Agreement and Plan of Merger and Reorganization - Quantum Corp. and Meridian Data Inc.
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
QUANTUM CORPORATION,
a Delaware corporation;
DEFIANT ACQUISITION SUB, INC.,
a Delaware corporation;
MERIDIAN DATA, INC.,
a Delaware corporation; and
MERIDIAN DATA, INC.,
a California corporation
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Dated as of May 10, 1999
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TABLE OF CONTENTS
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SECTION 1. DESCRIPTION OF TRANSACTION .................................................................. 1
1.1 Merger of Merger Sub into the Principal Company .......................................... 1
1.2 Effect of the Merger ..................................................................... 2
1.3 Closing; Effective Time .................................................................. 2
1.4 Certificate of Incorporation and Bylaws; Directors and Officers .......................... 2
1.5 Conversion of Shares ..................................................................... 2
1.6 Stock Options ............................................................................ 4
1.7 Closing of the Company's Transfer Books .................................................. 4
1.8 Exchange of Certificates ................................................................. 4
1.9 Dissenting Shares ........................................................................ 5
1.10 Tax Consequences ......................................................................... 6
1.11 Accounting Consequences .................................................................. 6
1.12 Further Action ........................................................................... 6
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............................................... 6
2.2 Certificate of Incorporation and Bylaws .................................................. 7
2.3 Capitalization, Etc. ..................................................................... 7
2.4 SEC Filings; Financial Statements ........................................................ 8
2.5 Absence of Changes ....................................................................... 9
2.6 Title to Assets .......................................................................... 11
2.7 Receivables; Customers ................................................................... 11
2.8 Real Property; Equipment; Leasehold ...................................................... 11
2.9 Proprietary Assets ....................................................................... 11
2.10 Contracts................................................................................. 15
2.11 Sale of Products; Performance of Services ................................................ 17
2.12 Liabilities .............................................................................. 18
2.13 Compliance with Legal Requirements ....................................................... 18
2.14 Certain Business Practices ............................................................... 18
2.15 Governmental Authorizations; Customs ..................................................... 18
2.16 Tax Matters .............................................................................. 19
2.17 Employee and Labor Matters; Benefit Plans ................................................ 20
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2.18 Environmental Matters .................................................................... 22
2.19 Insurance. ............................................................................... 23
2.20 Transactions with Affiliates ............................................................. 23
2.21 Legal Proceedings; Orders ................................................................ 24
2.22 Authority; Inapplicability of Anti-takeover Statutes; Binding Nature of Agreement......... 24
2.23 Section 203 of the DGCL Not Applicable; Company Rights Plan .............................. 24
2.24 No Discussions ........................................................................... 25
2.25 Vote Required ............................................................................ 25
2.26 Non-Contravention; Consents .............................................................. 25
2.27 Fairness Opinion ......................................................................... 26
2.28 Financial Advisor ........................................................................ 26
2.29 Registration Statement ................................................................... 26
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB ..................................... 27
3.1 Organization, Standing and Power ......................................................... 27
. 3.2 Capitalization, Etc. ..................................................................... 27
3.3 SEC Filings; Financial Statements ........................................................ 28
3.4 Disclosure ............................................................................... 28
3.5 Authority; Binding Nature of Agreement ................................................... 28
3.6 No Vote Required ......................................................................... 29
3.7 Non-Contravention; Consents .............................................................. 29
3.8 Valid Issuance ........................................................................... 29
SECTION 4. CERTAIN COVENANTS ........................................................................... 29
4.1 Access and Investigation ................................................................. 29
4.2 Operation of the Company's Business ...................................................... 30
4.3 No Solicitation .......................................................................... 33
4.4 Proprietary Assets ....................................................................... 35
4.5 Termination of Plans ..................................................................... 35
4.6 Plan Amendment ........................................................................... 35
4.7 Approval of Delaware Reincorporation ..................................................... 35
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4.8 Parent Notification ...................................................................... 36
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES ......................................................... 36
5.1 Registration Statement; Prospectus/Proxy Statement ....................................... 36
5.2 Company Stockholders' Meeting ............................................................ 37
5.3 Regulatory Approvals ..................................................................... 39
5.4 Stock Options ............................................................................ 39
5.5 Indemnification of Officers and Directors ................................................ 40
5.6 Additional Agreements .................................................................... 41
5.7 Disclosure ............................................................................... 41
5.8 Affiliate Agreements ..................................................................... 41
5.9 Tax Matters .............................................................................. 42
5.10 Listing .................................................................................. 42
5.11 Resignation of Officers and Directors .................................................... 42
5.12 Employee Service Credit .................................................................. 42
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB ................................ 43
6.1 Accuracy of Representations .............................................................. 43
6.2 Performance of Covenants ................................................................. 43
6.3 Effectiveness of Registration Statement .................................................. 43
6.4 Stockholder Approval ..................................................................... 43
6.5 Agreements and Documents ................................................................. 43
6.6 No Material Adverse Change ............................................................... 44
6.7 HSR Act .................................................................................. 44
6.8 No Restraints ............................................................................ 44
6.9 No Governmental Litigation ............................................................... 44
6.10 No Other Litigation ...................................................................... 45
6.11 Company Rights Plan ...................................................................... 45
6.12 Effectiveness of the Plan Amendment ...................................................... 45
6.13 Reincorporation in Delaware .............................................................. 45
6.14 No Reincorporation Liability ............................................................. 45
6.15 Stockholder Approval ..................................................................... 45
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SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY ........................................... 45
7.1 Accuracy of Representations .............................................................. 45
7.2 Performance of Covenants ................................................................. 46
7.3 Effectiveness of Registration Statement .................................................. 46
7.4 Stockholder Approval ..................................................................... 46
7.5 Documents ................................................................................ 46
7.6 HSR Act .................................................................................. 46
7.7 Listing .................................................................................. 46
7.8 No Restraints ............................................................................ 46
SECTION 8. TERMINATION ................................................................................. 47
8.1 Termination .............................................................................. 47
8.2 Effect of Termination .................................................................... 48
8.3 Expenses; Termination Fees ............................................................... 48
SECTION 9. MISCELLANEOUS PROVISIONS .................................................................... 48
9.1 Amendment ................................................................................ 48
9.2 Waiver ................................................................................... 49
9.3 No Survival of Representations and Warranties ............................................ 49
9.4 Entire Agreement; Counterparts ........................................................... 49
9.5 Applicable Law; Jurisdiction ............................................................. 49
9.6 Attorneys' Fees .......................................................................... 49
9.7 Assignability ............................................................................ 49
9.8 Notices .................................................................................. 50
9.9 Cooperation .............................................................................. 51
9.10 Construction ............................................................................. 51
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is
made and entered into as of May 10, 1999, by and among: QUANTUM CORPORATION, a
Delaware corporation ("PARENT"); DEFIANT ACQUISITION SUB, INC., a Delaware
corporation and a wholly owned subsidiary of Parent ("MERGER SUB"); and MERIDIAN
DATA, INC., a Delaware corporation (the "DELAWARE COMPANY") and MERIDIAN DATA,
INC., a California corporation, to the extent such corporation is in existence,
(the "CALIFORNIA COMPANY"), (the Delaware Company and the California Company are
referred to collectively herein as the "COMPANY", and "PRINCIPAL COMPANY" shall
mean, as between the California Company and the Delaware Company, that
corporation the shares of which are registered under Section 12(g) of the
Securities Act immediately prior to the Closing). Certain capitalized terms used
in this Agreement are defined in Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of
Merger Sub into the Principal Company in accordance with this Agreement, the
Delaware General Corporation Law and such other state laws as may be applicable
(the "Merger"). Upon consummation of the Merger, Merger Sub will cease to exist,
and the Principal Company will become a wholly owned subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For financial reporting purposes, it is intended that the
Merger be accounted for as a purchase.
C. The respective boards of directors of Parent, Merger Sub and the
Company have approved this Agreement and approved the Merger.
D. In order to induce Parent to enter into this Agreement and to
consummate the Merger, certain stockholders of the Principal Company are
entering into Voting Agreements pursuant to which they are agreeing to vote in
favor of the adoption and approval of this Agreement and the approval of the
Merger.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE PRINCIPAL COMPANY. Upon the terms
and subject to the conditions set forth in this Agreement, at the Effective Time
(as defined in Section 1.3), Merger Sub shall be merged with and into the
Principal Company, and the separate existence of Merger Sub shall cease. The
Principal Company will continue as the surviving corporation in the Merger (the
"SURVIVING CORPORATION") and be a wholly owned subsidiary of Parent.
1.
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1.2 EFFECT OF THE MERGER. The Merger shall have the effects set
forth in this Agreement, in the applicable provisions of the Delaware General
Corporation Law (the "DGCL") and such other state laws as may be applicable.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "CLOSING") shall take place at the offices
of Cooley Godward LLP, located at Five Palo Alto Square, 3000 El Camino Real,
Palo Alto, California, at 10:00 a.m. on a date to be mutually agreed to by
Parent and the Company (the "Closing Date"), which shall be no later than the
second business day after the satisfaction or waiver of the conditions set forth
in Sections 6 and 7. Contemporaneously with or as promptly as practicable after
the Closing, the parties hereto shall cause a properly executed certificate of
merger conforming to the requirements of the DGCL (the "CERTIFICATE OF MERGER")
to be filed with the Secretary of State of the State of Delaware and to file
such other certificates of merger or analogous documents to be filed with the
Secretary of State of such other states as may be required to effect the Merger.
The Merger shall take effect at the time the Certificate of Merger is filed with
the Secretary of State of the State of Delaware or at such later time as may be
specified in the Certificate of Merger (the "EFFECTIVE TIME").
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND
OFFICERS. Unless otherwise determined by Parent prior to the Effective Time:
(a) the Certificate of Incorporation of the Surviving
Corporation shall be the Certificate of Incorporation of Merger Sub except that
the name of the Surviving Corporation shall be Meridian Data, Inc.;
(b) the Bylaws of the Surviving Corporation shall be amended
and restated as of the Effective Time to conform to the Bylaws of Merger Sub as
in effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the respective individuals who are
directors and officers of Merger Sub immediately prior to the Effective Time.
1.5 CONVERSION OF SHARES.
(a) Subject to Sections 1.5(b), 1.5(c) and 1.5(d), at the
Effective Time, by virtue of the Merger and without any further action on the
part of Parent, Merger Sub, the Company or any stockholder of the Company:
(i) any shares of Company Common Stock then held by the
Principal Company or any Subsidiary of the Principal Company (or held in the
Principal Company's treasury) shall be canceled and retired and shall cease to
exist at the Effective Time, and no consideration shall be delivered in exchange
therefor;
(ii) any shares of Company Common Stock then held by
Parent, Merger Sub or any other Subsidiary of Parent shall be canceled and
retired and shall cease to exist at the Effective Time, and no consideration
shall be delivered in exchange therefor;
2.
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(iii) each share of the common stock, $0.001 par value
per share, of Merger Sub then outstanding shall be converted into one share of
common stock of the Surviving Corporation; and
(iv) except as provided in clauses "(i)" and "(ii)" of
this sentence, each share of Company Common Stock then outstanding shall be
converted into the right to receive 0.489 of a share of Parent Common Stock;
provided, however, that:
(A) if the Parent Average Stock Price is less than
$14.00, then each outstanding share of Company Common Stock shall be converted
into the number of shares of Parent Common Stock determined by dividing $7.00 by
the Parent Average Stock Price, and
(B) if the Parent Average Stock Price is greater
than $20.00, then each outstanding share of Company Common Stock shall be
converted into the number of shares of Parent Common Stock determined by
dividing $10.00 by the Parent Average Stock Price.
(b) The fraction of a share of Parent Common Stock into
which each outstanding share of Company Common Stock is to be converted pursuant
to Section 1.5(a)(iv) (as such fraction may be adjusted from time to time in
accordance with this Section 1.5(b)) is referred to as the "EXCHANGE RATIO."
If, between the date of this Agreement and the Effective Time, the outstanding
shares of Company Common Stock or Parent Common Stock are changed into a
different number or class of shares by reason of any stock split, division or
subdivision of shares, stock dividend, reverse stock split, consolidation of
shares, reclassification, recapitalization or other similar transaction, then
the Exchange Ratio shall be appropriately adjusted. For example, if one share of
Parent Common Stock, as constituted on the date hereof, is reconstituted into
one share of Class A Common Stock and one-half of a share of Class B Common
Stock and the Exchange Ratio is 0.5 such that 2 shares of Company Common Stock
would convert into 1 share of Parent Common Stock as constituted on the date
hereof, then with respect to the conversion into the reconstituted shares, 2
shares of Company Common Stock would be converted into 1 share of Class A Common
Stock and 1/2 share of Class B Common Stock.
(c) If any shares of Company Common Stock outstanding
immediately prior to the Effective Time are unvested or are subject to a
repurchase option, risk of forfeiture or other condition under any applicable
restricted stock purchase agreement or other agreement with the Company or under
which the Company has any rights, then (unless such condition terminates by
virtue of the Merger pursuant to the express term of such agreement) the shares
of Parent Common Stock issued in exchange for such shares of Company Common
Stock will also be unvested and subject to the same repurchase option, risk of
forfeiture or other condition, and the certificates representing such shares of
Parent Common Stock may accordingly be marked with appropriate legends. The
Company shall take all action that may be necessary to ensure that, from and
after the Effective Time, Parent is entitled to exercise any such repurchase
option or other right set forth in any such restricted stock purchase agreement
or other agreement.
3.
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(d) No fractional shares of Parent Common Stock shall be
issued in connection with the Merger, and no certificates or scrip for any such
fractional shares shall be issued. Any holder of Company Common Stock who would
otherwise be entitled to receive a fraction of a share of Parent Common Stock
(after aggregating all fractional shares of Parent Common Stock issuable to such
holder) shall, in lieu of such fraction of a share and upon surrender of such
holder's Company Stock Certificate(s) (as defined in Section 1.6), be paid in
cash the dollar amount (rounded to the nearest whole cent), without interest,
determined by multiplying such fraction by the closing price of a share of
Parent Common Stock on Nasdaq on the Effective Date (or, if such date is not a
trading day, then the trading day immediately preceding the Effective Date).
1.6 STOCK OPTIONS. At the Effective Time, all Company Options (as
defined in Section 2.3(b)) shall be assumed by Parent in accordance with Section
5.4.
1.7 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time:
(a) all shares of Company Common Stock outstanding immediately prior to the
Effective Time shall automatically be canceled and retired and shall cease to
exist, and all holders of certificates representing shares of Company Common
Stock that were outstanding immediately prior to the Effective Time shall cease
to have any rights as stockholders of the Company; and (b) the stock transfer
books of the Company shall be closed with respect to all shares of Company
Common Stock outstanding immediately prior to the Effective Time. No further
transfer of any such shares of Company Common Stock shall be made on such stock
transfer books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any shares of Company Common Stock (a
"COMPANY STOCK CERTIFICATE") IS presented to the Exchange Agent (as defined in
Section 1.8) or to the Surviving Corporation or Parent, such Company Stock
Certificate shall be canceled and shall be exchanged as provided in Section 1.8.
1.8 EXCHANGE OF CERTIFICATES.
(a) Harris Trust and Savings Bank or such other reputable
bank or trust company selected by Parent prior to the Closing Date shall act as
exchange agent in the Merger (the "EXCHANGE AGENT"). Promptly after the
Effective Time, Parent shall deposit with the Exchange Agent (i) certificates
representing the shares of Parent Common Stock issuable pursuant to this Section
1, and (ii) cash sufficient to make payments in lieu of fractional shares in
accordance with Section 1.5(d). The shares of Parent Common Stock and cash
amounts so deposited with the Exchange Agent, together with any dividends or
distributions received by the Exchange Agent with respect to such shares, are
referred to collectively as the "EXCHANGE FUND."
(b) As soon as practicable after the Effective Time, the
Exchange Agent will mail to the record holders of Company Stock Certificates (i)
a letter of transmittal in customary form and containing such provisions as
Parent may reasonably specify (including a provision confirming that delivery of
Company Stock Certificates shall be effected, and risk of loss and title to
Company Stock Certificates shall pass, only upon delivery of such Company Stock
Certificates to the Exchange Agent), and (ii) instructions for use in effecting
the surrender of Company Stock Certificates in exchange for certificates
representing Parent Common Stock. Upon surrender of a Company Stock Certificate
to the Exchange Agent for exchange, together
4.
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with a duly executed letter of transmittal and such other documents as may be
reasonably required by the Exchange Agent or Parent, (1) the holder of such
Company Stock Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of whole shares of Parent Common Stock that
such holder has the right to receive pursuant to the provisions of Section 1.5
(and cash in lieu of any fractional share of Parent Common Stock), and (2) the
Company Stock Certificate so surrendered shall be canceled. Until surrendered as
contemplated by this Section 1.8(b), each Company Stock Certificate shall be
deemed, from and after the Effective Time, to represent only the right to
receive shares of Parent Common Stock (and cash in lieu of any fractional share
of Parent Common Stock) as contemplated by Section 1.5. If any Company Stock
Certificate shall have been lost, stolen or destroyed, Parent may, in its
discretion and as a condition precedent to the issuance of any certificate
representing Parent Common Stock, require the owner of such lost, stolen or
destroyed Company Stock Certificate to provide an appropriate affidavit and to
deliver a bond (in such sum as Parent may reasonably direct) as indemnity
against any claim that may be made against the Exchange Agent, Parent or the
Surviving Corporation with respect to such Company Stock Certificate.
(c) No dividends or other distributions declared or made
with respect to Parent Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Company Stock Certificate with
respect to the shares of Parent Common Stock which such holder has the right to
receive upon surrender thereof until such holder surrenders such Company Stock
Certificate in accordance with this Section 1.8 (at which time such holder shall
be entitled, subject to the effect of applicable escheat or similar laws, to
receive all such dividends and distributions, without interest).
(d) Any portion of the Exchange Fund that remains
undistributed to holders of Company Stock Certificates as of the date 180 days
after the date on which the Merger becomes effective shall be delivered to
Parent upon demand, and any holders of Company Stock Certificates who have not
theretofore surrendered their Company Stock Certificates in accordance with this
Section 1.8 shall thereafter look only to Parent for satisfaction of their
claims for Parent Common Stock, cash in lieu of fractional shares of Parent
Common Stock and any dividends or distributions with respect to Parent Common
Stock.
(e) Neither Parent nor the Surviving Corporation shall be
liable to any holder or former holder of Company Common Stock or to any other
Person with respect to any shares of Parent Common Stock (or dividends or
distributions with respect thereto), or for any cash amounts, delivered to any
public official pursuant to any applicable abandoned property law, escheat law
or similar Legal Requirement.
1.9 DISSENTING SHARES. Notwithstanding anything to the contrary
contained in this Agreement, any shares of Company Common Stock outstanding
immediately prior to the Effective Time that are or may become "dissenting
shares" within the meaning of Section 1300(b) of the California Corporations
Code (the "CCC") if such section is applicable to this Merger, ("DISSENTING
SHARES") shall not be converted into or represent the right to receive Parent
Common Stock in accordance with Section 1.5(a)(iii) (or cash in lieu of
fractional shares in accordance with Section 1.5(d)), and each holder of
Dissenting Shares shall be entitled only to such rights as may be granted to
such holder under Chapter 13 of the CCC. From and after the Effective Time, a
holder of Dissenting Shares shall not be entitled to exercise any of the voting
5.
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rights or other rights of a shareholder of the Surviving Corporation. If any
holder of Dissenting Shares shall fail to assert or perfect, or shall waive,
rescind, withdraw or otherwise lose, such holder's right to dissent and obtain
payment under Chapter 13 of the CCC, then such shares shall automatically be
converted into and shall represent only the right to receive (upon the surrender
of Company Stock Certificate(s) previously representing such shares) Parent
Common Stock in accordance with Section 1.5(a)(iii) (and cash in lieu of any
fractional share in accordance with Section 1.5(d)) and any dividends or other
distributions to which such holder is entitled in accordance with Section 1.8.
1.10 TAX CONSEQUENCES. For federal income tax purposes, the Merger
is intended to constitute a reorganization within the meaning of Section 368 of
the Code. The parties to this Agreement hereby adopt this Agreement as a "plan
of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of
the United States Treasury Regulations.
1.11 ACCOUNTING CONSEQUENCES. For financial reporting purposes, the
Merger is intended to be accounted for as a purchase.
1.12 FURTHER ACTION. If, at any time after the Effective Time, any
further action is determined by Parent to be necessary or desirable to carry out
the purposes of this Agreement or to vest the Surviving Corporation with full
right, title and possession of and to all rights and property of Merger Sub and
the Company, the officers and directors of the Surviving Corporation and Parent
shall be fully authorized (in the name of Merger Sub, in the name of the Company
and otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that,
except as set forth in the disclosure schedule and that has been delivered by
the Company to Parent on the date of this Agreement (the "COMPANY DISCLOSURE
SCHEDULE"):
2.1 DUE ORGANIZATION; SUBSIDIARIES; ETC.
(a) The Company has no Subsidiaries and the Company does not
own any capital stock of, or any equity interest of any nature in, any other
Entity, other than the Entities identified in Part 2.1(a)(ii) of the Company
Disclosure Schedule. The Company has not agreed and is not obligated to make,
nor bound by any Contract under which it may become obligated to make, any
future investment in or capital contribution to any other Entity. The Company
has not, at any time, been a general partner of, or has otherwise been liable
for any of the debts or other obligations of, any general partnership, limited
partnership or other Entity.
(b) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all necessary power and authority: (i) to conduct its business in the manner in
which its business is currently being conducted; (ii) to own and use its assets
in the manner in which its assets are currently owned and used; and (iii) to
perform its obligations under all Contracts by which it is bound.
(c) The Company is qualified to do business as a foreign
corporation, and is in good standing, under the laws of all jurisdictions where
the nature of its business
6.
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requires such qualification and where the failure to be so qualified would
reasonably be expected to have a Material Adverse Effect on the Company.
2.2 CERTIFICATE OF INCORPORATION AND BYLAWS. The Company has
delivered to Parent accurate and complete copies of its certificate of
incorporation, bylaws and other charter and organizational documents, including
all amendments thereto.
2.3 CAPITALIZATION, ETC.
(a) As of the date of this Agreement, the authorized capital
stock of the Company consists of: (i) 35,000,000 shares of Company Common Stock,
of which 8,242,531 shares have been issued and are outstanding as of May 1, 1999
(which amount does not materially differ from the number of shares outstanding
as of the date of this Agreement); and (ii) 5,000,000 shares of Preferred Stock,
$0.01 par value per share, of which no shares have been issued or are
outstanding. The Company does not hold any shares of its capital stock in its
treasury. All of the outstanding shares of Company Common Stock have been duly
authorized and validly issued, and are fully paid and nonassessable, and were
issued in compliance with all applicable Federal and state securities laws and
other applicable Legal Requirements and all requirements set forth in applicable
Contracts. None of the outstanding shares of Company Common Stock is entitled or
subject to any preemptive right, right of participation, right of maintenance or
any similar right; and (ii) there is no Company Contract relating to the voting
or registration of, or restricting any Person from purchasing, selling, pledging
or otherwise disposing of (or granting any option or similar right with respect
to), any shares of Company Common Stock. Upon consummation of the Merger, (A)
the shares of Parent Common Stock issued in exchange for any shares of Company
Common Stock that are subject to a Contract pursuant to which the Company has
the right to repurchase, redeem or otherwise reacquire any shares of Company
Common Stock will, without any further act of Parent, the Company or any other
Person, become subject to the restrictions, conditions and other provisions
contained in such Contract, and (B) Parent will automatically succeed to and
become entitled to exercise the Company's rights and remedies under such
Contract. The Company is not under any obligation, or is bound by any Contract
pursuant to which it may become obligated, to repurchase, redeem or otherwise
acquire any outstanding shares of Company Common Stock.
(b) As of May 1, 1999: (i) 2,355,342 shares of Company
Common Stock are subject to issuance pursuant to outstanding options to purchase
shares of Company Common Stock pursuant to the Company's 1987 Incentive Stock
Plan, 1988 Incentive Stock Plan, 1992 Key Employee Stock Plan, 1992 Incentive
Stock Plan, 1995 Director Option Plan and the 1997 Stock Plan (collectively, the
"OPTION PLANS"); and (ii) 45,567 shares of Company Common Stock are reserved for
future issuance pursuant to the Company's 1992 Employee Stock Purchase Plan (the
"ESPP"). (Stock options granted by the Company pursuant to the Company's stock
option plans that are currently in effect or that have been in effect and
otherwise are referred to in this Agreement as "COMPANY OPTIONS.") There are no
Company Options other than Company Options outstanding under the Option Plans.
Part 2.3(b)(i) of the Company Disclosure Schedule sets forth the following
information with respect to each Company Option outstanding as of the date of
this Agreement: (i) the particular plan (if any) pursuant to which such Company
Option was granted; (ii) the name of the optionee; (iii) the number of shares of
Company Common Stock subject to such Company Option; (iv) the exercise
7.
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price of such Company Option; (v) the date on which such Company Option was
granted; and (vi) the extent to which such Company Option is vested and
exercisable as of May 1, 1999. All Company Options vest as set forth on Part
2.3(b)(i) of the Company Disclosure Schedule. The Company has delivered to
Parent accurate and complete copies of all Option Plans pursuant to which the
Company has ever granted stock options, and the forms of all stock option
agreements evidencing such options. Except as set forth in Part 2.3(b)(ii) of
the Company Disclosure Schedule, there are no commitments or agreements of any
character to which the Company is bound obligating the Company to accelerate the
vesting of any Company Option.
(c) Except for the Rights and as set forth in Part 2.3(b) of
the Company Disclosure Schedule, there is no: (i) outstanding subscription,
option, call, warrant or right (whether or not currently exercisable) to acquire
any shares of the capital stock or other securities of the Company; (ii)
outstanding security, instrument or obligation that is or may become convertible
into or exchangeable for any shares of the capital stock or other securities of
the Company; (iii) stockholder rights plan (or similar plan commonly referred to
as a "poison pill") or Contract under which the Company is or may become
obligated to sell or otherwise issue any shares of its capital stock or any
other securities; or (iv) condition or circumstance that may give rise to or
provide a basis for the assertion of a claim by any Person to the effect that
such Person is entitled to acquire or receive any shares of capital stock or
other securities of the Company. All Rights can be redeemed, at the sole option
of the Company at one cent per right prior to the Effective Time.
2.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has made available to Parent accurate and
complete copies of all registration statements, proxy statements and other
statements, reports, schedules, forms and other documents filed by the Company
with the SEC since December 31, 1997, and all amendments thereto and will
deliver to Parent accurate and complete copies of all such registration
statements, proxy statements and other statements, reports, schedules, forms and
other documents filed after the date of this Agreement and prior to the
Effective Time (collectively, the "COMPANY SEC DOCUMENTS"). All statements,
reports, schedules, forms and other documents required to have been filed by the
Company with the SEC have been so filed. As of the time it was filed with the
SEC (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing): (i) each of the Company SEC
Documents complied in all material respects with the applicable requirements of
the Securities Act or the Exchange Act (as the case may be) as of the date of
such filing and any Company SEC Documents filed after the date hereof will so
comply; and (ii) none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) The financial statements (including any related notes)
contained in the Company SEC Documents: (i) complied as to form in all
material respects with the published rules and regulations of the SEC applicable
thereto; (ii) were prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods covered
(except as may be indicated in the notes to such financial statements or, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC, and
8.
<PAGE> 14
except that the unaudited financial statements may not contain footnotes and are
subject to normal and recurring year-end adjustments which will not,
individually or in the aggregate, be material in amount), and (iii) fairly
present in all material respects the consolidated financial position of the
Company and its subsidiaries as of the respective dates thereof and the
consolidated results of operations and cash flows of the Company and its
subsidiaries for the periods covered thereby.
2.5 ABSENCE OF CHANGES. Since March 31, 1999, and except as
otherwise set forth in Part 2.5 of the Company Disclosure Schedule:
(a) No event has occurred that has had or would reasonably
be expected to have a Material Adverse Effect on the Company;
(b) there has not been any material loss, damage or
destruction to, or any material interruption in the use of, any of the assets of
the Company (whether or not covered by insurance);
(c) the Company has not (i) declared, accrued, set aside or
paid any dividend or made any other distribution in respect of any shares of
capital stock, or (ii) repurchased, redeemed or otherwise reacquired any shares
of capital stock or other securities (except for restricted stock repurchases
from terminated employees made in the ordinary course consistent with past
practices);
(d) the Company has not sold, issued or granted, or
authorized the issuance or grant of, (i) any capital stock or other security
(except for Company Common Stock issued upon the valid exercise of outstanding
Company Options in accordance with the terms of the option agreement pursuant to
which such Company Options are outstanding), (ii) any option, warrant or right
to acquire any capital stock or any other security (except for Company Options
described in Part 2.3(b)(i) of the Company Disclosure Schedule) or permitted to
be granted pursuant to Section 4.2, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security;
(e) the Company has not amended or waived any of its rights
under, or permitted the acceleration of vesting under, (i) any provision of any
of the Option Plans, (ii) any provision of any agreement evidencing any
outstanding Company Option, or (iii) any restricted stock purchase agreement;
(f) there has been no amendment to the certificate of
incorporation, bylaws or other charter or organizational documents of the
Company, and the Company has not effected or been a party to any merger,
consolidation, amalgamation, share exchange, business combination,
recapitalization, reclassification of shares, stock split, division or
subdivision of shares, reverse stock split, consolidation of shares or similar
transaction;
(g) the Company has not formed any Subsidiary or acquired
any equity interest or other interest in any other Entity;
9.
<PAGE> 15
(h) the Company has not made any capital expenditure which,
when added to all other capital expenditures made on behalf of the Company since
March 31, 1999, exceeds $50,000 in the aggregate;
(i) except in the ordinary course of business and consistent
with past practices, the Company has not (i) entered into or permitted any of
the assets owned or used by it to become bound by any Material Contract (as
defined in Section 2.10), nor (ii) amended or terminated, or waived any material
right or remedy under, any Material Contract;
(j) the Company has not (i) acquired, leased or licensed any
material right or other material asset from any other Person, (ii) sold or
otherwise disposed of, or leased or licensed, any material right or other
material asset to any other Person, nor (iii) waived or relinquished any
material right, except for rights or other assets acquired, leased, licensed or
disposed of in the ordinary course of business and consistent with past
practices;
(k) the Company has not written off as uncollectible, or
established any extraordinary reserve with respect to, any account receivable or
other indebtedness except in the ordinary course and consistent with past
practice and in accordance with GAAP;
(l) the Company has not made any pledge of any of its assets
or otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of business
and consistent with past practices;
(m) the Company has not (i) lent money to any Person, nor
(ii) incurred or guaranteed any indebtedness for borrowed money;
(n) the Company has not (i) established or adopted any Plan
(as defined in Section 2.17(a)), (ii) caused or permitted any Plan to be amended
in any material respect, or (iii) paid any bonus or made any profit-sharing or
similar payment to, or materially increased the amount of the wages, salary,
commissions, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers or employees;
(o) the Company has not changed any of its methods of
accounting or accounting practices in any material respect;
(p) the Company has not made any material Tax election;
(q) the Company has not commenced or settled any Legal
Proceeding;
(r) the Company has not entered into any material
transaction or taken any other material action that has had, or would reasonably
be expected to have, a Material Adverse Effect on the Company;
(s) the Company has not entered into any material
transaction or taken any other material action outside the ordinary course of
business or inconsistent with past practices; and
10.
<PAGE> 16
(t) except for the Merger contemplated hereby, the Company
has not agreed or committed to take any of the actions referred to in clauses
"(c)" through "(s)" above.
2.6 TITLE TO ASSETS. The Company owns, and has good, valid and
marketable title to all of the tangible properties and assets, real, personal
and mixed, purported to be owned by it. All of said assets are owned or leased
by the Company free and clear of any Encumbrances, except for (1) any lien for
current taxes not yet due and payable, (2) minor liens that have arisen in the
ordinary course of business and that do not (in any case or in the aggregate)
materially detract from the value of the assets subject thereto or materially
impair the operations of the Company, and (3) liens described in Part 2.6 of the
Company Disclosure Schedule.
2.7 RECEIVABLES; CUSTOMERS. All existing accounts receivable of the
Company (including those accounts receivable reflected on the unaudited
consolidated balance sheet of the Company as of March 31, 1999 included in the
Company SEC Documents (the "COMPANY BALANCE SHEET") that have not yet been
collected and those accounts receivable that have arisen since March 31, 1999
and have not yet been collected) (a) represent valid obligations of customers of
the Company arising from bona fide transactions entered into in the ordinary
course of business and (b) represent revenues that have been recognized in
accordance with GAAP.
2.8 REAL PROPERTY; EQUIPMENT; LEASEHOLD. All material items of
equipment and other tangible assets owned by or leased to the Company are
adequate for the uses to which they are being put, are in good and safe
condition and repair (ordinary wear and tear excepted) and are adequate for the
conduct of the business of the Company in the manner in which such business is
currently being conducted. Part 2.8(a) of the Company Disclosure Schedule
accurately identified all material items of equipment leased by the Company. The
Company does not own any real property or any interest in real property, except
for the leaseholds created under the real property leases identified in Part
2.8(b) of the Company Disclosure Schedule. All such real property is being
leased pursuant to lease agreements that are in full force and effect, are valid
and effective in accordance with their respective terms, and there is not, under
any such leases, any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default) that would result
in a Material Adverse Effect on the Company. The Company has valid leasehold
interests in the items listed in Parts 2.8(a) and 2.8(b) of the Company
Disclosure Schedule.
2.9 PROPRIETARY ASSETS.
(a) Part 2.9(a)(i) of the Company Disclosure Schedule sets
forth, with respect to each Proprietary Asset owned by the Company and
registered with any Governmental Body or for which an application has been filed
with any Governmental Body, (i) a brief description of such Proprietary Asset,
and (ii) the names of the jurisdictions covered by the applicable registration
or application. Part 2.9(a)(ii) of the Company Disclosure Schedule identifies
and provides a brief description of all other Proprietary Assets owned by the
Company that are material to the business of the Company. Part 2.9(a)(iii) of
the Company Disclosure Schedule identifies and provides a brief description of,
and identifies any ongoing royalty or payment obligations with respect to, each
Proprietary Asset that is licensed or otherwise made
11.
<PAGE> 17
available to the Company by any Person and is material to the business of the
Company (except for any Proprietary Asset that is licensed to the Company under
any third party software license generally available to the public at a cost of
less than $25,000), and identifies the Contract under which such Proprietary
Asset is being licensed or otherwise made available to such Company. The Company
has good, valid and marketable title to all of the Company Proprietary Assets
identified in Parts 2.9(a)(i) and 2.9(a)(ii) of the Company Disclosure Schedule,
free and clear of all Encumbrances, except for (i) any lien for current taxes
not yet due and payable, and (ii) minor liens that have arisen in the ordinary
course of business and that do not (individually or in the aggregate) materially
detract from the value of the assets subject thereto or materially impair the
operations of the Company. The Company have a valid right to use, license and
otherwise exploit all Proprietary Assets identified in Part 2.9(a)(iii) of the
Company Disclosure Schedule. Except as set forth in Part 2.9(a)(iv) of the
Company Disclosure Schedule, the Company has not developed jointly with any
other Person any Company Proprietary Asset that is material to the business of
the Company with respect to which such other Person has any rights. Except as
set forth in Part 2.9(a)(v) of the Company Disclosure Schedule, there is no
Company Contract (with the exception of end user license agreements in the form
previously delivered by the Company to Parent) pursuant to which any Person has
any right (whether or not currently exercisable) to use, license or otherwise
exploit any Company Proprietary Asset.
(b)
(i) The Company has taken reasonable measures and
precautions to protect and maintain the confidentiality, secrecy and value of
all material Company Proprietary Assets (except Company Proprietary Assets whose
value would be unimpaired by disclosure). Without limiting the generality of the
foregoing, except as set forth in Part 2.9(b) of the Company Disclosure
Schedule, (A) substantially all current employees of the Company who are or were
involved in, or who have contributed to, the creation or development of any
material Company Proprietary Asset or who have had access to any material
Company Proprietary Assets have executed and delivered to the Company an
agreement (containing no exceptions to or exclusions from the scope of its
coverage) that is substantially identical to the form of Confidential
Information and Invention Assignment Agreement previously delivered by the
Company to Parent, (B) all current employees, consultants and independent
contractors and all employees who have left the employ of the Company within the
past three years, in each case, who has or had access to or are or were involved
in the creation of either (1) Company Source Code or (2) products embodying the
Company Source Code, have all executed and delivered to the Company an agreement
(containing no exceptions to or exclusions from the scope of its coverage) that
is substantially identical to the form of Confidential Non-Disclosure Agreement
previously delivered to Parent; and (C) all former consultants and independent
contractors who had access to or were involved in the creation of either (1)
Company Source Code for the SNAP products or (2) products embodying the Company
Source Code for the SNAP products, have all executed and delivered to the
Company an agreement (containing no exceptions to or exclusions from the scope
of its coverage) that is substantially identical to the form of Confidential
Non-Disclosure Agreement previously delivered to Parent. No current or former
employee, officer, director, stockholder, consultant or independent contractor
has any right, claim or interest in or with respect to any Company Proprietary
Asset.
12.
<PAGE> 18
(ii) To the best of the knowledge of the Company, all
consultants and independent contractors who (A) have performed services for the
Company within the past three years but who are not current consultants and
independent contractors and (B) had access to or was involved in the creation of
either (1) Company Source Code (for products other than the SNAP products) or
(2) products embodying Company Source Code (other than Company Source Code for
the SNAP products), have all executed and delivered to the Company an agreement
(containing no exceptions to or exclusions from the scope of its coverage) that
is substantially identical to the form of Confidential Non-Disclosure Agreement
previously delivered to Parent.
(c) To the best of the knowledge of the Company: (i) all
patents, trademarks, service marks and copyrights held by the Company are valid,
enforceable and subsisting; (ii) none of the Company Proprietary Assets and no
Proprietary Asset that is currently being developed by the Company (either by
itself or with any other Person) infringes, misappropriates or makes unlawful or
unauthorized use of or with any Proprietary Asset owned or used by any other
Person; (iii) none of the products that are or have been designed, created,
developed, assembled, manufactured or sold by the Company is infringing,
misappropriating or making any unlawful or unauthorized use of any Proprietary
Asset owned or used by any other Person, and none of such products has at any
time infringed, misappropriated or made any unlawful or unauthorized use of, and
the Company has not received any notice or other communication (in writing or
otherwise) of any actual, alleged, possible or potential infringement,
misappropriation or unlawful or unauthorized use of, any Proprietary Asset owned
or used by any other Person; (iv) no other Person is infringing,
misappropriating or making any unlawful or unauthorized use of, and no
Proprietary Asset owned or used by any other Person infringes or conflicts with,
any material Company Proprietary Asset.
(d) The Company Proprietary Assets constitute all the
Proprietary Assets necessary to enable the Company to conduct their business in
the manner in which such business is being conducted. Except as is set forth on
Schedule 2.9(d)(ii) of the Company Disclosure Schedule, the Company has not (i)
licensed any of the material Company Proprietary Assets to any Person on an
exclusive basis, or (ii) entered into any covenant not to compete or Contract
limiting its ability to exploit fully any material Company Proprietary Assets or
to transact business in any market or geographical area or with any Person.
(e) Except as set forth in Part 2.9(e)(i) of the Company
Disclosure Schedule, the Company has not disclosed or delivered to any Person,
or permitted the disclosure or delivery to any escrow agent or other Person, of
any Company Source Code. No event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or could reasonably
be expected to, result in the disclosure or delivery to any Person of any
Company Source Code. Part 2.10(a)(xii) of the Company Disclosure Schedule
identifies each Contract pursuant to which the Company has deposited or is
required to deposit with an escrowholder or any other Person any Company Source
Code, and further describes whether the execution of this Agreement or the
consummation of any of the transactions contemplated hereby could reasonably be
expected to result in the release or disclosure of any Company Source Code. Part
2.9(e)(ii) of the Company Disclosure Schedule lists the Company Source Code or
portions thereof which the Company plans to annotate with comments in a manner
as is
13.
<PAGE> 19
customary for software developers which would facilitate the maintenance and
enhancement of such Company Source Code.
(f) (i) Each of the products that are or have been (within
the last three years) designed, created, developed, assembled, manufactured or
sold by the Company conforms in all material respects with any specification,
documentation and performance standard, made or provided with respect thereto by
or on behalf of the Company; (ii) each Company Source Code conforms in all
material respects to design specifications and documented performance criteria;
and (iii) there has not been any claim by any customer or other Person alleging
that any Company Proprietary Asset (including each version thereof that has ever
been licensed or otherwise made available by the Company to any Person) does not
conform in all material respects with any specification, documentation,
performance standard, or documented performance criteria made or provided by or
on behalf of the Company, and, to the best of the knowledge of the Company,
there is no basis for any such claim. To the best of the knowledge of the
Company, the Company has established adequate reserves on the Company Balance
Sheet to cover all costs associated with any obligations that the Company may
have with respect to the correction or repair of programming errors or other
defects in the Company Proprietary Assets.
(g) To the best of the knowledge of the Company, except as
set forth in Part 2.9(g)(i) of the Company Disclosure Schedule, each computer,
computer program and other item of software (whether installed on a computer or
on any other piece of equipment, including firmware) that is owned, licensed or
used by the Company for its internal business operations is Year 2000 Compliant.
Except as set forth in Part 2.9(g)(ii) of the Company Disclosure Schedule, each
computer program and other item of software that has been designed, developed,
sold, licensed or otherwise made available to any Person by the Company is Year
2000 Compliant. Except as set forth in Part 2.9(g)(iii) of the Company
Disclosure Schedule, the Company has conducted sufficient Year 2000 compliance
testing for each computer, computer program and item of software referred to in
the preceding two sentences to be able to determine whether such computer,
computer program and item of software is Year 2000 Compliant, and has obtained
warranties or other written assurances from each of its suppliers to the effect
that the products and services provided by such suppliers to the Company is Year
2000 Compliant. As used in this Agreement, "YEAR 2000 COMPLIANT" means, with
respect to a computer, computer program or other item of software, that such
computer, computer program or other items of software will properly perform date
sensitive functions before, during and after the Year 2000. Part 2.9(g)(iv) of
the Company Disclosure Schedule sets forth a brief description of the Year 2000
Compliant and non-Year 2000 Compliant systems, and a brief description of the
actions taken to date, and proposed to be taken, with respect to all Company
utilized systems.
(h) Except with respect to demonstration or trial copies, no
product, system, program or software module designed, developed, sold, licensed
or otherwise made available by the Company to any Person contains any "back
door," "time bomb," "Trojan horse," "worm," "drop dead device," "virus" or other
software routines or hardware components designed to permit unauthorized access
or to disable or erase software, hardware or data without the consent of the
user.
(i) Except as set forth in Part 2.9(i) of the Company
Disclosure Schedule, each SNAP product, SNAP system, SNAP program, SNAP
Proprietary Asset or other
14.
<PAGE> 20
SNAP asset designed, developed, manufactured, assembled, sold, installed,
repaired, licensed or otherwise made available by the Company to any Person was
free of any bug, virus, design defect or other defect or deficiency at the time
it was sold or otherwise made available, other than any immaterial bug or
similar defect that would not adversely affect in any material respect such SNAP
product, SNAP system, SNAP program, SNAP Company Proprietary Asset or other SNAP
asset (or the operation or performance thereof). Part 2.9(i) of the Company
Disclosure Schedule contains an accurate and complete copy of the most recent
"bug list" with respect to each SNAP product and SNAP product under development
or pre-release testing.
(j) Except as set forth in Part 2.90(j) of the Company
Disclosure Schedule, each product, system, program, Proprietary Asset or other
asset (other than SNAP products, SNAP systems, SNAP programs, SNAP Proprietary
Assets and other SNAP assets) designed, developed, manufactured, assembled,
sold, installed, repaired, licensed or otherwise made available by the Company
to any Person was free of any bug, virus, design defect or other defect or
deficiency at the time it was sold or otherwise made available, other than any
immaterial bug or similar defect that would not adversely affect in any material
respect such product, system, program, Company Proprietary Asset or other asset
(or the operation or performance thereof).
2.10 CONTRACTS.
(a) Part 2.10 of the Company Disclosure Schedule identifies
each Company Contract that constitutes a "Material Contract." For purposes of
this Agreement, each of the following shall be deemed to constitute a "MATERIAL
CONTRACT":
(i) any Contract or outstanding offer either (i)
relating to the employment of, or the performance of services by, any executive
officer or (ii) involving compensation in excess of $75,000 per annum (other
than oral Contracts with employees who are terminable "at will"); any Contract
pursuant to which the Company is or may become obligated to make any severance,
termination or similar payment to any current or former employee or director;
any Contract pursuant to which the Company is or may become obligated to make
any bonus or similar payment (other than payments in respect of salary) to any
current or former employee or director; and any Contract or Plan (including,
without limitation, any stock option plan, stock appreciation plan or stock
purchase plan), any of the benefits of which may be increased, or the vesting of
benefits of which may be accelerated;
(ii) any Contract (A) with any customer of the Company
with respect to which the Company has received revenues of more than $100,000
for the year ended December 31, 1998; (B) with respect to the distribution or
marketing of any product of the Company with respect to which the Company has
received revenues of more than $100,000 for the year ended December 31, 1998; or
(C) relating to the acquisition, transfer, development, sharing, license (to or
by the Company), use or other exploitation of any Proprietary Asset (except for
any Contract pursuant to which any Proprietary Asset is licensed to the Company
under any third party software license generally available to the public);
(iii) any Contract which provides for indemnification
of any officer, director, employee or agent of the Company;
15.
<PAGE> 21
(iv) any Contract imposing any restriction on the
right or ability of the Company (A) to compete with any other Person, (B) to
acquire any product or other asset or any services from any other Person, (C) to
solicit, hire or retain any Person as an employee, consultant or independent
contractor, (D) to develop, sell, supply, distribute, offer, support or service
any product or any technology or other asset to or for any other Person, (E) to
perform services for any other Person, or (F) to transact business or deal in
any other manner with any other Person;
(v) any Contract (A) relating to the acquisition,
issuance, voting, registration, sale or transfer of any securities, (B)
providing any Person with any preemptive right, right of participation, right of
maintenance or any similar right with respect to any securities, or (C)
providing the Company with any right of first refusal with respect to, or right
to purchase or otherwise acquire, any securities;
(vi) any Contract incorporating or relating to any
guaranty, any warranty or any indemnity or similar obligation;
(vii) any Contract imposing any confidentiality
obligation on the Company which is either (a) entered into outside the ordinary
course of business or (b) relating to the Proprietary Assets of others;
(viii) any Contract (A) to which any Governmental
Body is a party or under which any Governmental Body has any rights or
obligations, or (B) directly or indirectly benefiting any Governmental Body
(including any subcontract or other Contract between any Company and any
contractor or subcontractor to any Governmental Body);
(ix) any Contract requiring that the Company give
any notice or provide any information to any Person prior to considering or
accepting any Acquisition Proposal or similar proposal, or prior to entering
into any discussions, agreement, arrangement or understanding relating to any
Acquisition Transaction or similar transaction;
(x) any Contract that (i) has a term of more than
60 days and that may not be terminated by the Company (without penalty) within
60 days after the delivery of a termination notice by the Company and (ii) that
contemplates or involves the payment or delivery of cash or other consideration
in an amount or having a value in excess of $100,000 in any calendar year in the
aggregate, or contemplates or involves the performance of services having a
value in excess of $100,000 in any calendar year in the aggregate;
(xi) any joint marketing or development Contract
currently in force under which the Company has continuing material obligations
to jointly market any product, technology or service and which may not be
canceled without penalty upon notice of 60 days or less, or any material
Contract pursuant to which the Company has continuing material obligations to
jointly develop any Proprietary Asset that will not be owned, in whole or in
part, by the Company and which may not be canceled without penalty upon notice
of 90 days or less;
(xii) any Contract currently in force to disclose
or deliver to any Person, or permit the disclosure or delivery to any escrow
agent or other Person, of the source code, or any portion or aspect of the
source code, or any proprietary information or algorithm
16.
<PAGE> 22
contained in or relating to any source code, of the Company Proprietary Asset
that is material to the Company;
(xiii) any Contract pursuant to which any amounts
may become payable (whether currently or in the future) as a result of or in
connection with the Merger (whether to current or former officers and directors
of the Company or otherwise);
(xiv) any Contract (not otherwise identified in
clauses "(i)" through "(xiv)" of this sentence) that could reasonably be
expected to have a Material Adverse Effect on the Company or to any of the
transactions contemplated by this Agreement; and
(xv) any other Contract, if a breach of such
Contract could have a Material Adverse Effect on the Company.
The Company has delivered to Parent an accurate and complete copy of each
Material Contract.
(b) Each Company Contract that constitutes a Material
Contract is valid and in full force and effect, and is enforceable in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
The Company has not and, to the best of the knowledge of the Company, no Person
has violated or breached, or committed any default under, any Material Contract.
(c) The Company has not violated or breached, or committed
any default under, any Company Contract, and, to the best of the knowledge of
the Company, no other Person has violated or breached, or committed any default
under, any Company Contract, except for violations, breaches or defaults that
have not had and could not have a Material Adverse Effect on the Company; (ii)
to the best of the knowledge of the Company, no event has occurred, and no
circumstance or condition exists, that could (with or without notice or lapse of
time), (A) result in a violation or breach of any of the provisions of any
Company Contract, (B) give any Person the right to declare a default or exercise
any remedy under any Company Contract, (C) give any Person the right to receive
or require a rebate, chargeback, penalty or change in delivery schedule under
any Company Contract, (D) give any Person the right to accelerate the maturity
or performance of any Company Contract, (E) result in the disclosure, release or
delivery of any Company Source Code, or (F) give any Person the right to cancel,
terminate or modify any Company Contract, except in each such case for defaults,
acceleration rights, termination rights and other rights that have not had and
could not have a Material Adverse Effect on the Company; and (iii) the Company
has not received any notice or other communication regarding any actual or
possible violation or breach of, or default under, any Company Contract, except
in each such case for defaults, acceleration rights, termination rights and
other rights that have not had and could not have a Material Adverse Effect on
the Company.
2.11 SALE OF PRODUCTS; PERFORMANCE OF SERVICES
(a) Except as set forth in Part 2.11(a) of the Company
Disclosure Schedule, since January 1, 1996, each product, system, program,
Proprietary Asset or other asset designed, developed, manufactured, assembled,
sold, installed, repaired, licensed or otherwise made available by the Company
to any Person conformed and complied in all material respects
17.
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with the terms and requirements of any applicable warranty or other Contract and
with all applicable Legal Requirements.
(b) All installation services, programming services,
repair services, maintenance services, support services, training services,
upgrade services and other services that have been performed by the Company were
performed properly and in full conformity with the terms and requirements of all
applicable warranties and other Contracts and with all applicable Legal
Requirements.
(c) Except as set forth in Part 2.11(c) of the Company
Disclosure Schedule, since January 1, 1996, no customer or other Person has
asserted or threatened to assert any claim against the Company (i) under or
based upon any warranty provided by or on behalf of the Company, or (ii) under
or based upon any other warranty relating to any product, system, program,
Proprietary Asset or other asset designed, developed, manufactured, assembled,
sold, installed, repaired, licensed or otherwise made available by the Company
or any services performed by the Company.
2.12 LIABILITIES. The Company does not have any accrued,
contingent or other liabilities of any nature, either matured or unmatured,
including, without limitation, any liabilities relating to costs associated with
insuring that all software and hardware (and related Company Proprietary
Assets) that are sold, licensed or transferred by the Company to any Person,
computer systems, any software utilized by the Company or other components of
the Company's information technology infrastructure are Year 2000 Complaint
(whether or not required to be reflected in financial statements in accordance
with GAAP, and whether due or to become due), except for: (a) liabilities
identified as such on the Company Balance Sheet and (b) normal and recurring
current liabilities that have been incurred by the Company since March 31, 1999
in the ordinary course of business and consistent with past practices.
2.13 COMPLIANCE WITH LEGAL REQUIREMENTS. The Company is, and has
at all times since January 1, 1996 been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
has not had and would not reasonably be expected to have a Material Adverse
Effect on the Company. Since January 1, 1996, the Company has not received any
notice or other communication from any Governmental Body or other Person
regarding any actual or possible violation of, or failure to comply with, any
Legal Requirement.
2.14 CERTAIN BUSINESS PRACTICES. Neither the Company nor (to the
best of the knowledge of the Company) any director, officer, agent or employee
of the Company has, on behalf of the Company (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (iii) made any other unlawful payment.
2.15 GOVERNMENTAL AUTHORIZATIONS; CUSTOMS.
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(a) The Company holds all Governmental Authorizations
necessary to enable the Company to conduct its business in the manner in which
such business is currently being conducted. All such Governmental Authorizations
are valid and in full force and effect. The Company is, and at all times since
January 1, 1996 has been, in substantial compliance with the terms and
requirements of such Governmental Authorizations. Since January 1, 1996, the
Company has not received any notice or other communication from any Governmental
Body regarding (a) any actual or possible violation of or failure to comply with
any term or requirement of any material Governmental Authorization, or (b) any
actual or possible revocation, withdrawal, suspension, cancellation, termination
or modification of any material Governmental Authorization.
(b) Part 2.15(b) of the Company Disclosure Schedule
describes the terms of each grant, incentive or subsidy provided or made
available to or for the benefit of the Company by a Governmental Body. The
Company is in full compliance with all of the terms and requirements of each
grant, incentive and subsidy identified or required to be identified in Part
2.15(b) of the Company Disclosure Schedule. Neither the execution, delivery or
performance of this Agreement, nor the consummation of the Merger or any of the
other transactions contemplated by this Agreement, will (with or without notice
or lapse of time) give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate or modify, any grant, incentive or subsidy identified
or required to be identified in Part 2.15(b) of the Company Disclosure Schedule.
The Company has acted with reasonable care to properly value and classify, in
accordance with applicable tariff laws, rules and regulations, all goods that
Company or any or its subsidiaries import into the United States or into any
other country (the "Imported Goods"). There are currently no material claims
pending against the Company by the U.S. Customs Service or any foreign customs
authority relating to the valuation, classification or marking of the Imported
Goods.
2.16 TAX MATTERS.
(a) Each Tax Return required to be filed by or on behalf
of the Company with any Governmental Body with respect to any taxable period
ending on or before the Closing Date other than periods that have been closed by
the applicable statute of limitations (the "COMPANY RETURNS") (i) has been or
will be filed on or before the applicable due date, and (ii) has been, or will
be when filed, prepared in all material respects in compliance with all
applicable Legal Requirements. All amounts shown on the Company Returns to be
due on or before the Closing Date have been or will be paid on or before the
Closing Date.
(b) The Company Balance Sheet fully accrues all actual and
contingent liabilities for Taxes with respect to all periods through March 31,
1999 in accordance with generally accepted accounting principles. Since March
31, 1999, the Company has not incurred any Liability for any Tax other than in
the ordinary course of its business.
(c) Except as set forth in Part 2.16(c) of the Company
Disclosure Schedule, no Company Return has ever been examined or audited by any
Governmental Body. No extension or waiver of the limitation period applicable to
any of the Company Returns has been granted (by the Company or any other Person)
that is currently in effect, and no such extension or waiver has been requested
from the Company.
19.
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(d) No claim or Legal Proceeding is pending or, to the
best of the knowledge of the Company, has been threatened against or with
respect to the Company in respect of any material Tax. There are no unsatisfied
liabilities for material Taxes (including liabilities for interest, additions to
tax and penalties thereon and related expenses) with respect to any notice of
deficiency or similar document received by the Company with respect to any
material Tax (other than liabilities for Taxes asserted under any such notice of
deficiency or similar document which are being contested in good faith by the
Company and with respect to which adequate reserves for payment have been
established on the Company Balance Sheet). There are no liens for material Taxes
upon any of the assets of the Company except liens for current Taxes not yet due
and payable. The Company has not entered into or become bound by any agreement
or consent pursuant to Section 341(f) of the Code (or any comparable provision
of state or foreign Tax laws). The Company has not been and will not be required
to include any adjustment in taxable income for any tax period (or portion
thereof) pursuant to Section 481 or 263A of the Code (or any comparable
provision under state or foreign Tax laws) as a result of transactions or events
occurring, or accounting methods employed, prior to the Closing.
(e) There is no agreement, plan, arrangement or other
Contract covering any employee or independent contractor or former employee or
independent contractor of the Company that, considered individually or
considered collectively with any other such Contracts, will, or could reasonably
be expected to, give rise directly or indirectly to the payment of any amount
that would not be deductible pursuant to Section 280G of the Code (or any
comparable provision under state or foreign Tax laws). The Company is not, and
has never been, a party to or bound by any tax indemnity agreement, tax sharing
agreement, tax allocation agreement or similar Contract.
2.17 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.17(a) of the Company Disclosure Schedule
identifies each salary, bonus, vacation, deferred compensation, incentive
compensation, stock purchase, stock option, severance pay, termination pay,
death or disability benefits, hospitalization, medical, insurance, flexible
benefits, supplemental unemployment benefits, profit-sharing, pension,
retirement or other employee benefit plan, program or agreement maintained,
sponsored, contributed to or required to be contributed to by the Company for
the benefit of any current or former employee of the Company. (All plans,
programs and agreements of the type referred to in the prior sentence are
referred to in this Agreement as the "PLANS.") None of the Plans required to be
identified in the Company Disclosure Schedule is a multiemployer plan (within
the meaning of Section 3(37) of ERISA).
(b) Except as set forth in Part 2.17(a) of the Company
Disclosure Schedule, the Company does not sponsor or contribute to, and has not
at any time in the past maintained, sponsored or contributed to, any employee
pension benefit plan (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or any similar pension benefit
plan under the laws of any foreign jurisdiction, whether or not excluded from
coverage under specific Titles or Subtitles of ERISA, for the benefit of any
current or former employee or director of the Company (a "PENSION PLAN"). None
of the Pension Plans required to be identified in Part 2.17(a) of the Company
Disclosure Schedule is subject to Title IV of ERISA or Section 412 of the Code.
20.
<PAGE> 26
(c) Except as set forth in Part 2.17(a) of the Company
Disclosure Schedule, the Company does not maintain, sponsor or contribute to
any: (i) employee welfare benefit plan (as defined in Section 3(1) of ERISA) or
any similar welfare benefit plan under the laws of any foreign jurisdiction,
whether or not excluded from coverage under specific Titles or Subtitles of
ERISA, for the benefit of any current or former employee or director of the
Company (a "WELFARE PLAN"), or (ii) self-funded medical, dental or other similar
Plan.
(d) With respect to each Plan, the Company has delivered
to Parent: (i) an accurate and complete copy of such Plan (including all
amendments thereto); (ii) an accurate and complete copy of the annual report, if
required under ERISA, with respect to such Plan for each of the last two years;
(iii) an accurate and complete copy of the most recent summary plan description,
together with each summary of material modifications, if required under ERISA,
with respect to such Plan, (iv) if such Plan is funded through a trust or any
third party funding vehicle, an accurate and complete copy of the trust or other
funding agreement (including all amendments thereto) and accurate and complete
copies of the most recent financial statements thereof; (v) accurate and
complete copies of all Contracts relating to such Plan, including service
provider agreements, insurance contracts, minimum premium contracts, stop-loss
agreements, investment management agreements, subscription and participation
agreements and recordkeeping agreements; and (vi) an accurate and complete copy
of the most recent determination letter received from the Internal Revenue
Service with respect to such Plan (if such Plan is intended to be qualified
under Section 401(a) of the Code).
(e) Except as set forth in Part 2.16(e) of the Company
Disclosure Schedule, the Company is not and has never been required to be
treated as a single employer with any other Person under Section 4001(b)(1) of
ERISA or Section 414(b), (c), (m) or (o) of the Code. The Company has never been
a member of an "affiliated service group" within the meaning of Section 414(m)
of the Code. The Company has never made a complete or partial withdrawal from a
multiemployer plan, as such term is defined in Section 3(37) of ERISA, resulting
in "withdrawal liability," as such term is defined in Section 4201 of ERISA
(without regard to any subsequent reduction or waiver of such liability under
either Section 4207 or 4208 of ERISA).
(f) The Company has no plan or commitment to create any
additional Pension Plan or Welfare Plan, or to modify or change any existing
Welfare Plan or Pension Plan (other than to comply with applicable law) in a
manner that would affect any current or former employee or director of the
Company.
(g) No Plan provides death, medical or health benefits
(whether or not insured) with respect to any current or former employee or
director of the Company after any termination of service of such employee or
director (other than benefit coverage mandated by applicable law, including
coverage provided pursuant to Section 4980B of the Code).
(h) With respect to any Plan constituting a group health
plan within the meaning of Section 4980B(g)(2) of the Code, the provisions of
Section 4980B of the Code ("COBRA") have been complied with in all material
respects. Part 2.17(h) of the Company Disclosure Schedule describes all
obligations of the Company under any of the provisions of COBRA.
21.
<PAGE> 27
(i) Each of the Plans has been operated and administered
in all material respects in accordance with applicable Legal Requirements,
including ERISA, the Code and applicable foreign Legal Requirements.
(j) Each of the Plans intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter as to
its qualification from the Internal Revenue Service, and nothing has occurred
that would adversely affect the ability of the Company to rely on each such
determination letter.
(k) Except as set forth in Part 2.17(k) of the Company
Disclosure Schedule, neither the execution, delivery or performance of this
Agreement, nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will result in any bonus, golden parachute,
severance or other payment or obligation to any current or former employee or
director of the Company (whether or not under any Plan), or materially increase
the benefits payable or provided under any Plan, or result in any acceleration
of the time of payment, provision or vesting of any such benefits. Without
limiting the generality of the foregoing (and except as set forth in Part
2.17(k) of the Company Disclosure Schedule), the consummation of the Merger will
not result in the acceleration of vesting of any unvested Company Options.
(1) Part 2.17(1) of the Company Disclosure Schedule
identifies each employee of the Company as of the date of this Agreement, and
correctly reflects, in all material respects, the current salary and any other
compensation payable to such employee (including compensation payable pursuant
to bonus, deferred compensation or commission arrangements), such employee's
employer, date of hire and position and the principal office of such employee.
The Company is not a party to any collective bargaining contract or other
Contract with a labor union involving any of its employees. All of the employees
of the Company are "at will" employees.
(m) Part 2.17(m) of the Company Disclosure Schedule
identifies each employee of the Company who is not fully available to perform
work because of disability or other leave and sets forth the basis of such
disability or leave and the anticipated date of such employee's return to full
service.
(n) The Company is in compliance in all material respects
with all applicable Legal Requirements and Contracts relating to employment,
employment practices, wages, bonuses and terms and conditions of employment,
including employee compensation matters.
(o) The Company has good labor relations, and the Company
has no knowledge of any facts indicating that (i) the consummation of the Merger
or any of the other transactions contemplated by this Agreement will have a
material adverse effect on the labor relations of the Company, or (ii) as of the
date of this Agreement, any of the employees of the Company intend to terminate
his or her employment with the Company.
2.18 ENVIRONMENTAL MATTERS. The Company is in compliance in all
material respects with all applicable Environmental Laws, which compliance
includes the possession by
22.
<PAGE> 28
the Company of all permits and other Governmental Authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof. The Company has not received any notice or other communication (in
writing or otherwise), whether from a Governmental Body, citizens group,
employee or otherwise, that alleges that the Company is not in compliance with
any Environmental Law, and, to the best of the knowledge of the Company, there
are no circumstances that may prevent or interfere with the compliance by the
Company with any Environmental Law in the future. To the best of the knowledge
of the Company, no current or prior owner of any property leased or controlled
by the Company has received any notice or other communication (in writing or
otherwise), whether from a Government Body, citizens group, employee or
otherwise, that alleges that such current or prior owner or the Company is not
in compliance with any Environmental Law. To the best of the Company's
knowledge, (a) all property that is leased to, controlled by or used by the
Company, and all surface water, groundwater and soil associated with or adjacent
to such property is free of any material environmental contamination of any
nature, (b) none of the property leased to, controlled by or used by the Company
contains any underground storage tanks, asbestos, equipment using PCBs,
underground injection wells, and (c) none of the property leased to, controlled
by or used by the Company contains any septic tanks in which process wastewater
or any Materials of Environmental Concern have been disposed. The Company has
never sent or transported, or arranged to send or transport, any Materials of
Environmental Concern to a site that, pursuant to any applicable Environmental
Law (i) has been placed on the "National Priorities List" of hazardous waste
sites or any similar state list, (ii) is otherwise designated or identified as a
potential site for remediation, cleanup, closure or other environmental remedial
activity, or (iii) is subject to a Legal Requirement to take "removal" or
"remedial" action as detailed in any applicable Environmental Law or to make
payment for the cost of cleaning up the site.
2.19 INSURANCE. The Company has delivered to Parent a copy of
each material insurance policy and each self insurance program or arrangement
relating to the business, assets and operations of the Company. Each such
insurance policy is in full force and effect. Since January 1, 1996, the Company
has not received any notice or other communication regarding any actual or
possible (a) cancellation or invalidation of any such insurance policy, (b)
refusal of any coverage or rejection of any material claim under any insurance
policy, or (c) material adjustment in the amount of the premiums payable with
respect to any insurance policy. Except as set forth in Part 2.19 of the Company
Disclosure Schedule, there is no pending workers' compensation or other claim
under or based upon any insurance policy of the Company; and, to the best of the
knowledge of the Company, no event has occurred, and no condition or
circumstance exists, that might (with or without notice or lapse of time)
directly or indirectly give rise to or serve as a basis for any such claim.
2.20 TRANSACTIONS WITH AFFILIATES. Except as set forth in the
Company SEC Reports, since the date of the Company's last proxy statement filed
with the SEC, no event has occurred that would be required to be reported by the
Company pursuant to Item 404 of Regulation S-K promulgated by the SEC. Part 2.20
of the Company Disclosure Schedule identifies each person who is (or who may be
deemed to be) an "affiliate" (as that term is used in Rule 145 under the
Securities Act) of the Company as of the date of this Agreement.
23.
<PAGE> 29
2.21 LEGAL PROCEEDINGS; ORDERS.
(a) As of the date hereof, there is no pending Legal
Proceeding, and to the best of the knowledge of the Company, no Person has
threatened to commence any Legal Proceeding: (i) that involves the Company or
any of the assets owned or used by the Company; or (ii) that challenges, or that
may have the effect of preventing, delaying, making illegal or otherwise
interfering with, the Merger or any of the other transactions contemplated by
this Agreement. To the best of the knowledge of the Company, no event has
occurred, and no claim, dispute or other condition or circumstance exists, that
could reasonably be expected to, give rise to or serve as a basis for the
commencement of any such Legal Proceeding. To the best of the knowledge of the
Company, no event has occurred, and no claim, dispute or other circumstance or
condition exists, that will, or that could reasonably be expected to, cause or
provide a basis for a director, officer or other representative of the Company
to seek indemnification from, or commence a Legal Proceeding against or
involving, the Company.
(b) There is no material order, writ, injunction, judgment
or decree to which the Company, or any of the assets owned or used by the
Company, is subject. To the best of the knowledge of the Company, no officer or
key employee of the Company is subject to any order, writ, injunction, judgment
or decree that prohibits such officer or other employee from engaging in or
continuing any conduct, activity or practice relating to the business of the
Company.
2.22 AUTHORITY; INAPPLICABILITY OF ANTI-TAKEOVER STATUTES;
BINDING NATURE OF AGREEMENT. The Company has the absolute and unrestricted
right, power and authority to enter into and to perform its obligations under
this Agreement. The board of directors of the Company (at a meeting duly called
and held) has (a) determined (pursuant to a unanimous vote of all members of the
board of directors of the Company) that the Merger is advisable and fair and in
the best interests of the Company and its stockholders, (b) authorized and
approved (pursuant to a unanimous vote of all members of the board of directors
of the Company) the execution, delivery and performance of this Agreement by the
Company and approved (pursuant to a unanimous vote of all members of the board
of directors of the Company) the Merger, (c) recommended (pursuant to a
unanimous vote of all members of the board of directors of the Company) the
approval of this Agreement and the Merger by the holders of Company Common Stock
and directed that this Agreement and the Merger be submitted for consideration
by the Company's stockholders at the Company Stockholders' Meeting (as defined
in Section 5.2), and (d) adopted (pursuant to a unanimous vote of all members of
the board of directors of the Company) a resolution having the effect of causing
the Company not to be subject to any state takeover law or similar Legal
Requirement that might otherwise apply to the Merger or any of the other
transactions contemplated by this Agreement. The Company is not subject to
Section 2115 of the California Corporations Code. This Agreement constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of
law governing specific performance, injunctive relief and other equitable
remedies.
2.23 SECTION 203 OF THE DGCL NOT APPLICABLE; COMPANY RIGHTS PLAN.
As of the date hereof and at all times on or prior to the Effective Time, the
restrictions applicable to
24.
<PAGE> 30
business combinations contained in Section 203 of the DGCL are, and will be,
inapplicable to the execution, delivery and performance of this Agreement and to
the consummation of the Merger and the other transactions contemplated by this
Agreement. Prior to the execution of those certain Voting Agreements of even
date herewith between Parent and each of the Persons identified on Exhibit G
hereto, the board of directors of the Company approved said Voting Agreements
and the transactions contemplated thereby. The board of directors of Company has
taken all actions so that the Company Rights Plan has been amended to (i) render
the Rights Plan inapplicable to the Merger and the other transactions
contemplated by this Agreement, (ii) ensure that (x) none of Parent or its
subsidiaries is an Acquiring Person (as defined in the Company Rights Plan)
pursuant to the Company Rights Plan by virtue of the execution of this Agreement
or the consummation of the Merger or the other transactions contemplated hereby
and (y) a Distribution Date (as such term is defined in the Company Rights Plan)
does not occur by reason of the execution of this Agreement, the consummation of
the Merger, or the consummation of the transactions contemplated hereby, and
such amendment may not be further amended by Company without the prior consent
of Parent in its sole discretion.
2.24 NO DISCUSSIONS. Neither the Company, nor any Representative
of the Company, (i) is, or has at any time since January 1, 1998 been, engaged,
directly or indirectly, in any discussions or negotiations with any Person
relating to any Acquisition Proposal, (ii) has solicited, initiated, encouraged
or induced, or provided any nonpublic information to any Person relating to any
Acquisition Proposal, or (iii) has received any Acquisition Proposal.
2.25 VOTE REQUIRED. The affirmative vote of the holders of a
majority of the shares of Company Common Stock outstanding on the record date
for the Company Stockholders' Meeting (the "REQUIRED COMPANY STOCKHOLDER VOTE")
is the only vote of the holders of any class or series of the Company's capital
stock necessary to approve this Agreement, the Merger and the other transactions
contemplated by this Agreement.
2.26 NON-CONTRAVENTION; CONSENTS. Neither (1) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, nor (2) the consummation of the Merger or any of
the other transactions contemplated by this Agreement, will (with or without
notice or lapse of time):
(a) contravene, conflict with or result in a violation of
(i) any of the provisions of the certificate of incorporation, bylaws or other
charter or organizational documents of the Company, or (ii) any resolution
adopted by the stockholders, the board of directors or any committee of the
board of directors of the Company;
(b) contravene, conflict with or result in a violation of,
or give any Governmental Body or other Person the right to challenge the Merger
or any of the other transactions contemplated by this Agreement or to exercise
any remedy or obtain any relief under, any Legal Requirement or any order, writ,
injunction, judgment or decree to which the Company, or any of the assets owned
or used by the Company, is subject;
(c) contravene, conflict with or result in a violation of
any of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by the Company or
25.
<PAGE> 31
that otherwise relates to the business of the Company or to any of the assets
owned or used by the Company;
(d) contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of any Company Contract
that is or would constitute a Material Contract, or give any Person the right to
(i) declare a default or exercise any remedy under any such Company Contract,
(ii) a rebate, chargeback, penalty or change in delivery schedule under any such
Company Contract, (iii) accelerate the maturity or performance of any such
Company Contract, or (iv) cancel, terminate or modify any term of such Company
Contract;
(e) result in the imposition or creation of any
Encumbrance upon or with respect to any asset owned or used by the Company
(except for minor liens that will not, in any case or in the aggregate,
materially detract from the value of the assets subject thereto or materially
impair the operations of the Company); or
(f) result in, or increase the likelihood of, the
disclosure or delivery to any escrowholder or other Person of the Company Source
Code, or the transfer of any material asset of the Company to any Person.
Except as set forth on Section 2.26(f) of the Company Disclosure Schedule, or as
may be required by the Exchange Act, the DGCL, the HSR Act and the NASD Bylaws
(as they relate to the Form S-4 Registration Statement and the Prospectus/Proxy
Statement), the Company was not, is not and will not be required to make any
filing with or give any notice to, or to obtain any Consent from, any Person in
connection with (x) the execution, delivery or performance of this Agreement or
any of the other agreements referred to in this Agreement, or (y) the
consummation of the Merger or any of the other transactions contemplated by this
Agreement.
2.27 FAIRNESS OPINION. The Company's board of directors has
received the opinion of Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), financial advisor to the Company, to the effect that the consideration
to be received by the stockholders of the Company in the Merger is fair to the
stockholders of the Company from a financial point of view. The Company will
promptly furnish to Parent an accurate and complete copy of said written opinion
dated the date of this Agreement.
2.28 FINANCIAL ADVISOR. Except for DLJ, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or any of the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. The total of all fees, commissions and other amounts that may
become payable to DLJ by the Company if the Merger is consummated have been
communicated to Parent and the amounts to be paid shall not exceed the amounts
so communicated. The Company has furnished to Parent accurate and complete
copies of all agreements under which any such fees, commissions or other amounts
have been paid to may become payable and all indemnification and other
agreements related to the engagement of DLJ.
2.29 REGISTRATION STATEMENT. None of the information supplied or
to be supplied by or on behalf of the Company for inclusion or incorporation by
reference in the Form
26.
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S-4 Registration Statement will, at the time the Form S-4 Registration Statement
is filed with the SEC or at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading. None of the information supplied or to be supplied by or on
behalf of the Company for inclusion or incorporation by reference in the Proxy
Statement will, at the time the Prospectus/Proxy Statement is mailed to the
stockholders of the Company or at the time of the Company Stockholders' 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, in the light of the circumstances under which they are made, not
misleading. The Prospectus/Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated by the SEC thereunder, except that no representation or
warranty is made by Company with respect to statements made or incorporated by
reference therein based on information supplied by Parent for inclusion or
incorporation by reference in the Prospectus/Proxy Statement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company that, except
as set forth in the disclosure schedule delivered to the Company on the date of
this Agreement and signed by an executive officer of Parent (the "PARENT
DISCLOSURE SCHEDULE"):
3.1 ORGANIZATION, STANDING AND POWER. Each of Parent and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all necessary power and authority: (a)
to conduct its business in the manner in which its business is currently being
conducted; (b) to own and use its assets in the manner in which its assets are
currently owned and used; and (c) to perform its obligations under all Contracts
by which it is bound. Each of Parent and Merger Sub is duly qualified to do
business as a foreign corporation, and is in good standing, under the laws of
all jurisdictions where the nature of its business requires such qualification
and where the failure to be so qualified would have a Material Adverse Effect on
Parent.
3.2 CAPITALIZATION, ETC. As of the date of this Agreement, the
authorized capital stock of Parent consists of: (i) five hundred million
(500,000,000) shares of Parent Common Stock, $0.01 par value per share, of
which, as of April 25, 1999, 167,470,969 shares (which amount does not
materially differ from the amount issued and outstanding as of the date of this
Agreement) were issued and outstanding; and (ii) four million (4,000,000) shares
of preferred stock, $0.01 par value per share, of which no shares are
outstanding as of the date of this Agreement. As of the date of this Agreement,
there are no outstanding subscriptions, options, calls, warrants or rights to
acquire shares of Parent Common Stock other than pursuant to stock issuance or
stock option plans or other arrangements disclosed in the Parent SEC Documents.
The authorized capital stock of Merger Sub consists of one hundred (100) shares
of Common Stock, $0.001 par value per share, all of which have been issued and
are outstanding as of the date of this Agreement and are held by Parent. None of
the outstanding shares of Parent Common Stock is entitled or subject to any
preemptive right, right of participation, right of maintenance or any similar
right.
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3.3 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has made available to the Company accurate and
complete copies (excluding copies of exhibits) of each report, registration
statement and definitive proxy statement filed by Parent with the SEC since
December 31, 1997 and will deliver to the Company accurate and complete copies
of all such reports, registration statements and definitive proxy statements
filed after the date of this Agreement and prior to the Effective Time (the
"PARENT SEC DOCUMENTS"). As of the time it was filed with the SEC (or, if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing): (i) each of the Parent SEC Documents complied in all
material respects with the applicable requirements of the Securities Act or the
Exchange Act (as the case may be); and (ii) none of the Parent SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The consolidated financial statements (including any
related notes) contained in the Parent SEC Documents: (i) complied as to form in
all material respects with the published rules and regulations of the SEC
applicable thereto; (ii) were prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered (except as may be indicated in
the notes to such financial statements and, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC, and except that unaudited financial
statements may not contain footnotes and are subject to year-end audit
adjustments); and (iii) fairly present in all material respects the consolidated
financial position of Parent and its subsidiaries as of the respective dates
thereof and the consolidated results of operations of Parent and its
subsidiaries for the periods covered thereby.
3.4 DISCLOSURE. None of the information to be supplied by or on
behalf of Parent for inclusion or incorporation by reference in the Form S-4
Registration Statement will, at the time the Form S-4 Registration Statement is
filed with the SEC or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. None of the information to be supplied by or on behalf of Parent for
inclusion in the Prospectus/Proxy Statement will, at the time the
Prospectus/Proxy Statement is mailed to the stockholders of the Company or at
the time of the Company Stockholders' 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, in the light of the
circumstances under which they are made, not misleading. The Prospectus/Proxy
Statement will comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations promulgated by the SEC
thereunder, except that no representation or warranty is made by Parent with
respect to statements made or incorporated by reference therein based on
information supplied by the Company for inclusion or incorporation by reference
in the Prospectus/Proxy Statement.
3.5 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub
have the absolute and unrestricted right, power and authority to perform their
obligations under this Agreement; and the execution, delivery and performance by
Parent and Merger Sub of this Agreement have been duly authorized by all
necessary action on the part of Parent and Merger
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Sub and their respective boards of directors. This Agreement constitutes the
legal, valid and binding obligation of Parent and Merger Sub, enforceable
against them in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
3.6 NO VOTE REQUIRED. No vote of the holders of Parent Common
Stock is required to authorize the Merger.
3.7 NON-CONTRAVENTION; CONSENTS. Neither the execution and
delivery of this Agreement by Parent and Merger Sub nor the consummation by
Parent and Merger Sub of the Merger or any other transaction contemplated hereby
will (a) conflict with or result in any breach of any provision of the
certificate of incorporation or bylaws of Parent or the certificate of
incorporation or bylaws of Merger Sub, (b) result in a default by Parent or
Merger Sub under any Contract to which Parent or Merger Sub is a party, except
for any default which has not had and will not have a Material Adverse Effect on
Parent, or (c) result in a violation by Parent or Merger Sub of any order, writ,
injunction, judgment or decree to which Parent or Merger Sub is subject, except
for any violation which has not had and will not have a Material Adverse Effect
on Parent. Except as may be required by the Securities Act, the Exchange Act,
state securities or "blue sky" laws, the DGCL, the HSR Act and the NASD Bylaws
(as they relate to the S-4 Registration Statement and the Prospectus/Proxy
Statement), Parent is not and will not be required to make any filing with or
give any notice to, or to obtain any Consent from, any Person in connection with
the execution, delivery or performance of this Agreement or the consummation of
the Merger.
3.8 VALID ISSUANCE. The shares of Parent Common Stock to be
issued in the Merger will, when issued in accordance with the provisions of this
Agreement, be duly authorized, validly issued, fully paid and nonassessable and
issued in compliance with all applicable Federal and state securities laws and
the rules and regulations of the Nasdaq National Market.
SECTION 4. CERTAIN COVENANTS
4.1 ACCESS AND INVESTIGATION. During the period from the date of
this Agreement through the Effective Time (the "PRE-CLOSING PERIOD"), the
Company shall, and shall cause the respective Representatives of the Company to:
(1) provide Parent and Parent's Representatives with reasonable access to the
Company's Representatives, personnel and assets and to all existing books,
records, Tax Returns, work papers and other documents and information relating
to the Company; and (2) provide Parent and Parent's Representatives with such
copies of the existing books, records, Tax Returns, work papers and other
documents and information relating to the Company, and with such additional
financial, operating and other data and information regarding the Company, as
Parent may reasonably request. Without limiting the generality of the foregoing,
during the Pre-Closing Period, the Company shall promptly provide Parent with
copies of:
(a) all material operating and financial reports prepared
by the Company and its Subsidiaries for the Company's senior management,
including copies of the
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unaudited quarterly consolidated balance sheets of the Company and the related
unaudited monthly consolidated statements of operations, statements of
stockholders' equity and statements of cash flows;
(b) any written materials or communications sent by or on
behalf of the Company to its stockholders;
(c) any material notice, document or other communication
sent by or on behalf of the Company to any party to any Company Contract or sent
to the Company by any party to any Company Contract (other than any
communication that relates solely to routine commercial transactions between the
Company and the other party to any such Company Contract and that is of the type
sent in the ordinary course of business and consistent with past practices);
(d) any notice, report or other document filed with or
sent to any Governmental Body in connection with the Merger or any of the other
transactions contemplated by this Agreement; and
(e) any material notice, report or other document received
by the Company from any Governmental Body.
4.2 OPERATION OF THE COMPANY'S BUSINESS.
(a) During the Pre-Closing Period: (i) the Company shall
ensure that the Company conducts its business and operations (A) in the ordinary
course and in accordance with past practices and (B) in material compliance with
all applicable Legal Requirements and the requirements of all Company Contracts
that constitute Material Contracts; (ii) the Company shall use all reasonable
efforts to ensure that the Company preserves intact its current business
organization, keeps available the services of its current officers and other
employees and maintains its relations and goodwill with all suppliers,
customers, landlords, creditors, licensors, licensees, employees and other
Persons having business relationships with the Company; (iii) the Company shall
keep in full force all insurance policies referred to in Section 2.19; (iv) the
Company shall provide all notices, assurances and support required by any
Company Contract relating to any Company Proprietary Asset in order to ensure
that no condition under such Company Contract occurs which could result in, or
could increase the likelihood of, (A) any transfer or disclosure by the Company
of any Company Source Code, or (B) a release from any escrow of any Company
Source Code which has been deposited or is required to be deposited in escrow
under the terms of such Acquired Corporation Contract; and (v) cause all new
employees and consultants to enter into an agreement that is substantially
identical to the form of Confidential Information and Invention Assignment
Agreement previously delivered by the Company to Parent.
(b) During the Pre-Closing Period, the Company shall not
(without the prior written consent of Parent), and shall not permit the Company
to:
(i) declare, accrue, set aside or pay any dividend
or make any other distribution in respect of any shares of capital stock, or
repurchase, redeem or otherwise reacquire any shares of capital stock or other
securities;
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(ii) sell, issue, grant or authorize the issuance
or grant of (A) any capital stock or other security, (B) any option, call,
warrant or right to acquire any capital stock or other security (except that the
Company may grant options to employees hired after the date hereof below the
level of vice president in amounts and with such terms as are consistent with
the Company's past practices), or (C) any instrument convertible into or
exchangeable for any capital stock or other security (except that the Company
may issue shares of Company Common Stock (x) upon the valid exercise of Company
Options outstanding as of the date of this Agreement pursuant to the Option
Plans, and (y) pursuant to the ESPP);
(iii) except for the Plan Amendment, amend or waive
any of its rights under, or accelerate the vesting under, any provision of any
of the Option Plans, any provision of any agreement evidencing any outstanding
stock option or any restricted stock purchase agreement, or otherwise modify any
of the terms of any outstanding option, warrant or other security or any related
Contract;
(iv) amend or permit the adoption of any amendment
to its certificate of incorporation or bylaws or other charter or organizational
documents, or effect or become a party to any merger, consolidation,
amalgamation, share exchange, business combination, recapitalization,
reclassification of shares, stock split, division or subdivision of shares,
reverse stock split, consolidation of shares or similar transaction;
(v) form any Subsidiary or acquire any equity
interest or other interest in any other Entity;
(vi) make any individual capital expenditure in
excess of $50,000 or capital expenditures made on behalf of the Company during
the Pre-Closing Period, exceeding $200,000 in the aggregate;
(vii) make any payments outside of the ordinary
course of business;
(viii) enter into or become bound by, or permit any
of the assets owned or used by it to become bound by, any Material Contract, or
amend or terminate, waive any material right or remedy under, or, except in the
ordinary course of business consistent with past practice, exercise any material
right under, any Material Contract;
(ix) acquire, lease or license any right, property
or other asset from any other Person or sell or otherwise dispose of, or lease
or license, any right, property or other asset to any other Person (except in
each case for immaterial assets acquired, leased, licensed or disposed of by the
Company in the ordinary course of business and consistent with past practices),
or waive or relinquish any material right;
(x) lend money to any Person, or incur or guarantee
any indebtedness, or issue or sell any debt securities or warrants or right to
acquired debt securities of the Company or guarantee any debt securities of
others (other than travel advances to employees in the ordinary course of
business);
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(xi) establish, adopt or amend any employee benefit
plan (including adding employees who are not covered by the Severance Plan as of
the date of this Agreement to the Severance Plan), pay any bonus or make any
profit-sharing or similar payment to, or increase the amount of the wages,
salary, commissions, fringe benefits or other compensation or remuneration
payable to, any of its directors, officers or employees (except that the Company
may make routine, reasonable salary increases in connection with the Company's
customary employee review process and may pay customary bonuses consistent with
past practices payable in accordance with existing bonus plans referred to in
Part 2.17(a) of the Company Disclosure Schedule);
(xii) hire any employee at the level of director or
above, or with an annual base salary in excess of $100,000, or engage any
consultant or independent contractor for a period exceeding sixty (60) days or
for monthly compensation in excess of $10,000;
(xiii) materially revalue any of its assets or
change any of its pricing policies, product return policies, product maintenance
polices, service policies, product modification or upgrade policies, personnel
policies or other business policies, or any of its methods of accounting or
accounting practices in any respect;
(xiv) change the status, title or responsibilities,
including without limitation, termination or promotion, of any vice president
level employee or above of the Company, promote any employee to the level of
vice president or above in the Company, or promote anyone to an officer position
in the Company;
(xv) transfer or license to any Person or otherwise
extend the term of any agreement with respect to, amend or modify in any
material respect any rights (including without limitation distribution rights)
to the Proprietary Assets of the Company, or enter into assignments of future
patent rights, other than non-exclusive licenses and distribution rights in the
ordinary course of business and consistent with past practice;
(xvi) encumber any properties or assets which are
material, individually or in the aggregate, to the business of the Company,
except in the ordinary course of business consistent with past practice;
(xvii) make any Tax election;
(xviii) commence or settle any Legal Proceeding;
(xix) enter into any material transaction or take
any other material action outside the ordinary course of business or
inconsistent with past practices;
(xx) except for the Merger, take any action that
would result in or contribute to the acceleration of options or require any
payment to be made pursuant to the Severance Plan; or
(xxi) agree or commit to take any of the actions
described in clauses "(i)" through "(xx)" of this Section 4.2(b); provided,
however, that nothing in this
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Section 4.2(b) shall prevent the Company from complying with its obligations
under Section 4.7 hereof.
(c) During the Pre-Closing Period, the Company shall
promptly notify Parent in writing of: (i) the discovery by the Company of any
event, condition, fact or circumstance that occurred or existed on or prior to
the date of this Agreement and that caused or constitutes a material inaccuracy
in any representation or warranty made by the Company in this Agreement; (ii)
any event, condition, fact or circumstance that occurs, arises or exists after
the date of this Agreement and that would cause or constitute a material
inaccuracy in any representation or warranty made by the Company in this
Agreement if (A) such representation or warranty had been made as of the time of
the occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement; (iii) any event,
condition, fact or circumstance hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in the Company Disclosure Schedule; (iv) any material breach
of any covenant or obligation of the Company; (v) any event, condition, fact or
circumstance that would make the timely satisfaction of any of the conditions
set forth in Section 6 or Section 7 impossible or unlikely or that has had or
could reasonably be expected to have a Material Adverse Effect on the Company,
and (vi) any option grant made by the Company (specifying the name and title of
the optionee, number of option shares, vesting schedule, exercise price and
other material terms). Without limiting the generality of the foregoing, the
Company shall promptly advise Parent in writing of any Legal Proceeding or
material claim threatened, commenced or asserted against or with respect to the
Company. No notification given to Parent pursuant to this Section 4.2(c) shall
limit or otherwise affect any of the representations, warranties, covenants or
obligations of the Company contained in this Agreement.
(d) If any event, condition, fact or circumstance that is
required to be disclosed pursuant to Section 4.2(c) requires any change in the
Company Disclosure Schedule, or if any such event, condition, fact or
circumstance would require such a change assuming Company Disclosure Schedule
were dated as of the date of the occurrence, existence or discovery of such
event, condition, fact or circumstance, then the Company shall promptly deliver
to Parent an update to the Company Disclosure Schedule specifying such change.
No such update shall be deemed to supplement or amend the Company Disclosure
Schedule for the purpose of (i) determining the accuracy of any of the
representations and warranties made by the Company in this Agreement, or (ii)
determining whether any of the conditions set forth in Section 6 has been
satisfied.
4.3 NO SOLICITATION.
(a) From the date of this Agreement until the earlier of
the Effective Time or termination of this Agreement pursuant to Section 8, the
Company shall not directly or indirectly, and shall not authorize or permit any
Representative of the Company directly or indirectly to:
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(i) solicit, initiate, encourage or induce the
making, submission or announcement of any Acquisition Proposal or take any
action that could reasonably be expected to lead to an Acquisition Proposal;
(ii) furnish any information regarding the Company
to any Person in connection with or in response to an Acquisition Proposal;
(iii) engage in discussions or negotiations with
any Person with respect to any Acquisition Proposal;
(iv) approve, endorse or recommend any Acquisition
Proposal; or
(v) enter into any letter of intent or similar
document or any Contract contemplating or otherwise relating to any Acquisition
Transaction;
provided, however, that (A) nothing herein shall prohibit the Company's board of
directors from disclosing to the Company's stockholders a position with respect
to a tender offer pursuant to Rules 14d-9 and 14e-2 promulgated under the
Exchange Act and (B) prior to the adoption and approval of this Agreement by the
Required Company Stockholder Vote, the Company shall not be prohibited by this
Section 4.3(a) from (x) furnishing nonpublic information regarding the Company
to, or (y) entering into discussions with, any Person in response to a Superior
Offer that is submitted by such Person (and not withdrawn) if:
(1) neither the Company nor any
Representative of the Company shall have violated any of the restrictions set
forth in this Section 4.3;
(2) the board of directors of the Company
concludes in good faith, based upon the advice of its outside legal counsel,
that such action is required in order for the board of directors of the Company
to comply with its fiduciary obligations to the Company's stockholders under
applicable law;
(3) prior to furnishing any such nonpublic
information to, or entering into discussions with, such Person, the Company
gives Parent written notice of the identity of such Person and of the Company's
intention to furnish nonpublic information to, or enter into discussions with,
such Person, and the Company receives from such Person an executed
confidentiality agreement containing customary limitations on the use and
disclosure of all nonpublic written and oral information furnished to such
Person by or on behalf of the Company; and
(4) prior to furnishing any such nonpublic
information to such Person, the Company furnishes such nonpublic information to
Parent (to the extent such nonpublic information has not been previously
furnished by the Company to Parent).
Without limiting the generality of the foregoing, the Company acknowledges and
agrees that any violation of any of the restrictions set forth in the preceding
sentence by any Representative of the Company, whether or not such
Representative is purporting to act on behalf of the Company, shall be deemed to
constitute a breach of this Section 4.3 by the Company. In addition to the
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foregoing, the Company shall (i) provide Parent with at least forty-eight (48)
hours prior notice of any meeting of the Company's Board of Directors at which
the Company's Board of Directors is reasonably expected to consider a Superior
Offer and (ii) not recommend a Superior Offer to its shareholders for a period
of not less than the greater of three (3) business days or seventy-two (72)
hours after Parent's receipt of a copy of such Superior Offer (pursuant to
Section 4.3(b) below).
(b) The Company shall promptly advise Parent orally and in
writing of any Acquisition Proposal (including the identity of the Person making
or submitting such Acquisition Proposal and the terms thereof) that is made or
submitted by any Person during the Pre-Closing Period. The Company shall keep
Parent fully informed with respect to the status of any such Acquisition
Proposal and any modification or proposed modification thereto.
(c) The Company shall immediately cease and cause to be
terminated any existing discussions with any Person that relate to any
Acquisition Proposal.
4.4 PROPRIETARY ASSETS.
(a) During the Pre-Closing Period, the Company shall use
its best efforts to evaluate whether products it manufactured prior to December
31, 1997 are Year 2000 Compliant, document such compliance or lack thereof, and
assess the financial impact on the Company for liability to third parties for
any products the Company manufactured which are not Year 2000 Compliant.
(b) The Company shall complete the annotations listed in
Part 2.9(e)(ii) of the Company Disclosure Schedule by June 10, 1999.
4.5 TERMINATION OF PLANS. Upon the request of Parent, to the
extent permitted under applicable law and applicable contracts and the terms of
such Plan (including but not limited to the Company's 401(k) Plan), the Company
will terminate any Plan immediately prior to the Closing.
4.6 PLAN AMENDMENT. During the Pre-Closing Period, the Company
shall use its best efforts to amend the Severance Plan as provided in the Plan
Amendment.
4.7 APPROVAL OF DELAWARE REINCORPORATION. The Company shall take
all action necessary under all applicable Legal Requirements to remedy the
California Company's failure to obtain the requisite shareholder approval prior
to filing the Agreement and Plan of Merger, dated as of May 29, 1997, between
the California Company and the Delaware Company (the "1997 REINCORPORATION")
under the CCC and the DGCL, such that the Delaware Company shall be the
Principal Company. The Company shall use its best efforts to remedy such failure
as promptly as practicable after the date of this Agreement. If the Company
shall not have remedied such failure to Parent's reasonable satisfaction by June
7, 1999, and if it shall be necessary, in the reasonable judgment of Parent,
that, in order to remedy such failure, the Company needs to hold a special
meeting of the holders of the Company Common Stock (the "REINCORPORATION
MEETING") to consider, act upon and vote upon the reincorporation of Principal
Company in the State of Delaware or to ratify the 1997 Reincorporation, the
Company shall take all actions necessary under all applicable Legal Requirements
to call, give notice of,
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convene and hold the Reincorporation Meeting, in each case as promptly as
practicable after the date of such request from Parent; provided, that in no
event shall the Reincorporation Meeting be held later than thirty (30) days
after the mailing of a definitive proxy statement relating to the
Reincorporation Meeting. The Company shall ensure that the Reincorporation
Meeting is called, noticed, convened, held and conducted, and that all proxies
solicited in connection with the Reincorporation Meeting are solicited, in
compliance with all applicable Legal Requirements. The Company's obligation to
call, give notice of, convene and hold the Reincorporation Meeting in accordance
with this Section 4.7 shall not be limited or otherwise affected by the
commencement, disclosure, announcement or submission of any Superior Offer or
other Acquisition Proposal, or by any withdrawal, amendment or modification of
the recommendation of the board of directors of the Company with respect to the
Merger.
4.8 PARENT NOTIFICATION.
(a) During the Pre-Closing Period, Parent shall promptly
notify the Company in writing of: (i) the discovery by Parent of any event,
condition, fact or circumstance that occurred or existed on or prior to the date
of this Agreement and that caused or constitutes a material inaccuracy in any
representation or warranty made by Parent in this Agreement; (ii) any event,
condition, fact or circumstance that occurs, arises or exists after the date of
this Agreement and that would cause or constitute a material inaccuracy in any
representation or warranty made by the Company in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or (B)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement; (iii) any event, condition, fact or
circumstance hereafter arising which, if existing or occurring at the date of
this Agreement, would have been required to be set forth or described in the
Parent Disclosure Schedule; (iv) any material breach of any covenant or
obligation of Parent; and (v) any event, condition, fact or circumstance that
would make the timely satisfaction of any of the conditions set forth in Section
6 or Section 7 impossible or unlikely. No notification given to the Company
pursuant to this Section 4.8(a) shall limit or otherwise affect any of the
representations, warranties, covenants or obligations of Parent contained in
this Agreement.
(b) If any event, condition, fact or circumstance that
is required to be disclosed pursuant to Section 4.8(a) requires any change in
the Parent Disclosure Schedule, or if any such event, condition, fact or
circumstance would require such a change assuming. Parent Disclosure Schedule
were dated as of the date of the occurrence, existence or discovery of such
event, condition, fact or circumstance, then Parent shall promptly deliver to
the Company an update to the Parent Disclosure Schedule specifying such change.
No such update shall be deemed to supplement or amend the Parent Disclosure
Schedule for the purpose of (i) determining the accuracy of any of the
representations and warranties made by Parent in this Agreement, or (ii)
determining whether any of the conditions set forth in Section 7 has been
satisfied.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 REGISTRATION STATEMENT; PROSPECTUS/PROXY STATEMENT. As
promptly as practicable after the date of this Agreement, Parent and the Company
shall prepare and cause to
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be filed with the SEC the Prospectus/Proxy Statement and Parent shall prepare
and cause to be filed with the SEC the Form S-4 Registration Statement, in which
the Prospectus/Proxy Statement will be included as a prospectus, provided,
however, that notwithstanding anything to the contrary contained in this Section
5.1(a), if (and to the extent) Parent so elects: (i) the Proxy
Statement/Prospectus shall initially be filed with the SEC on a confidential
basis as a proxy statement of the Company under the Securities Act); (ii) until
such time as Parent has determined that it is reasonably likely that the SEC
will promptly declare the Form S-4 Registration Statement effective under the
Securities Act, all amendments to the Proxy Statement/Prospectus shall be filed
with the SEC on a confidential basis as amendments to the proxy statement of the
Company under Section 14 of the Exchange Act; and (iii) Parent shall not be
obligated to file the Form S-4 Registration Statement with the SEC until such
time as Parent has determined that it is reasonably likely that the SEC will
promptly declare the Form S-4 Registration Statement effective under the
Securities Act. Each of Parent and the Company shall use all reasonable efforts
to cause the Form S-4 Registration Statement and the Prospectus/Proxy Statement
to comply with the rules and regulations promulgated by the SEC, to respond
promptly to any comments of the SEC or its staff and to have the Form S-4
Registration Statement declared effective under the Securities Act as promptly
as practicable after it is filed with the SEC. The Company will use all
reasonable efforts to cause the Prospectus/Proxy Statement to be mailed to the
Company's stockholders as promptly as practicable after the Form S-4
Registration Statement is declared effective under the Securities Act. The
Company shall promptly furnish to Parent all information concerning the Company
and the Company's stockholders that may be required or reasonably requested in
connection with any action contemplated by this Section 5.1. If any event
relating to the Company occurs, or if the Company becomes aware of any
information, that should be disclosed in an amendment or supplement to the Form
S-4 Registration Statement or the Prospectus/Proxy Statement, then the Company
shall promptly inform Parent thereof and shall cooperate with Parent in filing
such amendment or supplement with the SEC and, if appropriate, in mailing such
amendment or supplement to the stockholders of the Company.
5.2 COMPANY STOCKHOLDERS' MEETING.
(a) The Company shall take all action necessary under
all applicable Legal Requirements to call, give notice of, convene and hold a
meeting of the holders of Company Common Stock to consider, act upon and vote
upon the adoption and approval of this Agreement and the approval of the Merger
(the "COMPANY STOCKHOLDERS' MEETING"). The Company Stockholders' Meeting shall
not be held fewer than twelve trading days following the Parent stockholders'
meeting related to the tracking stock proposal (the "PARENT MEETING") and shall
not be held fewer than thirty (30) days after following the Reincorporation
Meeting, (unless Parent shall have provided its prior written consent to hold
the Parent Meeting within a lesser number of days following the Reincorporation
Meeting) but will be held as promptly as practicable after the later to occur of
the (1) twelfth day following the Parent Meeting or (2) the thirtieth day
following the Reincorporation Meeting, and in any event within forty-five (45)
days after the latest of (A) the date the Form S-4 Registration Statement is
declared effective under the Securities Act, (B) the Parent Meeting or (C) the
Reincorporation Meeting; provided, however, that if the proxy materials for the
Parent Meeting have not been mailed by August 31, 1999, then on August 31, 1999
the date for the Company Stockholders' Meeting shall be set for as soon as
practicable thereafter and in any event no later than the latest of (1) October
31, 1999, (2) forty-
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five (45) days after the effective date of the Form S-4 Registration Statement,
or (3) forty-five (45) days after the Reincorporation Meeting; provided,
however, that notwithstanding anything to the contrary contained in this
Agreement, the Company may adjourn or postpone the Company Shareholders' Meeting
to the extent necessary to ensure that any necessary supplement or amendment to
the Joint Proxy Statement/Prospectus is provided to the Company's shareholders
in advance of a vote on the Merger and this Agreement or, if as of the time for
which Company Shareholders' Meeting is originally scheduled (as set forth in the
Joint Proxy Statement/Prospectus) there are insufficient shares of Company
Common Stock represented (either in person or by proxy) to constitute a quorum
necessary to conduct the business of the Company's Shareholders' Meeting. The
Company shall ensure that the Company Stockholders' Meeting is called, noticed,
convened, held and conducted, and that all proxies solicited in connection with
the Company Stockholders' Meeting are solicited, in compliance with all
applicable Legal Requirements. The Company's obligation to call, give notice of,
convene and hold the Company Stockholders' Meeting in accordance with this
Section 5.2(a) shall not be limited or otherwise affected by the commencement,
disclosure, announcement or submission of any Superior Offer or other
Acquisition Proposal, or by any withdrawal, amendment or modification of the
recommendation of the board of directors of the Company with respect to the
Merger.
(b) Subject to Section 5.2(c): (i) the board of
directors of the Company shall unanimously recommend that the Company's
stockholders vote in favor of and adopt and approve this Agreement and approve
the Merger at the Company Stockholders' Meeting; (ii) the Prospectus/Proxy
Statement shall include a statement to the effect that the board of directors of
the Company has unanimously recommended that the Company's stockholders vote in
favor of and adopt and approve this Agreement and approve the Merger at the
Company Stockholders' Meeting; and (iii) neither the board of directors of the
Company nor any committee thereof shall withdraw, amend or modify, or propose or
resolve to withdraw, amend or modify, in a manner adverse to Parent, the
unanimous recommendation of the board of directors of the Company that the
Company's stockholders vote in favor of and adopt and approve this Agreement and
approve the Merger. For purposes of this Agreement, said recommendation of the
board of directors of the Company shall be deemed to have been modified in a
manner adverse to Parent if said recommendation shall no longer be unanimous.
(c) Nothing in Section 5.2(b) shall prevent the board of
directors of the Company from withdrawing, amending or modifying its unanimous
recommendation in favor of the Merger at any time prior to the adoption and
approval of this Agreement by the Required Company Stockholder Vote if (i) a
Superior Offer is made to the Company and is not withdrawn, (ii) neither the
Company nor any of its Representatives shall have violated any of the
restrictions set forth in Section 4.3, (iii) the board of directors of the
Company concludes in good faith, based upon the advice of its outside counsel,
that, in light of such Superior Offer, the withdrawal, amendment or
modification of such recommendation is required in order for the board of
directors of the Company to comply with its fiduciary obligations to the
Company's stockholders under applicable law, (iv) the Company provides Parent
with at least 48 hours prior notice of any meeting of the Company's board of
directors at which such board of directors is expected to consider such Superior
Offer, and (v) the Company's board of directors does not withdraw, amend or
modify its unanimous recommendation in favor of the Merger for at least 72 hours
after the Company provides Parent with the name of the Person making such
Superior Offer and
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a copy of such Superior Offer. Nothing contained in this Section 5.2 shall limit
the Company's obligation to call, give notice of, convene and hold the Company
Stockholders' Meeting (regardless of whether the unanimous recommendation of the
board of directors of the Company shall have been withdrawn, amended or
modified).
5.3 REGULATORY APPROVALS. Each party shall use all reasonable
efforts to file, as promptly as practicable after the date of this Agreement,
all notices, reports and other documents required to be filed by such party with
any Governmental Body with respect to the Merger and the other transactions
contemplated by this Agreement, and to submit promptly any additional
information requested by any such Governmental Body. Without limiting the
generality of the foregoing, the Company and Parent shall, promptly after the
date of this Agreement, prepare and file the notifications required under the
HSR Act in connection with the Merger. The Company and Parent shall respond as
promptly as practicable to (i) any inquiries or requests received from the
Federal Trade Commission or the Department of Justice for additional information
or documentation and (ii) any inquiries or requests received from any state
attorney general or other Governmental Body in connection with antitrust or
related matters. Each of the Company and Parent shall (1) give the other party
prompt notice of the commencement of any Legal Proceeding by or before any
Governmental Body with respect to the Merger or any of the other transactions
contemplated by this Agreement, (2) keep the other party informed as to the
status of any such Legal Proceeding, and (3) promptly inform the other party of
any communication to or from the Federal Trade Commission, the Department of
Justice or any other Governmental Body regarding the Merger. The Company and
Parent will consult and cooperate with one another, and will consider in good
faith the views of one another, in connection with any analysis, appearance,
presentation, memorandum, brief, argument, opinion or proposal made or submitted
in connection with any Legal Proceeding under or relating to the HSR Act or any
other federal or state antitrust or fair trade law. In addition, except as may
be prohibited by any Governmental Body or by any Legal Requirement, in
connection with any Legal Proceeding under or relating to the HSR Act or any
other federal or state antitrust or fair trade law or any other similar Legal
Proceeding, each of the Company and Parent will permit authorized
Representatives of the other party to be present at each meeting or conference
relating to any such Legal Proceeding and to have access to and be consulted in
connection with any document, opinion or proposal made or submitted to any
Governmental Body in connection with any such Legal Proceeding.
5.4 STOCK OPTIONS.
(a) At the Effective Time, all rights with respect to
Company Common Stock under each Company Option then outstanding shall be
converted into and become rights with respect to Parent Common Stock, and Parent
shall assume each such Company Option in accordance with the terms (as in effect
as of the date of this Agreement) of the stock option plan under which it was
issued and the stock option agreement by which it is evidenced. From and after
the Effective Time, (i) each Company Option assumed by Parent may be exercised
solely for shares of Parent Common Stock, (ii) the number of shares of Parent
Common Stock subject to each such Company Option shall be equal to the number of
shares of Company Common Stock subject to such Company Option immediately prior
to the Effective Time multiplied by the Exchange Ratio, rounded down to the
nearest whole share, (iii) the per share exercise price under each such Company
Option shall be adjusted by dividing the per share
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exercise price under such Company Option by the Exchange Ratio and rounded up to
the nearest cent and (iv) any restriction on the exercise of any such Company
Option shall continue in full force and effect and the term, exercisability,
vesting schedule and other provisions of such Company Option shall otherwise
remain unchanged; provided, however, that each Company Option assumed by Parent
in accordance with this Section 5.4(a) shall, in accordance with its terms, be
subject to further adjustment as appropriate to reflect any stock split,
division or subdivision of shares, stock dividend, reverse stock split,
consolidation of shares, reclassification, recapitalization or other similar
transaction subsequent to the Effective Time. Parent shall file with the SEC,
promptly after the date on which the Merger becomes effective, a registration
statement on Form S-8 relating to the shares of Parent Common Stock issuable
with respect to the Company Options assumed by Parent in accordance with this
Section 5.4(a).
(b) The Company shall take all action that may be
necessary (under the plans pursuant to which Company Options are outstanding and
otherwise) to effectuate the provisions of this Section 5.4 and to ensure that,
from and after the Effective Time, holders of Company Options have no rights
with respect thereto other than those specifically provided in this Section 5.4.
(c) As of the Effective Time, the ESPP shall be
terminated. The rights of participants in the ESPP with respect to any offering
period then underway under the ESPP shall be determined by treating the last
business day prior to the Effective Time as the last day of such offering period
and by making such other pro-rata adjustments as may be necessary to reflect the
reduced offering period but otherwise treating such offering period as a fully
effective and completed offering period for all purposes of such Plan. Prior to
the Effective Time, the Company shall take all actions (including, if
appropriate, amending the terms of the ESPP) that are necessary to give effect
to the transactions contemplated by this Section 5.4(d).
5.5 INDEMNIFICATION OF OFFICERS AND DIRECTORS.
(a) All rights to indemnification existing in favor of those
Persons who are directors and officers of the Company as of the date of this
Agreement (the "Indemnified Persons") for acts and omissions occurring prior to
the Effective Time, as provided in the Company's Bylaws (as in effect as of the
date of this Agreement) and as provided in the indemnification agreements
between the Company and said Indemnified Persons (as in effect as of the date of
this Agreement), shall survive the Merger and shall be observed by the Surviving
Corporation and Parent to the fullest extent available under Delaware law for a
period of six years from the Effective Time.
(b) From the Effective Time until the third anniversary of the
Effective Time, the Surviving Corporation or Parent shall maintain in effect,
for the benefit of the Indemnified Persons with respect to acts or omissions
occurring prior to the Effective Time, the existing policy of directors' and
officers' liability insurance maintained by the Company as of the date of this
Agreement (the "Existing Policy"); provided, however, that (i) the Surviving
Corporation or Parent may substitute for the Existing Policy a policy or
policies of comparable coverage, and (ii) the Surviving Corporation shall not be
required to pay an annual premium for the Existing Policy (or for any substitute
policies) in excess of 150% of the amount of the last annual premium paid by the
Company prior to the date of this Agreement for the Existing Policy
40.
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(the "Premium Amount"). In the event any future annual premium for the Existing
Policy (or any substitute policies) exceeds the Premium Amount, the Surviving
Corporation or Parent shall be entitled to reduce the amount of coverage of the
Existing Policy (or any substitute policies) to the maximum amount of coverage
that can be obtained for a premium equal to the Premium Amount.
5.6 ADDITIONAL AGREEMENTS.
(a) Subject to Section 5.6(b), Parent and the Company shall use
all reasonable efforts to take, or cause to be taken, all actions necessary to
effectuate the Merger and make effective the other transactions contemplated by
this Agreement. Without limiting the generality of the foregoing, but subject to
Section 5.6(b), each party to this Agreement (i) shall make all filings (if any)
and give all notices (if any) required to be made and given by such party in
connection with the Merger and the other transactions contemplated by this
Agreement, (ii) shall use its best efforts to obtain each Consent (if any)
required to be obtained (pursuant to any applicable Legal Requirement or
Contract, or otherwise) by such party in connection with the Merger or any of
the other transactions contemplated by this Agreement, and (iii) shall use its
best efforts to lift any restraint, injunction or other legal bar to the Merger.
The Company shall promptly deliver to Parent a copy of each such filing made,
each such notice given and each such Consent obtained by the Company during the
Pre-Closing Period.
(b) Notwithstanding anything to the contrary contained in this
Agreement, Parent shall not have any obligation under this Agreement: (i) to
dispose or transfer or cause any of its Subsidiaries to dispose of or transfer
any assets, or to commit to cause the Company to dispose of any assets; (ii) to
discontinue or cause any of its Subsidiaries to discontinue offering any product
or service, or to commit to cause the Company to discontinue offering any
product or service; (iii) to license or otherwise make available, or cause any
of its Subsidiaries to license or otherwise make available, to any Person, any
technology, software or other Company Proprietary Asset or any Proprietary Asset
of Parent, or to commit to cause the Company to license or otherwise make
available to any Person any technology, software or other Company Proprietary
Asset or Proprietary Asset of Parent; (iv) to hold separate or cause any of its
Subsidiaries to hold separate any assets or operations (either before or after
the Closing Date), or to commit to cause the Company to hold separate any assets
or operations; or (v) to make or cause any of its Subsidiaries to make any
commitment (to any Governmental Body or otherwise) regarding its future
operations or the future operations of the Company.
5.7 DISCLOSURE. Parent and the Company shall consult with each other
before issuing any press release or otherwise making any public statement with
respect to the Merger or any of the other transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, neither Parent nor
the Company shall, and neither shall permit any of its Representatives to, make
any disclosure regarding the Merger or any of the other transactions
contemplated by this Agreement unless (a) the other party shall have approved
such disclosure or (b) the disclosing party shall have been advised by its
outside legal counsel that such disclosure is required by applicable law.
5.8 AFFILIATE AGREEMENTS. The Company shall use all reasonable efforts
to cause each Person identified in Part 2.20 of the Company Disclosure Schedule
and each other
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Person who is or becomes (or may be deemed to be) an "affiliate" (as that term
is used in Rule 145 under the Securities Act) of the Company to execute and
deliver to Parent, prior to the date of the mailing of the Prospectus/Proxy
Statement to the Company's stockholders, an Affiliate Agreement in the form of
Exhibit B.
5.9 TAX MATTERS. At or prior to the filing of the Form S-4 Registration
Statement, the Company and Parent shall execute and deliver to Cooley Godward
LLP and to Brobeck, Phleger & Harrison LLP tax representation letters in
customary form. Parent, Merger Sub and the Company shall each confirm to Cooley
Godward LLP and to Brobeck, Phleger & Harrison LLP the accuracy and completeness
as of the Effective Time of the tax representation letters delivered pursuant to
the immediately preceding sentence. Parent and the Company shall use all
reasonable efforts prior to the Effective Time to cause the Merger to qualify as
a tax free reorganization under Section 368(a)(1) of the Code. Following
delivery of the tax representations letters pursuant to the first sentence of
this Section 5.9, each of Parent and the Company shall use its reasonable
efforts to cause Cooley Godward LLP and Brobeck, Phleger & Harrison LLP,
respectively, to deliver to it a tax opinion satisfying the requirements of Item
601 of Regulation S-K promulgated under the Securities Act. In rendering such
opinions, each of such counsel shall be entitled to rely on the tax
representation letters referred to in this Section 5.9.
5.10 LISTING. Parent shall use its best efforts to cause the shares of
Parent Common Stock being issued in the Merger to be approved for listing
(subject to notice of issuance) on the Nasdaq National Market.
5.11 RESIGNATION OF OFFICERS AND DIRECTORS. The Company shall use all
reasonable efforts to obtain and deliver to Parent on or prior to the Closing
the resignation of each director and officer of the Company.
5.12 EMPLOYEE SERVICE CREDIT. Parent intends to maintain or cause the
Company to maintain employee benefit plans (as defined in Section 3(3) of ERISA)
for the benefit of employees of Company which are substantially similar to those
benefits provided for Parent's employees, including, without limitation, any of
the following benefit plans maintained by Parent: medical/dental/vision care,
life insurance, disability income, sick pay, holiday and vacation pay, 401(k)
plan coverage, Section 125 benefit arrangements, bonus profit-sharing or other
incentive plans, pension or retirement programs, dependent care assistance,
severance benefits, and employee stock option and stock purchase plans, to the
extent Company employees meet the eligibility requirements for each such plan or
program. Parent intends that Company's employees shall be given credit, for
purposes of any service requirements for participation, for their period of
service with the Company prior to the Effective Date, and Company employees
shall also, with respect to any Parent plans or programs which have co-payment,
deductible or other co-insurance features, receive credit for any amounts such
employees have paid to date in 1999 in co-payments, deductibles or co-insurance
under comparable programs maintained by the Company prior to the date hereof. In
addition, Parent intends that, to the maximum extent allowable under the
Company's medical/health plans, no Company employee who participates in any
medical/health plan of the Company at the Effective Date shall be denied
coverage under Parent's medical/health plan by reason of any pre-existing
condition exclusions.
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SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions:
6.1 ACCURACY OF REPRESENTATIONS. The representations and
warranties of the Company contained in this Agreement other than the
representations and warranties contained in Sections 2.1; 2.3;
2.9(a),(b)(i),(c),(d),(e),(f),(h) and (i); 2.10(a)(xii); 2.10(b) and (c), to the
extent such Sections 2.10(b) and (c) relate to Material Contracts of the type
specified in Section 2.10(a)(xii); and 2.24 (collectively, the "Special
Representations") shall have been accurate in all respects as of the date of
this Agreement and shall be accurate in all respects as of the Closing Date as
if made on and as of the Closing Date (it being understood that, for purposes of
determining the accuracy of such representations and warranties, (i) all
"Material Adverse Effect" qualifications and other materiality qualifications
contained in such representations and warranties shall be disregarded and (ii)
any update of or modification to the Company Disclosure Schedule made or
purported to have been made after the date of this Agreement shall be
disregarded), except for any such failure which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
the Company. The representations and warranties of the Company contained in the
Special Representations of this Agreement shall have been accurate in all
material respects as of the date of this Agreement and shall be accurate in all
material respects as of the Closing Date as if made on and as of the Closing
Date (it being understood that, for purposes of determining the accuracy of such
representations and warranties, (i) all "Material Adverse Effect" qualifications
and other materiality qualifications contained in such representations and
warranties shall be disregarded and (ii) any update of or modification to the
Company Disclosure Schedule made or purported to have been made after the date
of this Agreement shall be disregarded).
6.2 PERFORMANCE OF COVENANTS. Each covenant or obligation that
the Company is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all material respects.
6.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The Form S-4
Registration Statement shall have become effective in accordance with the
provisions of the Securities Act, and no stop order shall have been issued by
the SEC with respect to the Form S-4 Registration Statement.
6.4 STOCKHOLDER APPROVAL. This Agreement shall have been duly
adopted and approved, and the Merger shall have been duly approved, by the
Required Company Stockholder Vote.
6.5 AGREEMENTS AND DOCUMENTS. Parent shall have received the
following agreements and documents, each of which shall be in full force and
effect:
43.
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(a) Affiliate Agreements in the form of Exhibit B
executed by the Persons listed identified in Part 2.20 of the Company Disclosure
Schedule;
(b) Noncompetition Agreements in the form of Exhibit
C-1, executed by the persons listed on Exhibit D-1 and Employee Proprietary
Information and Invention Agreements, in the form of Exhibit C-2, executed by
the persons listed on Exhibit D-2;
(c) Executive Employment Agreement with Gianluca
Rattazzi in the form of Exhibit E;
(d) Voting Agreements in the form of Exhibit F, executed
by the persons listed on Exhibit G;
(e) a legal opinion of Cooley Godward LLP dated as of
the Closing Date and addressed to Parent, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368 of the Code (it
being understood that, in rendering such opinion, Cooley Godward LLP may rely
upon the tax representation letters referred to in Section 5.9);
(f) a certificate executed on behalf of the Company by
its Chief Executive Officer confirming that the conditions set forth in Sections
6.1, 6.2, 6.4, 6.6, 6.8, 6.9, 6.10, 6.11, 6.12 and 6.13 have been duly
satisfied; and
(g) the written resignations of all officers and
directors of the Company, effective as of the Effective Time.
6.6 NO MATERIAL ADVERSE CHANGE. Since the date of this
Agreement, there shall have been no change, occurrence or circumstance in the
business, condition, capitalization, assets, liabilities, operations or
financial performance of the Company which has had or is reasonably likely to
have a Material Adverse Effect on the Company.
6.7 HSR ACT. The waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated.
6.8 NO RESTRAINTS. No temporary restraining order, preliminary
or permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.9 NO GOVERNMENTAL LITIGATION. There shall not be pending or
threatened any Legal Proceeding in which a Governmental Body is or is threatened
to become a party or is otherwise involved, and neither Parent nor the Company
shall have received any communication from any Governmental Body in which such
Governmental Body indicates the possibility of commencing any Legal Proceeding
or taking any other action: (a) challenging or seeking to restrain or prohibit
the consummation of the Merger or any of the other transactions contemplated by
this Agreement; (b) relating to the Merger and seeking to obtain from Parent or
any of its Subsidiaries, or the Company, any damages or other relief that may be
material to Parent; (c) seeking to prohibit or limit in any material respect
Parent's ability to vote, receive
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dividends with respect to or otherwise exercise ownership rights with respect to
the stock of the Company; or (d) which would materially and adversely affect the
right of Parent or the Company to own the assets or operate the business of the
Company.
6.10 NO OTHER LITIGATION. There shall not be pending any Legal
Proceeding in which, in the reasonable judgment of Parent, there is a reasonable
possibility of an outcome that could have a Material Adverse Effect on the
Company or a Material Adverse Effect on Parent: (a) challenging or seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement; (b) relating to the Merger and
seeking to obtain from Parent or any of its Subsidiaries, or the Company, any
damages or other relief that may be material to Parent; (c) seeking to prohibit
or limit in any material respect Parent's ability to vote, receive dividends
with respect to or otherwise exercise ownership rights with respect to the stock
of the Company; or (d) which would affect adversely the right of Parent or the
Company to own the assets or operate the business of the Company.
6.11 COMPANY RIGHTS PLAN. All actions necessary to extinguish
and cancel all outstanding Rights under the Company Rights Plan or render such
Rights inapplicable to the Merger shall have been taken.
6.12 EFFECTIVENESS OF THE PLAN AMENDMENT. The Severance Plan
shall have been amended by the Plan Amendment and the Plan Amendment shall be
effective as of immediately prior to the Closing with respect to all employees
of the Company eligible for benefits under the Severance Plan.
6.13 REINCORPORATION IN DELAWARE. The Company shall have taken
all action required under Section 4.7 hereof such that the Principal Company
shall have succeeded to all of the rights, privileges, powers and franchises of
the California Company, and if any capital stock shall have been issued by the
Principal Company in any reincorporation of the Principal Company in the State
of Delaware, such issuance shall have been in compliance with all applicable
state securities or blue sky laws and shall have been exempt from registration
under the Securities Act.
6.14 NO REINCORPORATION LIABILITY. In the reasonable judgment of
Parent, there shall not have been an adverse effect on, and there shall not
exist any liability of, the Company or Parent, and there shall not be any
reasonable expectation of an adverse effect on the Company or Parent, or
reasonable expectation of the Company or Parent incurring any liability, related
to the California Company's failure to obtain the requisite shareholder approval
prior to the 1997 Reincorporation, other than reasonable expenses incurred by
the Company (including reasonable attorneys' fees) in connection with remedying
such failure not to exceed $1,000,000 in the aggregate.
6.15 STOCKHOLDER APPROVAL. Fewer than 10% of the outstanding
shares of Company Common Stock shall be Dissenting Shares.
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SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY
The obligation of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall have been
accurate in all respects as of the date of this Agreement and shall be accurate
in all respects as of the Closing Date as if made on and as of the Closing Date
(it being understood that, for purposes of determining the accuracy of such
representations and warranties, all materiality qualifications contained in such
representations and warranties shall be disregarded), except for any such
failure which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on Parent.
7.2 PERFORMANCE OF COVENANTS. All of the covenants and
obligations that Parent and Merger Sub are required to comply with or to perform
at or prior to the Closing shall have been complied with and performed in all
material respects.
7.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The Form S-4
Registration Statement shall have become effective in accordance with the
provisions of the Securities Act, and no stop order shall have been issued by
the SEC with respect to the Form S-4 Registration Statement.
7.4 STOCKHOLDER APPROVAL. This Agreement shall have been duly
adopted and approved, and the Merger shall have been duly approved, by the
Required Company Stockholder Vote.
7.5 DOCUMENTS. The Company shall have received the following
documents:
(a) a legal opinion of Brobeck, Phleger Harrison LLP,
dated as of the Closing Date, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code (it being
understood that, in rendering such opinion, Brobeck, Phleger Harrison LLP may
rely upon the tax representation letters referred to in Section 5.9), provided,
however, that if Brobeck, Phleger & Harrison LLP fails to deliver such opinion,
Cooley Godward LLP may deliver it and rely upon the tax representation letter
referred to in Section 5.9; and
(b) a certificate executed on behalf of Parent by an
executive officer of Parent, confirming that conditions set forth in Sections
7.1 and 7.2 have been duly satisfied.
7.6 HSR ACT. The waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated.
7.7 LISTING. The shares of Parent Common Stock to be issued in
the Merger shall have been approved for listing (subject to notice of issuance)
on the Nasdaq National Market.
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7.8 NO RESTRAINTS. No temporary restraining order, preliminary
or permanent injunction or other order preventing the consummation of the Merger
by the Company shall have been issued by any court of competent jurisdiction and
remain in effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger by the Company
illegal.
SECTION 8. TERMINATION
8.1 TERMINATION. This Agreement may be terminated prior to the
Effective Time (whether before or after approval of the Merger by the Required
Company Stockholder Vote):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Merger shall
not have been consummated by December 31, 1999 (unless the failure to consummate
the Merger is attributable to a failure on the part of the party seeking to
terminate this Agreement to perform any material obligation required to be
performed by such party at or prior to the Effective Time);
(c) by either Parent or the Company if a court of
competent jurisdiction or other Governmental Body shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger;
(d) by either Parent or the Company if (i) the Company
Stockholders' Meeting shall have been held and (ii) this Agreement and the
Merger shall not have been approved at such meeting by the Required Company
Stockholder Vote; provided, however, that the Company shall not be permitted to
terminate this Agreement pursuant to this Section 8.1(d) if the failure to
obtain the Required Company Stockholder Vote shall have been caused by the
action or failure to act of the Company and such action or failure to act
constitutes a material breach by the Company of this Agreement and unless the
Company shall have made all payments required to be made to Parent pursuant to
Section 8.3(b);
(e) by Parent (at any time prior to the adoption and
approval of this Agreement and the Merger by the Required Company Stockholder
Vote) if a Triggering Event shall have occurred;
(f) by Parent if any of the Company's representations
and warranties contained in this Agreement shall have been inaccurate as of the
date of this Agreement or shall have become inaccurate as of any subsequent date
(as if made on such subsequent date), or if any of the Company's covenants
contained in this Agreement shall have been breached in any respect, in either
case such that any of the conditions set forth in sections 6.1 or 6.2 would not
be satisfied as of the time such representation or warranty was or shall have
become inaccurate or as of the time of such breach; provided, however, that
Parent may not terminate this Agreement under this Section 8.1(f) on account of
an inaccuracy in the Company's representations and warranties that is curable by
the Company or on account of a breach of a covenant by the Company that is
curable by the Company unless the Company fails to cure such inaccuracy or
breach within 30 days after receiving written notice from Parent of such
inaccuracy or breach; or
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(g) by the Company if any of Parent's representations
and warranties contained in this Agreement shall have been inaccurate as of the
date of this Agreement or shall have become inaccurate as of any subsequent date
(as if made on such subsequent date), or if any of Parent's covenants contained
in this Agreement shall have been breached in any respect, in either case such
that any of the conditions set forth in Sections 7.1 or 7.2 would not be
satisfied as of the time such representation or warranty was or shall have
become inaccurate or as of the time of such breach; provided, however, that the
Company may not terminate this Agreement under this Section 8.1(g) on account
of an inaccuracy in Parent's representations and warranties that is curable by
Parent or on account of a breach of a covenant by Parent that is curable by
Parent unless Parent fails to cure such inaccuracy or breach within 30 days
after receiving written notice from the Company of such inaccuracy or breach.
8.2 EFFECT OF TERMINATION. In the event of the termination of
this Agreement as provided in Section 8.1, this Agreement shall be of no further
force or effect; provided, however, that (i) this Section 8.2, Section 8.3 and
Section 9 shall survive the termination of this Agreement and shall remain in
full force and effect, and (ii) the termination of this Agreement shall not
relieve any party from any liability for any intentional or willful inaccuracy
in or intentional or willful breach of any representation, warranty or covenant
contained in this Agreement.
8.3 EXPENSES; TERMINATION FEES.
(a) Except as set forth in this Section 8.3, all fees
and expenses incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses, whether or not the Merger is consummated; provided, however, that
Parent and the Company shall share equally all fees and expenses, other than
attorneys' fees, incurred in connection with the filing, printing and mailing of
the Form S-4 Registration Statement and the Prospectus/Proxy Statement and any
amendments or supplements thereto and (B) the filing of the premerger
notification and report forms relating to the Merger under the HSR Act.
(b) If (i) this Agreement is terminated by Parent or the
Company pursuant to Section 8.1(d) and (A) a Company Acquisition is consummated
or (B) a proposed Company Acquisition is publicly announced, in either case at
any time prior to the first anniversary of the date of this Agreement, or (ii)
this Agreement is terminated by Parent pursuant to Section 8.1(e), then, in
either such case, the Company shall pay to Parent, in cash at the time specified
in the next sentence, a nonrefundable fee in the amount of $4,550,000. In the
case of termination of this Agreement by the Company pursuant to Section 8.1(d),
the fee referred to in the preceding sentence shall be paid by the Company
contemporaneously with the earlier of the consummation of such Company
Acquisition or such announcement regarding a proposed Company Acquisition, and
in the case of termination of this Agreement by Parent pursuant to Section
8.1(d) or Section 8.1(e), the fee referred to in the preceding sentence shall be
paid by the Company within two business days after such termination.
48.
<PAGE> 54
SECTION 9. MISCELLANEOUS PROVISIONS
9.1 AMENDMENT. This Agreement may be amended with the approval
of the respective boards of directors of the Company and Parent at any time
(whether before or after the adoption and approval of this Agreement and the
approval of the Merger by the stockholders of the Company); provided, however,
that after any such adoption and approval of this Agreement and approval of the
Merger by the Company's stockholders, no amendment shall be made which by law
requires further approval of the stockholders of the Company without the further
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
9.2 WAIVER.
(a) No failure on the part of either party to exercise
any power, right, privilege or remedy under this Agreement, and no delay on the
part of either party in exercising any power, right, privilege or remedy under
this Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege or
remedy shall preclude any other or further exercise thereof or of any other
power, right, privilege or remedy.
(b) Neither party shall be deemed to have waived any
claim arising out of this Agreement, or any power, right, privilege or remedy
under this Agreement, unless the waiver of such claim, power, right, privilege
or remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such party; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
9.3 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties contained in this Agreement or in any certificate
delivered pursuant to this Agreement shall survive the Merger.
9.4 ENTIRE AGREEMENT; COUNTERPARTS. This Agreement and the other
agreements referred to herein constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof and thereof. This Agreement may be
executed in several counterparts, each of which shall be deemed an original and
all of which shall constitute one and the same instrument.
9.5 APPLICABLE LAW; JURISDICTION. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Delaware, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof. In any action between the parties
arising out of or relating to this Agreement or any of the transactions
contemplated by this Agreement: (a) each of the parties irrevocably and
unconditionally consents and submits to the exclusive jurisdiction and venue of
the state and federal courts located in the State of California; (b) if any such
action is commenced in a state court, then, subject to applicable law, no party
shall object to the removal of such action to any federal court located in the
Northern District of California; (c) each of the parties irrevocably waives the
right to trial by jury; and (d) each of the parties irrevocably consents to
service of process by first class certified mail, return
49.
<PAGE> 55
receipt requested, postage prepaid, to the address at which such party is to
receive notice in accordance with Section 9.9.
9.6 ATTORNEYS' FEES. In any action at law or suit in equity to
enforce this Agreement or the rights of any of the parties hereunder, the
prevailing party in such action or suit shall be entitled to receive a
reasonable sum for its attorneys' fees and all other reasonable costs and
expenses incurred in such action or suit.
9.7 ASSIGNABILITY. This Agreement shall be binding upon, and
shall be enforceable by and inure solely to the benefit of, the parties hereto
and their respective successors and assigns; provided, however, that neither
this Agreement nor any of the Company's rights hereunder may be assigned by the
Company without the prior written consent of Parent, and any attempted
assignment of this Agreement or any of such rights by the Company without such
consent shall be void and of no effect. Nothing in this Agreement, express or
implied, is intended to or shall confer upon any Person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement, except
that Section 5.5 hereof shall confer a benefit on the Indemnified Persons.
9.8 NOTICES. Any notice or other communication required or
permitted to be delivered to any party under this Agreement shall be in writing
and shall be deemed properly delivered, given and received (a) when delivered by
hand, or (b) two business days after sent by registered mail or, by courier or
express delivery service or by facsimile to the address or facsimile telephone
number set forth beneath the name of such party below (or to such other address
or facsimile telephone number as such party shall have specified in a written
notice given to the other parties hereto):
if to Parent: QUANTUM CORPORATION
500 McCarthy Blvd.
Milpitas, CA 95035
Attn: General Counsel
Facsimile: 408-324-7005
with a copy to: COOLEY GODWARD LLP
5 Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attn: Patrick A. Pohlen, Esq.
Facsimile: 650-857-0663
if to Merger Sub: DEFIANT ACQUISITION SUB, INC.
500 McCarthy Blvd.
Milpitas, CA 95035
Attn: General Counsel
Facsimile: 408-324-7005
50.
<PAGE> 56
with a copy to: COOLEY GODWARD LLP
5 Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attn: Patrick A. Pohlen, Esq.
Facsimile: 650-857-0663
if to the Company: MERIDIAN DATA, INC.
5615 Scotts Valley Drive
Scotts Valley, CA 95006
Attn: President and Chief Executive
Officer
Facsimile: (831) 438-4234
with a copy to: BROBECK, PHLEGER & HARRISON LLP
Spear Street Tower
One Market Street
San Francisco, CA 94105
Attn: Michael J. Kennedy, Esq.
Facsimile: 415-442-1010
9.9 COOPERATION. Each party agrees to cooperate fully with the
other party and to execute and deliver such further documents, certificates,
agreements and instruments and to take such other actions as may be reasonably
requested by the other party to evidence or reflect the transactions
contemplated by this Agreement and to carry out the intent and purposes of this
Agreement.
9.10 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include masculine and feminine genders.
(b) The parties hereto agree that any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not be applied in the construction or interpretation of
this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in
this Agreement to "Sections," "Exhibits" and "Schedules" are intended to refer
to Sections of this Agreement and Exhibits or Schedules to this Agreement.
(e) The bold-faced headings contained in this Agreement
are for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
51.
<PAGE> 57
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
QUANTUM CORPORATION
By: /s/ Michael Brown
---------------------------------
Michael Brown, Chairman, Chief
Executive Officer and President
DEFIANT ACQUISITION SUB, INC.
By: /s/ Peter van Cuylenburg
---------------------------------
Peter van Cuylenburg, Chairman,
Chief Executive Officer and
President
MERIDIAN DATA, INC. (DELAWARE)
By: /s/ Gianluca U. Rattazzi
---------------------------------
Gianluca U. Rattazzi, President
and Chief Executive Officer
MERIDIAN DATA, INC. (CALIFORNIA)
By: /s/ Gianluca U. Rattazzi
---------------------------------
Gianluca U. Rattazzi, President
and Chief Executive Officer
SIGNATURE PAGE
<PAGE> 58
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUISITION PROPOSAL. "Acquisition Proposal" shall mean any offer,
proposal or inquiry (other than an offer or proposal by Parent) contemplating or
otherwise relating to any Acquisition Transaction.
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction or series of transactions involving:
(a) any merger, consolidation, amalgamation, share exchange, business
combination, issuance of securities, acquisition of securities, tender offer,
exchange offer or other similar transaction (i) in which the Company is a
constituent company, (ii) in which a Person or "group" (as defined in the
Exchange Act and the rules promulgated thereunder) of Persons directly or
indirectly acquires the Company or more than twenty percent (20%) of the
Company's business or directly or indirectly acquires beneficial or record
ownership of securities representing, or exchangeable for or convertible into,
more than twenty percent (20%) of the outstanding securities of any class of
voting securities of the Company, or (iii) in which the Company issues
securities representing more than twenty percent (20%) of the outstanding
securities of any class of voting securities of the Company;
(b) any sale, lease, exchange, transfer, license, acquisition or
disposition of more than twenty percent (20%) of the assets of the Company; or
(c) any liquidation or dissolution of the Company.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached, as it may be amended from
time to time.
COMPANY ACQUISITION. "Company Acquisition" shall mean any of the
following transactions (other than the transactions contemplated by this
Agreement): (i) a merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company pursuant
to which the stockholders of the Company immediately preceding such transaction
hold less than 50% of the aggregate equity interests in the surviving or
resulting entity of such transaction or (ii) a sale or other disposition by the
Company of assets (excluding inventory and used equipment sold in the ordinary
course of business) representing in excess of 50% of the aggregate fair market
value of the Company's business immediately prior to such sale.
COMPANY COMMON STOCK. "Company Common Stock" shall mean the Common
Stock, $0.001 par value per share, of the Principal Company, together with the
associated Rights.
COMPANY CONTRACT. "Company Contract" shall mean any Contract: (a) to
which the Company is a party; (b) by which the Company or any asset of the
Company is or may become
A-1.
<PAGE> 59
bound or under which the Company has, or may become subject to, any obligation;
or (c) under which the Company has or may acquire any right or interest.
COMPANY RIGHTS PLAN. "Company Rights Plan" shall mean the Preferred
Shares Rights Agreement dated as of August 11, 1997 between the Company and Bank
Boston, N.A.
COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to the Company or otherwise used by the
Company.
COMPANY SOURCE CODE. "Company Source Code" shall mean any source code,
or any portion, aspect or segment of any source code, relating to any
Proprietary Asset owned by or licensed to the Company or otherwise used by the
Company.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan or legally
binding commitment or undertaking of any nature.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any company
limited by shares, limited liability company or joint stock company), firm,
society or other enterprise, association, organization or entity.
ENVIRONMENTAL LAW. "Environmental Law" shall mean any federal, state,
local or foreign Legal Requirement relating to pollution or protection of human
health or the environment (including ambient air, surface water, ground water,
land surface or subsurface strata), including any law or regulation relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
FORM S-4 REGISTRATION STATEMENT. "Form S-4 Registration Statement" shall
mean the registration statement on Form S-4 to be filed with the SEC by Parent
in connection with
A-2.
<PAGE> 60
issuance of Parent Common Stock in the Merger, as said registration statement
may be amended prior to the time it is declared effective by the SEC.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, variance, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal, foreign
or other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, ministry, fund, foundation, center, organization,
unit, body or Entity and any court or other tribunal).
HSR ACT. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body (or under the
authority of the Nasdaq National Market).
MATERIAL ADVERSE EFFECT. An event, violation, inaccuracy, circumstance
or other matter will be deemed to have a "Material Adverse Effect" on the
Company if such event, violation, inaccuracy, circumstance or other matter
(considered together with all other matters that would constitute exceptions to
the representations and warranties set forth in the Agreement but for the
presence of "Material Adverse Effect" or other materiality qualifications, or
any similar qualifications, in such representations and warranties) would have a
material adverse effect on (i) the business, condition, capitalization, assets,
liabilities, operations or financial performance of the Company taken as a
whole, except to the extent that any such event, violation, inaccuracy,
circumstance or other matter results from (x) the effect of the public
announcement, pendency or consummation of the Merger on the current or
prospective customers or suppliers of the Company, (y) changes in trading prices
for the Company's capital stock, or (z) changes in general economic conditions
or changes affecting the industry generally in which the Company operates;
provided, however, that in the case of the exceptions set forth in (x), (y) and
(z) above, the entity relying upon such exception to demonstrate that a Material
Adverse Effect had not occurred shall bear the burden of proof by a
preponderance of the evidence, that such exception is applicable, (ii) the
ability of the Company to consummate the Merger or any of the other
A-3.
<PAGE> 61
transactions contemplated by the Agreement or to perform any of its obligations
under the Agreement, or (iii) Parent's ability to vote, receive dividends with
respect to or otherwise exercise ownership rights with respect to the stock of
the Surviving Corporation. An event, violation, inaccuracy, circumstance or
other matter will be deemed to have a "Material Adverse Effect" on Parent if
such event, violation, inaccuracy, circumstance or other matter would have a
material adverse effect on the business, condition, assets, liabilities,
operations or financial performance of Parent and its subsidiaries taken as a
whole, except to the extent that any such event, violation, inaccuracy,
circumstance or other matter results from (x) the effect of the public
announcement, pendency or consummation of the Merger on the current or
prospective customers or suppliers of Parent or any of its subsidiaries, (y)
changes in trading prices for the Parent's capital stock or (z) changes in
general economic conditions or changes affecting the industry or industries
generally in which Parent and its subsidiaries operate; provided, however, that
in the case of the exceptions set forth in (x), (y) and (z) above, the entity
relying upon such exception to demonstrate that a Material Adverse Effect had
not occurred shall bear the burden of proof by a preponderance of the evidence,
that such exception is applicable.
MATERIALS OF ENVIRONMENTAL CONCERN. "Materials of Environmental Concern"
include chemicals, pollutants, contaminants, wastes, toxic substances, petroleum
and petroleum products and any other substance that is now or hereafter
regulated by any Environmental Law or that is otherwise a danger to health,
reproduction or the environment.
NASD. "NASD" shall mean the National Association of Securities Dealers,
Inc.
PARENT AVERAGE STOCK PRICE. "Parent Average Stock Price" shall mean the
average of the closing sales price of a share of Parent Common Stock as reported
on the Nasdaq National Market for each of the five (5) consecutive trading days
ending on and including the second trading day immediately preceding the date on
which a final vote of the stockholders of the Company on the adoption and
approval of this Agreement and the approval of the Merger shall have been held.
For example, if one share of Parent Common Stock, as constituted on the date
hereof, is reconstituted into one share of Class A Common Stock and one-half of
a share of Class B Common Stock, and the average of the closing sales price of a
share of Class A Common Stock for such consecutive trading days is $15.00 and
the average of the closing sales price of a share of Class B Common Stock for
such five trading days is $10.00, then the Parent Average Stock Price would be
$20.00 (i.e. $15.00 per Class A share plus the product of 0.5 of a Class B share
times $10.00 per Class B share).
PARENT COMMON STOCK. "Parent Common Stock" shall mean the Common Stock,
$0.01 par value per share, of Parent, as constituted as of the date of this
Agreement or such class or classes of shares into which the Parent Common Stock
may be changed by reason of any reclassification, recapitalization or other
similar transaction.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PLAN AMENDMENT. "Plan Amendment" shall mean the Plan Amendment attached
as Schedule 2.17(k)(i) to the Company Disclosure Schedule.
A-4.
<PAGE> 62
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent,
patent application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service mark (whether
registered or unregistered), service mark application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, source code, algorithm, invention, design,
blueprint, engineering drawing, proprietary product, technology, proprietary
right or other intellectual property right or intangible asset; or (b) right to
use or exploit any of the foregoing.
PROSPECTUS/PROXY STATEMENT. "Prospectus/Proxy Statement" shall mean the
proxy statement to be sent to the Company's stockholders in connection with the
Company Stockholders' Meeting.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
RIGHTS. "Rights" shall mean the preferred share purchase rights issued
pursuant to the Company Rights Plan.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933,
as amended.
SEVERANCE PLAN. "Severance Plan" shall mean the Parallan Computer, Inc.
Severance Plan which is attached as Schedule 2.17(k) to the Company Disclosure
Schedule.
SUBSIDIARY. An entity shall be deemed to be a "Subsidiary" of another
Person if such Person directly or indirectly owns, beneficially or of record,
(a) an amount of voting securities of other interests in such Entity that is
sufficient to enable such Person to elect at least a majority of the members of
such Entity's board of directors or other governing body, or (b) at least 50% of
the outstanding equity or financial interests or such Entity.
SUPERIOR OFFER. "Superior Offer" shall mean an unsolicited, bona fide
written offer made by a third party to purchase more than 50% of the outstanding
shares of Company Common Stock on terms that the board of directors of the
Company determines, in its reasonable judgment, after consultation with its
financial advisor, to be more favorable to the Company's stockholders than the
terms of the Merger; provided, however, that any such offer shall not be deemed
to be a "Superior Offer" if any financing required to consummate the transaction
contemplated by such offer is not committed and is not likely to be obtained by
such third party on a timely basis.
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, estimated tax,
unemployment tax, national health insurance tax, excise tax, ad valorem tax,
transfer tax, stamp tax, sales tax, use tax, property tax, business tax,
withholding tax or payroll tax), levy, assessment, tariff, duty (including any
customs duty), deficiency or fee, and any related charge or amount (including
any fine, penalty or interest), imposed, assessed or collected by or under the
authority of any Governmental Body.
A-5.
<PAGE> 63
TAX RETURN. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
TRIGGERING EVENT. A "Triggering Event" shall be deemed to have occurred
if: (i) the board of directors of the Company shall have failed to recommend, or
shall for any reason have withdrawn or shall have amended or modified in a
manner adverse to Parent its unanimous recommendation in favor of, the adoption
and approval of the Agreement or the approval of the Merger; (ii) the Company
shall have failed to include in the Prospectus/Proxy Statement the unanimous
recommendation of the board of directors of the Company in favor of the adoption
and approval of the Agreement and the approval of the Merger; (iii) the board of
directors of the Company fails to reaffirm its unanimous recommendation in favor
of the adoption and approval of the Agreement and the approval of the Merger
within ten (10) business days after Parent requests in writing that such
recommendation be reaffirmed; (iv) the board of directors of the Company shall
have approved, endorsed or recommended any Acquisition Proposal; (v) the Company
shall have entered into any letter of intent or similar document or any Contract
relating to any Acquisition Proposal; (vi) the Company shall have failed to hold
the Company Stockholders' Meeting within forty-five (45) days after the latest
of (A) the date the Form S-4 Registration Statement is declared effective under
the Securities Act, (B) the Reincorporation Meeting, or (C) either the Parent
Meeting (if the proxy materials for the Parent Meeting shall have been mailed by
August 31, 1999) or October 31, 1999 (if the proxy materials for the Parent
Meeting shall not have been mailed by August 31, 1999); (vii) a tender or
exchange offer relating to securities of the Company shall have been commenced
and the Company shall not have sent to its securityholders, within ten (10)
business days after the commencement of such tender or exchange offer, a
statement disclosing that the Company recommends rejection of such tender or
exchange offer; (viii) an Acquisition Proposal is publicly announced, and the
Company (A) fails to issue a press release announcing its opposition to such
Acquisition Proposal within ten (10) business days after such Acquisition
Proposal is announced or (B) otherwise takes actions inconsistent with opposing
such Acquisition Proposal; or (ix) the Company breaches or is deemed to have
breached any of its obligations under Section 4.3 of the Agreement.
A-6.
<PAGE> 64
EXHIBITS
Exhibit A - Certain Definitions
Exhibit B - Form of Affiliate Agreement
Exhibit C-1 - Form of Noncompetition Agreement
Exhibit C-2 - Form of Employee Proprietary Information and Invention Agreement
Exhibit D-1 - Persons to Execute Noncompetition Agreements in the form of
Exhibit C-1
Exhibit D-2 - Persons to Execute Employee Proprietary Information and Invention
Agreement in the form of Exhibit C-2
Exhibit E - Executive Employment Agreement with Gianluca Rattazzi
Exhibit F - Voting Agreement
Exhibit G - Persons to Execute Voting Agreement
<PAGE> 65
Exhibit D-1
Persons to Execute Noncompetition Agreement in the Form of Exhibit C-1
1. Gianluca Rattazzi
2. Luciano Dalle Ore
3. Carlo Garbagnati
4. Trevor Heathorn
5. Shmuel Shottan
A-2.
<PAGE> 66
Exhibit D-2
Persons to Execute Employee Proprietary Information and
Invention Agreement in the Form of
Exhibit C-2
1. Carlo Garbagnati
2. Trevor Heathorn
3. Shmuel Shottan
A-3.
<PAGE> 67
Exhibit G
Persons to Execute Voting Agreement in the Form of Exhibit G
1. Charlie Bass
2. Gianluca Rattazzi
3. Erik Miller
4. Shmuel Shottan
5. Mario Rosati
6. Pierluigi Zappacosta
7. Peter Johnson
A-4.