Exhibit 10.21
============================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
IDEON GROUP, INC.,
CUC INTERNATIONAL INC.
AND
IG ACQUISITION CORP.
DATED
AS OF
APRIL 19, 1996
===========================================================
TABLE OF CONTENTS
Page
----
ARTICLE I
THE MERGER . . . . . . . . . . . . . . . 2
SECTION 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2 Effect on Shares . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.3 Exchange of Certificates . . . . . . . . . . . . . . . . 4
SECTION 1.4 Dividends; Transfer Taxes . . . . . . . . . . . . . . . . 5
SECTION 1.5 No Fractional Shares . . . . . . . . . . . . . . . . . . 6
SECTION 1.6 Return of Exchange Fund . . . . . . . . . . . . . . . . . 7
SECTION 1.7 Adjustment of Conversion Number . . . . . . . . . . . . . 7
SECTION 1.8 No Further Ownership Rights in Shares . . . . . . . . . . 7
SECTION 1.9 Closing of Company Transfer Books . . . . . . . . . . . . 8
SECTION 1.10 Stock Options . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 1.11 Restricted Stock . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II
CLOSING . . . . . . . . . . . . . . . 9
SECTION 2.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE III
THE SURVIVING CORPORATION . . . . . . . . . . . . . . . 10
SECTION 3.1 Certificate of Incorporation . . . . . . . . . . . . . . 10
SECTION 3.2 Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.3 Directors and Officers . . . . . . . . . . . . . . . . . 10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . 10
SECTION 4.1 Corporate Existence and Power . . . . . . . . . . . . . . 10
SECTION 4.2 Corporate Authorization . . . . . . . . . . . . . . . . . 11
SECTION 4.3 Governmental Authorization . . . . . . . . . . . . . . . 12
SECTION 4.4 Non-Contravention . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.5 Capitalization . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.6 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.7 SEC Documents . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.8 Financial Statements; No Undisclosed Liabilities . . . . 16
SECTION 4.9 Form S-4 Registration Statement and Company Proxy
Statement/Prospectus . . . . . . . . . . . . . . . . . 16
SECTION 4.10 Absence of Certain Changes . . . . . . . . . . . . . . . 17
SECTION 4.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . 19
Page
----
SECTION 4.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.13 Employee Matters . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.14 Labor Matters . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.15 Compliance with Laws . . . . . . . . . . . . . . . . . . 23
SECTION 4.16 Finders' Fees . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.17 Environmental Matters . . . . . . . . . . . . . . . . . 24
SECTION 4.18 Property . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.19 Intangible Property . . . . . . . . . . . . . . . . . . 25
SECTION 4.20 Material Contracts . . . . . . . . . . . . . . . . . . . 26
SECTION 4.21 Accounting Matters . . . . . . . . . . . . . . . . . . . 27
SECTION 4.22 Vote Required . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.23 Fairness Opinion . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.24 Disclosure . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
AND MERGER SUBSIDIARY . . . . . . . . . . . . . . . . . . . 28
SECTION 5.1 Corporate Existence and Power . . . . . . . . . . . . . . 28
SECTION 5.2 Corporate Authorization . . . . . . . . . . . . . . . . . 29
SECTION 5.3 Governmental Authorization . . . . . . . . . . . . . . . 29
SECTION 5.4 Non-Contravention . . . . . . . . . . . . . . . . . . . . 29
SECTION 5.5 Form S-4 Registration Statement and Company Proxy
Statement/Prospectus . . . . . . . . . . . . . . . . . 30
SECTION 5.6 Finders' Fees . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.7 No Vote Required . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.8 Share Ownership . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.9 Capitalization . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.10 Accounting Matters . . . . . . . . . . . . . . . . . . . 32
SECTION 5.11 Ownership of Merger Subsidiary; No Prior Activities;
Assets of Merger Subsidiary . . . . . . . . . . . . . . 32
SECTION 5.12 SEC Documents . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.13 Financial Statements . . . . . . . . . . . . . . . . . . 33
SECTION 5.14 Absence of Certain Changes or Events . . . . . . . . . . 34
SECTION 5.15 Litigation . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 5.16 Authorization for Buyer Common Stock . . . . . . . . . . 34
SECTION 5.17 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.18 Disclosure . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VI
COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . 36
SECTION 6.1 Conduct of the Company . . . . . . . . . . . . . . . . . 36
ii
Page
----
SECTION 6.2 Stockholder Meeting; Proxy Material . . . . . . . . . . . 39
SECTION 6.3 Access to Information; Confidential Agreement . . . . . . 41
SECTION 6.4 No Solicitation . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.5 Conveyance Taxes . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VII
COVENANTS OF BUYER . . . . . . . . . . . . . 44
SECTION 7.1 Obligations of Merger Subsidiary . . . . . . . . . . . . 44
SECTION 7.2 Voting of Shares . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.3 Director and Officer Liability . . . . . . . . . . . . . 45
ARTICLE VIII
COVENANTS OF BUYER, MERGER SUBSIDIARY
AND THE COMPANY . . . . . . . . . . . . . 48
SECTION 8.1 Reasonable Best Efforts . . . . . . . . . . . . . . . . . 49
SECTION 8.2 Certain Filings . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.3 Public Announcements . . . . . . . . . . . . . . . . . . 49
SECTION 8.4 Conveyance Taxes . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.5 Further Assurances . . . . . . . . . . . . . . . . . . . 50
SECTION 8.6 Employee Matters. . . . . . . . . . . . . . . . . . . . . 50
SECTION 8.7 Company Proxy Statement and Registration Statement . . . 51
SECTION 8.8 Tax-Free Reorganization Treatment . . . . . . . . . . . . 51
SECTION 8.9 Notification of Certain Matters . . . . . . . . . . . . . 52
SECTION 8.10 Blue Sky Permits . . . . . . . . . . . . . . . . . . . . 52
SECTION 8.11 NYSE Listing . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 8.12 Pooling Letter . . . . . . . . . . . . . . . . . . . . . 52
SECTION 8.13 Pooling . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 8.14 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 8.16 Affiliates . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE IX
CONDITIONS TO THE MERGER . . . . . . . . . . . 54
SECTION 9.1 Conditions to the Obligations of Each Party . . . . . . . 54
SECTION 9.2 Conditions to the Obligations of the Company . . . . . . 55
SECTION 9.3 Conditions to the Obligations of Buyer and Merger
Subsidiary . . . . . . . . . . . . . . . . . . . . . . 57
iii
Page
----
ARTICLE X
TERMINATION . . . . . . . . . . . . . . 58
SECTION 10.1 Termination . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 10.2 Effect of Termination . . . . . . . . . . . . . . . . . 60
ARTICLE XI
DEFINED TERMS . . . . . . . . . . . . . . 60
ARTICLE XII
MISCELLANEOUS . . . . . . . . . . . . . . 66
SECTION 12.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 12.2 Survival of Representations and Warranties . . . . . . . 67
SECTION 12.3 Amendments; No Waivers . . . . . . . . . . . . . . . . . 68
SECTION 12.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 12.5 Successors and Assigns . . . . . . . . . . . . . . . . . 70
SECTION 12.6 Governing Law . . . . . . . . . . . . . . . . . . . . . 70
SECTION 12.7 Severability . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 12.8 Third Party Beneficiaries . . . . . . . . . . . . . . . 71
SECTION 12.9 Entire Agreement . . . . . . . . . . . . . . . . . . . . 71
SECTION 12.10 Counterparts; Effectiveness . . . . . . . . . . . . . . 71
COMPANY DISCLOSURE SCHEDULE
SCHEDULE 4.1 Corporate Existence and Power
SCHEDULE 4.3 Governmental Authorization
SCHEDULE 4.4 Non-Contravention
SCHEDULE 4.5 Capitalization
SCHEDULE 4.6 Subsidiaries
SCHEDULE 4.8 Financial Statements
SCHEDULE 4.10 Absence of Certain Changes
SCHEDULE 4.11 Litigation
SCHEDULE 4.12 Taxes
SCHEDULE 4.13(a) Employee Matters
SCHEDULE 4.14 Labor Matters
SCHEDULE 4.15 Compliance With Laws
SCHEDULE 4.17 Environmental Matters
SCHEDULE 4.19 Intangible Property
SCHEDULE 4.20 Material Contracts
SCHEDULE 6.1 Conduct of the Company
SCHEDULE 6.1(p) Conduct of the Company
iv
Page
----
SCHEDULE 7.3 Directors and Officers' Liability
SCHEDULE 8.6 Employee Matters
EXHIBIT 1 Form of Affiliate Letter
EXHIBIT 2 Buyer Tax Certificate
EXHIBIT 3 Company Tax Certificate
BUYER DISCLOSURE SCHEDULE
SCHEDULE 5.1 Corporate Existence and Power
SCHEDULE 5.9 Capitalization
SCHEDULE 5.14 Absence of Certain Changes or Events
SCHEDULE 5.15 Litigation
SCHEDULE 5.17 Taxes
SCHEDULE 6.2 Buyer Transactions
v
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 19, 1996 (this
"Agreement"), by and among Ideon Group, Inc., a Delaware corporation (the
"Company"), CUC International Inc., a Delaware corporation ("Buyer"), and IG
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Buyer
("Merger Subsidiary").
WHEREAS, the respective Boards of Directors of Buyer, Merger
Subsidiary and the Company have determined that it is fair to, and in the best
interests of their respective stockholders to consummate the acquisition of the
Company by Buyer upon the terms and subject to the conditions set forth herein;
and
WHEREAS, the respective Boards of Directors of the Company, Buyer and
Merger Subsidiary have approved and declared advisable this Agreement and the
merger of Merger Subsidiary with and into the Company, upon terms and subject to
the conditions set forth herein, whereby each issued and outstanding share of
common stock, par value $.01 per share, of the Company (the "Shares"), not owned
directly or indirectly by Buyer or Merger Subsidiary, will be converted into the
number of shares of common stock, par value $.01 per share of Buyer ("Buyer
Common Stock"), determined pursuant to Section 1.2(a) hereof; and
WHEREAS, it is intended that the Merger (as defined herein) shall be
recorded for accounting purposes as a pooling-of-interests; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, the Company has delivered to Buyer a letter (the "Company
Affiliate Letter") identifying all persons (each, a "Company Affiliate") who are
at the date hereof, "affiliates" of the Company for purposes of Rule 145 under
the Securities Act of 1933, as amended (the "Securities Act"), and each Company
Affiliate has delivered to Buyer a letter substantially in the form attached
hereto as Exhibit 1 (each, an "Affiliate Letter") relating to (i) the transfer
prior to the Effective Time (as
defined in Section 1.1(b)), of the Shares beneficially owned by such Company
Affiliate on the date hereof, and (ii) the transfer of the shares of Buyer
Common Stock to be received by such Company Affiliate in the Merger (as defined
in Section 1.1(a)); and
WHEREAS, Buyer, Merger Subsidiary and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements
contained in this Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. (a) Subject to the terms and conditions of
----------
this Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL"), at the Effective Time, Merger Subsidiary shall be merged (the "Merger")
with and into the Company, whereupon the separate existence of Merger Subsidiary
shall cease, and the Company shall be the surviving corporation (the "Surviving
Corporation") and shall continue to be governed by the laws of the State of
Delaware.
(b) The Company, Buyer and Merger Subsidiary will cause a certificate
of merger (the "Certificate of Merger") with respect to the Merger to be
executed and filed with the Secretary of State of the State of Delaware (the
"Secretary of State") as provided in the DGCL. The Merger shall become
effective on the date the Certificate of Merger has been duly filed with the
Secretary of State or at such date as is agreed between the parties and speci-
fied in the Certificate of Merger, and such time is hereinafter referred to as
the "Effective Time."
(c) From and after the Effective Time, the Surviving Corporation
shall possess all the rights, privileges, powers and franchises and be subject
to all of
2
the restrictions, disabilities, liabilities and duties of the Company and Merger
Subsidiary.
SECTION 1.2 Effect on Shares. At the Effective Time:
----------------
(a) Conversion of Shares; Merger Consideration. Subject to the
------------------------------------------
provisions of Section 1.5 and Section 1.7 hereof, each Share issued and out-
standing immediately prior to the Effective Time (other than Shares held by the
Company as treasury stock or by any Subsidiary of the Company or owned by Buyer,
Merger Subsidiary or any other Subsidiary of Buyer) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive that number of duly authorized, validly issued, fully
paid and nonassessable shares of Buyer Common Stock (the "Merger
Consideration")(such applicable number being hereinafter referred to as the
"Conversion Number"), equal to the quotient obtained by dividing (x) $13.50 by
(y) the Average Stock Price (as hereinafter defined); provided, however, that if
-------- -------
the Average Stock Price is $22 or less the Conversion Number shall be 0.6136 and
if the Average Stock Price is $36 or more the Conversion Number shall be 0.3750.
The "Average Stock Price" shall mean the average closing price per share of
Buyer Common Stock on the New York Stock Exchange (the "NYSE") as reported on
the NYSE Composite Tape during the fifteen consecutive trading day period (the
"Measurement Period") ending on the second calendar day immediately preceding
the Company Stockholder Meeting (as defined herein); provided, however, that if
-------- -------
such second calendar day is not a trading day, the Measurement Period shall end
on the next calendar day immediately preceding such second calendar day that is
a trading day.
(b) Cancellation of Shares. Each Share held by the Company as
----------------------
treasury stock or owned by Buyer, Merger Subsidiary or any other Subsidiary of
Buyer immediately prior to the Effective Time shall automatically be canceled
and retired and cease to exist, and no payment shall be made with respect there-
to. All Shares to be converted into Buyer Common Stock pursuant to this Section
1.2 shall, by virtue of the Merger and without any action on the part of the
holders thereof, cease to be outstanding, be canceled and retired and cease to
exist; and each holder of a certificate representing
3
prior to the Effective Time any such Shares shall thereafter cease to have any
rights with respect to such Shares, except the right to receive (i) certificates
representing shares of Buyer Common Stock into which such Shares have been
converted, (ii) any dividends and other distributions in accordance with Section
1.4 hereof and (iii) any cash, without interest, to be paid in lieu of any
fractional share of Buyer Common Stock in accordance with Section 1.5 hereof.
(c) Capital Stock of Merger Subsidiary. Each share of common stock
----------------------------------
of Merger Subsidiary issued and outstanding immediately prior to the Effective
Time shall be converted into and become one share of common stock, par value
$0.01, of the Surviving Corporation with the same rights, powers and privileges
as the shares so converted and shall constitute the only outstanding shares of
capital stock of the Surviving Corporation.
SECTION 1.3 Exchange of Certificates. (a) Prior to the Effective
------------------------
Time, Buyer shall appoint a commercial bank having capital of not less than
$500,000,000 (or such other Person or Persons as shall be acceptable to Buyer
and the Company) to act as exchange agent hereunder (the "Exchange Agent"). At
the Effective Time, Buyer shall deposit with the Exchange Agent, certificates
(the "Buyer Certificates") representing Buyer Common Stock which immediately
prior to the Effective Time represent a number of shares of Buyer Common Stock
required to be issued pursuant to Section 1.2(a) in exchange for the outstanding
Shares (together with cash as required to (i) pay any dividends or distributions
with respect thereto in accordance with Section 1.4 hereof and (ii) make
payments in lieu of fractional Shares pursuant to Section 1.5 hereof, being
hereinafter referred to as the "Exchange Fund"). The Exchange Fund shall not be
used for any other purpose except as provided for in this Agreement.
(b) Promptly after the Effective Time, the Exchange Agent shall mail
to each holder of record of a certificate or certificates which immediately
prior to the Effective Time represented outstanding Shares (the "Share Certifi-
cates") (i) a form of a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Share Certificates shall
pass, only upon actual delivery thereof to the
4
Exchange Agent) and (ii) instructions for use in effecting the surrender of the
Share Certificates in exchange for the property described in the next sentence.
Upon surrender for cancellation to the Exchange Agent of Share Certificate(s)
held by any record holder of a Share Certificate, together with such letter of
transmittal duly executed, such holder shall be entitled to receive in exchange
therefor (x) a Buyer Certificate representing the number of whole shares of
Buyer Common Stock into which the Shares represented by the surrendered Share
Certificate(s) shall have been converted at the Effective Time pursuant to this
Article I, (y) cash in lieu of any fractional share of Buyer Common Stock in
accordance with Section 1.5 hereof and (z) certain dividends and other
distributions in accordance with Section 1.4 hereof; and the Share
Certificate(s) so surrendered shall forthwith be cancelled.
(c) Subject to the provisions of Section 1.4 and Section 1.5 hereof,
each Share Certificate which immediately prior to the Effective Time represented
Shares to be converted in the Merger shall, from and after the Effective Time
until surrendered in exchange for Buyer Certificate(s) in accordance with this
Section 1.3, be deemed for all purposes to represent the number of shares of
Buyer Common Stock into which such Shares shall have been so converted.
SECTION 1.4 Dividends; Transfer Taxes. No dividends or other
-------------------------
distributions that are declared on or after the Effective Time on Buyer Common
Stock, or are payable to the holders of record thereof who became such on or
after the Effective Time, shall be paid to any Person entitled by reason of the
Merger to receive Buyer Certificates representing Buyer Common Stock, and no
cash payment in lieu of any fractional share of Buyer Common Stock shall be paid
to any such person pursuant to Section 1.5 hereof, until such Person shall have
surrendered its Share Certificate(s) as provided in Section 1.3 hereof. Subject
to applicable law, there shall be paid to each Person receiving a Buyer Certifi-
cate representing such shares of Buyer Common Stock: (i) at the time of such
surrender or as promptly as practicable thereafter, the amount of any dividends
or other distributions theretofore paid with respect to the shares of Buyer
Common Stock represented by such Buyer Certificate and having a record date on
or after the Effective Time and a payment
5
date prior to such surrender, and (ii) at the appropriate payment date or as
promptly as practicable thereafter, the amount of any dividends or other
distributions payable with respect to such shares of Buyer Common Stock and
having a record date on or after the Effective Time but prior to such surrender
and a payment date on or subsequent to such surrender. In no event shall the
Person entitled to receive such dividends or other distributions be entitled to
receive interest on such dividends or other distributions. Buyer shall make
available to the Exchange Agent the cash necessary for this purpose. If any
cash or Buyer Certificate representing shares of Buyer Common Stock is to be
paid to or issued in a name other than that in which the Share Certificate
surrendered in exchange therefor is registered, it shall be a condition of such
exchange that the Share Certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange shall pay to the Exchange Agent any transfer or other taxes required by
reason of the issuance of such Buyer Certificate and the distribution of such
cash payment in a name other than that of the registered holder of the Share
Certificate so surrendered, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable. "Person" means
an individual, a corporation, limited liability company, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or any agency or instrumentality thereof.
SECTION 1.5 No Fractional Shares. No certificates or scrip
--------------------
representing fractional shares of Buyer Common Stock shall be issued upon the
surrender for exchange of Share Certificates pursuant to this Article I; no
dividend or other distribution by Buyer and no stock split, combination or
reclassification shall relate to any such fractional share; and no such
fractional share shall entitle the record or beneficial owner thereof to vote or
to any other rights of a stockholder of Buyer. In lieu of any such fractional
share, each holder of Shares who would otherwise have been entitled thereto upon
the surrender of Share Certificate(s) for exchange pursuant to this Article I
will be paid an amount in cash (without interest) rounded to the nearest whole
cent, determined by multiplying (i) the per share closing price on the NYSE of
Buyer Common Stock (as reported on the
6
NYSE Composite Tape) on the date on which the Effective Time shall occur (or, if
Buyer Common Stock shall not trade on the NYSE on such date, the first day of
trading in Buyer Common Stock on the NYSE, thereafter) by (ii) the fractional
share to which such holder would otherwise be entitled. Buyer shall make
available to the Exchange Agent the cash necessary for this purpose.
SECTION 1.6 Return of Exchange Fund. Any portion of the Exchange
-----------------------
Fund which remains undistributed to the former holders of the Shares for one
year after the Effective Time shall be delivered to Buyer, upon its request, and
any such former holders who have not theretofore surrendered to the Exchange
Agent their Share Certificate(s) in compliance with this Article I shall
thereafter look only to Buyer for payment of their claim for shares of Buyer
Common Stock, any cash in lieu of fractional shares of Buyer Common Stock and
any dividends or distributions with respect to such shares of Buyer Common
Stock. Neither Buyer nor the Company shall be liable to any former holder of
Shares for any such shares of Buyer Common Stock held in the Exchange Fund (and
any cash, dividends and distributions payable in respect thereof) which is
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
SECTION 1.7 Adjustment of Conversion Number. In the event of any
-------------------------------
stock split, combination, reclassification or stock dividend with respect to
Buyer Common Stock, any change or conversion of Buyer Common Stock into other
securities or any other dividend or distribution with respect to Buyer Common
Stock (other than quarterly cash dividends issued in the ordinary course
consistent with past practice) and any distribution by Buyer of shares of
capital stock of any of its affiliates, or if a record date with respect to any
of the foregoing should occur, prior to the Effective Time, appropriate and
proportionate adjustments shall be made to the Conversion Number, and thereafter
all references in this Agreement to the Conversion Number shall be deemed to be
the Conversion Number as so adjusted.
SECTION 1.8 No Further Ownership Rights in Shares. All certificates
-------------------------------------
representing shares of Buyer Common Stock delivered upon the surrender for
exchange of any Share Certificate in accordance with the terms hereof
7
(including any cash paid pursuant to Section 1.4 or Section 1.5 hereof) shall be
deemed to have been delivered (and paid) in full satisfaction of all rights per-
taining to the Shares previously represented by such Share Certificate.
SECTION 1.9 Closing of Company Transfer Books. At the Effective
---------------------------------
Time, the stock transfer books of the Company shall be closed, and no transfer
of Shares shall thereafter be made. Subject to the last sentence of Section 1.6
hereof, if after the Effective Time, Share Certificates are presented to the
Surviving Corporation, they shall be cancelled and exchanged as provided in this
Article I.
SECTION 1.10 Stock Options. (a) Not later than the Effective Time,
-------------
each outstanding employee or director stock option (an "Option") to purchase
Shares granted under any employee or director stock option or compensation plan
or arrangement of the Company (other than any "stock purchase plan" within the
meaning of Section 423 of the Code) immediately prior to the Effective Time in
effect on the date hereof ("Company Stock Plans") whether or not then vested or
exercisable, shall become and represent an option to purchase the number of
shares of Buyer Common Stock (a "Substitute Option"), rounded up to the nearest
whole share, determined by multiplying (i) the number of Shares subject to such
Option immediately prior to the Effective Time by (ii) the Conversion Number, at
an exercise price per share of Buyer Common Stock (increased to the nearest
whole cent) equal to the exercise price per Share immediately prior to the
Effective Time divided by the Conversion Number; 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, the
conversion formula shall be adjusted if necessary to comply with Section 424(a)
of the Code. After the Effective Time, except as provided above in this Section
1.10, each Substitute Option shall be exercisable upon the same terms and
conditions as were applicable to the related Option immediately prior to the
Effective Time. Buyer shall register under the Securities Act on Form S-8 or
another appropriate form (and use its best efforts to maintain the effectiveness
thereof and maintain the current status of the prospectuses contained therein)
all Substitute Options and all shares of
8
Buyer Common Stock issuable pursuant to all Substitute Options. At or prior to
the Effective Time, Buyer shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Buyer Common Stock for delivery in
connection with the Substitute Options.
(b) Notwithstanding the foregoing, each Option held by any director
of the Company at the Effective Time, shall be converted at the Effective Time
into the right to receive that number of duly authorized, validly issued, fully
paid and nonassessable shares of Buyer Common Stock determined by multiplying
(i) the number of Shares such holder could have purchased had such holder
exercised such Option in full immediately prior to the Effective Time by (ii) a
fraction, the numerator of which shall be the excess, if any, of (A) the
Conversion Number multiplied by the Average Stock Price over (B) the applicable
exercise price of such Option and the denominator of which shall be the Average
Stock Price.
SECTION 1.11 Restricted Stock. Any unvested shares of restricted
----------------
stock of the Company, however granted, shall to the extent required in the plan,
agreement or instrument pursuant to which such restricted stock was granted,
vest and become free of all restrictions immediately prior to the Effective Time
and shall be convertible into Buyer Common Stock pursuant to Section 1.2 hereof.
ARTICLE II
CLOSING
SECTION 2.1 Closing. The closing of the Merger (the "Closing") will
-------
take place at 10:00 a.m., New York City time, on a date to be specified by the
parties, which shall be no later than the third business day after satisfaction
or waiver of all of the conditions set forth in Article IX hereof (the "Closing
Date"), at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New
York, New York 10153 unless another time, date or place is agreed to in writing
by the parties hereto.
9
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.1 Certificate of Incorporation. The certificate of
----------------------------
incorporation of the Company (the "Company Certificate of Incorporation") in
effect at the Effective Time shall be the certificate of incorporation of the
Surviving Corporation until amended in accordance with applicable law.
SECTION 3.2 Bylaws. The by-laws of the Company (the "Company By-
------
laws") in effect at the Effective Time shall be the by-laws of the Surviving
Corporation until amended in accordance with applicable law.
SECTION 3.3 Directors and Officers. From and after the Effective
----------------------
Time, until successors are duly elected or appointed and qualified in accordance
with applicable law, the directors of Merger Subsidiary at the Effective Time
shall be the initial directors of the Surviving Corporation and the officers of
the Company at the Effective Time shall be the initial officers of the Surviving
Corporation, in each case until their respective successors are duly elected and
appointed or qualified.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer and Merger Subsidiary
that:
SECTION 4.1 Corporate Existence and Power. The Company is a
-----------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and except as set forth on Schedule 4.1 of the
disclosure schedule delivered by the Company in connection herewith (the "Compa-
ny Disclosure Schedule"), has all corporate powers and all governmental
licenses, authorizations, consents and approvals (collectively, "Licenses") re-
quired to carry on its business as now conducted except where the failure to
have any such License would not have a Material Adverse Effect (as defined
below). The Company is duly qualified to do business as a foreign corporation
and is in good standing
10
in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not have a Mate-
rial Adverse Effect. As used herein, the term "Material Adverse Effect" means a
material adverse effect on the condition (financial or otherwise), business,
assets or results of operations of the Company and its Subsidiaries (as defined
in Section 4.6 hereof), or Buyer and Merger Subsidiary, as the case may be, in
each case taken as a whole, that is not a result of general changes in the
economy or the industries in which such entities operate. The Company has
heretofore delivered or made available to Buyer true and complete copies of the
Company Certificate of Incorporation and Company By-laws as currently in effect.
SECTION 4.2 Corporate Authorization. The execution, delivery and
-----------------------
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby are within the Company's corporate
powers and, except for any required approval by the Company's stockholders in
connection with the consummation of the Merger, have been duly authorized by all
necessary corporate action. This Agreement, assuming due and valid
authorization, execution and delivery by the parties hereto, constitutes a valid
and binding agreement of the Company enforceable against the Company in accor-
dance with its terms, except that (i) enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought. To the extent permitted under any
Option or option plan, restricted stock plan, agreement or instrument or any em-
ployment, executive, severance or similar agreement to which the Company or any
of its Subsidiaries is a party, such that none of the execution, delivery and
performance by the Company of this Agreement or the consummation of the
transactions contemplated hereby (including, without limitation, the election of
the members of the Board of Directors of Merger Subsidiary as the initial
directors of the Surviving Corporation at the Effective Time pursuant to Section
3.3) will constitute a "change of control"
11
or "change in control" thereunder or result in an alteration of the benefits and
burdens (including, without limitation, by means of acceleration) thereunder,
the necessary majority of members of the Board of Directors has approved the
execution, delivery and performance by the Company of this Agreement, and the
consummation by the Company of the transactions contemplated hereby.
SECTION 4.3 Governmental Authorization. Except as set forth in
--------------------------
Schedule 4.3 of the Company Disclosure Schedule, the execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby require no action by or in respect of,
or filing with, any governmental body, agency, official or authority (each, a
"Governmental Entity") other than: (i) the filing of a certificate of merger in
accordance with the DGCL; (ii) compliance with any applicable requirements of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act");
(iii) compliance with any applicable requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"); (iv) compliance with the applicable
requirements of state blue sky laws; (v) compliance with the applicable re-
quirements of any applicable takeover laws; and (vi) such other actions by or in
respect of, or filings with, any Governmental Entity the failure of which to
obtain or make would not have a Material Adverse Effect and which would not
materially impair or materially delay the ability of the Company to consummate
the transactions contemplated hereby.
SECTION 4.4 Non-Contravention. The execution, delivery and
-----------------
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby do not and will not (i) contravene or
conflict with the Company Certificate of Incorporation or Company By-laws, (ii)
except as set forth in Schedule 4.4 of the Company Disclosure Schedule and
assuming compliance with the matters referred to in Section 4.3 hereof, con-
travene or conflict with or constitute a violation of any provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable to
the Company or any Subsidiary of the Company, (iii) except as set forth in
Schedule 4.4 of the Company Disclosure Schedule, with or without the giving of
notice or passage of time or both, constitute a default under or give rise to a
right of termination, cancellation or acceleration
12
of any right or obligation of the Company or any Subsidiary of the Company or to
a loss of any benefit to which the Company or any Subsidiary of the Company is
entitled under any provision of any agreement, contract or other instrument
binding upon the Company or any Subsidiary of the Company or any license, fran-
chise, permit or other similar authorization held by the Company or any Subsid-
iary of the Company, or (iv) result in the creation or imposition of any Lien
(as defined below) on any asset of the Company or any Subsidiary of the Company,
excluding from the foregoing clauses (ii), (iii) or (iv), such violations,
breaches, defaults or Liens which would not have a Material Adverse Effect, and
which will not materially impair or materially delay the ability of the Company
to consummate the transactions contemplated hereby. For purposes of this
Agreement, "Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
SECTION 4.5 Capitalization. The authorized capital stock of the
--------------
Company consists of 90,000,000 Shares and 10,000,000 shares of preferred stock
(the "Preferred Stock"). As of March 31, 1996, there were (i) 27,981,831 Shares
issued and outstanding; (ii) 6,964,169 Shares held in the Company's treasury;
and (iii) no shares of Preferred Stock issued and outstanding. As of March 31,
1996, there were (i) 1,713,900 outstanding Options pursuant to the 1994 Long
Term Stock-Based Incentive Plan with an exercise price range of a minimum
exercise price of $7.625 and a maximum exercise price of $20.75; (ii) 108,700
outstanding Options pursuant to the Employees Stock Option Plan with a minimum
exercise price of $9.875 and a maximum exercise price of $19.125; (iii) 300,000
outstanding Options granted to outside directors with an exercise price range of
a minimum exercise price of $9.00 and a maximum exercise price of $13.00; (iv)
8,333 outstanding Options pursuant to the 1991 Employee Stock Option Plan with
an exercise price of $9.00; (v) 10,000 outstanding Options pursuant to the 1992
Employee Stock Option Plan with an exercise price of $8.875 and (vi) 30,000
outstanding Options pursuant to the Directors Stock Plan with an exercise price
of $15.875. Schedule 4.5 of the Company Disclosure Schedule accurately sets
forth information regarding the exercise price, date of grant and number of
granted Options for each holder of Options as of March 31, 1996. All outstand-
ing shares of
13
capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable. Except as set forth in this Section 4.5, and
except for changes since March 31, 1996 resulting from the exercise of employee
Options outstanding on such date, there are outstanding (i) no shares of capital
stock or other voting securities of the Company, (ii) no securities of the
Company or of any Subsidiary of the Company convertible into or exchangeable for
shares of capital stock or voting securities of the Company, and (iii) except as
set forth on Schedule 4.5 of the Company Disclosure Schedule, no options or
other rights to acquire from the Company, and no obligation of the Company to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company (the items in
clauses (i), (ii) and (iii) being referred to collectively as the "Company
Securities"). There are no outstanding obligations of the Company or any
Subsidiary of the Company to repurchase, redeem or otherwise acquire any Company
Securities. Except as set forth on Schedule 4.5 of the Company Disclosure
Schedule, there are no stockholder agreements, voting trusts or understandings
to which the Company is a party or by which it is bound relating to the voting
or registration of any shares of capital stock of the Company. Except as
otherwise provided in Section 1.11 of this Agreement, the Company has not taken
any action that would result in any Options or shares of restricted stock that
are unvested becoming vested in connection with or as a result of the execution
and delivery of this Agreement or the consummation of the transactions contem-
plated hereby. No Subsidiary of the Company owns any capital stock of the
Company.
SECTION 4.6 Subsidiaries. (a) Each Subsidiary of the Company that
------------
is actively engaged in any business or owns any material assets (an "Active
Subsidiary") (i) is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation, (ii) except
as set forth in Schedule 4.6 of the Company Disclosure Schedule, has all cor-
porate powers and all material governmental licenses, authorizations, consents
and approvals required to carry on its business as now conducted and (iii) is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where the character of the property owned or leased by it
or the nature of its ac-
14
tivities makes such qualification necessary, except with respect to (ii) and
(iii) above to the extent the failure of this representation and warranty to be
true would not have a Material Adverse Effect. For purposes of this Agreement,
"Subsidiary" means with respect to any Person, any corporation or other legal
entity of which such Person owns, directly or indirectly, more than 50% of the
outstanding stock or other equity interests, the holders of which are entitled
to vote for the election of the board of directors or other governing body of
such corporation or other legal entity. All Active Subsidiaries, their
respective jurisdictions of incorporation and the ownership interest of the
Company and its Subsidiaries in such Active Subsidiaries are identified on
Schedule 4.6 of the Company Disclosure Schedule.
(b) Each outstanding share of capital stock of each Subsidiary of the
Company has been duly and validly authorized and issued, is fully paid and
nonassessable and is owned by the Company and/or one or more of its Subsidiaries
free and clear of any Liens. There are no subscriptions, options, warrants,
calls, rights, convertible securities or other agreements or commitments of any
character relating to the issuance, transfer, sale, delivery, voting or redemp-
tion (including any rights of conversion or exchange under any outstanding
security or other instrument) for, any of the capital stock or other equity
interests of any of such Subsidiaries. There are no agreements requiring the
Company or any of its Subsidiaries to make contributions to the capital of, or
lend or advance funds to, any of the Subsidiaries of the Company.
SECTION 4.7 SEC Documents. The Company has filed all required
-------------
reports, proxy statements, forms and other documents with the SEC since January
1, 1994 ("Company SEC Documents"). As of their respective dates, (i) the
Company 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 Securities and Exchange Commission (the "SEC") promulgated
thereunder applicable to such Company SEC Documents, and (ii) none of the
Company SEC Documents contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the state-
15
ments made therein, in the light of the circumstances under which they were
made, not misleading.
SECTION 4.8 Financial Statements; No Undisclosed Liabilities. The
------------------------------------------------
consolidated financial statements of the Company included in the Company SEC
Documents (i) comply as to form in all material respects with all applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, (ii) have been prepared in conformity with generally accepted
accounting principles ("GAAP"), applied on a consistent basis (except in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) during the
periods involved (except as may be indicated in the related notes and schedules
thereto) and (iii) fairly present in all material respects the consolidated fi-
nancial position of the 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 statements, to
normal year-end audit adjustments). Except as set forth in Schedule 4.8 of the
Company Disclosure Schedule and except as set forth in the Company SEC Documents
filed and publicly available prior to the date of this Agreement, and except for
liabilities and obligations incurred in the ordinary course of business since
the date of the most recent consolidated balance sheet included in the Company
SEC Documents filed and publicly available prior to the date of this Agreement,
neither the Company nor any of its Subsidiaries has any liabilities or obliga-
tions of any nature (whether accrued, absolute, contingent or otherwise) re-
quired by GAAP to be set forth on a consolidated balance sheet of the Company
and its consolidated Subsidiaries or in the notes thereto.
SECTION 4.9 Form S-4 Registration Statement and Company Proxy
-------------------------------------------------
Statement/Prospectus. None of the information to be supplied by the Company for
- --------------------
inclusion or incorporation by reference in the Form S-4 Registration Statement
(as hereinafter defined) or the Company Proxy Statement (as hereinafter defined)
will (i) in the case of the Form S-4 Registration Statement, at the time it
becomes effective, at the Effective Time or at the Company Stockholder Meeting
(as hereinafter defined), 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 not
16
misleading, or (ii) in the case of the Company Proxy Statement, at the time of
the mailing of the Company Proxy Statement and at the time of the Company Stock-
holder Meeting, 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 not misleading. If at any time prior to the Effective
Time any event with respect to the Company, its officers and directors or any of
its Subsidiaries should occur which is required to be described in an amendment
of, or a supplement to, the Company Proxy Statement or the Form S-4 Registration
Statement, such event shall be so described, and such amendment or supplement
shall be promptly filed with the SEC and, as required by law, disseminated to
the stockholders of the Company. The Company Proxy Statement will (with respect
to information relating to the Company) comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder.
SECTION 4.10 Absence of Certain Changes. Except as disclosed in the
--------------------------
Company SEC Documents filed by the Company or as set forth in Schedule 4.10 of
the Company Disclosure Schedule, the Company and its Subsidiaries have conducted
their business in the ordinary course of business and there has not been since
January 1, 1996:
(a) any event, occurrence or facts which has had or reasonably could
be expected to have a Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend (other
than regular quarterly dividends) or other distribution with respect to any
shares of capital stock of the Company, or any repurchase, redemption or
other acquisition by the Company or any Subsidiary of the Company of any
outstanding shares of capital stock or other securities of, or other
ownership interests in, the Company or any Subsidiary of the Company;
(c) any amendment of any term of any outstanding security of the
Company or any Subsidiary of the Company;
17
(d) any incurrence, assumption or guarantee by the Company or any
Subsidiary of the Company of any indebtedness for borrowed money other than
in the ordinary course of business;
(e) any creation or assumption by the Company or any Subsidiary of
the Company of any Lien on any asset other than in the ordinary course of
business and other than Liens which do not have and could not reasonably be
expected to have a Material Adverse Effect;
(f) any making of any loan, advance or capital contributions to or
investment in any Person other than advances to employees in the ordinary
course of business and loans, advances or capital contributions to or
investments in wholly-owned Subsidiaries of the Company made in the
ordinary course of business;
(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company or
any Subsidiary of the Company which has had or could reasonably be expected
to have a Material Adverse Effect;
(h) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any Subsidiary of the Company relating to
its assets or business (including the acquisition or disposition of any as-
sets) or any relinquishment by the Company or any Subsidiary of the Company
of any contract or other right, in either case, that have had or could
reasonably be expected to have a Material Adverse Effect, other than trans-
actions and commitments in the ordinary course of business and those
contemplated by this Agreement;
(i) any change, or any application or request to the SEC for any
change, in any method of accounting or accounting practice by the Company
or any Subsidiary of the Company, except for any such change required by
reason of a concurrent change in generally accepted accounting principles;
18
(j) any (i) grant of any severance or termination pay to any
director, officer or employee of the Company or any Subsidiary of the
Company, (ii) employment, consulting, indemnification, severance,
termination, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or
employee of the Company or any Subsidiary of the Company entered into,
(iii) increase in benefits payable under any existing severance or
termination pay policies or employment agreements or (iv) increase in
compensation, bonus or other benefits payable to directors, officers or
employees of the Company or any Subsidiary of the Company, in each case,
other than in the ordinary course of business; or
(k) any authorization of any of, or commitment or agreement to take
any of, the foregoing actions except as otherwise expressly permitted by
this Agreement.
SECTION 4.11 Litigation. Except as set forth in either the Company
----------
SEC Documents or in Schedule 4.11 of the Company Disclosure Schedule, there is
no action, suit, investigation or proceeding pending against, or to the
knowledge of the Company threatened against, the Company, any Subsidiary of the
Company or any of their respective properties before any court or arbitrator or
any Governmental Entity, which, (a) if determined or resolved adversely to the
Company or any Subsidiary of the Company in accordance with the plaintiff's
demands, could reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect or (b) as of the date hereof, questions the validity
of this Agreement or any action to be taken by the Company in connection with
the consummation of the transactions contemplated by this Agreement. Except as
set forth in the Company SEC Documents, as of the date of this Agreement, none
of the Company or its Subsidiaries is subject to any outstanding order, writ,
injunction or decree which, insofar as can be reasonably foreseen, could
reasonably be expected to have a Material Adverse Effect or would prevent or
materially delay the consummation of the transactions contemplated hereby.
Except as set forth in the Company SEC Documents, Schedule 4.11 of the Company
Disclosure Schedule sets forth a complete list of (x) all actions, suits, inves-
tigations or proceedings pending against, or to the
19
knowledge of the Company, threatened against any former or current director or
officer of the Company or any Subsidiary of the Company and (y) to the knowledge
of the Company, all material actions, suits, investigations, or proceedings
pending or threatened against any former or current employee of the Company or
any Subsidiary of the Company, in the case of each of (x) and (y), based on, or
arising out of the fact that, such person is or was a director, officer or
employee, as the case may be, of the Company or any Subsidiary of the Company,
as well as such matters as have been completed and in respect of which the
Company has any remaining indemnification or other monetary obligations.
SECTION 4.12 Taxes. (a) Except as set forth on Schedule 4.12 of the
-----
Company Disclosure Schedule: (i) the Company and each of its Subsidiaries has
filed or has had filed on its behalf in a timely manner (within any applicable
extension periods) with the appropriate Governmental Entity all income and other
material Tax Returns (as defined herein) with respect to Taxes (as defined
herein) of the Company and each of its Subsidiaries; (ii) all material Taxes
with respect to the Company and its Subsidiaries have been paid in full or have
been provided for in accordance with GAAP on the Company's most recent balance
sheet which is part of the Company SEC Documents; (iii) there are no outstanding
agreements or waivers extending the statutory period of limitations applicable
to any federal, state, local or foreign income or other material Tax Returns
required to be filed by or with respect to the Company and its Subsidiaries;
(iv) none of the Tax Returns of or with respect to the Company or any of its
Subsidiaries is currently being audited or examined by any Governmental Entity;
and (v) no deficiency for any income or other material Taxes has been assessed
with respect to the Company or any of its Subsidiaries which has not been abated
or paid in full.
(b) For purposes of this Agreement, (i) "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, sales, use, ad valorem, goods and services, capital,
----------
transfer, franchise, profits, license, withholding, payroll, employment,
employer health, excise, estimated, severance, stamp, occupation, property or
other taxes, customs duties, fees, assessments or charges of
20
any kind whatsoever, together with any interest and any penalties, additions to
tax or additional amounts imposed by any taxing authority and (ii) "Tax Return"
shall mean any report, return, documents, declaration or other information or
filing required to be supplied to any taxing authority or jurisdiction with
respect to Taxes.
SECTION 4.13 Employee Matters. (a) Schedule 4.13(a) contains a true
----------------
and complete list of each bonus, deferred compensation, incentive compensation,
stock purchase, stock option, severance or termination pay, hospitalization or
other medical, life or other insurance, supplemental unemployment benefits,
profit-sharing, pension, or retirement plan, program, agreement or arrangement,
and each other employee benefit plan, program, agreement or arrangement,
sponsored, maintained or contributed to or required to be contributed to by the
Company or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), that together with the Company would be deemed a "single employer"
within the meaning of Section 4001(b)(1) of the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations promulgated
thereunder ("ERISA"), for the benefit of any employee or former employee of the
Company, whether formal or informal and whether legally binding or not (the
"Plans"). Schedule 4.13(a) identifies each of the Plans that is an "employee
welfare benefit plan," or "employee pension benefit plan" as such terms are de-
fined in Sections 3(1) and 3(2) of ERISA (such plans being hereinafter referred
to collectively as the "ERISA Plans").
(b) With respect to each of the Plans, the Company has heretofore
delivered or made available to Buyer true and complete copies of each of the
following documents:
(i) a copy of the Plan or a description of all material terms
thereof (including all amendments thereto);
(ii) a copy of the annual report, if required under ERISA, with
respect to each such Plan for the last three years;
21
(iii) a copy of the actuarial report, if required under ERISA,
with respect to each such Plan for the last three years; and
(iv) the most recent determination letter received from the
Internal Revenue Service with respect to each Plan that is intended to be
qualified under Section 401 of the Code.
(c) No material liability under Title IV of ERISA has been incurred
by the Company or any ERISA Affiliate since the effective date of ERISA that has
not been satisfied in full, and no condition exists that presents a material
risk to the Company or an ERISA Affiliate of incurring a material liability
under such Title, other than liability for premiums due the Pension Benefit
Guaranty Corporation ("PBGC"), which payments have been or will be made when
due.
(d) With respect to each of the ERISA Plans that is subject to Title
IV of ERISA, the present value of accrued benefits under such Plan, based upon
the actuarial assumptions used for funding purposes in the most recent actuarial
report prepared by such Plan's actuary with respect to such Plan, did not, as of
its latest valuation date, exceed the then current value of the assets of such
Plan allocable to such accrued benefits.
(e) Neither the Company, any ERISA Affiliate, any of the ERISA Plans,
any trust created thereunder nor any trustee or administrator thereof has
engaged in a transaction or has taken or failed to take any action in connection
with which the Company, any ERISA Affiliate, any of the ERISA Plans, any such
trust, any trustee or administrator thereof, or any party dealing with the ERISA
Plans or any such trust could be subject to either a material civil penalty
assessed pursuant to Section 409 or Section 502(i) of ERISA or a material tax
imposed pursuant to Section 4975, Section 4976 or Section 4980B of the Code.
(f) Full payment has been made, or will be made in accordance with
Section 404(a)(6) of the Code, of all amounts which the Company or any ERISA
Affiliate is required to pay under the terms of each of the ERISA Plans and
Section 412 of the Code.
22
(g) Each of the Plans has been operated and administered in all
material respects in accordance with applicable laws, including but not limited
to ERISA and the Code.
(h) The Company has not taken any action that would result in the
acceleration of any benefits under any Plan in connection with or as a result of
the execution, delivery and performance by the Company of this Agreement or the
consummation by the Company of the transactions contemplated hereby.
SECTION 4.14 Labor Matters. Except to the extent set forth in
-------------
Schedule 4.14 of the Disclosure Schedule (i) there is no labor strike, dispute,
slowdown, stoppage or lockout actually pending or threatened, to the knowledge
of the Company, against the Company and during the past three years there has
not been any such action; (ii) to the knowledge of the Company, there is no
current union organizing activities among the Company's employees nor does any
question concerning representation exist concerning such employees; (iii) there
is no unfair labor practice charge or complaint against the Company pending or,
to the knowledge of the Company, threatened before the National Labor Relations
Board or any similar state or foreign agency; (iv) there is no grievance pending
relating to any collective bargaining agreement or other grievance procedure;
(v) to the knowledge of the Company, no charges with respect to or relating to
the Company are pending before the Equal Employment Opportunity Commission or
any other agency responsible for the prevention of unlawful employment
practices; (vi) the Company and its Subsidiaries have complied with the Worker
Adjustment and Retraining Notification Act (the "WARN Act"), and other state or
local laws substantially similar in effect to the WARN Act, where the failure to
be in compliance with such state or local laws would have a Material Adverse Ef-
fect; and (vii) there are no collective bargaining agreements, employment con-
tracts or severance agreements with any union or any employees of the Company.
SECTION 4.15 Compliance with Laws. Except as set forth in Schedule
--------------------
4.11 (as applicable) and Schedule 4.15 of the Company Disclosure Schedule, the
Company and its Subsidiaries, and their respective businesses, are in compliance
with all Licenses, laws, statutes, ordinances
23
or regulations, including, but not limited to, Environmental Laws (as defined in
Section 4.17 below), except where such violations would not have a Material
Adverse Effect.
SECTION 4.16 Finders' Fees. Except for Lazard Freres & Co., L.L.C.,
-------------
there is no investment banker, broker, finder or other intermediary which has
been retained by or is authorized to act on behalf, of the Company or any Sub-
sidiary of the Company who would be entitled to any fee or commission from the
Company, any Subsidiary of the Company, Buyer or any of Buyer's affiliates upon
consummation of the transactions contemplated by this Agreement. An executed,
true and complete copy of such engagement letter has been delivered to Buyer.
SECTION 4.17 Environmental Matters. (a) Except as set forth in the
---------------------
Company SEC Documents or in Schedule 4.17 of the Company Disclosure Schedule:
(i) since January 1, 1995, the Company has not received any
written communication from any person or entity (including any Governmental
Entity) stating that it or its Subsidiaries may be a potentially
responsible party under Environmental Law (as defined in Section 4.17(c)
hereof) with respect to any actual or alleged environmental contamination;
neither the Company nor its Subsidiaries nor, to the Company's knowledge,
any Governmental Entity is conducting or has conducted any environmental
remediation or environmental investigation which could reasonably be
expected to result in liability for the Company or its Subsidiaries under
Environmental Law; and the Company and its Subsidiaries have not received
any request for information under Environmental Law from any Governmental
Entity with respect to any actual or alleged environmental contamination,
except, in each case, for communications, environmental remediation and
investigations and requests for information which would not, individually
or in the aggregate, have a Material Adverse Effect; and
(ii) since January 1, 1995, the Company and its Subsidiaries
have not received any written communication from any person or entity
(including any Governmental Entity) stating or alleging that
24
the Company or its Subsidiaries may have violated any Environmental Law, or
that the Company or its Subsidiaries has caused or contributed to any envi-
ronmental contamination that has caused any property damage or personal
injury under Environmental Law, except, in each case, for statements and
allegations of violations and statements and allegations of responsibility
for property damage and personal injury which would not, individually or in
the aggregate, have a Material Adverse Effect.
(b) (i) The Company has made available to Buyer each material
environmental investigation, study, audit, test, review and other analysis in
the possession of the Company or its Subsidiaries prepared in the last five
years conducted in relation to the business of the Company or any property or
facility now or previously owned, operated or leased by the Company or any
Subsidiary of the Company; and (ii) the Company has made available to Buyer each
consent decree, consent order or similar document currently in force and to
which it is a party relating to any property currently owned, leased or operated
by the Company or its Subsidiaries.
(c) For purposes of this Section 4.17, "Environmental Law" means all
applicable state, federal and local laws, regulations and rules, including
common law, judgments, decrees and orders relating to pollution, the preser-
vation of the environment, and the release of material into the environment.
SECTION 4.18 Property. The Company and its Subsidiaries, as the case
--------
may be, have good and valid title to, or in the case of leased property, have
valid leasehold interests in all properties and assets necessary to conduct the
business of the Company as currently conducted, except to the extent the failure
of this representation and warranty to be true would not have a Material Adverse
Effect. There are no developments affecting any of such properties or assets
pending or, to the knowledge of the Company threatened, which, could reasonably
be expected to have a Material Adverse Effect.
SECTION 4.19 Intangible Property. (a) The Company and its
-------------------
Subsidiaries own or possess adequate licenses or other valid rights to use all
trademarks, trademark rights, trade names, trade name rights, copy-
25
rights, service marks, trade secrets and applications for trademarks and for
service marks, which are material to the Company's business and operations (col-
lectively, "Intangible Property") used or held for use in connection with the
business of the Company and the Subsidiaries of the Company as currently
conducted. All material trademarks are validly registered or registrations have
been applied for.
(b) The Company, except as set forth in Schedule 4.19(b) of the
Company Disclosure Schedule, is unaware of any assertion or claim challenging
the validity of any Intangible Property. Except as set forth in Schedule
4.19(b) of the Company Disclosure Schedule, the conduct of the business of the
Company and its Subsidiaries as currently conducted does not conflict with any
trademark, trademark right, trade name or trade name right of any third party in
a manner that could reasonably be expected to have a Material Adverse Effect.
To the knowledge of the Company, there are no material infringements of any
Intangible Property.
SECTION 4.20 Material Contracts. Except as set forth on Schedule
------------------
4.13(a), Schedule 4.20 or Schedule 7.3 of the Company Disclosure Schedule, the
Company SEC Documents list all Material Contracts (as defined below) of the
Company (and all material amendments thereto) and all agreements or commitments
to enter into a Material Contract, and except as set forth on Schedule 4.20 of
the Company Disclosure Schedule or in the Company SEC Documents, to the knowl-
edge of the Company, each Material Contract is valid, binding and enforceable
and in full force and effect, except where such failure to be valid, binding and
enforceable and in full force and effect would not have a Material Adverse Ef-
fect, and there are no defaults thereunder, except those defaults that would not
have a Material Adverse Effect. For purposes of this Agreement, "Material Con-
tracts" shall mean (i) all contracts, agreements or understandings with
customers of the Company and its Subsidiaries in the last fiscal year where each
customers' contracts, agreements or understandings in the aggregate account for
more than $5 million of (x) SafeCard Services, Incorporated's ("SafeCard") net
annual billings or (y) each Subsidiaries' of the Company, other than SafeCard's,
annual revenues; (ii) all the acquisition, merger, asset purchase or sale agree-
ments entered into by the Company
26
in the last two fiscal years with a transaction value in excess of $10 million;
(iii) all indemnification, termination, severance, or "golden parachute"
agreements; and (iv) any other agreement within the meaning set forth in Item
601(b)(10) Regulation S-K of Title 17, Part 229 of the Code of Federal Regula-
tions. Except as set forth on Schedule 4.20 of the Company Disclosure Schedule,
no party to any such Material Contract has (i) given written notice to the
Company or any Subsidiary of the Company of or made a claim in writing against
the Company or any Subsidiary of the Company with respect to any breach or
default thereunder, in any such case in which such breach or default could
reasonably be expected to have a Material Adverse Effect on the Company or (ii)
given written or, to the knowledge of the senior executive officers of the
Company, oral notice to the Company or any Subsidiary of the Company that it
does not intend to renew or it intends to terminate any of its business rela-
tionships with the Company or any Subsidiary of the Company.
SECTION 4.21 Accounting Matters. Neither the Company nor, to the
------------------
best of the Company's knowledge, any of its affiliates has taken or agreed to
take any action that would prevent Buyer from accounting for the transactions to
be effected pursuant to this Agreement as a pooling of interests in accordance
with GAAP and applicable SEC regulations. The Company has not knowingly and
willfully failed to bring to the attention of Buyer any actions, or agreements
or understandings, whether written or oral, to act that would be reasonably
likely to prevent Buyer from accounting for the Merger as a pooling of
interests. The representations and warranties of the Company in the Company
Affiliate Letter are true and correct.
SECTION 4.22 Vote Required. The affirmative vote of the holders of a
-------------
majority of the outstanding Shares is the only vote of the holders of any class
or series of the Company's capital stock necessary or required under this
Agreement or under applicable law to approve the Merger, this Agreement and the
transactions contemplated hereby.
SECTION 4.23 Fairness Opinion. The Board of Directors of the Company
----------------
has received the written opinion of Lazard Freres & Co. L.L.C., to the effect
that, as of such date, the consideration to be received by holders of
27
Shares pursuant to the Merger is fair from a financial point of view to such
holders. An executed, true and complete copy of such opinion has been delivered
to Buyer and, as of the date hereof, such opinion has not been modified in any
material respect or withdrawn.
SECTION 4.24 Disclosure. No representation or warranty by the
----------
Company contained in this Agreement and no statement contained in any certifi-
cate delivered by the Company to Buyer or Merger Subsidiary pursuant to this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein and therein not
misleading when taken together in light of the circumstances in which they were
made.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER AND MERGER SUBSIDIARY
Buyer and Merger Subsidiary represent and warrant to the Company that:
SECTION 5.1 Corporate Existence and Power. Each of Buyer and Merger
-----------------------------
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and except as set
forth on Schedule 5.1 of the disclosure schedule delivered by Buyer and Merger
Subsidiary in connection herewith (the "Buyer Disclosure Schedule"), has all
corporate powers and all Licenses required to carry on its business as now con-
ducted except where the failure to have any such License would not, individually
or in the aggregate, have a Material Adverse Effect. Each of Buyer and Merger
Subsidiary is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification necessary,
except for those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. Each of Buyer
and Merger Subsidiary has heretofore delivered or made available to the Company
true and complete copies of Buyer's and Merger Subsidiary's Certificate of
Incorporation and By-laws as currently in effect.
28
SECTION 5.2 Corporate Authorization. The execution, delivery and
-----------------------
performance by Buyer and Merger Subsidiary of this Agreement and the
consummation by Buyer and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Buyer and Merger Subsidiary and have
been duly authorized by all necessary corporate action. This Agreement,
assuming due and valid authorization, execution and delivery by the other
parties hereto, constitutes a valid and binding agreement of each of Buyer and
Merger Subsidiary enforceable against Buyer and Merger Subsidiary in accordance
with its terms, except that (i) enforcement may be subject to applicable bank-
ruptcy, insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
SECTION 5.3 Governmental Authorization. The execution, delivery and
--------------------------
performance by Buyer and Merger Subsidiary of this Agreement and the
consummation by Buyer and Merger Subsidiary of the transactions contemplated
hereby require no action by or in respect of, or filing with, any Governmental
Entity other than: (i) the filing of a certificate of merger in accordance with
the DGCL; (ii) compliance with any applicable requirements of the HSR Act;
(iii) compliance with any applicable requirements of the Securities Act and Ex-
change Act; (iv) compliance with the applicable requirements of any applicable
takeover laws; and (v) such other actions by or in respect of, or filings with,
any Governmental Entity the failure of which to obtain or make would not have a
Material Adverse Effect and which would not materially impair or delay the
ability of Buyer or Merger Subsidiary to consummate the transactions contem-
plated hereby.
SECTION 5.4 Non-Contravention. The execution, delivery and
-----------------
performance by Buyer and Merger Subsidiary of this Agreement and the
consummation by Buyer and Merger Subsidiary of the transactions contemplated
hereby do not and will not (i) contravene or conflict with the Certificate of
Incorporation or By-laws of Merger Subsidiary or Buyer, (ii) assuming compliance
with the matters referred to in Section 5.3 hereof, contravene or conflict with
or constitute a violation of any provision of law,
29
regulation, judgment, injunction, order or decree binding upon or applicable to
Buyer or Merger Subsidiary, (iii) with or without the giving of notice or
passage of time or both, constitute a default under or give rise to a right of
termination, cancellation or acceleration of any right or obligation of Buyer or
Merger Subsidiary or to a loss of any benefit to which Buyer or Merger Subsid-
iary is entitled under any provision of any agreement, contract or other
instrument binding upon Buyer or Merger Subsidiary or any license, franchise,
permit or other similar authorization held by Buyer or Merger Subsidiary, or
(iv) result in the creation or imposition of any Lien on any asset of Buyer or
Merger Subsidiary excluding from the foregoing clauses (ii), (iii) or (iv) such
violations, breaches, defaults or Liens which would not have a Material Adverse
Effect, and which will not materially impair or materially delay the ability of
Buyer and Merger Subsidiary to consummate the transactions contemplated hereby.
SECTION 5.5 Form S-4 Registration Statement and Company Proxy
-------------------------------------------------
Statement/Prospectus. None of the information to be supplied by Buyer and
- --------------------
Merger Subsidiary for inclusion or incorporation by reference in the Form S-4
Registration Statement will (i) in the case of the Form S-4 Registration
Statement at the time it becomes effective, at the Effective Time or at the
Company Stockholder Meeting, 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 not misleading, or (ii) in the case of the
Company Proxy Statement, at the time of the mailing of the Company Proxy State-
ment and at the time of the Company Stockholder Meeting or at the Effective
Time, 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 not misleading. If at any time prior to the Effective Time
any event with respect to Buyer and Merger Subsidiary, their respective officers
and directors or any of Buyer's Subsidiaries should occur which is required to
be described in an amendment of, or a supplement to, the Form S-4 Registration
Statement or the Company Proxy Statement, such event shall be so described, and
such amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of the Company. The S-4
Registration Statement will
30
(with respect to information relating to Buyer and Merger Subsidiary) comply as
to form in all material respects with the requirements of the Securities Act and
the rules and regulations promulgated thereunder.
SECTION 5.6 Finders' Fees. Except for Goldman, Sachs & Co., whose
-------------
fees will be paid by Buyer, there is no investment banker, broker, finder or
other intermediary who might be entitled to any fee or commission in connection
with or upon consummation of the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Buyer or Merger Subsidiary.
SECTION 5.7 No Vote Required. No vote or special meeting of the
----------------
stockholders of Buyer or Merger Subsidiary is necessary or required by this
Agreement or under applicable law to approve the Merger, this Agreement or the
transactions contemplated hereby.
SECTION 5.8 Share Ownership. As of the date hereof, Buyer and Merger
---------------
Subsidiary do not own any Shares.
SECTION 5.9 Capitalization. The authorized capital stock of Buyer
--------------
consists of 400,000,000 shares of Buyer Common Stock, and 1,000,000 shares of
preferred stock, par value $.01 par value per share (the "Buyer Preferred
Stock"). As of March 29, 1996, there were issued and outstanding (i)
190,460,240 shares of Buyer Common Stock; (ii) no shares of Buyer Preferred
Stock; and (iii) options to purchase an aggregate of 21,056,064 shares of Buyer
Common Stock with exercise prices ranging from $.36 to $35.75. All of the out-
standing shares of capital stock of Buyer have been duly authorized and validly
issued and are fully paid and nonassessable. Schedule 5.9 of the Buyer Disclo-
sure Schedule accurately sets forth, as of the date of this Agreement, certain
information regarding the outstanding options, and such information is true and
correct. Except as set forth in this Section 5.9 or as disclosed on Schedule
5.9 of the Buyer Disclosure Schedule or in the Buyer SEC Documents, and except
for changes since March 29, 1996 resulting from the exercise of employee stock
options outstanding on such date, as of the date of this Agreement, there are
outstanding (i) no shares of capital stock or other voting securities of Buyer,
(ii) no securities of Buyer
31
or of any Subsidiary of Buyer convertible into or exchangeable for shares of
capital stock or voting securities of Buyer, and (iii) no options or other
rights to acquire from Buyer, and no obligation of Buyer to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of the Company (the items in clauses (i),
(ii) and (iii) being referred to collectively as the "Buyer Securities"). There
are no outstanding obligations of Buyer or of any Subsidiary of Buyer to repur-
chase, redeem or otherwise acquire any Buyer Securities. There are no
stockholder agreements, voting trusts or understandings to which Buyer is a
party or to which it is bound relating to the voting of any shares of capital
stock of Buyer.
SECTION 5.10 Accounting Matters. Neither Buyer, nor Merger
------------------
Subsidiary, nor, to the best of Buyer's or Merger Subsidiary's knowledge, any of
its affiliates has taken or agreed to take any action that would prevent Buyer
or Merger Subsidiary from accounting for the transactions to be effected
pursuant to this Agreement as a pooling of interests in accordance with GAAP and
applicable SEC regulations. Buyer has not knowingly and willfully failed to
bring to the attention of the Company any actions, or agreements or
understandings, whether written or oral, to act that would be reasonably likely
to prevent Buyer from accounting for the Merger as a pooling of interests.
SECTION 5.11 Ownership of Merger Subsidiary; No Prior Activities;
----------------------------------------------------
Assets of Merger Subsidiary. (a) Merger Subsidiary was formed solely for the
- ---------------------------
purpose of the Merger and engaging in the transactions contemplated hereby.
(b) As of the date hereof and the Effective Time, the capital stock
of Merger Subsidiary is and will be directly owned 100% by Buyer. Further,
there are not as of the date hereof and there will not be at the Effective Time
any outstanding or authorized options, warrants, calls, rights, commitments or
any other agreements of any character which Merger Subsidiary is a party to, or
may be bound by, requiring it to issue, transfer, sell, purchase, redeem or
acquire any shares of capital stock or any securities or rights convertible
into, exchangeable for, or evidencing the right to subscribe
32
for or acquire, any shares of capital stock of Merger Subsidiary.
(c) As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions contemplated hereby, Merger Subsidiary has not
and will not have incurred, directly or indirectly through any Subsidiary or
affiliate, any obligations or liabilities or engaged in any business or
activities of any type or kind whatsoever or entered into any agreements or
arrangements with any Person or entity.
SECTION 5.12 SEC Documents. Buyer has filed all required reports,
-------------
proxy statements, forms and other documents with the SEC since January 1, 1994
("Buyer SEC Documents"). As of their respective dates (i) the Buyer SEC Docu-
ments complied in all material respects with the requirements of the Securities
Act, or the Exchange Act, as the case may be, and the rules and regulations of
the SEC promulgated thereunder applicable to such Buyer SEC Documents, and (ii)
none of the Buyer SEC Documents contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the cir-
cumstances under which they were made, not misleading.
SECTION 5.13 Financial Statements. The consolidated financial
--------------------
statements of Buyer included in the Buyer SEC Documents (i) comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, (ii) have been prepared
in conformity with GAAP applied on a consistent basis (except in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) during the periods
involved (except as may be indicated in the related notes and schedules thereto)
and (iii) fairly present in all material respects the consolidated financial
position of Buyer and its consolidated subsidiaries as of the dates thereof, and
the results of its operations and its cash flows for the periods then ended
(subject, in the case of the unaudited statements, to normal year-end audit
adjustments and except that, in the case of financial statements included there-
in which were later restated to account for one or more business combinations
accounted for as poolings-of-interest, such
33
original financial statements do not reflect such restatements).
SECTION 5.14 Absence of Certain Changes or Events. Except as
------------------------------------
disclosed in the Buyer SEC Documents filed by Buyer and as set forth in Schedule
5.14 of the Buyer Disclosure Schedule, since the date of the most recent
consolidated balance sheet included in the Buyer SEC Documents filed and
publicly available prior to date of this Agreement, the business of Buyer has
been carried on only in the ordinary and usual course and there has not been any
adverse change in its business, properties, operations or financial condition
and no event has occurred and no fact or set of circumstances has arisen which
has resulted in or could reasonably be expected to result in a Material Adverse
Effect.
SECTION 5.15 Litigation. Except as set forth in either Buyer SEC
----------
Documents or in Schedule 5.15 of the Buyer Disclosure Schedule, there is no ac-
tion, suit, investigation or proceeding pending against, or to the knowledge of
Buyer or Merger Subsidiary threatened against, Buyer or Merger Subsidiary or any
of their respective properties before any court or arbitrator or any Governmen-
tal Entity, which, (a) if determined or resolved adversely to Buyer or Merger
Subsidiary in accordance with the plaintiff's demands, could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect or
(b) as of the date of this Agreement, questions the validity of this Agreement
or any action to be taken by Buyer or Merger Subsidiary in connection with the
consummation of the transactions contemplated by this Agreement. Except as
publicly disclosed by Buyer, as of the date of this Agreement, none of Buyer or
its Subsidiaries is subject to any outstanding order, writ, injunction or decree
which, insofar as can be reasonably foreseen in the future, could reasonably be
expected to have a Material Adverse Effect on Buyer or would prevent or
materially delay the consummation of the transactions contemplated hereby.
SECTION 5.16 Authorization for Buyer Common Stock. Buyer has taken
------------------------------------
all necessary action to permit it to issue the number of shares of Buyer Common
Stock required to be issued pursuant to this Agreement. Shares of Buyer Common
Stock issued pursuant to Agreement will, when issued, be validly issued, fully
paid and nonassess
34
able and no person will have any preemptive right of subscription or purchase in
respect thereof. Shares of Buyer Common Stock will, when issued, be registered
under the Securities Act and the Exchange Act and registered or exempt from
registration under any applicable state securities laws and will, when issued,
be listed on the NYSE, subject to official notice of issuance.
SECTION 5.17 Taxes. Except as set forth on Schedule 5.17 of the
-----
Buyer Disclosure Schedule: (i) Buyer and each of its Subsidiaries has filed or
has had filed on its behalf in a timely manner (within any applicable extension
periods) with the appropriate Governmental Entity all income and other material
Tax Returns with respect to Taxes of Buyer and each of its Subsidiaries; (ii)
all material Taxes with respect to Buyer and its Subsidiaries have been paid in
full or have been provided for in accordance with GAAP on the Buyer's most
recent balance sheet which is part of the Buyer SEC Documents; (iii) there are
no outstanding agreements or waivers extending the statutory period of limi-
tations applicable to any federal, state, local or foreign income or other
material Tax Returns required to be filed by or with respect to Buyer and its
Subsidiaries; (iv) none of the Tax Returns of or with respect to Buyer or any of
its Subsidiaries is currently being audited or examined by any Governmental
Entity; and (v) no deficiency for any income or other material Taxes has been
assessed with respect to Buyer or any of its Subsidiaries which has not been
abated or paid in full.
SECTION 5.18 Disclosure. No representation or warranty by Buyer or
----------
Merger Subsidiary contained in this Agreement and no statement contained in any
certificate delivered by Buyer or Merger Subsidiary to the Company pursuant to
this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein and
therein not misleading when taken together in light of the circumstances in
which they were made.
35
ARTICLE VI
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 6.1 Conduct of the Company. From the date hereof until the
----------------------
Effective Time, the Company and its Subsidiaries shall conduct their business in
the ordinary course and shall use their reasonable efforts to preserve intact
their business organizations and relationships with third parties and to keep
available the services of their present officers and employees. Without
limiting the generality of the foregoing other than as set forth on Schedule 6.1
of the Company Disclosure Schedule, as specifically contemplated by this
Agreement or with the written consent of Buyer or Merger Subsidiary (which
consent shall not be unreasonably withheld or delayed), from the date hereof
until the Effective Time, the Company will not (and will not cause or permit any
Subsidiary to):
(a) split, combine or reclassify any shares of capital stock,
declare, set aside or pay any dividend (other than regular quarterly
dividends and any dividend of a wholly-owned Subsidiary of the Company to
the Company or another wholly-owned Subsidiary of the Company) or other
distribution (whether in cash, stock or property or any combination
thereof) with respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company or any Subsid-
iary of the Company of any outstanding shares of capital stock or other
securities of, or other ownership interests in, the Company or any
Subsidiary of the Company;
(b) amend any term of any outstanding security of the Company or any
Subsidiary of the Company;
(c) except for working capital purposes pursuant to the Revolving
Credit Agreement, dated as of February 8, 1996, by and among the First
National Bank of Boston, Fleet Bank of Maine, Key Bank of Maine, Bank of
Scotland and Wright Express Corporation, and, except in the ordinary course
of business consistent with past practice pursuant to the Equipment Financ-
ing Agreement, dated as of February 7,
36
1996, by and between The First National Bank of Boston and Wright Express
Corporation, incur, assume or guarantee any indebtedness for borrowed money
of (x) except in the ordinary course of business in an amount not to exceed
$500,000 in the aggregate at any one time outstanding, the Company or any
Subsidiary of the Company or (y) any other Person;
(d) create, assume or suffer to exist any Lien on any material asset,
other than in the ordinary course of business;
(e) make any loan, advance or capital contribution to or invest in
any Person, other than in the ordinary course of business;
(f) cause any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets of the Company
or any Subsidiary of the Company which has had or could reasonably be
expected to have a Material Adverse Effect;
(g) (x) other than in the ordinary course of business consistent with
past practice, (i) enter into any transaction, commitment, contract or
agreement by the Company or any Subsidiary of the Company relating to their
assets or business (excluding the acquisition or disposition of any assets)
or (ii) relinquish any contract or other right, that (with respect to (ii))
has had or could reasonably be expected to have a Material Adverse Effect,
other than (with respect to each of (i) and (ii)) those expressly permitted
by this Agreement or (y) enter into any transaction, commitment, contract
or agreement to acquire or dispose of any assets of the Company or any
Subsidiary of the Company in excess of $150,000 in any individual
transaction or $750,000 in the aggregate;
(h) change, or apply to the SEC for, or request from the SEC any
change of, any method of accounting or accounting practice by the Company
or any Subsidiary of the Company, except for any such change required by
reason of a concurrent change in GAAP;
37
(i) (A) grant any severance or termination pay to any current or
former director or executive officer, or, other than in the ordinary course
of business, to any officer or any other employee of the Company or any
Subsidiary of the Company, (B) enter into any employment, consulting,
indemnification, severance, termination, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with
any current or former director or executive officer, or other than in the
ordinary course of business, with any officer or any other employee of the
Company or any Subsidiary of the Company, (C) other than in the ordinary
course of business, increase the benefits payable under any existing
severance or termination pay policies or employment agreements or
(D) increase the compensation, bonus or other benefits payable to any
current or former director or executive officer, or other than in the
ordinary course of business, to any officer or any other employee of the
Company or any Subsidiary of the Company;
(j) amend its certificate of incorporation or bylaws (or other
similar governing instrument);
(k) authorize for issuance, sell, deliver or agree to issue, sell or
deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of
any class or any other securities or equity equivalents (including, without
limitation, any stock options or stock appreciation rights) of the Company,
except for the issuance of stock upon the exercise of Options outstanding
on the date of this Agreement;
(l) except as may be required pursuant to GAAP, revalue in any mate-
rial respect any of its assets, including, without limitation, writing down
the value of inventory or writing-off notes or accounts receivable other
than in the ordinary course of business;
(m) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of
38
the Company or any of its Subsidiaries (other than the Merger);
(n) make or revoke any tax election or settle or compromise any tax
liability, in each case, material to the Company and its Subsidiaries taken
as a whole or change (or make a request to any taxing authority to change)
any material aspect of its method of accounting for tax purposes;
(o) subject to Section 6.1(q) below, pay, discharge or satisfy any
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction
in the ordinary course of business of liabilities or obligations reflected
or reserved against in, or contemplated by, the consolidated financial
statements (or notes thereof) of the Company and its Subsidiaries or
incurred in the ordinary course of business consistent with past practice;
(p) except as otherwise permitted by paragraph (i) or as set forth on
Schedule 6.1(p) of the Company Disclosure Schedule, settle or compromise
any pending or threatened suit, action, or proceeding;
(q) enter into any agreement or understanding, whether oral or
written, with any Halmos Entity or Halmos Assign (as each such term is
defined in Section 7.3(c)); except for agreements or understandings in the
ordinary course necessary for the continued defense or prosecution of any
such pending litigation matters set forth in Schedule 4.11 of the Company
Disclosure Schedule or as disclosed in the Company SEC Documents; or
(r) take, authorize any of, or commit or agree to take any of, the
foregoing actions except as otherwise expressly permitted by this
Agreement.
SECTION 6.2 Stockholder Meeting; Proxy Material. The Company shall
-----------------------------------
cause a meeting of its stockholders (including any postponements or adjournments
thereto, the "Company Stockholder Meeting") to be duly called and held as soon
as reasonably practicable for the purpose of voting on the approval and adoption
of this Agreement and
39
the Merger. The Board of Directors of the Company shall recommend approval and
adoption of this Agreement and the Merger by the Company's stockholders;
provided that the Company's Board of Directors may withdraw, modify or change
- --------
such recommendation if it has determined, based upon the advice of outside legal
counsel to the Company, that such recommendation would be reasonably likely to
be inconsistent with the Board of Directors' fiduciary duties under applicable
law. The Company will (i) as promptly as practicable following the date of this
Agreement, prepare and file with the SEC, will use its reasonable efforts to
have cleared by the SEC and thereafter mail to its stockholders as promptly as
practicable, a proxy statement that will be the same proxy statement/prospectus
contained in the Form S-4 Registration Statement (as hereinafter defined) and a
form of proxy, in connection with the vote of the Company's stockholders with
respect to the Merger (such proxy statement/prospectus, together with any amend-
ments thereof or supplements thereto, in each case in the form or forms mailed
to the Company's stockholders, is herein called the "Company Proxy Statement"),
(ii) use its reasonable efforts to obtain the necessary approvals by its stock-
holders of this Agreement and the transactions contemplated hereby and (iii)
otherwise comply in all material respects with all legal requirements applicable
to such meeting. The Company may, if it withdraws, modifies or changes its
recommendation in accordance with this Section 6.2, delay the filing or mailing,
as the case may be, of the Company Proxy Statement or the holding of the Company
Stockholder Meeting, in each case only to the extent necessary to revise the
Company Proxy Statement to reflect such withdrawal, modification or change and,
in the case of the Company Stockholder Meeting, to provide the minimum notice
thereof required under applicable law, the Company Certificate of Incorporation
or the Company By-laws. In addition, the Company will upon reasonable advance
notice provide Buyer with all financial and other data regarding the Company as
may be reasonably requested by Buyer in connection with the proxy statements and
registration statements on Form S-4 relating to the transactions described in
Schedule 6.2 of the Buyer Disclosure Schedule. The Company acknowledges that
such proxy statements and registration statements may be required to include
such data concerning the Company, and that the Company Proxy Statement may be
required to
40
contain certain financial and other data concerning the other parties to such
transactions.
SECTION 6.3 Access to Information; Confidential Agreement. (a) From
---------------------------------------------
the date hereof until the Effective Time, the Company will give Buyer, its
counsel, financial advisors, auditors and other authorized representatives
reasonable access during normal business hours to the offices, properties, books
and records of the Company and the Subsidiaries of the Company, will furnish to
Buyer, its counsel, financial advisors, auditors and other authorized repre-
sentatives such financial and operating data and other information as such
Persons may reasonably request and will instruct the Company's employees, coun-
sel and financial advisors to cooperate with Buyer in its investigation of the
business of the Company and the Subsidiaries of the Company; provided that all
--------
requests for information, to visit plants or facilities or to interview the
Company's employees or agents should be directed to and coordinated with an
executive officer of the Company; and provided further that no investigation
--------
pursuant to this Section 6.3 shall affect any representation or warranty given
by the Company to Buyer hereunder and any information received by Buyer or its
representatives shall remain subject to the Confidentiality Agreement dated
February 13, 1996 between Buyer and the Company (the "Confidentiality
Agreement").
(b) The parties hereto agree that the Confidentiality Agreement shall
be hereby amended to provide that any provision therein which in any manner
limits, restricts or prohibits the voting or acquisition of Shares by Buyer or
any of its affiliates or the representation of Buyer's designees on the
Company's Board of Directors or which in any manner would be inconsistent with
this Agreement or the transactions contemplated hereby shall be amended as of
the date hereof to permit the acquisition of Shares pursuant to the Merger, the
voting of Shares at the Company Stockholder Meeting or to otherwise effect the
transactions contemplated hereby. The Confidentiality Agreement shall otherwise
remain in full force and effect.
SECTION 6.4 No Solicitation. (a) From the date of this Agreement
---------------
until the termination of this Agreement in accordance with its terms, the Compa-
ny and its Subsidiaries will not, and the Company will use its
41
reasonable best efforts to ensure that the respective officers, directors and
employees of the Company and its Subsidiaries, and any investment banker,
financial advisor, attorney, accountant or other representative or agent
retained by it or any of its Subsidiaries, will not (i) solicit, initiate or
encourage (including by way of furnishing information) any Acquisition Proposal
(as defined below) or (ii) participate or engage in negotiations or discussions,
or disclose any nonpublic information relating to the Company or any Subsidiary
of the Company or afford access to the properties, books or records of the
Company or any Subsidiary of the Company, regarding any Acquisition Proposal;
provided that, if the Company's Board of Directors determines, based upon the
- --------
advice of outside legal counsel to the Company, that the failure to engage in
such negotiations or discussions or provide such information would be reasonably
likely to be inconsistent with the Board of Directors' fiduciary duties under
applicable law, the Company may in response to an Acquisition Proposal and sub-
ject to compliance with Section 6.4(c), furnish information with respect to the
Company and its Subsidiaries pursuant to a confidentiality agreement and par-
ticipate in negotiations regarding such Acquisition Proposal. For purposes of
this Agreement, "Acquisition Proposal" means any inquiry, offer or proposal from
any person relating to any direct or indirect acquisition or purchase of a
substantial portion of the assets of the Company or any of its Subsidiaries or
of over 20% of any class of equity securities of the equity interest of the
Company or any of its Subsidiaries, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more equity
interest of any class of equity securities of the Company or any of its Subsid-
iaries, any merger, consolidation, business combination, sale of substantially
all the assets, recapitalization, liquidation, dissolution or similar transac-
tion involving the Company or any of its Subsidiaries, other than the trans-
actions contemplated by this Agreement. Nothing contained in this Section 6.4
shall prohibit the Company or its Board of Directors from taking and disclosing
to the Company's stockholders a position with respect to a tender or exchange
offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under
the Exchange Act or from making such disclosure to the Company's stockholders or
making such disclosure as may be required by applicable law; provided, however,
-------- -------
neither the Company nor its Board
42
of Directors nor any committee thereof shall, except as permitted by Section 6.2
or 6.4(b), withdraw, modify or change, or propose to withdraw, modify or change,
its recommendation of approval and adoption of this Agreement and the Merger or
approve or recommend, or propose to approve or recommend, an Acquisition Pro-
posal.
(b) Except as set forth in this Section 6.2 or Section 6.4(b),
neither the Company nor the Board of Directors of the Company nor any committee
thereof shall (x) withdraw, modify or change, or propose to withdraw, modify or
change, in a manner adverse to Buyer, the recommendation by such Board of
Directors or such committee of the approval and adoption of this Agreement and
the Merger, (y) approve or recommend, or propose to approve or recommend, any
Acquisition Proposal or (z) cause the Company to enter into any agreement with
respect to any Acquisition Proposal. Notwithstanding the foregoing, in the
event that the Board of Directors of the Company determines, based upon the
advice of outside legal counsel to the Company, that the failure to take any of
the actions contemplated by the preceding sentence would be reasonably likely to
be inconsistent with the Board of Directors' fiduciary duties, the Board of
Directors of the Company may withdraw, modify or change its recommendation of
approval and adoption of this Agreement and the Merger, approve or recommend a
Superior Proposal or cause the Company to enter into an agreement with respect
to a Superior Proposal; but in the case of approving, recommending or causing
the Company to enter into an agreement with respect to a Superior Proposal, only
at a time that is after the second day following Buyer's receipt of written
notice (a "Notice of Superior Proposal") advising Buyer that the Board of
Directors of the Company has received a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal. In addition, if the Company enters into
an agreement with respect to a Superior Proposal and this Agreement is terminat-
ed pursuant to Section 10.1(vi)(B) or Section 10.1(vii), the Company shall
promptly pay, or cause to be paid, to Buyer, the Buyers' Expenses (as such term
is defined in Section 12.4). For purposes of this Agreement, a "Superior Pro-
posal" means any bona fide Acquisition Proposal to acquire, directly or indi-
rectly, for consideration consisting of cash and/or securities, more than 50% of
the shares of the Company common stock
43
then outstanding or all or substantially all the assets of the Company and
otherwise on terms which the Board of Directors of the Company determines in its
good faith judgment (based on the advice of a financial advisor of nationally
recognized reputation) to be more favorable to the Company's stockholders than
the Merger.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 6.4, the Company shall notify Buyer in
writing within one business day of any request for information or of any Acqui-
sition Proposal, or any inquiry with respect to or which would reasonably be
expected to result in an Acquisition Proposal, the material terms and conditions
of such request, Acquisition Proposal or inquiry. The Company will use it
reasonable best efforts to keep Buyer informed of the status and details (in-
cluding amendments or proposed amendments) of any such request, Acquisition Pro-
posal or inquiry.
SECTION 6.5 Conveyance Taxes. The Company shall timely pay any real
----------------
property transfer or gains, sales, use, transfer, value added, stock transfer
and stamp taxes, any transfer, recording, registration and other fees, and any
similar taxes (collectively, the "Conveyance Taxes") which become payable prior
to the Effective Time in connection with the transactions contemplated hereunder
that are required to be paid in connection therewith.
ARTICLE VII
COVENANTS OF BUYER
Buyer agrees that:
SECTION 7.1 Obligations of Merger Subsidiary. Buyer will take all
--------------------------------
action necessary to cause Merger Subsidiary to perform its obligations under
this Agreement and to consummate the Merger on the terms and conditions set
forth in this Agreement.
SECTION 7.2 Voting of Shares. Merger Subsidiary shall and Buyer
----------------
shall cause Merger Subsidiary to vote all Shares, if any, beneficially owned by
Merger Subsidiary or its affiliates in favor of adoption and
44
approval of the Merger and this Agreement at the Company Stockholder Meeting.
SECTION 7.3 Director and Officer Liability. (a) Buyer, Merger
------------------------------
Subsidiary and the Company agree that all rights to indemnification and all
limitations on liability existing in favor of any Indemnitee (as defined below)
as provided in the Company Certificate of Incorporation, Company By-laws or any
Indemnity Agreement (as hereinafter defined) shall survive the Merger and con-
tinue in full force and effect. To the extent permitted by (i) the DGCL, (ii)
the Company's Certificate of Incorporation and the Company's By-laws or (iii)
any agreement providing for indemnification by the Company or any Subsidiary of
the Company of any Indemnitee (A) in effect on the date of this Agreement (or
entered into thereafter in accordance with the provisions of Section 6.1 of this
Agreement) and listed on Schedule 7.3 of the Company Disclosure Schedule (unless
entered into after the date hereof in accordance with Section 6.1) or (B) in
effect on the date of this Agreement and listed in the Company SEC Documents
(each, an "Indemnity Agreement"), advancement of Expenses (as hereinafter de-
fined) pursuant to this Section 7.3 shall be mandatory rather than permissive
and the Surviving Corporation shall advance Costs (as defined in Section 7.3(b)
hereof) in connection with such indemnification. Buyer shall, and shall cause
the Surviving Corporation to, expressly assume and honor in accordance with
their terms all Indemnity Agreements.
(b) In addition to the other rights provided for in this Section 7.3
and not in limitation thereof (but without in any way limiting or modifying the
obligations of any insurance carrier contemplated by Section 7.3(d)), for ten
years from and after the Effective Time, Buyer shall, and shall cause the
Surviving Corporation to, to the fullest extent permitted by applicable law, (i)
indemnify and hold harmless the individuals who on or prior to the Effective
Time were officers, directors or employees of the Company or any of its Subsid-
iaries, and the heirs, executors, trustees, fiduciaries and administrators of
such officers, directors or employees (collectively, the "Indemnitees," which
term shall not include any Halmos Entity or other Person described or referred
to in Section 7.3(c) hereof, even if any such Halmos Entity or other Person is
or was an officer, director or employee of the Company) against all losses,
Expenses (as
45
hereinafter defined), claims, damages, liabilities, judgments, or amounts paid
in settlement (collectively, "Costs") in respect to any threatened, pending or
completed claim, action, suit or proceeding, whether criminal, civil, adminis-
trative or investigative based on, or arising out of or relating to the fact
that such person is or was a director, officer or employee of the Company or any
of its Subsidiaries and arising out of acts or omissions occurring on or prior
to the Effective Time (including, without limitation, in respect of acts or
omissions in connection with this Agreement and the transactions contemplated
hereby) (an "Indemnifiable Claim") and (ii) advance to such Indemnitees all
Expenses incurred in connection with any Indemnifiable Claim promptly after
receipt of reasonably detailed statements therefor; provided, that, except as
--------
otherwise provided pursuant to any Indemnity Agreement, the person to whom
Expenses are to be advanced provides an undertaking to repay such advances if it
is ultimately determined that such person is not entitled to indemnification
from Buyer or the Surviving Corporation. In the event any Indemnifiable Claim
is asserted or made within such ten year period, all rights to indemnification
and advancement of Expenses in respect of any such Indemnifiable Claim shall
continue until such Indemnifiable Claim is disposed of or all judgments, orders,
decrees or other rulings in connection with such Indemnifiable Claim are fully
satisfied; provided, however, that Buyer shall not be liable for any settlement
-------- -------
effected without its written consent (which consent shall not be unreasonably
withheld or delayed). Except as otherwise may be provided pursuant to any
Indemnity Agreement, the Indemnitees as a group may retain only one law firm
with respect to each related matter except to the extent there is, in the
opinion of counsel to an Indemnitee, under applicable standards of professional
conduct, a conflict on any significant issue between positions of any two or
more Indemnitees; provided, that, any law firm or firms so retained shall be
-------- ----
reasonably acceptable to Buyer. For the purposes of this Section 7.3, "Expens-
es" shall include reasonable attorneys' fees and all other costs, charges and
expenses paid or incurred in connection with investigating, defending, being a
witness in or participating in (including on appeal), or preparing to defend, be
a witness in or participate in any Indemnifiable Claim.
46
(c) Notwithstanding the foregoing, with respect to any Indemnifiable
Claim commenced or threatened by or on behalf of, (i) Peter Halmos, Steven
Halmos, Halmos Trading and Investment Company, The Halmos Foundation, Creditline
Corporation, Continuity Marketing Corporation and High Plains Capital Corpo-
ration (collectively, the "Halmos Entities"), (ii) any heirs, executors, succes-
sors, family members, assigns and any other Person claiming by, through or be-
cause of, a Halmos Entity ("Halmos Assign"), (iii) a Person that directly or
indirectly, whether through the ownership of voting securities or otherwise,
controls or is controlled by or is under common control with any Halmos Entity,
(iv) any Person in which any Halmos Entity or Halmos Assign has a 10% ownership
interest, (v) any employee or agent as of the date of this Agreement of any
Halmos Entity or (vi) any Person acting at the direct or indirect request of any
Halmos Entity or Halmos Assign, against any Indemnitee asserted at any time
after ten years after the Effective Time, Buyer shall, and shall cause the Sur-
viving Corporation to, indemnify and hold harmless and advance Expenses to such
Indemnitees to the extent provided in Section 7.3(b), but without any time limit
on the period for which the obligation of Buyer pursuant to this Section 7.3(c)
shall be in effect.
(d) For three years from the Effective Time, Buyer will, and will
cause the Surviving Corporation to maintain in effect the Company's current
directors' and officers' liability insurance covering those Persons who are cur-
rently covered by the Company's directors' and officers' liability insurance
policy (a copy of which has been made available to Buyer), or Buyer may
substitute therefor policies for directors' and officers' liability insurance
covering such Persons for at least the same coverage with respect to matters
occurring prior to the Effective Time; provided, however, that in no event shall
--------
Buyer be required to expend in any one year an amount in excess of $887,040
(i.e., the amount that is 200% of the annual premiums currently paid by the
Company for such insurance); provided, further, that if the annual premiums of
--------
such insurance coverage exceed such amount, Buyer shall be obligated to cause
the Surviving Corporation to obtain a policy with the greatest coverage avail-
able for a cost not exceeding such amount. In the event that any Indemnitee is
entitled to coverage under an officers' and directors' liability insurance
policy pursuant to this
47
Section 7.3(d) and such policy has lapsed, terminated, been repudiated or is
otherwise in breach or default as a result of Buyer's failure to maintain and
fulfill its obligations pursuant to such policy as provided in this Section
7.3(d), Buyer shall, and shall cause the Surviving Corporation to pay to the
Indemnitee such amounts and provide any other coverage or benefits as the Indem-
nitee shall have received pursuant to such policy. Buyer agrees that, should
the Surviving Corporation fail to comply with the obligations of this Section
7.3, Buyer shall be responsible therefor.
(e) Notwithstanding any other provisions hereof, the obligations of
the Company, the Surviving Corporation and Buyer contained in this Section 7.3
shall be binding upon the successors and assigns of Buyer and the Surviving
Corporation. In the event the Company or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other Person or (ii) transfers all or substantially all of its properties or
assets to any Person, then, and in each case, proper provision shall be made so
that successors and assigns of the Company or the Surviving Corporation, as the
case may be, honor the indemnification obligations set forth in this Section
7.3.
(f) The obligations of the Company, the Surviving Corporation, and
Buyer under this Section 7.3 shall not be terminated or modified in such a man-
ner as to adversely affect any Indemnitee to whom this Section 7.3 applies with-
out the consent of such affected Indemnitee (it being expressly agreed that the
Indemnitees to whom this Section 7.3 applies shall be third party beneficiaries
of this Section 7.3).
(g) Buyer shall, and shall cause the Surviving Corporation to,
advance all Expenses to any Indemnitee incurred by enforcing the indemnity or
other obligations provided for in this Section 7.3.
ARTICLE VIII
COVENANTS OF BUYER, MERGER SUBSIDIARY
AND THE COMPANY
48
The parties hereto agree that:
SECTION 8.1 Reasonable Best Efforts. Subject to the terms and
-----------------------
conditions of this Agreement, each party will use its reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement.
SECTION 8.2 Certain Filings. The Company and Buyer shall cooperate
---------------
with one another (a) in connection with the preparation of the Proxy Statement
and the Form S-4 Registration Statement, and (b) in determining whether any
action by or in respect of, or filing with, any Governmental Entity is required,
or any actions, consents, approvals or waivers are required to be obtained from
parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (c) in seeking any such actions,
consents, approvals or waivers or making any such filings, furnishing infor-
mation required in connection therewith or with the Company Proxy Statement or
the Form S-4 Registration Statement and seeking timely to obtain any such ac-
tions, consents, approvals or waivers.
SECTION 8.3 Public Announcements. Buyer, Merger Subsidiary and the
--------------------
Company will consult with each other before issuing any press release or making
any public statement with respect to this Agreement and the transactions contem-
plated hereby and, except as may be required by applicable law or any listing
agreement with any national securities exchange or foreign securities exchange,
as determined by Buyer, Merger Subsidiary or the Company, as the case may be,
will not issue any such press release or make any such public statement prior to
such consultation.
SECTION 8.4 Conveyance Taxes. Buyer and the Company shall cooperate
----------------
in the preparation, execution and filing of all Tax Returns, questionnaires,
applications, or other documents regarding any Conveyance Taxes which become
payable in connection with the transactions contemplated hereunder that are
required to be filed on or before the Effective Time.
49
SECTION 8.5 Further Assurances. At and after the Effective Time, the
------------------
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.
SECTION 8.6 Employee Matters. (a) For a period of one year
----------------
immediately following the Effective Time, Buyer agrees to cause the Surviving
Corporation and its Subsidiaries to provide to all active employees of the
Company as of the Effective Time who continue to be employed by the Company
("Continuing Employees") coverage under group medical, dental, 401(k) savings,
disability insurance, life insurance, accidental death and disability, and
vacation plans or arrangements which are, in the aggregate, substantially simi-
lar to the Plans providing such benefits to the employees immediately prior to
the Effective Time.
(b) Buyer shall, and shall cause its Subsidiaries to, honor in
accordance with their terms all agreements, contracts, arrangements, commitments
and understandings described in Schedule 8.6 of the Company Disclosure Schedule.
(c) For a period of one year immediately following the Closing Date,
Buyer agrees to cause the Surviving Corporation and its Subsidiaries to provide
to all active employees of the Company at the Closing Date which may be affected
by any reduction in force subsequent to the Closing Date the benefits set forth
in the Severance Policy adopted by the Board of Directors of the Company in
connection with the July 1995 restructuring and applied in the September 1995
and December 1995 restructurings and adopted by resolution for any reductions in
force in 1996 at the February 6, 1996 meeting of the Board of Directors.
50
SECTION 8.7 Company Proxy Statement and Registration Statement.
--------------------------------------------------
Buyer will, as promptly as practicable, prepare and, following receipt of
notification from the SEC that it has no further comments on the Company Proxy
Statement, file with the SEC a registration statement on Form S-4 (the "Form S-4
Registration Statement"), containing the Company Proxy Statement, and the
prospectus in connection with the registration under the Securities Act of Buyer
Common Shares issuable upon conversion of the Shares and the other transactions
contemplated hereby. Buyer will cooperate with the Company in the preparation
and filing of the Company Proxy Statement and will provide the Company with all
financial and other data concerning Buyer (including, if required, pro forma
financial statements and financial and other data regarding the other parties to
the transactions described in Schedule 6.2 of the Buyer Disclosure Schedule) as
is necessary in order for the Company to prepare the Company Proxy Statement.
Buyer and the Company will, and will cause their accountants and lawyers to, use
their best efforts to have or cause the Form S-4 Registration Statement declared
effective as promptly as practicable, including, without limitation, causing
their accountants to deliver necessary or required instruments such as opinions
and certificates, and will take any other action required or necessary to be
taken under federal or state securities laws or otherwise in connection with the
registration process.
SECTION 8.8 Tax-Free Reorganization Treatment. The Company, Buyer
---------------------------------
and Merger Subsidiary shall execute and deliver to Skadden, Arps, Slate, Meagher
& Flom, counsel to the Company, a certificate substantially in the form attached
hereto as Exhibit 2 or Exhibit 3, as the case may be, (the "Buyer Tax Certifi-
cate" and the "Company Tax Certificate", as the case may be) at such time or
times as reasonably requested by such law firm in connection with its delivery
of an opinion with respect to the transactions contemplated hereby, and shall
provide a copy thereof to Buyer and the Company. Prior to the Effective Time,
none of the Company, Buyer and Merger Subsidiary shall take or cause to be taken
any action which would cause to be untrue (or fail to take or cause not to be
taken any action which would cause to be true) any of the information, represen-
tations or covenants in Exhibit 2 or Exhibit 3, as the case may be.
51
SECTION 8.9 Notification of Certain Matters. The Company shall give
-------------------------------
prompt notice to Buyer and Merger Subsidiary, and Buyer and Merger Subsidiary
shall give prompt notice to the Company, of (i) the occurrence or nonoccurrence
of any event the occurrence or nonoccurrence of which would be likely to cause
any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time, (ii) any
material failure of the Company, Buyer or Merger Subsidiary, as the case may be,
to comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it hereunder, (iii) any notice of,
or other communication relating to, a default or event which, with notice or
lapse of time or both, would become a default, received by it or any of its
subsidiaries subsequent to the date of this Agreement and prior to the Effective
Time, under any material contract or agreement, (iv) any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated by this
Agreement, or (v) any Material Adverse Effect, other than changes resulting from
general economic conditions; provided, however, that the delivery of any notice
--------
pursuant to this Section 8.9 shall not cure such breach or noncompliance or
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
SECTION 8.10 Blue Sky Permits. Buyer shall use its best efforts to
----------------
obtain, prior to the effective date of the Form S-4 Registration Statement, all
necessary state securities laws or "blue sky" permits and approvals required to
carry out the transactions contemplated by this Agreement and the Merger, and
will pay all expenses incident thereto.
SECTION 8.11 NYSE Listing. Buyer shall use its best efforts to cause
------------
the shares of Buyer Common Stock constituting the Merger Consideration to be
listed on the NYSE, subject to notice of official issuance thereof.
SECTION 8.12 Pooling Letter. (a) Buyer shall use its best efforts
--------------
to cause Ernst & Young LLP, its independent auditors, to deliver to Buyer a
letter to the effect that pooling of interests accounting (under Accounting
Principles Board Opinion No. 16) is appropriate
52
for the Merger, provided that the Merger is consummated in accordance with the
terms and conditions of this Agreement, and the Company shall use its best ef-
forts to cause its independent auditors, Price Waterhouse LLP, to cooperate
fully with Ernst & Young LLP (including, without limitation, by delivering to
the Company a letter substantially similar to Ernst & Young LLP's letter to
Buyer) in connection with the delivery to Buyer of such letter.
(b) The Company shall use its best efforts to cause Price Waterhouse
LLP to deliver to the Company a letter to the effect that pooling of interests
accounting (under Accounting Principles Board Opinion No. 16) is appropriate for
the Merger, provided that the Merger is consummated in accordance with the terms
and conditions of this Agreement, and Buyer shall use its best efforts to cause
Ernst & Young LLP to cooperate fully with Price Waterhouse LLP (including,
without limitation, by delivering to Buyer a letter substantially similar to
Price Waterhouse LLP's letter to the Company) in connection with the delivery to
the Company of such letter.
SECTION 8.13 Pooling. The Company and Buyer each agrees that it will
-------
not knowingly take any action which could prevent the Merger from being
accounted for as a pooling of interests for accounting purposes (under
Accounting Principles Board Opinion No. 16) and the Company will bring to the
attention of Buyer, and Buyer will bring to the attention of the Company, any
actions, or agreements or understandings, whether written or oral, that could be
reasonably likely to prevent Buyer from accounting for the Merger as a pooling
of interests. The Company will use its reasonable best efforts to inform all
Company Affiliates and other relevant employees as to those actions that should
or should not be taken by such persons so that the Merger will be accounted for
as a pooling of interests.
SECTION 8.14 SEC Filings. Each of Buyer and the Company shall
-----------
promptly provide the other party (or its counsel) with copies of all filings
made by the other party or any of its Subsidiaries with the SEC or any other
state or federal Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
53
SECTION 8.15 Affiliate Agreements. Buyer and Merger Subsidiary shall
--------------------
have received the Affiliate Letters from the Company Affiliates.
SECTION 8.16 Affiliates. Promptly upon the Company obtaining
----------
knowledge of persons who, to the best knowledge of the Company, following the
date of this Agreement until the Effective Time, become "affiliates" of the
Company for purposes of Rule 145 of the Securities Act, the Company shall use
its reasonable best efforts to identify any such person in writing to Buyer, and
will use its reasonable best efforts to cause such persons prior to the mailing
of the Company Proxy Statement, or if thereafter as soon as reasonably practi-
cable, to deliver to Buyer an Affiliate Letter; provided, however, that the
-------- -------
Company will not affirmatively, without the prior written consent of Buyer, take
any action, by hiring or appointing a new officer or director or otherwise, so
as to cause any person to become an "affiliate" unless such person executes an
Affiliate Letter prior thereto.
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.1 Conditions to the Obligations of Each Party. The
-------------------------------------------
obligations of the Company, Buyer and Merger Subsidiary to consummate the Merger
are subject to the satisfaction on or prior to the Effective Time of the fol-
lowing conditions, except to the extent permitted by applicable law, that such
conditions may be waived:
(i) Stockholder Approval. The Merger shall have been duly
--------------------
approved by a majority of the votes cast by stockholders of the Company
entitled to vote thereon in accordance with applicable law and the Company
Certificate of Incorporation and Company By-laws.
(ii) Listing of Buyer Common Stock. The shares of Buyer Common
-----------------------------
Stock issuable in accordance with the Merger shall have been approved for
listing on the NYSE, subject to official notice of issuance.
54
(iii) Registration Statement. The Form S-4 Registration
----------------------
Statement shall have become effective in accordance with the provisions of
the Securities Act, and no order suspending such effectiveness shall have
been issued and remain in effect.
(iv) HSR Act. Any applicable waiting period under the HSR Act
-------
relating to the Merger shall have expired.
(v) No Injunction. No provision of any applicable law or
-------------
regulation and no judgment, injunction, order or decree shall prohibit the
consummation of the Merger or any transactions contemplated hereby.
(vi) Pooling. Buyer shall have received a letter from Ernst &
-------
Young LLP and the Company shall have received a letter from Price Water-
house LLP each to the effect that pooling of interests accounting (under
Accounting Principles Board Opinion No. 16) is appropriate for the Merger,
provided that the Merger is consummated in accordance with the terms of
this Agreement; provided, further, that the foregoing shall not be a condi-
-------- -------
tion to the Company's obligations if either Price Waterhouse LLP or Ernst &
Young LLP is unable to deliver such letter as a result of the Company
having breached the Company's representation set forth in Section 4.21 or
the Company's covenants set forth in Sections 8.12, 8.13 or 8.16 or the
Company or any of its affiliates having taken or failed to take any other
action, in any such case that would prevent, in the opinion of such firm,
Buyer from accounting for the Merger as a pooling of interests.
SECTION 9.2 Conditions to the Obligations of the Company. The
--------------------------------------------
obligations of the Company to consummate the Merger are subject to the
satisfaction on or prior to the Effective Time of the following conditions,
except to the extent permitted by applicable law, that such conditions may be
waived:
(i) Performance of Obligations Buyer and Merger Subsidiary.
------------------------------------------------------
Each of Buyer and Merger Subsidiary will have performed in all material
respects its agreements and covenants contained in or contem
55
plated by this Agreement which are required to be performed by it at or
prior to the Effective Time.
(ii) Representations and Warranties. The representations and
------------------------------
warranties of Buyer and Merger Subsidiary set forth in this Agreement shall
be true and correct in all material respects (i) on and as of the date
hereof and (ii) on and as of the Closing Date with the same effect as
thought such representations and warranties had been made on and as of the
Closing Date (except for representations and warranties that expressly
speak only as of a specific date or time which need only be true and
correct as of such date and time).
(iii) Closing Certificate. The Company shall have received a
-------------------
certificate signed by the chief executive officer of Buyer, dated the
Closing Date, to the effect that, to the best of such officer's knowledge,
the conditions set forth in Section 9.2(i) and 9.2(ii) hereof have been
satisfied.
(iv) Tax Opinion. The Company shall have received an opinion of
-----------
Skadden, Arps, Slate, Meagher & Flom, counsel to the Company, in form and
substance reasonably satisfactory to the Company, dated as of the Effective
Time, substantially to the effect that on the basis of facts, representa-
tions and assumptions set forth in such opinion which are consistent with
the state of facts then existing, the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code, and,
accordingly, for United States federal income tax purposes, that:
(A) no gain or loss will be recognized by the Company, Buyer or
Merger Subsidiary as a result of the Merger;
(B) no gain or loss will be recognized by a stockholder of the
Company whose Shares are exchanged solely for Buyer Common Stock
pursuant to the Merger (except with respect to cash received by a
holder of Shares in lieu of a fractional share interest in Buyer
Common Stock);
56
(C) the tax basis of the Buyer Common Stock received by a holder of
Shares in the Merger will be the same as the tax basis of the
Shares surrendered in exchange therefor (reduced by any amount
allocable to a fractional share interest in Buyer Common Stock
for which cash is received); and
(D) the holding period of the shares of Buyer Common Stock received
by a holder of Shares in the Merger will include the period
during which such Shares surrendered in exchange therefor were
held, provided that such Shares were held as capital assets at
the Effective Time of the Merger.
In rendering such opinion, such firm may require and rely upon
representations contained in the Buyer Tax Certificate, the Company Tax
Certificate and such other certificates from such other persons as such firm may
require.
SECTION 9.3 Conditions to the Obligations of Buyer and Merger
-------------------------------------------------
Subsidiary. The obligations of Buyer and Merger Subsidiary to consummate the
- ----------
Merger are subject to the satisfaction on or prior to the Effective Time of the
following conditions, except to the extent permitted by applicable law, that
such conditions may be waived:
(i) Performance of Obligations the Company. The Company will
--------------------------------------
have performed in all material respects its agreements and covenants
contained in or contemplated by this Agreement which are required to be
performed by it at or prior to the Effective Time.
(ii) Representations and Warranties. The representations and
------------------------------
warranties of the Company set forth in this Agreement shall be true and
correct in all material respects (i) on and as of the date hereof and (ii)
on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date
(except for representations and warranties that
57
expressly speak only as of a specific date or time which need only be true
and correct as of such date and time).
(iii) Closing Certificate. Buyer and Merger Subsidiary shall
-------------------
have received a certificate signed by the chief executive officer of the
Company, dated the Closing Date, to the effect that, to the best of such
officer's knowledge, the conditions set forth in Section 9.3(i) and 9.3(ii)
hereof have been satisfied.
(iv) Affiliate Agreements. Each Company Affiliate shall have
--------------------
performed his or its respective obligations under the applicable Affiliate
Letter.
ARTICLE X
TERMINATION
SECTION 10.1 Termination. This Agreement may be terminated and the
-----------
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any approval of this Agreement by the stockholders of the Company):
(i) by mutual written consent of the Company and Buyer;
(ii) by either the Company or Buyer, if the Merger has not been
consummated by December 31, 1996 (as such date may be extended by mutual
agreement or pursuant to the proviso to this sentence, the "Outside Termi-
nation Date"); provided, however, that the right to terminate this
--------
Agreement under this paragraph shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure to meet the date requirements of this para-
graph;
(iii) by either the Company or Buyer, if there shall be any law or
regulation that makes consummation of the Merger illegal or if any
judgment, injunction, order or decree enjoining Buyer or the Company from
consummating the Merger is entered and
58
such judgment, injunction, order or decree shall become final and
nonappealable;
(iv) by the Company if (A) there shall have been a breach of any
representation or warranty on the part of Buyer or Merger Subsidiary set
forth in this Agreement, or if any representation or warranty of Buyer or
Merger Subsidiary shall have become untrue, in either case such that the
condition set forth in Section 9.2(ii) would be incapable of being
satisfied by the Outside Termination Date or (B) there shall have been a
breach by Buyer or Merger Subsidiary of any of their respective covenants
or agreements hereunder having a Material Adverse Effect on Buyer or
materially adversely affecting (or materially delaying) the consummation of
the Merger, and Buyer or Merger Subsidiary, as the case may be, has not
cured such breach within twenty business days after notice by the Company
thereof;
(v) by Buyer and Merger Subsidiary if (A) there shall have been a
breach of any representation or warranty on the part of the Company set
forth in this Agreement, or if any representation or warranty of the
Company shall have become untrue, in either case such that the condition
set forth in Section 9.3(ii) would be incapable of being satisfied by the
Outside Termination Date or (B) there shall have been a breach by the
Company of its covenants or agreements hereunder having a Material Adverse
Effect on the Company or materially adversely affecting (or materially
delaying) the consummation of the Merger, and the Company has not cured
such breach within twenty business days after notice by Buyer or Merger
Subsidiary thereof;
(vi) by Buyer or Merger Subsidiary, if (A) the Board of Directors of
the Company or any committee thereof shall have withdrawn, modified or
changed in a manner adverse to Buyer or Merger Subsidiary its
recommendation of the Merger or this Agreement or approved or recommended a
Superior Proposal or (B) the Company shall have entered into a definitive
agreement with respect to an Acquisition Proposal;
(vii) by the Company, upon entering into a definitive agreement in
accordance with Section
59
6.4(b), provided (x) it has complied with all provisions of Section 6.4,
including the notice provisions therein, and (y) that it makes simultaneous
payment of Buyer's Expenses (as defined in Section 12.4); or
(viii) by Buyer, Merger Subsidiary or the Company, if the Company's
stockholders do not approve the Merger at the Company Stockholder Meeting.
The party desiring to terminate this Agreement pursuant to this Section 10.1
(other than with respect to Section 10.1(i)) shall give written notice of such
termination to the other party.
SECTION 10.2 Effect of Termination. If this Agreement is terminated
---------------------
pursuant to Section 10.1 hereof, this Agreement shall become void and of no
effect with no liability on the part of any party hereto; provided that (i) the
--------
agreements contained in Sections 4.16, 5.6, 10.2 and 12.4, hereof shall survive
the termination hereof; (ii) the Confidentiality Agreement shall remain in full
force and effect and Section 6.3(b) hereof shall have no binding effect whatso-
ever; and (iii) nothing contained in this Section 10.2 shall relieve any party
from liability for any breach of this Agreement.
ARTICLE XI
DEFINED TERMS
For the purposes of this Agreement, the following terms shall have the
following respective meanings:
"Active Subsidiary" shall have the meaning set forth in Section
4.6(a).
"Affiliate Letter" shall have the meaning set forth in the
Introduction.
"Agreement" shall have the meaning set forth in the Introduction.
"Acquisition Proposal" shall have the meaning set forth in Section
6.4.(a).
60
"Affiliates" shall have the meaning set forth in Section 8.9.
"Average Stock Price" shall have the meaning set forth in Section
1.2(a).
"blue sky" shall have the meaning set forth in Section 8.10.
"Buyer" shall have the meaning set forth in the Introduction.
"Buyer Certificates" shall have the meaning set forth in Section
1.3(a).
"Buyer Common Stock" shall have the meaning set forth in the
Introduction.
"Buyer Disclosure Schedule" shall have the meaning set forth in
Section 5.1.
"Buyer Preferred Stock" shall have the meaning set forth in Section
5.9.
"Buyer's Expenses" shall have the meaning set forth in Section
12.4(d).
"Buyer SEC Documents" shall have the meaning set forth in Section
5.12.
"Buyer Securities" shall have the meaning set forth in Section 5.9.
"Buyer Tax Certificate" shall have the meaning set forth in Section
8.8.
"Buyer's Accountants" shall have the meaning set forth in Section
8.12(a).
"Certificate of Merger" shall have the meaning set forth in Section
1.1(b).
"Closing" shall have the meaning set forth in Section 2.1.
"Closing Date" shall have the meaning set forth in Section 2.1.
61
"Code" shall have the meaning set forth in the Introduction.
"Company" shall have the meaning set forth in the Introduction.
"Company Affiliate" shall have the meaning set forth in Section the
Introduction.
"Company Affiliate Letter" shall have the meaning set forth in the
Introduction.
"Company By-laws" shall have the meaning set forth Section 3.2.
"Company Certificate of Incorporation" shall have the meaning set
forth in Section 3.1.
"Company Disclosure Schedule" shall have the meaning set forth in
Section 4.1.
"Company Proxy Statement" shall have the meaning set forth in Section
6.2(i).
"Company SEC Documents" shall have the meaning set forth in Section
4.7.
"Company Securities" shall have the meaning set forth in Section 4.5.
"Company Stock Plans" shall have the meaning set forth in Section
1.10.
"Company Stockholder Meeting" shall have the meaning set forth in
Section 6.2.
"Company Tax Certificate" shall have the meaning set forth in Section
8.8.
"Company's Accountants" shall have the meaning set forth in Section
8.12(a).
"Company's Expenses" shall have the meaning set forth in Section
12.4(e).
62
"Confidentiality Agreement" shall have the meaning set forth in
Section 6.3(a).
"Continuing Employees" shall have the meaning set forth in Section
8.6(a).
"Conversion Number" shall have the meaning set forth in Section
1.2(a).
"Conveyance Taxes" shall have the meaning set forth in Section 6.5.
"Costs" shall have the meaning set forth in Section 7.3(b).
"DGCL" shall have the meaning set forth in Section 1.1(a).
"Effective Time" shall have the meaning set forth in Section 1.1(b).
"employee pension benefit plan" shall have the meaning set forth in
Section 4.13(a).
"employee welfare benefit plan" shall have the meaning set forth in
Section 4.13(a).
"Environmental Law" shall have the meaning set forth in Section
4.17(c).
"ERISA" shall have the meaning set forth in Section 4.13(a).
"ERISA Affiliate" shall have the meaning set forth in Section 4.13(a).
"ERISA Plans" shall have the meaning set forth in Section 4.13(a).
"Exchange Act" shall have the meaning set forth in Section 4.3.
"Exchange Agent" shall have the meaning set forth in Section 1.3(a).
"Exchange Fund" shall have the meaning set forth in Section 1.3(a).
63
"Expenses" shall have the meaning set forth in Section 7.3(b).
"Form S-4 Registration Statement" shall have the meaning set forth in
Section 8.7.
"GAAP" shall have the meaning set forth in Section 4.8.
"Governmental Entity" shall have the meaning set forth in Section 4.3.
"Halmos Entities" shall have the meaning set forth in Section
7.3(c)(i).
"Halmos Assign" shall have the meaning set forth in Section
7.3(c)(iii).
"HSR Act" shall have the meaning set forth in Section 4.3.
"Indemnifiable Claim" shall have the meaning set forth in Section
7.3(b).
"Indemnitees" shall have the meaning set forth in Section 7.3(b).
"Indemnity Agreement" shall have the meaning set forth in Section
7.3(a).
"Intangible Property" shall have the meaning set forth in Section
4.19(a).
"Licenses" shall have the meaning set forth in Section 4.1.
"Lien" shall have the meaning set forth in Section 4.4.
"Material Adverse Effect" shall have the meaning set forth in Section
4.1.
"Material Contracts" shall have the meaning set forth in Section 4.20.
"Measurement Period" shall have the meaning set forth in Section
1.2(a).
64
"Merger" shall have the meaning set forth in Section 1.1(a).
"Merger Consideration" shall have the meaning set forth in Section
1.2(a).
"Merger Subsidiary" shall have the meaning set forth in the
Introduction.
"Notice of Superior Proposal" shall have the meaning set forth in
Section 6.4(b).
"NYSE" shall have the meaning set forth in Section 1.2(a).
"Option" shall have the meaning set forth in Section 1.10.
"Outside Termination Date" shall have the meaning set forth in Section
10.1(ii).
"PBGC" shall have the meaning set forth in Section 4.13(c).
"Person" shall have the meaning set forth in Section 1.4.
"Plans" shall have the meaning set forth in Section 4.13(a)
"Preferred Stock" shall have the meaning set forth in Section 4.5.
"SafeCard" shall have the meaning set forth in Section 4.20.
"SEC" shall have the meaning set forth in Section 4.7.
"Secretary of State" shall have the meaning set forth in Section
1.1(b).
"Securities Act" shall have the meaning set forth in the Introduction.
"Share Certificates" shall have the meaning set forth in Section
1.3(b).
65
"Shares" shall have the meaning set forth in the Introduction.
"single employer" shall have the meaning set forth in Section 4.13(a).
"Subsidiary" shall have the meaning set forth in Section 4.6(a).
"Substitute Option" shall have the meaning set forth in Section 1.10.
"Surviving Corporation" shall have the meaning set forth in Section
1.1(a).
"Tax Return" shall have the meaning set forth in Section 4.12(b)(ii).
"Taxes" shall have the meaning set forth in Section 4.12(b)(i).
"Third Party" shall have the meaning set forth in Section 12.4(e).
"Third Party Acquisition" shall have the meaning set forth in Section
12.4(e).
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 Notices. All notices, requests and other communications
-------
to any party hereunder shall be in writing (including telecopy or similar
writing) and shall be given,
if to Buyer or Merger Subsidiary, to:
CUC International, Inc.
707 Summer Street
Stamford, CT 06901
Telecopy: (203) 348-1982
Attention: Amy N. Lipton, Esq.
66
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telecopy: (212) 310-8007
Attention: Howard Chatzinoff, Esq.
if to the Company, to:
Ideon Group, Inc.
7596 Centurion Parkway
Jacksonville, Florida 32256
Telecopy: (904) 218-1850
Attention: Mr. Eugene Miller, Chairman of
the Board and Chief Executive Officer
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telecopy: (212) 735-2000
Attention: Roger S. Aaron, Esq.
or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective (i) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this Section 11.1
and the appropriate telecopy confirmation is received or (ii) if given by any
other means, when delivered at the address specified in this Section 12.1.
SECTION 12.2 Survival of Representations and Warranties. The
------------------------------------------
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time or the
termination of this Agreement. All covenants and agreements contained herein
which by their terms are to be performed in whole or in part subsequent to the
Effective Time shall survive the Merger in accordance with their terms. Nothing
contained in this Section 12.2 shall relieve any party from liability for any
willful breach of this Agreement.
67
SECTION 12.3 Amendments; No Waivers. (a) Except as may otherwise be
----------------------
provided herein, any provision of this Agreement may be amended or waived prior
to the Effective Time if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by the Company, Buyer and Merger
Subsidiary or in the case of a waiver, by the party against whom the waiver is
to be effective; provided that after the adoption of this Agreement by the
--------
stockholders of the Company, no such amendment or waiver shall, without the
further approval of such stockholders, alter or change (i) the amount or kind of
consideration to be received in exchange for any shares of capital stock of the
Company or (ii) any of the terms or conditions of this Agreement if such alter-
ation or change could adversely affect the holders of any shares of capital
stock of the Company.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 12.4 Expenses. (a) Except as provided below in this Section
--------
12.4, all fees and expenses incurred in connection with the Merger, this Agree-
ment and the transactions contemplated by this Agreement shall be paid by the
party incurring such fees or expenses, whether or not the Merger is consummated.
(b) The Company shall pay, or cause to be paid, in same day funds to
Buyer, Buyer's Expenses (as hereinafter defined), in the event that the Company
shall enter into a definitive agreement with respect to a Superior Proposal and
this Agreement shall be terminated pursuant to Section 10.1(vi)(B) or Section
10.1(vii). In addition, in the event that this Agreement shall be terminated
pursuant to Section 10.1(vi) or Section 10.1(vii) and, (i) within twelve months
thereafter, the Company enters into an agreement with respect to a Third Party
Acquisition (which is consummated within twelve months after such termination),
or a Third Party Acquisition occurs and is completed, (ii) after the date hereof
and prior to the date of termination, (x) the Company or its agents had engaged
in negotiations with a Third Party with respect to a Third Party Acquisition,
(y)
68
the Company or its agents furnished information to a Third Party with respect to
a Third Party Acquisition or (z) a Third Party submitted to the Company a pro-
posal (which shall include price and other material terms and conditions) for a
Third Party Acquisition and (iii) with respect to (x) and (y) above, the rele-
vant Third Party makes or announces (before or after such termination) a propos-
al with respect to a Third Party Acquisition; then the Company shall pay, or
cause to be paid, in same day funds, to Buyer, (A) a termination fee in the
amount of $7,000,000, which termination fee shall be paid on the date of consum-
mation of a Third Party Acquisition (if and only if a Third Party Acquisition
shall be consummated within twelve months after the date of termination), and
(B) to the extent not previously paid by the Company to Buyer pursuant to the
first sentence of this Section 12.4(b), Buyers' Expenses. It is expressly
agreed that the amount to be paid pursuant to this Section 12.4(b) represents
liquidated damages and not a penalty.
(c) The cost of printing the Form S-4 Registration Statement and the
Company Proxy Statement shall be borne equally by the Company and Buyer.
(d) The Company shall pay or cause to be paid (not later than ten
business days after submission of statements therefor) in same day funds to
Buyer, Buyer's Expenses in the event this Agreement shall be terminated pursuant
to Section 10.1(v). Buyer shall pay or cause to be paid (not later than ten
business days after submission of statements therefor) in same day funds to the
Company, Company's Expenses in the event this Agreement shall be terminated
pursuant to Section 10.1(iv). If Buyer or Merger Subsidiary shall submit a
request for reimbursement hereunder, Buyer or Merger Subsidiary will provide the
Company in due course with invoices or other reasonable evidence of such
expenses upon request. If the Company shall submit a request for reimbursement
hereunder, the Company will provide Buyer in due course with invoices or other
reasonable evidence of such expenses upon request.
(e) For purposes of this Section 12.4, "Third Party Acquisition"
means the occurrence of any of the following events: (i) the acquisition of the
Company by merger or otherwise by any person (which includes a "person" as such
term is defined in Section 13(d)(3) of the Exchange Act) or entity other than
Buyer, Merger Subsidiary or any affiliate thereof (a "Third Party"); (ii) the
acquisition by
69
a Third Party of more than 35% of the total assets of the Company and its
Subsidiaries, taken as a whole; or (iii) the acquisition by a Third Party of 35%
or more of the outstanding shares of Company Common Stock. For purposes of this
Section 12.4, "Buyer's Expenses" shall mean documented out-of-pocket fees and
expenses reasonably and actually incurred or paid by or on behalf of Buyer in
connection with the Merger and the consummation of any of the transactions con-
templated by this Agreement, including, reasonable fees and expenses of counsel,
accountants, experts, financial advisors and consultants to Buyer, in an
aggregate amount not to exceed $1,000,000. For purposes of this Section 12.4,
"Company's Expenses" shall mean documented out-of-pocket fees and expenses
reasonably and actually incurred or paid by or on behalf of the Company in
connection with the Merger and the consummation of any of the transactions con-
templated by this Agreement, including, reasonable fees and expenses of counsel,
accountants, experts, financial advisors and consultants to the Company, in an
aggregate amount not to exceed $1,000,000.
SECTION 12.5 Successors and Assigns. The provisions of this
----------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, provided that no party may assign,
--------
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto.
SECTION 12.6 Governing Law. This Agreement shall be construed in
-------------
accordance with and governed by the law of the State of Delaware without regard
to conflicts of laws.
SECTION 12.7 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated herein is not affected in any manner
materially adverse to any party hereto. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner.
70
SECTION 12.8 Third Party Beneficiaries. No provision of this
-------------------------
Agreement other than Section 7.3 and Section 8.6 hereof is intended to confer
upon any Person other than the parties hereto any rights or remedies hereunder.
SECTION 12.9 Entire Agreement. This Agreement, including any
----------------
exhibits or schedules hereto and the Confidentiality Agreement constitutes the
entire agreement among the parties hereto with respect to the subject matter
hereof and supersede all other prior agreements or undertaking with respect
thereto, both written and oral.
SECTION 12.10 Counterparts; Effectiveness. This Agreement may be
---------------------------
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
71
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
IDEON GROUP, INC.
By: /s/ Eugene Miller
--------------------------
Name: Eugene Miller
Title: Chairman and CEO
CUC INTERNATIONAL INC.
By:
----------------------
Name:
Title:
IG ACQUISITION CORP.
By:
----------------------
Name:
Title: