<PAGE> 1
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: May 11, 1998
ASPECT TELECOMMUNICATIONS CORPORATION
(Exact name of Registrant as specified in its charter)
CALIFORNIA 95-3962471
(State or other jurisdiction of (I.R.S. Identification No.)
Employer incorporation or organization)
1730 FOX DRIVE
SAN JOSE, CALIFORNIA 95131-2312
(Address of principal executive offices) (Zip code)
(408) 325-2200
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 11, 1998, pursuant to an Agreement and Plan of Merger dated
April 1, 1998 (the "Merger Agreement") among Aspect Telecommunications
Corporation (the "Registrant" or the "Company"), Venus Acquisition Corporation,
a Delaware corporation and wholly-owned subsidiary of the Registrant ("Sub"),
and Voicetek Corporation, a Massachusetts corporation ("Voicetek"), related
Articles of Merger dated May 11, 1998 between Sub and Voicetek filed with the
Secretary of State of the Commonwealth of Massachusetts, and a related
Certificate of Merger dated May 11, 1998 filed with the Secretary of State of
the State of Delaware, Sub was merged with and into Voicetek and Voicetek, as
the surviving corporation, became a wholly-owned subsidiary of the Registrant
(the "Merger").
Pursuant to the Merger Agreement, the Registrant paid approximately $72
million in cash for all Voicetek common and preferred shares outstanding,
converted all outstanding Voicetek options into options to purchase
approximately 450,000 shares of Registrant's common stock with a fair value of
approximately $11.0 million and assumed certain operating assets and
liabilities of Voicetek. The Registrant expects to record a one-time charge
against after-tax earnings of between $65 to $70 million ($1.20 and $1.30 per
share) for purchased in-process technology and development expense in the
quarter ending June 30, 1998. The source of the funds paid by the Company
under the Merger Agreement was the Company's cash, cash equivalents and short
term investments. The purchase price was agreed upon in arms' length
negotiation of the terms of the Merger. The Registrant received an opinion from
its financial advisor that the Merger was fair to the Registrant's shareholders
from a financial point of view. The Merger will be treated by the Registrant as
a purchase for accounting purposes.
Voicetek is a leading provider of software platforms and application
solutions, including highly scalable, mission-critical interactive voice
response ("IVR") and network-deployed enhanced services solutions.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a), (b) It is impracticable for the Registrant to provide the required
financial statements as of the filing of this report. In accordance with Item
7(a)(4) of the Instructions to Form 8-K, the Registrant expects that the
required financial statements will be filed as soon as they are available, and
in no event later than July 25, 1998.
(c) Exhibits.
2.1 Agreement and Plan of Merger dated April 1, 1998, among
the Registrant, Venus Acquisition Corporation, a Delaware
corporation and wholly-owned subsidiary of the Registrant,
and Voicetek Corporation, a Massachusetts corporation.
20.1 Press release of the Company, dated May 11, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
ASPECT TELECOMMUNICATIONS CORPORATION
(Registrant)
Date: May 22, 1998 By: /s/ Eric J. Keller
------------------------------------
Eric J. Keller
Vice President, Finance and Chief
Financial Officer (Principal
Financial and Accounting Officer)
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C> <C>
2.1 Agreement and Plan of Merger dated April 1, 1998, among the
Registrant, Venus Acquisition Corporation, a Delaware corporation
and wholly-owned subsidiary of the Registrant, and Voicetek
Corporation, a Massachusetts corporation.
20.1 Press release of the Company, dated May 11, 1998.
</TABLE>
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 1, 1998
AMONG
ASPECT TELECOMMUNICATIONS CORPORATION
VENUS ACQUISITION CORPORATION
AND
VOICETEK CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.4 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II - CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1 Conversion of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.2 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.3 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.4 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.5 No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.6 Accounting Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF TARGET . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.1 Organization of Target and its Subsidiaries . . . . . . . . . . . . . . . . . . . . . 7
Section 3.2 Target Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.3 Authority; No Conflict; Required Filings and Consents . . . . . . . . . . . . . . . . 9
Section 3.4 Financial Statements; Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . 10
Section 3.5 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.6 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.7 Title and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.8 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.9 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.10 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.11 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.12 Orders, Commitments and Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.13 Compliance With Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.14 Labor Difficulties; No Discrimination . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.15 Trade Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.16 Insider Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.17 Employees, Independent Contractors and Consultants . . . . . . . . . . . . . . . . . 23
Section 3.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.19 Payables; Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.20 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.21 Governmental Authorizations and Regulations . . . . . . . . . . . . . . . . . . . . . 24
Section 3.22 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.23 Compliance with Environmental Requirements . . . . . . . . . . . . . . . . . . . . . 24
Section 3.24 Corporate Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.25 Takeover Statutes Inapplicable . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.26 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.27 Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.28 Target Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
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Section 3.29 Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.30 Notice of Meeting to Target Stockholders . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.31 Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.32 Year 2000 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.33 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.34 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND SUB . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.1 Organization of Acquiror and Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.2 Authority; No Conflict; Required Filings and Consents . . . . . . . . . . . . . . . . 27
Section 4.3 Commission Filings; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.4 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.5 Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.6 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE V - PRECLOSING COVENANTS OF TARGET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.1 Approval of Target Stockholders; Other Filings . . . . . . . . . . . . . . . . . . . . 29
Section 5.2 Advice of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.3 Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.4 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.5 Satisfaction of Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.6 Other Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VI - PRECLOSING AND OTHER COVENANTS OF ACQUIROR AND SUB . . . . . . . . . . . . . . . . . . . . . . 34
Section 6.1 Advice of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 6.2 Reservation of Acquiror Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 6.3 Satisfaction of Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 6.4 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 6.5 Offer Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VII - OTHER AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.1 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.2 No Public Announcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.3 Regulatory Filings; Consents; Reasonable Efforts . . . . . . . . . . . . . . . . . . . 35
Section 7.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.5 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.6 Letters of Transmittal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.7 FIRPTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.8 HSR Act Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.9 Target Stock Options and Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.10 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.11 Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VIII - CONDITIONS TO MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger. . . . . . . . . . . . . . 37
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
<S> <C>
Section 8.2 Additional Conditions to Obligations of Acquiror and Sub . . . . . . . . . . . . . . . 38
Section 8.3 Additional Conditions to Obligations of Target . . . . . . . . . . . . . . . . . . . . 39
ARTICLE IX - TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.2 Effect of Termination; Break-Up Fees . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE X - ESCROW AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 10.1 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 10.2 Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 10.3 Escrow Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 10.4 Claims Upon Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 10.5 Objections to Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 10.6 Resolution of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 10.7 Stockholders' Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 10.8 Actions of the Stockholders' Agents . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.9 Claims for Specified Breaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.10 Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.11 Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 10.12 Distribution of Earnings on Escrow Consideration . . . . . . . . . . . . . . . . . . 47
ARTICLE XI - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.1 Survival of Representations and Covenants . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.5 Entire Agreement; No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . 49
Section 11.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.8 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.9 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.10 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.11 Enforcement of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
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EXHIBITS
EXHIBIT A - VOTING AND STOCK OPTION AGREEMENT
EXHIBIT B - LETTER OF TRANSMITTAL
EXHIBIT C - ESCROW AGREEMENT
EXHIBIT D - SUBJECT MATTER OF OPINION OF COUNSEL TO TARGET
EXHIBIT E - SUBJECT MATTER OF OPINION OF COUNSEL TO ACQUIROR
SCHEDULES
A - Target Stockholders Executing Voting and Stock Option Agreements
7.1 - Persons Executing Waivers of Option Acceleration
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of April 1, 1998 (this
"AGREEMENT"), is entered into by and among Aspect Telecommunications
Corporation, a California corporation ("ACQUIROR"), Venus Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of Acquiror
("SUB"), and Voicetek Corporation, a Massachusetts corporation ("TARGET").
RECITALS:
A. The Boards of Directors of Acquiror, Sub and Target deem it
advisable and in the best interests of each corporation and the respective
stockholders that Acquiror acquire Target;
B. The acquisition of Target shall be effected by the terms of
this Agreement through a transaction in which Sub will merge with and into
Target, Target will become a wholly-owned subsidiary of Acquiror (the
"MERGER"), and among other things, the outstanding shares of Common Stock, $.01
par value, of Target (the "TARGET COMMON STOCK"), the outstanding shares of
Preferred Stock, $.01 par value, of Target (the "TARGET PREFERRED STOCK")
(collectively, with Target Common Stock, the "TARGET CAPITAL STOCK") and the
outstanding warrants of Target (the "TARGET WARRANTS") (which Target Warrants
will be exercised immediately prior to the Closing) shall be converted into the
right to receive cash in the amounts and on the terms set forth herein;
C. As a condition and inducement to Acquiror's willingness to
enter into this Agreement, certain Target stockholders described on the
attached Schedule A have, concurrently with the execution of this Agreement,
executed and delivered Voting and Stock Option Agreements in the form attached
hereto as Exhibit A (the "VOTING AND STOCK OPTION AGREEMENTS"), pursuant to
which such stockholders have, among other things, agreed to vote their shares
of Target capital stock in favor of the Merger, granted to Acquiror the right
to acquire their shares of Target capital stock in certain circumstances and
agreed to grant Acquiror irrevocable proxies to vote such shares; and
D. As a further condition and inducement of Acquiror's
willingness to consummate the Merger, stockholders of Target will execute and
deliver letters of transmittal in the form attached hereto as Exhibit B (the
"LETTERS OF TRANSMITTAL"), pursuant to which the stockholders will surrender
their Target Capital Stock for cash and pursuant to which the stockholders have
agreed to indemnify Acquiror for certain matters under certain circumstances.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I
THE MERGER
<PAGE> 7
Section 1.1 Effective Time of the Merger. Subject to the
provisions of this Agreement, articles of merger (the "ARTICLES OF MERGER") in
such mutually acceptable form as is required by the relevant provisions of the
Massachusetts Business Corporation Law ("MASSACHUSETTS LAW") and the Delaware
General Corporation Law ("DGCL") shall be duly executed and delivered by the
parties hereto and thereafter delivered to the Secretaries of State of the
Commonwealth of Massachusetts and State of Delaware for filing on the Closing
Date (as defined in Section 1.2). The Merger shall become effective upon the
due and valid filing of the Articles of Merger with the Secretary of State of
the Commonwealth of Massachusetts or at such time thereafter as is provided in
the Articles of Merger (the "EFFECTIVE TIME"). The date of the Effective Time
shall be the "EFFECTIVE DATE".
Section 1.2 Closing. The closing of the Merger (the "CLOSING")
will take place at 11:00 a.m., Massachusetts time, on a date to be specified by
Acquiror and Target, which shall be no later than the second business day after
satisfaction or waiver of the latest to occur of the conditions set forth in
Article VIII (other than the delivery of the officers' certificates referred to
therein) (the "CLOSING DATE"), at the offices of Hutchins, Wheeler & Dittmar, A
Professional Corporation, 101 Federal Street, Boston, Massachusetts 02110
unless another date, time or place is agreed to in writing by Acquiror and
Target.
Section 1.3 Effects of the Merger.
(a) At the Effective Time (i) the separate existence of
Sub shall cease and Sub shall be merged with and into Target (Sub and Target
are sometimes referred to herein as the "CONSTITUENT CORPORATIONS" and Target
following consummation of the Merger is sometimes referred to herein as the
"SURVIVING CORPORATION"), (ii) the Articles of Organization of Target shall be
the Articles of Organization of the Surviving Corporation and (iii) the Bylaws
of Target as in effect immediately prior to the Effective Time shall be the
Bylaws of the Surviving Corporation.
(b) Following the Effective Time, the purpose of the
Surviving Corporation shall be to carry on the business of the Company as
conducted prior to the Effective Time. The Surviving Corporation shall only be
authorized to issue 1,000 shares of common stock, par value $.01 per share.
(c) At the Effective Time, the effect of the Merger shall
be as provided in the applicable provisions of Massachusetts Law. Without
limiting the generality of the foregoing, at and after the Effective Time, the
Surviving Corporation shall possess all the rights, privileges, powers and
franchises of a public as well as of a private nature, and be subject to all
the restrictions, disabilities and duties of each of the Constituent
Corporations.
Section 1.4 Directors and Officers. The directors of Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Organization and Bylaws of the Surviving Corporation, and the officers of Sub
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed.
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ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. At the Effective Time,
by virtue of the Merger and without any action on the part of the holder of any
shares of Target Capital Stock or capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding
share of the capital stock of Sub shall be converted into and become one fully
paid and nonassessable share of Common Stock, $.01 par value, of the Surviving
Corporation.
(b) Cancellation of Acquiror-Owned and Target-Owned
Stock. Any shares of Target Capital Stock that are owned by Acquiror, Sub,
Target or any other direct or indirect wholly-owned Subsidiary (as defined
below) of Acquiror or Target shall be canceled and retired and shall cease to
exist and no consideration shall be delivered in exchange therefor. As used in
this Agreement, the word "SUBSIDIARY" means, with respect to any other party,
any corporation or other organization, whether incorporated or unincorporated,
of which (i) such party or any other Subsidiary of such party is a general
partner (excluding partnerships, the general partnership interests of which
held by such party or any Subsidiary of such party do not have a majority of
the voting interest in such partnership) or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization or a majority
of the profit interests in such other organization is directly or indirectly
owned or controlled by such party or by any one or more of its Subsidiaries, or
by such party and one or more of its Subsidiaries.
(c) Conversion of Target Common Stock.
(i) The outstanding Target Preferred Stock and
Target Warrants will be converted into (or exercised for, in the case of Target
Warrants) Target Common Stock prior to the Effective Time. The exercise price
of the Target Warrants may be paid in whole (assuming sufficient amounts per
the terms of the Target Warrants) or in part by the cancellation of a portion
of outstanding long-term subordinated debt and prepayment charges, premiums or
penalties associated therewith. Subject to Sections 2.2 and 2.4, each issued
and outstanding share of Target Common Stock (other than shares to be canceled
in accordance with Section 2.1(b) and any Dissenting Shares as defined in and
to the extent provided in Section 2.3) shall be converted into the right to
receive, in cash, the Per Share Consideration (as defined below) per share of
Target Common Stock, payable to the holder thereof, without interest, upon
surrender of the certificate formerly representing such share in the manner
provided in Section 2.4. All such shares of Target Common Stock, when so
converted, shall no longer be outstanding and shall automatically be retired
and cease to exist, and each holder of a certificate representing any such
shares of Target Common Stock shall cease to have any rights with respect
thereto, except the right to receive the Per Share Consideration therefor upon
the surrender of such certificate in accordance with Section 2.4, without
interest, or in the case of Dissenting Shares, the right, if
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any, to receive payment from the Surviving Corporation of the fair value of
such shares of Target Common Stock as determined in accordance with
Massachusetts Law.
(ii) The "PER SHARE CONSIDERATION" shall be
determined by dividing (x) $85,750,000, less (A) the amount by which the total
amount of Target and its Subsidiaries' borrowed money or other debt (other than
accounts payable, accrued debt or deferred revenue), and capitalized leases at
the Effective Time exceeds $5,600,000 (not including Target's outstanding long
term subordinated debt and prepayment charges, premiums or other penalties paid
by Acquiror per subsection (B) below, (B) the amount used by Acquiror to repay
Target's and its Subsidiaries' outstanding long term subordinated debt,
including any prepayment charges, premiums or other penalties, which amount
will be paid simultaneously with the Closing, (C) the amount by which Target's
and its Subsidiaries' investment banking, legal and accounting fees and
expenses exceed the amounts set forth in the proviso in Section 9.3, and (D)
the amount of any liquidation preference, dividend preference or other like
payment on the Target Preferred Stock (as adjusted, the "MERGER CONSIDERATION")
by (y) the sum of (A) the total number of shares of Target Common Stock issued
and outstanding at the Effective Time, plus (B) the total number of shares of
Target Common Stock issuable upon conversion of all shares of Target Preferred
Stock issued and outstanding at the Effective Time, plus (C) the total number
of shares of Target Common Stock issuable upon exercise for cash of Target
Options (as defined in Section 2.1(d)) outstanding at the Effective Time,
whether vested or unvested, plus (D) the total number of shares of Target
Common Stock issuable upon exercise of the Target Warrants (as defined in
Section 2.1(d)) (to the extent unexercised).
(d) Target Stock Options and Target Warrants. At the
Effective Time, all then outstanding options, whether vested or unvested,
("TARGET OPTIONS") to purchase Target Common Stock issued under Target's 1992
Stock Option Plan, 1996 Stock Option Plan, 1996 Stock Option Plan for
Non-Employee Directors and Clerk, as amended January 14, 1998, and 1998 Stock
Option Plan for Non-Employee Directors and Clerk (each individually a "TARGET
OPTION PLAN" and collectively the "TARGET OPTION PLANS") that by their terms
survive the Closing will be assumed by Acquiror in accordance with Section 7.9.
All of the Target Options issued and outstanding as of the date of this
Agreement are listed on Schedule 3.2 of the Target Disclosure Schedule attached
hereto. An updated Schedule 3.2 of Target Options shall be delivered by Target
to Acquiror on the Closing Date. Additionally, prior to the Effective Time,
each Target Warrant will be exercised for Target Common Stock.
Section 2.2 Escrow Agreement. At the Effective Time, Acquiror
will deposit a portion of the cash component of the Merger Consideration equal
to $7,000,000 into escrow. Such amount shall be held in escrow on behalf of
the persons who are the holders of Target Common Stock, Target Preferred Stock
and Target Warrants immediately prior to the Effective Time (the "FORMER TARGET
STOCKHOLDERS"), on a pro rata basis, in accordance with each such Former Target
Stockholders' percentage ownership ("PRO RATA PORTION") of Target Common Stock
immediately prior to the Merger (assuming conversion of all Target Preferred
Stock and Target Warrants to Target Common Stock). Such amount (the "ESCROW
CONSIDERATION") shall be held as security for the Former Target Stockholders'
indemnification obligations under Article
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X, pursuant to the provisions of the Letters of Transmittal and the escrow
agreement (the "ESCROW AGREEMENT") to be executed pursuant to Section 7.5.
Section 2.3 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to
the contrary, any shares of Target Common Stock or Target Preferred Stock held
by a holder who has exercised such holder's dissenter's rights in accordance
with Massachusetts Law, and who, as of the Effective Time, has not effectively
withdrawn or lost such dissenter's rights ("DISSENTING SHARES"), shall not be
converted into or represent a right to receive the Per Share Consideration
pursuant to Section 2.1, but the holder of the Dissenting Shares shall only be
entitled to such rights as are granted by Massachusetts Law.
(b) Notwithstanding the provisions of Section 2.3(a), if
any holder of shares of Target Common Stock or Target Preferred Stock who
demands his dissenter's rights with respect to such shares under Section 2.1
shall effectively withdraw or lose (through failure to perfect or otherwise)
his rights to receive payment for the shares under Massachusetts Law, then, as
of the later of the Effective Time or the occurrence of such event, such
holder's shares shall automatically be converted into and represent only the
right to receive the Per Share Consideration as provided in Sections 2.1(c) and
2.2, without interest, upon surrender of the certificate or certificates
representing such shares.
(c) Target shall give Acquiror (i) prompt notice of any
written demands for payment with respect to any shares of capital stock of
Target pursuant to Massachusetts Law, withdrawals of such demands, and any
other instruments served pursuant to Massachusetts Law and received by Target
or its Subsidiaries and (ii) the opportunity to participate in all negotiations
and proceedings with respect to demands for dissenter's rights under
Massachusetts Law. Target shall not, except with the prior written consent of
Acquiror, voluntarily make any payment with respect to any demands for
dissenter's rights with respect to Target Common Stock or Target Preferred
Stock or offer to settle or settle any such demands.
Section 2.4 Exchange of Certificates.
(a) Exchange Agent. Prior to the Closing Date, Acquiror
shall appoint an exchange agent reasonably satisfactory to Acquiror and Target
(the "EXCHANGE AGENT") to serve as such in the Merger. The parties agree that
Acquiror may serve as its own exchange agent in the Merger if the Acquiror so
desires.
(b) Acquiror to Provide Cash. As of the Effective Time,
Acquiror shall deposit, or cause to be deposited, with the Exchange Agent, cash
issuable pursuant to Section 2.1 that shall be exchanged for outstanding shares
of Target Common Stock (such cash being hereafter referred to as the "EXCHANGE
FUND").
(c) Exchange Procedures. Acquiror shall use its best
efforts to cause prior to the Effective Time, the Exchange Agent or mail to
each holder of record of an outstanding certificate or certificates
("CERTIFICATES") which represented shares of Target Capital Stock which
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shares are being converted into Per Share Consideration (i) a letter of
transmittal (which shall specify that delivery shall be effected, and the risk
of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in the 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 the Per Share
Consideration. Upon surrender of the Certificate for cancellation to the
Exchange Agent or such other agent or agents as may be appointed by Acquiror,
together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, the holder of such Certificate shall
be entitled to receive in exchange therefor, the Per Share Consideration. The
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Target Capital Stock that is not registered in the
transfer records of Target, the appropriate Per Share Consideration may be
delivered to a transferee if the Certificate representing such Target Capital
Stock is presented to the Exchange Agent and accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Agreement, each Certificate shall be deemed at all times
after the Effective Time to represent the right to receive upon such surrender,
the Per Share Consideration but shall have no other right; provided, however,
that customary and appropriate certifications, indemnities and bonds allowing
exchange against lost or destroyed Certificates shall be provided; and provided
further that nothing in this Agreement shall require Acquiror to make a cash
payment to any holder of Target Capital Stock who shall fail to surrender a
Certificate representing such shares or the certification, indemnities and
bonds relating to a lost Certificate. Notwithstanding the foregoing, neither
the Exchange Agent nor any party hereto shall be liable to a holder of shares
of Target Capital Stock for the Per Share Consideration and any other cash,
dividends or distributions delivered to a public official pursuant to
applicable abandoned property, escheat and similar laws. Promptly following
the date that is six (6) months after the Effective Date, the Exchange Agent
shall return to the Acquiror the remaining portion of the Exchange Fund in its
possession relating to the transactions described in this Agreement, and the
Exchange Agent's duties shall terminate. Any Former Target Stockholders who
have not theretofore complied with this Article II shall thereafter look only
to Acquiror for payment of their Per Share Consideration and any other cash,
dividends and other distributions payable and/or issuable upon due surrender of
their Certificates (or affidavits of loss in lieu thereof), in each case,
without interest thereon (subject to applicable abandoned property, escheat and
similar laws). Nothing in this Agreement shall limit Hutchins, Wheeler &
Dittmar, A Professional Corporation, in its capacity as Target's transfer agent
and registrar for a period of forty-five days following the Effective Date,
from issuing replacement Certificates for lost or destroyed Certificates to
stockholders of record of Target at the Effective Time, upon presentation of
customary and appropriate certifications and indemnities allowing exchange
against such lost or destroyed Certificates. Following such forty-five day
period, Former Target Stockholders must comply with the other provisions of
this Section 2.4 for exchange of their Certificates.
Section 2.5 No Liability. Notwithstanding anything to the
contrary in this Agreement, 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.
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Section 2.6 Accounting Consequences. It is intended by the
parties hereto that the Merger be treated for accounting purposes as a purchase
transaction.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARGET
Target and its Subsidiaries represent and warrant to Acquiror and Sub
that the statements contained in this Article III are true and correct, except
as set forth in the disclosure schedule delivered by Target to Acquiror on or
before the date of this Agreement (the "TARGET DISCLOSURE SCHEDULE"). The
Target Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article III and disclosure
in any section shall be deemed disclosure for all sections of Article III,
provided that the relation of a given disclosure to another section is made
with reasonable particularity and the relation between the disclosure and the
related section is reasonably clear (for example: disclosure of a contract by
name under a particular section does not mean that contents of such contract
are disclosed for all purposes). All representations and warranties of Target
and its Subsidiaries in this Article III are qualified by a time limit such
that the representations and warranties are given only for the time period
during which applicable statutes of limitations do not bar assessments of
Damages for breach thereof.
Section 3.1 Organization of Target and its Subsidiaries. Target
and its Subsidiaries are corporations duly organized, validly existing and in
good corporate standing under the laws of their respective jurisdiction of
incorporation (as listed on Schedule 3.1), have the requisite corporate power
to own, lease and operate their property and to carry on their businesses as
now being conducted, and are duly qualified or licensed to do business and are
in good standing as foreign corporations in each jurisdiction in which the
nature of their businesses or ownership or leasing of properties makes such
qualification or licensing necessary and where the failure to be so qualified
or licensed could result in a material adverse effect on the business, assets
(including intangible assets), liabilities, condition (financial or otherwise),
prospects, or results of operations of Target or its Subsidiaries (a "MATERIAL
ADVERSE EFFECT"). Target's Subsidiaries are not engaged in any active trade or
business and have no assets or liabilities. The Target Disclosure Schedule
contains a true and complete listing of the locations of all offices or
facilities of Target and its Subsidiaries and a true and complete list of all
states in which Target and its Subsidiaries maintain any employees. The Target
Disclosure Schedule contains a true and complete list of all states in which
Target and its Subsidiaries are duly qualified or licensed to transact business
as a foreign corporation.
Section 3.2 Target Capital Structure.
(a) The authorized and issued capital stock of Target is
as set forth on Schedule 3.2. As of the date of this Agreement, all of the
shares of Target Common Stock issued and outstanding are validly issued, fully
paid and nonassessable, all of the shares of Preferred Stock issued and
outstanding (collectively, the "TARGET PREFERRED STOCK") are validly issued,
fully paid and nonassessable, and all of the Target Preferred Stock is which
are convertible into Target Common Stock with no liquidation preference,
dividend payments, or other additional
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consideration accruing to the Target Preferred Stock by virtue of this
transaction. As of the date of this Agreement, there are (i) warrants to
purchase up to 191,327 shares of Target Common Stock (collectively, the "TARGET
WARRANTS"); (ii) 6,857,994 shares of Target Common Stock reserved for future
issuance upon conversion of the Target Preferred Stock and upon exercise of the
Target Warrants; (iii) 1,069,019 shares of Target Common Stock reserved for
future issuance pursuant to Target Options granted and outstanding under the
Target Option Plans; and (iv) 80,000 shares of Target Common Stock reserved for
issuance upon exercise of options available to be granted in the future under
the Target Option Plans. There is no accrued or declared by unpaid dividend or
other amount payable on any shares of Target Preferred Stock following its
conversion into Target Common Stock or Target Common Stock. All shares of
Target Preferred Stock will be converted into Target Common Stock prior to the
Closing. The issued and outstanding shares of Target Common Stock and of each
series of Target Preferred Stock are held of record by the stockholders of
Target as set forth and identified in the stockholder list attached as Schedule
3.2(a) of the Target Disclosure Schedule. The issued and outstanding Target
Options are held of record by the option holders as set forth and identified in
the option holder list provided to Acquiror or its representatives. No Target
Common Stock or Target Preferred Stock is subject to repurchase by Target or
its Subsidiaries in the event the holder thereof ceases to be employed by
Target or its Subsidiaries. The issued and outstanding Target Warrants are
held of record by the warrantholders as set forth and identified in the
warrantholder list provided to Acquiror or its representatives. All shares of
Target Common Stock and Target Preferred Stock subject to issuance as specified
above, upon issuance on the terms and conditions specified in the instruments
pursuant to which they are issuable, shall be duly authorized, validly issued,
fully paid and nonassessable. All shares of Target Common Stock subject to
issuance upon the exercise of Target Options and Target Warrants, upon issuance
on the terms and conditions specified in the instrument pursuant to which they
are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. All outstanding shares of Target Common Stock, Target Preferred
Stock and outstanding Target Options and Target Warrants (collectively "TARGET
SECURITIES") were issued in compliance with applicable federal and state
securities laws. Except as set forth in the Target Disclosure Schedule, there
are no obligations, contingent or otherwise, of Target or its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of Target Common Stock or
Target Preferred Stock or make any investment (in the form of a loan, capital
contribution or otherwise) in any other entity. An updated Schedule 3.2(a) of
the Target Disclosure Schedule reflecting changes permitted by this Agreement
in the capitalization of Target and its Subsidiaries between the date hereof
and the Effective Time shall be delivered by Target to Acquiror on the Closing
Date.
(b) Except as set forth in this Section 3.2, there are no
equity securities of any class or series of Target or its Subsidiaries, or any
security exchangeable into or exercisable for such equity securities, issued,
reserved for issuance or outstanding. Except as set forth in this Section 3.2,
there are no options, warrants, equity securities, calls, rights, commitments
or agreements of any character to which Target or its Subsidiaries is a party
or by which it is bound obligating Target or its Subsidiaries to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of capital
stock of Target or its Subsidiaries or obligating Target or its Subsidiaries to
grant, extend, accelerate the vesting of or enter into any such option,
warrant, equity security, call, right, commitment or agreement. Neither Target
nor its Subsidiaries is in
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discussion, formal or informal, with any person or entity regarding the
issuance of any form of additional equity of Target or its Subsidiaries that
has not been issued or committed to prior to the date of this Agreement.
Except as provided in this Agreement and the other Transaction Documents (as
defined in Section 3.3(a)) or any transaction contemplated hereby or thereby
there are no voting trusts, proxies or other agreements or understandings with
respect to the voting of the shares of capital stock of Target or its
Subsidiaries (i) to which the Company is a party, or (ii) to the knowledge of
the Company, otherwise.
(c) All Target Options have been issued in accordance
with the terms of the Target Option Plans and pursuant to the standard forms of
option agreement previously provided to Acquiror or its representatives.
Neither Target nor its Subsidiaries has plans, arrangements or commitments of
any kind to alter the terms of any Target Options, including without limitation
any stock option repricing or other exchange programs. No option will by its
terms require an adjustment in connection with the Merger. Neither the
consummation of the transactions contemplated by this Agreement or the other
Transaction Documents nor any action taken by Target or its Subsidiaries in
connection with such transactions will result in (i) any acceleration of
vesting in favor of any optionee under any Target Option; (ii) any additional
benefits for any optionee under any Target Option; or (iii) the inability of
Acquiror after the Effective Date to exercise any right or benefit held by
Target or its Subsidiaries prior to the Effective Time with respect to any
Target Option assumed by Acquiror, including, without limitation, the right to
repurchase an optionee's unvested shares on termination of such optionee's
employment. The assumption by Acquiror of Target Options in accordance with
Section 7.9 hereunder will not (i) give the optionees additional benefits which
they did not have under their options prior to such assumption (after taking
into account the existing provisions of the options, such as their respective
exercise prices and vesting schedules) or (ii) constitute a breach of the
Target Option Plans or any agreement entered into pursuant to such plans.
Section 3.3 Authority; No Conflict; Required Filings and
Consents.
(a) Target has all requisite corporate power and
authority to enter into this Agreement and all Transaction Documents to which
it is or will become a party and to consummate the transactions contemplated by
this Agreement and such Transaction Documents. The execution and delivery of
this Agreement and such Transaction Documents and the consummation of the
transactions contemplated by this Agreement and such Transaction Documents 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 stockholders under the
provisions of Massachusetts Law and Target's Articles of Organization. This
Agreement has been and such Transaction Documents have been or, to the extent
not executed as of the date hereof, will be duly executed and delivered by
Target. This Agreement and each of the Transaction Documents to which Target
is a party constitutes, and each of the Transaction Documents to which Target
will become a party when executed and delivered by Target will constitute,
assuming the due authorization, execution and delivery by the other parties
hereto and thereto, the valid and binding obligation of Target, enforceable
against Target in accordance with their respective terms. For purposes of this
Agreement, "TRANSACTION DOCUMENTS" means all documents or agreements required
to be delivered by any party under this Agreement including the Articles of
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Merger, the Escrow Agreement, the Voting and Stock Option Agreements, the
Irrevocable Proxies and the Letters of Transmittal.
(b) The execution and delivery by Target of this
Agreement and the Transaction Documents to which it is or will become a party
does not and the consummation of the transactions contemplated by this
Agreement and the Transaction Documents to which it is or will become a party
will not, (i) conflict with, or result in any violation or breach of any
provision of the Articles of Organization or Bylaws of Target or its
Subsidiaries, (ii) result in any violation or breach of, or constitute (with or
without notice or lapse of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit) under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which Target or its Subsidiaries is a party or by which it or any
of its properties or assets may be bound, or (iii) conflict or violate any
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Target or its Subsidiaries or any
of its properties or assets, except in the case of (ii) and (iii) for any such
conflicts, violations, defaults, terminations, cancellations or accelerations
which would not have a Material Adverse Effect on Target or its Subsidiaries.
(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 or its Subsidiaries in
connection with the execution and delivery of this Agreement or of any other
Transaction Document to which it is or will become a party or the consummation
of the transactions contemplated by this Agreement or such Transaction Document
or the continuation of the business activities of Target or its Subsidiaries
following consummation of the Merger without a Material Adverse Effect, except
for (i) the filing of the Articles of Merger with the Massachusetts and
Delaware Secretaries of State, (ii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required
under applicable federal and state securities laws, (iii) such filings as may
be required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"); and (iv) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, could be expected
to have a Material Adverse Effect on Target or its Subsidiaries.
Section 3.4 Financial Statements; Absence of Undisclosed
Liabilities.
(a) Target has delivered to Acquiror copies of Target's
unaudited balance sheet as of February 28, 1998, (the "MOST RECENT BALANCE
SHEET") and statements of operations, stockholders' equity and cash flow for
the two month period then-ended (together with the Most Recent Balance Sheet,
the "TARGET INTERIM FINANCIALS") and the audited balance sheets as of December
31, 1996 and 1997 and the related statements of operations, stockholders'
equity and cash flows for the fiscal year ended December 31, 1996 and the
fiscal year ended December 31, 1997, respectively (collectively, the "TARGET
FINANCIAL STATEMENTS").
(b) The Target Financial Statements are complete and in
accordance with the books and records of Target and present fairly in all
material respects the financial position,
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results of operations and cash flows of Target as of their historical dates and
for the periods indicated, subject, in the case of unaudited financial
statements, to normal year-end adjustments and the absence of notes required
under generally accepted accounting principles which adjustments and notes were
not, and will not be, material. The Target Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with prior periods. The reserves, if any, reflected on the
Target Financial Statements are adequate in light of the contingencies with
respect to which they were made.
(c) Neither Target nor its Subsidiaries has any debt,
liability, or obligation of any nature, whether accrued, absolute, contingent,
or otherwise, and whether due or to become due, that is not reflected or
reserved against in the Most Recent Balance Sheet. All debts, liabilities, and
obligations incurred after the date of the Most Recent Balance Sheet were
incurred in the ordinary course of business, and are usual and normal in amount
and not material both individually and in the aggregate to Target's or its
Subsidiaries' businesses.
Section 3.5 Tax Matters.
(a) For purposes of this Section 3.5 and other provisions
of this Agreement relating to Taxes, the following definitions shall apply:
(i) The term "TAXES" shall mean all taxes,
however denominated, including any interest, penalties or other additions to
tax that may become payable in respect thereof, (A) imposed by any federal,
territorial, state, local or foreign government or any agency or political
subdivision of any such government, which taxes shall include, without limiting
the generality of the foregoing, all income or profits taxes (including but not
limited to, federal income taxes and state income taxes), payroll and employee
withholding taxes, unemployment insurance, social security taxes, sales and use
taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes,
business license taxes, occupation taxes, real and personal property taxes,
stamp taxes, environmental taxes, ozone depleting chemicals taxes, transfer
taxes, workers' compensation, Pension Benefit Guaranty Corporation premiums and
other governmental charges, and other obligations of the same or of a similar
nature to any of the foregoing, which are required to be paid, withheld or
collected, (B) any liability for the payment of amounts referred to in (A) as a
result of being a member of any affiliated, consolidated, combined or unitary
group, or (C) any liability for amounts referred to in (A) or (B) as a result
of any obligations to indemnify another person.
(ii) The term "RETURNS" shall mean all reports,
estimates, declarations of estimated tax, information statements and returns
relating to, or required to be filed in connection with, any Taxes, including
information returns or reports with respect to backup withholding and other
payments to third parties.
(b) All Returns required to be filed by or on behalf of
Target and its Subsidiaries have been duly filed on a timely basis and such
Returns are true, complete and correct. All Taxes shown to be payable on such
Returns or on subsequent assessments with respect thereto, and all payments of
estimated Taxes required to be made by or on behalf of Target and its
Subsidiaries under Section 6655 of the Code or comparable provisions of state,
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local or foreign law, have been paid in full on a timely basis or have been
accrued on the Most Recent Balance Sheet, and no other Taxes are payable by
Target or its Subsidiaries with respect to items or periods covered by such
Returns (whether or not shown on or reportable on such Returns). Target and
its Subsidiaries have withheld and paid over all Taxes required to have been
withheld and paid over, and complied with all information reporting and backup
withholding requirements, including maintenance of required records with
respect thereto, in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party. There are no liens on
any of the assets of Target or its Subsidiaries with respect to Taxes, other
than liens for Taxes not yet due and payable or for Taxes that Target or its
Subsidiaries are contesting in good faith through appropriate proceedings and
for which appropriate reserves have been established on the Most Recent Balance
Sheet. Neither Target nor its Subsidiaries has at any time been (i) a member
of an affiliated group of corporations filing consolidated, combined or unitary
income or franchise tax returns, or (ii) a member of any partnership or joint
venture for a period for which the statue of limitations for any Tax
potentially applicable as a result of such membership has not expired.
(c) The amount of Target's and its Subsidiaries'
liability for unpaid Taxes (whether actual or contingent) for all periods
through the date of the Most Recent Balance Sheet does not, in the aggregate,
exceed the amount of the current liability accruals for Taxes reflected on the
Most Recent Balance Sheet, and the Most Recent Balance Sheet reflects proper
accrual in accordance with generally accepted accounting principles applied on
a basis consistent with prior periods of all liabilities for Taxes payable
after the date of the Most Recent Balance Sheet attributable to transactions
and events occurring prior to such date. No liability for Taxes has been
incurred (or prior to Closing will be incurred) since such date other than in
the ordinary course of business.
(d) Acquiror has been furnished by Target and its
Subsidiaries with true and complete copies of (i) relevant portions of income
tax audit reports, statements of deficiencies, closing or other agreements
received by or on behalf of Target and its Subsidiaries relating to Taxes, and
(ii) all federal and state income or franchise tax Returns and state sales and
use tax Returns for or including Target and its Subsidiaries for all periods
since January 1, 1990. Neither Target nor its Subsidiaries does business in or
derives income from any state other than states for which Returns have been
duly filed and furnished to Acquiror.
(e) The Returns of or including Target and its
Subsidiaries have not been audited by a government or taxing authority since
January 1, 1990, nor is any such audit in process, pending or, to Target's
knowledge, threatened (either in writing or verbally, formally or informally).
No deficiencies exist or have been asserted (either in writing or verbally,
formally or informally), and neither Target nor its Subsidiaries has received
notice (either in writing or verbally, formally or informally) that it has not
filed a Return or paid Taxes required to be filed or paid. Neither Target nor
its Subsidiaries is a party to any action or proceeding for assessment or
collection of Taxes, nor has such event been asserted or threatened (either in
writing or verbally, formally or informally) against Target or its Subsidiaries
or any of its respective assets. No waiver or extension of any statute of
limitations is in effect with respect to Taxes or Returns of Target or its
Subsidiaries. Target and its Subsidiaries have disclosed on their respective
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federal and state income and franchise tax Returns all positions taken therein
that could give rise to a substantial understatement penalty within the meaning
of Code Section 6662 or comparable provisions of applicable state tax laws.
(f) Neither Target nor its Subsidiaries is, nor has it
ever been, a party to any tax sharing agreement.
(g) Neither Target nor its Subsidiaries is, nor has it
been, a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code, and Acquiror is not required to withhold tax by
reason of Section 1445 of the Code. Neither Target nor its Subsidiaries is a
"consenting corporation" under Section 341(f) of the Code. Neither Target nor
its Subsidiaries has entered into any compensatory agreements with respect to
the performance of services which payment thereunder would result in a
nondeductible expense to Target or its Subsidiaries pursuant to Section 280G of
the Code or an excise tax to the recipient of such payment pursuant to Section
4999 of the Code. Neither Target nor its Subsidiaries has agreed to, nor is it
required to make any adjustment under Code Section 481(a) by reason of, a
change in accounting method. Neither Target nor its Subsidiaries is, nor has
it been, a "reporting corporation" subject to the information reporting and
record maintenance requirements of Section 6038A and the regulations
thereunder. Target and its Subsidiaries are in compliance with the terms and
conditions of any applicable tax exemptions, agreements or orders of any
foreign government to which it may be subject or which it may have claimed, and
the transactions contemplated by this Agreement will not have any adverse
effect on such compliance.
(h) The Target Disclosure Schedule sets forth accurate
and complete information regarding Target's and its Subsidiaries' net operating
losses for federal and each applicable state tax purposes. Neither Target nor
its Subsidiaries has net operating losses and credit carryovers or other tax
attributes currently subject to limitation under Sections 382, 383, or 384 of
the Code.
Section 3.6 Absence of Certain Changes or Events. Since December
31, 1997, neither Target nor its Subsidiaries has:
(a) suffered any Material Adverse Effect (provided,
however, that Material Adverse Effect for this purpose shall exclude the impact
of events directly related to announcement of the Merger by Acquiror in
accordance with Section 7.2 of this Agreement on Target's business);
(b) suffered any damage, destruction or loss, whether
covered by insurance or not, that has resulted, or could be reasonably expected
to result, in a Material Adverse Effect on Target or its Subsidiaries;
(c) granted or agreed to make any increase in the
compensation payable or to become payable by Target or its Subsidiaries to its
officers or, in the ordinary course of business consistent with prior practice,
to its non-officer employees;
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(d) declared, set aside or paid any dividend or made any
other distribution on or in respect of the shares of the capital stock of
Target or its Subsidiaries or declared any direct or indirect redemption,
retirement, purchase or other acquisition by Target or its Subsidiaries of such
shares;
(e) modified or amended the terms of any Target Option
Plans, Target Options or Target Warrants;
(f) issued any shares of capital stock of Target or its
Subsidiaries or any warrants, rights, options or entered into any commitment
relating to the shares of Target or its Subsidiaries, except for the issuance
of shares of Target capital stock pursuant to the exercise of Target Options
and Target Warrants listed in the Target Disclosure Schedule and the conversion
of outstanding Target Preferred Stock;
(g) made any change in the accounting methods or
practices it follows, including without limitation reserve practices, whether
for general financial or tax purposes, or any change in depreciation or
amortization policies or rates adopted therein;
(h) sold, leased, abandoned or otherwise disposed of any
real property or any machinery, equipment or other operating property;
(i) sold, assigned, transferred, licensed (except in the
ordinary course of business consistent with prior practice), or otherwise
disposed of any patent, trademark, trade name, brand name, copyright (or
pending application for any patent, trademark or copyright) invention, work of
authorship, process, know-how, formula or trade secret or interest thereunder
or other intangible asset;
(j) permitted or allowed any of its property or assets to
be subjected to any mortgage, deed of trust, pledge, lien, security interest
or;
(k) made any capital expenditure or commitment
individually or in the aggregate in excess of $50,000;
(l) paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets to, or entered into any
agreement or arrangement with, any of its Affiliates (as defined in Section
3.16), officers, directors or stockholders or any affiliate or associate of any
of the foregoing;
(m) made any amendment to or terminated any agreement
which, if not so amended or terminated, would be required to be disclosed on
the Target Disclosure Schedule; or
(n) agreed to take any action described in this Section
3.6 or outside of its ordinary course of business or which would constitute a
breach of any of the representations contained in this Agreement.
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Section 3.7 Title and Related Matters. Target and its
Subsidiaries have good and marketable title to their respective properties,
interests in properties and assets, real and personal, used in or necessary for
the operation of the businesses of Target and its Subsidiaries, free and clear
of all mortgages, liens, pledges, charges or encumbrances of any kind or
character, except the lien of current taxes not yet due and payable. The
equipment of Target and its Subsidiaries used in the operation of their
respective businesses is, taken as a whole, (i) adequate for the business
conducted by Target and its Subsidiaries and (ii) in good operating condition
and repair, ordinary wear and tear excepted. All real or personal property
leases to which Target and its Subsidiaries are parties are valid, binding,
enforceable against Target and effective in accordance with their respective
terms. To the knowledge of Target, there is not under any of such leases any
existing default or event of default or event which, with notice or lapse of
time or both, would constitute a default. The Target Disclosure Schedule
contains a description of all personal property with an individual net book
value in excess of $25,000 and real property leased or owned by Target and its
Subsidiaries, describing their respective interests in said property. True and
correct copies of Target's and its Subsidiaries' respective real property and
personal property leases have been provided to Acquiror or its representatives.
Section 3.8 Intellectual Property.
(a) Target and its Subsidiaries own, or are
licensed or otherwise possess legally enforceable rights to use, all patents,
patent rights, trademarks, trademark rights, trade names, trade name rights,
service marks, copyrights, and any applications for any of the foregoing,
maskworks, net lists, schematics, industrial models, inventions, technology,
know-how, trade secrets, inventory, ideas, algorithms, processes, computer
software programs or applications (in both source code and object code form),
and tangible or intangible proprietary information or material that are used in
the businesses of Target and its Subsidiaries as currently conducted
("INTELLECTUAL PROPERTY").
(b) Schedule 3.8(b) of the Target Disclosure
Schedule lists (i) all patents and patent applications and all trademarks,
trade names and service marks, copyrights and maskworks, included in the
Intellectual Property, including the jurisdictions in which each such
Intellectual Property right has been issued or registered or in which any
application for such issuance and registration has been filed, (ii) all
licenses, sublicenses and other agreements as to which Target or its
Subsidiaries are parties and pursuant to which any person is authorized to use
any Intellectual Property and (iii) all licenses, sublicenses and other
agreements as to which Target or its Subsidiaries are parties and pursuant to
which Target or its Subsidiaries is authorized to use any third party
Intellectual Property ("THIRD PARTY INTELLECTUAL PROPERTY RIGHTS") which are
incorporated in, are or form a part of any current or proposed product of
Target or its Subsidiaries. Neither Target nor its Subsidiaries is in
violation of any license, sublicense or agreement described in Schedule 3.8(b)
of the Target Disclosure Schedule. The execution and delivery of this
Agreement by Target and the consummation of the transactions contemplated
hereby will not cause Target or its Subsidiaries to be in violation or default
under any such license, sublicense or agreement, nor entitle any other party to
any such license, sublicense or agreement to terminate or modify such license,
sublicense or agreement. Except as set forth in Schedule 3.8(b) of the Target
Disclosure Schedule, Target and its Subsidiaries are the
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sole and exclusive owners or licensees of, with all right, title and interest
in and to (free and clear of any liens), the Intellectual Property, and have
sole and exclusive rights thereto (and are not contractually obligated to pay
any compensation to any third party in respect thereof).
(c) Except as set forth in Schedule 3.8(c) of the
Target Disclosure Schedule, to Target's knowledge, there is no unauthorized
use, disclosure, infringement or misappropriation of any Intellectual Property
rights of Target or its Subsidiaries any trade secret or any Intellectual
Property right of any third party to the extent licensed by or through Target
or its Subsidiaries, by any third party, including any employee or former
employee of Target or its Subsidiaries. Neither Target nor its Subsidiaries has
entered into any agreement to indemnify any other person against any charge of
infringement of any Intellectual Property, other than indemnification
provisions contained in purchase orders, reseller agreements or OEM agreements
arising in the ordinary course of business.
(d) Neither Target nor its Subsidiaries is nor
will it be as a result of the execution and delivery of this Agreement or the
performance of its obligations under this Agreement in breach of any license,
sublicense or other agreement relating to the Intellectual Property or Third
Party Intellectual Property Rights.
(e) All patents, registered trademarks, service
marks and copyrights held by Target and its Subsidiaries are valid and
subsisting and there is no assertion or claim challenging the validity of any
Intellectual Property of Target. Neither Target nor its Subsidiaries has been
named in any action, suit or proceeding which involves a claim of infringement
of any patents, trademarks, service marks, copyrights or violation of any trade
secret or other proprietary right of any third party. Neither the conduct of
the business of Target or its Subsidiaries as currently conducted, nor the
manufacture, sale, licensing or use of any of the products of Target or its
Subsidiaries as now manufactured, sold or licensed or used, nor the use in any
way of the Intellectual Property in the manufacture, use, sale or licensing by
Target or its Subsidiaries of any products currently in development, infringes
on or conflicts with, in any way, any license, trademark, trademark right,
trade name, trade name right, patent, patent right, industrial model,
invention, service mark or copyright of any third party. All registered
trademarks, service marks and copyrights held by Target and its Subsidiaries
are valid and subsisting. To Target's knowledge, no third party is challenging
the ownership by Target or its Subsidiaries, or the validity or effectiveness
of, any of the Intellectual Property. Neither Target nor its Subsidiaries has
brought any action, suit or proceeding for infringement of Intellectual
Property or breach of any license or agreement involving Intellectual Property
against any third party. There are no pending or, to Target's knowledge,
threatened, interferences, re-examinations, oppositions or nullities involving
any patents, patent rights or applications therefor of Target or its
Subsidiaries, except such as may have been commenced by Target or its
Subsidiaries. Neither Target nor its Subsidiaries has publicly disclosed any
Intellectual Property that is the subject of a pending patent application filed
by Target or its Subsidiaries prior to one year before the date of filing of
such patent application. There is no breach or violation of or, to Target's
knowledge, threatened, or actual loss of rights under any license agreement to
which Target or its Subsidiaries is a party.
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(f) Target and its Subsidiaries have secured
valid written assignments from all consultants and employees who contributed to
the creation or development of Intellectual Property of the rights to such
contributions that Target and its Subsidiaries do not already own by operation
of law.
(g) Target and its Subsidiaries have taken all
commercially reasonable steps to protect and preserve the confidentiality of
all Intellectual Property not otherwise protected by patents, patent
applications or copyright ("CONFIDENTIAL INFORMATION"). Target and its
Subsidiaries have a policy requiring each employee, consultant and independent
contractor to execute proprietary information and confidentiality agreements
substantially in Target's or its Subsidiaries' standard forms (copies of which
have been provided to Acquiror) and all current and former employees,
consultants and independent contractors of Target and its Subsidiaries have
executed such an agreement. All use, disclosure or appropriation of
Confidential Information embodied in or related to the current products of, or
products currently under development by Target or its Subsidiaries and owned
by Target or its Subsidiaries by or to a third party has been pursuant to the
terms of a written agreement between Target or its Subsidiaries and such third
party. All use, disclosure or appropriation of Confidential Information not
owned by Target or its Subsidiaries has been pursuant to the terms of a written
agreement between Target or its Subsidiaries and the owner of such Confidential
Information, or is otherwise lawful.
Section 3.9 Employee Benefit Plans.
(a) The Target Disclosure Schedule lists, with respect to
Target and its Subsidiaries and any trade or business (whether or not
incorporated) which is treated as a single employer with Target and its
Subsidiaries (an "ERISA AFFILIATE") within the meaning of Section 414(b), (c),
(m) or (o) of the Code, (i) all employee benefit plans (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), (ii) each loan to a non-officer employee, loans to officers and
directors and any stock option, stock purchase, phantom stock, stock
appreciation right, supplemental retirement, severance, sabbatical, medical,
dental, vision care, disability, employee relocation, cafeteria benefit (Code
Section 125) or dependent care (Code Section 129), life insurance or accident
insurance plans, programs or arrangements, (iii) all bonus, pension, profit
sharing, savings, deferred compensation or incentive plans, programs or
arrangements, (iv) other fringe or employee benefit plans, programs or
arrangements that apply to senior management of Target and its Subsidiaries and
that do not generally apply to all employees, and (v) any current or former
employment or executive compensation or severance agreements, written or
otherwise, for the benefit of, or relating to, any present or former employee,
consultant or director of Target or its Subsidiaries as to which (with respect
to any of items (i) through (v) above) any potential liability is borne by
Target or its Subsidiaries (together, the "TARGET EMPLOYEE PLANS").
(b) Target has delivered to Acquiror or its
representatives a copy of each of the Target Employee Plans and related plan
documents (including trust documents, insurance policies or contracts, employee
booklets, summary plan descriptions and other authorizing documents, and, to
the extent still in its possession, any material employee communications
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relating thereto) and has, with respect to each Target Employee Plan which is
subject to ERISA reporting requirements, provided copies of any Form 5500
reports filed for the last three plan years. Any Target Employee Plan intended
to be qualified under Section 401(a) of the Code has either obtained from the
Internal Revenue Service a favorable determination letter as to its qualified
status under the Code, including all amendments to the Code effected by the Tax
Reform Act of 1986 and subsequent legislation, or has applied to the Internal
Revenue Service for such a determination letter prior to the expiration of the
requisite period under applicable Treasury Regulations or Internal Revenue
Service pronouncements in which to apply for such determination letter and to
make any amendments necessary to obtain a favorable determination. Target has
also furnished Acquiror with the most recent Internal Revenue Service
determination letter issued with respect to each such Target Employee Plan, and
nothing has occurred since the issuance of each such letter which could
reasonably be expected to cause the loss of the tax- qualified status of any
Target Employee Plan subject to Code Section 401(a).
(c) (i) None of the Target Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person; (ii)
there has been no "prohibited transaction," as such term is defined in Section
406 of ERISA and Section 4975 of the Code, with respect to any Target Employee
Plan; (iii) each Target Employee Plan has been administered in accordance with
its terms and in compliance with the requirements prescribed by any and all
statutes, rules and regulations (including ERISA and the Code), and Target, its
Subsidiaries and each ERISA Affiliate have performed all obligations required
to be performed by them under, are not in default, under or violation of, and
have no knowledge of any default or violation by any other party to, any of the
Target Employee Plans; (iv) neither Target, its Subsidiaries nor any ERISA
Affiliate is subject to any liability or penalty under Sections 4976 through
4980 of the Code or Title I of ERISA with respect to any of the Target Employee
Plans; (v) all contributions required to be made by Target, its Subsidiaries or
any ERISA Affiliate to any Target Employee Plan have been made on or before
their due dates and a reasonable amount has been accrued for contributions to
each Target Employee Plan for the current plan years; (vi) with respect to each
Target Employee Plan, no "reportable event" within the meaning of Section 4043
of ERISA (excluding any such event for which the thirty (30) day notice
requirement has been waived under the regulations to Section 4043 of ERISA) nor
any event described in Section 4062, 4063 or 4041 of ERISA has occurred; and
(vii) no Target Employee Plan is covered by, and neither Target, its
Subsidiaries nor any ERISA Affiliate has incurred or expects to incur any
liability under Title IV of ERISA or Section 412 of the Code. With respect to
each Target Employee Plan subject to ERISA as either an employee pension plan
within the meaning of Section 3(2) of ERISA or an employee welfare benefit plan
within the meaning of Section 3(1) of ERISA, Target has prepared in good faith
and timely filed all requisite governmental reports (which were true and
correct as of the date filed) and has properly and timely filed and distributed
or posted all notices and reports to employees required to be filed,
distributed or posted with respect to each such Target Employee Plan. No suit,
administrative proceeding, action or other litigation has been brought, or to
the knowledge of Target or its Subsidiaries is threatened, against or with
respect to any such Target Employee Plan, including any audit or inquiry by the
IRS or United States Department of Labor. Neither Target, its Subsidiaries nor
any ERISA Affiliate is a party to, or has made any contribution to or otherwise
incurred any obligation under, any "multi-employer plan" as defined in Section
3(37) of ERISA.
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(d) With respect to each Target Employee Plan, Target and
its Subsidiaries have complied with (i) the applicable health care continuation
and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA") and the proposed regulations thereunder and (ii) the applicable
requirements of the Family Leave Act of 1993 and the regulations thereunder.
(e) The consummation of the transactions contemplated by
this Agreement will not (i) entitle any current or former employee or other
service provider of Target, its Subsidiaries or any other ERISA Affiliate to
severance benefits or any other payment (including, without limitation,
unemployment compensation, golden parachute or bonus), or (ii) accelerate the
time of payment or vesting of any such benefits, or (iii) increase or
accelerate any benefits or the amount of compensation due any such employee or
service provider.
(f) There has been no amendment to, written
interpretation or announcement (whether or not written) by Target, its
Subsidiaries or other ERISA Affiliate relating to, or change in participation
or coverage under, any Target Employee Plan which would materially increase the
expense of maintaining such Plan above the level of expense incurred with
respect to that Plan for the most recent fiscal year included in the Target
Financial Statements.
Section 3.10 Bank Accounts. The Target Disclosure Schedule sets
forth the names and locations of all banks, trust companies, savings and loan
associations and other financial institutions at which Target or its
Subsidiaries maintain accounts of any nature and the names of all persons
authorized to draw thereon or make withdrawals therefrom.
Section 3.11 Material Contracts.
(a) Schedule 3.11 of the Target Disclosure
Schedule contain a list of all contracts and agreements to which Target or its
Subsidiaries are parties and that are material to the business, results of
operations or condition (financial or otherwise) of Target or its Subsidiaries
(such contracts, agreements and arrangements as are required to be set forth in
Section 3.11(a) of the Target Disclosure Schedule being referred to herein
collectively as the "MATERIAL CONTRACTS"). Material Contracts shall include,
without limitation, the following:
(i) each contract and agreement (other
than routine purchase orders and pricing quotes in the ordinary course of
business covering a period of less than one year or less) for the purchase of
inventory, spare parts, other materials or personal property with any supplier
or for the furnishing of services to Target or its Subsidiaries under the terms
of which Target or its Subsidiaries: (A) paid or otherwise gave consideration
of more than $50,000 in the aggregate during the fiscal year ended December 31,
1997, (B) is likely to pay or otherwise give consideration of more than $50,000
in the aggregate during the fiscal year ending December 31, 1998, (C) is likely
to pay or otherwise give consideration of more than $50,000, in the aggregate
over the remaining term of such contract or (D) cannot be canceled by Target or
its Subsidiaries without penalty or further payment of less than $50,000;
(ii) each customer contract and agreement
(other than routine purchase orders, pricing quotes with open acceptance and
other tender bids, in each case, entered
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into in the ordinary course of business and covering a period of one year or
less) to which Target or its Subsidiaries are parties which (A) involved
consideration of more than $50,000 in the aggregate during the fiscal year
ended December 31, 1997, (B) is likely to involve consideration of more than
$50,000 in the aggregate during the fiscal year ending December 31, 1998, (C)
is likely to involve consideration of more than $50,000 in the aggregate over
the remaining term of the contract or (D) cannot be canceled by Target or its
Subsidiaries without penalty or further payment of less than $50,000;
(iii) (A) all distributor, manufacturer's
representative, broker, franchise, agency and dealer contracts and agreements
to which Target or its Subsidiaries are parties (specifying on a matrix, in the
case of distributor agreements, the name of the distributor, product,
territory, termination date and exclusivity provisions) and (B) all sales
promotion, market research, marketing and advertising contracts and agreements
to which Target or its Subsidiaries are parties which: (x) involved
consideration of more than $50,000 in the aggregate during the fiscal year
ended December 31, 1997, (y) are likely to involve consideration of more than
$50,000 in the aggregate during the fiscal year ending December 31, 1998 or (z)
are likely to involve consideration of more than $50,000 in the aggregate over
the remaining term of the contract;
(iv) all management contracts with
independent contractors or consultants (or similar arrangements) to which
Target or its Subsidiaries are parties and which (A) involved consideration of
more than $50,000 in the aggregate during the fiscal year ended December 31,
1997, (B) are likely to involve consideration of more than $50,000 in the
aggregate during the fiscal year ending December 31, 1998 or (C) are likely to
involve consideration of more than $50,000 in the aggregate over the remaining
term of the contract;
(v) all contracts and agreements
(excluding routine checking account overdraft agreements involving petty cash
amounts) under which Target or its Subsidiaries have created, incurred, assumed
or guaranteed (or may create, incur, assume or guarantee) indebtedness or under
which Target or its Subsidiaries have imposed (or may impose) a security
interest or lien on any of their respective assets, whether tangible or
intangible, to secure indebtedness;
(vi) all contracts and agreements that
limit the ability of Target or its Subsidiaries or, after the Effective Time,
Acquiror, the Surviving Corporation or any of their affiliates, to compete in
any line of business or with any person or in any geographic area or during any
period of time, or to solicit any customer or client;
(vii) all contracts and agreements between
or among Target or its Subsidiaries, on the one hand, and any affiliate of
Target or its Subsidiaries (other than a wholly-owned subsidiary), on the other
hand;
(viii) all contracts and agreements to
which Target or its Subsidiaries are parties under which it has agreed to
supply products to a customer at specified prices, whether directly or through
a specific distributor, manufacturer's representative or dealer; and
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(ix) all other contracts or agreements
(A) which are material to Target or its Subsidiaries or the conduct of their
respective businesses, (B) the absence of which would have a Material Adverse
Effect on Target or its Subsidiaries or (C) which are believed by Target or its
Subsidiaries to be of unique value even though not material to the businesses
of Target or its Subsidiaries.
(b) Each of Target's or its Subsidiaries'
licenses, each Material Contract and each other material contract or agreement
of Target or its Subsidiaries which would have been required to be disclosed in
Schedule 3.11 of the Target Disclosure Schedule had such contract or agreement
been entered into prior to the date of this Agreement, is a legal, valid and
binding agreement of Target. Neither Target nor its Subsidiaries is in default
of and to the best of Target's knowledge, no other party is in default of, any
Target license or Material Contract; none of the Target licenses or Material
Contracts has been canceled by Target or its Subsidiaries or by any other
party; neither Target nor its Subsidiaries is in receipt of any claim of
default under any such agreement; and neither Target nor its Subsidiaries
anticipates any termination or change to, or receipt of a proposal with respect
to, any such agreement as a result of the Merger or otherwise. Target and its
Subsidiaries have furnished Acquiror with true and complete copies of all such
agreements, together with all amendments, waivers or other changes thereto.
Section 3.12 Orders, Commitments and Returns. All accepted
arrangements entered into by Target and its Subsidiaries for, and all
agreements, contracts, or commitments for the purchase of supplies by Target
and its Subsidiaries, were made in the ordinary course of business. To the
knowledge of Target, no outstanding purchase or outstanding lease commitment of
Target and its Subsidiaries is in excess of the normal, ordinary and usual
requirements of its business or was made at any price (on both a per unit and
aggregate basis) materially in excess of the current market price at the time
made, or contains terms and conditions materially more onerous to Target and
its Subsidiaries than those usual and customary in the industry. There are no
oral contracts or arrangements for the sale of any product or service by Target
or its Subsidiaries.
Section 3.13 Compliance With Law. Target and its Subsidiaries and
the operation of their respective businesses are in compliance in all material
respects with all applicable laws and regulations. Neither Target nor its
Subsidiaries nor, to Target's knowledge, any of their respective employees has
directly or indirectly paid or delivered any fee, commission or other sum of
money or item of property, however characterized, to any finder, agent,
government official or other party in the United States or any other country,
that was or is in violation of any federal, state, or local statute or law or
of any statute or law of any other country having jurisdiction. Neither Target
nor its Subsidiaries has participated directly or indirectly in any boycotts or
other similar practices affecting any of its customers. Target and its
Subsidiaries have complied in all material respects at all times with any and
all applicable federal, state and foreign laws, rules, regulations,
proclamations and orders relating to the importation or exportation of its
products.
Section 3.14 Labor Difficulties; No Discrimination.
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(a) Neither Target nor its Subsidiaries is engaged in any
unfair labor practice and is not in violation of any applicable laws respecting
employment and employment practices, terms and conditions of employment, and
wages and hours. There is no unfair labor practice complaint against Target or
its Subsidiaries actually pending or, to the knowledge of Target, threatened
before the National Labor Relations Board. There is no strike, labor dispute,
slowdown, or stoppage actually pending or, to the knowledge of Target,
threatened against Target or its Subsidiaries. To the knowledge of Target, no
union organizing activities are taking place with respect to the respective
businesses of Target or its Subsidiaries. No grievance, nor any arbitration
proceeding arising out of or under any collective bargaining agreement is
pending and, to the knowledge of Target, no claims therefor exist. No
collective bargaining agreement that is binding on Target or its Subsidiaries
restricts either Target or its Subsidiaries from relocating or closing any of
its operations. Neither Target nor its Subsidiaries has experienced any work
stoppage or other labor difficulty.
(b) Since January 1, 1992, there is and has not been any
claim against Target or its Subsidiaries, or to Target's knowledge, threatened
against Target or its Subsidiaries, based on actual or alleged race, age, sex,
disability or other harassment or discrimination, or similar tortious conduct,
nor to the knowledge of Target or its Subsidiaries, is there any basis for any
such claim.
(c) There are no pending claims against Target or its
Subsidiaries under any workers compensation plan or policy or for long term
disability. Neither Target nor its Subsidiaries has any material obligations
under COBRA with respect to any former employees or qualifying beneficiaries
thereunder. There are no proceedings pending or, to the knowledge of Target,
threatened, between Target or its Subsidiaries and any of their respective
employees, which proceedings have or could reasonably be expected to have a
Material Adverse Effect on Target or its Subsidiaries.
Section 3.15 Trade Regulation. All of the prices charged by Target
and its Subsidiaries in connection with the marketing or sale of any products
or services have been in compliance with all applicable laws and regulations.
No claims have been communicated or threatened in writing against Target or
its Subsidiaries with respect to wrongful termination of any dealer,
distributor or any other marketing entity, discriminatory pricing, price
fixing, unfair competition, false advertising, or any other violation of any
laws or regulations relating to anti-competitive practices or unfair trade
practices of any kind, and to Target's and its Subsidiaries' knowledge, no
specific situation, set of facts, or occurrence provides any basis for any such
claim.
Section 3.16 Insider Transactions. To the knowledge of Target, no
affiliate ("AFFILIATE") as defined in Rule 12b-2 under the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT") of Target or its Subsidiaries has
any interest in any equipment or other property, real or personal, tangible or
intangible, including, without limitation, any Target Proprietary Rights or any
creditor, supplier, customer, manufacturer, agent, representative, or
distributor of Target Products; provided, however, that no such Affiliate or
other person shall be deemed to have such an interest solely by virtue of the
ownership of less than 5% of the outstanding stock or debt securities of any
publicly-held company, the stock or debt securities of
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which are traded on a recognized stock exchange or quoted on the National
Association of Securities Dealers Automated Quotation System.
Section 3.17 Employees, Independent Contractors and Consultants.
The Target Disclosure Schedule lists and describes all past (since January 1,
1996) and all currently effective written or, to Target's knowledge, oral
consulting, independent contractor and/or employment agreements and other
material agreements concluded with individual employees, independent
contractors or consultants to which Target or its Subsidiaries are parties.
True and correct copies of all such written agreements have been provided to
Acquiror or its representatives. All independent contractors have been
properly classified as independent contractors for the purposes of federal and
applicable state tax laws, laws applicable to employee benefits and other
applicable law. All salaries and wages paid by Target and its Subsidiaries
are in compliance in all material respects with applicable federal, state and
local laws. Also shown on the Target Disclosure Schedule are the names,
positions and salaries or rates of pay, including bonuses, of all persons
presently employed by Target and its Subsidiaries.
Section 3.18 Insurance. The Target Disclosure Schedule contains a
list of the principal policies of fire, liability and other forms of insurance
currently or previously held by Target and its Subsidiaries, and all claims
made by Target and its Subsidiaries under such policies. To the knowledge of
Target, neither Target nor its Subsidiaries have done anything, either by way
of action or inaction, that might invalidate such policies in whole or in part.
There is no 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 and its Subsidiaries are otherwise in
compliance with the terms of such policies and bonds in all material respects.
Target has no knowledge of any threatened termination of, or material premium
increase with respect to, any of such policies.
Section 3.19 Payables; Accounts Receivable. All accounts payable
and notes payable by Target and its Subsidiaries to third parties as of the
date hereof arose, and as of the Closing, will have arisen, in the ordinary
course of business. All vendors to Target and its Subsidiaries have been
paid in accordance with Target's and its Subsidiaries' arrangements with their
vendors. Subject to any reserves set forth in the Most Recent Balance Sheet,
the accounts receivable shown on the Most Recent Balance Sheet represent and
will represent bona fide claims against debtors for sales and other charges,
and are not subject to discount except for normal cash and immaterial trade
discounts. The amount carried for doubtful accounts and allowances disclosed
in the Most Recent Balance Sheet is sufficient to provide for any losses which
may be sustained on realization of the receivables.
Section 3.20 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 against Target or its Subsidiaries or any of their
respective properties or any of its properties or any of its officers or
directors (in their capacities as such). There is no judgment, decree or order
against Target or its Subsidiaries, or, to the knowledge of Target, any of its
respective directors or officers (in their capacities as such).
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To Target's knowledge, no circumstances exist that could reasonably be expected
to result in a claim against Target or its Subsidiaries as a result of the
conduct of Target's or its Subsidiaries' respective businesses (including,
without limitation, any claim of infringement of any intellectual property
right).
Section 3.21 Governmental Authorizations and Regulations. Target
and its Subsidiaries have 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 and its Subsidiaries
currently operate or hold any interest in any of their respective properties or
(ii) that is required for the operation of Target's or its Subsidiaries'
respective businesses or the holding of any such interest, and all of such
authorizations are in full force and effect.
Section 3.22 Subsidiaries. Except for the Subsidiaries listed in
the Target Disclosure Schedule, neither Target nor its Subsidiaries owns or
controls (directly or indirectly) any capital stock, bonds or other securities
of, and has no proprietary interest in, any other corporation, general or
limited partnership, firm, association or business organization, entity or
enterprise, and Neither Target nor its Subsidiaries controls (directly or
indirectly) the management or policies of any other corporation, partnership,
firm, association or business organization, entity or enterprise.
Section 3.23 Compliance with Environmental Requirements. Target
and its Subsidiaries have obtained all material permits, licenses and other
authorizations which are required under federal, state and local laws
applicable to Target and its Subsidiaries and relating to pollution or
protection of the environment, including laws or provisions relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials, substances, or wastes into air,
surface water, groundwater, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants or hazardous or toxic materials,
substances, or wastes or which are intended to assure the safety of employees,
workers or other persons. Target and its Subsidiaries are in compliance in all
material respects with all terms and conditions of all such permits, licenses
and authorizations. There are no conditions, circumstances, activities,
practices, incidents, or actions which may form the basis of any claim, action,
suit, proceeding, hearing, or investigation of, by, against or relating to
Target and its Subsidiaries, based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge, release or threatened release into the
environment, of any pollutant, contaminant, or hazardous or toxic substance,
material or waste, or relating to the safety of employees, workers or other
persons.
Section 3.24 Corporate Documents. Target and its Subsidiaries
have furnished to Acquiror or its representatives: (a) copies of their
respective Articles of Organization and Bylaws, as amended to date; (b) copies
of their respective minute books containing all records required to be set
forth of all proceedings, consents, actions, and meetings of the stockholders,
the board of directors and any committees thereof; (c) copies of all material
permits, orders, and consents issued by any regulatory agency with respect to
Target and its Subsidiaries, or any securities of Target and its Subsidiaries,
and all applications for such permits, orders, and consents; and (d) copies of
the stock transfer books of Target and its Subsidiaries setting forth all
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transfers of any capital stock. The corporate minute books, stock certificate
books, stock registers and other corporate records of Target and its
Subsidiaries are complete and accurate, and the signatures appearing on all
documents contained therein are the true signatures of the persons purporting
to have signed the same. All actions reflected in such books and records were
duly and validly taken in compliance with the laws of the applicable
jurisdiction.
Section 3.25 Takeover Statutes Inapplicable. No "fair price,"
"moratorium," "control share acquisition" or other similar anti-takeover
statute or regulation (each a "TAKEOVER STATUTE") is applicable to Target or
its Subsidiaries, the Per Share Consideration, the Merger Consideration, the
Merger or any of the other transactions contemplated by this Agreement. Target
has heretofore delivered to Acquiror a complete and correct copy of the
resolutions of the Board of Directors of Target approving the Merger and this
Agreement, and such approval is sufficient to render inapplicable to the Offer,
the Merger, this Agreement and the transactions contemplated by this Agreement
the provisions of Chapters 110C and 110F of the Massachusetts
Corporation-Related Laws to the extent, if any, that such statutes are
applicable to such transactions and this Agreement. On or prior to the date
hereof, Target has taken all corporate action necessary to cause the
restrictions set forth in Chapters 110D and 110E of the Massachusetts
Corporation-Related Laws to be inapplicable to the Merger and other similar
transactions involving Target and its stockholders.
Section 3.26 Brokers and Finders. Except for BancAmerica
Roberston Stephens and the fees payable by Target to such firm described in an
engagement letter dated December 8, 1997, a complete and correct copy of which
has been provided to Acquiror on or prior to the date hereof, neither Target
nor its Subsidiaries has employed any broker or finder or incurred any
liability for any fee or commission to any broker, finder or intermediary in
connection with the transactions contemplated hereby.
Section 3.27 Customers and Suppliers. As of the date hereof, no
customer which individually accounted for more than 5% of Target's gross
revenues during the 12-month period preceding the date hereof, and no supplier
of Target or its Subsidiaries, has canceled or otherwise terminated, or made
any written threat to Target or its Subsidiaries to cancel or otherwise
terminate its relationship with Target or Subsidiaries, or has at any time on
or after December 31, 1997 decreased materially its services or supplies to
Target or its Subsidiaries in the case of any such supplier, or its usage of
the services or products of Target or its Subsidiaries in the case of such
customer, and to Target's knowledge, no such supplier or customer intends to
cancel or otherwise terminate its relationship with Target or its Subsidiaries
or to decrease materially its services or supplies to Target or its
Subsidiaries or its usage of the services or products of Target or its
Subsidiaries, as the case may be. Neither Target nor its Subsidiaries has
knowingly breached, so as to provide a benefit to Target or its Subsidiaries
that was not intended by the parties, any agreement with, or engaged in any
fraudulent conduct with respect to, any customer or supplier or Target or its
Subsidiaries.
Section 3.28 Target Action. The Board of Directors of Target, by
unanimous written consent or at a meeting duly called and held, has by the
unanimous vote of all directors (i) determined that the Merger is fair and in
the best interests of Target and its stockholders, (ii)
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approved the Merger and this Agreement in accordance with the provisions of
Massachusetts Law and (iii) directed that this Agreement and the Merger be
submitted to Target stockholders for their approval and resolved to recommend
that Target stockholders vote in favor of the approval of this Agreement and
the Merger.
Section 3.29 Offers. Target and its Subsidiaries have suspended or
terminated, and have the legal right to terminate or suspend, all negotiations
and discussions of Acquisition Transactions (as defined in Section 5.6) with
parties other than Acquiror.
Section 3.30 Notice of Meeting to Target Stockholders.
Stockholders of Target will be sent certain documentation including a Notice of
Meeting and this Agreement (with exhibits thereto) in connection with the
meeting of Target stockholders to consider the Merger (the "TARGET STOCKHOLDERS
MEETING") and in connection with a written consent of stockholders of Target.
Information contained in such documentation shall not, on the date such
information is first mailed to Target stockholders, at the time of the Target
Stockholders Meeting, or effective time of a written consent of stockholders
and at the Effective Time, contain any statement which is false with respect to
any material fact. If at any time prior to the Effective Time any event of
information should be discovered by Target or its Subsidiaries which should be
set forth in an amendment to any of the foregoing documents, Target shall
promptly inform Acquiror and Sub and shall communicate such information to the
Target stockholders in an appropriate manner. Notwithstanding the foregoing,
Target does not make any representation, warranty or covenant with respect to
any information supplied by Acquiror or Sub which is contained in any of the
foregoing documents.
Section 3.31 Products. There are no defects in the design or
technology embodied in any product which Target or its Subsidiaries markets or
has marketed in the past that materially impair or are likely to impair
materially the intended use of the product or materially injure any consumer of
the product or third party. Target has delivered to Acquiror copies of its
warranty policies and all outstanding warranties or guarantees relating to any
of Target's or its Subsidiaries' products other than warranties or guarantees
implied by law. Target is not aware of any claims asserting (a) any damage,
loss or injury cased by any product or (b) any breach of any express or implied
product warranty or any other similar claim with respect to any product other
than standard warranty obligations made by seller in the ordinary course of
business.
Section 3.32 Year 2000 Compliance. Target represents and warrants
that Target's or its Subsidiaries' Generations 4.0 product, including, without
limitation, any time-and-date related codes, data entry features and internal
subroutines thereof, (a) automatically accommodate the change in date from
December 31, 1999 to January 1, 2000 without negatively affecting the
performance of Target's or its Subsidiaries' products, and (b) accurately
accept, reflect, and calculate all dates that are relevant to the performance
of Target's or its Subsidiaries' products (collectively "YEAR 2000
COMPLIANCE"); provided that such performance is substantially dependent upon
the Year 2000 Compliance of the products of Target's customers.
Section 3.33 Inventory. All inventory of Target and its
Subsidiaries reflected in the Most Recent Balance Sheet or thereafter acquired
by Target or its Subsidiaries prior to the
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Closing Date is or will be owned by Target or its Subsidiaries free and clear
of liens or encumbrances of any kind. All items to be delivered to Target or
its Subsidiaries for inventory after the Closing Date that are subject to
purchase commitments outstanding at the Closing Date consist of items that are
or upon delivery will be good and merchantable and of a quality and quantity
presently usable and saleable in the ordinary course of business. The
inventory is not stated on the Most Recent Balance Sheet in an amount greater
than the estimated net realizable value thereof.
Section 3.34 Disclosure. No statement by Target or its
Subsidiaries contained in this Agreement, its exhibits and schedules nor in any
of the certificates or documents, including any of the Transaction Documents,
delivered or required to be delivered by Target or its Subsidiaries_ to
Acquiror or Sub under this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made. Target has disclosed to Acquiror all
material information of which it is aware relating specifically to the
operations and business of Target and its Subsidiaries as of the date of this
Agreement or the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND SUB
Acquiror and Sub represent and warrant to Target that, except as
disclosed in Acquiror's Report on Form 10-K for the year ended December 31,
1997, Annual Report to Shareholders for the year ended December 31, 1997 and
Proxy Statement for Acquiror's Annual Meeting of Shareholders to be held May
14, 1998, the statements contained in this Article IV are true and correct.
Section 4.1 Organization of Acquiror and Sub. Each of Acquiror
and Sub is a corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation and has all
requisite corporate power to own, lease and operate its property and to carry
on its business as now being conducted and is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the failure to
be so qualified or licensed would have a Material Adverse Effect on Acquiror
and its Subsidiaries, taken as a whole.
Section 4.2 Authority; No Conflict; Required Filings and
Consents.
(a) Each of Acquiror and Sub has all requisite corporate
power and authority to enter into this Agreement and the other Transaction
Documents to which it is or will become a party and to consummate the
transactions contemplated by this Agreement and such Transaction Documents.
The execution and delivery of this Agreement and such Transaction Documents and
the consummation of the transactions contemplated by this Agreement and such
Transaction Documents have been duly authorized by all necessary corporate
action on the part of Acquiror and Sub. This Agreement has been and such
Transaction Documents have been or, to the extent not executed as of the date
hereof, will be duly executed and delivered by Acquiror and Sub.
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This Agreement and each of the Transaction Documents to which Acquiror or Sub
is a party constitutes, and each of the Transaction Documents to which Acquiror
or Sub will become a party when executed and delivered by Acquiror or Sub will
constitute, the valid and binding obligation of Acquiror or Sub, enforceable in
accordance with its terms.
(b) The execution and delivery by Acquiror or Sub of this
Agreement and the Transaction Documents to which it is or will become a party
does not, and consummation of the transactions contemplated by this Agreement
or the Transaction Documents to which it is or will become a party will not,
(i) conflict with, or result in any violation or breach of any provision of the
Articles of Incorporation or Bylaws of Acquiror or Sub, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a default (or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any material benefit) under any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, contract or other agreement, instrument or obligation filed as an
exhibit to an Acquiror Commission Report, or (iii) conflict or violate any
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Acquiror or Sub or any of their
properties or assets, except in the case of (ii) and (iii) for any such
conflicts, violations, defaults, terminations, cancellations or accelerations
which would not have a Material Adverse Effect on Acquiror and its
Subsidiaries, taken as a whole.
(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 Sub in connection with the execution and
delivery of this Agreement or the Transaction Documents to which it is or will
become a party or the consummation of the transactions contemplated hereby or
thereby, except for (i) the filing of the Articles of Merger with the
Massachusetts and Delaware Secretaries of State, (ii) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal and state securities laws and the laws of any
foreign country, (iii) such filings as may be required under the HSR Act, and
(iv) such other consents, authorizations, filings, approvals and registrations
which, if not obtained or made, could be expected to have a Material Adverse
Effect on Acquiror and its Subsidiaries, taken as a whole.
Section 4.3 Commission Filings; Financial Statements.
(a) Acquiror has filed with the Securities and Exchange
Commission (the "COMMISSION") and made available to Target or its
representatives all forms, reports and documents required to be filed by
Acquiror with the Commission since January 1, 1997 (collectively, the "ACQUIROR
COMMISSION REPORTS"). The Acquiror Commission Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Act of 1933, as amended, (the "SECURITIES ACT"), and the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), as the case may be, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material
fact required to be stated in such Acquiror Commission Reports or necessary in
order to make the
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statements in such Acquiror Commission Reports, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the financial statements (including, in each
case, any related notes) contained in the Acquiror Commission Reports (except
to the extent amended or superseded by a later filing), and each of the
financial statements (and any related notes) included in any Acquiror
Commission Reports filed after the date of this Agreement until the Closing,
complied or will comply as to form in all material respects with the applicable
published rules and regulations of the Commission with respect thereto, was
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes to such financial statements or, in the case of unaudited
statements, as permitted by Form 10-Q of the Commission) and fairly presented
the consolidated financial position of Acquiror and its Subsidiaries as at the
respective dates and the consolidated results of its operations and cash flows
for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year- end adjustments
which were not or are not expected to be material in amount.
Section 4.4 Financing. Acquiror and Sub possess sufficient cash
funds to enable them to acquire all of the issued and outstanding Target Stock
pursuant to the Merger and to pay all fees and expenses payable by Acquiror and
Sub related to the transactions contemplated by this Agreement.
Section 4.5 Sub. Sub was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement, has engaged in no
other business activities and has conducted its operations only as contemplated
by this Agreement.
Section 4.6 Disclosure. No statement by Acquiror or Sub contained
in this Agreement, its exhibits and schedules nor in any of the certificates or
documents, including any of the Transaction Documents, delivered or required to
be delivered by Acquiror or Sub to Target under this Agreement, when taken and
read together with any Acquiror Commission Reports filed in 1998, contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made.
ARTICLE V
PRECLOSING COVENANTS OF TARGET
Section 5.1 Approval of Target Stockholders; Other Filings.
Prior to the Closing Date and at the earliest practicable date following the
date hereof, Target will either hold a stockholders' meeting for the purpose of
seeking approval of this Agreement, the Merger and related matters or obtain
the unanimous written consent of its stockholders in lieu of such stockholders'
meeting. Stockholders will be advised that the Board of Directors has
unanimously approved the transaction and will recommend to the stockholders of
Target that they approve this Agreement and the Merger and the Board of
Directors shall use its best efforts to obtain the approval of the stockholders
of Target entitled to vote on or consent to this
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Agreement and the Merger in accordance with Massachusetts law and Target's
Articles of Organization. As promptly as practicable after the date of this
Agreement, Target and Acquiror will prepare any filings or documents required
under applicable state law, the Exchange Act, the Securities Act or any other
Federal, foreign or state securities or blue sky laws relating to the Merger
and the transactions contemplated by this Agreement. The foregoing documents
will comply in all material respects with all applicable requirements of law
and the rules and regulations promulgated thereunder. Whenever any event
occurs which is required to be set forth in an amendment or supplement to the
foregoing documents, Target or Acquiror, as the case may be, will promptly
inform the other of such occurrence and cooperate in making any appropriate
amendment or supplement, and/or mailing to stockholders of Target, such
amendment or supplement.
Section 5.2 Advice of Changes. Target will promptly advise
Acquiror in writing of any event occurring subsequent to the date of this
Agreement which would render any representation or warranty of Target contained
in this Agreement, if made on or as of the date of such event or the Closing
Date, untrue or inaccurate.
Section 5.3 Operation of Business. During the period from the
date of this Agreement and continuing until the earlier of the termination of
the Agreement or the Effective Time, Target and its Subsidiaries agrees
(except to the extent that Acquiror shall otherwise consent in writing), to
carry on its business in the usual, regular and ordinary course in
substantially the same manner as previously conducted, to pay its debts and
taxes when due, subject to good faith disputes over such debts or taxes, to pay
or perform other obligations (including without limitation accounts payable)
when due, and, to the extent consistent with such business, use all reasonable
efforts consistent with past practices and policies to preserve intact its
present business organization, collect its accounts receivable, keep available
the services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, licensors, licensees,
and others having business dealings with it, to the end that its goodwill and
ongoing businesses shall be unimpaired at the Effective Time. Target shall
promptly notify Acquiror of any event or occurrence not in the ordinary course
of business of Target or its Subsidiaries. Except as expressly contemplated by
this Agreement, neither Target nor its Subsidiaries shall, without the prior
written consent of Acquiror:
(a) Accelerate, amend or change the period of
exercisability or the vesting schedule of options or restricted stock granted
under any employee stock plan or agreements or authorize cash payments in
exchange for any Target Option or any options granted under any of such plans
except as specifically required by the terms of such plans or any related
agreements or any such agreements in effect as of the date of this Agreement
and disclosed in the Target Disclosure Schedule and except as contemplated by
Section 7.1 hereof;
(b) 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 capital stock of such party, or purchase or
otherwise acquire, directly or indirectly, any shares of its capital stock
except from former employees, directors and
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consultants in accordance with agreements providing for the repurchase of
shares in connection with any termination of service by such party;
(c) 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 shares of its
capital stock, 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 (i) the issuance of (A)
shares of Target Common Stock issuable upon exercise of Target Options or
Target Warrants, which are outstanding on the date of this Agreement, (B)
shares of Target Common Stock issuable upon conversion of shares of Target
Preferred Stock, or (C) Target Options to purchase up to 30,000 shares of
Target Common Stock to be issued in the ordinary course to certain employees of
Target hired between December 31, 1997 and the Effective Date, or (ii) the
repurchase of shares of Common Stock from terminated employees pursuant to the
terms of outstanding stock restriction or similar agreements;
(d) Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership or other business organization or division, or
otherwise acquire or agree to acquire any assets;
(e) Sell, lease, license or otherwise dispose of any of
its properties or assets which are material, individually or in the aggregate,
to the business of Target or its Subsidiaries, except in the ordinary course of
business;
(f) (i) Increase or agree to increase the compensation
payable or to become payable to its officers or employees, except for increases
in salary or wages of non-officer employees in accordance with past practices,
(ii) grant any additional severance or termination pay to, or enter into any
employment or severance agreements with, officers, (iii) grant any severance or
termination pay to, or enter into any employment or severance agreement, with
any non-officer employee, except in accordance with past practices, (iv) enter
into any collective bargaining agreement, or (v) 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;
(g) Revalue any of its assets, including writing down the
value of inventory or writing off notes or accounts receivable, provided that
any write-off is no larger than the specific reserve related thereto;
(h) Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities or guarantee any debt
securities of others other than in the ordinary course of business consistent
with prior practice;
(i) Amend or propose to amend its Articles of
Organization or Bylaws;
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(j) Incur or commit to incur any capital expenditures in
excess of $100,000 in the aggregate or in excess of $100,000 as to any
individual matter;
(k) Lease, license (except in the ordinary course of
business consistent with prior practice) , sell, transfer or encumber or permit
to be encumbered any asset, Target Intellectual Property or other property
associated with the business of Target or its Subsidiaries (including sales or
transfers to Affiliates of Target or its Subsidiaries);
(1) Enter into any lease or contract for the purchase or
sale of any property, real or personal except in the ordinary course of
business;
(m) Fail to maintain its equipment and other assets in
good working condition and repair according to the standards it has maintained
up to the date of this Agreement, subject only to ordinary wear and tear;
(n) Change accounting methods, including without
limitation reserve practices;
(o) Amend or terminate any material contract, agreement
or license to which it is a party except in the ordinary course of business;
(p) Loan any amount to any person or entity, or guaranty
or act as a surety for any obligation;
(q) Waive or release any material right or claim, except
in the ordinary course of business;
(r) Make or change any Tax or accounting election, change
any annual accounting period, adopt or change any accounting method, file any
amended Return, enter into any closing agreement, settle any Tax claim or
assessment relating to Target or its Subsidiaries, surrender any right to claim
refund of Taxes, consent to any extension or waiver of the limitation period
applicable to any Tax claim or assessment relating to Target or its
Subsidiaries, or take any other action or omit to take any action, if any such
election, adoption, change, amendment, agreement, settlement, surrender,
consent or other action or omission would have the effect of increasing the Tax
liability of Target, its Subsidiaries or Acquiror;
(s) Do anything that would cause there to be a Material
Adverse Effect with respect to Target or its Subsidiaries;
(t) Enter into any agreement in which the obligation of
Target or its Subsidiaries exceeds $100,000 or shall not terminate or be
subject to termination for convenience within 180 days following execution
other than in the ordinary course of business consistent with prior practice;
(u) Enter into any agreement not in the ordinary course
of business (including without limitation any material licenses, any OEM
agreements, any exclusive agreements of any
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kind, or any agreements providing for obligations that would extend beyond six
months of the date of this Agreement);
(v) Repay any of its long term subordinated indebtedness
(except that such debt and all or part of any prepayment charge, premium or
penalty may be canceled in connection with the exercise of the Target
Warrants); or
(w) Take, or agree in writing or otherwise to take, any
of the actions described in Sections (a) through (v) above, or any action which
is reasonably likely to make any of Target's representations or warranties
contained in this Agreement untrue or incorrect in any material respect on the
date made (to the extent so limited) or as of the Effective Time.
Section 5.4 Access to Information. Until the Closing, Target
shall allow Acquiror and its agents reasonable access during normal business
hours upon reasonable notice to its files, books, records, and offices,
including, without limitation, any and all information relating to taxes,
commitments, contracts, leases, licenses, and personal property and financial
condition. Until the Closing, Target shall cause its accountants to cooperate
with Acquiror and its agents in making available all financial information
requested, including without limitation the right to examine all working papers
pertaining to all financial statements prepared or audited by such accountants.
Section 5.5 Satisfaction of Conditions Precedent. Target will
use its best efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Sections 8.1 and 8.2, and Target will use its
best efforts to cause the transactions contemplated by this Agreement to be
consummated, and, without limiting the generality of the foregoing, to obtain
all consents and authorizations of third parties and to make all filings with,
and give all notices to, third parties which may be necessary or reasonably
required on its part in order to effect the transactions contemplated by this
Agreement. Target shall use its best efforts to obtain any and all consents
necessary with respect to those Material Contracts listed in Section 3.11(a) of
the Target Disclosure Schedule in connection with the Merger (the "MATERIAL
CONSENTS").
Section 5.6 Other Negotiations. Target will not (and it will not
permit any of its officers, directors, employees, agents and Affiliates on its
behalf to) take any action to solicit, initiate, seek, encourage or support any
inquiry, proposal or offer from, furnish any information to, or participate in
any negotiations with, any corporation, partnership, person or other entity or
group (other than Acquiror) regarding any acquisition of Target or its
Subsidiaries, any merger or consolidation with or involving Target or its
Subsidiaries, or any acquisition of any material portion of the stock or assets
of Target or its Subsidiaries or any material license of Target Proprietary
Rights (any of the foregoing being referred to in this Agreement as an
"ACQUISITION TRANSACTION") or enter into an agreement concerning any
Acquisition Transaction with any party other than Acquiror. If between the
date of this Agreement and the termination of this Agreement pursuant to
Section 9.1, Target or its Subsidiaries receive from a third party any offer or
indication of interest regarding any Acquisition Transaction, or any request
for information regarding any Acquisition Transaction, Target shall (i) notify
Acquiror immediately (orally and in writing) of such offer, indication of
interest or request, including the identity of such party and
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the full terms of any proposal therein, and (ii) notify such third party of
Target's obligations under this Agreement.
ARTICLE VI
PRECLOSING AND OTHER COVENANTS OF ACQUIROR AND SUB
Section 6.1 Advice of Changes. Acquiror and Sub will promptly
advise Target in writing of any event occurring subsequent to the date of this
Agreement which would render any representation or warranty of Acquiror or Sub
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect.
Section 6.2 Reservation of Acquiror Common Stock. Acquiror shall
reserve for issuance, out of its authorized but unissued capital stock, the
maximum number of shares of Acquiror Common Stock as may be issuable upon
exercise of Target Options pursuant to the Merger. Acquiror shall cause such
shares of Acquiror Common Stock to be authorized for listing on the Nasdaq
National Market ("NASDAQ").
Section 6.3 Satisfaction of Conditions Precedent. Acquiror and
Sub will use their best efforts to satisfy or cause to be satisfied all the
conditions precedent which are set forth in Sections 8.1 and 8.3, and Acquiror
and Sub will use their best efforts to cause the transactions contemplated by
this Agreement to be consummated, and, without limiting the generality of the
foregoing, to obtain all consents and authorizations of third parties and to
make all filings with, and give all notices to, third parties which may be
necessary or reasonably required on its part in order to effect the
transactions contemplated hereby.
Section 6.4 Financing. Acquiror and Sub shall maintain
sufficient cash funds to enable them to acquire all of the issued and
outstanding Target Capital Stock on a fully diluted basis pursuant to the
Merger and to pay all fees and expenses payable by Acquiror and Sub related to
the transactions contemplated by this Agreement.
Section 6.5 Offer Letters. Acquiror shall deliver offer letters
regarding employment by Acquiror to those individuals listed in Schedule 7.1.
ARTICLE VII
OTHER AGREEMENTS
Section 7.1 Waivers. Target shall obtain waivers of the
Executive Employment Agreements and the acceleration provisions of those Target
Options held by those full-time employees of Target set forth on Schedule 7.1,
except to the extent provided in an offer letter delivered by Acquiror pursuant
to Section 6.5.
Section 7.2 No Public Announcement. The parties have agreed upon
the form and substances of a joint press release announcing the consummation of
the Merger, which shall be issued at a time and in a manner mutually agreed
upon. Other than such joint press release, the
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parties shall make no public announcement concerning this Agreement, their
discussions or any other memoranda, letters or agreements between the parties
relating to the Merger; provided, however, that either of the parties, but only
after reasonable consultation with the other, may make disclosure if required
under applicable law.
Section 7.3 Regulatory Filings; Consents; Reasonable Efforts.
Subject to the terms and conditions of this Agreement, Target and Acquiror
shall use their respective best efforts to (i) make all necessary filings with
respect to the Merger and this Agreement under the Exchange Act and applicable
blue sky or similar securities laws and obtain required approvals and
clearances with respect thereto and supply all additional information requested
in connection therewith; (ii) make merger notification or other appropriate
filings with federal, state or local governmental bodies or applicable foreign
governmental agencies and obtain required approvals and clearances with respect
thereto and supply all additional information requested in connection
therewith; (iii) obtain all consents, waivers, approvals, authorizations and
orders required in connection with the authorization, execution and delivery of
this Agreement and the consummation of the Merger; and (iv) take, or cause to
be taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable.
Section 7.4 Further Assurances. Prior to and following the
Closing, each party agrees to cooperate fully with the other parties and to
execute such further instruments, documents and agreements and to give such
further written assurances, as may be reasonably requested by any other party
to better evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
Section 7.5 Escrow Agreement. On or before the Effective Date,
the parties hereto shall exercise their best efforts to cause the Escrow Agent
(as defined in Section 10.2) and the Stockholders' Agents (as defined in
Section 10.7) to enter into an Escrow Agreement in substantially the form
attached hereto as Exhibit C.
Section 7.6 Letters of Transmittal. On or before the Closing,
the parties hereto shall exercise their best efforts to cause Target
Stockholders holding at least 92% of the Target Capital Stock to execute and
deliver Letters of Transmittal to Acquiror.
Section 7.7 FIRPTA. Target shall, prior to the Closing Date,
provide Acquiror with a properly executed Foreign Investment and Real Property
Tax Act of 1980 ("FIRPTA") Notification Letter which states that shares of
capital stock of Target do not constitute "United States real property
interests" under Section 897(c) of the Code, for purposes of satisfying
Acquiror's obligations under Treasury Regulation Section 1.1445-2(c)(3). In
addition, simultaneously with delivery of such FIRPTA Notification Letter,
Target shall provide to Acquiror, as agent for Target, a form of notice to the
Internal Revenue Service in accordance with the requirements of Treasury
Regulation Section 1.897-2(h)(2), along with written authorization for Acquiror
to deliver such notice form to the Internal Revenue Service on behalf of Target
upon the Closing of the Merger.
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Section 7.8 HSR Act Filing. Acquiror and Target shall promptly
make their respective filings, and shall thereafter make any required
submissions, under the HSR Act with respect to the Merger and shall cooperate
with each other with respect to the foregoing. Target shall not participate in
any meeting with the Federal Trade Commission or Department of Justice in
respect of the filing of Target under the HSR Act or any review by either of
the foregoing agencies without giving Acquiror prior notice of such meetings
and offering Acquiror the opportunity to attend and participate in such
meetings. Both Acquiror and Target shall take all reasonable actions necessary
to cause the expiration of the notice periods under the HSR Act as promptly as
possible after the execution of this Agreement.
Section 7.9 Target Stock Options and Warrants.
(a) Subject to the provisions of this Section 7.9, at and
as of the Effective Time of the Merger, Acquiror will assume the Target Options
and all obligations of Target under the Target Option Plans. In furtherance of
the foregoing, Target agrees to use its best efforts to cause holders of Target
Options issued under the 1992 Stock Option Plan and the 1996 Stock Option Plan
to waive their rights, as necessary to permit Acquiror's assumption of their
options, under such plans and agree to the assumption of their Target Options
by Acquiror. Each Target Option so assumed by Acquiror under this Agreement
will continue to have, and be subject to, the same terms and conditions set
forth in the Target Option Plans and in the other documents governing such
Target Option immediately prior to the Effective Time of the Merger. Each
Target Option shall be converted into an option to acquire a fraction of an
option to purchase Acquiror Common Stock (an "ACQUIROR STOCK OPTION") equal to
the Per Share Consideration divided by $28.0626, the average of the closing
price of the Acquiror Common Stock (the "ACQUIROR COMMON STOCK PRICE") as
reported on Nasdaq for the five trading days immediately preceding the date of
this Agreement (the "OPTION EXCHANGE RATIO"). The exercise price of the
assumed Target Options will be equal to the existing price divided by the
Option Exchange Ratio.
(b) Qualification as ISOs. It is the intention of the
parties that each assumed Target Option qualify as an "incentive stock option"
within the meaning of Section 422 of the Code ("ISOS") to the extent that such
Target Option constituted an ISO immediately prior to the Effective Time of the
Merger. No assumed Target Option will entitle the holder thereof to any
additional benefits within the meaning of Section 424(a)(2) of the Code that
were not available prior to such assumption.
(c) Documentation. After the Effective Time of the
Merger, Acquiror shall issue to each holder of an outstanding Target Option,
upon the surrender to Acquiror, a document evidencing the foregoing assumption
by Acquiror.
(d) Registration. Acquiror will file a Registration
Statement covering the shares of Acquiror Common Stock issuable upon the
exercise of Target Options and will use its best efforts to cause such shares
to be registered under the Securities Act within fifteen (15) days after the
Closing Date on Form S-8 and to maintain such registration in effect until the
exercise or termination of the Target Options; provided, however, that the
parties acknowledge that:
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(i) Acquiror has, as of the date of this Agreement, a pending Confidential
Treatment Request before the Commission, and (ii) Acquiror must resolve such
Request prior to filing a Registration Statement pursuant to this Section
7.9(d).
Section 7.10 Employee Benefits. Acquiror shall continue Target's
employee benefit plans (not including stock option plans) as currently in
effect immediately following the Effective Time; Acquiror and Target shall
cooperate with each other over the twelve months following the Effective Time
to determine benefits for Employees of Target and its Subsidiaries which are in
the aggregate are no less favorable to such employees than those provided from
time to time by Acquiror and its Subsidiaries to similarly situated employees.
Acquiror shall consider the Effective Date the date of hire of record for all
Target employees for purposes of determining such employees' eligibility date
for participation in Acquiror's CSI Program. Such employees' date of hire by
Target will be deemed their "seniority date" for purposes of computing normal
vacation time and five year plaque purposes.
Section 7.11 Subordinated Debt. Neither Target nor its Subsidiaries
shall repay any outstanding long term subordinated debt prior to the Closing;
however, such debt and all or part of any prepayment charge, premium or penalty
may be canceled in connection with the exercise of the Target Warrants.
Acquiror shall repay such debt (to the extent still outstanding) concurrently
with the Closing, including any prepayment charge, premium or penalty.
ARTICLE VIII
CONDITIONS TO MERGER
Section 8.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to this Agreement to effect
the Merger shall be subject to the satisfaction prior to the Closing Date of
the following conditions:
(a) Approvals. Other than the filings provided for by
Section 1.2, all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by, any
Governmental Entity shall have been filed, occurred or been obtained;
including, without limitation, such approvals, waivers and consents as may be
required under the HSR Act.
(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 or limiting
or restricting conduct or operation of the business of Acquiror or the
Surviving Corporation after the Merger shall have been issued, nor shall any
proceeding brought by a domestic administrative agency or commission or other
domestic Governmental Entity or other third party, 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.
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Section 8.2 Additional Conditions to Obligations of Acquiror and
Sub. The obligations of Acquiror and Sub to effect the Merger are subject to
the satisfaction of each of the following conditions, any of which may be
waived in writing exclusively by Acquiror and Sub:
(a) Stockholder Approval. At least ninety-two percent
(92%) of the shares held by stockholders of Target entitled to vote on or
consent to this Agreement and the Merger in accordance with Massachusetts Law
and Target's Articles of Organization shall have been voted in favor of this
Agreement and the Merger.
(b) Representations and Warranties. The representations
and warranties of Target set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date, except for
changes contemplated by this Agreement; and Acquiror shall have received a
certificate signed on behalf of Target by the chief executive officer and the
chief financial officer of Target to such effect.
(c) Performance of Obligations of Target. Target shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date; and
Acquiror shall have received a certificate signed on behalf of Target by the
chief executive officer and the chief financial officer of Target to such
effect.
(d) Conversion of Target Preferred Stock and Target
Warrants. All outstanding shares of Target Preferred Stock shall have been
converted into shares of Target Common Stock and all Target Warrants shall have
been exercised for Target Common Stock.
(e) Escrow Agreement. The Escrow Agent and Stockholders'
Agents shall have executed and delivered to Acquiror the Escrow Agreement and
such agreement shall remain in full force and effect.
(f) Letters of Transmittal. Each stockholder of Target
who is listed on Schedule A shall have executed and delivered to Acquiror a
Letter of Transmittal.
(g) Opinion of Target's Counsel. Acquiror shall have
received an opinion dated the Closing Date of Hutchins, Wheeler & Dittmar, A
Professional Corporation, counsel to Target, as to substantially the matters
attached hereto as Exhibit D.
(h) Approvals. All authorizations, consents (including
the Material Consents), or approvals of, or notifications to any third party,
required by Target's or its Subsidiaries' contracts, agreements or other
obligations in connection with the consummation of the Merger shall have
occurred or been obtained.
(i) Termination of Agreements; Option Assumption
Agreements. Target shall have obtained the waivers described in Section 7.1.
Holders of Target Options issued under the 1992 Stock Option Plan and the 1996
Stock Option Plan shall have waived, as necessary to permit Acquiror's
assumption of their options, their rights under such plans and agreed to the
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assumption of their Target Options by Acquiror. Target shall also terminate
those agreements listed on Schedule 8.2(i).
(j) Board Resignations. Target shall have received
written letters of resignation from the Target Board of Directors from each of
the current members of such Board, in each case effective at the Effective
Time.
(k) No Material Adverse Effect. Target shall not have
suffered any Material Adverse Effect between December 31, 1997 and the Closing
Date; provided, however, that monthly revenues shall not be considered to have
suffered a Material Adverse Effect if such revenues are not materially
adversely changed from the average of the corresponding months within each
quarter of fiscal 1997, and provided further that Material Adverse Effect for
this purpose shall exclude the impact of events directly related to
announcement of the Merger by Acquiror in accordance with Section 7.2 of this
Agreement on Target's business.
(l) Employment. As of the Closing Date, not less than
eighty-five percent (85%) of Target's employees and not less than twenty of the
twenty-five most highly compensated employees will have signed, and not taken
any action or expressed any intent to terminate or modify an offer letter
accepting employment with Acquiror together with and such other agreements as
are customarily executed by new employees of Acquiror or Sub or other
affiliates in form and content satisfactory to Target.
(m) Intellectual Property Ownership. Target and its
Subsidiaries have secured valid written assignments from all consultants and
employees who contributed to the creation or development of Intellectual
Property of the rights to such contributions that Target and its Subsidiaries
do not already own by operation of law.
(n) Audited Financial Statements. Target shall have
delivered to Acquiror audited financial statements for the period ended
December 31, 1997, which financials shall contain either (i) an unqualified
auditor's opinion, or (ii) a qualified ("going concern") auditor's opinion;
provided that if a qualified auditor's opinion is delivered, it shall only be
qualified due to (a) Target's default under its Fleet Bank credit arrangements,
(b) lack of operating income and insufficient credit line to sustain operations
through the current year or (c) the drain on Target's cash position resulting
from payments made to the holders of Target Preferred Stock (by virtue of such
Target Preferred Stock holdings).
Section 8.3 Additional Conditions to Obligations of Target. The
obligation of Target to effect the Merger is subject to the satisfaction of
each of the following conditions, any of which may be waived, in writing,
exclusively by Target:
(a) Representations and Warranties. The representations
and warranties of Acquiror and Sub set forth in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and
(except to the extent such representations speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date, and Target shall
have
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received a certificate signed on behalf of Acquiror by the chief executive
officer and the chief financial officer of Acquiror to such effect.
(b) Performance of Obligations of Acquiror and Sub.
Acquiror and Sub shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the
Closing Date; and Target shall have received a certificate signed on behalf of
Acquiror by the chief executive officer and the chief financial officer of
Acquiror to such effect.
(c) Opinion of Acquiror's Counsel. Target shall have
received an opinion dated the Closing Date of Venture Law Group, A Professional
Corporation, counsel to Acquiror, as to substantially the matters attached
hereto as Exhibit E.
(d) Offer Letters. Acquiror shall have delivered offer
letters regarding employment by Acquiror to those individuals listed in
Schedule 7.1.
ARTICLE IX
TERMINATION AND AMENDMENT
Section 9.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time:
(a) by mutual written consent of Acquiror and Target;
(b) by either Acquiror or Target, by giving written
notice to the other party, if a court of competent jurisdiction or other
Governmental Entity shall have issued a nonappealable final order, decree or
ruling or taken any other action, in each case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger, except if the party
relying on such order, decree or ruling or other action shall not have complied
with its respective obligations under Sections 5.5 or 6.3 of this Agreement, as
the case may be;
(c) by Acquiror or Target, by giving written notice to
the other party, if the other party is in material breach of any
representation, warranty, or covenant of such other party contained in this
Agreement, which breach shall not have been cured, if subject to cure, within
20 business days following receipt by the breaching party of written notice of
such breach by the other party;
(d) by Acquiror, by giving written notice to Target, if
the Closing shall not have occurred on or before July 15, 1998 by reason of the
failure of any condition precedent under Section 8.1 or 8.2 (unless the failure
results primarily from a breach by Acquiror of any representation, warranty, or
covenant of Acquiror contained in this Agreement);
(e) by Target, by giving written notice to Acquiror, if
the Closing shall not have occurred on or before July 15, 1998 by reason of the
failure of any condition precedent
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under Section 8.1 or 8.3 (unless the failure results primarily from a breach by
Target of any representation, warranty, or covenant of Target contained in this
Agreement); or
(f) by Acquiror, by giving written notice to Target, if
the required approvals of the stockholders of Target contemplated by this
Agreement shall not have been obtained by reason of the failure to obtain the
required consents or votes upon a vote taken by written consent or at a meeting
of stockholders, duly convened therefor or at any adjournment thereof.
Section 9.2 Effect of Termination; Break-Up Fees. In the event
of termination of this Agreement as provided in Section 9.1, this Agreement
shall immediately become void and there shall be no liability or obligation on
the part of Acquiror, Target, Sub or their respective officers, directors,
stockholders or Affiliates, except to the extent that such termination results
from the breach by any such party of any of its representations, warranties or
covenants set forth in this Agreement. In the event of termination of this
Agreement by Target pursuant to Sections 9.1(c) or 9.1(e) as a result of a
breach on the part of Acquiror of a representation, warranty, covenant or
agreement in this Agreement, Acquiror shall pay Target a break-up fee of
$3,000,000; provided Target is not also in breach of this Agreement. The
parties hereby acknowledge that the damages that may be sustained by Target,
its officers, directors, Subsidiaries and Affiliates in the event of a breach
of this Agreement by Acquiror are difficult to ascertain, and each party hereby
agrees that the break-up fee set forth above is fair and reasonable and, in
light of the difficulty of determining actual damages, represents a prior
agreement among the parties as to appropriate liquidated damages in the event
of Acquiror's breach of this Agreement and constitutes payment for all damages
or other claims associated with such breach. Such break-up fee shall be paid
by Acquiror to Target within ten (10) business days following termination of
this Agreement for such breach.
Section 9.3 Fees and Expenses.
(a) Except as set forth in this Section 9.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby, including Target's legal, investment banking and
accounting fees and expenses, shall be paid by Acquiror at Closing provided
such amounts are invoiced in full at the Closing; provided, however, that
Target's and its Subsidiaries' legal and accounting fees and expenses related
to the transaction shall not exceed $100,000 and that Target's and its
Subsidiaries' investment banking fees and expenses related to the transaction
shall not exceed $1,100,000, such fees and expenses to be invoiced in full at
the Closing. Target and its Subsidiaries shall use their best efforts to
consummate the Merger within such budget and shall not enter into any agreement
inconsistent with such budget. To the extent that fees and expenses exceed the
amounts provided above, they shall be treated as reductions in the Merger
Consideration. In the event that the Merger Consideration is not so reduced,
for any reason, then such excesses shall be treated as claims against the
Escrow Consideration.
(b) In the event that the Merger is not consummated, each
party shall pay its own fees and expenses, including, without limitation, all
legal, investment banking and accounting fees.
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ARTICLE X
ESCROW AND INDEMNIFICATION
Section 10.1 Indemnification.
(a) Notwithstanding any investigation at any time with
regard thereto by or on behalf of any party to this Agreement, from and after
the Effective Time and subject to the limitations contained in Section 10.2,
the Former Target Stockholders will, pro rata, in accordance with their Pro
Rata Portion, indemnify and hold Acquiror harmless against any loss, expense,
liability or other damage, including attorneys' fees, to the extent of the
amount of such loss, expense, liability or other damage (collectively
"DAMAGES") that Acquiror has incurred by reason of (i) the breach by Target of
any representation, warranty, covenant or agreement of Target contained in this
Agreement that occurs or becomes known to Acquiror, or (ii) any breach of
Sections 3.1, 3.4, 3.5(d), 3.5(e), 3.8(e), 3.9(b), 3.11(b), 3.20 (to the extent
of cross-references to Sections 3.11(b) and 3.8) or 3.22, without regard to any
qualifier or exception thereto taken in the Target Disclosure Schedule.
(b) In addition, the Former Target Stockholders,
severally on a pro rata basis, shall hold harmless and indemnify Acquiror from
and against, and shall compensate and reimburse Acquiror for any Damages which
are suffered or incurred by Acquiror or to which Acquiror may otherwise become
subject at any time only to the extent that such Damages (i) arise from or as a
result of fraud by Target or any Former Target Stockholder or (ii) relate to a
breach of Section 3.5 of the Merger Agreement for as long as the
representations contained in Section 3.5 of the Merger Agreement survive
pursuant to Section 11.1 of the Merger Agreement (each such breach a "SPECIFIED
BREACH").
Section 10.2 Escrow Fund. As security for the indemnities in
Section 10.1, as soon as practicable after the Effective Date, the Escrow
Consideration shall be deposited with Chase Trust Company of California as
escrow agent (the "ESCROW AGENT"), such deposit to constitute the Escrow Fund
(the "ESCROW FUND") and to be governed by the terms set forth in this Article X
and in the Escrow Agreement. Except as otherwise contemplated by this
Agreement and the Escrow Agreement, the indemnification obligations of the
Former Target Stockholders pursuant to this Article X shall be limited to the
amount and assets deposited and present in the Escrow Fund and Acquiror shall
not be entitled to pursue any claims for indemnification under this Article X
against the Former Target Stockholders directly or personally and the sole
recourse of Acquiror shall be to make claims against the Escrow Fund in
accordance with the terms of the Escrow Agreement. Nothing in this Agreement,
however, shall limit in any manner (whether by time, amount, procedure or
otherwise), any remedy at law or in equity to which Acquiror may be entitled as
a result of a Specified Breach.
Section 10.3 Escrow Period. The Escrow Fund shall terminate on
March 31, 1999 (the period from the Closing to such date referred to as the
"ESCROW PERIOD"), provided, however, that the amount of Escrow Consideration,
which, in the reasonable judgment of Acquiror (as supported by the Officer's
Certificate delivered pursuant to Section 10.4, together with any updates
thereto delivered prior to the expiration of the Escrow Period in accordance
with Section
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10.4 hereof), subject to the objection of the Stockholders' Agents and the
subsequent resolution of the matter in the manner provided in Section 10.6, is
necessary to satisfy any unsatisfied claims specified in any Officer's
Certificate theretofore delivered to the Escrow Agent and the Stockholders'
Agents prior to termination of the Escrow Period with respect to Damages
incurred or litigation pending prior to expiration of the Escrow Period, shall
remain in the Escrow Fund until such claims have been finally resolved.
Amounts released from the Escrow Fund (other than to Acquiror) shall be paid or
distributed pro rata among the Holders (as defined in the Escrow Agreement)
based upon their respective percentage interests therein at the time.
Section 10.4 Claims Upon Escrow Fund. Upon receipt by the Escrow
Agent on or before the last day of the Escrow Period of a certificate signed by
any appropriately authorized officer of Acquiror (an "OFFICER'S CERTIFICATE"):
(i) Stating the aggregate amount of Acquiror's
Damages or an estimate thereof, in each case to the extent known or
determinable at such time, and,
(ii) Specifying in reasonable detail the
individual items of such Damages included in the amount so stated, the date
each such item was paid or properly accrued or arose, and the nature of the
misrepresentation, breach or claim to which such item is related,
the Escrow Agent shall, subject to the provisions of Sections 10.5 and
10.6 hereof, deliver to Acquiror out of the Escrow Fund, as promptly as
practicable, the Escrow Consideration having a value equal to such Damages all
in accordance with the Escrow Agreement and Section 10.5 below.
Section 10.5 Objections to Claims. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such Officer's
Certificate shall be delivered to the Stockholders' Agents (as defined in
Section 10.7 below) and for a period of thirty (30) days after such delivery,
the Escrow Agent shall make no delivery of the Escrow Consideration pursuant to
Section 10.3 unless the Escrow Agent shall have received written authorization
from the Stockholders' Agents to make such delivery. After the expiration of
such thirty (30) day period, the Escrow Agent shall make delivery of the Escrow
Consideration in the Escrow Fund in accordance with Section 10.3, provided,
however that no such delivery may be made if the Stockholders' Agents shall
object in a written statement to the claim made in the Officer's Certificate,
and such statement shall have been delivered to the Escrow Agent and to
Acquiror prior to the expiration of such thirty (30) day period.
Section 10.6 Resolution of Conflicts.
(a) In case the Stockholders' Agents shall so object in
writing to any claim or claims by Acquiror made in any Officer's Certificate,
Acquiror shall have thirty (30) days to respond in a written statement to the
objection of the Stockholders' Agents. If after such thirty (30) day period
there remains a dispute as to any claims, the Stockholders' Agents and Acquiror
shall attempt in good faith for thirty (30) days to agree upon the rights of
the respective parties with respect to each of such claims. If the
Stockholders' Agents and Acquiror should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties and shall
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be furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely
on any such memorandum and shall distribute the Escrow Consideration from the
Escrow Fund in accordance with the terms of the memorandum.
(b) If no such agreement can be reached after good faith
negotiation, either Acquiror or the Stockholders' Agents may, by written notice
to the other, demand arbitration of the matter unless the amount of the damage
or loss is at issue in pending litigation with a third party, in which event
arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either such event the matter shall be
settled by arbitration conducted by three arbitrators. Within fifteen (15)
days after such written notice is sent, Acquiror (on the one hand) and the
Stockholders' Agents (on the other hand) shall each select one arbitrator, and
the two arbitrators so selected shall select a third arbitrator. The decision
of the arbitrators as to the validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the parties to this Agreement,
and notwithstanding anything in Section 10.3, the Escrow Agent shall be
entitled to act in accordance with such decision and make or withhold payments
out of the Escrow Fund in accordance with such decision.
(c) Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. Any such arbitration shall be
held in Chicago, Illinois under the commercial rules then in effect of the
American Arbitration Association. The non- prevailing party to an arbitration
shall pay its own expenses, the fees of each arbitrator, the administrative fee
of the American Arbitration Association, and the expenses, including, without
limitation, the reasonable attorneys' fees and costs, incurred by the
prevailing party to the arbitration.
Section 10.7 Stockholders' Agents.
(a) By virtue of approving this Agreement and the Merger,
the Target Stockholders shall be deemed to have constituted and appointed John
A. Blaeser and Christopher Lynch as agents (the "STOCKHOLDERS' AGENTS") for and
on behalf of the Former Target Stockholders to give and receive notices and
communications, to authorize delivery to Acquiror of the Escrow Consideration
or other property from the Escrow Fund in satisfaction of claims by Acquiror,
to object to such deliveries, to agree to, negotiate, enter into settlements
and compromises of, and demand arbitration and comply with orders of courts and
awards of arbitrators with respect to such claims, to negotiate, compromise and
settle claims involving the Escrow Agent under the Escrow Agreement, and to
take all actions necessary or appropriate in the judgment of the Stockholders'
Agents for the accomplishment of the foregoing. All actions of the
Stockholders' Agents shall be taken jointly, not individually. Such agency may
be changed by the holders of a majority in interest of the Escrow Consideration
from time to time upon not less than five (5) days' prior written notice to
Acquiror. No bond shall be required of the Stockholders' Agents, and the
Stockholders' Agents shall receive no compensation for services. Notices or
communications to or from the Stockholders' Agents shall constitute notice to
or from each of the Former Target Stockholders.
(b) The Stockholders' Agents shall not be liable for any
act done or omitted hereunder as Stockholders' Agent while acting in good faith
and in the exercise of reasonable
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judgment, and any act done or omitted pursuant to the advice of counsel shall
be conclusive evidence of such good faith. The Former Target Stockholders
shall severally and pro rata, in accordance with their Pro Rata Portion,
indemnify the Stockholders' Agents and hold them harmless against any loss,
liability or expense incurred without gross negligence or bad faith on the part
of the Stockholders' Agents and arising out of or in connection with the
acceptance or administration of their duties hereunder under this Agreement or
the Escrow Agreement.
(c) The Stockholders' Agents shall have reasonable access
to information about Target and Acquiror and the reasonable assistance of
Target's and Acquiror's officers and employees for purposes of performing their
duties and exercising their rights under this Article X, provided that the
Stockholders' Agents shall treat confidentially and not disclose any nonpublic
information from or about Target or Acquiror to anyone (except on a need to
know basis to individuals who agree to treat such information confidentially).
Section 10.8 Actions of the Stockholders' Agents. A decision,
act, consent or instruction of the Stockholders' Agents shall constitute a
decision of all of the Former Target Stockholders for whom consideration
otherwise payable to them is deposited in the Escrow Fund and shall be final,
binding and conclusive upon each such Former Target Stockholder, and the Escrow
Agent and Acquiror may rely upon any decision, act, consent or instruction of
the Stockholders' Agents as being the decision, act, consent or instruction of
each and every such Former Target Stockholder. The Escrow Agent and Acquiror
are hereby relieved from any liability to any person for any acts done by them
in accordance with such decision, act, consent or instruction of the
Stockholders' Agents.
Section 10.9 Claims for Specified Breaches. In the event Acquiror
decides to pursue a claim for Damages resulting from a Specified Breach,
Acquiror shall notify the Former Target Stockholders of such claim through an
Officer's Certificate, and the parties shall then proceed to resolve the claim
in accordance with the procedures set forth in Sections 10.5 and 10.6.
Section 10.10 Third Party Claims.
(a) As soon as practicable after receipt of notice of
commencement of any action by any third party evidenced by service of process
or other legal pleading, or with reasonable promptness after the assertion in
writing of any claim by a third party, Acquiror shall give the Stockholders'
Agents written notice thereof together with a copy of such claim, process or
other legal pleading, and the Stockholders' Agents shall have the right to
undertake the defense, settlement, compromise or other disposition thereof
through a legal representative of the Stockholders' Agents own choosing. The
reasonable fees or expenses of the Stockholders' Agents incurred in connection
with the defense of such claim, up to $100,000 in the aggregate for all claims
under this Section 10.10, shall be promptly reimbursed or paid out of the
Escrow Fund; provided, however, that to the extent the fees or expenses of the
Stockholders' Agents exceed $100,000 in the aggregate, and if a portion of the
Escrow Consideration becomes available for release to the Former Target
Stockholders at the conclusion of the Escrow Period, then the Stockholders'
Agents shall be entitled to receive their excess fees and expenses prior and in
preference to any distribution of the Escrow Consideration to the Former Target
Stockholders.
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(b) In the event that the Stockholders' Agents, by the
thirtieth day after receipt of notice of any such claim (or, if earlier, by the
tenth day preceding the day on which an answer or other pleading must be served
in order to prevent judgment by default in favor of the person asserting such
claim), do not elect to defend against such claim, Acquiror (upon further
notice to the Stockholders' Agents) will have the right to undertake the
defense, compromise or settlement of such claim on behalf of and for the
account and risk of the Former Target Stockholders. The reasonable costs of
defense of any third party action or claim shall be paid from the Escrow Fund.
(c) Notwithstanding Sections 10.10(a) and (b), Acquiror
shall have the right to retain control of the defense of any third party action
or claim described in Section 10.10(a) which involves potential Damages in
excess of the value of the Escrow Consideration remaining in the Escrow Fund or
could reasonably be expected to affect Acquiror's on-going operations.
Section 10.11 Other Agreements. Notwithstanding the provisions of
Section 10.1:
(a) The Former Target Stockholders shall not be liable
for Damages to Acquiror hereunder until the aggregate amount of all such
obligations exceeds $250,000, at which time the Former Target Stockholders
shall become liable for all such obligations relating back to the first dollar
of Damages (not merely those Damages in excess of $250,000), and all such
Damages will become due and payable.
(b) Target's accounts payable balance at the Effective
Time will be compared with such balance at December 31, 1997, and if the
balance at the Effective Time is greater than the balance at December 31, 1997,
then:
(i) if the excess is less than or equal to
$200,000, then the Former Target Stockholders shall not be liable for Damages
to Acquiror with regard to such balance;
(ii) if the excess is greater than $200,000, then
the Former Target Stockholders shall become liable for the full amount of such
excess relating back to the first dollar of the excess (not merely the amount
in excess of $200,000), and such amount shall constitute Damages hereunder.
Any Damages constituted under this Section 10.11(b) shall be treated
in accordance with Section 10.11(a) above.
(c) Acquiror acknowledges that Target has not established
any warranty reserves in its financial statements for product or service claims
warranted under this Agreement. Accordingly, Acquiror agrees that the Former
Target Stockholders shall not be liable for "warranty claims" incurred by
Acquiror, where "warranty claims" shall be defined as any costs incurred
related to any product or service in which an excess of 90% of the revenue
associated with such product or service has been previously recognized, which
costs are required to either (a) fulfill expressed or implied warranty
obligations or (b) result in customer acceptance of products or services.
Further, such costs shall not be considered "warranty claims" if the costs
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result in gross margins of no less than those gross margins on similar products
or services realized during the year ended December 31, 1997.
Section 10.12 Distribution of Earnings on Escrow Consideration. On
January 15, 1999, an amount equal to forty-five percent (45%) of the earnings
accumulated on the Escrow Consideration (over the $7 million initial Escrow
Consideration) while held in the Escrow Fund shall be distributed to the Former
Target Stockholders, pro rata in accordance with their percentage interest
therein.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Survival of Representations and Covenants. All
representations, warranties, covenants and agreements of Target contained in
this Agreement shall survive the Closing and any investigation at any time made
by or on behalf of Acquiror until March 31, 1999, except for the
representations contained in Section 3.5, which shall survive until the
expiration of any applicable statute of limitations under applicable law. If
Escrow Consideration or other assets are retained in the Escrow Fund beyond
expiration of the period specified in the Escrow Agreement, then
(notwithstanding the expiration of such time period) the representation,
warranty, covenant or agreement applicable to such claim shall survive until,
but only for purposes of, the resolution of the claim to which such retained
Escrow Consideration or other assets relate. All representations, warranties,
covenants and agreements of Acquiror contained in this Agreement shall
terminate as of the Effective Time, provided that the covenants and agreements
contained in Sections 7.9 and 9.3 shall survive the Closing and shall continue
in full force and effect.
Section 11.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (which is confirmed) or two business days after being
mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Acquiror or Sub:
Aspect Telecommunications Corporation
1160 Ridder Park Drive
San Jose, CA 95131
Attention: Chairman and CEO
Fax No: (408) 325-2260
Telephone No: (408) 325-2200
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with a copy at the same address to the attention of the
General Counsel and with a copy to:
Venture Law Group
A Professional Corporation
2800 Sand Hill Road
Menlo Park, California 94025
Attention: Jon E. Gavenman
Fax No: (650) 233-8386
Telephone No: (650) 854-4488
(b) if to Target, to:
Voicetek Corporation
19 Alpha Road
Chelmsford, MA 01824
Attention: President and CEO
Fax No: (508) 250-9393
Telephone No: (508) 250-9378
with a copy to:
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 02110
Attention: Anthony J. Medaglia, Jr.
Fax No: (617) 951-1295
Telephone No: (617) 951-6600
Section 11.3 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. 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. Whenever the words "INCLUDE,"
"INCLUDES" or "INCLUDING" are used in this Agreement they shall be deemed to be
followed by the words "WITHOUT LIMITATION." Where representations or
warranties are qualified by knowledge, information, belief or awareness of
Target, unless expressly provided to the contrary, such statements are deemed
to include a statement that such knowledge, information, belief or awareness
has been acquired after due and careful inquiry in respect of the relevant
subject matter of such representations or warranty.
Section 11.4 Counterparts. This Agreement may be executed in two
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two 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.
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Section 11.5 Entire Agreement; No Third Party Beneficiaries. This
Agreement (including the documents and the instruments referred to herein) and
the Transaction Documents (a) constitute the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, and (b) are not intended to
confer upon any person other than the parties hereto (including without
limitation any employees of Target or its Subsidiaries) any rights or remedies
hereunder.
Section 11.6 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of California as applied to
agreements made and performed in California by residents of California, without
regard to any applicable conflicts of law principles.
Section 11.7 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 assigns.
Section 11.8 Amendment. This Agreement may be amended by the
parties hereto, at any time before or after approval of matters presented in
connection with the Merger by the stockholders of Target, but after any such
stockholder approval, no amendment shall be made which by law requires the
further approval of stockholders without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 11.9 Extension; Waiver. At any time prior to the
Effective Time, the parties hereto may, to the extent legally allowed, (i)
extend the time for the performance of any of the obligations or the other acts
of the other parties hereto, (ii) waive any inaccuracies in the representations
or warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on
behalf of such party.
Section 11.10 Arbitration. Subject to Section 11.11, in the event
of any dispute arising under this Agreement, the parties agree to submit the
resolution of such dispute to binding arbitration. Such arbitration shall be
governed by the Commercial Arbitration Rules of the American Arbitration
Association, shall take place in Chicago, Illinois and shall be adjudicated by
three arbitrators, each of whom shall be a member of the American Arbitration
Association. One of such arbitrators shall be appointed by Target, one of such
arbitrators shall be appointed by Acquiror and the third of such arbitrators
shall be selected mutually by the two arbitrators. Such arbitration shall take
place as soon as practicable following the occurrence of any dispute. There
shall be limited discovery prior to the arbitration hearing, subject to the
discretion of the arbitrators, as follows: exchange of witness lists and
copies of documentary evidence and documents related to or arising out of
issues to be arbitrated, and depositions of all party witnesses, and such other
depositions as may be allowed by the arbitrators, upon a showing of good cause,
provided that the total number of depositions requested by each side shall not
exceed
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three. The costs of such arbitration, including legal fees and expenses of
each party, shall be borne by the losing party.
Section 11.11 Enforcement of Agreement. The parties hereto agree
that irreparable damage would occur in the event any provision of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be
entitled to obtain an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof (i) if
Acquiror or Sub is seeking relief, then in the courts of the Commonwealth of
Massachusetts or the United States for the District of Massachusetts, or (ii)
if Target or the Target Stockholders are seeking relief, then in the courts of
the State of California located in Santa Clara County, California or of the
United States for the Northern District of California this being in addition to
any other remedy to which such party may be entitled at law or in equity. By
each party's execution and delivery hereof, such party hereby irrevocably
submits to the jurisdiction of any such court in connection with any such suit
or proceeding, irrevocably waives any objection, including any objection to the
laying of venue or based on the grounds of forum non conveniens, which it may
now or hereafter have to the bringing of any action or proceeding in such
jurisdiction in respect of this Agreement, and each party irrevocably waives
personal service of any summons, complaint or other process which may be made
by any other means permitted by California or Massachusetts law as the case may
be, and irrevocably consents to service pursuant to the notice provisions of
Section 11.2 hereof. EACH PARTY HERETO FURTHER HEREBY IRREVOCABLY WAIVES ITS
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BROUGHT HEREUNDER.
[Signature Page Follows]
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IN WITNESS WHEREOF, Acquiror, Sub and Target have caused this
Agreement and Plan of Merger to be signed by their respective officers
thereunto duly authorized as of the date first written above.
ASPECT TELECOMMUNICATIONS CORPORATION
By: /s/ James R. Carreker
---------------------------------------
Title: Chairman/Chief Executive Officer
-----------------------------------
VENUS ACQUISITION
CORPORATION
By: /s/ James R. Carreker
---------------------------------------
Title: President
-----------------------------------
VOICETEK CORPORATION
By: /s/ Sheldon Dinkes
---------------------------------------
Title: President/Chief Financial Officer
------------------------------------
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
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EXHIBIT 20.1
EDITORIAL CONTACTS:
Eric Keller Sheldon Dinkes
Aspect Telecommunications Voicetek
(408) 325-2200 (978) 250-9393
ASPECT TELECOMMUNICATIONS ANNOUNCES CLOSING OF
VOICETEK ACQUISITION
Intelligent network and IVR software firm joins leading call center
solutions provider
SAN JOSE, CA, MAY 11, 1998 -- Aspect Telecommunications (Nasdaq: ASPT), a global
leader in mission-critical call center solutions, announced today the successful
closing of the acquisition of privately held Voicetek Corporation of Chelmsford,
MA, previously announced on April 1, 1998. Voicetek's approximately 200
employees will continue to be based primarily in Chelmsford, a Boston area
suburb, and its former CEO, Sheldon Dinkes, will lead a newly formed OEM and
intelligent network sales organization for Aspect.
Voicetek is a leading provider of software platforms and application solutions,
including highly scalable, mission-critical interactive voice response (IVR) and
network-deployed enhanced services solutions. Voicetek's products and
partnerships will complement and enhance Aspect's set of integrated call center
solutions, strengthening Aspect's current leadership position within the global
call center market. The combined offerings of Voicetek and Aspect will, in the
near term, provide a more extensive range of automation solutions and, in the
future, enable Aspect to offer both network and customer premise-based call
center solutions. These solutions will be developed for both Aspect's existing
markets as well as the rapidly evolving telecommunications services industry.
Aspect paid approximately $72 million in cash for all Voicetek common and
preferred shares outstanding, converted all outstanding Voicetek options into
approximately 450,000 Aspect options, and assumed certain operating assets and
liabilities of Voicetek. As previously announced, Aspect expects to record a
one-time charge against after-tax earnings of between $1.20 per share and $1.30
per share for purchased in-process technology and development expense in the
quarter ended June 30, 1998.
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<PAGE> 2
ASPECT ACQUIRES VOICETEK, PAGE 2
ABOUT ASPECT TELECOMMUNICATIONS
Aspect Telecommunications provides comprehensive business solutions for
mission-critical call centers worldwide. Aspect integrated call center products
and services help businesses such as airlines, retail sales, financial services
and communications enhance productivity, increase revenues and provide superior
customer service. Aspect products include automatic call distributors,
computer-telephony integration solutions, call center management and reporting
software, automation solutions and planning and forecasting packages. The
company also provides business applications consulting and systems integration
services and around-the-clock support. Aspect is based in San Jose, California,
with offices in North America, Europe and Asia-Pacific. For more information
about Aspect Telecommunications, visit the company's Web site at www.aspect.com
or call 1-800-226-8441.
Except for historical information contained herein, the matters discussed in
this news release are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, Section 32E of the Securities and
Exchange Act of 1934, as amended, and the Private Securities Litigation Reform
Act of 1995, and are made under the safe-harbor provisions thereof. Such
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those projected including
the following: inability to successfully integrate the operations, technologies,
products and/or personnel of the two companies in a successful, profitable, and
timely manner; inability to realize anticipated synergies, economies of scale,
or other value associated with the acquisition; inability to commercialize
acquired technologies successfully or on a timely basis; diversion of
management's attention and disruption of the Company's ongoing business;
inability to retain key technical and managerial personnel of both companies;
inability to establish and maintain uniform standards, controls, procedures, and
policies; competitive responses to the transaction; and impairment of
relationships with employees, vendors, and/or customers, including, in
particular Voicetek's OEM and VAR relationships. Other risks that could cause
actual results to differ materially from those projected are discussed in
Aspect's Form 10-K for the fiscal year ended December 31, 1997. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect management's analysis only as of the date hereof. Aspect undertakes no
obligation to publicly release the results of any revision to these
forward-looking statements which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
Aspect and the Aspect logo are trademarks or registered trademarks of Aspect
Telecommunications Corporation in the United States and/or other countries. All
other product or service names mentioned in this document may be trademarks of
the companies with which they are associated.
###
