Agreement and Plan of Merger and Reorganization - Medical Dynamics Inc. and InfoCure Corp.
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
MEDICAL DYNAMICS, INC., A COLORADO CORPORATION,
INFOCURE CORPORATION, A DELAWARE CORPORATION
AND
CADI ACQUISITION CORPORATION, A COLORADO CORPORATION
DATED: OCTOBER 10, 2000
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TABLE OF CONTENTS
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1. DEFINITIONS........................................................ A-2
1.1. "Affiliate"................................................. A-2
1.2. "Best Efforts".............................................. A-2
1.3. "Breach".................................................... A-2
1.4. "Closing"................................................... A-2
1.5. "Closing Date".............................................. A-2
1.6. "Code"...................................................... A-2
1.7. "Company Disclosure Schedule"............................... A-2
1.8. "Company Material Adverse Effect"........................... A-2
1.9. "Consent"................................................... A-2
1.10. "Contemplated Transactions"................................. A-2
1.11. "Contract".................................................. A-3
1.12. "Damages"................................................... A-3
1.13. "Effective Time"............................................ A-3
1.14. "Encumbrance"............................................... A-3
1.15. "Environmental Requirements"................................ A-3
1.16. "ERISA"..................................................... A-3
1.17. "ERISA Affiliate"........................................... A-3
1.18. "Exchange Act".............................................. A-3
1.19. "Facilities"................................................ A-3
1.20. "GAAP"...................................................... A-3
1.21. "Governmental Authorization"................................ A-3
1.22. "Governmental Body"......................................... A-3
1.23. "HSR Act"................................................... A-3
1.24. "IRS"....................................................... A-4
1.25. "Knowledge"................................................. A-4
1.26. "Legal Requirement"......................................... A-4
1.27. "Order"..................................................... A-4
1.28. "Ordinary Course of Business"............................... A-4
1.29. "Organizational Documents".................................. A-4
1.30. "Parent Disclosure Schedule"................................ A-4
1.31. "Parent Material Adverse Effect"............................ A-4
1.32. "Person".................................................... A-4
1.33. "Plan"...................................................... A-4
1.34. "Proceeding"................................................ A-4
1.35. "Related Person"............................................ A-5
1.36. "Representative"............................................ A-5
1.37. "Securities Act"............................................ A-5
1.38. "Subsidiary"................................................ A-5
1.39. "Tax Returns"............................................... A-5
1.40. "Taxes"..................................................... A-6
1.41. "Threatened"................................................ A-6
2. MERGER............................................................. A-6
2.1. The Merger.................................................. A-6
2.2. Effective Time; Closing..................................... A-6
2.3. Effect of the Merger........................................ A-6
2.4. Articles of Incorporation; Bylaws; Directors and Officers... A-6
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2.5. Effect on Capital Stock..................................... A-7
2.6. Exchange of Certificates.................................... A-9
2.7. Lost, Stolen or Destroyed Certificates...................... A-10
2.8. No Further Ownership Rights in Company Common Stock......... A-11
2.9. Additional Actions.......................................... A-11
2.10. Tax and Accounting Consequences............................. A-11
2.11. Automatic Conversion of Parent Preferred Stock Into
PracticeWorks Preferred Stock............................. A-11
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................... A-11
3.1. Organization, Good Standing, Corporate Power and
Subsidiaries.............................................. A-11
3.2. Authority; No Conflict...................................... A-12
3.3. Capitalization.............................................. A-13
3.4. SEC Filings; Financial Statements........................... A-14
3.5. Books and Records........................................... A-15
3.6. Real Property Interests..................................... A-15
3.7. Condition and Sufficiency of Assets......................... A-15
3.8. Accounts Receivable......................................... A-15
3.9. Inventory................................................... A-16
3.10. No Undisclosed Liabilities.................................. A-16
3.11. Taxes....................................................... A-16
3.12. No Company Material Adverse Effect.......................... A-17
3.13. Employee Benefits Matters................................... A-17
3.14. Compliance With Legal Requirements; Governmental
Authorizations............................................ A-20
3.15. Legal Proceedings; Orders................................... A-21
3.16. Absence of Certain Changes and Events....................... A-22
3.17. Contracts; No Defaults...................................... A-23
3.18. Insurance................................................... A-25
3.19. Environmental Matters....................................... A-25
3.20. Employees................................................... A-26
3.21. Government Contracts........................................ A-27
3.22. Intellectual Property Rights of the Company................. A-27
3.23. Certain Payments............................................ A-33
3.24. Relationships With Related Persons.......................... A-33
3.25. Brokers or Finders.......................................... A-33
3.26. Labor Relations; Compliance................................. A-33
3.27. Disclosure Documents........................................ A-34
3.28. Disclosure.................................................. A-34
3.29. Vote Required............................................... A-34
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF MERGER SUB AND
4. PARENT............................................................. A-34
4.1. Organization................................................ A-34
4.2. Authorization............................................... A-35
4.3. Absence of Restrictions and Conflicts....................... A-35
4.4. Capitalization of Parent and Merger Sub..................... A-36
4.5. SEC Filings; Financial Statements........................... A-36
4.6. Litigation.................................................. A-37
4.7. Registration Statement; Proxy Statement..................... A-37
4.8. Certain Proceedings......................................... A-37
4.9. Brokers or Finders.......................................... A-37
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5. CERTAIN AGREEMENTS OF THE PARTIES.................................. A-37
5.1. No Solicitation............................................. A-37
5.2. Public Disclosure........................................... A-39
5.3. Reasonable Efforts; Notification............................ A-39
5.4. Third Party Consents........................................ A-40
5.5. Indemnification............................................. A-40
5.6. Nasdaq Listing.............................................. A-41
5.7. Reimbursement of Employee Costs and Expenses................ A-41
5.8. Provision of Loan By Parent to Company...................... A-41
5.9. PracticeWorks Spin-off...................................... A-41
6. ADDITIONAL COVENANTS OF THE PARTIES................................ A-41
6.1. Mutual Covenants............................................ A-41
6.2. Covenants of the Company.................................... A-44
6.3. Form S-8.................................................... A-46
6.4. Stock Options and Warrants.................................. A-46
7. CONDITIONS......................................................... A-47
7.1. Mutual Conditions........................................... A-47
7.2. Conditions to Obligations of Merger Sub and Parent.......... A-48
7.3. Conditions to Obligations of the Company.................... A-49
8. TERMINATION........................................................ A-50
8.1. Termination................................................. A-50
8.2. Notice of Termination; Effect of Termination................ A-51
8.3. Fees and Expenses........................................... A-51
8.4. Amendment................................................... A-53
8.5. Extension; Waiver........................................... A-53
8.6. Special Parent Payment...................................... A-53
9. MISCELLANEOUS...................................................... A-53
9.1. Survival of Representations and Warranties.................. A-53
9.2. Notices..................................................... A-53
9.3. Further Assurances.......................................... A-54
9.4. Waiver...................................................... A-54
9.5. Entire Agreement and Modification........................... A-54
9.6. Assignments, Successors and No Third-Party Rights........... A-55
9.7. Section Headings, Construction.............................. A-55
9.8. Time of Essence............................................. A-55
9.9. Governing Law............................................... A-55
9.10. Counterparts................................................ A-55
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EXHIBITS:
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Exhibit A Form of Shareholder Agreement.
Exhibit B Form of Certificate of Designation.
Exhibit C-1 Form of Employment Agreement for Daniel L. Richmond.
Exhibit C-2 Form of Employment Agreement for Chae U. Kim.
Exhibit D Form of Norton Lidstone, P.C. Legal Opinion.
Exhibit E Form of Morris, Manning & Martin, L.L.P. Legal Opinion.
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
(this "Agreement"), is made and entered into as of this 10th day of October,
2000, by and among INFOCURE CORPORATION, a Delaware corporation ("Parent"), CADI
ACQUISITION CORPORATION, a Colorado corporation and a wholly-owned subsidiary of
Parent ("Merger Sub") and MEDICAL DYNAMICS, INC., a Colorado corporation
("Company").
RECITALS:
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Colorado Business Corporation Act ("Colorado Law"), Parent,
Merger Sub and Company intend to enter into a transaction pursuant to which
Merger Sub will be merged with and into Company.
B. The Board of Directors of Company (i) has determined that the Merger (as
defined in Section 2.1.) is consistent with and in furtherance of the long-term
business strategy of Company and fair to, and in the best interests of, Company
and its shareholders; (ii) has approved and declared advisable this Agreement,
and has approved the Merger and the other transactions contemplated by this
Agreement and (iii) has determined to recommend that the shareholders of Company
adopt and approve this Agreement and approve the Merger.
C. The Board of Directors of Parent (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Parent
and is fair to, and in the best interests of, Parent and its stockholders; (ii)
has approved this Agreement, the Merger and the other transactions contemplated
by this Agreement; (iii) has approved the issuance of shares of common stock,
$.001 par value per share, of Parent ("Parent Common Stock") pursuant to the
Merger and (iv) has approved the issuance of shares of Series A preferred stock,
$.001 par value per share, of Parent ("Parent Preferred Stock"), having the
designations, preferences and rights set forth on EXHIBIT B, pursuant to the
Merger.
D. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement (i) Edwin L.
Adair, M.D. and Pat Horsley Adair; (ii) Daniel L. Richmond; (iii) Chae U. Kim
and (iv) Van A. Horsley (such individuals collectively referred to as the
"Principal Shareholders") are entering into Shareholder Agreements in the form
attached hereto as EXHIBIT A (the "Shareholder Agreements").
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
F. This Agreement amends and restates in its entirety that certain original
Agreement and Plan Merger and Reorganization dated December 21, 1999, as amended
by that First Amendment to the Agreement and Plan of Merger dated April 10,
2000, and as further amended by that certain Second Amendment to the Agreement
and Plan of Merger dated June 21, 2000.
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NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. DEFINITIONS.
The following terms shall have the following meanings:
1.1. "AFFILIATE" is used in this Agreement to indicate a relationship with
one (1) or more persons and when used shall mean any corporation or organization
of which such person is an executive officer, director or partner or is directly
or indirectly the beneficial owner of ten percent (10%) or more of any class of
equity securities or financial interest therein; any trust or other estate in
which such person has a beneficial interest or as to which such person serves as
trustee or in any similar fiduciary capacity; any relative or spouse of such
person, or any relative of such spouse (such relative being related to the
person in question within the second degree); or any person that directly, or
indirectly through one (1) or more intermediaries, controls or is controlled by,
or is under common control with, the person specified.
1.2. "BEST EFFORTS" means the efforts that a prudent Person desirous of
achieving a result would reasonably use in similar circumstances to ensure that
such result is achieved as expeditiously as possible; provided, however, that an
obligation to use Best Efforts under this Agreement does not require the Person
subject to that obligation to take actions that would result in a materially
adverse change in the benefits of this Agreement and the Contemplated
Transactions to such Person.
1.3. "BREACH" means a "breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement and will be deemed to have
occurred if there is or has been any inaccuracy in or any failure to perform or
comply with, such representation, warranty, covenant, obligation, or other
provision.
1.4. "CLOSING" is defined in this Agreement in Section 2.2.
1.5. "CLOSING DATE" is defined in this Agreement in Section 2.2.
1.6. "CODE" means the Internal Revenue Code of 1986, as amended, including
regulations or other authoritative notices or rulings issued by the Internal
Revenue Service thereunder.
1.7. "COMPANY DISCLOSURE SCHEDULE" is defined in this Agreement in Section
3.
1.8. "COMPANY MATERIAL ADVERSE EFFECT" means a material adverse effect on
the financial condition, results of operation, business or properties of the
Company and Subsidiary taken as a whole.
1.9. "CONSENT" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
1.10. "CONTEMPLATED TRANSACTIONS" means all of the transactions
contemplated by this Agreement, including, without limitation:
A. The Merger; and
B. The performance by Merger Sub, Parent and the Company of their
respective covenants and obligations under this Agreement.
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1.11. "CONTRACT" means any agreement, contract, subcontract, lease, binding
understanding, instrument, note, option, warranty, purchase order, license,
sublicense, insurance policy, benefit plan, commitment, obligation, promise or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
1.12. "DAMAGES" means any loss, liability, claim, damages, expense
(including, without limitation, costs of investigation and defense and
reasonable attorneys' fees) or diminution of value, whether or not involving a
third party.
1.13. "EFFECTIVE TIME" is defined in this Agreement in Section 2.2.
1.14. "ENCUMBRANCE" means any security interest, mortgage, lien, charge,
adverse claim or restriction of any kind, including, but not limited to, any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership.
1.15. "ENVIRONMENTAL REQUIREMENTS" means federal, state and local laws
relating to pollution or protection of the environment, including laws or
provisions relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials, substances, or wastes
into air, surface water, groundwater, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials, substances, or wastes.
1.16. "ERISA" means the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
1.17. "ERISA AFFILIATE" means any Person which would be required to be
aggregated with the Company under Code sec. 414(b), (c), (m) and/or (o) and/or
under ERISA sec. 4001(a)(14) at any time during the period beginning seven (7)
years prior to the Closing Date and ending immediately prior to the Closing.
1.18. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
1.19. "FACILITIES" means any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company or any Subsidiary and any
buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently or formerly owned or operated by the Company
or any Subsidiary.
1.20. "GAAP" means generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the financial statements
referred to in Section 3.4. were prepared.
1.21. "GOVERNMENTAL AUTHORIZATION" means any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
1.22. "GOVERNMENTAL BODY" means any national, state or municipal or other
local government, state or municipal or other local governmental body, any
subdivision, agency, commission or authority thereof, or any quasi-governmental
or private body exercising any regulatory or taxing authority thereunder.
1.23. "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, 15 U.S.C. sec. 18a, et seq.
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1.24. "IRS" means the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
1.25. "KNOWLEDGE" means an individual will be deemed to have "Knowledge" of
a particular fact or other matter if such individual is actually aware of such
fact or other matter, or a prudent individual given his position with the
Company could be expected to discover or otherwise become aware of such fact or
other matter. A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving or has served within the last five (5) years as a director, executive,
officer, partner, executor or trustee of such Person (or in any similar
capacity) has, or at any time had, Knowledge of such fact or other matter.
1.26. "LEGAL REQUIREMENT" means any federal, state, local, municipal or
other administrative order, constitution, law, ordinance, principle of common
law, regulation, statute, or treaty.
1.27. "ORDER" means any award, decision, injunction, judgment, order,
ruling or verdict entered, issued, made or rendered by any court, administrative
agency or other Governmental Body or by any arbitrator.
1.28. "ORDINARY COURSE OF BUSINESS" means an action taken by a Person will
be deemed to have been taken in the "Ordinary Course of Business" only if such
action is consistent with the past practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person. In the case
of Company, the term "Ordinary Course of Business" shall include the changes in
the Company's operations since December 21, 1999 taken at the specific request
of Parent, including, but not limited to: (i) Company's cessation of marketing
and selling of it's Computer Age Dentist software product; (ii) Company's
compensating sales personnel who are selling the PracticeWorks product; (iii)
Company's termination of approximately thirty-five (35) employees and (iv) the
other changes in Company's business resulting therefrom as disclosed in the
reports filed by the Company under the Exchange Act.
1.29. "ORGANIZATIONAL DOCUMENTS" means (i) the Articles of Incorporation
and the Bylaws of a corporation; (ii) any charter or similar document adopted or
filed in connection with the creation, formation, or organization of a Person
and (iii) any amendment to any of the foregoing.
1.30. "PARENT DISCLOSURE SCHEDULE" is defined in this Agreement in Section
4.
1.31. "PARENT MATERIAL ADVERSE EFFECT" means a material adverse effect on
the financial condition, results of operation, business or properties of the
Parent and all of it subsidiaries taken as a whole.
1.32. "PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
1.33. "PLAN" as defined in Section 3.13.A. of this Agreement.
1.34. "PROCEEDING" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
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1.35. "RELATED PERSON" means with respect to a particular individual:
A. Each other member of such individual's Family;
B. Any Person that is directly or indirectly controlled by such
individual or one (1) or more members of such individual's Family;
C. Any Person in which such individual or members of such individual's
Family hold (individually or in the aggregate) a Material Interest; and
D. Any Person with respect to which such individual or one (1) or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
A. Any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
B. Any Person that holds a Material Interest in such specified Person;
C. Each Person that serves as a director, officer, partner, executor,
or trustee of such specified Person (or in a similar capacity);
D. Any Person in which such specified Person holds a Material
Interest;
E. Any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
F. Any Related Person of any individual described in clause B. or C.
For purposes of this definition, (i) the "Family" of an individual
includes (1) the individual's spouse and (2) any other natural person who
is related to the individual or the individual's spouse within the second
degree and (ii) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of
1934) of voting securities or other voting interests representing at least
five percent (5%) of the outstanding voting power of a Person or equity
securities or other equity interests representing at least five percent
(5%) of the outstanding equity securities or equity interests in a Person.
1.36. "REPRESENTATIVE" means with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
1.37. "SECURITIES ACT" means the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
1.38. "SUBSIDIARY" shall mean Computer Age Dentist, Inc., a California
corporation.
1.39. "TAX RETURNS" means any return, report, information return or other
document (including any related or supporting information) filed or required to
be filed with any Governmental Body in connection with the determination,
assessment or collection of any Taxes or the administration of any laws,
regulations or administrative requirements relating to any Taxes.
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1.40. "TAXES" means all taxes, charges, fees, levies, interest, penalties,
additions to tax or other assessments, including, but not limited to, income,
excise, property, sales, use, value added and franchise taxes and customs
duties, imposed by any Governmental Body and any payments with respect thereto
required under any tax-sharing agreement.
1.41. "THREATENED" means a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made (orally or in writing) or any notice has been given (orally or in
writing), or any other event has occurred or any other circumstances exist, that
would lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action or other matter is likely to be asserted, commenced, taken or otherwise
pursued in the future.
2. MERGER.
2.1. THE MERGER. At the Effective Time and subject to and upon the terms
and conditions of this Agreement, Merger Sub shall be merged with and into
Company (the "Merger"), the separate corporate existence of Merger Sub shall
cease and Company shall continue as the surviving corporation under the
corporate name it possesses immediately prior to the Effective Time. Company as
the surviving corporation after the Merger is sometimes hereinafter referred to
as the "Surviving Corporation."
2.2. EFFECTIVE TIME; CLOSING. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing Articles
of Merger with the Secretary of State of the State of Colorado in accordance
with the relevant provisions of Colorado Law (the "Articles of Merger") (the
time of such filing (or such later time as may be agreed in writing by Company
and Parent and specified in the Articles of Merger) being the "Effective Time")
as soon as practicable on or after the Closing Date (as herein defined). The
closing of the Merger (the "Closing") shall take place at the offices of Morris,
Manning & Martin, L.L.P., 1600 Atlanta Financial Center, 3343 Peachtree Road,
N.E., Atlanta, Georgia 30326, at a time and date to be specified by the parties,
which shall be no later than the second (2nd) business day after the
satisfaction or waiver of the conditions set forth in Section 7., or at such
other time, date and location as the parties hereto agree in writing (the
"Closing Date").
2.3. EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of Colorado
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
2.4. ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS. At the
Effective Time, the Articles of Incorporation of Company, as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
of the Surviving Corporation and thereafter shall continue to be its Articles of
Incorporation (until amended as provided under Colorado Law).
The Bylaws of Company, as in effect immediately prior to the Effective
Time, shall be the Bylaws of the Surviving Corporation and thereafter shall
continue to be its bylaws (until amended as provided therein and under Colorado
Law).
The initial directors and officers of the Surviving Corporation shall be
the directors and the officers of Merger Sub who are serving in such capacities
immediately prior to the
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Effective Time, and such directors and officers shall continue to serve as the
directors and officers of the Surviving Corporation in accordance with the
bylaws of the Surviving Corporation.
2.5. EFFECT ON CAPITAL STOCK. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Merger Sub, Company or the holders of any of the following
securities, the following shall occur:
A. CONVERSION OF COMPANY COMMON STOCK. Each share of common stock, $.001
par value per share, of Company (the "Company Common Stock") issued and
outstanding immediately prior to the Effective Time, other than any shares of
Company Common Stock to be canceled pursuant to Section 2.5.B. and any
Dissenting Shares (as defined and to the extent provided in Section 2.5.), will
be canceled and extinguished and automatically converted (subject to Section
2.5.F.) into the right to receive (i) .06873 of a share, unless adjusted as
provided for herein, of Parent Common Stock ("Common Exchange Ratio") and (ii)
0.07558 of a share of Parent Preferred Stock, such shares to be represented by
depository receipts representing 0.100 per share of Parent Preferred Stock
rounded up to the nearest 1/100th share of Parent Preferred Stock. When used
herein unless the context otherwise requires, the term "Parent Preferred Stock"
also includes the depository receipts.
B. CANCELLATION OF COMPANY-OWNED STOCK. Each share of Company Common Stock
held by Company or any direct or indirect wholly-owned subsidiary of Company
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
C. WARRANTS. All warrants to purchase Company Common Stock (collectively,
the "Warrants") then outstanding shall be terminated and replaced with new
warrants to purchase Parent Common Stock in the manner described in Section 6.4.
D. STOCK OPTIONS. All options (collectively, the "Options") to purchase
Company Common Stock then outstanding under the Company's stock option plans
referenced in SCHEDULE 3.3 (collectively, the "Company Stock Option Plans")
shall be terminated and replaced with new options to purchase Parent Common
Stock in the manner described in Section 6.4.
E. ADJUSTMENTS TO CONVERSION. The conversion rights of holders of Company
Common Stock shall be adjusted to reflect fully the effect of any stock split,
reverse split, stock dividend (including any dividend or distribution of
securities convertible into Company Common Stock, Parent Common Stock or Parent
Preferred Stock), reorganization, recapitalization or other like change with
respect to Company Common Stock, Parent Common Stock or Parent Preferred Stock
occurring after the date hereof and prior to the Effective Time.
F. FRACTIONAL SHARES. As of the Effective Time, all such shares of Company
Common Stock shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each certificate previously
representing any such shares shall thereafter represent only the right to
receive a certificate representing the shares of Parent Common Stock and Parent
Preferred Stock into which such Company Common Stock was converted in the
Merger. The holders of such certificates previously evidencing such shares of
the Company Common Stock outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such shares of the Company
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Common Stock as of the Effective Time except as otherwise provided herein or by
law. Such certificates previously representing shares of the Company Common
Stock shall be exchanged for certificates representing whole shares of Parent
Common Stock and Parent Preferred Stock issued in consideration therefor upon
the surrender of such certificates in accordance with the provisions of Section
2.6., without interest. No fractional shares of Parent Common Stock or Parent
Preferred Stock will be issued in connection with the Merger, but in lieu
thereof, the holder of any shares of Company Common Stock who would otherwise be
entitled to receive (i) a fraction of a share of Parent Common Stock shall
receive cash in an amount equal to the value of such fractional shares, which
shall be equal to the fraction of a share of Parent Common Stock that would
otherwise be issued multiplied by Four and 93/100 Dollars ($4.93) or (ii) a
depository receipt representing less than 0.10 of a share of Parent Preferred
Stock shall receive cash in an amount equal to the value of such depository
receipt, which shall be equal to the fraction of a share of Parent Preferred
Stock less than 0.10 share that would otherwise be issued multiplied by Five and
44/100 Dollars ($5.44).
G. CONDITIONAL STOCK. If any shares of Company Common Stock outstanding
immediately prior to the Effective Time are unvested or are subject to a
repurchase option, risk of forfeiture or other condition under any applicable
restricted stock purchase agreement or other agreement with the Company, then
the shares of Parent Common Stock and Parent Preferred Stock issued in exchange
for such shares of Company Common Stock will also be unvested and subject to the
same repurchase option, risk of forfeiture or other condition, and the
certificates representing such shares of Parent Common Stock and Parent
Preferred Stock may accordingly be marked with appropriate legends. The Company
shall take all action that may be necessary to ensure that, from and after the
Effective Time, Parent is entitled to exercise any such repurchase option or
other right set forth in any such restricted stock purchase agreement or other
agreement.
H. ODD LOT CASH-OUT. Notwithstanding Sections 2.5.A. and 2.5.F. above, any
holder, owning in the aggregate, one hundred (100) or fewer shares of Company
Common Stock ("Odd Lot Shareholder"), shall instead receive cash in an amount
equal to 75/100 Dollars ($.75) per share of Company Common Stock held by such
Odd Lot Shareholder.
I. DISSENTERS RIGHTS.
(i) Notwithstanding any provision of this Agreement to the contrary, any
shares of Company Common Stock held by a holder who has demanded and perfected
appraisal or dissenters' rights for such shares in accordance with Colorado Law
and who, as of the Effective Time, has not effectively withdrawn or lost such
appraisal or dissenters' rights (the "Dissenting Shares") shall not be converted
into or represent a right to receive the consideration set forth pursuant to
this Section 2.5., but the holder thereof shall only be entitled to such rights
as are granted by Colorado Law.
(ii) Notwithstanding the provisions of subsection (i), if any holder of
shares of Company Common Stock who demands appraisal of such shares under
Colorado Law shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, then, as of the later of the Effective Time
and the occurrence of such event, such holder's shares shall automatically be
converted into and represent only the right to receive Parent Common Stock,
Parent Preferred Stock and payment for any fractional share as provided in this
Section 2.5., without interest thereon, upon surrender of the certificate
representing such shares.
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(iii) The Company shall give Parent (1) prompt notice of any written
demands for appraisal of any shares of Company Common Stock, withdrawals of such
demands, and any other instruments served pursuant to Colorado Law and received
by the Company and (2) the opportunity to participate in all negotiations and
proceedings with respect to demands for appraisal under Colorado Law. The
Company shall not, except with the prior written consent of Parent, voluntarily
make any payment with respect to any demands for appraisal of capital stock of
the Company or offer to settle or settle any such demands.
2.6. EXCHANGE OF CERTIFICATES.
A. EXCHANGE AGENT; PARENT TO PROVIDE COMMON STOCK. Promptly after the
Effective Time, Parent shall supply, or shall cause to be supplied, to or for
the account of a bank or trust company designated by Parent (the "Exchange
Agent"), for exchange in accordance with this Section 2.6., through the Exchange
Agent, certificates evidencing the Parent Common Stock and Parent Preferred
Stock issuable pursuant to Section 2.5. in exchange for outstanding shares of
Company Common Stock, and cash in an amount sufficient for payment in lieu of
fractional shares pursuant to Section 2.5.F. and any dividends or other
distributions to which holders of shares of Company Common Stock may be entitled
pursuant to Section 2.6.C.
B. EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, Parent shall cause the Exchange Agent to mail to each holder of
record (as of the Effective Time) of a certificate or certificates which
immediately prior to the Effective Time evidenced outstanding shares of Company
Common Stock (the "Certificates") whose shares were converted into shares of
Parent Common Stock and Parent Preferred Stock pursuant to Section 2.5., cash in
lieu of any fractional shares pursuant to Section 2.5.F. and any dividends or
other distributions to which holders of shares of Company Common Stock may be
entitled pursuant to Section 2.6.C. (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates evidencing shares of
Parent Common Stock and Parent Preferred Stock, cash in lieu of any fractional
shares pursuant to Section 2.5.F. and any dividends or other distributions
pursuant to Section 2.6.C. Upon surrender of a Certificate for cancellation to
the Exchange Agent or to such other agent or agents as may be appointed by
Parent, together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, and such other customary
documents as may be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange thereof (i) certificates
evidencing that number of whole shares of Parent Common Stock and Parent
Preferred Stock into which such holder's shares of Company Common Stock were
converted at the Effective Time; (ii) any dividends or other distributions to
which such holder is entitled pursuant to Section 2.6.C. and (iii) cash in lieu
of fractional shares to which such holder is in entitled pursuant to Section
2.5.F., and the Certificate so surrendered shall forthwith be canceled. In the
event of a transfer of ownership of shares of Company Common Stock which is not
registered in the transfer records of the Company as of the Effective Time,
Parent Common Stock and Parent Preferred Stock and cash may be issued and paid
in accordance with this Section 2. to a transferee if the Certificate evidencing
such shares is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer pursuant to this Section 2.6. and
by evidence that any applicable stock transfer taxes have been paid. Until so
surrendered, each outstanding Certificate that, prior to the Effective
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Time, represented shares of Company Common Stock will be deemed from and after
the Effective Time, for all corporate purposes, other than the payment of
dividends, to evidence only the ownership of the number of full shares of Parent
Common Stock and Parent Preferred Stock into which such shares of Company Common
Stock shall have been so converted and the right to receive an amount in cash in
lieu of the issuance of any fractional shares in accordance with Section 2.5.F.
and any dividends or distributions payable pursuant to Section 2.6.C.
C. DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or other
distributions declared or made after the Effective Time, with respect to Parent
Common Stock or Parent Preferred Stock with a record date after the Effective
Time, shall be paid to the holder of any unsurrendered Certificate until the
holder of such Certificate shall surrender such Certificate or comply with the
lost instrument procedure set forth in Section 2.7. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing whole shares of Parent Common Stock and
Parent Preferred Stock issued in exchange therefor, without interest, at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such whole
shares of Parent Common Stock and Parent Preferred Stock.
D. TRANSFERS OF OWNERSHIP. If any certificate for shares of Parent Common
Stock or Parent Preferred Stock is to be issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it will be
a condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Parent or any person designated by it
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Parent Common Stock or Parent Preferred Stock in any name other
than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of Parent or any agent designated by it that
such tax has been paid or is not payable.
E. REQUIRED WITHHOLDING. Each of the Exchange Agent, Parent and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Company Common Stock such amounts as may be required
to be deducted or withheld therefrom under the Code or under any provision of
state, local or foreign tax law or under any other applicable legal requirement.
To the extent such amounts are so deducted or withheld, such amounts shall be
treated for all purposes under this Agreement as having been paid to the person
to whom such amounts would otherwise have been paid.
F. NO LIABILITY. Notwithstanding anything to the contrary in this Section
2.6., neither the Exchange Agent, Parent, Merger Sub nor the Company shall be
liable to any holder of shares of Company Common Stock, Parent Common Stock or
Parent Preferred Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
2.7. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Company Common
Stock as may be required pursuant to Section 2.5.; provided, however, that
Parent may, in its sole discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against
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any claim that may be made against Parent or the Exchange Agent with respect to
the Certificates alleged to have been lost, stolen or destroyed.
2.8. NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares of
Parent Common Stock and Parent Preferred Stock issued upon the surrender for
exchange of shares of Company Common Stock in accordance with the terms hereof
(including any cash paid in respect thereof pursuant to Sections 2.5.F. and
2.6.C.) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock, and there shall be no further
registration of transfers on the records of the Surviving Corporation of shares
of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates are presented to the
Surviving Corporation for any reason, they shall be cancelled and exchanged as
provided in this Section 2.
2.9. ADDITIONAL ACTIONS. If, at any time after the Effective Time, the
Surviving Corporation or Parent shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of the Company or otherwise to carry out the
purposes of this Agreement, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of the Company, all such deeds, bills of sale, assignments and assurances
and to take and do, in the name and on behalf of the Company, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or otherwise to carry out the purposes of
this Agreement.
2.10. TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
hereto that the Merger shall constitute a reorganization within the meaning of
Section 368 of the Code. The parties hereto 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 Income Tax Regulations.
2.11. AUTOMATIC CONVERSION OF PARENT PREFERRED STOCK INTO PRACTICEWORKS
PREFERRED STOCK. All Parent Preferred Stock issued pursuant to Section 2.5.
shall be subject to automatic exchange into shares of PracticeWorks Preferred
Stock upon a spin-off of Parent's PracticeWorks division as further described in
EXHIBIT B hereto (the "PracticeWorks Spin-off"). The PracticeWorks Spin-off,
while expected, is at InfoCure's discretion and subject to, among other things,
appropriate consents (including consents of senior lenders) and no guarantee is
made hereunder that the PracticeWorks Spin-off will occur.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
As of September 25, 2000 and as of the Closing Date, Company represents and
warrants to Merger Sub and Parent, subject to such exceptions as are
specifically disclosed in writing in the disclosure schedule and referencing a
specific representation supplied by the Company to Merger Sub and Parent dated
as of September 25, 2000 and certified by a duly authorized officer of Company
(the "Company Disclosure Schedule"), as follows:
3.1. ORGANIZATION, GOOD STANDING, CORPORATE POWER AND SUBSIDIARIES.
A. SCHEDULE 3.1.A of the Company Disclosure Schedule contains a complete
and accurate list of the Company and each Subsidiary's name, its jurisdiction of
incorporation, other jurisdictions in which it is authorized to do business.
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The Company and the Subsidiary are each a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction in
which it is organized, with full corporate power and authority to conduct its
business as it is now being conducted and to own or use the properties and
assets that it purports to own or use.
The Company and the Subsidiary are each duly qualified or licensed to do
business as a foreign corporation and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification, except where the failure to be so qualified or
licensed would not result in a Company Material Adverse Effect.
B. The Company and Subsidiary have delivered to Merger Sub copies of the
Organizational Documents of the Company and Subsidiary, as currently in effect.
C. Neither Company nor Subsidiary has agreed nor is obligated to make nor
be bound by any Contract under which it may become obligated to make, any future
investment in or capital contribution to any other entity. Neither the Company
nor the Subsidiary owns, directly or indirectly, any equity or similar interest
convertible, exchangeable or exercisable for, any equity or similar interest in,
any corporation, partnership, joint venture or other business association or
entity.
3.2. AUTHORITY; NO CONFLICT.
A. The Company has all necessary corporate power and authority to execute
and deliver this Agreement and to perform its obligations hereunder and, subject
only to obtaining the approval of the shareholders of the Company of the Merger
(the "Shareholder Approval"), to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Company and the
consummation by Company of the transactions contemplated hereby have been duly
and validly approved by the Company Board of Directors, as required by
applicable law and the Company Board of Directors has, as of the date of this
Agreement, determined (i) that the Merger is advisable and fair to, and in the
best interests of Company and its shareholders and (ii) to recommend that the
shareholders of Company approve and adopt this Agreement and approve the Merger.
This Agreement is, or when executed and delivered by the Company will be, a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as to the effect, if any, of (i) applicable
bankruptcy and other similar laws affecting the rights of creditors generally
and (ii) rules of law governing specific performance, injunctive relief and
other equitable remedies.
B. Except as set forth in SCHEDULE 3.2 of the Company Disclosure Schedule,
neither the execution and delivery of this Agreement by the Company nor, after
obtaining the Shareholder Approval, the consummation or performance of any of
the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time):
(i) Contravene, conflict with, or result in a violation of any
provision of the Organizational Documents of the Company or the Subsidiary;
(ii) Contravene, conflict with, or result in a violation of, or give
any Governmental Body or, to the Knowledge of the Company, other Person the
right to challenge any of the Contemplated Transactions or to exercise any
remedy or obtain any relief under, any Legal Requirement or any Order to
which the Company or the
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Subsidiary, or any of the assets owned or used by the Company or the
Subsidiary, may be subject;
(iii) Subject to the filing of the Articles of Merger with the
Colorado Secretary of State, 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 the
Subsidiary or that otherwise relates to the business of, or any of the
assets owned or used by the Company or the Subsidiary;
(iv) Cause the Company or the Subsidiary to become subject to, or to
become liable for the payment of, any Tax;
(v) Cause any of the assets owned by the Company or the Subsidiary to
be reassessed or revalued by any taxing authority or other Governmental
Body;
(vi) Contravene, conflict with, or result in a violation or breach of
any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any material Contract to which Company
or the Subsidiary is a party or by which Company or the Subsidiary or its
or any of their respective properties are bound or affected; or
(vii) Result in the imposition or creation of any Encumbrance upon or
with respect to any of the assets owned or used by the Company or the
Subsidiary.
C. Except as set forth in SCHEDULE 3.2 of the Company Disclosure
Schedule and such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Company
Material Adverse Effect or have a material adverse effect on the ability of
the parties to consummate the Merger, the Company and the Subsidiary are
not or will not be required to give any notice to or obtain any Consent
from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
3.3. CAPITALIZATION. The authorized capital stock of the Company consists
of (i) thirty million (30,000,000) shares of Company Common Stock, par value
$.001 per share and five million (5,000,000) shares of Preferred Stock, $.001
par value per share ("Company Preferred Stock"). At the close of business on
August 21, 2000 (i) thirteen million two hundred forty thousand sixty-six
(13,240,066) shares of Company Common Stock were issued and outstanding, all of
which are validly issued, fully paid and nonassessable; (ii) no shares of
Company Common Stock were held in treasury by Company or by any Subsidiary;
(iii) three million one hundred twenty-five thousand eight hundred thirty-seven
(3,125,837) shares of Company Common Stock were reserved for issuance upon the
exercise of outstanding options to purchase Company Common Stock under the
Company Stock Option Plans; (iv) one million three hundred forty-nine thousand
(1,349,000) shares of Company Common Stock were available for future grant under
the Company Stock Option Plans and (v) one hundred fifty thousand (150,000)
shares of Company Common Stock were reserved for future issuance upon conversion
of warrants of the Company. As of August 31, 2000, no shares of Company
Preferred Stock were issued or outstanding. SCHEDULE 3.3 of the Company
Disclosure Schedule sets forth the following information with respect to each
Option and Warrant (as defined in Section 6.4.) outstanding as of the date of
this Agreement: (i) the name and address of
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the optionee or warrant holder; (ii) the particular plan pursuant to which such
Option was granted; (iii) the number of shares of Company Common Stock subject
to such Option or Warrant; (iv) the exercise price of such Option or Warrant;
(v) the date on which such Option or Warrant was granted; (vi) the applicable
vesting schedule and (vii) the date on which such Option or Warrant expires.
Company has made available to Parent accurate and complete copies of all stock
option plans pursuant to which the Company has granted such Options that are
currently outstanding and the form of all stock option agreements and
instruments evidencing such Options and Warrants. Except as set forth in
SCHEDULE 3.3, all shares of Company Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the instrument
pursuant to which they are issuable, would be duly authorized, validly issued,
fully paid and nonassessable. There are no commitments or agreements of any
character to which the Company is bound obligating the Company to accelerate the
vesting of any Option as a result of the Merger. All outstanding shares of
Company Common Stock, all outstanding Options and Warrants, and all outstanding
shares of capital stock of Subsidiary have been issued and granted in compliance
with (i) all applicable securities laws and other applicable Legal Requirements
and (ii) all requirements set forth in applicable Contracts. Except for
securities Company owns free and clear of all Encumbrances, as of the date of
this Agreement, there are no equity securities, partnership interests or similar
ownership interests of any class of equity security of Subsidiary, or any
security exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except as set forth in SCHEDULE 3.3, there
are no subscriptions, options, warrants, equity securities, partnership
interests or similar ownership interests, calls, rights (including preemptive
rights), commitments or agreements of any character to which Company or
Subsidiary is a party or by which it is bound obligating Company or Subsidiary
to issue, deliver or sell, or cause to be issued, delivered or sold, or
repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or
acquisition of, any shares of capital stock, partnership interests or similar
ownership interest s of the Company or Subsidiary or obligating the Company or
Subsidiary to grant, extend, accelerate the vesting of or enter into any such
subscription, option, warrant, equity security, call, right, commitment or
agreement. As of the date of this Agreement, except as contemplated by this
Agreement and except as set forth in SCHEDULE 3.3, there are no registration
rights and there is no voting trust, proxy, rights plan, anti-takeover plan or
other agreement or understanding to which the Company or Subsidiary is a party
or by which they are bound with respect to any equity security of any class of
the Company or with respect to any equity security, partnership interest or
similar ownership interest of any class of Subsidiary. Stockholders of the
Company will not be entitled to dissenters' rights under applicable state law in
connection with the Merger.
3.4. SEC FILINGS; FINANCIAL STATEMENTS.
A. Company has made available to Parent a correct and complete copy of each
report, schedule, registration statement and definitive proxy statement filed by
Company with the Securities and Exchange Commission ("SEC") since September 1,
1998 (the "Company SEC Reports"), which are all the forms, reports and documents
required to be filed by Company with the SEC since September 1, 1998. The
Company SEC Reports (i) were prepared in accordance with the requirements of the
Securities Act or the Exchange Act, as the case may be and (ii) did not at the
time they were filed (and if amended or superseded by a filing prior to the date
of this Agreement then on the date of such filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light
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of the circumstances under which they were made, not misleading. None of
Company's Subsidiaries is required to file any reports or other documents with
the SEC.
B. Each set of consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports was prepared in
accordance with GAAP (except as may be indicated in the notes thereto or, in the
case of unaudited statements, do not contain footnotes as permitted by Form 10-Q
of the Exchange Act) and each fairly presents the consolidated financial
position of Company and the Subsidiary at the respective dates thereof and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal adjustments which were not or are not expected to be material in amount.
C. Company has previously furnished to Parent a complete and correct copy
of any amendments or modifications, which have not yet been filed with the SEC,
but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Company with the SEC pursuant to
the Securities Act or the Exchange Act.
3.5. BOOKS AND RECORDS. The books of account, stock record books, and
other records of the Company and the Subsidiary, all of which have been made
available to Merger Sub and Parent, are complete and correct in all material
respects.
The minute books of the Company and the Subsidiary made available to
counsel for Parent are the only minute books of the Company and the Subsidiary
and contain a reasonably accurate summary, in all material respects, of all
meetings held of, and corporate action taken by, the stockholders, the Board of
Directors and committees of the Board of Directors of Company and the Subsidiary
since the time of its incorporation. At the Closing, all of those books and
records will be in the possession of the Company.
3.6. REAL PROPERTY INTERESTS. Neither the Company nor the Subsidiary owns
real property. SCHEDULE 3.6 of the Company Disclosure Schedule contains a
complete and accurate list of all leaseholds or other interests in real property
of the Company and the Subsidiary. The Company has delivered or made available
to Merger Sub and Parent copies of the lease agreements and other instruments by
which the Company and the Subsidiary acquired such leasehold and other real
property interests.
3.7. CONDITION AND SUFFICIENCY OF ASSETS. Except as set forth on SCHEDULE
3.7 of the Company Disclosure Schedule, to the Company's Knowledge, the
buildings, plants, structures and equipment of the Company and the Subsidiary
are structurally sound, are in good operating condition and repair, subject to
normal wear and tear, and are adequate for the uses to which they are being put.
3.8. ACCOUNTS RECEIVABLE. All accounts receivable of the Company and the
Subsidiary that are reflected on the Financial Statements or on the accounting
records of the Company as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will
be as of the Closing Date current and collectible net of the respective reserves
shown on the Financial Statements or on the accounting records of the Company
and the Subsidiary as of the Closing Date (which reserves are adequate and
calculated consistent with past practice).
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Subject to such reserves, each of the Accounts Receivable either has been
or will be collected in full, without any set-off, within one hundred fifty
(150) days on which it first becomes due and payable. To the Knowledge of the
Company, there is no contest, claim, or right of set-off, other than returns in
the Ordinary Course of Business, under any material Contract with any obligor of
an Accounts Receivable relating to the amount or validity of such Accounts
Receivable.
SCHEDULE 3.8 of the Company Disclosure Schedule contains a complete and
accurate list of all Accounts Receivable as of September 25, 2000, which list
sets forth the aging of such Accounts Receivable.
3.9. INVENTORY. All inventory of the Company and the Subsidiary, whether
or not reflected in the Financial Statements, consists of a quality and quantity
usable and salable in the Ordinary Course of Business, except for obsolete items
and items of below-standard quality, all of which have been or will be written
off or written down to net realizable value in the Financial Statements or on
the accounting records of the Company and the Subsidiary as of the Closing Date,
as the case may be.
3.10. NO UNDISCLOSED LIABILITIES. Except as set forth in SCHEDULE 3.10 of
the Company Disclosure Schedule, neither the Company nor the Subsidiary have any
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent or otherwise) except for liabilities or
obligations reflected or reserved against in the Financial Statements and not
heretofore paid or discharged and current liabilities incurred in the Ordinary
Course of Business since June 30, 1999.
3.11. TAXES.
A. Except as set forth on SCHEDULE 3.11 to the Company Disclosure Schedule,
the Company and the Subsidiary have timely filed all Tax Returns that they were
required to file. All such Tax Returns were correct and complete in all material
respects. The Company and the Subsidiary have paid in full or made adequate
provision by the establishment of reserves for all Taxes which have become due
or which are attributable to the conduct of the Company's and the Subsidiary's
business prior to August 31, 2000. The Company and the Subsidiary will continue
to make adequate provision for all such Taxes for all periods through the
Closing Date. The Company and the Subsidiary are not the beneficiaries of any
extension of time within which to file any Tax Return.
Except as set forth on SCHEDULE 3.11, the Company has no Knowledge of any
Tax deficiency proposed or Threatened against the Company or the Subsidiary.
There are no Tax liens upon any property or assets of the Company or the
Subsidiary to secure the payment of any delinquent Taxes.
Except as set forth on SCHEDULE 3.11, the Company and the Subsidiary have
made all payments of estimated Taxes when due in amounts sufficient to avoid the
imposition of any penalty.
B. Except as set forth on SCHEDULE 3.11, all Taxes and other assessments
and levies which the Company or the Subsidiary were required by law to withhold
or to collect have been duly withheld and collected, and have been paid over to
the proper Governmental Body.
C. Except as set forth in SCHEDULE 3.11, the Tax Returns of the Company and
the Subsidiary have never been audited by the IRS or other Governmental Body,
nor are any such audits in process. Except as set forth in SCHEDULE 3.11, there
are no outstanding
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agreements or waivers extending the statute of limitations applicable to any Tax
Returns of the Company or the Subsidiary for any period.
D. For federal income tax purposes, the Company and the Subsidiary have a
taxable year ending on September 30 in each year.
E. The Company has not filed a consent under Code sec. 341(f) concerning
collapsible corporations. The Company and the Subsidiary have not made any
material payments, are not obligated to make any material payments, and are not
a party to any agreement that under any circumstances could obligate it to make
any material payments that will not be deductible under Code sec. 280G. The
Company and the Subsidiary have not been a United States real property holding
corporation within the meaning of Code sec. 897(c)(2) during the applicable
period specified in Code sec. 897(c)(1)(A)(ii). The Company and the Subsidiary
are not a party to any Tax allocation or sharing agreement. Except with respect
to the Subsidiary, the Company (i) has not been a member of an affiliated group
filing a consolidated federal income Tax Return and (ii) has no liability for
the Taxes of any Person under Reg. sec. 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract, or
otherwise.
F. The Company's and the Subsidiary's Tax basis in its assets for purposes
of determining its future amortization, depreciation and other federal income
tax deductions is accurately reflected on the Company's and the Subsidiary's
books and records in all material respects.
3.12. NO COMPANY MATERIAL ADVERSE EFFECT. Since June 30, 1999, there has
not been any Company Material Adverse Effect, and to the Company's Knowledge, no
event has occurred and no circumstance exists that may result in a Company
Material Adverse Effect other than with respect to general domestic or
international economic conditions and other than the changes in the Company's
financial condition, business and operations as disclosed in Company's reports
filed under the Exchange Act, which changes are continuing to date.
3.13. EMPLOYEE BENEFITS MATTERS.
A. SCHEDULE 3.13.1 lists all plans, programs, and similar agreements,
commitments or arrangements (including, but not limited to, any bonus, profit
sharing, pension, deferred compensation, stock option, stock purchase, fringe
benefit, severance, post-retirement, scholarship, tuition reimbursement,
disability, sick leave, vacation, commission, retention or other arrangements),
whether oral or written, sponsored or maintained by or on behalf of, or to which
contributions are or were made by, Company and/or any ERISA Affiliate within the
last seven (7) years that provide or provided benefits, compensation or other
remuneration to, or for the benefit of, current or former employees of Company
and/or any ERISA Affiliate or any or any other individual who provides services
to the Company and/or any ERISA Affiliate (including, but not limited to, any
shareholder, officer, director, employee or consultant), or any spouse, child or
other dependent of such current or former employee or other individual ("Plan"
or "Plans"). Except as disclosed on SCHEDULE 3.13.1, there are no other benefits
to which any current or former employees of Company and/or any ERISA Affiliate
or any or any other individual who provides services to the Company and/or any
ERISA Affiliate (including, but not limited to, any shareholder, officer,
director, employee or consultant), or any spouse, child or other dependent of
such current or former employee or other individual is entitled or for which the
Company and/or any ERISA Affiliate has any obligation. Except as set forth on
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SCHEDULE 3.13.1, only current employees of Company participate in the Plans,
except as required by I.R.C. sec. 4980B and/or ERISA sec.sec. 601-609. Copies of
all Plans and, to the extent applicable, all related trust agreements, actuarial
reports, and valuations for the most recent three (3) years, all summary plan
descriptions, prospectuses, Annual Report Form 5500's or similar forms (and
attachments thereto) for the most recent three (3) years, all Internal Revenue
Service determination letters, and any related documents requested by Buyer,
including all amendments, modifications and supplements thereto, all material
employee and/or participant communications relating to each such Plan, and all
insurance contracts, administrative services agreements or contracts, have been
delivered to Buyer, and all of the same are true, correct and complete.
B. With respect to each Plan to the extent applicable:
(i) No litigation or administrative or other proceeding or
investigation, claim, lawsuit, arbitration or other action is pending or
threatened involving such Plan or any administrator, fiduciary, employee,
contributing employer, contractor or agent of such Plan, other than routine
claims for benefits in the ordinary course for such Plan.
(ii) Such Plan has been administered and operated in compliance with,
and has been amended to comply with, all applicable laws, rules, and
regulations, including, without limitation, ERISA, the Code, and the
regulations issued under ERISA and the Code.
(iii) Company and ERISA Affiliates have made and as of the Closing
Date will have made or accrued, all payments and contributions required, or
reasonably expected to be required, to be made under the provisions of such
Plan or required to be made under applicable laws, rules and regulations,
with respect to any period prior to the Closing Date, such amounts to be
determined using the ongoing actuarial and funding assumptions of the Plan
if applicable.
(iv) Such Plan is fully funded in an amount sufficient to pay all
liabilities (whether or not vested) accrued (including liabilities and
obligations for health care, life insurance and other benefits after
termination of employment) and claims incurred through August 31, 2000.
(v) On the Closing Date such Plan will be fully funded in an amount
sufficient to pay all liabilities (whether or not vested) accrued as of the
Closing Date (including liabilities and obligations for health care, life
insurance and other benefits after termination of employment) and claims
incurred as of the Closing Date, or adequate reserves will be set up on
Company's books and records, or paid-up insurance will be provided,
therefor.
(vi) Such Plan has been administrated and operated only in the
ordinary and usual course and in accordance with its terms, and there has
not been in the four (4) years prior hereto any increase in the liabilities
of such Plan beyond increases typically experienced as a result of changes
in the workforce.
(vii) Such Plan is not a multiemployer plan (as defined in ERISA
sec. 3(37) or 4001(a)(3)), is not a single-employer plan (as defined in
ERISA sec. 4001(a)(15)), and is not a defined benefit plan (as defined in
ERISA sec. 3(35)), and is not a plan maintained by more than one employer
(within the meaning of Code sec. 413(c)).
(viii) No Person has engaged in any "prohibited transaction" (as
defined in ERISA sec. 406 or Code sec. 503(b) or 4975) with respect to such
Plan on or prior to the
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Closing Date, and no Person who would be a fiduciary with respect to such
Plan has breached any of his responsibilities or obligations imposed upon
fiduciaries under Title I of ERISA which would subject Company or any ERISA
Affiliate, or any Person whom the Company has an obligation to indemnify,
to any liability.
(ix) Such Plan contains provisions which allow additional benefits
under the Plan to be discontinued at any time and for any reason, and which
allow the Plan to be terminated (or the Company's participation in the Plan
to be terminated) by the Company at any time and for any reason, and, if
such Plan were terminated (or the Company's participation in such Plan were
terminated) on or prior to the Closing Date, no additional liability would
be incurred by the Company by such action.
(x) All communications with respect to such Plan by any Person on or
prior to the Closing Date have reflected accurately the documents and
operations of such Plan, and no Person has, as of the Closing Date, any
liability under any applicable law by reason of any communication or
failure to communicate with respect to or in connection with such Plan.
(xi) Such Plan does not provide benefits to any former employee, or
any other Person who is not performing services for the Company, except as
required by Code sec. 4980B and/or ERISA sec.sec. 601-609.
(xii) No liability to the Pension Benefit Guaranty Corporation
("PBGC") has been incurred or will be incurred as of the Closing Date by
Company or any ERISA Affiliate, except for PBGC insurance premiums (if
any), and all such insurance premiums incurred or accrued up to and
including the Closing Date have been timely paid, or will be timely paid
prior to the Closing Date.
(xiii) Neither the Company nor any ERISA Affiliate has ceased
operations at any facility or withdrawn from such Plan in a manner which
could subject the Company to liability under ERISA sec. 4062, 4063 or 4064,
and no events have occurred or will occur on or prior to the Closing Date
which might give rise to any liability of Company to the PBGC under Title
IV of ERISA or which could reasonably be anticipated to result in any
claims being made against Company by the PBGC.
(xiv) No entitlement to any benefit (including, but not limited to,
severance pay, unemployment compensation or payment contingent upon a
change in control or ownership of the Company) from such Plan shall arise,
and no acceleration or increase in benefits due any Person shall occur, by
reason of the consummation of the transactions contemplated by this
Agreement.
(xv) An ERISA fiduciary insurance policy issued by a licensed
insurance company is in place covering each and every fiduciary of such
Plan.
(xvi) If such Plan purports to provide benefits which qualify for
tax-favored treatment under Code sec. 79, 105, 106, 117, 120, 125, 127 129
or 132, the Plan satisfies the requirements of said Code sections.
C. The participants and beneficiary records with respect to each Plan
providing benefits to employees or other Persons performing services for the
Company and their spouses, dependents, etc., are in the custody of the Company
(or an agent of the Company who must, upon demand, provide such records to the
Company), and such records accurately state the history of each participant and
beneficiary in connection with each
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such Plan and accurately state the benefits earned by and/or owed to each such
participant and beneficiary.
D. Except as otherwise set forth on SCHEDULE 3.13.2, the Company is not
liable for and neither the Company nor Merger Sub nor Parent will be liable for,
any contribution, Tax, lien, penalty, cost, interest, claim, loss, action, suit,
damage, cost assessment or other similar type of liability or expense of any
ERISA Affiliate (including predecessors thereof) with regard to any Plan
maintained, sponsored or contributed to by an ERISA Affiliate, including,
without limitation, withdrawal liability arising under Title IV of ERISA,
liabilities to the PBGC, or liabilities under Code sec. 412 or ERISA sec. 302.
3.14. COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS. For
purposes of this Section 3.14. only, the term "Company" shall be deemed to
include the Company and the Subsidiary.
A. Except as set forth in SCHEDULE 3.14 of the Company Disclosure Schedule:
(i) The Company is, and at all times since September 30, 1998 has
been, in full compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its business or the
ownership or use of any of its assets except where the failure to comply
with a Legal Requirement would not have a Company Material Adverse Effect;
(ii) To the Knowledge of the Company, no event has occurred or
circumstance exists that (with or without notice or lapse of time) (1) may
constitute or result in a violation by the Company of, or a failure on the
part of the Company to comply with, any Legal Requirement or (2) may give
rise to any obligation on the part of the Company to undertake, or to bear
all or any portion of the cost of, any remedial action of any nature except
for events or circumstances which in the aggregate would not have a Company
Material Adverse Effect; and
(iii) The Company has not received, at any time since September 30,
1998, any written notice or other written communication from any
Governmental Body or any other Person regarding (1) any actual, alleged,
possible, or potential violation of, or failure to comply with, any Legal
Requirement or (2) any actual, alleged, possible, or potential obligation
on the part of the Company to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature.
B. The Company has all Governmental Authorizations necessary to conduct its
business as presently conducted. Each Governmental Authorization is valid and in
full force and effect. Except as set forth in SCHEDULE 3.14 of the Company
Disclosure Schedule:
(i) The Company is, and at all times since September 30, 1998 has
been, in full compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be identified in
SCHEDULE 3.14 of the Company Disclosure Schedule, except where the failure
to comply with a Governmental Authorization would not have a Company
Material Adverse Effect;
(ii) To the Knowledge of the Company, no event has occurred or
circumstance exists that may (with or without notice or lapse of time) (1)
constitute or result directly or indirectly in a violation of or a failure
to comply with any term or requirement of any Governmental Authorization
listed or required to be listed in SCHEDULE 3.14 of the Company Disclosure
Schedule or (2) result directly or indirectly
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in the revocation, withdrawal, suspension, cancellation, or termination of,
or any modification to, any Governmental Authorization listed or required
to be listed in SCHEDULE 3.14 of the Company Disclosure Schedule, except
for events or circumstances which in the aggregate would not have a Company
Material Adverse Effect;
(iii) The Company has not received, at any time since September 30,
1998, any written notice or other written communication from any
Governmental Body or any other Person regarding (1) any actual or alleged
violation of or failure to comply with any term or requirement of any
Governmental Authorization or (2) any actual or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to
any Governmental Authorization; and
(iv) All applications required to have been filed for the renewal of
the Governmental Authorizations listed or required to be listed in SCHEDULE
3.14 of the Company Disclosure Schedule have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other filings
required to have been made with respect to such Governmental Authorizations
have been duly made on a timely basis with the appropriate Governmental
Bodies, except where the failure to make such filings in a timely manner
would not have a Company Material Adverse Effect.
The Governmental Authorizations listed in SCHEDULE 3.14 of the Company
Disclosure Schedule collectively constitute all of the Governmental
Authorizations that are material to the conduct of the Company's business in the
manner it is currently conducted and to operate such business and to permit the
Company to own and use its assets in the manner in which it currently owns and
uses such assets.
3.15. LEGAL PROCEEDINGS; ORDERS.
A. Except as set forth in SCHEDULE 3.15 of the Company Disclosure Schedule,
there is no pending Proceeding:
(i) That has been commenced by or against the Company or the
Subsidiary; or
(ii) To the Knowledge of the Company, that challenges, or that may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions.
Except as set forth in SCHEDULE 3.15 of the Company Disclosure Schedule, to
the Knowledge of the Company, (i) no such Proceeding has been Threatened and
(ii) no event has occurred or circumstance exists that may give rise to or serve
as a basis for the commencement of any Proceeding that could reasonably be
expected to result in a Company Material Adverse Effect. The Company and the
Subsidiary have delivered to Merger Sub and Parent copies of all pleadings,
correspondence, and other documents relating to each pending Proceeding listed
in SCHEDULE 3.15 of the Company Disclosure Schedule. The Proceedings listed in
SCHEDULE 3.15 of the Company Disclosure Schedule will not have a Company
Material Adverse Effect.
B. Except as set forth in SCHEDULE 3.15 of the Company Disclosure Schedule:
(i) There is no Order to which the Company or the Subsidiary, or, to
the Company's Knowledge, any of the assets owned or used by the Company or
the Subsidiary, is subject; and
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(ii) To the Company's Knowledge, no officer, director, or employee of
the Company or the Subsidiary is subject to any Order that prohibits such
officer, director, or employee from engaging in or continuing any conduct,
activity, or practice relating to the business of the Company or the
Subsidiary as currently conducted.
C. Except as set forth in SCHEDULE 3.15 of the Company Disclosure Schedule:
(i) The Company and the Subsidiary are, and at all times since
September 30, 1998 have been, in full compliance with all of the terms and
requirements of each Order to which it, or any of the assets owned or used
by it, is or has been subject, except where the failure to comply would not
have a Company Material Adverse Effect;
(ii) To the Knowledge of the Company, no event has occurred or
circumstance exists that may constitute or result in (with or without
notice or lapse of time) a violation of or failure to comply with any term
or requirement of any Order to which the Company or the Subsidiary, or any
of the assets owned or used by the Company or the Subsidiary, is subject,
except for events or circumstances which in the aggregate would not have a
Company Material Adverse Effect; and
(iii) Neither the Company nor the Subsidiary have received, at any
time since September 30, 1998, any written notice from any Governmental
Body or any other Person regarding any actual or alleged violation of, or
failure to comply with, any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company or the
Subsidiary, is or has been subject.
3.16. ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Schedule 3.16 of the Company Disclosure Schedule and in the recent changes in
capitalization as reflected in Section 3.3. hereto, since June 30, 1999, the
Company and the Subsidiary have conducted their businesses only in the Ordinary
Course of Business and there has not been any:
A. Change in the Company's or the Subsidiary's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital stock of
the Company or the Subsidiary; issuance of any security convertible into such
capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by the Company or the Subsidiary of any shares
of any such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
B. Amendment to the Organizational Documents of the Company or the
Subsidiary;
C. Except in the Ordinary Course of Business, payment or increase by the
Company or the Subsidiary of any bonuses, salaries, or other compensation to any
stockholder, director, officer or employee or entry into any employment,
severance, or similar Contract with any director, officer, or employee;
D. Adoption of, or substantial increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any employees of
the Company or the Subsidiary;
E. Damage to or destruction or loss of any asset or property of the Company
or the Subsidiary, whether or not covered by insurance that had a Company
Material Adverse Effect;
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F. Entry into, termination of, or receipt of written notice of termination
of any Contract or transaction involving a total remaining commitment by or to
the Company or the Subsidiary of at least Twenty-Five Thousand and No/100
Dollars ($25,000.00);
G. Sale (other than sales of inventory in the Ordinary Course of Business),
lease, or other disposition of any asset or property of the Company or the
Subsidiary or mortgage, pledge, or imposition of any Encumbrance on any material
asset or property of the Company or the Subsidiary, including the sale, lease,
or other disposition of any of the Software and Intangibles;
H. Cancellation or waiver of any claims or rights with a value to the
Company or the Subsidiary in excess of Twenty-Five Thousand and No/100 Dollars
($25,000.00);
I. Material change in the accounting methods used by the Company or the
Subsidiary; or
J. Agreement, whether oral or written, by the Company or the Subsidiary to
do any of the foregoing.
3.17. CONTRACTS; NO DEFAULTS.
A. SCHEDULE 3.17(A) of the Company Disclosure Schedule contains a complete
and accurate list (other than Customer License Agreements which are disclosed in
Section 3.22.), and the Company has delivered to Merger Sub and Parent true and
complete copies, of:
(i) Each Contract that involves performance of services or delivery of
goods or materials by the Company or the Subsidiary of an amount or value
in excess of Twenty-Five Thousand and No/100 Dollars ($25,000.00);
(ii) Each Contract that involves performance of services or delivery
of goods or materials to the Company or the Subsidiary of an amount or
value in excess of Twenty-Five Thousand and No/100 Dollars ($25,000.00);
(iii) Except for customer Contracts and inventory and equipment
purchase orders incurred in the Ordinary Course of Business, each Contract
that was not entered into in the Ordinary Course of Business and that
involves expenditures or receipts of the Company or the Subsidiary in
excess of Twenty-Five Thousand and No/100 Dollars ($25,000.00);
(iv) Each lease, rental or occupancy agreement, license, installment
and conditional sale agreement, and other Contract affecting the ownership
of, leasing of, title to, use of, or any leasehold or other interest in,
any real or personal property (except personal property leases and
installment and conditional sales agreements having a value per item or
aggregate payments of less than Twenty-Five Thousand and No/100 Dollars
($25,000.00) and with terms of less than one (1) year) of the Company or
the Subsidiary;
(v) Each collective bargaining agreement and other Contract to or with
any labor union or other employee representative of a group of employees
relating to the Company or the Subsidiary;
(vi) Each joint venture, partnership, and other Contract (however
named) involving a sharing of profits, losses, costs, or liabilities by the
Company or the Subsidiary with any other Person;
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(vii) Each Contract containing covenants that in any way purport to
restrict the business activity of the Company or the Subsidiary or limit
the freedom of the Company or the Subsidiary to engage in any line of
business or to compete with any Person;
(viii) Each Contract (relating to the Company or the Subsidiary)
providing for payments to or by any Person based on sales, purchases, or
profits, other than direct payments for goods;
(ix) Each power of attorney relating to the Company or the Subsidiary
that is currently effective and outstanding;
(x) Each Contract relating to the Company or the Subsidiary for
capital expenditures in excess of Twenty-Five Thousand and No/100 Dollars
($25,000.00);
(xi) Each written warranty, guaranty, and or other similar undertaking
with respect to contractual performance extended by the Company or the
Subsidiary other than in the Ordinary Course of Business; and
(xii) Each amendment, supplement, and modification in respect of any
of the foregoing.
B. Except as set forth in SCHEDULE 3.17(B) of the Company Disclosure
Schedule, to the Knowledge of the Company, no officer, director, or employee of
the Company or the Subsidiary is bound by any Contract that purports to limit
the ability of such officer, director or employee to (i) engage in or continue
any conduct, activity, or practice relating to the business of the Company or
any Subsidiary, as currently conducted or (ii) assign to the Company or any
Subsidiary any rights to any invention, improvement, or discovery relating to
the business of the Company or any Subsidiary.
C. Except as set forth in SCHEDULE 3.17(C) of the Company Disclosure
Schedule, each Contract identified or required to be identified in SCHEDULE
3.17(A) of the Company Disclosure Schedule is in full force and effect, except
as to matters or default which in the aggregate would not have a Company
Material Adverse Effect.
D. Except as set forth in SCHEDULE 3.17(D) of the Company Disclosure
Schedule:
(i) The Company and each Subsidiary is in full compliance with all
material terms and requirements of each Contract under which Company or
such Subsidiary has or had any obligation or liability or by which Company
or such Subsidiary or any of the assets owned or used by Company or such
Subsidiary is or was bound, except where the failure to comply with such
terms and requirements would not have a Company Material Adverse Effect;
(ii) To the Knowledge of the Company, each other Person that has or
had any obligation or liability under any Contract under which the Company
has or had any rights is in full compliance with all material terms and
requirements of such Contract;
(iii) To the Knowledge of the Company, no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or breach of, or give
the Company or other Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to
cancel, terminate, or modify, any material Contract, except for
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events or circumstances which in the aggregate would not have a Company
Material Adverse Effect; and
(iv) Neither the Company nor any Subsidiary has given to or received
from any other Person, at any time since March 31, 1999, any written notice
regarding any actual, alleged, possible, or potential violation or breach
of, or default under, any material Contract.
E. There are no renegotiations of or attempts to renegotiate any material
amounts paid or payable to the Company or any Subsidiary under current or
completed Contracts with any Person and the Company has not received any written
demand for such renegotiation.
3.18. INSURANCE.
A. The Company has delivered to Merger Sub and Parent:
(i) True and complete copies of all policies of insurance to which the
Company or the Subsidiary is a party;
(ii) True and complete copies of all pending applications for policies
of insurance; and
(iii) Any written statement by the auditor of the Financial Statements
with regard to the adequacy of such entity's coverage or of the reserves
for claims.
B. Except as set forth on SCHEDULE 3.18(B) of the Company Disclosure
Schedule:
(i) All policies to which the Company or the Subsidiary is a party or
that provide coverage to the Company or the Subsidiary, or any director of
the Company or the Subsidiary:
(1) Are in full force and effect, except as to matters or defaults
which in the aggregate, would not have a Company Material Adverse
Effect; and
(2) Taken together in the reasonable judgment of the Company,
provide adequate insurance coverage for the assets and the operations of
the Company or any Subsidiary for all risks to which the Company or the
Subsidiary is normally exposed.
(ii) Neither the Company nor Subsidiary has received any written
notice of cancellation or other indication that any insurance policy is no
longer in full force or effect or will not be renewed or that the issuer of
any policy is not willing or able to perform its obligations thereunder.
(iii) The Company and Subsidiary has paid all premiums due and has
otherwise performed all of its material obligations under each policy to
which the Company or such Subsidiary is a party or that provides coverage
to the Company or such Subsidiary or any director thereof, except where the
failure to so perform would not in the aggregate have a Company Material
Adverse Effect.
3.19. ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 3.19 of the
Company Disclosure Schedule, the Company and the Subsidiary have obtained and
are in compliance with all permits, licenses and other authorizations
(collectively, "Permits") required to do business by Environmental Requirements.
To the Company's Knowledge,
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there are no conditions, circumstances, activities, practices, incidents, or
actions (collectively, "Conditions") resulting from the conduct of its business
which Conditions may reasonably form the basis of any claim or suit against the
Company or the Subsidiary based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling by the
Company or the Subsidiary, or the emission, discharge, release or Threatened
release by the Company or the Subsidiary into the environment, of any pollutant,
contaminant, or hazardous or toxic materials, substances or wastes.
3.20. EMPLOYEES.
A. SCHEDULE 3.20.1 contains a complete and accurate list of the following
information for each employee or director of Company and Subsidiary, including
each employee on leave of absence or layoff status: name of employee or
director; date of hire, job title and "essential functions" (as defined in 29
C.F.R. Section 1630.2(n)); current compensation and any change in compensation
during the past two (2) years; vacation accrued; and service credited for
purposes of vesting and eligibility to participate under Company's Plans to the
extent applicable under such Plans.
B. No employee or director of Company or Subsidiary is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such employee or
director and any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or will affect (i) the performance of his duties as an
employee or director of Company or Subsidiary or (ii) the ability of Company or
Subsidiary to conduct its business, including any Proprietary Rights Agreement
with Company or Subsidiary by any such employee or director. No key employee of
Company or Subsidiary intends to terminate his employment with Company or
Subsidiary.
C. SCHEDULE 3.20.2 contains a complete and accurate list of the following
information for each retired employee or director of Company or the Subsidiary,
or their dependents, receiving benefits or scheduled to receive benefits in the
future: name, listing of benefits to which they are entitled and funding
mechanism for such benefits.
D. SCHEDULE 3.20.3 contains a complete listing of all "covered employees"
and "qualified beneficiaries" (as each is defined in ERISA sec.sec. 607(2) and
(3) and/or Code ss. 4980B(f)(7)) who have experienced a qualifying event (within
the meaning of ERISA sec. 603 and/or Code sec. 4980B(f)(3)) with respect to a
Plan, and/or who are eligible for continuation coverage (within the meaning of
ERISA sec. 602 and/or Code sec. 4980B(f)(2)) and/or whose period for
continuation coverage has not expired. Included in this listing is the current
address for each such individual, the date on which they would have (absent
continuation coverage) lost coverage, whether the individual has elected
continuation coverage, and for individuals who have not yet elected continuation
coverage, the date on which the individual was notified of their right to
continuation coverage.
E. SCHEDULE 3.20.4 contains a complete listing of all employees who are on
a leave of absence from the Company or the Subsidiary (indicating also whether
or not such leave is pursuant to the Family and Medical Leave Act of 1993, as
amended) and denoting whether such employee is receiving or entitled to receive
health coverage under a Plan during such period of leave.
3.21. GOVERNMENT CONTRACTS. Except as set forth in SCHEDULE 3.21 of the
Company Disclosure Schedule, neither the Company nor the Subsidiary have any
business contracts
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with any independent or executive agency, division, subdivision, audit group or
procuring office of the federal government or of a state government, including
any prime contractor of the federal government and any higher level
subcontractor of a prime contractor of the federal government, and including any
employees or agents thereof, in each case acting in such capacity.
3.22. INTELLECTUAL PROPERTY RIGHTS OF THE COMPANY. For purposes of this
Section 3.22. only, the term "Company" shall be deemed to include the Company
and the Subsidiary.
3.22.1. SCHEDULE 3.22.1 (i) contains a complete list of each governmental
filing, whether federal, state, local, foreign or otherwise, related to patents,
copyrights, trademarks, service marks, trade names, maskworks, other Intangibles
and Software (such terms are defined in Section 3.22.2.M.) (collectively
"Registrations") of Company; (ii) identifies each pending Registration of
Company with respect to the Intangibles and Software (defined in Section
4.9.2.M.); (iii) identifies all of Company's applications for or Registrations
regarding the Intangibles and Software which have been withdrawn, abandoned, or
have lapsed or been denied and (iv) specifies any advice to Company with respect
to such Registration or protectability of the Intangibles and Software
summarizing such advice.
SCHEDULE 3.22.1 also identifies (i) each license agreement or other written
or oral agreement or permission ("License Agreement") and in which Company has
granted to any third party any right with respect to any of the Intangibles or
Software; (ii) each item of the Intangibles and Software used or possessed by
Company that any third party owns and the license, sublicense, agreement or
other permission in connection therewith (the "Third Party License Agreement"),
together with the term thereof, and all royalties or other amounts due thereon
and (iii) each agreement entered into by Company that provides for the sale of
license or access to any source code of the Software, including, without
limitation, any source code escrow agreement ("Source Code Agreement").
Company has supplied Parent with correct and complete copies of all License
Agreements, Third Party License Agreements and Source Code Agreements.
Company has complied with all License Agreements, Third Party License
Agreements and Source Code Agreements, and to the best of Company's knowledge,
all other parties to such agreements have complied with all provisions thereof;
and no default or event of default exists under any of the License Agreements,
Third Party License Agreements, or Source Code Agreements.
3.22.2.
A. SCHEDULE 3.22.2 is an accurate and complete list and description
(including a name, product description, the language in which it is written and
the type of hardware platform(s) on which it runs) of all of the following:
(i) All Software owned by Company, whether purchased from a third
party, developed by or on behalf of Company, currently under development or
otherwise ("Owned Software").
(ii) All Software, other than the Owned Software, that is either (x)
offered or provided by Company, directly or through Distributors, to
customers of Company or (y) used by Company to provide information or
services to customers of Company for a fee (collectively, "Customer
Software"; the Owned Software and the Customer Software are collectively
referred to as the "Company Software").
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(iii) All Software, other than Company Software, that is licensed or
marketed to or from third parties or otherwise used by Company for any
purpose whatsoever (collectively, "Other Software"), other than Other
Software that is generally available for license at retail or directly via
the Internet ("COTS").
B. To the extent not set forth in SCHEDULE 3.22.1, SCHEDULE 3.22.2
separately sets forth an accurate and complete list and description of each
copyright, trademark, trademark application or registration, service mark,
service mark application or registration, patent application or registration,
and name and logo included in the Intangibles (as defined below in this Section)
owned, marketed or licensed by Company to or from third parties, used or under
development by Company. SCHEDULE 3.22.2 indicates Company's ownership of such
items or the source of Company's right to use such items.
C. No Software other than the Owned Software, Customer Software and Other
Software is required to operate the Company's businesses as currently conducted
and as contemplated by existing Company Software product and service plans.
SCHEDULE 3.22.2 identifies all individuals who have contributed to the
development of the Owned Software.
D. Except as explained on SCHEDULE 3.22.2, Company owns and has good and
marketable title to the Owned Software and Intangibles attributable to the Owned
Software, and has the full right to use all of the Customer Software and Other
Software, and Intangibles attributable thereto, as used or required to operate
the Company's businesses as currently conducted and as contemplated in the
future in accordance with Company's written business plans, free and clear of
any liens, claims, charges or encumbrances which would affect the use of such
Software in connection with the operation of the Company's businesses as
currently conducted and as contemplated in the future in accordance with
Company's written business plans.
E. No rights of any third party not previously obtained are necessary to
market, license, sell, modify, update, and/or create derivative works for any
Software as to which Company takes any such action in its businesses as
currently conducted.
F. With respect to Software which is licensed by Company to third parties
or used in connection with the providing of services to third parties in the
Company's businesses:
(i) Company maintains machine-readable master-reproducible copies,
reasonably complete technical documentation and/or user manuals for the
most current releases or versions thereof and for all earlier releases or
versions thereof currently being supported by Company;
(ii) In each case, the machine-readable copy substantially conforms to
the corresponding source code listing;
(iii) Such Software is written in the language set forth on SCHEDULE
3.22.2, for use on the hardware set forth on SCHEDULE 3.22.2 with standard
operating systems;
(iv) Such Software can be maintained and modified by reasonably
competent programmers familiar with such language, hardware and operating
systems; and
(v) In each case the Software operates in accordance with the user
manual thereof without operating defects of any material nature.
G. None of the Software or Intangibles listed on SCHEDULE 3.22.1 or
SCHEDULE 3.22.2, or their respective past or current uses by or through Company
has violated or infringed
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upon, or is violating or infringing upon, any Software, patent, copyright, trade
secret or other Intangible of any person. Company has adequately maintained all
trade secrets and copyrights with respect to the Software. Company has performed
all obligations imposed upon it with regard to the Customer Software and Other
Software which are required to be performed by it on or prior to August 31,
2000, and neither Company nor, to the knowledge of Company, any other party, is
in breach of or default thereunder in any respect, nor to Company's knowledge,
is there any event which with notice or lapse of time or both would constitute a
default thereunder.
H. To the knowledge of Company, no person is violating or infringing upon,
or has violated or infringed upon at any time, any of Company's proprietary
rights to any of the Software or Intangibles listed on either SCHEDULE 3.22.1 or
SCHEDULE 3.22.2.
I. None of the Software or Intangibles listed on SCHEDULE 3.22.1 and
SCHEDULE 3.22.2 are owned by or registered in the name of any of Company's
shareholders, any current or former owner or shareholder, partner, director,
executive, officer, employee, salesperson, agent, customer, contractor of
Company or its representative nor does any such person have any interest therein
or right thereto, including, but not limited to, the right to royalty payments.
Except as listed on SCHEDULE 3.22.2, Company has granted no third party any
exclusive rights related to any Owned Software.
J. No litigation is pending and no claim has been made against Company or,
to the knowledge of Company, is threatened, which contests the right of Company
to sell or license to any person or entity or use any of the Owned Software,
Customer Software or Other Software. No former employer of any employee or
consultant of Company has made a claim against Company or, to the knowledge of
Company, against any other person, that Company or such employee or consultant
is misappropriating or violating the Intangibles of such former employer.
K. Company is not a party to or bound by and, upon the consummation of the
transactions contemplated by this Agreement, will not be a party to or bound by
(as a result of any acts or agreements of Company), any license or other
agreement requiring the payment by Company or its assigns of any royalty or
license payment, excluding such agreements relating to the Customer Software to
the extent such royalty or license payment is expressly set forth on SCHEDULE
3.22.2.
L. [INTENTIONALLY LEFT BLANK].
M. For purposes of this Agreement, "Software" means any computer program,
operating system, applications system, microcode, firmware or software of any
nature, whether operational, under development or inactive, including all object
code, source code, technical manuals, compilation procedures, execution
procedures, flow charts, programmers notes, user manuals and other documentation
thereof, whether in machine-readable form, programming language or any other
language or symbols and whether stored, encoded, recorded or written on disk,
tape, film, memory device, paper or other media of any nature.
"Intangible" means:
(i) Patents, patent applications, patent disclosures, all re-issues,
divisions, continuations, renewals, extensions and continuation-in-parts
thereof and improvements thereto;
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(ii) Trademarks, service marks, trade dress, logos, trade names, and
corporate names and registrations and applications for registration thereof
and all goodwill associated therewith;
(iii) Copyrights and registrations and applications for registration
thereof;
(iv) Maskworks and registrations and applications for registration
thereof;
(v) All right, title and interest in all computer software, data and
documentation (including, without limitation, modifications, enhancements,
revisions or versions of or to any of the foregoing and prior releases of
any of the foregoing applicable to any operating environment);
(vi) Trade secrets and confidential business information (including,
without limitation, ideas, formulas, compositions, inventions, whether
patentable or unpatentable and whether or not reduced to practice,
know-how, manufacturing and production processes and techniques, research
and development information, drawings, flow charts, processes ideas,
specifications, designs, plans, proposals, technical data, copyrightable
works, financial, marketing, and business data, pricing and cost
information, business and marketing plans, and customer and supplier lists
and information);
(vii) Other proprietary rights;
(viii) All rights necessary to prevent claims of invasion of privacy,
right of publicity, defamation, infringement of moral rights, or any other
causes of action arising out of the use, adaptation, modification,
reproduction, distribution, sale, or exhibition of the Software;
(ix) All income, royalties, damages and payments due at Closing or
thereafter with respect to the Owned Software, Customer Software, Other
Software, or other Intangibles and all other rights thereunder including,
without limitation, damages and payments for past, present or future
infringements or misappropriations thereof, the right to sue and recover
for past, present or future infringements or misappropriations thereof;
(x) All rights to use all of the foregoing forever; and
(xi) All other rights in, to, and under the foregoing in all
countries.
"Distributor" means Company and any other person or entity that has been
authorized by Company to sell, license or offer to sell or license any Company
Software, other than an employee of Company. Distributors may include, without
limitation, value added resellers, original equipment manufacturers, dealers,
sales agents, and distributors.
3.22.3. MILLENNIUM COMPLIANCE.
A. Except as noted in SCHEDULE 3.22.3, the Owned Software and to the best
knowledge of Company, the Customer Software and Other Software, are "Millennium
Compliant." For the purposes of this Agreement "Millennium Compliant" means:
(i) The functions, calculations, and other computing processes of the
Owned Software, Other Software and Customer Software (collectively,
"Processes") perform in an accurate manner regardless of the date in time
on which the Processes are actually performed and regardless of the date
input to the Owned Software, Other
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Software, and Customer Software, whether before, on, or after January 1,
2000, and whether or not the dates are affected by leap years;
(ii) The Owned Software, Other Software, and Customer Software accept,
store, sort, extract, sequence, and otherwise manipulate date inputs and
date values, and return and display date values, in an accurate manner
regardless of the dates used, whether before, on, or after January 1, 2000;
(iii) The Owned Software, Other Software, and Customer Software will
function without interruptions caused by the date in time on which the
Processes are actually performed or by the date input to the Owned
Software, Other Software, and Customer Software, whether before, on, or
after January 1, 2000;
(iv) The Owned Software, Other Software, and Customer Software accept
and respond to two (2) digit year and four (4) digit year date input in a
manner that resolves any ambiguities as to the century in a defined,
predetermined, and accurate manner;
(v) The Owned Software, Other Software, and Customer Software display,
print, and provide electronic output of date information in ways that are
unambiguous as to the determination of the century; and
(vi) The Owned Software, Customer Software, and Other Software have
been tested by Company to determine whether the Owned Software, Customer
Software, and Other Software are Millennium Compliant. Company shall
deliver the test plans and results of such tests upon written request from
Parent. Company shall notify Parent immediately of the results of any tests
or any claim or other information that indicates the Owned Software,
Customer Software, and Other Software are not Millennium Compliant.
B. Except as set forth in SCHEDULE 3.22.3(B) of the Company Disclosure
Schedule and except as described in the next following sentence, the Company has
inquired as to the Millennium Compliance of the Customer Software and any
computer hardware and devices owned or leased by the Company that operates any
of the Company Software ("Company Hardware") with the vendor thereof, has
obtained assurances that such Customer Software and Company Hardware is
Millennium Compliant, and has tested such Customer Software and Company Hardware
in conjunction with the Owned Software to determine whether the operation of the
Owned Software would result in dated-related failures or errors in such Customer
Software or Company Hardware. In the event that the Company obtains information
that such Customer Software or Company Hardware is not Millennium Compliant or
such Customer Software or Company Hardware fails the testing as described above,
the Company has established and has timely implemented written plans to migrate
the Company and all Company customers off of such Customer Software or Company
Hardware before the Company anticipates that errors or failures in such Customer
Software or Company Hardware will occur.
C. Except as set forth in SCHEDULE 3.22.3(C) of the Company Disclosure
Schedule and except as described in the next following sentence, the Company has
inquired as to the Millennium Compliance of the Other Software with the vendor
thereof and has obtained assurances that such Other Software is Millennium
Compliant. In the event that the Company obtains information that such Other
Software is not Millennium Compliant, the Company has established and has timely
implemented written plans to migrate the
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Company off of such Other Software before the Company anticipates that errors or
failures in such Other Software will occur.
D. Each customer of Company identified on SCHEDULE 3.22.3(D) has received a
copy of the correspondence attached to SCHEDULE 3.21.3(D).
E. SCHEDULE 3.22.3(E) of the Company Disclosure Schedule sets forth true
and correct information called for therein with respect to each customer of
Company.
3.22.4. Without limiting any of the foregoing, to the best knowledge of
Company, none of Company's current or former officers, executives, directors,
partners, shareholders, employees, salespersons, customers, or independent
contractors have disclosed to (without proper obligation of confidentiality) or
otherwise used or utilized on behalf of any person other than Company, any trade
secrets or proprietary information, including, without limitation, the source
codes for Company Software.
All License Agreements, Third Party License Agreements, software
development agreements, and any other written agreement between Company and any
third party in which trade secrets or confidential information of Company,
Company's customers, agents, or suppliers are disclosed binds the recipient
thereof to take reasonable steps to protect the proprietary rights of Company
and its customers, agents, and suppliers in such trade secrets and confidential
information.
SCHEDULE 3.22.4 identifies all individuals who have materially contributed
to the development of the Owned Software.
3.22.5. COMPANY SOFTWARE:
A. Performs in accordance with all published specifications for such
Software;
B. Complies with all other published documentation, descriptions and
literature with respect to such Software; and
C. Complies with all representations, warranties and other requirements
specified in all of Company's License Agreements.
3.22.6. Except as set forth on SCHEDULE 3.22.6, none of Company's
shareholders have an ownership right or other interest in any Software or
Intangibles related to the Acquired Business, and no claims have been made or,
to the knowledge of the Company, is threatened, that the Company Software
substantially fails to perform as set forth in Section 3.22.5.
3.22.7. All Company's contracts with customers (collectively "Customer
Contracts"), whether completed or outstanding, were or are evidenced by written
agreements containing provisions reasonably equivalent to those contained in
SCHEDULE 3.22.7 hereto, with only such changes as would not affect the rights of
Company and would not impose on Company any additional obligations.
No Customer Contract provided for the transfer to the customer therein of
any Intangibles relating to Company Software as to which Company thereafter
shall have no further rights. No current Customer Contract provides that the
customer therein shall be entitled to sublicense or otherwise transfer to a
third party any of the Intangibles relating to Company Software unless such
third party agrees to be bound by the confidentiality provisions thereof and
agrees to pay Company royalties and other amounts comparable to those under such
Customer Contract.
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Except as set forth on SCHEDULE 3.22.7, each past or present customer of
Company and each past or present customer of Company to whom Company disclosed
any of the Intangibles relating to Company Software is bound by a
confidentiality provision which requires such past or present customer to take
reasonable steps to protect the rights of Company in the Intangibles relating to
Company Software.
3.23. CERTAIN PAYMENTS. To the Knowledge of the Company, neither the
Company or any Subsidiary nor any director, officer, agent, or employee of the
Company or any Subsidiary, nor any other Person associated with or acting for or
on behalf of the Company or any Subsidiary, has directly or indirectly:
A. On behalf of the Company or any Subsidiary or for the Company's or any
Subsidiary's benefit, made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services in violation of any
Legal Requirement.
B. Established or maintained any fund or asset on behalf of the Company or
any Subsidiary that has not been recorded in the books and records of the
Company or any Subsidiary.
3.24. RELATIONSHIPS WITH RELATED PERSONS. Except as set forth in SCHEDULE
3.24 of the Company Disclosure Schedule, no Related Person of the Company or the
Subsidiary has, or since September 30, 1998, has had, any interest in any
property (whether real, personal, or mixed and whether tangible or intangible),
used in the Company's or the Subsidiary's businesses.
Except as set forth in SCHEDULE 3.24 of the Company Disclosure Schedule, to
the Knowledge of the Company, no Related Person of the Company or the Subsidiary
owns, or since September 30, 1998, has owned (of record or as a beneficial
owner) an equity interest or any other financial or profit interest in, a Person
that has a material financial interest in any transaction with the Company or
the Subsidiary.
Except as set forth in SCHEDULE 3.24 of the Company Disclosure Schedule, no
Related Person of the Company is a party to any Contract or commitment with the
Company.
3.25. BROKERS OR FINDERS. Except as set forth on SCHEDULE 3.25, neither
the Company, the Subsidiary nor their agents have incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
3.26. LABOR RELATIONS; COMPLIANCE. Neither the Company nor the Subsidiary
have been nor are a party to any collective bargaining or other labor Contract.
There has not been, there is not presently pending or existing, and there is not
Threatened:
A. Any strike, slowdown, picketing, work stoppage or employee grievance
process;
B. Any Proceeding against or affecting Company or Subsidiary relating to
the alleged violation of any Legal Requirement pertaining to labor relations or
employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting any of Company or their
premises; or
C. Any application for certification of a collective bargaining agent.
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No event has occurred or circumstance exists that could provide the basis
for any work stoppage or other labor dispute. There is no lockout of any
employees by Company or Subsidiary, and no such action is contemplated by
Company or Subsidiary. Company and Subsidiary have complied in all respects with
all Legal Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and health
and plant closing. The Company and Subsidiary have only employed individuals
authorized to work in the United States.
Company and Subsidiary are not liable for the payment of any compensation,
Damages, taxes, fines, penalties, or other amounts, however, designated, for
failure to comply with any of the foregoing Legal Requirements.
3.27. DISCLOSURE DOCUMENTS. None of the information supplied or to be
supplied by the Company for inclusion in or incorporation by reference in (i)
the Proxy Statement (as defined in Section 6.1.) and (ii) the registration
statement (as defined in Section 4.3.) including the Proxy Statement included
therein, will, in the case of the Proxy Statement, at the time of mailing of the
Proxy Statement to stockholders of the Company, contain any untrue statement of
a material fact or will omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading or will, in the case of
the Registration Statement, at the time the Registration Statement 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 to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The Proxy Statement will comply as
to form in all material respects with the provisions of the Exchange Act, the
rules and regulations thereunder, except that no representation is made by the
Company with respect to information supplied by Parent or Merger Sub for
inclusion therein.
3.28. DISCLOSURE. No representation or warranty made by the Company in
this Agreement or any Exhibit hereto or in the Company Disclosure Schedule, when
taken together, contains or contained (as of the date made) any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements or facts contained herein or therein not misleading in light of
the circumstances under which they were made.
3.29. VOTE REQUIRED. The affirmative vote of a majority of the votes that
holders of the outstanding shares of Company Common Stock are entitled to vote
with respect to the Merger is the only vote of the holders of any class or
series of Company's capital stock necessary to approve this Agreement and the
transactions contemplated hereby.
4. REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF MERGER SUB AND PARENT.
As of September 25, 2000 and as of the Closing Date, Merger Sub and Parent,
jointly and severally, hereby represent and warrant to the Company, subject to
such exceptions as are specifically disclosed in writing in the disclosure
letter and referenced by a specific representation supplied by Parent to Company
dated as of September 25, 2000 and certified by a duly authorized officer of
Parent (the "Parent Disclosure Schedule"), as follows:
4.1. ORGANIZATION. Each of Merger Sub and Parent is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and Merger Sub and Parent each has all
requisite corporate power and authority to own,
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lease and operate its assets and to carry on its business as now being
conducted. Each of Merger Sub and Parent is duly qualified to transact business,
and is in good standing, as a foreign corporation in each jurisdiction where the
character of its activities requires such qualification, except where the
failure to so qualify would not have a material adverse effect on the assets,
liabilities, results of operations, financial condition, business or prospects
of Merger Sub, Parent or their respective subsidiaries taken as a whole.
4.2. AUTHORIZATION. Each of Merger Sub and Parent has full corporate power
and authority to execute and deliver this Agreement and to perform its
respective obligations under this Agreement and to consummate the Merger and the
other transactions contemplated hereby (the "Parent/Merger Sub Ancillary
Agreements"). The execution and delivery of this Agreement by Merger Sub and
Parent and the performance by Merger Sub and Parent of their respective
obligations hereunder and the consummation of the Merger, the Parent/Merger Sub
Ancillary Agreements and the other transactions provided for herein have been
duly and validly authorized by all necessary corporate action on the part of
each of Merger Sub and Parent. This Agreement and the Parent/Merger Sub
Ancillary Agreements have been duly executed and delivered by each of Merger Sub
and Parent and each constitutes the legal, valid and binding agreement of Merger
Sub and Parent, enforceable against each of Merger Sub and Parent in accordance
with its terms, subject to applicable bankruptcy, insolvency and other similar
laws affecting the enforceability of creditors' rights generally, general
equitable principles and the discretion of courts in granting equitable
remedies. Each other agreement to be executed by Merger Sub and Parent in
connection with this Agreement will be duly executed and delivered by Merger Sub
and Parent in accordance with its terms, subject to applicable bankruptcy,
insolvency and other similar laws affecting the enforceability of creditors'
rights generally, general equitable principles and the discretion of courts in
granting equitable remedies.
4.3. ABSENCE OF RESTRICTIONS AND CONFLICTS. The execution, delivery and
performance of this Agreement, the consummation of the Merger and the other
transactions contemplated by this Agreement, and the fulfillment of and
compliance with the terms and conditions of this Agreement do not and will not,
with the passing of time or the giving of notice or both, violate or conflict
with, constitute a breach of or default under, result in the loss of any
material benefit under, or permit the acceleration of any obligation under, (i)
any term or provision of the Organizational Documents of Merger Sub or Parent;
(ii) any Contract material to the business and operations of Merger Sub or
Parent; (iii) any judgment, decree, injunction or order of any court or
governmental authority or agency to which Merger Sub or Parent is a party or by
which Merger Sub or Parent or any of their respective properties is bound or
(iv) any statute, law, regulation or rule applicable to Merger Sub or Parent, so
as to have, in the case of subsections (ii) through (iv) above, a material
adverse effect on the assets, liabilities, results of operations, financial
condition, business or prospects of Merger Sub or Parent and their respective
subsidiaries taken as a whole. Except for (i) filing of the Articles of Merger;
(ii) the filing of a Form S-4 Registration Statement (the "Registration
Statement") with the Securities and Exchange Commission ("SEC") in accordance
with the Securities Act; (iii) the filing of the Proxy Statement (as defined in
Section 6.1.) with the SEC in accordance with the Exchange Act and (iv) the
filing of such consents, approvals, orders, authorizations, registrations,
declarations and filing as may be required under applicable state securities
laws, no Consent, approval, order or authorization of, or registration,
declaration or filing with, any government agency or public or regulatory unit,
agency, body or authority with respect to Merger Sub or Parent is required in
connection with the execution, delivery or performance of this Agreement by
Merger Sub or Parent or the consummation of the
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Contemplated Transactions contemplated by this Agreement by Merger Sub or
Parent, the failure to obtain which would have a material adverse effect upon
the assets, liabilities, results of operations, financial condition, business or
prospects of Merger Sub or Parent and its subsidiaries taken as a whole.
4.4. CAPITALIZATION OF PARENT AND MERGER SUB. The authorized capital stock
of Parent consists of two hundred million (200,000,000) shares of common stock,
$.001 par value per share of which thirty million three hundred fifty-two
thousand seven hundred sixty-five (30,352,765) shares were issued and
outstanding as of December 10, 1999 and two million (2,000,000) shares of
preferred stock, $.001 par value per share, of which zero (0) shares are issued
and outstanding. The authorized capital stock of Merger Sub consists of one
thousand (1,000) shares of common stock, par value $.01 per share, all of which,
as of the date hereof, are issued and outstanding. All of the outstanding shares
of Parent's and Merger Sub's respective capital stock are duly authorized,
validly issued, fully paid and nonassessable. The shares of Parent Common Stock
to be issued pursuant to this Agreement have been duly authorized and, when
issued, will be validly issued, fully paid and nonassessable.
4.5. SEC FILINGS; FINANCIAL STATEMENTS.
A. Parent has made available to Company a correct and complete copy of each
report, schedule, registration statement and definitive proxy statement filed by
Parent with the SEC on or after January 1, 1999 (the "Parent SEC Reports"),
which are all the forms, reports and documents required to be filed by Parent
with the SEC since January 1, 1999. The Parent SEC Reports (i) were prepared in
accordance with the requirements of the Securities Act or the Exchange Act, as
the case may be and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of Parent's subsidiaries is required to file any reports or
other documents with the SEC.
B. Each set of consolidated financial statements (including, in each case,
any related notes thereto) contained in the Parent SEC Reports was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, do not contain footnotes as permitted by Form 10-Q of the
Exchange Act) and each fairly represents the consolidated financial position of
Parent and its subsidiaries at the respective dates thereof and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal
adjustments which were not or are not expected to be material in amount.
C. Parent has previously furnished to Company a complete and correct copy
of any amendments or modifications, which have not yet been filed with the SEC,
but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Parent with the SEC pursuant to
the Securities Act or the Exchange Act.
4.6. LITIGATION. Except as may be disclosed in the Parent SEC Reports,
there are no suits, arbitrations, actions, claims, complaints, grievances,
investigations or proceedings pending or, to the Knowledge of Parent or Merger
Sub, Threatened against Parent or Merger Sub that, if resolved against Parent or
Merger Sub could be reasonably expected to
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have a material adverse effect on Parent or Merger Sub on their ability to
consummate the Merger and the other transactions contemplated hereby.
4.7. REGISTRATION STATEMENT; PROXY STATEMENT. None of the information
supplied or to be supplied by Parent for inclusion or incorporation by reference
in (i) the S-4 will, at the time the S-4 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 light of the circumstances under which they are made, not
misleading and (ii) the Proxy Statement will, at the dates mailed to the
shareholders of Company at the time of the Company Shareholders' meeting (the
"Meeting") and as of the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The S-4 will comply as
to form in all material respects with the provisions of the Securities Act and
the rules and regulations promulgated by the SEC thereunder. Notwithstanding the
foregoing, Parent makes no representation or warranty with respect to any
information supplied by the Company which is contained in any of the foregoing
documents.
4.8. CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Merger Sub or Parent that challenges, or may have the effect
of preventing, delaying, making illegal, or otherwise interfering with, any of
the Contemplated Transactions. To the knowledge of Merger Sub or Parent, no such
Proceeding has been Threatened.
4.9. BROKERS OR FINDERS. Except as set forth on SCHEDULE 4.9 of the Parent
Disclosure Schedule, neither Merger Sub or Parent nor any of their respective
officers or agents have incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
5. CERTAIN AGREEMENTS OF THE PARTIES.
5.1. NO SOLICITATION.
A. From and after the date of this Agreement until the Effective Time or
termination of this Agreement pursuant to Section 8., Company and Subsidiary
will not, nor will they authorize or permit any of their respective officers,
directors, affiliates or employees or any investment banker, attorney or other
advisor or representative retained by any of them to, directly or indirectly,
(i) solicit, initiate, encourage or induce the making, submission or
announcement of any Acquisition Proposal (as defined below); (ii) participate in
any discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes or may reasonably be
expected to lead to, any Acquisition Proposal; (iii) engage in discussions 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, agreement or commitment contemplating or
otherwise relating to any Acquisition Transaction (as defined below); provided,
however, that nothing contained in this Section 5.1. shall prohibit the Board of
Directors of Company (1) from complying with Rule 14d-9 or 14e-2(a) promulgated
under the Exchange Act with regard to a tender or exchange offer not made in
violation of this Section 5.1. or (2) during the period between mailing of the
Proxy Statement to
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Company's shareholders and receipt of the approval by the shareholders of
Company of this Agreement and the Merger from, in response to an unsolicited,
bona fide written Acquisition Proposal that Company's Board of Directors
reasonably concludes based upon the advice of its independent financial advisors
constitutes a Superior Proposal (as defined below), engaging in discussions with
and furnishing information to the party making such Acquisition Proposal to the
extent (a) the Board of Directors of the Company determines in good faith based
on the advice of its outside legal counsel that its fiduciary obligations under
applicable law require it to do so; (b) (x) at least five (5) days prior to
furnishing any such nonpublic information to, or entering into discussions or
negotiations with, such party, Company gives Parent written notice of Company's
intention to furnish nonpublic information to, or enter into discussions or
negotiations with, such party and (y) Company receives from such party an
executed confidentiality agreement containing customary limitations on the use
and disclosure of all nonpublic written and oral information furnished to such
party by or on behalf of Company and (c) contemporaneously with furnishing any
such nonpublic information to such party, Company furnishes such nonpublic
information to Parent (to the extent such nonpublic information has not been
previously furnished by the Company to Parent). Company and its subsidiaries
will immediately case any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in this Section 5.1. by any officer,
director or employee of Company or any of its subsidiaries or any investment
banker, attorney or other advisor or representative of Company or any of its
subsidiaries shall be deemed to be a breach of this Section 5.1. by Company.
For purposes of this Agreement, (i) "Acquisition Proposal" shall mean any
offer or proposal (other than an offer or proposal by Parent) relating to any
Acquisition Transaction. For the purposes of this Agreement; (ii) "Acquisition
Transaction" shall mean any transaction or series of related transactions other
than the transactions contemplated by this Agreement involving: (1) any
acquisition or purchase from the Company by any person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of more than a five percent (5%) interest in the total outstanding
voting securities of the Company or any of its subsidiaries or any tender offer
or exchange offer that if consummated would result in any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning five percent (5%) or more of the total
outstanding voting securities of the Company or any of its subsidiaries or any
merger, consolidation, business combination or similar transaction involving the
Company pursuant to which the shareholders of the Company immediately preceding
such transaction hold less than ninety-five percent (95%) of the equity
interests in the surviving or resulting entity of such transaction; (2) any
sale, lease (other than in the ordinary course of business), exchange, transfer,
license (other than in the ordinary course of business), acquisition or
disposition of more than five percent (5%) of the assets of the Company or (3)
any liquidation, dissolution, recapitalization or other significant corporate
reorganization of the Company and (iii) "Superior Proposal" shall mean an
Acquisition Proposal with respect to which (x) Company's Board of Directors
shall have concluded in good faith, after considering applicable state law; on
the basis of the written opinion of independent outside counsel that such action
is necessary to prevent Company's Board of directors from violating its
fiduciary duties to Company's shareholders under applicable law; (y) if any cash
consideration is involved, shall not be subject to any financing contingency,
and with respect to which Company's Board of Directors shall have determined
(based upon the written opinion of Company's independent financial advisors) in
the exercise of its
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fiduciary duties to Company's shareholders that the acquiring party is capable
of consummating the proposed Acquisition Transaction on the terms proposed and
(z) Company's Board of Directors shall have determined in the exercise of its
fiduciary duties to Company's shareholders that the proposed Acquisition
Transaction provides greater value to the shareholders of Company than the
Merger (based upon the written opinion of Company's independent financial
advisors that such Acquisition Transaction is superior to the Merger from a
financial point of view).
B. In addition to the obligations of Company set forth in paragraph A. of
this Section 5.1., Company as promptly as practicable, and in any event within
twenty-four (24) hours, shall advise Parent orally and in writing of any request
for information which Company reasonably believes would lead to an Acquisition
Proposal or of any Acquisition Proposal, or any inquiry with respect to or which
Company reasonably should believe would lead to any Acquisition Proposal, the
material terms and conditions of such request, Acquisition Proposal or inquiry,
and the identity of the person or group making any such request, Acquisition
Proposal or inquiry. Company will keep Parent informed in all material respects
of the status and details (including material amendments or proposed amendments)
or any such request, Acquisition Proposal or inquiry. In addition to the
foregoing, Company shall (i) provide Parent with at least forty-eight (48) hours
prior notice (or such lesser prior notice as provided to the members of
Company's Board of Directors, but in no event less than eight (8) hours) of any
meeting of Company's Board of Directors at which Company's Board of Directors is
reasonably expected to consider a Superior Offer and (ii) provide Parent with at
least five (5) business days prior written notice of a meeting of Company's
Board of Directors at which Company's Board of Directors is reasonably expected
to recommend a Superior Offer to its shareholders and together with such notice
a copy of the definitive documentation relating to such Superior Offer.
5.2. PUBLIC DISCLOSURE. Parent and Company will consult with each other
and agree before issuing any press release or otherwise making any public
statement with respect to the Merger, this Agreement or an Acquisition Proposal
and will not issue any such press release or make any such public statement
prior to such agreement, except as may be required by law or any listing
agreement with a national securities exchange, in which case reasonable efforts
to consult with the other party will be made prior to any such release or public
statement. The parties have agreed to the text of the joint press release
announcing the signing of this Agreement.
5.3. REASONABLE EFFORTS; NOTIFICATION.
A. Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including using reasonable efforts to accomplish the following: (i)
the taking of all reasonable acts necessary to cause the conditions precedent
set forth in Section 7. to be satisfied; (ii) the obtaining of all necessary
actions or nonactions, waivers, consents, approvals, orders and authorizations
from Governmental Bodies and the making of all necessary registrations,
declarations and filings (including registrations, declarations and filings with
Governmental Bodies, if any) and the taking of all reasonable steps as may be
necessary to avoid any suit, claim, action, investigation or proceeding by any
Governmental Body; (iii) the obtaining of all necessary consents, approvals or
waivers
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from third parties; (iv) the defending of any suits, claims, actions,
investigations or proceedings, whether judicial or administrative, challenging
this Agreement or the consummation of the transactions contemplated hereby,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Body vacated or reversed and (v) the execution or
delivery of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement. In
connection with and without limiting the foregoing, Company and its Board of
Directors shall, if any state takeover statute or similar statute or regulation
is or becomes applicable to the Merger, this Agreement or any of the
transactions contemplated by this Agreement, use all reasonable efforts to
ensure that the Merger and the other transactions contemplated by this Agreement
may be consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Merger, this Agreement and the transactions contemplated hereby.
Notwithstanding anything herein to the contrary, nothing in this Agreement shall
be deemed to require Parent or Company or any subsidiary or affiliate thereof to
agree to any divestiture by itself or any of its affiliates of shares of capital
stock or of any business, assets or property, or the imposition of any material
limitation on the ability of any of them to conduct their business or to own or
exercise control of such assets, properties and stock.
B. Company shall give prompt notice to Parent of any representation or
warranty made by it contained in this Agreement becoming untrue or inaccurate,
or any failure of Company to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement, in each case, such that the conditions set forth in Section
7.2.A. or 7.2.B. would not be satisfied; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
C. Parent shall give prompt notice to Company of any representation or
warranty made by it or Merger Sub contained in this Agreement becoming untrue or
inaccurate, or any failure of Parent or Merger Sub to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section 7.3.A. or 7.3.B. would not be satisfied; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
5.4. THIRD PARTY CONSENTS. As soon as practicable following the date
hereof, Parent and Company will each use its commercially reasonable efforts to
obtain any consents, waivers and approvals under any of its or its subsidiaries'
respective agreements, contracts, licenses or leases required to be obtained in
connection with the consummation of the transactions contemplated hereby.
5.5. INDEMNIFICATION. From and after the Effective Time, Parent will cause
the Surviving Corporation to fulfill and honor in all respects the obligations
of Company pursuant to any indemnification agreements between Company and its
directors and officers in effect immediately prior to the Effective Time and any
indemnification provisions under the Company Organizational Documents as in
effect on the date hereof. The Certificate of Incorporation and Bylaws of the
Surviving Corporation will contain provisions with respect to exculpation and
indemnification that are at least as favorable to the indemnified parties
thereunder (the "Indemnified Parties") as those contained in the
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Company Organizational Documents as in effect on the date hereof, which
provisions will not be amended, repealed or otherwise modified for a period of
four (4) years from the Effective Time in any manner that would adversely affect
the rights thereunder of the Indemnified Parties, unless such modification is
required by law.
5.6. NASDAQ LISTING. Parent agrees to authorize for listing on Nasdaq the
shares of Parent Common Stock issuable and those required to be reserved for
issuance, in connection with the Merger, upon official notice of issuance.
5.7. REIMBURSEMENT OF EMPLOYEE COSTS AND EXPENSES. Beginning October 1,
2000 and continuing until the earlier of (i) the termination of this Agreement
pursuant to Section 8 below or (ii) the Closing Date, the Parent will reimburse
the Subsidiary on a monthly basis for all costs and expenses, including salary,
benefits, commissions and travel or related expenses associated with the
following employees of Subsidiary who directly devote all or a portion of their
time and effort to the sales, training or support of the Parent's products and
services: (i) Karen Barbera; (ii) Michelle Peabody-Meyers; (iii) Fran Melda;
(iv) Art Michele; (v) Dan Sands and (vi) Jeff Weiss. The Subsidiary will provide
documentation of such efforts and expenses to the Parent and the Parent will pay
the stated amount within twenty (20) days of receipt of such documentation. If
the Parent disagrees with the amount stated by the Subsidiary, the Parent will
nevertheless pay such amount, subject to recoupment if the Parent's review of
the Subsidiary's books and records indicates that any portion of the amount was
not due. Any dispute on whether any recoupment is due or as to the amount of the
recoupment, will be negotiated between the principals of the Subsidiary and the
Parent and, if not resolved to the parties' satisfaction, will be conclusively
resolved by the independent certified public accountant for the Parent after a
review of records which the Subsidiary may supply to such independent public
accountant.
5.8. PROVISION OF LOAN BY PARENT TO COMPANY. Pursuant to that certain
Third Amendment to Loan Documents dated as of October 10, 2000 by and among
Company, Subsidiary and Parent and related documents (the "Loan Documents"),
Parent has agreed to advance an additional Two Hundred Fifty Thousand and No/100
Dollars ($250,000.00) to Company and Subsidiary to be used for general working
capital purposes, which advance shall made on or before October 20, 2000 and
upon such advance, the total aggregate principal loan balance outstanding will
be ($1,550,000.00).
5.9. PRACTICEWORKS SPIN-OFF. Unless this Agreement is terminated prior to
the Effective Time pursuant to Section 8 below, the parties shall cause the
proposed Merger to be consummated prior to the PracticeWorks Spin-off.
6. ADDITIONAL COVENANTS OF THE PARTIES.
The parties hereto hereby agree as follows with respect to the period from
and after the date of this Agreement.
6.1. MUTUAL COVENANTS.
A. [RESERVED].
B. Tax-Deferred Treatment. Each of the parties shall use its reasonable
efforts to cause the Merger to constitute a tax-deferred "reorganization" under
Section 368(a) of the Code.
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C. Confidentiality; Access to Information.
(i) Prior to the Effective Time and after any termination of this
Agreement each party hereto will hold, and will use its best efforts to
cause its officers, directors, employees, accountants, counsel,
consultants, advisors, affiliates (as such term is used in Rule 12b-2 under
the Exchange Act) and representatives (collectively, the
"Representatives"), to hold, in confidence all confidential documents and
information concerning the other parties hereto and the Subsidiary
furnished to such party in connection with the transactions contemplated by
this Agreement, including, without limitation, all analyses, compilations,
studies or records prepared by the party receiving the information or by
such party's Representatives, that contain or otherwise reflect or are
generated from such information (collectively, the "Confidential
Material"). The party furnishing any Confidential Material is herein
referred to as the "Delivering Company" and the party receiving any
Confidential Material is herein referred to as the "Receiving Company."
(ii) The Receiving Company agrees that the Confidential Material will
not be used other than for the purpose of the transaction contemplated by
this Agreement, and that such information will be kept confidential by the
Receiving Company and its Representatives; provided, however, that (1) any
of such information may be disclosed to the Representatives who need to
know such information for the purpose described above (it being understood
that (a) each such Representative shall be informed by the Receiving
Company of the confidential nature of such information, shall be directed
by the Receiving Company to treat such information confidentially and not
to use it other than for the purpose described above and shall agree to be
bound by the terms of this Section 6.1.C. and (b) in any event, the
Receiving Company shall be responsible for any breach of this Agreement by
any of its Representatives) and (2) any other disclosure of such
information may be made if the Delivering Company has, in advance,
consented to such disclosure in writing. The Receiving Company will make
all reasonable, necessary and appropriate efforts to safeguard the
Confidential Material from disclosure to anyone other than as permitted
hereby.
(iii) Notwithstanding the foregoing, if the Receiving Company or any
of its Representatives is requested or required (by oral question or
request for information or documents in legal proceedings, interrogatories,
subpoena, civil investigative demand or similar process) to disclose any
Confidential Material, the Receiving Company will promptly notify the
Delivering Company of such request or requirement so that the Delivering
Company may seek an appropriate protective order and/or waive the Receiving
Company's compliance with the provisions or this Agreement. If, in the
absence of a protective order or the receipt of a waiver hereunder, the
Receiving Company or any of its Representatives is nonetheless, in the
reasonable written opinion of the Receiving Company's counsel, compelled to
disclose Confidential Material to any tribunal, the Receiving Company or
such Representative, after notice to the Delivering Company, may disclose
such information to such tribunal. The Receiving Party shall exercise
reasonable efforts to obtain reliable assurance that confidential treatment
will be accorded the Confidential Material so disclosed. The Receiving
Company or such Representative shall not be liable for the disclosure of
Confidential Material hereunder to a tribunal compelling such disclosure
unless such disclosure to such tribunal was caused by or resulted from a
previous disclosure by the Receiving Company or any of its Representatives
not permitted by this Agreement.
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(iv) This Section 6.1.C. shall be inoperative as to particular
portions of the Confidential Material if such information (1) is or becomes
generally available to the public other than as a result of a disclosure by
the Receiving Company or its Representatives; (2) was available to the
Receiving Company on a non-confidential basis prior to its disclosure to
the Receiving Company by the Delivering Company or the Delivering Company's
Representatives or (3) becomes available to the Receiving Company on a
non-confidential basis from a source other than the Delivering Company or
the Delivering Company's Representatives, provided that such source is not
known by the Receiving Company, after reasonable inquiry, to be bound by a
confidentiality agreement with the Delivering Company or the Delivering
Company's Representatives and is not otherwise prohibited from transmitting
the information to the Receiving Company by a contractual, legal or
fiduciary obligation. The fact that information included in the
Confidential Material is or becomes otherwise available to the Receiving
Company or its Representatives under clauses (1) through (2) above shall
not relieve the Receiving Company or its Representatives of the
prohibitions of the confidentiality provisions of this Section 6.1. with
respect to the balance of the Confidential Material.
(v) If this Agreement is terminated, each party hereto will, and will
use its best efforts to cause its officers, directors, employees,
accountants, counsel, consultants, advisors and agents to, destroy or
deliver to the party from whom such Confidential Material was obtained,
upon request, all documents and other materials, and all copies thereof,
obtained by such party or on its behalf from any such other parties in
connection with this Agreement that are subject to such confidence.
D. Proxy Statement/Registration Statement; Shareholder Approval. Following
the execution of this Agreement, Parent, Merger Sub and the Company will
mutually cooperate to prepare and file with the SEC a preliminary proxy
statement relating to the Merger (the "Proxy Statement") and Parent will prepare
and file with the SEC the Registration Statement in which the Proxy Statement
will be included as a prospectus. Each of Parent, Merger Sub and the Company
will respond to any comments of the SEC and will use its best efforts to have
the Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing and when the Registration Statement is
declared effective by the SEC, the Company will thereafter promptly cause the
Proxy Statement to be mailed to its stockholders. In connection therewith,
Parent, Merger Sub and the Company will prepare and file any other filings
required under the Exchange Act, the Securities Act or any other Federal or blue
sky laws relating to the Merger and the transactions contemplated by this
Agreement (the "Other Filings"). Each party will notify the other party promptly
upon the receipt of any comments from the SEC or its staff and of any
supplements to the Registration Statement, the Proxy Statement or any Other
Filing or for additional information and will supply the other party with copies
of all correspondence between such party or any of its representatives, on the
one hand, and the SEC, or its staff or other government officials, on the other
hand, with respect to the Registration Statement, the Proxy Statement, the
Merger or any Other Filing. The Proxy Statement, the Registration Statement and
the Other Filings will comply in all material respects with all applicable
requirements of law and the rules and regulations promulgated thereunder. Each
party agrees to cooperate with the other to provide all materials, documents,
exhibits and other requested information necessary to assure such compliance.
Whenever any event occurs which is required to be set forth in an amendment or
supplement to the Proxy Statement, the Registration Statement or any Other
Filing, Parent or the Company, as the case may be, will promptly inform the
other party of such
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occurrence and cooperate in filing with the SEC or its staff or any other
government officials, and/or mailing to stockholders of the Company, such
amendment or supplement. The Proxy Statement will also include the approval of
this Agreement and the Merger and the recommendation of the Board of Directors
of the Company to Company's shareholders that they vote in favor of approval of
this Agreement and the Merger, subject to the right of the Board of Directors of
the Company to withdraw its recommendation and recommend a Superior Proposal
determined to be such in compliance with Section 5.1. of this Agreement;
provided, however, that the Board of Directors of Company shall submit this
Agreement to Company's shareholders whether or not at any time subsequent to the
date hereof such board determines that it can no longer make such
recommendation. Promptly after the date hereof, the Company will exercise its
best efforts and take all action necessary in accordance with Colorado law and
its Certificate of Incorporation and Bylaws to convene the Meeting to be held as
promptly as practicable, and in any event within (forty (40)) days after the
declaration of effectiveness of the Registration Statement, for the purpose of
voting upon this Agreement. Unless Company's Board of Directors has withdrawn
its recommendation of this Agreement and the Merger in compliance with Section
5.1., Company shall use all reasonable efforts to solicit from its shareholders
proxies in favor of the approval of this Agreement and the Merger pursuant to
the Proxy Statement and shall take all other action necessary or advisable to
secure the vote or consent of shareholders required by Colorado Law or
applicable stock exchange requirements to obtain such approval. Notwithstanding
any provision in this Agreement to the contrary, the Company acknowledges and
agrees that Parent may, by notice to the Company, postpone the filing of the
Registration Statement, the request to accelerate the declaration of
effectiveness of the Registration Statement, or the mailing of the Proxy
Statement to the Company's shareholders if at any time the Board of Directors of
Parent, in good faith, determines that it would be detrimental to the Parent or
Company for such Registration Statement to be filed or declared effective, or
for such Proxy Statement to be mailed to the shareholders of the Company;
provided, that any such postponement shall not exceed ninety (90) days in
duration.
6.2. COVENANTS OF THE COMPANY.
A. CONDUCT OF THE COMPANY'S OPERATIONS. During the period from the date of
this Agreement to the Effective Time or the date of termination of this
Agreement, the Company and the Subsidiary shall use its reasonable efforts to
maintain and preserve their respective business organizations and to retain the
services of their respective officers and key employees and maintain
relationships with customers, suppliers and other third parties to the end that
their goodwill and ongoing business shall not be impaired in any material
respect. Without limiting the generality of the foregoing, during the period
from the date of this Agreement to the Effective Time, neither the Company nor
Subsidiary shall, except as otherwise expressly contemplated by this Agreement
and the transactions contemplated hereby, without the prior written consent of
Parent, such consent not to be unreasonably withheld or delayed:
(i) Sell, transfer, lease, pledge, mortgage, encumber or otherwise
dispose of any of its personal property or assets other than sales or
leases of inventory or licensing of Intellectual Property Assets in the
Ordinary Course of Business.
(ii) Make or propose any changes in its Articles of Incorporation or
Bylaws.
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(iii) Merge or consolidate with any other Person or acquire a material
amount of assets or capital stock of any other Person or enter into any
confidentiality agreement with any Person other than in the Ordinary Course
of Business.
(iv) Incur, create, assume or otherwise become liable for indebtedness
for borrowed money or assume, guarantee, endorse or otherwise as an
accommodation become responsible or liable for obligations of any other
individual, corporation or other entity, or enter into any arrangement
having the economic effect of any of the foregoing other than in connection
with the financing of ordinary course trade payables consistent with past
practice other than its Subsidiaries, except in the Ordinary Course of
Business.
(v) Create any subsidiaries.
(vi) Enter into or modify any employment, severance, termination or
similar agreements or arrangements with, or grant any bonuses, salary
increases, severance or termination pay to, any officer, director,
consultant or employee.
(vii) Change its method of doing business, in any material respect, or
change any material method or principle of accounting in a manner that is
inconsistent with past practice.
(viii) Settle any Proceeding, whether now pending or hereafter made or
brought involving an amount in excess of Twenty-Five Thousand and No/100
Dollars ($25,000.00).
(ix) Modify, amend or terminate, or waive, release or assign any
material rights or claims with respect to, any material Contract to which
the Company or Subsidiary is a party or any confidentiality agreement to
which the Company or Subsidiary is a party.
(x) Incur or commit to any capital expenditures, obligations or
liabilities in respect thereof which in the aggregate exceed or would
exceed Fifty Thousand and No/100 Dollars ($50,000.00) on a cumulative
basis.
(xi) Issue, sell or grant options, warrants or rights to purchase or
subscribe to, or enter into any arrangement or contract with respect to the
issuance or sale of any securities of the Company or Subsidiary, or rights
or obligations convertible into or exchangeable for any securities of the
Company or Subsidiary, or alter the terms of any presently outstanding
options or make any changes, by split-up, combination, reorganization or
otherwise in the capital structure of the Company or Subsidiary.
(xii) Declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock.
(xiii) Grant any severance or termination pay to any officer or
employee except pursuant to written agreements outstanding, or policies
existing, on the date hereof and as previously disclosed in writing or made
available to Parent, or adopt any new severance plan.
(xiv) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for any capital stock.
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(xv) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock of Company or Subsidiary, except repurchases of
unvested shares at cost in connection with the termination of the
employment relationship with any employee pursuant to stock option or
purchase agreements in effect on the date hereof.
(xvi) Engage in any action that could cause the Merger to fail to
qualify as a "reorganization" under Section 368(a) of the Code, whether or
not (in each case) otherwise permitted by the provisions of this Section
6.2.
(xvii) Engage in any action with the intent to directly or indirectly
adversely impact any of the transactions contemplated by this Agreement.
(xviii) Make any tax election that, individually or in the aggregate,
is reasonably likely to adversely affect in any material respect the tax
liability or tax attributes of Company or Subsidiary or settle or
compromise any material income tax liability.
(xix) Agree in writing or otherwise to take any of the foregoing
actions.
B. INTELLECTUAL PROPERTY MATTERS. The Company shall use its reasonable
efforts to preserve its ownership rights to all of the intellectual property
("Intellectual Property") described in Section 3.22. free and clear of any
Encumbrances and shall use its reasonable efforts to assert, contest and
prosecute any infringement of any issued foreign or domestic patent, trademark,
service mark, trade name or copyright that forms a part of the Intellectual
Property or any misappropriation or disclosure of any trade secret, confidential
information or know-how that forms a part of the Intellectual Property.
C. SHAREHOLDER AGREEMENTS. The Company shall deliver or cause to be
delivered to Parent, concurrently with the execution of this Agreement, from
each of the Principal Shareholders, an executed Shareholder Agreement (the
"Shareholder Agreements") in the form attached hereto as EXHIBIT A, agreeing,
among other things, to vote in favor of the Merger.
6.3. FORM S-8. Parent agrees to file, if available, for use by Parent, a
registration statement on Form S-8 for the shares of Parent Common Stock
issuable with respect to assumed Options no later than twenty (20) business days
after the Closing Date.
6.4. STOCK OPTIONS AND WARRANTS.
A. At the Effective Time, the Company's obligations with respect to each
outstanding Option or Warrant, whether vested or unvested, will be terminated
and such Option or Warrant shall be replaced with an option or warrant, as the
case may be, (such replacement options or warrants shall hereinafter be referred
to collectively as "Parent Securities" or individually as "Parent Security") to
acquire shares of Parent Common Stock equal to the product of the number of
shares of Company Common Stock that were purchasable under such Option or
Warrant immediately prior to the Effective Time multiplied by .1521298, rounded
up to the nearest whole number of shares of Parent Common Stock. The per share
exercise price for the shares of Parent Common Stock issuable upon exercise of
such Parent Security will be equal to the quotient determined by dividing the
exercise price per share of Company Common Stock at which the related Option or
Warrant was exercisable immediately prior to the Effective Time by .1521298 and
rounding the resulting exercise price up to the nearest whole cent. Each Parent
Security shall be evidenced by an option or warrant agreement in a form
acceptable to Parent and shall contain the following additional provisions: (i)
with respect to any Parent Security to be issued to Messrs. Horsley, Bayne and
Bilanich or to individuals who are
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<PAGE> 51
former employees or directors of either Company or Subsidiary as of the date of
this Agreement, the expiration date of such Parent Security shall be the same
expiration date as presently provided in such party's existing option or warrant
agreement with the Company; (ii) with respect to any Parent Security to be
issued to any other party not described in clause (i) above, the expiration date
of such Parent Security shall be the later of (x) one (1) year from the date of
Closing or (y) the thirtieth (30th) day following termination of such employee's
employment with the Company or Subsidiary, but in no event shall such expiration
date extend beyond the expiration date presently provided in such party's
existing option or warrant agreement with the Company and (iii) the Parent
Security shall be subject to automatic exchange for a comparable option or
warrant to acquire PracticeWorks common stock upon the PracticeWorks Spin-off,
adjusted to reflect the exchange rate applicable to other options or warrants of
the Parent which are exchanged in connection with the PracticeWorks Spin-off.
B. Upon execution of this Agreement, Company will promptly send notice to
each Option or Warrant holder of the proposed termination and exchange of such
holder's Options or Warrants as described above, and the Company further agrees
to take any and all other action as may be required under any existing option or
warrant agreements to effectuate the transactions contemplated by this Section
6.4.
C. Parent will reserve sufficient shares of Parent Common Stock for
issuance under this Section 6.4. hereof.
7. CONDITIONS.
7.1. MUTUAL CONDITIONS. The obligations of the parties hereto to
consummate the Merger shall be subject to the satisfaction at or prior to the
Closing Date of the following conditions:
A. No temporary restraining order, preliminary or permanent injunction or
other order or decree which prevents the consummation of the Merger shall have
been issued and remain in effect, and no statute, rule or regulation shall have
been enacted by any Governmental Body which prevents the consummation of the
Merger.
B. [INTENTIONALLY LEFT BLANK].
C. No Proceeding shall be instituted by any Governmental Body which seeks
to prevent consummation of the Merger or seeking material damages in connection
with the transactions contemplated hereby which continues to be outstanding.
D. The Registration Statement shall have been declared effective by the SEC
under the Securities Act. No stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued by the SEC and
no proceedings for that purpose and no similar proceeding in respect of the
Proxy Statement shall have been initiated or, to the knowledge of Parent, Merger
Sub or the Company, threatened in writing by the SEC.
E. The shares of Parent Common Stock issuable to the shareholders of
Company pursuant to this Agreement and such other shares required to be reserved
for issuance in connection with the Merger shall have been authorized for
listing on Nasdaq upon official notice of issuance.
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<PAGE> 52
F. All waiting periods, if any, under the HSR Act relating to the Merger
will have expired or terminated early.
G. The Shareholder Approval shall have been obtained.
H. Parent and Company shall each have received written opinions from their
respective tax counsel in the form and substance reasonably satisfactory to
them, to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code and such opinions shall not have been
withdrawn; provided, however, that if the counsel to either Parent or Company
does not render such opinion, this condition shall nonetheless be deemed to be
satisfied with respect to such party if counsel to the other party renders such
opinion to such party. The parties to this Agreement agree to make such
reasonable representations as requested by such counsel for the purpose of
rendering such opinions.
7.2. CONDITIONS TO OBLIGATIONS OF MERGER SUB AND PARENT. The obligations
of Merger Sub and Parent to consummate and effect the Merger shall be subject to
the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Parent:
A. REPRESENTATIONS AND WARRANTIES. Each representation and warranty of
Company contained in this Agreement (i) shall have been true and correct as of
December 31, 1999 and (ii) shall be true and correct on and as of the Closing
Date with the same force and effect as if made on and as of the Closing Date
except (1) for such failures to be true and correct that do not in the aggregate
constitute a Company Material Adverse Effect; provided, however, such Company
Material Adverse Effect qualifier shall be inapplicable with respect to
representations and warranties contained in Sections 3.2.A., 3.3., 3.29., 3.30.
and 3.31. and (2) for those representations and warranties which address matters
only as of a particular date (which representations shall have been true and
correct (subject to the qualifications set forth in the preceding clause (1)) as
of such particular date) (it being understood that, for purposes of determining
the accuracy of such representations and warranties, (i) all "Company Material
Adverse Effect" qualifications and other qualifications based on the word
"material" or similar phrases 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).
B. The Company shall have performed in all material respects each
obligation and agreement and shall have complied in all material respects with
each covenant to be performed and complied with by such parties hereunder prior
to the Effective Time.
C. Since the date of this Agreement, there shall not have been any Company
Material Adverse Effect or any material adverse effect on the ability of the
Company to consummate the transactions contemplated hereby.
D. The Company shall have furnished Merger Sub and Parent with a
certificate dated the Closing Date signed on behalf of it by its President to
the effect that the conditions set forth in Sections 7.2.A., B. and C. have been
satisfied.
E. Daniel L. Richmond and Chae U. Kim shall each have executed an
Employment Agreement, in the forms of which are attached hereto as EXHIBIT C-1
and EXHIBIT C-2, respectively.
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<PAGE> 53
F. Merger Sub and Parent shall have received the legal opinion, dated the
Closing Date, of Norton Lidstone, P.C., counsel to the Company, in substantially
the form attached hereto as EXHIBIT D.
G. The Company shall have obtained all material consents, waivers,
approvals, authorizations or orders, including the consents set forth on
SCHEDULE 3.2, and made all filings in connection with the authorization,
execution and delivery of this Agreement by the Company and the consummation by
each of the transactions contemplated hereby.
H. The Company and Parent shall have fully complied with all of their
obligations and covenants set forth in Section 6.1.D. above.
I. The total aggregate amount of cash paid by Parent pursuant to Section
2.5.H. shall not exceed Five Hundred Thousand and No/100 Dollars ($500,000.00).
7.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by the Company:
A. Each representation and warranty of Merger Sub and Parent set forth in
Section 4. (i) shall have been true and correct as of September 25, 2000 and
(ii) shall be true and correct on and as of the Closing Date as though made on
and as of the Closing Date except (1) for such failures to be true and correct
that do not in the aggregate constitute a Parent Material Adverse Effect and (2)
for those representations and warranties which address matters only as of a
specified date, which need be true and correct (which representations and
warranties shall have been true and correct (subject to the qualifications set
forth in the preceding clause (1)) as of such particular date (it being
understood that, for purposes of determining the accuracy of such
representations and warranties, (i) all "Parent Material Adverse Effect"
qualifications and other qualifications based on the word "material" or similar
phrases contained in such representations and warranties shall be disregarded
and (ii) any update of or modification to the Parent Disclosure Schedule made or
purported to have been made after the date of this Agreement shall be
disregarded).
B. Each of Merger Sub and Parent shall have performed in all material
respects each obligation and agreement and shall have complied in all material
respects with each covenant to be performed and complied with by it hereunder at
or prior to the Effective Time.
C. Since the date of this Agreement, there shall not have been any material
adverse change in the assets, liabilities, results of operations, business or
financial condition of Merger Sub and Parent or any material adverse effect on
the ability of Merger Sub and Parent to consummate the transactions contemplated
hereby.
D. Each of Merger Sub and Parent shall have furnished the Company with a
certificate dated the Closing Date signed on its behalf by its Chairman,
President or any Vice President to the effect that the conditions set forth in
Sections 7.3.A., B. and C. have been satisfied.
E. The Company shall have received the legal opinion, dated the Closing
Date, of Morris, Manning & Martin, L.L.P., counsel to Merger Sub and Parent,
substantially in the form attached hereto as EXHIBIT E.
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<PAGE> 54
8. TERMINATION.
8.1. TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after the requisite approval of the
shareholders of Company:
A. By mutual written consent duly authorized by the Boards of Directors of
Parent and Company;
B. By either Company or Parent if the Merger shall not have been
consummated by December 31, 2000 for any reason; provided, however, that the
right to terminate this Agreement under this Section 8.1.B. shall not be
available to any party whose action or failure to act has been a principal cause
of or resulted in the failure of the Merger to occur on or before such date and
such action or failure to act constitutes a breach of this Agreement;
C. By either Company or Parent if a Governmental Body shall have issued an
order, decree or ruling or taken any other action, in any case having the effect
of permanently restraining, enjoining or otherwise prohibiting the Merger, which
order, decree, ruling or other action is final and nonappealable;
D. By either Company or Parent if the required approval of the shareholders
of Company contemplated by this Agreement shall not have been obtained by reason
of the failure to obtain the required vote at a meeting of Company shareholders
duly convened therefor or at any adjournment therefor;
E. By Company, upon a breach of any representation, warranty, covenant or
agreement on the part of Parent set forth in this Agreement, or if any
representation or warranty of Parent shall have become untrue, in either case
such that the conditions set forth in Section 7.3.A., B. or C. would not be
satisfied as of the time of such breach or as of the time such representation or
warranty shall have become untrue, provided, that if such inaccuracy in Parent's
representations and warranties or breach by Parent is curable by Parent, then
Company may not terminate this Agreement under this Section 8.1.E. for thirty
(30) days after delivery of written notice from Company to Parent of such
breach, provided Parent continues to exercise best efforts to cure such breach
(it being understood that Company may not terminate this Agreement pursuant to
this paragraph E. if such breach by Parent is cured during such thirty (30) day
period);
F. By Parent, upon a breach of any representation, warranty, covenant or
agreement on the part of Company set forth in this Agreement, or if any
representation or warranty of Company shall have become untrue, in either case
such that the conditions set forth in Section 7.2.A., B. or C. would not be
satisfied as of the time of such breach or as of the time such representation or
warranty shall have become untrue, provided, that if such inaccuracy in
Company's representations and warranties or breach by Company is curable by
Company, then Parent may not terminate this Agreement under this Section 8.1.F.
for thirty (30) days after delivery of written notice from Parent to Company of
such breach, provided Company continues to exercise best efforts to cure such
breach (it being understood that Parent may not terminate this Agreement
pursuant to this paragraph F. if such breach by Company is cured during such
thirty (30) day period);
G. By Parent, if (i) the Board of Directors of Company withdraws, modifies
or changes its recommendation of this Agreement or the Merger in a manner
adverse to Parent or its stockholders; (ii) the Board of Directors of Company
shall have
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recommended to the shareholders of Company an Acquisition Proposal; (iii) the
Company fails to comply with Section 5.1.; (iv) an Acquisition Proposal shall
have been announced or otherwise become publicly known and the Board of
Directors of Company shall have (1) failed to recommend against acceptance of
such by its shareholders (including by taking no position, or indicating its
inability to take a position, with respect to the acceptance by its shareholders
of an Acquisition Proposal involving a tender offer or exchange offer) or (2)
failed to reconfirm its approval and recommendation of this Agreement and the
transactions contemplated hereby within five (5) business days thereafter; (v)
any of the Principal Shareholders fail to comply with the Shareholder Agreement
or (vi) the Board of Directors of Company resolves to take any of the actions
described above; or
H. By Company, if the Share Value, as defined below, is less than Three and
45/100 Dollars ($3.45), or by Parent, if the Share Value is greater than Six and
41/100 Dollars ($6.41). Termination of the Agreement by either party pursuant to
this Section 8.1.H. shall require delivery of written notice of termination to
the other party; however, if Company provides notice pursuant to this Section
8.1.H., that notice shall be irrevocable and Parent shall have the option, in
its sole discretion, by giving written notice to Company of such election prior
to Closing to reject the notice and proceed with Closing (i) using an adjusted
Common Exchange Ratio equal to the product of .06873 multiplied by a fraction,
the numerator of which is $3.45 and the denominator of which is the Share Value
or (ii) in lieu of issuing Parent Common Stock as otherwise set forth herein,
pay cash in the amount of $.2372 per share of Company Common Stock. For purposes
hereof, the term "Share Value" shall mean an amount equal to the average closing
price of a share of Parent Common Stock as reported on NASDAQ for the twenty
(20) consecutive trading days immediately preceding the Closing Date.
Termination of the Agreement under this section does not entitle the
non-terminating party to any termination fee, reimbursement of expenses, or
payment of a penalty of any kind.
8.2. NOTICE OF TERMINATION; EFFECT OF TERMINATION. Except as otherwise
provided in Section 8.1.H. above, any termination of this Agreement under
Section 8.1. above will be effective immediately upon the delivery of written
notice of the terminating party to the other parties hereto (or such later time
as may be required by Section 8.1.). In the event of the termination of this
agreement as provided in Section 8.2., this Agreement shall be of no further
force or effect, except (i) as set forth in this Section 8.2., Section
6.1.C.(i), Section 8.3. and Section 9., each of which shall survive the
termination of this Agreement and (ii) nothing herein shall relieve any party
from liability for fraud in connection with, or any willful breach of, this
Agreement.
8.3. FEES AND EXPENSES.
A. GENERAL. Except as set forth in this Section 8.3., all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated; provided, however, that Parent and Company
shall share equally all fees and expenses, other than attorneys' and accountants
fees and expenses, incurred (i) in relation to the printing and filing of the
Proxy Statement (including any preliminary materials related thereto) and the
S-4 (including financial statements and exhibits) and any amendments or
supplements thereto or (ii) for the premerger notification and report forms
under the HSR Act.
B. TERMINATION FEE.
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<PAGE> 56
(i) In the event that (1) Parent shall terminate this Agreement
pursuant to Section 8.1.G. or (2) this Agreement shall be terminated (x)
pursuant to Section 8.1.B. or (y) pursuant to Section 8.1.D. and, in the
case of either (x) or (y), (a) at or prior to such termination, there shall
exist or have been proposed an Acquisition Proposal and (b) within nine (9)
months after such termination, Company shall enter into a definitive
agreement with respect to any Company Acquisition or any Company
Acquisition shall be consummated, then, in the case of (1), promptly after
such termination, or in the case of (2), concurrently with the execution of
a definitive agreement with respect to, or the consummation of, as
applicable, such Company Acquisition, Company shall pay to Parent an amount
in cash equal to Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00) (the "Termination Fee").
(ii) In the event that Parent shall terminate this Agreement pursuant
to Section 8.1.F., then Company shall promptly reimburse Parent for
Parent's costs and expenses in connection with this Agreement and the
transactions contemplated hereby ("Parent's Expenses"), and if, within nine
(9) months of such termination of this Agreement, Company shall enter into
a definitive agreement with respect to any Company Acquisition or any
Company Acquisition involving Company shall be consummated, then
concurrently with the execution of a definitive agreement with respect to,
or the consummation of, as applicable, such Company Acquisition, then
Company shall pay to Parent an amount in cash equal to the amount by which
the Termination Fee exceeds the amount of Parent's Expenses previously
reimbursed by Company pursuant hereto.
(iii) The Company acknowledges that the agreements contained in this
Section 8.3.B. are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, Parent would not enter
into this Agreement; accordingly, if the Company fails to pay in a timely
manner the amounts due pursuant to this Section 8.3.B. and, in order to
obtain such payment, Parent makes a claim that results in a judgment
against the Company for the amounts set forth in this Section 8.3.B., the
Company shall pay to Parent its costs and expenses (including attorneys'
fees and expenses) in connection with such suit, together with interest on
the amounts set forth in this Section 8.3.B. at the prime rate of interest
as reported by SunTrust Bank, N.A. in effect on the date such payment was
required to be made. Payment of the fees described in this Section 8.3.B.
shall not be in lieu of damages incurred in the event of breach of this
Agreement. For the purposes of this Agreement, "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 shareholders of the
Company immediately preceding such transaction hold less than fifty percent
(50%) of the aggregate equity interests in the surviving or resulting
entity of such transaction; (ii) a sale or other disposition by the Company
of assets representing in excess of fifty percent (50%) of the aggregate
fair market value of the Company's business immediately prior to such sale
or (iii) the acquisition by any person or group (including by way of a
tender offer or an exchange offer or issuance by the Company), directly or
indirectly, of beneficial ownership or a right to acquire beneficial
ownership of shares representing in excess of fifty percent (50%) of the
voting power of the then outstanding shares of capital stock of the
Company.
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8.4. AMENDMENT. Subject to applicable law, this Agreement may be amended
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of Parent, Merger Sub and Company.
8.5. EXTENSION; WAIVER. At any time prior to the Effective Time, any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto;
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
8.6. SPECIAL PARENT PAYMENT. In the event that Company shall terminate
this Agreement pursuant to Section 8.1.E., Parent shall pay to Company an amount
in cash equal to Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00),
and Parent hereby waives the right to offset such amount against any amounts due
Parent by Company pursuant to the loan described in Section 5.8.
9. MISCELLANEOUS.
9.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Company, Parent and Merger Sub contained in this Agreement shall
terminate at the Effective Time, and only the covenants that by their terms
survive the Effective Time shall survive the Effective Time.
9.2. NOTICES. Except as otherwise set forth herein, all notices given in
connection with this Agreement shall be in writing and shall be delivered either
by personal delivery, by telecopy or similar facsimile means, by certified or
registered mail, return receipt requested, or by express courier or delivery
service, addressed to the parties hereto at the following addresses:
<TABLE>
<S> <C> <C>
A. Company: Medical Dynamics, Inc.
99 Inverness Drive East
Englewood, Colorado 80112
Attention: Van Horsley, President
Telecopy No.: (303) 799-1378
With a copy to: Norton Lidstone, P.C.
5445 DTC Parkway
The Quadrant, Suite 850
Englewood, Colorado 80111
Attention: Herrick K. Lidstone, Jr., Esq.
Telecopy No.: (303) 221-5553
</TABLE>
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<PAGE> 58
<TABLE>
<S> <C> <C>
B. Merger Sub and Parent: InfoCure Corporation and CADI Acquisition
Corporation
1765 The Exchange, Suite 450
Atlanta, Georgia 30339
Attention: Richard E. Perlman
Telecopy No.: (770) 857-1300
With a copy to: Morris, Manning & Martin, L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: Richard L. Haury, Jr., Esq.
Telecopy No.: (404) 365-9532
</TABLE>
or at such other address and number as either party shall have previously
designated by written notice given to the other party in the manner hereinabove
set forth. Notices shall be deemed given (i) when received, if sent by telecopy
or similar facsimile means (confirmation of such receipt by confirmed facsimile
transmission being deemed receipt of communications sent by telecopy or other
facsimile means) and (ii) when delivered and receipted for (or upon the date of
attempted delivery where delivery is refused), if hand-delivered, sent by
express courier or delivery service, or sent by certified or registered mail,
return receipt requested.
9.3. FURTHER ASSURANCES. The parties hereto agree to furnish upon request
to each other such further information, to execute and deliver to each other
such other documents, and to do such other acts and things, all as the other
party hereto may at any time reasonably request for the purpose of carrying out
the intent of this Agreement and the documents referred to herein.
9.4. WAIVER. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay on the part of
any party in exercising any right, power or privilege under this Agreement or
the documents referred to herein shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or privilege preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. To the maximum extent permitted by applicable law, no claim or
right arising out of this Agreement or the documents referred to herein can be
discharged by one party hereto, in whole or in part, by a waiver or renunciation
of the claim or right unless in writing signed by the other party hereto; no
waiver which may be given by a party hereto shall be applicable except in the
specific instance for which it is given; and no notice to or demand on one party
hereto shall be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to
herein.
9.5. ENTIRE AGREEMENT AND MODIFICATION. This Agreement, including all
exhibits and schedules hereto, are intended by the parties to this Agreement as
a final expression of their agreement with respect to the subject matter hereof,
and are intended as a complete and exclusive statement of the terms and
conditions of that agreement. This Agreement may not be modified, rescinded or
terminated orally, and no modification, rescission, termination or attempted
waiver of any of the provisions hereof (including this Section) shall be valid
unless in writing and signed by the party against whom the same is sought to be
enforced.
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9.6. ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS. This Agreement
shall apply to and be binding in all respect upon, and shall inure to the
benefit of, the successors and assigns of the parties hereto. Nothing expressed
or referred to in this Agreement is intended or shall be construed to give any
person or entity other than the parties to this Agreement any legal or equitable
right, remedy or claim under or with respect to this Agreement, or any provision
hereof, it being the intention of the parties hereto that this Agreement and all
of its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement, their successors and assigns, and for the benefit of
no other person or entity; provided, however, that the parties hereto consent to
the assignment of interests in this Agreement, including all exhibits and
schedules hereto, as collateral security for the obligations of Parent and
Merger Sub following the Closing to Finova Capital Corporation.
9.7. SECTION HEADINGS, CONSTRUCTION. The headings of articles and sections
contained in this Agreement are provided for convenience only. They form no part
of this Agreement and shall not affect its construction or interpretation. All
references to articles and sections in this Agreement refer to the corresponding
articles and sections of this Agreement. All words used herein shall be
construed to be of such gender or number as the circumstances require. Unless
otherwise specifically noted, the words "herein," "hereof," "hereby,"
"hereinabove," "hereinbelow," "hereunder," and words of similar import, refer to
this Agreement as a whole and not to any particular section, subsection,
paragraph, clause or other subdivision hereof.
9.8. TIME OF ESSENCE. With regard to all time periods set forth or
referred to in this Agreement, time is of the essence.
9.9. GOVERNING LAW. Except to the extent mandatorily governed by Colorado
Law, 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 law thereof.
9.10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement, and all of which, when taken together, shall be deemed to constitute,
but one and the same agreement.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
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IN WITNESS WHEREOF, the Company, Merger Sub and Parent, by their duly
authorized officers, have each caused this Agreement to be executed as of the
date first written above.
PARENT:
InfoCure Corporation
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
MERGER SUB:
CADI Acquisition Corporation
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
COMPANY:
Medical Dynamics, Inc.
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
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