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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): SEPTEMBER 19, 1999
NICHOLS RESEARCH CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 0-15295 63-0713665
(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
4090 MEMORIAL PARKWAY, SOUTH
HUNTSVILLE, ALABAMA 35802-1326
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (256) 883-1140
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
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D9091701
NY2:\813232\01\HFHS01!.DOC\65508.0003
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ITEM 5. OTHER EVENTS.
On September 19, 1999, the Registrant entered into an
Agreement and Plan of Merger (the "Merger Agreement") with Computer Sciences
Corporation ("CSC") and Nevada Acquisition Corporation, a wholly owned
subsidiary of CSC ("Acquisition"), providing for the merger of Acquisition with
and into the Registrant (the "Merger"). Upon consummation of the Merger (i) the
Registrant will become a wholly owned subsidiary of CSC and (ii) each
outstanding share of common stock of the Registrant will be converted into
common stock (together with the associated preferred stock purchase rights) of
CSC and the right to receive cash in lieu of fractional shares of CSC common
stock.
Attached hereto and incorporated herein by reference are
the Merger Agreement and a joint press release of the Registrant and CSC dated
September 20, 1999 describing the Merger.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
The exhibits listed below are filed as a part of this
report:
2.1 Agreement and Plan of Merger dated as of September
19, 1999 by and among the Registrant, CSC and Nevada
Acquisition Corporation
99.1 Joint Press Release of the Registrant and CSC dated
September 20, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereto duly authorized.
NICHOLS RESEARCH CORPORATION
Dated: September 20, 1999 By: /s/ Chris H. Horgen
------------------------------------
Chris H. Horgen
Chairman and Chief Executive Officer
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EXHIBIT INDEX
EXHIBIT
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2.1 Agreement and Plan of Merger dated as of September 19, 1999 by
and among the Registrant, CSC and Nevada Acquisition Corporation
99.1 Joint Press Release of the Registrant and CSC dated September 20,
1999
3
EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
DATED AS OF SEPTEMBER 19, 1999
AMONG
NICHOLS RESEARCH CORPORATION,
COMPUTER SCIENCES CORPORATION
AND
NEVADA ACQUISITION CORPORATION
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TABLE OF CONTENTS
Page
----
ARTICLE 1 THE MERGER................................................... 1
Section 1.1. The Merger............................................ 1
Section 1.2. Effective Time........................................ 1
Section 1.3. Closing of the Merger................................. 2
Section 1.4. Effects of the Merger................................. 2
Section 1.5. Certificate of Incorporation and Bylaws............... 2
Section 1.6. Directors............................................. 2
Section 1.7. Officers.............................................. 3
Section 1.8. Conversion of Shares.................................. 3
Section 1.9. No Appraisal Rights................................... 4
Section 1.10. Exchange of Certificates............................. 4
Section 1.11. Stock Options........................................ 6
Section 1.12. Confidentiality Agreement............................ 7
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY................ 8
Section 2.1. Organization and Qualification; Subsidiaries.......... 8
Section 2.2. Capitalization of the Company and its Subsidiaries.... 8
Section 2.3. Authority Relative to this Agreement; Recommendation.. 10
Section 2.4. SEC Reports; Financial Statements..................... 10
Section 2.5. Information Supplied.................................. 11
Section 2.6. Consents and Approvals; No Violations................. 11
Section 2.7. No Default............................................ 12
Section 2.8. No Undisclosed Liabilities; Absence of Changes........ 12
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Section 2.9. Litigation............................................ 13
Section 2.10. Compliance with Applicable Law....................... 13
Section 2.11. Employee Benefit Plans; Labor Matters................ 13
Section 2.12. Environmental Laws and Regulations................... 16
Section 2.13. Taxes................................................ 17
Section 2.14. Leased and Owned Property............................ 19
Section 2.15. Intellectual Property; Software...................... 20
Section 2.16. Insurance............................................ 24
Section 2.17. Tax Treatment; Pooling............................... 25
Section 2.18. Affiliates........................................... 25
Section 2.19. Certain Business Practices........................... 25
Section 2.20. Insider Interests.................................... 25
Section 2.21. Opinion of Financial Adviser......................... 25
Section 2.22. Brokers.............................................. 25
Section 2.23. Disclosure........................................... 26
Section 2.24. No Existing Discussions.............................. 26
Section 2.25. Section 203 of the DGCL; Other Takeover Laws......... 26
Section 2.26. Government Contracts................................. 26
Section 2.27. No Research Grants................................... 28
Section 2.28. Investigative Proceedings............................ 28
Section 2.29. Health Care Business................................. 29
Section 2.30. Licenses and Governmental Authorizations............. 29
Section 2.31. Year 2000 Compliance................................. 29
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ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION.... 30
Section 3.1. Organization.......................................... 30
Section 3.2. Capitalization of Parent and its Subsidiaries......... 31
Section 3.3. Authority Relative to this Agreement; Recommendation.. 32
Section 3.4. SEC Reports; Financial Statements..................... 32
Section 3.5. Information Supplied.................................. 33
Section 3.6. Consents and Approvals; No Violations................. 33
Section 3.7. No Default............................................ 33
Section 3.8. No Undisclosed Liabilities; Absence of Changes........ 34
Section 3.9. Litigation............................................ 34
Section 3.10. Compliance with Applicable Law....................... 34
Section 3.11. Employee Benefit Plans; Labor Matters................ 35
Section 3.12. Environmental Laws and Regulations................... 36
Section 3.13. Tax Matters.......................................... 36
Section 3.14. Title to Property.................................... 36
Section 3.15. Intellectual Property; Software...................... 37
Section 3.16. Insurance............................................ 37
Section 3.17. No Prior Activities of Acquisition................... 37
Section 3.18. Tax Treatment; Pooling............................... 37
Section 3.19. Affiliates........................................... 37
Section 3.20. Certain Business Practices........................... 38
Section 3.21. Insider Interests.................................... 38
Section 3.22. Disclosure........................................... 38
Section 3.23. Brokers.............................................. 38
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Section 3.24. Year 2000 Compliance................................. 38
ARTICLE 4 COVENANTS.................................................... 39
Section 4.1. Conduct of Business of the Company.................... 39
Section 4.2. Conduct of Business of Parent......................... 41
Section 4.3. Preparation of S-4 and the Proxy Statement............ 42
Section 4.4. Other Potential Acquirers............................. 42
Section 4.5. Comfort Letters....................................... 44
Section 4.6. Meeting of Company Stockholders....................... 44
Section 4.7. Stock Exchange Listing................................ 45
Section 4.8. Access to Information................................. 45
Section 4.9. Additional Agreements; Reasonable Efforts............. 46
Section 4.10. Public Announcements................................. 46
Section 4.11. Directors' and Officers' Insurance; Indemnification.. 46
Section 4.12. Notification of Certain Matters...................... 47
Section 4.13. Affiliates; Pooling; Tax Free Reorganization......... 48
Section 4.14. State Takeover Laws.................................. 48
Section 4.15. Employee Benefits.................................... 49
ARTICLE 5 CONDITIONS TO CONSUMMATION OF THE MERGER..................... 49
Section 5.1. Conditions to Each Party's Obligations to Effect
the Merger............................................ 49
Section 5.2. Conditions to the Obligations of the Company.......... 50
Section 5.3. Conditions to the Obligations of Parent and
Acquisition........................................... 51
ARTICLE 6 TERMINATION; AMENDMENT; WAIVER............................... 52
Section 6.1. Termination........................................... 52
Section 6.2. Effect of Termination................................. 54
Section 6.3. Fees and Expenses..................................... 54
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Section 6.4. Amendment............................................. 55
Section 6.5. Extension; Waiver..................................... 55
ARTICLE 7 MISCELLANEOUS................................................ 56
Section 7.1. Nonsurvival of Representations and Warranties......... 56
Section 7.2. Entire Agreement; Assignment.......................... 56
Section 7.3. Validity.............................................. 56
Section 7.4. Notices............................................... 56
Section 7.5. Governing Law......................................... 57
Section 7.6. Descriptive Headings.................................. 57
Section 7.7. Parties in Interest................................... 57
Section 7.8. Certain Definitions................................... 57
Section 7.9. Personal Liability.................................... 58
Section 7.10. Specific Performance................................. 58
Section 7.11. Counterparts......................................... 58
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TABLE OF DEFINED TERMS
----------------------
Cross Reference
Term in Agreement Page
- ---- --------------- ----
Acquisition............................Preamble....................... 1
Affiliate..............................Section 7.8(a).................54
Agreement..............................Preamble....................... 1
business combination...................Section 2.25...................25
business day...........................Section 7.8(c).................55
capital stock..........................Section 7.8(d).................55
Certificates...........................Section 1.10(b)................ 4
Closing Date...........................Section 1.3.................... 2
Closing................................Section 1.3.................... 2
Code...................................Preamble....................... 1
Company Affiliates.....................Section 2.18...................24
Company Board..........................Section 2.3(a)................. 9
Company Disclosure Schedule............Article 2...................... 7
Company Financial Advisor..............Section 2.21...................24
Company Permits........................Section 2.10...................12
Company Plans..........................Section 1.11(a)................ 6
Company................................Preamble....................... 1
Company SEC Reports....................Section 2.4(a).................10
Company Securities.....................Section 2.2(a)................. 8
Company Stock Option...................Section 1.11(a)................ 6
Company Stock Options..................Section 1.11(a)................ 6
Confidentiality Agreement..............Section 1.12................... 7
Copyrights.............................Section 2.15(a)................19
Designated Software Agreements.........Section 2.15(i)................23
DGCL...................................Section 1.1.................... 1
Effective Time.........................Section 1.2.................... 2
Employee Plans.........................Section 2.11(a)................13
Environmental Claim....................Section 2.12(b)................16
Environmental Laws.....................Section 2.12(a)................15
ERISA Affiliate........................Section 2.11(a)................13
ERISA..................................Section 2.11(a)................12
Exchange Act...........................Section 2.2(c)................. 9
Exchange Agent.........................Section 1.10(a)................ 4
Exchange Fund..........................Section 1.10(a)................ 4
FCPA...................................Section 2.19...................24
Governmental Entity....................Section 2.6....................11
group health plan......................Section 2.11(b)................14
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HSR Act................................Section 2.6.....................10
Incentive Stock Options................Section 1.11(a)................. 6
Indemnified Liabilities................Section 4.11....................45
Indemnified Persons....................Section 4.11....................44
Intellectual Property..................Section 2.15(a).................19
interested stockholder.................Section 2.25....................25
IRS....................................Section 2.11(a).................13
ISO....................................Section 1.11(a)................. 6
Knowledge..............................Section 7.8(e)..................55
Known..................................Section 7.8(e)..................55
Licensed Software......................Section 2.15(g).................22
Licensed Software Agreements...........Section 2.15(h).................22
Licensed Technology Agreements.........Section 2.15(h).................22
Lien...................................Section 2.2(b).................. 9
Marks..................................Section 2.15(a).................19
Material Adverse Effect................Section 2.1(a).................. 7
Material Adverse Effect................Section 3.1(a)..................29
Merger Certificate.....................Section 1.2..................... 1
Merger Consideration...................Section 1.8(a).................. 3
Merger.................................Section 1.1..................... 1
multi-employer plan....................Section 2.11(b).................13
multiple employer plan.................Section 2.11(b).................13
Notice of Change.......................Section 4.4(b)..................41
NYSE...................................Section 1.10(f)................. 6
Other Licensed Technology Agreements...Section 2.15(h).................22
Owned Software.........................Section 2.15(g).................22
Parent Affiliates......................Section 3.19....................35
Parent Common Stock....................Section 1.8(a).................. 3
Parent Intellectual Property Rights....Section 3.15(a).................35
Parent Permits.........................Section 3.10....................33
Parent.................................Preamble........................ 1
Parent Rights Agreement................Section 3.2(a)..................29
Parent Rights..........................Section 3.2(a)..................29
Parent SEC Reports.....................Section 3.4(a)..................30
Parent Securities......................Section 3.2(a)..................30
Patents................................Section 2.15(a).................19
Payor..................................Section 2.30....................28
Person.................................Section 7.8(f)..................55
Pooling Transaction....................Section 2.17....................24
Proxy Statement........................Section 2.5.....................10
S-4....................................Section 2.5.....................10
SEC....................................Section 2.4(a).................. 9
Securities Act.........................Section 2.4(a).................. 9
Shares.................................Section 1.8(a).................. 2
Software...............................Section 2.15(a).................19
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subsidiaries...........................Section 7.8(g)..................55
subsidiary.............................Section 7.8(g)..................55
Superior Proposal......................Section 4.4(c)..................42
Surviving Corporation..................Section 1.1..................... 1
Tax Return.............................Section 2.13(a).................16
Tax....................................Section 2.13(a).................16
tax-exempt use property................Section 2.13(k).................18
Third Party Acquisition................Section 4.4(c)..................41
Third Party............................Section 4.4(c)..................41
Trade Secrets..........................Section 2.15(a).................19
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
September 19, 1999, is among NICHOLS RESEARCH CORPORATION, a Delaware
corporation (the "Company"), COMPUTER SCIENCES CORPORATION, a Nevada
corporation ("Parent"), and NEVADA ACQUISITION CORPORATION, a Delaware
corporation and a direct wholly owned subsidiary of Parent ("Acquisition").
WHEREAS, the Boards of Directors of the Company, Parent and Acquisition
each has, in light of and subject to the terms and conditions set forth
herein, (i) determined that the Merger (as defined below) is advisable, is
fair to their respective stockholders and in the best interests of such
stockholders and (ii) approved the Merger in accordance with this Agreement;
WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Merger is intended to be treated as a "pooling of
interests" for financial accounting purposes.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the Company, Parent and Acquisition
hereby agree as follows:
ARTICLE 1
THE MERGER
Section 1.1. The Merger.
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At the Effective Time (as defined below) and upon the terms and subject
to the conditions of this Agreement and in accordance with the Delaware
General Corporation Law (the "DGCL"), Acquisition shall be merged with and
into the Company (the "Merger"). Following the Merger, the Company shall
continue as the surviving corporation (the "Surviving Corporation") and the
separate corporate existence of Acquisition shall cease. The Merger is
intended to qualify as a tax-free reorganization under Section 368(a) of the
Code.
Section 1.2. Effective Time.
--------------
Subject to the terms and conditions set forth in this Agreement, a
Certificate of Merger (the "Merger Certificate") shall be duly executed and
acknowledged by the Company and thereafter delivered to the Secretary of
State of the State of Delaware for filing pursuant to the DGCL on the Closing
Date (as defined in Section 1.3). The Merger shall become effective at such
time as a properly executed and certified copy of the Merger Certificate is
duly filed by the Secretary of State of the State of Delaware in accordance
with the DGCL or such later time as Parent and the Company
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may agree upon and set forth in the Merger Certificate (the time the Merger
becomes effective being referred to herein as the "Effective Time").
Section 1.3. Closing of the Merger.
---------------------
The closing of the Merger (the "Closing") will take place at 10:00 a.m.,
Los Angeles time, on November 29, 1999, unless on such date one or more of
the conditions set forth in Article 5 hereof has not been satisfied or
waived, in which event the Closing will take place on a date and time to be
specified by the parties, which shall be no later than the second business
day after satisfaction of the latest to occur of the conditions set forth in
Article 5 (the "Closing Date"), at the offices of Gibson, Dunn & Crutcher,
333 South Grand Avenue, Los Angeles, California 90071, unless another place
is agreed to in writing by the parties hereto.
Section 1.4. Effects of the Merger.
---------------------
The Merger shall have the effects set forth in the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the properties, rights, privileges, powers and franchises
of the Company and Acquisition shall vest in the Surviving Corporation, and
all debts, liabilities and duties of the Company and Acquisition shall become
the debts, liabilities and duties of the Surviving Corporation.
Section 1.5. Certificate of Incorporation and Bylaws.
---------------------------------------
The Certificate of Incorporation of the Company in effect at the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation until amended in accordance with applicable law; provided,
however, that Article IV of the Certificate of Incorporation of the Company
shall be amended in its entirety to read as follows: "The aggregate number of
shares which the Corporation shall have the authority to issue is one
thousand (1,000), $.01 par value per share, to be designated 'Common Stock'."
The Bylaws of the Company in effect at the Effective Time shall be the Bylaws
of the Surviving Corporation until amended in accordance with applicable law.
Section 1.6. Directors.
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The directors of Acquisition at the Effective Time shall be the initial
directors of the Surviving Corporation, each to hold office in accordance
with the Certificate of Incorporation and Bylaws of the Surviving Corporation
until such director's successor is duly elected or appointed and qualified.
Section 1.7. Officers.
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The officers of the Company at the Effective Time shall be the initial
officers of the Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and Bylaws of the Surviving Corporation
until such officer's successor is duly elected or appointed and qualified.
Section 1.8. Conversion of Shares.
--------------------
(a) At the Effective Time, each share of common stock, par value
$.01 per share, of the Company (individually a "Share" and collectively the
"Shares") issued and outstanding immediately prior to the Effective Time
(other than (i) Shares held in the Company's treasury and (ii) each Share
held by Parent or Acquisition) shall, by virtue of the Merger and without any
action on the part of Parent, Acquisition, the Company or the
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holder thereof, be converted into and shall become a fraction of a fully paid
and nonassessable share of common stock, $1.00 par value per share, of Parent
("Parent Common Stock") equal to the Exchange Ratio, as defined below.
Unless the context otherwise requires, each reference in this Agreement to
shares of Parent Common Stock shall include the associated Parent Rights (as
such term is defined in Section 3.2(a) hereof). Notwithstanding the
foregoing, if between the date of this Agreement and the Effective Time the
outstanding shares of Parent Common Stock or the Shares shall have been
changed into a different number of shares or a different class, by reason of
any stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, then the exchange ratio contemplated by
the Merger shall be correspondingly adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination or
exchange of shares.
(b) For all purposes of this Agreement, the following definitions
shall apply:
(i) "Initial Parent Price" means $66.194 per share.
(ii) "Final Parent Price" means the average closing price
of Parent Common Stock on the New York Stock Exchange for fifteen trading
days selected by lot out of the twenty consecutive trading days next
preceding the third trading day prior to the date of the meeting of
stockholders of the Company set forth in the Proxy Statement (as defined
below) initially sent to holders of Shares.
(iii) "Exchange Ratio" means a fraction:
(A) the numerator of which is $28.00 and the
denominator of which is the Initial Parent Price, if the difference (positive
or negative) between the Final Parent Price and the Initial Parent Price
equals a number that is less than or equal to ten percent (10%) of the
Initial Parent Price;
(B) the numerator of which is $30.80 and the
denominator of which is the Final Parent Price, if the Final Parent Price
exceeds the Initial Parent Price by an amount in excess of ten percent (10%)
of the Initial Parent Price;
(C) the numerator of which is $25.20 and the
denominator of which is the Final Parent Price if the Initial Parent Price
exceeds the Final Parent Price by an amount in excess of ten percent (10%) of
the Initial Parent Price but less than or equal to 20% of the Initial Parent
Price; and
(D) the numerator of which is $25.20 and the
denominator of which is 80% of the Initial Parent Price if the Initial Parent
Price exceeds the Final Parent Price by an amount in excess of 20% of the
Initial Parent Price.
(c) At the Effective Time, each outstanding share of the common
stock, par value $.01 per share, of Acquisition shall be converted into one
share of common stock, par value $.01 per share, of the Surviving
Corporation.
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(d) At the Effective Time, each Share held in the treasury of the
Company and each Share held by Parent or Acquisition immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the
part of Parent, Acquisition or the Company, be canceled, retired and cease to
exist and no payment shall be made with respect thereto.
Section 1.9. No Appraisal Rights.
-------------------
Neither the holders of Shares nor the holders of shares of Parent Common
Stock shall be entitled to appraisal rights.
Section 1.10. Exchange of Certificates.
------------------------
(a) As of the Effective Time, Parent shall deposit with
ChaseMellon Shareholder Services, L.L.C., or, following consultation with the
Company, such other agent or agents (the "Exchange Agent") as may be
appointed by Parent and Acquisition, for the benefit of the holders of
Shares, for exchange in accordance with this Article 1, through the Exchange
Agent: (i) certificates representing the appropriate number of shares of
Parent Common Stock and (ii) cash to be paid in lieu of fractional shares of
Parent Common Stock (such shares of Parent Common Stock and such cash are
hereinafter referred to as the "Exchange Fund") issuable pursuant to Section
1.8 in exchange for outstanding Shares.
(b) As soon as reasonably practicable after the Effective Time,
the Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates") whose shares were converted into the
right to receive shares of Parent Common Stock pursuant to Section 1.8: (i) a
letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon delivery
of the Certificates to the Exchange Agent and shall be in such form and have
such other provisions as Parent and the Company may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock. Upon
surrender of a Certificate to the Exchange Agent, together with such letter
of transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing that
number of whole shares of Parent Common Stock and, if applicable, a check
representing the cash consideration to which such holder may be entitled on
account of a fractional share of Parent Common Stock, which such holder has
the right to receive pursuant to the provisions of this Article 1, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Shares which is not registered in the transfer
records of the Company, a certificate representing the proper number of
shares of Parent Common Stock may be issued to a transferee if the
Certificate representing such Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer
and by evidence that any applicable stock transfer taxes have been paid.
Until surrendered as contemplated by this Section 1.10, each Certificate
shall be deemed at any time after the Effective Time to represent only the
right to receive upon such surrender the certificate representing shares
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of Parent Common Stock and cash in lieu of any fractional shares of Parent
Common Stock as contemplated by this Section 1.10.
(c) No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock represented
thereby and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 1.10(f) until the holder of record of such
Certificate shall surrender such Certificate. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of any cash payable in lieu of a
fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 1.10(f) and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with
a record date after the Effective Time but prior to surrender and a payment
date subsequent to surrender payable with respect to such whole shares of
Parent Common Stock.
(d) In the event that any Certificate for Shares shall have been
lost, stolen or destroyed, the Exchange Agent shall issue in exchange
therefor, upon the making of an affidavit of that fact by the holder thereof,
such shares of Parent Common Stock and cash in lieu of fractional shares, if
any, as may be required pursuant to this Agreement; provided, however, that
Parent or the Exchange Agent, may, in its discretion, require the delivery of
a suitable bond and/or indemnity.
(e) All shares of Parent Common Stock issued upon the surrender
for exchange of Shares in accordance with the terms hereof (including any
cash paid pursuant to Section 1.10(c) or 1.10(f)) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such Shares,
subject, however, to the Surviving Corporation's obligation to pay any
dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by the Company on such
Shares in accordance with the terms of this Agreement or prior to the date
hereof and which remain unpaid at the Effective Time, and there shall be no
further registration of transfers on the stock transfer books of the
Surviving Corporation of the Shares which were outstanding immediately prior
to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article 1.
(f) No fractions of a share of Parent Common Stock shall be issued
in the Merger, but in lieu thereof each holder of Shares otherwise entitled
to a fraction of a share of Parent Common Stock shall, upon surrender of his
or her Certificate or Certificates, be entitled to receive an amount of cash
(without interest) determined by multiplying the closing price for Parent
Common Stock as reported on the New York
5
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Stock Exchange (the "NYSE") Composite Transactions on the business day five
days prior to the Effective Time by the fractional share interest to which
such holder would otherwise be entitled. The parties acknowledge that
payment of the cash consideration in lieu of issuing fractional shares was
not separately bargained for consideration but merely represents a mechanical
rounding off for purposes of simplifying the corporate and accounting
complexities which would otherwise be caused by the issuance of fractional
shares.
(g) Any portion of the Exchange Fund which remains undistributed
to the stockholders of the Company for twelve months after the Effective Time
shall be delivered to Parent, upon demand, and any stockholders of the
Company who have not theretofore complied with this Article 1 shall
thereafter look only to Parent for payment of their claim for Parent Common
Stock, any cash in lieu of fractional shares of Parent Common Stock and any
applicable dividends or distributions with respect to Parent Common Stock, as
the case may be.
(h) Neither Parent nor the Company shall be liable to any holder
of Shares, or Parent Common Stock, as the case may be, for such shares (or
dividends or distributions with respect thereto) or cash from the Exchange
Fund delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
Section 1.11. Stock Options.
-------------
(a) At the Effective Time, each outstanding option to purchase
Shares (a "Company Stock Option" or collectively "Company Stock Options")
issued pursuant to the plans set forth on Section 1.11(a) of the Company
Disclosure Schedule, whether vested or unvested, shall be assumed by Parent
(all plans or agreements described above pursuant to which any Company Stock
Option has been issued are referred to collectively as the "Company Plans").
Each Company Stock Option shall be deemed to constitute an option to acquire,
on the same terms and conditions as were applicable under such Company Stock
Option, the same number of shares of Parent Common Stock, rounded to the
nearest whole number, as the holder of such Company Stock Option would have
been entitled to receive pursuant to the Merger had such holder exercised
such option in full immediately prior to the Effective Time, at a price per
share equal to (y) the aggregate exercise price for the shares of Company
Common Stock otherwise purchasable pursuant to such Company Stock Option
divided by (z) the product of the number of shares of Company Common Stock
otherwise purchasable pursuant to such Company Stock Option times the
Exchange Ratio; provided, however, that in the case of any option to which
Section 421 of the Code applies by reason of its qualification under Section
422 of the Code ("incentive stock options" or "ISOs"), the option price, the
number of shares purchasable pursuant to such option and the terms and
conditions of exercise of such option shall be determined in order to comply
with Section 424(a) of the Code.
(b) As soon as practicable after the Effective Time, Parent shall
deliver to the holders of Company Stock Options appropriate notices setting
forth such holders'
6
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rights pursuant to the respective Company Plans, and the agreements
evidencing the grants of such Company Stock Options shall continue in effect
on the same terms and conditions (subject to the adjustments required by this
Section 1.11 after giving effect to the Merger).
(c) Parent shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Parent Common Stock for
delivery upon exercise of Company Stock Options assumed in accordance with
this Section 1.11. As soon as practicable after the Effective Time, Parent
shall file a registration statement on Form S-8 (or any successor or other
appropriate form) with respect to the shares of Parent Common Stock subject
to any Company Stock Options held by persons who are or were directors,
officers or employees of the Company or its subsidiaries and shall use its
best efforts to maintain the effectiveness of such registration statement
(and maintain the current status of the prospectus contained therein) for so
long as such Company Stock Options remain outstanding.
Section 1.12. Confidentiality Agreement.
-------------------------
The Company and Parent have entered into a confidentiality agreement,
dated as of August 26, 1999 (the "Confidentiality Agreement"), a copy of
which is attached hereto as Exhibit D.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the appropriately numbered and lettered Section
of the Disclosure Schedule previously delivered by the Company to Parent (the
"Company Disclosure Schedule"), the Company hereby represents and warrants to
each of Parent and Acquisition as follows:
Section 2.1. Organization and Qualification; Subsidiaries.
--------------------------------------------
(a) Each of the Company and each of its subsidiaries is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has all requisite power
and authority to own, lease and operate its properties and to carry on its
businesses as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and authority
would not have a Material Adverse Effect (as defined below) on the Company.
When used in connection with the Company or its subsidiaries, the term
"Material Adverse Effect" means any change or effect that (i) is or is
reasonably likely to be materially adverse to the business, results of
operations, condition (financial or otherwise) or prospects of the Company
and its subsidiaries, taken as whole, other than any change or effect arising
out of general economic conditions unrelated to any business in which the
Company and its subsidiaries are engaged, or (ii) impairs or is reasonably
likely to impair the ability of the Company to consummate the transactions
contemplated hereby.
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(b) The Company has heretofore delivered to Parent accurate and
complete copies of the Certificate of Incorporation and Bylaws (or similar
governing documents), as currently in effect, of the Company and all of its
subsidiaries. Each of the Company and each of its subsidiaries is duly
qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
Section 2.2. Capitalization of the Company and its Subsidiaries.
--------------------------------------------------
(a) The authorized capital stock of the Company consists of:
30,000,000 Shares, of which, as of August 31, 1999, 14,209,179 Shares were
issued and outstanding and 168,500 Shares were held in the Company's
treasury. All of the outstanding Shares have been validly issued, and are
fully paid, nonassessable and free of preemptive rights. As of August 31,
1999, 1,522,870 Shares were reserved for issuance and issuable upon or
otherwise deliverable in connection with the exercise of outstanding Company
Stock Options. Between August 31, 1999 and the date hereof, no shares of the
Company's capital stock have been issued other than pursuant to Company Stock
Options already in existence on August 31, 1999, and, between August 31, 1999
and the date hereof, no stock options have been granted. Except as set forth
above, as of the date hereof, there are outstanding (i) no shares of capital
stock or other voting securities of the Company, (ii) no securities of the
Company or its subsidiaries convertible into or exercisable or exchangeable
for shares of capital stock or voting securities of the Company, (iii) no
options or other rights to acquire from the Company or its subsidiaries, and,
except as described in the Company SEC Reports (as defined below), no
obligations of the Company or its subsidiaries to issue, any capital stock,
voting securities or securities convertible into or exercisable or
exchangeable for capital stock or voting securities of the Company, and (iv)
no equity equivalents, interests in the ownership or earnings of the Company
or its subsidiaries or other similar rights (collectively "Company
Securities"). As of the date hereof there are no outstanding obligations of
the Company or any of its subsidiaries to repurchase, redeem or otherwise
acquire any Company Securities. There are no stockholder agreements, voting
trusts or other agreements or understandings to which the Company is a party
or by which it is bound relating to the voting or registration of any shares
of capital stock of the Company.
(b) Section 2.2(b) of the Company Disclosure Schedule identifies
each subsidiary of the Company as of the date hereof and shows the
jurisdiction of incorporation or organization of each such subsidiary. All
of the outstanding capital stock of the Company's subsidiaries (other than
directors' qualifying shares in the case of certain foreign subsidiaries) is
owned by the Company, directly or indirectly, free and clear of any Lien (as
defined below) or any other limitation or restriction (including any
restriction on the right to vote or sell the same, except as may be provided
as a matter of law). There are no securities of the Company or its
subsidiaries convertible into or
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exercisable or exchangeable for, no options or other rights to acquire from
the Company or its subsidiaries, and no other contract, understanding,
arrangement or obligation (whether or not contingent) providing for the
issuance or sale, directly or indirectly, of, any capital stock or other
ownership interests in, or any other securities of, any subsidiary of the
Company. There are no outstanding contractual obligations of the Company or
any of its subsidiaries to repurchase, redeem or otherwise acquire any
outstanding shares of capital stock or other ownership interests in any
subsidiary of the Company. For purposes of this Agreement, "Lien" means,
with respect to any asset (including, without limitation, any security) any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind
in respect of such asset or any agreement to grant any of the foregoing.
(c) The Shares (including the associated Company Rights)
constitute the only class of equity securities of the Company or its
subsidiaries registered or required to be registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
Section 2.3. Authority Relative to this Agreement; Recommendation.
----------------------------------------------------
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of the Company (the "Company
Board") and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby, except, with respect to consummation of the Merger, the
adoption of this Agreement by the holders of a majority of the then
outstanding Shares. This Agreement has been duly and validly executed and
delivered by the Company and constitutes a valid, legal and binding agreement
of the Company, enforceable against the Company in accordance with its terms.
(b) The Company Board has resolved to recommend that the
stockholders of the Company approve and adopt this Agreement.
Section 2.4. SEC Reports; Financial Statements.
---------------------------------
(a) The Company has filed all required forms, reports and
documents with the Securities and Exchange Commission (the "SEC") since
August 31, 1996, each of which, as amended, has complied in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and the Exchange Act, each as in effect on
the dates such forms, reports and documents were filed. The Company has
heretofore delivered or promptly will deliver to Parent, in the form filed
with the SEC (including any amendments thereto and all exhibits), (i) its
Annual Reports on Form 10-K for each of the fiscal years ended August 31,
1996, 1997 and 1998, (ii) all definitive proxy statements relating to the
Company's meetings of stockholders (whether annual or special) held since
August 31, 1996 and (iii) all other
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<PAGE>
reports or registration statements filed by the Company with the SEC since
August 31, 1996 (all of the foregoing, collectively, the "Company SEC
Reports"). None of such Company SEC Reports, including, without limitation,
any financial statements or schedules included or incorporated by reference
therein, contained, when filed, or, if amended, to the extent amended on the
date of filing of such amendment, any untrue statement of a material fact or
omitted to state a material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements of the Company included in the
Company SEC Reports, as amended therein, fairly present, in conformity with
generally accepted accounting principles applied on a consistent basis
(except as may be indicated in the notes thereto), the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and their consolidated results of operations and changes in financial
position for the periods then ended.
(b) The Company has heretofore made available or promptly will
make available to Parent a complete and correct copy of any amendments or
modifications, which are or will be required to be filed with the SEC but
have not yet been filed with the SEC, to agreements, documents or other
instruments which previously have been filed by the Company with the SEC
pursuant to the Exchange Act.
Section 2.5. Information Supplied.
-------------------
None of the information supplied or to be supplied by the Company for
inclusion or incorporation by reference in (i) the registration statement on
Form S-4 to be filed with the SEC by Parent in connection with the issuance
of shares of Parent Common Stock in the Merger (the "S-4") will, at the time
the S-4 is filed with the SEC or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and (ii) the proxy statement relating
to the meeting of the Company's stockholders to be held in connection with
the Merger (the "Proxy Statement") will, at the date mailed to stockholders
of the Company and at the times of the meeting or meetings of stockholders of
the Company to be held in connection with the Merger, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein not
misleading. The Proxy Statement, insofar as it relates to the meeting of the
Company's stockholders to vote on the Merger, will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
Section 2.6. Consents and Approvals; No Violations.
-------------------------------------
Except for filings, permits, authorizations, consents and approvals as may be
required under, and other applicable requirements of, the Securities Act, the
Exchange Act, state securities or blue sky laws, and the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and except
for certain foreign governmental approvals and the filing and recordation of
the Merger Certificate as required by the DGCL, no filing with or notice to,
and no permit, authorization, consent or approval of, any court or tribunal
10
<PAGE>
or administrative, governmental or regulatory body, agency or authority,
whether domestic or foreign (a "Governmental Entity"), is necessary for the
execution and delivery by the Company of this Agreement or the consummation
by the Company of the transactions contemplated hereby, except where the
failure to obtain such permits, authorizations, consents or approvals or to
make such filings or give such notices would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. Neither the
execution, delivery and performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the respective
Certificate of Incorporation or Bylaws (or similar governing documents) of
the Company or any of its subsidiaries, (ii) result in a material violation
or material breach of, or constitute (with or without notice or lapse of time
or both) a material default (or give rise to any right of termination,
amendment, cancellation or acceleration or any Lien) under, any of the terms,
conditions or provisions of any material note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to
which the Company or any of its subsidiaries is a party or by which any of
them or any of their respective properties or assets may be bound, or (iii)
violate any order, writ, injunction, decree, or (in any material respect) any
material law, statute, rule or regulation applicable to the Company or any of
its subsidiaries or any of their respective properties or assets.
Section 2.7. No Default.
----------
None of the Company or any of its subsidiaries is in breach, default or
violation (and no event has occurred which with notice or the lapse of time
or both would constitute a material breach, default or violation) of any
term, condition or provision of (i) its Certificate of Incorporation or
Bylaws (or similar governing documents), (ii) any material note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument
or obligation to which the Company or any of its subsidiaries is a party or
by which any of them or any of their respective properties or assets may be
bound, in any material respect or (iii) any order, writ, injunction, decree,
or (in any material respect) any material law, statute, rule or regulation
applicable to the Company, any of its subsidiaries or any of their respective
properties or assets. Each material note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which any of them or any
of their respective properties or assets may be bound is in full force and
effect and is not subject to any material default thereunder of which the
Company is aware by any party obligated to the Company or any subsidiary
thereunder.
Section 2.8. No Undisclosed Liabilities; Absence of Changes.
----------------------------------------------
Except as and to the extent publicly disclosed by the Company in the
Company SEC Reports, since August 31, 1998, none of the Company or any of its
subsidiaries has had any material liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise, that would be required by
generally accepted accounting principles to be reflected on a consolidated
balance sheet of the Company (including the notes thereto) or which,
individually or in the aggregate, has or has had a Material Adverse Effect on
the Company. Since August 31, 1998, none of the Company or any of its
subsidiaries has incurred any liabilities of any nature, whether or not
accrued, contingent or otherwise,
11
<PAGE>
having, and there have been no events, changes or effects with respect to the
Company or any of its subsidiaries having, individually or in the aggregate,
a Material Adverse Effect on the Company. Except as and to the extent
publicly disclosed by the Company in the Company SEC Reports, since August
31, 1998, there has not been any action or event that would have required the
consent of Parent pursuant to Section 4.1 of this Agreement had such action
or event occurred after the date of this Agreement. Section 2.8 of the
Company Disclosure Schedule sets forth a detailed list of all "earn-out" or
similar obligations (of whatever form, name or description, related to the
past, present or future performance of the Company, any of its subsidiaries
or any portions of any of their respective businesses) of the Company or any
of its subsidiaries, arising out of or related to acquisitions of persons
(whether by merger, stock purchase, share exchange, asset purchase, or
otherwise) by the Company or any of its subsidiaries and which obligations
either have not expired by their own terms or with respect to which there
exist as of the date hereof or may exist in the future any liabilities of the
Company or any of its subsidiaries to any person, whether fixed or
contingent, liquidated or unliquidated, accrued or unaccrued.
Section 2.9. Litigation.
----------
There is no suit, claim, action, proceeding or investigation pending or,
to the knowledge of the Company, threatened against the Company or any of its
subsidiaries or any of their respective properties or assets having,
individually or in the aggregate, a Material Adverse Effect on the Company.
None of the Company or any of its subsidiaries is subject to any outstanding
order, writ, injunction or decree having, individually or in the aggregate, a
Material Adverse Effect on the Company.
Section 2.10. Compliance with Applicable Law.
------------------------------
The Company and each of its subsidiaries hold all material permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary for the lawful conduct of their respective businesses (the
"Company Permits"). The Company and each of its subsidiaries are in material
compliance with the terms of the Company Permits. The businesses of the
Company and each of its subsidiaries are not being conducted in material
violation of any material law, ordinance, rule or regulation of any
Governmental Entity. No investigation or review by any Governmental Entity
with respect to the Company or any of its subsidiaries is pending or, to the
knowledge of the Company, threatened, nor, to the knowledge of the Company,
has any Governmental Entity indicated an intention to conduct the same.
Section 2.11. Employee Benefit Plans; Labor Matters.
-------------------------------------
(a) Section 2.11(a) of the Company Disclosure Schedule lists all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and all bonus, stock
option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance and other similar fringe or employee benefit plans,
programs or arrangements, and any severance agreements, written or otherwise,
for the benefit of, or relating to, any current or former
12
<PAGE>
employee or director of the Company, any trade or business (whether or not
incorporated) which is a member of a controlled group including the Company
or which is under common control with the Company (an "ERISA Affiliate")
within the meaning of Section 414 of the Code, as well as each plan with
respect to which the Company or an ERISA Affiliate could incur liability
under Section 4069 (if such plan has been or were terminated) or Section
4212(c) of ERISA (together, the "Employee Plans"). The Company has delivered
to Parent, if applicable, a copy of (i) the three (3) most recent annual
reports on Form 5500 filed with the Internal Revenue Service (the "IRS") for
each disclosed Employee Plan, including any actuarial and auditor reports
required to be filed with the annual reports, (ii) the most recent plan
documents and related trust documents, adoption agreements, nondiscrimination
test reports for the last 3 years, and all amendments thereto for each such
Employee Plan (other than those referred to in Section 4(b)(4) of ERISA),
including, in the case of any Employee Plan not set forth in writing, a
written description thereof, (iii) the most recent summary plan descriptions
for each Employee Plan, (iv) the most recent favorable IRS determination
letter and antecedent application materials, and (v) the most recent funding
and service agreements and most current insurance policies or contracts with
respect to the Employee Plans.
(b) (i) the Company and its Subsidiaries do not maintain or
have an obligation to contribute to retiree health plans which provide for
continuing benefits or coverage for current or former officers or employees
of the Company or any of its Subsidiaries except (1) for coverage that
expires on the last day of the calendar month in which the employee's
termination takes place, (2) as may be required under Part 6 of Title I of
ERISA and at the sole expense of the participant or the participant's
beneficiary or (3) a medical expense reimbursement account plan pursuant to
Section 125 of the Code; (ii) none of the Employee Plans is a "multi-employer
plan" as such term is defined in Section 3(37) of ERISA, a "multiple employer
plan" as such term is defined in Section 4063 or 4064 of ERISA, or subject to
Title IV of ERISA; (ii) no officer, director or employee of the Company has
committed a material breach of any responsibility or obligation imposed upon
fiduciaries by Title I of ERISA with respect to any Employee Plan; (iii) all
Employee Plans are in compliance in all material respects both with their
terms and in operation with the requirements prescribed by all applicable
statutes (including ERISA and the Code), orders, or governmental rules and
regulations currently in effect with respect thereto, and the Company and
each of its subsidiaries have performed all material obligations required to
be performed by them under, are not in any material respect in default under
or in violation of, and have no knowledge of any default or violation by any
other party to, any of the Employee Plans; (iv) each Employee Plan intended
to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code is so qualified and no event has
occurred and no condition or circumstance has existed or exists which may
reasonably be expected to result in the disqualification of such Employee
Plan; (v) all contributions required to be made to any Employee Plan pursuant
to Section 412 of the Code (without regard to any waivers of such
requirements) or the terms of the Employee Plan, have been made on or before
their due dates (including any contractual or statutory grace periods); (vi)
other than routine claims for benefits, there is no claim pending or to the
knowledge of the
13
<PAGE>
Company, threatened, involving any Employee Plan by any person against such
Employee Plan, the Company, any subsidiary of the Company or any of their
ERISA Affiliates; (vii) there is no pending or, to the knowledge of the
Company, threatened claim or investigation involving any Employee Plan by the
Department of Labor or any other governmental authority except where such
claim individually or in the aggregate shall not have or could not reasonably
be expected to have a Material Adverse Effect; (viii) each of the Employee
Plans which is an employee benefit plan within the meaning of Section 3(3) of
ERISA can be terminated upon 90 days notice with respect to benefit coverage
relating to employment after the date of termination of such plan (excluding
any benefit coverage relating to employment through the date of termination
of such plan, including, but not limited to, benefits accrued or incurred
through the date of termination of such plan), except where the inability to
so terminate would result in annual costs in excess of $2.0 million of
incremental annual costs beyond the costs of maintaining a generally
applicable similar plan of Parent and its affiliates (and the representations
and warranties contained in this clause (viii) shall be deemed to be
qualified as to materiality for all purposes of Section 5.3(a) of this
Agreement); and (ix) with respect to any Employee Plan which is a "group
health plan" as such term is defined in Section 5000(b)(i) of the Code, the
Company, each subsidiary of the Company and their ERISA Affiliates have
complied in all respects with the provisions of Part 6 of Title I of ERISA
and Sections 4980B, 9801, 9802, 9811 and 9812 of the Code except where such
failure to so comply individually or in the aggregate shall not have or could
not reasonably be expected to have a Material Adverse Effect.
(c) Section 2.11(c) of the Company Disclosure Schedule sets forth
a true and complete list, as of the date of this Agreement, of each person
who holds any Company Stock Options or Company Restricted Stock, together
with the number of Shares which are subject thereto, the date of grant, the
extent to which such option or Company Restricted Stock is vested (or will
become vested within six months from the date hereof, or as a result of the
Merger, or upon termination of employment following the Merger), the exercise
price of such option, the purchase price of such Company Restricted Stock,
whether such option is intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code, and the expiration date of
such option. Section 2.11(c) of the Company Disclosure Schedule also sets
forth the total number of such ISOs and such nonqualified options. Other
than the automatic vesting of Company Stock Options or Company Restricted
Stock that may occur without any action on the part of the Company or its
officers or directors, the Company has not taken any action that would result
in any Company Stock Options or Company Restricted Stock that are unvested
becoming vested or their terms being extended in connection with or as a
result of the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby.
(d) The Company has made available to Parent (i) a schedule
listing all officers and members of senior management of the Company
including each individual's job title, current salary and target bonus; (ii)
copies of all employment agreements with officers and members of senior
management of the Company; (ii) copies of all
14
<PAGE>
agreements with any former employee of the Company obligating the Company to
make annual cash payments in an amount exceeding $300,000; (iii) a schedule
listing all officers and members of senior management of the Company who have
executed a non-competition agreement with the Company; (iv) copies (or
descriptions) of all current and proposed severance agreements, programs and
policies of the Company with or relating to its employees; and (v) copies of
all plans, programs, agreements and other arrangements of the Company with or
relating to its employees which contain change in control provisions.
(e) There shall be no payment, accrual of additional benefits,
acceleration of payments, vesting, or term extension of any benefit under any
Employee Plan or any agreement or arrangement disclosed under this Section
2.11 solely by reason of entering into or in connection with the transactions
contemplated by this Agreement.
(f) There are no actions, claims or investigations pending or, to
the knowledge of the Company or any of its subsidiaries, threatened between
the Company or any of its subsidiaries and any of their respective employees,
which would have had or could have, individually or in the aggregate, a
Material Adverse Effect on the Company. Neither the Company nor any of its
subsidiaries is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by the Company or any of its
subsidiaries, except as disclosed in Section 2.11(f) of the Company
Disclosure Schedule, nor does the Company know of any activities or
proceedings of any labor union to organize any such employees. The Company
has no knowledge of any strikes, slowdowns, work stoppages, lockouts or
threats thereof by or with respect to any employees of the Company or any of
its subsidiaries. The Company and its subsidiaries have complied in all
material respects with the provisions of the Worker Adjustment and Retraining
Notification Act ("WARN") and do not reasonably expect to incur any material
liabilities under WARN prior to the consummation of the transactions
contemplated by this Agreement.
(g) Neither the Company nor any ERISA Affiliate maintains or has
an obligation to contribute to any Employee Plan which is subject to any
laws, regulations, or jurisdiction outside the United States.
Section 2.12. Environmental Laws and Regulations.
----------------------------------
(a) Except as publicly disclosed by the Company in the Company SEC
Reports, (i) each of the Company and each of its subsidiaries is in material
compliance with all applicable federal, state, local and foreign laws and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) (collectively,
"Environmental Laws"), which compliance includes, but is not limited to, the
possession by the Company and each of its subsidiaries of all material
permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof; and
(ii) to the knowledge of the
15
<PAGE>
Company, there are no circumstances that are likely to prevent or interfere
with such material compliance in the future.
(b) Except as publicly disclosed by the Company in the Company SEC
Reports, there is no action, cause of action, claim, investigation, demand or
notice by any person or entity alleging liability under or non-compliance
with any Environmental Law (an "Environmental Claim") that are pending or, to
the knowledge of the Company, threatened against the Company or any of its
subsidiaries or, to the knowledge of the Company, against any person or
entity whose liability for any Environmental Claim the Company or any of its
subsidiaries has or may have retained or assumed either contractually or by
operation of law.
(c) The Company is not aware of any material spill, release or
disposal of any substance that is regulated by any Environmental Law on any
real property that is, or was, owned or leased by it or one of its
subsidiaries or predecessors.
Section 2.13. Taxes.
-----
(a) Definitions. For purposes of this Agreement:
-----------
(i) the term "Tax" (including "Taxes") means (A) all
federal, state, local, foreign and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
lease, service, service use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, windfall profits, customs,
duties or other taxes, fees, assessments or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts with respect thereto, (B) any liability for payment of amounts
described in clause (A) whether as a result of transferee liability, of being
a member of an affiliated, consolidated, combined or unitary group for any
period, or otherwise through operation of law, and (C) any liability for the
payment of amounts described in clauses (A) or (B) as a result of any tax
sharing, tax indemnity or tax allocation agreement or any other express or
implied agreement to indemnify any other person; and
(ii) the term "Tax Return" means any return, declaration,
report, statement, information statement and other document required to be
filed with respect to Taxes.
(b) The Company and each of its subsidiaries have accurately
prepared in all material respects and timely filed all material Tax Returns
they are required to have filed. Such Tax Returns are accurate and correct
in all material respects.
(c) The Company and each of its subsidiaries have paid all Taxes
shown as due on all Tax Returns and have adequately provided for all Taxes
they are required to provide for.
(d) As of the date of this Agreement: (i) No claim has been made
in writing by any taxing authority in any jurisdiction where the Company and
16
<PAGE>
its subsidiaries do not file Tax Returns that any of them is or may be
subject to Tax by that jurisdiction; and
(i) no current extensions or waivers of statutes of
limitations with respect to any Tax Returns have been given by or requested
in writing from the Company or any of its subsidiaries.
(e) As of the date of this Agreement, Section 2.13(e) of the
Company Disclosure Schedule sets forth with respect to federal and state
income and franchise Taxes:
(i) those taxable years for which examinations by taxing
authorities are presently being conducted;
(ii) those years for which written notice of pending or
threatened examination or adjustment has been received; and
(iii) those years for which required income Tax Returns have
not yet been filed.
(f) All deficiencies asserted or assessments made against the
Company or any subsidiary as a result of any examinations by any taxing
authority have been fully paid or are being contested in good faith.
(g) There are no Liens for Taxes (other than for current Taxes not
yet due and payable or for Taxes which are being contested in good faith)
upon the assets of the Company or any subsidiary.
(h) Neither the Company nor any of its subsidiaries is a party
to or bound by any tax indemnity, tax sharing or tax allocation agreement
with any party that is not a member of the Company's affiliated group, within
the meaning of Section 1504(a) of the Code, on the date hereof.
(i) Neither the Company nor any of its subsidiaries is a party to
or bound by any closing agreement or offer in compromise with any taxing
authority.
(j) Neither the Company nor any of its subsidiaries :
(i) has been a member of an affiliated group of
corporations, within the meaning of Section 1504 of the Code, or a member of
a combined, consolidated or unitary group for state, local or foreign Tax
purposes (other than the group the common parent of which is the Company);
(ii) has filed a consent pursuant to the collapsible
corporation provisions of Section 341(f) of the Code (or any corresponding
provision of state, local or foreign income Tax law) or agreed to have
Section 341(f)(2) of the Code (or any corresponding provision of state, local
or foreign income Tax law) apply to any disposition of any asset owned by any
of them.
17
<PAGE>
(k) None of the assets of the Company or any of its subsidiaries
is property that the Company or any of its subsidiaries is required to treat
as being owned by any other person pursuant to the so-called "safe harbor
lease" provisions of former Section 168(f)(8) of the Internal Revenue Code of
1954, as amended; none of the assets of the Company or any of its
subsidiaries directly or indirectly secures any debt the interest on which is
tax exempt under Section 103(a) of the Code; none of the assets of the
Company or any of its subsidiaries is "tax-exempt use property" within the
meaning of Section 168(h) of the Code; and none of the assets of the Company
or any of its subsidiaries is required to be or is being depreciated pursuant
to the alternative depreciation system under Section 168(g)(2) of the Code.
(l) Section 2.13(l) of the Company Disclosure Schedule sets forth
all foreign jurisdictions in which the Company or any subsidiary is subject
to Tax, is engaged in business or has a permanent establishment.
(m) The Company is not and has not been, a United States real
property holding corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(a) of the Code.
Section 2.14. Leased and Owned Property.
-------------------------
(a) The Company and its subsidiaries presently own no real
property and have no legal or equitable interests in any real property other
than leasehold interests.
(b) Section 2.14(b) of the Company Disclosure Schedule sets forth
a complete and correct list of all real property leases to which the Company
or any of its subsidiaries is a party, including the address of the property,
the name and address of the parties, the expiration date of the lease, the
monthly rent as of the Closing, and any additional rent currently payable
under each such lease (the "Real Property Leases").
(c) There is no material breach or event of default on the part of
the Company or any of its subsidiaries, or to the knowledge of the Company,
the landlord with respect to any of the Real Property Leases, and, to the
knowledge of the Company, there has been no event that, with the giving of
notice or lapse of time, or both, would constitute a material breach or event
of default by the Company, any of its subsidiaries or landlord under any of
the Real Property Leases. All the Real Property Leases are in full force and
effect and are valid and enforceable against the parties thereto in
accordance with their terms in all material respects. The Company is not
aware of any material expenditures which are required or are reasonably
likely to be required under the provisions of any Real Property Lease for any
purpose other than payment of rent or other charges due under such leases as
provided therein.
(d) There are no pending or, to the knowledge of the Company,
threatened condemnation, eminent domain or similar proceedings with respect
to any of the premises leased under any of the Real Property Leases.
18
<PAGE>
(e) The Company and each of its subsidiaries have good and
marketable title to all of their personal properties and assets, free and
clear of all Liens except liens for taxes not yet due and payable and such
liens, if any, as do not materially detract from the value of or interfere
with the present use of the personal property affected thereby and which
would not, individually or in the aggregate, have a Material Adverse Effect
on the Company; and, to the Company's knowledge, all leases pursuant to which
the Company or any of its subsidiaries lease from others personal property
are in good standing, valid and enforceable in accordance with their
respective terms, and there is not, to the knowledge of the Company, under
any of such leases, any existing material default or event of default by any
party thereto (or event which with notice or lapse of time, or both, would
constitute a material default) except where the lack of such good standing,
validity and enforceability, or the existence of such default or event, would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company.
Section 2.15. Intellectual Property; Software.
-------------------------------
(a) For all purposes of this Agreement,
(i) "Intellectual Property Rights" means intellectual
----------------------------
property rights arising from or in respect of the following, whether
protected, created or arising under the laws of the United States or any
other jurisdiction: (A) fictional business names, trade names, service names,
registered and unregistered trademarks and service marks and logos (including
any Internet domain names), and applications therefor (collectively,
"Marks"); (B) patents, patent rights and all applications therefor, including
-----
any and all continuation, divisional, continuation-in-part, or reissue patent
applications or patents issuing thereon (collectively, "Patents"); (C)
-------
copyrights and all registrations and applications therefor (collectively,
"Copyrights"); and (D) know-how, trade secrets, inventions, discoveries,
----------
concepts, ideas, methods, processes, designs, formulae, technical data,
drawings, specifications, data bases and other proprietary and confidential
information, including customer lists, in each case to the extent not
included in the foregoing clauses (B) or (C) (collectively, "Trade Secrets";
-------------
Marks, Patents, Copyrights and Trade Secrets are, collectively, "Intellectual
Property").
(ii) "Software" means any and all (i) computer programs,
--------
including any and all software implementations of algorithms, models and
methodologies, whether in source code or object code, (ii) databases and
compilations, including any and all data and collections of data, whether
machine readable or otherwise, (iii) descriptions, flow-charts and other work
product used to design, plan, organize and develop any of the foregoing, and
(iv) all documentation, including user manuals and training materials,
relating to any of the foregoing, in each case developed or licensed by the
Company or any of its subsidiaries, or used in or necessary for the conduct
of their business, specifically excluding those items prepared for customers
in the operation of the Company's and its subsidiaries' business for which
the customer contractually has vested title.
(b) Section 2.15(b) of the Company Disclosure Schedule sets forth
---------------
a complete and correct list of all material Intellectual Property Rights
owned, licensed or used by the Company or any of its subsidiaries in the
conduct of their businesses, together with a listing of all material
licenses, franchises, licensing agreements (whether
19
<PAGE>
as licensor or licensee) to which the Company or any of its subsidiaries is a
party, and any other arrangement with respect to such Intellectual Property
Rights. All Intellectual Property Rights owned, licensed or used by the
Company or any of its subsidiaries or used or exercised in or necessary to
the conduct of the Company's and its subsidiaries' business, are referred to
herein, collectively, as the "Company Intellectual Property Assets."
------------------------------------
(c) Neither the Company nor any of its subsidiaries has, during
the three years preceding the date of this Agreement, been a party to any
Proceeding, nor, to the knowledge of the Company and its subsidiaries, is any
Proceeding threatened, that involved or is likely to involve a claim of
infringement or misappropriation by any person (including any Governmental
Entity) of any Intellectual Property Right of such person. Except as
disclosed in Sections 2.15(b), (c), (g) or (h) of the Company Disclosure
Schedule, no Company Intellectual Property Asset owned by the Company is
subject to any outstanding order, judgment, decree, or stipulation
restricting in any material respect the use thereof by the Company or any of
its subsidiaries, or restricting in any material respect the licensing
thereof by the Company or any person. Except as would not have a Material
Adverse Effect on the Company, the current use and exploitation of the
Intellectual Property Assets by the Company and its subsidiaries (including
without limitation the licensing or other distribution of Software to third
parties by the Company or any of its subsidiaries) does not infringe upon,
violate or result in the misappropriation of Intellectual Property Right of
any person.
(d)
(i) the Company or one of its subsidiaries owns all right,
title and interest in each of the Marks and Patents listed in Section 2.15(b)
---------------
of the Company Disclosure Schedule (collectively, the "Company Marks and
-----------------
Patents"), and Company and its subsidiaries have not received any notice or
- -------
claim (whether written or oral) challenging Company's or the relevant
subsidiary's exclusive and complete ownership of any Company Marks and
Patents or suggesting that any other Person has any claim of legal or
beneficial ownership or other claim or interest with respect thereto;
(ii) to the knowledge of the Company and its subsidiaries,
the Company Marks and Patents are legally valid and enforceable and the
Company and its subsidiaries have not received any notice or claim (whether
written or oral) challenging the validity or enforceability of any Company
Marks and Patents;
(iii) to the knowledge of the Company and its subsidiaries,
the Company has not taken any action (or failed to take any action), or used
or enforced (or failed to use or enforce) any of the material Company Marks
and Patents, in each case in a manner that would result in the abandonment,
cancellation, forfeiture, relinquishment, or unenforceability of any of the
material Company Marks and Patents or any of Company's rights therein;
(iv) Company has taken reasonable steps to protect
Company's rights in and to each of the Company Marks and Patents and to
prevent the unauthorized use thereof by any other Person, in each case in
accordance with
20
<PAGE>
standard industry practice, and has adequately policed (as determined by the
Company in its reasonable discretion) the Company Marks and Patents against
third party infringement of which it is aware;
(v) except as set forth in Sections 2.15(b), (c), (g) or
(h) of the Company Disclosure Schedule, the Company has not granted to any
Person any material right, license or permission to use any of the Company
Marks and Patents;
(vi) all maintenance fees, annuities, and the like due on
Company Marks and Patents have been timely paid, except as would not have a
Material Adverse Effect on the Company;
(vii) no Mark that constitutes a Company Mark and Patent has
been or is now involved in any opposition or cancellation proceeding and, to
Company's knowledge, no such action is threatened with the respect to any of
the Company Marks and Patents, except as would not have a Material Adverse
Effect on the Company; and
(ix) no Patent that constitutes a Company Mark and Patent
has been or is now involved in any interference, reissue, reexamination or
opposition proceeding or any other litigation or proceeding of any kind,
except as would not have a Material Adverse Effect on the Company.
(e) The Company has taken reasonable precautions (as determined by
the Company's management) to protect the secrecy of any of its Trade Secrets
that derive commercial value from not being generally known to the public.
Except as would not have a Material Adverse Effect on the Company, the
Company and each of its subsidiaries has the absolute and unrestricted right
to use all of the Trade Secrets. Neither the Company nor any of its
subsidiaries has received any notice or claim challenging the Company's
absolute and unrestricted right to use any of the Trade Secrets or suggesting
that any other person has any claim with respect thereto. To the knowledge
of the Company and its subsidiaries, none of the Trade Secrets has been, or
is alleged to have been, misappropriated from any other person. Except under
appropriate confidentiality obligations, there has been no disclosure by the
Company of material confidential information or other Trade Secrets that
derive commercial value from not being generally known to the public.
(f) The Company or its subsidiaries either owns the entire right,
title and interest in, to and under, or has acquired a license to use, any
and all Company Intellectual Property Assets which are material to the
conduct of their businesses in the manner that such businesses have
heretofore been or is presently being conducted or as contemplated to be
conducted pursuant to the Company's current business plan, and no other
Intellectual Property Rights are necessary for the unimpaired continued
operation of such businesses after the Effective Time in all material
respects in the manner that such businesses have heretofore been or are
presently being conducted.
(g) Section 2.15(g) of the Company Disclosure Schedule sets forth
a complete and accurate list of all of the material Software (excluding
Software that is
21
<PAGE>
available in consumer retail stores and subject to "shrink-wrap" agreements).
Section 2.15(g) of the Company Disclosure Schedule specifically identifies
all material Software that is owned exclusively by the Company or any of its
subsidiaries (the "Owned Software") and all material Software that is used by
the Company or any of its subsidiaries in the conduct of their business that
is not exclusively owned by the Company or any of its subsidiaries (excluding
software that is available in consumer retail stores and subject to "shrink-
wrap" agreements) (the "Licensed Software"). The Company or a subsidiary
thereof is the owner of all right, title and interest in and to all Owned
Software, including without limitation all Copyrights, Trade Secrets and
other Intellectual Property Rights relating thereto, and neither the Company
nor any of its subsidiaries has received any notice or claim (whether
written, oral or otherwise) challenging the Company's complete and exclusive
ownership of all Owned Software and all such Intellectual Property Rights
relating thereto or claiming that any other person has any claim of legal or
beneficial ownership with respect thereto. The Company has not assigned,
licensed, transferred or encumbered any of its rights in or to any Owned
Software, including without limitation any Copyrights, Trade Secrets or other
Intellectual Property Rights with respect thereto, to any person, excluding
any non-exclusive licenses granted to distributors or customers in the
ordinary course of business. The Company and its subsidiaries have lawfully
acquired the right to use the Licensed Software, as it is used in the conduct
of their business as presently conducted, and have not exercised any rights
in respect of any Licensed Software, including without limitation any
reproduction, distribution or derivative work rights, outside the scope of
any license expressly granted by the person from which the right to use such
Licensed Software was obtained.
(h) Section 2.15(h) of the Company Disclosure Schedule contains a
complete and accurate specific list of all material agreements and
arrangements pertaining to the Licensed Software (excluding software that is
available in consumer retail stores and subject to "shrink-wrap" agreements)
(collectively, "Licensed Software Agreements") and a complete and accurate
list of all agreements and arrangements pertaining to any other technology
used or practiced by the Company as to which a person other than the Company
or any of its subsidiaries owns the applicable Intellectual Property Rights
(collectively, "Other Licensed Technology Agreements" and, together with
Licensed Software Agreements, the "Licensed Technology Agreements"). Section
2.15(h) of the Company Disclosure Schedule sets forth a complete and accurate
list of all royalty obligations of the Company and its subsidiaries under any
Licensed Technology Agreements. All Licensed Technology Agreements are in
full force and effect, and neither the Company nor any of its subsidiaries is
in material breach thereof, nor are they aware of any claim or information to
the contrary. All Licensed Technology Agreements will be maintained by the
Company and its subsidiaries in full force and effect through the Effective
Time, except as would not have a Material Adverse Effect on the Company.
There are no outstanding, and, to the Company's knowledge, no threatened
disputes with respect to any Licensed Technology Agreement. Except as would
not have a Material Adverse Effect on the Company, neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will result in the impairment of any rights under, any
Licensed Technology Agreement.
22
<PAGE>
(i) Section 2.15(i) of the Company Disclosure Schedule contains a
complete and accurate list of all agreements and arrangements involving the
grant by the Company or any subsidiary to any person of any right to
distribute, prepare derivative works based on, support or maintain or
otherwise commercially exploit any Software, including without limitation any
value-added reseller agreements, joint development or marketing agreements or
strategic alliance agreements involving any Software (collectively,
"Designated Software Agreements"). All Designated Software Agreements are in
full force and effect, and neither the Company nor any of its subsidiaries is
in material breach thereof, nor are they aware of any claim or basis for a
claim to the contrary. Except as would not have a Material Adverse Effect on
the Company, all Designated Software Agreements will be maintained by the
Company and its subsidiaries in full force and effect through the Effective
Time. There are no outstanding and, to the Company's knowledge, no
threatened disputes or disagreements with respect to any Designated Software
Agreement. Except as would not have a Material Adverse Effect on the
Company, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in any
impairment of rights under any Designated Software Agreement.
(j) To the knowledge of the Company, the Company has taken
commercially reasonable actions in accordance with industry practice to
protect its Intellectual Property Rights in relation to employees,
independent contractors and consultants including entering into agreements
with such persons that assign to the Company or such subsidiary all of the
employee's, contractor's or consultant's rights, including all Intellectual
Property Rights, in any Intellectual Property created or developed thereby
that is used in connection with, or that relates to, the business of the
Company and its subsidiaries. To the knowledge of the Company, no employee
of the Company or any subsidiary has entered into any contract or other
agreement with any person (other than the Company or the applicable
subsidiary) that restricts or limits in any way the scope or type of work in
which the employee may be engaged for the Company or such subsidiary or
requires the employee to transfer, assign, or disclose information concerning
the employee's work with the Company or such subsidiary to any other person.
Section 2.16. Insurance.
---------
The Company and its subsidiaries maintain general liability and other
business insurance that the Company believes to be prudent for its business.
Section 2.16 of the Company Disclosure Schedule lists all insurance policies
covering the Company or any of its subsidiaries or employees where the annual
premiums are in excess of fifty thousand dollars ($50,000).
Section 2.17. Tax Treatment; Pooling.
----------------------
Neither the Company nor any of its subsidiaries nor, to the Company's
knowledge, any of its other affiliates, has taken or agreed to take action
that would prevent the Merger from (a) constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code or (b) being
treated for financial accounting purposes as a pooling of interests in
accordance with generally
23
<PAGE>
accepted accounting principles and the published rules, regulations and
interpretations of the SEC (a "Pooling Transaction").
Section 2.18. Affiliates.
----------
Except for the directors and executive officers of the Company, each of
whom is listed in Section 2.18 of the Company Disclosure Schedule, there are
no persons who may be deemed to be affiliates of the Company under Rule 145
of the Securities Act ("Company Affiliates").
Section 2.19. Certain Business Practices.
--------------------------
None of the Company, any of its subsidiaries or, to the Company's
knowledge, any directors, officers, agents or employees of the Company or any
of its subsidiaries has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or
violated any provision of the Foreign Corrupt Practices Act of 1977, as
amended (the "FCPA"), or (iii) made any other unlawful payment.
Section 2.20. Insider Interests.
-----------------
No officer or director of the Company has any fiduciary or other
ownership interest in any material property, real or personal, tangible or
intangible, including without limitation, any computer software or Company
Intellectual Property Rights, used in or pertaining to the business of the
Company or any subsidiary.
Section 2.21. Opinion of Financial Adviser.
----------------------------
Each of Goldman, Sachs & Co. and The Robinson-Humphrey Company LLC (the
"Company Financial Advisers") has delivered to the Company Board its opinion,
to the effect that, as of such date, the Exchange Ratio is fair to the
holders of Shares from a financial point of view, and written opinions to
such effect shall be delivered by the Company Financial Advisers within three
days of the date hereof.
Section 2.22. Brokers.
-------
No broker, finder or investment banker (other than the Company Financial
Advisers and Mr. Mark Dunkel, true and correct copies of whose engagement
agreements have been provided to Parent is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf
of the Company.
Section 2.23. Disclosure.
----------
No representation or warranty of the Company in this Agreement or any
certificate, schedule, document or other instrument furnished or to be
furnished to Parent pursuant hereto or in connection herewith contains, as of
the date of such representation, warranty, certificate, schedule, document or
instrument, or will contain any untrue statement of a material fact or omits,
at the date thereof, or will omit to state a material fact necessary to make
any statement herein or therein, in light of the circumstances under which
such statement is or will be made, not misleading.
Section 2.24. No Existing Discussions.
-----------------------
As of the date hereof, the Company is not engaged, directly or
indirectly, in any discussions or negotiations with any other party with
respect to any Third Party Acquisition (as defined in Section 4.4).
24
<PAGE>
Section 2.25. Section 203 of the DGCL; Other Takeover Laws.
--------------------------------------------
The Company Board has taken all actions required to be taken by it so
that the restrictions contained in Section 203 of the DGCL applicable to an
"interested stockholder" or a "business combination" (as defined in Section
203) and the restrictions contained in any "fair price," "business
combination" or "control share acquisition" statute or other similar statute
or regulation of any other jurisdiction applicable to the transactions
contemplated hereby, will not apply to the execution, delivery or performance
of this Agreement or the consummation of the Merger or the other transactions
contemplated by this Agreement.
Section 2.26. Government Contracts.
--------------------
(a) With respect to each and every executory Government Contract
or outstanding Bid to which the Company or any of the Company's subsidiaries
is a party: (i) the Company and each of its subsidiaries has complied in all
material respects with all material terms and conditions of such Government
Contract or Bid, including all material clauses, provisions and requirements
incorporated expressly, by reference or by operation of law therein; (ii) the
Company and each of its subsidiaries has complied in all material respects
with all requirements of statute, rule, regulation, order or agreement with
the U.S. Government pertaining to such Government Contract or Bid; (iii) all
material representations and certifications executed, acknowledged or set
forth in or pertaining to such Government Contract or Bid were current,
accurate and complete in all material respects as of their effective date,
and the Company and each of its subsidiaries has complied in all material
respects with all such representations and certifications; (iv) neither the
U.S. Government nor any prime contractor, subcontractor or other person has
notified the Company or any of its subsidiaries, either orally or in writing,
that the Company or any of its subsidiaries has breached or violated any
statute, rule, regulation, certification, representation, clause, provision
or requirement; (v) no termination for convenience, termination for default,
cure notice or show cause notice has been issued; (vi) since August 31, 1997,
no cost incurred by the Company or any of its subsidiaries has been
questioned or disallowed; and (vii) no money due to the Company or any of its
subsidiaries has been withheld or set off. Section 2.26(a)(1) of the Company
Disclosure Schedule lists each and every executory Government Contract to
which the Company or any of its subsidiaries is a party; Section 2.26(a)(2)
of the Company Disclosure Schedule lists each and every outstanding Bid to
which the Company or any of its subsidiaries is a party.
(b) (i) Neither the Company, nor any of the Company's subsidiaries
nor, to the Company's knowledge, any of the Company's or its subsidiaries'
other affiliates, directors, officers, employees, agents or consultants is
(or for the last five years has been) under administrative, civil or criminal
investigation, indictment or information, audit or internal investigation
with respect to any alleged irregularity, misstatement or omission arising
under or relating to any Government Contract or Bid; (ii) neither the Company
nor any of the Company's subsidiaries nor, to the Company's knowledge, any of
the Company's or its subsidiaries' other respective affiliates, directors,
officers, employees, agents or consultants has made a voluntary disclosure to
the U.S. Government
25
<PAGE>
with respect to any alleged irregularity, misstatement or omission arising
under or relating to any Government Contract or Bid that has led or could
lead, either before or after the Closing Date, to any of the consequences set
forth in (i) - (ii) above or any other damage, penalty assessment, recoupment
of payment or disallowance of cost.
(c) There exist (i) no financing arrangements with respect to
performance of any executory Government Contract; (ii)no material outstanding
claims against the Company or any of its subsidiaries, either by the U.S.
Government or by any prime contractor, subcontractor, vendor or other third
party, arising under or relating to any Government Contract or Bid; (iii) no
facts that are known to the Company or any of its subsidiaries upon which
such a material claim may be based in the future; (iv) no material disputes
between the Company or any of its subsidiaries and the U.S. Government or any
prime contractor, subcontractor or vendor arising under or relating to any
Government Contract or Bid; and (v) no facts that are known by the Company or
any of its subsidiaries over which such a material dispute may arise in the
future. Neither the Company nor any of its subsidiaries has any interest in
any pending or potential claim against the U.S. Government or any prime
contractor, subcontractor or vendor arising under or relating to any
Government Contract or Bid.
(d) Neither the Company, nor any of the Company's subsidiaries,
nor, to the Company's knowledge, any of their other respective affiliates,
directors, officers or employees is (or at any time during the last five
years has been) suspended or debarred from doing business with the U.S.
Government or has been declared nonresponsible or ineligible for U.S.
Government contracting. To the knowledge of the Company and its
subsidiaries, there are no circumstances that would warrant the institution
of suspension or debarment proceedings or the finding of nonresponsibility or
ineligibility on the part of the Company or any of its subsidiaries in the
future.
(e) There exists no Government Contract as to which, as of August
31, 1999, the estimated cost at completion (including material and labor
costs, other direct costs, overheads, engineering costs and manufacturing
costs, whether incurred or yet to be incurred) exceeds by $500,000 the
aggregate contract revenue recorded or to be recorded under such Government
Contract through completion (a "Loss Contract").
(f) Neither the Company nor any of its subsidiaries has any fixed-
price development contracts.
(g) For all purposes of this Section 2.26, "Bid" means any
quotation, bid or proposal by the Company or any of its affiliates which, if
accepted or awarded, would lead to a contract with the U. S. Government or
any other entity, including a prime contractor or a higher tier subcontractor
to the U. S. Government, for the design, manufacture or sale of products or
the provision of services by the Company or any of its subsidiaries.
(h) For all purposes of this Section 2.26, "Government Contract"
means any prime contract, subcontract, teaming agreement or arrangement,
joint venture,
26
<PAGE>
basic ordering agreement, letter contract, purchase order, delivery order;
Bid, change order, arrangement or other commitment of any kind relating to
the business of the Company or any of its subsidiaries between the Company or
any of its subsidiaries and (i) the U. S. Government, (ii) any prime
contractor to the U, S, Government or (iii) any subcontractor with respect to
any contract described in clause (i) or (ii). For all purposes of this
Section 2.26, "executory Government Contract" means a Government Contract
that has not been closed by the U.S. Government, such prime contractor or
such subcontractor, as appropriate.
Section 2.27. No Research Grants.
------------------
Neither the Company nor any of its subsidiaries since September 1, 1989
has provided any research, educational or study grants of any kind to any
hospital, physician or health care provider.
Section 2.28. Investigative Proceedings.
-------------------------
Neither the Company nor any of its subsidiaries since September 1, 1989
has received written notice that the Company or any subsidiary has been, the
subject of any investigative proceeding before or conducted by any Payor (as
defined in Section 2.30 of this Agreement) or any federal or state regulatory
authority or the agent of any such authority or Payor, including, without
limitation, federal and state health authorities. There are no actions,
appeals, investigations, audits or reviews pending or, to the knowledge of
the Company and its subsidiaries, threatened before any Payor or other
entity, commission, board or agency, with respect to any claims or reports
filed by the Company or its subsidiaries with any Payor.
Section 2.29. Health Care Business.
--------------------
Neither the Company, nor any of the Company's subsidiaries, nor, to the
Company's or any of its subsidiaries' knowledge, any of their other
respective affiliates, directors, officers or employees, to the extent they
operate, administer or provide services to any employee benefit plan within
the meaning of ERISA Section 3(3), or to others providing services to such a
plan, other than an Employee Benefit Plan as described in Section 2.11(a)
hereof, has committed any violation of Title I of ERISA or Code Section 4975
with respect to such plan having a Material Adverse Effect on the Company.
Section 2.30. Licenses and Governmental Authorizations.
----------------------------------------
Seller possesses all Governmental Authorizations necessary for the
conduct of its business, activities and operations. Section 2.30 of the
Company Disclosure Schedule contains a list of all Governmental
Authorizations held or applied for by Seller which have a material affect on
its business operations or activities. All such Governmental Authorizations
are in full force and effect and are not subject to any material conditions
which are unusual or not customary and there is no event nor is any action or
proceeding pending or, to the Company's knowledge threatened which could
cause permanent revocation or suspension of or otherwise adversely affect the
continued use and enjoyment of any such Governmental Authorization. The term
"Governmental Authorization" shall mean any material approval, consent,
license, permit, accreditation, waiver, or other authorization required by
any Governmental Authority in order to own or operate all or any part of the
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business of the Company and its subsidiaries. To the Company's knowledge,
there is no proposed termination or cancellation of or material adverse
modification or change in the relationship of Seller with any Payor. The
term "Payor" shall mean Blue Cross, Blue Shield or any material third party
payor, including but not limited to, insurance companies, health maintenance
organizations, preferred provider organizations, peer review organizations or
any other managed care program or healthcare provider, or any fiscal or other
intermediary or carrier acting for or on behalf of such payor.
Section 2.31. Year 2000 Compliance.
--------------------
(a) The following terms have the following meanings:
(i) "Products" of a person means all of the products and
systems of a person or any of its subsidiaries (including products and
systems currently under development), including without limitation all
Software, that have been marketed or commercially distributed or used by the
person or any of its subsidiaries in connection with the performance of data
processing or other services for customers at any time within the five (5)-
year period ending on the date hereof; and
(ii) "Business Systems" of a person means all of the
internal computer systems and other equipment of a person or any of its
subsidiaries, comprised of software, hardware (including, without limitation,
computer and all other machinery), databases or embedded control systems
(microprocessor controlled, robotic or other device) related to its or their
business.
(b) The Products of the Company and the Business Systems of the
Company will not be materially adversely affected, nor will the use or
functionality thereof be materially adversely limited, by the advent of the
year 2000, the advent of the twenty-first century or the transition from the
twentieth century through the year 2000 and into the twenty-first century
(collectively referred to herein as a "Year 2000 Event"). Neither the
Company nor any subsidiary of the Company is reasonably likely to incur
liabilities, costs or expenses arising from or relating to failure or faulty
operation of any Product of the Company or Business System of the Company,
due to a Year 2000 Event where the aggregate of such liabilities, costs and
expenses would have a Material Adverse Effect on the Company, nor will the
business or operations of the Company or any subsidiary be disrupted by any
such failure or faulty operation, to the extent that such disruption would
have a Material Adverse Effect.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION
Except as set forth on the appropriately numbered and lettered Section
of the Disclosure Schedule previously delivered by Parent to the Company (the
"Parent Disclosure Schedule"), Parent and Acquisition hereby represent and
warrant to the Company as follows:
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Section 3.1. Organization.
------------
(a) Each of Parent and each of its subsidiaries is duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation or organization and has all requisite power and authority
to own, lease and operate its properties and to carry on its businesses as
now being conducted, except where the failure to be so organized, existing
and in good standing or to have such power and authority would not,
individually or in the aggregate, have a Material Adverse Effect (as defined
below) on Parent. When used in connection with Parent or Acquisition, the
term "Material Adverse Effect" means any change or effect that (i) is
materially adverse to the business, results of operations, condition
(financial or otherwise) or prospects of Parent and its subsidiaries, taken
as a whole, other than any change or effect arising out of general economic
conditions unrelated to any businesses in which Parent and its subsidiaries
are engaged, or (ii) may impair the ability of Parent and/or Acquisition to
consummate the transactions contemplated hereby.
(b) Parent has heretofore delivered to the Company accurate and
complete copies of the Articles or Certificate of Incorporation and Bylaws,
as currently in effect, of Parent and Acquisition. Each of Parent and each
of its subsidiaries is duly qualified or licensed and in good standing to do
business in each jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
or licensing necessary, except in such jurisdictions where the failure to be
so duly qualified or licensed and in good standing would not, individually or
in the aggregate, have a Material Adverse Effect on Parent.
Section 3.2. Capitalization of Parent and its Subsidiaries.
---------------------------------------------
(a) The authorized capital stock of Parent consists of 275,000,000
shares of Parent Common Stock, of which, as of September 10, 1999,
160,095,425 shares and were issued and outstanding and 375,024 shares were
held in Parent's treasury (together with the associated preferred stock
purchase rights (the "Parent Rights") issued pursuant to the Rights
Agreement, dated February 18, 1998, between Parent and ChaseMellon
Shareholder Services, L.L.C. (the "Parent Rights Agreement")), and 1,000,000
shares of preferred stock, $1.00 par value per share, none of which is
outstanding. All of the outstanding shares of Parent Common Stock have been
validly issued, and are fully paid, nonassessable and free of preemptive
rights. As of September 10, 1999, 11,512,269 shares of Parent Common Stock
were reserved for issuance and issuable upon or otherwise deliverable in
connection with the exercise of outstanding options. Between September 10,
1999 and the date hereof, no shares of Parent's capital stock have been
issued other than pursuant to stock options already in existence on September
10, 1999. Except as set forth above, as of the date hereof, there are
outstanding (i) no shares of capital stock or other voting securities of
Parent, (ii) no securities of Parent or its subsidiaries convertible into or
exercisable or exchangeable for shares of capital stock or voting securities
of Parent, (iii) no options or other rights to acquire from Parent or its
subsidiaries, and no obligations of Parent or its subsidiaries to
29
<PAGE>
issue, any capital stock, voting securities or securities convertible into or
exercisable or exchangeable for capital stock or voting securities of Parent,
and (iv) no equity equivalents, interests in the ownership or earnings of
Parent or its subsidiaries or other similar rights (collectively "Parent
Securities"). As of the date hereof, there are no outstanding obligations of
Parent or any of its subsidiaries to repurchase, redeem or otherwise acquire
any Parent Securities. There are no stockholder agreements, voting trusts or
other agreements or understandings to which Parent is a party or by which it
is bound relating to the voting of any shares of capital stock of Parent.
(b) The Parent Common Stock (including the associated Parent
Rights) constitutes the only class of equity securities of Parent or its
subsidiaries registered or required to be registered under the Exchange Act.
Section 3.3. Authority Relative to this Agreement; Recommendation.
----------------------------------------------------
Each of Parent and Acquisition has all necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the boards of directors of Parent and
Acquisition and by Parent as the sole stockholder of Acquisition, and no
other corporate proceedings on the part of Parent or Acquisition are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of Parent and Acquisition and constitutes a valid, legal
and binding agreement of each of Parent and Acquisition, enforceable against
each of Parent and Acquisition in accordance with its terms.
Section 3.4. SEC Reports; Financial Statements.
---------------------------------
(a) Parent has filed all required forms, reports and documents
with the SEC since March 30, 1996, each of which has complied in all material
respects with all applicable requirements of the Securities Act and the
Exchange Act, each as in effect on the dates such forms, reports and
documents were filed. Parent has heretofore delivered to the Company, in the
form filed with the SEC (including any amendments thereto but excluding any
exhibits), (i) its Annual Reports on Form 10-K for the fiscal years ended
March 28, 1997, April 3, 1998 and April 2, 1999, (ii) all definitive proxy
statements relating to Parent's meetings of stockholders (whether annual or
special) held since March 30, 1996 and (iii) all other reports or
registration statements filed by Parent with the SEC since March 30, 1996
(all of the foregoing, collectively, the "Parent SEC Reports"). None of such
Parent SEC Reports, including, without limitation, any financial statements
or schedules included or incorporated by reference therein, contained, when
filed, any untrue statement of a material fact or omitted to state a material
fact required to be stated or incorporated by reference therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements of Parent included in the Parent SEC Reports fairly present, in
conformity with generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes thereto),
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the consolidated financial position of Parent and its consolidated
subsidiaries as of the dates thereof and their consolidated results of
operations and changes in financial position for the periods then ended.
(b) Parent has heretofore made available or promptly will make
available to the Company a complete and correct copy of any amendments or
modifications, which are required to be filed with the SEC but have not yet
been filed with the SEC, to agreements, documents or other instruments which
previously have been filed by Parent with the SEC pursuant to the Exchange
Act.
Section 3.5. Information Supplied.
--------------------
None of the information supplied or to be supplied by Parent or
Acquisition for inclusion or incorporation by reference in (i) the S-4 will,
at the time the S-4 is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and (ii)
the Proxy Statement will, at the date mailed to Company stockholders and at
the times of the meeting or meetings of stockholders of the Company to be
held in connection with the Merger, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The S-4 will comply
as to form in all material respects with the provisions of the Securities Act
and the rules and regulations thereunder.
Section 3.6. Consents and Approvals; No Violations.
-------------------------------------
Except for filings, permits, authorizations, consents and approvals as
may be required under, and other applicable requirements of, the Securities
Act, the Exchange Act, state securities or blue sky laws, the HSR Act and the
rules of the NYSE, and except for certain foreign governmental approvals and
the filing and recordation of the Merger Certificate as required by the DGCL,
no filing with or notice to, and no permit, authorization, consent or
approval of, any Governmental Entity is necessary for the execution and
delivery by Parent or Acquisition of this Agreement or the consummation by
Parent or Acquisition of the transactions contemplated hereby, except where
the failure to obtain such permits, authorizations, consents or approvals or
to make such filings or give such notices would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. Neither the execution,
delivery and performance of this Agreement by Parent or Acquisition nor the
consummation by Parent or Acquisition of the transactions contemplated hereby
will (i) conflict with or result in any breach of any provision of the
respective Certificate of Incorporation or Bylaws (or similar governing
documents) of Parent or Acquisition or any of Parent's other subsidiaries,
(ii) result in a material violation or material breach of, or constitute
(with or without notice or lapse of time or both) a material default (or give
rise to any right of termination, amendment, cancellation or acceleration or
any Lien) under, any of the terms, conditions or provisions of any material
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Parent or Acquisition or any of Parent's
other subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound or (iii) violate any
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order, writ, injunction, decree, or, in any material respect, any material
law, statute, rule or regulation applicable to Parent or Acquisition or any
of Parent's other subsidiaries or any of their respective properties or
assets, except in the case of clauses (ii) or (iii) for violations, breaches
or defaults which would not, individually or in the aggregate, have a
Material Adverse Effect on Parent.
Section 3.7. No Default.
----------
None of Parent or any of its subsidiaries is in breach, default or
violation (and no event has occurred which with notice or the lapse of time
or both would constitute a breach, default or violation) of any term,
condition or provision of (i) its Articles of Incorporation or Bylaws (or
similar governing documents), (ii) any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to
which Parent or any of its subsidiaries is a party or by which any of them or
any of their respective properties or assets may be bound or (iii) any order,
writ, injunction, decree, law, statute, rule or regulation applicable to
Parent, its subsidiaries or any of their respective properties or assets,
except in the case of clauses (ii) or (iii) for violations, breaches or
defaults that would not, individually or in the aggregate, have a Material
Adverse Effect on Parent. Each note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which
Parent or any of its subsidiaries is a party or by which any of them or any
of their respective properties or assets may be bound that is material to
Parent and its subsidiaries taken as a whole is in full force and effect and
is not subject to any material default thereunder of which Parent is aware by
any party obligated to Parent or any subsidiary thereunder.
Section 3.8. No Undisclosed Liabilities; Absence of Changes.
----------------------------------------------
Except as and to the extent publicly disclosed by Parent in the Parent
SEC Reports, as of April 3, 1999, none of Parent or its subsidiaries had any
liabilities or obligations of any nature, whether or not accrued, contingent
or otherwise, that would be required by generally accepted accounting
principles to be reflected on a consolidated balance sheet of Parent and its
consolidated subsidiaries (including the notes thereto) or which would have,
individually or in the aggregate, a Material Adverse Effect on Parent. From
April 3, 1999 through the date hereof, none of Parent or its subsidiaries has
incurred any liabilities of any nature, whether or not accrued, contingent or
otherwise, which could reasonably be expected to have, and there have been no
events, changes or effects with respect to Parent or its subsidiaries having
or which could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent.
Section 3.9. Litigation.
----------
Except as publicly disclosed by Parent in the Parent SEC Reports, there
is no suit, claim, action, proceeding or investigation pending or, to the
knowledge of Parent, threatened against Parent or any of its subsidiaries or
any of their respective properties or assets which, individually or in the
aggregate, could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect or could reasonably be expected to
prevent or delay the consummation of the transactions contemplated by this
Agreement. Except as publicly disclosed by Parent in the Parent SEC Reports,
none of Parent or its subsidiaries is subject to any outstanding order, writ,
injunction or decree which, insofar as can be reasonably foreseen in the
future, could
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reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent or could reasonably be expected to prevent or delay
the consummation of the transactions contemplated hereby.
Section 3.10. Compliance with Applicable Law.
------------------------------
Except as publicly disclosed by Parent in the Parent SEC Reports, Parent
and its subsidiaries hold all permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses (the "Parent Permits"), except for
failures to hold such permits, licenses, variances, exemptions, orders and
approvals which would not, individually or in the aggregate, have a Material
Adverse Effect on Parent. Except as publicly disclosed by Parent in the
Parent SEC Reports, Parent and its subsidiaries are in compliance with the
terms of the Parent Permits, except where the failure so to comply would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
Except as publicly disclosed by Parent in the Parent SEC Reports, the
businesses of Parent and its subsidiaries are not being conducted in
violation of any law, ordinance, rule or regulation of any Governmental
Entity except for violations or possible violations which do not, and,
insofar as reasonably can be foreseen, in the future will not, individually
or in the aggregate, have a Material Adverse Effect on Parent. Except as
publicly disclosed by Parent in the Parent SEC Reports, no investigation or
review by any Governmental Entity with respect to Parent or its subsidiaries
is pending or, to the knowledge of Parent, threatened, nor, to the knowledge
of Parent, has any Governmental Entity indicated an intention to conduct the
same, other than, in each case, those which Parent reasonably believes will
not, individually or in the aggregate, have a Material Adverse Effect on
Parent.
Section 3.11. Employee Benefit Plans; Labor Matters.
-------------------------------------
(a) Schedule 3.11(a) of the Parent Disclosure Schedule lists all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and all bonus, stock
option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance and other similar fringe or employee benefit plans,
programs or arrangements, and any severance agreements, written or otherwise,
for the benefit of, or relating to, any current or former employee or
director of Parent, any trade or business (whether or not incorporated) which
is a member of a controlled group including Parent or which is under common
control with Parent (an "ERISA Affiliate") within the meaning of Section 414
of the Code, as well as each plan with respect to which Parent or an ERISA
Affiliate could incur liability under Section 4069 (if such plan has been or
were terminated) or Section 4212(c) of ERISA (together, the "Parent Benefit
Plans").
(b) With respect to each Parent Benefit Plan, (i) no event has
occurred and, to the knowledge of Parent, there currently exists no condition
or set of circumstances, in connection with which Parent or any of its
subsidiaries could be subject to any liability under the terms of the Parent
Benefit Plans, ERISA, the Code or any other applicable law which would have,
individually or in the aggregate, a Material Adverse
33
<PAGE>
Effect on Parent. There is no pending, or to Parent's knowledge, threatened
labor dispute, strike or work stoppage against Parent or any of its
subsidiaries which may reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent.
Section 3.12. Environmental Laws and Regulations.
----------------------------------
(a) Except as publicly disclosed by Parent in the Parent SEC
Reports, (i) each of Parent and its subsidiaries is in material compliance
with all Environmental Laws, except for non-compliance that would not,
individually or in the aggregate, have a Material Adverse Effect on Parent,
which compliance includes, but is not limited to, the possession by Parent
and its subsidiaries of all material permits and other governmental
authorizations required under applicable Environmental Laws, and compliance
with the terms and conditions thereof; (ii) none of Parent or its
subsidiaries has received written notice of, or, to the knowledge of Parent,
is the subject of, any Environmental Claim that could reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on
Parent; and (iii) to the knowledge of Parent, there are no circumstances that
are reasonably likely to prevent or interfere with such material compliance
in the future.
(b) Except as publicly disclosed by Parent, there are no
Environmental Claims which could reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect on Parent that are pending
or, to the knowledge of Parent, threatened against Parent or any of its
subsidiaries or, to the knowledge of Parent, against any person or entity
whose liability for any Environmental Claim Parent or any of its subsidiaries
has or may have retained or assumed either contractually or by operation of
law.
Section 3.13. Tax Matters.
-----------
Parent and each of its subsidiaries have accurately prepared in all
material respects and timely filed all material Tax Returns they are required
to have filed. Such Tax Returns are accurate and correct in all material
respects. Parent and each of its subsidiaries have paid all Taxes shown as
due on all Tax Returns and have adequately provided for all Taxes for which
they are required to provide.
Section 3.14. Title to Property.
-----------------
Parent and each of its subsidiaries have good and marketable title to
all of their properties and assets, free and clear of all Liens, except liens
for taxes not yet due and payable and such liens or other imperfections of
title, if any, as do not materially detract from the value of or interfere
with the present use of the property affected thereby or which would not,
individually or in the aggregate, have a Material Adverse Effect on Parent;
and, to Parent's knowledge, all leases pursuant to which Parent or any of its
subsidiaries lease from others real or personal property are in good
standing, valid and enforceable in accordance with their respective terms,
and there is not, to the knowledge of Parent, under any of such leases, any
existing material default or event of default (or event which with notice or
lapse of time, or both, would constitute a material default and in respect of
which the Parent or such subsidiary has not taken adequate steps to prevent
such a default from occurring) except where the lack of such
34
<PAGE>
good standing, validity and enforceability, or the existence of such default
or event, would not, individually or in the aggregate, have a Material
Adverse Effect on Parent.
Section 3.15. Intellectual Property; Software.
-------------------------------
(a) Each of Parent and its subsidiaries owns, or possesses
adequate licenses or other valid rights to use, all existing United States
and foreign patents, trademarks, trade names, services marks, copyrights,
trade secrets, and applications therefor that are material to its business as
currently conducted (the "Parent Intellectual Property Rights").
(b) The validity of the Parent Intellectual Property Rights and
the title thereto of Parent or any subsidiary, as the case may be, is not
being questioned in any litigation to which Parent or any subsidiary is a
party.
(c) The conduct of the business of Parent and its subsidiaries as
now conducted does not, to Parent's knowledge, infringe any valid patents,
trademarks, tradenames, service marks or copyrights of others. The
consummation of the transactions contemplated hereby will not result in the
loss or impairment of any material Parent Intellectual Property Rights.
(d) Each of Parent and its subsidiaries considers its computer
software as trade secrets, and each has taken steps it believes appropriate
to protect and maintain the same as such.
Section 3.16. Insurance.
---------
Parent and its subsidiaries maintain general liability and other
business insurance that Parent believes to be reasonably prudent for its
business.
Section 3.17. No Prior Activities of Acquisition.
----------------------------------
Except for obligations incurred in connection with its incorporation or
organization or the negotiation and consummation of this Agreement and the
transactions contemplated hereby, Acquisition has neither incurred any
obligation or liability nor engaged in any business or activity of any type
or kind whatsoever or entered into any agreement or arrangement with any
person.
Section 3.18. Tax Treatment; Pooling.
----------------------
Neither Parent nor, to the knowledge of Parent, any of its affiliates
has taken or agreed to take any action that would prevent the Merger (a) from
constituting a reorganization qualifying under the provisions of Section
368(a) of the Code or (b) from being treated as a Pooling Transaction for
financial accounting purposes.
Section 3.19. Affiliates.
----------
Except for the directors and executive officers of Parent, there are no
persons who, to the knowledge of Parent, may be deemed to be affiliates of
Parent under Rule 1-02 of Regulation S-X of the SEC ("Parent Affiliates").
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Section 3.20. Certain Business Practices.
--------------------------
None of Parent, any of its subsidiaries or any directors, officers,
agents or employees of Parent or any of its subsidiaries has (i) used any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the
FCPA, or (iii) made any other unlawful payment.
Section 3.21. Insider Interests.
-----------------
No officer or director of the Parent has any interest in any material
property, real or personal, tangible or intangible, including without
limitation, any computer software or Parent Intellectual Property Rights,
used in or pertaining to the business of Parent or any subsidiary.
Section 3.22. Disclosure. No representation or warranty of Parent in this
Agreement or any certificate, schedule, document or other instrument
furnished or to be furnished to the Company pursuant hereto or in connection
herewith contains, as of the date of such representation, warranty,
certificate, schedule, document or instrument, or will contain any untrue
statement of a material fact or omits, at the date thereof, or will omit to
state a material fact necessary to make any statement herein or therein, in
light of the circumstances under which such statement is or will be made, not
misleading.
Section 3.23. Brokers.
-------
No broker, finder or investment banker (other than Merrill Lynch & Co.)
is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Acquisition.
Section 3.24. Year 2000 Compliance.
--------------------
All of the Products of Parent and the Business Systems of Parent, and
the conduct by Parent and its subsidiaries of their business with customers
and suppliers will not be affected by the advent of the year 2000, the advent
of the twenty-first century or the transition from the twentieth century
through the year 2000 and into the twenty-first century in a manner that
constitutes a Material Adverse Effect on Parent. Neither Parent nor any
subsidiary of Parent is reasonably likely to incur liabilities, costs or
expenses arising from or relating to failure or faulty operation of any
Product of Parent or Business System of Parent, due to a Year 2000 Event
where the aggregate of such liabilities, costs and expenses would have a
Material Adverse Effect on Parent, nor will the business or operations of
Parent or any subsidiary be disrupted by any such failure or faulty
operation, to the extent such disruption would have a Material Adverse Effect
on Parent.
ARTICLE 4
COVENANTS
Section 4.1. Conduct of Business of the Company.
----------------------------------
Except as contemplated by this Agreement or as described in Section 4.1
of the Company Disclosure Schedule, during the period from the date hereof to
the Effective Time, the Company will, and will
36
<PAGE>
cause each of its subsidiaries to, conduct its operations in the ordinary
course of business consistent with past practice and, to the extent
consistent therewith, with no less diligence and effort than would be applied
in the absence of this Agreement, seek to preserve intact its current
business organizations, keep available the service of its current officers
and employees and preserve its relationships with customers, suppliers and
others having business dealings with it to the end that its goodwill and
ongoing businesses shall be unimpaired at the Effective Time. Without
limiting the generality of the foregoing, except as otherwise expressly
provided in this Agreement or as described in Section 4.1 of the Company
Disclosure Schedule, prior to the Effective Time, neither the Company nor any
of its subsidiaries will, without the prior written consent of Parent:
(a) amend its certificate of incorporation or Bylaws (or other
similar governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities (except bank loans
in the ordinary course of business consistent with past practice) or equity
equivalents (including, without limitation, any stock options or stock
appreciation rights), except for the issuance and sale of Shares pursuant to
options previously granted under the Company Plans and the grant of options
under the Company Plans to purchase up to 275,000 Shares relating to fiscal
1999 awards made in the ordinary course of business;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof, except for cash dividends
in accordance with past practices and amounts per share) in respect of its
capital stock, make any other actual, constructive or deemed distribution in
respect of its capital stock or otherwise make any payments to stockholders
in their capacity as such, or redeem or otherwise acquire any of its
securities or any securities of any of its subsidiaries;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any or its subsidiaries (other than the
Merger);
(e) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership of
any subsidiary;
(f) (i) incur or assume any long-term or short-term debt or issue
any debt securities except for borrowings under existing lines of credit in
the ordinary course of business consistent with past practice; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person,
except in the ordinary course of business consistent with past practice and
except for obligations of subsidiaries of the Company incurred in the
ordinary course of business; (iii) make any loans, advances or capital
contributions to, or
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investments in, any other person (other than to subsidiaries of the Company
or customary loans or advances to employees, in each case in the ordinary
course of business consistent with past practice); (iv) pledge or otherwise
encumber shares of capital stock of the Company or its subsidiaries; or (v)
mortgage or pledge any of its material assets, tangible or intangible, or
create or suffer to exist any material Lien with respect thereto (other than
tax Liens for Taxes not yet due);
(g) except as may be required by law, enter into, adopt or amend
or terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
director, officer or employee in any manner, or increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan and arrangement as in effect as of the
date hereof (including, without limitation, the granting of stock
appreciation rights or performance units); provided, however, that this
paragraph (g) shall not prevent the Company or its subsidiaries from (i)
entering into employment agreements or severance agreements with new
employees in the ordinary course of business and consistent with past
practice or (ii) increasing annual compensation and/or providing for or
amending bonus arrangements for employees for fiscal 1999 in the ordinary
course of year-end compensation reviews consistent with past practice;
(h) acquire, sell, lease or dispose of any assets in any single
transaction or series of related transactions having a fair market value in
excess of $1 million in the aggregate;
(i) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles or practices used by it;
(j) revalue in any material respect any of its assets, including,
without limitation, writing down the value of software or inventory or
writing-off notes or accounts receivable, other than in the ordinary course
of business and in accordance with GAAP, applied on a basis consistent with
past practice;
(k) (i) acquire (by merger, consolidation, or acquisition of stock
or assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein; (ii) enter into any material
contract or agreement other than in the ordinary course of business
consistent with past practice; (iii) authorize any new capital expenditure or
expenditures which, individually, is in excess of $1 million or, in the
aggregate, are in excess of $5 million; provided that none of the foregoing
--------
shall limit any capital expenditure required pursuant to existing customer
contracts;
(l) make any Tax election or settle or compromise any Tax
liability material to the Company and its subsidiaries taken as a whole;
38
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(m) settle or compromise any pending or threatened suit, action or
claim which relates to the transactions contemplated hereby or the settlement
or compromise of which could have a Material Adverse Effect on the Company;
(n) commence any material software development project or
terminate any material software development project that is currently
ongoing, in either case except pursuant to the terms of existing contracts
with customers;
(o) take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through 4.1(n) or any action which would
make any of the representations or warranties of the Company contained in
this Agreement untrue or incorrect; or
(p) take any action or permit any action to be taken that would
accelerate the vesting of any stock options issued by the Company or any of
its subsidiaries.
Section 4.2. Conduct of Business of Parent.
-----------------------------
Except as contemplated by this Agreement, during the period from the
date hereof to the Effective Time, Parent will, and will cause each of its
subsidiaries to, conduct its operations in the ordinary course of business
consistent with past practice and, to the extent consistent therewith, with
no less diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business organizations, keep
available the service of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings
with it to the end that its goodwill and ongoing businesses shall be
unimpaired at the Effective Time. Without limiting the generality of the
foregoing, except as otherwise expressly provided in this Agreement, prior to
the Effective Time, neither Parent nor any of its subsidiaries will, without
the prior written consent of the Company:
(a) knowingly take any action that would result in a failure to
maintain the trading of the Parent Common Stock on the NYSE;
(b) declare, set aside or pay any dividend or other distribution
in respect of its capital stock, except for dividends payable in Parent
Common Stock or dividends by a subsidiary of Parent to Parent or another
subsidiary of Parent or (other than in connection with the forfeiture of
restricted stock or the exercise of stock options) redeem, repurchase or
otherwise acquire any of its securities;
(c) acquire or agree to acquire or agree to be acquired, by
merging or consolidating with, by purchasing an equity interest in or the
assets of, or by any other manner, any business or any corporation,
partnership or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets of any other entity (other than the
purchase of assets from suppliers, clients or vendors in the ordinary course
of business and consistent with past practice), or agree to a sale of a
material portion of its
39
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assets if, in each case, such transaction would prevent or delay for more
than 30 days the consummation of the transactions contemplated by this
Agreement;
(d) adopt or propose to adopt any amendments to its charter
documents which would have an adverse effect on the consummation of the
transactions contemplated by this Agreement; or
(e) take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.2(a) through 4.2(d) or any action which would
make any of the representations or warranties of Parent contained in this
Agreement untrue or incorrect.
Section 4.3. Preparation of S-4 and the Proxy Statement.
------------------------------------------
Parent and the Company shall promptly prepare and file with the SEC the
Proxy Statement, and Parent shall prepare and file with the SEC the S-4, in
which the Proxy Statement will be included as a prospectus. Each of Parent
and the Company shall use its best efforts to have the S-4 declared effective
under the Securities Act as promptly as practicable after such filing.
Parent shall also take any action (other than qualifying to do business in
any jurisdiction in which it is now not so qualified) required to be taken
under any applicable state securities laws in connection with the issuance of
Parent Common Stock in the Merger and upon the exercise of Company Stock
Options, and the Company shall furnish all information concerning the Company
and the holders of Shares as may be reasonably requested in connection with
any such actions.
Section 4.4. Other Potential Acquirers.
-------------------------
(a) The Company, its affiliates and their respective officers,
directors, employees, representatives and agents shall immediately cease any
discussions or negotiations with any parties with respect to any Third Party
Acquisition (as defined below). The Company may furnish confidential
information and access, in each case only in response to unsolicited requests
therefor, to any person or group pursuant to confidentiality agreements with
terms no less favorable to the Company than the Confidentiality Agreement is
with respect to Parent, and may participate in discussions and negotiate with
such person or group concerning any Third Party Acquisition, in all cases
only if (i) such person or group has submitted a Superior Proposal (as
defined in paragraph (c) below) to the Company Board relating to any such
transaction and (ii) the Company Board by a majority vote determines in its
good faith judgment, after consultation with and based upon the advice of its
independent legal counsel, that it is required to do so in order to comply
with its fiduciary duties. The Company Board shall provide a copy of any
such Superior Proposal to Parent promptly upon receipt thereof and thereafter
keep Parent promptly advised of any development with respect thereto. Except
as set forth above, neither the Company nor any of its affiliates shall, nor
shall the Company authorize or permit any of its or their respective
officers, directors, employees, representatives or agents to, directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any person or group (other
than Parent and Acquisition, any affiliate or associate of Parent and
40
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Acquisition or any designees of Parent and Acquisition) concerning any Third
Party Acquisition; provided, however, that nothing herein shall prevent the
Company Board from taking, and disclosing to the Company's stockholders, a
position contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange
Act with regard to any tender offer.
(b) Except as set forth in this Section 4.4(b), the Company Board
shall not withdraw, or modify in a manner adverse to Parent, its
recommendation of the transactions contemplated hereby or approve or
recommend, or cause the Company to enter into any agreement with respect to,
any Third Party Acquisition. Notwithstanding the foregoing, if the Company
Board by a majority vote determines in its good faith judgment, after
consultation with and based upon the advice of its independent legal counsel,
that it is required to do so in order to comply with its fiduciary duties,
the Company Board may withdraw, or modify in a manner adverse to Parent, its
recommendation of the transactions contemplated hereby or approve or
recommend a Superior Proposal, but in each case only (i) after providing
written notice to Parent (a "Notice of Change") advising Parent that the
Company Board has received a Superior Proposal, specifying the material terms
and conditions of such Superior Proposal and identifying the person or group
making such Superior Proposal and (ii) if Parent does not, within five
business days of Parent's receipt of the Notice of Change, make an offer
which the Company Board by a majority vote determines in its good faith
judgment (after consultation with its financial advisers and legal counsel)
to be as favorable to the Company's stockholders as such Superior Proposal;
provided, however, that the Company shall not be entitled to withdraw, or
modify in a manner adverse to Parent, its recommendation of the transactions
contemplated hereby or enter into any agreement with respect to a Superior
Proposal unless and until this Agreement is terminated by its terms pursuant
to Section 6.1.
(c) For the purposes of this Agreement, "Third Party Acquisition"
means the occurrence, after the date hereof, of any of the following events:
(i) the acquisition of the Company by merger or otherwise by any person
(which includes a "person" or "group" as such terms are defined in Section
13(d)(3) of the Exchange Act) other than Parent, Acquisition or any affiliate
thereof (a "Third Party"); (ii) the acquisition by a Third Party of more than
30% of the total assets of the Company and its subsidiaries, taken as a
whole; (iii) the beneficial ownership by a Third Party of 20% or more of the
outstanding Shares (other than the beneficial ownership by a person named on
Section 4.4(c) of the Disclosure Schedule, with respect to which person 20%
shall be deemed to be replaced by 30% for purposes of this clause (iii));
(iv) the adoption by the Company of a plan of liquidation or the declaration
or payment of an extraordinary dividend; (v) the repurchase by the Company or
any of its subsidiaries of more than 15% of the outstanding Shares; or (vi)
the acquisition by the Company or any subsidiary, by merger, purchase of
stock or assets, joint venture or otherwise, of a direct or indirect
ownership interest or investment in any business whose annual revenues, net
income or assets is equal to or greater than 40% of the annual revenues, net
income or assets of the Company and its subsidiaries taken as a whole. For
purposes of this Agreement, a
41
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"Superior Proposal" means any bona fide written proposal to acquire, directly
or indirectly, by merger, consolidation, share exchange, share purchase,
business combination or other similar transaction involving the Company or
any of its subsidiaries, for consideration consisting of cash, securities or
other property, more than 50% of the Shares then outstanding or a substantial
portion of the consolidated assets of the Company, which the Company Board by
a majority vote determines in its good faith judgment (after consultation
with its financial advisers and legal counsel), (i) would, if consummated,
result in a transaction that is more favorable to the Company's stockholders
from a financial point of view than the Merger and (ii) is reasonably capable
of being completed in accordance with its terms (taking into account all
legal, financial, regulatory, and other aspects of the proposal including the
nature and sufficiency of financing, if any, for such proposal and the Person
making the proposal).
Section 4.5. Comfort Letters.
---------------
(a) The Company shall use all reasonable efforts to cause Ernst &
Young LLP to deliver a letter dated as of the date of the Proxy Statement and
the S-4, and addressed to the Company and Parent and their respective Boards
of Directors, in form and substance reasonably satisfactory to Parent and
customary in scope and substance for agreed upon procedures letters delivered
by independent public accountants in connection with registration statements
and proxy statements similar to the Proxy Statement and the S-4.
(b) Parent shall use all reasonable efforts to cause Deloitte &
Touche LLP to deliver a letter dated as of the date of the Proxy Statement
and the S-4, and addressed to Parent and the Company and their respective
Boards of Directors, in form and substance reasonably satisfactory to the
Company and customary in scope and substance for agreed upon procedures
letters delivered by independent public accountants in connection with
registration statements and proxy statements similar to the Proxy Statement
and the S-4.
Section 4.6. Meeting of Company Stockholders.
-------------------------------
The Company shall take all action necessary, in accordance with
applicable law and its certificate of incorporation and bylaws, to duly call,
give notice of, convene and hold a meeting of its stockholders as promptly as
practicable to consider and vote upon the adoption and approval of this
Agreement and the transactions contemplated hereby. The stockholder vote
required for the adoption and approval of the transactions contemplated by
this Agreement shall be the vote required by the DGCL and the certificate of
incorporation and bylaws of the Company. The Company will, through its
Boards of Directors, recommend to its stockholders approval of such matters;
provided, however, that, subject to the provisions of Section 6.3, the
Company Board may withdraw its recommendation if (i) the Company receives a
Superior Proposal and, (ii) after complying with the provisions of Section
4.4(b), the Company Board by a majority vote determines in its good faith
judgment, after consultation with and based upon the advice of its
independent legal counsel, that it is required, in order to comply with its
fiduciary duties, to recommend the
42
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Superior Proposal. The Company and Parent shall coordinate and cooperate
with respect to the timing of such meeting and shall use their best efforts
to hold such meeting as soon as practicable after the date hereof.
Section 4.7. Stock Exchange Listing.
----------------------
Parent shall use its best efforts to cause the shares of Parent Common
Stock to be issued in the Merger and the shares of Parent Common Stock to be
reserved for issuance upon exercise of Company Stock Options (i) to be
approved for listing on the NYSE and (ii) to be approved for listing on each
other national securities exchange on which Parent Common Stock is then
listed, in each case subject to official notice of issuance, on or prior to
the Effective Time.
Section 4.8. Access to Information.
---------------------
(a) Between the date hereof and the Effective Time, the Company
will give Parent and its authorized representatives, and Parent will give the
Company and its authorized representatives, reasonable access to all
employees, plants, offices, warehouses and other facilities and to all books
and records of itself and its subsidiaries, will permit the other party to
make such inspections as such party may reasonably request and will cause its
officers and those of its subsidiaries to furnish the other party with such
financial and operating data and other information with respect to the
business and properties of itself and its subsidiaries as the other party may
from time to time reasonably request. Each party will direct all requests
for information and access to a senior executive to be designated by the
other party, and shall conduct such inspections and investigations in a
manner that does not unreasonably interfere with the conduct of business by
the other party.
(b) Between the date hereof and the Effective Time, the Company
shall furnish to Parent, and Parent shall furnish to the Company, within 25
business days after the end of each fiscal month (commencing with August
1999), an unaudited consolidated balance sheet of the party furnishing such
information as of the end of such month and the related consolidated
statements of earnings and stockholders' equity (deficit) for such period,
and, within 25 business days after the end of each fiscal quarter, a
statement of cash flows for the quarter then ended, each prepared in
accordance with generally accepted accounting principles in conformity with
the practices consistently applied by such party with respect to its monthly
and quarterly financial statements. All the foregoing shall be in accordance
with the books and records of the party furnishing such information and shall
fairly present its consolidated financial position (taking into account the
differences between the monthly and quarterly statements prepared by such
party in conformity with its past practices) as of the last day of the period
then ended.
(c) Each of the parties hereto will hold and will cause its
consultants and advisers to hold in confidence all documents and information
furnished to it in connection with the transactions contemplated by this
Agreement pursuant to the terms of the Confidentiality Agreement.
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Section 4.9. Additional Agreements; Reasonable Efforts.
-----------------------------------------
Subject to the terms and conditions herein provided, each of the parties
hereto agrees to use all reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things reasonably necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement, including,
without limitation, (i) cooperating in the preparation and filing of the
Proxy Statement and the S-4, any filings that may be required under the HSR
Act, and any amendments to any thereof; (ii) obtaining consents of all third
parties and Governmental Entities necessary, proper or advisable for the
consummation of the transactions contemplated by this Agreement; (iii)
contesting any legal proceeding relating to the Merger; and (iv) executing
any additional instruments necessary to consummate the transactions
contemplated hereby. Subject to the terms and conditions of this Agreement,
Parent and the Company agree to use all reasonable efforts to cause the
Effective Time to occur as soon as practicable after the stockholder votes
with respect to the Merger. In case at any time after the Effective Time any
further action is necessary to carry out the purposes of this Agreement, the
proper officers and directors of each party hereto shall take all such
necessary action.
Section 4.10. Public Announcements.
--------------------
Parent and the Company will consult with one another before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated by this Agreement, including, without limitation,
the Merger, and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by
applicable law or by obligations pursuant to any listing agreement with the
NYSE as determined by Parent or the Company, as the case may be.
Section 4.11. Directors' and Officers' Insurance; Indemnification.
---------------------------------------------------
(a) Parent will provide, until the sixth anniversary of the Closing
Date, the directors and officers of the Company who are currently covered by
the Company's existing insurance and indemnification policy an insurance and
indemnification policy that provides coverage for events occurring prior to
the Effective Time (the "D&O Insurance") that is no less favorable than the
Company's existing policy or, if substantially equivalent coverage is
unavailable, the best available coverage; provided, that Parent shall not be
--------
required to pay an annual premium for the D&O Insurance in excess of 200% of
the last annual premium paid by the Company prior to the date hereof, but in
such case shall purchase as much coverage as possible for such amount.
(b) After the Effective Time, the Surviving Corporation shall indemnify
and hold harmless each person who is now, or has been prior to the date
hereof or who becomes prior to the Effective Time, an officer or director of
the Company or any of its subsidiaries (the "Indemnified Persons") against
(i) all losses, claims, damages, costs, expenses (including without
limitation counsel fees and expenses), settlement payments or liabilities
arising out of or in connection with any claim, demand, action, suit,
proceeding or investigation based in whole or in part on, or arising in whole
or in part out of, the fact that such person is or was an officer or director
of the Company or
44
<PAGE>
any of its subsidiaries, whether or not pertaining to any matter existing or
occurring at or prior to the Effective Time and whether or not asserted or
claimed prior to or at or after the Effective Time (the "Indemnified
Liabilities") and (ii) all Indemnified Liabilities based in whole or in part
on, or arising in whole or in part out of, or pertaining to, this Agreement
or the transactions contemplated hereby, in each case to the fullest extent
required or permitted under applicable law or under the Surviving
Corporation's certificate of incorporation or bylaws. Each Indemnified
Person is intended to be a third party beneficiary of this Section 4.11 and
may specifically enforce its terms. This Section 4.11 shall not limit or
otherwise adversely affect any rights any Indemnified Person may have under
any agreement with the Company or under the Company's certificate of
incorporation or bylaws.
Section 4.12. Notification of Certain Matters.
-------------------------------
The Company shall give prompt notice to Parent and Acquisition, and
Parent and Acquisition shall give prompt notice to the Company, of (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at or prior
to the Effective Time and (ii) any material failure of the Company, Parent or
Acquisition, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section
- -------- -------
4.12 shall not cure such breach or non-compliance or limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
Section 4.13. Affiliates; Pooling; Tax Free Reorganization.
--------------------------------------------
(a) Within thirty days after the date hereof, the Company shall
obtain from any person who was a Company Affiliate on the date of this
Agreement, a letter agreement substantially in the form of Exhibit A hereto,
and shall deliver the same to Parent within such thirty day period.
(b) The Company shall obtain from any person who may be deemed to
have become a Company Affiliate after the date of this Agreement and on or
prior to the Effective Time, a letter agreement substantially in the form of
Exhibit A hereto, and shall deliver the same to Parent as soon as
practicable.
(c) Within thirty days after the date hereof, Parent shall obtain
from any person who was a Parent Affiliate on the date of this Agreement, a
letter agreement substantially in the form of Exhibit B hereto.
(d) Parent shall obtain from any person who may be deemed to have
become a Parent Affiliate after the date of this Agreement and on or prior to
the Effective Time, a letter agreement substantially in the form of Exhibit B
hereto.
(e) Parent shall not be required to maintain the effectiveness of
the S-4 for the purpose of resale of shares of Parent Common Stock by
stockholders of the
45
<PAGE>
Company who may be affiliates of the Company or Parent pursuant to Rule 145
under the Securities Act.
(f) Each party hereto shall use all reasonable efforts to cause
the Merger to be treated for financial accounting purposes as a Pooling
Transaction, and shall not take, and shall use all reasonable efforts to
prevent any affiliate of such party from taking, any actions which could
prevent the Merger from being treated for financial accounting purposes as a
Pooling Transaction.
(g) The Company and Parent and Acquisition shall execute and
deliver to Weil, Gotshal & Manges LLP, counsel to the Company, and Gibson,
Dunn & Crutcher LLP, counsel to Parent, certificates substantially in the
form attached hereto as Exhibits C-1 and C-2, respectively, at such time or
times as reasonably requested by such law firm in connection with its
delivery of an opinion with respect to the transactions contemplated hereby.
Prior to the Effective Time, none of the Company, Parent or Acquisition shall
take or cause to be taken any action which would cause to be untrue (or fail
to take or cause not to be taken any action which would cause to be untrue)
any of the representations in Exhibits C-1 or C-2.
Section 4.14. State Takeover Laws.
-------------------
If any "fair price," "business combination" or "control share
acquisition" statute or other similar statute or regulation is or shall
become applicable to the transactions contemplated hereby, Parent, the
Company and their respective Boards of Directors shall use all reasonable
efforts to grant such approvals and take such actions as are necessary so
that the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and shall otherwise act to
minimize the effects of any such statute or regulation on the transactions
contemplated hereby.
Section 4.15. Employee Benefits.
-----------------
(a) On or before Closing, the Company shall cause (i) the Nichols
Research Corporation Retirement Plan, The Welkins Associates Ltd. Money
Purchase Plan, the PRISM Simplified Employee Pension Plan, and the Murray &
West, Inc. 401(k) Plan (the "Retirement Plans") to be terminated with an
effective date of termination to be on or before Closing (the "Termination
Date") and (ii) the account of each participant in the Retirement Plans as of
the Termination Date to become one hundred percent (100%) vested and
nonforfeitable.
(b) The Company shall take all actions necessary to provide that
each outstanding and valid option or right to purchase shares of Company
common stock granted or provided under the Company's 1988 Employees' Stock
Purchase Plan (the "Stock Purchase Plan") shall be exercised automatically on
the day that is at least three (3) days prior to the Closing Date and the
Stock Purchase Plan shall be terminated effective immediately thereafter.
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<PAGE>
(c) For the purposes of eligibility to participate and vesting in
Parent's Matched Asset Plan, Parent shall cause each employee of the Company
to receive full credit for years of service with the Company or any affiliate
of the Company (and service otherwise credited by the Company or any
affiliate of the Company) prior to the Closing.
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 5.1. Conditions to Each Party's Obligations to Effect the
----------------------------------------------------
Merger.
------
The respective obligations of each party hereto to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) this Agreement shall have been approved and adopted by the
requisite vote of the stockholders of the Company;
(b) no statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or enforced by
any United States court or United States governmental authority which
prohibits, restrains or enjoins the consummation of the Merger;
(c) any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired, and any other governmental or regulatory
notices or approvals required in order to consummate the transactions
contemplated hereby shall have been either filed or received;
(d) the S-4 shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceedings seeking a stop
order, and Parent shall have received all state securities laws or "blue sky"
permits and authorizations necessary to issue shares of Parent Common Stock
in exchange for Shares in the Merger; and
(e) (i) the Company shall have received confirmation in writing
from Ernst & Young LLP that in accordance with generally accepted accounting
principles and applicable published rules and regulations of the SEC, the
Company is eligible to be a party to a merger accounted for as a Pooling
Transaction and that Ernst & Young LLP is not aware of any matters that
prohibit the use of pooling of interests accounting in connection with the
Merger, and such confirmation shall not have been withdrawn or modified in
any material respect, and (ii) Parent shall have received a written opinion
from Deloitte & Touche LLP stating that the Merger will be accounted for
under generally accepted accounting principles as a Pooling Transaction and
such opinion shall not have been withdrawn or modified in any material
respect.
Section 5.2. Conditions to the Obligations of the Company.
--------------------------------------------
The obligation of the Company to effect the Merger is subject to the
satisfaction at or prior to the Effective Time of the following additional
conditions:
47
<PAGE>
(a) each of the representations and warranties of Parent and
Acquisition contained in this Agreement that is qualified as to materiality
shall be true and correct at and as of the Effective Time as if made at and
as of such time (other than representations and warranties that address
matters only as of a certain date, which shall be true and correct as of such
certain date) and each of the representations and warranties that is not so
qualified shall be true and correct in all material respects at and as of the
Effective Time as if made on and as of such date (other than representations
and warranties that address matters only as of a certain date, which shall be
true and correct in all material respects as of such certain date), in each
case except as contemplated or permitted by this Agreement, and the Company
shall have received a certificate signed on behalf of Parent to such effect;
(b) each of the covenants and obligations of Parent and
Acquisition to be performed at or before the Effective Time pursuant to the
terms of this Agreement shall have been duly performed in all material
respects at or before the Effective Time, and at the Closing Parent and
Acquisition shall have delivered to the Company a certificate to that effect;
(c) the shares of Parent Common Stock issuable to the Company
stockholders pursuant to this Agreement and such other shares required to be
reserved for issuance in connection with the Merger shall have been
authorized for listing on the NYSE upon official notice of issuance;
(d) the Company shall have received the opinion, based on the
representations of the Company and Parent and Acquisition substantially in
the form attached hereto as Exhibits C-1 and C-2, respectively, of Weil,
Gotshal & Manges LLP, counsel to the Company, to the effect that the Merger
will be treated for federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Code and such opinion shall not have
been withdrawn or modified in any material respect;
(e) Parent shall have received the opinion, based on the
representations of the Company and Parent and Acquisition substantially in
the form attached hereto as Exhibits C-1 and C-2, respectively, of Gibson,
Dunn & Crutcher LLP, counsel to Parent, a copy of which shall have been
provided to the Company, to the effect that the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code and such opinion shall not have been withdrawn or modified
in any material respect; and
(f) there shall have been no events, changes or effects with
respect to Parent or its subsidiaries having a Material Adverse Effect on
Parent.
Section 5.3. Conditions to the Obligations of Parent and Acquisition.
-------------------------------------------------------
The respective obligations of Parent and Acquisition to effect the
Merger are subject to the satisfaction at or prior to the Effective Time of
the following additional conditions:
(a) each of the representations and warranties of the Company
contained in this Agreement that is qualified as to materiality shall be true
and correct at
48
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and as of the Effective Time as if made at and as of such time (other than
representations and warranties that address matters only as of a certain
date, which shall be true and correct as of such certain date) and each of
the representations and warranties that is not so qualified shall be true and
correct in all material respects at and as of the Effective Time as if made
on and as of such date (other than representations and warranties that
address matters only as of a certain date, which shall be true and correct in
all material respects as of such certain date), in each case except as
contemplated or permitted by this Agreement, and Parent shall have received a
certificate signed on behalf of the Company to such effect;
(b) each of the covenants and obligations of the Company to be
performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or
before the Effective Time, and at the Closing the Company shall have
delivered to Parent a certificate to that effect;
(c) Parent shall have received from each affiliate of the Company
referred to in Section 4.13 an executed copy of the letter attached hereto as
Exhibit A and shall have received from each affiliate of Parent referred to
in Section 4.13 an executed copy of the letter attached hereto as Exhibit B;
(d) the Company shall have obtained the consent or approval of
each person whose consent or approval shall be required in order to permit
the succession by the Surviving Corporation pursuant to the Merger to any
material obligation, right or interest of the Company or any subsidiary of
the Company under any material loan or credit agreement, note, mortgage,
indenture, lease or other contract, agreement or instrument, provided, that
--------
obtaining such consents or approvals with respect to the credit facility
agreements set forth in Section 5.3(d) of the Company Disclosure Schedule
shall not be a condition precedent to the respective obligations of Parent
and Acquisition to effect the Merger;
(e) Parent shall have received the opinion, based on the
representations of the Company and Parent and Acquisition substantially in
the form attached hereto as Exhibits C-1 and C-2, respectively, of Gibson,
Dunn & Crutcher LLP, counsel to Parent, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and such opinion shall not have been
withdrawn or modified in any material respect; and
(f) there shall have been no events, changes or effects with
respect to the Company or its subsidiaries having a Material Adverse Effect
on the Company.
49
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ARTICLE 6
TERMINATION; AMENDMENT; WAIVER
Section 6.1. Termination.
-----------
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time, whether before or after approval and
adoption of this Agreement by the Company's stockholders:
(a) by mutual written consent of Parent, Acquisition and the
Company;
(b) by Parent and Acquisition or the Company if (i) any court of
competent jurisdiction in the United States or other United States
Governmental Entity shall have issued a final order, decree or ruling or
taken any other final action restraining, enjoining or otherwise prohibiting
the Merger and such order, decree, ruling or other action is or shall have
become nonappealable or (ii) the Merger has not been consummated by February
29, 2000 (the "Expiration Date"); provided that no party may terminate this
Agreement pursuant to this clause (ii) if such party's failure to fulfill any
of its obligations under this Agreement shall have been the reason that the
Effective Time shall not have occurred on or before said date;
(c) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of Parent or Acquisition set forth in
this Agreement, or if any representation or warranty of Parent or Acquisition
shall have become untrue, in either case such that the conditions set forth
in Section 5.2(a) would be incapable of being satisfied by the Expiration
Date (or as otherwise extended), provided that the Company has not breached
any of its obligations hereunder; (ii) there shall have been a breach by
Parent or Acquisition of any of their respective covenants or agreements
hereunder having a Material Adverse Effect on Parent or materially adversely
affecting (or materially delaying) the consummation of the Merger, and Parent
or Acquisition, as the case may be, has not cured such breach within twenty
business days after notice by the Company thereof, provided that the Company
has not breached any of its obligations hereunder; (iii) the Company shall
have convened a meeting of its stockholders to vote upon the Merger and shall
have failed to obtain the requisite vote of its stockholders; (iv) the
Company Board shall have recommended to the Company's stockholders a Superior
Proposal; (v) the Company Board shall have withdrawn, modified or changed its
approval or recommendation of this Agreement or the Merger or shall have
failed to call, give notice of, convene or hold a stockholders' meeting to
vote upon the Merger, or shall have adopted any resolution to effect any of
the foregoing, provided, that the Company shall not be entitled to terminate
--------
this Agreement pursuant to clause (iv) or (v) hereof unless (x) the Company
has complied with Section 4.4 hereof and (y) prior to such termination, the
Company shall have paid to Parent, in immediately available funds, the
amounts required to be paid pursuant to Section 6.3(a) hereof; (vi) the
Initial Parent Price exceeds the Final Parent Price by an amount in excess of
20% of the Initial Parent Price;
50
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or (vii) there shall have been events, changes or effects with respect to
Parent and its subsidiaries having a Material Adverse Effect on Parent; or
(d) by Parent and Acquisition if (i) there shall have been a
breach of any representation or warranty on the part of the Company set forth
in this Agreement, or if any representation or warranty of the Company shall
have become untrue, in either case such that the conditions set forth in
Section 5.3(a) would be incapable of being satisfied by the Expiration Date
(or as otherwise extended), provided that neither Parent nor Acquisition has
breached any of its obligations hereunder; (ii) there shall have been a
breach by the Company of any of its covenants or agreements hereunder having
a Material Adverse Effect on the Company or materially adversely affecting
(or materially delaying) the consummation of the Merger, and the Company has
not cured such breach within twenty business days after notice by Parent or
Acquisition thereof, provided that neither Parent nor Acquisition has
breached any of its obligations hereunder; (iii) the Company Board shall have
recommended to the Company's stockholders a Superior Proposal; (iv) the
Company Board shall have withdrawn, modified or changed its approval or
recommendation of this Agreement or the Merger or shall have failed to call,
give notice of, convene or hold a stockholders' meeting to vote upon the
Merger, or shall have adopted any resolution to effect any of the foregoing;
(v) the Company shall have convened a meeting of its stockholders to vote
upon the Merger and shall have failed to obtain the requisite vote of its
stockholders; or (vi) there shall have been events, changes or effects with
respect to the Company and its subsidiaries having a Material Adverse Effect
on the Company.
Section 6.2. Effect of Termination.
---------------------
In the event of the termination and abandonment of this Agreement
pursuant to Section 6.1, this Agreement shall forthwith become void and have
no effect, without any liability on the part of any party hereto or its
affiliates, directors, officers or stockholders, other than the provisions of
this Section 6.2 and Sections 4.8(c) and 6.3 hereof. Nothing contained in
this Section 6.2 shall relieve any party from liability for any breach of
this Agreement.
Section 6.3. Fees and Expenses.
-----------------
(a) In the event that this Agreement shall be terminated pursuant
to:
(i) Sections 6.1(c)(iv) or (v) or 6.1(d)(iii) or (iv);
(ii) Sections 6.1(d)(i) or (ii) and, within twelve months
thereafter, the Company enters into an agreement with respect to a Third
Party Acquisition, or a Third Party Acquisition occurs, involving any party
(or any affiliate thereof) (x) with which the Company (or its agents) had
negotiations with a view to a Third Party Acquisition, (y) to which the
Company (or its agents) furnished information with a view to a Third Party
Acquisition or (z) which had submitted a proposal or expressed an interest in
a Third Party Acquisition, in the case of each of clauses (x), (y) and (z)
after the date hereof and prior to such termination; or
51
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(iii) Sections 6.1(c)(iii) or 6.1(d)(v) and, at the time of
the Company stockholders' meeting at which the Company failed to obtain the
requisite vote, as applicable, either (x) there shall be outstanding an offer
by a Third Party to consummate, or there shall have been under consideration
by the Company or there shall have been publicly announced a plan or proposal
with respect to, a Third Party Acquisition or (y) any Third Party shall have
publicly reported beneficial ownership (whether or not such report disclaims
beneficial ownership) of 20% or more of the outstanding Shares (unless such
Third Party is the person named on Section 4.4(c) of the Company Disclosure
Schedule, in which event 20% shall be deemed to be replaced by 30% for
purposes of this clause (y));
Parent and Acquisition would suffer direct and substantial damages, which
damages cannot be determined with reasonable certainty. To compensate Parent
and Acquisition for such damages, the Company shall pay to Parent the amount
of $16.5 million as liquidated damages immediately upon the occurrence of the
event described in this Section 6.3(a) giving rise to such damages. It is
specifically agreed that the amount to be paid pursuant to this Section
6.3(a) represents liquidated damages and not a penalty.
(b) Upon the termination of this Agreement pursuant to Sections
6.1(c)(iii) or (vi) or 6.1(d)(i), (ii) or (v), in addition to any other
remedies that Parent or Acquisition may have as a result of such termination,
the Company shall reimburse Parent, Acquisition and their affiliates (not
later than ten business days after submission of statements therefor) for all
documented out-of-pocket fees and expenses, actually and reasonably incurred
by any of them or on their behalf in connection with the Merger and the
consummation of all transactions contemplated by this Agreement (including,
without limitation, fees payable to investment bankers, counsel to any of the
foregoing, and accountants), up to an aggregate of $5 million, which amount
shall be credited against the fee payable pursuant to Section 6.3(a), if any.
(c) Upon the termination of this Agreement pursuant to Section
6.1(c)(i) or (ii), in addition to any other remedies that the Company may
have as a result of such termination, Parent shall reimburse the Company and
their affiliates (not later than ten business days after submission of
statements therefor) for all documented out-of-pocket fees and expenses,
actually and reasonably incurred by any of them or on their behalf in
connection with the Merger and the consummation of all transactions
contemplated by this Agreement (including, without limitation, fees payable
to investment bankers, counsel to any of the foregoing, and accountants), up
to an aggregate of $5 million.
(d) Except as specifically provided in this Section 6.3, each
party shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby.
Section 6.4. Amendment.
---------
This Agreement may be amended by action taken by the Company, Parent and
Acquisition at any time before or after approval of the Merger by the
stockholders of the Company but, after any such approval, no amendment shall
52
<PAGE>
be made which requires the approval of such stockholders under applicable law
without such approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of the parties hereto.
Section 6.5. Extension; Waiver.
-----------------
At any time prior to the Effective Time, each party hereto may (i)
extend the time for the performance of any of the obligations or other acts
of the other party, (ii) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document,
certificate or writing delivered pursuant hereto or (iii) waive compliance by
the other party with any of the agreements or conditions contained herein.
Any agreement on the part of any party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf
of such party. The failure of any party hereto to assert any of its rights
hereunder shall not constitute a waiver of such rights.
ARTICLE 7
MISCELLANEOUS
Section 7.1. Nonsurvival of Representations and Warranties.
---------------------------------------------
The representations and warranties made herein shall not survive beyond
the Effective Time or a termination of this Agreement. This Section 7.1
shall not limit any covenant or agreement of the parties hereto which by its
terms requires performance after the Effective Time.
Section 7.2. Entire Agreement; Assignment.
----------------------------
This Agreement and the Confidentiality Agreement (a) constitute the
entire agreement between the parties hereto with respect to the subject
matter hereof and supersede all prior or contemporaneous agreements and
understandings, both written and oral, between the parties with respect to
the subject matter hereof and thereof and (b) shall not be assigned by
operation of law or otherwise; provided, however, that Acquisition may assign
-------- -------
any or all of its rights and obligations under this Agreement to any direct,
wholly-owned subsidiary of Parent, but no such assignment shall relieve
Acquisition of its obligations hereunder if such assignee does not perform
such obligations.
Section 7.3. Validity.
--------
If any provision of this Agreement, or the application thereof to any
person or circumstance, is held invalid or unenforceable, the remainder of
this Agreement, and the application of such provision to other persons or
circumstances, shall not be affected thereby and, to such end, the provisions
of this Agreement are agreed to be severable.
Section 7.4. Notices.
-------
All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by facsimile or by
overnight courier to each other party as follows:
53
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if to Parent or Acquisition: Computer Sciences Corporation
2100 East Grand Avenue
El Segundo, CA 90245
Attention: Hayward D. Fisk, Esq.
Paul T. Tucker
with a copy to: Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, CA 90071
Attention: Ronald S. Beard, Esq.
if to the Company to: Nichols Research Corporation
4090 South Memorial Parkway
Huntsville, Alabama 35815
Attention: Chris H. Horgen
with a copy to: Weil, Gotshal & Manges LLP
765 Fifth Avenue
New York, NY 10153
Attention: Frederick S. Green
or to such other address as the person to which notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section 7.5. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to the principles of conflicts
of law thereof.
Section 7.6. Descriptive Headings.
--------------------
The descriptive headings herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
Section 7.7. Parties in Interest.
-------------------
This Agreement shall be binding upon and inure solely to the benefit of
each party hereto and its successors and permitted assigns, and except as
provided in Sections 1.11, 4.11 and 7.2, nothing in this Agreement, express
or implied, is intended to or shall confer upon any other person any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
Section 7.8. Certain Definitions.
-------------------
For the purposes of this Agreement, the term:
(a) "affiliate" of a person means (except as otherwise provided in
Sections 2.18, 3.19 and 4.13) a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
54
<PAGE>
(b) "beneficial ownership" shall have the meaning set forth in
Rule 13d-3 promulgated under the Exchange Act;
(c) "business day" means any day other than a day on which the
NYSE is closed;
(d) "capital stock" means common stock, preferred stock,
partnership interests, limited liability company interests or other ownership
interests entitling the holder thereof to vote with respect to matters
involving the issuer thereof;
(e) "knowledge" or "known" means, with respect to any matter in
question, if an executive officer of the Company or Parent, as the case may
be, has actual knowledge of such matter;
(f) "person" means an individual, corporation, partnership, joint
venture, limited liability company, association, trust, unincorporated
organization or other legal entity; and
(g) "subsidiary" or "subsidiaries" of the Company, Parent, the
Surviving Corporation or any other person, means any corporation,
partnership, joint venture, limited liability company, association, trust,
unincorporated association or other legal entity of which the Company,
Parent, the Surviving Corporation or any such other person, as the case may
be (either alone or through or together with any other subsidiary), owns,
directly or indirectly, 50% or more of the capital stock, the holders of
which are generally entitled to vote for the election of the board of
directors or other governing body of such legal entity, or, with respect to
any entity without capital stock, 50% or more of the equity interests or 50%
or more of the voting interests in such entity.
Section 7.9. Personal Liability.
------------------
This Agreement shall not create or be deemed to create or permit any
personal liability or obligation on the part of any direct or indirect
stockholder of the Company or Parent or any officer, director, employee,
agent, representative or investor of or in any party hereto.
Section 7.10. Specific Performance.
--------------------
The parties hereby acknowledge and agree that the failure of any party
to perform its agreements and covenants hereunder, including its failure to
take all actions as are necessary on its part to consummate the Merger, will
cause irreparable injury to the other parties for which damages, even if
available, will not be an adequate remedy. Accordingly, each party hereby
consents to the issuance of injunctive relief by any court of competent
jurisdiction to compel performance of such party's obligations and to the
granting by any court of the remedy of specific performance of its
obligations hereunder; provided, however, that, if Parent is entitled to
receive and in fact receives any payment or reimbursement of expenses
pursuant to Sections 6.3(a) or (b), it shall not be entitled to specific
performance to compel the consummation of the Merger.
55
<PAGE>
Section 7.11. Counterparts.
------------
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
56
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IN WITNESS WHEREOF, each of the parties has caused this Agreement and
Plan of Merger to be duly executed on its behalf as of the day and year first
above written.
NICHOLS RESEARCH CORPORATION
By: /s/ Chris H. Horgen
-------------------------------
Name: Chris H. Horgen
Title: Chairman
COMPUTER SCIENCES CORPORATION
By: /s/ Van B. Honeycutt
-------------------------------
Name: Van B. Honeycutt
Title: Chairman
NEVADA ACQUISITION CORPORATION
By: /s/ Leon J. Level
-------------------------------
Name: Leon J. Level
Title: Vice President
57
EXHIBIT 99.1
Contact: Bill Lackey FOR IMMEDIATE RELEASE
Director, Investor Relations Moved On PR Newswire
Computer Sciences Corporation September 20, 1999
310.615.1700
[email protected]
Frank Pollare
Director, Public Information
Computer Sciences Corporation
310.615.1601
[email protected]
Pat L. Hattox
Corporate Vice President, Investor Relations
Nichols Research Corporation
256.885.7447
[email protected]
NICHOLS RESEARCH TO MERGE INTO CSC
Synergies In The U.S. Federal, Healthcare And Commercial Markets
To Be Realized
EL SEGUNDO, CA and HUNTSVILLE, AL, Sept. 20 -- Computer Sciences
Corporation (NYSE: CSC) and Nichols Research Corporation (NASDAQ: NRES) today
announced that they have signed a definitive agreement for Nichols to merge
into CSC in a stock-for-stock transaction accounted for as a pooling of
interests.
The merger with Nichols, a leading information technology (I/T) services
company, enhances CSC's position in the U.S. federal, healthcare and
commercial markets.
Each share of Nichols will be converted into .423 shares of CSC. As
described below, this exchange ratio is subject to adjustment based upon the
average closing price of CSC stock during a specified period prior to the
consummation of the transaction. At an exchange ratio of .423, the
stockholders of Nichols will receive approximately 6,080,000 shares of CSC,
which had a value of $391 million based on CSC's closing
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Computer Sciences Corporation - page 2 September 20, 1999
price on September 17, 1999. CSC will also assume all of Nichols'
outstanding stock options at the same exchange ratio. The merger is expected
to be tax-free to Nichols stockholders.
The transaction, which has been unanimously approved by the boards of
directors of both companies, requires approval by the shareholders of
Nichols, as well as customary regulatory approvals.
At an exchange ratio of .423, the transaction, before synergies and
special merger-related charges, is expected to be accretive to CSC's earnings
per share for the fiscal year ending March 31, 2000. CSC expects to realize
the benefit of the synergies in the following fiscal year.
Nichols, which has approximately 3,000 employees in 30 U.S. locations,
reported revenues of $455 million for the 12 months ended May 31, 1999.
"Nichols Research complements three of our key business sectors," said
Van B. Honeycutt, CSC chairman, president and CEO. "Their services are well
respected in the U.S. federal defense and intelligence areas as well as
within other U.S. civil agencies. In addition, their technology offerings
for the healthcare market expand and complement our Healthcare Group, while
in the commercial consulting area, Nichols' professional staff will augment
our capabilities to develop enterprise-wide solutions for corporate clients."
"Joining CSC benefits our clients, employees and shareholders alike,"
said Chris Horgen, chairman and CEO of Nichols. "The combination provides us
the resources to offer an even higher level of quality services for our
clients, while giving our employees broader opportunities to enrich their
professional growth. It also gives our shareholders an outstanding return on
their Nichols investment."
Complementary Capabilities in Key CSC Markets
In the U.S. federal market, which accounts for approximately 80 percent
of Nichols' revenues, the company provides the U.S. Army, Air Force, Navy and
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Computer Sciences Corporation - page 3 September 20, 1999
intelligence agencies with extensive systems engineering, information
technology and technical assistance for aviation, missile and space defense
systems. In addition, Nichols and CSC have substantial intelligence
activities in the Washington, D.C. area. The combination of the two firms
will result in a large pool of highly qualified individuals with high-level
security clearances. Nichols has a total U.S. federal contract backlog of
over $1.2 billion.
Nichols is a leading provider of defense technology services for the
Huntsville- based Redstone Arsenal, which is home to several major U.S. Army
organizations. Redstone has an aggregate annual budget authorization
exceeding $15 billion, one of the largest in the U.S. government.
CSC already employs more than 2,300 I/T professionals in the Huntsville
region supporting government and commercial customers, while Nichols has over
1,600 professional staff in the region.
"The combined resources will provide us with a powerful workforce in the
region with the depth and breadth to support current and future client
requirements, particularly as the U. S. government considers additional
investments in our missile defense systems," Honeycutt said. "The rate of
I/T spending in the intelligence sector and in some pockets of the defense
area continues to grow and offer good margins. Nichols' systems engineering
capabilities complement and expand our existing Department of Defense
business and enhance our competitiveness in the aviation, missile and space
defense areas of the federal market.
"We also expect Huntsville to be one of the first Army organizations to
outsource its I/T infrastructure, and the combination of CSC and Nichols will
place us in a strong position to capture this work."
In the healthcare market, which accounts for approximately 10 percent of
Nichols' revenues, the combination of the companies' expertise will enhance
CSC's strong position in the claims processing and applications outsourcing
areas. Nichols uses
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Computer Sciences Corporation - page 4 September 20, 1999
a software platform for claims processing delivered through an Internet-based
network while CSC has been offering solutions based on its Power MHS mid-
range platform.
"The addition of Nichols' healthcare capabilities supports several of
our growth strategies," Honeycutt explained. "First, it strengthens our
offerings and positions CSC as one of the leading I/T service providers in
the managed care market segment. Second, with these enhanced capabilities,
we continue to capitalize on the growing trend for companies to outsource
their business processes and applications software needs."
Nichols supports a wide array of health insurance and provider
organizations in the managed care and practice management segments of the
healthcare market.
Finally, in the commercial consulting and systems integration sector,
approximately 220 Nichols professionals will join CSC and expand the
company's expertise in developing and implementing enterprise-wide solutions
for corporate and state government clients. These professionals are
currently fully billable on existing long-term projects for a variety of
commercial and state and local government clients. Nichols' commercial
consulting activities represent approximately 10 percent of the company's
revenues.
"At a time when corporations and organizations are exploring ways to
improve their front and back office functions to achieve strategic and
operational objectives, adding highly qualified I/T professionals strengthens
CSC's ability to develop effective solutions for our clients," Honeycutt
said.
The three Nichols units complement CSC's Federal Sector, Healthcare
Group and Consulting Group.
Description of Merger Exchange Ratio Adjustment
As described above, each share of Nichols will be converted into .423
shares of CSC. This exchange ratio is subject to adjustment based upon the
average closing price of CSC stock on 15 randomly chosen days during the 20-
trading day period ending four trading days prior to the meeting of Nichols'
stockholders to vote on the merger. If this
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Computer Sciences Corporation - page 5 September 20, 1999
average CSC stock price is greater than $72.81, the exchange ratio will be
equal to $30.80 divided by such average price. If the average CSC stock
price is between $59.57 and $52.96, the exchange ratio will be equal to
$25.20 divided by such average price. If the average CSC stock price is less
than $52.96, the exchange ratio will be .476 shares of CSC for each share of
Nichols.
About CSC
Computer Sciences Corporation helps clients in industry and government
use information technology to achieve strategic and operational objectives.
With 52,000 employees in more than 700 offices worldwide, the company tailors
solutions from a broad suite of integrated service and technology offerings,
including e-business strategies and technologies; management and I/T
consulting; systems development and integration; application software; and
I/T and business process outsourcing.
Since its formation in 1959, CSC has been known for its flexibility in
its relationships with clients. Through numerous agreements with hardware
and software technology firms, the company is able to identify and manage
solutions specifically tailored to each client's needs. CSC had revenues of
$8 billion for the twelve months ended July 2, 1999. Its headquarters are in
El Segundo, California. For more information, visit the company's web site
at www.csc.com.
- 0 -
The description of the transaction in this press release is necessarily
incomplete. For a complete description, please refer to the Agreement and
Plan of Merger, which will be attached as an exhibit to the Current Report on
Form 8-K to be filed with the Securities and Exchange Commission today.
All statements in this press release that do not directly and exclusively
relate to historical facts constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements represent the intentions, plans, expectations and beliefs of CSC
and Nichols, and are subject to risks, uncertainties and other factors, many
of which are outside their control. These factors could cause actual results
to differ materially from such forward-looking statements. For a description
of these factors, see the section titled "Management's Discussion and
Analysis of Financial Conditions and Results of Operations" in CSC's Annual
Report on Form 10-K for the fiscal year ended April 2, 1999 and in Nichols'
Annual Report on Form 10-K for the fiscal year ended August 31, 1998.
