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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: June 25, 1999
S3 INCORPORATED
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(Exact name of registrant as specified in its charter)
Delaware 0-21126 77-0204341
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification Number)
2841 Mission College Boulevard, Santa Clara, CA 95054
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(Address of principal executive offices) (Zip Code)
(408) 588-8000
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(Registrant's telephone number,
including area code)
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Item 5. Other Events.
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S3 Incorporated, a Delaware corporation (the "Registrant" or "S3") and
Diamond Multimedia Systems, Inc., a Delaware corporation ("Diamond"), have
entered into an Agreement and Plan of Merger, dated as of June 21, 1999 (the
"Merger Agreement"), whereby a wholly-owned subsidiary of S3 ("Merger Sub") will
be merged with and into Diamond, with Diamond as the surviving entity (the
"Merger").
As a result of the Merger, the outstanding shares of common stock,
$0.001 par value per share, of Diamond (the "Diamond Common Stock") will be
converted into shares of common stock, $0.0001 par value per share, of S3 (the
"S3 Common Stock") at an exchange ratio equal to 0.52 share of S3 Common Stock
for each share of Diamond Common Stock. As a result of the Merger, Diamond will
become a wholly-owned subsidiary of S3.
The closing of the Merger is subject to certain conditions, including
the approval of the stockholders of Diamond and S3 and the expiration or early
termination of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act.
S3 and Diamond entered into a Credit Agreement, dated as of June 10,
1999, and amended on June 14, 1999 (the "Credit Agreement"), pursuant to which
S3 agreed to make three (3) separate loans to Diamond in amounts not exceeding
$20.0 million in the aggregate. As of the date hereof, S3 has made two of those
three loans to Diamond in the aggregate amount of $10.0 million. In connection
with the aforesaid loans, Diamond issued to S3 three (3) warrants to purchase an
aggregate of 4,597,871 shares of Diamond Common Stock at exercise prices ranging
from $4.18 to $4.471875 per share.
Copies of the Merger Agreement and the Credit Agreement are attached as
exhibits to this report and are incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
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(a) Exhibits.
2.1 Agreement and Plan of Merger between Diamond
Multimedia Systems, Inc. and S3 Incorporated,
dated as of June 21, 1999.
10.1 (1) Credit Agreement, dated as of June 11, 1999, by
and between Diamond Multimedia Systems, Inc. and
S3 Incorporated.
10.2 (2) First Amendment to Credit Agreement, dated as
of June 14, 1999, by and between Diamond
Multimedia Systems, Inc. and S3 Incorporated.
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(1) Incorporated by reference to Exhibit 2.1 to the Schedule 13D filed by
Registrant (as the Reporting Person) on June 25, 1999 in connection
with securities issued by Diamond Multimedia Systems, Inc.
(2) Incorporated by reference to Exhibit 2.2 to the Schedule 13D filed by
Registrant (as the Reporting Person) on June 25, 1999 in connection
with securities issued by Diamond Multimedia Systems, Inc.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: June 25, 1999.
S3 INCORPORATED
By /s/ Walter D. Amaral
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Walter D. Amaral
Senior Vice President, Finance
Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
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2.1 Agreement and Plan of Merger between Diamond
Multimedia Systems, Inc. and S3 Incorporated,
dated as of June 21, 1999.
10.1 (1) Credit Agreement, dated as of June 11, 1999, by
and between Diamond Multimedia Systems, Inc. and
S3 Incorporated.
10.2 (2) First Amendment To Credit Agreement, dated as of
June 14, 1999, by and between Diamond
Multimedia Systems, Inc. and S3 Incorporated.
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(1) Incorporated by reference to Exhibit 2.1 to the Schedule 13D filed by
Registrant (as the Reporting Person) on June 25, 1999 in connection
with securities issued by Diamond Multimedia Systems, Inc.
(2) Incorporated by reference to Exhibit 2.2 to the Schedule 13D filed by
Registrant (as the Reporting Person) on June 25, 1999 in connection
with securities issued by Diamond Multimedia Systems, Inc.
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Exhibit 2.1
AGREEMENT AND PLAN
OF MERGER
BETWEEN
DIAMOND MULTIMEDIA SYSTEMS, INC.
AND
S3 INCORPORATED
Dated as of June 21, 1999
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TABLE OF CONTENTS
ARTICLE I
THE MERGER
Section 1.1 The Merger.....................................................1
Section 1.2 Conversion of Shares...........................................2
Section 1.3 Surrender and Payment..........................................3
Section 1.4 Stock Options..................................................4
Section 1.5 Adjustments....................................................5
Section 1.6 Fractional Shares..............................................5
Section 1.7 Withholding Rights.............................................5
Section 1.8 Lost Certificates..............................................6
ARTICLE II
CERTAIN GOVERNANCE MATTERS
Section 2.1 Acquirer Board of Directors.................... ...............6
Section 2.2 Acquirer Officers..............................................6
Section 2.3 Certificate of Incorporation of the Surviving Corporation......6
Section 2.4 By-Laws of the Surviving Corporation...........................6
Section 2.5 Directors and Officers of the Surviving Corporation. ..........6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization and Qualification.................................7
Section 3.2 Capitalization.................................................7
Section 3.3 Authority......................................................8
Section 3.4 Governmental Authorization.....................................8
Section 3.5 Non-Contravention..............................................9
Section 3.6 Subsidiaries...................................................9
Section 3.7 SEC Filings.................................................. 10
Section 3.8 Financial Statements. ....................................... 10
Section 3.9 Disclosure Documents......................................... 10
Section 3.11 No Undisclosed Material Liabilities.......................... 11
Section 3.12 Litigation................................................... 12
Section 3.13 Taxes........................................................ 12
Section 3.14 Employee Benefit Plans....................................... 12
Section 3.15 Compliance with Laws......................................... 14
Section 3.16 Finders' or Advisors' Fees................................... 14
Section 3.17 Environmental Matters........................................ 14
Section 3.18 Labor Matters................................................ 14
Section 3.19 Title to Property............................................ 14
Section 3.20 Leaseholds................................................... 15
Section 3.21 Management Payments.......................................... 15
Section 3.22 Intellectual Property........................................ 15
Section 3.23 Insurance.................................................... 16
Section 3.25 Opinion of Financial Advisor................................. 16
Section 3.26 Tax Treatment................................................ 16
Section 3.27 Takeover Statutes............................................ 16
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIRER
Section 4.1 Organization and Qualification............................... 16
Section 4.2 Capitalization............................................... 17
Section 4.3 Authority.................................................... 18
Section 4.4 Governmental Authorization................................... 18
Section 4.5 Non-Contravention............................................ 18
Section 4.6 Subsidiaries................................................. 18
Section 4.7 SEC Filings.................................................. 19
Section 4.8 Financial Statements. ....................................... 19
Section 4.9 Disclosure Documents......................................... 20
Section 4.11 No Undisclosed Material Liabilities.......................... 21
Section 4.12 Litigation................................................... 21
Section 4.13 Taxes........................................................ 21
Section 4.14 Employee Benefit Plans....................................... 21
Section 4.15 Compliance with Laws......................................... 23
Section 4.16 Finders' or Advisors' Fees................................... 23
Section 4.17 Environmental Matters........................................ 23
Section 4.18 Labor Matters................................................ 23
Section 4.19 Title to Property............................................ 23
Section 4.20 Leaseholds................................................... 23
Section 4.21 Management Payments.......................................... 24
Section 4.22 Intellectual Property........................................ 24
Section 4.23 Insurance.................................................... 24
Section 4.25 Opinion of Financial Advisor................................. 25
Section 4.26 Tax Treatment................................................ 25
ARTICLE V
COVENANTS OF THE COMPANY
Section 5.1 Conduct of Business of the Company.......................... 25
Section 5.2 No Solicitation............................................. 26
ARTICLE VI
COVENANTS OF ACQUIRER
Section 6.1 Conduct of Business of Acquirer............................. 27
Section 6.2 No Solicitation............................................. 28
Section 6.3 Indemnification............................................. 29
Section 6.4 NNM Listings................................................ 30
Section 7.1 Access to Information....................................... 30
Section 7.2 Registration Statement and Proxy Statement.................. 30
Section 7.3 Stockholders' Meetings...................................... 31
Section 7.4 Reasonable Efforts; Other Actions........................... 31
Section 7.5 Public Announcements........................................ 31
Section 7.6 Notification of Certain Matters............................. 31
Section 7.7 Expenses.................................................... 32
Section 7.8 Affiliates.................................................. 32
Section 7.9 Certain Benefit Plans....................................... 32
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Section 7.10 Formation of Merger Subsidiary.............................. 32
ARTICLE VIII
CONDITIONS TO THE MERGER
Section 8.1 Conditions to the Obligations of Each Party................. 33
Section 8.2 Conditions to the Obligations of Acquirer and Merger
Subsidiary.............................................. 33
Section 8.3 Conditions to the Obligations of the Company................ 34
ARTICLE IX
TERMINATION
Section 9.1 Termination................................................. 35
Section 9.2 Termination by Acquirer..................................... 35
Section 9.3 Termination by the Company.................................. 36
Section 9.4 Procedure for Termination................................... 36
Section 9.5 Effect of Termination....................................... 37
ARTICLE X
MISCELLANEOUS
Section 10.1 Notices..................................................... 38
Section 10.2 Non-Survival of Representations and Warranties.............. 39
Section 10.3 Amendments; No Waivers...................................... 39
Section 10.4 Successors and Assigns...................................... 39
Section 10.5 Governing Law............................................... 39
Section 10.6 Jurisdiction................................................ 39
Section 10.7 Waiver of Jury Trial........................................ 40
Section 10.8 Counterparts; Effectiveness................................. 40
Section 10.9 Entire Agreement............................................ 40
Section 10.10 Captions.................................................... 40
Section 10.11 Severability................................................ 40
SCHEDULES
Schedule 1.4 Company Stock Option Plans
Schedule 8.1(d) Required Third Party Consents
EXHIBITS
Exhibit 7.8 Form of Affiliate Agreement
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 21, 1999, (the
"Agreement"), by and between DIAMOND MULTIMEDIA SYSTEMS, INC., a Delaware
corporation (the "Company") and S3 INCORPORATED, a Delaware corporation
("Acquirer").
RECITALS
WHEREAS, Acquirer will cause a wholly owned Delaware corporation to be
formed as soon as practicable following the date hereof ("Merger Subsidiary");
WHEREAS, the respective Boards of Directors of Acquirer and the Company
have approved this Agreement, and deem it advisable and in the best interests of
each corporation and its respective stockholders to consummate the merger of
Merger Subsidiary with and into the Company upon the terms and subject to the
conditions of this Agreement;
WHEREAS, pursuant to the Merger, among other things, and subject to the
terms and conditions of this Agreement, all of the issued and outstanding shares
of capital stock of the Company shall be converted into the right to receive
shares of voting common stock of Acquirer, and all outstanding options to
purchase shares of common stock of the Company shall be assumed by Acquirer;
WHEREAS, it is intended that the Merger qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code") and be accounted for as a purchase transaction;
and
WHEREAS, each of the parties hereto desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated hereby:
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. (a) In accordance with the provisions of this
Agreement and the General Corporation Law of the State of Delaware (the
"Delaware Law"), at the Effective Time, Merger Subsidiary shall be merged (the
"Merger") with and into the Company, whereupon the separate existence of Merger
Subsidiary shall cease and the Company shall be the surviving corporation
(hereinafter sometimes called the "Surviving Corporation") in the Merger and a
wholly owned subsidiary of Acquirer.
(b) As soon as practicable after but no later than two business days
following satisfaction or, to the extent permitted hereunder, waiver of all
conditions to the Merger, the Company and Merger Subsidiary shall file a
certificate of merger with the Secretary of State of the State of Delaware and
make all other filings or recordings required by Delaware Law in connection with
the Merger. The Merger shall become effective at such time as the certificate of
merger is duly filed with the Secretary of State of the State of Delaware or at
such later time as is specified in the certificate of merger (the "Effective
Time").
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(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, property, powers and franchises and be
subject to all of the restrictions, disabilities, debts and duties of the
Company and Merger Subsidiary, all as provided under the Delaware Law.
(d) Unless this Agreement is earlier terminated pursuant to Section 9,
the closing of the Merger (the "Closing") shall take place at the offices of
Pillsbury Madison & Sutro LLP, 2550 Hanover Street, Palo Alto, California as
soon as practicable, but in any event within two business days after the day on
which the last to be fulfilled or waived of the conditions set forth in Article
VIII (other than those conditions that by their nature are to be fulfilled at
the Closing, but subject to the fulfillment or waiver of such conditions) shall
be fulfilled or waived in accordance with this Agreement or at such other time,
place and date as is mutually agreed to in writing by the parties hereto. The
date of the Closing is referred to in this Agreement as the "Closing Date."
Section 1.2 Conversion of Shares. (a) As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof:
(i) Each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become one
validly issued, fully paid and nonassessable share of common stock, par value
$.001 per share, of the Surviving Corporation with the same rights, powers and
privileges as the shares so converted, and such shares shall constitute the only
outstanding shares of capital stock of the Surviving Corporation. From and after
the Effective Time, all certificates representing the common stock of Merger
Subsidiary shall be deemed for all purposes to represent the number of shares of
common stock of the Surviving Corporation into which they were converted in
accordance with this Section 1.2(a)(i).
(ii) Each share of common stock, par value $.001 per share, of the
Company (a "Company Share") held by the Company as treasury stock or owned by
Acquirer or any subsidiary of Acquirer, shall be cancelled, and no payment shall
be made with respect thereto.
(iii) Each Company Share outstanding immediately prior to the Effective
Time shall, except as otherwise provided in Section 1.2(a)(ii), by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive .052 shares (the "Exchange Ratio") of validly issued,
fully paid and nonassessable common stock, par value $.0001 per share, of
Acquirer ("Acquirer Common Stock").
(b) From and after the Effective Time, all Company Shares converted in
accordance with Section 1.2(a)(iii) shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such Company Shares shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration (as defined below), as applicable, and any dividends payable
pursuant to Section 1.3(f).
(c) The Acquirer Common Stock to be received as consideration pursuant
to the Merger by each holder of Company Shares (together with cash in lieu of
fractional shares of Acquirer Common Stock as specified below) is referred to
herein as the "Merger Consideration."
(d) For purposes of this Agreement, the word "Subsidiary" when used with
respect to any Person means any other Person, whether incorporated or
unincorporated, of which (i) more than fifty percent (50%) of the securities or
other ownership interests or (ii) securities or other interests having by their
terms ordinary voting power to elect more than fifty percent (50%) of the board
of directors or others performing similar functions with respect to such
corporation or other organization, is directly owned
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or controlled by such Person or by any one or more of its Subsidiaries. For
purposes of this Agreement, "Person" means an individual, a corporation, a
limited liability company, a partnership, an association, a trust or any other
entity or organization, including a government or political subdivision or any
agency or instrumentality thereof.
Section 1.3 Surrender and Payment. (a) Prior to the Effective Time,
Acquirer shall appoint an agent reasonably acceptable to the Company (the
"Exchange Agent") for the purpose of exchanging certificates representing
Company Shares (the "Certificates") for the Merger Consideration. Acquirer will
make available to the Exchange Agent, as needed, the Merger Consideration to be
paid in respect of the Company Shares. Promptly after the Effective Time,
Acquirer will send, or will cause the Exchange Agent to send, to each holder of
record at the Effective Time of Company Shares a letter of transmittal for use
in such exchange (which shall specify that the delivery shall be effected, and
risk of loss and title shall pass, only upon proper delivery of the Certificates
to the Exchange Agent) in such form as the Company and Acquirer may reasonably
agree, for use in effecting delivery of Company Shares to the Exchange Agent.
(b) Each holder of Company Shares that have been converted into a right
to receive the Merger Consideration, upon surrender to the Exchange Agent of a
Certificate, together with a properly completed letter of transmittal, will be
entitled to receive the Merger Consideration in respect of the Company Shares
represented by such Certificate. Until so surrendered, each such Certificate
shall, after the Effective Time, represent for all purposes only the right to
receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid to a Person
other than the Person in whose name the Certificate is registered, it shall be a
condition to such payment that the Certificate so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the Person
requesting such payment shall pay to the Exchange Agent any transfer or other
taxes required as a result of such payment to a Person other than the registered
holder of such Certificate or establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no further registration of
transfers of Company Shares. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be canceled and exchanged for
the consideration provided for, and in accordance with the procedures set forth,
in this Article I.
(e) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 1.3(a) that remains unclaimed by the holders
of Company Shares one year after the Effective Time shall be returned to
Acquirer, upon demand, and any such holder who has not exchanged such holder's
Company Shares for the Merger Consideration in accordance with this Section 1.3
prior to that time shall thereafter look only to Acquirer for payment of the
Merger Consideration in respect of such holder's Company Shares. Notwithstanding
the foregoing, Acquirer shall not be liable to any holder of Company Shares for
any amount paid to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(f) No dividends or other distributions with respect to Acquirer Common
Stock issued in the Merger shall be paid to the holder of any unsurrendered
Certificates until such Certificates are surrendered as provided in this Section
1.3. Subject to the effect of applicable laws, following such surrender, there
shall be paid, without interest, to the record holder of the Acquirer Common
Stock issued in exchange therefor (i) at the time of such surrender, all
dividends and other distributions payable in respect of such Acquirer Common
Stock with a record date after the Effective Time and a payment date on or prior
to the date of such surrender and not previously paid and (ii) at the
appropriate payment
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date, the dividends or other distributions payable with respect to such Acquirer
Common Stock with a record date after the Effective Time but with a payment date
subsequent to such surrender. For purposes of dividends or other distributions
in respect of Acquirer Common Stock, all Acquirer Common Stock to be issued
pursuant to the Merger (but not options therefor issued pursuant to Section 1.4
unless actually exercised at the Effective Time) shall be entitled to dividends
pursuant to the immediately preceding sentence as if issued and outstanding as
of the Effective Time.
Section 1.4 Stock Options. (a) At the Effective Time, each outstanding
option to purchase Company Shares (a "Company Stock Option") granted under the
Company's plans identified in the Schedule 1.4 as being the only compensation or
benefit plans or agreements pursuant to which Company Shares may be issued
(collectively, the "Company Stock Option Plans"), whether vested or not vested,
shall be deemed assumed by Acquirer and shall thereafter be deemed to constitute
an option to acquire, on the same terms and conditions (including any provisions
for acceleration) as were applicable under such Company Stock Option prior to
the Effective Time (in accordance with the past practice of the Company with
respect to interpretation and application of such terms and conditions), the
number (rounded down to the nearest whole number) of shares of Acquirer Common
Stock determined by multiplying (x) the number of Company Shares subject to such
Company Stock Option immediately prior to the Effective Time by (y) the Exchange
Ratio, at a price per share of Acquirer Common Stock (rounded up to the nearest
whole cent) equal to (A) the exercise price per Company Share otherwise
purchasable pursuant to such Company Stock Option divided by (B) the Exchange
Ratio. The parties intend that the conversion of the Company Stock Options
hereunder will meet the requirements of Section 424(a) of the Code and this
Section 1.4(a) shall be interpreted consistent with such intention. Subject to
the terms of the Company Stock Options and the documents governing such Company
Stock Options, the Merger will not terminate or accelerate any Company Stock
Option or any right of exercise, vesting or repurchase relating thereto with
respect to Acquirer Common Stock acquired upon exercise of such assumed Company
Stock Option. Holders of Company Stock Options will not be entitled to acquire
Company Shares after the Merger. In addition, prior to the Effective Time, the
Company will make any amendments to the terms of such stock option or
compensation plans or arrangements that are necessary to give effect to the
transactions contemplated by this Section 1.4. Promptly following the Effective
Time, Acquirer will issue to each holder of an outstanding Company Stock Option
a document evidencing the foregoing assumption of such Company Stock Option by
Acquirer.
(b) Acquirer shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Acquirer Common Stock for delivery
pursuant to the terms set forth in this Section 1.4.
(c) At the Effective Time, each outstanding purchase right with respect
to all open offering periods under the Company's Employee Stock Purchase Plan
(each an "Assumed Purchase Right") shall be assumed by Parent. Each Assumed
Purchase Right shall continue to have, and be subject to, the terms and
conditions set forth in the Company's Employee Stock Purchase Plan and the
documents governing the Assumed Purchase Right, except that the purchase price
of such shares of Acquirer Common Stock for each respective purchase date under
each Assumed Purchase Right shall be the lower of (i) the quotient determined by
dividing eighty-five percent (85%) of the fair market value of the Company
Common Stock on the offering date of each assumed offering period by the
Exchange Ratio or (ii) eighty-five percent (85%) of the fair market value of the
Acquirer Common Stock on each purchase date of each assumed offering period
occurring after the Effective Time (with the number of shares rounded down to
the nearest whole share and the purchase price rounded up to the nearest whole
cent). The Assumed Purchase Rights shall be exercised at such times following
the Effective Time as set forth in the Company's Employee Stock Purchase Plan,
and each participant shall, accordingly, be issued shares of Acquirer Common
Stock at such times. The Company's Employee Stock Purchase Plan shall terminate
with the exercise of the last Assumed Purchase Right, and no additional purchase
rights shall
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be granted under the Company's Employee Stock Purchase Plan following the
Effective Time. Acquirer agrees that from and after the Effective Time,
employees of the Company may participate in Acquirer's employee stock purchase
plan, subject to the terms and conditions of such plan.
(d) At the Effective Time, each award or account (including restricted
stock, stock equivalents and stock units, but excluding Company Stock Options
and Assumed Purchase Rights) outstanding as of the date hereof ("Company Award")
that has been established, made or granted under any employee incentive or
benefit plans, programs or arrangements and non-employee director plans
maintained by the Company on or prior to the date hereof which provide for
grants of equity-based awards or equity-based accounts shall be amended or
converted into a similar instrument of Acquirer, in each case with such
adjustments to the terms and conditions of such Company Awards as are
appropriate to preserve the value inherent in such Company Awards with no
detrimental effects on the holders thereof. The other terms and conditions of
each Company Award, and the plans or agreements under which they were issued,
shall continue to apply in accordance with their terms and conditions, including
any provisions for acceleration (as such terms and conditions have been
interpreted and applied by the Company in accordance with its past practice).
(e) At the Effective Time, Acquirer shall file with the Securities and
Exchange Commission (the "SEC") a registration statement on an appropriate form
or a post-effective amendment to a previously filed registration statement under
the Securities Act of 1933, as amended (the "1933 Act"), with respect to the
Acquirer Common Stock subject to options and other equity-based awards issued
pursuant to this Section 1.4, and shall use all commercially reasonable efforts
to maintain the current status of the prospectus contained therein, as well as
comply with any applicable state securities or "blue sky" laws, for so long as
such options or other equity-based awards remain outstanding.
Section 1.5 Adjustments. If at any time during the period between the
date of this Agreement and the Effective Time, any change in the outstanding
shares of capital stock of Acquirer or the Company (other than as contemplated
in Section 3.2 or Section 4.2 or permitted under this Agreement) shall occur,
including, without limitation, by reason of any reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, or any stock dividend thereon with a record date during such period, the
Merger Consideration shall be appropriately adjusted.
Section 1.6 Fractional Shares. (a) No fractional shares of Acquirer
Common Stock shall be issued in the Merger. All fractional shares of Acquirer
Common Stock that a holder of Company Shares would otherwise be entitled to
receive as a result of the Merger shall be aggregated and if a fractional share
results from such aggregation, such holder shall be entitled to receive from the
Exchange Agent, in lieu thereof, an amount in cash determined by multiplying the
closing price of one share of Acquirer Common Stock on the Nasdaq National
Market ("NNM") on the Closing Date by the fraction of a share of Acquirer Common
Stock to which such holder would otherwise have been 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
problems that would otherwise be caused by the issuance of fractional shares. As
promptly as practicable after the determination of the amount of cash, if any,
to be paid to holders of fractional interests, the Exchange Agent shall so
notify Acquirer, and Acquirer shall deposit or cause to be deposited with the
Exchange Agent such amount and shall cause the Exchange Agent to make available
such amounts to such holders of fractional interests without interest.
Section 1.7 Withholding Rights. Each of the Surviving Corporation and
Acquirer shall be entitled to deduct and withhold from the consideration
otherwise payable to any person pursuant to this Article I such amounts as it is
required to deduct and withhold with respect to the making of such
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payment under any provision of federal, state, local or foreign tax law. To the
extent that amounts are so withheld by the Surviving Corporation or Acquirer, as
the case may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Company Shares in respect of
which such deduction and withholding was made by the Surviving Corporation or
Acquirer, as the case may be.
Section 1.8 Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Exchange Agent, the posting by such person of a bond, in such reasonable
amount as the Exchange Agent may direct, as indemnity against any claim that may
be made against it, the Surviving Corporation or the Exchange Agent with respect
to such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration to be paid in respect
of the Company Shares represented by such Certificate as contemplated by this
Article I.
ARTICLE II
CERTAIN GOVERNANCE MATTERS
Section 2.1 Acquirer Board of Directors. At the Effective Time, Acquirer
shall cause the Board of Directors of Acquirer to consist of either five or
seven directors (with the total number of directors to be established by
Acquirer), a majority of one of whom shall be directors of Acquirer prior to the
Effective Time and the remainder of whom shall be directors designated by the
Company after consultation with the Acquirer (the "Company Board Designees").
Section 2.2 Acquirer Officers. The officers of the Acquirer after the
Effective Time shall be determined by the Board of Directors of the Acquirer
immediately after the Effective Time, following consultation between the
respective Chief Executive Officers of Acquirer and the Company, except that Mr.
Kenneth F. Potashner shall be the Chairman and Chief Executive Officer of
Acquirer and Mr. William J. Schroeder shall be offered the position of President
and Chief Operating Officer of Acquirer, to hold office from and after the
Effective Time (assuming such individuals desire to continue in such positions
as of such date) until their respective successors are duly appointed and
qualify in the manner provided in the By-Laws of the Acquirer or as otherwise
provided by law or their earlier resignation or removal.
Section 2.3 Certificate of Incorporation of the Surviving Corporation.
The certificate of incorporation of Merger Subsidiary in effect at the Effective
Time shall be the certificate of incorporation of the Surviving Corporation
until amended in accordance with applicable law.
Section 2.4 By-Laws of the Surviving Corporation. Subject to Section
6.3, the by-laws of Merger Subsidiary in effect at the Effective Time shall be
the by-laws of the Surviving Corporation until amended in accordance with
applicable law.
Section 2.5 Directors and Officers of the Surviving Corporation. Subject
to Section 6.3, from and after the Effective Time, until successors are duly
elected or appointed and qualified in accordance with applicable law, (a) the
directors of Merger Subsidiary at the Effective Time shall be the directors of
the Surviving Corporation, and (b) the officers of the Company at the Effective
Time shall be the officers of the Surviving Corporation.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in a letter delivered by the Company to Acquirer
immediately prior to the execution of this Agreement and signed by a duly
authorized officer of the Company (the "Company Disclosure Letter"), the Company
represents and warrants to Acquirer as follows:
Section 3.1 Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own,
lease and operate its respective properties and to carry on its business as now
being conducted.
The Company is qualified to do business as a foreign corporation and is
in good standing under the laws of each state or other jurisdiction in which the
nature of its business requires such qualification, except where the failure to
be so qualified or in good standing which, taken together with all other such
failures, would not have a Material Adverse Effect on the Company. For purposes
of this Agreement, the term "Material Adverse Effect" means, when used in
connection with the Company or Acquirer, as the case may be, any change,
violation, inaccuracy, circumstance or effect that is materially adverse to the
business, properties, assets (including intangible assets), liabilities,
capitalization or financial condition of either party and its Subsidiaries,
taken as a whole, as the case may be; provided, however, that the following
shall not be taken into account in determining whether there has been or could
or would be a "Material Adverse Effect" on or with respect to a party: (i) any
occurrences relating to the economy of the United States in general or the
economies in which such entity operates or the multi- media and connectivity
products for personal computer industry in general and not specifically relating
to such party, (ii) the delay or cancellation of orders for such party's
products from customers or distributors (or other resellers) directly
attributable to the announcement of this Agreement or the pendency of the
Merger, (iii) the lack of or delay in availability of components or raw
materials from such party's suppliers directly attributable to the announcement
of this Agreement or the pendency of the Merger, (iv) any litigation brought or
threatened against a party or any officer or member of the Board of Directors of
such party in respect of this Agreement or the Merger (including any stockholder
class action litigation arising from allegations or a breach of fiduciary duty
relating to this Agreement), (v) the loss of employees as a result of reductions
in force that are mutually agreed upon by the Company and Acquirer, (vi) the
loss of employees with titles of director or officer in an amount not in excess
of fifteen percent (15%) of the number of such employees as of the date of this
Agreement or the loss of employees with titles other than director or officer in
an amount not in excess of fifteen percent (15%) of the number of such employees
as of the date of this Agreement (excluding in each case employees lost pursuant
to reductions in force described in clause (v) and in the case of employees with
titles of director or officer losses resulting solely from a failure by Acquirer
to offer commercially reasonable retention incentives to such employees prior to
the Closing), and (vii) changes in trading prices for such party's securities.
The Company has made available to Acquirer true and complete copies of
the Company's certificate of incorporation and by-laws, as amended to the date
hereof.
Section 3.2 Capitalization. The authorized capital stock of the Company
consists of 75,000,000 Company Shares and 8,000,000 shares of Preferred Stock,
par value $.001 per share, all of which shares of Preferred Stock have not been
designated. As of May 31, 1999, (i) 35,573,024 Company Shares were issued and
outstanding, (ii) no shares of Preferred Stock were issued and outstanding,
(iii) no Company Shares were held in the treasury of the Company or any of its
Subsidiaries, and (iv) 9,891,497 Company Shares are reserved for issuance
pursuant to the Company Option Plans, of which stock options to
7
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purchase 8,650,905 Company Shares have been granted (of which options to
purchase an aggregate of 1,954,324 shares were exercisable). As of May 31, 1999,
1,050,000 Company Shares were reserved under the Company's Employee Stock
Purchase Plan, of which 649,422 have been granted. All the outstanding shares of
the Company's capital stock are, and all Company Shares that may be issued
pursuant to the exercise of outstanding employee stock options will be, when
issued in accordance with the terms thereof, duly authorized, validly issued,
fully paid and non-assessable. Except as disclosed in the Company Disclosure
Letter and except for changes since the close of business on May 31, 1999
resulting from the exercise of employee stock options outstanding on such date
or options granted as permitted by Section 5.1, there are outstanding (x) no
shares of capital stock or other voting securities of the Company, (y) no
securities of the Company convertible into or exchangeable for shares of capital
stock or voting securities of the Company, and (z) no options, warrants or other
rights to acquire from the Company, and no preemptive or similar rights,
subscription or other rights, convertible securities, agreements, arrangements
or commitments of any character, relating to the capital stock of the Company,
obligating the Company to issue, transfer or sell, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of the Company or obligating the Company to grant, extend or
enter into any such option, warrant, subscription or other right, convertible
security, agreement, arrangement or commitment (the items in clauses (x), (y)
and (z) being referred to collectively as the "Company Securities"). There are
no outstanding obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any Company Securities. There are not as
of the date hereof and there will not be at the Effective Time any stockholder
agreements, voting trusts or other agreements or understandings to which the
Company or any of its Subsidiaries is a party or by which it is bound relating
to the voting of any shares of the capital stock of the Company or any
agreements, arrangements, or other understandings to which the Company or any of
its Subsidiaries is a party or by which it is bound that will limit in any way
the solicitation of proxies by or on behalf of the Company from, or the casting
of votes by, the stockholders of the Company with respect to the Merger.
Section 3.3 Authority. The Company has full corporate power and
authority to execute and deliver this Agreement and, subject to the requisite
approval of its stockholders, 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 and
approved by the Company's Board of Directors, and other than the requisite
approval by its stockholders, no other corporate proceedings are necessary to
authorize this Agreement or the consummation of the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by the
Company and, assuming this Agreement constitutes a legal, valid and binding
agreement of the other parties hereto, it constitutes a legal, valid and binding
agreement of the Company, enforceable against it in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.
Section 3.4 Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation of the Merger
by the Company require no consent of, or filing with, any governmental body,
agency, official or authority other than (a) the filing of a certificate of
merger in accordance with Delaware Law, (b) compliance with any applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR Act"), (c) compliance with any applicable requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the "Exchange Act"), (d) compliance with any applicable requirements
of the 1933 Act and state securities laws, and (e) other actions or filings
which if not taken or made would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
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Section 3.5 Non-Contravention. The execution, delivery and performance
by the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby do not and will not (a) assuming compliance
with the matters referred to in Section 3.3, contravene or conflict with the
certificate of incorporation or by-laws of the Company, (b) assuming compliance
with the matters referred to in Section 3.4, contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to the Company or any of
its Subsidiaries, (c) constitute a default under or give rise to a right of
termination, cancellation or acceleration of any right or obligation of the
Company or any of its Subsidiaries or to a loss of any benefit to which the
Company or any of its Subsidiaries is entitled under any provision of any
agreement, contract or other instrument binding upon the Company or any of its
Subsidiaries or any license, franchise, permit or other similar authorization
held by the Company or any of its Subsidiaries, or (d) result in the creation or
imposition of any Lien on any asset of the Company or any of its Subsidiaries,
except for such contraventions, conflicts or violations referred to in clause
(b) or defaults, rights of termination, cancellation or acceleration, or losses
or Liens referred to in clause (c) or (d) that would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. For purposes of this
Agreement, "Lien" means, with respect to any asset of the Company or Acquirer,
as the case may be, any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset other than any such mortgage,
lien, pledge, charge, security interest or encumbrance (i) for Taxes (as defined
in Section 3.13) not yet due or being contested in good faith (and for which
adequate accruals or reserves have been established on the Company Balance Sheet
or the Acquirer Balance Sheet (as such terms are defined in Sections 3.8 and
4.8, respectively), as the case may be) or (ii) which is a carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other like lien
arising in the ordinary course of business. Except as disclosed in the Company
Disclosure Letter, neither the Company nor any Subsidiary of the Company is a
party to any agreement that expressly limits the ability of the Company or any
Subsidiary of the Company, or would limit Acquirer or any Subsidiary of Acquirer
after the Effective Time, to compete in or conduct any line of business or
compete with any Person or in any geographic area or during any period of time
except to the extent that any such limitation, individually or in the aggregate,
would not be reasonably likely to have a Material Adverse Effect on Acquirer
after the Effective Time.
Section 3.6 Subsidiaries. Each of the Company's Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted. Each of the Subsidiaries is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or leased or the nature
of its activities makes such qualification necessary, except where the failure
to be so qualified or in good standing would not have a Material Adverse Effect
on the Company. Exhibit 21 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 (the "1998 10-K"), as filed with SEC, lists
the only Subsidiaries of the Company at December 31, 1998, and all Subsidiaries
of the Company thereafter formed or acquired are listed in the Company
Disclosure Letter. All of the outstanding shares of capital stock of the
Subsidiaries are validly issued, fully paid and nonassessable and, other than
directors' qualifying shares in the case of foreign Subsidiaries, are owned by
the Company or by a wholly owned Subsidiary of the Company free and clear of all
material liens, claims, charges or encumbrances, and there are no irrevocable
proxies with respect to such shares. Except as set forth in the Company
Disclosure Letter and except for the capital stock of its Subsidiaries, the
Company does not own, directly or indirectly, any capital stock or other
ownership interest in any corporation, partnership, joint venture, limited
liability company or other entity which is material to the business of the
Company and its Subsidiaries, taken as a whole. There are no material
restrictions on the Company to vote the stock of any of its Subsidiaries.
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Section 3.7 SEC Filings. (a) The Company has made available to Acquirer
(i) its annual reports on Form 10-K for its fiscal years ended December 31,
1996, 1997 and 1998, (ii) its quarterly reports on Form 10-Q for its quarter
ended March 31, 1999, (iii) its proxy or information statements relating to
meetings of, or actions taken without a meeting by, the stockholders of the
Company held since December 31, 1998, and (iv) all of its other reports,
statements, schedules and registration statements filed with the SEC since
December 31, 1998 (the documents referred to in this Section 3.7(a) being
referred to collectively as the "Company SEC Documents"). The Company's
quarterly report on Form 10-Q for its fiscal quarter ended March 31, 1998 is
referred to herein as the "Company 10-Q."
(b) As of its filing date, each Company SEC Document complied as to form
in all material respects with the applicable requirements of the Exchange Act
and the 1933 Act.
(c) As of its filing date, each Company SEC Document filed pursuant to
the Exchange Act did not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(d) Each such registration statement, as amended or supplemented, if
applicable, filed pursuant to the 1933 Act as of the date such statement or
amendment became effective did not 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.
Section 3.8 Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company (including any related notes and schedules) included in its annual
reports on Form 10-K and the quarterly report on Form 10-Q referred to in
Section 3.7 fairly present in all material respects, in conformity with
generally accepted accounting principles ("GAAP") 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 (subject to normal year-end adjustments and
the absence of notes in the case of any unaudited interim financial statements).
For purposes of this Agreement, "Company Balance Sheet" means the consolidated
balance sheet of the Company as of March 31, 1999 set forth in the Company 10-Q
and "Company Balance Sheet Date" means March 31, 1999.
Section 3.9 Disclosure Documents. (a) The joint proxy statement of the
Company and Acquirer relating to the meetings of stockholders of the Company and
Acquirer contemplated by Section 7.3 and prospectus of Acquirer relating to the
shares of Acquirer Common Stock to be issued in connection with the Merger (the
"Joint Proxy Statement/Prospectus") to be filed with the SEC in connection with
the Merger and the registration statement on Form S-4 of Acquirer (the "Form
S-4") to be filed under the 1933 Act relating to the issuance of Acquirer Common
Stock in the Merger, and any amendments or supplements thereto, will, when
filed, subject to the last sentence of Section 3.9(b), comply as to form in all
material respects with the requirements of the Exchange Act and the 1933 Act.
(b) Neither the Joint Proxy Statement/Prospectus to be filed with the
SEC, nor any amendment or supplement thereto, will, at the date the Joint Proxy
Statement/Prospectus or any such amendment or supplement is first mailed to
stockholders of Company or at the time such stockholders vote on the adoption
and approval of this Agreement and the transactions contemplated hereby, contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Neither the Form S-4
nor any amendment or supplement thereto will at the time it becomes effective
under the 1933 Act
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or at the Effective Time contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading. No representation or warranty is made by the
Company in this Section 3.9 with respect to statements made or incorporated by
reference therein based on information supplied by Acquirer for inclusion or
incorporation by reference in the Joint Proxy Statement/Prospectus or the Form
S-4.
Section 3.10 Absence of Certain Changes. Except as set forth in the
Company Disclosure Letter, since the Company Balance Sheet Date, the Company and
its Subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been:
(a) any event, occurrence or development of a state of circumstances or
facts which has had or reasonably would be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company or any
repurchase, redemption or other acquisition by the Company or any of its
Subsidiaries of any outstanding shares of capital stock or other securities of,
or other ownership interests in, the Company or any of its Subsidiaries, except
for the repurchase of shares of employees at cost upon termination of employment
with the Company;
(c) any amendment of any material term of any outstanding security of
the Company or any of its Subsidiaries;
(d) any transaction or commitment made, or any contract, agreement or
settlement entered into, by (or judgment, order or decree affecting) the Company
or any of its Subsidiaries relating to its assets or business (including the
acquisition or disposition of any assets) or any relinquishment by the Company
or any of its Subsidiaries of any contract or other right, in either case,
material to the Company and its Subsidiaries taken as a whole, other than
transactions, commitments, contracts, agreements or settlements (including
without limitation settlements of litigation and tax proceedings) in the
ordinary course of business consistent with past practice, those contemplated by
this Agreement, or as agreed to in writing by Acquirer;
(e) any change in any method of accounting or accounting practice (other
than any change for tax purposes) by the Company or any of its Subsidiaries,
except for any such change which is not significant or which is required by
reason of a concurrent change in GAAP; or
(f) any (i) grant of any severance or termination pay to (or amendment
to any such existing arrangement with) any director, officer or employee of the
Company or any of its Subsidiaries, (ii) entering into of any employment,
deferred compensation or other similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee of the Company or any
of its Subsidiaries, (iii) increase in benefits payable under any existing
severance or termination pay policies or employment agreements or (iv) increase
in (or amendments to the terms of) compensation, bonus or other benefits payable
to directors, officers or employees of the Company or any of its Subsidiaries,
other than in the ordinary course of business consistent with past practice, as
permitted by this Agreement, or as agreed to in writing by Acquirer.
Section 3.11 No Undisclosed Material Liabilities. There are no
liabilities of the Company or any Subsidiary of the Company of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, other than:
<PAGE>
(a) liabilities disclosed or provided for in the Company Balance Sheet
or in the notes thereto;
(b) liabilities which in the aggregate would not reasonably be expected
to have a Material Adverse Effect on the Company;
(c) liabilities disclosed in the Company SEC Documents filed prior to
the date hereof or set forth in the Company Disclosure Letter; and
(d) liabilities under this Agreement.
Section 3.12 Litigation. Except as disclosed in the Company SEC
Documents filed prior to the date hereof, there is no action, suit,
investigation or proceeding pending against, or to the knowledge of the Company
threatened against or affecting, the Company or any of its Subsidiaries or any
of their respective properties before any court or arbitrator or any
governmental body, agency or official which would reasonably be expected to have
a Material Adverse Effect on the Company.
Section 3.13 Taxes. Except as set forth in the Company Balance Sheet
(including the notes thereto) or as otherwise set forth in the Company
Disclosure Letter and except as would not, individually or in the aggregate,
have a Material Adverse Effect on the Company, (i) all Company Tax Returns
required to be filed with any taxing authority by, or with respect to, the
Company and its Subsidiaries have been filed in accordance with all applicable
laws; (ii) the Company and its Subsidiaries have timely paid all Taxes shown as
due and payable on the Company Tax Returns that have been so filed, and, as of
the time of filing, the Company Tax Returns correctly reflected the facts
regarding the income, business, assets, operations, activities and the status of
the Company and its Subsidiaries (other than Taxes which are being contested in
good faith and for which adequate reserves are reflected on the Company Balance
Sheet); (iii) the Company and its Subsidiaries have made provision for all Taxes
payable by the Company and its Subsidiaries for which no Company Tax Return has
yet been filed; (iv) the charges, accruals and reserves for Taxes with respect
to the Company and its Subsidiaries reflected on the Company Balance Sheet are
adequate under GAAP to cover the Tax liabilities accruing through the date
thereof; (v) there is no action, suit, proceeding, audit or claim now proposed
or pending against or with respect to the Company or any of its Subsidiaries in
respect of any Tax where there is a reasonable possibility of an adverse
determination; and (vi) to the best of the Company's knowledge and belief,
neither the Company nor any of its Subsidiaries is liable for any Tax imposed on
any entity other than such Person, except as the result of the application of
Treas. Reg. Section 1.1502-6 (and any comparable provision of the tax laws of
any state, local or foreign jurisdiction) to the affiliated group of which the
Company is the common parent. For purposes of this Agreement, "Taxes" shall mean
any and all taxes, charges, fees, levies or other assessments, including,
without limitation, all net income, gross income, gross receipts, excise, stamp,
real or personal property, ad valorem, withholding, social security (or
similar), unemployment, occupation, use, service, service use, license, net
worth, payroll, franchise, severance, transfer, recording, employment, premium,
windfall profits, environmental (including taxes under Section 59A of the Code),
customs duties, capital stock, profits, disability, sales, registration, value
added, alternative or add-on minimum, estimated or other taxes, assessments or
charges imposed by any federal, state, local or foreign governmental entity and
any interest, penalties, or additions to tax attributable thereto. For purposes
of this Agreement, "Tax Returns" shall mean any return, report, form or similar
statement required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
Section 3.14 Employee Benefit Plans. (a) Prior to the date hereof, the
Company has provided Acquirer with a list (set forth in the Company Disclosure
Letter) identifying each material "employee
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benefit plan," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA"), each material employment, severance or similar
contract, plan, arrangement or policy applicable to any director, former
director, employee or former employee of the Company and each material plan or
arrangement (written or oral), providing for compensation, bonuses,
profit-sharing, stock option or other stock related rights or other forms of
incentive or deferred compensation, vacation benefits, insurance coverage
(including any self-insured arrangements), health or medical benefits,
disability benefits, workers' compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance benefits) which is
maintained, administered or contributed to by the Company and covers any
employee or director or former employee or director of the Company, or under
which the Company has any liability. Such material plans (excluding any such
plan that is a "multiemployer plan," as defined in Section 3(37) of ERISA) are
referred to collectively herein as the "Company Employee Plans."
(b) Except as set forth in the Company Disclosure Letter, each Company
Employee Plan has been maintained in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
(including but not limited to ERISA and the Code) which are applicable to such
Plan, except where failure to so comply would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
(c) Neither the Company nor any affiliate of the Company has incurred a
liability under Title IV of ERISA that has not been satisfied in full, and no
condition exists that presents a material risk to the Company or any affiliate
of the Company of incurring any such liability other than liability for premiums
due the Pension Benefit Guaranty Corporation (which premiums have been paid when
due).
(d) All Company Employee Plans that are intended to be qualified under
Section 401(a) of the Code have been the subject of determination, opinion,
notification or advisory letters from the Internal Revenue Service ("IRS") which
the Company has made available to Acquirer. Each such letter has the effect of
stating that each such Company Employee Plan is qualified and is exempt from
Federal income taxes under Section 501(a) of the Code. The remedial amendment
period with respect to each such Company Employee Plan has not expired for any
amendment to any such Company Employee Plan that was made on or after the date
of the application for the determination, opinion, notification or advisory
letter. No such determination, opinion, notification or advisory letter has been
revoked, nor has any event occurred since the date of the most recent such
letter that would adversely affect its qualification, other than as set forth in
the Company Disclosure Letter.
(e) Except as set forth in the Company Disclosure Letter, no director or
officer or other employee of the Company or any of its Subsidiaries will become
entitled to any retirement, severance or similar benefit or enhanced or
accelerated benefit (including any acceleration of vesting or lapse of
repurchase rights or obligations with respect to any employee stock option or
other benefit under any stock option plan or compensation plan or arrangement of
the Company) solely as a result of the transactions contemplated hereby.
(f) Except as set forth in the Company Disclosure Letter, no Company
Employee Plan provides post-retirement health and medical, life or other
insurance benefits for retired employees of the Company or any of its
Subsidiaries (other than benefit coverage mandated by applicable statute,
including benefits provided pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as codified in Code section 4980B and ERISA sections
601 et seq., as amended from time to time ("COBRA")).
(g) Except as set forth in the Company Disclosure Letter, there has been
no amendment to, written interpretation or announcement (whether or not written)
by the Company or any of its affiliates relating
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to, or change in employee participation or coverage under, any Company Employee
Plan which would increase materially the expense of maintaining such Company
Employee Plan above the level of the expense incurred in respect thereof for the
12 months ended on the Company Balance Sheet Date.
Section 3.15 Compliance with Laws. Neither the Company nor any of its
Subsidiaries is in violation of, or has since January 1, 1999 violated, any
applicable provisions of any laws, statutes, ordinances or regulations except
for any violations that, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect on the Company.
Section 3.16 Finders' or Advisors' Fees. Except for Lazard Freres & Co.
and Wasserstein Perella & Co., Inc., there is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of the Company or any of its Subsidiaries who might be entitled to any
fee or commission in connection with the transactions contemplated by this
Agreement.
Section 3.17 Environmental Matters. (a) Except with such exceptions as,
individually or in the aggregate, have not had, and would not reasonably be
expected to have, a Material Adverse Effect on the Company, (i) no notice,
notification, demand, request for information, citation, summons, complaint or
order has been received by, and no investigation, action, claim, suit,
proceeding or review is pending or, to the knowledge of the Company or any of
its Subsidiaries, threatened by any Person against, the Company or any of its
Subsidiaries, and no penalty has been assessed against the Company or any of its
Subsidiaries, in each case, with respect to any matters relating to or arising
out of any Environmental Law; (ii) the Company and its Subsidiaries are and have
been in compliance with all Environmental Laws; and (iii) there are no
liabilities of or relating to the Company or any of its Subsidiaries relating to
or arising out of any Environmental Law of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability.
(b) For purposes of this Section 3.17 and Section 4.17, the term
"Environmental Laws" means any federal, state, local and foreign statutes, laws
(including, without limitation, common law), judicial decisions, regulations,
ordinances, rules, judgments, orders, codes, injunctions, permits, governmental
agreements or governmental restrictions relating to human health and safety, the
environment or to pollutants, contaminants, wastes, or chemicals.
Section 3.18 Labor Matters. There are no controversies pending or, to
the best knowledge of each of the Company and its respective Subsidiaries,
threatened, between the Company or any of its Subsidiaries and any of their
respective employees, which controversies have or could reasonably be expected
to have a Material Adverse Effect on the Company. As of the date of this
Agreement, 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 its Subsidiaries nor does the Company or its
Subsidiaries know of any activities or proceedings of any labor union to
organize any such employees (i) as of the date of this Agreement and (ii) which,
as of the Closing Date, have or could reasonably be expected to have a Material
Adverse Effect on the Company and its Subsidiaries. As of the date of this
Agreement, neither the Company nor any of its Subsidiaries has any knowledge of
any strikes, slowdowns, work stoppages or lockouts, or threats thereof, by or
with respect to any employees of the Company or any of its Subsidiaries (x) as
of the date of this Agreement and (y) which, as of the Closing Date, have or
could reasonably be expected to have a Material Adverse Effect on the Company
and its Subsidiaries.
Section 3.19 Title to Property. The Company and each of its Subsidiaries
has good and marketable title to all of its material properties and assets, free
and clear of all Liens, except for liens
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for taxes not yet due and payable and such liens or other imperfections of title
and use restrictions, if any, as do not materially detract from the value of or
interfere with the present use of the property affected thereby or which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
Section 3.20 Leaseholds. Neither the Company nor any of its Subsidiaries
has given or received notice of any material default under any material lease
under which the Company or any of its Subsidiaries is the lessee of real
property (each a "Company Lease" and collectively the "Company Leases") and, to
the knowledge of the Company, neither the Company nor any of its Subsidiaries
nor any other party thereto is in default in any material respect under any of
the Company Leases. All of the Company Leases are in full force and effect, and
are valid, binding and enforceable in accordance with their terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' or
lessors' rights generally and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies. Except as set forth in the Company Disclosure Letter, neither the
Company nor any of its Subsidiaries has leased, subleased, licensed or assigned,
as the case may be, all or any portion of its leasehold interest under any
Company Lease to any person.
Section 3.21 Management Payments. Other than as set forth in the Company
Disclosure Letter, no employee or former employee of the Company will be
entitled to additional compensation or to the early vesting or acceleration of
payment of any compensation that arises out of or are related to the
consummation of the Merger and the transactions contemplated thereby.
Section 3.22 Intellectual Property. The Company or its Subsidiaries owns
each of the patents and patent applications referred to in the Company SEC
Documents and, except as set forth in the Company SEC Documents, (i) to the
knowledge of the Company, each of the Company and its Subsidiaries owns or
possesses, or could obtain ownership or possession of (on terms not materially
adverse to the consolidated financial position, stockholders' equity, or results
of operations of the Company and its Subsidiaries taken as a whole) adequate and
enforceable rights to use all other Intellectual Property (as defined below)
necessary for the conduct of their businesses, (ii) no claims are pending or, to
the knowledge of the Company, threatened that the Company or any Subsidiary is
infringing on or otherwise violating the rights of any Person with regard to any
Intellectual Property that, if the subject of an unfavorable decision, ruling or
finding, could reasonably be expected to (or, with respect to any pending patent
litigation, the Company does not believe will) have a Material Adverse Effect
and the Company knows of no basis therefor, and (iii) to the knowledge of the
Company, no person is infringing on or otherwise violating any right of the
Company or any Subsidiary with respect to any Intellectual Property owned by or
licensed to the Company or any Subsidiary. Except as set forth in the Company
SEC Documents, the Company has received no notice of potential indemnity claims
from customers based upon a notice of infringement any such customer has
received from a patent owner relating to an assertion of infringement of a
patent other than potential indemnity claims that individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect.
The Company's policy is to require that its employees execute agreements
assigning to the Company all rights such employees otherwise would have in
Intellectual Property developed by such employees while in the employ of the
Company.
For purposes of this Agreement, "Intellectual Property" shall mean, with
respect a Person, patents, copyrights, trademarks (registered and unregistered),
service marks, brand names, trade names, and registrations in any jurisdiction
of, and applications in any jurisdiction to register, the foregoing, technology,
know-how, software, and tangible or intangible proprietary information or
materials and any other trade secrets related thereto.
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Section 3.23 Insurance. The insurance carried by the Company and its
Subsidiaries is in such types and amounts and covering such risks as are
consistent with customary practices and standards of companies engaged in
businesses and operations similar to those of the Company and its Subsidiaries.
Except as would not have a Material Adverse Effect on the Company, all such
insurance is in full force and effect and none of the Company nor any of its
Subsidiaries is in default thereunder. Except as would not have a Material
Adverse Effect on the Company, all claims thereunder have been filed in a due
and timely fashion. Except as would not have a Material Adverse Effect on the
Company, neither the Company nor any of its Subsidiaries has been notified in
writing of a refusal of any material insurance coverage relating to products
liability (including renewals of any such products liability coverage) by any
insurance carrier to which it has applied for insurance during the past three
years.
Section 3.24 Year 2000 Compliance. Except as would not reasonably be
expected to have a Material Adverse Effect on the Company, all of the Company's
Information Technology (as defined below) effectively addresses the Year 2000
Issues, and will not cause an interruption in the ongoing operations of the
Company's business on or after January 1, 2000. For purposes of this Agreement,
the term "Information Technology" shall mean and include all software, hardware,
firmware, telecommunications systems, network systems, embedded systems and
other systems, components and/or services that are owned or used by the Company
in the conduct of its business, and the term "Year 2000 Issues" shall mean the
question of whether product or software accurately processes and stores
date/time data (including, but not limited to calculating, comparing,
displaying, recording and sequencing operations involving date/time data)
during, from and into and between the twentieth and twenty-first centuries, and
the years 1999 and 2000, including correct processing of leap year data.
Section 3.25 Opinion of Financial Advisor. The Company has received the
opinion of Wasserstein Perella & Co., Inc. to the effect that, as of the date of
such opinion, the Exchange Ratio is fair from a financial point of view to the
holders of Company Shares (other than Acquirer or any of its Subsidiaries or
affiliates), and, as of the date hereof, such opinion has not been withdrawn.
Section 3.26 Tax Treatment. Neither the Company nor, to the Company's
knowledge, any of its affiliates has taken or agreed to take any action or is
aware of any fact or circumstance that would prevent the Merger from qualifying
as a reorganization within the meaning of Section 368 of the Code (a "368
Reorganization").
Section 3.27 Takeover Statutes. The Board of Directors of the Company
has taken the necessary action to make inapplicable Section 203 of the Delaware
Law and any other applicable antitakeover or similar statute or regulation to
this Agreement and the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIRER
Except as disclosed in a letter delivered by Acquirer to the Company
immediately prior to the execution of this Agreement and signed by a duly
authorized officer of Acquirer (the "Acquirer Disclosure Letter"), Acquirer
represents and warrants to the Company as follows (provided, that the following
representations and warranties relating to Merger Subsidiary shall instead be
made as of such time as Merger Subsidiary becomes a party hereto):
Section 4.1 Organization and Qualification. Each of Acquirer and
Merger Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware
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and has all requisite corporate power and authority to own, lease and operate
its respective properties and to carry on its business as now being conducted.
Each of Acquirer and Merger Subsidiary is qualified to do business as a
foreign corporation and is in good standing under the laws of each state or
other jurisdiction in which the nature of its business requires such
qualification, except where the failure to be so qualified or in good standing
which, taken together with all other such failures, would not have a Material
Adverse Effect on Acquirer.
Since the date of its incorporation, Merger Subsidiary has not engaged
in any activities other than in connection with or as contemplated by this
Agreement. Acquirer has made available to the Company true and complete copies
of Acquirer's and Merger Subsidiary's certificate of incorporation and by-laws,
as amended to the date hereof.
Section 4.2 Capitalization. The authorized capital stock of Acquirer
consists of 120,000,000 shares of Acquirer Common Stock and 5,000,000 shares of
preferred stock, par value $.0001 per share, of which there are designated
500,000 shares of Series A Participating Preferred Stock and the remaining
shares of which have not been designated. As of May 31, 1999, (i) 52,752,810
shares of Acquirer Common Stock were issued and outstanding, (ii) no shares of
Series A Participating Preferred Stock (all of which are reserved for issuance
in accordance with the Rights Agreement (the "Acquirer Rights Agreement") dated
as of May 14, 1997, between Acquirer and The First National Bank of Boston, as
Rights Agent, pursuant to which Acquirer has issued Rights (the "Acquirer
Rights") to purchase Series A Participating Preferred Stock) were issued and
outstanding, and (iii) no shares of Acquirer Common Stock were held in the
treasury of Acquirer or any of its Subsidiaries. As of June 21, 1999, 30,734,468
shares of Acquirer Common Stock are reserved for issuance pursuant to Acquirer's
plans identified in the Acquirer Disclosure Letter as being the only
compensation or benefit plans or agreements pursuant to which shares of Acquirer
Common Stock may be issued (collectively, the "Acquirer Stock Option Plans"), of
which stock options to purchase 15,730,732 shares of Acquirer Common Stock have
been granted and are outstanding (of which options to purchase an aggregate of
6,283,522 shares were exercisable). All the outstanding shares of Acquirer's
capital stock are, and all shares of Acquirer Common Stock that may be issued
pursuant to the exercise of outstanding employee stock options and convertible
securities will be, when issued in accordance with the terms thereof, duly
authorized, validly issued, fully paid and non-assessable. Except as disclosed
in the Acquirer Disclosure Letter and except for changes since the close of
business on May 31, 1999, there are outstanding (x) no shares of capital stock
or other voting securities of Acquirer, (y) no securities of Acquirer
convertible into or exchangeable for shares of capital stock or voting
securities of Acquirer, and (z) no options, warrants or other rights to acquire
from Acquirer, and no preemptive or similar rights, subscription or other
rights, convertible securities, agreements, arrangements or commitments of any
character, relating to the capital stock of Acquirer, obligating Acquirer to
issue, transfer or sell, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
Acquirer or obligating Acquirer to grant, extend or enter into any such option,
warrant, subscription or other right, convertible security, agreement,
arrangement or commitment (the items in clauses (x), (y) and (z) being referred
to collectively as the "Acquirer Securities"). Except as set forth in the
Acquirer Disclosure Letter, there are no outstanding obligations of Acquirer or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any Acquirer
Securities. There are not as of the date hereof and there will not be at the
Effective Time any stockholder agreements, voting trusts or other agreements or
understandings to which Acquirer or any of its Subsidiaries is a party or by
which it is bound relating to the voting of any shares of the capital stock of
Acquirer or any agreements, arrangements, or other understandings to which
Acquirer or any of its Subsidiaries is a party or by which it is bound that will
limit in any way the solicitation of proxies by or on behalf of Acquirer from,
or the casting of votes by, the stockholders of Acquirer with respect to the
Merger.
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Section 4.3 Authority. Each of Acquirer and Merger Subsidiary has full
corporate power and authority to execute and deliver this Agreement and, subject
to the requisite approval of its stockholders, 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 and approved by the respective Boards of Directors of Acquirer and
Merger Subsidiary, and except for any required approval by Acquirer's
stockholders of (i) the Merger, (ii) the amendment of Acquirer's certificate of
incorporation to increase the number of authorized shares of Acquirer Common
Stock to 175,000,000, (iii) the issuance of Acquirer Common Stock in connection
with the Merger, and (iv) the election of the Company Board Designees to
Acquirer's Board of Directors (clauses (i), (ii), (iii) and (iv) being the
"Acquirer Stockholder Approval"), no other corporate proceedings are necessary
to authorize this Agreement or the consummation of the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Acquirer and Merger Subsidiary and, assuming this Agreement constitutes a legal,
valid and binding agreement of the other parties hereto, it constitutes a legal,
valid and binding agreement of Acquirer, enforceable against it in accordance
with its terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.
Section 4.4 Governmental Authorization. The execution, delivery and
performance by Acquirer and Merger Subsidiary of this Agreement and the
consummation of the Merger by Acquirer and Merger Subsidiary require no consent
of, or filing with, any governmental body, agency, official or authority other
than (a) the filing of a certificate of merger in accordance with Delaware Law,
(b) compliance with any applicable requirements of the HSR Act, (c) compliance
with any applicable requirements of the Exchange Act, (d) compliance with any
applicable requirements of the 1933 Act and state securities laws, and (e) other
actions or filings which if not taken or made would not, individually or in the
aggregate, have a Material Adverse Effect on Acquirer.
Section 4.5 Non-Contravention. The execution, delivery and performance
by Acquirer and Merger Subsidiary of this Agreement and the consummation by
Acquirer and Merger Subsidiary of the transactions contemplated hereby do not
and will not (a) assuming compliance with the matters referred to in Section
4.3, contravene or conflict with the certificate of incorporation or by-laws of
Acquirer or Merger Subsidiary, (b) assuming compliance with the matters referred
to in Section 4.4, contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to Acquirer or any of its Subsidiaries, (c) constitute a
default under or give rise to a right of termination, cancellation or
acceleration of any right or obligation of Acquirer or any of its Subsidiaries
or to a loss of any benefit to which Acquirer or any of its Subsidiaries is
entitled under any provision of any agreement, contract or other instrument
binding upon Acquirer or any of its Subsidiaries or any license, franchise,
permit or other similar authorization held by Acquirer or any of its
Subsidiaries, or (d) result in the creation or imposition of any Lien on any
asset of Acquirer or any of its Subsidiaries, except for such contraventions,
conflicts or violations referred to in clause (b) or defaults, rights of
termination, cancellation or acceleration, or losses or Liens referred to in
clause (c) or (d) that would not, individually or in the aggregate, have a
Material Adverse Effect on Acquirer. Except as disclosed in the Acquirer
Disclosure Letter, neither Acquirer nor any Subsidiary of Acquirer is a party to
any agreement that expressly limits the ability of Acquirer or any Subsidiary of
Acquirer to compete in or conduct any line of business or compete with any
Person or in any geographic area or during any period of time except to the
extent that any such limitation, individually or in the aggregate, would not be
reasonably likely to have a Material Adverse Effect on Acquirer after the
Effective Time.
Section 4.6 Subsidiaries. Each of Acquirer's Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all requisite
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corporate power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted. Each of the Subsidiaries is
duly qualified as a foreign corporation to do business, and is in good standing,
in each jurisdiction where the character of its properties owned or leased or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified or in good standing would not have a Material
Adverse Effect on Acquirer. Exhibit 21 to Acquirer's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998 (the "Acquirer 10-K"), as filed with
the SEC, lists the only Subsidiaries of Acquirer at December 31, 1998, and,
except for Merger Subsidiary, all Subsidiaries of Acquirer thereafter formed or
acquired are listed in the Acquirer Disclosure Letter. All of the outstanding
shares of capital stock of the Subsidiaries are validly issued, fully paid and
nonassessable and, other than directors' qualifying shares in the case of
foreign Subsidiaries, are owned by Acquirer or by a wholly owned Subsidiary of
Acquirer free and clear of all material liens, claims, charges or encumbrances,
and there are no irrevocable proxies with respect to such shares. Except as set
forth in the Acquirer Disclosure Letter and except for the capital stock of its
Subsidiaries, Acquirer does not own, directly or indirectly, any capital stock
or other ownership interest in any corporation, partnership, joint venture,
limited liability company or other entity which is material to the business of
Acquirer and its Subsidiaries, taken as a whole. There are no material
restrictions on Acquirer to vote the stock of any of its Subsidiaries.
Section 4.7 SEC Filings. (a) Acquirer has made available to the Company
(i) its annual reports on Form 10-K for its fiscal years ended December 31,
1996, 1997 and 1998, (ii) its quarterly reports on Form 10-Q for its quarter
ended March 31, 1999, (iii) its proxy or information statements relating to
meetings of, or actions taken without a meeting by, the stockholders of Acquirer
held since December 31, 1998, and (iv) all of its other reports, statements,
schedules and registration statements filed with the SEC since December 31, 1998
(the documents referred to in this Section 4.7(a) being referred to collectively
as the "Acquirer SEC Documents"). Acquirer's quarterly report on Form 10-Q for
its fiscal quarter ended March 31, 1998 is referred to herein as the "Acquirer
10-Q."
(b) As of its filing date, each Acquirer SEC Document complied as to
form in all material respects with the applicable requirements of the Exchange
Act and the 1933 Act.
(c) As of its filing date, each Acquirer SEC Document filed pursuant to
the Exchange Act did not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(d) Each such registration statement, as amended or supplemented, if
applicable, filed pursuant to the 1933 Act as of the date such statement or
amendment became effective did not 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.
Section 4.8 Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Acquirer
(including any related notes and schedules) included in its annual reports on
Form 10-K and the quarterly report on Form 10-Q referred to in Section 4.7
fairly present in all material respects, in conformity with GAAP applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of Acquirer 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 (subject to normal year-end
adjustments and the absence of notes in the case of any unaudited interim
financial statements). For purposes of this Agreement, "Acquirer Balance Sheet"
means the consolidated balance sheet of Acquirer as of March 31, 1999 set forth
in Acquirer 10-Q and "Acquirer Balance Sheet Date" means March 31, 1999.
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Section 4.9 Disclosure Documents. (a) The Joint Proxy Statement/
Prospectus to be filed with the SEC in connection with the Merger and the Form
S-4 to be filed under the 1933 Act relating to the issuance of Acquirer Common
Stock in the Merger, and any amendments or supplements thereto, will, when
filed, subject to the last sentence of Section 4.9(b), comply as to form in all
material respects with the requirements of the Exchange Act and the 1933 Act.
(b) Neither the Joint Proxy Statement/Prospectus to be filed with the
SEC, nor any amendment or supplement thereto, will, at the date the Joint Proxy
Statement/Prospectus or any such amendment or supplement is first mailed to
stockholders of Acquirer or at the time such stockholders vote on the adoption
and approval of this Agreement and the transactions contemplated hereby, contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Neither the Form S-4
nor any amendment or supplement thereto will at the time it becomes effective
under the 1933 Act or at the Effective Time contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. No representation or
warranty is made by Acquirer in this Section 4.9 with respect to statements made
or incorporated by reference therein based on information supplied by the
Company for inclusion or incorporation by reference in the Joint Proxy
Statement/Prospectus or the Form S-4.
Section 4.10 Absence of Certain Changes. Except as set forth in the
Acquirer Disclosure Letter, since Acquirer Balance Sheet Date, Acquirer and its
Subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been:
(a) any event, occurrence or development of a state of circumstances or
facts which has had or reasonably would be expected to have, individually or in
the aggregate, a Material Adverse Effect on Acquirer;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Acquirer or any
repurchase, redemption or other acquisition by Acquirer or any of its
Subsidiaries of any outstanding shares of capital stock or other securities of,
or other ownership interests in, Acquirer or any of its Subsidiaries;
(c) any amendment of any material term of any outstanding security of
Acquirer or any of its Subsidiaries;
(d) any transaction or commitment made, or any contract, agreement or
settlement entered into, by (or judgment, order or decree affecting) Acquirer or
any of its Subsidiaries relating to its assets or business (including the
acquisition or disposition of any assets) or any relinquishment by Acquirer or
any of its Subsidiaries of any contract or other right, in either case, material
to Acquirer and its Subsidiaries taken as a whole, other than transactions,
commitments, contracts, agreements or settlements (including without limitation
settlements of litigation and tax proceedings) in the ordinary course of
business consistent with past practice, those contemplated by this Agreement, or
as agreed to in writing by the Company;
(e) any change in any method of accounting or accounting practice (other
than any change for tax purposes) by Acquirer or any of its Subsidiaries, except
for any such change which is not significant or which is required by reason of a
concurrent change in GAAP; or
(f) any (i) grant of any severance or termination pay to (or amendment
to any such existing arrangement with) any director, officer or employee of
Acquirer or any of its Subsidiaries, (ii) entering
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into of any employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or employee
of Acquirer or any of its Subsidiaries, (iii) increase in benefits payable under
any existing severance or termination pay policies or employment agreements or
(iv) increase in (or amendments to the terms of) compensation, bonus or other
benefits payable to directors, officers or employees of Acquirer or any of its
Subsidiaries, other than in the ordinary course of business consistent with past
practice, as permitted by this Agreement, or as agreed to in writing by the
Company.
Section 4.11 No Undisclosed Material Liabilities. There are no
liabilities of Acquirer or any Subsidiary of Acquirer of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
other than:
(a) liabilities disclosed or provided for in Acquirer Balance Sheet or
in the notes thereto;
(b) liabilities which in the aggregate would not reasonably be expected
to have a Material Adverse Effect on Acquirer;
(c) liabilities disclosed in Acquirer SEC Documents filed prior to the
date hereof or set forth in the Acquirer Disclosure Letter; and
(d) liabilities under this Agreement.
Section 4.12 Litigation. Except as disclosed in Acquirer SEC Documents
filed prior to the date hereof, there is no action, suit, investigation or
proceeding pending against, or to the knowledge of Acquirer threatened against
or affecting, Acquirer or any of its Subsidiaries or any of their respective
properties before any court or arbitrator or any governmental body, agency or
official which would reasonably be expected to have a Material Adverse Effect on
Acquirer.
Section 4.13 Taxes. Except as set forth in the Acquirer Balance Sheet
(including the notes thereto) or as otherwise set forth in the Acquirer
Disclosure Letter and except as would not, individually or in the aggregate,
have a Material Adverse Effect on Acquirer, (i) all Acquirer Tax Returns
required to be filed with any taxing authority by, or with respect to, Acquirer
and its Subsidiaries have been filed in accordance with all applicable laws;
(ii) Acquirer and its Subsidiaries have timely paid all Taxes shown as due and
payable on Acquirer Tax Returns that have been so filed, and, as of the time of
filing, Acquirer Tax Returns correctly reflected the facts regarding the income,
business, assets, operations, activities and the status of Acquirer and its
Subsidiaries (other than Taxes which are being contested in good faith and for
which adequate reserves are reflected on the Acquirer Balance Sheet); (iii)
Acquirer and its Subsidiaries have made provision for all Taxes payable by
Acquirer and its Subsidiaries for which no Acquirer Tax Return has yet been
filed; (iv) the charges, accruals and reserves for Taxes with respect to
Acquirer and its Subsidiaries reflected on the Acquirer Balance Sheet are
adequate under GAAP to cover the Tax liabilities accruing through the date
thereof; (v) there is no action, suit, proceeding, audit or claim now proposed
or pending against or with respect to Acquirer or any of its Subsidiaries in
respect of any Tax where there is a reasonable possibility of an adverse
determination; and (vi) to the best of Acquirer's knowledge and belief, neither
Acquirer nor any of its Subsidiaries is liable for any Tax imposed on any entity
other than such Person, except as the result of the application of Treas. Reg.
Section 1.1502-6 (and any comparable provision of the tax laws of any state,
local or foreign jurisdiction) to the affiliated group of which Acquirer is the
common parent.
Section 4.14 Employee Benefit Plans. (a) Prior to the date hereof,
Acquirer has provided the Company with a list (set forth in the Acquirer
Disclosure Letter) identifying each material "employee
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benefit plan," as defined in Section 3(3) of ERISA, each material employment,
severance or similar contract, plan, arrangement or policy applicable to any
director, former director, employee or former employee of Acquirer and each
material plan or arrangement (written or oral), providing for compensation,
bonuses, profit-sharing, stock option or other stock related rights or other
forms of incentive or deferred compensation, vacation benefits, insurance
coverage (including any self-insured arrangements), health or medical benefits,
disability benefits, workers' compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance benefits) which is
maintained, administered or contributed to by Acquirer and covers any employee
or director or former employee or director of Acquirer, or under which Acquirer
has any liability. Such material plans (excluding any such plan that is a
"multiemployer plan," as defined in Section 3(37) of ERISA) are referred to
collectively herein as the "Acquirer Employee Plans."
(b) Except as set forth in the Acquirer Disclosure Letter, each Acquirer
Employee Plan has been maintained in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
(including but not limited to ERISA and the Code) which are applicable to such
Plan, except where failure to so comply would not, individually or in the
aggregate, have a Material Adverse Effect on Acquirer.
(c) Neither Acquirer nor any affiliate of Acquirer has incurred a
liability under Title IV of ERISA that has not been satisfied in full, and no
condition exists that presents a material risk to Acquirer or any affiliate of
Acquirer of incurring any such liability other than liability for premiums due
the Pension Benefit Guaranty Corporation (which premiums have been paid when
due).
(d) All Acquirer Employee Plans that are intended to be qualified under
Section 401(a) of the Code have been the subject of determination, opinion,
notification or advisory letters from the IRS which Acquirer has made available
to the Company. Each such letter has the effect of stating that each such
Acquirer Employee Plan is qualified and is exempt from Federal income taxes
under Section 501(a) of the Code. The remedial amendment period with respect to
each such Acquirer Employee Plan has not expired for any amendment to any such
Acquirer Employee Plan that was made on or after the date of the application for
the determination, opinion, notification or advisory letter. No such
determination, opinion, notification or advisory letter has been revoked, nor
has any event occurred since the date of the most recent such letter that would
adversely affect its qualification, other than as set forth in the Acquirer
Disclosure Letter.
(e) Except as set forth in the Acquirer Disclosure Letter, no director
or officer or other employee of Acquirer or any of its Subsidiaries will become
entitled to any retirement, severance or similar benefit or enhanced or
accelerated benefit (including any acceleration of vesting or lapse of
repurchase rights or obligations with respect to any employee stock option or
other benefit under any stock option plan or compensation plan or arrangement of
Acquirer) solely as a result of the transactions contemplated hereby.
(f) Except as reflected in Acquirer SEC Documents filed prior to the
date hereof, no Acquirer Employee Plan provides post-retirement health and
medical, life or other insurance benefits for retired employees of Acquirer or
any of its Subsidiaries (other than benefit coverage mandated by applicable
statute, including benefits provided pursuant to COBRA).
(g) Except as set forth in the Acquirer Disclosure Letter, there has
been no amendment to, written interpretation or announcement (whether or not
written) by Acquirer or any of its affiliates relating to, or change in employee
participation or coverage under, any Acquirer Employee Plan which would
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increase materially the expense of maintaining such Acquirer Employee Plan above
the level of the expense incurred in respect thereof for the 12 months ended on
the Acquirer Balance Sheet Date.
Section 4.15 Compliance with Laws. Neither Acquirer nor any of its
Subsidiaries is in violation of, or has since January 1, 1999 violated, any
applicable provisions of any laws, statutes, ordinances or regulations except
for any violations that, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect on Acquirer.
Section 4.16 Finders' or Advisors' Fees. Except for Lehman Brothers
Inc., there is no investment banker, broker, finder or other intermediary which
has been retained by or is authorized to act on behalf of Acquirer or any of its
Subsidiaries who might be entitled to any fee or commission in connection with
the transactions contemplated by this Agreement.
Section 4.17 Environmental Matters. Except for such exceptions as,
individually or in the aggregate, have not had, and would not reasonably be
expected to have, a Material Adverse Effect on Acquirer, (i) no notice,
notification, demand, request for information, citation, summons, complaint or
order has been received by, and no investigation, action, claim, suit,
proceeding or review is pending or, to the knowledge of Acquirer or any of its
Subsidiaries, threatened by any Person against, Acquirer or any of its
Subsidiaries, and no penalty has been assessed against Acquirer or any of its
Subsidiaries, in each case, with respect to any matters relating to or arising
out of any Environmental Law; (ii) Acquirer and its Subsidiaries are and have
been in compliance with all Environmental Laws; and (iii) there are no
liabilities of or relating to Acquirer or any of its Subsidiaries relating to or
arising out of any Environmental Law of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability.
Section 4.18 Labor Matters. There are no controversies pending or, to
the best knowledge of each of Acquirer and its respective Subsidiaries,
threatened, between Acquirer or any of its Subsidiaries and any of their
respective employees, which controversies have or could reasonably be expected
to have a Material Adverse Effect of the Acquirer. As of the date of this
Agreement, neither Acquirer nor any of its Subsidiaries is a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by Acquirer or its Subsidiaries nor does Acquirer or its
Subsidiaries know of any activities or proceedings of any labor union to
organize any such employees (i) as of the date of this Agreement and (ii) which,
as of the Closing Date, have or could reasonably be expected to have a Material
Adverse Effect on Acquirer and its Subsidiaries. As of the date of this
Agreement, neither Acquirer nor any of its Subsidiaries has any knowledge of any
strikes, slowdowns, work stoppages or lockouts, or threats thereof, by or with
respect to any employees of Acquirer or any of its Subsidiaries (x) as of the
date of this Agreement and (y) which, as of the Closing Date, have or could
reasonably be expected to have a Material Adverse Effect on Acquirer and its
Subsidiaries.
Section 4.19 Title to Property. Acquirer and each of its Subsidiaries
has good and marketable title to all of its material properties and assets, free
and clear of all Liens, except for liens for taxes not yet due and payable and
such liens or other imperfections of title and use restrictions, if any, as do
not materially detract from the value of or interfere with the present use of
the property affected thereby or which, individually or in the aggregate, would
not have a Material Adverse Effect on Acquirer.
Section 4.20 Leaseholds. Neither Acquirer nor any of its Subsidiaries
has given or received notice of any material default under any material lease
under which Acquirer or any of its Subsidiaries is the lessee of real property
(each an "Acquirer Lease" and collectively the "Acquirer Leases") and, to the
knowledge of Acquirer, neither Acquirer nor any of its Subsidiaries nor any
other party thereto
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is in default in any material respect under any of the Acquirer Leases. All of
the Acquirer Leases are in full force and effect, and are valid, binding and
enforceable in accordance with their terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' or lessors' rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies. Except as set forth in the
Acquirer Disclosure Letter, neither Acquirer nor any of its Subsidiaries has
leased, subleased, licensed or assigned, as the case may be, all or any portion
of its leasehold interest under any Acquirer Lease to any person.
Section 4.21 Management Payments. Other than as set forth in the
Acquirer Disclosure Letter, no employee or former employee of Acquirer will be
entitled to additional compensation or to the early vesting or acceleration of
payment of any compensation that arises out of or are related to the
consummation of the Merger and the transactions contemplated thereby.
Section 4.22 Intellectual Property. Acquirer or its Subsidiaries owns
each of the patents and patent applications referred to in the Acquirer SEC
Documents and, except as set forth in the Acquirer SEC Documents, (i) to the
knowledge of Acquirer, each of Acquirer and its Subsidiaries owns or possesses,
or could obtain ownership or possession of (on terms not materially adverse to
the consolidated financial position, stockholders' equity, or results of
operations of Acquirer and its Subsidiaries taken as a whole) adequate and
enforceable rights to use all other Intellectual Property necessary for the
conduct of their businesses, (ii) no claims are pending or, to the knowledge of
Acquirer, threatened that Acquirer or any Subsidiary is infringing on or
otherwise violating the rights of any Person with regard to any Intellectual
Property that, if the subject of an unfavorable decision, ruling or finding,
could reasonably be expected to (or, with respect to any pending patent
litigation, Acquirer does not believe will) have a Material Adverse Effect and
Acquirer knows of no basis therefor, and (iii) to the knowledge of Acquirer, no
person is infringing on or otherwise violating any right of Acquirer or any
Subsidiary with respect to any Intellectual Property owned by or licensed to
Acquirer or any Subsidiary. Except as set forth in the Acquirer SEC Documents,
Acquirer has received no notice of potential indemnity claims from customers
based upon a notice of infringement any such customer has received from a patent
owner relating to an assertion of infringement of a patent other than potential
indemnity claims that individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect. Acquirer's policy is to require that
its employees execute agreements assigning to Acquirer all rights such employees
otherwise would have in Intellectual Property developed by such employees while
in the employ of Acquirer.
Section 4.23 Insurance. The insurance carried by Acquirer and its
Subsidiaries is in such types and amounts and covering such risks as are
consistent with customary practices and standards of companies engaged in
businesses and operations similar to those of Acquirer and its Subsidiaries.
Except as would not have a Material Adverse Effect on Acquirer, all such
insurance is in full force and effect and none of Acquirer nor any of its
Subsidiaries is in default thereunder. Except as would not have a Material
Adverse Effect on Acquirer, all claims thereunder have been filed in a due and
timely fashion. Except as would not have a Material Adverse Effect on Acquirer,
neither Acquirer nor any of its Subsidiaries has been notified in writing of a
refusal of any material insurance coverage relating to products liability
(including renewals of any such products liability coverage) by any insurance
carrier to which it has applied for insurance during the past three years.
Section 4.24 Year 2000 Compliance. Except as would not reasonably be
expected to have a Material Adverse Effect on Acquirer, all of Acquirer's
Information Technology effectively addresses the Year 2000 Issues, and will not
cause an interruption in the ongoing operations of Acquirer's business on or
after January 1, 2000.
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Section 4.25 Opinion of Financial Advisor. Acquirer has received the
opinion of Lehman Brothers Inc. to the effect that, as of the date of such
opinion, the Exchange Ratio is fair from a financial point of view to Acquirer,
and, as of the date hereof, such opinion has not been withdrawn.
Section 4.26 Tax Treatment. Neither Acquirer nor, to Acquirer's
knowledge, any of its affiliates has taken or agreed to take any action or is
aware of any fact or circumstance that would prevent the Merger from qualifying
as a 368 Reorganization.
ARTICLE V
COVENANTS OF THE COMPANY
Section 5.1 Conduct of Business of the Company. Except as contemplated
by this Agreement or as expressly agreed to in writing by Acquirer, during the
period from the date of this Agreement to the earlier of the termination of this
Agreement in accordance with Article IX (the "Termination Date") and the
Effective Time, each of the Company and its Subsidiaries will conduct its
operations according to its ordinary course of business consistent with past
practice, and will use all commercially reasonable efforts to preserve intact
its business organization, to keep available the services of its officers and
employees and to maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with it and
will take no action which would materially adversely affect the ability of the
parties to consummate the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, and except as otherwise expressly
provided in this Agreement, prior to earlier of the Termination Date and the
Effective Time, the Company will not nor will it permit any of its Subsidiaries
to, without the prior written consent of Acquirer:
(a) amend its certificate of incorporation or by-laws;
(b) authorize for issuance, issue, sell, deliver, grant any options for,
or otherwise agree or commit to issue, sell or deliver any shares of any class
of its capital stock or any securities convertible into shares of any class of
its capital stock, except (i) pursuant to and in accordance with the terms of
currently outstanding convertible securities and options, and (ii) options
granted under the Company Stock Option Plans, in the ordinary course of business
consistent with past practice (but in no event shall options be granted covering
more than 5,000 Company Shares per individual or 100,000 Company Shares in the
aggregate);
(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 (including stock of any Subsidiary) or any combination
thereof) in respect of its capital stock or purchase, redeem or otherwise
acquire any shares of its own capital stock or any of its Subsidiaries, other
than the repurchase at cost of shares of employees upon termination of their
employment with the Company or its Subsidiaries;
(d) except in the ordinary course of business, consistent with past
practice (i) create, incur, assume, maintain or permit to exist any long-term
debt or any short-term debt for borrowed money other than under existing lines
of credit, except for any loans to be made by Acquirer to the Company pursuant
to the Credit Agreement dated as of June 11, 1999, as amended; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except its
wholly owned Subsidiaries in the ordinary course of business and consistent with
past practices; or (iii) make any loans, advances or capital contributions to,
or investments in, any other person;
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(e) except as otherwise expressly contemplated by this Agreement or in
the ordinary course of business, consistent with past practice, (i) increase in
any manner the compensation of any of its directors, officers or other
employees; (ii) pay or agree to pay any pension, retirement allowance or other
employee benefit not required, or enter into or agree to enter into any
agreement or arrangement with such director, officer or employee, whether past
or present, relating to any such pension, retirement allowance or other employee
benefit, except as required under currently existing agreements, plans or
arrangements; (iii) grant any severance or termination pay to, or enter into any
employment or severance agreement with any of its directors, officers or other
employees; or (iv) except as may be required to comply with applicable law,
become obligated (other than pursuant to any new or renewed collective
bargaining agreement) under any new pension plan, welfare plan, multiemployer
plan, employee benefit plan, benefit arrangement, or similar plan or
arrangement, which was not in existence on the date hereof, including any bonus,
incentive, deferred compensation, stock purchase, stock option, stock
appreciation right, group insurance, severance pay, retirement or other benefit
plan, agreement or arrangement, or employment or consulting agreement with or
for the benefit of any person, and to amend any of such plans or any of such
agreements in existence on the date hereof;
(f) except as otherwise expressly contemplated by this Agreement and
except with respect to commitments or liabilities incurred in connection with
this Agreement and the transactions contemplated hereby, including the
incurrence of legal, accounting and investment banking fees and expenses, enter
into any other material agreements, commitments or contracts, other than
agreements, commitments or contracts for the purchase, sale or lease of goods or
services in the ordinary course of business, consistent with past practice;
(g) except in the ordinary course of business, consistent with past
practice, or as contemplated by this Agreement authorize, recommend, propose or
announce an intention to authorize, recommend or propose, or enter into any
agreement in principle or an agreement with respect to, any plan of liquidation
or dissolution, any acquisition of a material amount of assets or securities,
any sale, transfer, lease, license, pledge, mortgage, or other disposition or
encumbrance of a material amount of assets or securities or any material change
in its capitalization, or any entry into a material contract or any amendment or
modification of any material contract or any release or relinquishment of any
material contract rights; or
(h) agree to do any of the foregoing.
Section 5.2 No Solicitation. The Company agrees that, from and after the
date of this Agreement until the earlier of the Termination Date and the
Effective Time, neither it nor any of its Subsidiaries nor any of the officers
or directors of it or its Subsidiaries, nor its or their employees, investment
bankers, attorneys, accountants, financial advisors, agents or other
representatives (collectively, "Representatives"), shall directly or indirectly,
initiate, solicit or otherwise induce any inquiries or the making of a Company
Acquisition Proposal (as defined below). The Company further agrees that neither
it nor any of its Subsidiaries nor any of its or its Subsidiaries' officers or
directors shall, and that it shall direct and use its best reasonable efforts to
cause its Representatives not to, directly or indirectly, have any discussions
with or provide any confidential information or data to any Person relating to a
Company Acquisition Proposal or engage in any negotiations concerning a Company
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement a Company Acquisition Proposal; provided, however, that nothing
contained in this Agreement shall prevent the Company or its Board of Directors
from (i) making any disclosure to its stockholders if, in the good faith
judgment of its Board of Directors, failure so to disclose would be inconsistent
with its obligations under applicable law; (ii) negotiating with or furnishing
information to any Person who has made a bona fide written Company Acquisition
Proposal which did not result from a breach of this Section 5.2; or (iii)
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recommending such Company Acquisition Proposal to its stockholders, if and only
to the extent that, in the case of actions referred to in clause (ii) or clause
(iii), such Company Acquisition Proposal is a Superior Proposal (as defined
below) and Acquirer is given at least two business days' notice of the identity
of the third party and all material terms and conditions of the Superior
Proposal to respond to such Superior Proposal. The Company agrees that it will,
on the date hereof, immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any Person conducted heretofore
with respect to any Company Acquisition Proposal. Nothing contained in this
Agreement shall prevent the Board of Directors of the Company from complying
with Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act with regard to
a Company Acquisition Proposal; provided that the Board of Directors of the
Company shall not recommend that the stockholders of the Company tender their
shares in connection with a tender offer except to the extent the Board of
Directors of the Company determines in its good faith judgment that such a
recommendation is required to comply with the fiduciary duties of the Board of
Directors of the Company to stockholders under applicable law, after receiving
the advice of outside legal counsel.
For purposes of this Agreement, "Company Acquisition Proposal" shall
mean any offer or proposal (other than an offer or proposal by Acquirer)
relating to any transaction or series of related transactions involving: (A) any
purchase from the Company or acquisition by any Person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of more than a five percent (5%) interest in the total outstanding
voting securities of the Company or any tender offer or exchange offer that if
consummated would result in any person or "group" (as defined under Section
13(d) of the Exchange Act and the rules and regulations thereunder) beneficially
owning five percent (5%) or more of the total outstanding voting securities of
the Company or any merger, consolidation, business combination or similar
transaction involving the Company; (B) any sale, lease (other than in the
ordinary course of business), exchange, transfer, license (other than in the
ordinary course of business), acquisition or disposition of more than five
percent (5%) of the assets of the Company; or (C) any liquidation or dissolution
of the Company. For purposes of this Agreement, a "Superior Proposal" means, in
respect of the Company, an unsolicited, bona fide Company Acquisition Proposal
for or in respect of at least a majority of the outstanding Company Shares on
terms that the Board of Directors of the Company determines, in its good faith
judgment (based on consultation with its financial advisors) to be more
favorable to the Company's stockholders than the terms of the Merger, that is
not subject to a financing condition, and is from a Person that in the
reasonable judgment of the Company's Board of Directors (based on advice from a
nationally recognized investment bank) is financially capable of consummating
such proposal.
ARTICLE VI
COVENANTS OF ACQUIRER
Section 6.1 Conduct of Business of Acquirer. Except as contemplated by
this Agreement or as expressly agreed to in writing by the Company, during the
period from the date of this Agreement to the earlier of the Termination Date
and the Effective Time, each of Acquirer and its Subsidiaries will use all
commercially reasonable efforts to preserve intact its business organization, to
keep available the services of its officers and employees and to maintain
satisfactory relationships with suppliers, distributors, customers and others
having business relationships with it and will take no action which would
materially adversely affect the ability of the parties to consummate the
transactions contemplated by this Agreement. Notwithstanding anything to the
contrary herein, Acquirer may (subject to Section 6.2 and paragraph (d) below)
issue, sell or deliver, grant any options for, or commit to issue, sell or
deliver any shares of any class of its capital stock or other securities
convertible into any class of its capital stock prior to the Closing Date and
may (subject to Section 6.1(d) below) purchase or acquire
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the securities or assets of other entities. Without limiting the generality of
the foregoing, and except as otherwise expressly provided in this Agreement,
prior to the Effective Time, Acquirer will not nor will it permit any of its
Subsidiaries to, without the prior written consent of the Company:
(a) amend its certificate of incorporation or by-laws, except as
required by the terms of this Agreement;
(b) 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) in respect of its capital stock or
purchase, redeem or otherwise acquire any shares of its own capital stock or any
of its Subsidiaries, other than the repurchase at cost of shares of employees
upon termination of their employment with Acquirer or its Subsidiaries;
(c) except in the ordinary course of business, consistent with past
practice, create, incur, assume, maintain or permit to exist any long-term debt
or any short-term debt for borrowed money other than under existing lines of
credit or in an amount in excess of $50,000,000;
(d) except in the ordinary course of business, consistent with past
practice, or as contemplated by this Agreement, authorize, recommend, propose or
announce an intention to authorize, recommend or propose, or enter into any
agreement in principle or an agreement with respect to, any plan of liquidation
or dissolution, or any acquisition of a material amount of assets or securities
that individually or in the aggregate would require Acquirer's stockholders'
approval or the acquisition of assets for consideration in excess of $50,000,000
or the acquisition, by merger or otherwise, of all the outstanding securities of
any entity whose securities are listed and publicly traded on the Nasdaq Stock
Market, the New York or American Stock Exchange or an equivalent foreign stock
exchange; or
(e) agree to do any of the foregoing.
Section 6.2 No Solicitation. Acquirer agrees that, from and after the
date of this Agreement until the earlier of the Termination Date and the
Effective Time, neither it nor any of its Subsidiaries nor any of the officers
or directors of it or its Subsidiaries or its or their Representatives shall,
directly or indirectly, initiate, solicit or otherwise facilitate any inquiries
or the making of an Acquirer Acquisition Proposal (as defined below). Acquirer
further agrees that neither it nor any of its Subsidiaries nor any of its or its
Subsidiaries' officers or directors shall, and that it shall direct and use its
best reasonable efforts to cause its Representatives not to, directly or
indirectly, have any discussions with or provide any confidential information or
data to any Person relating to an Acquirer Acquisition Proposal or engage in any
negotiations concerning an Acquirer Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquirer Acquisition
Proposal; provided, however, that nothing contained in this Agreement shall
prevent Acquirer or its Board of Directors from (i) making any disclosure to its
stockholders if, in the good faith judgment of its Board of Directors, failure
so to disclose would be inconsistent with its obligations under applicable law;
(ii) negotiating with or furnishing information to any Person who has made a
bona fide written Acquirer Acquisition Proposal which did not result from a
breach of this Section 6.2; or (iii) recommending such Acquirer Acquisition
Proposal to its stockholders, if and only to the extent that, in the case of
actions referred to in clause (ii) or clause (iii), such Acquirer Acquisition
Proposal is a Superior Proposal (as defined below) and the Company is given at
least two business days' notice of the existence of such Superior Proposal.
Acquirer agrees that it will, on the date hereof, immediately cease and cause to
be terminated any existing activities, discussions or negotiations with any
Person conducted heretofore with respect to any Acquirer Acquisition Proposal.
Nothing contained in this Agreement shall prevent the Board of Directors of
Acquirer from complying with Rule 14d-9 and Rule 14e-2 promulgated under the
Exchange
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Act with regard to an Acquirer Acquisition Proposal; provided that the Board of
Directors of Acquirer shall not recommend that the stockholders of Acquirer
tender their shares in connection with a tender offer except to the extent the
Board of Directors of Acquirer determines in its good faith judgment that such a
recommendation is required to comply with the fiduciary duties of the Board of
Directors of Acquirer to stockholders under applicable law, after receiving the
advice of outside legal counsel.
For purposes of this Agreement, "Acquirer Acquisition Proposal" shall
mean any offer or proposal relating to any transaction or series of related
transactions involving: (A) any purchase from Acquirer or acquisition by any
person or "group" (as defined under Section 13(d) of the Exchange Act and the
rules and regulations thereunder) of more than a fifty percent (50%) interest in
the total outstanding voting securities of Acquirer or any tender offer or
exchange offer that if consummated would result in any Person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning fifty percent (50%) or more of the total
outstanding voting securities of Acquirer or any merger, consolidation, business
combination or similar transaction involving Acquirer in which the stockholders
of Acquirer immediately prior to such transaction do not own, immediately after
such transaction, at least a majority of the outstanding securities entitled to
vote generally for the election of directors or similar managing authority of
the surviving or resulting entity in such transaction; (B) any sale, lease
(other than in the ordinary course of business), exchange, transfer, license
(other than in the ordinary course of business), acquisition or disposition of
all or substantially all of the assets of Acquirer; or (C) any liquidation or
dissolution of Acquirer. For purposes of this Agreement, a "Superior Proposal"
means, in respect of Acquirer, an unsolicited, bona fide Acquirer Acquisition
Proposal on terms that the Board of Directors of Acquirer determines, in its
good faith judgment (based on consultation with its financial advisors) to be
fair to Acquirer's stockholders, that is not subject to a financing condition,
and is from a Person that in the reasonable judgment of Acquirer's Board of
Directors (based on advice from a nationally recognized investment bank) is
financially capable of consummating such proposal.
Section 6.3 Indemnification. (a) Acquirer shall indemnify, defend and
hold harmless the present and former officers, directors, employees and agents
of the Company and its Subsidiaries against all losses, claims, damages,
expenses or liabilities arising out of actions or omissions or alleged actions
or omissions occurring at or prior to the Effective Time to the same extent and
on the same terms and conditions (including with respect to advancement of
expenses) provided for in the Company's certificate of incorporation and by-laws
and agreements in effect at the date hereof (to the extent consistent with
applicable law). The certificate of incorporation and by-laws of the Surviving
Corporation shall contain the provisions with respect to indemnification and
exculpation from liability set forth in the Company's certificate of
incorporation and by-laws on the date of this Agreement, which provisions shall
not be amended, repealed or otherwise modified for a period of six years after
the Effective Time in any manner that would adversely affect the rights
thereunder of any person who, immediately prior to the Effective Time, was an
indemnified party under such provisions.
(b) For a period of six years after the Effective Time, Acquirer shall
cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by the Company (provided that Acquirer
may substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are no less advantageous) with respect to
claims arising from facts or events which occurred on or before the Effective
Time; provided, however, that Acquirer shall not be obligated to make annual
premium payments for such insurance to the extent such premiums exceed two
hundred percent (200%) of the premiums paid as of the date hereof by the Company
for such insurance.
(c) The provisions of this Section 6.3 are intended to be for the
benefit of, and shall be enforceable by each indemnified party hereunder, his or
her heirs and his or her representatives.
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Section 6.4 NNM Listings. Acquirer shall promptly following the
execution of this Agreement prepare and submit to The Nasdaq Stock Market a
listing application covering the shares of Acquirer Common Stock (and associated
Acquirer Rights) issuable in the Merger and upon exercise of the Company Stock
Options, and shall use all commercially reasonable efforts to obtain, prior to
the Effective Time, approval for the listing of such Acquirer Common Stock (and
associated Acquirer Rights), subject to official notice of issuance.
ARTICLE VII
COVENANTS OF ACQUIRER AND THE COMPANY
Section 7.1 Access to Information. (a) From the date of this Agreement
until the earlier of the Termination Date and the Effective Time, each of the
Company and Acquirer will give the other party and their authorized
representatives (including counsel, environmental and other consultants,
accountants and auditors) access during normal business hours to all facilities,
personnel and operations and to all books and records of it and its
Subsidiaries, will permit the other party to make such inspections as it may
reasonably require 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 its business and properties as such party may from
time to time reasonably request.
(b) Each of the parties hereto will hold and will cause its consultants
and advisors to hold in strict confidence pursuant to the Confidentiality
Agreement previously entered into by the parties (the "Confidentiality
Agreement") all documents and information furnished to the other in connection
with the transactions contemplated by this Agreement as if each such consultant
or advisor was a party thereto.
Section 7.2 Registration Statement and Proxy Statement. (a) Acquirer and
the Company shall file with the SEC as soon as is reasonably practicable after
the date hereof the Joint Proxy Statement/Prospectus and Acquirer shall file the
Registration Statement in which the Joint Proxy Statement/Prospectus shall be
included. Acquirer and the Company shall use all commercially reasonable efforts
to have the Registration Statement declared effective by the SEC as promptly as
practicable. Acquirer shall also take any action required to be taken under
applicable state blue sky or securities laws in connection with the issuance of
shares of Acquirer Common Stock pursuant to this Agreement. Acquirer and the
Company shall promptly furnish to each other all information, and take such
other actions, as may reasonably be requested in connection with any action by
any of them in connection with this Section 7.2(a).
(b) If at any time prior to the Effective Time any event shall occur
which is required to be described in the Joint Proxy Statement/Prospectus or
Form S-4, such event shall be so described, and an amendment or supplement shall
be promptly filed with the SEC and, as required by law, disseminated to the
stockholders of Acquirer and the Company; provided that no amendment or
supplement to the Joint Proxy Statement/Prospectus or the Form S-4 will be made
by Acquirer or the Company without the approval of the other party. To the
extent applicable, each of Acquirer and the Company will advise the other,
promptly after it receives notice thereof, of the time when the Form S-4 has
become effective or any supplement or amendment has been filed, the issuance of
any stop order, the suspension of the qualification of the shares of Acquirer
Common Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the Joint Proxy
Statement/Prospectus or the Form S-4 or comments thereon and responses thereto
or requests by the SEC for additional information.
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(c) Acquirer and the Company shall each use all commercially reasonable
efforts to cause to be delivered to the other a comfort letter of its
independent auditors, dated a date within two business days of the effective
date of the Form S-4, in form reasonably satisfactory to the other party and
customary in scope and substance for such letters in connection with similar
registration statements.
Section 7.3 Stockholders' Meetings. The Company and Acquirer each shall
call a meeting of its respective stockholders (the "Company Stockholder Meeting"
and the "Acquirer Stockholder Meeting," respectively, and together, the
"Stockholders Meetings") to be held as promptly as practicable in accordance
with applicable law and each company's certificate of incorporation and by-laws
for the purpose of voting upon (i) in the case of the Company, the adoption and
approval of this Agreement and the transactions contemplated hereby (the
"Company Stockholder Approval"), and (ii) in the case of Acquirer, the items
contemplated by the Acquirer Stockholder Approval. Except as otherwise required
by the fiduciary duties of its Board of Directors (as determined in good faith
by such Board following the receipt of advice of its outside legal counsel to
such effect) and in accordance with Sections 5.2 and 6.2, as the case may be, of
this Agreement, (i)(A) the Company will, through its Board of Directors,
recommend to its stockholders the approval and adoption of this Agreement and
the Merger and (B) Acquirer will, through its Board of Directors, recommend to
its stockholders the approval of the issuance of Acquirer Common Stock in the
Merger and the approval of the amendments to Acquirer's certificate of
incorporation to increase the authorized number of shares of Acquirer Common
Stock to 175,000,000 shares and (ii) each of the Company and Acquirer will use
all commercially reasonable efforts to obtain the foregoing approval of their
respective stockholders. Acquirer and the Company shall coordinate and cooperate
with respect to the timing of the Stockholders Meetings and shall each use all
commercially reasonable efforts to hold Stockholders Meetings on the same day as
soon as practicable after the date on which the Form S-4 becomes effective.
Section 7.4 Reasonable Efforts; Other Actions. Subject to the terms and
conditions herein provided and applicable law, the Company and Acquirer shall
use all commercially reasonable efforts promptly to take, or cause to be taken,
all other actions and do, or cause to be done, all other things necessary,
proper or appropriate under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement, including,
without limitation, (i) the filing of Notification and Report Forms under the
HSR Act with the Federal Trade Commission (the "FTC") and the Antitrust Division
of the Department of Justice (the "Antitrust Division") and using their
reasonable best efforts to respond as promptly as practicable to all inquiries
received from the FTC or the Antitrust Division for additional information or
documentation, (ii) the taking of any actions required to qualify the Merger as
a 368 Reorganization, (iii) the obtaining of all necessary consents, approvals
or waivers under its material contracts, and (iv) the lifting of any legal bar
to the Merger.
Section 7.5 Public Announcements. Before issuing any press release or
otherwise making any public statements with respect to the Merger, Acquirer and
the Company will consult with each other as to its form and substance and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by law.
Section 7.6 Notification of Certain Matters. Each of the Company and
Acquirer shall give prompt notice to the other party of (i) any notice of, or
other communication relating to, a breach of this Agreement or event which, with
notice or lapse of time or both, would become a breach, received by it or any of
its Subsidiaries subsequent to the date of this Agreement and prior to the
Effective Time, under any contract to which it or any of its Subsidiaries is a
party or it, any of its Subsidiaries or any of its or their respective
properties is subject, which breach would be reasonably likely to have a
Material Adverse Effect on it, or (ii) any notice or other communication from
any third party alleging
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that the consent of such third party is or may be required in connection with
the transactions contemplated by this Agreement.
Section 7.7 Expenses. Except as set forth in Section 9.5, Acquirer, and
the Company, shall bear their respective expenses incurred in connection with
the Merger, including, without limitation, the preparation, execution and
performance of this Agreement and the transactions contemplated hereby, and all
fees and expenses of investment bankers, finders, brokers, agents,
representatives, counsel and accountants, except that expenses incurred in
printing, mailing and filing (including without limitation, SEC filing fees and
stock exchange listing application fees) Form S-4 and the Joint Proxy
Statement/Prospectus shall be shared equally by the Company and Acquirer.
Section 7.8 Affiliates. Each of the Company and Acquirer shall deliver
to the other a letter identifying all persons who, as of the date hereof, may be
deemed to be "affiliates" thereof for purposes of Rule 145 under the Securities
Act (the "Affiliates") and shall advise the other in writing of any persons who
become an Affiliate prior to the Effective Time. The Company shall cause each
person who is so identified as an Affiliate to deliver to Acquirer, no later
than the earlier of July 8, 1999 or the date such person becomes an Affiliate, a
written agreement substantially in the form of Exhibit 7.8 hereto.
Section 7.9 Certain Benefit Plans. As soon as practicable after the
execution of this Agreement, the Company and Acquirer shall use their
commercially reasonable efforts to confer and work together in good faith to
agree upon mutually acceptable employee benefit arrangements (and terminate
Company Employee Plans immediately prior to the Effective Time if appropriate)
so as to provide benefits to employees of the Company generally equivalent in
the aggregate to those provided to similarly situated employees of Acquirer. In
addition, the Company agrees that it and its Subsidiaries shall terminate any
and all group severance, separation, retention and salary continuation plans,
programs or arrangements (other than contractual agreements disclosed on the
Company Disclosure Letter) prior to the Effective Time. Years of service with
the Company or any of its Subsidiaries or predecessor organizations thereof (and
service otherwise credited by the Company or any of its Subsidiaries or
predecessor organizations thereof) prior to the Effective Time shall be credited
under the Acquirer Employee Plans listed under Items 3, 11 and 12 of Schedule
4.14(a) to the Acquirer Disclosure Letter to the same extent as service with
Acquirer is credited under such Acquirer Employee Plans (including for purposes
of eligibility, vesting and benefit accrual). Employees of the Company who
participate in an Acquirer Employee Plan listed under Items 3, 11 and 12 of
Schedule 4.14(a) to the Acquirer Disclosure Letter shall participate in such
Acquirer Employee Plan on terms no less favorable than those offered by Acquirer
to employees of Acquirer (including those provisions relating to the coverage of
dependents). Acquirer shall use its commercially reasonable efforts to cause any
and all pre-existing condition limitations, eligibility waiting periods and
evidence of insurability requirements under any group plans to be waived with
respect to Employees of the Company who participate in any Acquirer Employee
Plan listed under Items 3, 11 and 12 of Schedule 4.14(a) to the Acquirer
Disclosure Letter, and their eligible dependents, and shall provide each such
participant and dependent with credit for any co-payments and deductibles paid
prior to the Effective Time for purposes of satisfying any applicable
deductible, out-of-pocket, or similar requirements under all such Acquirer
Employee Plans in which such participants are eligible to participate after the
Effective Time. Notwithstanding any of the foregoing to the contrary, none of
the provisions contained herein shall operate to duplicate any benefit provided
to any employee of the Company or the funding of any such benefit.
Section 7.10 Formation of Merger Subsidiary. As soon as practicable
following the execution of this Agreement, but no later than one week following
such date, Acquirer shall cause Merger Subsidiary to be formed in the State of
Delaware and to take all corporate action necessary to approve
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and to become a party to this Agreement. Each of the parties hereto agrees that
upon formation of Merger Subsidiary it shall execute an amendment to this
Agreement and such other documents as may be necessary to cause Merger
Subsidiary to become a party to this Agreement.
ARTICLE VIII
CONDITIONS TO THE MERGER
Section 8.1 Conditions to the Obligations of Each Party. The obligations
of the Company, Acquirer and Merger Subsidiary to consummate the Merger are
subject to the satisfaction (or, to the extent legally permissible, waiver) at
or prior to the Closing of the following conditions:
(a) this Agreement shall have been adopted by the stockholders of the
Company in accordance with Delaware Law;
(b) any applicable waiting period under the HSR Act relating to the
Merger shall have expired or terminated early;
(c) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit or enjoin the consummation of the
Merger;
(d) the parties shall have received all required approvals and third
party consents listed on Schedule 8.1(d);
(e) the matters constituting the Acquirer Stockholder Approval shall
have been approved by the stockholders of Acquirer in accordance with applicable
law or regulation;
(f) the Form S-4 shall have been declared effective under the 1933 Act
and no stop order suspending the effectiveness of the Form S-4 shall be in
effect and no proceedings for such purpose shall be pending before or threatened
by the SEC; and
(g) the shares of Acquirer Common Stock to be issued in the Merger shall
have been approved for listing on the NNM, subject to official notice of
issuance.
Section 8.2 Conditions to the Obligations of Acquirer and Merger
Subsidiary. The obligations of Acquirer and Merger Subsidiary to consummate the
Merger are subject to the satisfaction (or, to the extent legally permissible,
waiver) of the following further conditions:
(a)(i) the Company shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time, (ii) the representations and warranties of the Company contained
in this Agreement shall be true and correct as of the Closing Date with the same
force and effect as if made on the Closing Date (provided that any such
representation and warranty made as of a specific date shall be true and correct
as of such specific date), except for such inaccuracies that individually or in
the aggregate do not have a Material Adverse Effect on the Company as of the
Closing Date and except for changes contemplated by this Agreement (it being
understood that, for purposes of determining the accuracy of such
representations and warranties, all "Material Adverse Effect" qualifications and
other qualifications based on the word "material" or similar phrases contained
in such representations and warranties shall be disregarded, and any update of
or modification to the Company Disclosure Letter made or proposed to have been
made after the execution of this Agreement
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shall be disregarded), and (iii) Acquirer shall have received a certificate
signed by the chief executive officer of the Company to the foregoing effect;
and
(b) Acquirer shall have received an opinion of Pillsbury Madison & Sutro
LLP in form and substance reasonably satisfactory to Acquirer, on the basis of
certain facts, representations and assumptions set forth in such opinion, dated
the Effective Time, to the effect that the Merger will be treated for federal
income tax purposes as a reorganization qualifying under the provisions of
Section 368(a) of the Code and that each of Acquirer, Merger Subsidiary and the
Company will be a party to the reorganization within the meaning of Section
368(b) of the Code. In rendering such opinion, such counsel shall be entitled to
rely upon certain representations of officers of Acquirer and the Company
reasonably requested by counsel. If the opinion referred to in this Section
8.2(b) is not delivered, such condition shall be deemed to be satisfied if the
Acquirer shall have received an opinion from Wilson Sonsini Goodrich & Rosati,
Professional Corporation, or another law firm selected by the Company and
reasonably acceptable to Acquirer. Acquirer will cooperate in obtaining such
opinion, including, without limitation, making (and requesting from affiliates)
appropriate representations with respect to relevant matters.
Section 8.3 Conditions to the Obligations of the Company. The obligation
of the Company to consummate the Merger is subject to the satisfaction (or, to
the extent legally permissible, waiver) of the following further conditions:
(a)(i) Acquirer shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time, (ii) the representations and warranties of Acquirer contained in
this Agreement shall be true and correct as of the Closing Date with the same
force and effect as if made on the Closing Date (provided that any such
representation and warranty made as of a specific date shall be true and correct
as of such specific date), except for such inaccuracies that individually or in
the aggregate do not have a Material Adverse Effect on Acquirer as of the
Closing Date and except for changes contemplated by this Agreement (it being
understood that, for purposes of determining the accuracy of such
representations and warranties, all "Material Adverse Effect" qualifications and
other qualifications based on the word "material" or similar phrases contained
in such representations and warranties shall be disregarded, and any update of
or modification to the Acquirer Disclosure Letter made or proposed to have been
made after the execution of this Agreement shall be disregarded), and (iii) the
Company shall have received a certificate signed by the chief executive officer
of Acquirer to the foregoing effect; and
(b) the Company shall have received an opinion of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, in form and substance reasonably
satisfactory to the Company, on the basis of certain facts, representations and
assumptions set forth in such opinion, dated the Effective Time, to the effect
that the Merger will be treated for federal income tax purposes as a
reorganization qualifying under the provisions of Section 368(a) of the Code and
that each of the Company, Merger Subsidiary and Acquirer will be a party to the
reorganization within the meaning of Section 368(b) of the Code. In rendering
such opinion, such counsel shall be entitled to rely upon certain
representations of officers of the Company and Acquirer reasonably requested by
counsel. If the opinion referred to in this Section 8.3(b) is not delivered,
such condition shall be deemed to be satisfied if the Acquirer shall have
received an opinion from Pillsbury Madison & Sutro LLP or another law firm
selected by Acquirer and reasonably acceptable to the Company. The Company will
cooperate in obtaining such opinion, including, without limitation, making (and
requesting from affiliates) appropriate representations with respect to relevant
matters.
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ARTICLE IX
TERMINATION
Section 9.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of the Company or Acquirer:
(a) by mutual consent of Acquirer and the Company;
(b) by either Acquirer or the Company if the Merger shall not have been
consummated on or before December 31, 1999 (the "End Date"), which date may be
extended by mutual written consent of the parties hereto; provided, however,
that the right to terminate this Agreement under this Section 9.1(b) shall not
be available to any party prior to February 28, 2000 whose action or failure to
act has been a principal cause of or resulted in the failure of the Merger to
occur on or before such date and such action or failure to act constitutes a
material breach of this Agreement.
(c) by either Acquirer or the Company, if any court of competent
jurisdiction in the United States or other governmental body in the United
States shall have issued an order (other than a temporary restraining order),
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger, and such order, decree, ruling or other action shall
have become final and nonappealable; provided that the party seeking to
terminate this Agreement shall have used all commercially reasonable efforts to
avoid, remove or lift such order, decree or ruling; or
(d) by either Acquirer or the Company, if the requisite stockholder
approvals of the stockholders of either Acquirer or the Company are not obtained
at the meeting of stockholders duly called and held therefor; provided, however,
that the right to terminate this Agreement under this Section 9.1(d) shall not
be available to a Person where the failure to obtain stockholder approval of
such Person shall have been caused by the action or failure to act of such
Person and such action or failure to act constitutes a material breach by such
Person of this Agreement.
Section 9.2 Termination by Acquirer. This Agreement may be terminated by
action of the Board of Directors of Acquirer, at any time prior to the Effective
Time, before or after the approval by the stockholders of Acquirer or the
Company, if (a) the Company shall have failed to comply in any material respect
with any of the covenants or agreements contained in Articles I, V and VII of
this Agreement to be complied with or performed by the Company at or prior to
such date of termination; provided, however, that if such failure to comply is
capable of being cured prior to the End Date, such failure shall not have been
cured within 15 days of delivery to the Company of written notice of such
failure, (b) there exists a breach or breaches of any representation or warranty
of the Company contained in this Agreement such that the closing condition set
forth in Section 8.2(a) would not be satisfied; provided, however, that if such
breach or breaches are capable of being cured prior to the End Date, such
breaches shall not have been cured within 15 days of delivery to the Company of
written notice of such breach or breaches, (c) a Company Triggering Event (as
defined below) shall have occurred, or (d)(i) the Board of Directors of Acquirer
authorizes Acquirer, subject to complying with the terms of this Agreement, to
enter into a binding written agreement concerning a transaction that constitutes
a Superior Proposal with respect to Acquirer and Acquirer notifies the Company
in writing in accordance with Section 6.2 that it intends to enter into such an
agreement, attaching the most current version of such agreement (or a
description of all material terms and conditions thereof) to such notice and
(ii) Acquirer upon such termination pursuant to this clause (d) pays to the
Company in immediately available funds the fees required to be paid pursuant to
Section 9.5. Acquirer agrees to notify the Company promptly if its intention to
enter into a written agreement referred to in its notification pursuant to
clause (d) above shall change at any time after giving such notification.
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For the purposes of this Agreement, a "Company Triggering Event" shall
be deemed to have occurred if: (i) the Board of Directors of the Company or any
committee thereof shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to Acquirer its recommendation in favor of, the
adoption and approval of the Agreement or the approval of the Merger; (ii) the
Company shall have failed to include in the Joint Proxy Statement/Prospectus the
recommendation of the Board of Directors of the Company in favor of the adoption
and approval of the Agreement and the approval of the Merger; (iii) the Board of
Directors of the Company or any committee thereof shall have approved or
recommended any Superior Proposal with respect to the Company; or (iv) a tender
or exchange offer relating to securities of the Company shall have been
commenced by a Person unaffiliated with Acquirer and the Company shall not have
sent to its securityholders pursuant to Rule 14e-2 promulgated under the
Exchange Act, within ten business days after such tender or exchange offer is
first published, sent or given, a statement disclosing that the Company
recommends rejection of such tender or exchange offer.
Section 9.3 Termination by the Company. This Agreement may be terminated
at any time prior to the Effective Time, before or after the approval by the
stockholders of Acquirer or the Company, by action of the Board of Directors of
the Company, if (a) Acquirer shall have failed to comply in any material respect
with any of the covenants or agreements contained in Articles I, II, VI and VII
of this Agreement to be complied with or performed by Acquirer at or prior to
such date of termination; provided, however, that if such failure to comply is
capable of being cured prior to the End Date, such failure shall not have been
cured within 15 days of delivery to Acquirer of written notice of such failure,
(b) there exists a breach or breaches of any representation or warranty of
Acquirer contained in this Agreement such that the closing condition set forth
in Section 8.3(a) would not be satisfied; provided, however, that if such breach
or breaches are capable of being cured prior to the End Date, such breaches
shall not have been cured within 15 days of delivery to Acquirer of written
notice of such breach or breaches, (c) an Acquirer Triggering Event (as defined
below) shall have occurred, or (d)(i) the Board of Directors of the Company
authorizes the Company, subject to complying with the terms of this Agreement,
to enter into a binding written agreement concerning a transaction that
constitutes a Superior Proposal with respect to the Company and the Company
notifies Acquirer in writing in accordance with Section 5.2 that it intends to
enter into such an agreement, attaching the most current version of such
agreement (or a description of all material terms and conditions thereof) to
such notice and (ii) the Company upon such termination pursuant to this clause
(d) pays to Acquirer in immediately available funds the fees required to be paid
pursuant to Section 9.5.
For the purposes of this Agreement, an "Acquirer Triggering Event" shall
be deemed to have occurred if: (i) the Board of Directors of Acquirer or any
committee thereof shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to the Company its recommendation in favor of, the
adoption and approval of the Agreement or the approval of the Merger; (ii)
Acquirer shall have failed to include in the Joint Proxy Statement/Prospectus
the recommendation of the Board of Directors of Acquirer in favor of the
adoption and approval of the Agreement and the approval of the Merger; (iii) the
Board of Directors of Acquirer or any committee thereof shall have approved or
recommended any Superior Proposal with respect to Acquirer; or (iv) a tender or
exchange offer relating to securities of Acquirer shall have been commenced by a
Person unaffiliated with Acquirer and Acquirer shall not have sent to its
securityholders pursuant to Rule 14e- promulgated under the Exchange Act, within
ten business days after such tender or exchange offer is first published, sent
or given, a statement disclosing that Acquirer recommends rejection of such
tender or exchange offer.
Section 9.4 Procedure for Termination. In the event of termination by
Acquirer or the Company pursuant to this Article IX, written notice thereof
shall forthwith be given to the other.
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Section 9.5 Effect of Termination. (a) In the event of termination of
this Agreement pursuant to this Article IX, no party hereto (or any of its
directors or officers) shall have any liability or further obligation to any
other party to this Agreement, except as provided in this Section 9.5 and
Section 7.1(b) hereof.
(b) If
(i) the Company shall terminate this Agreement pursuant to
Section 9.3(d);
(ii) Acquirer shall terminate this Agreement pursuant to Section
9.2(c), unless at the time of such Company Triggering Event, any of the
conditions set forth in Section 8.3(a) would not have been satisfied as
of such date and would not be reasonably capable of being satisfied; or
(iii) either the Company or Acquirer shall terminate this
Agreement pursuant to Section 9.1(d) in circumstances where the Company
Stockholder Approval was not been obtained at the Company Stockholder
Meeting and prior to the Company Stockholder Meeting a Company
Acquisition Proposal was made by any Person and within twelve months
after termination of this Agreement the Company consummates a Company
Acquisition or enters into a definitive agreement with respect to such
Company Acquisition Proposal that provides for a Company Acquisition;
then in any case as described in clause (i), (ii) or (iii) the Company shall pay
to Acquirer (by wire transfer of immediately available funds not later than the
date of termination of this Agreement or, in the case of clause (iii), the date
of such definitive agreement) an amount equal to $5,000,000. Except as provided
in Section 9.5(d), the fees provided for in this Section 9.5(b) are intended to
be liquidated damages and, as such, the sole and exclusive remedy for any and
all claims on any theory that might be asserted with respect to any of the
matters discussed in this Article IX, and no party hereto shall seek any
additional damages or remedies at law or in equity as a result or consequence of
any such matter. Acceptance by Acquirer of the payment referred to in the
foregoing sentence shall constitute conclusive evidence that this Agreement has
been validly terminated and upon acceptance of payment of such amount the
Company shall be fully released and discharged from any liability or obligation
resulting from or under this Agreement. For purposes of this Agreement, the term
"Company Acquisition" shall mean (i) a merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company pursuant to which the stockholders of the Company
immediately preceding such transaction hold less than fifty percent (50%) of the
aggregate equity interests in the surviving or resulting entity of such
transaction, (ii) a sale or other disposition by the Company of assets
representing in excess of fifty percent (50%) of the aggregate fair market value
of the Company's business immediately prior to such sale, or (iii) the
acquisition by any person or group (including by way of a tender offer or an
exchange offer or issuance by the Company), directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of shares
representing in excess of fifty percent (50%) of the voting power of the then
outstanding shares of capital stock of the Company.
(c) If
(i) Acquirer shall terminate this Agreement pursuant to Section
9.2(d);
(ii) the Company shall terminate this Agreement pursuant to
Section 9.3(c), unless at the time of such Acquirer Triggering Event,
any of the conditions set forth in Section 8.2(a) would not have been
satisfied as of such date and would not be reasonably capable of being
satisfied;
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(iii) either the Company or Acquirer shall terminate this
Agreement pursuant to Section 9.1(d) in circumstances where the Acquirer
Stockholder Approval was not been obtained at the Acquirer Stockholder
Meeting and prior to the Acquirer Stockholder Meeting an Acquirer
Acquisition Proposal was made by any Person and within twelve months
after termination of this Agreement Acquirer consummates the transaction
contemplated by such Acquirer Acquisition Proposal or enters into a
definitive agreement with respect to such Acquirer Acquisition Proposal;
then in any case as described in clause (i), (ii) or (iii) Acquirer shall pay to
the Company (by wire transfer of immediately available funds not later than the
date of termination of this Agreement or, in the case of clause (iii), the date
of such definitive agreement) an amount equal to $5,000,000. Except as provided
in Section 9.5(d), the fees provided for in this Section 9.5(c) are intended to
be liquidated damages and, as such, the sole and exclusive remedy for any and
all claims on any theory that might be asserted with respect to any of the
matters discussed in this Article IX, and no party hereto shall seek any
additional damages or remedies at law or in equity as a result or consequence of
any such matter. Acceptance by the Company of the payment referred to in the
foregoing sentence shall constitute conclusive evidence that this Agreement has
been validly terminated and upon acceptance of payment of such amount Acquirer
shall be fully released and discharged from any liability or obligation
resulting from or under this Agreement.
(d) Notwithstanding anything to the contrary, payment of the fees
provided for in Section 9.5 shall not be in lieu of damages incurred in the
event of a willful or intentional breach of this Agreement by either party.
ARTICLE X
MISCELLANEOUS
Section 10.1 Notices. Any notice, request, instruction or other document
to be given hereunder by any party to the other shall be in writing and
delivered personally or sent by certified mail, postage prepaid, by telecopy
(with receipt confirmed and promptly confirmed by personal delivery, U.S. first
class mail, or courier), or by courier service, as follows:
(a) If to Acquirer or Merger Subsidiary to:
S3 Incorporated
2801 Mission College Boulevard
Santa Clara, CA 95052-8058
Attn: Chief Executive Officer
Telecopier: (408) 588-8050
with a copy to:
Pillsbury Madison & Sutro LLP
2550 Hanover Street
Palo Alto, CA 94304
Attn: Jorge A. del Calvo
Telecopier: (650) 233-4545
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(b) If to the Company to:
Diamond Multimedia Systems, Inc.
2880 Junction Avenue
San Jose, CA 95134
Attention: Chief Executive Officer
Telecopier: (408) 325-7145
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94306
Attn: Jeffrey D. Saper
Telecopier: (650) 493-6811
Section 10.2 Non-Survival of Representations and Warranties. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time or the
termination of this Agreement.
Section 10.3 Amendments; No Waivers. (a) Any provision of this Agreement
(including the Exhibits and Schedules hereto) may be amended or waived prior to
the Effective Time if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Company, Acquirer and Merger
Subsidiary, or in the case of a waiver, by the party against whom the waiver is
to be effective; provided that after the adoption of this Agreement by the
stockholders of the Company, no such amendment or waiver shall, without the
further approval of such stockholders, alter or change (i) the amount or kind of
consideration to be received in exchange for any shares of capital stock of the
Company, (ii) any term of the certificate of incorporation of the Surviving
Corporation or (iii) any of the terms or conditions of this Agreement if such
alteration or change would adversely affect the holders of any shares of capital
stock of the Company.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 10.4 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto except that Merger Subsidiary
may transfer or assign, in whole or from time to time in part, to one or more of
its affiliates, its rights under this Agreement, but any such transfer or
assignment will not relieve Merger Subsidiary of its obligations hereunder.
Section 10.5 Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of Delaware, without regard
to principles of conflicts of law.
Section 10.6 Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby shall be brought
exclusively in the Court of Chancery of the State of Delaware, and each of the
parties hereby consents to the jurisdiction of such court (and of the
appropriate appellate
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courts therefrom) in any such suit, action or proceeding and irrevocably waives,
to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
in any such court or that any such suit, action or proceeding which is brought
in any such court has been brought in an inconvenient forum. Process in any such
suit, action or proceeding may be served on any party anywhere in the world,
whether within or without the jurisdiction of any such court. Without limiting
the foregoing, each party agrees that service of process on such party as
provided in Section 10.1 shall be deemed effective service of process on such
party.
Section 10.7 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 10.8 Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
Section 10.9 Entire Agreement. This Agreement (including the Exhibits
and Schedules hereto) and the Confidentiality Agreement constitute the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter hereof and
thereof. Except as provided in Section 6.3(c), no provision of this Agreement or
any other agreement contemplated hereby is intended to confer on any Person
other than the parties hereto any rights or remedies.
Section 10.10 Captions. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.
Section 10.11 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that
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the transactions contemplated hereby be consummated as originally contemplated
to the fullest extent possible.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed, all as of the date first above written.
S3 INCORPORATED
By /s/ Kenneth F. Potashner
--------------------------------------
Kenneth F. Potashner
President and Chief Executive Officer
DIAMOND MULTIMEDIA SYSTEMS, INC.
By /s/ William J. Schroeder
--------------------------------------
William J. Schroeder
President and Chief Executive Officer
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