comparable charter or organizational documents;
(iv) directly or indirectly acquire, make any investment in, or
make any capital contributions to, any person other than in the ordinary course
of business consistent with past practice;
(v) directly or indirectly sell, pledge or otherwise dispose
of or encumber any of its properties or assets that are material to its
business, except for sales, pledges or other dispositions or encumbrances in the
ordinary course of business consistent with past practice;
(vi) (A) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person, other than indebtedness owing to or
guarantees of indebtedness owing to Company or any direct or indirect wholly
owned Subsidiary of Company or (B) make any loans or advances to any other
person, other than to Company or to any direct or indirect wholly owned
Subsidiary of Company and other than routine advances to employees consistent
with past practice, except, in the case of clause (A), for borrowings under the
Existing Credit Agreement (as hereinafter defined) in the ordinary course of
business consistent with past practice or pursuant to Advances provided for in
Section 6.11;
(vii) grant or agree to grant to any officer, employee or
consultant any increase in wages or bonus, severance, profit sharing,
retirement, deferred compensation, insurance or other compensation or benefits,
or establish any new compensation or benefit plans or arrangements, or amend or
agree to amend any existing Company Plans, except as may be required under
existing agreements or by law;
(viii) accelerate the payment, right to payment or vesting of any
bonus, severance, profit sharing, retirement, deferred compensation, stock
option, insurance or other compensation or benefits;
(ix) enter into or amend any employment, consulting, severance
or similar agreement with any individual, except with respect to new hires of
non-officer employees in the ordinary course of business consistent with past
practice;
23
(x) adopt or enter into a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other material reorganization or any agreement relating to an Acquisition
Proposal (as hereinafter defined);
(xi) make any tax election or settle or compromise any income
tax liability of Company or of any of its Subsidiaries involving on an
individual basis more than $50,000;
(xii) make any change in any method of accounting or accounting
practice or policy, except as required by any changes in generally accepted
accounting principles;
(xiii) enter into any agreement, understanding or commitment that
restrains, limits or impedes Company's ability to compete with or conduct any
business or line of business;
(xiv) except as specified in Section 5.1 of the Disclosure
Schedule, plan, announce, implement or effect any reduction in force, lay-off,
early retirement program, severance program or other program or effort
concerning the termination of employment of employees of Company or its
Subsidiaries;
(xv) accelerate the collection of any account receivable or
delay the payment of any account payable, or otherwise reduce the assets or
increase the liabilities of Company or any of its Subsidiaries otherwise than in
the ordinary course of business consistent with past practice, in any such case
with the purpose or effect of using the resulting increase in the cash flow of
Company or any of its Subsidiaries to reduce the total indebtedness of Company
and its Subsidiaries for money borrowed; or
(xvi) authorize any of, or commit or agree to take any of, the
foregoing actions in respect of which it is restricted by the provisions of this
Section 5.1.
ARTICLE VI
ADDITIONAL COVENANTS
Section 6.1 Preparation of the Proxy Statement. As soon as practicable
----------------------------------
following the date hereof, Company and Parent shall jointly prepare a proxy
statement (the "Proxy Statement"), in accordance with the Exchange Act and the
rules and regulations under the Exchange Act, with respect to the transactions
contemplated hereby. Company, Parent and Merger Sub shall cooperate with each
other in the preparation of the Proxy Statement. Company and Parent shall use
all reasonable efforts to respond promptly to any comments made by the SEC with
respect to the Proxy Statement and to cause the Proxy Statement to be mailed to
the stockholders of Company at the earliest practicable date.
24
Section 6.2 Stockholders Meeting. Company shall take all action
--------------------
necessary, in accordance with the MBCL, the Exchange Act and other applicable
law and its articles of organization and by-laws, to convene and hold a special
meeting of the stockholders of Company (the "Stockholders Meeting") as promptly
as practicable after the date hereof for the purpose of considering and voting
upon this Agreement and to solicit proxies pursuant to the Proxy Statement in
connection therewith. Subject to the provisions of Section 6.6(b), the Board of
Directors of Company shall recommend that the holders of Shares vote in favor of
the approval of this Agreement at the Stockholders Meeting and shall cause such
recommendation to be included in the Proxy Statement. At the Stockholders
Meeting, Parent and Merger Sub shall vote any Shares beneficially owned by them
(which may be voted by them pursuant to applicable law) in favor of the approval
of this Agreement.
Section 6.3 Access to Information; Confidentiality. Each of Parent and
--------------------------------------
Company shall, and shall cause each of its Subsidiaries to, afford to the other
and its officers, employees, counsel, financial advisors and other
representatives access during the period prior to the Effective Time to all its
properties, books, contracts, commitments, Returns, personnel and records and,
during such period, each of Parent and Company shall, and shall cause each of
its Subsidiaries to, furnish as promptly as practicable to the other such
information concerning its business, properties, financial condition, operations
and personnel as the other may from time to time request. Any such
investigation by Parent or Company shall not affect the representations or
warranties contained in this Agreement. Except as required by law, Parent and
Company will hold, and will cause its directors, officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any non-public information obtained from the other in
confidence to the extent required by, and in accordance with the provisions of,
the letter agreement, dated June 9, 1998, between Parent and Company with
respect to confidentiality and other matters.
Section 6.4 Reasonable Best Efforts. On the terms and subject to the
-----------------------
conditions set forth in this Agreement, each of the parties shall use its
reasonable best efforts to take, or cause to be taken, all actions, and do, or
cause to be done, and assist and cooperate with the other parties in doing, all
things necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the Merger and the other transactions
contemplated hereby, including the satisfaction of the respective conditions set
forth in Article VII.
Section 6.5 Public Announcements. Parent and Merger Sub, on the one
--------------------
hand, and Company, on the other hand, shall consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
press release, SEC filing (including without limitation the Proxy Statement) or
other public statements with respect to the transactions contemplated hereby,
including the Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
applicable law, by court process or by obligations pursuant to any listing
agreement with any national securities exchange.
25
Section 6.6 No Solicitation; Acquisition Proposals.
--------------------------------------
(a) During the period from and including the date of this Agreement to
and including the Effective Time, Company shall not, and shall not authorize or
permit any of its Subsidiaries, or any of its or their affiliates, officers,
directors, employees, agents or representatives (including without limitation
any investment banker, financial advisor, attorney or accountant retained by
Company or any of its Subsidiaries), to, directly or indirectly, initiate,
solicit or encourage (including by way of furnishing information or assistance),
or take any other action to facilitate, any inquiries, any expression of
interest or the making of any proposal that constitutes, or may reasonably be
expected to lead to, an Acquisition Proposal, or enter into or maintain or
continue discussions or negotiate with any person in furtherance of such
inquiries or to obtain an Acquisition Proposal or agree to or endorse any
Acquisition Proposal; provided, however, that nothing in this Agreement shall
prohibit the Board of Directors of Company, prior to the time at which this
Agreement shall have been approved by Company's stockholders, from furnishing
information to, or entering into, maintaining or continuing discussions or
negotiations with, any person that makes an unsolicited, bona fide written
Acquisition Proposal after the date hereof if, and to the extent that, the Board
of Directors of Company, after consultation with and based upon the advice of
independent legal counsel, determines in good faith that (i) such Acquisition
Proposal would be more favorable to Company's stockholders than the Merger, and
(ii) the failure to take such action would result in a breach by the Board of
Directors of Company of its fiduciary duties to Company's stockholders under
applicable law, and, prior to furnishing any non-public information to such
person, Company receives from such person an executed confidentiality agreement
with provisions no less favorable to Company than the letter agreement relating
to the furnishing of confidential information of Company to Parent referred to
in the last sentence of Section 6.3. Company shall promptly (and, in any event
within 24 hours) notify Parent after receipt of any Acquisition Proposal or any
request for information relating to Company or any of its Subsidiaries or for
access to the properties, books or records of Company or any of its Subsidiaries
by any person who has informed Company that such person is considering making,
or has made, an Acquisition Proposal (which notice shall identify the person
making, or considering making, such Acquisition Proposal and shall set forth the
material terms of any Acquisition Proposal received), and Company shall keep
Parent informed in reasonable detail of the terms, status and other pertinent
details of any such Acquisition Proposal.
(b) During the period from and including the date of this Agreement
to and including the Effective Time, neither the Board of Directors of Company
nor any committee thereof shall withdraw or modify, or propose publicly to
withdraw or modify, in a manner adverse to Parent or Merger Sub, the approval of
this Agreement or the transactions contemplated hereby or the recommendation
referred to in the penultimate sentence of Section 6.2; provided, however, that
nothing contained in this Agreement will prohibit the Board of Directors of
Company from withdrawing or modifying the recommendation referred to in the
penultimate sentence of Section 6.2 following the receipt by Company after the
date hereof, under circumstances not involving any breach of the provisions of
Section 6.6(a), of an unsolicited Acquisition Proposal if, and to the extent
that, the Board of Directors of Company, after consultation with and based upon
the advice of independent legal counsel, determines in good faith that (i) the
transactions contemplated by such Acquisition Proposal would be more favorable
to Company's stockholders than the transactions contemplated hereby, and (ii)
the failure to take such action would result in a
26
breach by the Board of Directors of Company of its fiduciary duties to Company's
stockholders under applicable law; and provided further that nothing contained
in this Agreement will prohibit the Board of Directors of Company from, to the
extent applicable, complying with Rule 14e-2 promulgated under the Exchange Act
with regard to an Acquisition Proposal.
(c) Nothing in this Section 6.6, and no action taken by the Board of
Directors of the Company pursuant to this Section 6.6, will (i) have any effect
on Company's obligations under the first sentence of Section 6.2, which
obligations shall be absolute and unconditional, (ii) permit Company to
terminate this Agreement except in accordance with the provisions of Section
8.1, (iii) permit Company to enter into any agreement providing for any
transaction contemplated by an Acquisition Proposal for as long as this
Agreement remains in effect, or (iv) affect in any manner any other obligation
of Company under this Agreement.
(d) For purposes of this Agreement, "Acquisition Proposal" means an
inquiry, offer, proposal or other indication of interest regarding any of the
following (other than the transactions contemplated by this Agreement or the
Stock Option Agreement with Parent or Merger Sub) involving Company: (i) any
merger, consolidation, share exchange, recapitalization, business combination or
other similar transaction; (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of all or substantially all the assets of Company
and its Subsidiaries, taken as a whole, in a single transaction or series of
related transactions; (iii) any tender offer or exchange offer for 20% percent
or more of the outstanding shares of capital stock of Company or the filing of a
registration statement under the Securities Act in connection therewith; or (iv)
any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
Section 6.7 Consents, Approvals and Filings. Upon the terms and subject
-------------------------------
to the conditions hereof, each of the parties hereto shall (a) make promptly its
respective filings, and thereafter make any other required submissions, under
the HSR Act and the Exchange Act, with respect to the Merger and the other
transactions contemplated hereby and (b) use its reasonable best efforts to
take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the Merger and the other
transactions contemplated hereby, including without limitation using its
reasonable best efforts to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of Governmental Entities and parties
to contracts with Company and its Subsidiaries as are necessary for the
consummation of the Merger and the other transactions contemplated hereby and to
fulfill the conditions to the Merger; provided, however, that in no event shall
Parent or any of its Subsidiaries be required to agree or commit to divest, hold
separate, offer for sale, abandon, limit its operation of or take similar action
with respect to any assets (tangible or intangible) or any business interest of
it or any of its Subsidiaries (including without limitation the Surviving
Corporation after consummation of the Merger) in connection with or as a
condition to receiving the consent or approval of any Governmental Entity
(including without limitation under the HSR Act). In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of each party to
this Agreement shall use their reasonable best efforts to take all such action.
27
Section 6.8 Board Action Relating to Stock Option Plans. As soon as
-------------------------------------------
practicable following the date of this Agreement, the Board of Directors of
Company (or, if appropriate, any committee administering a Stock Option Plan)
shall adopt such resolutions and take such actions as may be required to cause
each outstanding Option to be automatically converted, at the Effective Time,
into a Substitute Option in accordance with Section 2.2 and shall make such
other changes to the Stock Option Plans as it deems appropriate to give effect
to the Merger (subject to the approval of Parent, which shall not be
unreasonably withheld).
Section 6.9 Employee Benefit Matters.
------------------------
(a) From and after the Effective Time, Parent shall, and shall cause
its Subsidiaries (including the Surviving Corporation) to, honor and provide for
payment of all accrued obligations and benefits under all Company Plans and
employment or severance agreements between Company and persons who are or had
been employees of Company or any of its Subsidiaries at or prior to the
Effective Time ("Covered Employees"), all in accordance with their respective
terms.
(b) From and after the Effective Time, Parent shall, and shall cause
its Subsidiaries (including the Surviving Corporation) to, provide Covered
Employees who remain in the employ of Parent or any such Subsidiary employee
benefits that are reasonably comparable to the employee benefits provided to
similarly situated employees of Parent or any such Subsidiary who are not
Covered Employees. To the extent that Covered Employees are included in any
benefit plan of Parent or its Subsidiaries, Parent agrees that the Covered
Employees shall receive credit under such plan (other than any such plan
providing for sabbaticals) for service prior to the Effective Time with Company
and its Subsidiaries to the same extent such service was counted under similar
Company Plans for purposes of eligibility, vesting, eligibility for retirement
(but not for benefit accrual) and, with respect to vacation, disability and
severance, benefit accrual. To the extent that Covered Employees are included
in any medical, dental or health plan other than the plan or plans they
participated in at the Effective Time, Parent agrees that any such plans shall
not include pre-existing condition exclusions, except to the extent such
exclusions were applicable under the similar Company Plan at the Effective Time,
and shall provide credit for any deductibles and co-payments applied or made
with respect to each Covered Employee in the calendar year of the change.
(c) Notwithstanding anything in this Agreement to the contrary, from
and after the Effective Time, the Surviving Corporation will have sole
discretion over the hiring, promotion, retention, firing and other terms and
conditions of the employment of employees of the Surviving Corporation. Except
as otherwise provided in this Section 6.9, nothing herein shall prevent Parent
or the Surviving Corporation from amending or terminating any Company Plan in
accordance with its terms.
Section 6.10 Indemnification; Directors' and Officers' Insurance.
---------------------------------------------------
(a) For a period of five years after the Effective Time, the
provisions with respect to indemnification set forth in the certificate of
incorporation and bylaws of Merger Sub as in effect on the date of this
Agreement (true, correct and complete copies of which have been
28
provided to Company) shall not be amended, repealed or otherwise modified in any
manner that would adversely affect the rights thereunder of individuals who at
any time prior to the Effective Time were directors or officers of Company in
respect of actions or omissions occurring at or prior to the Effective Time
(including without limitation the transactions contemplated by this Agreement),
unless such modification is required by law.
(b) For a period commencing at the Effective Time and expiring not
later than the fifth anniversary of the Effective Time, Parent shall cause to be
maintained in effect policies of directors' and officers' liability insurance,
for the benefit of those persons who are covered by Company's directors' and
officers' liability insurance policies at the Effective Time, providing coverage
with respect to matters occurring prior to the Effective Time that is at least
equal to the coverage provided under Company's current directors' and officers'
liability insurance policies, to the extent that such liability insurance can be
maintained at an annual cost to Parent not greater than 150 percent of the
premium for the current Company directors' and officers' liability insurance;
provided that if such insurance cannot be so maintained at such cost, Parent
shall maintain as much of such insurance as can be so maintained at a cost equal
to 150 percent of the current annual premiums of Company for such insurance.
Section 6.11 Credit Arrangements.
-------------------
(a) During the period from and after the date hereof to the earlier of
the Effective Time and the termination of this Agreement pursuant to Section
8.1, Company shall not (i) modify, amend or supplement, or waive any rights
under or in relation to, or enter into any agreement or arrangement inconsistent
with, the Forbearance Agreement, the Overadvance Note or the Loan Documents (or
request any of the foregoing from Silicon Valley Bank), (ii) make any payments
on account of any outstanding borrowings or other obligations under the Loan
Documents, except (A) mandatory payments of accrued interest on outstanding
principal balances under the Loan Documents as contemplated by Section 5(b) and
Section 7 of the Forbearance Agreement and (B) mandatory payments in respect of
Overadvances as contemplated by Section 6 of the Forbearance Agreement, or (iii)
effect any advance under the Overadvance Facility (each, an "Advance"), except
with Parent's prior written consent obtained in accordance with the provisions
of Section 6.11(b).
(b) Company may request that Parent consent to one or more Advances to
be used by Company solely to finance its working capital requirements in the
ordinary course of business consistent with past practice. Each request for
Parent's consent to an Advance under this Section 6.11(b) shall set forth the
proposed amount thereof, the intended use of the proceeds thereof and
confirmation that the conditions set forth in Section 6.11(c) are then satisfied
(it being understood that Company shall request an Advance only to the extent
that Company's other uncommitted sources of working capital are at the time
inadequate to satisfy Company's working capital requirements). Subject to
Company's compliance with this Section 6.11(b) and the satisfaction of the
conditions set forth in Section 6.11(c), Parent shall consent to an Advance so
long as the making of such Advance would not result in all Advances in the
aggregate exceeding $3,000,000; provided, however, that Parent, in its sole and
absolute discretion, may consent to one or more Advances that would result in
all Advances in the aggregate exceeding $3,000,000 or at a time when all
Advances in the aggregate already exceed $3,000,000.
29
(c) The obligation of Parent to consent to any Advance shall be
subject to the satisfaction on the date that any Advance is to be made (an
"Advance Date") of the following conditions:
(i) The Forbearance Agreement, the Overadvance Note and the
Loan Documents shall be in full force and effect without modification, amendment
or supplement, and neither Company nor Silicon Valley Bank shall have (A) waived
any rights thereunder without Parent's prior written consent or (B) taken or
omitted to take (or expressed any intention to take or omit to take) any action
in contravention thereof.
(ii) Company shall not have taken or omitted to take (or
expressed any intention to take or omit to take) any action in contravention of
the provisions of this Section 6.11 or the Cash Management Plan set forth in
Annex 6.11 to this Agreement.
(iii) All conditions to the obligations of Parent and Merger
Sub to effect the Merger set forth in Section 7.1(b) and Sections 7.2(a),
7.2(b), 7.2(c) and 7.2(d) shall have been satisfied (with the references in
Sections 7.2(a) and 7.2(b) to the "Closing Date" being deemed for purposes of
this Section 6.11(b)(ii) to be references to the applicable Advance Date).
(iv) From the date hereof to the applicable Advance Date,
neither Company nor any of its Subsidiaries or any of its or their affiliates,
officers, directors, employees, agents or representatives (including without
limitation any investment banker, financial advisor, attorney or accountant
retained by Company or any of its Subsidiaries) shall have (A) initiated,
solicited or encouraged (including by way of providing information or
assistance), or taken any other action to facilitate, any inquiries, any
expression of interest or the making of any proposal that constitutes, or may
reasonably be expected to lead to, an Acquisition Proposal or (B) entered into,
maintained or continued discussions or negotiated with any person in furtherance
of such inquiries or to obtain an Acquisition Proposal or agreed to or endorsed
any Acquisition Proposal.
(v) The making of an Advance to Company shall not cause a
default or event of default to occur under the Forbearance Agreement, the
Overadvance Note, the Loan Documents or any other obligations of Company or any
of its Subsidiaries for borrowed money or evidenced by indentures, credit
agreements, security agreements, mortgages, guarantees, promissory notes or
other contracts relating to the borrowing of money.
(vi) If a default or event of default has occurred and is
continuing under any indenture, credit agreement, security agreement, mortgage,
guaranty, promissory note or other contract relating to the borrowing of money
(including the Forbearance Agreement, the Overadvance Note and the Loan
Documents) to which the Company is a party, Company shall have obtained a
written waiver of such default or event of default or a forbearance agreement,
in each case in form and substance reasonably satisfactory to Parent.
(d) Neither Parent nor Merger Sub nor any of their respective
affiliates, directors, officers, employees or agents shall have any liability to
Company or any other person in connection with any action taken or omitted to be
taken under this Section 6.11 or in connection with any Advance or request for
an Advance; provided, however, without limiting the generality
30
or effect of Sections 8.1(c) and 8.2, that nothing contained in this Section
6.11(d) shall relieve Parent of liability for any willful or intentional breach
by Parent of this Section 6.11.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.
----------------------------------------------------------
The respective obligation of each party to effect the Merger is subject to the
satisfaction or written waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been approved by
--------------------
the affirmative vote of the holders of the requisite number of shares of capital
stock of Company in the manner required pursuant to Company's articles of
organization and by-laws, the MBCL and other applicable law.
(b) No Injunctions or Restraints. No temporary restraining order,
----------------------------
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that the party
invoking this condition shall have complied with its obligations under Section
6.7.
(c) HSR Act. All necessary waiting periods under the HSR Act
-------
applicable to the Merger shall have expired or been earlier terminated.
Section 7.2 Conditions to Obligations of Parent and Merger Sub. The
--------------------------------------------------
obligation of each of Parent and Merger Sub to effect the Merger is further
subject to satisfaction or written waiver on or prior to the Closing Date of the
following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Company contained in this Agreement, which representations and
warranties shall be deemed for purposes of this Section 7.2 not to include any
qualification or limitation with respect to materiality (whether by reference to
"Material Adverse Effect" or otherwise), shall be true and correct as of the
Closing Date, except where the matters in respect of which such representations
and warranties are not true and correct, in the aggregate, have not had and
could not reasonably be expected to have a Material Adverse Effect on Company,
with the same effect as though such representations and warranties were made as
of the Closing Date, and Parent and Merger Sub shall have received a certificate
signed on behalf of Company by an authorized officer of Company to such effect.
(b) Performance of Obligations of Company. Company shall have
-------------------------------------
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent and Merger
Sub shall have received a certificate signed on behalf of Company by an
authorized officer of Company to such effect.
31
(c) No Material Adverse Change. Since the date of this Agreement,
--------------------------
Company and its Subsidiaries, taken as a whole, shall not have experienced any
Material Adverse Change.
(d) Certain Litigation. There shall not be pending or threatened any
------------------
suit, action or proceeding seeking to restrain or prohibit the Merger or seeking
to obtain from Parent or Company or any of their respective affiliates in
connection with the Merger any material damages, or seeking any other relief
that, following the Merger, would materially limit or restrict the ability of
Parent and its Subsidiaries to own and conduct both the assets and businesses
owned and conducted by Parent and its Subsidiaries prior to the Merger and the
assets and businesses owned and conducted by Company and its Subsidiaries prior
to the Merger.
(e) Consents. All consents, authorizations, orders and approvals of
--------
(or filings or registrations with) any Governmental Entity or any other person
required to be obtained or made prior to the Effective Time in connection with
the execution, delivery and performance of this Agreement shall have been
obtained or made, except for the filing of the articles of merger pursuant to
Section 1.3 and except where the failure to have obtained or made such consents,
authorizations, orders, approvals, filings or registrations could not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on Parent or the Surviving Corporation.
(f) Insurance. Parent and Company shall have received written
---------
confirmation reasonably satisfactory to Parent from the insurers identified on
Annex 7.2 to this Agreement as to the matters set forth on such Annex.
(g) Termination or Modification of Certain Agreements. Each of the
-------------------------------------------------
Agreement, dated December 1, 1996, between Company and SciTools Inc. (formerly
known as Scientific Toolworks, Inc.) relating to ADA Professional Developers
Tool, as amended, the Agreement, dated August 12, 1997, between Company and
Proforma Corporation relating to Provision Workbench/BPR Modelers, as amended,
and the Agreement, dated January 1, 1998, between Company and Mesa Systems
Guild, Inc. relating to Mesa/Teamwork Model Bridge, as amended, shall have been
terminated or modified on terms reasonably satisfactory to Parent.
(h) Certain Actions by Secured Lender. Silicon Valley Bank shall not
---------------------------------
have exercised any rights or remedies or taken any other action under or in
respect of the Loan Documents or the Overadvance Note (as such terms are
hereinafter defined) and shall not have failed to make any Advance requested by
Company and consented to by Parent pursuant to Section 6.11.
Section 7.3 Conditions to Obligation of Company. The obligation of the
-----------------------------------
Company to effect the Merger is further subject to satisfaction or written
waiver on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of each of Parent and Merger Sub contained in this Agreement, which
representations and warranties shall be deemed for purposes of this Section 7.3
not to include any qualification or limitation with
32
respect to materiality (whether by reference to "Material Adverse Effect" or
otherwise), shall be true and correct as of the Closing Date, except where the
matters in respect of which such representations and warranties are not true and
correct, in the aggregate, have not had and could not reasonably be expected to
have a Material Adverse Effect on Parent or a material adverse effect on the
economic benefits to be realized by the holders of Shares as a result of the
consummation of the Merger, with the same effect as though such representations
and warranties were made as of the Closing Date, and Company shall have received
a certificate signed on behalf of Parent and Merger Sub by an authorized officer
of Parent to such effect.
(b) Performance of Obligations of Parent and Merger Sub. Each of
---------------------------------------------------
Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and the Company shall have received a certificate signed on
behalf of Parent by an authorized officer of Parent to such effect.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination.
-----------
(a) This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Effective Time, notwithstanding
approval thereof by the stockholders of Company, in any one of the following
circumstances:
(i) By mutual written consent duly authorized by the Boards of
Directors of Parent and Company.
(ii) By Parent or Company, if the Effective Time shall not have
occurred on or before December 31, 1998, otherwise than as a result of any
material breach of any provision of this Agreement by the party seeking to
effect such termination.
(iii) By Parent or Company, if any federal or state court of
competent jurisdiction or other Governmental Entity shall have issued an order,
decree or ruling, or taken any other action permanently restraining, enjoining
or otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and non-appealable, provided that neither party
may terminate this Agreement pursuant to this Section 8.1(a)(iii) if it has not
complied with its obligations under Section 6.7.
(iv) By Parent or Company, if the Stockholders Meeting shall have
been held and this Agreement shall not have been approved by the affirmative
vote of the holders of the requisite number of shares of capital stock of
Company, provided that Company may not terminate this Agreement pursuant to this
Section 8.1(a)(iv) unless it shall have paid to Parent the Fee provided for in
Section 8.1(b).
33
(v) By Parent, if (A) the Board of Directors of Company or any
committee thereof shall have (1) withdrawn or modified, in a manner adverse to
Parent or Merger Sub, its approval of this Agreement or the transactions
contemplated hereby or the recommendation referred to in the penultimate
sentence of Section 6.2, (2) approved, endorsed or recommended to its
stockholders an Acquisition Proposal, or (3) resolved to do any of the foregoing
or (B) if the Stockholders Meeting shall not have been held by October 31, 1998
as a result of a breach by Company of its obligations under Section 6.2.
(vi) By Parent or Company, if (A) the other party shall have
failed to comply in any material respect with any of the material covenants and
agreements contained in this Agreement to be complied with or performed by such
party at or prior to such date of termination, and such failure continues for 20
business days after the actual receipt by such party of a written notice from
the other party setting forth in detail the nature of such failure, or (B) the
representations and warranties of the other party contained in this Agreement,
which representations and warranties shall be deemed for purposes of this
Section 8.1(a)(vi) not to include any qualification or limitation with respect
to materiality (whether by reference to a "Material Adverse Effect" or
otherwise), shall have been untrue in any respect on the date when made (or in
the case of any representations and warranties that are made as of a different
date, as of such different date) and the matters in respect of which such
representations and warranties shall have been untrue, in the aggregate, have
had or could reasonably be expected to have a Material Adverse Effect on such
other party.
(b) If this Agreement is terminated pursuant to:
(i) Section 8.1(a)(iv); or
(ii) Section 8.1(a)(v);
then, in such event, Company shall pay to Parent prior to such termination, in
the case of termination by Company pursuant to Section 8.1(a)(iv), or promptly
(and in any event within three business days) after such termination, in the
case of termination by Parent pursuant to Section 8.1(a)(iv) or Section
8.1(a)(v), a fee in the amount of $570,000 (the "Fee"), which amount shall be
payable in immediately available funds.
(c) If this Agreement is terminated by Company pursuant to Section
8.1(a)(vi), then, in such event, (i) Parent shall pay to or for the account of
Company promptly (and in any event within three business days) after such
termination, an amount in immediately available funds equal to $570,000 (the
"Liquidated Damages Amount") to be applied as follows: (i) first, to any
accrued and unpaid interest on any then-outstanding Advances, (ii) next, to the
principal amount of any then-outstanding Advances, and (iii) finally, to the
extent not applied pursuant to clauses (i) and/or (ii), to an account specified
by Company for such purpose. Notwithstanding anything in this Agreement to the
contrary, the payment of the Liquidated Damages Amount pursuant to the
immediately preceding sentence shall be the sole and exclusive remedy of Company
for any and all damages arising or resulting from or relating to any of the
matters referred to in Section 8.1(a)(vi) and, upon compliance by Parent with
its obligations (if any) under this Section 8.1(c), none of Parent, Merger Sub,
any other Subsidiary of Parent or any of their respective officers, directors,
employees, agents, representatives or stockholders shall have any liability or
further obligation to Company or any of its
34
officers, directors, employees, agents, representatives or stockholders, or to
any other person in respect of any such matters.
Section 8.2 Effect of Termination. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 8.1(a) hereof, this Agreement
(except for the provisions of Section 4.1(t), the last sentence of Section 6.3,
paragraphs (b) and (c) of Section 8.1, this Section 8.2 and Article IX) shall
forthwith become void and cease to have any force or effect, without any
liability on the part of any party hereto or any of its affiliates; provided,
however, that nothing in this Section 8.2 shall relieve any party to this
Agreement of liability for any willful or intentional breach of this Agreement.
Section 8.3 Amendment. Subject to any applicable provisions of the
---------
MBCL, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement by written agreement executed and delivered by duly
authorized officers of the respective parties; provided, however, that after
approval of this Agreement at the Stockholders Meeting, no amendment shall be
made which would reduce the amount or change the type of consideration into
which each Share shall be converted upon consummation of the Merger. This
Agreement may not be modified or amended except by written agreement executed
and delivered by duly authorized officers of each of the respective parties.
Section 8.4 Extension; Waiver. At any time prior to the Effective Time,
-----------------
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement, or (c)
subject to Section 8.3, waive compliance with any of the agreements or
conditions of the other parties contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall be valid only if set
forth in a written instrument executed and delivered by a duly authorized
officer on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
Section 8.5 Procedure for Termination, Amendment, Extension or Waiver.
---------------------------------------------------------
A termination of this Agreement pursuant to Section 8.1, an amendment of this
Agreement pursuant to Section 8.3 or an extension or waiver pursuant to Section
8.4 shall, in order to be effective, require in the case of Parent, Merger Sub
or Company, action by its Board of Directors or the duly authorized designee of
its Board of Directors.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Nonsurvival of Representations and Warranties. None of the
---------------------------------------------
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
35
Section 9.2 Fees and Expenses. Whether or not the Merger shall be
-----------------
consummated, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby, except that each of Company and Parent shall
bear and pay one-half of the costs and expenses incurred in connection with the
filing of the premerger notification and report forms under the HSR Act
(including filing fees).
Section 9.3 Definitions. For purposes of this Agreement:
-----------
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) "business day" means any day other than Saturday, Sunday or any
other day on which banks in the City of New York are required or permitted to
close;
(c) "Common Merger Consideration" means the amount of cash the right
to receive which a Common Share shall be converted into at the Effective Time
pursuant to Section 2.1(c).
(d) "Conversion Factor" means an amount equal to the quotient obtained
by dividing the Common Merger Consideration by $21.50 (i.e., the closing price
----
for shares of Parent Common Stock on August 26, 1998).
(e) "Disclosure Schedule" means the disclosure schedule delivered by
each party to the other simultaneously with the execution of this Agreement;
(f) "Environmental Laws" means any federal, state or local law
relating to: (i) releases or threatened releases of Hazardous Substances or
materials containing Hazardous Substances; (ii) the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Substances or
materials containing Hazardous Substances; or (iii) otherwise relating to
pollution of the environment or the protection of human health;
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, including the rules and regulations promulgated by the SEC pursuant
thereto;
(h) "Forbearance Agreement" means the Forbearance Agreement, dated as
of August 27, 1998, among Silicon Valley Bank, Company, Cayenne Software
Limited, Bachman GmbH and Cadre Technologies;
(i) "Hazardous Substances" means: (i) those substances defined in or
regulated under the following federal statutes and their state counterparts, as
each may be amended from time to time, and all regulations thereunder: the
Hazardous Materials Transportation Act, the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and Liability Act,
the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the
Federal Insecticide, Fungicide and Rodenticide Act and the Clean Air Act; (ii)
petroleum and petroleum products including crude oil and any fractions thereof;
(iii) natural gas, synthetic gas and any mixtures thereof; (iv) radon; (v) any
other contaminant; and (vi) any substance with respect to which any Governmental
Entity requires environmental investigation, monitoring, reporting or
remediation;
36
(j) "knowledge" means the actual knowledge of any executive officer of
Company or Parent, as the case may be;
(k) "Liens" means, collectively, all pledges, claims, liens, charges,
mortgages, conditional sale or title retention agreements, hypothecations,
collateral assignments, security interests, easements and other encumbrances of
any kind or nature whatsoever;
(l) "Loan Documents" has the meaning ascribed thereto in the
Forbearance Agreement, as such Loan Documents are modified by the Forbearance
Agreement;
(m) "Material Adverse Change" means any one or more changes, events or
occurrences which have had or could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on Company; provided, however,
that, solely for purposes of this definition insofar as it relates to changes,
events, or occurrences after the date hereof and, subject to the next following
proviso, no effect that is directly attributable to (i) the performance by
Company of its covenants hereunder, (ii) decreases in Company's consolidated
revenues, or (iii) the inability of Company or any of its Subsidiaries to
collect their respective accounts receivable after making collection efforts
consistent with past practice shall be deemed to constitute a Material Adverse
Effect on Company; provided, further, however, that the inability of Company to
pay its debts when the same are due and payable (whether or not in the ordinary
course of business or as a result of any action by any person (other than a
breach by Parent of its obligations under Section 6.11) that affects the time at
which such obligations are due and payable) shall in all events be deemed to
constitute a Material Adverse Effect on Company for purposes of this definition;
(n) a "Material Adverse Effect" with respect to any person means a
material adverse effect on (i) the ability of such person to perform its
obligations under this Agreement or to consummate the transactions contemplated
hereby or (ii) the condition (financial or otherwise), assets, liabilities
(actual or contingent), results of operations or business of such person and its
Subsidiaries taken as a whole;
(o) the "NYSE" means the New York Stock Exchange;
(p) "Overadvance Facility" has the meaning ascribed thereto in the
Forbearance Agreement;
(q) "Overadvance Note" has the meaning ascribed thereto in the
Forbearance Agreement;
(r) a "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity;
37
(s) "Preferred Merger Consideration" means the amount of cash the
right to receive which a Preferred Share shall be converted into at the
Effective Time pursuant to Section 2.1(c).
(t) "Preferred Stockholders" means Integral Capital Partners III,
L.P., Integral Capital Partners International III, L.P., Winston Partners L.P.,
Winston II LLC and Winston II LDC;
(u) "Securities Act" means the Securities Act of 1933, as amended,
including the rules and regulations promulgated by the SEC pursuant thereto;
(v) a "Subsidiary" of any person means any other person of which (i)
the first mentioned person or any Subsidiary thereof is a general partner, (ii)
voting power to elect a majority of the board of directors or others performing
similar functions with respect to such other person is held by the first
mentioned person and/or by any one or more of its Subsidiaries, or (iii) at
least 50% of the equity interests of such other person is, directly or
indirectly, owned or controlled by such first mentioned person and/or by any one
or more of its Subsidiaries.
Section 9.4 Notices. All notices, requests, claims, demands and other
-------
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(i) if to Parent or to Merger Sub, to
Sterling Software, Inc.
300 Crescent Court
Suite 1200
Dallas, Texas 75201
Attention: Don J. McDermett, Jr., Esq.
Telecopy: (214) 981-1265
with a copy (which shall not constitute notice) to:
Jones, Day, Reavis & Pogue
2300 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Mark E. Betzen, Esq.
Telecopy: (214) 969-5100
38
(ii) if to Company, to
Cayenne Software, Inc.
14 Crosby Drive
Bedford, Massachusetts 07130
Attention: Frederick H. Phillips
Telecopy: (781) 280-6018
with a copy (which shall not constitute notice) to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Peter H. Dodson, Esq.
Telecopy: (617) 951-7050
Section 9.5 Interpretation. When a reference is made in this Agreement
--------------
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for convenience of reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
Section 9.6 Entire Agreement; Third-Party Beneficiaries. This Agreement
-------------------------------------------
constitutes the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement (except for the letter agreement referenced in
the last sentence of Section 6.3 and the Stock Option Agreement). This
Agreement is not intended to confer upon any person (including without
limitation any employees or former employees of Company), other than the parties
hereto, any rights or remedies.
Section 9.7 Governing Law. Except to the extent necessarily governed by
-------------
the GBCC, this Agreement shall be governed by, and construed in accordance with,
the laws of The Commonwealth of Massachusetts, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
Section 9.8 Assignment. Neither this Agreement nor any of the rights,
----------
interests or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, and any such assignment without
such prior written consent shall be null and void, except that Parent and/or
Merger Sub may assign this Agreement to any direct or indirect wholly owned
Subsidiary of Parent without the prior consent of Company; provided that Parent
and/or Merger Sub, as the case may be, shall remain liable for all of its
obligations under this Agreement. 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.
39
Section 9.9 Enforcement. 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. Accordingly, the parties
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this Agreement
in any appropriate state court in The Commonwealth of Massachusetts or federal
court in Suffolk County in The Commonwealth of Massachusetts, this being in
addition to any other remedy to which they are entitled at law or in equity.
Each of the parties hereto (i) shall submit itself to the personal jurisdiction
of any appropriate state court in The Commonwealth of Massachusetts or federal
court in Suffolk County in The Commonwealth of Massachusetts in the event any
dispute arises out of this Agreement or any of the transactions contemplated
hereby, (ii) shall not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court, and (iii) shall not bring
any action relating to this Agreement or any of the transactions contemplated
hereby in any court other than any appropriate state court in The Commonwealth
of Massachusetts or federal court in Suffolk County in The Commonwealth of
Massachusetts.
Section 9.10 Severability. Whenever possible, each provision or portion
------------
of any provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
Section 9.11 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same instrument and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
[signature page follows]
40
IN WITNESS WHEREOF, Parent, Merger Sub and Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
STERLING SOFTWARE, INC.
By: /s/ Don J. McDermett, Jr.
--------------------------------------------
Don J. McDermett, Jr.
Senior Vice President and General Counsel
STERLING SOFTWARE (SOUTHERN), INC.
By: /s/ Don J. McDermett, Jr.
--------------------------------------------
Don J. McDermett, Jr.
Vice President and Secretary
CAYENNE SOFTWARE, INC.
By: /s/ John J. Alexander
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John J. Alexander
President and Chief Executive Officer
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