<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Schedule 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. ____)1
Integrated Systems Consulting Group, Inc.
(Name of Issuer)
Common Stock, $.005 par value
(Title of Class of Securities)
45813K 10 7
(CUSIP Number)
James A. Ounsworth, Senior Vice President and General Counsel
Safeguard Scientifics, Inc.
800 The Safeguard Building, 435 Devon Park Drive, Wayne, PA 19087
(610) 293-0600
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
September 9, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
[X].
NOTE. Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See Rule
13d-7(b) for other parties to whom copies are to be sent.
1The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 or otherwise subject to the liabilities of that section of the Act but
shall be subject to all other provisions of the Act (however, see the Notes).
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CUSIP No. 45813K 10 7 13D
1. NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Safeguard Scientifics, Inc. #23-1609753
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ X ]
(b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS*
Not applicable
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Pennsylvania
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
7. SOLE VOTING POWER
0
8. SHARED VOTING POWER
756,025 shares of common stock
9. SOLE DISPOSITIVE POWER
0
10. SHARED DISPOSITIVE POWER
756,025 shares of common stock
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
756,025 shares of common stock (includes 169,931 currently exercisable
warrants to purchase common stock).
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.2%
14. TYPE OF REPORTING PERSON*
CO
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CUSIP No. 45813K 10 7 13D
1. NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Safeguard Scientifics (Delaware), Inc. #51-1291171
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ X ]
(b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS*
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
7. SOLE VOTING POWER
0
8. SHARED VOTING POWER
756,025 shares of common stock
9. SOLE DISPOSITIVE POWER
0
10. SHARED DISPOSITIVE POWER
756,025 shares of common stock
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
756,025 shares of common stock (includes 169,931 currently exercisable
warrants to purchase common stock).
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.2%
14. TYPE OF REPORTING PERSON*
CO
3
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Background
Safeguard Scientifics (Delaware), Inc. and Safeguard Scientifics, Inc.
have previously jointly filed a Schedule 13G dated February 7, 1997 with respect
to beneficial ownership of the shares of common stock, $.005 par value per
share, of Integrated Systems Consulting Group, Inc. (the "Issuer"). This
Schedule 13D is being filed pursuant to Rule 13d-1(e)(1)(i)for the reasons set
forth below in Item 4.
ITEM 1. Security and Issuer
The title of the class of equity securities to which this Schedule 13D
relates is common stock, $.005 par value per share (hereinafter referred to as
the "Shares"). The Issuer's principal executive offices are located at 575 East
Swedesford Road, Wayne, PA 19087.
ITEM 2. Identity and Background
This Schedule 13G is being filed by Safeguard Scientifics, Inc.
("Safeguard") and Safeguard Scientifics (Delaware), Inc. ("Safeguard Delaware"
and collectively with Safeguard, the "Reporting Persons"). Safeguard Delaware is
a wholly owned subsidiary of Safeguard, and all securities reported in this
Schedule 13D as being beneficially owned by Safeguard are held of record by
Safeguard Delaware. Set forth in Schedule I annexed hereto is the name, identity
and background of each Reporting Person and set forth in Schedules II and III is
the information required by Item 2 of Schedule 13D about the identity and
background of each Reporting Person's directors, executive officers and
controlling persons, if any.
During the last five years, neither Reporting Person nor, to the best
of each Reporting Person's knowledge, none of each such Reporting Person's
executive officers, directors, and controlling persons identified in the
schedules attached hereto, has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors), or has been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws. Each executive officer, director, and controlling
person of each Reporting Person is a United States citizen, except where
otherwise indicated.
ITEM 3. Source and Amount of Funds or Other Consideration
The Shares held by Safeguard Delaware were purchased at a per share
price of approximately $2.89 in June and August 1995 from the Issuer and David
Lipson, the Issuer's Chairman, Chief Executive Officer and President. In
connection with that transaction, the Issuer also issued to Safeguard Delaware a
warrant to purchase 169,931 shares at an exercise price of $3.68 per share,
which warrant became exercisable on April 17, 1996 and expires on April 17,
1999. Safeguard Delaware obtained the funds used to pay the purchase price from
Safeguard, which obtained such funds from a bank loan. All share and per
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share information included in this Schedule 13D have been adjusted to give
effect to a three-for-two stock split authorized by the Issuer's Board of
Directors on November 16, 1995.
ITEM 4. Purpose of Transaction
The Shares beneficially owned by Reporting Persons have been held for
investment purposes.
On September 9, 1998, the Issuer entered into an Agreement and Plan of
Merger and Reorganization (the "Merger Agreement") pursuant to which Foxtrot
Acquisition Sub, Inc. (the "Merger Sub"), a wholly owned subsidiary of First
Consulting Group, Inc. ("FCG"), will merge with and into Issuer (the "Merger"),
upon consummation of which Merger Sub will cease to exist and Issuer will become
a wholly owned subsidiary of FCG. The officers and directors of Issuer
immediately after the effective time of the Merger will be the officers and
directors of Merger Sub immediately prior to the effective time of the Merger
and shall serve as the officers and directors of Issuer until their respective
successors are elected and qualified or duly appointed, as the case may be. Upon
consummation of the Merger, the Articles of Incorporation and Bylaws of Issuer
will be amended and restated to conform to the Articles of Incorporation and
Bylaws of Merger Sub immediately prior to the Merger.
In connection with the Merger, each Share of Issuer held by Safeguard
Delaware will be exchanged for 0.77 shares of FCG, and the warrants held by
Safeguard Delaware will be assumed by FCG. If the Merger is consummated,
Issuer's common stock will be deregistered under the Securities Exchange Act of
1934, as amended, and delisted from the Nasdaq National Market.
To facilitate the consummation of the Merger, Safeguard Delaware has
entered into a Company Voting Agreement, dated as of September 9, 1998, with FCG
(the "Company Voting Agreement"), and a Company Affiliate Agreement, dated as of
September 9, 1998, with FCG and Issuer (the "Company Affiliate Agreement").
Pursuant to the Company Voting Agreement, Safeguard Delaware has agreed
(i) not to transfer any Shares beneficially owned by it unless and until the
proposed transferee of such Shares shall have executed a counterpart of the
Company Voting Agreement and an irrevocable proxy and agreed to hold such Shares
subject to all of the terms and provisions of the Company Voting Agreement; (ii)
not to deposit any of its Shares into a voting trust or grant any proxy, voting
agreement or similar agreement with respect to such Shares; and (iii) to vote
all shares beneficially owned by it in favor of the Merger, the execution and
delivery of the Merger Agreement and the approval of the terms thereof, and all
other actions contemplated by the Merger Agreement. Pursuant to the Company
Voting Agreement, Safeguard Delaware has granted a proxy (the "Irrevocable
Proxy") to FCG solely with respect to stockholders' votes concerning the matters
described in the immediately preceding sentence. The provisions of the Company
Voting Agreement and Irrevocable Proxy terminate upon the Termination Date (as
defined in the Company Voting Agreement).
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Pursuant to the Company Affiliate Agreement, Safeguard Delaware has
agreed that it will not sell, pledge, transfer or otherwise dispose of any
shares of common stock of FCG delivered in connection with the Merger, except
pursuant to an effective registration statement or in compliance with Rule 145
or such other exemption from the registration requirements of the Securities Act
of 1933, as amended. The Company Affiliate Agreement also provides that until
the earlier of (i) FCG's public announcement of financial results covering at
least 30 days of combined operations of FCG and Issuer, or (ii) the
Reorganization Agreement is terminated in accordance with its terms, Safeguard
Delaware will not sell, exchange, transfer, pledge, distribute or otherwise
dispose of or grant any options, establish any "short" or put-equivalent
position with respect to or enter into any similar transaction (through
derivatives or otherwise) intended or having the effect, directly or indirectly,
of reducing its risk relative to: (i) Issuer's Shares (except pursuant to and
upon consummation of the Merger); or (ii) any FCG Common Stock received by it in
the Merger or upon exercise of warrants assumed by FCG in the Merger. Provided
certain conditions are met, the Company Affiliate Agreement provides for certain
exceptions to the foregoing restrictions on transfer relating to: (i) certain de
minimis transfers; (ii) transfers in payment of the exercise price of warrants
to purchase Issuer's Shares or FCG Common Stock; or (iii) charitable donations.
The foregoing descriptions relating to the Merger and related
transactions are qualified in their entirety by reference to the terms of such
agreements. The Merger Agreement is attached hereto as Exhibit 99.1 and
incorporated herein by reference. The Company Voting Agreement is attached
hereto as Exhibit 99.2 and incorporated herein by reference. The Company
Affiliate Agreement is attached hereto as Exhibit 99.3 and incorporated herein
by reference.
ITEM 5. Interest in the Securities of the Issuer
The table below sets forth the aggregate number of Shares and
percentage of the Issuer's outstanding Shares beneficially owned by each
Reporting Person and by each executive officer, director, and controlling
person, if any, of the Reporting Persons named in the Schedules attached hereto.
Except as otherwise noted, each person listed has sole voting and dispositive
power over all Shares listed opposite his or its name. Any of the aforementioned
persons whose names do not appear in the table below do not, to the best of
Reporting Persons' knowledge, beneficially own any Shares of the Issuer.
Unless otherwise indicated in a footnote in the following table,
neither Reporting Person nor, to the best of each Reporting Person's knowledge,
any person named in the Schedules attached hereto, has consummated any
transaction in the Issuer's Shares during the past sixty days other than as set
forth herein.
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<TABLE>
<CAPTION>
Number of Shares Percentage of
Name of Person Beneficially Owned Outstanding Shares
- --------------- ------------------- ------------------
<S> <C> <C>
Safeguard Scientifics,
Inc. (1) 756,025 9.2%
Safeguard Scientifics,
(Delaware) Inc.(1) 756,025 9.2%
Delbert W. Johnson (2) 2,496 *
Robert E. Keith Jr. 5,000 *
Donald R. Caldwell (3) 15,290 *
Michael W. Miles 4,352 *
Peter Likins (4) 900 *
Jerry L. Johnson 1,167 *
Thomas C. Lynch 4,061 *
James A. Ounsworth 745 *
Warren V. Musser 125,833 1.6%
Gerald M. Wilk 18,792 *
</TABLE>
- -----------
* Less than 1%
(1) Includes 169,931 Shares issuable upon the exercise of Warrants. The
securities listed for Safeguard Scientifics, Inc. ("Safeguard") are
held in the name of Safeguard Scientifics (Delaware), Inc. ("Safeguard
Delaware"). Safeguard Delaware is a wholly owned subsidiary of
Safeguard. Safeguard and Safeguard Delaware each have shared power to
vote and direct the vote and to dispose of and direct the disposition
of all of the securities listed.
(2) Includes 2,000 shares purchased by Mr. Johnson on September 1, 1998 at
a per share price of $10.50.
(3) Includes 200 shares held in a custodial account on behalf of a
minor child and 438 shares held in a
trust.
(4) Dr. Likins sold 2,100 shares on September 2, 1998 at a per share price
of $11.75.
ITEM 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Safeguard Scientifics, Inc. has entered into the agreements described
in Item 4.
ITEM 7. Material to be Filed as Exhibits
Exhibit 99.1 Agreement and Plan of Merger and Reorganization among First
Consulting Group, Inc., a Delaware Corporation, Foxtrot
Acquisition Sub, Inc., a Delaware corporation, and Integrated
Systems Consulting Group, Inc., a Pennsylvania corporation,
dated as of September 9, 1998
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Exhibit 99.2 Form of Company Voting Agreement, dated as of September 9,
1998, a substantially similar version of which has been
executed by and between First Consulting Group, Inc., a
Delaware corporation, and Safeguard Scientifics, Inc., a
Pennsylvania corporation
Exhibit 99.3 Form of Company Affiliate Agreement, dated as of September 9,
1998, a substantially similar version of which has been
executed by and among First Consulting Group, Inc., a Delaware
corporation, Integrated Systems Consulting Group, Inc., a
Pennsylvania corporation, and Safeguard Scientifics, Inc., a
Pennsylvania corporation
8
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SIGNATURES
After reasonable inquiry and to best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct. In executing this statement, the undersigned agrees, to
the extent required by Rule 13d-1(f), that this statement is being filed on
behalf on each of the Reporting Persons herein.
Dated: September 18, 1998 Safeguard Scientifics, Inc.
By: /s/ James A. Ounsworth
-----------------------------------
James A. Ounsworth
Sr. Vice President, General
Counsel and Secretary
9
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SIGNATURES
After reasonable inquiry and to best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct. In executing this statement, the undersigned agrees, to
the extent required by Rule 13d-1(f), that this statement is being filed on
behalf on each of the Reporting Persons herein.
Dated: September 18, 1998 Safeguard Scientifics (Delaware),
Inc.
By: /s/ James A. Ounsworth
-----------------------------------
James A. Ounsworth
Vice President and Secretary
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EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
Exhibit 99.1 Agreement and Plan of Merger and Reorganization among First
Consulting Group, Inc., a Delaware Corporation, Foxtrot
Acquisition Sub, Inc., a Delaware corporation, and Integrated
Systems Consulting Group, Inc., a Pennsylvania corporation,
dated as of September 9, 1998
Exhibit 99.2 Form of Company Voting Agreement, dated as of September 9,
1998, a substantially similar version of which has been
executed by and between First Consulting Group, Inc., a
Delaware corporation, and Safeguard Scientifics, Inc., a
Pennsylvania corporation
Exhibit 99.3 Form of Company Affiliate Agreement, dated as of September 9,
1998, a substantially similar version of which has been
executed by and among First Consulting Group, Inc., a Delaware
corporation, Integrated Systems Consulting Group, Inc., a
Pennsylvania corporation, and Safeguard Scientifics, Inc., a
Pennsylvania corporation
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Schedule I
Identity and Background
1. Safeguard Scientifics, Inc.
Safeguard Scientifics, Inc., a Pennsylvania corporation ("Safeguard"),
owns all of the outstanding capital stock of Safeguard Scientifics
(Delaware), Inc., a Delaware corporation ("Safeguard Delaware").
Safeguard has an address at 800 The Safeguard Building, 435 Devon Park
Drive, Wayne, PA 19087-1945. Safeguard is a unique partnership of
entrepreneurial companies focused on information technology markets.
See Schedule II with respect to the executive officers and directors of
Safeguard as of the date of filing this Schedule 13D.
2. Safeguard Scientifics (Delaware), Inc.
Safeguard Delaware is a wholly owned subsidiary of Safeguard. Safeguard
Delaware is a holding company and has an office at 103 Springer
Building, 3411 Silverside Road, P. O. Box 7048, Wilmington, DE 19803.
Schedule III provides information about the executive officers and
directors of Safeguard Delaware as of the date of filing this Schedule
13D.
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SCHEDULE II
DIRECTORS AND EXECUTIVE OFFICERS
OF
SAFEGUARD SCIENTIFICS, INC.
Executive Officers*
<TABLE>
<CAPTION>
Business Principal
Name Address Occupation
- ---- -------- ----------
<S> <C> <C>
Warren V. Musser Safeguard Scientifics,Inc. Chairman of the Board and Chief
800 The Safeguard Building Executive Officer
435 Devon Park Drive
Wayne, PA 19087
Donald R. Caldwell Safeguard Scientifics, Inc. President and Chief Operating
800 The Safeguard Building Officer
435 Devon Park Drive
Wayne, PA 19087
Edward R. Anderson CompuCom Systems, Inc. President and Chief Executive
7171 Forest Lane Officer, CompuCom Systems
Dallas, TX 75230
Jerry L. Johnson Safeguard Scientifics, Inc. Senior Vice President,
800 The Safeguard Building Operations
435 Devon Park Drive
Wayne, PA 19087
Thomas C. Lynch Safeguard Scientifics, Inc. Senior Vice President
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Michael W. Miles Safeguard Scientifics, Inc. Sr. Vice President and Chief
800 The Safeguard Building Financial Officer
435 Devon Park Drive
Wayne, PA 19087
James A. Ounsworth Safeguard Scientifics, Inc. Sr. Vice President, General
800 The Safeguard Building Counsel and Secretary
435 Devon Park Drive
Wayne, PA 19087
Glenn T. Rieger Safeguard Scientifics, Inc. Sr. Vice President
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
</TABLE>
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<TABLE>
<S> <C> <C>
Directors*
Judith Areen Georgetown University Executive Vice President for
600 New Jersey Ave., N.W. Law Center, Georgetown University
Washington, D.C. 20001 and Professor of Law
Vincent G. Bell Jr. Verus Corp. President and Chief
259 Radnor-Chester Rd. Executive Officer, Verus Corp.
Radnor, PA 19087
Donald R. Caldwell (same as previous page) (same as previous page)
Robert A. Fox R.A.F. Industries President, R.A.F. Industries
One Pitcairn Pl, Suite 2100
165 Township Line Road
Jenkintown, PA 19046-3593
Delbert W. Johnson Safeguard Scientifics, Inc. Vice President, Safeguard
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087-1945
Robert E. Keith Jr. TL Ventures President and CEO, Technology
800 The Safeguard Building Leaders Management, Inc.
435 Devon Park Drive
Wayne, PA 19087
Peter Likins University of Arizona President, University of
Administration Building Arizona
Room 71
P. O. Box 21006
Tucson, AZ 85721-0066
Jack L. Messman Union Pacific Resources President and CEO, Union
801 Cherry Street, MS4001 Pacific Resources
Fort Worth, TX 76102
Warren V. Musser (Same as previous page) (Same as previous page)
Russell E. Palmer The Palmer Group President, The Palmer Group
3600 Market Street
Suite 530
Philadelphia, PA 19104
John W. Poduska Sr. Advanced Visual Systems Chairman of the Board, Advanced
300 Fifth Avenue Visual Systems, Inc.
Waltham, MA 02154
</TABLE>
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<TABLE>
<S> <C> <C>
Heinz Schimmelbusch Safeguard International President and CEO, Safeguard
Group, Inc. International Group, Inc.,
800 The Safeguard Building President and CEO,
435 Devon Park Drive Allied Resource Corporation, and
Wayne, PA 19087-1945 Managing Director, Safeguard
International Fund, L.P.
Hubert J.P.Schoemaker Centocor, Inc. Chairman of the Board,
200 Great Valley Parkway Centocor, Inc.
Malvern, PA 19355
</TABLE>
- ----------
* All Executive Officers and Directors are U.S. citizens, except Heinz
Schimmelbusch, who is a citizen of Austria, and Hubert J.P. Schoemaker, who is a
citizen of the Netherlands.
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SCHEDULE III
DIRECTORS AND EXECUTIVE OFFICERS
OF
SAFEGUARD SCIENTIFICS (DELAWARE), INC.
Executive Officers*
<TABLE>
<CAPTION>
Business Principal
Name Address Occupation
- ---- -------- ----------
<S> <C> <C>
Donald R. Caldwell Safeguard Scientifics,Inc. President and CEO, Safeguard
800 The Safeguard Building and President, Safeguard
435 Devon Park Drive Delaware
Wayne, PA 19087
James A. Ounsworth Safeguard Scientifics, Inc. Sr. Vice President and
800 The Safeguard Building Secretary, Safeguard and Vice
435 Devon Park Drive President and Secretary,
Wayne, PA 19087 Safeguard Delaware
Michael W. Miles Safeguard Scientifics, Inc. Sr. Vice President and CFO,
800 The Safeguard Building Safeguard and Vice President
435 Devon Park Drive and Asst. Treasurer, Safeguard
Wayne, PA 19087 Delaware
Directors*
Gerald M. Wilk (Same as above) (Same as above)
James A. Ounsworth (Same as above) (Same as above)
Michael W. Miles Safeguard Scientifics, Inc. Vice President and Controller
800 The Safeguard Building of Safeguard
435 Devon Park Drive
Wayne, PA 19087
William F. White Safeguard Scientifics, Inc. Tax Director of
800 The Safeguard Building Safeguard
435 Devon Park Drive
Wayne, PA 19087
</TABLE>
- -------
* All Executive Officers and Directors are U.S. Citizens
16
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EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
AND
REORGANIZATION
among
FIRST CONSULTING GROUP, INC.,
A DELAWARE CORPORATION;
FOXTROT ACQUISITION SUB, INC.,
A DELAWARE CORPORATION;
and
INTEGRATED SYSTEMS CONSULTING GROUP, INC.,
A PENNSYLVANIA CORPORATION
DATED AS OF SEPTEMBER 9, 1998
<PAGE>
AGREEMENT AND PLAN
OF
MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is
made and entered into as of September 9, 1998, by and among: FIRST CONSULTING
GROUP, INC., a Delaware corporation ("Parent"); FOXTROT ACQUISITION SUB, INC., a
Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"); and
Integrated Systems Consulting Group, Inc., a Pennsylvania corporation (the
"Company"). Certain capitalized terms used in this Agreement are defined in
Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger (the
"Merger") of Merger Sub with and into the Company in accordance with this
Agreement and the Pennsylvania Business Corporation Law of 1988, as amended (the
"PBCL"), and the Delaware General Corporation Law, as amended (the "DGCL"). Upon
consummation of the Merger, Merger Sub will cease to exist, and the Company will
become a wholly-owned subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For accounting purposes, it is intended that the Merger be
treated as a "pooling of interests."
C. The Board of Directors of the Company has (i) determined that the
Merger is consistent with and in furtherance of the long-term strategy of the
Company and fair to, and in the best interests of, the Company and its
shareholders, (ii) approved this Agreement, the Merger and the other
transactions contemplated by this Agreement and (iii) determined to recommend
that the shareholders of the Company adopt and approve this Agreement and
approve the Merger.
D. The respective Boards of Directors of Parent and Merger Sub have
approved this Agreement and the Merger.
E. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's willingness to enter into this Agreement,
each of the affiliate shareholders of the Company listed on Exhibit B-1 hereto
is entering into a Voting Agreement substantially in the form attached hereto as
Exhibit C-1; and as a condition and inducement to the Company's willingness to
enter into this Agreement, each of the affiliate stockholders of Parent listed
on Exhibit B-2 hereto is entering into a Voting Agreement substantially in the
form attached hereto as Exhibit C-2.
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F. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's willingness to enter into this Agreement,
each of the Persons identified on Exhibit D-1 hereto is entering into an
Affiliate Agreement substantially in the form attached hereto as Exhibit E-1.
Concurrently with the execution of this Agreement, and as a condition and
inducement to the Company's willingness to enter into this Agreement, each of
the Persons identified on Exhibit D-2 hereto is entering into an Affiliate
Agreement substantially in the form attached hereto as Exhibit E-2.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
Section 1. DESCRIPTION OF TRANSACTION
1.1 Merger of Merger Sub into the Company. Upon the terms and subject
to the conditions set forth in this Agreement, at the Effective Time (as defined
in Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 Effect of the Merger. The Merger shall have the effects set forth
in this Agreement and in the applicable provisions of the PBCL and the DGCL.
1.3 Closing; Effective Time. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Cooley Godward LLP, Five Palo Alto Square, 3000 El Camino Real, Palo Alto,
California, at 10:00 a.m. on a date to be designated by Parent (the "Closing
Date"), which shall be no later than the second business day after satisfaction
or waiver of the conditions set forth in Sections 6 and 7. Contemporaneously
with or as promptly as practicable after the Closing, properly executed articles
of merger conforming to the requirements of the PBCL (the "Articles of Merger")
shall be filed with the Department of State of the Commonwealth of Pennsylvania
and a properly executed certificate of merger conforming to the requirements of
the DGCL shall be filed with the Secretary of State of the State of Delaware.
The Merger shall take effect at the later of (a) the time the Articles of Merger
is accepted for filing by the Department of State of the Commonwealth of
Pennsylvania, (b) the time the certificate of merger is accepted for filing by
the Secretary of State of the State of Delaware and (c) at such later time as
may be specified in the Articles of Merger (the "Effective Time").
1.4 Certificate of Incorporation and Bylaws; Directors and Officers.
Unless otherwise determined by Parent prior to the Effective Time:
(a) the Articles of Incorporation and Bylaws of the Surviving
Corporation shall be amended and restated as of the Effective Time to conform to
the Amended and Restated Articles of Incorporation and Amended and Restated
Bylaws substantially in the form attached hereto as Exhibits F-1 and F-2,
respectively; provided,
3
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however, that at the Effective Time the Articles of Incorporation of the
Surviving Corporation shall be amended so that the name of the Surviving
Corporation shall be Integrated Systems Consulting Group, Inc.; and
(b) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the directors and officers of
Merger Sub immediately prior to the Effective Time, until their respective
successors are elected and qualified or duly appointed, as the case may be.
1.5 Conversion of Shares
(a) Subject to Section 1.5(d), at the Effective Time, by
virtue of the Merger and without any further action on the part of Parent,
Merger Sub, the Company or any shareholder of the Company:
(i) any shares of Company Common Stock then held by
the Company or any subsidiary of the Company (or held in the Company's treasury)
shall be canceled;
(ii) any shares of Company Common Stock then held by
Parent, Merger Sub or any other subsidiary of Parent shall be canceled;
(iii) except as provided in clauses "(i)" and "(ii)"
above and subject to Sections 1.5(b) and (d) and Section 1.9, each share of
Company Common Stock then outstanding shall be converted into the right to
receive 0.77 of a share of Parent Common Stock; and
(iv) each share of the common stock, no par value per
share, of Merger Sub then outstanding shall be converted into one share of
common stock of the Surviving Corporation.
(b) The fraction of a share of Parent Common Stock into which
each outstanding share of Company Common Stock is to be converted pursuant to
Section 1.5(a)(iii) (as such fraction may be adjusted in accordance with this
Section 1.5(b)) is referred to as the "Exchange Ratio." If, between the date of
this Agreement and the Effective Time, the outstanding shares of Company Common
Stock or Parent Common Stock are changed into a different number or class of
shares by reason of any stock split, stock dividend, reverse stock split,
reclassification, recapitalization or other similar transaction, then the
Exchange Ratio shall be appropriately adjusted.
(c) If any shares of Company Common Stock outstanding
immediately prior to the Effective Time are unvested or are subject to a
repurchase option, risk of forfeiture or other condition under any applicable
restricted stock purchase agreement or other agreement with the Company, then
the shares of Parent Common Stock issued in exchange for such shares of Company
Common Stock will also be unvested and subject to the same repurchase option,
risk of forfeiture or other condition, and the
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certificates representing such shares of Parent Common Stock may accordingly be
marked with appropriate legends. The Company shall take all action that may be
necessary to ensure that, from and after the Effective Time, Parent is entitled
to exercise any such repurchase option or other right set forth in any such
restricted stock purchase agreement or other agreement.
(d) No fractional shares of Parent Common Stock shall be
issued in connection with the Merger, and no certificates for any such
fractional shares shall be issued. In lieu of such fractional shares, any holder
of Company Common Stock who would otherwise be entitled to receive a fraction of
a share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock issuable to such holder) shall, upon surrender of such
holder's Company Stock Certificate(s) (as defined in Section 1.7), be paid in
cash the dollar amount (rounded to the nearest whole cent), without interest,
determined by multiplying such fraction by the closing price of a share of
Parent Common Stock on Nasdaq on the Effective Date.
1.6 Stock Options and Warrants. At the Effective Time, all Company
Options (as defined in Section 2.3(b)) shall be assumed by Parent in accordance
with Section 5.5, and all Company Warrants (as defined in Section 2.3(c)) shall
be assumed by Parent in accordance with Section 5.7.
1.7 Closing of the Company's Transfer Books. At the Effective Time: (a)
all shares of Company Common Stock outstanding immediately prior to the
Effective Time shall automatically be canceled and retired and shall cease to
exist, and all holders of certificates representing shares of Company Common
Stock that were outstanding immediately prior to the Effective Time shall cease
to have any rights as shareholders of the Company; and (b) the stock transfer
books of the Company shall be closed with respect to all shares of Company
Common Stock outstanding immediately prior to the Effective Time. No further
transfer of any such shares of Company Common Stock shall be made on such stock
transfer books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of such shares of Company Common Stock
(a "Company Stock Certificate") is presented to the Exchange Agent (as defined
in Section 1.8) or to the Surviving Corporation or Parent, such Company Stock
Certificate shall be canceled and shall be exchanged as provided in Section 1.8.
1.8 Exchange of Certificates
(a) Prior to the Closing Date, Parent shall select a reputable
bank or trust company to act as exchange agent in the Merger (the "Exchange
Agent"). Promptly after the Effective Time, Parent shall deposit with the
Exchange Agent (i) certificates representing the shares of Parent Common Stock
issuable pursuant to this Section 1 and (ii) cash sufficient to make payments in
lieu of fractional shares in accordance with Section 1.5(d). The shares of
Parent Common Stock and cash amounts so deposited with the Exchange Agent,
together with any dividends or
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distributions received by the Exchange Agent with respect to such shares, are
referred to collectively as the "Exchange Fund."
(b) As soon as practicable after the Effective Time, the
Exchange Agent will mail to the registered holders of Company Stock Certificates
(i) a letter of transmittal in customary form and containing such provisions as
Parent may reasonably specify (including a provision confirming that delivery of
Company Stock Certificates shall be effected, and risk of loss and title to
Company Stock Certificates shall pass, only upon delivery of such Company Stock
Certificates to the Exchange Agent), and (ii) instructions for use in effecting
the surrender of Company Stock Certificates in exchange for certificates
representing Parent Common Stock. Subject to Section 1.5(d), upon surrender of a
Company Stock Certificate to the Exchange Agent for exchange, together with a
duly executed letter of transmittal and such other documents as may be
reasonably required by the Exchange Agent or Parent, (A) the holder of such
Company Stock Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of shares of Parent Common Stock that such
holder has the right to receive pursuant to the provisions of Section
1.5(a)(iii) together with any cash in lieu of fractional share(s) pursuant to
the provisions of Section 1.5(d), and (B) the Company Stock Certificate so
surrendered shall be canceled. Until surrendered as contemplated by this Section
1.8(b), each Company Stock Certificate shall be deemed, from and after the
Effective Time, to represent only the right to receive shares of Parent Common
Stock (and cash in lieu of any fractional share of Parent Common Stock) as
contemplated by Section 1.5. If any Company Stock Certificate shall have been
lost, stolen or destroyed, Parent may, in its discretion and as a condition
precedent to the issuance of any certificate representing Parent Common Stock,
require the owner of such lost, stolen or destroyed Company Stock Certificate to
provide an appropriate affidavit and to deliver a bond (in such sum as Parent
may reasonably direct) as indemnity against any claim that may be made against
the Exchange Agent, Parent or the Surviving Corporation with respect to such
Company Stock Certificate.
(c) No dividends or other distributions declared or made with
respect to Parent Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Company Stock Certificate with
respect to the shares of Parent Common Stock represented thereby, until such
holder surrenders such Company Stock Certificate in accordance with this Section
1.8 (at which time such holder shall be entitled to receive all such dividends
and distributions, without interest).
(d) Any portion of the Exchange Fund that remains
undistributed to holders of Company Stock Certificates as of the date 180 days
after the date on which the Merger becomes effective shall be delivered to
Parent upon demand, and any holders of Company Stock Certificates who have not
theretofore surrendered their Company Stock Certificates in accordance with this
Section 1.8 shall thereafter look only to Parent for satisfaction of their
claims for Parent Common Stock, cash in lieu of fractional shares of Parent
Common Stock and any dividends or distributions with
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respect to Parent Common Stock.
(e) Each of the Exchange Agent, Parent and the Surviving
Corporation shall be entitled to deduct and withhold from any consideration
payable or otherwise deliverable pursuant to this Agreement to any holder or
former holder of Company Common Stock such amounts as may be required to be
deducted or withheld therefrom under the Code or under any provision of state,
local or foreign tax law or under any other applicable Legal Requirement. To the
extent such amounts are so deducted or withheld, such amounts shall be treated
for all purposes under this Agreement as having been paid to the Person to whom
such amounts would otherwise have been paid.
(f) Neither Parent nor the Surviving Corporation shall be
liable to any holder or former holder of Company Common Stock with respect to
any shares of Parent Common Stock (or dividends or distributions with respect
thereto), or for any cash amounts, delivered to any public official pursuant to
any applicable abandoned property, escheat or similar Legal Requirement.
1.9 Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, shares, if any, of Company Common Stock that are issued and
outstanding immediately prior to the Effective Time that are held by any
shareholder who has not voted such shares in favor of the Merger and who shall
have delivered a written notice of intention to demand payment of fair value of
such shares in the manner provided in Section 1574 of the PBCL ("Dissenting
Shares") shall not be converted into or be exchangeable for the right to receive
the consideration provided in Section 1.5(a)(iii) (or cash in lieu of fractional
shares in accordance with Section 1.5(d)) unless and until such holder shall
have failed to perfect or shall have effectively withdrawn or lost his right to
be paid fair value under the PBCL. If such holder shall have failed to perfect
or have effectively withdrawn or lost such right, his shares of Company Common
Stock shall thereupon be deemed to have been converted into and to have become
exchangeable for, at the Effective Time, the right to receive the consideration
provided in Section 1.5(a)(iii) (or cash in lieu of fractional shares in
accordance with Section 1.5(d)) without any interest thereon.
1.10 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.11 Accounting Consequences. For accounting purposes, the Merger is
intended to be treated as a "pooling of interests."
1.12 Further Action. If, at any time after the Effective Time, any
further action is determined by Parent to be necessary or desirable to carry out
the purposes of this
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Agreement or to vest the Surviving Corporation with full right, title and
possession of and to all rights and property of Merger Sub and the Company, the
officers and directors of the Surviving Corporation and Parent shall be fully
authorized (in the name of Merger Sub, in the name of the Company and otherwise)
to take such action.
Section 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that,
except as set forth in the disclosure schedule that has been prepared by the
Company in accordance with the requirements of Section 9.6 and that has been
delivered by the Company to Parent on the date of this Agreement and signed by
the President of the Company (the "Company Disclosure Schedule"):
2.1 Due Organization; Subsidiaries; Etc.
(a) The Company has no Subsidiaries, except for the
corporations identified in Part 2.1(a)(i) of the Company Disclosure Schedule;
and neither the Company nor any of the other corporations identified in Part
2.1(a)(i) of the Company Disclosure Schedule owns any capital stock of, or any
equity interest of any nature in, any other Entity. (The Company and each of its
Subsidiaries are referred to collectively in this Agreement as the "Acquired
Corporations".) None of the Acquired Corporations has agreed or is obligated to
make, or is bound by any Contract under which it may become obligated to make,
any future investment in or capital contribution to any other Entity. None of
the Acquired Corporations has, at any time, been a general partner of any
general partnership, limited partnership or other Entity.
(b) Each of the Acquired Corporations is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all corporate power and authority: (i)
to conduct its business in the manner in which its business is currently being
conducted; (ii) to own and use its assets in the manner in which its assets are
currently owned and used; and (iii) to perform its obligations under all
Contracts by which it is bound.
(c) None of the Acquired Corporations is or has been required
to be qualified, authorized, registered or licensed to do business as a foreign
corporation in any jurisdiction other than the jurisdictions identified in Part
2.1(c) of the Company Disclosure Schedule, except where the failure to be so
qualified, authorized, registered or licensed has not had and will not have a
Material Adverse Effect on the Acquired Corporations. Each of the Acquired
Corporations is in good standing as a foreign corporation in each of the
respective jurisdictions identified in Part 2.1(c) of the Company Disclosure
Schedule.
2.2 Articles of Incorporation and Bylaws. The Company has delivered to
Parent accurate and complete copies of the articles of incorporation, bylaws and
other charter and organizational documents of the respective Acquired
Corporations,
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including all amendments thereto. None of the Acquired Corporations is in
violation of any of the provisions of its articles of incorporation or bylaws or
equivalent governing instruments.
2.3 Capitalization, Etc.
(a) The authorized capital stock of the Company consists of:
(i) twenty-five million (25,000,000) shares of Company Common Stock, $.005 par
value per share, of which, as of August 31, 1998, 8,076,404 shares (which amount
does not materially differ from the amount issued and outstanding as of the date
of this Agreement) have been issued and are outstanding; and (ii) five hundred
thousand (500,000) shares of preferred stock, $1.00 par value per share, of
which no shares are outstanding as of the date of this Agreement. All of the
outstanding shares of Company Common Stock have been duly authorized and validly
issued, and are fully paid and nonassessable. As of the date of this Agreement,
there are 1,151,109 shares of Company Common Stock held in treasury by the
Company and no shares of stock held in treasury by any of the other Acquired
Corporations. (i) None of the outstanding shares of Company Common Stock is
entitled or subject to any preemptive right, right of participation, right of
maintenance or any similar right; (ii) none of the outstanding shares of Company
Common Stock is subject to any right of first refusal in favor of the Company;
and (iii) there is no Acquired Corporation Contract relating to the voting or
registration of, or restricting any Person from purchasing, selling, pledging or
otherwise disposing of (or granting any option or similar right with respect
to), any shares of Company Common Stock. Upon consummation of the Merger, (A)
the shares of Parent Common Stock issued in exchange for any shares of Company
Common Stock that are subject to a Contract pursuant to which the Company has
the right to repurchase, redeem or otherwise reacquire any shares of Company
Common Stock will, without any further act of Parent, the Company or any other
Person, become subject to the restrictions, conditions and other provisions
contained in such Contract, and (B) Parent will automatically succeed to and
become entitled to exercise the Company's rights and remedies under any such
Contract. None of the Acquired Corporations is under any obligation to
repurchase, redeem or otherwise acquire any outstanding shares of Company Common
Stock.
(b) As of August 31, 1998, 957,725 shares (which amount does
not materially differ from the amount subject to options outstanding as of the
date of this Agreement) of Company Common Stock are subject to issuance pursuant
to outstanding options to purchase Company Common Stock. (Stock options granted
by the Company pursuant to the Company's stock option plans are referred to in
this Agreement as "Company Options.") Part 2.3(b)(i) of the Company Disclosure
Schedule sets forth the following information with respect to each Company
Option outstanding as of August 31, 1998: (i) the particular plan pursuant to
which such Company Option was granted; (ii) the name of the optionee; (iii) the
number of shares of Company Common Stock subject to such Company Option; (iv)
the exercise price of such Company Option; (v) the date on which such Company
Option was granted; (vi)
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the applicable vesting schedule and the extent to which such Company Option is
vested and exercisable as of the date of this Agreement; and (vii) the date on
which such Company Option expires. The Company has delivered to Parent accurate
and complete copies of all stock option plans pursuant to which the Company has
ever granted stock options and the form of all stock option agreements
evidencing such options. There are no commitments or agreements of any character
to which the Company is bound obligating the Company to accelerate the vesting
of any Company Option.
(c) As of the date of this Agreement, six hundred seventy-nine
thousand, seven hundred twenty-three (679,723) shares of Company Common Stock
are subject to issuance pursuant to outstanding warrants to purchase Company
Common Stock ("Company Warrants"). Part 2.3(c) of the Company Disclosure
Schedule sets forth the following information with respect to each Company
Warrant outstanding as of the date of this Agreement: (i) the name of the
warrant holder; (ii) the number of shares of Company Common Stock subject to
such Company Warrant; (iii) the exercise price of such Company Warrant; (iv) the
date on which such Company Warrant was granted; (v) the applicable vesting
schedule and the extent to which such Company Warrant is vested and exercisable
as of the date of this Agreement; and (vii) the date on which such Company
Warrant expires. The Company has delivered to Parent accurate and complete
copies of all agreements, certificates and other documents evidencing all
warrants which the Company has ever granted.
(d) Except as set forth in Parts 2.3(b), 2.3(c) or 2.3(d) of
the Company Disclosure Schedule there is no: (i) outstanding subscription,
option, call, warrant or right (whether or not currently exercisable) to acquire
any shares of the capital stock or other securities of the Company; (ii)
outstanding security, instrument or obligation that is or may become convertible
into or exchangeable for any shares of the capital stock or other securities of
the Company; (iii) shareholder rights plan (or similar plan commonly referred to
as a "poison pill") or Contract under which the Company is or may become
obligated to sell or otherwise issue any shares of its capital stock or any
other securities; or (iv) condition or circumstance that may give rise to or
provide a basis for the assertion of a claim by any Person to the effect that
such Person is entitled to acquire or receive any shares of capital stock or
other securities of the Company.
(e) All outstanding shares of Company Common Stock, all
outstanding Company Options, all outstanding Company Warrants and all
outstanding shares of capital stock of each Subsidiary of the Company have been
issued and granted in compliance with (i) all applicable securities laws and
other applicable Legal Requirements, and (ii) all requirements set forth in
applicable Contracts.
(f) All of the outstanding shares of capital stock of each of
the Entities identified in Part 2.1(a)(i) of the Company Disclosure Schedule are
validly issued, fully paid and nonassessable and are owned beneficially and of
record by the Company,
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free and clear of any Encumbrances.
2.4 SEC Filings; Financial Statements
(a) The Company has delivered to Parent accurate and complete
copies of all registration statements, proxy statements and other statements,
reports, schedules, forms and other documents filed by the Company with the SEC
and will deliver to Parent accurate and complete copies of all such registration
statements, proxy statements and other statements, reports, schedules, forms and
other documents filed after the date of this Agreement and prior to the
Effective Time (collectively, the "Company SEC Documents"). All statements,
reports, schedules, forms and other documents required to have been filed by the
Company with the SEC have been so filed. As of the time it was filed with the
SEC (or, if amended or superseded by a later filing, then on the date of such
filing): (i) each of the Company SEC Documents filed with the SEC complied in
all material respects with the applicable requirements of the Securities Act or
the Exchange Act (as the case may be) as of the date of such filing and any
Company SEC Documents filed after the date hereof will so comply; and (ii) none
of the Company SEC Documents contained any untrue statement of material fact or
omitted to state a material fact required to be state therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) The consolidated financial statements (including any
related notes) contained in the Company SEC Documents filed with the SEC (the
"Company Financial Statements"): (i) complied as to form in all material
respects with the published rules and regulations of the SEC applicable thereto;
(ii) were prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods covered (except as
may be indicated in the notes to such financial statements or, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC, and except that the
unaudited financial statements may not contain footnotes and other information
required for complete financial statements), and (iii) fairly present the
consolidated financial position of the Company and its subsidiaries as of the
respective dates thereof and the consolidated results of operations of the
Company and its subsidiaries for the periods covered thereby. All adjustments
(consisting of recurring accruals) considered necessary for a fair presentation
of the financial statements have been included. The audited consolidated balance
sheet of the Company and its subsidiaries included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 is sometimes referred
to herein as the "Company Balance Sheet" and the unaudited consolidated balance
sheet of the Company and its subsidiaries as of June 30, 1998 included in the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 is
sometimes referred to herein as the "Company Unaudited Interim Balance Sheet."
All financial statements (including any related notes) contained in Company SEC
Documents filed after the date hereof shall meet the conditions set forth in
(i), (ii) and (iii) of this Section 2.4(b).
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2.5 Absence of Changes. Since the date of the Company Unaudited Interim
Balance Sheet:
(a) there has not been any material adverse change in the
business, condition, assets, liabilities, operations, financial performance or
prospects of the Acquired Corporations taken as a whole, and no event has
occurred that could reasonably be expected to have a Material Adverse Effect on
the Acquired Corporations;
(b) there has not been any material loss, damage or
destruction to, or any material interruption in the use of, any of the assets of
any of the Acquired Corporations (whether or not covered by insurance);
(c) none of the Acquired Corporations has (i) declared,
accrued, set aside or paid any dividend or made any other distribution in
respect of any shares of capital stock, or (ii) repurchased, redeemed or
otherwise reacquired any shares of capital stock or other securities;
(d) none of the Acquired Corporations has sold, issued,
granted or authorized the issuance or grant of (i) any capital stock or other
security (except for Company Common Stock issued upon the exercise of
outstanding Company Options or Company Warrants), (ii) any option, call, warrant
or right to acquire any capital stock or any other security (except for Company
Options described in Part 2.3(b)(i) of the Company Disclosure Schedule), or
(iii) any instrument convertible into or exchangeable for any capital stock or
other security;
(e) the Company has not amended or waived any of its rights
under, or permitted the acceleration of vesting under, (i) any provision of any
of the Company's stock option plans, (ii) any provision of any agreement
evidencing any outstanding Company Option or Company Warrant, or (iii) any
restricted stock purchase agreement;
(f) except as provided in Part 2.5(f) of the Company
Disclosure Schedule, there has been no amendment to the articles of
incorporation, bylaws or other charter or organizational documents of any of the
Acquired Corporations, and none of the Acquired Corporations has effected or
been a party to any merger, consolidation, share exchange, business combination,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(g) except as provided in Part 2.5(g) of the Company
Disclosure Schedule, none of the Acquired Corporations has (i) received any
Acquisition Proposal, or (ii) solicited, initiated, encouraged or induced, or
provided any nonpublic information to or entered into any discussions with any
Person for the purpose of soliciting, initiating, encouraging or inducing, the
making or submission of any Acquisition Proposal;
(h) none of the Acquired Corporations has formed any
subsidiary or
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acquired any equity interest or other interest in any other Entity;
(i) none of the Acquired Corporations has made any capital
expenditures which exceed $800,000 in the aggregate;
(j) except in the ordinary course of business and consistent
with past practices, none of the Acquired Corporations has (i) entered into or
permitted any of the assets owned or used by it to become bound by any Material
Contract (as defined in Section 2.10), or (ii) amended or prematurely
terminated, or waived any material right or remedy under, any Material Contract;
(k) none of the Acquired Corporations has (i) acquired, leased
or licensed any material right or other material asset from any other Person,
(ii) sold or otherwise disposed of, or leased or licensed, any material right or
other material asset to any other Person, or (iii) waived or relinquished any
right, except for rights or other assets acquired, leased, licensed or disposed
of in the ordinary course of business and consistent with past practices;
(l) none of the Acquired Corporations has written off as
uncollectible, or established any extraordinary reserve with respect to, any
account receivable or other indebtedness in excess of $25,000 with respect to
any single matter, or in excess of $50,000 in the aggregate;
(m) except as set forth on Part 2.5 (m) of the Company
Disclosure Schedule, none of the Acquired Corporations has made any pledge of
any of its assets or otherwise permitted any of its assets to become subject to
any Encumbrance, except for pledges of immaterial assets made in the ordinary
course of business and consistent with past practices;
(n) except as set forth in Part 2.5(n) of the Company
Disclosure Schedule and except for intercompany indebtedness among the Acquired
Corporations and relocation and travel advances referred to in Section 2.8(b),
none of the Acquired Corporations has (i) lent money to any Person, or (ii)
incurred or guaranteed any indebtedness for borrowed money;
(o) except as provided in Part 2.5(o) of the Company
Disclosure Schedule, none of the Acquired Corporations has (i) established or
adopted any Plan (as defined in Section 2.16(a)), (ii) caused or permitted any
Plan to be amended in any material respect, or (iii) paid any bonus or made any
profit-sharing or similar payment to, or materially increased the amount of the
wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or employees;
(p) none of the Acquired Corporations has changed any of its
methods of accounting or accounting practices in any respect;
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(q) none of the Acquired Corporations has made any material
election with respect to Taxes;
(r) except as set forth in Part 2.5(r) of the Company
Disclosure Schedule, none of the Acquired Corporations has commenced or settled
any Legal Proceeding;
(s) none of the Acquired Corporations has entered into any
material transaction or taken any other material action that has had, or could
reasonably be expected to have, a Material Adverse Effect on the Acquired
Corporations; and
(t) except as set forth in Part 2.5(t) of the Company
Disclosure Schedule, none of the Acquired Corporations has agreed or committed
to take any of the actions referred to in clauses "(c)" through "(s)" above.
2.6 Leasehold; Equipment. None of the Acquired Corporations own any
real property or any interest in real property, except for the leaseholds
created under the real property leases identified in Part 2.6 of the Company
Disclosure Schedule. All such real property is being leased pursuant to lease
agreements that are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event of default (or event which with notice or
lapse of time, or both, would constitute a default) that would result in a
Material Adverse Effect on the Acquired Corporations. Part 2.6 of the Company
Disclosure Schedule accurately identifies all material items of equipment leased
by the Acquired Corporations. All material items of equipment and other tangible
assets owned by or leased to the Acquired Corporations are adequate for the uses
to which they are being put, are in good condition and repair (ordinary wear and
tear excepted) and are adequate for the conduct of the business of the Acquired
Corporations in the manner in which such business is currently being conducted.
2.7 Title to Assets. The Acquired Corporations own, and have good,
valid and marketable title to, or in the case of leased properties and assets,
valid leasehold interests in, all of their respective tangible properties and
assets, real, personal and mixed, used or held for use in their business,
including: (i) all assets reflected on the Company Unaudited Interim Balance
Sheet; and (ii) all other assets reflected in the books and records of the
Acquired Corporations as being owned or leased by the Acquired Corporations.
Except as set forth in Part 2.7 of the Company Disclosure Schedule, all of said
assets are owned or leased by the Acquired Corporations free and clear of any
Encumbrances, except for (x) any lien for current taxes not yet due and payable,
and (y) minor liens that have arisen in the ordinary course of business and that
do not (in any case or in the aggregate) materially detract from the value of
the assets subject thereto or materially impair the operations of any of the
Acquired Corporations.
2.8 Receivables; Significant Customers
(a) Part 2.8 of the Company Disclosure Schedule provides an
accurate
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and complete breakdown and aging of all accounts receivable of the Acquired
Corporations as of the date of the Company Unaudited Interim Balance Sheet. All
existing accounts receivable of the Acquired Corporations (including those
accounts receivable reflected on the Company Unaudited Interim Balance Sheet
that have not yet been collected and those accounts receivable that have arisen
since the date of the Company Unaudited Interim Balance Sheet and have not yet
been collected) (i) represent valid obligations of customers of the Acquired
Corporations arising from bona fide transactions entered into in the ordinary
course of business, (ii) are current and will be collected in full when due,
without any counterclaim or set off and are not subject to any dispute or threat
of nonpayment (net of the allowance for doubtful accounts set forth on the
Company Unaudited Interim Balance Sheet and an additional amount not to exceed
$250,000 in the aggregate) and (iii) represent revenues that have been
recognized in accordance with GAAP.
(b) Part 2.8(b) of the Company Disclosure Schedule contains an
accurate and complete list as of August 31, 1998 of all loans and advances made
by any of the Acquired Corporations to any employee, director, consultant or
independent contract of such Acquired Corporation, other than routine travel or
relocation advances made to employees in the ordinary course of business, which
loan and advances do not materially differ from the loans and advances as of the
date of this Agreement.
(c) Part 2.8(c) of the Company Disclosure Schedule sets forth
a complete and accurate list of all Significant Customers. For purposes of this
Agreement, "Significant Customers" are the twenty (20) customers of the Company
that have effected the most purchases, in dollar terms, and accounted for the
most revenues, in dollar terms, during the four (4) fiscal quarter period ended
June 30, 1998. None of the Company's Significant Customers has canceled,
returned or substantially reduced or, to the knowledge of the Company, is
currently attempting or threatening to cancel, return or substantially reduce,
any purchases from, orders to or services provided by the Company. The Company
has not received any material customer complaints concerning its products and/or
services.
2.9 Proprietary Assets
(a) Part 2.9(a)(i) of the Company Disclosure Schedule sets
forth, with respect to each Company Proprietary Asset registered with any
Governmental Body or for which an application has been filed with any
Governmental Body, (i) a brief description of such Proprietary Asset, and (ii)
the names of the jurisdictions covered by the applicable registration or
application. The Company owns no Proprietary Assets other than the Company
Proprietary Assets set forth in Part 2.9(a)(i) of the Company Disclosure
Schedule. Part 2.9(a)(iii) of the Disclosure Schedule identifies and provides a
brief description of each Proprietary Asset licensed to the Company by any
Person (except for any Proprietary Asset that is licensed to the Company under
any third party software license generally available to the public at a cost of
less than $10,000), and identifies the license agreement under which such
Proprietary Asset is being licensed to
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the Company. To the best of the knowledge of the Company, the Company has good,
valid and marketable title to all of the Company Proprietary Assets identified
in Parts 2.9(a)(i) and 2.9(a)(ii) of the Disclosure Schedule, free and clear of
all liens and other Encumbrances, and has a valid right to use all Proprietary
Assets identified in Part 2.9(a)(iii) of the Disclosure Schedule. Except as set
forth in Part 2.9(a)(v) of the Disclosure Schedule, to the best of the knowledge
of the Company, the Company is not obligated to make any payment to any Person
for the use of any Company Proprietary Asset. The Company has not developed
jointly with any other Person any Company Proprietary Asset with respect to
which such other Person has any rights.
(b) The Company has taken all commercially reasonable measures
and precautions necessary to protect and maintain the confidentiality and
secrecy of all Company Proprietary Assets (except Company Proprietary Assets
whose value would be unimpaired by public disclosure) and otherwise to maintain
and protect the value of all Company Proprietary Assets.
(c) To the best of the knowledge of the Company, none of the
Company Proprietary Assets infringes or conflicts with any Proprietary Asset
owned or used by any other Person. Except as set forth in Part 2.9(c) of the
Company Disclosure Schedule, to the best of the knowledge of the Company, the
Company is not infringing, misappropriating or making any unlawful use of, and
the Company has not at any time infringed, misappropriated or made any unlawful
use of, or received any notice or other communication (in writing or otherwise)
of any actual, alleged, possible or potential infringement, misappropriation or
unlawful use of, any Proprietary Asset owned or used by any other Person. To the
best of the knowledge of the Company, no other Person is infringing,
misappropriating or making any unlawful use of, and no Proprietary Asset owned
or used by any other Person infringes or conflicts with, any Company Proprietary
Asset.
(d) (i) Each Company Proprietary Asset conforms in all
material respects with any specification, documentation, performance standard,
representation or statement made or provided with respect thereto by or on
behalf of the Company; and (ii) there has not been any claim by any customer or
other Person alleging that any Company Proprietary Asset (including each version
thereof that has ever been licensed or otherwise made available by the Company
to any Person) does not conform in all material respects with any specification,
documentation, performance standard, representation or statement made or
provided by or on behalf of the Company, and, to the best of the knowledge of
the Company, there is no basis for any such claim. To the best of the knowledge
of the Company, the Company has established adequate reserves on the Company
Unaudited Interim Balance Sheet to cover all costs associated with any
obligations that the Company may have with respect to the correction or repair
of programming errors or other defects in the Company Proprietary Assets.
(e) The Company Proprietary Assets constitute all the
Proprietary
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Assets necessary to enable the Company to conduct its business in the manner in
which such business has been and is being conducted. Except as set forth in Part
2.9(e) of the Company Disclosure Schedule, (i) the Company has not licensed any
of the Company Proprietary Assets to any Person on an exclusive basis, and (ii)
the Company has not entered into any covenant not to compete or Contract
limiting its ability to exploit fully any of its Proprietary Assets or to
transact business in any market or geographical area or with any Person.
(f) All employees set forth in Part 2.9(f) of the Company
Disclosure Schedule have executed and delivered an agreement to the Company
(containing no exceptions to or exclusions from the scope of its coverage) that
is substantially identical to the form of Employment Agreement or Employee
Agreement previously delivered to Parent by the Company. Substantially all other
current and substantially all former employees of the Company have executed and
delivered to the Company an agreement (containing no exceptions to or exclusions
from the scope of its coverage) that is substantially identical to the form of
confidential information and invention assignment agreement previously delivered
to Parent. Substantially all current and former consultants and independent
contractors to the Company have executed and delivered to the Company an
agreement (containing no exceptions to or exclusions from the scope of its
coverage) that is substantially identical to the form of consultant confidential
information and invention assignment agreement previously delivered to Parent.
(g) Except as set forth in Part 2.9(g) of the Company
Disclosure Schedule, to the best of the knowledge of the Company, each of the
Acquired Corporations has taken adequate steps to ensure that all software (and
related Proprietary Assets) used in its operations are Year 2000 Compliant (as
defined below). For purposes of this Agreement, "Year 2000 Compliant" shall mean
that software that can individually, and in combination and in conjunction with
all other systems, products or processes with which they are required or
designed to interface, continue to be used normally and to operate successfully
(both in functionality and performance in all material respects) over the
transition into the twenty first century when used in accordance with the
documentation relating to all software (and related Acquired Corporation
Proprietary Assets) that is sold, licensed or transferred by any Acquired
Corporation to any Person, including being able to, before, on and after January
1, 2000 substantially conform to the following: (i) use logic pertaining to
dates which allow users to identify and/or use the century portion of any date
fields without special processing; and (ii) respond to all date elements and
date input so as to resolve any ambiguity as to century in a disclosed, defined
and pre-determined manner and provide date information in ways which are
unambiguous as to century, either by permitting or requiring the century to be
specified or where the data element is represented without a century, the
correct century is unambiguous for all manipulations involving that element.
2.10 Contracts
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(a) Part 2.10 of the Company Disclosure Schedule identifies
each Acquired Corporation Contract that constitutes a "Material Contract." For
purposes of this Agreement, each of the following shall be deemed to constitute
a "Material Contract":
(i) (A) any Contract or outstanding offer relating to
the employment of, or the performance of services by, any employee, (B) any
Contract pursuant to which any of the Acquired Corporations is required to make
any severance, termination or similar payment, bonus or relocation payment or
any other payment (other than payments in respect of salary) to any current or
former employee or director of any of the Acquired Corporations and (C) any
Contract or Plan (including, without limitation, any stock option plan, stock
appreciation plan or stock purchase plan), any of the benefits of which may be
increased, or the vesting of benefits of which may be accelerated;
(ii) any Contract (A) relating to the acquisition,
transfer, development, sharing, license (to or by any of the Acquired
Corporations), use or other exploitation of any Proprietary Asset (except for
any Contract pursuant to which any Proprietary Asset is licensed to the Acquired
Corporations under any third party software license generally available to the
public); or (B) with respect to the distribution or marketing of any products of
the Acquired Corporations;
(iii) any Contract which provides for indemnification
of any officer, director, employee or agent of any of the Acquired Corporations;
(iv) any Contract imposing any restriction on the
right or ability of any Acquired Corporation (A) to compete in any market or
geographic area with any other Person, (B) to acquire any product or other asset
or any services from any other Person, to sell any product or other asset to or
perform any services for any other Person or to transact business or deal in any
other manner with any other Person, or (C) to develop or distribute any
technology;
(v) any Contract (A) relating to the acquisition,
issuance, voting, registration, sale or transfer of any securities (other than
the issuance of Company Common Stock upon the valid exercise of Company Options
or Company Warrants outstanding as of the date of this Agreement), (B) providing
any Person with any preemptive right, right of participation, right of
maintenance or any similar right with respect to any securities, or (C)
providing the Company with any right of first refusal with respect to, or right
to repurchase or redeem, any securities;
(vi) any Contract requiring that the Company give any
notice or provide any information to any Person prior to accepting any
Acquisition Proposal;
(vii) any Contract that (A) contemplates or involves
payment or delivery of cash or other consideration in an amount or having a
value in excess of $7,500 per month and (B) has a term of more than 90 days and
that may not be
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terminated by such Acquired Corporation within 90 days after the delivery of a
termination notice by such Acquired Corporation;
(viii) any Contract that contemplates or involves
payment or delivery of cash or other consideration by any of the Acquired
Corporations in an amount or having a value in excess of $100,000 in the
aggregate;
(ix) except as set forth in Part 2.10(a)(ix) of the
Company Disclosure Schedule, any Contract or Plan (including, without
limitation, any stock option plan, stock appreciation plan or stock purchase
plan), any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the execution of this Agreement or the
consummation of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement;
(x) any joint marketing or development Contract
currently in force under which an Acquired Corporation has continuing material
obligations to jointly market any product, technology or service and which may
not be canceled without penalty upon notice of 30 days or less, or any material
Contract pursuant to which an Acquired Corporation has continuing material
obligations to jointly develop any Proprietary Asset that will not be owned, in
whole or in part, by an Acquired Corporation and which may not be canceled
without penalty upon notice of 90 days or less;
(xi) any Contract currently in force to disclose or
deliver to any Person, or permit the disclosure or delivery to any escrow agent
or other Person, of the source code, or any portion or aspect of the source
code, or any proprietary information or algorithm contained in or relating to
any source code, of any Acquired Corporation Proprietary Asset that is material
to the Acquired Corporations taken as a whole;
(xii) any Contract (not otherwise identified in
clauses "(i)" through "(xi)" of this sentence) that is or would be material to
any of the Acquired Corporations, to the business, condition, capitalization or
operations of any of the Acquired Corporations or to any of the transactions
contemplated by this Agreement; and
(xiii) any other Contract, if a breach of such
Contract could reasonably be expected to have a Material Adverse Effect on the
Acquired Corporations.
(b) Each Material Contract is valid and in full force and
effect, and is enforceable by an Acquired Corporation in accordance with its
terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies. To the best of the
knowledge of the Company, no Person has violated or breached, or committed any
default under, any Material Contract.
(c) (i) None of the Acquired Corporations has violated or
breached, or
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committed any default under, any Acquired Corporation Contract, and, to the best
of the knowledge of the Company, no other Person has violated or breached, or
committed any default under, any Acquired Corporation Contract that will have a
Material Adverse Effect on the Acquired Corporations; (ii) to the best of the
knowledge of the Company, no event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time) will, or could
reasonably be expected to, (A) result in a violation or breach of any of the
provisions of any Acquired Corporation Contract, (B) give any Person the right
to declare a default or exercise any remedy under any Acquired Corporation
Contract, (C) give any Person the right to a rebate, chargeback, penalty or
change in delivery schedule under any Acquired Corporation Contract, (D) give
any Person the right to accelerate the maturity or performance of any Acquired
Corporation Contract, or (E) give any Person the right to cancel, terminate or
modify any Acquired Corporation Contract that will have a Material Adverse
Effect on the Acquired Corporations; (iii) none of the Acquired Corporations or
any of their Representatives has received any notice or other communication
regarding any actual or possible violation or breach of, or default under, any
Acquired Corporation Contract that will have a Material Adverse Effect on the
Acquired Corporation; and (iv) each of the Acquired Corporations has obtained
all necessary export licenses related to the export of its products.
(d) Except as set forth in Part 2.10(d) of the Company
Disclosure Schedule, there is no Acquired Corporation Contract to which any
Governmental Body is a party or under which any Governmental Body has any rights
or obligations, or directly or indirectly benefiting any Governmental Body
(including any subcontract or other Contract between any Acquired Corporation
and any contractor or subcontractor to any Governmental Body).
(e) No Person is renegotiating, or has a right pursuant to the
terms of any Material Contract to renegotiate, any amount paid or payable to any
Acquired Corporation under any Material Contract or any other material term or
provision of any Material Contract, except for Acquired Corporation Contracts,
which are being renegotiated or provide for renegotiation pursuant to their
terms in the ordinary course of the Company's business.
2.11 Year 2000 Liabilities. None of the Acquired Corporations has any
accrued, contingent or other liabilities of any nature, either matured or
unmatured, including, without limitation, any liabilities relating to costs
associated with insuring that all software (and related Acquired Corporation
Proprietary Assets) that is sold, licensed or transferred by any Acquired
Corporation to any Person, computer systems, any software utilized by the
Acquired Corporations or other components of the Acquired Corporations'
information technology infrastructure are Year 2000 Compliant (whether or not
required to be reflected in financial statements in accordance with GAAP, and
whether due or to become due), except for: (a) liabilities identified as such in
the "liabilities" column of the Company Unaudited Interim Balance Sheet; and (b)
normal and recurring liabilities that have been incurred by the Acquired
Corporations since the
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date of the Company Unaudited Interim Balance Sheet in the ordinary course of
business and consistent with past practices.
2.12 Compliance with Legal Requirements. Each of the Acquired
Corporations is, and has at all times since June 3, 1996 been, in compliance
with all applicable Legal Requirements, except where the failure to comply with
such Legal Requirements has not had and will not have a Material Adverse Effect
on the Acquired Corporations. Since June 3, 1996, none of the Acquired
Corporations has received any notice or other communication from any
Governmental Body regarding any actual or possible violation of, or failure to
comply with, any Legal Requirement.
2.13 Certain Business Practices. None of the Acquired Corporations nor
any director, officer, agent or employee of any of the Acquired Corporations
has, on behalf of any of the Acquired Corporations, (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (iii) made any other unlawful payment.
2.14 Governmental Authorizations. The Acquired Corporations hold all
Governmental Authorizations necessary to enable the Acquired Corporations to
conduct their respective businesses in the manner in which such businesses are
currently being conducted. All such Governmental Authorizations are valid and in
full force and effect. Each Acquired Corporation is, and at all times since June
3, 1996 has been, in substantial compliance with the terms and requirements of
such Governmental Authorizations. Since June 3, 1996, none of the Acquired
Corporations has received any notice or other communication from any
Governmental Body regarding (a) any actual or possible violation of or failure
to comply with any term or requirement of any Governmental Authorization, or (b)
any actual or possible revocation, withdrawal, suspension, cancellation,
termination or modification of any Governmental Authorization.
2.15 Tax Matters
(a) Except as set forth in Part 2.15(a) of the Company
Disclosure Schedule, all Tax Returns required to be filed by or on behalf of the
respective Acquired Corporations with any Governmental Body with respect to any
taxable period ending on or before the Closing Date (the "Acquired Corporation
Returns") (i) have been or will be filed on or before the applicable due date
(including any extensions of such due date if properly obtained), and (ii) have
been, or will be when filed, prepared in all material respects in compliance
with all applicable Legal Requirements. All amounts shown on the Acquired
Corporation Returns to be due on or before the Closing Date have been or will be
paid on or before the Closing Date.
(b) The Company Financial Statements fully accrue all actual
and
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contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with GAAP. Each Acquired Corporation will establish, in
the ordinary course of business and consistent with its past practices, reserves
adequate for the payment of all Taxes for the period from the date of this
Agreement through the Closing Date.
(c) Except as set forth in Part 2.15(c) of the Company
Disclosure Schedule, since the Acquired Corporation Return for the taxable
period ended December 31, 1994, no Acquired Corporation Return has ever been
examined or audited by any Governmental Body. No extension or waiver of the
limitation period applicable to any of the Acquired Corporation Returns has been
granted (by the Company or any other Person), and no such extension or waiver
has been requested from any Acquired Corporation.
(d) No claim or Legal Proceeding is pending or, to the best of
the knowledge of the Company, has been threatened against or with respect to any
Acquired Corporation in respect of any material Tax. There are no unsatisfied
liabilities for material Taxes (including liabilities for interest, additions to
tax and penalties thereon and related expenses) with respect to any notice of
deficiency or similar document received by any Acquired Corporation with respect
to any material Tax (other than liabilities for Taxes asserted under any such
notice of deficiency or similar document which are being contested in good faith
by the Acquired Corporations and with respect to which adequate reserves for
payment have been established). There are no liens for material Taxes upon any
of the assets of any of the Acquired Corporations except liens for current Taxes
not yet due and payable. None of the Acquired Corporations has entered into or
become bound by any agreement or consent pursuant to Section 341(f) of the Code.
None of the Acquired Corporations has been, and none of the Acquired
Corporations will be, required to include any adjustment in taxable income for
any tax period (or portion thereof) pursuant to Section 481 of the Code or any
comparable provision under state or foreign Tax laws as a result of transactions
or events occurring, or accounting methods employed, prior to the Closing.
(e) Except as set forth in Part 2.15(e) of the Company
Disclosure Schedule, there is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of any of the Acquired Corporations that, considered
individually or considered collectively with any other such Contracts, will, or
could reasonably be expected to, give rise directly or indirectly to the payment
of any amount that would not be deductible pursuant to Section 280G or Section
162 of the Code. None of the Acquired Corporations is, or has ever been, a party
to or bound by any tax indemnity agreement, tax sharing agreement, tax
allocation agreement or similar Contract.
2.16 Employee and Labor Matters; Benefit Plans
(a) Part 2.16(a) of the Company Disclosure Schedule identifies
each
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salary, bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance pay, termination pay, hospitalization, medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (collectively, the "Plans") sponsored,
maintained, contributed to or required to be contributed to by any of the
Acquired Corporations for the benefit of any current or former employee of any
of the Acquired Corporations.
(b) Except as set forth in Part 2.16(a) of the Company
Disclosure Schedule, none of the Acquired Corporations maintains, sponsors or
contributes to, and none of the Acquired Corporations has at any time in the
past maintained, sponsored or contributed to, any employee pension benefit plan
(as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), whether or not excluded from coverage under specific
Titles or Merger Subtitles of ERISA) for the benefit of employees or former
employees of any of the Acquired Corporations (a "Pension Plan"). None of the
Plans identified in Part 2.16(a) of the Company Disclosure Schedule is subject
to Title IV of ERISA or Section 412 of the Code.
(c) Except as set forth in Part 2.16(a) or Part 2.16(c) of the
Company Disclosure Schedule, none of the Acquired Corporations maintains,
sponsors or contributes to any: (i) employee welfare benefit plan (as defined in
Section 3(1) of ERISA, whether or not excluded from coverage under specific
Titles or Merger Subtitles of ERISA) for the benefit of any employees or former
employees of any of the Acquired Corporations (a "Welfare Plan"), or (ii)
self-funded medical, dental or other similar Plan. None of the Plans identified
in Part 2.16(a) of the Company Disclosure Schedule is a multi-employer plan
(within the meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, the Company has delivered to
Parent: (i) an accurate and complete copy of such Plan (including all amendments
thereto); (ii) an accurate and complete copy of the annual report, if required
under ERISA, with respect to such Plan for the last two years; (iii) an accurate
and complete copy of the most recent summary plan description, together with
each Summary of Material Modifications, if required under ERISA, with respect to
such Plan, (iv) if such Plan is funded through a trust or any third party
funding vehicle, an accurate and complete copy of the trust or other funding
agreement (including all amendments thereto) and accurate and complete copies
the most recent financial statements thereof; (v) accurate and complete copies
of all Contracts relating to such Plan, including service provider agreements,
insurance contracts, minimum premium contracts, stop-loss agreements, investment
management agreements, subscription and participation agreements and
recordkeeping agreements; and (vi) an accurate and complete copy of the most
recent determination letter received from the Internal Revenue Service with
respect to such Plan (if such Plan is intended to be qualified under Section
401(a) of the Code).
(e) None of the Acquired Corporations is or has ever been
required to be treated as a single employer with any other Person under Section
4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the Code. None of the
Acquired
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Corporations has ever been a member of an "affiliated service group" within the
meaning of Section 414(m) of the Code. None of the Acquired Corporations has
ever made a complete or partial withdrawal from a multi-employer plan, as such
term is defined in Section 3(37) of ERISA, resulting in "withdrawal liability,"
as such term is defined in Section 4201 of ERISA (without regard to subsequent
reduction or waiver of such liability under either Section 4207 or 4208 of
ERISA).
(f) None of the Acquired Corporations has any plan or
commitment to create any Welfare Plan or any additional Pension Plan, or to
modify or change any existing Pension Plan (other than to comply with applicable
law) in a manner that would affect any employee of any of the Acquired
Corporations.
(g) Except as set forth in Part 2.16(g) of the Company
Disclosure Schedule, no Plan provides death, medical or health benefits (whether
or not insured) with respect to any current or former employee of any of the
Acquired Corporations after any such employee's termination of service (other
than (i) benefit coverage mandated by applicable law, including coverage
provided pursuant to Section 4980B of the Code, (ii) deferred compensation
benefits accrued as liabilities on the Company Balance Sheet, and (iii) benefits
the full cost of which are borne by current or former employees of any of the
Acquired Corporations (or the employees' beneficiaries)).
(h) With respect to any Plan constituting a group health plan
within the meaning of Section 4980B(g)(2) of the Code, the provisions of Section
4980B of the Code ("COBRA") have been complied with in all material respects.
Part 2.16(h) of the Company Disclosure Schedule describes all obligations of the
Acquired Corporations as of the date of this Agreement under any of the
provisions of COBRA.
(i) Each of the Plans has been operated and administered in
all material respects in accordance with applicable Legal Requirements,
including but not limited to ERISA and the Code.
(j) Each of the Plans intended to be qualified under Section
401(a) of the Code has received a favorable determination from the Internal
Revenue Service, and the Company is not aware of any reason why any such
determination letter should be revoked.
(k) Except as set forth in Part 2.16(k) of the Company
Disclosure Schedule, neither the execution, delivery or performance of this
Agreement, nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will result in any payment (including any bonus,
golden parachute or severance payment) to any current or former employee or
director of any of the Acquired Corporations (whether or not under any Plan), or
materially increase the benefits payable under any Plan, or result in any
acceleration of the time of payment or vesting of any such benefits.
(l) Part 2.16(l) of the Company Disclosure Schedule contains a
list of
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all salaried employees of each of the Acquired Corporations as of the date of
this Agreement, and correctly reflects, in all material respects, their base
salaries, their targeted annual bonus amounts, their dates of employment and
their positions. None of the Acquired Corporations is a party to any collective
bargaining contract or other Contract with a labor union involving any of its
employees. All of the employees of the Acquired Corporations are "at will"
employees.
(m) Part 2.16(m) of the Company Disclosure Schedule identifies
each Employee who is not fully available to perform work because of disability
or other leave and sets forth the basis of such leave and the anticipated date
of return to full service.
(n) Each Plan complies in all material respects with all
applicable Legal Requirements. Each of the Acquired Corporations is in
compliance in all material respects with all Contracts relating to employment,
employment practices, wages, bonuses and terms and conditions of employment,
including employee compensation matters.
(o) Except as set forth in Part 2.16(o) of the Company
Disclosure Schedule, each of the Acquired Corporations has good labor relations,
and none of the Acquired Corporations has any knowledge of any facts indicating
that (i) the consummation of the Merger or any of the other transactions
contemplated by this Agreement will have a material adverse effect on the labor
relations of any of the Acquired Corporations, or (ii) any of the employees of
the Acquired Corporations intends to terminate his or her employment with the
Acquired Corporation with which such employee is employed.
2.17 Environmental Matters. Each of the Acquired Corporations is in
compliance in all material respects with all applicable Environmental Laws,
which compliance includes the possession by each of the Acquired Corporations of
all permits and other Governmental Authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof. None
of the Acquired Corporations has received any notice or other communication (in
writing or otherwise), whether from a Governmental Body, citizens group,
employee or otherwise, that alleges that any of the Acquired Corporations is not
in compliance with any Environmental Law, and, to the best of the knowledge of
the Company, there are no circumstances that may prevent or interfere with the
compliance by any of the Acquired Corporations with any Environmental Law in the
future. To the best of the knowledge of the Company, no current or prior owner
of any property leased or controlled by any of the Acquired Corporations has
received any notice or other communication (in writing or otherwise), whether
from a Government Body, citizens group, employee or otherwise, that alleges that
such current or prior owner or any of the Acquired Corporations is not in
compliance with any Environmental Law. To the best of the knowledge of the
Company, all property that is leased to, controlled by or used by the Company,
and all surface water, groundwater and soil associated with or adjacent to such
property is in clean and healthful condition and is free of any material
environmental contamination of
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any nature. (For purposes of this Section 2.17 and Section 3.13: (i)
"Environmental Law" means any federal, state, local or foreign Legal Requirement
relating to pollution or protection of human health or the environment
(including ambient air, surface water, ground water, land surface or subsurface
strata), including any law or regulation relating to emissions, discharges,
releases or threatened releases of Materials of Environmental Concern, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environmental Concern;
and (ii) "Materials of Environmental Concern" include chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products and any
other substance that is now or hereafter regulated by any Environmental Law or
that is otherwise a danger to health, reproduction or the environment.)
2.18 Insurance. The Company has delivered to Parent a copy of each
insurance policy and each self insurance program relating to the business,
assets or operations of any of the Acquired Corporations. Each such insurance
policy is in full force and effect. Since June 3, 1996, none of the Acquired
Corporations has received any notice or other communication regarding any actual
or possible (a) cancellation or invalidation of any insurance policy, (b)
refusal of any coverage or rejection of any material claim under any insurance
policy, or (c) material adjustment in the amount of the premiums payable with
respect to any insurance policy. Except as set forth in Part 2.18 of the Company
Disclosure Schedule, there is no pending claim (including any workers'
compensation claim) under or based upon any insurance policy of any of the
Acquired Corporations; and, to the best of the knowledge of the Company, no
event has occurred, and no condition or circumstance exists, that might (with or
without notice or lapse of time) directly or indirectly give rise to or serve as
a basis for any such claim.
2.19 Transactions with Affiliates. Except as set forth in the Company
SEC Documents, since the date of the Company's last proxy statement filed with
the SEC, no event has occurred that would be required to be reported by the
Company pursuant to Item 404 of Regulation S-K promulgated by the SEC. Part 2.19
of the Company Disclosure Schedule identifies each person who is an "affiliate"
(as that term is used in Rule 145 promulgated under the Securities Act) of the
Company as of the date of this Agreement.
2.20 Legal Proceedings; Orders
(a) Except as set forth in Part 2.20(a) of the Company
Disclosure Schedule, there is no pending Legal Proceeding (including, to the
best knowledge of the Company, any investigation), and no Person has overtly
threatened to commence any Legal Proceeding: (i) that involves any of the
Acquired Corporations or any of the assets owned or used by any of the Acquired
Corporations, including, without limitation, any Acquired Company Proprietary
Asset; or (ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, the Merger or any of the
other transactions contemplated by this Agreement. To the best of the knowledge
of the Company, no event has occurred, and no claim, dispute or other condition
or circumstance exists, that will, or that could reasonably be expected to, give
rise to or serve as a basis for the commencement of any such Legal Proceeding.
To the best of the knowledge of the Company, no event has occurred, and no
claim, dispute or other
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condition or circumstance exists, that will, or that could reasonably be
expected to, cause or provide a basis for a director, officer or other
Representative of any of the Acquired Corporations to seek indemnification from,
or commence a Legal Proceeding against or involving, any of the Acquired
Corporations.
(b) There is no order, writ, injunction, judgment or decree to
which any of the Acquired Corporations, or any of the assets owned or used by
any of the Acquired Corporations, is subject. To the best of the knowledge of
the Company, no officer or other employee of any of the Acquired Corporations is
subject to any order, writ, injunction, judgment or decree that prohibits such
officer or other employee from engaging in or continuing any conduct, activity
or practice relating to the business of any of the Acquired Corporations.
2.21 Authority; Inapplicability of Anti-takeover Statutes; Binding
Nature of Agreement. The Company has the absolute and unrestricted right,
corporate power and authority to enter into and to perform its obligations under
this Agreement. The Board of Directors of the Company (at a meeting duly called
and held) has (a) unanimously determined that the Merger is advisable and fair
and in the best interests of the Company and its shareholders, (b) unanimously
approved the execution, delivery and performance of this Agreement by the
Company and has unanimously approved the Merger, (c) unanimously recommended the
adoption and approval of this Agreement and the Merger by the holders of Company
Common Stock and directed that this Agreement and the Merger be submitted for
consideration by the Company's shareholders at the Company Shareholders' Meeting
(as defined in Section 5.2), and (d) approved, and the stockholders of the
Company have adopted, an amendment to the Company's Articles of Incorporation
having the effect of causing the Company not to be subject to any state takeover
law or similar Legal Requirement that might otherwise apply to the Merger or any
of the other transactions contemplated by this Agreement except as set forth in
Part 2.21 of the Company Disclosure Schedule. This Agreement constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of
law governing specific performance, injunctive relief and other equitable
remedies.
2.22 No Existing Discussions. None of the Acquired Corporations, and no
Representative of any of the Acquired Corporations, is engaged, directly or
indirectly, in any discussions or negotiations with any other Person relating to
any Acquisition Proposal.
2.23 Accounting Matters. To the best of the knowledge of the Company,
neither the Company nor any of its affiliates has taken or agreed to, or plans
to, take
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any action that would prevent Parent from accounting for the Merger as a
"pooling of interests."
2.24 Vote Required. The affirmative vote of the holders of a majority
of the shares of Company Common Stock outstanding on the record date for the
Company Shareholder Meeting (the "Required Company Shareholder Vote") is the
only vote of the holders of any class or series of the Company's capital stock
necessary to adopt and approve this Agreement, the Merger and the other
transactions contemplated by this Agreement.
2.25 Non-Contravention; Consents. Neither (i) the execution, delivery
or performance of this Agreement or any of the other agreements referred to in
this Agreement, nor (ii) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i)
any of the provisions of the articles of incorporation, bylaws or other charter
or organizational documents of any of the Acquired Corporations, or (ii) any
resolution adopted by the shareholders, the board of directors or any committee
of the board of directors of any of the Acquired Corporations;
(b) contravene, conflict with or result in a violation of, or
give any Governmental Body or other Person the right to challenge the Merger or
any of the other transactions contemplated by this Agreement or to exercise any
remedy or obtain any relief under, any Legal Requirement or any order, writ,
injunction, judgment or decree to which any of the Acquired Corporations, or any
of the assets owned or used by any of the Acquired Corporations, is subject;
(c) contravene, conflict with or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by any of the Acquired Corporations or that otherwise
relates to the business of any of the Acquired Corporations or to any of the
assets owned or used by any of the Acquired Corporations;
(d) except as set forth in Part 2.25(d) of the Company
Disclosure Schedule, contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of any Acquired
Corporation Contract that is or would constitute a Material Contract, or give
any Person the right to (i) declare a default or exercise any remedy under any
such Acquired Corporation Contract, (ii) a rebate, chargeback, penalty or change
in delivery schedule under any such Acquired Corporation Contract, (iii)
accelerate the maturity or performance of any such Acquired Corporation
Contract, or (iv) cancel, terminate or modify any term of such Acquired
Corporation Contract; or
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(e) result in the imposition or creation of any Encumbrance
upon or with respect to any asset owned or used by any of the Acquired
Corporations (except for minor liens that will not, in any case or in the
aggregate, materially detract from the value of the assets subject thereto or
materially impair the operations of any of the Acquired Corporations).
Except as may be required by the Exchange Act, the PBCL, the DGCL and the rules
of the National Association of Securities Dealers, Inc. ("NASD") (as they relate
to the S-4 Registration Statement and the Joint Proxy Statement/Prospectus, as
defined in Section 2.28(b)), none of the Acquired Corporations was, is or will
be required to make any filing with or give any notice to, or to obtain any
Consent from, any Person in connection with (x) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, or (y) the consummation of the Merger or any of the other
transactions contemplated by this Agreement.
2.26 Fairness Opinion. The Company's Board of Directors has received
the written opinion of Robert W. Baird & Co. Incorporated, financial advisor to
the Company, dated the date of this Agreement, to the effect that the Exchange
Ratio is fair to the shareholders of the Company from a financial point of view.
The Company has furnished an accurate and complete copy of said written opinion
to Parent.
2.27 Financial Advisor. Except for Robert W. Baird & Co. Incorporated,
no broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger or any of the other
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of any of the Acquired Corporations. The Company has communicated to
Parent the fee formula pursuant to which fees, commissions and other amounts
will be paid by the Company to Robert W. Baird & Co. Incorporated if the Merger
is consummated. The Company has furnished to Parent accurate and complete copies
of all agreements under which any such fees, commissions or other amounts have
been paid or may become payable and all indemnification and other agreements
relating to the engagement of Robert W. Baird & Co. Incorporated.
2.28 Full Disclosure
(a) This Agreement (including the Company Disclosure Schedule)
does not, and the certificate referred to in Section 6.6(e) will not, (i)
contain any representation, warranty or information that is false or misleading
with respect to any material fact, or (ii) omit to state any material fact
necessary in order to make the representations, warranties and information
contained and to be contained herein and therein (in the light of the
circumstances under which such representations, warranties and information were
or will be made or provided) not false or misleading.
(b) None of the information supplied or to be supplied by or
on behalf of the Company for inclusion or incorporation by reference in the
registration statement
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on Form S-4 to be filed with the SEC by Parent in connection with the issuance
of Parent Common Stock in the Merger (the "S-4 Registration Statement") will, at
the time the S-4 Registration Statement is filed with the SEC or at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. None of the information
supplied or to be supplied by or on behalf of the Company for inclusion or
incorporation by reference in the Joint Proxy Statement/Prospectus to be filed
with the SEC as part of the S-4 Registration Statement (the "Joint Proxy
Statement/Prospectus"), will, at the time the Joint Proxy Statement/Prospectus
is mailed to the shareholders of the Company, at the time of the Company
Shareholders' Meeting or as of the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they are made, not misleading. The Joint Proxy
Statement/Prospectus will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations promulgated by the
SEC thereunder.
Section 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.
Parent and Merger Sub, jointly and severally, represent and warrant to
the Company that, except as set forth in the disclosure schedule delivered to
the Company on the date of this Agreement and signed by an executive officer of
Parent (the "Parent Disclosure Schedule"):
3.1 Organization, Standing and Power. Each of Parent and Merger Sub is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of Parent and Merger Sub has all corporate
power and authority to own its properties and to carry on its business as now
being conducted and is duly qualified to do business and is in good standing in
each jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect on Parent and Merger Sub.
3.2 Captialization, Etc. The authorized capital stock of Parent
consists of: (i) fifty million (50,000,000) shares of Parent Common Stock, $.001
par value per share, of which, as of August 31, 1998, 15,925,602 shares (which
amount does not materially differ from the amount issued and outstanding as of
the date of this Agreement) were issued and outstanding; and (ii) ten million
(10,000,000) shares of preferred stock, $.001 par value per share, of which no
shares are outstanding as of the date of this Agreement. As of the date of this
Agreement, there are no outstanding subscriptions, options, calls, warrants or
rights to acquire shares of Parent Common Stock other than pursuant to stock
issuance or stock option plans or other arrangements disclosed in the Parent SEC
Documents. The authorized capital stock of Merger Sub consists of one hundred
(100) shares of Common Stock ("Merger Sub Common Stock"), $.001 par
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value per share, all of which have been issued and are outstanding as of the
date of this Agreement and are held by Parent. As of the date of this Agreement,
there are no shares of Parent Common Stock held in treasury by Parent. None of
the outstanding shares of Parent Common Stock is entitled or subject to any
preemptive right, right of participation, right of maintenance or any similar
right.
3.3 SEC Filings; Financial Statements
(a) Parent has delivered to the Company accurate and complete
copies (excluding copies of exhibits) of each report, registration statement (on
a form other than Form S-8) and definitive proxy statement filed by Parent with
the SEC between November 26, 1997 and the date of this Agreement and will
deliver to the Company accurate and complete copies of all such registration
statements, proxy statements and other statements, reports, schedules, forms and
other documents filed after the date of this Agreement and prior to the
Effective Date (the "Parent SEC Documents"), which are all of the forms, reports
and documents required to be filed by Parent with the SEC since November 26,
1997. As of the time it was filed with the SEC (or, if amended or superseded by
a later filing, then on the date of such filing): (i) each of the Parent SEC
Documents filed with the SEC was timely filed and complied in all material
respects with the applicable requirements of the Securities Act or the Exchange
Act (as the case may be) as of the date of such filing and any Parent SEC
Documents filed after the date hereof and prior to the Effective Time will so
comply; and (ii) none of the Parent SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(b) The consolidated financial statements contained in the
Parent SEC Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered (except as may be indicated in the notes to such financial
statements and, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC, and except that unaudited financial statements may not contain
footnotes and other information required to complete financial statements); and
(iii) fairly present the consolidated financial position of Parent and its
subsidiaries as of the respective dates thereof and the consolidated results of
operations of Parent and its subsidiaries for the periods covered thereby. All
adjustments (consisting of recurring accruals) considered necessary for a fair
presentation of the financial statements have been included. The audited
consolidated balance sheet of Parent and its subsidiaries for the year ended
December 31, 1997 included in the Company's final Prospectus dated February 13,
1998 is sometimes referred to herein as the "Parent Balance Sheet" and the
unaudited consolidated balance sheet of Parent and its subsidiaries as of June
30, 1998 included in Parent's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998 is sometimes referred to herein as the "Parent Unaudited
Interim Balance Sheet." All financial
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statements (including any related notes) contained in Company SEC Documents
filed after the date hereof shall meet the conditions set forth in (i), (ii) and
(iii) of this Section 3.3(b).
3.4 Disclosure
(a) This Agreement (including the Parent Disclosure Schedule)
does not, and the certificate referred to in Section 7.5(e) will not, (i)
contain any representation, warranty or information that is false or misleading
with respect to any material fact, or (ii) omit to state any material fact
necessary in order to make the representations, warranties and information
contained and to be contained herein and therein (in the light of the
circumstances under which such representations, warranties and information were
or will be made or provided) not false or misleading.
(b) None of the information to be supplied by or on behalf of
Parent for inclusion in the S-4 Registration Statement will, at the time the S-4
Registration Statement becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading. None
of the information to be supplied by or on behalf of Parent for inclusion in the
Joint Proxy Statement/Prospectus will, at the time the Joint Proxy
Statement/Prospectus is mailed to the shareholders of Parent, at the time of the
Parent Shareholders' Meeting or as of the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. The S-4
Registration Statement will comply as to form in all material respects with the
provisions of the Securities Act and the rules and regulations promulgated by
the SEC thereunder, except that no representation or warranty is made by Parent
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. The Joint Proxy Statement/Prospectus
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations promulgated by the SEC thereunder.
3.5 Absence of Certain Changes or Events. Except as set forth in Part
3.5 of the Parent Disclosure Schedule between the date of the Parent Unaudited
Interim Balance Sheet and the date of this Agreement: (i) there has not been any
event that has had a Material Adverse Effect on Parent; (ii) Parent has not
declared, accrued, set aside or paid any dividend; and (iii) Parent has not
incurred any liabilities other than in the ordinary course of business and
consistent with past practices.
3.6 Authority; Binding Nature of Agreement. Parent and Merger Sub have
the absolute and unrestricted right, power and authority to perform their
obligations under this Agreement; and the execution, delivery and performance by
Parent and
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Merger Sub of this Agreement have been duly authorized by all necessary action
on the part of Parent and Merger Sub and their respective boards of directors.
This Agreement constitutes the legal, valid and binding obligation of Parent and
Merger Sub, enforceable against them in accordance with its terms, subject to
(i) laws of general application relating to bankruptcy, insolvency and the
relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
3.7 Non-Contravention; Consents. Neither the execution and delivery of
this Agreement by Parent and Merger Sub nor the consummation by Parent and
Merger Sub of the Merger will (a) conflict with or result in any breach of any
provision of the certificate of incorporation or bylaws of Parent or the
articles of incorporation or bylaws of Merger Sub, or (b) result in a default by
Parent or Merger Sub under any Contract to which Parent or Merger Sub is a
party, except for any default which has not had and will not have a Material
Adverse Effect on Parent, or (c) result in a violation by Parent or Merger Sub
of any law, statute, rule, regulation, order, writ, injunction, judgment or
decree to which Parent or Merger Sub is subject, except for any violation which
has not had and will not have a Material Adverse Effect on Parent. Except as may
be required by the Securities Act, the Exchange Act, state securities or "blue
sky" laws, the PBCL, the DGCL and the rules of the NASD (as they relate to the
S-4 Registration Statement and the Joint Proxy Statement/Prospectus), Parent is
not and will not be required to make any filing with or give any notice to, or
to obtain any Consent from, any Person in connection with the execution and
delivery of this Agreement, or the consummation of the Merger.
3.8 Vote Required. The only vote of Parent's stockholders required to
approve the issuance of Parent Common Stock in the Merger is the vote of a
majority of votes cast in person or by proxy as prescribed by rules of the NASD
(the "Required Parent Stockholder Vote").
3.9 Valid Issuance. The Parent Common Stock to be issued in the Merger
will, when issued in accordance with the provisions of this Agreement, be duly
authorized, validly issued, fully paid and nonassessable.
3.10 Accounting Matters. To the best of the knowledge of Parent, Parent
has not taken and has not agreed, and does not plan, to take any action that
would prevent Parent from accounting for the Merger as a "pooling of interests."
3.11 Fairness Opinion. Parent's Board of Directors has received the
written opinion of Hambrecht & Quist LLC, financial advisor to Parent, dated as
of the date of this Agreement, to the effect that the Exchange Ratio is fair to
Parent from a financial point of view. Parent has furnished an accurate and
complete copy of said written opinion to the Company.
3.12 Tax Matters
(a) All Tax Returns required to be filed by or on behalf of
the Parent
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and its Subsidiaries with any Governmental Body with respect to any taxable
period ending on or before the Closing Date (the "Parent Returns") (i) have been
or will be filed on or before the applicable due date (including any extensions
of such due date if properly obtained), and (ii) have been, or will be when
filed, prepared in all material respects in compliance with all applicable Legal
Requirements. All amounts shown on the Parent Returns to be due on or before the
Closing Date have been or will be paid on or before the Closing Date.
(b) The Parent financial statements in the Parent SEC
Documents fully accrue all actual and contingent liabilities for Taxes with
respect to all periods through the dates thereof in accordance with GAAP. Parent
will establish, in the ordinary course of business and consistent with its past
practices, reserves adequate for the payment of all Taxes for the period from
the date of this Agreement through the Closing Date.
(c) Since the Parent Return for the taxable period ended
December 31, 1992, no Parent Return has ever been examined or audited by any
Governmental Body. No extension or waiver of the limitation period applicable to
any of the Parent Returns has been granted (by Parent or any other Person), and
no such extension or waiver has been requested from Parent or any of its
Subsidiaries.
(d) No claim or Legal Proceeding is pending or, to the best of
the knowledge of the Parent, has been threatened against or with respect to
Parent or any of its Subsidiaries in respect of any material Tax. There are no
unsatisfied liabilities for material Taxes (including liabilities for interest,
additions to tax and penalties thereon and related expenses) with respect to any
notice of deficiency or similar document received by Parent or any of its
Subsidiaries with respect to any material Tax (other than liabilities for Taxes
asserted under any such notice of deficiency or similar document which are being
contested in good faith by Parent or any of its Subsidiaries and with respect to
which adequate reserves for payment have been established). There are no liens
for material Taxes upon any of the assets of any of Parent or any of its
Subsidiaries except liens for current Taxes not yet due and payable. Neither
Parent nor any of its Subsidiaries has entered into or become bound by any
agreement or consent pursuant to Section 341(f) of the Code. Neither Parent nor
any of its Subsidiaries has been, and neither Parent nor any of its Subsidiaries
will be, required to include any adjustment in taxable income for any tax period
(or portion thereof) pursuant to Section 481 or 263A of the Code or any
comparable provision under state or foreign Tax laws as a result of transactions
or events occurring, or accounting methods employed, prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of Parent or any of its Subsidiaries that, considered
individually or considered collectively with any other such Contracts, will, or
could reasonably be expected to, give rise directly or indirectly to the payment
of any amount that would not be deductible
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pursuant to Section 280G or Section 162 of the Code. Neither Parent nor any of
its Subsidiaries is, or has ever been, a party to or bound by any tax indemnity
agreement, tax sharing agreement, tax allocation agreement or similar Contract.
3.13 Environmental Matters. Except as set forth in Part 3.13 of the
Parent Disclosure Schedule, each of Parent and its Subsidiaries is in compliance
in all material respects with all applicable Environmental Laws, which
compliance includes the possession by each of Parent and its Subsidiaries of all
permits and other Governmental Authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof.
Neither Parent nor any of its Subsidiaries has received any notice or other
communication (in writing or otherwise), whether from a Governmental Body,
citizens group, employee or otherwise, that alleges that any of Parent or its
Subsidiaries is not in compliance with any Environmental Law, and, to the
knowledge of Parent, there are no circumstances that may prevent or interfere
with the compliance by Parent or any of its Subsidiaries with any Environmental
Law in the future. To the knowledge of the Parent, no current or prior owner of
any property leased or controlled by Parent or any of its Subsidiaries has
received any notice or other communication (in writing or otherwise), whether
from a Government Body, citizens group, employee or otherwise, that alleges that
such current or prior owner or Parent or any of its Subsidiaries is not in
compliance with any Environmental Law. To the knowledge of Parent, all property
that is leased to, controlled by or used by Parent, and all surface water,
groundwater and soil associated with or adjacent to such property is in clean
and healthful condition and is free of any material environmental contamination
of any nature.
3.14 Significant Customers. Part 3.14 of the Parent Disclosure Schedule
sets forth a complete and accurate list of all Parent's Significant Customers.
For purposes of this Agreement, "Parent's Significant Customers" are the twenty
(20) customers of the Parent that have effected the most purchases, in dollar
terms, and accounted for the most revenues, in dollar terms, during the fiscal
year ended December 31, 1997. None of the Parent's Significant Customers has
canceled, returned or substantially reduced or, to the knowledge of the Parent,
is currently attempting or threatening to cancel, return or substantially
reduce, any purchases from, orders to or services provided by the Parent. Parent
has not received any material customer complaints concerning its products and/or
services.
3.15 Year 2000 Liabilities. Neither Parent nor any of its Subsidiaries
has any accrued, contingent or other liabilities of any nature, either matured
or unmatured, including, without limitation, any liabilities relating to costs
associated with insuring that all software (and related Parent Proprietary
Assets) that is sold, licensed or transferred by Parent or any of its
Subsidiaries to any Person, computer systems, any software utilized by the
Parent or other components of the Parent's information technology infrastructure
are Year 2000 Compliant (whether or not required to be reflected in financial
statements in accordance with GAAP, and whether due or to become due), except
for: (a) liabilities identified as such in the "liabilities" column of the
Parent
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Unaudited Interim Balance Sheet as of June 30, 1998 included in the Parent's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998; and (b)
normal and recurring liabilities that have been incurred by Parent since the
date of the Parent Unaudited Interim Balance Sheet in the ordinary course of
business and consistent with past practices.
Section 4. CERTAIN COVENANTS OF THE COMPANY
4.1 Access and Investigation. During the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), the Company
shall, and shall cause the respective Representatives of the Acquired
Corporations to: (a) provide Parent and Parent's Representatives with reasonable
access to the Acquired Corporations' Representatives, personnel and assets and
to all existing books, records, Tax Returns, work papers and other documents and
information relating to the Acquired Corporations; and (b) provide Parent and
Parent's Representatives with such copies of the existing books, records, Tax
Returns, work papers and other documents and information relating to the
Acquired Corporations, and with such additional financial, operating and other
data and information regarding the Acquired Corporations, as Parent may
reasonably request. Without limiting the generality of the foregoing, during the
Pre-Closing Period, the Company shall promptly provide Parent with copies of:
(a) any written materials or communications sent by or on
behalf of the Company to its shareholders;
(b) any material notice, document or other communication sent
by or on behalf of any of the Acquired Corporations to any party to any Material
Contract or sent to any of the Acquired Corporations by any party to any
Material Contract (other than any communication that relates solely to
commercial transactions between the Company and the other party to any such
Material Contract and that is of the type sent in the ordinary course of
business and consistent with past practices);
(c) any notice, report or other document filed with or sent to
any Governmental Body in connection with the Merger or any of the other
transactions contemplated by this Agreement; and
(d) any material notice, report or other document received by
any of the Acquired Corporations from any Governmental Body.
4.2 Operation of the Company's Business
(a) During the Pre-Closing Period: (i) the Company shall
ensure that each of the Acquired Corporations conducts its business and
operations (A) in the ordinary course and in accordance with past practices and
(B) in compliance with all applicable Legal Requirements and the requirements of
all Acquired Company Contracts that constitute Material Contracts; (ii) the
Company shall use all reasonable
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efforts to ensure that each of the Acquired Corporations preserves intact its
current business organization, keeps available the services of its current
officers and employees and maintains its relations and goodwill with all
suppliers, customers, landlords, creditors, licensors, licensees, employees and
other Persons having business relationships with the respective Acquired
Corporations; (iii) the Company shall keep in full force all insurance policies
referred to in Section 2.18; (iv) the Company shall provide all notices,
assurances and support required by any Acquired Corporation Contract relating to
any Proprietary Asset in order to ensure that no condition under such Acquired
Corporation Contract occurs which could result in, or could increase the
likelihood of, (A) any transfer or disclosure by any Acquired Corporation of any
source code materials or other Proprietary Asset, or (B) a release from any
escrow of any source code materials or other Proprietary Asset which have been
deposited or are required to be deposited in escrow under the terms of such
Acquired Corporation Contract; and (v) the Company shall (to the extent
requested by Parent) cause its officers to report regularly to Parent concerning
the status of the Company's business.
(b) During the Pre-Closing Period, the Company shall not
(without the prior written consent of Parent), and shall not permit any of the
other Acquired Corporations to:
(i) declare, accrue, set aside or pay any dividend or
make any other distribution in respect of any shares of capital stock, or
repurchase, redeem or otherwise reacquire any shares of capital stock or other
securities;
(ii) sell, issue, grant or authorize the issuance or
grant of (i) any capital stock or other security, (ii) any option, call, warrant
or right to acquire any capital stock or other security, or (iii) any instrument
convertible into or exchangeable for any capital stock or other security (except
that the Company may (A) issue Company Common Stock upon the valid exercise of
Company Options or Company Warrants outstanding as of the date of this Agreement
and (B) in the ordinary course of business and consistent with past practices,
grant options exercisable into not more than two hundred fifty (250) shares of
Company Common Stock per newly-hired employee);
(iii) amend or waive any of its rights under, or
accelerate the vesting under, any provision of any of the Company's stock option
plans, any provision of any agreement evidencing any outstanding stock option or
any restricted stock purchase agreement, or otherwise modify any of the terms of
any outstanding option, warrant or other security or any related Contract;
(iv) amend or permit the adoption of any amendment to
its articles of incorporation or bylaws or other charter or organizational
documents, or effect or become a party to any merger, consolidation, share
exchange, business combination, recapitalization, reclassification of shares,
stock split, reverse stock split or
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similar transaction;
(v) form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(vi) make any capital expenditure (except that the
Acquired Corporations may make capital expenditures that, when added to all
other capital expenditures made on behalf of the Acquired Corporations during
the Pre-Closing Period, do not exceed $50,000 with respect to any single capital
expenditure or $100,000 in the aggregate);
(vii) enter into or become bound by, or permit any of
the assets owned or used by it to become bound by, any Material Contract (other
than Contracts identified pursuant to Section 2.10(a)(viii) hereunder), or amend
or prematurely terminate, or waive or exercise any material right or remedy
(including any right to repurchase shares of Company Common Stock) under, any
Material Contract (other than Contracts identified pursuant to Section
2.10(a)(viii) hereunder);
(viii) acquire, lease or license any right or other
asset from any other Person or sell or otherwise dispose of, or lease or
license, any right or other asset to any other Person (except in each case for
immaterial assets acquired, leased, licensed or disposed of by the Company in
the ordinary course of business and consistent with past practices), or waive or
relinquish any material right;
(ix) incur any indebtedness for borrowed money (other
than (i) in connection with the financing of ordinary trade payables; (ii)
pursuant to existing credit facilities; (iii) in connection with leasing
activities in the ordinary course of business; or (iv) for tax planning purposes
in the ordinary course of business) or guarantee any indebtedness of any person
for borrowed money, or issue or sell any debt securities or warrants or right to
acquire debt securities of any of the Acquired Corporations or guarantee any
debt securities of others.
(x) except in the ordinary course of business and
consistent with past practices, establish, adopt or amend any employee benefit
plan, pay any bonus except in accordance with the terms of existing Plans or
pursuant to commitments made prior to the date of this Agreement, or make any
profit-sharing or similar payment to, or increase the amount of the wages,
salary, commissions, fringe benefits or other compensation or remuneration
payable to, any of its directors, officers or employees;
(xi) grant any severance or termination pay to any
officer or employee except payments in amounts consistent with policies and past
practices or pursuant to written agreements outstanding, or policies existing,
on the date hereof and as previously disclosed in writing or made available to
Parent, or adopt any new severance plan;
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(xii) hire any new employee having an annual salary
in excess of $100,000 or as an officer of the Company or engage any consultant
or independent contractor for a period exceeding sixty (60) days;
(xiii) change the status, title or responsibilities,
including without limitation, termination or promotion, of any officer of the
Company or promote any employee to an officer position in the Company;
(xiv) transfer or license to any Person or otherwise
extend the term of any agreement with respect to, amend or modify in any
material respect any rights (including without limitation distribution rights)
to the Proprietary Assets of the Acquired Corporations, or enter into
assignments of future patent rights, other than non-exclusive licenses and
distribution rights in the ordinary course of business and consistent with past
practice;
(xv) sell, lease, license, encumber or otherwise
dispose of any properties or assets which are material, individually or in the
aggregate, to the business of the Company, except in the ordinary course of
business consistent with past practice or lend funds to any third party (other
than intracompany loans and travel advances in the ordinary course of business);
(xvi) change any of its methods of accounting or
accounting practices in any respect;
(xvii) make any election with respect to Taxes;
(xviii) commence or settle any Legal Proceeding;
(xix) enter into any material transaction or take any
other material action outside the ordinary course of business or inconsistent
with past practices;
(xx) enter into any agreement requiring the consent
or approval of any third party with respect to the Merger; or
(xxi) agree or commit to take any of the actions
described in clauses "(i)" through "(xx)" of this Section 4.2(b).
(c) During the Pre-Closing Period, the Company shall promptly
notify Parent in writing of: (i) the discovery by the Company of any event,
condition, fact or circumstance that occurred or existed on or prior to the date
of this Agreement and that caused or constitutes a material inaccuracy in any
representation or warranty made by the Company in this Agreement; (ii) any
event, condition, fact or circumstance that occurs, arises or exists after the
date of this Agreement and that would cause or constitute a material inaccuracy
in any representation or warranty made by the Company in this Agreement if (A)
such representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or
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circumstance, or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement; (iii) any event,
condition, fact or circumstance hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in the Company Disclosure Schedule; (iv) any material breach
of any covenant or obligation of the Company; and (v) any event, condition, fact
or circumstance that would make the timely satisfaction of any of the conditions
set forth in Section 6 or Section 7 impossible or unlikely or that has had or
could reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations. No notification given to Parent pursuant to this Section 4.2(c)
shall limit or otherwise affect any representations, warranties, covenants or
obligations of the Company contained in this Agreement.
(d) If any event, condition, fact or circumstance that is
required to be disclosed pursuant to Section 4.2(c) requires any change in the
Company Disclosure Schedule, or if any such event, condition, fact or
circumstance would require such a change assuming Company Disclosure Schedule
were dated as of the date of the occurrence, existence or discovery of such
event, condition, fact or circumstance, then the Company shall promptly deliver
to Parent an update to the Company Disclosure Schedule specifying such change.
No such update shall be deemed to supplement or amend the Company Disclosure
Schedule for the purpose of (i) determining the accuracy of any of the
representations and warranties made by the Company in this Agreement, or (ii)
determining whether any of the conditions set forth in Section 6 has been
satisfied.
4.3 No Solicitation
(a) From the date of this Agreement until the earlier of the
Effective Time or termination of this Agreement pursuant to Section 8, the
Company shall not directly or indirectly, and shall not authorize or permit any
subsidiary of the Company or any Representative of any of the Acquired
Corporations directly or indirectly to, (i) solicit, initiate, encourage or
induce the making, submission or announcement of any Acquisition Proposal or
take any action that could reasonably be expected to lead to an Acquisition
Proposal, (ii) furnish any information regarding any of the Acquired
Corporations to any Person in connection with or in response to an Acquisition
Proposal, (iii) engage in discussions with any Person with respect to any
Acquisition Proposal, (iv) approve, endorse or recommend any Acquisition
Proposal or (v) enter into any letter of intent or similar document or any
Contract contemplating or otherwise relating to any Acquisition Transaction;
provided, however, that prior to the approval of this Agreement by the Required
Company Shareholder Vote, this Section 4.3(a) shall not prohibit the Company
from furnishing nonpublic information regarding the Acquired Corporations to, or
entering into discussions with, any Person in response to a Superior Offer
submitted by such Person (and not withdrawn) if (1) neither the Company nor any
Representative of any of the Acquired Corporations shall have violated any of
the restrictions set forth in this Section 4.3, (2) the Board of Directors of
the Company concludes in good faith, based upon the advice of its outside legal
counsel, that such
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action is required in order for the Board of Directors of the Company to comply
with its fiduciary obligations to the Company's shareholders under applicable
law, (3) prior to furnishing any such nonpublic information to, or entering into
discussions with, such Person, the Company gives Parent written notice of the
identity of such Person and of the Company's intention to furnish nonpublic
information to, or enter into discussions with, such Person, and the Company
receives from such Person an executed confidentiality agreement containing
customary limitations on the use and disclosure of all nonpublic written and
oral information furnished to such Person by or on behalf of the Company, and
(4) prior to furnishing any such nonpublic information to such Person, the
Company furnishes such nonpublic information to Parent (to the extent such
nonpublic information has not been previously furnished by the Company to
Parent). Without limiting the generality of the foregoing, the Company
acknowledges and agrees that any violation of any of the restrictions set forth
in the preceding sentence by any Representative of any of the Acquired
Corporations, whether or not such Representative is purporting to act on behalf
of any of the Acquired Corporations, shall be deemed to constitute a breach of
this Section 4.3 by the Company. In addition to the foregoing, the Company shall
(i) provide Parent with at least twenty-four (24) hours prior notice of any
meeting of the Company's Board of Directors at which the Company's Board of
Directors is reasonably expected to consider a Superior Offer and (ii) not
recommend a Superior Offer to its shareholders for a period of not less than the
greater of two (2) business days or forty-eight (48) hours after Parent's
receipt of a copy of such Superior Offer (pursuant to Section 4.3(b) below).
(b) The Company shall promptly advise Parent orally and in
writing of any Acquisition Proposal (including the identity of the Person making
or submitting such Acquisition Proposal and the terms thereof) that is made or
submitted by any Person during the Pre-Closing Period. The Company shall keep
Parent fully informed with respect to the status of any such Acquisition
Proposal and any modification or proposed modification thereto.
(c) The Company shall immediately cease and cause to be
terminated any existing discussions with any Person that relate to any
Acquisition Proposal.
Section 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 Registration Statement; Joint Proxy Statement/Prospectus
(a) As promptly as practicable after the date of this
Agreement, the Company and Parent shall prepare and cause to be filed with the
SEC the S-4 Registration Statement, together with the Joint Proxy
Statement/Prospectus and any other documents required by the Securities Act, the
Exchange Act or any other Federal, foreign or Blue Sky or related laws in
connection with the Merger and the transactions contemplated by this Agreement
("Other Filings"). Each of Parent and the Company will notify the other promptly
upon the receipt of any comments from the SEC or its staff or any other
government officials and of any request by the SEC or its staff or any other
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government officials for amendments or supplements to the S-4 Registration
Statement, the Joint Proxy Statement/Prospectus or any Other Filings or for
additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the S-4 Registration Statement, the Joint Proxy
Statement/Prospectus, any Other Filings or the Merger. Each of Parent and the
Company shall use all reasonable efforts to cause the S-4 Registration Statement
(including the Joint Proxy Statement/Prospectus) and any Other Filings to comply
with the rules and regulations promulgated by the SEC, to respond promptly to
any comments of the SEC or its staff and to have the S-4 Registration Statement
declared effective under the Securities Act as promptly as practicable after it
is filed with the SEC. Parent will use all reasonable efforts to cause the Joint
Proxy Statement/Prospectus to be mailed to Parent's stockholders and the Company
will use all reasonable efforts to cause the Joint Proxy Statement/Prospectus to
be mailed to the Company's shareholders, as promptly as practicable after the
Form S-4 Registration Statement is declared effective under the Securities Act.
The Company shall promptly furnish to Parent all information concerning the
Acquired Corporations and the Company's shareholders that may be required or
reasonably requested in connection with any action contemplated by this Section
5.1. If any event relating to any of the Acquired Corporations occurs, or if the
Company becomes aware of any information, that should be set forth in an
amendment or supplement to the S-4 Registration Statement or the Joint Proxy
Statement/Prospectus, then the Company shall promptly inform Parent thereof and
shall cooperate with Parent in filing such amendment or supplement with the SEC
and, if appropriate, in mailing such amendment or supplement to the shareholders
of the Company and the stockholders of Parent.
(b) Prior to the Effective Time, Parent shall use reasonable
efforts to obtain all regulatory approvals needed to ensure that the Parent
Common Stock to be issued in the Merger will be registered or qualified under
the securities law of every jurisdiction of the United States in which any
registered holder of Company Common Stock has an address of record on the record
date for determining the shareholders entitled to notice of and to vote at the
Company Shareholders' Meeting; provided, however, that Parent shall not be
required (i) to qualify to do business as a foreign corporation in any
jurisdiction in which it is not now qualified or (ii) to file a general consent
to service of process in any jurisdiction.
5.2 Company Shareholders' Meeting
(a) The Company shall take all action necessary under all
applicable Legal Requirements to call, give notice of, convene and hold a
meeting of the holders of Company Common Stock (the "Company Shareholders'
Meeting") to consider, act upon and vote upon the adoption of this Agreement and
approval of the Merger. The Company Shareholders' Meeting will be held as
promptly as practicable and in any event within forty-five (45) days after the
S-4 Registration Statement is declared
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effective under the Securities Act; provided, however, that notwithstanding
anything to the contrary contained in this Agreement, the Company may adjourn or
postpone the Company Shareholders' Meeting to the extent necessary to ensure
that any necessary supplement or amendment to the Joint Proxy
Statement/Prospectus is provided to the Company's shareholders in advance of a
vote on the Merger and this Agreement or, if as of the time for which Company
Shareholders' Meeting is originally scheduled (as set forth in the Joint Proxy
Statement/Prospectus) there are insufficient shares of Company Common Stock
represented (either in person or by proxy) to constitute a quorum necessary to
conduct the business of the Company's Shareholders' Meeting. The Company shall
ensure that the Company Shareholders' Meeting is called, noticed, convened, held
and conducted, and that all proxies solicited in connection with the Company
Shareholders' Meeting are solicited, in compliance with all applicable Legal
Requirements. The Company's obligation to call, give notice of, convene and hold
the Company Shareholders' Meeting in accordance with this Section 5.2(a) shall
not be limited or otherwise affected by the commencement, disclosure,
announcement or submission to the Company of any Acquisition Proposal, or by any
withdrawal, amendment or modification of the recommendation of the Board of
Directors of the Company with respect to the Merger.
(b) Subject to Section 5.2(c): (i) the Board of Directors of
the Company shall unanimously recommend that the Company's shareholders vote in
favor of and adopt and approve this Agreement and the Merger at the Company
Shareholders' Meeting; (ii) the Joint Proxy Statement/Prospectus shall include a
statement to the effect that the Board of Directors of the Company has
unanimously recommended that the Company's shareholders vote in favor of and
adopt and approve this Agreement and the Merger at the Company Shareholders'
Meeting; and (iii) neither the Board of Directors of the Company nor any
committee thereof shall withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify, in a manner adverse to Parent, the unanimous
recommendation of the Board of Directors of the Company that the Company's
shareholders vote in favor of and adopt and approve this Agreement and the
Merger. For purposes of this Agreement, said recommendation of the Board of
Directors shall be deemed to have been modified in a manner adverse to Parent if
said recommendation shall no longer be unanimous.
(c) Nothing in Section 5.2(b) shall prevent the Board of
Directors of the Company from withdrawing, amending or modifying its unanimous
recommendation in favor of the Merger if (i) a Superior Offer is made to the
Company and is not withdrawn, (ii) neither the Company nor any of its
Representatives shall have violated any of the restrictions set forth in Section
4.3, and (iii) the Board of Directors of the Company concludes in good faith,
based upon the advice of its outside counsel, that, in light of such Superior
Offer, the withdrawal, amendment or modification of such recommendation is
required in order for the Board of Directors of the Company to comply with its
fiduciary obligations to the Company's shareholders under applicable law.
Nothing contained in this Section 5.2 shall limit the Company's obligation to
hold and convene the Company Shareholders' Meeting (regardless of whether
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the unanimous recommendation of the Board of Directors of the Company shall have
been withdrawn, amended or modified).
5.3 Parent Stockholders' Meeting
(a) Parent shall take all action necessary to call, give
notice of, convene and hold a meeting of the holders of Parent Common Stock to
consider and vote upon the issuance of Parent Common Stock in the Merger (the
"Parent Stockholders' Meeting"). The Parent Stockholders' Meeting will be held
as promptly as practicable and in any event within forty-five (45) days after
the S-4 Registration Statement is declared effective under the Securities Act;
provided, however, that notwithstanding anything to the contrary contained in
this Agreement, Parent may adjourn or postpone the Parent Stockholders' Meeting
to the extent necessary to ensure that any necessary supplement or amendment to
the Joint Proxy Statement/Prospectus is provided to Parent's stockholders in
advance of a vote on the issuance of Parent Common Stock in the Merger or, if as
of the time for which the Parent Stockholders' Meeting is originally scheduled
(as set forth in the Joint Proxy Statement/Prospectus) there are insufficient
shares of Parent Common Stock represented (either in person or by proxy) to
constitute a quorum necessary to conduct the business of the Parent's
Stockholders' Meeting.
(b) (i) The board of directors of Parent shall unanimously
recommend that Parent's stockholders vote in favor of the issuance of Parent
Common Stock in the Merger; (ii) the Joint Proxy Statement/Prospectus shall
include a statement to the effect that the board of directors of Parent has
unanimously recommended that Parent's stockholders vote in favor of the issuance
of Parent Common Stock in the Merger; and (iii) neither the board of directors
of Parent nor any committee thereof shall withdraw, amend or modify, or propose
or resolve to withdraw, amend or modify, in a manner adverse to the Company, the
unanimous recommendation of the board of directors of Parent that Parent's
stockholders vote in favor of the issuance of Parent Common Stock in the Merger.
For purposes of this Agreement, said recommendation of Parent's board of
directors shall be deemed to have been modified in a manner adverse to the
Company if said recommendation shall no longer be unanimous.
5.4 Regulatory Approvals. The Company and Parent shall use all
reasonable efforts to file, as soon as practicable after the date of this
Agreement, all notices, reports and other documents required to be filed with
any Governmental Body with respect to the Merger and the other transactions
contemplated by this Agreement, and to submit promptly any additional
information requested by any such Governmental Body. The Company and Parent
shall respond as promptly as practicable to any inquiries or requests received
from any state attorney general or other Governmental Body in connection with
antitrust or related matters. Each of the Company and Parent shall (1) give the
other party prompt notice of the commencement of any Legal Proceeding by or
before any Governmental Body with respect to the Merger or any of the other
transactions contemplated by this Agreement, (2) keep the other party
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informed as to the status of any such Legal Proceeding, and (3) promptly inform
the other party of any communication to or from the Federal Trade Commission,
the Department of Justice or any other Governmental Body regarding the Merger.
The Company and Parent will consult and cooperate with one another, and will
consider in good faith the views of one another, in connection with any
analysis, appearance, presentation, memorandum, brief, argument, opinion or
proposal made or submitted in connection with any Legal Proceeding under or any
other federal or state antitrust or fair trade law. In addition, except as may
be prohibited by any Governmental Body or by any Legal Requirement, in
connection with any Legal Proceeding under or any other federal or state
antitrust or fair trade law or any other similar Legal Proceeding, each of the
Company and Parent agrees to permit authorized Representatives of the other
party to be present at each meeting or conference relating to any such Legal
Proceeding and to have access to and be consulted in connection with any
document, opinion or proposal made or submitted to any Governmental Body in
connection with any such Legal Proceeding.
5.5 Stock Options
(a) Subject to Section 5.5(b), at the Effective Time, all
rights with respect to Company Common Stock under each Company Option then
outstanding shall be converted into and become rights with respect to Parent
Common Stock, and Parent shall assume each such Company Option in accordance
with the requirements of Section 424(a) of the Code (as in effect as of the date
of this Agreement) and the terms of the stock option plan under which it was
issued and the stock option agreement by which it is evidenced. From and after
the Effective Time, (i) each Company Option assumed by Parent may be exercised
solely for shares of Parent Common Stock, (ii) the number of shares of Parent
Common Stock subject to each such Company Option shall be equal to the number of
shares of Company Common Stock subject to such Company Option immediately prior
to the Effective Time multiplied by the Exchange Ratio, rounding down to the
nearest whole share (with cash, less the applicable exercise price, being
payable for any fraction of a share), (iii) the per share exercise price under
each such Company Option shall be adjusted by dividing the per share exercise
price under such Company Option by the Exchange Ratio and rounding up to the
nearest cent and (iv) any restriction on the exercise of any such Company Option
shall continue in full force and effect and the term, exercisability, vesting
schedule and other provisions of such Company Option shall otherwise remain
unchanged; provided, however, that each Company Option assumed by Parent in
accordance with this Section 5.5(a) shall, in accordance with its terms, be
subject to further adjustment as appropriate to reflect any stock split, stock
dividend, reverse stock split, reclassification, recapitalization or other
similar transaction subsequent to the Effective Time.
(b) Notwithstanding anything to the contrary contained in this
Section 5.5, in lieu of assuming outstanding Company Options in accordance with
Section 5.5(a), Parent may, at its election, cause such outstanding Company
Options to be
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replaced by issuing equivalent replacement stock options in substitution
therefor that are substantially the same.
(c) The Company shall take all action that may be necessary
(under the plans pursuant to which Company Options are outstanding and
otherwise) to effectuate the provisions of this Section 5.5 and to ensure that,
from and after the Effective Time, holders of Company Options have no rights
with respect thereto other than those specifically provided in this Section 5.5.
5.6 Form S-8. Parent agrees to file a registration statement on Form
S-8 for the shares of Parent Common Stock issuable with respect to assumed
Company Options as soon as reasonably practical (and in any event within sixty
(60) days) after the Effective Time.
5.7 Warrants. At the Effective Time, all rights with respect to Company
Common Stock under Company Warrants that are then outstanding shall be converted
into and become rights with respect to Parent Common Stock, and Parent shall
assume each Company Warrant in accordance with the terms (as in effect as of the
date hereof) of such Company Warrants. From and after the Effective Time, (a)
each Company Warrant assumed by Parent may be exercised solely for shares of
Parent Common Stock, (b) the number of shares of Parent Common Stock subject to
each Company Warrant shall be equal to the number of shares of Company Common
Stock subject to such Company Warrant immediately prior to the Effective Time
multiplied by the Exchange Ratio, rounding down to the nearest whole share (with
cash, less the applicable exercise price, being payable for any fraction of a
share), (c) the per share exercise price under each such Company Warrant shall
be adjusted by dividing the per share exercise price under such Company Warrant
by the Exchange Ratio and rounding up to the nearest cent and (d) any
restriction on the exercise of any Company Warrant shall continue in full force
and effect and the term, exercisability, schedule and other provisions of such
Company Warrant shall otherwise remain unchanged; provided, however, that such
Company Warrant shall, in accordance with its terms, be subject to further
adjustment as appropriate to reflect any stock split, stock dividend,
recapitalization or other similar transaction subsequent to the Effective Time.
The Company shall take all action that may be necessary (under the Company
Warrants and otherwise) to effectuate the provisions of this Section 5.7 and to
ensure that, from and after the Effective Time, holders of Company Warrants have
no rights with respect thereto other than those specifically provided herein.
5.8 Indemnification of Officers and Directors
(a) All rights to indemnification existing in favor of the
current directors and officers of the Company for acts and omissions occurring
prior to the Effective Time, as provided in the Company's Bylaws (as in effect
as of the date of this Agreement) and as provided in any indemnification
agreements between the Company and said officers and directors (as in effect as
of the date of this Agreement), shall
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survive the Merger and shall be observed by Parent and the Surviving Corporation
for a period of not less than six (6) years from the Effective Time.
(b) From the Effective Time until the third anniversary of the
date on which the Merger becomes effective, the Surviving Corporation shall
maintain in effect, for the benefit of the current directors and officers of the
Company with respect to acts or omissions occurring prior to the Effective Time,
the lesser of (i) the existing amount of coverage of the existing policy of
directors' and officers' liability insurance maintained by the Company as of the
date of this Agreement (the "Existing Policy") and (ii) the amount of coverage
purchased by 150% of the amount of the last annual premium paid by the Company
prior to the date of this Agreement for the Existing Policy; provided, however,
that the Surviving Corporation may substitute for the Existing Policy a policy
or policies of comparable coverage.
5.9 Pooling of Interests; Tax Free Reorganization. Each of the Company
and Parent agrees (a) not to take any action during the Pre-Closing Period that
would adversely affect the ability of Parent to account for the Merger as a
"pooling of interests," (b) to use all reasonable efforts to attempt to ensure
that none of its "affiliates" (as that term is used in Rule 145 promulgated
under the Securities Act) takes any action that could adversely affect the
ability of Parent to account for the Merger as a "pooling of interests" and (c)
not to take any action either prior to or after the Effective Time that could
reasonably be expected to cause the Merger to fail to qualify as a
"reorganization" under Section 368(a) of the Code. The Company agrees to provide
KPMG Peat Marwick LLP and Grant Thornton LLP such letters as may be reasonably
requested by either of them with respect to the letters referred to in Sections
6.6(b) and 6.6(c).
5.10 Additional Agreements
(a) Subject to Section 5.10(b), Parent and the Company shall
use all reasonable efforts to take, or cause to be taken, all actions necessary
to consummate the Merger and make effective the other transactions contemplated
by this Agreement. Without limiting the generality of the foregoing, but subject
to Section 5.10(b), each party to this Agreement (i) shall make all filings (if
any) and give all notices (if any) required to be made and given by such party
in connection with the Merger and the other transactions contemplated by this
Agreement, (ii) shall use all reasonable efforts to obtain each Consent (if any)
required to be obtained (pursuant to any applicable Legal Requirement or
Contract, or otherwise) by such party in connection with the Merger or any of
the other transactions contemplated by this Agreement, and (iii) shall use all
reasonable efforts to lift any restraint, injunction or other legal bar to the
Merger. The Company shall promptly deliver to Parent a copy of each such filing
made, each such notice given and each such Consent obtained by the Company
during the Pre-Closing Period.
(b) Notwithstanding anything to the contrary contained in this
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Agreement, Parent shall not have any obligation under this Agreement: (i) to
dispose or cause any of its subsidiaries to dispose of any assets, or to commit
to cause any of the Acquired Corporations to dispose of any assets; (ii) to
discontinue or cause any of its subsidiaries to discontinue offering any
product, or to commit to cause any of the Acquired Corporations to discontinue
offering any product; (iii) to license or otherwise make available, or cause any
of its subsidiaries to license or otherwise make available, to any Person, any
technology, software or other Proprietary Asset, or to commit to cause any of
the Acquired Corporations to license or otherwise make available to any Person
any technology, software or other Proprietary Asset; (iv) to hold separate or
cause any of its subsidiaries to hold separate any assets or operations (either
before or after the Closing Date), or to commit to cause any of the Acquired
Corporations to hold separate any assets or operations; or (v) to make or cause
any of its Subsidiaries to make any commitment (to any Governmental Body or
otherwise) regarding its future operations or the future operations of any of
the Acquired Corporations.
5.11 Confidentiality. The parties acknowledge that the Company and
Parent have previously executed a Mutual Non-Disclosure Agreement, dated as of
June 16, 1998 (the "Confidentiality Agreement"), which Confidentiality Agreement
will continue in full force and effect in accordance with its terms.
5.12 Disclosure. Parent and the Company have agreed to the text of a
joint press release announcing the signing of this Agreement and shall consult
with each other before issuing any other press release or otherwise making any
public statement with respect to the Merger or any of the other transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing, the Company shall not, and shall not permit any of its
Representatives to, make any disclosure regarding the Merger or any of the other
transactions contemplated by this Agreement unless (a) Parent shall have
approved such disclosure or (b) the Company shall have been advised in writing
by its outside legal counsel that such disclosure is required by applicable law.
5.13 Tax Matters
(a) At or prior to the filing of the S-4 Registration
Statement, Parent and Merger Sub and the Company shall execute and deliver to
Cooley Godward LLP and to Saul, Ewing, Remick & Saul LLP tax representation
letters in the forms attached as Exhibit G-1 and G-2, as applicable;
(b) Parent, Merger Sub and the Company shall each confirm to
Cooley Godward LLP and to Saul, Ewing, Remick & Saul LLP the accuracy and
completeness as of the Effective Time of the tax representation letters
delivered pursuant to Section 5.13(a);
(c) Parent, Merger Sub and the Company shall use all
reasonable efforts to cause the Merger to qualify as a tax free reorganization
under
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Section 368(a)(1) of the Code; and
(d) Following delivery of the tax representation letters
pursuant to Section 5.13(a), each of Parent and the Company shall use its
reasonable efforts to cause Cooley Godward LLP and Saul, Ewing, Remick & Saul
LLP, respectively, to deliver promptly to it a legal opinion satisfying the
requirements of Item 601 of Regulation S-K promulgated under the Securities Act.
In rendering such opinions, each of such counsel shall be entitled to rely on
the tax representation letters delivered pursuant to Section 5.13(a).
5.14 Resignation of Officers and Directors. The Company shall use all
reasonable efforts to obtain and deliver to Parent prior to the Closing the
resignation of each officer and director of the Company.
5.15 Nasdaq Listing. Parent shall use all reasonable efforts to have
the shares of Parent Common Stock issuable to the shareholders of the Company
pursuant to the Agreement and such other shares required to be reserved for
issuance in connection with the Merger authorized for listing on Nasdaq upon
official notice of issuance.
5.16 FIRPTA Matters. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasury Regulations, and (b) the Company shall deliver to the
Internal Revenue Service the notification required under Section 1.897 - 2(h)(2)
of the United States Treasury Regulations.
5.17 Parent Board of Directors. As soon as practicable after the
Effective Time, Parent shall use reasonable efforts to nominate and appoint (i)
Warren V. Musser, or such other nominee designated by the Company, to Class I of
its Board of Directors to serve until the annual meeting of stockholders to be
held in 1999 and (ii) David S. Lipson, or such other nominee designated by the
Company, to Class II of its Board of Directors to serve until the annual meeting
of stockholders to be held in 2000.
5.18 Access to Information. During the Pre-Closing Period, Parent
shall, and shall cause its Representatives, to: (a) provide the Company and its
Representatives with reasonable access to Parent's Representatives, personnel
and assets and to all existing books, records, Tax Returns, work papers and
other documents and information relating to Parent and its Subsidiaries; and (b)
provide the Company and its Representatives with such copies of the existing
books, records, Tax Returns, work papers and other documents and information
relating to Parent and its Subsidiaries, and with such additional financial,
operating and other data and information regarding Parent and its Subsidiaries,
as the Company may reasonably request. Without limiting the generality of the
foregoing, during the Pre-Closing Period, Parent shall promptly provide the
Company with copies of any notice, report or other document filed with or
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sent to any Governmental Body in connection with the Merger or any of the other
transactions contemplated by this Agreement.
Section 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions, and upon consummation of the Closing, all conditions herein shall be
deemed satisfied and any liability for failure to satisfy any condition herein
shall be precluded:
6.1 Accuracy of Representations. The representations and warranties of
the Company contained in this Agreement shall have been accurate in all material
respects as of the date of this Agreement and shall be accurate in all material
respects as of the Closing Date as if made on and as of the Closing Date;
provided, however, that any representations and warranties qualified by
"Material Adverse Effect" or other materiality qualifications are accurate in
all respects as of the date of this Agreement and shall be accurate in all
respects as of the Closing Date as if made on and as of the Closing Date.
6.2 Performance of Covenants. Each covenant or obligation that the
Company is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all material respects.
6.3 Effectiveness of Registration Statement. The S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with respect
to the S-4 Registration Statement.
6.4 Stockholder Approval. This Agreement and the Merger shall have been
duly approved by the Required Company Shareholder Vote, and the issuance of
Parent Common Stock in the Merger shall have been duly approved by the Required
Parent Stockholder Vote. Fewer than 10% of the outstanding shares of Company
Common Stock shall be Dissenting Shares.
6.5 Consents. All material Consents required to be obtained in
connection with the Merger and the other transactions contemplated by this
Agreement (including the Consents identified in Part 2.25 of the Company
Disclosure Schedule) shall have been obtained and shall be in full force and
effect.
6.6 Agreements and Documents. Parent and Merger Sub shall have received
the following agreements and documents, each of which shall be in full force and
effect:
(a) the statement referred to in Section 5.16(b), executed by
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the Company;
(b) a letter from KPMG Peat Marwick LLP, dated as of the
Closing Date and addressed to Parent and the Company, reasonably satisfactory in
form and substance to Parent and Grant Thornton LLP, to the effect that, after
reasonable investigation, KPMG Peat Marwick LLP is not aware of any fact
concerning the Company or any of the Company's shareholders or affiliates that
could preclude Parent from accounting for the Merger as a "pooling of interests"
in accordance with GAAP, Accounting Principles Board Opinion No. 16 and all
published rules, regulations and policies of the SEC;
(c) a letter from Grant Thornton LLP, dated as of the Closing
Date and addressed to Parent, reasonably satisfactory in form and substance to
Parent, to the effect that, after reasonable investigation, Grant Thornton LLP
is not aware of any fact concerning Parent or any of Parent's stockholders or
affiliates that could preclude Parent from accounting for the Merger as a
"pooling of interests" in accordance with GAAP, Accounting Principles Board
Opinion No. 16 and all published rules, regulations and policies of the SEC;
(d) a legal opinion of Cooley Godward LLP, dated as of the
Closing Date and addressed to Parent, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368 of the Code (it
being understood that, in rendering such opinion, Cooley Godward LLP may rely
upon the tax representation letters referred to in Section 5.13);
(e) a certificate executed on behalf of the Company by its
Chief Executive Officer confirming that the conditions set forth in Sections
6.1, 6.2, 6.4, 6.5, 6.7 and 6.8 have been duly satisfied; and
(f) the written resignations of all officers and directors of
the Company, effective as of the Effective Time.
6.7 No Material Adverse Change. There shall have been no material
adverse change in the business, condition, assets, liabilities, operations or
financial performance of the Acquired Corporations since the date of this
Agreement.
6.8 FIRPTA Compliance. The Company shall have filed with the Internal
Revenue Service the notification referred to in Section 5.16.
6.9 Listing. The shares of Parent Common Stock to be issued in the
Merger shall have been authorized for listing on Nasdaq, subject to notice of
issuance.
6.10 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes
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consummation of the Merger illegal.
6.11 No Governmental Litigation. There shall not be pending or
threatened any Legal Proceeding in which a Governmental Body is or is threatened
to become a party or is otherwise involved: (a) challenging or seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement; (b) relating to the Merger and
seeking to obtain from Parent or any of its subsidiaries any damages that may be
material to Parent; (c) seeking to prohibit or limit in any material respect
Parent's ability to vote, receive dividends with respect to or otherwise
exercise ownership rights with respect to the stock of the Surviving
Corporation; or (d) which would materially and adversely affect the right of
Parent, the Surviving Corporation or any subsidiary of Parent to own the assets
or operate the business of the Company.
6.12 No Other Litigation. There shall not be pending any Legal
Proceeding in which there is a reasonable possibility of an outcome that would
have a Material Adverse Effect on the Acquired Corporations or on Parent: (a)
challenging or seeking to restrain or prohibit the consummation of the Merger or
any of the other transactions contemplated by this Agreement; (b) relating to
the Merger and seeking to obtain from Parent or any of its subsidiaries any
damages that may be material to Parent, (c) seeking to prohibit or limit in any
material respect Parent's ability to vote, receive dividends with respect to or
otherwise exercise ownership rights with respect to the stock of the Surviving
Corporation; or (d) which would affect adversely the right of Parent, the
Surviving Corporation or any subsidiary of Parent to own the assets or operate
the business of the Company.
Section 7. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY
The obligation of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions, and upon
consummation of the Closing, all conditions herein shall be deemed satisfied and
any liability for failure to satisfy any condition herein shall be precluded:
7.1 Accuracy of Representation. The representations and warranties of
Parent and Merger Sub contained in this Agreement shall have been accurate in
all material respects as of the date of this Agreement and shall be accurate in
all material respects as of the Closing Date as if made on and as of the Closing
Date; provided, however, that any representations and warranties qualified by
"Material Adverse Effect" or other materiality qualifications are accurate in
all respects as of the date of this Agreement and shall be accurate in all
respects as of the Closing Date as if made on and as of the Closing Date.
7.2 Performance of Covenants. All of the covenants and obligations that
Parent and Merger Sub are required to comply with or to perform at or prior to
the
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Closing shall have been complied with and performed in all material respects.
7.3 The S-4 Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order shall
have been issued by the SEC with respect to the S-4 Registration Statement.
7.4 Stockholder Approval. This Agreement and the Merger shall have been
duly approved by the Required Company Shareholder Vote, and the issuance of
Parent Common Stock in the Merger shall have been duly approved by the Required
Parent Stockholder Vote.
7.5 Documents. The Company shall have received the following documents:
(a) a Registration Rights Agreement in the form of Exhibit H,
executed by Parent and each person identified on Exhibit I.
(b) a legal opinion of Saul, Ewing, Remick & Saul LLP, dated
as of the Closing Date and addressed to the Company, to the effect that the
Merger will constitute a reorganization within the meaning of Section 368 of the
Code (it being understood that, in rendering such opinion, Saul, Ewing, Remick &
Saul LLP may rely upon tax representation letters including those referred to in
Section 5.13);
(c) a letter from KPMG Peat Marwick LLP, dated as of a date no
earlier than three (3) days prior to the Closing Date and addressed to the
Company, reasonably satisfactory in form and substance to Parent and Grant
Thornton LLP, to the effect that, after reasonable investigation, KPMG Peat
Marwick LLP is not aware of any fact concerning the Company or any of the
Company's shareholders or affiliates that could preclude Parent from accounting
for the Merger as a "pooling of interests" in accordance with GAAP, Accounting
Principles Board Opinion No. 16 and all published rules, regulations and
policies of the SEC;
(d) a letter from Grant Thornton LLP, dated as of a date no
earlier than three (3) days prior to the Closing Date and addressed to Parent,
reasonably satisfactory in form and substance to Parent, to the effect that,
after reasonable investigation, Grant Thornton LLP is not aware of any fact
concerning Parent or any of Parent's stockholders or affiliates that would
preclude Parent from accounting for the Merger as a "pooling of interests" in
accordance with GAAP, Accounting Principles Board Opinion No. 16 and all
published rules, regulations and policies of the SEC; and
(e) a certificate executed on behalf of Parent by an executive
officer of Parent, confirming that conditions set forth in Sections 7.1, 7.2,
7.3 and 7.6 have been duly satisfied.
7.6 No Material Adverse Change. There shall have been no material
adverse change in Parent's business, condition, assets, liabilities, operations
or
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financial performance since the date of this Agreement.
7.7 Listing. The shares of Parent Common Stock to be issued in the
Merger shall have been authorized for listing on Nasdaq, subject to notice of
issuance.
7.8 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger by
the Company shall have been issued by any court of competent jurisdiction and
remain in effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger by the Company
illegal.
Section 8. TERMINATION
8.1 Termination. This Agreement may be terminated prior to the
Effective Time, whether before or after approval of the Merger by the
shareholders of the Company:
(a) by mutual written consent of the Boards of Directors of
the Parent and the Company;
(b) by either Parent or the Company if the Merger shall not
have been consummated by January 31, 1999 (unless the failure to consummate the
Merger is attributable to a failure on the part of the party seeking to
terminate this Agreement to perform any material obligation required to be
performed by such party at or prior to the Effective Time);
(c) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Body shall have issued a final and
non-appealable order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger;
(d) by either Parent or the Company if (i) the Company
Shareholders' Meeting shall have been held (either on the date for which such
Meeting was originally scheduled or pursuant to any permissible adjournment or
postponement) and (ii) this Agreement and the Merger shall not have been adopted
and approved at such meeting by the Company Required Shareholder Vote (provided
that the right to terminate this Agreement under this Section 8.1(d) shall not
be available to the Company where the failure to obtain Company shareholder
approval shall have been caused by the action or failure to act of the Company
and such action or failure to act constitutes a material breach by the Company
of this Agreement);
(e) by Parent (at any time prior to the adoption and approval
of this Agreement and the Merger by the Company Required Shareholder Vote) if a
Triggering Event shall have occurred;
(f) by either Parent or Company if (i) the Parent
Stockholders' Meeting
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shall have been held (either on the date for which such Meeting was originally
scheduled or pursuant to any permissible adjournment or postponement) and (ii)
issuance of the Parent Common Stock in the Merger shall not have been approved
at such meeting by the Parent Required Stockholder Vote;
(g) by Parent if any of the Company's representations and
warranties contained in this Agreement shall be or shall have become materially
inaccurate, or if any of the Company's covenants contained in this Agreement
shall have been breached in any material respect; provided, however, that if an
inaccuracy in the Company's representations and warranties or a breach of a
covenant by the Company is curable by the Company and the Company is continuing
to exercise all reasonable efforts to cure such inaccuracy or breach, then
Parent may not terminate this Agreement under this Section 8.1(g) on account of
such inaccuracy or breach; or
(h) by the Company if any of Parent's representations and
warranties contained in this Agreement shall be or shall have become materially
inaccurate, or if any of Parent's covenants contained in this Agreement shall
have been breached in any material respect; provided, however, that if an
inaccuracy in Parent's representations and warranties or a breach of a covenant
by Parent is curable by Parent and Parent is continuing to exercise all
reasonable efforts to cure such inaccuracy or breach, then the Company may not
terminate this Agreement under this Section 8.1(h) on account of such inaccuracy
or breach.
8.2 Notice of Termination; Effect of Termination. Any termination under
Section 8.1 above will be effective immediately upon the delivery of written
notice of the terminating party to the other parties hereto. In the event of the
termination of this Agreement as provided in Section 8.1, this Agreement shall
be of no further force or effect; provided, however, that (i) this Section 8.2,
Section 8.3 and Section 9 shall survive the termination of this Agreement and
shall remain in full force and effect, (ii) the termination of this Agreement
shall not relieve any party from any liability for any breach of this Agreement
and (iii) no termination of this Agreement shall affect the obligations of the
parties contained in the Confidentiality Agreement, all of which obligations
shall survive termination of this Agreement in accordance with their terms.
8.3 Expenses; Termination Fees
(a) Except as set forth in this Section 8.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses, whether or not the Merger is consummated; provided, however, that
Parent and the Company shall share equally all fees and expenses, other than
attorneys' fees, incurred in connection with the printing and filing of the S-4
Registration Statement and the Joint Proxy Statement/Prospectus and any
amendments or supplements thereto.
(b) If this Agreement is terminated by Parent pursuant to
Section
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8.1(e), then the Company shall pay to Parent (at the time specified in Section
8.3(c)), a nonrefundable fee equal to five million dollars ($5,000,000) (the
"Termination Fee") in cash within three (3) days of such termination.
(c) If this Agreement is terminated by Company or Parent
pursuant to Section 8.1(d) and an Acquisition Transaction is consummated or a
proposed Acquisition Transaction is publicly announced at anytime prior to the
first anniversary of the date of this Agreement, Company shall pay to Parent the
Termination Fee contemporaneously with the earlier of the consummation of such
Acquisition Transaction or such announcement regarding a proposed Acquisition
Agreement.
Section 9. MISCELLANEOUS PROVISIONS
9.1 Amendment. This Agreement may be amended with the approval of the
respective boards of directors of the Company and Parent at any time (whether
before or after approval of this Agreement and the Merger by the shareholders of
the Company; and whether before or after approval of the issuance of Parent
Common Stock in the Merger by Parent's stockholders); provided, however, that
(i) after any such approval of this Agreement and the Merger by the Company's
shareholders, no amendment shall be made which by law or NASD regulation
requires further approval of the shareholders of the Company without the further
approval of such shareholders, and (ii) after any such approval of the issuance
of Parent Company Stock in the Merger by Parent's stockholders, no amendment
shall be made which by law or NASD regulation requires further approval of
Parent's stockholders without the further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
9.2 Waiver
(a) No failure on the part of any party to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
party in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No party shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such party; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
9.3 No Survival of Representations and Warranties. None of the
representations and warranties contained in this Agreement or in any certificate
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delivered pursuant to this Agreement shall survive the Merger.
9.4 Entire Agreement; Counterparts. This Agreement and the other
agreements referred to herein constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, among or between any
of the parties with respect to the subject matter hereof and thereof. This
Agreement may be executed in several counterparts, each of which shall be deemed
an original and all of which shall constitute one and the same instrument.
9.5 Applicable Law; Jurisdiction. THIS AGREEMENT IS MADE UNDER, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. In any action between
or among any of the parties, whether arising out of this Agreement or otherwise,
(a) each of the parties irrevocably and unconditionally consent in the State of
California; (b) if any such action is commenced in a state court, then, subject
to applicable law, no party shall object to the removal of such action to any
federal court located in the law, no party shall object to the removal of such
action to any federal court located in the State of California; (c) each of the
parties irrevocably waivers the right to trial by jury; and (d) each of the
parties irrevocably consents to service of process by first class certified
mail, return receipt requested, postage prepaid, to the address at which such
party is to receive notice in accordance with Section 9.9.
9.6 Disclosure Schedule. Each of the Company Disclosure Schedule and
the Parent Disclosure Schedule shall be arranged in separate parts corresponding
to the numbered and lettered sections contained in Sections 2 and 3,
respectively, and the information disclosed in any numbered or lettered part
shall be deemed to relate to and to qualify only the particular representation
or warranty set forth in the corresponding numbered or lettered section in
Section 2 or 3, respectively, and shall not be deemed to relate to or to qualify
any other representation or warranty unless such relationship or qualification
is reasonably apparent.
9.7 Attorneys' Fees. In any action at law or suit in equity to enforce
this Agreement or the rights of any of the parties hereunder, the prevailing
party in such action or suit shall be entitled to receive a reasonable sum for
its attorneys' fees and all other reasonable costs and expenses incurred in such
action or suit.
9.8 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure solely to the benefit of, the parties hereto and their
respective successors and assigns; provided, however, that neither this
Agreement nor any of the Company's rights hereunder may be assigned by the
Company without the prior written consent of Parent, and any attempted
assignment of this Agreement or any of such rights by the Company without such
consent shall be void and of no effect. Except as set forth in Section 5.8 with
respect to the current directors and officers of the
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Company, nothing in this Agreement, express or implied, is intended to or shall
confer upon any Person any right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
9.9 Notices. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
if to Parent: First Consulting Group, Inc.
111 W. Ocean Boulevard, 4th Floor
Long Beach, CA 90802
Facsimile: (562) 432-1932
if to Merger Sub: Foxtrot Acquisition Sub, Inc.
111 W. Ocean Boulevard, 4th Floor
Long Beach, CA 90802
Facsimile: (562) 432-1932
if to the Company: Integrated Systems Consulting Group, Inc.
575 East Swedesford Road
Wayne, PA 19087
Facsimile: (610) 989-7100
9.10 Cooperation. The Company agrees to cooperate fully with Parent and
to execute and deliver such further documents, certificates, agreements and
instruments and to take such other actions as may be reasonably requested by
Parent to evidence or reflect the transactions contemplated by this Agreement
and to carry out the intent and purposes of this Agreement.
9.11 Construction
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and
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variations thereof, shall not be deemed to be terms of limitation, but rather
shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this
Agreement and Exhibits to this Agreement.
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IN WITNESS WHEREOF, the parties have caused this AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION to be executed as of the date first above written.
FIRST CONSULTING GROUP, INC.
By:
Printed Name:
Title:
FOXTROT ACQUISITION SUB, INC.
By:
Printed Name:
Title:
INTEGRATED SYSTEMS CONSULTING GROUP, INC.
By:
Printed Name:
Title:
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EXHIBITS INDEX
<TABLE>
<S> <C>
Exhibit A...........................Certain Definitions
Exhibit B-1 ........................Company Shareholders who have executed Voting Agreements
Exhibit B-2 ........................Parent Stockholders who have executed a Voting Agreement
Exhibit C-1 ........................Form of Voting Agreement for Company Shareholders
Exhibit C-2 ........................Form of Voting Agreement for Parent Stockholders
Exhibit D-1.........................Individuals executing Company Affiliate Agreement in Form of Exhibit E-1
Exhibit D-2.........................Individuals executing Parent Affiliate Agreement in Form of Exhibit E-2
Exhibit E-1 ........................Form of Affiliate Agreement for Company Affiliates
Exhibit E-2 ........................Form of Affiliate Agreement for Parent Affiliates
Exhibit F-1 ........................Form of Surviving Corporation Articles of Incorporation
Exhibit F-2 ........................Form of Surviving Corporation Bylaws
Exhibit G-1.........................Form of Tax Representation Letter to be delivered by Parent and Merger Sub
Exhibit G-2 ........................Form of Tax Representation Letter to be delivered by Company
Exhibit H ..........................Form of Registration Rights Agreement
Exhibit I...........................Individuals to execute Registration Rights Agreement in Form of Exhibit H
</TABLE>
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EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Acquired Corporation Contract. "Acquired Corporation Contract" shall
mean any Contract: (a) to which any of the Acquired Corporations is a party; (b)
by which any of the Acquired Corporations or any asset of any of the Acquired
Corporations is or may become bound or under which any of the Acquired
Corporations has, or may become subject to, any obligation; or (c) under which
any of the Acquired Corporations has or may acquire any right or interest.
Acquired Corporation Proprietary Asset. "Acquired Corporation
Proprietary Asset" shall mean any Proprietary Asset owned by or licensed to any
of the Acquired Corporations or otherwise used by any of the Acquired
Corporations.
Acquisition Proposal. "Acquisition Proposal" shall mean any offer or
proposal (other than an offer or proposal by Parent) contemplating or otherwise
relating to any Acquisition Transaction.
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction or series of related transactions involving:
(e) any merger, consolidation, share exchange, business
combination, issuance of securities, acquisition of securities, tender offer,
exchange offer or other similar transaction (i) in which any of the Acquired
Corporations is a constituent corporation, (ii) in which a Person or "group" (as
defined in the Exchange Act and the rules promulgated thereunder) of Persons
directly or indirectly acquires the Company or more than fifty percent (50%) of
the Company's business or directly or indirectly acquires beneficial or record
ownership of securities representing more than twenty percent (20%) of the
outstanding securities of any class of voting securities of any of the Acquired
Corporations, or (iii) in which any of the Acquired Corporations issues
securities representing more than twenty percent (20%) of the outstanding
securities of any class of voting securities of the Company;
(f) any sale, lease (other than in the ordinary course of
business), exchange, transfer, license (other than in the ordinary course of
business), acquisition or disposition of more than 50% of the assets of the
Company; or
(g) any liquidation or dissolution of the Company.
Agreement. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached, as it may be amended from
time to
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time.
Company Common Stock. "Company Common Stock" shall mean the Common
Stock, $.005 par value per share, of the Company.
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
Contract. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan or legally
binding commitment or undertaking of any nature.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
Governmental Authorization. "Governmental Authorization" shall mean
any: (a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
Governmental Body. "Governmental Body" shall mean any: (a) nation,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal, foreign
or other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
Legal Proceeding. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other
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Governmental Body or any arbitrator or arbitration panel.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
Material Adverse Effect. An event, violation, inaccuracy, circumstances
or other matter will be deemed to have a "Material Adverse Effect" on the
Acquired Corporations if such event, violation, inaccuracy, circumstance or
other matter would have a material adverse effect on (i) the business,
condition, capitalization, assets, liabilities, operations or financial
performance of the Acquired Corporations taken as a whole, (ii) the ability of
the Company to consummate the Merger or any of the other transactions
contemplated by the Agreement or to perform any of its obligations under the
Agreement, or (iii) Parent's ability to vote, receive dividends with respect to
or otherwise exercise ownership rights with respect to the stock of the
Surviving Corporation. An event, violation, inaccuracy, circumstance or other
matter will be deemed to have a "Material Adverse Effect" on Parent if such
event, violation, inaccuracy, circumstance or other matter would have a material
adverse effect on the business, condition, assets, liabilities, operations or
financial performance of Parent and its subsidiaries taken as a whole.
Nasdaq. "Nasdaq" shall mean the Nasdaq National Market.
Parent Common Stock. "Parent Common Stock" shall mean the Common Stock,
$.001 par value per share, of Parent.
Person. "Person" shall mean any individual, Entity or Governmental
Body.
Proprietary Asset. "Proprietary Asset" shall mean any: (a) patent,
patent application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service mark (whether
registered or unregistered), service mark application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program (in source and executable form), algorithm,
invention, design, blueprint, engineering drawing, proprietary product,
technology, proprietary right or other intellectual property right or intangible
asset in any jurisdiction in the world; or (b) right to use or exploit any of
the foregoing in any jurisdiction in the world.
Representatives. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
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Securities Act. "Securities Act" shall mean the Securities Act of 1933,
as amended.
Subsidiary. An entity shall be deemed to be a "Subsidiary" of another
Person if such Person directly or indirectly owns, beneficially or of record, an
amount of voting securities of other interests in such Entity that is sufficient
to enable such Person to elect at leased a majority of the members of such
Entity's board of directors or other governing body.
Superior Offer. "Superior Offer" shall mean an unsolicited, bona fide
written offer made by a third party to purchase more than 50% of the outstanding
shares of Company Common Stock on terms that the board of directors of the
Company determines, in its reasonable judgment, based upon the written advice of
its financial advisor, to be more favorable to the Company's shareholders than
the terms of the Merger; provided, however, that any such offer shall not be
deemed to be a "Superior Offer" if any financing required to consummate the
transaction contemplated by such offer is not committed and is not likely to be
obtained by such third party on a timely basis.
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
Tax Return. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
Triggering Event. A "Triggering Event" shall be deemed to have occurred
if: (i) the Board of Directors of the Company shall have failed to recommend, or
shall for any reason have withdrawn or shall have amended or modified in a
manner adverse to Parent its unanimous 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
unanimous 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 fails to reaffirm its unanimous
recommendation in favor of the adoption and approval of the Agreement and the
approval of the Merger within five (5) business days after the Parent request in
writing that such recommendation be reaffirmed; (iv) the board of directors of
the
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Company shall have approved, endorsed or recommended any Acquisition Proposal;
(v) the Company shall have entered into any letter of intent of similar document
or any Contract relating to any Acquisition Proposal; (vi) the Company shall
have failed to hold the Company Shareholders' Meeting as promptly as practicable
and in any event within 45 days after the Form S-4 Registration Statement is
declared effective under the Securities Act; (vii) a tender or exchange offer
relating to securities of the Company shall have been commenced and the Company
shall not have sent to its securityholders, within ten (10) business days after
the commencement of such tender or exchange offer, a statement disclosing that
the Company recommends rejection of such tender or exchange offer; (viii) an
Acquisition Proposal is publicly announced, and the Company (A) fails to issue a
press release announcing its opposition to such Acquisition Proposal within five
business days after such Acquisition Proposal is announced or (B) otherwise
fails to actively oppose such Acquisition Proposal; or (ix) the Company breaches
or is deemed to have breached any of its obligations under Section 4.3 of the
Agreement.
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EXHIBIT B-1
COMPANY SHAREHOLDERS WHO HAVE EXECUTED VOTING AGREEMENTS
1. David S. Lipson
2. Technology Leaders II
3. Safeguard Scientifics, Inc.
4. Warrant and Stock Trust
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EXHIBIT B-2
PARENT STOCKHOLDERS WHO HAVE EXECUTED VOTING AGREEMENTS
1. James A. Reep
2. Thomas A. Reep
3. Brent A. Hanson
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EXHIBIT C-1
FORM OF VOTING AGREEMENT FOR COMPANY SHAREHOLDERS
69
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EXHIBIT C-2
FORM OF VOTING AGREEMENT FOR PARENT STOCKHOLDERS
70
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EXHIBIT D-1
INDIVIDUALS EXECUTING COMPANY AFFILIATE AGREEMENT IN FORM OF EXHIBIT E-1
1. David S. Lipson
2. Technology Leaders II
3. Safeguard Scientifics, Inc.
4. Warrant and Stock Trust
5. Melissa S. Clancey
6. David F. Elderkin
7. David D. Gathman
8. Edward P. Kaiserian
9. Jay M. Rose
10. Victor E. Stambaugh
11. Frank Baldino, Jr., Ph.D.
12. Melvyn E. Bergstein
13. Donald R. Caldwell
14. Mark J. DeNino
15. David S. Fehr
16. James L. Mann
17. Donna J. Pedrick
18. Michael D. Stern
19. Edward S.J. Tomeszko, Ph.D.
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EXHIBIT D-2
INDIVIDUALS EXECUTING PARENT AFFILIATE AGREEMENT IN FORM OF EXHIBIT E-2
20. James A. Reep
21. Brent A. Hanson
22. Thomas A. Reep
23. Frank I. Mueller
24. Roy A. Ziegler
25. Steven Heck
26. Richard N. Kramer
27. Luther J. Nussbaum
28. Stanley R. Nelson
29. Steven Lazarus
30. Stephen E. Olson
31. Jack O. Vance
32. Scott S. Parker
33. Donald M. Tompkins
34. Michael R. Gorsage
35. Erica L. Drazen
36. Roy W. Walters
37. Paula K. Cowen
38. Associate 401(k) and Stock Ownership Plan
(Union Bank of California, Trustee)
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EXHIBIT E-1
FORM OF AFFILIATE AGREEMENT FOR COMPANY AFFILIATES
73
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EXHIBIT E-2
FORM OF AFFILIATE AGREEMENT FOR PARENT AFFILIATES
74
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EXHIBIT F-1
FORM OF SURVIVING CORPORATION ARTICLES OF INCORPORATION
75
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EXHIBIT F-2
FORM OF SURVIVING CORPORATION BYLAWS
76
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EXHIBIT G-1
FORM OF TAX REPRESENTATION LETTER TO BE DELIVERED BY PARENT AND MERGER SUB
77
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EXHIBIT G-2
FORM OF TAX REPRESENTATION LETTER TO BE DELIVERED BY COMPANY
78
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EXHIBIT H
FORM OF REGISTRATION RIGHTS AGREEMENT
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EXHIBIT I
INDIVIDUALS TO EXECUTE REGISTRATION RIGHTS AGREEMENT IN FORM OF EXHIBIT H
1. David S. Lipson
2. Technology Leaders II
3. Safeguard Scientifics, Inc.
4. Warrant and Stock Trust
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<TABLE>
<S> <C>
SECTION 1.DESCRIPTION OF TRANSACTION..............................................................................2
1.1 Merger of Merger Sub into the Company...........................................................2
1.2 Effect of the Merger............................................................................2
1.3 Closing; Effective Time.........................................................................2
1.4 Certificate of Incorporation and Bylaws; Directors and Officers.................................2
1.5 Conversion of Shares............................................................................3
1.6 Stock Options and Warrants......................................................................4
1.7 Closing of the Company's Transfer Books.........................................................4
1.8 Exchange of Certificates........................................................................4
1.9 Dissenting Shares...............................................................................5
1.10 Tax Consequences................................................................................6
1.11 Accounting Consequences.........................................................................6
1.12 Further Action..................................................................................6
SECTION 2.REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........................................................6
2.1 Due Organization; Subsidiaries; Etc.............................................................6
2.2 Articles of Incorporation and Bylaws............................................................7
2.3 Capitalization, Etc.............................................................................7
2.4 SEC Filings; Financial Statements...............................................................9
2.5 Absence of Changes.............................................................................10
2.6 Leasehold; Equipment...........................................................................12
2.7 Title to Assets................................................................................12
2.8 Receivables; Significant Customers.............................................................12
2.9 Proprietary Assets.............................................................................13
2.10 Contracts......................................................................................15
2.11 Year 2000 Liabilities..........................................................................17
2.12 Compliance with Legal Requirements.............................................................18
2.13 Certain Business Practices.....................................................................18
2.14 Governmental Authorizations....................................................................18
2.15 Tax Matters....................................................................................18
2.16 Employee and Labor Matters; Benefit Plans......................................................19
2.17 Environmental Matters..........................................................................22
</TABLE>
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<TABLE>
<S> <C>
2.18 Insurance......................................................................................22
2.19 Transactions with Affiliates...................................................................23
2.20 Legal Proceedings; Orders......................................................................23
2.21 Authority; Inapplicability of Anti-takeover Statutes; Binding Nature of Agreement..............23
2.22 No Existing Discussions........................................................................24
2.23 Accounting Matters.............................................................................24
2.24 Vote Required..................................................................................24
2.25 Non-Contravention; Consents....................................................................24
2.26 Fairness Opinion...............................................................................25
2.27 Financial Advisor..............................................................................25
2.28 Full Disclosure................................................................................25
SECTION 3.REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB................................................26
3.1 Organization, Standing and Power...............................................................26
3.2 Capitalization, Etc............................................................................26
3.3 SEC Filings; Financial Statements..............................................................27
3.4 Disclosure.....................................................................................27
3.5 Absence of Certain Changes or Events...........................................................28
3.6 Authority; Binding Nature of Agreement.........................................................28
3.7 Non-Contravention; Consents....................................................................28
3.8 Vote Required..................................................................................29
3.9 Valid Issuance.................................................................................29
3.10 Accounting Matters.............................................................................29
3.11 Fairness Opinion...............................................................................29
3.12 Tax Matters....................................................................................29
3.13 Environmental Matters..........................................................................30
3.14 Significant Customers..........................................................................30
3.15 Year 2000 Liabilities..........................................................................31
SECTION 4.CERTAIN COVENANTS OF THE COMPANY.......................................................................31
4.1 Access and Investigation.......................................................................31
4.2 Operation of the Company's Business............................................................32
</TABLE>
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<TABLE>
<S> <C>
4.3 No Solicitation................................................................................35
SECTION 5.ADDITIONAL COVENANTS OF THE PARTIES....................................................................36
5.1 Registration Statement; Joint Proxy Statement/Prospectus.......................................36
5.2 Company Shareholders' Meeting..................................................................37
5.3 Parent Stockholders' Meeting...................................................................38
5.4 Regulatory Approvals...........................................................................39
5.5 Stock Options..................................................................................39
5.6 Form S-8.......................................................................................40
5.7 Warrants.......................................................................................40
5.8 Indemnification of Officers and Directors......................................................40
5.9 Pooling of Interests; Tax Free Reorganization..................................................41
5.10 Additional Agreements..........................................................................41
5.11 Confidentiality................................................................................42
5.12 Disclosure.....................................................................................42
5.13 Tax Matters....................................................................................42
5.14 Resignation of Officers and Directors..........................................................42
5.15 Nasdaq Listing.................................................................................42
5.16 FIRPTA Matters.................................................................................43
5.17 Parent Board of Directors......................................................................43
5.18 Access to Information..........................................................................43
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS
OF PARENT AND MERGER SUB.......................................................................43
6.1 Accuracy of Representations....................................................................43
6.2 Performance of Covenants.......................................................................43
6.3 Effectiveness of Registration Statement........................................................44
6.4 Stockholder Approval...........................................................................44
6.5 Consents.......................................................................................44
6.6 Agreements and Documents.......................................................................44
6.7 No Material Adverse Change.....................................................................45
6.8 FIRPTA Compliance..............................................................................45
6.9 Listing........................................................................................45
</TABLE>
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<TABLE>
<S> <C>
6.10 No Restraints..................................................................................45
6.11 No Governmental Litigation.....................................................................45
6.12 No Other Litigation............................................................................45
SECTION 7.CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY......................................................45
7.1 Accuracy of Representations....................................................................46
7.2 Performance of Covenants.......................................................................46
7.3 Effectiveness of Registration Statement........................................................46
7.4 Stockholder Approval...........................................................................46
7.5 Documents......................................................................................46
7.6 No Material Adverse Change.....................................................................47
7.7 Listing........................................................................................47
7.8 No Restraints..................................................................................47
SECTION 8.TERMINATION............................................................................................47
8.1 Termination....................................................................................47
8.2 Notice of Termination; Effect of Termination...................................................48
8.3 Expenses; Termination Fees.....................................................................48
SECTION 9.MISCELLANEOUS PROVISIONS...............................................................................49
9.1 Amendment......................................................................................49
9.2 Waiver.........................................................................................49
9.3 No Survival of Representations and Warranties..................................................49
9.4 Entire Agreement; Counterparts.................................................................49
9.5 Applicable Law; Jurisdiction...................................................................50
9.6 Disclosure Schedule............................................................................50
9.7 Attorneys' Fees................................................................................50
9.8 Assignability..................................................................................50
9.9 Notices........................................................................................50
9.10 Cooperation....................................................................................51
9.11 Construction...................................................................................51
</TABLE>
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EXHIBIT 99.2
COMPANY VOTING AGREEMENT
THIS VOTING AGREEMENT is entered into as of September 9, 1998, by and
between FIRST CONSULTING GROUP, INC., a Delaware corporation ("Parent"), and the
undersigned stockholder ("Stockholder").
RECITALS
WHEREAS, Stockholder is a stockholder of Integrated Systems Consulting
Group, Inc., a Pennsylvania corporation (the "Company").
WHEREAS, Parent, Foxtrot Acquisition Sub, Inc., a Delaware corporation
and a wholly-owned subsidiary of Parent ("Merger Sub"), and the Company, are
entering into an Agreement and Plan of Merger and Reorganization of even date
herewith (the "Merger Agreement") which provides (subject to the conditions set
forth therein) for the merger of Merger Sub with and into the Company (the
"Merger").
NOW, THEREFORE, in order to induce Parent and Merger Sub to enter into
the Merger Agreement and consummate the transactions contemplated thereby, and
for other valuable consideration (the receipt and sufficiency of which are
hereby acknowledged by Stockholder), Stockholder hereby covenants and agrees as
follows:
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants herein
contemplated and intending to be legally bound hereby, the parties hereto agree
as follows:
1. Certain Definitions.
For purposes of this Agreement:
(a) "Company Common Stock" shall mean the common stock, par
value $.005 per share, of the Company.
(b) "Expiration Date" shall mean the earlier of (i) the date
upon which the Merger Agreement is validly terminated pursuant to Section 8
thereof, or (ii) the date upon which the Merger becomes effective in accordance
with the terms and provisions of the Merger Agreement.
(c) Stockholder shall be deemed to "Own" or to have acquired
"Ownership" of a security if Stockholder: (i) is the record owner of such
security; or (ii) is the "beneficial owner" (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934) of such security.
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(d) "Person" shall mean any (i) individual, (ii) corporation,
limited liability company, partnership or other entity or (iii) governmental
authority.
(e) "Subject Securities" shall mean: (i) all securities of the
Company (including all shares of Company Common Stock and all options, warrants
and other rights to acquire shares of Company Common Stock) Owned by Stockholder
as of the date of this Agreement; and (ii) all additional securities of the
Company (including all additional shares of Company Common Stock and all
additional options, warrants and other rights to acquire shares of Company
Common Stock) of which Stockholder acquires Ownership during the period from the
date of this Agreement through the Expiration Date.
(f) A Person shall be deemed to have a effected a "Transfer"
of a security if such Person directly or indirectly: (i) sells, pledges,
encumbers, grants an option with respect to, transfers or disposes of such
security or any interest in such security; or (ii) enters into an agreement or
commitment contemplating the possible sale of, pledge of, encumbrance of, grant
of an option with respect to, transfer of or disposition of such security or any
interest therein.
2. Transfer of Subject Securities.
2.1 Transferee of Subject Securities to be Bound by this Agreement.
Stockholder agrees that, during the period from the date of this Agreement
through the Expiration Date, Stockholder shall not cause or permit any Transfer
of any of the Subject Securities to be effected unless each Person to which any
of such Subject Securities, or any interest in any of such Subject Securities,
is or may be transferred shall have: (a) executed a counterpart of this
Agreement and a proxy in the form attached hereto as Exhibit A (with such
modifications as Parent may reasonably request); and (b) agreed to hold such
Subject Securities (or interest in such Subject Securities) subject to all of
the terms and provisions of this Agreement.
2.2 Transfer of Voting Rights. Stockholder agrees that, during the
period from the date of this Agreement through the Expiration Date, Stockholder
shall ensure that: (a) none of the Subject Securities is deposited into a voting
trust; and (b) no proxy is granted, and no voting agreement or similar agreement
is entered into, with respect to any of the Subject Securities.
3. Voting of Shares.
3.1 Voting Agreement. Stockholder agrees that, during the period from
the date of this Agreement through the Expiration Date:
(a) at any meeting of stockholders of the Company, however
called, and at every adjournment thereof, Stockholder shall (unless otherwise
directed in writing by Parent) cause all outstanding shares of Company Common
Stock that are Owned by Stockholder as of the record date fixed for such meeting
to be voted in favor
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of the approval and adoption of the Merger Agreement and the approval of the
Merger, and in favor of each of the other actions contemplated by the Merger
Agreement; and
(b) in the event written consents are solicited or otherwise
sought from stockholders of the Company with respect to the approval or adoption
of the Merger Agreement, with respect to the approval of the Merger or with
respect to any of the other actions contemplated by the Merger Agreement,
Stockholder shall (unless otherwise directed in writing by Parent) cause to be
executed, with respect to all shares of Company Common Stock that are Owned by
Stockholder as of the record date fixed for the consent to the proposed action,
a written consent or written consents to such proposed action.
3.2 Proxy; Further Assurances.
(a) Contemporaneously with the execution of this Agreement:
(i) Stockholder shall deliver to Parent a proxy in the form attached to this
Agreement as Exhibit A, which shall be irrevocable to the fullest extent
permitted by law, with respect to the shares referred to therein (the "Proxy");
and (ii) Stockholder shall cause to be delivered to Parent an additional proxy
(in the form attached hereto as Exhibit A) executed on behalf of the record
owner of any outstanding shares of Company Common Stock that are owned
beneficially (within the meaning of Rule 13d-3 under the Securities Exchange Act
of 1934), but not of record, by Stockholder.
(b) From time to time and without additional consideration,
Stockholder shall execute and deliver, or cause to be executed and delivered,
such additional transfers, assignments, endorsements, proxies, consents and
other instruments, and shall take such further actions, as Parent may request
for the purpose of carrying out and furthering the intent of this Agreement.
4. Waiver of Dissenters' Rights. Stockholder hereby irrevocably and
unconditionally waives, and agrees to cause to be waived and to prevent the
exercise of, any rights of appraisal, any dissenters' rights and any similar
rights relating to the Merger or any related transaction that Stockholder or any
other Person may have by virtue of the ownership of any outstanding shares of
Company Common Stock Owned by Stockholder.
5. No Solicitation. Stockholder agrees that, during the period from the date of
this Agreement through the Expiration Date, Stockholder shall not, directly or
indirectly, and Stockholder shall ensure that his Representatives (as defined in
the Merger Agreement) do not, directly or indirectly: (i) solicit, initiate,
encourage or induce the making, submission or announcement of any Acquisition
Proposal (as defined in the Merger Agreement) or take any action that could
reasonably be expected to lead to an Acquisition Proposal; (ii) furnish any
information regarding the Company or any direct or indirect subsidiary of the
Company to any Person in connection with or in response to an Acquisition
Proposal or potential Acquisition Proposal; or (iii) engage in discussions
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with any Person with respect to any Acquisition Proposal. Stockholder shall
immediately cease and discontinue, and Stockholder shall ensure that his
Representatives immediately cease and discontinue, any existing discussions with
any Person that relate to any Acquisition Proposal.
6. Representations and Warranties of Stockholder. Stockholder hereby represents
and warrants to Parent as follows:
6.1 Authorization, etc. Stockholder has the absolute and unrestricted
right, power, authority and capacity to execute and deliver this Agreement and
the Proxy and to perform his obligations hereunder and thereunder. This
Agreement and the Proxy have been duly executed and delivered by Stockholder and
constitute legal, valid and binding obligations of Stockholder, enforceable
against Stockholder in accordance with their terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
6.2 No Conflicts or Consents.
(a) The execution and delivery of this Agreement and the Proxy
by Stockholder do not, and the performance of this Agreement and the Proxy by
Stockholder will not: (i) conflict with or violate any law, rule, regulation,
order, decree or judgment applicable to Stockholder or by which he or any of his
properties is or may be bound or affected; or (ii) result in or constitute (with
or without notice or lapse of time) any breach of or default under, or give to
any other Person (with or without notice or lapse of time) any right of
termination, amendment, acceleration or cancellation of, or result (with or
without notice or lapse of time) in the creation of any encumbrance or
restriction on any of the Subject Securities pursuant to, any contract to which
Stockholder is a party or by which Stockholder or any of his affiliates or
properties is or may be bound or affected.
(b) The execution and delivery of this Agreement and the Proxy
by Stockholder do not, and the performance of this Agreement and the Proxy by
Stockholder will not, require any consent or approval of any Person.
6.3 Title to Securities. As of the date of this Agreement: (a)
Stockholder holds of record (free and clear of any encumbrances or restrictions)
the number of outstanding shares of Company Common Stock set forth under the
heading "Shares Held of Record" on the signature page hereof; (b) Stockholder
holds (free and clear of any encumbrances or restrictions) the options, warrants
and other rights to acquire shares of Company Common Stock set forth under the
heading "Options and Other Rights" on the signature page hereof; (c) Stockholder
Owns the additional securities of the Company set forth under the heading
"Additional Securities Beneficially Owned" on the signature page hereof; and (d)
Stockholder does not directly or indirectly Own any shares of capital stock or
other securities of the Company, or any option, warrant or
4
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other right to acquire (by purchase, conversion or otherwise) any shares of
capital stock or other securities of the Company, other than the shares and
options, warrants and other rights set forth on the signature page hereof.
6.4 Accuracy of Representations. The representations and warranties
contained in this Agreement are accurate in all respects as of the date of this
Agreement, will be accurate in all respects at all times through the Expiration
Date and will be accurate in all respects as of the date of the consummation of
the Merger as if made on that date.
7. Miscellaneous.
7.1 Survival of Representations, Warranties and Agreements. All
representations, warranties, covenants and agreements made by Stockholder in
this Agreement shall survive (i) the consummation of the Merger, (ii) any
termination of the Merger Agreement and (iii) the Expiration Date.
7.2 Indemnification. Stockholder shall hold harmless and indemnify
Parent and Parent's affiliates from and against, and shall compensate and
reimburse Parent and Parent's affiliates for, any loss, damage, claim,
liability, fee (including attorneys' fees), demand, cost or expense (regardless
of whether or not such loss, damage, claim, liability, fee, demand, cost or
expense relates to a third-party claim) that is directly or indirectly suffered
or incurred by Parent or any of Parent's affiliates, or to which Parent or any
of Parent's affiliates otherwise becomes subject, and that arises directly or
indirectly from, or relates directly or indirectly to any inaccuracy in or
breach of any representation, warranty, covenant or obligation of Stockholder
contained in this Agreement or in the Proxy.
7.3 Expenses. All costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such costs and expenses.
7.4 Notices. Any notice or other communication required or permitted to
be delivered to Parent or Stockholder under this Agreement shall be in writing
and shall be deemed properly delivered, given and received when delivered (by
hand, by registered mail, by courier or express delivery service or by
facsimile) to the address or facsimile telephone number set forth beneath the
name of such party below (or to such other address or facsimile telephone number
as such party shall have specified in a written notice given to the other
party):
if to Stockholder:
at the address or facsimile phone number set forth below
Stockholder's signature on the signature page hereof
with a copy to:
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<PAGE>
Saul, Ewing, Remick & Saul LLP
1055 Westlakes Drive, Suite 150
Berwyn, PA 19312
Attn: David S. Antzis
Fax: (610) 408-4401
if to Parent:
First Consulting Group, Inc.
111 W. Ocean Boulevard, 4th Floor
Long Beach, CA 90802
Attn: Luther J. Nussbaum
Facsimile: (562) 432-1932
with a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: Patrick A. Pohlen
Fax: (650) 849-7400
7.5 Severability. If any provision of this Agreement or any part of any
such provision is held under any circumstances to be invalid or unenforceable in
any jurisdiction, then (a) such provision or part thereof shall, with respect to
such circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (b) the invalidity or unenforceability of such provision or part thereof
under such circumstances and in such jurisdiction shall not affect the validity
or enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (c) the invalidity or
unenforceability of such provision or part thereof shall not affect the validity
or enforceability of the remainder of such provision or the validity or
enforceability of any other provision of this Agreement. Each provision of this
Agreement is separable from every other provision of this Agreement, and each
part of each provision of this Agreement is separable from every other part of
such provision.
7.6 Entire Agreement. This Agreement, the Proxy, and any other
documents delivered by the parties in connection herewith constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings between the
parties with respect thereto.
7.7 Assignment; Binding Effect. Except as provided herein, neither this
Agreement nor any of the interests or obligations hereunder may be assigned or
delegated by Stockholder and any attempted or purported assignment or delegation
of
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any of such interests or obligations shall be void. Subject to the preceding
sentence, this Agreement shall be binding upon Stockholder and his heirs,
estate, executors, personal representatives, successors and assigns, and shall
inure to the benefit of Parent and its successors and assigns. Without limiting
any of the restrictions set forth in Section 2 or elsewhere in this Agreement,
this Agreement shall be binding upon any Person to whom any Subject Securities
are transferred. Nothing in this Agreement is intended to confer on any Person
(other than Parent and its successors and assigns) any rights or remedies of any
nature.
7.8 Specific Performance. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement or the
Proxy was not performed in accordance with its specific terms or was otherwise
breached. Stockholder agrees that, in the event of any breach or threatened
breach by Stockholder of any covenant or obligation contained in this Agreement
or in the Proxy, Parent shall be entitled (in addition to any other remedy that
may be available to it, including monetary damages) to seek and obtain (a) a
decree or order of specific performance to enforce the observance and
performance of such covenant or obligation, and (b) an injunction restraining
such breach or threatened breach.
7.9 Non-Exclusivity. The rights and remedies of Parent under this
Agreement are not exclusive of or limited by any other rights or remedies which
it may have, whether at law, in equity, by contract or otherwise, all of which
shall be cumulative (and not alternative). Nothing in this Agreement shall limit
any of Stockholder's obligations, or the rights or remedies of Parent, under any
Affiliate Agreement between Parent and Stockholder; and nothing in any such
Affiliate Agreement shall limit any of Stockholder's obligations, or any of the
rights or remedies of Parent, under this Agreement.
7.10 Governing Law. This Agreement and the Proxy shall be construed in
accordance with, and governed in all respects by, the laws of the State of
Pennsylvania (without giving effect to principles of conflicts of laws).
7.11 Counterparts. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.
7.12 Captions. The captions contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
7.13 Attorneys' Fees. If any legal action or other legal proceeding
relating to this Agreement or the enforcement of any provision of this Agreement
is brought against Stockholder, the prevailing party shall be entitled to
recover reasonable attorneys' fees, costs and disbursements (in addition to any
other relief to which the
7
<PAGE>
prevailing party may be entitled).
7.14 Waiver. No failure on the part of Parent to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of
Parent in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy. Parent shall not be deemed to have waived any claim
available to Parent arising out of this Agreement, or any power, right,
privilege or remedy of Parent under this Agreement, unless the waiver of such
claim, power, right, privilege or remedy is expressly set forth in a written
instrument duly executed and delivered on behalf of Parent; and any such waiver
shall not be applicable or have any effect except in the specific instance in
which it is given.
[THIS SPACE INTENTIONALLY LEFT BLANK]
8
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this COMPANY VOTING
AGREEMENT to be executed as of the date first written above.
FIRST CONSULTING GROUP, INC.
Signed:
Printed Name:
Title:
STOCKHOLDER
Signed:
Printed Name:
Address:
Facsimile:
<TABLE>
<CAPTION>
Additional Securities Beneficially
Shares Held of Record Options and Other Rights Owned
<S> <C> <C>
</TABLE>
9
<PAGE>
EXHIBIT A
FORM OF IRREVOCABLE PROXY
The undersigned stockholder of INTEGRATED SYSTEMS CONSULTING GROUP,
INC., a Pennsylvania corporation (the "Company"), hereby irrevocably (to the
fullest extent permitted by law) appoints and constitutes James A. Reep, Luther
J. Nussbaum and Thomas A. Reep, and First Consulting Group, Inc., a Delaware
corporation ("Parent"), and each of them, the attorneys and proxies of the
undersigned with full power of substitution and resubstitution, to the full
extent of the undersigned's rights with respect to (i) the outstanding shares of
capital stock of the Company owned of record by the undersigned as of the date
of this proxy, which shares are specified on the final page of this proxy, and
(ii) any and all other shares of capital stock of the Company which the
undersigned may acquire on or after the date hereof. (The shares of the capital
stock of the Company referred to in clauses "(i)" and "(ii)" of the immediately
preceding sentence are collectively referred to as the "Shares.") Upon the
execution hereof, all prior proxies given by the undersigned with respect to any
of the Shares are hereby revoked, and the undersigned agrees that no subsequent
proxies will be given with respect to any of the Shares.
This proxy is irrevocable, is coupled with an interest and is granted
in connection with the Voting Agreement, dated as of the date hereof, between
Parent and the undersigned (the "Voting Agreement"), and is granted in
consideration of Parent entering into the Agreement and Plan of Merger and
Reorganization, dated as of the date hereof, among Parent, Foxtrot Acquisition
Sub, Inc. and the Company (the "Merger Agreement").
The attorneys and proxies named above will be empowered, and may
exercise this proxy, to vote the Shares at any time until the earlier to occur
of the valid termination of the Merger Agreement or the effective time of the
merger contemplated thereby (the "Merger") at any meeting of the stockholders of
the Company, however called, or in connection with any solicitation of written
consents from stockholders of the Company, in favor of the approval and adoption
of the Merger Agreement and the approval of the Merger, and in favor of each of
the other actions contemplated by the Merger Agreement.
The undersigned may vote the Shares on all other matters.
This proxy shall be binding upon the heirs, estate, executors, personal
representatives, successors and assigns of the undersigned (including any
transferee of any of the Shares).
If any provision of this proxy or any part of any such provision is
held under any circumstances to be invalid or unenforceable in any jurisdiction,
then (a) such provision or part thereof shall, with respect to such
circumstances and in such jurisdiction, be
10
<PAGE>
deemed amended to conform to applicable laws so as to be valid and enforceable
to the fullest possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction, and (c) the
invalidity or unenforceability of such provision or part thereof shall not
affect the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this proxy. Each provision
of this proxy is separable from every other provision of this proxy, and each
part of each provision of this proxy is separable from every other part of such
provision.
This proxy shall terminate upon the earlier of the valid termination of
the Merger Agreement or the effective time of the Merger.
Dated: September 9, 1998
Signed
Printed Name
Number of shares of common stock of
Integrated Systems Consulting
Group, Inc. owned of record as of the
date of this proxy:
11
<PAGE>
EXHIBIT 99.3
COMPANY AFFILIATE AGREEMENT
THIS COMPANY AFFILIATE AGREEMENT (this "Agreement") is dated as of
September 9, 1998, by and between FIRST CONSULTING GROUP, INC., a Delaware
corporation ("Parent"), INTEGRATED SYSTEMS CONSULTING GROUP, INC., a
Pennsylvania corporation ("Company"), and the undersigned affiliate
("Affiliate").
RECITALS
WHEREAS, Affiliate is a stockholder of Company.
WHEREAS, Parent, Foxtrot Acquisition Sub, Inc., a Delaware corporation
and a wholly-owned subsidiary of Parent ("Merger Sub"), and Company have entered
into an Agreement and Plan of Merger and Reorganization dated as of September 9,
1998 (the "Merger Agreement"), providing for the merger of Merger Sub with and
into Company (the "Merger"). The Merger Agreement contemplates that, upon
consummation of the Merger, (i) the holders of the common stock of Company
("Company Common Stock") will receive shares of common stock of Parent ("Parent
Common Stock") in exchange for their shares of Company Common Stock and (ii)
Company will become a wholly-owned subsidiary of Parent. It is accordingly
contemplated that Affiliate will receive shares of Parent Common Stock in the
Merger.
WHEREAS, Affiliate understands that the Parent Common Stock being
issued in the Merger will be issued pursuant to a registration statement on Form
S-4 and that Affiliate may be deemed to be an "affiliate" of Company, as the
term "affiliate" is used (i) for purposes of paragraphs (c) and (d) of Rule 145
("Rule 145") of the General Rules and Regulations of the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act"), and (ii) in the SEC's Accounting Series Releases 130 and 135,
and, as such, Affiliate may only transfer, sell or dispose of such Parent Common
Stock in accordance with this Affiliate Agreement and Rule 145.
WHEREAS, it is a condition to the consummation of the Merger pursuant
to the Merger Agreement that the independent accounting firms that audit the
annual financial statements of Parent and Company will have delivered the
written concurrences with the conclusions of management of Parent and Company to
the effect that the Merger will be accounted for as a pooling of interests under
Accounting Principles Board Opinion No. 16.
AGREEMENT
NOW, THEREFORE, in order to induce Parent and Company to consummate the
transactions contemplated by the Merger Agreement, and for other valuable
1
<PAGE>
consideration (the receipt and sufficiency of which are hereby acknowledged by
Affiliate), Affiliate hereby covenants and agrees as follows:
1. Representations and Warranties. Affiliate represents and warrants to
Parent as follows:
(a) Affiliate is the holder and "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of the
number of shares of Company Common Stock set forth under Affiliate's signature
below (the "Company Shares"), and Affiliate has good and valid title to Company
Shares, free and clear of any liens, pledges, security interests, adverse
claims, equities, options, proxies, charges, encumbrances or restrictions of any
nature.
(b) Affiliate has carefully read this Agreement, and has
discussed with Affiliate's own independent counsel to the extent Affiliate felt
necessary the limitations imposed on Affiliate's ability to sell, transfer or
otherwise dispose of the shares of Parent Common Stock that Affiliate is to
receive in the Merger (the "Parent Shares"). Affiliate fully understands the
limitations this Agreement places upon Affiliate's ability to sell, transfer or
otherwise dispose of the Parent Shares.
(c) Affiliate understands that the representations, warranties
and covenants set forth herein will be relied upon by Parent, Company, and their
respective affiliates, counsel and accounting firms for purposes of determining
Parent's eligibility to account for the Merger as a "pooling of interests," and
that substantial losses and damages may be incurred by these persons if
Affiliate's representations, warranties or covenants are breached.
2. Prohibition Against Transfer. In addition to the restrictions set
forth elsewhere herein, Affiliate agrees that Affiliate shall not effect any
sale, transfer or other disposition of the Parent Shares unless:
(a) such sale, transfer or other disposition is made in
conformity with the volume and other requirements of Rule 145 under the
Securities Act, as evidenced by a broker's letter and a representation letter
executed by Affiliate (reasonably satisfactory in form and content to Parent),
each stating that such requirements have been met;
(b) counsel reasonably satisfactory to Parent shall have
advised Parent in a written opinion letter (reasonably satisfactory in form and
content to Parent), upon which Parent may rely, that such sale, transfer or
other disposition will be exempt from registration under the Securities Act;
(c) such sale, transfer or other disposition is effected
pursuant to an effective registration statement under the Securities Act; or
(d) an authorized representative of the SEC shall have
rendered
2
<PAGE>
written advice to Affiliate to the effect that the SEC would take no
action, or that the staff of the SEC would not recommend that the SEC take
action, with respect to such proposed sale, transfer or other disposition, and a
copy of such written advice and all other related communications with the SEC
shall have been delivered to Parent.
3. Stop Transfer Instructions; Legend. Affiliate acknowledges and
agrees that (a) stop transfer instructions will be given to Parent's transfer
agent with respect to the Parent Shares, and (b) each certificate representing
any of such shares of Parent Common Stock or any substitutions thereof shall
bear a legend (together with any other legend or legends required by applicable
state securities laws or otherwise), stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT IN ACCORDANCE WITH
THE PROVISIONS OF SUCH RULE AND IN ACCORDANCE WITH THE TERMS
OF AN AGREEMENT DATED AS OF SEPTEMBER 9, 1998, BETWEEN THE
REGISTERED HOLDER FIRST CONSULTING GROUP, INC., A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF FIRST
CONSULTING GROUP, INC.
4. Covenants Related to Pooling of Interests. In accordance with SEC
Staff Accounting Bulletin No. 65 ("SAB 65"), during the period contemplated by
SAB 65, until the earlier of (i) Parent's public announcement of financial
results covering at least 30 days of combined operations of Parent and Company
or (ii) the Merger Agreement is terminated in accordance with its terms,
Affiliate will not sell, exchange, transfer, pledge, distribute, or otherwise
dispose of or grant any option, establish any "short" or put-equivalent position
with respect to or enter into any similar transaction (through derivatives or
otherwise) intended or having the effect, directly or indirectly, to reduce its
risk relative to: (i) any shares of Company Common Stock, except pursuant to and
upon the consummation of the Merger; or (ii) any shares of Parent Common Stock
received by Affiliate in the Merger or any shares of Parent Common Stock
received by Affiliate upon exercise of options assumed by Parent in connection
with the Merger. Parent may, at its discretion, cause a restrictive legend
covering the restrictions referred to in this Section 4 to be placed on Parent
Common Stock certificates issued to Affiliate in the Merger and place a stock
transfer notice consistent with the restrictions referred to in this Section 4
with its transfer agent with respect to such certificates, provided such
restrictive legend shall be removed and/or notice shall be countermanded
promptly upon expiration of the necessity therefor at the request of Affiliate.
5. Permitted Transfers. Notwithstanding anything to the contrary
contained
3
<PAGE>
in this Agreement, Affiliate (i) may transfer Affiliate's pro rata portion (of
the total number of shares available under the "de minimis" exception referred
to in this clause (i) to all affiliates of Parent and Company) of the "de
minimis" number of shares of Company Common Stock and Parent Common Stock
available for sale in accordance with SEC Staff Accounting Bulletin No. 76 (the
"De Minimis Pool") contingent upon confirmation and approval by legal counsel
for Company and independent auditors to Company and Parent that such transfer
qualifies as within Affiliate's pro rata portion of the De Minimis Pool and does
not otherwise adversely affect the Parent's ability to account for the Merger as
a "pooling of interests" (ii) may (with the written consent of Parent, not to be
unreasonably withheld): (A) transfer shares of Company Common Stock or Parent
Common Stock to Company in payment of the exercise price of options to purchase
Company Common Stock; (B) transfer shares of Parent Common Stock in payment of
the exercise price of options to purchase Parent Common Stock; (C) transfer
shares of Company Common Stock or Parent Common Stock to any organization
qualified under Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended, so long as such organization has traditionally been supported by
contributions from the general public (as opposed to being supported largely by
a specific donor); and (D) transfer shares of Company Common Stock or shares of
Parent Common Stock to a trust established for the benefit of Affiliate and/or
for the benefit of one or more members of Affiliate's family, or make a bona
fide gift of shares of Common Stock of Company or shares of Parent Common Stock
to one or more members of Affiliate's family, provided that in the case of a
transfer or gift pursuant to this clause (C) or (D), a transferee of such shares
agrees to be bound by the limitations set forth in this Agreement.
6. Specific Performance. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement was not
performed in accordance with its specific terms or was otherwise breached.
Affiliate agrees that, in the event of any breach or threatened breach by
Affiliate of any covenant or obligation contained in this Agreement, each of
Parent and Company shall be entitled (in addition to any other remedy that may
be available to it, including monetary damages) to seek and obtain (a) a decree
or order of specific performance to enforce the observance and performance of
such covenant or obligation, and (b) an injunction restraining such breach or
threatened breach.
7. Independence of Obligations. The covenants and obligations of
Affiliate set forth in this Affiliate Agreement shall be construed as
independent of any other agreement or arrangement between Affiliate, on the one
hand, and Company or Parent, on the other. The existence of any claim or cause
of action by Affiliate against Company or Parent shall not constitute a defense
to the enforcement of any of such covenants or obligations against Affiliate.
8. Notices. Any notice or other communication required or permitted to
be delivered under this Agreement shall be in writing and shall be deemed
properly delivered, given and received when delivered (by hand, by registered
mail, by courier or
4
<PAGE>
express delivery service or by facsimile confirmation) to the address or
facsimile telephone number set forth beneath the name of such party below (or to
such other address or facsimile telephone number as such party shall have
specified in a written notice given to the other party):
if to Parent: First Consulting Group, Inc.
111 W. Ocean Boulevard- 4th Floor
Long Beach, CA 90802
Attn: Luther J. Nussbaum
Fax: (562) 432-1932
with a copy to: Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attn: Patrick A. Pohlen
Fax: (650) 849-7400
if to Company: Integrated Systems Consulting Group, Inc.
575 East Swedesford Road
Wayne, PA 19087
Attn: Thomas Olenzak
Fax: (610) 989-7050
with a copy to: Saul, Ewing, Remick & Saul LLP
1055 Westlakes Drive, Suite 150
Berwyn, PA 19312
Attn: David S. Antzis
Fax: (610) 408-4401
if to Affiliate:
at the address or facsimile phone number set forth below
Affiliate's signature on the signature page hereof.
with a copy to: Saul, Ewing, Remick & Saul LLP
1055 Westlakes Drive, Suite 150
Berwyn, PA 19312
Attn: David S. Antzis
Fax: (610) 408-4401
9. Severability. If any provision of this Agreement or any part of any
such provision is held under any circumstances to be invalid or unenforceable in
any jurisdiction, then (a) such provision or part thereof shall, with respect to
such
5
<PAGE>
circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (b) the invalidity or unenforceability of such provision or part thereof
under such circumstances and in such jurisdiction shall not affect the validity
or enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (c) the invalidity or
unenforceability of such provision or part thereof shall not affect the validity
or enforceability of the remainder of such provision or the validity or
enforceability of any other provision of this Agreement. Each provision of this
Agreement is separable from every other provision of this Agreement, and each
part of each provision of this Agreement is separable from every other part of
such provision.
10. Governing Law. This Agreement shall be construed in accordance
with, and governed in all respects by, the laws of the State of California
(without giving effect to principles of conflicts of laws).
11. Waiver. No failure on the part of Parent or Company to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of Parent or Company in exercising any power, right, privilege or remedy under
this Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege or
remedy shall preclude any other or further exercise thereof or of any other
power, right, privilege or remedy. Neither Parent or Company shall be deemed to
have waived any claim arising out of this Agreement, or any power, right,
privilege or remedy under this Agreement, unless the waiver of such claim,
power, right, privilege or remedy is expressly set forth in a written instrument
duly executed and delivered on behalf of the party deemed to be charged; and any
such waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
12. Captions. The captions contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
13. Further Assurances. Affiliate shall execute and/or cause to be
delivered to Parent or Company such instruments and other documents and shall
take such other actions as Parent or Company may reasonably request to
effectuate the intent and purposes of this Agreement.
14. Entire Agreement. This Agreement, the Merger Agreement and any
Voting Agreement or Noncompetition Agreement between Affiliate and Parent or
Irrevocable Proxy executed by Affiliate in favor of Parent constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings between the
parties with respect thereto.
15. Non-Exclusivity. The rights and remedies of Parent and Company
6
<PAGE>
hereunder are not exclusive of or limited by any other rights or remedies which
Parent may have, whether at law, in equity, by contract or otherwise, all of
which shall be cumulative (and not alternative). Nothing in this Agreement shall
limit any of Affiliate's obligations, or the rights or remedies of Parent or
Company, under any Voting Agreement (including any Irrevocable Proxy contained
therein) or Noncompetition Agreement between Parent and Affiliate; and nothing
in any such Voting Agreement (including any Irrevocable Proxy) or Noncompetition
Agreement shall limit any of Affiliate's obligations, or any of the rights or
remedies of Parent, under this Agreement.
16. Amendments. This Agreement may not be amended, modified, altered,
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of Parent, Company and Affiliate.
17. Binding Nature. This Agreement will be binding upon Affiliate and
Affiliate's representatives, executors, administrators, estate, heirs,
successors and assigns, and shall inure to the benefit of Company, Parent and
their respective successors and assigns.
18. Attorneys' Fees and Expenses. If any legal action or other legal
proceeding relating to the enforcement of any provision of this Agreement is
brought against Affiliate, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
19. Assignment. This Agreement and all obligations of Affiliate
hereunder are personal to Affiliate and may not be transferred or delegated by
Affiliate at any time. Company or Parent may freely assign any or all of its
rights under this Affiliate Agreement, in whole or in part, to any other person
or entity without obtaining the consent or approval of Affiliate.
20. Survival. Each of the representations, warranties, covenants and
obligations contained in this Agreement shall survive the consummation of the
Merger.
7
<PAGE>
The undersigned have executed this Agreement as of the date first set
forth above.
FIRST CONSULTING GROUP, INC.
By:
Printed Name:
Title:
INTEGRATED SYSTEMS CONSULTING GROUP, INC.
By:
Printed Name:
Title:
AFFILIATE:
By:
Printed Name:
Address:
Facsimile:
Integrated Systems Consulting
Group, Inc. Stock Beneficially owned
by Affiliate:
shares of Common Stock
8
<PAGE>
shares of Common Stock issuable upon
exercise of outstanding options
9
