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: NOVEMBER 18, 1999
---------------------------------
(Date of Earliest Event Reported)
ONTRACK DATA INTERNATIONAL, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
MINNESOTA 0-21375 41-1521650
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(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of Incorporation)
9023 COLUMBINE ROAD
EDEN PRAIRIE, MN 55347
----------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 937-1107
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ITEM 5. OTHER EVENTS.
On November 18, 1999, Ontrack Data International, Inc. ("Ontrack")
entered into an Agreement and Plan of Reorganization (the "Agreement") with
Legato Systems, Inc., a publicly held company headquartered in Palo Alto,
California ("Legato"), and Legato's wholly-owned subsidiary Lasso Acquisition
Corp.
Pursuant to the Agreement, Ontrack will merge with and into Lasso
Acquisition Corp. which will continue as a wholly-owned subsidiary under the
name Ontrack Products Division, Inc. (the "Merger"). In connection with the
Merger, each issued and outstanding share of Ontrack common stock will be
converted into 0.1491 shares of Legato Common Stock and the right to receive
$2.00 in cash. The closing of the Merger is subject to approval by Ontrack
shareholders and the satisfaction of other closing conditions described in the
Agreement. The Merger will be accounted for as a purchase.
This description of the Agreement and the Merger is qualified in its
entirety by reference to the full text of the Agreement which is attached hereto
as an Exhibit.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Exhibits
2 Agreement and Plan of Reorganization by and among Ontrack Data
International, Inc., a Minnesota corporation, Legato Systems, Inc., a
Delaware corporation, and Lasso Acquisition Corp., a Minnesota
Corporation, dated as of November 18, 1999.
99 Press release of Legato, dated November 18, 1999 with respect to the
Merger.
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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.
ONTRACK DATA INTERNATIONAL, INC.
December 6, 1999 By /s/ Michael W. Rogers
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Michael W. Rogers
Chief Executive Officer
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
LEGATO SYSTEMS, INC.
LASSO ACQUISITION CORP.
AND
ONTRACK DATA INTERNATIONAL, INC.
NOVEMBER 18, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER..........................................................1
1.1 The Merger...........................................................1
1.2 Closing; Effective Time..............................................2
1.3 Effect of the Merger.................................................2
1.4 Articles of Incorporation; Bylaws....................................2
1.5 Directors and Officers...............................................2
1.6 Effect on Capital Stock..............................................2
1.7 Surrender of Certificates............................................4
1.8 No Further Ownership Rights in Target Capital Stock..................5
1.9 Lost, Stolen or Destroyed Certificates...............................5
1.10 Tax Consequences....................................................6
1.11 Return of Exchange Fund.............................................6
1.12 Taking of Necessary Action; Further Action..........................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF TARGET...........................6
2.1 Organization, Standing and Power.....................................7
2.2 Capital Structure....................................................7
2.3 Authority............................................................8
2.4 SEC Documents; Financial Statements..................................9
2.5 Absence of Certain Changes...........................................9
2.6 Absence of Undisclosed Liabilities..................................10
2.7 Litigation..........................................................10
2.8 Restrictions on Business Activities.................................10
2.9 Governmental Authorization..........................................10
2.10 Title to Property..................................................11
2.11 Intellectual Property..............................................11
2.12 Environmental Matters..............................................13
2.13 Taxes..............................................................13
2.14 Employee Benefit Plans.............................................15
2.15 Employees and Consultants..........................................17
2.16 Related-Party Transactions.........................................18
2.17 Insurance..........................................................19
2.18 Compliance with Laws...............................................19
2.19 Brokers' and Finders' Fees.........................................19
2.20 Vote Required......................................................19
2.21 No Breach of Material Contracts....................................19
2.22 Registration Statement; Proxy Statement/Prospectus.................19
2.23 Complete Copies of Materials.......................................20
2.24 Opinion of Financial Advisor.......................................20
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2.25 Board Approval.....................................................20
2.26 Section 673 of Minnesota Law Not Applicable........................20
2.27 Representations Complete...........................................20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER
SUB..............................................................21
3.1 Organization, Standing and Power....................................21
3.2 Capital Structure...................................................21
3.3 Authority...........................................................22
3.4 SEC Documents; Financial Statements.................................23
3.5 Absence of Certain Changes..........................................24
3.6 Absence of Undisclosed Liabilities..................................24
3.7 Intellectual Property...............................................24
3.8 Environmental Matters...............................................24
3.9 Employee Benefit Plans..............................................24
3.10 Litigation.........................................................24
3.11 Compliance with Laws...............................................25
3.12 Proxy Statement....................................................25
3.13 Board Approval.....................................................25
3.14 Representations Complete...........................................25
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME...............................25
4.1 Conduct of Business of Target and Acquiror..........................25
4.2 Conduct of Business of Target.......................................26
4.3 Notices.............................................................28
ARTICLE V ADDITIONAL AGREEMENTS..............................................29
5.1 No Solicitation.....................................................29
5.2 Proxy Statement/Prospectus; Registration Statement..................30
5.3 Shareholders Meeting................................................30
5.4 Access to Information...............................................30
5.5 Confidentiality.....................................................31
5.6 Public Disclosure...................................................31
5.7 Consents; Cooperation...............................................31
5.8 Update Disclosure; Breaches.........................................32
5.9 Stockholder Lists...................................................32
5.10 Indemnification....................................................32
5.11 Irrevocable Proxies................................................33
5.12 Legal Requirements.................................................33
5.13 Tax-Free Reorganization............................................33
5.14 Stock Options......................................................33
5.15 Listing of Additional Shares.......................................35
5.16 Additional Agreements; Reasonable Efforts..........................35
5.17 Employee Benefits..................................................35
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ARTICLE VI CONDITIONS TO THE MERGER..........................................35
6.1 Conditions to Obligations of Each Party to Effect the Merger........35
6.2 Additional Conditions to the Obligations of Target..................36
6.3 Additional Conditions to the Obligations of Acquiror................37
ARTICLE VII TERMINATION, EXPENSES, AMENDMENT AND WAIVER......................38
7.1 Termination.........................................................38
7.2 Effect of Termination...............................................40
7.3 Expenses and Termination Fees.......................................40
7.4 Amendment...........................................................40
7.5 Extension; Waiver...................................................41
ARTICLE IX GENERAL PROVISIONS................................................41
8.1 Notices.............................................................41
8.2 Interpretation......................................................42
8.3 Counterparts........................................................42
8.4 Entire Agreement; No Third Party Beneficiaries......................42
8.5 Severability........................................................43
8.6 Remedies Cumulative.................................................43
8.7 Governing Law.......................................................43
8.8 Assignment..........................................................43
8.9 Rules of Construction...............................................43
SCHEDULES
Target Disclosure Letter
Acquiror Disclosure Letter
Option Schedule
EXHIBITS
Exhibit A Articles of Merger
Exhibit B Voting and Proxy Agreement
Exhibit C Employment and Non-Competition Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of November 18, 1999, by and among Legato Systems, Inc., a
Delaware corporation ("Acquiror"), Lasso Acquisition Corp., a Minnesota
corporation ("Merger Sub") and Ontrack Data International, Inc. a Minnesota
corporation ("Target").
RECITALS
A. The Boards of Directors of Target, Acquiror and Merger Sub believe
it is in the best interests of their respective companies and the stockholders
of their respective companies that Target and Merger Sub combine into a single
company through the statutory merger of Target with and into Merger Sub (the
"Merger") and, in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, each outstanding share
of capital stock of Target ("Target Capital Stock"), shall be converted into
shares of Common Stock of Acquiror, $.0001 par value ("Acquiror Common Stock"),
at the rate set forth herein.
C. Target, Acquiror and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Sections 368(a)(1)(A) and 368(a)(2)(D) of
the Code.
E. The parties intend for the Merger to be accounted for as a purchase.
F. Concurrent with the execution of this Agreement and as an inducement
to Acquiror to enter into this Agreement, certain of the affiliates of Target
who are shareholders, officers or directors are entering into an agreement to
vote the shares of Target's Common Stock owned by such persons to approve the
Merger and against any competing proposals.
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the parties
agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the Articles
of Merger attached hereto as Exhibit A (the "Articles of Merger") and the
applicable provisions of the Minnesota Business Corporation Act ("Minnesota
Law"), Target shall be merged with and into Merger Sub, the separate corporate
existence of Target shall cease and Merger Sub shall continue as the surviving
corporation
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under the name "Ontrack Products Division, Inc." Merger Sub as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"Surviving Corporation."
1.2 Closing; Effective Time. The closing of the transactions
contemplated hereby (the "Closing") shall take place as soon as practicable
after the satisfaction or waiver of each of the conditions set forth in Article
VI hereof or at such other time as the parties hereto agree (the date on which
the Closing shall occur, the "Closing Date"). The Closing shall take place at
the offices of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP,
155 Constitution Drive, Menlo Park, California 94025, or at such other location
as the parties hereto agree. On the Closing Date, the parties hereto shall cause
the Merger to be consummated by filing the Articles of Merger, together with the
required officers' certificates, with the Secretary of State of the State of
Minnesota, in accordance with the relevant provisions of Minnesota Law (the time
and date of such filing being the "Effective Time" and the "Effective Date,"
respectively).
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Articles of Merger and the
applicable provisions of Minnesota Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Target and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Target and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the Articles
of Incorporation of the Surviving Corporation until thereafter amended as
provided by Minnesota Law and such Articles of Incorporation except that as of
the Effective Time, Article I of the Articles of Incorporation shall be amended
to read: "The name of the corporation shall be Ontrack Products Division, Inc."
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 Directors and Officers. At the Effective Time, the directors of
Merger Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, to hold office until such time as such directors resign,
are removed or their respective successors are duly elected or appointed. The
officers of Merger Sub immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, to hold office until such time as such
officers resign, are removed or their respective successors are duly elected or
appointed.
1.6 Effect on Capital Stock. By virtue of the Merger and without any
action on the part of Acquiror, Merger Sub, Target or the holders of any of
Target's securities:
(a) Conversion of Target Capital Stock. At the Effective Time, each
share of Target Common Stock issued and outstanding immediately prior to the
Effective Time (other than any shares of Target Common Stock to be canceled
pursuant to Section 1.6(b) or any shares of Target Capital Stock to which
dissenters' rights have been exercised pursuant to Section 1.6(f)) will be
canceled and extinguished and be converted automatically into the right to
receive (i) .1491 of a share of
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Acquiror Common Stock (the "Common Exchange Ratio") and (ii) two dollars ($2.00)
in cash (the "Cash Consideration").
At the Effective Time, and as more particularly set forth in Section
5.14, each option to purchase Target Common Stock outstanding immediately prior
to the Effective Time will be canceled and extinguished and be converted
automatically into an option to purchase .1822 of a share of Acquiror Common
Stock (the "Option Exchange Ratio").
No adjustment shall be made in the number of shares of Acquiror Common
Stock issued in the Merger as a result of any cash proceeds received by Target
from the date hereof to the Closing Date pursuant to the exercise of currently
outstanding Target Options.
(b) Cancellation of Target Capital Stock Owned by Acquiror or
Target. At the Effective Time, all shares of Target Capital Stock that are owned
by Target as treasury stock, and each share of Target Capital Stock owned by
Acquiror or any direct or indirect wholly owned subsidiary of Acquiror or of
Target immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) Target Stock Option Plans. At the Effective Time, the Non-
Qualified Stock Option Plan and the 1996 Stock Incentive Plan (collectively, the
"Target Stock Option Plans") and all options to purchase Target Common Stock
then outstanding under the Target Stock Option Plan shall be assumed by Acquiror
in accordance with Section 5.14.
(d) Adjustments to Exchange Ratios. The Common Exchange Ratio, the
amount of Cash Consideration and the Option Exchange Ratio shall be adjusted to
reflect fully the effect of any stock split, reverse split, stock dividend
(including any dividend or distribution of securities convertible into Acquiror
Common Stock or Target Capital Stock), reorganization, recapitalization or other
like change with respect to Acquiror Common Stock or Target Capital Stock
occurring after the date hereof and prior to the Effective Time.
(e) Fractional Shares. No fraction of a share of Acquiror Common
Stock will be issued, but in lieu thereof each holder of shares of Target
Capital Stock who would otherwise be entitled to a fraction of a share of
Acquiror Common Stock (after aggregating all fractional shares of Acquiror
Common Stock to be received by such holder) shall receive from Acquiror an
amount of cash (rounded to the nearest whole cent) equal to the product of (i)
such fraction, multiplied by (ii) the average closing price of a share of
Acquiror Common Stock for the ten (10) most recent days that Acquiror Common
Stock has traded ending on the trading day immediately prior to the Effective
Time, as reported on the Nasdaq National Market.
(f) Dissenters' Rights. Notwithstanding any provisions of this
Agreement to the contrary, any Target Capital Stock outstanding immediately
prior to the Effective Time held by a holder who has demanded and perfected the
right, if any, to receive fair value for such Target Capital Stock ("Dissenting
Shares") in accordance with the provisions of Sections 302A.471 and 302A.473 of
the Minnesota Law and as of the Effective Time has not withdrawn or lost such
dissenter's rights shall not be converted into or represent a right to receive
the consideration pursuant to Section 1.6(a) (the "Merger Consideration"), but
the shareholder shall only be entitled to such rights as are granted by the
Minnesota Law. If a holder of Target Capital Stock who asserts dissenter's
rights under
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the Minnesota Law withdraws or loses such rights (through failure to perfect or
otherwise), then, as of the Effective Time or the occurrence of such event,
whichever last occurs, those shares (the "Unperfected Shares") shall be
converted into and represent only the right to receive the Merger Consideration
as provided in Section 1.6(a), without interest, upon the surrender of the
certificate or certificates representing those Unperfected Shares. Target shall
give Acquiror (i) prompt notice of any written notice of intent to demand fair
value for any Unperfected Shares, attempted withdrawals of such demands, the
deposit of any shares for which payment is demanded, and any other instruments
served pursuant to the Minnesota Law received by the Target relating to
dissenters' rights and (ii) the opportunity to participate in all negotiations
and proceedings with respect to the assertion of dissenters' rights under the
Minnesota Law. The Target shall not, except with the prior written consent of
Acquiror, voluntarily make any payment with respect to any such demands for
payment of fair value, offer to settle or settle any such demands or approve any
withdrawal of any such demands.
1.7 Surrender of Certificates.
(a) Exchange Agent. Harris Trust and Savings Bank shall act as
exchange agent (the "Exchange Agent") in the Merger.
(b) Acquiror to Provide Common Stock and Cash. Promptly after the
Effective Time, Acquiror shall make available to the Exchange Agent for exchange
in accordance with this Article I, through such reasonable procedures as
Acquiror may adopt, (i) the shares of Acquiror Common Stock issuable pursuant to
Section 1.6(a) in exchange for shares of Target Capital Stock outstanding
immediately prior to the Effective Time, plus cash in an amount sufficient to
permit payment of the Cash Consideration pursuant to Section 1.6(a), and cash in
lieu of fractional shares pursuant to Section 1.6(e) (such cash amounts and
certificates being hereinafter referred to as the "Exchange Fund").
(c) Exchange Procedures. Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "Certificates") that immediately prior to the
Effective Time represented outstanding shares of Target Capital Stock, whose
shares were converted into the right to receive shares of Acquiror Common Stock,
the Cash Consideration and cash in lieu of fractional shares, pursuant to
Section 1.6, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon receipt of the Certificates by the Exchange Agent, and shall be in
such form and have such other provisions as Acquiror may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Acquiror Common Stock, the Cash
Consideration and cash in lieu of fractional shares. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Acquiror, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
shares of Acquiror Common Stock and payment of the Cash Consideration and cash
in lieu of fractional shares that such holder has the right to receive pursuant
to Section 1.6, and the Certificate so surrendered shall forthwith be canceled.
Until so surrendered, each outstanding Certificate that, prior to the Effective
Time, represented shares of Target Capital Stock will be deemed from and after
the Effective Time, for all corporate purposes, other than the payment of
dividends, to evidence the ownership of the number of full shares of Acquiror
Common Stock into which such shares of Target Capital Stock shall have been so
converted and the right to receive the Cash
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Consideration and an amount in cash in lieu of the issuance of any fractional
shares in accordance with Section 1.6.
(d) Distributions with Respect to Unexchanged Shares. No dividends
or other distributions with respect to Acquiror Common Stock with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Acquiror Common Stock represented
thereby until the holder of record of such Certificate surrenders such
Certificate. Subject to applicable law, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of Acquiror Common Stock issued in exchange therefor,
without interest, at the time of such surrender, the amount of any such
dividends or other distributions with a record date after the Effective Time
that would have been previously payable (but for the provisions of this Section
1.7(d)) with respect to such shares of Acquiror Common Stock.
(e) Transfers of Ownership. If any certificate for shares of
Acquiror Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the Certificate so surrendered is
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Acquiror or any agent designated by
it any transfer or other taxes required by reason of the issuance of a
certificate for shares of Acquiror Common Stock in any name other than that of
the registered holder of the Certificate surrendered, or established to the
satisfaction of Acquiror or any agent designated by it that such tax has been
paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
Section 1.7, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to any person for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in Target Capital Stock. All shares of
Acquiror Common Stock issued upon the surrender for exchange of shares of Target
Capital Stock in accordance with the terms hereof (including any cash paid in
lieu of fractional shares), together with the Cash Consideration, shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Target Capital Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Target
Capital Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of
Acquiror Common Stock (and cash in lieu of fractional shares), together with the
Cash Consideration, as may be required pursuant to Section 1.6; provided,
however, that Acquiror may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Acquiror, the Surviving
Corporation or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
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1.10 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code. No party shall take any action that would, to such party's knowledge,
cause the Merger to fail to qualify as a reorganization within the meaning of
Section 368 of the Code. In the event the status of the Merger as a
reorganization under Sections 368(a)(1)(A) and 368(a)(2)(D) is challenged by the
IRS on a basis of a technical deficiency, this Agreement will be deemed amended
to the extent the amendment does not materially change the position of the
parties as of the date of its execution, to correct any such technical
deficiency.
1.11 Return of Exchange Fund. Any portion of the Exchange Fund that
remains unclaimed by shareholders of Target for six (6) months after the
Effective Time shall be returned to Acquiror, upon demand, and any holder of
Target Capital Stock who has not theretofore complied with Section 1.7 shall
thereafter look only to Acquiror for issuance of the number of shares of
Acquiror Common Stock and the Cash Consideration to which such holder has become
entitled, subject to Section 1.7(f).
1.12 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Target and Merger Sub, the officers and directors of Target
and Merger Sub are fully authorized in the name of their respective corporations
or otherwise to take, and shall take, all such lawful and necessary action, so
long as such action is not inconsistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TARGET
Target represents and warrants to Acquiror and Merger Sub that the
statements contained in this Article II are true and correct, except as set
forth in the disclosure letter delivered by Target to Acquiror prior to the
execution and delivery of this Agreement (the "Target Disclosure Letter"). The
Target Disclosure Letter shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article II, and the
disclosure in any paragraph shall qualify only the corresponding paragraph in
this Article II unless a cross-reference is made to another paragraph which such
disclosure also qualifies. Any reference in this Article II to an agreement
being "enforceable" shall be deemed to be qualified to the extent such
enforceability is subject to (i) laws of general application relating to
bankruptcy, insolvency, moratorium and the relief of debtors, and (ii) the
availability of specific performance, injunctive relief and other equitable
remedies. In the remainder of this Article II, "Target" will be deemed to
include (and each representation and warranty will apply separately and
collectively to) Target and each of Target's subsidiaries, unless the context
otherwise requires.
2.1 Organization, Standing and Power. Each of Target and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Target has the
corporate power to own its properties and to carry on its business as now being
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified and in good standing would
have a Material Adverse Effect (as defined in Section 8.2) on Target. Target has
delivered to Acquiror a true and correct copy of the Articles of Incorporation
and Bylaws or other charter documents, as applicable, of Target and each of its
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subsidiaries, each as amended to date. Target is not in violation of any of the
provisions of its Articles of Incorporation or Bylaws or equivalent
organizational documents. Target is the owner of all outstanding shares of
capital stock of each of its subsidiaries and all such shares are duly
authorized, validly issued, fully paid and nonassessable. All of the outstanding
shares of capital stock of each such subsidiary are owned by Target free and
clear of any liens, charges, claims or encumbrances or rights of others. There
are no outstanding subscriptions, options, warrants, puts, calls, rights,
exchangeable or convertible securities or other commitments or agreements of any
character relating to the issued or unissued capital stock or other securities
of any such subsidiary, or otherwise obligating Target or any such subsidiary to
issue, transfer, sell, purchase, redeem or otherwise acquire any such
securities. Target does not directly or indirectly own any equity or similar
interest in, or any interest convertible or exchangeable or exercisable for, any
equity or similar interest in, any corporation, partnership, joint venture or
other business association or entity other than its subsidiaries.
2.2 Capital Structure. The authorized capital stock of Target consists
of 25,000,000 shares of Common Stock, $.01 par value, and 1,000,000 shares of
Preferred Stock, $.01 par value, of which there were issued and outstanding as
of the date of this Agreement, 9,961,944 shares of Common Stock and no shares of
Preferred Stock. There are no other outstanding shares of capital stock or
voting securities and no outstanding commitments to issue any shares of capital
stock or voting securities after the date of this Agreement, other than pursuant
to the exercise of (i) options outstanding as of the date of this Agreement
under the Target Stock Option Plans, and (ii) the exercise of subscription
rights outstanding as of the date of this Agreement under the Target ESPP. All
outstanding shares of Target Capital Stock are duly authorized, validly issued,
fully paid and non-assessable and are free of any liens or encumbrances other
than any liens or encumbrances created by or imposed upon the holders thereof,
and are not subject to preemptive rights, rights of first refusal, rights of
first offer or similar rights created by statute, the Articles of Incorporation
or Bylaws of Target or any agreement to which Target is a party or by which it
is bound. As of the date of this Agreement, Target has reserved (i) 1,800,000
shares of Common Stock for issuance to employees, directors and consultants
pursuant to the Target Stock Option Plans, of which 254,072 shares have been
issued pursuant to option exercises or direct stock purchases, and 1,501,117
shares are subject to outstanding, unexercised options and (ii) 250,000 shares
of Common Stock for issuance to employees pursuant to the Target ESPP, of which
110,833 shares have been issued and approximately 3,000 shares are subject to
outstanding subscription rights based on withholdings through November 15, 1999
and Target stock price as of October 1, 1999. Except for (i) the rights created
pursuant to this Agreement and (ii) Target's right to repurchase any unvested
shares under the Target Stock Option Plans, there are no other options,
warrants, calls, rights, commitments or agreements of any character to which
Target is a party or by which it is bound obligating Target to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased
or redeemed, any shares of Target capital stock or obligating Target to grant,
extend, accelerate the vesting of, change the price of, or otherwise amend or
enter into any such option, warrant, call, right, commitment or agreement. There
are no contracts, commitments or agreements relating to the voting, purchase or
sale of Target Capital Stock (i) between or among Target and any of its
shareholders and (ii) to Target's knowledge, among any of Target's shareholders
or between any of Target's shareholders and any third party, except for the
shareholders delivering Voting Agreements (as defined below). The terms of the
Target Stock Option Plans permit the assumption of such Target Stock Option
Plans by Acquiror or the substitution of options to purchase Acquiror Common
Stock as provided in this Agreement, without the consent or approval of the
holders of the outstanding options, the Target shareholders, or otherwise and
without any acceleration of the exercise schedule or vesting provisions in
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effect for such options. The current "Purchase Period" (as defined in the Target
ESPP) commenced under the Target ESPP on October 1, 1999 and will end prior to
the Effective Time, and except for the purchase rights granted on such
commencement date to participants in the current Purchase Period, there are no
other purchase rights or options outstanding under the Target ESPP. True and
complete copies of all agreements and instruments relating to or issued under
the Target Stock Option Plans and Target ESPP have been made available to
Acquiror, and such agreements and instruments have not been amended, modified or
supplemented, and there are no agreements to amend, modify or supplement such
agreements or instruments from the form made available to Acquiror. All
outstanding Common Stock was issued in compliance with all applicable federal
and state securities laws.
2.3 Authority.
(a) Target has all requisite corporate power and authority to enter
into this Agreement, the Articles of Merger and the Option Agreement
(collectively, the "Transaction Documents") and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Target, subject only to the approval of the
Merger by Target's shareholders as contemplated by Section 6.1. This Agreement
and the other Transaction Documents have been duly executed and delivered by
Target and constitute the valid and binding obligations of Target, enforceable
against Target in accordance with their terms.
(b) The execution and delivery of this Agreement and the other
Transaction Documents by Target do not, and the consummation and performance of
the transactions contemplated hereby and thereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit under, or require a
consent to assignment or a novation under (i) any provision of the Articles of
Incorporation or Bylaws of Target, as amended, or (ii) any contract, agreement,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Target or any of its properties or
assets, except in the case of clause (ii) as would not individually or in the
aggregate have a Material Adverse Effect on Target.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to Target in connection with the
execution and delivery of this Agreement and the other Transaction Documents or
the consummation of the transactions contemplated hereby or thereby, except for
(i) the filing of the Articles of Merger, together with the required officers'
certificates, as provided in Section 1.2; (ii) the filing of the Proxy Statement
(as defined is Section 2.23 hereof) with the SEC in accordance with the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and clearance
thereof by the SEC; (iii) the filing of a report on Form 8-K in accordance with
the Exchange Act; (iv) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and the securities laws of any foreign country; (v) such
filings as may be required under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended ("HSR"); and (vi) such other consents, authorizations,
filings, approvals and registrations that, if not obtained or made, would not
have a Material Adverse Effect on Target and would not prevent, or materially
alter or delay any of the transactions contemplated by this Agreement.
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2.4 SEC Documents; Financial Statements. Target has furnished to
Acquiror a true and complete copy of each statement, report, registration
statement (with the prospectus in the form filed pursuant to Rule 424(b) of the
Securities Act), definitive proxy statement, and other filing filed with the SEC
by Target since January 1, 1998, and, prior to the Effective Time, Target will
have furnished Acquiror with true and complete copies of any additional
documents filed with the SEC by Target prior to the Effective Time
(collectively, the "Target SEC Documents"). In addition, Target has made
available to Acquiror all exhibits to the Target SEC Documents filed prior to
the date hereof, and will promptly make available to Acquiror all exhibits to
any additional Target SEC Documents filed prior to the Effective Time. All
documents required to be filed as exhibits to the Target SEC Documents have been
so filed, and all material contracts so filed as exhibits are in full force and
effect, except those that have expired in accordance with their terms, and
neither Target nor any of its subsidiaries is in default thereunder except for
any such default that individually or in the aggregate would not or could not
reasonably be expected to have a Material Adverse Effect on Target. As of their
respective filing dates, the Target SEC Documents complied in all material
respects with the requirements of the Exchange Act and the Securities Act, and
none of the Target SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading, except to the extent corrected by a
subsequently filed Target SEC Document. The financial statements of Target,
including the notes thereto, included in the Target SEC Documents (the "Target
Financial Statements") fairly present the consolidated financial condition and
the related consolidated statements of operations, of shareholder's equity, and
of cash flows of Target at the dates and during the periods indicated therein
(subject, in the case of unaudited statements, to normal, recurring year-end
adjustments), complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto as of their respective dates, and have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent throughout the periods indicated and consistent with each other
(except as may be indicated in the notes thereto or, in the case of unaudited
statements included in Quarterly Reports on Form 10-Qs, as permitted by Form
10-Q and Regulations S-K and S-X of the SEC).
2.5 Absence of Certain Changes. Since September 30, 1999, (the "Target
Balance Sheet Date"), Target has conducted its business in the ordinary course
consistent with past practice and there has not occurred: (i) any change, event
or condition (whether or not covered by insurance) that has resulted in, or
might reasonably be expected to result in, a Material Adverse Effect (as defined
in Section 8.2) on Target; (ii) any acquisition, sale or transfer of any
material asset of Target; (iii) any change in accounting methods or practices
(including any change in depreciation or amortization policies or rates) by
Target or any revaluation by Target of any of its assets; (iv) any declaration,
setting aside, or payment of a dividend or other distribution with respect to
the shares of Target, or any direct or indirect redemption, purchase or other
acquisition by Target of any of its shares of capital stock; (v) any material
contract entered into by Target, other than as provided to Acquiror, or any
material amendment or termination of, or default under, any material contract to
which Target is a party or by which it is bound; (vi) any amendment or change to
the Articles of Incorporation or Bylaws of Target; (vii) any increase in or
modification of the compensation or benefits payable or to become payable by
Target to any of its directors, employees or consultants other than with respect
to non-officer employees and consultants only, any increases in the ordinary
course of business consistent with past practice; or (viii) any negotiation or
agreement by Target to do any of the things described in the preceding clauses
(i)
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through (vii) (other than negotiations with Acquiror and its representatives
regarding the transactions contemplated by this Agreement).
2.6 Absence of Undisclosed Liabilities. Target has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet for the period ended September 30, 1999 (the "Target Balance
Sheet"), (ii) those obligations or liabilities (including contractual
obligations) incurred in the ordinary course of business since the Target
Balance Sheet Date in amounts consistent with prior periods, and (iii) those
incurred in connection with the execution of this Agreement.
2.7 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Target, threatened
(including allegations that could form the basis for future action) against
Target or any of its properties or officers or directors (in their capacities as
such), which, if adversely determined would or could reasonably be expected to
have a Material Adverse Effect on Target. There is no judgment, decree or order
against Target, or, to the knowledge of Target, any of its directors or officers
(in their capacities as such), that could prevent, enjoin, or materially alter
or delay any of the transactions contemplated by this Agreement, or that could
reasonably be expected to have a Material Adverse Effect on Target. All
litigation to which Target is a party (or, to the knowledge of Target,
threatened to become a party) is disclosed in the Target Disclosure Letter.
Target does not have any plans to initiate any litigation, arbitration or other
proceeding against any third party.
2.8 Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon Target that has or could
reasonably be expected to have the effect of prohibiting or impairing in any
material respect any current business practice of Target, any acquisition of
property by Target or the conduct of business by Target as currently conducted
by Target.
2.9 Governmental Authorization. Target has obtained each federal,
state, county, local or foreign governmental consent, license, permit, grant, or
other authorization of a Governmental Entity (i) pursuant to which Target
currently operates or holds any interest in any of its properties or (ii) that
is required for the operation of Target's business or the holding of any such
interest ((i) and (ii) herein collectively called "Target Authorizations"), and
all of such Target Authorizations are in full force and effect, except where the
failure to obtain or have any such Target Authorizations could not reasonably be
expected to have a Material Adverse Effect on Target.
2.10 Title to Property. Target has good and marketable title to all of
its properties, interests in properties and assets, real and personal, necessary
for the conduct of its business as presently conducted or which are reflected in
the Target Balance Sheet or acquired after the Target Balance Sheet Date (except
properties, interests in properties and assets sold or otherwise disposed of in
the ordinary course of business since the Target Balance Sheet Date), or with
respect to leased properties and assets, valid leasehold interests therein, in
each case free and clear of all mortgages, liens, pledges, charges or
encumbrances of any kind or character, except (i) liens for current taxes not
yet due and payable, (ii) such imperfections of title, liens and easements as do
not and will not materially detract from or interfere with the use of the
properties subject thereto or affected thereby, or otherwise materially impair
business operations involving such properties and (iii) liens securing debt that
are reflected on the Target Balance Sheet. The plants, property and equipment of
Target that are used in the operations of its business are in good operating
condition and repair (normal wear and tear excepted). All properties used
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in the operations of Target are reflected in the Target Balance Sheet to the
extent generally accepted accounting principles require the same to be
reflected. Except as set forth in the Target Disclosure Letter, Target does not
own or lease any real property. For purposes of this Section 2.10, the term
"property" or "properties" does not include Intellectual Property.
2.11 Intellectual Property.
(a) Target owns or is licensed for, and in any event possesses
sufficient rights with respect to, all Intellectual Property (defined below)
that is used, exercised, or exploited ("Used") in, or that may be necessary for,
its business as currently conducted ("Target Intellectual Property," which term
will also include all other Intellectual Property owned by or licensed to Target
now or in the past) without any material conflict with or infringement or
misappropriation of any rights or property of others ("Infringement"). Such
ownership, licenses and rights are exclusive (A) except with respect to
Inventions (defined below) in the public domain that are not important
differentiators of Target's business and (B) except with respect to standard,
generally commercially available, "off-the-shelf" third party products that are
not part of any current product, service or Intellectual Property offering of
Target. No Target Intellectual Property was conceived or developed directly or
indirectly with or pursuant to government funding or a government contract.
"Intellectual Property" means (i) inventions (whether or not patentable); trade
names, trade marks, service marks, logos and other designations ("Marks"); works
of authorship; mask works; data; technology, know-how, trade secrets, ideas and
information; designs; formulas; algorithms; processes; schematics; computer
software (in source code and/or object code form); and all other intellectual
and industrial property of any sort ("Inventions") and (ii) patent rights; Mark
rights; copyrights; mask work rights; SUI GENERIS database rights; trade secret
rights; moral rights; and all other intellectual and industrial property rights
of any sort throughout the world, and all applications, registrations, issuances
and the like with respect thereto ("IP Rights"). With respect to patent rights,
moral rights and Mark rights, the representations and warranties of this Section
2.11(a) are made only to Target's knowledge. All copyrightable matter within
Target Intellectual Property has been created by persons who were employees of
Target at the time of creation and no third party has or will have "moral
rights" or rights to terminate any assignment or license with respect thereto.
Target has not received any written communication alleging or suggesting that or
questioning whether Target has been or may be engaged in, liable for or
contributing to any Infringement, nor does Target have any reason to expect that
any such communication will be forthcoming.
(b) To the extent included in Target Intellectual Property (but
excluding Intellectual Property licensed to Target only on a nonexclusive basis
and material to Target's business), the Target Disclosure Letter lists (by name,
number, jurisdiction, owner and, where applicable, the name and address of each
inventor) all patents and patent applications; all registered and unregistered
Marks; and all registered and, if material, unregistered copyrights and mask
works; and all other issuances, registrations, applications and the like with
respect to those or any other IP Rights. No cancellation, termination,
expiration or abandonment of any of the foregoing (except natural expiration or
termination at the end of the full possible term, including extensions and
renewals) is anticipated by Target. Target is not aware of any material
questions or challenges (or any specific basis therefor) with respect to the
validity of any of the foregoing issued or registered IP Rights (or any part or
claim thereof).
(c) There is, to the knowledge of Target, no unauthorized Use,
disclosure, infringement or misappropriation of any Target Intellectual Property
by any third party, including, without limitation, any employee or former
employee of Target.
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(d) Target has taken all reasonable and appropriate steps to
protect and preserve the confidentiality of all Target Intellectual Property
with respect to which Target has exclusivity and that is not otherwise disclosed
in published patents or patent applications or registered copyrights ("Target
Confidential Information"). Except where failure to do so would not have a
Material Adverse Effect on Target, all use by and disclosure to employees or
others of Target Confidential Information has been pursuant to the terms of
valid and binding written confidentiality and nonuse/restricted-use agreements.
Except as set forth in the Target Disclosure Letter, Target has not disclosed or
delivered to any third party, or permitted the disclosure or delivery to any
escrow holder or other person any part of any source code.
(e) Each current and former employee and contractor of Target who
is or was involved in, or who has contributed to, the creation or development of
any Target Intellectual Property has executed and delivered (and to the
knowledge of Target is in compliance with) an enforceable agreement in
substantially the form of Target's standard Confidentiality and Non-Compete
Agreement (in the case of an employee) or a consulting agreement providing for
the valid assignment to Target of all Target Intellectual Property created or
developed for the Target (in the case of a contractor).
(f) To Target's knowledge, Target is not Using, and it will not be
necessary to Use, (i) any Inventions of any of its past or present employees or
contractors (or people currently intended to be hired) made prior to or outside
the scope of their employment by Target or (ii) any confidential information or
trade secrets of any former employer of any such person.
2.12 Environmental Matters. Target is and has at all times operated its
business in material compliance with all Environmental Laws and to Target's
knowledge, no material expenditures are or will be required in order to comply
with such Environmental Laws. "Environmental Laws" means all applicable
statutes, rules, regulations, ordinances, orders, decrees, judgments, permits,
licenses, consents, approvals, authorizations, and governmental requirements or
directives or other obligations lawfully imposed by governmental authority under
federal, state or local law pertaining to the protection of the environment,
protection of public health, protection of worker health and safety, the
treatment, emission and/or discharge of gaseous, particulate and/or effluent
pollutants, and/or the handling of hazardous materials, including without
limitation, the Clean Air Act, 42 U.S.C. ss. 7401, et seq., the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), 42
U.S.C. ss. 9601, et seq., the Federal Water Pollution Control Act, 33 U.S.C. ss.
1321, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801,
et seq., the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901, et seq.
("RCRA"), and the Toxic Substances Control Act, 15 U.S.C. ss. 2601, et seq.
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2.13 Taxes.
(a) All Tax returns, statements, reports, declarations and other
forms and documents (including without limitation estimated Tax returns and
reports and material information statements, returns and reports) required to be
filed with any Tax authority with respect to any Taxable period ending on or
before the Effective Time, by or on behalf of Target (collectively, "Tax
Returns" and individually a "Tax Return"), have been or will be completed and
filed when due (including any extensions of such due date) and all amounts shown
due on such Tax Returns on or before the Effective Time have been or will be
paid on or before such date. The Target September 30, 1999, balance sheet
included in the Financial Statements (the "Target Balance Sheet") (i) fully
accrues for all actual and contingent liabilities for Taxes with respect to all
periods through September 30, 1999, and Target has not and will not incur any
Tax liability in excess of the amount reflected on such Target Balance Sheet
with respect to such periods (excluding any amount thereof that reflects timing
differences between the recognition of income for purposes of GAAP and for Tax
purposes), and (ii) accrues in accordance with GAAP for all material liabilities
for Taxes payable after September 30, 1999, with respect to all transactions and
events occurring on or prior to such date. All information set forth in the
notes to the Target Financial Statements relating to Tax matters is true,
complete (with respect to such matters required under GAAP) and accurate in all
material respects. No material Tax liability since September 30, 1999, has been
or will be incurred by Target other than in the ordinary course of business, and
adequate provision has been made by Target for all Taxes since that date in
accordance with GAAP on at least a quarterly basis.
(b) Target has previously provided or made available to Acquiror
true and correct copies of all Tax Returns filed since January 1, 1995. Target
has withheld and paid to the applicable financial institution or Tax authority
all amounts required to be withheld. To the best knowledge of Target, Tax
Returns filed with respect to Taxable years of Target through the Taxable year
ended December 31, 1998 in the case of the United States, have been examined and
closed. Target (or any member of any affiliated or combined group of which
Target has been a member) has not granted any extension or waiver of the
limitation period applicable to any Tax Returns that is still in effect. There
is no material claim, audit, action, suit, proceeding, or (to the knowledge of
Target) investigation now pending or (to the knowledge of Target) threatened
against or with respect to Target in respect of any Tax or assessment. No
written notice of deficiency or similar document of any Tax authority has been
received by Target, and there are no liabilities for Taxes (including
liabilities for interest, additions to Tax and penalties thereon and related
expenses) with respect to the issues that have been raised (and are currently
pending) by any Tax authority that could, if determined adversely to Target,
materially and adversely affect the liability of Target for Taxes. There are no
liens for Taxes (other than for current Taxes not yet due and payable) upon the
assets of Target. Target has never been a member of an affiliated group of
corporations, within the meaning of Section 1504 of the Code. Target is in full
compliance with all the terms and conditions of any Tax exemptions or other
Tax-sharing agreement or order of a foreign government and the consummation of
the Merger will not have any adverse effect on the continued validity and
effectiveness of any such Tax exemption or other Tax-sharing agreement or order.
Neither Target nor any person on behalf of Target has entered into or will enter
into any agreement or consent pursuant to the collapsible corporation provisions
of Section 341(f) of the Code (or any corresponding provision of state, local or
foreign income tax law) or agreed to have Section 341(f)(2) of the Code (or any
corresponding provision of state, local or foreign income tax law) apply to any
disposition of any asset owned by Target. None of the assets of Target is
property that Target is required to treat as being owned by any other person
pursuant to the so-called "safe harbor lease" provisions of former Section
168(f)(8) of the Code. None of the assets of Target directly or indirectly
secures any debt
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the interest on which is tax-exempt under Section 103(a) of the Code. None of
the assets of Target is "tax-exempt use property" within the meaning of Section
168(h) of the Code. Target has not made and will not make a deemed dividend
election under Treas. Reg. ss.1.1502-32(f)(2) or a consent dividend election
under Section 565 of the Code. Target has never been a party (either as a
distributing corporation as a corporation that has been distributed) to any
transaction intended to qualify under Section 355 of the Code or any
corresponding provision of state law. Target has not participated in (and will
not participate in) an international boycott within the meaning of Section 999
of the Code. Target does not have and has not had a permanent establishment in
any foreign country, as defined in any applicable tax treaty or convention
between the United States of America and such foreign country and Target has not
engaged in a trade or business within any foreign country. Target has never
elected to be treated as an S-corporation under Section 1362 of the Code or any
corresponding provision of federal or state law. All material elections with
respect to Target's Taxes made during the fiscal years ending December 31, 1996,
1997 and 1998 are reflected on the Target Tax Returns for such periods, copies
of which have been provided or made available to Acquiror. After the date of
this Agreement, no material election with respect to Taxes will be made without
the prior written consent of Acquiror, which consent will not be unreasonably
withheld or delayed. Target is not party to any joint venture, partnership, or
other arrangement or contract that could be treated as a partnership for federal
income tax purposes. Target is not currently and never has been subject to the
reporting requirements of Section 6038A of the Code. There is no agreement,
contract or arrangement to which Target is a party that could, individually or
collectively, result in the payment of any amount that would not be deductible
by reason of Sections 280G (as determined without regard to Section 280G(b)(4)),
162(a) (by reason of being unreasonable in amount), 162 (b) through (p) or 404
of the Code. Target is not a party to or bound by any Tax indemnity, Tax sharing
or Tax allocation agreement (whether written or unwritten or arising under
operation of federal law as a result of being a member of a group filing
consolidated Tax returns, under operation of certain state laws as a result of
being a member of a unitary group, or under comparable laws of other states or
foreign jurisdictions) that includes a party other than Target nor does Target
owe any amount under any such Agreement. Target is not, and has not been, a
United States real property holding corporation (as defined in Section 897(c)(2)
of the Code) during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code. Other than by reason of the Merger, Target has not been and will
not be required to include any material 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, events or accounting methods employed prior to the Merger.
(c) For purposes of this Agreement, the following terms have the
following meanings: "Tax" (and, with correlative meaning, "Taxes" and "Taxable")
means any and all taxes including, without limitation, (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, value added, net worth, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty or other tax
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Governmental Entity (a "Tax authority") responsible for the
imposition of any such tax (domestic or foreign), (ii) any liability for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any Taxable
period or as the result of being a transferee or successor thereof and (iii) any
liability for the payment of any amounts of the type described in (i) or (ii) as
a result of any express or implied obligation to indemnify
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any other person. As used in this Section 2.13, the term "Target" means Target
and any entity included in, or required under GAAP to be included in, any of the
Target Financial Statements.
2.14 Employee Benefit Plans.
(a) For all purposes under this Section 2.14 "ERISA Affiliate"
shall mean each person (as defined in Section 3(9) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) that, together with Target,
is treated as a single employer under Section 4001(b) of ERISA or Section 414 of
the Code. Except for the plans and agreements listed in Schedule 2.14
(collectively, the "Plans"), Target and its ERISA Affiliates do not maintain,
are not a party to, do not contribute to and are not obligated to contribute to,
and employees or former employees of Target and its ERISA Affiliates and their
dependents or survivors do not receive benefits under, any of the following
(whether or not set forth in a written document):
(i) Any employee benefit plan, as defined in section 3(3) of
ERISA;
(ii) Any bonus, deferred compensation, incentive, restricted
stock, stock purchase, stock option, stock appreciation right, phantom stock,
supplemental pension, executive compensation, cafeteria benefit, dependent care,
director or employee loan, fringe benefit, sabbatical, severance, termination
pay or similar plan, program, policy, agreement or arrangement; or
(iii) Any plan, program, agreement, policy, commitment or other
arrangement relating to the provision of any benefit described in section 3(1)
of ERISA to former employees or directors or to their survivors, other than
procedures intended to comply with the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA").
(b) Neither Target nor any ERISA Affiliate has terminated,
suspended, discontinued contributions to or withdrawn from any employee pension
benefit plan, as defined in section 3(2) of ERISA, including (without
limitation) any multiemployer plan, as defined in section 3(37) of ERISA.
(c) Target has provided to Acquiror complete, accurate and current
copies of each of the following:
(i) The text (including amendments) of each of the Plans, to
the extent reduced to writing;
(ii) A summary of each of the Plans, to the extent not
previously reduced to writing;
(iii) With respect to each Plan that is an employee benefit
plan (as defined in section 3(3) of ERISA), the following:
(1) The most recent summary plan description, as described
in section 102 of ERISA;
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(2) Any summary of material modifications that has been
distributed to participants but has not been incorporated in an updated summary
plan description furnished under Subparagraph (1) above; and
(3) The annual report, as described in section 103 of
ERISA, and (where applicable) actuarial reports, for the three most recent plan
years for which an annual report or actuarial report has been prepared; and
(iv) With respect to each Plan that is intended to qualify
under section 401(a) of the Code the most recent determination letter concerning
the plan's qualification under section 401(a) of the Code, as issued by the
Internal Revenue Service, and any subsequent determination letter application.
(d) With respect to each Plan that is an employee benefit plan (as
defined in section 3(3) of ERISA), the requirements of ERISA applicable to such
Plan have been satisfied, except to the extent that a failure to satisfy any of
such requirements would not have a Material Adverse Effect.
(e) With respect to each Plan that is subject to COBRA, the
requirements of COBRA applicable to such Plan have been satisfied, except to the
extent that a failure to satisfy any of such requirements would not have a
Material Adverse Effect.
(f) With respect to each Plan that is subject to the Family Medical
Leave Act of 1993, as amended, the requirements of such Act applicable to such
Plan have been satisfied, except to the extent that a failure to satisfy any of
such requirements would not have a Material Adverse Effect.
(g) Each Plan that is intended to qualify under section 401(a) of
the Code meets the requirements for qualification under section 401(a) of the
Code and the regulations thereunder, except to the extent that such requirements
may be satisfied by adopting retroactive amendments under section 401(b) of the
Code and the regulations thereunder. Each such Plan has been administered in
accordance with its terms (or, if applicable, such terms as will be adopted
pursuant to a retroactive amendment under section 401(b) of the Code) and the
applicable provisions of ERISA and the Code and the regulations thereunder,
except to the extent that a failure to be so administered would not have a
Material Adverse Effect.
(h) Neither Target nor any ERISA Affiliate has any accumulated
funding deficiency under section 412 of the Code or any termination or
withdrawal liability under Title IV of ERISA, except to the extent that any such
liability would not have a Material Adverse Effect.
(i) All contributions, premiums or other payments due from the
Target to (or under) any Plan have been fully paid or adequately provided for on
the books and financial statements of Target except to the extent that failure
to pay or provide for such contributions, premiums or other payments would not
have a Material Adverse Effect. All accruals (including, where appropriate,
proportional accruals for partial periods) have been made in accordance with
prior practices.
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2.15 Employees and Consultants.
(a) Target has provided Acquiror with a true and complete list of
all individuals employed by Target as of the date hereof and the position and
base compensation payable to each such individual. The Target Disclosure Letter
contains a list of any written and a description of any oral employment
agreements, consulting agreements or termination or severance agreements to
which Target is a party.
(b) Target is not a party to or subject to a labor union or a
collective bargaining agreement or arrangement and is not a party to any labor
or employment dispute.
(c) The consummation of the transactions contemplated herein will
not result in (i) any amount becoming payable to any employee, director or
independent contractor of Target, (ii) the acceleration of payment or vesting of
any benefit, option or right to which any employee, director or independent
contractor of Target may be entitled, (iii) the forgiveness of any indebtedness
of any employee, director or independent contractor of Target or (iv) any cost
becoming due or accruing to Target or the Acquiror with respect to any employee,
director or independent contractor of Target.
(d) Target is not obligated and upon consummation of the Merger
will not be obligated to make any payment or transfer any property that would be
considered a "parachute payment" under section 280G(b)(2) of the Code.
(e) To the knowledge of Target, no employee of Target has been
injured in the work place or in the course of his or her employment except for
injuries that are covered by insurance or for which a claim has been made under
workers' compensation or similar laws.
(f) Target has complied in all material respects with the
verification requirements and the record-keeping requirements of the Immigration
Reform and Control Act of 1986 ("IRCA"); to the knowledge of Target, the
information and documents on which Target relied to comply with IRCA are true
and correct; and there have not been any discrimination complaints filed against
Target pursuant to IRCA, and to the knowledge of Target, there is no basis for
the filing of such a complaint that could reasonably be expected to have a
Material Adverse Effect.
(g) Target has not received or been notified of any written
complaint by any employee, applicant, union or other party of any discrimination
or other conduct forbidden by law or contract, nor to the knowledge of Target,
is there a basis for any complaint, except such complaints as could not
reasonably be expected to have a Material Adverse Effect.
(h) Target's action in complying with the terms of this Agreement
will not violate any agreements with any of Target's employees.
(i) Target has filed or will file all required reports and
information with respect to its employees that are due prior to the Closing Date
and otherwise has complied in its hiring, employment, promotion, termination and
other labor practices with all applicable federal and state law and regulations,
including without limitation those within the jurisdiction of the United States
Equal Employment Opportunity Commission, United States Department of Labor and
state and local human rights or civil rights agencies, except to the extent that
any such failure to file or comply would not have a Material Adverse Effect on
Target.
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(j) Target is not aware that any of its employees or contractors is
obligated under any agreement, commitments, judgment, decree, order or otherwise
(an "Employee Obligation") that could reasonably be expected to interfere with
the use of his or her best efforts to promote the interests of Target or that
could reasonably be expected to conflict with any of Target's business as
conducted and that could reasonably be expected to have a Material Adverse
Effect on Target. Neither the execution nor delivery of this Agreement nor the
conduct of Target's business as conducted, will, to Target's knowledge, conflict
with or result in a material breach of the terms, conditions or provisions of,
or constitute a default under, any Employee Obligation.
2.16 Related-Party Transactions. No employee, officer, or director of
Target or member of his or her immediate family is indebted to Target, nor is
Target indebted (or committed to make loans or extend or guarantee credit) to
any of them. To Target's knowledge, none of such persons has any direct or
indirect ownership interest in any firm or corporation with which Target is
affiliated or with which Target has a business relationship, or any firm or
corporation that competes with Target, except to the extent that employees,
officers, or directors of Target and members of their immediate families own
stock in publicly traded companies that may compete with Target. No member of
the immediate family of any officer or director of Target is directly or
indirectly interested in any material contract with Target.
2.17 Insurance. Target has policies of insurance and bonds of the type
and in amounts customarily carried by persons conducting businesses or owning
assets similar to those of Target. There is no material claim pending under any
of such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and Target is otherwise
in compliance with the terms of such policies and bonds. Target has no knowledge
of any threatened termination of, or material premium increase with respect to,
any of such policies.
2.18 Compliance with Laws. Target has complied with, is not in
violation of, and has not received any written notices of violation with respect
to, any federal, state, local or foreign statute, law or regulation with respect
to the conduct of its business, or the ownership or operation of its business,
except for such violations or failures to comply as could not be reasonably
expected to have a Material Adverse Effect on Target.
2.19 Brokers' and Finders' Fees. Target has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
2.20 Vote Required. The affirmative vote of the holders of a majority
of the Target Common Stock outstanding on the record date set for the Target
Shareholders Meeting (as hereafter defined) is the only vote of the holders of
any of Target's Capital Stock necessary to approve this Agreement and the
transactions contemplated hereby.
2.21 No Breach of Material Contracts. The Target has performed all of
the obligations required to be performed by it and is entitled to all benefits
under, and, to Target's knowledge, is not alleged to be in default in respect of
any material contract, except where the default would not and could not be
expected to have a Material Adverse Effect on Target. Each of the material
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contracts is in full force and effect, unamended, and there exists no default or
event of default or event, occurrence, condition or act, with respect to Target
or to Target's knowledge with respect to the other contracting party, or
otherwise that, with or without the giving of notice, the lapse of the time or
the happening of any other event or conditions, could reasonably be expected to
(A) become a default or event of default under any material contract, which
default or event of default could reasonably be expected to have a Material
Adverse Effect on Target or (B) result in the loss or expiration of any material
right or option by Target (or the gain thereof by any third party) under any
material contract or (C) the release, disclosure or delivery to any third party
of any part of the source code. True, correct and complete copies of all
material contracts have been delivered to the Acquiror.
2.22 Registration Statement; Proxy Statement/Prospectus. The written
information supplied by Target expressly for the purpose of inclusion in the
registration statement on Form S-4 (or such other or successor form as shall be
appropriate) pursuant to which the issuance of the shares of Acquiror Common
Stock to be issued in the Merger will be registered with the SEC (the
"Registration Statement") shall not at the time the Registration Statement
(including any amendments or supplements thereto) is declared effective by the
SEC contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein not misleading.
The written information supplied by Target expressly for the purpose of
inclusion in the proxy statement/prospectus to be sent to the shareholders of
Target in connection with the meetings of Target's shareholders (the "Target
Shareholders Meeting") to be held in connection with the Merger (such proxy
statement/prospectus as amended or supplemented is referred to herein as the
"Proxy Statement") shall not, on the date the Proxy Statement is first mailed to
Target's shareholders, at the time of the Target Shareholders Meeting and at the
Effective Time, contain any untrue statement of a material fact, or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading. If at
any time prior to the Effective Time any event or information should be
discovered by Target that should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement, Target shall
promptly inform Acquiror and Merger Sub. Notwithstanding the foregoing, Target
makes no representation, warranty or covenant with respect to any information
supplied by Acquiror or Merger Sub that is contained in any of the foregoing
documents.
2.23 Complete Copies of Materials. Target has delivered or made
available true and complete copies of each document that has been requested by
Acquiror or its counsel in connection with their technical, legal and accounting
review of Target.
2.24 Opinion of Financial Advisor. Target has been advised in writing
by its financial advisor, U.S. Bancorp Piper Jaffray, that in its opinion, as of
the date of this Agreement, the Merger is fair to the shareholders of Target
from a financial point of view.
2.25 Board Approval. The Board of Directors of Target has unanimously
(i) approved this Agreement and the Merger, (ii) determined that the Merger is
in the best interest of the shareholders of Target and is on terms that are fair
to such shareholders and (iii) recommended that the shareholders of Target
approve this Agreement and the Merger.
2.26 Section 673 of Minnesota Law Not Applicable. The Board of
Directors of Target has taken all actions so that the restrictions contained in
Section 302A.673 of the Minnesota Law applicable to a "business combination" (as
defined in Section 302A.673) will not apply to the
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execution, delivery or performance of this Agreement or the consummation of the
Merger or the other transactions contemplated by this Agreement.
2.27 Representations Complete. None of the representations or
warranties made by Target herein or in any Schedule hereto, including the Target
Disclosure Letter, or certificate furnished by Target pursuant to this Agreement
or the Target SEC Documents, when all such documents are read together in their
entirety, contains or will contain at the Effective Time any untrue statement of
a material fact, or omits or will omit at the Effective Time to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Acquiror and Merger Sub represent and warrant to Target that the
statements contained in this Article III are true and correct, except as set
forth in the Disclosure Letter delivered by Acquiror to Target to prior to the
execution and delivery of this Agreement (the "Acquiror Disclosure Letter"). The
Acquiror Disclosure Letter shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article III, and the
disclosure in any paragraph shall qualify only the corresponding paragraph in
this Article III unless a cross reference is made to another paragraph which
such disclosure also qualifies. Any reference in this Article III to an
agreement being "enforceable" shall be deemed to be qualified to the extent such
enforceability is subject to (i) laws of general application relating to
bankruptcy, insolvency, moratorium and the relief of debtors, and (ii) the
availability of specific performance, injunctive relief and other equitable
remedies.
3.1 Organization, Standing and Power. Each of Acquiror and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Each of Acquiror
and its subsidiaries has the corporate power to own its properties and to carry
on its business as now being conducted and is duly qualified to do business and
is in good standing in each jurisdiction in which the failure to be so qualified
and in good standing would have a Material Adverse Effect on Acquiror. Acquiror
has delivered a true and correct copy of the Certificate of Incorporation and
Bylaws of Acquiror and Merger Sub, each as amended to date, to Target. Neither
Acquiror nor Merger Sub is in violation of any of the provisions of its
Certificate of Incorporation or Bylaws. Acquiror is the owner of all outstanding
shares of capital stock of each of its subsidiaries, except where required by
local law, and all such shares are duly authorized, validly issued, fully paid
and nonassessable. All of the outstanding shares of capital stock of each such
subsidiary are owned by Acquiror free and clear of all liens, charges, claims or
encumbrances or rights of others. There are no outstanding subscriptions,
options, warrants, puts, calls, rights, exchangeable or convertible securities
or other commitments or agreements of any character relating to the issued or
unissued capital stock or other securities of any such subsidiary, or otherwise
obligating Acquiror or any such subsidiary to issue, transfer, sell, purchase,
redeem or otherwise acquire any such securities. Except as disclosed in the
Acquiror SEC Documents (as defined in Section 3.4), Acquiror does not directly
or indirectly own any equity or similar interest in, or any interest convertible
or exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
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3.2 Capital Structure. The authorized capital stock of Acquiror
consists of 200,000,000 shares of Common Stock, $.0001 par value, and 5,000,000
shares of Preferred Stock, $.0001 par value, of which there were issued and
outstanding as of September 30, 1999, 84,981,147 shares of Common Stock and no
shares of Preferred Stock. An aggregate of 30,000 shares of Acquiror's Series A
Junior Participating Preferred Stock ("Acquiror Junior Preferred Stock") were
reserved for future issuance pursuant to the Rights Agreement, dated May 23,
1997, between Acquiror and Harris Trust and Savings Bank, as Rights Agent (the
"Acquiror Rights Agreement"). There are no other outstanding shares of capital
stock or voting securities of Acquiror other than shares of Acquiror Common
Stock issued after September 30, 1999, upon (i) the exercise of options issued
under Acquiror's 1995 Stock Option/Stock Issuance Plan (the "Acquiror Stock
Option Plan") or (ii) the exercise of subscription rights outstanding as of such
date under the Acquiror Employee Stock Purchase Plan (the "Acquiror ESPP"). The
authorized capital stock of Merger Sub consists of 1,000 shares of Common Stock,
$.0001 par value, all of which are issued and outstanding and are held by
Acquiror. All outstanding shares of Acquiror have been duly authorized, validly
issued, fully paid and are nonassessable and free of any liens or encumbrances
other than any liens or encumbrances created by or imposed upon the holders
thereof and are not subject to preemptive rights, rights of first refusal or
other similar rights created by statute, the Certificate of Incorporation or
Bylaws of Acquiror or Merger Sub or any agreement to which Acquiror or Merger
Sub is a party or by which it is bound. As of September 30, 1999, Acquiror had
reserved (i) 16,460,793 shares of Common Stock for issuance to employees,
directors and independent contractors pursuant to the Acquiror Stock Option
Plan, of which approximately 12,687,995 shares have been issued pursuant to
option exercises, and approximately 12,662,858 shares are subject to
outstanding, unexercised options, and (ii) 8,400,000 shares of Common Stock for
issuance to employees pursuant to the Acquiror ESPP, of which 1,909,257 shares
have been issued and as of September 30, 1999, approximately 6,490,743 shares
are subject to outstanding subscriptions. Other than as set forth above and the
commitment to issue shares of Common Stock pursuant to this Agreement; there are
no other options, warrants, calls, rights, commitments or agreements of any
character to which Acquiror or Merger Sub is a party or by which either of them
is bound obligating Acquiror or Merger Sub to issue, deliver, sell, repurchase
or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of the capital stock of Acquiror or Merger Sub or obligating Acquiror or
Merger Sub to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement. The shares of Common Stock to be issued pursuant to the
Merger will, upon their issuance, be duly authorized, validly issued, fully
paid, and non-assessable, will not be subject to any preemptive or other
statutory right of shareholders; will be issued in compliance with applicable
U.S. Federal and state securities laws; will be free of any liens or
encumbrances other than any liens or encumbrances created by or imposed upon the
holders thereof; and will have the rights attached thereto under the Acquiror
Rights Agreement.
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3.3 Authority.
(a) Each of Acquiror and Merger Sub has all requisite corporate
power and authority to enter into this Agreement and the other Transaction
Documents and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the other Transaction Documents
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of each of
Acquiror and Merger Sub. This Agreement and the other Transaction Documents have
been duly executed and delivered by each of Acquiror and Merger Sub and
constitute the valid and binding obligations of each of Acquiror and Merger Sub,
enforceable against Acquiror and Merger Sub in accordance with their terms.
(b) The execution and delivery of this Agreement and the other
Transaction Documents do not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of a benefit under, or require a consent to assignment or
a novation under (i) any provision of the Certificate of Incorporation or Bylaws
of Acquiror or any of its subsidiaries, as amended, or (ii) any material
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Acquiror or any of its subsidiaries
or their properties or assets.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to Acquiror or any of its subsidiaries in connection with the
execution and delivery of this Agreement or the other Transaction Documents by
Acquiror and Merger Sub or the consummation by Acquiror and Merger Sub of the
transactions contemplated hereby or thereby, except for (i) the filing of the
Articles of Merger, together with the required officers' certificates, as
provided in Section 1.2, (ii) the filing of a Form 8-K with the SEC and National
Association of Securities Dealers ("NASD") within 15 days after the Closing
Date, (iii) any filings as may be required under applicable state securities
laws and the securities laws of any foreign country, (iv) such filings as may be
required under HSR, (v) the filing with the Nasdaq National Market of a
Notification Form for Listing of Additional Shares with respect to the shares of
Acquiror Common Stock issuable upon conversion of the Target Capital Stock in
the Merger and upon exercise of the options under the Target Stock Option Plans
assumed by Acquiror, and (vi) such other consents, authorizations, filings,
approvals and registrations that, if not obtained or made, would not have a
Material Adverse Effect on Acquiror or Merger Sub and would not prevent,
materially alter or delay any of the transactions contemplated by this Agreement
or the other Transaction Documents.
3.4 SEC Documents; Financial Statements. Acquiror has furnished to
Target a true and complete copy of each statement, report, registration
statement (with the prospectus in the form filed pursuant to Rule 424(b) of the
Securities Act), definitive proxy statement, and other filing filed with the SEC
by Acquiror since January 1, 1998, and, prior to the Effective Time, Acquiror
will have furnished Target with true and complete copies of any additional
documents filed with the SEC by Acquiror prior to the Effective Time
(collectively, the "Acquiror SEC Documents"). In addition, Acquiror has made
available to Target all exhibits to the Acquiror SEC Documents filed prior to
the date hereof, and will promptly make available to Target all exhibits to any
additional Acquiror SEC Documents filed prior to the Effective Time. All
documents required to be filed as exhibits to the
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Acquiror SEC Documents have been so filed, and all material contracts so filed
as exhibits are in full force and effect, except those that have expired in
accordance with their terms, and neither Acquiror nor any of its subsidiaries is
in default thereunder. As of their respective filing dates, the Acquiror SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the Securities Act, and none of the Acquiror SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading,
except to the extent corrected by a subsequently filed Acquiror SEC Document.
The financial statements of Acquiror, including the notes thereto, included in
the Acquiror SEC Documents (the "Acquiror Financial Statements") fairly present
the consolidated financial condition and the related consolidated statements of
operations, of stockholder's equity, and of cash flows of Acquiror at the dates
and during the periods indicated therein (subject, in the case of unaudited
statements, to normal, recurring year-end adjustments), complied as to form in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto as of their
respective dates, and have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent throughout the periods
indicated and consistent with each other (except as may be indicated in the
notes thereto or, in the case of unaudited statements included in Quarterly
Reports on Form 10-Qs, as permitted by Form 10-Q of the SEC).
3.5 Absence of Certain Changes. Since September 30, 1999 (the "Acquiror
Balance Sheet Date"), Acquiror has conducted its business in the ordinary course
consistent with past practice and there has not occurred any change, event or
condition (whether or not covered by insurance) that has resulted in, or might
reasonably be expected to result in, a Material Adverse Effect on Acquiror.
3.6 Absence of Undisclosed Liabilities. Acquiror has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet for the period ended September 30, 1999 (the "Acquiror Balance
Sheet"), (ii) those obligations or liabilities (including contractual
obligations) incurred in the ordinary course of business since the Acquiror
Balance Sheet Date in amounts consistent with prior periods, and (iii) those
incurred in connection with the execution of this Agreement.
3.7 Intellectual Property. Acquiror and its subsidiaries own or are
licensed for and in any event possess sufficient rights with respect to all
Intellectual Property that is Used in, or that may be necessary for, the
business of Acquiror and its subsidiaries as currently conducted by Acquiror and
its subsidiaries ("Acquiror Intellectual Property"), except to the extent that
the failure to have such rights have not had and would not reasonably be
expected to have a Material Adverse Effect on Acquiror. Acquiror's rights to
Acquiror Intellectual Property is without any conflict with or infringement or
misappropriation of any rights or property of others. With respect to patent
rights, moral rights and Mark rights, the representations and warranties of this
Section 3.7 are made only to Acquiror's knowledge.
3.8 Environmental Matters. Acquiror is and has at all times operated
its business in material compliance with all Environmental Laws and to
Acquiror's knowledge, no material expenditures are or will be required in order
to comply with such Environmental Laws.
3.9 Employee Benefit Plans. With respect to each Acquiror Plan that is
an employee benefit plan (as defined in section 3(3) of ERISA), the requirements
of ERISA with respect to such Plan have been satisfied, except to the extent
that a failure to satisfy any of such requirements would not have a Material
Adverse Effect.
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3.10 Litigation. Except as disclosed in the Acquiror SEC Documents,
there is no private or governmental action, suit, proceeding, claim, arbitration
or investigation pending before any agency, court or tribunal, foreign or
domestic, or, to the knowledge of Acquiror or any of its subsidiaries,
threatened against Acquiror or any of its subsidiaries or any of their
respective properties or any of their respective officers or directors (in their
capacities as such) that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on Acquiror. There is no judgment,
decree or order against Acquiror or any of its subsidiaries or, to the knowledge
of Acquiror or any of its subsidiaries, any of their respective directors or
officers (in their capacities as such) that could prevent, enjoin, or materially
alter or delay any of the transactions contemplated by this Agreement, or that
could reasonably be expected to have a Material Adverse Effect on Acquiror.
3.11 Compliance with Laws. Each of Acquiror and its subsidiaries has
complied with, are not in violation of, and have not received any notices of
violation with respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures to comply as
could not be reasonably expected to have a Material Adverse Effect on Acquiror.
3.12 Proxy Statement. The written information supplied by Acquiror and
Merger Sub expressly for the purpose of inclusion in the Proxy Statement shall
not, on the date the Proxy Statement is first mailed to Target's shareholders,
at the time of the Target Shareholders Meeting and at the Effective Time,
contain any untrue statement of a material fact, or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. If at any time prior
to the Effective Time any event or information should be discovered by Acquiror
or Merger Sub that should be set forth in an amendment to the Registration
Statement or a supplement to the Proxy Statement, Acquiror and Merger Sub will
promptly inform Target. Notwithstanding the foregoing, neither Acquiror nor
Merger Sub make any representation, warranty or covenant with respect to any
information supplied by Target that is contained in any of the foregoing
documents.
3.13 Board Approval. The Board of Directors of Acquiror and Merger Sub
have approved this Agreement and the Merger.
3.14 Representations Complete. None of the representations, warranties
or statements made by Acquiror or Merger Sub herein or in any Schedule hereto,
including the Acquiror Disclosure Letter, or certificate furnished by Acquiror
pursuant to this Agreement, or the Acquiror SEC Documents, when all such
documents are read together in their entirety, contains or will contain at the
Effective Time any untrue statement of a material fact, or omits or will omit at
the Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of Target and Acquiror. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, Target and Acquiror each agree (except
to the extent expressly contemplated by this
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Agreement or as consented to in writing by the other), to carry on its and its
subsidiaries' business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted. Target further agrees to
(i) pay and to cause its subsidiaries to pay debts and Taxes when due, subject
to good faith disputes over such debts or Taxes, and (ii) to use all reasonable
efforts consistent with past practice and policies to preserve intact its and
its subsidiaries' present business organizations, keep available the services of
its and its subsidiaries' present officers and key employees and preserve its
and its subsidiaries' relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with it or its
subsidiaries, to the end that its and its subsidiaries' goodwill and ongoing
businesses shall be unimpaired at the Effective Time in all material respects.
Target and Acquiror each agree to promptly notify each other of any event or
occurrence not in the ordinary course of its or its subsidiaries' business, and
of any event that could have a Material Adverse Effect on Target and Acquiror,
respectively. Without limiting the foregoing, except as expressly contemplated
by this Agreement, Target shall not do, cause or permit any of the following, or
allow, cause or permit any of its subsidiaries to do, cause or permit any of the
following, without the prior written consent of Acquiror:
(a) Charter Documents. Cause or permit any amendments to its
Articles of Incorporation or Bylaws;
(b) Dividends; Changes in Capital Stock. Declare or pay any
dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of, or in substitution for, shares of
its capital stock, or repurchase or otherwise acquire, directly or indirectly,
any shares of its capital stock, except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of shares
in connection with any termination of service to it or its subsidiaries; or
(c) Other. Take, or agree in writing or otherwise to take, any of
the actions described in Sections 4.1(a) and (b) above, or any action that would
make any of its representations or warranties contained in this Agreement untrue
or incorrect or prevent it from performing or cause it not to perform its
covenants hereunder in any material respect.
4.2 Conduct of Business of Target. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, except as expressly contemplated by this
Agreement, Target shall not do, cause or permit any of the following, or allow,
cause or permit any of its subsidiaries to do, cause or permit any of the
following, without the prior written consent of Acquiror:
(a) Material contracts. Enter into any material contract,
agreement, license or commitment, or violate, amend or otherwise modify or waive
any of the terms of any of its material contracts, agreements or licenses, other
than in the ordinary course of business and consistent with past practice;
(b) Stock Option Plans, etc. Accelerate, amend or change the period
of exercisability or vesting of options or other rights granted under its stock
plans or authorize cash payments in exchange for any options or other rights
granted under any of such plans; provided, however, the foregoing shall not
effect any such rights or provisions existing as of the date of this Agreement
which are identified in the Target Disclosure Letter;
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(c) Issuance of Securities. Issue, deliver or sell or authorize or
propose the issuance, delivery or sale of, or purchase or propose the purchase
of, any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than the issuance of shares of its Common Stock
pursuant to the exercise of stock options, warrants or other rights therefor
outstanding as of the date of this Agreement; in particular, Target shall not
issue any securities in connection with the earn-out provisions set forth in the
Stock Purchase Agreement between Target and Mijenix Corporation, dated July 7,
1999;
(d) Intellectual Property. Transfer to or license any person or
entity or otherwise extend, amend or modify in any material respect any rights
to Intellectual Property, other than the grant of non-exclusive licenses in the
ordinary course of business and consistent with past practice;
(e) Exclusive Rights. Enter into or amend any agreements pursuant
to which any other party is granted exclusive marketing, manufacturing or other
exclusive rights of any type or scope with respect to any of its products or
technology;
(f) Dispositions. Sell, lease, license or otherwise dispose of or
encumber any of its properties or assets that are material, individually or in
the aggregate, to its and its subsidiaries' business, taken as a whole;
(g) Indebtedness. Incur or commit to incur any indebtedness for
borrowed money or guarantee any such indebtedness or issue or sell any debt
securities or guarantee any debt securities of others;
(h) Leases. Enter into any operating lease requiring payments in
excess of $100,000;
(i) Payment of Obligations. Pay, discharge or satisfy in an amount
in excess of $100,000 in any one case or $500,000 in the aggregate, any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise) arising other than in the ordinary course of business, other than
the payment, discharge or satisfaction of liabilities reflected or reserved
against in the Target Financial Statements;
(j) Capital Expenditures. Incur or commit to incur any capital
expenditures in excess of $200,000 in any one case, or $1,000,000 in the
aggregate;
(k) Insurance. Reduce in any material manner the amount of any
insurance coverage provided by existing insurance policies;
(l) Termination or Waiver. Terminate or waive any right of
substantial value, other than in the ordinary course of business;
(m) Employee Benefits; Severance. Take any of the following
actions, unless otherwise contemplated by this Agreement or required by
obligations of Target existing as of the date of this Agreement and as
identified in the Target Disclosure Letter: (i) increase or agree to increase
the compensation payable or to become payable to its officers or employees,
except for increases
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in salary or wages of non-officer employees in the ordinary course of business
and consistent with past practices, (ii) grant any additional severance or
termination pay to, or enter into any employment or severance agreements with,
any officer or employee, (iii) enter into any collective bargaining agreement,
or (iv) establish, adopt, enter into or amend in any material respect any bonus,
profit sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, trust, fund, policy or arrangement for the benefit of any directors,
officers or employees, other than discretionary bonus payments or profit sharing
with respect to 1999 services which will not in the aggregate exceed $1,250,000
and shall be allocated and set by Michael Rogers. United States employees of
Target who are terminated as a direct result of the Merger between the date of
this Agreement and a date six months following the Effective Date shall receive
a lump sum severance payment in an amount equal to two (2) weeks base salary
plus one (1) week base salary for every full year of employment with Target
(including service with Mijenix); European employees shall receive such
severance payments as may be required by local law, which shall not be less than
the amount provided United States employees;
(n) Lawsuits. Commence a lawsuit or arbitration proceeding other
than (i) for the routine collection of bills, (ii) in such cases where it in
good faith determines that failure to commence suit would result in the material
impairment of a valuable asset of its business, provided that it consults with
Acquiror prior to the filing of such a suit, or (iii) for a breach of this
Agreement;
(o) Acquisitions. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets that are material, individually or in the aggregate,
to its and its subsidiaries' business, taken as a whole;
(p) Taxes. Make any material Tax election other than in the
ordinary course of business and consistent with past practice, change any
material Tax election, adopt any Tax accounting method other than in the
ordinary course of business and consistent with past practice, change any Tax
accounting method, file any Tax return (other than any estimated tax returns,
immaterial information returns, payroll tax returns or sales tax returns) or any
amendment to a Tax return, enter into any closing agreement, settle any Tax
claim or assessment or consent to any Tax claim or assessment provided that
Acquiror shall not unreasonably withhold or delay approval of any of the
foregoing actions;
(q) Revaluation. Revalue any of its material assets, including
without limitation writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business; or
(r) Other. Take or agree in writing or otherwise to take, any of
the actions described in Sections 4.2(a) through (q) above, or any action that
would make any of its representations or warranties in any material respect
contained in this Agreement untrue or incorrect or prevent it from performing or
cause it not to perform its covenants hereunder.
4.3 Notices. Target shall give all notices and other information
required to be given to the employees of Target, any collective bargaining unit
representing any group of employees of Target, and any applicable government
authority under the National Labor Relations Act, the Internal
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Revenue Code, the Consolidated Omnibus Budget Reconciliation Act, and other
applicable law in connection with the transactions provided for in this
Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 No Solicitation.
(a) Target shall not, directly or indirectly, through any officer,
director, employee, financial advisor, attorney, representative, subsidiary or
agent of such party (i) take any action to solicit, initiate or encourage any
inquiries or proposals that constitute, or could reasonably be expected to lead
to, a proposal or offer for a merger, consolidation, business combination, sale
of substantial assets, sale of shares of capital stock (including without
limitation by way of a tender offer) or similar transaction involving Target or
any of its subsidiaries, other than the transactions contemplated by this
Agreement (any of the foregoing inquiries or proposals being referred to in this
Agreement as an "Acquisition Proposal"), (ii) engage in negotiations or
discussions concerning, or provide any non-public information to any person or
entity relating to, any Acquisition Proposal, or (iii) agree to or recommend any
Acquisition Proposal; PROVIDED, HOWEVER, that nothing contained in this
Agreement shall prevent Target, or its Board of Directors, to the extent such
Board of Directors determines, in good faith, that such Board of Directors'
fiduciary duties under applicable law require it to do so, from (A) furnishing
non-public information to, or entering into discussions or negotiations with,
any person or entity in connection with an unsolicited, bona fide, written
Acquisition Proposal by such person or entity or recommending an unsolicited,
bona fide, written Acquisition Proposal by such person or entity to the
shareholders of Target, if and only to the extent that (1) the Board of
Directors of Target believes in its good faith reasonable judgment (based upon
and consistent with advice received in consultation with independent financial
and legal advisors) that such Acquisition Proposal is reasonably capable of
being completed on the terms proposed and, after taking into account the
strategic benefits anticipated to be derived from the Merger and the long-term
prospects of Acquiror and Target as a combined company, would, if consummated,
result in a transaction more favorable from a financial point of view than the
transaction contemplated by this Agreement (any such more favorable Acquisition
Proposal being referred to in this Agreement as a "Superior Proposal") and the
Board of Directors of Target determines in good faith that such action is
necessary for such Board of Directors to comply with its fiduciary duties to
shareholders under applicable law and (2) prior to furnishing such non-public
information to, or entering into discussions or negotiations with, such person
or entity, such Board of Directors receives from such person or entity an
executed confidentiality agreement with terms no less favorable to such party
than those contained in the Nondisclosure Agreement dated October 29, 1999
between Acquiror and Target (the "Nondisclosure Agreement"), such non-public
information has been previously delivered to the Board of Directors of Acquiror,
and Target advises the Acquiror hereto in writing of such disclosure or
discussions or negotiations, including the party to whom disclosed or with whom
discussions or negotiations will occur; or (B) complying with Rules 14d-9 and
14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal.
Without limiting the foregoing, it is understood that any violations of the
restrictions set forth in this paragraph by any officer, director, employee,
financial advisor, attorney, representative, subsidiary or agent of Target,
whether or not acting on behalf of Target, shall be deemed to be a breach of
this Section 5.1 by Target.
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(b) Target shall notify Acquiror immediately after receipt by
Target (or their advisors) of any Acquisition Proposal or any request for
non-public information in connection with an Acquisition Proposal or for access
to the properties, books or records of such party or any of its subsidiaries by
any person or entity that informs such party that it is considering making, or
has made, an Acquisition Proposal. Such notice shall be made orally and in
writing and shall indicate in reasonable detail the identity of the offeror and
the terms and conditions of such proposal, inquiry or contact. Such party shall
continue to keep the other party hereto informed, on a current basis, of the
status of any such discussions or negotiations and the terms being discussed or
negotiated.
5.2 Proxy Statement/Prospectus; Registration Statement. As promptly as
practicable after the execution of this Agreement, Target and Acquiror shall
prepare proxy materials relating to the approval of the Merger and the
transactions contemplated hereby by the shareholders of Target and, as promptly
as practicable, Acquiror shall file with the SEC a Registration Statement on
Form S-4 (or such other or successor form as shall be appropriate), which
complies in form with applicable SEC requirements and shall use all reasonable
efforts to cause the Registration Statement to become effective as soon
thereafter as practicable. Subject to the provisions of Section 5.1, the Proxy
Statement shall include the unanimous recommendation of the Board of Directors
of Target in favor of the Merger; provided that such recommendation may not be
included or may be withdrawn if previously included if Target's Board of
Directors believes in good faith that a Superior Proposal (as defined in Section
5.1) has been made and, shall determine that to include such recommendation or
not withdraw such recommendation if previously included would constitute a
breach of the Board of Directors' fiduciary duty under applicable law.
5.3 Shareholders Meeting. Target shall promptly after the date hereof
take all actions necessary to call a meeting of its shareholders to be held for
the purpose of voting upon this Agreement and the Merger, which meeting shall be
held (to the extent permitted by law) within forty-five (45) days of the date on
which the Registration Statement is declared effective. Subject to Section 5.2,
Target will, through its Board of Directors, unanimously recommend to its
shareholders approval of such matters. Target shall use all reasonable efforts
to solicit from its shareholders proxies in favor of or, subject to Section 5.1,
with respect to such matters (whether or not the Board of Directors of Target
shall have withdrawn or modified its unanimous recommendation of this Agreement
or the Merger).
5.4 Access to Information.
(a) Target shall afford Acquiror and its accountants, counsel and
other representatives, reasonable access during normal business hours during the
period prior to the Effective Time to (i) all of Target's and its subsidiaries'
properties, books, contracts, commitments and records, and (ii) all other
information concerning the business, properties and personnel of Target and its
subsidiaries as Acquiror may reasonably request. Target agrees to provide to
Acquiror and its accountants, counsel and other representatives copies of
internal financial statements promptly upon request.
(b) Subject to compliance with applicable law, from the date hereof
until the Effective Time, each of Acquiror and Target shall confer on a regular
and frequent basis with one or more representatives of the other party to report
operational matters of materiality and the general status of ongoing operations.
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(c) No information or knowledge obtained in any investigation
pursuant to this Section 5.4 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
5.5 Confidentiality. The parties acknowledge that Acquiror and Target
have previously executed a Nondisclosure Agreement dated October 29, 1999, which
Confidentiality Agreement shall continue in full force and effect in accordance
with its terms.
5.6 Public Disclosure. Unless otherwise permitted by this Agreement,
Acquiror and Target shall consult with each other before issuing any press
release or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by law or to comply with the
rules and regulations of the SEC or any obligations pursuant to any listing
agreement with any national securities exchange or with the NASD.
5.7 Consents; Cooperation.
(a) Each of Acquiror and Target shall promptly apply for or
otherwise seek, and use all reasonable efforts to obtain, all consents and
approvals required to be obtained by it for the consummation of the Merger,
including those required under HSR, and shall use all reasonable efforts to
obtain all necessary consents, waivers and approvals under, or to deliver notice
of the Merger as required by, any of its material contracts in connection with
the Merger for the assignment thereof or otherwise. The parties hereto will
consult and cooperate with one another, and consider in good faith the views of
one another, in connection with any analyses, appearances, presentations,
memoranda, briefs, arguments, opinions and proposals made or submitted by or on
behalf of any party hereto in connection with proceedings under or relating to
HSR or any other federal or state antitrust or fair trade law.
(b) Each of Acquiror and Target shall use all reasonable efforts to
resolve such objections, if any, as may be asserted by any Governmental Entity
with respect to the transactions contemplated by this Agreement under HSR, the
Sherman Act, as amended, the Clayton Act, as amended, the Federal Trade
Commission Act, as amended, and any other Federal, state or foreign statutes,
rules, regulations, orders or decrees that are designed to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade (collectively, "Antitrust Laws"). In connection therewith, if any
administrative or judicial action or proceeding is instituted (or threatened to
be instituted) challenging any transaction contemplated by this Agreement as
violative of any Antitrust Law, each of Acquiror and Target shall cooperate and
use all reasonable efforts vigorously to contest and resist any such action or
proceeding and to have vacated, lifted, reversed, or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or permanent
(each an "Order"), that is in effect and that prohibits, prevents, or restricts
consummation of the Merger or any such other transactions, unless by mutual
agreement Acquiror and Target decide that litigation is not in their respective
best interests. Notwithstanding the provisions of the immediately preceding
sentence, it is expressly understood and agreed that neither Acquiror nor Target
shall have any obligation to litigate or contest any administrative or judicial
action or proceeding or any Order beyond the earlier of (i) June 30, 2000, or
(ii) the date of a ruling preliminarily enjoining the Merger issued by a court
of competent
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jurisdiction. Each of Acquiror and Target shall use all reasonable efforts to
take such action as may be required to cause the expiration of the notice
periods under the HSR or other Antitrust Laws with respect to such transactions
as promptly as possible after the execution of this Agreement.
(c) Notwithstanding the foregoing, neither Acquiror nor Target
shall be required to agree, as a condition to any Approval, to divest itself of
or hold separate any subsidiary, division or business unit that is material to
the business of such party and its subsidiaries, taken as a whole, or the
divestiture or holding separate of which would be reasonably likely to have a
Material Adverse Effect on (A) the business, properties, assets, liabilities,
financial condition or results of operations of such party and its subsidiaries,
taken as a whole or (B) the benefits intended to be derived as a result of the
Merger.
5.8 Update Disclosure; Breaches. From and after the date of this
Agreement until the Effective Time, each party hereto shall promptly notify the
other party, by written update to its Disclosure Letter, of (i) the occurrence
or non-occurrence of any event that would be likely to cause any condition to
the obligations of any party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied, or (ii) the failure of
Target or Acquiror, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it pursuant to this
Agreement that would be likely to result in any condition to the obligations of
any party to effect the Merger and the other transactions contemplated by this
Agreement not to be satisfied in any material respect. The delivery of any
notice pursuant to this Section 5.8 shall not cure any breach of any
representation or warranty requiring disclosure of such matter prior to the date
of this Agreement or otherwise limit or affect the remedies available hereunder
to the party receiving such notice.
5.9 Stockholder Lists. Upon the execution of this Agreement, Acquiror
and Target will provide each other with a list of those persons who are, in
Acquiror's or Target's respective reasonable judgment, "affiliates" of Acquiror
or Target, respectively, within the meaning of Rule 145 under the Securities Act
("Rule 145"). Each such person who is an "affiliate" of Acquiror or Target
within the meaning of Rule 145 is referred to herein as an "Affiliate." Acquiror
and Target shall provide each other such information and documents as Target or
Acquiror shall reasonably request for purposes of reviewing such list and shall
notify the other party in writing regarding any change in the identity of its
Affiliates prior to the Closing Date.
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5.10 Indemnification.
(a) From and after the Effective Time, Acquiror and the Surviving
Corporation jointly and severally shall indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date of this Agreement
or who becomes prior to the Effective Time, an officer, director or employee of
Target or any of its subsidiaries (the "Indemnified Parties") in respect of acts
or omissions occurring on or prior to the Effective Time to the extent provided
under Target's Articles of Incorporation, Bylaws (as in effect on the date
hereof) and indemnification agreements in effect as of the Effective Time
(provided, however, that Target covenants that it will not enter into
indemnification agreements or modify existing indemnification agreements between
the date of this Agreement and the Effective Time, except as required by law and
except that officers and directors of Target may execute a form of
indemnification agreement in the form previously provided to Acquiror or its
counsel); provided that such indemnification shall be subject to any limitation
imposed from time to time under applicable law.
(b) For a period of six years after the Effective Time, Acquiror
will cause the Surviving Corporation to use its commercially reasonable efforts
to maintain in effect, if available, directors' and officers' liability
insurance covering those persons who are currently covered by Target's
directors' and officers' liability insurance policy on terms substantially
similar to those applicable to the current directors and officers of Target;
provided, however, that in no event will Acquiror or the Surviving Corporation
be required to expend in excess of $250,000 in the aggregate (i.e., for six
years coverage) for such coverage (or such coverage as is available for such
$250,000).
5.11 Irrevocable Proxies. Target shall use its best efforts, on behalf
of Acquiror and pursuant to the request of Acquiror, to cause Michael Rogers and
Gary Stevens to execute and deliver to Acquiror, a Voting and Proxy Agreement in
the form of Exhibit B attached hereto concurrently with the execution of this
Agreement.
5.12 Legal Requirements. Each of Acquiror and Target will, and will
cause their respective subsidiaries to, take all reasonable actions necessary to
comply promptly with all legal requirements that may be imposed on them with
respect to the consummation of the transactions contemplated by this Agreement
and will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such requirements imposed upon such other party
in connection with the consummation of the transactions contemplated by this
Agreement and will take all reasonable actions necessary to obtain (and will
cooperate with the other parties hereto in obtaining) any consent, approval,
order or authorization of, or any registration, declaration or filing with, any
Governmental Entity or other person, required to be obtained or made in
connection with the taking of any action contemplated by this Agreement.
5.13 Tax-Free Reorganization. Neither Target, Acquiror nor Merger Sub
will, either before or after consummation of the Merger, take any action that,
to the knowledge of such party, would cause the Merger to fail to constitute a
"reorganization" within the meaning of Code Section 368.
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5.14 Stock Options.
(a) At the Effective Time, the Target Stock Option Plans and each
outstanding option to purchase shares of Target Common Stock under the Target
Stock Option Plans, whether vested or unvested, shall be assumed by Acquiror.
Target has delivered to Acquiror a schedule (the "Option Schedule") that sets
forth a true and complete list as of the date hereof of all holders of
outstanding options under the Target Stock Option Plans, including the number of
shares of Target Capital Stock subject to each such option, the exercise or
vesting schedule, the exercise price per share and the term of each such option.
On the Closing Date, Target shall deliver to Acquiror an updated Option Schedule
current as of such date. Each such option so assumed by Acquiror under this
Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the Target Stock Option Plans immediately prior to the
Effective Time, except that (i) such option shall be exercisable for that number
of whole shares of Acquiror Common Stock equal to the product of the number of
shares of Target Common Stock that were issuable upon exercise of such option
immediately prior to the Effective Time multiplied by the Option Exchange Ratio,
and rounded down to the nearest whole number of shares of Acquiror Common Stock,
(ii) the per share exercise price for the shares of Acquiror Common Stock
issuable upon exercise of such assumed option shall be equal to the quotient
determined by dividing the exercise price per share of Target Common Stock at
which such option was exercisable immediately prior to the Effective Time, by
the Option Exchange Ratio, rounded up to the nearest whole cent, (iii) assumed
options which provided for acceleration of vesting upon a change in control of
Target shall be fully vested on and after the Effective Date and shall be
exercisable until the date 12 months following the later of (A) the Effective
Date or (B) cessation of the optionee's service (if such optionee commenced
service with Acquiror following the Closing), (iv) assumed options held by
directors, former directors and consultants to the directors shall be fully
vested on and after the Effective Date and shall be exercisable until the date
12 months following the Effective Date, and (v) except as provided in the
foregoing clauses (iii) and (iv), no assumed option shall provide for an
exercise period in excess of 12 months in the event of the cessation of the
optionee's service. The options so assumed by Acquiror shall qualify following
the Effective Time as incentive stock options as defined in Section 422 of the
Code to the extent such options qualified as incentive stock options prior to
the Effective Time. Within twenty (20) business days after the Effective Time,
Acquiror will issue to each person whose option shall be assumed in accordance
with this section 5.14, a document in form and substance satisfactory to Target
evidencing the foregoing assumption of such option by Acquiror. Neither Acquiror
nor Target shall be in breach of this Agreement solely as a result of any
optionholder failing to sign an Assumption Agreement.
(b) Acquiror shall take all corporate action necessary to reserve
and make available for issuance a sufficient number of shares of Acquiror Common
Stock for delivery under Target Stock Options assumed in accordance with this
Section 5.14. Within five (5) business days after the Effective Time, Acquiror
shall file a registration statement on Form S-8 (or any successor or other
appropriate forms) which will register the shares of Acquiror Common Stock
subject to assumed options to the extent permitted by Federal securities laws
and shall use its reasonable efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
options remain outstanding.
(c) Outstanding purchase rights under the Target ESPP shall be
exercised upon the earlier of (i) the next scheduled purchase date under the
Target ESPP or (ii) immediately prior to the Effective Time, and each
participant in the Target ESPP shall accordingly be
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issued shares of Target Common Stock at that time which shall be converted into
shares of Acquiror Common Stock in the Merger. The Target ESPP shall terminate
with such exercise date, and no purchase rights shall be subsequently granted or
exercised under the Target ESPP. Target employees who meet the eligibility
requirements for participation in the Aquiror Employee Stock Purchase Plan shall
begin payroll deductions under that plan as of the start date of the first
offering period thereunder beginning at least thirty (30) days after the
Effective Time.
5.15 Listing of Additional Shares. Prior to the Effective Time,
Acquiror shall file with Nasdaq a Notification Form for Listing of Additional
Shares with respect to the shares referred to in Section 6.1(e) below.
5.16 Additional Agreements; Reasonable Efforts. Each of the parties
agrees to use all reasonable efforts to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, subject to the appropriate vote of
shareholders of Target described in Section 5.3, including cooperating fully
with the other party, including by provision of information. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation with
full title to all properties, assets, rights, approvals, immunities and
franchises of either of the constituent corporations, the proper officers and
directors of each party to this Agreement shall take all such necessary action.
5.17 Employee Benefits. Acquiror shall take such reasonable actions, to
the extent permitted by Acquiror's benefits program, as are necessary to allow
eligible employees of Target to participate in the benefit programs of Acquiror,
or alternative benefits programs in the aggregate substantially comparable to
those applicable to employees of Acquiror, as soon as practicable after the
Effective Time of the Merger. For purposes of satisfying the terms and
conditions of such programs, to the extent permitted by Acquiror's benefit
programs and applicable law, Acquiror shall use reasonable efforts to give full
credit for eligibility or vesting for each participant's period of service with
Target. To the extent permitted by such plans, Acquiror shall waive any
pre-existing condition exclusion and actively- at-work requirements under its
medical or dental plans.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to consummate and effect
this Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by agreement of all the
parties hereto:
(a) Shareholder Approval. This Agreement and the Merger shall have
been approved and adopted by the holders of at least a majority of the shares of
Target Common Stock outstanding as of the record date set for the Target
Shareholders Meeting.
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(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal. In the event an
injunction or other order shall have been issued, each party agrees to use its
reasonable efforts to have such injunction or other order lifted.
(c) Governmental Approval. Acquiror and Target and their respective
subsidiaries shall have timely obtained from each Governmental Entity all
approvals, waivers and consents, if any, necessary for consummation of or in
connection with the Merger and the several transactions contemplated hereby,
including such approvals, waivers and consents as may be required under the
Securities Act, under state Blue Sky laws, and under HSR.
(d) Tax Opinion. Each of Target and Acquiror shall have received a
written opinion from their respective counsel to the effect that the Merger will
constitute a reorganization within the meaning of Section 368 of the Code, which
opinions shall be substantially identical in substance. In preparing the Target
and the Acquiror tax opinions, counsel may rely on reasonable assumptions and
may also rely on (and to the extent reasonably required, the parties and
Target's shareholders shall make) reasonable representations related thereto.
(e) Listing of Additional Shares. The filing with the Nasdaq
National Market of a Notification Form for Listing of Additional Shares with
respect to the shares of Acquiror Common Stock issuable upon conversion of the
Target Common Stock in the Merger and upon exercise of the options under the
Target Stock Option Plans assumed by Acquiror shall have been made.
6.2 Additional Conditions to the Obligations of Target. The obligations
of Target to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, by Target:
(a) Representations, Warranties and Covenants. Except as disclosed
in the Acquiror Disclosure Letter, (i) the representations and warranties of
Acquiror in this Agreement shall be true and correct in all material respects
(except for such representations and warranties that are qualified by their
terms by a reference to materiality, which representations and warranties as so
qualified shall be true in all respects) on and as of the Effective Time as
though such representations and warranties were made on and as of such time, and
(ii) Acquiror shall have performed and complied in all material respects with
all covenants, obligations and conditions of this Agreement required to be
performed and complied with by them as of the Effective Time.
(b) Certificate of Acquiror. Target shall have been provided with a
certificate executed on behalf of Acquiror by its President and its Chief
Financial Officer to the effect that, as of the Effective Time:
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(i) all representations and warranties made by Acquiror under
this Agreement are true and complete in all material respects (except for such
representations and warranties that are qualified by their terms by a reference
to materiality, which representations and warranties as so qualified shall be
true in all respects); and
(ii) all covenants, obligations and conditions of this
Agreement to be performed by Acquiror on or before such date have been so
performed in all material respects.
(c) No Material Adverse Changes. There shall not have occurred any
material adverse change in the condition (financial or otherwise), properties,
assets (including intangible assets), liabilities, business, operations or
results of operations of Acquiror and its subsidiaries, taken as a whole.
6.3 Additional Conditions to the Obligations of Acquiror. The
obligations of Acquiror and Merger Sub to consummate and effect this Agreement
and the transactions contemplated hereby shall be subject to the satisfaction at
or prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Acquiror:
(a) Representations, Warranties and Covenants. Except as disclosed
in the Acquiror Disclosure Letter (i) the representations and warranties of
Target in this Agreement shall be true and correct in all material respects
(except for such representations and warranties that are qualified by their
terms by a reference to materiality, which representations and warranties as so
qualified shall be true in all respects) on and as of the Effective Time as
though such representations and warranties were made on and as of such time, and
(ii) Target shall have performed and complied in all material respects with all
covenants, obligations and conditions of this Agreement required to be performed
and complied with by it as of the Effective Time.
(b) Certificate of Target. Acquiror shall have been provided with a
certificate executed on behalf of Target by its President and Chief Financial
Officer to the effect that, as of the Effective Time:
(i) all representations and warranties made by Target under
this Agreement are true and complete in all material respects (except for such
representations and warranties that are qualified by their terms by a reference
to materiality, which representations and warranties as so qualified shall be
true in all respects); and
(ii) all covenants, obligations and conditions of this
Agreement to be performed by Target on or before such date have been so
performed in all material respects.
(c) Third Party Consents. Acquiror shall have been furnished with
evidence satisfactory to it of the consent or approval of those persons whose
consent or approval shall be required in connection with the Merger under the
contracts of Target set forth on Schedule 6.3(c) hereto.
(d) Injunctions or Restraints on Merger and Conduct of Business. No
proceeding brought by any administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking to
prevent the consummation of the Merger shall be
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pending. In addition, no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal or regulatory restraint provision limiting or restricting Acquiror's
conduct or operation of the business of Target and its subsidiaries, following
the Merger shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other Governmental Entity, domestic or
foreign, seeking the foregoing be pending.
(e) No Material Adverse Changes. There shall not have occurred any
material adverse change in the condition (financial or otherwise), properties,
assets (including intangible assets), liabilities, business, operations or
results of operations of Target and its subsidiaries, taken as a whole.
(f) Resignation of Directors. The directors of Target in office
immediately prior to the Effective Time shall have resigned as directors of
Target effective as of the Effective Time.
(g) Employment and Non-Competition Agreements. The employees of
Target set forth on Schedule 6.3(g) shall have entered into an Employment and
Non-Competition Agreement in the form attached hereto as Exhibit C.
(h) Election under Section 338(h)(10) of the Code. Target and
Jennifer Kronenberg shall have filed a joint election under Section 338(h)(10)
of the Code with respect to Target's purchase from Jennifer Kronenberg of all
outstanding stock of Mijenix Corporation, a Wisconsin corporation, pursuant to
the Stock Purchase Agreement by and among Target, Jennifer Kronenberg and
Mijenix Corporation, dated as of July 7, 1999.
(i) Termination of Target 401(k) Plan. Target shall have terminated
its 401(k) Plan.
ARTICLE VII
TERMINATION, EXPENSES, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time (with respect to Sections 7.1(b) through 7.1(f), by written
notice by the terminating party to the other party), whether before or after
approval of the matters presented in connection with the Merger by the
shareholders of Target:
(a) by mutual written consent of Target and Acquiror; or
(b) by either Target or Acquiror if the Merger shall not have been
consummated by June 30, 2000 (the "Outside Date") (provided that the right to
terminate this Agreement under this Section 7.1(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been a
significant cause of or resulted in the failure of the Merger to occur on or
before such date); or
(c) by either Target or Acquiror if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree or ruling or taken any
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other nonappealable final action, in each case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger; or
(d) by either Acquiror or Target, if at the Target Shareholders'
Meeting (including any adjournment or postponement), the requisite vote of the
shareholders of Target in favor of this Agreement and the Merger shall not have
been obtained (provided that the right to terminate this Agreement under this
Section 7.1(d) shall not be available to Target where the failure to obtain
Target Shareholder Approval shall have been caused by the action or failure to
act of Target and such action or failure to act constitutes a material breach by
Target of this Agreement). A material breach by a party of Sections 5.2 or 5.3
hereof will constitute a material breach hereunder; or
(e) by Acquiror, if (i) the Board of Directors of Target shall have
withdrawn or modified its recommendation of this Agreement or the Merger; (ii)
the Board of Directors of Target fails to reaffirm its recommendation of this
Agreement or the Merger within ten (10) business days after Acquiror requests in
writing that such unanimous recommendation be reaffirmed at any time following
the public announcement of an Acquisition Proposal; (iii) the Board of Directors
of Target shall have recommended to the shareholders of Target an Alternative
Transaction; (iv) a tender offer or exchange offer for 15% or more of the
outstanding shares of Target Common Stock is commenced (other than by Acquiror
or an Affiliate of Acquiror) and the Board of Directors of Target shall not have
sent to its security holders pursuant to Rule 14e-2 within ten (10) business
days after such tender or exchange offer is first published, sent or given, a
statement disclosing that Target recommends rejection of such tender or exchange
offer; or (v) for any other reason Target fails to call and hold the Target
Shareholders' Meeting within forty-five days after the Registration Statement is
declared effective under the Securities Act if such date is on or before the
Outside Date; or
(f) by Target or Acquiror, if there has been a breach of any
representation, warranty, covenant or agreement on the part of the other party
set forth in this Agreement, which breach (i) causes the conditions set forth in
Section 6.2(a) or (b) (in the case of termination by Target) or 6.3(a) or (b)
(in the case of termination by Acquiror) not to be satisfied, and (ii) shall not
have been cured within twenty (20) business days (or prior to the Outside Date,
if earlier) following receipt by the breaching party of written notice of such
breach from the other party.
As used in this Agreement, "Alternative Transaction" means either
(i) a transaction pursuant to which any person (or group of persons) other than
Acquiror or its respective affiliates (a "Third Party"), acquires more than 15%
of the outstanding shares of Target Common Stock, as the case may be, pursuant
to a tender offer or exchange offer or otherwise, (ii) a merger or other
business combination involving Target pursuant to which any Third Party acquires
more than 15% of the outstanding equity securities of Target or the entity
surviving such merger or business combination, (iii) any other transaction
pursuant to which any Third Party acquires control of assets (including for this
purpose the outstanding equity securities of subsidiaries of Target, and the
entity surviving any merger or business combination including any of them) of
Target having a fair market value (as determined by the Board of Directors of
Target or Acquiror, as the case may be, in good faith) equal to more than 15% of
the fair market value of all the assets of Target and its subsidiaries, taken as
a whole, immediately prior to such transaction, or (iv) any public announcement
by a Third Party of a proposal, plan or intention to do any of the foregoing or
any agreement to engage in any of the foregoing.
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7.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Acquiror or Target
or their respective officers, directors, stockholders or affiliates, except as
otherwise set forth in Section 7.3 and except to the extent that such
termination results from the breach by a party hereto of any of its
representations, warranties or covenants set forth in this Agreement; provided
that, the provisions of Section 5.5 (Confidentiality), Section 7.3 (Expenses and
Termination Fees) and this Section 7.2 shall remain in full force and effect and
survive any termination of this Agreement.
7.3 Expenses and Termination Fees.
(a) Except as set forth in this Section 7.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not the
Merger is consummated; PROVIDED, HOWEVER, that Acquiror and Target shall share
equally all fees and expenses, other than attorneys' fees, incurred in relation
to the printing and filing of the Proxy Statement (including any related
preliminary materials) and the Registration Statement (including financial
statements and exhibits) and any amendments or supplements.
(b) Target shall pay Acquiror a termination fee of $5,000,000 in
immediately available funds within five business days after the termination of
this Agreement by Acquiror pursuant to Section 7.1(e).
(c) Acquiror shall pay Target's out-of-pocket expenses incurred in
connection with this Agreement (and the transactions contemplated hereby),
including without limitations the fees and expenses of financial advisors,
accountants and legal counsel and printing and filing fees (collectively,
"Termination Expenses"), in immediately available funds within five (5) business
days following termination of this Agreement by Target pursuant to Section
7.1(f) after a willful breach by Acquiror of this Agreement and Target shall pay
Acquiror's Termination Expenses in immediately available funds within five (5)
business days following termination of this Agreement by Acquiror pursuant to
Section 7.1(f) after a willful breach by Target of this Agreement.
7.4 Amendment. The boards of directors of the parties hereto may cause
this Agreement to be amended at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto; provided that an
amendment made subsequent to adoption of the Agreement by the shareholders of
Target shall not (i) alter or change the amount or kind of consideration to be
received on conversion of the Target Capital Stock, (ii) alter or change any
material term of the Articles of Incorporation of the Surviving Corporation to
be effected by the Merger, or (iii) alter or change any of the terms and
conditions of the Agreement if such alteration or change would adversely affect
the holders of Target Capital Stock.
7.5 Extension; Waiver. At any time prior to the Effective Time any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any
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agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
at the following address (or at such other address for a party as shall be
specified by like notice):
(a) if to Acquiror or Merger Sub, to:
Legato Systems, Inc.
3210 Porter Drive
Palo Alto, CA 94304
Attention: Louis C. Cole
Facsimile No.: (650) 812-6032
Telephone No.: (650) 812-6000
with a copy to:
Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP
155 Constitution Drive
Menlo Park, CA 94025
Attention: Robert V. Gunderson, Jr.
Facsimile No.: (650) 321-2800
Telephone No.: (650) 463-5200
(b) if to Target, to:
Ontrack Data International, Inc.
9023 Columbine Road
Eden Prarie, MN 55347
Attention: Michael Rogers
Facsimile No.: (612) 949-4170
Telephone No.: (612) 937-1107
40
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with a copy to:
Lindquist & Vennum PLLP
4200 IDS Center
Minneapolis, MN 55402
Attention: John R. Houston
Facsimile No.: (612) 371-3207
Telephone No.: (612) 371-3211
8.2 Interpretation. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." In this Agreement, any reference to any event, change, condition or
effect being "material" with respect to any entity or group of entities means
any material event, change, condition or effect related to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business, operations or results of operations of such entity or
group of entities. In this Agreement, any reference to a "Material Adverse
Effect" with respect to any entity or group of entities means any event, change,
condition or effect that is materially adverse to the condition (financial or
otherwise), properties, assets (including intangible assets), liabilities,
business, operations or results of operations of such entity and its
subsidiaries, taken as a whole. In this Agreement, any reference to a party's
"knowledge" means such party's actual knowledge after due and diligent inquiry
of officers, directors and other employees of such party and its subsidiaries
reasonably believed to have knowledge of such matters. The phrase "made
available" in this Agreement shall mean that the information referred to has
been made available if requested by the party to whom such information is to be
made available. The phrases "the date of this Agreement", "the date hereof", and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to November 18, 1999. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
8.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.4 Entire Agreement; No Third Party Beneficiaries. This Agreement, the
other Transaction Documents and the documents and instruments and other
agreements specifically referred to herein or delivered pursuant hereto,
including the Exhibits, the Schedules, including the Target Disclosure Letter
and the Acquiror Disclosure Letter (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, except for the Confidentiality Agreement,
which shall continue in full force and effect, and shall survive any termination
of this Agreement or the Closing, in accordance with its terms; (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except for the rights of the Target Shareholders and
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optionholders to receive the consideration set forth in Article I of this
Agreement and the provisions of Sections 5.14 and 5.17.
8.5 Severability. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.6 Remedies Cumulative. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or equity
upon such party, and the exercise by a party of any one remedy will not preclude
the exercise of any other remedy.
8.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to applicable
principles of conflicts of law. Each of the parties hereto irrevocably consents
to the exclusive jurisdiction of any court located within the State of Delaware,
in connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, agrees that process may be served upon them in any
manner authorized by the laws of the State of Delaware for such persons and
waives and covenants not to assert or plead any objection that they might
otherwise have to such jurisdiction and such process.
8.8 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of, and be enforceable by the parties and their respective
successors and permitted assigns.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
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IN WITNESS WHEREOF, Target, Acquiror and Merger Sub have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized, all as of the date first written above.
ONTRACK DATA INTERNATIONAL, INC.
By: /s/ Michael W. Rogers, CEO
-------------------------------------
Name and
Title
LEGATO SYSTEMS, INC.
By: /s/ Louis C. Cole, CEO
-------------------------------------
Name and
Title
LASSO ACQUISITION CORP.
By: /s/ Louis C. Cole, Director
-------------------------------------
Name and
Title
SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION
Exhibit 99
EDITORIAL CONTACT: INVESTOR CONTACT:
Trish Terry Stephen C. Wise
Corporate Affairs Chief Financial Officer
925.875.8062 650.812.6102
[email protected]
FOR IMMEDIATE RELEASE
LEGATO ANNOUNCES DEFINITIVE AGREEMENT
TO ACQUIRE ONTRACK
EXPANDS INFORMATION CONTINUANCE INTO DATA
RECOVERY SOFTWARE AND SERVICE SOLUTIONS
PALO ALTO, CA - NOVEMBER 18, 1999 - Legato Systems, Inc. (NASDAQ:LGTO), the
leader in enterprise storage management software, today announced the signing of
a definitive agreement to acquire Ontrack Data International, Inc., the world
leader in data recovery software and service solutions. The acquisition expands
Legato's leadership in data availability and extends the company's information
continuance strategy to include premier data recovery software and service
solutions. The combination of Legato and Ontrack will allow Legato to offer
enterprise customers a new level of data availability to enhance their overall
information management plans. This acquisition also gives Legato the desktop
tools to aggressively move into the expanding application service provider (ASP)
market.
The transaction will be accounted for under purchase accounting, and is expected
to close in late January 2000, subject to customary regulator and shareholder
approvals. Legato will issue a combination of approximately 1.485 million shares
of Legato stock (or 0.1491 shares for each issued and outstanding share of
Ontrack's common stock) and approximately $20 million in cash for all of the
outstanding stock of Ontrack Corporation, and will assume its employee options.
The value of the transaction, based on Legato's closing price as of November 17,
is approximately $134 million. Legato expects that the acquisition of Ontrack
Corporation will be accretive to its 2000 earnings, excluding non-recurring
merger-related costs and the ongoing amortization associated with the
acquisition.
"The combination of Legato and Ontrack will give customers a more complete and
more comprehensive set of data and application availability solutions provided
by a single, industry-leading company," stated Louis Cole, president and CEO of
Legato Systems. "Legato has a long history of providing our customers with
leading data recovery solutions The acquisition of Ontrack greatly
<PAGE>
extends our reach into the growing market for recovering data that has been
previously unrecoverable using conventional methods," concluded Cole.
Ontrack Data International is the leading provider of data recovery services and
products. It is the only company to perform data recoveries on virtually every
type of storage media device, platform and operating system. Ontrack has
recovered data remotely and in its labs for more than 100,000 organizations and
individuals throughout the world. Ontrack Disk Manager technology is also used
on approximately 60 million desktops through several large OEM partners. In
addition, Ontrack provides award-winning software tools to help prevent critical
data loss and to recover data.
Ontrack has pioneered advances in information management services with specific
expertise in Electronic Information Search and Data Conversion Services. Ontrack
is uniquely qualified to help customers in these areas because of its ability to
respond quicky to a customer's needs and develop tools and processes to extract
information.
"Together, Ontrack and Legato can grow the information management services
business more quickly and effectively than as separate companies," said Michael
Rogers, CEO, Ontrack Data International. "We plan to aggressively integrate our
combined technologies and services to deliver superior products to customers
that need to manage and produce valuable electronic data for consumer, business,
legal or regulatory purposes."
The acquisition of Ontrack is a natural extension to Legato's leadership in
protecting, managing and moving data in heterogeneous environments. Legato is
delivering information continuance through solutions that enable data and
application availability. This acquisition enables Legato to provide the highest
level of service in advanced storage management.
ABOUT LEGATO
Legato Systems, Inc. (NASDAQ:LGTO), is a worldwide leader in the enterprise
storage management software market. Helping companies leverage
business-critical, corporate data assets, Legato's products and services enable
information continuance, a seamless approach to the movement, management and
protection of data throughout an enterprise. Founded in 1989, Legato's storage
management software products have become the recognized industry standard with
the largest installed base representing over 65,000 customers. Legato's products
are available through a network of Legato-licensed resellers, integrators and
OEM partners and directly from Legato. Legato's corporate headquarters is
located at 3210 Porter Drive, Palo Alto, CA 94304. Telephone: 650.812.6000.
ABOUT ONTRACK
Ontrack, a leading provider of data availability software and service solutions,
helps customers protect, recover and discover their valuable data. Using its
hundreds of proprietary tools and techniques, Ontrack is able to recover lost or
corrupted data from all operating systems and types of storage devices through
its do-it-yourself, remote and in-lab capabilities. Ontrack now offers a line
<PAGE>
of award-winning software tools to help prevent critical data loss through a
broad line of problem solving, file management and productivity utilities.
Ontrack can be reached through its World Wide Web site at http://www.ontrack.com
or by calling 800-872-2599 (612-937-5161). In addition to its Minneapolis
headquarters, Ontrack operates other locations in Los Angeles, Washington, D.C.,
New York, Tokyo, London, Paris, Stuttgart and Boulder, Colo.
###
THIS ANNOUNCEMENT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THESE FORWARD-LOOKING STATEMENTS
ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM HISTORICAL OR ANTICIPATED RESULTS IN SUCH STATEMENTS.
FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO,
RISKS ASSOCIATED WITH ACQUISITIONS GENERALLY, INCLUDING INTEGRATION OF
OPERATIONS, DIVERSION OF MANAGEMENT'S TIME AND ATTENTION, RISK OF A DOWNTURN IN
LEGATO'S OR ONTRACK'S RESULTS OF OPERATIONS DURING THE PERIOD THE MERGER IS
PENDING, AND OTHER RISKS DISCUSSED IN THE "RISK FACTORS" SECTION OF THE
COMPANY'S REPORT FILED FROM TIME TO TIME WITH THE SECURITIES AND EXCHANGE
COMMISSION, COPIES OF WHICH ARE AVAILABLE ON REQUEST FROM THE COMPANY. THIS
PUBLIC ANNOUNCEMENT CONTAINS INFORMATION THAT IS ACCURATE AS OF NOVEMBER 18,
1999, THE DATE OF THIS PUBLIC ANNOUNCEMENT.
The Legato logo design, Legato NetWorker, SmartMedia, and ClientPak are
registered trademarks, and Celestra, Co-StandbyServer, GEMS, and the
SnapShotServer are trademarks of Legato Systems, Inc. All other brand names or
marks are trademarks of their respective owners.
