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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 4, 1998
PHARMACOPEIA, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Delaware 0-27188 33-0557266
(State or other jurisdiction (Commission File Number) (IRS Employer Identification No.)
of incorporation)
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101 College Road East, Princeton, New Jersey 08540
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 452-3600
Not Applicable
(Former name or former address, if changed from last report)
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Item 5. Other Events.
On February 4, 1998, Pharmacopeia, Inc. ("Pharmacopeia") and Molecular
Simulations Incorporated ("MSI") announced the execution of a definitive merger
agreement (the "Merger Agreement") under which Pharmacopeia will acquire MSI in
a tax-free, stock-for-stock transaction to be accounted for on a pooling basis.
Pursuant to the Merger Agreement, Micro Acquisition Corporation, a wholly owned
subsidiary of Pharmacopeia, will be merged into MSI with MSI as the surviving
corporation.
Pursuant to the Merger Agreement, Pharmacopeia will acquire all of the
outstanding stock of MSI for approximately 7.0 million newly-issued shares of
Pharmacopeia common stock. Pharmacopeia will also convert the outstanding MSI
options into Pharmacopeia options, potentially resulting in the net issuance of
an additional 1.5 million new Pharmacopeia shares.
The transaction is subject to certain conditions, including stockholder
approvals, the effectiveness of a registration statement under federal
securities laws relating to the Pharmacopeia common stock to be issued in the
merger, the listing of such Pharmacopeia common stock on the Nasdaq National
Market and the expiration of applicable waiting periods under pre-merger
notification regulations.
The Merger Agreement and the press release issued in connection therewith
are filed as exhibits to this report and are incorporated herein by reference.
The description of the Merger Agreement set forth herein does not purport to be
complete and is qualified in its entirety by the provisions of the Merger
Agreement. The shares of Pharmacopeia common stock will be offered to MSI
stockholders only through a prospectus forming part of a registration statement
that will be filed with the Securities and Exchange Commission.
Item 7. Financial Statements and Exhibits.
The following exhibits are filed herewith:
Exhibits:
2 Agreement and Plan of Merger and Reorganization, dated as of
February 4, 1998, among Pharmacopeia, Inc., Micro Acquisition
Corporation and Molecular Simulations Incorporated. (Pursuant to
Item 601(b)(2) of Regulation S-K, certain schedules to the
Merger Agreement are omitted. The exhibit contains a list
identifying the contents of the schedules and Pharmacopeia
agrees to furnish supplementally copies of the schedules to the
Securities and Exchange Commission upon request.)
99 Text of press release, dated February 4, 1998, issued by
Pharmacopeia, Inc. and Molecular Simulations Incorporated.
2
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PHARMACOPEIA, INC.
By: /s/ Lewis J. Shuster
Lewis J. Shuster, Executive Vice
President, Corporate Development and Chief
Financial Officer
(Duly Authorized Officer and Chief
Accounting Officer)
Date: February 5, 1998
3
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EXHIBIT INDEX
Exhibit
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2 Agreement and Plan of Merger and Reorganization, dated as of February 4,
1998, among Pharmacopeia, Inc., Micro Acquisition Corporation and
Molecular Simulations Incorporated.
99 Text of press release, dated February 4, 1998, issued by Pharmacopeia,
Inc. and Molecular Simulations Incorporated.
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Exhibit 2
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AMONG:
PHARMACOPEIA, INC.
a Delaware corporation;
MICRO ACQUISITION CORPORATION,
a Delaware corporation; and
MOLECULAR SIMULATIONS INCORPORATED
a Delaware corporation
___________________________
Dated as of February 4, 1998
___________________________
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TABLE OF CONTENTS
(CONTINUED)
Section 1. Description Of Transaction....................................... 1
1.1 Merger of Merger Sub into the Company.............................. 1
1.2 Effect of the Merger............................................... 1
1.3 Closing; Effective Time............................................ 1
1.4 Certificate of Incorporation and Bylaws; Directors and Officers.... 2
1.5 Conversion of Shares............................................... 2
1.6 Closing of the Company's Transfer Books............................ 3
1.7 Exchange of Certificates........................................... 3
1.8 Appraisal Rights................................................... 4
1.9 Tax Consequences................................................... 5
1.10 Accounting Consequences........................................... 5
1.11 Further Action.................................................... 5
Section 2. Representations And Warranties Of The Company.................... 5
2.1 Due Organization; Subsidiaries; Etc................................ 5
2.2 Certificate of Incorporation and Bylaws; Records................... 6
2.3 Capitalization, Etc................................................ 6
2.4 Financial Statements............................................... 7
2.5 Absence of Changes................................................. 7
2.6 Title to Assets; Equipment; Real Property.......................... 8
2.7 Proprietary Assets................................................. 8
2.8 Contracts.......................................................... 9
2.9 Compliance with Legal Requirements................................. 10
2.10 Governmental Authorizations....................................... 10
2.11 Tax Matters....................................................... 10
2.12 Employee Benefit Plans............................................ 11
2.13 Environmental Matters............................................. 12
2.14 Insurance......................................................... 14
2.15 Related Party Transactions........................................ 14
2.16 Legal Proceedings; Orders......................................... 14
2.17 Authority; Binding Nature of Agreement............................ 14
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TABLE OF CONTENTS
(CONTINUED)
Page
2.18 Vote Required.................................................... 15
2.19 Non-Contravention; Consents...................................... 15
2.20 Financial Advisor................................................ 15
2.21 Employees........................................................ 16
Section 3. Representations And Warranties Of Parent And Merger Sub......... 16
3.1 Due Organization, Standing and Power.............................. 16
3.2 Capitalization, Etc............................................... 17
3.3 SEC Filings; Financial Statements................................. 17
3.4 Absence of Changes................................................ 18
3.5 Proprietary Assets................................................ 18
3.6 Contracts......................................................... 19
3.7 Compliance with Legal Requirements................................ 19
3.8 Governmental Authorizations....................................... 19
3.9 Employee Benefit Plans............................................ 20
3.10 Environmental Matters............................................ 21
3.11 Insurance........................................................ 21
3.12 Legal Proceedings; Orders........................................ 21
3.13 Authority; Binding Nature of Agreement........................... 21
3.14 Vote Required.................................................... 22
3.15 Non-Contravention; Consents...................................... 22
3.16 Financial Advisor................................................ 22
3.17 Valid Issuance................................................... 22
Section 4. Certain Covenants Of The Parties................................ 23
4.1 Access and Investigation.......................................... 23
4.2 Operation of the Company's Business............................... 23
4.3 Operation of Parent's Business.................................... 25
4.4 No Solicitation................................................... 26
Section 5. Additional Covenants Of The Parties............................. 28
5.1 Registration Statement; Joint Proxy Statement..................... 28
5.2 Stockholders' Meetings............................................ 28
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TABLE OF CONTENTS
(CONTINUED)
Page
5.3 Regulatory Approvals.............................................. 29
5.4 Stock Options..................................................... 29
5.5 Indemnification of Officers and Directors......................... 30
5.6 Pooling of Interests; Tax Free Reorganization..................... 30
5.7 Additional Agreements............................................. 31
5.8 Disclosure........................................................ 31
5.9 Affiliate Agreements.............................................. 31
5.10 Tax Matters...................................................... 32
5.11 Parent Plans and Benefit Arrangements............................ 32
5.12 Nasdaq Quotation................................................. 32
5.13 Resignation of Directors......................................... 32
5.14 Election to Board of Directors................................... 32
5.15 FIRPTA Matters................................................... 32
Section 6. Conditions Precedent to Obligations of Parent and Merger Sub.... 32
6.1 Accuracy of Representations....................................... 32
6.2 Performance of Covenants.......................................... 33
6.3 Effectiveness of Registration Statement........................... 33
6.4 Stockholder Approval.............................................. 33
6.5 Agreements and Documents.......................................... 33
6.6 Quotation......................................................... 33
6.7 No Restraints..................................................... 34
6.8 HSR Act........................................................... 34
6.9 Material Adverse Change........................................... 34
6.10 Compliance Certificate........................................... 34
Section 7. Conditions Precedent To Obligations Of The Company.............. 34
7.1 Accuracy of Representations....................................... 34
7.2 Performance of Covenants.......................................... 34
7.3 Effectiveness of Registration Statement........................... 34
7.4 Stockholder Approval.............................................. 34
7.5 Agreements and Documents.......................................... 35
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TABLE OF CONTENTS
(CONTINUED)
Page
7.6 Quotation......................................................... 35
7.7 No Restraints..................................................... 35
7.8 HSR Act........................................................... 35
7.9 Material Adverse Change........................................... 35
7.10 Compliance Certificate........................................... 36
Section 8. Termination..................................................... 36
8.1 Termination....................................................... 36
8.2 Effect of Termination............................................. 37
8.3 Termination Fee; Expenses......................................... 37
Section 9. Miscellaneous Provisions........................................ 38
9.1 Amendment......................................................... 38
9.2 Waiver............................................................ 38
9.3 No Survival of Representations and Warranties..................... 38
9.4 Entire Agreement; Counterparts; Applicable Law.................... 38
9.5 Assignability..................................................... 39
9.6 Notices........................................................... 39
9.7 Cooperation....................................................... 40
9.8 Construction...................................................... 40
9.9 Titles............................................................ 40
9.10 Sections and Exhibits............................................ 40
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EXHIBITS
EXHIBIT A - Certain Definitions
Exhibit B - Form of Affiliate Agreement
Exhibit C - Form of Opinion of Cooley Godward LLP
Exhibit D - Form of Opinion of Dechert Price & Rhoads
Exhibit E - Form of Tax Representation Letters
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AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is made
and entered into as of February 4, 1998, by and among: PHARMACOPEIA, INC., a
Delaware corporation ("Parent"); MICRO ACQUISITION CORPORATION, a Delaware
corporation and a wholly owned subsidiary of Parent ("Merger Sub"); and
MOLECULAR SIMULATIONS INCORPORATED, a Delaware corporation (the "Company").
Certain capitalized terms used in this Agreement are defined in Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of Merger
Sub into the Company in accordance with this Agreement and the Delaware General
Corporation Law (the "Merger"). Upon consummation of the Merger, Merger Sub
will cease to exist, and the Company will become a wholly owned subsidiary of
Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For accounting purposes, it is intended that the Merger
be treated as a "pooling of interests."
C. The respective boards of directors of Parent, Merger Sub and the
Company have approved this Agreement and the Merger.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject
to the conditions set forth in this Agreement and in accordance with the
provisions of applicable law, at the Effective Time (as defined in Section 1.3),
Merger Sub shall be merged with and into the Company, and the separate existence
of Merger Sub shall cease. The Company will continue as the surviving
corporation in the Merger (the "Surviving Corporation").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth
in this Agreement and in the applicable provisions of the Delaware General
Corporation Law (the "DGCL").
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Cooley Godward LLP, 4365 Executive Drive, Suite 1100, San Diego, California
92121-2128 or at such other place as the parties may agree, at 10:00 a.m. on a
date to be specified by the parties (the "Closing Date"), which (subject to the
satisfaction or waiver of the conditions set forth in Sections 6 and 7) shall be
no later than the second business day after satisfaction of the latest to occur
of the conditions set forth in Sections 6.4, 6.6, 6.8, 7.4, 7.6 and 7.8.
Contemporaneously with or as promptly as practicable after the Closing, a
properly executed certificate of merger conforming to the requirements of the
DGCL (the "Certificate of Merger") shall be filed with
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the Secretary of State of the State of Delaware. The Merger shall take effect
at the time the Certificate of Merger is filed with the Secretary of State of
the State of Delaware (the "Effective Time").
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS.
Unless otherwise determined by Parent and the Company prior to the Effective
Time:
(a) the Certificate of Incorporation of the Surviving Corporation
shall be amended and restated as of the Effective Time to conform to the
Certificate of Incorporation of Merger Sub in the form filed with the Secretary
of State of the State of Delaware on January 9, 1998, except that the name of
the Surviving Corporation will be Molecular Simulations Incorporated;
(b) the Bylaws of the Surviving Corporation shall be amended and
restated as of the Effective Time to conform to the Bylaws of Merger Sub as in
effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the respective individuals who are
directors and officers of Merger Sub immediately prior to the Effective Time.
1.5 CONVERSION OF SHARES.
(a) Subject to Sections 1.5(c) and 1.8, at the Effective Time, by
virtue of the Merger and without any further action on the part of Parent,
Merger Sub, the Company or any stockholder of the Company:
(i) any shares of Company Capital Stock then held by the Company or
any subsidiary of the Company (or held in the Company's treasury) shall be
canceled;
(ii) any shares of Company Capital Stock then held by Parent, Merger
Sub or any other subsidiary of Parent shall be canceled;
(iii) except as provided in clauses "(i)" and "(ii)" above and subject
to Section 1.5(b), each share of Company Capital Stock then outstanding shall be
converted into .5292 of a share of Parent Common Stock (as adjusted pursuant to
Section 1.5(b), the "Exchange Ratio") upon surrender of the certificate
representing such share of Company Capital Stock in the manner provided in
Section 1.7 (or in the case of a lost, stolen or destroyed certificate, upon
delivery of an affidavit in the manner provided in Section 1.7); and
(iv) each share of the common stock, par value $.01 per share, of
Merger Sub then outstanding shall be converted into one share of common stock of
the Surviving Corporation.
(b) Subject to Section 4.2, if, between the date of this Agreement and
the Effective Time, the outstanding shares of Company Capital Stock or Parent
Common Stock are changed into a different number or class of shares by reason of
any stock split, stock dividend, reverse stock split, reclassification,
recapitalization or other similar transaction, then the Exchange Ratio shall be
appropriately adjusted.
(c) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, any holder of Company
Capital Stock who would otherwise be entitled to receive a fraction of a share
of
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Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock issuable to such holder) shall, upon surrender of such holder's Company
Stock Certificate(s), be paid in cash the dollar amount (rounded to the nearest
whole cent), without interest, determined by multiplying such fraction by the
last reported bid price of a share of Parent Common Stock on the Nasdaq on the
date the Merger becomes effective.
1.6 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time:
(a) all shares of Company Capital Stock outstanding immediately prior to the
Effective Time shall automatically be canceled and retired and shall cease to
exist, and all holders of certificates representing shares of Company Capital
Stock that were outstanding immediately prior to the Effective Time shall cease
to have any rights as stockholders of the Company; and (b) the stock transfer
books of the Company shall be closed with respect to all shares of Company
Capital Stock outstanding immediately prior to the Effective Time. No further
transfer of any such shares of Company Capital Stock shall be made on such stock
transfer books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of such shares of Company Capital Stock
(a "Company Stock Certificate") is presented to the Exchange Agent (as defined
in Section 1.7) or to the Surviving Corporation or Parent, such Company Stock
Certificate shall be canceled and shall be exchanged as provided in Section 1.7.
1.7 EXCHANGE OF CERTIFICATES.
(a) Prior to the Closing Date, Parent shall select a reputable bank or
trust company to act as exchange agent in the Merger (the "Exchange Agent").
Promptly after the Effective Time, Parent shall deposit with the Exchange Agent
(i) certificates representing the shares of Parent Common Stock issuable
pursuant to this Section 1 and (ii) cash sufficient to make payments in lieu of
fractional shares in accordance with Section 1.5(c). The shares of Parent
Common Stock and cash amounts so deposited with the Exchange Agent, together
with any dividends or distributions received by the Exchange Agent with respect
to such shares, are referred to collectively as the "Exchange Fund."
(b) As soon as practicable after the Effective Time, the Exchange
Agent will mail to the holders of Company Stock Certificates (i) a letter of
transmittal in customary form and containing such provisions as Parent may
reasonably specify (including a provision confirming that delivery of Company
Stock Certificates shall be effected, and risk of loss and title to Company
Stock Certificates shall pass, only upon delivery of such Company Stock
Certificates to the Exchange Agent), and (ii) instructions for use in effecting
the surrender of Company Stock Certificates in exchange for certificates
representing Parent Common Stock. Subject to Section 1.5(c), upon surrender of
a Company Stock Certificate to the Exchange Agent for exchange, together with a
duly executed letter of transmittal and such other documents as may be
reasonably required by the Exchange Agent or Parent, (1) the holder of such
Company Stock Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of shares of Parent Common Stock that such
holder has the right to receive pursuant to the provisions of Section
1.5(a)(iii), and (2) the Company Stock Certificate so surrendered shall be
canceled. Until surrendered as contemplated by this Section 1.7, each Company
Stock Certificate shall be deemed, from and after the Effective Time, to
represent only the right to receive shares of Parent Common Stock (and cash in
lieu of any fractional share of Parent Common Stock) as contemplated by this
Section 1. If any Company Stock Certificate shall have been lost, stolen or
destroyed, Parent may, in its discretion and as a condition precedent to the
issuance of any certificate representing Parent Common Stock, require the owner
of such lost, stolen or destroyed Company Stock Certificate to provide an
appropriate affidavit as indemnity against any claim that may be made against
the Exchange Agent, Parent or the Surviving Corporation with respect to such
Company Stock Certificate. Neither Parent nor the Exchange Agent shall require
the owner of such lost, stolen or destroyed Company Stock Certificate to provide
a bond as
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indemnity against any claim that may be made against the Exchange Agent, Parent
or the Surviving Corporation with respect to such Company Stock Certificate. In
the event of a transfer of ownership of Company Capital Stock which is not
registered in the transfer records of the Company, a certificate representing
the proper number of shares of Parent Common Stock may be issued to a transferee
if the certificate representing such Company Capital Stock is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer, and by evidence that any applicable stock transfer taxes have
been paid.
(c) Any portion of the Exchange Fund that remains undistributed to
former stockholders of the Company six months after the date on which the Merger
becomes effective shall be delivered to Parent upon demand, and any former
stockholders of the Company who have not theretofore surrendered their Company
Stock Certificates in accordance with this Section 1.7 shall thereafter look
only to Parent for satisfaction of their claims for Parent Common Stock, cash in
lieu of fractional shares of Parent Common Stock and any dividends or
distributions with respect to Parent Common Stock.
(d) 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 Capital 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. 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.
(e) Neither Parent nor the Surviving Corporation shall be liable to
any holder or former holder of Company Common Stock for any shares of Parent
Common Stock (or dividends or distributions with respect thereto), or for any
cash amounts, delivered to any public official pursuant to any applicable
abandoned property, escheat or similar law.
1.8 APPRAISAL RIGHTS.
(a) Notwithstanding anything to the contrary contained in this
Agreement, Appraisal Shares (as defined in Section 1.8(c)) shall not be
converted into or represent the right to receive Parent Common Stock in
accordance with Section 1.5(a) (or cash in lieu of fractional shares in
accordance with Section 1.5(c)), and each holder of Appraisal Shares shall be
entitled only to such rights with respect to such Appraisal Shares as may be
granted to such holder in Section 262 of the DGCL. From and after the Effective
Time, a holder of Appraisal Shares shall not have and shall not be entitled to
exercise any of the voting rights or other rights of a stockholder of the
Surviving Corporation. If any holder of Appraisal Shares shall fail to perfect
or shall waive, rescind, withdraw or otherwise lose such holder's right of
appraisal under Section 262 of the DGCL, then (i) any right of such holder to
require the Company to purchase the Appraisal Shares for cash shall be
extinguished and (ii) such shares shall automatically be converted into and
shall represent only the right to receive (upon the surrender of the certificate
or certificates representing such shares) Parent Common Stock in accordance with
Section 1.5(a) (and cash in lieu of any fractional share in accordance with
Section 1.5(c)).
(b) The Company (i) shall give Parent prompt written notice of any
demand by any stockholder of the Company for appraisal of such stockholder's
shares of Company Capital Stock pursuant to the DGCL and of any other notice,
demand or instrument delivered to the Company pursuant to the DGCL, and (ii)
shall give Parent's Representatives the opportunity to participate in all
negotiations and proceedings with respect to any such notice, demand or
instrument. The Company shall not make any
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payment or settlement offer with respect to any such notice or demand unless
Parent shall have consented in writing to such payment or settlement offer.
(c) For purposes of this Agreement, "Appraisal Shares" shall refer to
any shares of Company Capital Stock outstanding immediately prior to the
Effective Time that are held by stockholders who are entitled to demand and who
properly demand appraisal of such shares pursuant to, and who comply with the
applicable provisions of, Section 262 of the DGCL.
1.9 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.10 ACCOUNTING CONSEQUENCES. For accounting purposes, the Merger is
intended to be treated as a "pooling of interests."
1.11 FURTHER ACTION. If, at any time after the Effective Time, any
further action is determined by Parent to be necessary or desirable to carry out
the purposes of this Agreement or to vest the Surviving Corporation with full
right, title and possession of and to all rights and property of Merger Sub and
the Company, the officers and directors of the Surviving Corporation and Parent
shall be fully authorized (in the name of Merger Sub, in the name of the Company
and otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that, except
as set forth in the disclosure schedule delivered by the Company to Parent on
the date of this Agreement (the "Company Disclosure Schedule"):
2.1 DUE ORGANIZATION; SUBSIDIARIES; ETC.
(a) The Company owns no shares of capital stock of, or equity interest
of any nature in, any Entity, other than as set forth in Part 2.1(a)(i) of the
Company Disclosure Schedule (the "Subsidiaries") and as set forth in Part
2.1(a)(ii) of the Company Disclosure Schedule. (The Company and the
Subsidiaries are referred to collectively in this Agreement as the "Acquired
Corporations"). None of the Acquired Corporations has agreed or is obligated to
make any future investment in or capital contribution to any Entity other than
an Acquired Corporation.
(b) Each of the Acquired Corporations is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has the necessary corporate power and authority: (i) to
conduct its business in the manner in which its business is currently being
conducted; (ii) to own and use its assets in the manner in which its assets are
currently owned and used; and (iii) to perform its obligations under all
Contracts by which it is bound.
(c) Each of the Acquired Corporations is qualified to do business as a
foreign corporation, and is in good standing, under the laws of the
jurisdictions where the nature of its business requires such qualification and
where the failure to so qualify will have a Material Adverse Effect on the
Acquired Corporations. Each such jurisdiction is listed in Part 2.1(c) of the
Company Disclosure Schedule.
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2.2 CERTIFICATE OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered or made available to Parent accurate and complete copies of the
certificate of incorporation and bylaws of the Company, including all amendments
thereto. The Company has made available to Parent accurate and complete copies
in all material respects of the minutes and other records of the meetings and
other proceedings (including any actions taken by written consent or otherwise
without a meeting) of the stockholders of the Company and the board of directors
and all committees of the board of directors of the Company.
2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of the Company consists of: (i)
25,000,000 shares of Company Common Stock, of which 9,805,135 shares have been
issued and are outstanding as of the date of this Agreement; (ii) 1,500,000
shares of Company Class B Common Stock, of which 1,246,882 shares have been
issued and are outstanding as of the date of this Agreement; and (iii) 2,222,223
shares of Company Preferred Stock, all of which have been designated "Series A
Convertible Preferred Stock," of which 2,222,223 shares have been issued and are
outstanding as of the date of this Agreement. All of the outstanding shares of
Company Capital Stock have been duly authorized and validly issued, and are
fully paid and non-assessable.
(b) As of the date of this Agreement: 3,188,587 shares of Company
Common Stock are reserved for future issuance pursuant to stock options granted
and outstanding. (Stock options granted by the Company pursuant to its stock
option plans are referred to in this Agreement as "Company Options.") The
Company has delivered or made available to Parent accurate and complete copies
of all stock option plans pursuant to which the Company (or any of its
predecessors) has ever granted stock options. Part 2.3(b) of the Company
Disclosure Schedule accurately sets forth as of February 3, 1998 the names of
all persons who held outstanding Company Options, and sets forth for each person
as of February 3, 1998 (i) the plans under which Company Options have been
issued to such person, (ii) the number of vested Company Options held by such
person and (iii) a vesting schedule for the unvested Company Options held by
such person.
(c) Except for the Company Options and as set forth in Part 2.3(c) of
the Company Disclosure Schedule, as of the date of this Agreement, there is no:
(i) outstanding subscription, option, call, warrant or right to acquire any
shares of the capital stock or other securities of the Company; (ii) outstanding
security, instrument or obligation that is or will become convertible into or
exchangeable for any shares of the capital stock or other securities of the
Company (except for the 1,246,882 shares of Company Class B Common Stock
outstanding as of the date of this Agreement, which are convertible into
1,246,882 shares of Company Common Stock and the 2,222,223 shares of Company
Preferred Stock outstanding as of the date of this Agreement, which are
convertible into 2,222,223 shares of Company Common Stock); or (iii) Contract
under which the Company is or will become obligated to sell or otherwise issue
any shares of its capital stock or any other securities.
(d) The outstanding shares of capital stock of each Subsidiary are
validly issued, fully paid and nonassessable and are owned beneficially and of
record by the Company, free and clear of any Encumbrances.
(e) Except as set forth in Part 2.3(e) of the Company Disclosure
Schedule, none of the awards, grants or other agreements pursuant to which the
Company Options were issued have provisions which accelerate the vesting or
right to exercise such options upon the execution of this Agreement, the
consummation of the transactions contemplated hereby or any other change of
control or similar event.
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(f) The Company is not party to any Acquired Corporation Contract that
obligates it to, and is not otherwise obligated to, repurchase or redeem any of
its issued securities. Except as set forth in Part 2.3(f) of the Company
Disclosure Schedule, there is no voting trust or other arrangement to which the
Company or any Subsidiary is a party with respect to the voting of the Company
Capital Stock.
2.4 FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent the following financial
statements and notes (collectively, the "Company Financial Statements"):
(i) the audited consolidated balance sheets of the Company as of
December 31, 1996 and 1995, and the related audited consolidated statements of
operations, statements of stockholders' equity and statements of cash flows of
the Company for the years ended December 31, 1996, 1995 and 1994, together with
the notes thereto and the unqualified report of Arthur Andersen LLP relating
thereto; and
(ii) the unaudited consolidated balance sheet of the Company as of
September 30, 1997 (the "Company Unaudited Interim Balance Sheet"), and the
related unaudited consolidated statement of operations and a statement of cash
flows of the Company for the nine months then ended.
(b) The Company Financial Statements present fairly, in all material
respects, the consolidated financial position of the Acquired Corporations as of
the respective dates thereof and the consolidated results of operations and cash
flows of the Acquired Corporations for the periods covered thereby. The Company
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
covered (except that the financial statements referred to in Section 2.4(a)(ii)
do not contain footnotes and are subject to normal and recurring year-end audit
adjustments, which will not, individually or in the aggregate, be material in
magnitude).
(c) Except for liabilities or obligations which are accrued or
reserved in the Company Financial Statements (or reflected in the Notes thereto)
or which were incurred after September 30, 1997 in the ordinary course of
business, the Company has no liabilities or obligations (accrued or contingent)
of a nature required by GAAP to be reflected in a balance sheet or that would be
required to be disclosed in footnotes that would be required pursuant to Article
10 of Regulation S-X promulgated by the SEC in connection with the filing with
the SEC of a quarterly report on Form 10-Q.
(d) Part 2.4(d) of the Company Disclosure Schedule is an aged list of
the Company's accounts receivable as of September 30, 1997. The Company's
accounts receivable arose in the ordinary course of business for goods or
services delivered or rendered, constitute only valid, undisputed claims and are
not subject to counterclaims or setoffs.
2.5 ABSENCE OF CHANGES. Between September 30, 1997 and the date of this
Agreement, none of the Acquired Corporations has:
(a) sold or transferred any material portion of its assets or any
material portion of the interests in such portion other than sales of the
Company's products in the ordinary course of business;
(b) suffered any material loss, or material interruption in use, of
any asset or property (whether or not covered by insurance), on account of fire,
flood, riot, strike or other hazard or Act of God;
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(c) made any material change in the nature of its business or
operations;
(d) without limitation by the enumeration of any of the foregoing,
entered into any material transaction other than sales or licenses of the
Company's products and services;
(e) incurred any liabilities other than in the ordinary course of
business; or
(f) suffered any adverse change with respect to its business or
financial condition which has had a Material Adverse Effect on the Acquired
Corporations.
2.6 TITLE TO ASSETS; EQUIPMENT; REAL PROPERTY. The Acquired
Corporations own, and have good, valid and marketable title to, the assets
purported to be owned by them and which are material to the Acquired
Corporations or to the conduct of their business. Except as set forth in Part
2.6 of the Company Disclosure Schedule, such assets are owned by the Acquired
Corporations free and clear of any Encumbrances, except for (x) any lien for
current taxes not yet due and payable and (y) liens that have arisen in the
ordinary course of business and that do not materially detract from the value of
the assets subject thereto or materially impair the operations of the Acquired
Corporations. The material items of equipment and other tangible assets owned
by or leased to the Acquired Corporations are adequate for the uses to which
they are being put and are in good condition and repair (ordinary wear and tear
excepted). None of the Acquired Corporations owns or leases any real property
or any material interest in real property, except for the leaseholds created
under the real property leases included in Part 2.8 of the Company Disclosure
Schedule.
2.7 PROPRIETARY ASSETS.
(a) The Acquired Corporations own or have a valid right to use and
exploit the intellectual property in the Acquired Corporation Proprietary
Assets. Except as set forth in Part 2.7(a)(i) of the Company Disclosure
Schedule, none of the Acquired Corporations jointly owns with any other Person
any Acquired Corporation Proprietary Asset (i) that an Acquired Corporation
purports to own and (ii) that is material to the business of the Acquired
Corporations. Except as set forth in Part 2.7(a)(ii) of the Company Disclosure
Schedule, as of December 31, 1997, there is no Acquired Corporation Contract
pursuant to which any Acquired Corporation has granted any Person other than
another Acquired Corporation any right (whether or not currently exercisable) to
sublicense, commercially distribute or otherwise market any Acquired Corporation
Proprietary Asset.
(b) The Acquired Corporations have taken commercially reasonable
measures and precautions to protect and maintain the confidentiality, secrecy
and value of the Acquired Corporation Proprietary Assets (except Acquired
Corporation Proprietary Assets whose value would be unimpaired by public
disclosure). No current or former officer, director, stockholder, employee,
consultant or independent contractor has any ownership right with respect to any
Acquired Corporation Proprietary Asset.
(c) To the Knowledge of the Company: (i) all patents, trademarks,
service marks and copyrights that are registered with any Governmental Body and
held by any of the Acquired Corporations are valid and subsisting; (ii) none of
the Acquired Corporation Proprietary Assets, the use thereof in the Acquired
Corporations' business activities or the conduct of the Acquired Corporations'
business as presently conducted infringes any Proprietary Asset owned or used by
any other Person; and (iii) no other Person is infringing any Acquired
Corporation Proprietary Asset.
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(d) The Acquired Corporation Proprietary Assets, together with
agreements for the license to an Acquired Corporation of software generally
available to the public, constitute all the material Proprietary Assets
necessary to enable the Acquired Corporations to conduct their business in the
manner in which such business is currently being conducted. None of the
Acquired Corporations has (i) licensed any of the Acquired Corporation
Proprietary Assets to any Person on an exclusive basis, or (ii) entered into any
covenant not to compete or Contract limiting its ability (A) to exploit fully
any material Acquired Corporation Proprietary Assets or (B) to transact business
in any market or geographical area or with any Person.
(e) Except as otherwise provided in Part 2.7(e) of the Company
Disclosure Schedule, the Company has maintained the source code of the Acquired
Corporation Proprietary Assets and no third party has a copy of the source code
for any Acquired Corporation Proprietary Assets that the Company purports to
own.
(f) The Acquired Corporation Proprietary Assets are Year 2000
Compliant. For purposes of this Agreement, "Year 2000 Compliant" means that the
Acquired Corporation Proprietary Assets which have an internal calendar or a
requirement to manipulate, store, compare or sequence dates (i) will accurately
manage, manipulate, input, accept, process, store and output dates up to,
including and following January 1, 2000 without adversely affecting the
operability of the Acquired Corporation Proprietary Assets or the utility of the
data produced therefrom and (ii) will accurately process date/time data from the
year 1999 into the year 2000.
(g) Part 2.7(g) of the Company Disclosure Schedule sets forth all
patents that have been issued to an Acquired Corporation, patent applications
that have been filed by an Acquired Corporation and trademarks that have been
registered by an Acquired Corporation and the jurisdictions in which such
patents have been issued, patent applications have been filed and trademarks
have been registered.
(h) With respect to the in-license agreements identified in Part
2.7(h) of the Company Disclosure Schedule and the software licensed to an
Acquired Corporation pursuant thereto (the "Identified In-License Software"),
such in-license agreements provide an Acquired Corporation with sufficient
rights for such Acquired Corporation to license to its customers for their use
the Acquired Corporation's current commercially released products that
incorporate the Identified In-License Software.
2.8 CONTRACTS.
(a) Part 2.8 of the Company Disclosure Schedule identifies each
Acquired Corporation Contract as of December 31, 1997.
(b) The Company has delivered or made available to Parent accurate and
complete copies of the written Contracts identified in Part 2.8 of the Company
Disclosure Schedule, including the amendments thereto. Each Contract identified
in Part 2.8 of the Company Disclosure Schedule is valid and in full force and
effect.
(c) Except as set forth in Part 2.8 of the Company Disclosure
Schedule:
(i) none of the Acquired Corporations has violated or breached, or
committed any default under, any Material Contract, and, to the Knowledge of the
Company, no other Person has violated or breached, or committed any default
under, any Material Contract, except where such violations,
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breaches or defaults have not had and will not have a Material Adverse Effect on
the Acquired Corporations;
(ii) none of the Acquired Corporations has executed any written
amendments of any Acquired Corporation Contract;
(iii) none of the Acquired Corporations has waived in writing any of
its material rights under any Material Contract; and
(iv) since September 30, 1997, none of the Acquired Corporations has
received any written cancellation or notice of non-renewal of any Material
Contract that in 1997 generated revenue for any of the Acquired Corporations in
an amount greater than $500,000.
2.9 COMPLIANCE WITH LEGAL REQUIREMENTS. Each of the Acquired
Corporations is in compliance with applicable Legal Requirements, except where
the failure to comply with such Legal Requirements will not have a Material
Adverse Effect on the Acquired Corporations. Except as disclosed in Part 2.9 of
the Company Disclosure Schedule, none of the Acquired Corporations has received
(i) at any time since January 1, 1995, any notice or written communication from
any Governmental Body regarding any actual or possible violation of, or failure
to comply with, any Legal Requirement or (ii) prior to January 1, 1995 any such
notice or communication that remains pending. To the Knowledge of the Company,
no investigation or review of any of the Acquired Corporations by any
Governmental Body is pending or threatened, other than those which would not
reasonably be expected to result in a Material Adverse Effect on the Acquired
Corporations.
2.10 GOVERNMENTAL AUTHORIZATIONS. The Acquired Corporations hold the
Governmental Authorizations necessary to enable the Acquired Corporations to
conduct their respective businesses in the manner in which such businesses are
currently being conducted and in compliance with applicable Legal Requirements,
except where failure to hold such Governmental Authorizations will not have a
Material Adverse Effect on the Acquired Corporations. Such Governmental
Authorizations are valid and in full force and effect. Each Acquired
Corporation is in compliance with the terms and requirements of such
Governmental Authorizations except where failure to be in compliance will not
have a Material Adverse Effect on the Acquired Corporations. None of the
Acquired Corporations has received (i) at any time since January 1, 1995 any
written notice or other written communication from any Governmental Body
regarding (a) any actual or possible violation of or failure to comply with any
term or requirement of any material Governmental Authorization or (b) any actual
or possible revocation, withdrawal, suspension, cancellation, termination or
modification of any material Governmental Authorization or (ii) prior to January
1, 1995 any such notice or communication that remains pending.
2.11 TAX MATTERS.
(a) The Tax Returns required to be filed by or on behalf of the
respective Acquired Corporations with any Governmental Body with respect to any
taxable period ending on or before the Closing Date (the "Acquired Corporation
Returns") (i) have been or will be filed on a timely basis on or before the
applicable due date (including any extensions of such due date) and (ii) have
been, or will be when filed, prepared in compliance with applicable Legal
Requirements, except where failure to be in such compliance would not have a
Material Adverse Effect on the Acquired Corporations. The amounts shown on the
Acquired Corporation Returns to be due on or before the Closing Date and on all
notices of assessment or demand for payment received by the Acquired
Corporations have been or will be paid on or before the Closing Date.
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(b) The Company Financial Statements fully accrue the Company's
liabilities for Taxes with respect to all periods through the dates thereof in
accordance with generally accepted accounting principles. Each Acquired
Corporation will establish, in the ordinary course of business and consistent
with its past practices, appropriate reserves for the payment of Taxes due for
the period from September 30, 1997 through the Closing Date.
(c) There are no examinations or audits of any Acquired Corporation
Return currently underway, and no extension or waiver of the limitation period
applicable to any Acquired Corporation Return is in effect.
(d) No proposed adjustment, claim or Legal Proceeding is pending or,
to the Knowledge of the Company, has been threatened against or with respect to
any Acquired Corporation in respect of any material Tax. There are no
unsatisfied liabilities for material Taxes (including liabilities for interest,
additions to tax and penalties thereon and related expenses) with respect to any
notice of deficiency or similar document received by any Acquired Corporation
with respect to any material Tax. There are no liens for material Taxes upon
any of the assets of any of the Acquired Corporations except liens for current
Taxes not yet due and payable. None of the Acquired Corporations has entered
into or become bound by any agreement or consent pursuant to Section 341(f) of
the Code. None of the Acquired Corporations has been, and none of the Acquired
Corporations will be, required to include any adjustment in taxable income for
any tax period (or portion thereof) pursuant to Section 481 or 263A of the Code
or any comparable provision under state or foreign Tax laws as a result of
transactions or events occurring, or accounting methods employed, prior to the
Closing. None of the Acquired Corporations has been the subject of a Tax ruling
or closing agreement with a Governmental Body that has continuing effect.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of any of the Acquired Corporations that could reasonably
be expected to give rise directly or indirectly to the payment of any amount
that would not be deductible pursuant to Section 280G or Section 162 of the
Code. None of the Acquired Corporations is, or has ever been, a party to or
bound by any tax indemnity agreement, tax sharing agreement, tax allocation
agreement or similar Contract. Except as set forth in Part 2.11(e) of the
Company Disclosure Schedule, none of the Acquired Corporations has ever been a
member of a consolidated group of corporations or analogous group under state or
local law for which it could be liable for the Taxes of any Person (other than
such Acquired Corporation) following the Effective Time.
2.12 EMPLOYEE BENEFIT PLANS.
(a) Set forth on Part 2.12 of the Company Disclosure Schedule is a
true and complete list of each (i) "employee benefit plan," as defined in
Section 3(3) of ERISA (including any "multiemployer plan" as defined in Section
3(37) of ERISA), and (ii) all other pension, retirement, supplemental
retirement, deferred compensation, excess benefit, profit sharing, bonus,
incentive, stock purchase, stock ownership, stock option, stock appreciation
right, severance, salary continuation, termination, change-of-control, health,
life, disability, group insurance, vacation, holiday and fringe benefit plan,
program or arrangement (each such plan, program or arrangement described in the
foregoing clauses (i) and (ii), a "Plan") currently maintained, contributed to,
or required to be contributed to, by the Acquired Corporations or any ERISA
Affiliate of any Acquired Corporation or under which the Acquired Corporations
or any ERISA Affiliate of any Acquired Corporation have any liability
(collectively the "Company Plans").
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(b) Each Company Plan which is intended to be qualified under Section
401(a) of the Code has received a favorable determination from the IRS covering
the provisions of the Tax Reform Act of 1986 stating that such Company Plan is
so qualified.
(c) Except as otherwise disclosed in Part 2.12 of the Company
Disclosure Schedule:
(i) The Acquired Corporations and all ERISA Affiliates of the Acquired
Corporations are in compliance in all material respects with the provisions of
ERISA and the Code applicable to the Company Plans. Each Company Plan has been
maintained, operated and administered in compliance in all material respects
with its terms and any related documents or agreements and the applicable
provisions of ERISA and the Code.
(ii) No Company Plan is subject to Title IV of ERISA and no Company
Plan is a "multiemployer plan" as defined in Section 3(37) of ERISA.
(iii) The Company Plans which are "employee pension benefit plans"
within the meaning of Section 3(2) of ERISA and which are intended to meet the
qualification requirements of Section 401(a) of the Code now meet, and at all
times since their inception have met, the requirements for such qualification,
and the related trusts are now, and at all times since their inception have
been, exempt from taxation under Section 501(a) of the Code.
(iv) Except for claims for benefits in the normal operation of the
Company Plans, there is no pending or threatened audit, assessment, complaint,
proceeding or investigation of any kind in any court or governmental agency with
respect to any Company Plan.
(v) Neither a "prohibited transaction" within the meaning of Section
406 of ERISA or Section 4975 of the Code nor any breach of any duty imposed by
Title I of ERISA has occurred with respect to any Company Plan.
(vi) With respect to each Company Plan that is a "group health plan"
within the meaning of ERISA Section 607(l) and that is subject to Code Section
4980B, the Acquired Corporations comply in all material respects with the
continuation coverage requirements of those provisions and Part 6 of Title I of
ERISA.
(vii) No Company Plan provides benefits, including, without
limitation, death or medical benefits, beyond termination of service or
retirement other than (i) coverage mandated by law, or (ii) death or retirement
benefits under a Company Plan qualified under Code Section 401(a).
2.13 ENVIRONMENTAL MATTERS.
(a) None of the Acquired Corporations is liable or potentially liable
for any material response cost or natural resource damages under any so-called
"superfund" or "superlien" law or similar Legal Requirement, at or with respect
to any site.
(b) The Acquired Corporations are and have been in compliance with all
applicable Environmental Laws, except for failures to be in compliance that
would not reasonably be expected to have a Material Adverse Effect on the
Acquired Corporations. The Acquired Corporations possess all material permits
and other material Governmental Authorizations required under applicable
Environmental Laws, and the Acquired Corporations are and have been in
compliance with the terms and requirements of all such
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Governmental Authorizations, except for failures to be in compliance that would
not reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations. None of the Acquired Corporations has received or given, and to
the Knowledge of the Company, no current or prior owner of any property leased
or controlled by any of the Acquired Corporations has received or given any
notice, citation, summons, order, complaint, penalty, assessment, request for
information, demand or other communication (in writing) to or from any
Governmental Body or other Person regarding any actual, alleged, possible or
potential material liability or responsibility arising from or relating to the
presence, generation, manufacture, production, transportation, importation, use,
treatment, refinement, processing, handling, storage, discharge, release,
emission or disposal of any Material of Environmental Concern that has not
already been paid or fully resolved without any outstanding obligations. No
Person has ever commenced or threatened to commence any contribution action or
other Legal Proceeding against any of the Acquired Corporations in connection
with any such actual, alleged, possible or potential liability or
responsibility; and to the Knowledge of the Company, no event has occurred, and
no condition or circumstance exists, that would reasonably be expected to
directly or indirectly give rise to, or result in any of the Acquired
Corporations becoming subject to, any such liability or responsibility.
(c) To the Knowledge of the Company, none of the Acquired
Corporations has generated, manufactured, produced, transported, imported, used,
treated, refined, processed, handled, stored, discharged, released or disposed
of any Material of Environmental Concern. To the Knowledge of the Company, none
of the Acquired Corporations has permitted (knowingly or otherwise) any Material
of Environmental Concern to be generated, manufactured, produced, used, treated,
refined, processed, handled, stored, discharged, released or disposed of
(whether lawfully or unlawfully):
(i) on or beneath the surface of any real property that is, or that
has at any time been, owned by, leased to, controlled or used by any of the
Acquired Corporations;
(ii) in or into any surface water, groundwater, soil or air associated
with or adjacent to any such real property; or
(iii) in or into any well, pit, pond, lagoon, impoundment, ditch,
landfill, building, structure, facility, improvement, installation, equipment,
pipe, pipeline, vehicle or storage container that is or was located on or
beneath the surface of any such real property or that is or has at any time been
owned by, leased to, controlled by or used by any of the Acquired Corporations.
(d) To the Knowledge of the Company, all property that is owned by,
leased to, controlled by or used by any of the Acquired Corporations, and all
surface water, groundwater, soil and air associated with or adjacent to such
property:
(i) is free of any Material of Environmental Concern and any
harmful chemical or physical conditions; and
(ii) is free of any environmental contamination of any nature.
(e) To the Knowledge of the Company, there is no storage tank or other
storage container that is or has been owned by, leased to, controlled by or used
by any of the Acquired Corporations, or that is located on or beneath the
surface of any real property owned by, leased to, controlled by or used by any
of the Acquired Corporations.
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(f) There have been no environmental inspections, investigations,
studies, audits, tests, reviews or other analyses conducted by, for or at the
request of the Company or the Acquired Corporations, or to the Knowledge of the
Company, by any other Person in relation to any property or business now or
previously owned, operated or leased by the Company or the Acquired
Corporations.
2.14 INSURANCE. The Company has delivered or made available to Parent a
copy of each material insurance policy relating to the business, assets or
operations of the Acquired Corporations. Each such insurance policy is in full
force and effect. Since December 31, 1995, none of the Acquired Corporations
has received any written notice or other written communication regarding any
actual or possible (a) cancellation or invalidation of any insurance policy (b)
refusal of any coverage or rejection of any material claim under any insurance
policy, or (c) material adjustment in the amount of the premiums payable with
respect to any insurance policy. There is no pending material claim (including
any workers' compensation claim) under or based upon any insurance policy of any
of the Acquired Corporations. Part 2.14 of the Company Disclosure Schedule sets
forth each material insurance policy relating to the business, assets or
operations of the Acquired Corporations, the coverage provided thereunder and
the premiums therefor.
2.15 RELATED PARTY TRANSACTIONS. No Related Party has any direct or
indirect interest in any material asset used in or otherwise relating to the
business of any of the Acquired Corporations. No Related Party has any direct
or indirect financial interest in any Acquired Corporation Contract, transaction
or business dealing involving any of the Acquired Corporations. No Related
Party is competing directly or indirectly with any of the Acquired Corporations.
No Related Party has any claim or right against any of the Acquired Corporations
(other than rights under Company Options and rights to receive compensation for
services performed as an employee of an Acquired Corporation). (For purposes of
this Section 2.15 each of the following shall be deemed to be a "Related Party":
(i) each individual who is an officer of any of the Acquired Corporations; (ii)
each member of the immediate family of each of the individuals referred to in
clause "(i)" above; and (iii) any trust or other Entity (other than an Acquired
Corporation) in which any one of the individuals referred to in clauses "(i)"
and "(ii)" above holds (or in which more than one of such individuals
collectively hold), beneficially or otherwise, a material voting, proprietary or
equity interest.)
2.16 LEGAL PROCEEDINGS; ORDERS.
(a) There is no pending Legal Proceeding, and (to the Knowledge of the
Company) no Person has overtly threatened to commence any Legal Proceeding: (i)
that involves any of the Acquired Corporations or any assets owned or used by
any of the Acquired Corporations and that, if adversely decided, would have a
Material Adverse Effect on the Acquired Corporations; or (ii) that challenges
the Merger or any of the other transactions contemplated by this Agreement.
(b) There is no order, writ, injunction, judgment or decree to which
any of the Acquired Corporations, or any assets owned or used by any of the
Acquired Corporations, is subject.
2.17 AUTHORITY; BINDING NATURE OF AGREEMENT. The Company has the
corporate right, power and authority to enter into and to perform its
obligations under this Agreement. The board of directors of the Company (at a
meeting duly called and held) has (a) determined by a unanimous vote of the
directors present that the Merger is advisable and fair and in the best
interests of the Company and its stockholders, (b) approved the execution,
delivery and performance of this Agreement by the Company, and (c) recommended
the adoption and approval of this Agreement by the holders of Company Capital
Stock and directed that this Agreement be submitted for consideration by the
Company's stockholders at the
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Company Stockholders' Meeting (as defined in Section 5.2). Other than the
Company Stockholders' Meeting, no other corporate proceedings are necessary to
authorize this Agreement and consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
2.18 VOTE REQUIRED. The Company Required Vote (as hereinafter defined)
is the only vote of the holders of any class or series of the Company's capital
stock necessary to adopt and approve this Agreement, the Merger and the other
transactions contemplated by this Agreement. For purposes of this Agreement, "
Company Required Vote" shall mean the affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock and Company Preferred
Stock (voting together as a single class).
2.19 NON-CONTRAVENTION; CONSENTS. Neither (1) the execution, delivery
or performance of this Agreement or any of the other agreements referred to in
this Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of any of the
provisions of the certificate of incorporation or bylaws of any of the Acquired
Corporations;
(b) contravene, conflict with or result in a violation of, any Legal
Requirement or any order, writ, injunction, judgment or decree to which any of
the Acquired Corporations, or any material assets owned or used by any of the
Acquired Corporations, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of any material Governmental Authorization that is held by
any of the Acquired Corporations or that otherwise relates to the business of
any of the Acquired Corporations or to any material assets owned or used by any
of the Acquired Corporations; or
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, or result in the creation of any lien with respect
to the assets of an Acquired Corporation pursuant to, any provision of any
Material Contract, except for any such violations, liens, breaches or defaults,
or failures to give notice that, individually or in the aggregate, will not have
a Material Adverse Effect on the Acquired Corporations.
Except as contemplated by this Agreement or as may be required by the DGCL or
under the HSR Act, none of the Acquired Corporations is or will be required to
make any filing with or give any notice to, or to obtain any Consent from, any
Person in connection with (x) the execution, delivery or performance of this
Agreement or any of the other agreements referred to in this Agreement or (y)
the consummation of the Merger or any of the other transactions contemplated by
this Agreement, except where the failure to take such actions will not have a
Material Adverse Effect on the Acquired Corporations.
2.20 FINANCIAL ADVISOR. Except as set forth in Part 2.20 of the Company
Disclosure Schedule, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger or
any of the other transactions contemplated by this Agreement based upon
arrangements made by or on behalf of either of the Acquired Corporations.
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2.21 EMPLOYEES. Part 2.21 of the Company Disclosure Schedule contains
an accurate list of: (i) all written agreements providing for a term of
employment between any Acquired Corporation and any current or retired employee;
(ii) all collective bargaining agreements to which any Acquired Corporation is a
party; (iii) the name, office location and salary of all full- and part-time
employees of the Company as of December 31, 1997; and (iv) a description of
personal perquisites and other personal benefits paid to or on behalf of any
employee of the Company during 1997 to the extent that the aggregate amount of
such perquisites and other personal benefits exceeds the lesser of $50,000 or
10% of the total of annual salary and bonus paid to such employee (it being
understood that such perquisites and benefits do not include benefits made
available under Company Plans). The Company does not have a written severance
pay policy. To the Knowledge of the Company, as of the date of this Agreement,
none of Michael J. Savage, Saiid Zarrabian, David B. Hiatt, Steven Herbert,
Thomas M. Carney, Christopher Herd and Michael Stapleton has indicated to any
other Person that he is considering terminating his employment with the Company.
The Company does not know of any efforts within the last three years to attempt
to organize the Company's employees, and no strike or labor dispute involving
the Company and a group of its employees has occurred during the last three
years or, to the Knowledge of the Company, is threatened. The Company has
complied in all material respects with applicable wage and hour, equal
employment, safety and other legal requirements relating to its employees,
except where the failure to comply will not have a Material Adverse Effect on
the Acquired Corporations.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company that, except as
set forth in the disclosure schedule delivered by Parent to the Company on the
date of this Agreement (the "Parent Disclosure Schedule"):
3.1 DUE ORGANIZATION, STANDING AND POWER.
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each of Parent and Merger Sub has the necessary
corporate power and authority: (i) to conduct its business in the manner in
which its business is currently being conducted; (ii) to own and use its assets
in the manner in which its assets are currently owned and used; and (iii) to
perform its obligations under all Contracts by which it is bound.
(b) Each of the Parent, Merger Sub and its other subsidiaries is
qualified to do business as a foreign corporation, and is in good standing,
under the laws of the jurisdictions where the nature of its business requires
such qualification and where the failure to so qualify will have a Material
Adverse Effect on Parent. Each such jurisdiction is listed in Part 3.1(b) of
the Parent Disclosure Schedule.
(c) Parent has delivered or made available to the Company accurate and
complete copies of the certificate of incorporation and bylaws of Parent,
including all amendments thereto. Parent has made available to the Company
accurate and complete copies in all material respects of the minutes and other
records of the meetings and other proceedings (including any actions taken by
written consent or otherwise without a meeting) of the stockholders of Parent
and the board of directors and all committees of the board of directors of
Parent.
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3.2 CAPITALIZATION, ETC.
(a) The authorized capital stock of Parent consists of: (i)
40,000,000 shares of Parent Common Stock, of which 11,795,486 shares have been
issued and are outstanding as of the date of this Agreement; and (ii) 2,000,000
shares of preferred stock, of which no shares have been issued and are
outstanding as of the date of this Agreement. There are no shares of Parent
Common Stock held in treasury. All of the outstanding shares of capital stock
of Parent have been duly authorized and validly issued, and are fully paid and
non-assessable.
(b) As of the date of this Agreement: 1,340,440 shares of Parent
Common Stock are reserved for future issuance pursuant to stock options granted
and outstanding.
(c) Except as described in Sections 3.2(a) and (b) above, and except
as set forth in Part 3.2(c) of the Parent Disclosure Schedule, as of the date of
this Agreement there is no: (i) outstanding subscription, option, call, warrant
or right to acquire any shares of the capital stock or other securities of
Parent; (ii) outstanding security, instrument or obligation that is or will
become convertible into or exchangeable for any shares of the capital stock or
other securities of Parent; (iii) Contract under which Parent is or will become
obligated to sell or otherwise issue any shares of its capital stock or any
other securities; or (iv) voting trust or other arrangement to which Parent is a
party with respect to the voting of the capital stock of Parent. Parent is not
party to any Contract that obligates it to, and is not otherwise obligated to,
repurchase or redeem any of its issued securities.
3.3 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has delivered or made available to the Company accurate and
complete copies of each report, registration statement (on a form other than
Form S-8) and definitive proxy statement filed by Parent with the SEC between
January 1, 1996 and the date of this Agreement (the "Parent SEC Documents"). As
of the time it was filed with the SEC (or, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing): (i) each
of the Parent SEC Documents complied in all material respects with the
applicable requirements of the Securities Act or the Exchange Act (as the case
may be); and (ii) none of the Parent SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. None of
the Parent SEC Documents, the representations made in this Agreement, and the
provisions of the Parent Disclosure Schedule, when read together, contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(b) The consolidated financial statements contained in the Parent SEC
Documents: (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered, except as may be indicated in the notes to
such financial statements and (in the case of unaudited statements) as permitted
by Form 10-Q of the SEC, and except that unaudited financial statements may not
contain footnotes and are subject to year-end audit adjustments which will not,
individually or in the aggregate, be material in magnitude; and (iii) fairly
present the consolidated financial position of Parent and its subsidiaries as of
the respective dates thereof and the consolidated results of operations of
Parent and its subsidiaries for the periods covered thereby.
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(c) Except for liabilities or obligations which are accrued or
reserved in the financial statements (or reflected in the Notes thereto)
included in the Parent SEC Documents or which were incurred after September 30,
1997 in the ordinary course of business, Parent has no liabilities or
obligations (accrued or contingent) of a nature required by GAAP to be reflected
in a balance sheet or that would be required to be disclosed in footnotes that
are required pursuant to Article 10 of Regulation S-X promulgated by the SEC in
connection with the filing with the SEC of a quarterly report on Form 10-Q.
3.4 ABSENCE OF CHANGES. Between September 30, 1997 and the date of
this Agreement, and except as set forth in Part 3.4 of the Parent Disclosure
Schedule, neither Parent nor any of its subsidiaries has:
(a) sold or transferred any material portion of its assets or any
material portion of the interests in such portion other than sales of Parent's
products in the ordinary course of business;
(b) suffered any material loss, or material interruption in use, of
any asset or property (whether or not covered by insurance), on account of fire,
flood, riot, strike or other hazard or Act of God;
(c) made any material change in the nature of its business or
operations;
(d) without limitation by the enumeration of any of the foregoing,
entered into any material transaction other than sales of Parent's and its
subsidiaries' products;
(e) incurred any liabilities other than in the ordinary course of
business; or
(f) suffered any adverse change with respect to its business or
financial condition which has had a Material Adverse Effect on Parent.
3.5 PROPRIETARY ASSETS.
(a) Each of Parent and its subsidiaries owns or has a valid right to
use and exploit the intellectual property in the Parent Proprietary Assets.
Except as set forth in Part 3.5(a) of the Parent Disclosure Schedule, neither
Parent nor any of its subsidiaries jointly owns with any other Person any Parent
Proprietary Asset (i) that Parent or any of its subsidiaries purports to own and
(ii) that is material to the business of Parent or its subsidiaries. Except as
set forth in Part 3.5(a) of the Parent Disclosure Schedule, as of December 31,
1997 there is no Parent Contract pursuant to which Parent or any of its
subsidiaries has granted any Person any right (whether or not currently
exercisable) to use, sublicense, commercially distribute or otherwise exploit
any Parent Proprietary Asset.
(b) Parent and its subsidiaries have taken commercially reasonable
measures and precautions to protect and maintain the confidentiality, secrecy
and value of the Parent Proprietary Assets (except Parent Proprietary Assets
whose value would be unimpaired by public disclosure). No current or former
officer, director, stockholder, employee, consultant or independent contractor
has any ownership right with respect to any Parent Proprietary Asset.
(c) To the Knowledge of Parent: (i) all patents, trademarks, service
marks and copyrights that are registered with any Governmental Body and held by
Parent and its subsidiaries are valid and subsisting; (ii) except as set forth
in Part 3.5(c)(ii) of the Parent Disclosure Schedule, none of the Parent
Proprietary Assets, the use thereof in Parent's and its subsidiaries' business
activities or the conduct of Parent's and its subsidiaries' business as
presently conducted by Parent and its subsidiaries infringes any
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Proprietary Asset owned or used by any other Person; and (iii) except as set
forth in Part 3.5(c)(iii) of the Parent Disclosure Schedule, no other Person is
infringing any Parent Proprietary Asset.
(d) The Parent Proprietary Assets, together with agreements for the
license to Parent or any of its subsidiaries of software generally available to
the public, constitute all the material Proprietary Assets necessary to enable
Parent and its subsidiaries to conduct their business in the manner in which
such business is currently being conducted. Except as set forth in Part 3.5(a)
of the Parent Disclosure Schedule, none of Parent or its subsidiaries has (i)
licensed any of the Parent Proprietary Assets to any Person on an exclusive
basis, or (ii) entered into any covenant not to compete or Contract limiting its
ability (A) to exploit fully any material Parent Proprietary Asset or (B) to
transact business in any market or geographical area or with any Person.
3.6 CONTRACTS.
(a) Parent has delivered or made available to the Company accurate and
complete copies of the Parent Contracts. Each Parent Contract is valid and in
full force and effect;
(b) Neither Parent nor any of its subsidiaries has violated or
breached, or committed any default under, any Parent Contract, and, to the
Knowledge of the Parent and Merger Sub, no other Person has violated or
breached, or committed any default under, any Parent Contract, except where such
violations, breaches or defaults and have not had and will not have a Material
Adverse Effect on Parent; and
(c) Neither Parent nor any of its subsidiaries has executed any
written amendments of, or waived in writing any of its material rights under,
any Parent Contract.
3.7 COMPLIANCE WITH LEGAL REQUIREMENTS. Each of Parent and its
subsidiaries is in compliance with applicable Legal Requirements, except where
the failure to comply with such Legal Requirements will not have a Material
Adverse Effect on Parent. Neither Parent nor any of its subsidiaries has
received (i) at any time since January 1, 1995 any notice or written
communication from any Governmental Body regarding any actual or possible
violation of, or failure to comply with, any Legal Requirement or (ii) prior to
January 1, 1995 any such notice or communication that remains pending. To the
Knowledge of Parent, no investigation or review of Parent or any of its
subsidiaries by any Governmental Body is pending or threatened, other than those
which would not reasonably be expected to result in a Material Adverse Effect on
Parent.
3.8 GOVERNMENTAL AUTHORIZATIONS. Parent and its subsidiaries hold the
Governmental Authorizations necessary to enable Parent and its subsidiaries to
conduct their respective businesses in the manner in which such businesses are
currently being conducted and in compliance with applicable Legal Requirements,
except where failure to hold such Governmental Authorizations will not have a
Material Adverse Effect on Parent. Such Governmental Authorizations are valid
and in full force and effect. Each of Parent and its subsidiaries is in
compliance with the terms and requirements of such Governmental Authorizations
except where failure to be in compliance will not have a Material Adverse Effect
on Parent. None of Parent or its subsidiaries has received (i) at any time
since January 1, 1995 any written notice or other written communication from any
Governmental Body regarding (a) any actual or possible violation of or failure
to comply with any term or requirement of any material Governmental
Authorization or (b) any actual or possible revocation, withdrawal, suspension,
cancellation, termination or modification of any material Governmental
Authorization or (ii) prior to January 1, 1995 any such notice or communication
that remains pending.
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3.9 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in Part 3.9 of the Parent Disclosure Schedule,
each Plan currently maintained, contributed to, or required to be contributed
to, by Parent or any of its subsidiaries or any ERISA Affiliate of Parent or any
of its subsidiaries or under which Parent or any of its subsidiaries or any
ERISA Affiliate of Parent or any of its subsidiaries have any liability
(collectively, the "Parent Plans") which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination from the IRS
covering the provisions of the Tax Reform Act of 1986 stating that such Parent
Plan is so qualified.
(b) Except as otherwise disclosed in Part 3.9 of the Parent Disclosure
Schedule:
(i) Parent and its subsidiaries and all ERISA Affiliates of Parent and
its subsidiaries are in compliance in all material respects with the provisions
of ERISA and the Code applicable to the Parent Plans. Each Parent Plan has been
maintained, operated and administered in compliance in all material respects
with its terms and any related documents or agreements and the applicable
provisions of ERISA and the Code.
(ii) No Parent Plan is subject to Title IV of ERISA and no Parent Plan
is a "multiemployer plan" as defined in Section 3(37) of ERISA.
(iii) The Parent Plans which are "employee pension benefit plans"
within the meaning of Section 3(2) of ERISA and which are intended to meet the
qualification requirements of Section 401(a) of the Code now meet, and at all
times since their inception have met, the requirements for such qualification,
and the related trusts are now, and at all times since their inception have
been, exempt from taxation under Section 501(a) of the Code.
(iv) Except for claims for benefits in the normal operation of the
Parent Plans, there is no pending or threatened audit, assessment, complaint,
proceeding or investigation of any kind in any court or governmental agency with
respect to any Parent Plan.
(v) Neither a "prohibited transaction" within the meaning of Section
406 of ERISA or Section 4975 of the Code nor any breach of any duty imposed by
Title I of ERISA has occurred with respect to any Parent Plan.
(vi) With respect to each Parent Plan that is a "group health plan"
within the meaning of ERISA Section 607(l) and that is subject to Code Section
4980B, such Parent Plan complies in all material respects with the continuation
coverage requirements of those provisions and Part 6 of Title I of ERISA.
(vii) No Parent Plan provides benefits, including, without
limitation, death or medical benefits, beyond termination of service or
retirement other than (i) coverage mandated by law, or (ii) death or retirement
benefits under a Parent Plan qualified under Code Section 401(a).
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3.10 ENVIRONMENTAL MATTERS. Parent and its subsidiaries are and have
been in compliance with all applicable Environmental Laws, except for failures
to be in compliance that would not reasonably be expected to have a Material
Adverse Effect on Parent. Parent and its subsidiaries possess all material
permits and other material Governmental Authorizations required under applicable
Environmental Laws, and Parent and its subsidiaries are and have been in
compliance with the terms and requirements of all such Governmental
Authorizations, except for failures to be in compliance that would not
reasonably be expected to have a Material Adverse Effect on Parent. Neither
Parent nor any of its subsidiaries has received or given, and to the Knowledge
of Parent, no current or prior owner of any property leased or controlled by
Parent or any of its subsidiaries has received or given any notice, citation,
summons, order, complaint, penalty, assessment, request for information, demand
or other communication (in writing) to or from any Governmental Body or other
Person regarding any actual, alleged, possible or potential material liability
or responsibility arising from or relating to the presence, generation,
manufacture, production, transportation, importation, use, treatment,
refinement, processing, handling, storage, discharge, release, emission or
disposal of any Material of Environmental Concern that has not already been paid
or fully resolved without any outstanding obligations. No Person has ever
commenced or threatened to commence any contribution action or other Legal
Proceeding against Parent or any of its subsidiaries in connection with any such
actual, alleged, possible or potential liability or responsibility.
3.11 INSURANCE. Each material insurance policy relating to the
business, assets or operations of Parent or any of its subsidiaries is in full
force and effect. Since December 31, 1995, neither Parent nor any of its
subsidiaries has received any written notice or other written communication
regarding any actual or possible (a) cancellation or invalidation of any
insurance policy, (b) refusal of any coverage or rejection of any material claim
under any insurance policy or (c) material adjustment in the amount of the
premiums payable with respect to any insurance policy. There is no pending
material claim (including any workers' compensation claim) under or based upon
any insurance policy of any of Parent or any of its subsidiaries.
3.12 LEGAL PROCEEDINGS; ORDERS.
(a) There is no pending Legal Proceeding and (to the Knowledge of
Parent) no Person has overtly threatened to commence any Legal Proceeding: (i)
that involves Parent or its subsidiaries or any of the assets owned or used by
Parent or its subsidiaries and that, if adversely decided, would have a Material
Adverse Effect on Parent; or (ii) that challenges the Merger or any of the other
transactions contemplated by this Agreement.
(b) There is no order, writ, injunction, judgment or decree to which
Parent or any of its Subsidiaries, or any assets owned or used by Parent or any
of its Subsidiaries, is subject.
3.13 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have
the corporate right, power and authority to enter into and perform their
respective obligations under this Agreement. The board of directors of Parent
(at a meeting duly called and held) has (a) determined by a unanimous vote of
the directors present that the Merger is advisable and fair and in the best
interests of Parent and its stockholders, (b) approved the execution, delivery
and performance of this Agreement by Parent (including the contemplated issuance
of Parent Common Stock in the Merger in accordance with this Agreement) and (c)
recommended the approval of the issuance of Parent Common Stock in the Merger by
the holders of Parent Common Stock and directed that approval of such issuance
be submitted for consideration by Parent's stockholders at the Parent
Stockholders' Meeting (as defined in Section 5.2). The execution, delivery and
performance by Merger Sub of this Agreement have been duly authorized by all
necessary action on the part of Merger Sub and its board of directors. Other
than the Parent Stockholders' Meeting, no other corporate proceedings are
necessary to authorize this Agreement or consummate the transactions
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contemplated hereby. This Agreement has been duly executed and delivered by
Parent and Merger Sub and constitutes the legal, valid and binding obligation of
Parent and Merger Sub, enforceable against them in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
3.14 VOTE REQUIRED. The Parent Required Vote (as hereinafter defined)
is the only vote of the holders of any class or series of Parent's capital stock
necessary to approve the issuance of the Parent Common Stock in the Merger. For
purposes of this Agreement, "Parent Required Vote" shall mean the affirmative
vote of the holders of a majority of the outstanding shares of Parent Common
Stock.
3.15 NON-CONTRAVENTION; CONSENTS. Neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of any of the
provisions of the certificate of incorporation or bylaws of Parent or any of its
subsidiaries;
(b) contravene, conflict with or result in a violation of, any Legal
Requirement or any order, writ, injunction, judgment or decree to which or any
material assets owned or used by Parent or any of its subsidiaries is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of any material Governmental Authorization that is held by
Parent or any of its subsidiaries or that otherwise relates to the business of
Parent or any of its subsidiaries or to any material assets owned or used by
Parent or any of its subsidiaries; or
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, or result in the creation of any lien with respect
to Parent's assets pursuant to, or require the giving of notice under, any
provision of any Parent Contract, except for any such violations, liens,
breaches or defaults, or failures to give notice that will not, individually or
in the aggregate, have a Material Adverse Effect on the Parent.
Except as contemplated by this Agreement or as may be required by the DGCL,
federal and state securities laws, the By-laws of the National Association of
Securities Dealers or under the HSR Act, neither Parent nor Merger Sub is or
will be required to make any filing with or give any notice to, or to obtain any
Consent from, any Person in connection with (x) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement or (y) the consummation of the Merger or any of the other transactions
contemplated by this Agreement, except where the failure to take such actions
will not have a Material Adverse Effect on Parent.
3.16 FINANCIAL ADVISOR. Except as set forth in Part 3.16 of the Parent
Disclosure Schedule, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger or
any of the other transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Merger Sub.
3.17 VALID ISSUANCE. The Parent Common Stock to be issued in the Merger
will, when issued in accordance with the provisions of this Agreement, be
validly issued, fully paid and nonassessable.
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SECTION 4. CERTAIN COVENANTS OF THE PARTIES
4.1 ACCESS AND INVESTIGATION.
(a) During the period from the date of this Agreement through the
Effective Time (the "Pre-Closing Period"), the Company shall, and shall cause
its Representatives and the Subsidiaries' Representatives to provide Parent and
Parent's Representatives with, reasonable access to the Acquired Corporations'
Representatives, personnel and assets and to all existing books, records, Tax
Returns, work papers and other documents and information relating to the
Acquired Corporations. All information obtained through such access shall be
treated as Evaluation Material under that certain letter agreement between the
Company and Parent dated September 24, 1997 (the "Company Confidentiality
Agreement").
(b) During the Pre-Closing Period, (i) Parent shall, and shall cause
its Representatives and its subsidiaries' Representatives to provide the Company
and the Company's Representatives with, reasonable access to the Parent's
Representatives, personnel and assets and to all existing books, records, Tax
Returns, work papers and other documents and information relating to Parent and
its subsidiaries and (ii) Parent shall consult with the Company in advance of,
and shall provide any information reasonably requested by the Company with
respect to, the sale, issuance or grant of shares of Parent Common Stock or
securities or rights exercisable for or convertible into shares of Parent Common
Stock (except stock options granted to employees, consultants or directors)
that, when aggregated with all such issuances since the date of this Agreement
(assuming conversion into, or exercise for, shares of Parent Common Stock of any
such securities) exceed 1,000,000 shares of Parent Common Stock (as
appropriately adjusted for any stock split, stock dividend, reverse stock split,
reclassification, recapitalization or other similar transaction). All
information obtained through such access or consultation shall be treated as
Proprietary Information under that certain letter agreement between the Company
and Parent dated November 14, 1997 (the "Parent Confidentiality Agreement").
4.2 OPERATION OF THE COMPANY'S BUSINESS.
(a) During the Pre-Closing Period: (i) the Company shall use
reasonable effort to cause each of the Acquired Corporations to conduct its
business and operations (A) in the ordinary course and (B) in material
compliance with applicable Legal Requirements and the requirements of the
Acquired Corporation Contracts; and (ii) the Company shall use reasonable
efforts to cause each of the Acquired Corporations to preserve intact its
current business organization, to keep available the services of its current
officers and employees and to maintain its relations and goodwill with all
suppliers, customers, landlords, creditors, licensors, licensees, employees and
other Persons having business relationships with the respective Acquired
Corporations.
(b) During the Pre-Closing Period, the Company shall not (without the
prior written consent of Parent, which consent shall not be unreasonably
withheld or delayed by Parent), and shall not permit the Subsidiaries to:
(i) declare, accrue, set aside or pay any dividend or make any other
distribution in respect of any shares of capital stock, or repurchase, redeem or
otherwise reacquire any shares of capital stock or other securities (excluding
transactions among the Company and the Subsidiaries);
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(ii) sell, issue, grant or authorize the issuance or grant of (i) any
capital stock or other security, (ii) any option, call, warrant or right to
acquire, or relating to, any capital stock or other security, or (iii) any
instrument convertible into or exchangeable for any capital stock or other
security (except that the Company may (1) issue up to 3,469,105 shares of
Company Common Stock upon the valid conversion of shares of outstanding Company
Preferred Stock and Company Class B Common Stock, (2) issue Company Common Stock
upon the valid exercise of Company Options outstanding as of the date of this
Agreement, (3) grant the Company Options described in Part 2.3C of the Company
Disclosure Schedule and issue shares of Company Common Stock upon exercise of
such Company Options and (4) in addition to the Company Options described in
Part 2.3C of the Company Disclosure Schedule, grant Company Options (and issue
shares of Company Common Stock upon exercise of such Company Options) in
accordance with past practices in connection with the hiring of new employees,
provided that, with respect to this clause (4) only, the aggregate of the number
of shares of Company Capital Stock (A) outstanding as of the Effective Time, (B)
issuable upon exercise of Company Options outstanding as of the Effective Time
and (C) issuable upon exercise of the Company Options described in Part 2.3C of
the Company Disclosure Schedule does not exceed the aggregate of the number of
shares of Company Capital Stock (x) outstanding as of the date of this
Agreement, (y) issuable upon exercise of Company Options outstanding as of the
date of this Agreement and (z) issuable upon exercise of the Company Options
described in Part 2.3C of the Company Disclosure Schedule); provided, however,
that any Subsidiary may conduct such a transaction with the Company;
(iii) amend or permit the adoption of any amendment to its
certificate of incorporation or bylaws or other charter or organizational
documents, or effect or become a party to any merger, consolidation, share
exchange, business combination, recapitalization, reclassification of shares,
stock split, reverse stock split or similar transaction;
(iv) enter into or become bound by, or permit any of the assets owned
or used by it to become bound by, any Acquired Corporation Contract outside the
ordinary course of business, or amend or prematurely terminate, or waive any
material right or remedy under, any Acquired Corporation Contract outside the
ordinary course of business;
(v) lend money to any Person other than travel advances to employees
of the Company not to exceed $10,000 to any individual employee, loans to
employees of the Company for the purchase of computers in accordance with the
Company's policy for such loans and in amounts not to exceed $5,000 to any
individual employee, and relocation advances to employees made in the ordinary
course of business and consistent with past practice; or incur or guarantee any
indebtedness (except that the Company may make routine borrowings in the
ordinary course of business and in accordance with prudent business practices)
or guarantee any other obligations of a third party;
(vi) establish, adopt or amend any Company Plan or other employee
benefit plan, pay any bonus or make any profit-sharing or similar payment
(except pursuant to existing Contracts, programs or Company Plan terms
consistent with past practice) to, or increase by more than 6% the amount of the
wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or employees;
(vii) change any of its methods of accounting or accounting practices
in any respect;
(viii) make any material Tax election;
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(ix) enter into any settlement of any Legal Proceeding involving
payments by an Acquired Corporation in excess of $50,000 or involving any
material asset of either of the Acquired Corporations;
(x) hire any employee or consultant where the total annual
compensation payable to such person would exceed, or in the case of a person
working on a commission or similar performance basis, would reasonably be
expected to exceed, $125,000;
(xi) acquire any equity interest in or a substantial portion of the
assets of another Entity or otherwise acquire any assets outside the ordinary
course of business;
(xii) sell, lease, license, waive, release, transfer or encumber any
of its assets outside the ordinary course of business;
(xiii) make any capital contribution to, or investment in, a third
person;
(xiv) approve or propose any Stockholder Rights Plan that would
affect the consummation of the transactions contemplated hereby;
(xv) take any action to cause any insurance policy naming any of the
Acquired Corporations as a beneficiary or a loss payee to be canceled or
terminated;
(xvi) acquire or agree to acquire by merging or consolidating with,
or by purchasing or agreeing to purchase any assets or equity securities of, or
by any other manner, any business or any Entity or division thereof;
(xvii) terminate or amend the terms of any employment agreement with
any executive officer of the Company or terminate the employment of any such
executive officer (excluding terminations for "cause" as defined in an
employment agreement); or
(xviii) agree or commit to take any of the actions described in
clauses "(i)" through "(xvii)" of this Section 4.2(b).
(c) Notwithstanding anything to the contrary contained in this Section
4.2, the Company shall not be required under this Section 4.2 to take any
action, or refrain from acting in a manner, that would cause the Company to
violate the HSR Act.
4.3 OPERATION OF PARENT'S BUSINESS.
(a) During the Pre-Closing Period: (i) Parent shall use reasonable
effort to cause Parent and each of its subsidiaries to conduct its business and
operations (A) in the ordinary course and (B) in material compliance with
applicable Legal Requirements and the requirements of the Parent Contracts; and
(ii) Parent shall use reasonable efforts to cause Parent and each of its
subsidiaries to preserve intact its current business organization, to keep
available the services of its current officers and employees and to maintain its
relations and goodwill with all suppliers, customers, landlords, creditors,
licensors, licensees, employees and other Persons having business relationships
with Parent and its subsidiaries.
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(b) During the Pre-Closing Period, Parent shall not (without the prior
written consent of the Company, which consent shall not be unreasonably withheld
or delayed by the Company), and shall not permit its subsidiaries to:
(i) declare, accrue, set aside or pay any dividend or make any other
distribution in respect of any shares of capital stock, or repurchase, redeem or
otherwise reacquire any shares of capital stock or other securities (excluding
transactions among Parent and its subsidiaries);
(ii) sell, issue or grant shares of Parent Common Stock or securities
or rights exercisable for or convertible into shares of Parent Common Stock
(except stock options to employees, consultants or directors) that, when
aggregated with all such issuances since the date of this Agreement (assuming
conversion into, or exercise for, shares of Parent Common Stock of any such
securities) exceed 2,500,000 shares of Parent Common Stock (as appropriately
adjusted for any stock split, stock dividend, reverse stock split,
reclassification, recapitalization or other similar transaction);
(iii) materially amend or permit the adoption of any material
amendment to its certificate of incorporation or bylaws;
(iv) change any of its methods of accounting or accounting practices
in any respect;
(v) expend more than $15,000,000 of funds in a single transaction, or
more than an aggregate of $25,000,000 of funds in a series of transactions, in
connection with any capital contribution to, investment in, or acquisition of
all or any portion of the equity securities or assets of any Entity;
(vi) approve or propose any Stockholder Rights Plan that would affect
the consummation of the transactions contemplated hereby; or
(vii) agree or commit to take any of the actions described in clauses
"(i)" through "(vi)" of this Section 4.3(b).
(c) Notwithstanding anything to the contrary contained in this Section
4.3, Parent shall not be required under this Section 4.3 to take any action, or
refrain from acting in a manner, that would cause Parent to violate the HSR Act.
4.4 NO SOLICITATION.
(a) The Acquired Corporations and the Acquired Corporations'
Representatives shall not directly or indirectly (i) solicit, initiate,
encourage or induce the making, submission or announcement of any Company
Acquisition Proposal, (ii) furnish any nonpublic information regarding any of
the Acquired Corporations to any Person in connection with or in response to a
Company Acquisition Proposal, (iii) negotiate or engage in discussions with any
Person with respect to any Company Acquisition Proposal, (iv) approve, endorse
or recommend any Company Acquisition Transaction or (v) enter into any letter of
intent or Contract contemplating or otherwise relating to any Company
Acquisition Proposal; provided, however, that notwithstanding any other
provision hereof, the Company may (i) at any time prior to the time the
Company's stockholders shall have voted to approve this Agreement, engage in
discussions or negotiations with a third party who (without any solicitation,
initiation, encouragement, discussion or negotiations, directly or indirectly,
by or with the Company or its Representatives after the date hereof) seeks to
initiate
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such discussions or negotiations and may furnish such third party information
concerning the Company and its business, properties and assets if, and only to
the extent that, (A)(x) the third party has first made a Company Acquisition
Proposal that is financially superior to the terms hereof and has demonstrated
that financing for the Company Acquisition Proposal is reasonably likely to be
obtained (as determined in good faith by the Company's Board of Directors after
consultation with its financial advisors) and (y) the Company's Board of
Directors shall conclude in good faith, after considering applicable provisions
of state law, on the basis of oral or written advice of outside counsel that
failing to take such action would result in substantial likelihood of liability
for breach of the Company's Board of Directors' fiduciary duties under
applicable law and (B) prior to furnishing such information to or entering into
discussions or negotiations with such person or entity, the Company (x) provides
prompt notice to Parent to the effect that it is planning to furnish information
to or enter into discussions or negotiations with such person or entity and (y)
receives from such Person an executed confidentiality agreement in reasonably
customary form on terms not in the aggregate materially more favorable to such
Person than the terms contained in the Company Confidentiality Agreement, and
(ii) accept a Company Acquisition Proposal from a third party, provided the
Company first terminates this Agreement pursuant to Section 8.1(f). Except as
may be restricted by the terms of Contracts entered into by the Company prior to
the date of this Agreement, the Company shall notify Parent orally and in
writing of any such inquiries, offers or proposals received after the date of
this Agreement (including, without limitation, the terms and conditions of any
such proposal and the identity of the person making it), within 24 hours of the
receipt thereof, shall keep Parent informed of the status and details of any
such inquiry, offer or proposal.
(b) The Company shall immediately cease and cause to be terminated any
existing discussions or negotiations with any Person that relate to any Company
Acquisition Proposal. Notwithstanding anything to the contrary contained in
this Agreement, the Company may give a copy of Sections 4.4(a), 4.4(b) and 5.2
to any Person who submits an unsolicited bona fide written Company Acquisition
Proposal to the Company.
(c) Parent its subsidiaries and Parents' and its subsidiaries'
Representatives shall not directly or indirectly (i) solicit, initiate,
encourage or induce the making, submission or announcement of any Parent
Acquisition Proposal, (ii) furnish any nonpublic information regarding Parent or
any of its subsidiaries to any Person in connection with or in response to a
Parent Acquisition Proposal, (iii) negotiate or engage in discussions with any
Person with respect to any Parent Acquisition Proposal, (iv) approve, endorse
or recommend any Parent Acquisition Transaction or (v) enter into any letter of
intent or Contract contemplating or otherwise relating to any Parent Acquisition
Proposal; provided, however, that notwithstanding any other provision hereof,
Parent may take such actions if (A) Parent's Board of Directors shall conclude
in good faith, after considering applicable provisions of state law, on the
basis of oral or written advice of outside counsel that failing to take such
action would result in substantial likelihood of liability for breach of
Parent's Board of Directors' fiduciary duties under applicable law and (B) prior
to furnishing such information to or entering into discussions or negotiations
with such person or entity, Parent (x) provides prompt notice to the Company to
the effect that it is planning to furnish information to or enter into
discussions or negotiations with such person or entity and (y) receives from
such Person an executed confidentiality agreement in reasonably customary form
on terms not in the aggregate materially more favorable to such Person than the
terms contained in Parent Confidentiality Agreement. Except as may be
restricted by the terms of contracts entered into by Parent prior to the date of
this Agreement, Parent shall notify the Company orally and in writing of any
such inquiries, offers or proposals received after the date of this Agreement
(including, without limitation, the terms and conditions of any such proposal
and the identity of the person making it), within 24 hours of the receipt
thereof, shall keep the Company informed of the status and details of any such
inquiry, offer or proposal.
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(d) Parent shall immediately cease and cause to be terminated any
existing discussions or negotiations with any Person that relate to any Parent
Acquisition Proposal. Notwithstanding anything to the contrary contained in
this Agreement, Parent may give a copy of Sections 4.4(c), 4.4(d) and 5.2 to any
Person who submits an unsolicited bona fide written Parent Acquisition Proposal
to Parent.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 REGISTRATION STATEMENT; JOINT PROXY STATEMENT.
(a) As promptly as practicable after the date of this Agreement, the
Company and Parent shall prepare and cause to be filed with the SEC the Form S-4
Registration Statement, together with the Joint Proxy Statement and any other
documents required by the Securities Act or the Exchange Act in connection with
the Merger. Each of Parent and the Company shall use all reasonable efforts to
cause the Form S-4 Registration Statement (including the Joint Proxy Statement)
to comply with the rules and regulations promulgated by the SEC, to respond
promptly to any comments of the SEC or its staff and to have the Form S-4
Registration Statement declared effective under the Securities Act as promptly
as practicable after it is filed with the SEC. Parent will use all reasonable
efforts to cause the Joint Proxy Statement to be mailed to Parent's
stockholders, and the Company will use all reasonable efforts to cause the Joint
Proxy Statement to be mailed to the Company's stockholders, as promptly as
practicable after the Form S-4 Registration Statement is declared effective
under the Securities Act. Each of the Company and Parent shall promptly furnish
to the other all information that may be required or reasonably requested in
connection with any action contemplated by this Section 5.1. Each of the
Company and Parent shall notify the other promptly of the receipt of any
comments from the SEC or its staff and of any request by the SEC or its staff
for any amendment or supplement to the Form S-4 Registration Statement or Joint
Proxy Statement or for any other information and shall supply the other with
copies of all correspondence between such party and the SEC or its staff or
other governmental officials with respect to the Form S-4 Registration Statement
or Joint Proxy Statement. The information supplied by each of Parent and the
Company for inclusion in the Form S-4 Registration Statement and the Joint Proxy
Statement shall not (i) at the time the Form S-4 Registration Statement is
declared effective, (ii) at the time the Joint Proxy Statement is first mailed
to the stockholders of Parent and the Company, (iii) at the time of the Company
Stockholders' Meeting and at the time of the Parent Stockholders' Meeting, and
(iv) at the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. If Parent or the Company becomes aware of any
information that should be disclosed in an amendment or supplement to the Form
S-4 Registration Statement or the Joint Proxy Statement, then Parent or the
Company, as the case may be, shall promptly inform the Company or Parent thereof
and shall cooperate with the other in filing such amendment or supplement with
the SEC and, if appropriate, in mailing such amendment or supplement to the
stockholders of the Company and Parent.
(b) Prior to the Effective Time, Parent shall use reasonable efforts
to obtain all regulatory approvals needed to ensure that the Parent Common Stock
to be issued in the Merger will be qualified under the securities law of every
jurisdiction of the United States in which any registered holder of Company
Capital Stock has an address of record on the record date for determining the
stockholders entitled to notice of and to vote on the Merger.
5.2 STOCKHOLDERS' MEETINGS.
(a) Subject to the fiduciary duties of the directors of Company, (i)
the Company shall take all action necessary under all applicable Legal
Requirements to call, give notice of, convene and hold a
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meeting of the holders of Company Common Stock and Company Preferred Stock (the
"Company Stockholders' Meeting") to consider, act upon and vote upon the
adoption of this Agreement and approval of the Merger and (ii) the Board of
Directors of the Company shall recommend that the Company's stockholders vote in
favor of and adopt and approve this Agreement and the Merger at the Company
Stockholders' Meeting.
(b) Subject to the fiduciary duties of the directors of Parent, (i)
Parent shall take all action necessary under all applicable Legal Requirements
to call, give notice of, convene and hold a meeting of the holders of Parent
Common Stock (the "Parent Stockholders' Meeting") to consider, act upon and vote
upon the issuance of Parent Common Stock in the Merger and (ii) the Board of
Directors of Parent shall recommend that Parent's stockholders vote in favor of
the issuance of Parent Common Stock in the Merger at the Parent Stockholders'
Meeting.
(c) The Company and Parent shall coordinate the timing of the Company
Stockholders' Meeting and the Parent Stockholders' Meeting and shall use their
best efforts to hold such meetings on the same day and within forty-five (45)
days after the Form S-4 Registration Statement is declared effective under the
Securities Act.
5.3 REGULATORY APPROVALS. The Company and Parent shall use all
reasonable efforts to file as soon as practicable after the date of this
Agreement all notices, reports and other documents required by law to be filed
with any Governmental Body with respect to the Merger and the other transactions
contemplated by this Agreement and to submit promptly any additional information
requested by any such Governmental Body. Without limiting the generality of the
foregoing, the Company and Parent shall, promptly after the date of this
Agreement, prepare and file the notifications required under the HSR Act in
connection with the Merger. The Company and Parent shall respond as promptly as
practicable to (i) any inquiries or requests received from the Federal Trade
Commission or the Department of Justice for additional information or
documentation and (ii) any inquiries or requests received from any state
attorney general or other Governmental Body in connection with antitrust or
related matters. Each of the Company and Parent shall (i) give the other party
prompt notice of the commencement of any material Legal Proceeding by or before
any court or other Governmental Body with respect to the Merger or any of the
other transactions contemplated by this Agreement, (ii) keep the other party
informed as to the status of any such Legal Proceeding and (iii) except as may
be prohibited by any Governmental Body or by any Legal Requirement, permit the
other party to be present at each meeting or conference relating to any such
Legal Proceeding and to have access to and be consulted in connection with any
document filed with or provided to any Governmental Body in connection with any
such Legal Proceeding.
5.4 STOCK OPTIONS. At the Effective Time, all rights with respect to
Company Common Stock under each Company Option then outstanding shall be
converted into and become rights with respect to Parent Common Stock, and Parent
shall assume each such Company Option in accordance with the terms (as in effect
as of the date of this Agreement) of the stock option plan under which it was
issued and the stock option agreement by which it is evidenced. From and after
the Effective Time, (i) each Company Option assumed by Parent may be exercised
solely for shares of Parent Common Stock, (ii) the number of shares of Parent
Common Stock subject to each such Company Option shall be equal to the number of
shares of Company Common Stock subject to such Company Option immediately prior
to the Effective Time multiplied by the Exchange Ratio, rounding down to the
nearest whole share (with cash, less the applicable exercise price (as adjusted
as set forth in clause "(iii)" of this sentence), being payable for any fraction
of a share), (iii) the per share exercise price under each such Company Option
shall be adjusted by dividing the per share exercise price under such Company
Option by the Exchange Ratio and rounding up to the nearest hundredth of a cent
and (iv) any restriction on the exercise of any such Company Option shall
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continue in full force and effect and the term, exercisability, vesting schedule
and other provisions of such Company Option shall otherwise remain unchanged;
provided, however, that each Company Option assumed pursuant to this Section
5.4(a) shall, in accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, stock dividend, reverse stock split,
reclassification, recapitalization or other similar transaction subsequent to
the Effective Time. After the Effective Time, Parent will deliver to each
holder of an outstanding Company Option a notice describing the assumption of
such Company Option. Parent agrees to file with the SEC a Registration
Statement on Form S-8 relating to the shares of Parent Common Stock issuable
with respect to the assumed Company Options no later than the business day
immediately following the Closing Date.
5.5 INDEMNIFICATION OF OFFICERS AND DIRECTORS.
(a) From and after the Effective Time and for a period of six years
thereafter, (i) Parent shall, and shall cause the Surviving Corporation to,
fulfill and honor in all respects the rights of present and former directors,
officers and employees of Parent and the Company (the "Indemnified Parties"),
respectively, to be indemnified and held harmless as provided for in the
Certificate of Incorporation, By-laws and indemnity agreements of Parent and the
Company as in effect on the date of this Agreement, with respect to acts and
omissions occurring prior to the Effective Time, and (ii) Parent shall, and
shall cause the Surviving Corporation to, indemnify the directors and officers
of Parent and the Surviving Corporation, respectively, to the fullest extent
permitted by their respective certificates of incorporation and by-laws and by
applicable law.
(b) For six years after the Effective Time, Parent shall cause to be
maintained the current policies of the officers' and directors' liability
insurance maintained by the Company and Parent covering persons who are
presently covered by the Company's and Parent's officers' and directors'
liability insurance policies with respect to actions and omissions occurring
prior to the Effective Time to the extent available; provided, that policies
with third party insurers of similar or better A.M. Best rating of at least the
same coverage containing terms and conditions that are not less advantageous to
the insured may be substituted therefor; provided, further, that in no event
shall Parent be required to maintain or procure insurance coverage pursuant to
this Section 5.5 for an amount per annum in excess of 150% of the current annual
premiums with respect to each such policy; provided, however, that if the annual
premiums of such insurance coverage exceed such amount, Parent shall obtain or
cause to be obtained policies with the best coverage available for a cost not
exceeding such amount.
(c) Parent shall bear and pay, and shall reimburse the Indemnified
Parties for, all costs and expenses, including attorneys' fees, that may be
incurred by the Indemnified Parties in seeking to enforce their rights against
Parent and the Surviving Corporation under this Section 5.5.
(d) This Section 5.5 shall survive the consummation of the Merger and
the Effective Time, is intended to benefit and may be enforced by the
Indemnified Parties and their respective heirs, successors and assigns and shall
be binding on Parent and the Surviving Corporation and their respective
successors and assigns.
5.6 POOLING OF INTERESTS; TAX FREE REORGANIZATION. Each of the Company
and Parent agrees (i) not to take any action during the Pre-Closing Period that
would adversely affect the ability of Parent to account for the Merger as a
"pooling of interests," and (ii) to use commercially reasonable efforts to
attempt to ensure that none of its "affiliates" (as that term is used in Rule
145 promulgated under the Securities Act) takes any action that could adversely
affect the ability of Parent to account for the Merger as a "pooling of
interests." Parent and the Company shall use all commercially reasonable
efforts prior to
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the Effective Time to cause the Merger to qualify as a tax free reorganization
under Section 368(a)(1) of the Code.
5.7 ADDITIONAL AGREEMENTS. Each party to this Agreement (i) shall make
all filings (if any) and give all notices (if any) required to be made and given
by such party in connection with the Merger and the other transactions
contemplated by this Agreement, and (ii) shall use reasonable efforts to obtain
each Consent (if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
Merger or any of the other transactions contemplated by this Agreement. Each
party shall promptly deliver to the other party a copy of each such filing made,
each such notice given and each such Consent obtained during the Pre-Closing
Period.
5.8 DISCLOSURE.
(a) The Company shall not, and shall not permit any of its
Representatives to, issue any press release or otherwise publicly disseminate
any document or other written material relating to the Merger or any of the
other transactions contemplated by this Agreement unless (i) Parent shall have
approved such press release or written material (it being understood that Parent
shall not unreasonably withhold its approval of any such press release or
written material), or (ii) the Company shall have been advised by its outside
legal counsel that the issuance of such press release or the dissemination of
such written material is required or advisable by any applicable law or
regulation, and the Company shall have consulted with Parent prior to issuing
such press release or disseminating such written material. The Company shall use
reasonable efforts to ensure that none of its Representatives makes any public
statement that is materially inconsistent with any press release issued or any
written material publicly disseminated by the Company with respect to the Merger
or with respect to any of the other transactions contemplated by this Agreement.
(b) Parent shall not, and shall not permit any of its Representatives
to, issue any press release or otherwise publicly disseminate any document or
other written material relating to the Merger or any of the other transactions
contemplated by this Agreement unless (i) the Company shall have approved such
press release or written material (it being understood that the Company shall
not unreasonably withhold its approval of any such press release or written
material), or (ii) Parent shall have been advised by its outside legal counsel
that the issuance of such press release or the dissemination of such written
material is required or advisable by any applicable law or regulation, and
Parent shall have consulted with the Company prior to issuing such press release
or disseminating such written material; provided, however, that Parent shall be
entitled to file with the SEC, after the execution and delivery of this
Agreement, a Report on Form 8-K, together with a copy of this Agreement
(including the exhibits hereto) and the press release (which shall have been
approved by the Company) announcing this Agreement. Parent shall use reasonable
efforts to ensure that none of its Representatives makes any public statement
that is materially inconsistent with any press release issued or any written
material publicly disseminated by Parent with respect to the Merger or with
respect to any of the other transactions contemplated by this Agreement.
5.9 AFFILIATE AGREEMENTS. The Company shall use reasonable efforts to
cause each Person who is or becomes an "affiliate" (as that term is used in Rule
145 promulgated under the Securities Act) of the Company to execute and deliver
to Parent, prior to the date of the mailing of the Proxy Statement to the
Company's stockholders, an Affiliate Agreement in the form of Exhibit B. Parent
shall use reasonable efforts to cause each of Parent's "affiliates" (as that
term is used in Rule 145 promulgated under the Securities Act) to execute and
deliver to Parent, at least 30 days prior to the date on which the Merger
becomes effective, an "affiliate letter" in customary form relating to "pooling
of interests" accounting requirements.
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5.10 TAX MATTERS. At or prior to the Closing, the Company and Parent
shall execute and deliver to Dechert Price & Rhoads and to Cooley Godward LLP
appropriate tax representation letters in the form of Exhibit E (which will be
used in connection with the legal opinions contemplated by Sections 6.5(f) and
7.5(e)). Parent and the Company shall use all reasonable efforts to cause the
Merger to qualify as a tax free reorganization under Section 368(a)(1) of the
Code.
5.11 PARENT PLANS AND BENEFIT ARRANGEMENTS. Any pre-existing condition
limitations contained in any Parent Plans under which any Continuing Employee
otherwise becomes eligible to receive benefits and who would be deemed under
such Parent Plans to have a disqualifying pre-existing condition will be waived,
to the extent such condition was covered by a Company Plan immediately prior to
the Effective Time. For purposes of determining the eligibility and vesting of
Continuing Employees under the Parent Plans, each Continuing Employee (who
otherwise becomes eligible under the Parent Plans) shall be given full credit
under the Parent Plans for such Continuing Employee's period of service with the
Company prior to the Effective Time which was recognized under the Company Plans
prior to the Effective Time. For purposes of this Section 5.11 "Continuing
Employee" shall mean any employee of the Company who continues as an employee of
the Surviving Corporation or Parent after the Effective Time.
5.12 NASDAQ QUOTATION. Parent shall use reasonable efforts to cause the
shares of Parent Common Stock being issued in the Merger to be approved for
quotation on Nasdaq.
5.13 RESIGNATION OF DIRECTORS. The Company shall use reasonable efforts
to obtain and deliver to Parent prior to the Closing the resignation of each
director of the Company.
5.14 ELECTION TO BOARD OF DIRECTORS. At the Effective Time, the
Parent's board of directors shall consist of not more than nine members and
Michael Savage and one other director of the Company that is reasonably
acceptable to Parent will be elected to the Parent's board of directors. One of
the two individuals shall be a Class I director of Parent and the other shall be
a Class II director of Parent.
5.15 FIRPTA MATTERS. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasury Regulations, and (b) the Company shall deliver to the
Internal Revenue Service the notification required under Section 1.897 - 2(h)(2)
of the United States Treasury Regulations.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
6.1 ACCURACY OF REPRESENTATIONS. The representations and warranties of
the Company set forth in this Agreement shall have been accurate when made and
shall be accurate as of the Closing Date as if made on and as of the Closing
Date, except, in any and all respects under this Section 6.1, for
representations and warranties that expressly speak only as of a specific date
or time which need only be accurate as of such date or time (it being understood
that, for purposes of determining the accuracy of such representations and
warranties in any and all respects under this Section 6.1, inaccuracies that
would not, individually or in the aggregate, have a Material Adverse Effect on
the Acquired Corporations shall be disregarded).
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6.2 PERFORMANCE OF COVENANTS. All of the covenants that the Company is
required to comply with or to perform under this Agreement at or prior to the
Closing shall have been complied with and performed in all material respects.
6.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The Form S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with respect
to the Form S-4 Registration Statement.
6.4 STOCKHOLDER APPROVAL. This Agreement shall have been duly adopted
and the Merger shall have been duly approved by the Company Required Vote and
the issuance of Parent Common Stock in the Merger shall have been approved by
the Parent Required Vote.
6.5 AGREEMENTS AND DOCUMENTS. Parent shall have received the following
documents, each of which shall be in full force and effect:
(a) Affiliate Agreements in the form of Exhibit B, executed by each
Person who is reasonably determined by the Company to be an "affiliate" of the
Company (as that term is used in Rule 145 promulgated under the Securities Act);
(b) the statement referred to in Section 5.15(a), executed by the
Company;
(c) a letter from Arthur Andersen LLP, dated as of the Closing Date
and addressed to the Company, reasonably satisfactory in form and substance to
Parent and Ernst & Young LLP, to the effect that, after reasonable
investigation, Arthur Andersen LLP concurs with Company's management's
conclusion that the Company could be a combining entity in a transaction
accounted for as a "pooling of interests" in accordance with generally accepted
accounting principles, Accounting Principles Board Opinion No. 16 and all
published rules, regulations and policies of the SEC;
(d) a letter from Ernst & Young LLP, dated as of the Closing Date and
addressed to Parent, reasonably satisfactory in form and substance to Parent and
Arthur Andersen LLP, regarding such firm's concurrence with Parent's
management's conclusions as to the appropriateness of "pooling of interests" in
accordance with generally accepted accounting principles, Accounting Principles
Board Opinion No. 16 and all published rules, regulations and policies of the
SEC;
(e) a legal opinion of Cooley Godward LLP, dated as of the Closing
Date, in the form attached hereto as Exhibit C; provided, however, that such
opinion may reflect changes or exceptions that, considered collectively, would
not have a material adverse effect on the consummation of the transactions
contemplated hereby and have not had and would not reasonably be expected to
have a Material Adverse Effect on the Acquired Corporations taken as a whole.
(f) a legal opinion of Dechert Price & Rhoads, dated as of the Closing
Date, to the effect that the Merger will constitute a reorganization within the
meaning of Section 368 of the Code. In rendering such opinion, such firm may
rely on such representations, warranties and certificates as it deems reasonable
or appropriate under the circumstances.
6.6 QUOTATION. The shares of Parent Common Stock to be issued in the Merger
shall have been approved for quotation on Nasdaq.
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6.7 NO RESTRAINTS. No temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the Merger shall have
been issued by any court of competent jurisdiction and remain in effect, and
there shall not be any U.S. federal or state law or regulation enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal. Other
than the filing of a Certificate of Merger with the Secretary of State of the
State of Delaware, all authorizations, consents, waivers, orders or approvals
of, or declarations or filing with, any Governmental Body, the failure of which
to obtain or make would have a Material Adverse Effect on Parent or the
Surviving Corporation, shall have been obtained or made. Parent shall have
received all state securities or "blue sky" permits and other authorizations, if
any, necessary to issue the shares of Parent Common Stock pursuant to this
Agreement.
6.8 HSR ACT. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
6.9 MATERIAL ADVERSE CHANGE. No Material Adverse Change shall have
occurred with respect to the Company.
6.10 COMPLIANCE CERTIFICATE. Parent shall have received a certificate, duly
executed by an executive officer of the Company, certifying that the conditions
set forth in Sections 6.1 and 6.2 have been satisfied.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS. The representations and warranties of
Parent and Merger Sub set forth in this Agreement shall have been accurate when
made and shall be accurate as of the Closing Date as if made on and as of the
Closing Date, except, in any and all respects under this Section 7.1, for
representations and warranties that expressly speak only as of a specific date
or time which need only be true and correct as of such date or time (it being
understood that, for purposes of determining the accuracy of such
representations and warranties in any and all respects under this Section 7.1,
inaccuracies that would not, individually or in the aggregate, have a Material
Adverse Effect on Parent shall be disregarded).
7.2 PERFORMANCE OF COVENANTS. All of the covenants that Parent or Merger
Sub is required to comply with or to perform under this Agreement at or prior to
the Closing shall have been complied with and performed in all material
respects.
7.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The Form S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with respect
to the Form S-4 Registration Statement.
7.4 STOCKHOLDER APPROVAL. This Agreement shall have been duly adopted and
the Merger shall have been duly approved by the Company Required Vote and the
issuance of Parent Common Stock in the Merger shall have been approved by the
Parent Required Vote.
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7.5 AGREEMENTS AND DOCUMENTS. The Company shall have received the following
documents, each of which shall be in full force and effect:
(a) Affiliate letters as described in Section 5.9 of this Agreement,
executed by each Person who is reasonably determined by Parent to be an
"affiliate" of Parent (as that term is used in Rule 145 promulgated under the
Securities Act);
(b) a letter from Arthur Andersen LLP, dated as of the Closing Date
and addressed to the Company, reasonably satisfactory in form and substance to
the Company and Ernst & Young LLP, to the effect that, after reasonable
investigation, Arthur Andersen LLP concurs with Company's management's
conclusion that the Company could be a combining entity in a transaction
accounted for as a "pooling of interests" in accordance with generally accepted
accounting principles, Accounting Principles Board Opinion No. 16 and all
published rules, regulations and policies of the SEC;
(c) a letter from Ernst & Young LLP, dated as of the Closing Date and
addressed to Parent, reasonably satisfactory in form and substance to the
Company and Arthur Andersen LLP, regarding such firm's concurrence with Parent's
management's conclusions as to the appropriateness of a "pooling of interests"
in accordance with generally accepted accounting principles, Accounting
Principles Board Opinion No. 16 and all published rules, regulations and
policies of the SEC;
(d) a legal opinion of Dechert Price & Rhoads, dated as of the Closing
Date, in the form attached hereto as Exhibit D; provided, however, that such
opinion may reflect changes or exceptions that, considered collectively, would
not have a material adverse effect on the consummation of the transactions
contemplated hereby and have not had and would not reasonably be expected to
have a Material Adverse Effect on Parent; and
(e) a legal opinion of Cooley Godward LLP, dated as of the Closing
Date, to the effect that the Merger will constitute a reorganization within the
meaning of Section 368 of the Code. In rendering such opinion, such firm may
rely on such representations, warranties and certificates as it deems reasonable
or appropriate under the circumstances.
7.6 QUOTATION. The shares of Parent Common Stock to be issued in the Merger
shall have been approved for quotation on Nasdaq.
7.7 NO RESTRAINTS. No temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the Merger by the
Company shall have been issued by any court of competent jurisdiction and remain
in effect, and there shall not be any U.S. federal or state law or regulation
enacted or deemed applicable to the Merger that makes consummation of the Merger
by the Company illegal. Other than the filing of a Certificate of Merger with
the Secretary of State of the State of Delaware, all authorizations, consents,
waivers, orders or approvals of, or declarations or filing with, any
Governmental Body, the failure of which to obtain or make would have a Material
Adverse Effect on Parent or the Surviving Corporation shall have been obtained
or made.
7.8 HSR ACT. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
7.9 MATERIAL ADVERSE CHANGE. No Material Adverse Change shall have occurred
with respect to Parent.
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7.10 COMPLIANCE CERTIFICATE. The Company shall have received a certificate,
duly executed by an executive officer of Parent, certifying that the conditions
set forth in Sections 7.1 and 7.2 have been satisfied.
SECTION 8. TERMINATION
8.1 TERMINATION. This Agreement may be terminated prior to the Effective
Time, whether before or after approval of the Merger by the stockholders of the
Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated by July 1, 1998 (unless the failure to consummate the Merger is
attributable to a failure on the part of the party seeking to terminate this
Agreement to perform any material obligation required to be performed by such
party at or prior to the Effective Time);
(c) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Body shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger;
(d) by either Parent or the Company if the Company Stockholders'
Meeting shall have been held and this Agreement and the Merger shall not have
been adopted and approved at such meeting by the Company Required Vote;
provided, however, that (1) Parent shall not be permitted to terminate this
Agreement pursuant to this Section 8.1(d) if the failure of the Company's
stockholders to adopt and approve this Agreement and the Merger at the Company
Stockholders' Meeting is attributable to a failure on the part of Parent to
perform any material obligation required to have been performed by Parent under
this Agreement and (2) the Company shall not be permitted to terminate this
Agreement pursuant to this Section 8.1(d) if the failure of the Company's
stockholders to adopt and approve this Agreement and the Merger at the Company
Stockholders' Meeting is attributable to a failure on the part of the Company to
perform any material obligation required to have been performed by the Company
under this Agreement;
(e) by either Parent or the Company if the Parent Stockholders'
Meeting shall have been held and the issuance of Parent Common Stock in the
Merger shall not have been approved at such meeting by the Parent Required Vote;
provided, however, that (1) the Company shall not be permitted to terminate this
Agreement pursuant to this Section 8.1(e) if the failure of the Parent's
stockholders to approve the issuance of Parent Common Stock in the Merger at the
Parent Stockholders' Meeting is attributable to a failure on the part of the
Company to perform any material obligation required to have been performed by
the Company under this Agreement and (2) Parent shall not be permitted to
terminate this Agreement pursuant to this Section 8.1(e) if the failure of
Parent's stockholders to approve the issuance of Parent Common Stock in the
Merger at the Parent Stockholders' Meeting is attributable to a failure on the
part of Parent to perform any material obligation required to have been
performed by Parent under this Agreement;
(f) by either Parent or the Company if the Company or any committee of
the Company's Board of Directors (1) shall withdraw or modify in any adverse
manner its approval or recommendation of this Agreement or the transactions
contemplated hereby, (2) shall approve or recommend any merger or acquisition of
the Company or a material portion of its assets, or any tender offer for shares
of Company Capital Stock, in each case, other than by Parent or an affiliate of
Parent or (3) shall resolve to take any of the actions specified in the
foregoing clauses (1) or (2);
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(g) by either Parent or the Company if Parent or any committee of
Parent's Board of Directors (1) shall withdraw or modify in any adverse manner
its approval or recommendation of this Agreement or the transactions
contemplated hereby, (2) shall approve or recommend any merger or acquisition of
the Parent or a material portion of its assets, or any tender offer for shares
of Parent Common Stock, or (3) shall resolve to take any of the actions
specified in the foregoing clauses (1) or (2);
(h) by Parent, following a breach of any representation, warranty or
covenant of the Company set forth in this Agreement, in any such case such that
the condition set forth in Section 6.1 or Section 6.2 would not be satisfied as
of the time of such breach, provided, that if such breach in such
representation, warranty or covenant is curable by the Company through the
exercise of reasonable efforts within 45 days after the time of such breach,
then Parent may not terminate this Agreement under this Section 8.1(h) during
such 45-day period provided the Company continues to exercise such reasonable
efforts and Parent may not, in any event, terminate this Agreement under this
Section 8.1(h) as a result of such breach if such breach shall have been cured
in all material respects; and provided further, that Parent may not terminate
this Agreement pursuant to this Section 8.1(h) if it shall have willfully and
materially breached this Agreement; or
(i) by the Company, following a breach of any representation, warranty
or covenant of Parent set forth in this Agreement, in any such case such that
the condition set forth in Section 7.1 or Section 7.2 would not be satisfied as
of the time of such breach, provided that if such breach in such representation,
warranty or covenant is curable by Parent through the exercise of reasonable
efforts within 45 days after the time of such breach, then the Company may not
terminate this Agreement under this Section 8.1(i) during such 45-day period
provided Parent continues to exercise such reasonable efforts and the Company
may not, in any event, terminate this Agreement under this Section 8.1(i) as a
result of such breach if such breach shall have been cured in all material
respects; and, provided further, that the Company may not terminate this
Agreement pursuant to this Section 8.1(i) if it shall have willfully and
materially breached this Agreement.
8.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 8.1, this Agreement shall be of no further
force or effect; provided, however, that (i) this Section 8.2, Section 8.3,
Section 4.1 and Section 9 shall survive the termination of this Agreement and
shall remain in full force and effect, and (ii) the termination of this
Agreement shall not relieve any party from any liability for any willful and
knowing breach of this Agreement.
8.3 TERMINATION FEE; EXPENSES.
(a) If this Agreement is terminated by Parent or the Company pursuant
to Section 8.1(d), then the Company shall pay to Parent, in cash, a
nonrefundable fee in the amount of $1,750,000. If this Agreement is terminated
by Parent or the Company pursuant to Section 8.1(e), then Parent shall pay to
the Company, in cash, a nonrefundable fee in the amount of $1,750,000. If this
Agreement is terminated by Parent or the Company pursuant to Section 8.1(f),
then the Company shall pay to Parent, in cash, a nonrefundable fee in the amount
of $3,000,000. If this Agreement is terminated by Parent or the Company
pursuant to Section 8.1(g), then Parent shall pay to the Company, in cash, a
nonrefundable fee in the amount of $3,000,000.
(b) If this Agreement is terminated by Parent pursuant to Section
8.1(h), then the Company shall pay Parent, in cash, a nonrefundable fee equal to
120% of Parent's out-of-pocket legal and accounting costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby. If
this Agreement is terminated by the Company pursuant to Section 8.1(i), then
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Parent shall pay the Company, in cash, a nonrefundable fee equal to 120% of the
Company's out-of-pocket legal and accounting costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby.
(c) Any termination payment required under Section 8.3 shall be made
within three (3) business days after termination of this Agreement.
(d) The payments called for by this Section 8.3 shall not be deemed to
be liquidated damages, and shall be in addition to any rights or remedies at
law or equity arising out of a breach of the obligations set forth in this
Agreement.
(e) The Company and Parent shall each bear and pay 50% of all filing
fees required to be paid to a Governmental Body under the HSR Act in connection
with the transactions contemplated by this Agreement, if any, and all filing
fees required to be paid to the SEC in connection with the filing of the Form S-
4 Registration Statement.
(f) Except as otherwise provided by this Section 8.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses, whether or not the Merger is consummated.
SECTION 9. MISCELLANEOUS PROVISIONS
9.1 AMENDMENT. This Agreement may be amended with the approval of the
respective Boards of Directors of the Company and Parent at any time before or
after approval of this Agreement by the stockholders of the Company; provided,
however, that after any such stockholder approval, no amendment shall be made
which by law requires further approval of the stockholders of the Company
without the further approval of such stockholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
9.2 WAIVER.
(a) No failure on the part of any party to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any party
in exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.
(b) No party shall be deemed to have waived any claim arising out of
this Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
party; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
9.3 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties contained in this Agreement or in any certificate
delivered pursuant to this Agreement shall survive the Merger.
9.4 ENTIRE AGREEMENT; COUNTERPARTS; APPLICABLE LAW. This Agreement and the
other agreements referred to herein constitute the entire agreement and
supersede all prior agreements and
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understandings, both written and oral, among or between any of the parties with
respect to the subject matter hereof and thereof. This Agreement may be executed
in several counterparts, each of which shall be deemed an original and all of
which shall constitute one and the same instrument, and shall be governed in all
respects by the laws of the State of Delaware as applied to contracts entered
into and to be performed entirely within Delaware.
9.5 ASSIGNABILITY. This Agreement shall be binding upon, and shall be
enforceable by and inure solely to the benefit of, the parties hereto and their
respective permitted successors and assigns; provided, however, that neither
this Agreement nor any of any party's rights or obligations hereunder may be
assigned by any party without the prior written consent of the other parties
hereto, and any attempted assignment of this Agreement or any of such rights or
obligations without such consent shall be void and of no effect. Except as set
forth in Section 5.5 with respect to directors and officers of the Company and
as otherwise provided in this Agreement, nothing in this Agreement is intended
to or shall confer upon any Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
9.6 NOTICES. All notices and other communications pursuant to this
Agreement shall be in writing and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized, overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
To Parent or MergerSub:
Pharmacopeia, Inc.
101 College Road East
Princeton Forrestal Center
Princeton, NJ 08540
Attention: Lewis Shuster
Telephone: (609) 452-3600
Fax: (609) 452-2434
with a copy to:
Dechert Price & Rhoads
Princeton Pike Corporate Center
997 Lenox Drive
Building 3, Suite 210
Lawrenceville, NJ 08648
Attention: James J. Marino, Esq.
Telephone: (609) 520-3230
Fax: (609) 520-3259
To the Company:
Molecular Simulations Incorporated
9685 Scranton Road
San Diego, CA 92121
Attention: President
Telephone: (619) 458-9990
Fax: (619) 597-9799
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with a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attention: James R. Jones, Esq.
Telephone: (650) 843-5000
Fax: (650) 857-0663
All such notices and other communications shall be deemed to have been received
(a) in the case of personal delivery, on the date of such delivery, (b) in the
case of a telecopy, when the party receiving such telecopy shall have confirmed
receipt of the communication, (c) in the case of delivery by nationally-
recognized, overnight courier, on the business day following dispatch and (d) in
the case of mailing, on the fifth business day following such mailing.
9.7 COOPERATION. Each of the Company and Parent agrees to cooperate
fully with the other party and to execute and deliver such further documents,
certificates, agreements and instruments and to take such other actions as may
be reasonably requested by the other party to evidence or reflect the
transactions contemplated by this Agreement and to carry out the intent and
purposes of this Agreement.
9.8 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; the feminine gender shall include
the masculine and neuter genders; and the neuter gender shall include the
masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
9.9 TITLES. The titles and captions of the Sections of this Agreement
are included for convenience of reference only and shall have no effect on the
construction or meaning of this Agreement.
9.10 SECTIONS AND EXHIBITS. Except as otherwise indicated, all
references in this Agreement to "Sections" and "Exhibits" are intended to refer
to Sections of this Agreement and Exhibits to this Agreement.
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In Witness Whereof, the parties have caused this Agreement to be executed
as of the date first above written.
PHARMACOPEIA, INC.
By: /s/ Joseph A. Mollica
Name: Joseph A. Mollica, Ph.D.
Title: Chairman of the Board,
President and Chief Executive
Officer
MICRO ACQUISITION CORPORATION
By: /s/ Joseph A. Mollica
Name: Joseph A. Mollica, Ph.D.
Title: Chairman of the Board,
President and Chief Executive
Officer
MOLECULAR SIMULATIONS INCORPORATED
By: /s/ Michael Savage
Name: Michael Savage
Title: President and Chief Executive
Officer
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Exhibit A to Exhibit 2
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUIRED CORPORATION CONTRACT. "Acquired Corporation Contract" shall mean
any Contract that is material to any of the Acquired Corporations, to the
business or operations of any of the Acquired Corporations or to any of the
transactions contemplated by the Agreement: (a) to which any of the Acquired
Corporations is a party; or (b) by which any of the Acquired Corporations or any
asset of any of the Acquired Corporations is bound or under which any of the
Acquired Corporations has, any obligation, except for (1) end user license
agreements entered into by the Company in the ordinary course of business, (2)
agreements for the license to an Acquired Corporation of software generally
available to the public and (3) customer contracts entered into in the ordinary
course of business.
ACQUIRED CORPORATION PROPRIETARY ASSET. "Acquired Corporation Proprietary
Asset" shall mean any material Proprietary Asset owned by or exclusively
licensed to any of the Acquired Corporations, except for (1) end user license
agreements entered into by the Company in the ordinary course of business and
(2) agreements for the license to an Acquired Corporation of software generally
available to the public. As used herein, "exclusively licensed" means
exclusively licensed for commercial use subject to certain retentions,
exceptions and license-backs.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached, as it may be amended from
time to time.
COMPANY ACQUISITION PROPOSAL. "Company Acquisition Proposal" shall mean
any offer or proposal (other than an offer or proposal by Parent) contemplating
or otherwise relating to any Company Acquisition Transaction.
COMPANY ACQUISITION TRANSACTION. "Company Acquisition Transaction" shall
mean any transaction or series of related transactions involving:
(a) any merger, consolidation, share exchange, business combination,
issuance of securities, acquisition of securities, tender offer, exchange
offer or other similar transaction (i) in which an Acquired Corporation is
a constituent corporation, (ii) in which a Person or "group" (as defined in
the Exchange Act and the rules promulgated thereunder) of Persons acquires
beneficial or record ownership of securities representing more than 50% of
the outstanding securities of any class of voting securities of an Acquired
Corporation, or (iii) in which an Acquired Corporation issues securities
representing more than 50% of the outstanding securities of any class of
voting securities of an Acquired Corporation; or
(b) 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 50% of the assets of an
Acquired Corporation.
COMPANY CAPITAL STOCK. "Company Capital Stock" shall mean Company Common
Stock, Company Class B Common Stock and Company Preferred Stock.
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COMPANY CLASS B COMMON STOCK. "Company Class B Common Stock" shall mean
the Class B, nonvoting common stock, $.001 par value per share, of the Company.
COMPANY COMMON STOCK. "Company Common Stock" shall mean the common stock,
$.001 par value per share, of the Company.
COMPANY PREFERRED STOCK. "Company Preferred Stock" shall mean the Series A
Convertible Preferred Stock, $.01 par value per share, of the Company.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan or legally
binding commitment or undertaking of any nature.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest or encumbrance.
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
ENVIRONMENTAL LAW. "Environmental Law" shall mean any federal, state,
local or foreign Legal Requirement relating to pollution or protection of human
health or the environment (including ambient air, surface water, ground water,
land surface or subsurface strata), including any law or regulation relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
ERISA. "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
ERISA AFFILIATE. With respect to any Entity, "ERISA Affiliate" shall mean
(i) any corporation included with such Entity in a controlled group of
corporations within the meaning of Section 414(b) of the Code; (ii) any trade or
business (whether or not incorporated) which is under common control with such
Entity within the meaning of Section 414(c) of the Code; (iii) any member of an
affiliate service group of which such Entity is a member within the meaning of
Section 414(m) of the Code; or (iv) any other person or entity treated as an
affiliate of such Entity under Section 414(o) of the Code.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
FORM S-4 REGISTRATION STATEMENT. "Form S-4 Registration Statement" shall
mean the registration statement on Form S-4 to be filed with the SEC by Parent
in connection with issuance of Parent Common Stock in the Merger, as said
registration statement may be amended prior to the time it is declared effective
by the SEC.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
permit, license, certificate, franchise, permission, clearance, registration,
qualification or authorization issued, granted,
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given or otherwise made available by or under the authority of any Governmental
Body or pursuant to any Legal Requirement.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
HSR ACT. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
JOINT PROXY STATEMENT. "Joint Proxy Statement" shall mean the joint proxy
statement to be sent to the Company's stockholders in connection with the
Company Stockholder's Meeting and to Parent's stockholders in connection with
the Parent Stockholders' Meeting.
KNOWLEDGE. "Knowledge" shall mean the actual knowledge of the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, General
Counsel, Vice President of Sales and Vice President of Research and Development
of any entity to which such term applies.
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding or hearing conducted or heard by or before,
or otherwise involving, any court or other Governmental Body or any arbitrator
or arbitration panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, ordinance, code,
rule or regulation, issued, enacted, adopted, promulgated, implemented or
otherwise put into effect by or under the authority of any Governmental Body.
MATERIAL ADVERSE CHANGE. An event, circumstance or other matter will be
deemed to constitute a "Material Adverse Change" with respect to the Acquired
Corporations if such event, circumstance or other matter would have a material
adverse effect on the business, condition, assets, liabilities, operations or
financial performance of the Acquired Corporations taken as a whole; provided,
however, that (i) any event, circumstance or other matter occurring after the
date of the Agreement that results from or relates to general economic or
industry conditions, after giving due consideration to the performance of the
Acquired Corporation's competition and the effect of such conditions on the
Acquired Corporation's customer base, shall be disregarded; (ii) any event,
circumstance or other matter occurring after the date of this Agreement that
results from or relates to the taking of any action contemplated or permitted by
this Agreement or the announcement or pendency of the Merger shall be
disregarded; and (iii) any change that results from or relates to quarterly or
monthly fluctuations in the financial condition, business or results of
operations of the Acquired Corporations similar in nature to those experienced
by the Acquired Corporations in prior years shall be disregarded. An event,
circumstance or other matter will be deemed to constitute a "Material Adverse
Change" with respect to Parent if such event, circumstance or other matter would
have a material adverse effect on the business, condition, assets, liabilities,
operations or financial performance of Parent and its subsidiaries taken as a
whole; provided, however, that (i) any event, circumstance or other matter
occurring after the date of the Agreement that results from or relates to
general economic or industry conditions, after giving due consideration to the
performance of Parent and its subsidiaries' competition and the effect of such
conditions on Parent's and its subsidiaries' customer base, shall be
disregarded; (ii) any event, circumstance or other matter occurring after the
date of this Agreement that results from or relates to the taking of any action
contemplated or permitted by this Agreement or the announcement or pendency of
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the Merger shall be disregarded; and (iii) any change that results from or
relates to quarterly or monthly fluctuations in the financial condition,
business or results of operations of Parent and its subsidiaries similar in
nature to those experienced by Parent and its subsidiaries in prior years shall
be disregarded.
MATERIAL ADVERSE EFFECT. An event, violation, inaccuracy, circumstance or
other matter will be deemed to have a "Material Adverse Effect" on the Acquired
Corporations if such event, violation, inaccuracy, circumstance or other matter
would have a material adverse effect on the business, condition, assets,
liabilities, operations or financial performance of the Acquired Corporations
taken as a whole. An event, violation, inaccuracy, circumstance or other matter
will be deemed to constitute a "Material Adverse Effect" on Parent if such
event, violation, inaccuracy, circumstance or other matter would have a material
adverse effect on the business, condition, assets, liabilities, operations or
financial performance of Parent and its subsidiaries taken as a whole.
MATERIAL CONTRACT. "Material Contract" shall mean any Contract that is
material to any of the Acquired Corporations, to the business or operations of
any of the Acquired Corporations or to any of the transactions contemplated by
this Agreement: (a) to which any of the Acquired Corporations is a party; or
(b) by which any of the Acquired Corporations or any asset of any of the
Acquired Corporations is bound or under which any of the Acquired Corporations
has any obligation.
MATERIALS OF ENVIRONMENTAL CONCERN. "Materials of Environmental Concern"
shall mean chemicals, pollutants, contaminants, wastes, toxic or hazardous
substances, petroleum and petroleum products and any other toxic or hazardous
substance, waste or material that is now regulated by any Environmental Law.
NASDAQ. "Nasdaq" shall mean the Nasdaq National Market.
PARENT ACQUISITION PROPOSAL. "Parent Acquisition Proposal" shall mean any
offer or proposal contemplating or otherwise relating to any Parent Acquisition
Transaction.
PARENT ACQUISITION TRANSACTION. "Parent Acquisition Transaction" shall
mean any transaction or series of related transactions involving:
(a) any merger, consolidation, share exchange, business combination,
issuance of securities, acquisition of securities, tender offer, exchange
offer or other similar transaction (i) in which Parent or any of its
subsidiaries is a constituent corporation, (ii) in which a Person or
"group" (as defined in the Exchange Act and the rules promulgated
thereunder) of Persons acquires beneficial or record ownership of
securities representing more than 50% of the outstanding securities of any
class of voting securities of Parent, or (iii) in which Parent or any of
its subsidiaries issues securities representing more than 50% of the
outstanding securities of any class of voting securities of Parent or any
of its subsidiaries; or
(c) 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 50% of the assets of
Parent or any of its subsidiaries.
PARENT COMMON STOCK. "Parent Common Stock" shall mean the Common Stock,
$.0001 par value per share, of Parent.
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PARENT CONTRACT. "Parent Contract" shall mean any Contract that has been
filed by Parent as an exhibit to a registration statement or report filed by
Parent with the SEC.
PARENT PROPRIETARY ASSET. "Parent Proprietary Asset" shall mean any
material Proprietary Asset owned by or exclusively licensed to Parent or its
subsidiaries except for agreements for the license to Parent or its subsidiaries
of software generally available to the public.
PARENT FINANCIAL STATEMENTS. "Parent Financial Statements" shall mean:
(i) the audited and unaudited consolidated financial statements of Parent
contained in the Parent SEC Documents; and (ii) the Parent Unaudited Interim
Balance Sheet.
PARENT UNAUDITED INTERIM BALANCE SHEET. "Parent Unaudited Interim Balance
Sheet" means the unaudited consolidated balance sheet of Parent and its
subsidiaries as of September 30, 1997.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service mark (whether
registered or unregistered), service mark application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, computer software, computer program, source
code, algorithm, invention, proprietary product, technology, proprietary right
or other intellectual property right or intangible asset; or (b) right to use or
exploit any of the foregoing.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933, as
amended.
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, imposed, assessed or
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TAX RETURN. "Tax Return" shall mean any return (including any information
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to, any Governmental Body in connection with the determination, assessment,
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A-5
<PAGE>
Exhibit 99
[LOGO OF PHARMACOPEIA APPEARS HERE]
CONTACT: Sue Rodney
Pharmacopeia, Inc.
Manager, Investor Relations
(609) 452-3643
David Hiatt
Molecular Simulations Inc.
Chief Financial Officer
(619) 597-9747
PHARMACOPEIA, INC. ANNOUNCES AGREEMENT TO ACQUIRE
MOLECULAR SIMULATIONS INC.
-COMBINATION WILL CREATE UNIQUE PLATFORM FOR ACCELERATED DRUG DISCOVERY-
Princeton, NJ, and San Diego, CA, February 4, 1998 Pharmacopeia, Inc., (Nasdaq:
PCOP) and Molecular Simulations Inc. (MSI) today announced that they have signed
a definitive agreement pursuant to which Pharmacopeia will acquire all of the
outstanding stock of MSI for approximately 7.0 million newly-issued shares of
Pharmacopeia common stock. Pharmacopeia will also convert the outstanding MSI
options into Pharmacopeia options, potentially resulting in the net issuance of
an additional 1.5 million new Pharmacopeia shares. Based on the $16.50 per
share closing price of Pharmacopeia common stock on February 3, 1998, the
transaction is valued at approximately $140 million. The agreement has been
approved by the Boards of Directors of both companies but remains subject to
customary closing conditions, including regulatory approval and approval by the
stockholders of both companies. The transaction is expected to close during the
second quarter of 1998.
MSI is a San Diego, California-based provider of predictive modeling software
and services for both life and materials science research. MSI's products
enable scientists to simulate chemical behavior at the molecular level by
modeling structures and properties of molecular systems. These products are
used by scientists in R&D laboratories worldwide to enhance the speed and
efficiency of the R&D process by reducing overall costs, decreasing product lead
times, and accelerating time to market. MSI has recently implemented a Web-
based architecture, which will expand the availability of MSI software products
and libraries to any scientist using a Web browser on a desktop computer. MSI
has over 3,500 installed sites in commercial, academic and governmental research
and development laboratories with approximately 10,000 users.
"Combining these two industry leaders provides great opportunity to our
customers, employees and stockholders," said Joseph A. Mollica, Pharmacopeia's
Chairman, President and Chief Executive Officer. "Each company's strengths
complement the other. We believe that Pharmacopeia's ability to design and
synthesize large, rationally-designed libraries that expedite the drug discovery
process will be further refined by MSI's molecular design and analysis tools.
Our scientists will be able to work closely with MSI's scientists to more
tightly integrate computational, combinatorial and experimental chemistry.
These complementary strengths combined with MSI's emerging Web-based
applications will help position us to take drug discovery to a new level."
-more-
<PAGE>
Pharmacopeia Acquires MSI
February 4, 1998
Page 2
"The power of the combined company," continued Dr. Mollica, "lies in MSI's
ability to develop software to access the wealth of data inherent in
Pharmacopeia's large and growing database of structure-activity relationships.
This information will be used to validate existing design tools and to develop
new capabilities for use by Pharmacopeia, MSI and each company's respective
customers. We have enormous respect for MSI, its employees and customers and
look forward to achieving further success together."
"MSI is pleased to join forces with a pioneer such as Pharmacopeia," said
Michael J. Savage, MSI's President and Chief Executive Officer. "The ability to
directly apply our technology in Pharmacopeia's drug design process will enable
us to further enhance our portfolio of scientific simulation software. By
enhancing our products, we would be able to offer more value to our current and
prospective customers and improve Pharmacopeia's ability to achieve further
success on behalf of their customers and within their internal programs. In
addition, by combining the two companies, we significantly expand the scope of
products and services we can now offer to our more than 10,000 users, including
most major pharmaceutical and chemical companies. The strengths of the combined
operations provide powerful new opportunities for both companies."
Upon completion of the transaction, which will be structured as a tax-free
stock-for-stock exchange and accounted for as a pooling of interests, MSI will
become a wholly-owned subsidiary of Pharmacopeia. Michael Savage, MSI's
President and Chief Executive Officer, will remain President of MSI and will
report directly to Joseph Mollica, Pharmacopeia's Chairman, President and CEO.
Mr. Savage and one other MSI Board member will be added to Pharmacopeia's Board
of Directors.
BT Alex. Brown Incorporated acted as financial advisor to Pharmacopeia, while
Goldman, Sachs & Co. provided financial advice to MSI.
Pharmacopeia, Inc. is a leader in drug discovery combining small molecule
combinatorial chemistry with high throughput screening. Using ECLiPS, its
proprietary tagging technology, Pharmacopeia generates large libraries, now
consisting of 3.7 million diverse, easily identifiable, small molecules. Using
state-of-the-art high throughput screening, Pharmacopeia tests its compounds in
a full complement of assays, including enzyme, receptor binding and cell-based
assays. Pharmacopeia is using its libraries and screening capabilities to
develop three potential profit centers: 1) the licensing of libraries to
pharmaceutical companies for evaluation in multiple drug discovery programs, 2)
the identification and optimization of lead compounds for specific targets
provided by customers, and 3) the licensing to pharmaceutical companies of drug
development candidates developed in Pharmacopeia's internal drug discovery
programs. Pharmacopeia currently has collaborative agreements with Akzo Nobel/NV
Organon, Bayer Corp., Berlex Laboratories, Bristol-Myers Squibb, Daiichi,
Novartis, Schering-Plough, and Zeneca. Pharmacopeia also has a research
partnership with Regeneron Pharmaceuticals and research arrangements with
several biotechnology companies and academic and government laboratories.
-more-
<PAGE>
Pharmacopeia Acquires MSI
February 4, 1998
Page 3
This news release shall not constitute an offer to exchange or sell or the
solicitation of an offer to exchange or sell nor shall there be any exchange or
sale of securities in any state in which such an offer, solicitation or exchange
or sale will be unlawful prior to the registration or qualification under the
securities laws of such state.
###
Except for the historical information contained herein, this statement may
contain projections or other forward-looking statements regarding future events
or the future financial performance of the Companies. We wish to caution you
that such statements are just predictions and that actual events or results may
differ materially. We refer you to the documents that Pharmacopeia files from
time to time with the Securities and Exchange Commission, specifically the last
filed Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. These
documents contain and identify important factors that could cause the actual
results to differ materially from those contained in the projections or forward
looking statements.
Editor's Note:
- --------------
This release is available on Pharmacopeia's and MSI's websites at
http://www.pcop.com and http://www.msi.com, respectively.
