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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) OCTOBER 19, 1999
LEVEL 8 SYSTEMS, INC.
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(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-26392 11-2920559
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
8000 REGENCY PARKWAY, CARY, NC 27511
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (919) 380-5000
NOT APPLICABLE
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
On October 20, 1999, Level 8 Systems, Inc. ("Level 8") announced that
it had entered into an Agreement and Plan of Merger dated as of October 19, 1999
(the "Merger Agreement") with Template Software, Inc. ("Template") and with
Level 8's wholly-owned subsidiary, TSAC, Inc. ("Subsidiary"). The Merger
Agreement provides for Level 8's acquisition of Template by Template's merger
with and into the Subsidiary.
Under the Merger Agreement, each share of Template common stock will be
exchanged for $4.00 in cash plus Level 8 common stock with a value of $3.90. The
actual number of shares of Level 8 common stock to be exchanged for each
Template share will be based on the average trading price of Level 8 common
stock for the 10 trading days prior to the third trading day before stockholder
approval, but will not be less than 0.2838 Level 8 shares per Template share (if
Level 8's average trading price exceeds $13.74) or more than 0.3672 Level 8
shares per Template share (if Level 8's average trading price is less than
$10.62). The merger is intended to qualify as a tax-free reorganization, which
means that Template stockholders would generally be permitted to defer taxes on
the Level 8 stock portion of the purchase price.
In connection with the merger, Level 8 has received a commitment for
additional financing. The financing will be guaranteed by Liraz Systems, Ltd.,
Level 8's principal stockholder, in return for a number of shares of Level 8
common stock to be determined by the independent directors of Level 8 based on
market conditions and Level 8's financing needs at closing. The additional
financing is subject to the negotiation and execution of a definitive agreement.
The merger is subject to certain conditions to closing, including
stockholder approval, regulatory approval, and necessary consents and filings.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(c) Exhibits
2.1 Agreement and Plan of Merger dated as of October 19,
1999, by Level 8 Systems, Inc., TSAC, Inc., and
Template Software, Inc.
10.1 Stockholders Agreement by and among Level 8 Systems,
Inc. Template Software, Inc. and various stockholders
of Level 8 and Template.
23.1 Consent of PricewaterhouseCoopers to incorporation by
reference of their report on the audited financial
statements of Seer Technologies, Inc. into Level 8's
Form S-3 registration statement on file number
333-84681.
99.1 Press Release of Level 8 Systems, Inc. and Template
Software, Inc. dated October 20, 1999, announcing the
execution of the definitive merger agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LEVEL 8 SYSTEMS, INC.
Date: November 5, 1999 By: /s/ Dennis McKinnie
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Dennis McKinnie
Senior Vice President,
Chief Legal and Administrative Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
2.1 Agreement and Plan of Merger dated as of October 19, 1999, by Level 8
Systems, Inc., TSAC, Inc., and Template Software, Inc.
10.1 Stockholders Agreement by and among Level 8 Systems, Inc. Template
Software, Inc. and various stockholders of Level 8 and Template.
23.1 Consent of PricewaterhouseCoopers to incorporation by reference of
their report on the audited financial statements of Seer Technologies,
Inc. into Level 8's Form S-3 registration statement on file number
333-84681.
99.1 Press Release of Level 8 Systems, Inc. and Template Software, Inc.
dated October 20, 1999, announcing the execution of the definitive
merger agreement.
</TABLE>
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EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LEVEL 8 SYSTEMS, INC.,
TSAC, INC.
AND
TEMPLATE SOFTWARE, INC.
DATED AS OF OCTOBER 19, 1999
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE I THE MERGER................................................................2
Section 1.1 The Merger................................................................2
Section 1.2 Closing...................................................................2
Section 1.3 Effective Time............................................................2
Section 1.4 Effects of the Merger.....................................................2
Section 1.5 Articles of Incorporation; Bylaws.........................................2
Section 1.6 Directors; Officers.......................................................3
Section 1.7 Tax Consequences..........................................................3
ARTICLE II. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS..................................................3
Section 2.1 Effect on Capital Stock...................................................3
Section 2.2 Stock Options.............................................................4
ARTICLE III. EXCHANGE OF CERTIFICATES..................................................4
Section 3.1 Exchange of Certificates..................................................4
ARTICLE IV. REPRESENTATIONS AND WARRANTIES............................................8
Section 4.1 Representations and Warranties of Company.................................8
Section 4.2 Representations and Warranties of Parent and Merger Sub..................29
ARTICLE V. CONDUCT OF BUSINESS OF COMPANY...........................................35
Section 5.1 Conduct of Business of Company...........................................35
ARTICLE VI. ADDITIONAL COVENANTS.....................................................37
Section 6.1 Preparation of the Joint Proxy Statement/Prospectus and Form S-4.........37
Section 6.2 Accountants' Letters.....................................................38
Section 6.3 Stockholders Meeting; Board Recommendation...............................39
Section 6.4 Access to Information, Confidentiality...................................41
Section 6.5 Reasonable Best Efforts..................................................42
Section 6.6 Public Announcements.....................................................42
Section 6.7 No Solicitation; Acquisition Proposals...................................42
Section 6.8 Consents, Approvals and Filings..........................................44
Section 6.9 Company Options..........................................................44
Section 6.10 Employee Benefit Matters.................................................46
Section 6.11 Affiliates and Certain Stockholders......................................46
Section 6.12 Nasdaq Listing...........................................................47
Section 6.13 Rights Agreement.........................................................47
Section 6.14 Indemnification and Insurance............................................47
Section 6.15 Tax Treatment............................................................47
Section 6.16 Subsidiaries' Directors and Officers.....................................48
Section 6.17 Stockholders Agreement...................................................48
Section 6.18 Financing................................................................48
</TABLE>
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<TABLE>
<S> <C> <C>
Section 6.19 Employment Agreements and Noncompetition Agreements......................48
Section 6.20 Tax Matters..............................................................48
ARTICLE VII. CONDITIONS PRECEDENT.....................................................48
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger...............48
Section 7.2 Conditions to Obligations of Parent and Merger Sub.......................49
Section 7.3 Conditions to Obligation of Company......................................51
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER........................................52
Section 8.1 Termination..............................................................52
Section 8.2 Effect of Termination....................................................55
Section 8.3 Amendment................................................................55
Section 8.4 Extension; Waiver........................................................55
Section 8.5 Procedure for Termination, Amendment, Extension or Waiver................55
ARTICLE IX. GENERAL PROVISIONS.......................................................56
Section 9.1 Nonsurvival of Representations and Warranties............................56
Section 9.2 Fees and Expenses........................................................56
Section 9.3 Definitions..............................................................56
Section 9.4 Notices..................................................................58
Section 9.5 Interpretation...........................................................59
Section 9.6 Entire Agreement; Third-Party Beneficiaries..............................59
Section 9.7 Governing Law............................................................59
Section 9.8 Assignment...............................................................59
Section 9.9 Enforcement..............................................................59
Section 9.10 Severability.............................................................60
Section 9.11 Counterparts.............................................................60
</TABLE>
EXHIBIT A Plan of Merger
EXHIBIT B Affiliate Letter
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of October 19, 1999 (this
"Agreement"), is made and entered into by and among Level 8 Systems, Inc., a
Delaware corporation ("Parent"), TSAC, Inc., a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), and Template Software, Inc., a
Virginia corporation ("Company"). Parent, Merger Sub and Company are sometimes
hereinafter collectively referred to as the "Parties."
RECITALS:
WHEREAS, the respective Boards of Directors of the Parties have
determined that it would be advisable and in the best interests of their
respective corporations and their respective stockholders for Parent to acquire
Company, by means of a merger of Company with and into Merger Sub (the
"Merger"), on the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition to each of the Parties' willingness to enter into this
Agreement, Parent and Company have entered into a Stockholders Agreement, dated
as of the date hereof (the "Stockholders Agreement"), with each of the
stockholders named on the signature pages thereof, pursuant to which each such
stockholder has agreed, among other things, to vote all shares of capital stock
of Company and Parent owned by such stockholder in favor of the adoption of this
Agreement and the transactions contemplated by this Agreement;
WHEREAS, the Parties desire to make certain representations, warranties
and covenants in connection with the Merger and to prescribe various conditions
to the consummation of the Merger; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained in this Agreement, the Parties hereto hereby agree as
follows:
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ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. On the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law (the "DGCL") and the Virginia Stock Corporation Act (the "VSCA"), the Merger
shall be effected and Company shall be merged with and into Merger Sub at the
Effective Time (as defined in Section 1.3). At the Effective Time, the separate
existence of Company shall cease and Merger Sub shall continue as the surviving
corporation (sometimes hereinafter referred to as the "Surviving Corporation").
SECTION 1.2 CLOSING. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Article VIII, and subject to the satisfaction or waiver of all of the conditions
set forth in Article VII, the closing of the Merger (the "Closing") will take
place at 10:00 a.m. on the second business day (the "Closing Date") following
satisfaction or waiver of all of the conditions set forth in Article VII, other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to the fulfillment or waiver of those conditions, at the offices of
Powell, Goldstein, Frazer & Murphy LLP, 191 Peachtree Street, N.E., Suite 1600,
Atlanta, Georgia 30303, unless another date, time or place is agreed to in
writing by the Parties hereto.
SECTION 1.3 EFFECTIVE TIME. The Parties hereto shall file with the
Secretary of State of the State of Delaware (the "Delaware Secretary of State")
and the State Corporation Commission of Virginia (the "Virginia Commission") on
the Closing Date (or on such other date as Parent and Company may agree) a
certificate and/or articles of merger and any other appropriate documents,
including a plan of merger, in the form attached hereto as Exhibit A (the "Plan
of Merger"), executed in accordance with the relevant provisions of the DGCL and
VSCA, and make all other filings or recordings required under the DGCL and VSCA
in connection with the Merger. The Merger shall become effective upon the filing
of the certificate and/or articles of merger with the Delaware Secretary of
State and the Virginia Commission, or at such later time as is specified in the
certificate and/or articles of merger (the "Effective Time").
SECTION 1.4 EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in the applicable provisions of the DGCL, the VSCA and the Plan of
Merger. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, all property of Company and Merger Sub shall vest in the
Surviving Corporation, and all liabilities of Company and Merger Sub shall
become the liabilities of the Surviving Corporation.
SECTION 1.5 CERTIFICATE OF INCORPORATION; BYLAWS. At the Effective
Time, (a) the certificate of incorporation of Merger Sub as in effect at the
Effective Time shall, from and after the Effective Time, be the certificate of
incorporation of the Surviving Corporation until thereafter changed or amended
in accordance with the provisions thereof and applicable law, and (b) the bylaws
of Merger Sub as in effect at the Effective Time shall, from and after the
Effective Time, be the bylaws of the Surviving Corporation until thereafter
changed or amended in accordance with the provisions thereof and applicable law.
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SECTION 1.6 .DIRECTORS; OFFICERS. From and after the Effective Time,
the directors and officers of Merger Sub shall be the directors and officers of
the Surviving Corporation, until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be.
SECTION 1.7 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.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS
SECTION 2.1 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue
of the Merger and without any action on the part of any holder of shares of
Company's common stock, par value $0.01 per share ("Shares"), or any shares of
capital stock of Merger Sub:
(a) Common Stock of Merger Sub. Each share of common
stock, par value $0.01 per share, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and
become one validly issued, fully paid and nonassessable share of common
stock, par value $0.01 per share, of the Surviving Corporation.
(b) Cancellation of Treasury Shares and Parent-Owned
Shares. Each Share issued and outstanding immediately prior to the
Effective Time that is owned by Company or any Subsidiary (as defined
in Section 9.3(k)) of Company or by Parent, Merger Sub or any other
Subsidiary of Parent (other than shares in trust accounts, managed
accounts, custodial accounts and the like that are beneficially owned
by third parties) shall automatically be canceled and retired and shall
cease to exist, and no cash or other consideration shall be delivered
or deliverable in exchange therefor.
(c) Conversion of Shares. Each Share issued and
outstanding immediately prior to the Effective Time (other than
Dissenting Shares (as defined in Section 3.1(j) and Shares to be
canceled and retired in accordance with Section 2.1(b)) shall be
converted into the right to receive (i) U.S. $4.00 in cash (the "Cash
Consideration"), and (ii) that number of shares of common stock, par
value $0.001 per share ("Common Stock"), of Parent equal to the
Exchange Ratio (the "Stock Consideration," and together with the Cash
Consideration, the "Merger Consideration"). The "Exchange Ratio" shall
be a fraction, the numerator of which is U.S. $3.90 and the denominator
of which is the Average Trading Price of Parent's Common Stock. The
term "Average Trading Price" shall mean the average of the closing
sales prices of a share of Parent Common Stock on The Nasdaq Stock
Market for the ten consecutive trading days immediately preceding the
third trading day immediately preceding the date on which a meeting of
Parent's stockholders called for the purpose of voting on the Merger
("Parent Stockholders Meeting") shall have been held and a final vote
of Parent's stockholders adopting and
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approving this Agreement and the transactions contemplated hereby shall
have been taken. Notwithstanding anything to the contrary contained
herein, (A) in the event the Average Trading Price is less than $10.62
(the "Base Price"), then the Exchange Ratio shall be 0.3672, and (B) in
the event the Average Trading Price is more than $13.74, then the
Exchange Ratio shall be 0.2838. In the event there is no such closing
sales price on a day within the ten day periods referenced in this
Section 2.1 (c), the closing sales price on the day nearest preceding
such day shall be utilized.
(d) Anti-Dilution. In the event of any stock dividend,
stock split, reclassification, recapitalization, combination or
exchange of shares with respect to, or rights issued in respect of,
Parent Common Stock on or after the date hereof and prior to the
Effective Time, the Exchange Ratio shall be adjusted accordingly.
SECTION 2.2 Stock Options. At and as of the Effective Time, all Company
Options (as defined in Section 4.1(d)), which have not otherwise been exercised
or cancelled as provided in Section 6.9, shall be assumed by Parent in
accordance with Section 6.9.
ARTICLE III
EXCHANGE OF CERTIFICATES
SECTION 3.1 EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. Prior to or concurrently with the
Effective Time, Parent shall enter into an agreement with such bank or
trust company as may be designated by Parent (the "Exchange Agent"),
which shall provide that Parent shall deposit with the Exchange Agent
as of the Effective Time, for the benefit of the holders of Shares, for
exchange in accordance with this Article III, through the Exchange
Agent, the aggregate Cash Consideration, sufficient cash payable in
lieu of any fractional shares of Common Stock and certificates
representing the shares of Common Stock (such Cash Consideration and
shares of Common Stock, together with any dividends or distributions
with respect thereto with a record date after the Effective Time, and
any cash payable in lieu of any fractional shares of Common Stock,
being hereinafter referred to as the "Exchange Fund") issuable pursuant
to Section 2.1 in exchange for outstanding Shares.
(b) Letters of Transmittal; Surrender of Certificates. As
soon as reasonably practicable after the Effective Time, Parent shall
instruct the Exchange Agent to mail to each holder of record (other
than Company or any of its Subsidiaries or Parent, Merger Sub or any
other Subsidiary of Parent) holding a certificate or certificates that,
immediately prior to the Effective Time, evidenced outstanding Shares
(the "Certificates"), (i) a form of letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent, and shall be in such form and have
such other provisions as Parent may reasonably specify), and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate
for cancellation to the Exchange Agent together with
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such letter of transmittal, duly executed, and such other customary
documents as may be required pursuant to such instructions, the holder
of such Certificate shall be entitled to receive in exchange therefor
the applicable amount of Cash Consideration and a certificate
representing the number of whole shares of Common Stock (and cash in
lieu of fractional shares of Common Stock as contemplated by this
Section 3.1) that the aggregate number of Shares previously represented
by such Certificate shall have been converted into the right to receive
pursuant to Section 2.1(c), and the Certificate so surrendered shall
forthwith be canceled. No interest shall be paid or accrued on any cash
payable upon the surrender of any Certificate. If payment is to be made
to a person other than the person in whose name the surrendered
Certificate is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or otherwise in
proper form for transfer and that the person requesting such payment
shall pay any transfer or other taxes required by reason of the payment
to a person other than the registered holder of the surrendered
Certificate or established to the satisfaction of Parent and the
Surviving Corporation that such taxes have been paid or are not
applicable.
(c) Distributions with Respect to Unexchanged Shares. No
Cash Consideration and no dividends or other distributions with respect
to Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the
shares of Common Stock issuable upon the surrender of such Certificate
pursuant to Section 3.1(b), and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 3.1(e), and
all such Cash Consideration, dividends, other distributions and cash in
lieu of fractional shares of Common Stock shall be paid by Parent to
the Exchange Agent and shall be included in the Exchange Fund, in each
case until the surrender of such Certificate pursuant to Section
3.1(b). Subject to the effect of applicable escheat or similar laws,
following the surrender of any such Certificate pursuant to Section
3.1(b) there shall be paid to the holder of the certificate
representing the whole shares of Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the
applicable amount of Cash Consideration and the amount of dividends or
other distributions with respect to such whole shares of Common Stock
with a record date after the Effective Time theretofore paid with
respect to such whole shares of Common Stock, and the amount of any
cash payable in lieu of a fractional share of Common Stock to which
such holder is entitled pursuant to Section 3.1(e), and (ii) at the
appropriate payment date, the amount of dividends or other
distributions with respect to such whole shares of Common Stock with a
record date after the Effective Time but prior to such surrender and
with a payment date subsequent to such surrender payable with respect
to such whole shares of Common Stock.
(d) Cancellation and Retirement of Shares, No Further
Rights. As of the Effective Time, all Shares (other than Dissenting
Shares and Shares to be canceled in accordance with Section 2.1(b))
issued and outstanding immediately prior to the Effective Time shall
cease to be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a Certificate theretofore
representing any such Shares shall cease to have any rights with
respect thereto (including without limitation the right to vote),
except the right to receive the Merger Consideration, without interest,
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upon surrender of such Certificate in accordance with Section 3.1(b),
and until so surrendered, each such Certificate shall represent for all
purposes only the right to receive the Merger Consideration, without
interest. The Merger Consideration paid upon the surrender for exchange
of Certificates in accordance with the terms of this Article III shall
be deemed to have been paid in full satisfaction of all rights
pertaining to the Shares theretofore represented by such Certificates.
(e) No Fractional Shares.
(i) No certificates or scrip representing
fractional shares of Common Stock shall be issued upon the
surrender for exchange of Certificates which have been
converted pursuant to Section 2.1(c), and such fractional
share interests shall not entitle the owner thereof to vote or
to any rights of a stockholder of Parent.
(ii) In lieu of any such fractional shares, each
holder of Shares who would otherwise have been entitled to a
fraction of a share of Common Stock upon surrender of
Certificates for exchange pursuant to this Section 3.1 (after
taking into account all Certificates delivered by such
holders) will be paid an amount in cash (without interest),
rounded to the nearest cent, determined by multiplying (A) the
per share closing sales price of Parent's Common Stock (as
reported on The Nasdaq Stock Market) on the trading day
immediately prior to the date on which the Effective Time
occurs, by (B) the fractional interest to which such holder
otherwise would be entitled. Such amount in cash shall be
deemed to be substituted for any such fractional share and
constitute a portion of the Merger Consideration with respect
to the related Shares. The fractional share interest of each
holder of Shares will be aggregated, and no holder of Shares
will receive cash in an amount equal to or greater than the
value of one full share of Parent's Common Stock.
(f) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by Parent,
in (i) direct obligations of the United States of America with
maturities of 90 days or less, (ii) obligations for which the full
faith and credit of the United States of America is pledged to provide
for the payment of principal and interest, or (iii) interest bearing
accounts of commercial banks with capital exceeding $500 million. Any
net earnings with respect to the Exchange Fund shall be the property of
and paid over to Parent 180 days after the Effective Time, and Parent
shall include any income earned by the Exchange Fund on its applicable
Tax Returns (as defined in Section 4.1(o)(i)) and pay any Taxes (as
defined in the last paragraph of Section 4.1(o)) with respect thereto.
(g) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of
Certificates for 180 days after the Effective Time shall be delivered
to Parent, upon demand, and any holders of Certificates that have not
theretofore complied with this Article III shall thereafter look only
to Parent, and only as general creditors thereof, for payment of their
claim for any Merger Consideration, any cash in lieu of fractional
shares of Common Stock and any dividends or distributions with respect
to Common Stock provided for in Section 3.1(c).
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(h) No Liability. None of Parent, Merger Sub, the
Surviving Corporation or the Exchange Agent shall be liable to any
person in respect of any payments or distributions payable from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall
not have been surrendered prior to five years after the Effective Time
(or immediately prior to such earlier date on which any Merger
Consideration in respect of such Certificate would otherwise escheat to
or become the property of any Governmental Entity (as defined in
Section 4.1(c)), any amounts payable in respect of such Certificate
shall, to the extent permitted by applicable law, become the property
of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.
(i) Withholding Rights. Parent shall be entitled to
deduct and withhold, or cause to be deducted or withheld, from the
consideration otherwise payable pursuant to this Agreement to any
holder of Shares, Company Options or Certificates such amounts as are
required to be deducted and withheld with respect to the making of such
payment under the Code, or any provision of applicable state, local or
foreign tax law. To the extent that amounts are so deducted and
withheld, such deducted and withheld amounts shall be treated for all
purposes of this Agreement as having been paid to such holders in
respect of which such deduction and withholding was made.
(j) Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares that are issued and outstanding
immediately prior to the Effective Time and that are held by
stockholders who have complied with the procedures for appraisal set
forth in the VSCA (the "Dissenting Shares") shall not be converted into
or be exchangeable for the right to receive the Merger Consideration,
unless and until such holder shall have failed to perfect or shall have
effectively withdrawn or lost his, her or its right to appraisal and
payment under the VSCA. If such holder shall have so failed to perfect
or shall have effectively withdrawn or lost such right, his, her or its
Shares shall thereupon be deemed to have been converted into and to
have become exchangeable for, as of the Effective Time, the right to
receive the Merger Consideration, without any interest thereon. Company
shall not settle, compromise or pay any amount with respect to any
claim for appraisal in connection with the Merger without the prior
written consent of Parent. Holders of Dissenting Shares shall be
entitled only to such rights as may be granted to such holder under the
VSCA, and from and after the Effective Time, a holder of Dissenting
Shares shall not be entitled to exercise any of the voting rights or
other rights of a stockholder of Surviving Corporation.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 REPRESENTATIONS AND WARRANTIES OF COMPANY. Company
represents and warrants to Parent and Merger Sub, as of the date hereof and as
of the Closing Date (unless specifically made as of another date), as follows:
(a) Organization and Standing. Each of Company and each
Subsidiary of Company is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it is
incorporated and has the requisite corporate power and authority to
carry on its business as now being conducted. Each of Company and each
Subsidiary of Company is duly qualified or licensed to do business and
is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed could not reasonably
be expected to have, individually or in the aggregate, a Material
Adverse Effect (as defined in Section 9.3(h)) on Company. Company has
furnished to Parent true, complete and correct copies of the articles
of incorporation and bylaws or comparable governing documents of
Company and each Subsidiary of Company, in each case as amended to the
date of this Agreement. A true, correct and complete list of all
Subsidiaries of Company, together with the jurisdiction of
incorporation of each such Subsidiary and the percentage of each such
Subsidiary's capital stock owned by Company or another Subsidiary, is
set forth in Section 4.1(a) of the Disclosure Schedule (as defined in
Section 9.3(c)).
(b) Authority; Noncontravention; and Corporate Power.
Company has the requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Company and the
consummation by Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
Company, subject, in the case of the Merger, to the adoption of this
Agreement by its stockholders as contemplated by Section 6.3. This
Agreement has been duly executed and delivered by Company and, assuming
that this Agreement constitutes a valid and binding obligation of
Parent and Merger Sub, constitutes a valid and binding obligation of
Company, enforceable against Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally and to general principles of equity. None of
Company or its Subsidiaries is in violation of its articles of
incorporation (or the comparable governing documents) or bylaws. Except
as specified in Section 4.1(b) of the Disclosure Schedule, the
execution and delivery of this Agreement does not, and the consummation
of the transactions contemplated hereby and compliance with the
provisions hereof will not, (i) conflict with any of the provisions of
the articles of incorporation or bylaws of Company or the comparable
governing documents of any Subsidiary of Company, in each case as
amended to the date of this Agreement, (ii) subject to the governmental
filings and other matters referred to in the next following sentence,
conflict with, result in a breach of or default (with or without notice
or lapse of time, or both) under, or give rise to a material
obligation, a right of
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<PAGE> 12
termination, cancellation or acceleration of any obligation or a loss
of a material benefit under, or require the consent of any person
under, any indenture or other agreement, permit, concession, franchise,
license or similar instrument or undertaking to which Company or any of
its Subsidiaries is a party or by which Company or any of its
Subsidiaries or any of their respective assets is bound or affected, or
(iii) subject to the governmental filings and other matters referred to
in Section 4.1(c), contravene any domestic or foreign law, rule or
regulation or any order, writ, judgment, injunction, decree,
determination or award currently in effect, which, in the case of
clauses (ii) and (iii) above could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company.
(c) Consents and Approvals. No consent, approval or
authorization of, or declaration or filing with, or notice to, any
domestic or foreign court, governmental agency or regulatory authority
(a "Governmental Entity") or any other third party which has not been
received or made (or has been received or made but is not otherwise in
full force and effect) is required by or with respect to Company or any
of its Subsidiaries in connection with the execution and delivery of
this Agreement by Company or the consummation by Company of the
transactions contemplated hereby, except for (i) the filing with the
Securities and Exchange Commission (the "SEC") of (A) the Joint Proxy
Statement/Prospectus (as hereinafter defined), and (B) such reports
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as may be required in connection with this Agreement and the
transactions contemplated hereby, (ii) the approval of the Merger by
Company's stockholders, (iii) the filing of the certificate and/or
articles of merger with the Virginia Commission and the Delaware
Secretary of State and appropriate documents with the relevant
authorities of other states in which Company is qualified to do
business, (iv) such other consents, approvals, authorizations, filings
or notices as are specified in Section 4.1(c) of the Disclosure
Schedule, and (v) any other consents, approvals, authorizations,
filings or notices the failure to make or obtain which could not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Company.
(d) Capital Structure. The authorized capital stock of
Company consists solely of (i) 17,000,000 Shares and 3,000,000 shares
of preferred stock, par value $0.01 per share, of Company ("Preferred
Shares"). At the close of business on October 15, 1999, (i) 4,922,830
Shares were issued and outstanding, (ii) no Preferred Shares were
issued and outstanding, (iii) 3,306,702 Shares were subject to issuance
pursuant to outstanding options to purchase Shares pursuant to
Company's 1986 Incentive Stock Option Plan, 1992 Incentive Stock Option
Plan, 1992 Incentive Stock Option Plan-Class B, 1992 Non-Statutory
Stock Option Plan, and the 1996 Equity Incentive Plan (collectively,
the "Option Plans"). There are no outstanding options under the
Company's 1984 Incentive Stock Option Plan. Stock options granted by
Company pursuant to the Option Plans that are currently in effect or
that have been in effect and otherwise are referred to in this
Agreement are referred to herein as "Company Options." There are no
Company Options other than Company Options outstanding under the Option
Plans. Section 4.1(d) of the Disclosure Schedule sets forth the
following information with respect to each Company Option outstanding
as of the date of this Agreement: (i) the particular plan (if any)
pursuant to which such Company Option was
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<PAGE> 13
granted; (ii) the name of the optionee; (iii) the number of Shares
subject to such Company Option; (iv) the exercise price of such Company
Option; (v) the date on which such Company Option was granted; and (vi)
the extent to which such Company Option is vested and exercisable as of
October 15, 1999. All Company Options vest as set forth in Section
4.1(d) of the Disclosure Schedule. The Company has delivered to Parent
accurate and complete copies of all Option Plans pursuant to which
Company has ever granted stock options, and the forms of all stock
option agreements evidencing such options. Except as set forth in
Section 4.1(d) of the Disclosure Schedule and as otherwise contemplated
in this Agreement, there are no commitments or agreements of any nature
to which Company is bound obligating Company to accelerate the vesting
of any Company Option. Except as set forth in this Section 4.1(d), at
the close of business on October 19, 1999, no shares of capital stock
or other equity securities of Company were issued, reserved for
issuance or outstanding. All outstanding shares of capital stock of
Company are duly authorized, validly issued, fully paid and
nonassessable and are not subject to preemptive rights. Except as
specified above or in Section 4.1(d) of the Disclosure Schedule or as
contemplated by the Stockholders Agreement, neither Company nor any
Subsidiary of Company has or, at or after the Effective Time will have,
any outstanding option, warrant, call, subscription or other right,
agreement or commitment which (A) obligates Company or any Subsidiary
of Company to issue, sell or transfer, or repurchase, redeem or
otherwise acquire, any shares of the capital stock of Company or any
Subsidiary of Company, (B) restricts the transfer of any shares of
capital stock of Company or any of its Subsidiaries, or (C) relates to
the voting of any shares of capital stock of Company or any of its
Subsidiaries. No bonds, debentures, notes or other indebtedness of
Company or any Subsidiary of Company having the right to vote (or
convertible into, or exchangeable for, securities having the right to
vote) on any matters on which the stockholders of Company or any
Subsidiary of Company may vote are issued or outstanding. Except as
specified in Section 4.1(d) of the Disclosure Schedule, all the
outstanding shares of capital stock of each Subsidiary of Company have
been duly authorized and are validly issued, fully paid and
nonassessable and are owned by Company, by one or more Subsidiaries of
Company or by Company and one or more of such Subsidiaries, free and
clear of all Liens (as defined in Section 9.3(g)). Except as set forth
in Section 4.1(d) of the Disclosure Schedule, neither Company nor any
of its Subsidiaries has any contract, commitment or other obligation to
repurchase, redeem or otherwise acquire any Shares or any capital stock
of any of Company's Subsidiaries, or make any investment (whether by
loan, capital contribution or otherwise) in any person. Except as set
forth in Section 4.1(d) of the Disclosure Schedule, neither Company nor
any of its Subsidiaries owns, or has any contract, commitment or other
obligation to acquire, any other securities of any person or any direct
or indirect equity or ownership interest in any other business.
(e) SEC Documents. Company has filed all required
reports, schedules, forms, statements and other documents with the SEC
since January 28, 1997 (such reports, schedules, forms, statements and
other documents are hereinafter referred to as the "SEC Documents"). As
of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the
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<PAGE> 14
SEC Documents as of such dates contained any untrue statements 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 light
of the circumstances under which they were made, not misleading. The
consolidated financial statements of Company included in the SEC
Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
SEC with respect thereto, have been prepared in accordance with
generally accepted accounting principles (except, in the case of
unaudited consolidated quarterly statements, as permitted by Form 10-Q
of the SEC) applied on a consistent basis during the periods involved
(except as may otherwise be indicated in the notes thereto) and fairly
present the consolidated financial position of Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited quarterly statements, to normal
year-end audit adjustments).
(f) Absence of Certain Changes or Events; No Undisclosed
Material Liabilities.
(i) Except as disclosed in the SEC Documents
filed by Company and publicly available prior to the date of
this Agreement (the "Filed SEC Documents") or specified in
Section 4.1(f) of the Disclosure Schedule, since the date of
the most recent audited financial statements included in the
Filed SEC Documents, Company and its Subsidiaries have
conducted their businesses only in the ordinary course, and
there has not been: (A) any change, event or occurrence which
has had or could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on Company; (B)
any declaration, setting aside or payment of any dividend or
other distribution in respect of shares of Company's capital
stock, or any redemption or other acquisition by Company of
any shares of its capital stock; (C) any increase in the rate
or terms of compensation payable or to become payable by
Company or its Subsidiaries to their directors, officers or
key employees, except increases occurring in the ordinary
course of business consistent with past practices; (D) any
entry into, or increase in the rate or terms of, any bonus,
insurance, severance, pension or other employee or retiree
benefit plan, payment or arrangement made to, for or with any
such directors, officers or key employees, except increases
occurring in the ordinary course of business consistent with
past practices or as required by applicable law; (E) any entry
into any agreement, commitment or transaction by Company or
any of its Subsidiaries which is material to Company and its
Subsidiaries taken as a whole, except for agreements,
commitments or transactions entered into in the ordinary
course of business consistent with past practice; (F) any
change by Company in accounting methods, principles or
practices, except as required or permitted by generally
accepted accounting principles; (G) any write-off or
write-down of, or any determination to write-off or
write-down, any asset of Company or any of its Subsidiaries or
any portion thereof which write-off, write-down or
determination exceeds $50,000 individually or $100,000 in the
aggregate; (H) any announcement or implementation of any
reduction in force, lay-off, early retirement program,
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<PAGE> 15
severance program or other program or effort concerning the
termination of employment of employees of Company or its
Subsidiaries; or (I) any announcement of or entry into any
agreement, commitment or transaction by Company or any of its
Subsidiaries to do any of the things described in the
preceding clauses (A) through (H) otherwise than as expressly
provided for herein.
(ii) Except as disclosed in the Filed SEC
Documents or specified in Section 4.1(f) of the Disclosure
Schedule and liabilities incurred in the ordinary course of
business consistent with past practice since the date of the
most recent financial statements included in the Filed SEC
Documents, there are no liabilities of Company or its
Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, due, to become due, determined,
determinable or otherwise required by generally accepted
accounting principles ("GAAP") to be reflected on a
consolidated balance sheet of Company and its consolidated
Subsidiaries or in the notes, exhibits or schedules thereto,
having, or which could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on
Company.
(g) Real Property; Other Assets.
(i) Section 4.1(g)(i) of the Disclosure Schedule
sets forth all of the real property owned in fee by Company
and its Subsidiaries (the "Owned Real Property").
(ii) Company or one of its Subsidiaries has good
and marketable fee simple title to each parcel of Owned Real
Property and good and marketable title to each other asset
reflected in the latest balance sheet of Company included in
the Filed SEC Documents (other than any such other asset
disposed of or consumed in the ordinary course of business or
as specified on Section 4.1(g)(ii) of the Disclosure Schedule)
free and clear of all Liens except (A) those reflected or
reserved against in the latest balance sheet of Company
included in the Filed SEC Documents, (B) taxes and general and
special assessments not in default and payable without penalty
and interest, (C) those Liens set forth on Section 4.1(g)(ii)
of the Disclosure Schedule, and (D) such other Liens and other
imperfections of title, if any, as do not detract from the
value or materially interfere with the present use of the
property affected thereby.
(iii) Section 4.1(g)(iii) of the Disclosure
Schedule sets forth a true and complete list, and Company has
heretofore made available to Parent true, correct and complete
copies of all leases, subleases and other agreements (the
"Real Property Leases") under which Company or any of its
Subsidiaries uses or occupies or has the right to use or
occupy, now or in the future, real property or facility (the
"Leased Real Property"), including all modifications,
amendments and supplements thereto. Except as set forth in
Section 4.1(h)(iii) of the Disclosure Schedule or in each case
where the failure could not reasonably be expected to have,
individually, a Material Adverse Effect on Company:
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<PAGE> 16
(A) Company or one of its Subsidiaries has a valid and
subsisting leasehold interest in each parcel of Leased Real
Property free and clear of all Liens and each Real Property
Lease is in full force and effect; (B) all rent and other sums
and charges payable by Company or its Subsidiaries as tenants
thereunder are current in all respects; (C) no termination
event or condition or uncured default on the part of Company
or any such Subsidiary or, to Company's knowledge, the
landlord, exists under any Real Property Lease; (D) to
Company's knowledge, Company or one of its Subsidiaries is the
sole undisputed lessee of each Leased Real Property, is in
actual possession thereof and is entitled to quiet enjoyment
thereof in accordance with the terms of the applicable Real
Property Lease; and (E) no consent or approval from the lessor
under the Real Property Leases is required for the
consummation by Company of the transactions contemplated
hereby.
(iv) To Company's knowledge, each parcel of the
Owned Real Property has (A) full and unencumbered legal access
to a publicly dedicated street, (B) adequate water supply,
storm and sanitary sewage or septic facilities, telephone,
gas, and electrical facilities, and all other required public
utilities, and (C) no easements are required or necessary for
the full access and use of each parcel of Owned Real Property.
(v) To Company's knowledge, Company's, or any of
its Subsidiaries', current use of the Owned Real Property and
the Leased Real Property and the improvements and buildings
located thereon and the presently anticipated future use of
the Owned Real Property and the Leased Real Property in
connection with the operation of Company's, or any of its
Subsidiaries', business is in compliance in all material
respects and substantially conforms with all applicable zoning
and building regulation requirements.
(h) Software.
(i) Section 4.1(h)(i) of the Disclosure Schedule
sets forth under the caption "Owned Software" a true, correct
and complete list of all material computer programs (source
code or object code) which were developed for or on behalf of,
or have been purchased by, Company or any Subsidiary of
Company and which are currently used internally by Company or
which have been distributed by Company or any of its
Subsidiaries and all material computer programs under
development by Company or its Subsidiaries but not currently
distributed (collectively, the "Owned Software"), and Section
4.1(h)(i) of the Disclosure Schedule sets forth under the
caption "Licensed Software" a true, correct and complete list
of all material computer programs (source code or object code)
licensed to Company or any Subsidiary of Company by another
person which are currently used internally by Company or which
have been distributed by Company or any of its Subsidiaries,
whether as integrated or bundled with any of Company's or its
Subsidiaries' computer programs or as a separate stand-alone
product (specifically excluding any off-the-shelf computer
program that is validly
13
<PAGE> 17
and properly licensed under a shrink-wrap license)
(collectively, the "Licensed Software" and, together with the
Owned Software, the "Software").
(ii) Except as specified in Section 4.1(h)(ii) of
the Disclosure Schedule, Company, directly or through its
Subsidiaries, has good, marketable and exclusive title to, and
the valid and enforceable power and unqualified right to sell,
license, lease, transfer, use, create derivative works of, or
otherwise exploit, all versions and releases of the Owned
Software and all copyrights thereof, free and clear of all
Liens. Company, directly or through its Subsidiaries, is in
actual possession of the source code and object code for each
computer program included in the Owned Software, and Company,
directly or through its Subsidiaries, is in possession of all
other documentation, including without limitation all related
engineering specifications, program flow charts, installation
and user manuals and know-how necessary for the effective use
of the Software as currently used in Company's business or as
offered or represented to Company's customers or potential
customers. Company, directly or through its Subsidiaries, is
in actual possession of the object code and user manuals for
each computer program included in the Licensed Software. The
Software constitutes all of the computer programs necessary to
conduct Company's business as now conducted, and includes all
of the computer programs licensed or offered for license to
Company's customers and potential customers or otherwise used
in the development, marketing, licensing, sale or support of
the products and the services presently offered by Company.
Except as specified in Section 4.1(h)(ii) of the Disclosure
Schedule, no person other than Company and its Subsidiaries
has any right or interest of any kind or nature in or with
respect to the Owned Software or any portion thereof or any
rights to sell, license, lease, transfer, use or otherwise
exploit the Owned Software or any portion thereof.
(iii) Section 4.1(h)(iii) of the Disclosure
Schedule sets forth a true, correct and complete list, by
computer program, of (A) all persons other than Company and
its Subsidiaries that have been provided with the source code
or have a right to be provided with the source code (including
any such right that may arise after the occurrence of any
specified event or circumstance, either with or without the
giving of notice or passage of time or both) for any of the
Owned Software, and (B) all source code escrow agreements
relating to any of the Owned Software (setting forth as to any
such escrow agreement the source code subject thereto and the
names of the escrow agent and all other persons who are actual
or potential beneficiaries of such escrow agreement), and
identifies with specificity all agreements and arrangements
pursuant to which the execution, delivery and performance of
this Agreement or the consummation of the transactions
contemplated hereby would entitle any third party or parties
to receive possession of the source code for any of the Owned
Software or any related technical documentation. Except as
specified in Section 4.1(h)(iii) of the Disclosure Schedule,
no person (other than Company and its Subsidiaries and any
person that is a party to a contract referred to in clause (F)
of Section 4.1(k) that restricts such person from disclosing
any information concerning such source code) is in
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<PAGE> 18
possession of, or has or has had access to, any source code
for any computer program included in the Owned Software.
(iv) There are no defects in any computer program
included in the Software that would materially adversely
affect the functioning thereof in accordance with any
published specifications therefor or in accordance with any
warranties given with respect thereto. Without limiting the
generality of the foregoing, all of the Software has the
following properties and capabilities: (A) the capability to
correctly recognize and accurately process dates expressed as
a four-digit number (or the binary equivalent or other machine
readable iteration thereof) (collectively, "Four-Digit
Dates"); (B) the capability to accurately execute calculations
using Four-Digit Dates; (C) the functionality (both on-line
and batch), including entry, inquiry, maintenance and update,
to support processing involving Four-Digit Dates; (D) the
capability to generate interfaces and reports that support
processing involving Four-Digit Dates; (E) the capability to
generate and successfully transition, without human
intervention, into the year 2000 using the correct system date
and to thereafter continue processing with Four-Digit Dates;
(F) the capability to provide correct results in forward and
backward data calculations spanning century boundaries,
including the conversion of pre-2000 dates currently stored as
two-digit dates; and (G) the capability to correctly recognize
leap years, including the year 2000, and to properly process
date calculations involving or spanning leap years. Each
computer program included in the Software is in machine
readable form and contains all current revisions. Section
4.1(h)(iv) of the Disclosure Schedule sets forth a true,
correct and complete list of current claims of defects by
customers of Company or any of its Subsidiaries under
warranties or support and maintenance agreements.
(v) Except as specified in Section 4.1(h)(v) of
the Disclosure Schedule, none of the sale, license, lease,
transfer, use, reproduction, distribution, modification or
other exploitation by Company or any Subsidiary of Company of
any version or release of any computer program included in the
Software obligates or will obligate Company or any Subsidiary
of Company to pay any royalty, fee or other compensation to
any other person.
(vi) Neither Company nor any of its Subsidiaries
markets, or has marketed, and none of them have supported or
is obligated to support, any Licensed Software separate from
the Owned Software.
(vii) Except as specified in Section 4.1(h)(vii)
of the Disclosure Schedule: (A) no material agreement, license
or other arrangement pertaining to any of the Software
(including, without limitation, any development, distribution,
marketing, user or maintenance agreement, license or
arrangement) to which Company or any Subsidiary of Company is
a party will terminate or become terminable by any party
thereto as a result of the execution, delivery or performance
of this Agreement or the consummation of the transactions
contemplated hereby; and (B) all licenses covering Licensed
Software are of perpetual duration (subject to provisions
allowing Company to terminate and
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<PAGE> 19
provisions allowing the respective licensors to terminate in
the event of a breach by Company).
(i) Intellectual Property.
(i) Section 4.1(i)(i) of the Disclosure Schedule
sets forth a true, correct and complete list (including, to
the extent applicable, registration, application or file
numbers) of all patents, and all material copyrights, trade
dress, trademarks, trade names, service marks, domain names
and other material intellectual property rights, including,
without limitation, trade secrets, processes, formulae,
designs and know-how used by Company or any Subsidiary of
Company in connection with the conduct of Company's business,
and all registrations of or applications for registration of
any of the foregoing, including any additions thereto or
extensions, continuations, renewals or divisions thereof
(setting forth the registration, issue or serial number and a
description of the same) (collectively, the "Intellectual
Property"). Parent has heretofore been furnished with true,
correct and complete copies of each registration or
application for registration covering any of the Intellectual
Property or Software which is registered with, or in respect
of which any application for registration has been filed with,
any Governmental Entity.
(ii) The Intellectual Property includes all of
the material intellectual property rights owned by or licensed
by or to Company and its Subsidiaries that are necessary to
conduct Company's business as it is now conducted, and
includes all of the material intellectual property rights
owned by or licensed by or to Company and its Subsidiaries
that are used in the development, marketing, licensing or
support of the Software or are licensed by Company to, or
offered for license to, Company's customers or potential
customers. Except as specified in Section 4.1(i)(ii) of the
Disclosure Schedule, (A) Company, directly or through its
Subsidiaries, has good, marketable and exclusive title to, and
the valid and enforceable power and unqualified right to use,
the Intellectual Property free and clear of all Liens, and (B)
no person or entity other than Company and its Subsidiaries
has any right or interest of any kind or nature in or with
respect to the Intellectual Property or any portion thereof or
any rights to use, market or exploit the Intellectual Property
or any portion thereof.
(iii) For purposes of this Section 4.1(i), the
term "Intellectual Property" shall not be deemed to include
the Software, which is treated in Section 4.1(h).
(j) No Infringement. Except as specified in Section
4.1(j) of the Disclosure Schedule, neither the existence nor the sale,
license, lease, transfer, use, reproduction, distribution, modification
or other exploitation by Company, any Subsidiary of Company or any of
their respective successors or assigns of any Owned Software or
Intellectual Property (and, to Company's knowledge, the Licensed
Software), as such Software or Intellectual Property, as the case may
be, is or was, or is currently contemplated to be sold, licensed,
leased, transferred, used or otherwise exploited by such persons, does,
did or will (A) infringe on any patent, trademark, copyright or other
right of any other person,
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<PAGE> 20
(B) constitute a misuse or misappropriation of any trade secret,
know-how, process, proprietary information or other right of any other
person or a violation of any relevant agreement governing the license
of the Licensed Software to Company or its Subsidiaries, or (C) entitle
any other person to any interest therein, or right to compensation from
Company, any Subsidiary of Company or any of their respective
successors or assigns, by reason thereof, in each case, except as could
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Company. Except as specified in Section
4.1(j) of the Disclosure Schedule, neither Company nor any of its
Subsidiaries has received any complaint, assertion, threat or
allegation or otherwise has notice of any lawsuit, claim, demand,
proceeding or investigation involving matters of the type contemplated
by the immediately preceding sentence or has knowledge of any facts or
circumstances that could reasonably be expected to give rise to any
such lawsuit, claim, demand, proceeding or investigation. Except as
specified in Section 4.1(j) of the Disclosure Schedule, and except as
provided in the relevant agreements governing the license of the
Licensed Software to Company or its Subsidiaries, there are no
restrictions on the ability of Company, any Subsidiary of Company or
any of their respective successors or assigns to sell, license, lease,
transfer, use, reproduce, distribute, modify or otherwise exploit any
Software or Intellectual Property.
(k) Material Contracts. There have been made available to
Parent and its representatives true, correct and complete copies of all
of the following contracts to which Company or any of its Subsidiaries
is a party or by which any of them is bound (collectively, the
"Material Contracts"): (A) contracts with any current officer, director
or employee of Company or any of its Subsidiaries; (B) contracts
pursuant to which Company or any of its Subsidiaries licenses other
persons to use any of the Software or has agreed to support, maintain,
upgrade, enhance, modify, port, or consult with respect to any of the
Software, or pursuant to which other persons license Company or any of
its Subsidiaries to use the Licensed Software; (C) contracts (1) for
the sale of any of the assets of Company or any of its Subsidiaries,
other than contracts entered into in the ordinary course of business,
or (2) for the grant to any person of any preferential rights to
purchase any of its assets; (D) contracts by which Company has agreed
to design, develop, author or create any new custom, or customized
software for any third party; (E) contracts which restrict Company or
any of its Subsidiaries from competing in any line of business or with
any person in any geographical area or which restrict any other person
from competing with Company or any of its Subsidiaries in any line of
business or in any geographical area; (F) contracts which restrict
Company or any of its Subsidiaries from disclosing any information
concerning or obtained from any other person or which restrict any
other person from disclosing any information concerning or obtained
from Company or any of its Subsidiaries; (G) indentures, credit
agreements, security agreements, mortgages, guarantees, promissory
notes and other contracts relating to the borrowing of money; and (H)
all other agreements, contracts or instruments entered into outside of
the ordinary course of business or which are material to Company.
Except as specified in Section 4.1(k) of the Disclosure Schedule or as
could not reasonably be expected to have a Material Adverse Effect on
Company, all of the Material Contracts are in full force and effect and
are the legal, valid and binding obligation of Company and/or its
Subsidiaries, enforceable against them in accordance with their
respective terms,
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<PAGE> 21
subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies
generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at
law or in equity). Except as specified in Section 4.1(k) of the
Disclosure Schedule, neither Company nor any of its Subsidiaries is in
breach or default (with or without notice or lapse of time, or both) in
any material respect under any Material Contract nor, to the knowledge
of Company, is any other party to any Material Contract in breach or
default (with or without notice or lapse of time, or both) thereunder
in any material respect. Except as described or listed in Section
4.1(k) of the Disclosure Schedule, neither Company nor any of its
Subsidiaries is a party to any existing contract, obligation or
commitment of any type in any of the following categories: (1) any
sales contract, including any open bid or quotation, which is of an
open-end or blanket nature; (2) contracts for the purchase of
materials, supplies or equipment which have not been entered into in
the ordinary course of business and consistent with past practice or
for capital expenditures in excess of $75,000; (3) contracts with
distributors, manufacturers' representatives or sales agents, except
those which are terminable at the option of Company or any of its
Subsidiaries on 60 days' notice or less without incurring any liability
in excess of $50,000; (4) contracts under which Company or any of its
Subsidiaries has, except by way of endorsement of negotiable
instruments for collection in the ordinary course of business and
consistent with past practice, become absolutely or contingently or
otherwise liable for (aa) the performance of any other person, firm or
corporation under a contract, or (bb) the whole or any part of the
indebtedness or liabilities of any other person, firm or corporation;
(5) powers of attorney outstanding from Company or any of it
Subsidiaries other than as issued in the ordinary course of business
and consistent with past practice with respect to customs, insurance,
patent, trademark or tax matters, or to agents for service of process;
(6) contracts under which any amount payable by Company or any of its
Subsidiaries is dependent upon the revenues or profits of Company or
any of its Subsidiaries (other than employment contracts containing
bonus payment provisions dependent on Company's or any of its
Subsidiaries' financial performance which are contained in Section
4.1(k) of the Disclosure Schedule); (7) contracts with any party for
the loan of money or availability of credit to or from Company or any
of its Subsidiaries (except trade credit extended by Company or any of
its Subsidiaries to its or their customers or travel advances to its or
their employees in the ordinary course of business and consistent with
past practice); or (8) any hedging, option, derivative or other similar
transaction.
(l) Litigation, etc. Except as disclosed in the Filed SEC
Documents or as specified in Section 4.1(l) of the Disclosure Schedule,
(i) there is no suit, claim, action or proceeding (at law or in equity)
pending or, to the knowledge of Company, threatened against Company or
any of its Subsidiaries, and to the knowledge of Company, there is no
investigation pending or threatened against Company or any of its
Subsidiaries, in each case, before any court or other Governmental
Entity, (ii) neither Company nor any of its Subsidiaries is subject to
any outstanding order, writ, judgement, injunction, decree or
arbitration order or award, and (iii) to the knowledge of Company, no
event, fact or circumstance which could reasonably be expected to give
rise to a suit, claim, action, or proceeding (at law or in equity)
against Company or any of its Subsidiaries exist that, in any such case
described in clauses (i), (ii) and (iii), could reasonably be expected
to have,
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<PAGE> 22
individually or in the aggregate, a Material Adverse Effect on Company.
As of the date hereof, there are no suits, claims, actions, proceedings
or investigations pending or, to the knowledge of Company, threatened,
seeking to prevent, hinder, modify or challenge the transactions
contemplated by this Agreement.
(m) Compliance with Applicable Laws. All federal, state,
local and foreign governmental approvals, authorizations, certificates,
filings, franchises, licenses, notices, permits and rights
(collectively, "Permits") necessary for each of Company and its
Subsidiaries to own, lease or operate its properties and assets and to
carry on its business as now conducted have been obtained or made, and
there has occurred no default (with or without notice or lapse of time
or both) under any such Permit, except for the lack of Permits and for
defaults under Permits which lack or default could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on Company. Except as disclosed in the Filed SEC Documents or in
Section 4.1 (m) of the Disclosure Schedule, Company and its
Subsidiaries are in compliance with all applicable statutes, laws,
ordinances, rules, orders and regulations of any Governmental Entity,
except for non-compliance which could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on
Company.
(n) Environmental Laws. Except as specified in Section
4.1(n) of the Disclosure Schedule, to Company's knowledge: (i) neither
Company nor any of its Subsidiaries has violated or is in violation of
any Environmental Law (as defined in Section 9.3(d)); (ii) none of the
Owned Real Property or Leased Real Property (including without
limitation soils and surface and ground waters) has been or are
contaminated with any Hazardous Substance (as defined in Section
9.3(e)); (iii) neither Company nor any of its Subsidiaries is
potentially liable or liable for any off-site contamination; (iv)
neither Company nor any of its Subsidiaries has any notice of an actual
liability, remediation obligation or reporting duty under any
Environmental Law; (v) no assets of Company or any of its Subsidiaries
are subject to pending or threatened Liens under any Environmental Law;
(vi) Company and its Subsidiaries have all Permits required under any
Environmental Law ("Environmental Permits"); and (vii) Company and its
Subsidiaries are in compliance with their respective Environmental
Permits.
(o) Taxes. Except as specified in Section 4.1(o) of the
Disclosure Schedule:
(i) Except where the failure to do so could not
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Company, each of
Company and each Subsidiary of Company (and any affiliated or
unitary group of which any such person was a member) has (A)
timely filed all federal, state, local and foreign returns,
declarations, reports, estimates, information returns and
other statements of any kind ("Returns") required to be filed
by or for it in respect of any Taxes (as defined in the last
paragraph of this Section 4.1(o)) and has caused such Returns
as so filed to be true, correct and complete, (B) established
reserves that are reflected in Company's most recent financial
statements included in the Filed SEC Documents and that as so
reflected are adequate for the payment of all Taxes with
respect to the results of operations of Company and its
Subsidiaries through the date of such financial statements,
and
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<PAGE> 23
(C) timely withheld and paid over to the proper taxing
authorities all Taxes required to be so withheld and paid over
through the date hereof. Each of Company and each Subsidiary
of Company (and any affiliated or unitary group of which any
such person was a member) has timely paid all Taxes with
respect to any Returns referred to in the immediately
preceding sentence and that became due and payable on or
before the date hereof.
(ii) (A) There has been no taxable period since
1991 for which a Return of Company or any of its Subsidiaries
has been examined on audit by the Internal Revenue Service
(the "IRS") or an applicable state, local or foreign taxing
authority that remains open as of the date hereof, and (B)
except for alleged deficiencies which have been finally and
irrevocably resolved, Company has not received formal or
informal notification that any deficiency for any Taxes, the
amount of which could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on
Company, has been or will be proposed, asserted or assessed
against Company or any of its Subsidiaries by any federal,
state, local or foreign taxing authority or court with respect
to any period.
(iii) Neither Company nor any of its Subsidiaries
has (A) executed or entered into with the IRS or any other
taxing authority any agreement or other document that
continues in force and effect beyond the Effective Time and
that extends or has the effect of extending the period for
assessments or collection of any Taxes, (B) executed or
entered into with the IRS or any other taxing authority any
closing agreement or other similar agreement (nor has Company
or any of its Subsidiaries received any ruling, technical
advice memorandum or similar determination) affecting the
determination of Taxes required to be shown on any Return not
yet filed, or (C) requested any extension of time to be
granted to file after the Effective Date any Return required
by applicable law to be filed by it.
(iv) Neither Company nor any of its Subsidiaries
has made an election under Section 341(f) of the Code or
agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined
in Section 341(f)(4) of the Code) owned by Company or any of
its Subsidiaries. None of the assets of Company or any of its
Subsidiaries is required to be treated as being owned by any
other person pursuant to the "safe harbor" leasing provisions
of Section 168(f)(8) of the Internal Revenue Code of 1954 as
formerly in effect.
(v) Neither Company nor any of its Subsidiaries
is a party to, is bound by or has any obligation under any tax
sharing agreement or similar agreement or arrangement.
(vi) Company has no pending application with the
IRS under Section 481(a) of the Code requesting a change in
accounting method or otherwise.
(vii) Neither Company nor any of its Subsidiaries
is, or has been, a United States Real Property Holding
Corporation within the meaning of Section
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<PAGE> 24
897(c)(2) of the Code during the applicable period specified
in Section 897(c)(1)(A)(ii) of the Code.
(viii) Except for the group of which Company is
presently the common parent, Company has never been a member
of an affiliated group of corporations, within the meaning of
Section 1504 of the Code, and each of Company's Subsidiaries
has never been a member of an affiliated group of
corporations, within the meaning of Section 1504 of the Code,
except where Company was the common parent of such affiliated
group.
For purposes of this Agreement, "Taxes" shall mean all
federal, state, local, foreign or other jurisdiction taxes including,
but without limitation, income, property, sales, excise, employment,
payroll, franchise, withholding and other taxes, tariffs, charges,
fees, levies, imposts, duties, licenses or other assessments of every
kind and description, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority.
(p) Benefit Plans. Section 4.1(p) of the Disclosure
Schedule sets forth a true, correct and complete list of all the
employee benefit plans (as that phrase is defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) maintained or contributed to for the benefit of any current
or former employee, officer or director of Company or any of its
Subsidiaries ("Company ERISA Plans") and any other benefit or
compensation plan, program or arrangement maintained or contributed to
for the benefit of any current or former employee, officer or director
of Company or any of its Subsidiaries (Company ERISA Plans and such
other plans being referred to as "Company Plans"). Company has
furnished to Parent and its representatives a true, correct and
complete copy of every document pursuant to which each Company Plan is
established or operated (including any summary plan descriptions), a
written description of any Company Plan for which there is no written
document, and the three most recent annual reports, financial
statements and actuarial valuations with respect to each Company Plan,
if required. Except as specified in Section 4.1(p) of the Disclosure
Schedule:
(i) No member of Company Group (as defined
below) maintains, or has at any time established or
maintained, or has at any time obligated to make, or made,
contributions to or under any multiemployer plan (as defined
in Section 3(37) and Section 4001(a)(3) of ERISA).
(ii) None of Company Plans promises or provides
retiree health or life insurance benefits to any person (other
than continuation health coverage benefits under the
Consolidated Omnibus Budget Reconciliation Act).
(iii) None of Company Plans provides for payment
of a benefit, the increase of a benefit amount, the payment of
a contingent benefit or the acceleration of the payment or
vesting of a benefit by reason of the execution of this
Agreement or the consummation of the transactions contemplated
by this Agreement.
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<PAGE> 25
(iv) Neither Company nor any of its Subsidiaries
has an obligation to adopt, or is considering the adoption of,
any new Company Plan or, except as required by law, the
amendment of an existing Company Plan.
(v) The IRS has issued favorable determination
letters to the effect that each Company ERISA Plan intended to
be qualified under Section 401(a) of the Code qualifies under
Code Section 401(a) and that any related trust is exempt from
taxation under Code Section 501(a), and such determination
letters remain in effect and have not been revoked. Copies of
the most recent determination letters and any outstanding
requests for a determination letter with respect to each
Company ERISA Plan have been delivered to Parent. Except as
disclosed in Section 4.1(p) of the Disclosure Schedule, no
Company ERISA Plan has been amended since the issuance of each
respective determination letter. The Company ERISA Plans
currently comply in form with the requirements under Code
Section 401(a), other than changes required by statutes,
regulations and rulings for which amendments are not yet
required.
No issue concerning the qualification of Company
ERISA Plans is pending before or, to the knowledge of Company,
is threatened by the IRS. The Company ERISA Plans have been
administered in all material respects according to their terms
(except for those terms which are inconsistent with the
changes required by statutes, regulations, and rulings for
which changes are not yet required to be made, in which case
Company ERISA Plans have been administered in accordance with
the provisions of those statutes, regulations and rulings) and
in all material respects in accordance with the requirements
of Code Section 401(a), in each case, except as could not,
individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Company. Neither Company nor
any of its Subsidiaries or any other entities which now or in
the past constitute a single employer within the meaning of
Code Section 414 (the "Company Group") or any fiduciary of any
Company ERISA Plan has done anything that would adversely
affect the qualified status of Company ERISA Plans or the
related trusts.
Any Company ERISA Plan which is required to satisfy
Code Section 401(k)(3) and 401(m)(2) has been tested for
compliance with, and has satisfied the requirements of, Code
Section 401(k)(3) and 401(m)(2) for each plan year ending
prior to the Closing Date.
(vi) Each Company Plan has been operated in
accordance with its terms and the requirements of all
applicable law, in each case, except as could not,
individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Company.
(vii) No member of Company Group nor any other
"disqualified person" or "party in interest" (as defined in
Code Section 4975 and ERISA Section 3(14), respectively) with
respect to Company Plans, has engaged in any "prohibited
transaction" (as defined in Code Section 4975 or ERISA Section
406).
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<PAGE> 26
All members of Company Group and all "fiduciaries" (as defined
in ERISA Section 3(21)) with respect to Company Plans,
including any members of Company Group which are fiduciaries
as to a Company ERISA Plan, have complied in all respects with
the requirements of ERISA Section 404. No member of Company
Group and no party in interest or disqualified person with
respect to Company Plans has taken or omitted any action which
could lead to the imposition of an excise tax under the Code
or a fine under ERISA. Except as disclosed in the Disclosure
Schedule, no member of Company Group is subject to any
material liability, tax or penalty whatsoever to any person
whomsoever as a result of any member of Company Group engaging
in a prohibited transaction under ERISA or the Code, and
Company Group has no knowledge of any circumstances which
reasonably might result in any such material liability, tax or
penalty as a result of a breach of fiduciary duty under ERISA.
(viii) No member of Company Group maintains or has
maintained an "employee benefit pension plan" within the
meaning of ERISA Section 3(2) that is or was subject to Title
IV of ERISA or has incurred any direct or indirect liability
under, arising out of or by operation of Title IV of ERISA in
connection with the termination of, or withdrawal from, any
Company ERISA Plan or other retirement plan or arrangement,
and no fact or event exists that could reasonably be expected
to give rise to any such liability.
(ix) Each member of Company Group has made full
and timely payment of, or has accrued pending full and timely
payment, all amounts which are required under the terms of
each of Company Plans and in accordance with applicable laws
to be paid as a contribution to each Company Plan and no
excise taxes are assessable as a result of any nondeductible
or other contributions made or not made to a Company Plan. The
assets of all Company Plans which are required under
applicable laws to be held in trust are in fact held in trust,
and the assets of each such Company Plan equal or exceed the
liabilities of each such plan. The liabilities of each other
plan are properly and accurately reported on the financial
statements and records of Company. The assets of each Company
Plan are reported at their fair market value on the books and
records of each plan.
(x) There are no claims relating to Company
Plans, other than routine claims for benefits.
(xi) Each member of Company Group has complied
with the continuation coverage requirements of Section 1001 of
the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, and ERISA Sections 601 through 608. Each member of
Company Group has also complied with the portability, access,
and renewability provisions of Section K, Chapter 100 of the
Code and Section 701 et. seq. of ERISA.
(xii) Except as set forth in Section 4.1(p)(xii)
of the Disclosure Schedule, no member of Company Group is
obligated, contingently or otherwise,
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<PAGE> 27
under any agreement to pay any amount which would be treated
as a "parachute payment," as defined in Code Section 280G(b)
(determined without regard to Code Section 280G(b)(2)(A)(ii)).
(xiii) None of Company Plans provide for benefits
or other participation therein, and Company has received no
claims or demands for participation in or benefits under any
Company Plan, by any individual classified or treated by
Company as an independent contractor.
The representations and warranties set forth in this Section
4.1(p) shall be true and correct as if made with respect to the
equivalent rules and regulations governing employee benefits and
related matters in the United Kingdom and Germany.
(q) Absence of Changes in Benefit Plans. Except as
disclosed in the Filed SEC Documents or in Section 4.1(q) of the
Disclosure Schedule, since the date of the most recent audited
financial statements included in the Filed SEC Documents, neither
Company nor any of its Subsidiaries has adopted or agreed to adopt any
collective bargaining agreement or any Company Plan.
(r) Labor Matters.
(i) Except as disclosed in the Filed SEC
Documents or specified in Section 4.1(r)(i) of the Disclosure
Schedule, neither Company nor any of its Subsidiaries is a
party to any employment, labor or collective bargaining
agreement, and there are no employment, labor or collective
bargaining agreements which pertain to employees of Company or
any of its Subsidiaries. Company has heretofore delivered to
Parent true, complete and correct copies of the agreements
referred to in the previous sentence, together with all
amendments, modifications, supplements or side letters
affecting the duties, rights and obligations of any party
thereunder.
(ii) No employees of Company or any of its Subsidiaries
are represented by any labor organization and, to the
knowledge of Company, no labor organization or group of
employees of Company or any of its Subsidiaries has made a
pending demand for recognition or certification. There are no
representation or certification proceedings or petitions
seeking a representation proceeding presently pending or
threatened in writing to be brought or filed with the National
Labor Relations Board or any other labor relations tribunal or
authority and, to the knowledge of Company, there are no
organizing activities involving Company or any of its
Subsidiaries pending with any labor organization or group of
employees of Company or any of its Subsidiaries.
(iii) Except as specified in Section 4.1(r)(iii)
of the Disclosure Schedule, there are no (A) unfair labor
practice charges, grievances or complaints pending or
threatened in writing by or on behalf of any employee or group
of employees of Company or any of its Subsidiaries, or (B)
complaints, charges or claims against Company or any of its
Subsidiaries pending, or threatened in
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<PAGE> 28
writing to be brought or filed, with any Governmental Entity
or arbitrator based on, arising out of, in connection with, or
otherwise relating to the employment or termination of
employment of any individual by Company or any of its
Subsidiaries.
(s) State Takeover Statutes; Company Rights Plan. As of
the date hereof and at all times on or prior to the Effective Time, the
restrictions applicable to business combinations contained in
affiliated transactions and control share acquisitions contained in the
VSCA or any other applicable state takeover statute, are, and will be,
inapplicable to the execution, delivery and performance of this
Agreement and to the consummation of the Merger and the other
transactions contemplated by this Agreement. Prior to the execution of
the Stockholders Agreement, the Board of Directors of Company approved
the Stockholders Agreement and the transactions contemplated thereby.
The Board of Directors of Company has taken all actions so that the
Rights Agreement, dated as of July 3, 1998, between Company and First
Union National Bank, as rights agent (the "Company Rights Plan") has
been amended to (i) render Company Rights Plan inapplicable to Parent,
the Merger and the other transactions contemplated by this Agreement,
(ii) ensure that (A) none of Parent or its Subsidiaries is an Acquiring
Person (as defined in Company Rights Plan) pursuant to Company Rights
Plan by virtue of the execution of this Agreement or the Stockholders
Agreement or the consummation of the Merger or the other transactions
contemplated hereby, and (B) a Distribution Date (as such term is
defined in Company Rights Plan) does not occur, and the Rights (as such
term is defined in Company Rights Plan) will not become distributable,
nonredeemable or exercisable, by reason of the execution of this
Agreement, the Stockholders Agreement the consummation of the Merger,
or the consummation of the transactions contemplated hereby.
(t) Brokers. No broker, investment banker, financial
advisor or other person, other than U.S. Bancorp Piper Jaffray, the
fees and expenses of which will be paid by Company, is entitled to any
broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby
based upon arrangements made by or on behalf of Company.
(u) Written Opinion of Financial Advisor. Company has
received the written opinion of U.S. Bancorp Piper Jaffray, dated
October 19, 1999 (a true and complete copy of which has been delivered
to Parent by Company), to the effect that, based upon and subject to
the matters set forth therein and as of the date thereof, the Merger
Consideration is fair to the holders of Shares from a financial point
of view.
(v) Voting Requirements. The affirmative vote of the
holders of at least two-thirds of the outstanding Shares entitled to
vote at Company Stockholders Meeting (as defined in Section 6.3(a))
with respect to the adoption of this Agreement, voting together as a
single class, is the only vote of the holders of any class or series of
Company's capital stock or other securities required in connection with
the consummation by Company of the Merger and the other transactions
contemplated hereby to be consummated by Company.
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(w) Government Contracts. Section 4.1(w) of the
Disclosure Schedule lists all contracts, leases, agreements, licenses,
commitments or understandings, subcontracts, written or oral, between
Company, or any of its Subsidiaries, and a Governmental Entity
("Government Contracts"), which have not been administratively closed
out, including all labor task orders and level of effort with the
United States Government of Company or any of its Subsidiaries. The
representations and warranties in this Section 4.1(w) with respect to
Government Contracts shall take precedence over any inconsistent
representations or warranties in any other Section of Article IV of
this Agreement, and the representations and warranties of this Section
4.1(w) apply and relate only to Government Contracts to which Company
or any of its Subsidiaries is a party. Except as set forth in Section
4.1(w) of the Disclosure Schedule:
(i) Company and each of its Subsidiaries is not
nor have their predecessors been a party to any contractual
obligation or subject to any applicable law requirement
involving organizational or institutional conflicts of
interest such that would result in the termination of any
Government Contract, that would impose any material limitation
on Company's or its Subsidiaries' ability to perform such
Government Contract or to continue their business as presently
conducted, or that would impose any material limitation upon
Parent's submission of a proposal in response to any
resolicitation of any Government Contracts.
(ii) No payment has been made by Company or its
Subsidiaries or their predecessors, or to their knowledge, by
any person authorized to act on their behalf, to any person in
connection with any Government Contract of Company or its
Subsidiaries or their predecessors, in violation of applicable
United States or foreign procurement laws or regulations,
United States criminal or civil laws relating to bribes or
gratuities, or in violation of the Foreign Corrupt Practices
Act or other requirements of law.
(iii) With respect to each Government Contract to
which Company or any of its Subsidiaries is, or any of their
predecessors was, a party: (A) representations and
certifications executed, acknowledged or set forth in or
pertaining to such Government Contract were complete and
correct in all material respects as to their effective date,
and each of Company, its Subsidiaries and their predecessors
has complied in all material respects with all such
representations and certifications; (B) neither the United
States Government nor any prime contractor, subcontractor or
other person has notified Company, its Subsidiaries or their
predecessors, either orally (to Company's knowledge) or in
writing, that Company, its Subsidiaries or their predecessors
have breached or violated any applicable law, or, for any
Government Contract, any certificate, representation, clause,
provision or requirement pertaining thereto; and (C) no
termination for convenience or termination for default has
occurred within the last five years and no cure notice or show
cause notice is currently in effect pertaining to such
Government Contract.
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<PAGE> 30
(iv) To Company's knowledge, (A) neither Company,
its Subsidiaries, their predecessors nor any of their
respective directors, officers or employees is (or during the
last five years has been) under administrative, civil, or
criminal investigation or indictment by any Governmental
Entity, with respect to any alleged irregularity, misstatement
or omission arising under or relating to any Government
Contract, and (B) during the last five years, Company, its
Subsidiaries and their predecessors have not conducted or
initiated any internal investigation or made a voluntary
disclosure to the United States Government in connection with
Government Contracts.
(v) To Company's knowledge, there exists (A) no
outstanding claims against Company, its Subsidiaries or their
predecessors, either by the United States Government or by any
prime contractor, subcontractor, vendor or other third party,
arising under or relating to any Government Contract, and (B)
except as disclosed in Section 4.1(l) of the Disclosure
Schedule, no disputes between Company, its Subsidiaries or
their predecessors and the United States Government under the
Contracts Disputes Act or any other federal statute or between
Company, or its Subsidiaries or their predecessors and any
prime contractor, subcontractor or vendor arising under or
relating to any such Government Contract.
(vi) To Company's knowledge, neither Company, any
of its Subsidiaries, any of their predecessors nor any person
while serving as director, officer or employee of Company, any
of its Subsidiaries or any of their predecessors during the
last five years has been (A) suspended or debarred from doing
business with the United States Government, or (B) the subject
of a finding of nonresponsibility or ineligibility for United
States Government contracting.
(vii) Neither Company, any of its Subsidiaries,
nor any of their predecessors is, and to Company's knowledge,
no other party is, in material breach of or in default under
any Government Contract. Furthermore, (A) Company and each of
its Subsidiaries is and has been, and their predecessors were,
in compliance with all applicable law requirements pertaining
to the award and performance of Government Contracts, (B)
Company, its Subsidiaries and their predecessors have had at
all times all authorizations required in connection with the
award and performance of their Government Contracts, (C) all
of the Government Contracts were competitively awarded, and
(D) neither Company, any of its Subsidiaries nor any of their
predecessors has received any written notice of violation of
any applicable law requirement or authorization which could
result in the loss of any security clearance, the inability to
continue to perform Government Contracts or to obtain future
Government Contracts or the suspension or debarment from
government contracting. Neither Company, any of its
Subsidiaries nor any of their predecessors is subject to any
judgment, writ, decree or injunction of any Governmental
Entity relating to the award and performance of Government
Contracts or any transaction or activities incidental thereto.
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(viii) With respect to each Government Contract to
which Company or any of its Subsidiaries is or any of their
predecessors was a party: (A) all contract reporting required
to be submitted to the applicable Governmental Entity is
up-to-date, and each of Company, its Subsidiaries and their
predecessors has complied in all material respects with all
such contract reporting obligations pursuant to the applicable
laws; (B) the internal accounting system used to track costs
of operations and contract performance of Company and each of
its Subsidiaries is in full compliance with the Cost
Accounting Standards as set forth in 49 Code of Federal
Regulations, Chapter 99, and as otherwise required by
applicable laws, if required; (C) the Cost and Pricing Data
(as defined in the Federal Acquisition Regulation, 48 Code of
Federal Regulations, Chapter) previously supplied to the
applicable Governmental Entity is accurate, complete and
current; and (iv) the internal cost accounting and labor
accounting system of Company and each of its Subsidiaries is
adequate to properly allocate employee time.
(ix) With respect to each Government Contract,
there are currently no domestic civil, criminal or
administrative actions, suits, written claims, written
allegations of defective pricing, defective products and
services, cost mischarging or violations of the cost
accounting standards under any applicable law, hearings or
proceedings pending (including but not limited to those which
are likely to result in the suspension or debarment of Company
or any of its Subsidiaries from contracting with the United
States Government) or, to the knowledge of Company, threatened
against Company or any of its Subsidiaries.
(x) Company has not granted "unlimited rights"
or "Government Purpose License Rights," or any
unlimited-quantity, agency-wide, or site licenses in any of
the Software to any Governmental Entity; no Governmental
Entity has claimed such rights and none is entitled thereto.
(x) Insurance. Company has insurance policies and
fidelity bonds covering its and its Subsidiaries' assets, business,
equipment, properties, operations, employees, officers and directors of
the type and in amounts customarily carried by persons conducting
business similar to that of Company. All premiums due and payable under
all such policies and bonds have been paid, and Company is otherwise in
full compliance with the terms and conditions of all such policies and
bonds, except where the failure to have made payment or to be in full
compliance could not reasonably be expected to have a Material Adverse
Effect. The reserves established by Company in respect of all matters
as to which Company self-insures, including for workers' compensation
and workers' medical coverage, are adequate and appropriate. Section
4.1(x) of the Disclosure Schedule sets forth a true and complete list
of all insurance policies, fidelity bonds and self-insurance provisions
of Company.
(y) Business Relationships. The relationships of Company
and its Subsidiaries with their significant customers, distributors,
licensors, designers and suppliers are satisfactory in all material
respects to the Company and, to Company's knowledge, the execution of
this Agreement and the consummation of the Merger and the other
transactions contemplated hereby will not materially adversely affect
the
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relationships of Company and its Subsidiaries with such customers,
distributors, licensors, designers and suppliers.
(z) HSR Compliance. The Company is not a person (nor is
it included in a person), that has total assets of $100 million or more
or annual net sales of $100 million or more, within the meaning of, and
all as determined in accordance with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
SECTION 4.2 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB. Parent and Merger Sub represent and warrant to Company, as of the date
hereof and as of the Closing Date (unless specifically made as of another date),
as follows:
(a) Organization and Standing. Each of Parent and Merger
Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is
incorporated. Except as disclosed in Section 4.2(a) of the Disclosure
Schedule, each of Parent and Merger Sub is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary, other than
in such jurisdictions where the failure to be so qualified or licensed
could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent. Parent has furnished to
Company true, complete and correct copies of the certificates of
incorporation and bylaws of Parent and Merger Sub, in each case, as
amended to the date of this Agreement.
(b) Authority; Noncontravention; and Corporate Power.
Parent and Merger Sub have the requisite corporate power and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by
Parent and Merger Sub and the consummation by Parent and Merger Sub of
the transactions contemplated hereby have been duly authorized by the
respective Boards of Directors of Parent and Merger Sub and have been
duly approved by Parent as sole stockholder of Merger Sub and, except
for the approval by the affirmative vote of holders of the requisite
number of shares of Parent Common Stock with respect to the issuance of
Parent Common Stock in the Merger pursuant to this Agreement and the
adoption of a proposal to increase the number of Parent Common Stock
under Parent's 1997 Stock Option Plan, no other corporate proceedings
on the part of Parent or Merger Sub are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by each of Parent and
Merger Sub and, assuming this Agreement constitutes a valid and binding
obligation of Company, constitutes a valid and binding obligation of
each of Parent and Merger Sub, enforceable against each such party in
accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and to
general principals of equity. None of Parent or its Subsidiaries is in
violation of its certificate of
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incorporation or bylaws. Except as specified in Section 4.2(b) of the
Disclosure Schedule, the execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby and
compliance with the provisions of this Agreement will not (i) conflict
with any of the provisions of the certificate of incorporation or
bylaws of Parent or the certificate of incorporation or bylaws of
Merger Sub, in each case as amended to the date of this Agreement, (ii)
subject to the governmental filings and other matters referred to in
the following sentence, conflict with, result in a breach of or default
(with or without notice or lapse of time, or both) under, or give rise
to a material obligation, a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or
require the consent of any person under, any indenture, or other
agreement, permit, concession, franchise, license or similar instrument
or undertaking to which Parent or Merger Sub is a party or by which
Parent or Merger Sub or any of their respective assets is bound or
affected, or (iii) subject to the governmental filings and other
matters referred to in the following sentence, contravene any law, rule
or regulation, or any order, writ, judgment, injunction, decree,
determination or award currently in effect, which, in the case of
clauses (ii) and (iii) above, could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent.
Except as disclosed in Section 4.2(b) of the Disclosure Schedule, no
consent, approval or authorization of, or declaration or filing with,
or notice to, any Governmental Entity or third party which has not been
received or made is required by or with respect to Parent or Merger Sub
in connection with the execution and delivery of this Agreement by
Parent or Merger Sub or the consummation by Parent or Merger Sub, as
the case may be, of any of the transactions contemplated hereby, except
for (A) the filing with the SEC of the Form S-4 (as defined in Section
6.1(c)) and the declaration of effectiveness of the Form S-4 and such
reports under the Exchange Act as may be required in connection with
this Agreement and the transactions contemplated hereby, (B) the filing
of the certificate and/or articles of merger with the Virginia
Commission and the Delaware Secretary of State and appropriate
documents with the relevant authorities of other states in which
Company is qualified to do business, (C) such other consents,
approvals, authorizations, filings or notices as are specified in
Section 4.2(b) of the Disclosure Schedule, and (D) any other consents,
approvals, authorizations, filings or notices the failure to make or
obtain which could not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Parent.
(c) Capital Structures. The authorized capital stock of
Parent consists of (i) 40,000,000 shares of Common Stock, and (ii)
10,000,000 shares of preferred stock, par value $0.001 per share, of
which 21,000 shares have been designated Series A 4.0% Convertible
Redeemable Preferred Stock ("Series A Preferred Stock"). At the close
of business on October 13, 1999, (A) 8,873,791 shares of Common Stock
were issued and outstanding, (B) 21,000 shares of Series A Preferred
Stock were issued and outstanding, (C) 3,620,000 shares of Common Stock
were reserved for issuance pursuant to Parent's employee and director
benefit plans, of which options to purchase 2,570,554 shares were
outstanding, (D) 2,780,632 shares of Common Stock were reserved for
issuance pursuant to outstanding warrants, and (E) 2,100,000 shares of
Common Stock were reserved for issuance upon conversion of the Series A
Preferred Stock. Except as set forth in the immediately preceding
sentence, at the close of business on October 13, 1999, no shares of
capital stock or other equity securities of Parent were issued,
reserved for issuance or outstanding. All outstanding shares of capital
stock of Parent are, and all shares of Common Stock which may be issued
pursuant to this Agreement will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to
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preemptive rights. The authorized capital stock of Merger Sub consists
of 1,000 shares of common stock, $0.01 par value per share, 1,000 of
which have been validly issued, are fully paid, and nonassessable, and
are owned by Parent. No bonds, debentures, notes or other indebtedness
of Parent having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters
on which the stockholders of Parent may vote are issued or outstanding.
Except as set forth above, Parent does not have any outstanding option,
warrant, call, subscription or other right, agreement or commitment
which obligates Parent to issue, sell or transfer, repurchase, redeem
or otherwise acquire any shares of the capital stock of Parent.
(d) SEC Documents. Parent has filed all required reports,
schedules, forms, statements and other documents with the SEC since
January 1, 1997 (such reports, schedules, forms, statements and other
documents are hereinafter referred to as the "Parent SEC Documents").
As of their respective dates, or if amended, as of the date of such
amendment, the Parent SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Parent SEC Documents, and none of the
Parent SEC Documents as of such dates contained any untrue statements
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
light of the circumstances under which they were made, not misleading.
The consolidated financial statements of Parent included in the Parent
SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in
the case of unaudited consolidated quarterly statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may otherwise be indicated in the notes
thereto) and fairly present the consolidated financial position of
Parent and its consolidated Subsidiaries as of the dates thereof and
the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited quarterly
statements, to normal year-end audit adjustments).
(e) Absence of Certain Changes or Events. Except as
disclosed in the Parent SEC Documents filed by Parent and publicly
available prior to the date of this Agreement (the "Filed Parent SEC
Documents") or specified in Section 4.2(e) of the Disclosure Schedule,
since the date of the most recent audited financial statements included
in the Filed Parent SEC Documents, Parent and its Subsidiaries have
conducted their business only in the ordinary course consistent with
past practice, and there has not been: (i) any change, event or
occurrence which has had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent;
(ii) any declaration, setting aside or payment of any dividend or other
distribution in respect of shares of Parent's capital stock other than
regular quarterly dividends on Parent's outstanding Series A Preferred
Stock, or any redemption or other acquisition by Parent of any shares
of its capital stock; (iii) any change by Parent in accounting methods,
principles or practices, except as required or permitted by generally
accepted accounting principles; or (iv) any announcement of or entry
into any agreement, commitment or transaction by
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Parent or any of its Subsidiaries to do any of the things described in
the preceding clauses (i) through (iii) otherwise than as expressly
provided for herein.
(f) Brokers. No broker, investment banker, financial
advisor or other person, other than Advest Financial Advisors and
except as disclosed in Section 4.2(f) of the Disclosure Schedule, the
fees and expenses of which will be paid by Parent, is entitled to any
broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby
based upon arrangements made by or on behalf of Parent or Merger Sub.
(g) Interim Operations of Merger Sub. Merger Sub was
formed solely for the purpose of engaging in the transactions
contemplated hereby, has engaged in no other business activities and
has conducted its operations only as contemplated hereby.
(h) Financing. In order the finance the Merger, Parent
has obtained a commitment letter (the "Commitment Letter") from Bank
Hapoalim (the "Bank"), pursuant to which the Bank has committed,
subject to the terms and conditions thereof, to provide Parent and
Merger Sub with financing in an aggregate amount of up to $35 million
(the "Financing"), a true, complete and correct copy of which has
previously been provided to Company. Subject to the terms and
conditions of the Commitment Letter (including the conditions to
funding specified therein) and this Agreement, the Financing is
sufficient to consummate the Merger.
(i) No Undisclosed Material Liabilities. Except as
disclosed in the Parent SEC Documents and liabilities incurred in the
ordinary course of business consistent with past practice since the
date of the most recent financial statements included in the Filed
Parent SEC Documents, there are no liabilities of Parent or its
Subsidiaries of any kind whatsoever, whether accrued, contingent,
absolute, due, to become due, determined, determinable or otherwise,
required by GAAP to be reflected on a consolidated balance sheet of
Parent and its Subsidiaries or in the notes, schedules or exhibits
thereto, having, or which could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent.
(j) No Undisclosed Defaults. Except as disclosed in the
Parent SEC Documents, Parent and its Subsidiaries are not in default in
any material obligation or covenant on its part to be performed under
any lease or contract that is material to the business of Parent and
its Subsidiaries.
(k) Title to Properties. Parent or one of its
Subsidiaries has good and marketable title to each material asset
reflected in the latest balance sheet of Parent included in the Parent
SEC Documents (other than any such asset disposed of or consumed in the
ordinary course of business and any asset, the lack of good and
marketable title could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent),
free and clear of all Liens except those Liens that are reflected in
the financial statements included in the Parent SEC Documents and those
Liens that could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on Parent.
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(l) Software.
(i) Parent, directly or through its Subsidiaries, has good,
marketable and exclusive title to, and the valid and enforceable power
and unqualified right to sell, license, lease, transfer, use, create
derivative works of, or otherwise exploit, all versions and releases of
all material computer programs (source code or object code) which were
developed for or on behalf of, or have been purchased by, Parent or any
of its Subsidiaries and which are currently used internally by Parent
or which have been distributed by Parent or any of its Subsidiaries and
all material computer programs under development by Parent or its
Subsidiaries but not currently distributed ("Parent Owned Software")
and all copyrights thereof, except in such cases which, individually or
in the aggregate, could not reasonably be expected to have a Material
Adverse Effect on Parent.
(ii) Except as disclosed in Parent SEC Documents, there are no
known defects in any computer program included in the Parent Owned
Software or any material computer programs licensed to Parent or any of
its Subsidiaries ("Parent Licensed Software" and, together with Parent
Owned Software, "Parent Software") that would adversely affect the
functioning thereof in accordance with any published specifications
therefor or in accordance with any warranties given with respect
thereto or that would cause the Parent Software to fail to have the
properties and capabilities set forth in Section 4.1(h)(iv).
(m) Intellectual Property. Except as disclosed in the Parent SEC
Documents, Parent and/or one of its Subsidiaries has all material intellectual
property rights (by ownership, valid license or otherwise) that are necessary to
conduct their business as it is now conducted.
(n) No Infringement. Except as disclosed in the Parent SEC Documents,
neither the existence nor the sale, license, lease, transfer, use, reproduction,
distribution, modification or other exploitation by Parent or any Subsidiary of
Parent of any material Parent Owned Software or material intellectual property,
as such Parent Owned Software or intellectual property, as the case may be, is
sold, licensed, leased, transferred, used or otherwise exploited by such
persons, does (i) infringe on any patent, trademark, copyright or other right of
any other person, (ii) constitute a misuse or misappropriation of any trade
secret, know-how, process, proprietary information or other right of any other
person, or (iii) entitle any other person to any interest therein, or right to
compensation from Parent or any Subsidiary of Parent by reason thereof, in each
case, except as could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent.
(o) Litigation. Except as disclosed in the Filed SEC Documents or as
specified in Section 4.2(o) of the Disclosure Schedule, (i) there is no suit,
claim, action or proceeding (at law or in equity) pending or, to the knowledge
of Parent, threatened against Parent or any of its Subsidiaries, and to the
knowledge of Parent, there is no
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investigation pending or threatened against Parent or any of its Subsidiaries,
in each case, before any court or other Governmental Entity, (ii) neither Parent
nor any of its Subsidiaries is subject to any outstanding order, writ,
judgement, injunction, decree or arbitration order or award, and (iii) to the
knowledge of Parent, no event, fact or circumstance which could reasonably be
expected to give rise to a suit, claim, action or proceeding (at law or in
equity) against Parent or any of its Subsidiaries exist that, in any such case
described in clauses (i), (ii) and (iii) could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent. As of the
date hereof, there are no suits, claims, actions or proceedings pending or, to
the knowledge of Parent, threatened, seeking to prevent, hinder, modify or
challenge the transactions contemplated by this Agreement.
(p) Compliance with Applicable Laws. Except as disclosed in the Parent
SEC Documents, all Permits necessary for each of Parent and its Subsidiaries to
own, lease or operate its properties and assets and to carry on its business as
now conducted have been obtained or made, and there has occurred no default
(with or without notice or lapse of time or both) under any such Permit, except
for the lack of Permits and for defaults under Permits which lack or default
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent. Except as disclosed in the Parent SEC
Documents, Parent and its Subsidiaries are in compliance with all applicable
statutes, laws, ordinances, rules, orders and regulations of any Governmental
Entity, except for non-compliance which could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Parent.
(q) Taxes. Except as set forth in the Parent SEC Documents, as of the
date of this Agreement, Parent and each of its Subsidiaries has filed all Tax
returns and reports required to be filed by it and has paid all Taxes with
respect to such Returns (as defined in Section 4.1(o)), and the most recent
financial statements contained in the Filed SEC Documents reflect an adequate
reserve for all Taxes of the Parent and its Subsidiaries for all taxable periods
and portions thereof through the date of such financial statements. As of the
date of this Agreement, no material deficiencies for any Taxes have been
proposed, asserted or assessed against the Parent or its Subsidiaries, nor is
there, to the knowledge of the Parent after reasonable inquiry, any reasonable
basis for the assertion of any such deficiency. No requests for waivers of the
time to assess any such Taxes are pending as of the date of this Agreement.
Proper amounts have been withheld by the Parent and its Subsidiaries from
employee compensation payments for all periods in compliance with the Tax
withholding provisions of applicable laws, except where the failure to withhold
proper amounts could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Parent or its Subsidiaries. As
of the date of this Agreement, none of the federal income tax Returns of Parent
or its Subsidiaries have been examined by the IRS for the fiscal years through
December 31, 1998. Parent has not taken any action nor does it have any
knowledge of any fact or circumstance that is reasonably likely to prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code.
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(r) Benefit Plans. Except as disclosed in the Parent SEC
Documents, with respect to all material employee benefit plans (as
defined in ERISA) maintained or contributed to for the benefit of any
current or former employee, officer or director of Parent or any of its
Subsidiaries ("Parent ERISA Plans") and any other material benefit or
compensation plan, program or arrangement maintained or contributed to
for the benefit of any current or former employee, officer or director
of the Parent or any of its Subsidiaries (Parent ERISA Plans and such
other plans being referred to as "Parent Plans") are in material
compliance with ERISA and the Code, if applicable, and such Parent
Plans have been operated in material compliance with ERISA and the Code
and any Parent Plan intended to be so qualified under Section 401(a) of
the Code has been determined by the IRS to be so qualified and, to the
Company's knowledge, nothing has occurred to cause the loss of such
qualified status.
(s) HSR Compliance. The Parent is not a person (nor is it
included in a person), that has total assets of $100 million or more or
annual net sales of $100 million or more, within the meaning of, and
all as determined in accordance with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
ARTICLE V
CONDUCT OF BUSINESS OF COMPANY
SECTION 5.1 CONDUCT OF BUSINESS OF COMPANY. Except as expressly
provided for herein (including, without limitation, Section 6.9 hereof relating
to Company Options), during the period from the date of this Agreement to the
Effective Time, Company shall, and shall cause each of its Subsidiaries to, act
and carry on its business only in the ordinary course of business consistent
with past practice and, to the extent consistent therewith, use reasonable best
efforts to preserve intact its current business organizations, keep available
the services of its current key officers and employees and preserve the goodwill
of those engaged in material business relationships with Company, and to that
end, without limiting the generality of the foregoing, Company shall not, and
shall not permit any of its Subsidiaries to, without the prior written consent
of Parent:
(a) (i) declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, securities or other property)
in respect of, any of its outstanding capital stock (other than, with
respect to a Subsidiary of Company, to its corporate Parent), (ii)
split, combine or reclassify any of its outstanding capital stock or
issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its outstanding capital
stock, or (iii) purchase, redeem or otherwise acquire any shares of its
outstanding capital stock or any rights, warrants or options to acquire
any such shares, except, in the case of this clause (iii), for the
acquisition of Shares from holders of Company Options in full or
partial payment of the exercise price payable by such holder upon
exercise of Company Options;
(b) issue, sell, grant, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any
securities convertible into or exchangeable for, or any rights,
warrants or options to acquire, any such shares, voting securities or
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convertible or exchangeable securities, other than upon the exercise of
Company Options outstanding on the date of this Agreement;
(c) amend its articles of incorporation, bylaws or other
comparable charter or organizational documents;
(d) directly or indirectly acquire, make any investment in, or
make any capital contributions to, any person other than in the
ordinary course of business consistent with past practice;
(e) directly or indirectly sell, pledge or otherwise dispose
of or encumber any of its properties or assets that are material to its
business, except for sales, pledges or other dispositions or
encumbrances in the ordinary course of business consistent with past
practice;
(f) (i) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person, other than indebtedness owing
to or guarantees of indebtedness owing to Company or any direct or
indirect wholly owned Subsidiary of Company, or (ii) make any loans or
advances to any other person, other than to Company or to any direct or
indirect wholly owned Subsidiary of Company and other than routine
travel advances to employees or customer trade credit consistent with
past practice, except, in the case of clause (i), for borrowings under
existing credit facilities described in the Filed SEC Documents in the
ordinary course of business consistent with past practice;
(g) grant or agree to grant to any officer, employee or
consultant any increase in wages or bonus, severance, profit sharing,
retirement, deferred compensation, insurance or other compensation or
benefits, or establish any new compensation or benefit plans or
arrangements, or amend or agree to amend any existing Company Plans,
except as may be required under existing agreements or by law and
normal, regularly scheduled increases in respect of non-officer
employees consistent with past practices;
(h) enter into or amend any employment, consulting, severance
or similar agreement with any individual, except with respect to new
hires of nonofficer employees in the ordinary course of business
consistent with past practice;
(i) adopt or enter into a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other material reorganization or any agreement
relating to an Acquisition Proposal (as defined in Section 6.3);
(j) make any tax election or settle or compromise any income
tax liability of Company or of any of its Subsidiaries involving on an
individual basis more than $50,000;
(k) make any change in any method of accounting or accounting
practice or policy, except as required by any changes in generally
accepted accounting principles;
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(l) enter into any agreement, understanding or commitment that
restrains, limits or impedes Company's ability to compete with or
conduct any business or line of business, except for any such
agreement, understanding or commitment entered into in the ordinary
course of business consistent with past practice;
(m) plan, announce, implement or effect any reduction in
force, lay-off, early retirement program, severance program or other
program or effort concerning the termination of employment of employees
of Company or its Subsidiaries;
(n) except as previously approved by the Board of Directors of
Company prior to the date hereof and as identified to Parent prior to
the date hereof, authorize or commit to make capital expenditures in
excess of $75,000;
(o) amend the Company Rights Plan except as required by this
Agreement; or
(p) authorize any of, or commit or agree to take any of, the
foregoing actions in respect of which it is restricted by the
provisions of this Section 5.1.
ARTICLE VI
ADDITIONAL COVENANTS
SECTION 6.1 PREPARATION OF THE JOINT PROXY STATEMENT/PROSPECTUS AND
FORM S-4. As soon as practicable following the date hereof:
(a) Company and Parent shall jointly prepare for inclusion in
the Form S-4 a joint proxy statement/prospectus (the "Joint Proxy
Statement/Prospectus") relating to the Merger in accordance with the
Securities Act and the Exchange Act and the rules and regulations under
the Securities Act and the Exchange Act, with respect to the
transactions contemplated hereby. Company, Parent and Merger Sub shall
cooperate with each other in the preparation of the Joint Proxy
Statement/Prospectus. Company and Parent shall use all reasonable
efforts to respond promptly to any comments made by the SEC with
respect to the Joint Proxy Statement/Prospectus, to cause the Form S-4
to be declared effective under the Securities Act as promptly as
practicable after the filing thereof with the SEC and to cause the
Joint Proxy Statement/Prospectus to be mailed to the stockholders of
Parent and Company at the earliest practicable date after the Form S-4
is declared effective by the SEC.
(b) Parent shall prepare and file with the SEC the Form S-4.
Each of Company and Parent shall use all reasonable efforts to have the
Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing. Parent shall also take any action (other
than qualifying to do business in any jurisdiction in which it is not
now so qualified) required to be taken under any applicable state
securities laws in connection with the issuance of Common Stock in the
Merger, and Company shall furnish all information concerning Company
and the holders of the Shares as may be reasonably requested in
connection with any such action.
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(c) The Company agrees that none of the information supplied
or to be supplied by Company specifically for inclusion or
incorporation by reference in, or which may be deemed to be
incorporated by reference in, (i) the registration statement on Form
S-4 to be filed with the SEC by Parent in connection with the issuance
by Parent of shares of Common Stock in the Merger (the "Form S-4")
will, at the time the Form S-4 becomes effective under the Securities
Act and at any time thereafter it is amended or supplemented, contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading, or (ii) the Joint Proxy Statement/Prospectus
will, at the time it is mailed to the stockholders of each of Company
and Parent, and at any time thereafter it is amended or supplemented,
and at the time of the Company Stockholders Meeting and Parent
Stockholders Meeting, 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, at the time and in
light of the circumstances under which they are made, not misleading.
The Company agrees that the Joint Proxy Statement/Prospectus will
comply as to form in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations
thereunder, except with respect to statements made or incorporated by
reference therein based on information supplied by Parent or Merger Sub
specifically for inclusion or incorporation by reference therein, or
which may be deemed to be incorporated by reference therein.
(d) Parent and Merger Sub each agrees that none of the
information supplied or to be supplied by Parent or Merger Sub for
inclusion or incorporation by reference in, or which may be deemed to
be incorporated by reference in, (i) the Form S-4 will, at the time the
Form S-4 becomes effective under the Securities Act and at anytime
thereafter it is amended or supplemented, contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, or (ii) the Joint Proxy Statement/Prospectus will, at the
time it is mailed to the stockholders of each of Parent and Company and
at any time thereafter it is amended or supplemented, and at the time
of the Company Stockholders Meeting and Parent Stockholder Meeting,
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, at the time and in light of the
circumstances under which they are made, not misleading. Parent and
Merger Sub each agrees that the Form S-4 and the Joint Proxy
Statement/Prospectus will comply as to form in all material respects
with the requirements of the Securities Act and the Exchange Act and
the rules and regulations thereunder, except with respect to statements
made or incorporated by reference therein based on information supplied
by Company specifically for inclusion or incorporation by reference
therein, or which may be deemed to be incorporated by reference
therein.
SECTION 6.2 ACCOUNTANTS' LETTERS.
(a) Company shall use its best efforts to cause to be
delivered to Parent a "comfort" letter of PricewaterhouseCoopers LLP,
Company's independent public accountants, dated a date within two
business days before the date on which the Form S-4
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shall become effective, and a "comfort" letter of
PricewaterhouseCoopers LLP, dated a date within two business days
before the Closing Date, each addressed to Company and Parent, related
to the performance by PricewaterhouseCoopers LLP of its procedures with
respect to the financial statements and other financial information
contained in or incorporated by reference in the Form S-4, in form and
substance reasonably satisfactory to Parent and customary in scope and
substance for letters delivered by independent accountants in
connection with registration statements similar to the Form S-4.
(b) Parent shall use its best efforts to cause to be delivered
to Company a "comfort" letter of PricewaterhouseCoopers LLP, Parent's
independent public accountants, dated a date within two business days
before the date on which the Form S-4 shall become effective, and a
"comfort" letter of PricewaterhouseCoopers LLP, dated a date within two
business days before the Closing Date, each addressed to Company and
Parent, relating to the performance by PricewaterhouseCoopers LLP of
its procedures with respect to the financial statements and other
financial information of Parent contained in or incorporated by
reference in the Form S-4, in form and substance reasonably
satisfactory to Company and customary in scope and substance for
letters delivered by independent accountants in connection with
registration statements similar to the Form S-4.
SECTION 6.3 STOCKHOLDERS MEETING; BOARD RECOMMENDATION.
(a) Company shall take all action necessary, in accordance
with the VSCA, the Exchange Act and other applicable law and its
articles of incorporation and bylaws, to convene and hold a special
meeting of the stockholders of Company (the "Company Stockholders
Meeting") as promptly as practicable after the date hereof for the
purpose of considering and voting upon this Agreement and to solicit
proxies pursuant to the Joint Proxy Statement/Prospectus in connection
therewith. Company shall ensure that the Company Stockholders Meeting
is called, noticed, convened, held and conducted, and that all proxies
solicited in connection with the Company Stockholders Meeting are
solicited, in compliance with all applicable legal requirements.
Notwithstanding Section 6.3(c), Company's obligation to call, give
notice of, convene and hold the Company Stockholders Meeting in
accordance with this Section 6.3(a) shall not be limited or otherwise
affected by the commencement, disclosure, announcement or submission of
any Superior Offer (as defined below) or other Acquisition Proposal (as
defined below), or by any withdrawal, amendment or modification of the
recommendation of the Board of Directors of Company with respect to the
Merger.
(b) Subject only to Section 6.3(c) hereof: (i) the Board of
Directors of Company shall unanimously recommend that Company's
stockholders vote in favor of and adopt and approve this Agreement and
approve the Merger at the Company Stockholders Meeting; (ii) the Joint
Proxy Statement/Prospectus shall include a statement to the effect that
the Board of Directors of Company has unanimously recommended that
Company's stockholders vote in favor of and adopt and approve this
Agreement and approve the Merger at the Company Stockholders Meeting;
and (iii) neither the Board of Directors of Company nor any committee
thereof shall withdraw, amend or modify, or
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propose or resolve to withdraw, amend or modify, in a manner adverse to
Parent, the unanimous recommendation of the Board of Directors of
Company that Company's stockholders vote in favor of and adopt and
approve this Agreement and approve the Merger. For purposes of this
Agreement, said recommendation of the Board of Directors of Company
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 6.3(b) shall prevent the Board of
Directors of Company from withdrawing, amending or modifying its
unanimous recommendation in favor of the Merger at any time prior to
the adoption and approval of this Agreement by Company's stockholders
if (i) a Superior Offer is made to Company and is not withdrawn, (ii)
neither Company nor any of its directors, officers, affiliates, or
legal or financial advisors ("Representatives") shall have violated any
of the covenants set forth in this Section 6.7, (iii) the Board of
Directors of Company concludes in good faith, after and based upon
consultation with 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 Company to comply
with its fiduciary obligations to Company's stockholders under
applicable law, and (iv) Company provides Parent with at least five
business days prior written notice of any meeting or written consent of
Company's Board of Directors at which such Board of Directors is
expected to consider or act upon such Superior Offer, which notice
shall include a copy of such Superior Offer with the name of the person
making such Superior Offer.
(d) For purposes of this Agreement, "Acquisition Proposal"
means an inquiry, offer or proposal regarding any of the following
(other than the transactions contemplated by this Agreement) involving
Company or its Subsidiaries: (i) any merger, reorganization,
consolidation, share exchange, recapitalization, business combination,
liquidation, dissolution, or other similar transaction involving, or,
any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of, all or any significant portion of the assets or 20% or
more of the equity securities of, Company or any of its Subsidiaries,
in a single transaction or series of related transactions which could
reasonably be expected to interfere with the completion of the Merger;
(ii) any tender offer or exchange offer for 20% or more of the
outstanding shares of capital stock of Company or the filing of a
registration statement under the Securities Act in connection
therewith; or (iii) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any
of the foregoing.
(e) For purposes of this Agreement, a "Superior Offer" means
an unsolicited, bona fide written offer with respect to an Acquisition
Proposal made by a third person that the Board of Directors of Company
determines in its good faith judgment (based upon the written advice of
its financial advisor and a copy of which shall have been provided to
Parent) to be more favorable generally to Company's stockholders than
the Merger, taking into account all financial and strategic
considerations, including relevant legal, financial, regulatory and
other aspects of such proposal, and the conditions to and prospects for
completion of such proposal than the Merger; provided, however, that
any such offer shall not be deemed to be a "Superior Offer" if any
financing required to
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complete the transaction contemplated by such offer is not fully
committed unless, in the good faith determination of the Board of
Directors of Company, such financing is likely to be obtained by such
party on a timely basis.
(f) Nothing contained in this Section 6.3 shall prohibit
Company from taking and disclosing to its stockholders a position
contemplated by Rule 14d-9 or Rule 14e-2 promulgated under the Exchange
Act or from making any disclosure to Company's stockholders which, in
the good faith judgment of the Board of Directors of Company after
consultation with outside counsel, is required under applicable law;
provided that Company does not withdraw or modify, or propose to
withdraw or modify, its position with respect to the Merger or approve
or recommend, or propose to approve or recommend, an Acquisition
Proposal unless Company and its Board of Directors have complied with
all the provisions of this Article VI.
SECTION 6.4 ACCESS TO INFORMATION, CONFIDENTIALITY.
(a) Upon reasonable notice, Company shall, and shall cause
each of its Subsidiaries to, afford to Parent and to Parent's officers,
employees, counsel, financial advisors and other representatives access
during the period prior to the Effective Time to all its properties,
books, contracts, commitments, Returns, personnel and records and,
during such period, Company shall, and shall cause each of its
Subsidiaries to, furnish as promptly as practicable to Parent such
information concerning its business, properties, financial condition,
operations and personnel as Parent may from time to time reasonably
request. Any such investigation by Parent shall not affect the
representations or warranties contained in this Agreement. Except as
required by law, Parent will hold, and will cause its directors,
officers, employees, accountants, counsel, financial advisors and other
representatives and affiliates to hold, any non-public information
obtained from Company in confidence to the extent required by, and in
accordance with the provisions of, the letter agreement dated August
17, 1999, between Parent and Company with respect to confidentiality
and other matters, and Parent agrees that, prior to the Effective Time,
it will not use any such non-public information to, directly or
indirectly, divert or attempt to divert any business, customer or
employee of Company or any of its Subsidiaries.
(b) Upon reasonable notice, Parent shall, and shall cause each
of its Subsidiaries to, afford to Company and to Company's officers,
employees, counsel, financial advisors and other representatives access
during the period prior to the Effective Time to all its properties,
books, contracts, commitments, Returns, personnel and records and,
during such period, Parent shall, and shall cause each of its
Subsidiaries to, furnish as promptly as practicable to Company such
information concerning its business, properties, financial condition,
operations and personnel as Company may from time to time reasonably
request. Any such investigation by Company shall not affect the
representations or warranties contained in this Agreement. Except as
required by law, Company will hold, and will cause its directors,
officers, employees, accountants, counsel, financial advisors and other
representatives and affiliates to hold, any non-public information
obtained from Parent in confidence to the extent required by, and in
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accordance with the provisions of, the letter agreement, dated August
17, 1999, between Parent and Company with respect to confidentiality
and other matters, and Company agrees that, prior to the Effective
Time, it will not use any such non-public information to, directly or
indirectly, divert or attempt to divert any business, customer or
employee of Parent or any of its Subsidiaries.
SECTION 6.5 REASONABLE BEST EFFORTS. On the terms and subject to the
conditions set forth in this Agreement, each of the Parties shall use its
reasonable best efforts to take, or cause to be taken, all actions, and do, or
cause to be done, and assist and cooperate with the other Parties in doing, all
things necessary, proper or advisable (a) to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated hereby, including the satisfaction of the respective conditions set
forth in Article VII, (b) to facilitate the ability of Parent and the Surviving
Corporation to obtain facility security clearances from the appropriate
Government Entities for each of Company's facilities currently having such
facility security clearances and appropriate security clearances for personnel
of the Surviving Corporation, (c) to avoid the termination for convenience by
any Governmental Entity or non-renewal of any Government Contract, and (d) to
maintain Company's current customer relationships.
SECTION 6.6. PUBLIC ANNOUNCEMENTS. Parent and Merger Sub, on the
one hand, and Company, on the other hand, shall consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
press release, SEC filing (including without limitation the Form S-4 and the
Joint Proxy Statement/Prospectus) or other public statements with respect to the
transactions contemplated hereby, including the Merger, and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by applicable law, by court process or by obligations
pursuant to the rules of The Nasdaq Stock Market.
SECTION 6.7. NO SOLICITATION; ACQUISITION PROPOSALS.
(a) From the date of this Agreement until the earlier of the
Effective Time or termination of this Agreement pursuant to Article
VIII and subject only to Section 6.7(b) of this Agreement, Company
shall not directly or indirectly, and shall not authorize or permit any
Representative of Company directly or indirectly to:
(i) solicit, initiate, knowingly encourage or knowingly
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 non-public information regarding
Company to any person in connection with or in response to an
Acquisition Proposal;
(iii) engage in discussions or negotiations with any
person with respect to any Acquisition Proposal;
(iv) approve, endorse or recommend any Acquisition
Proposal; or
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(v) enter into any letter of intent or similar document or
any contract, agreement, commitment or understanding, written or oral,
contemplating or otherwise relating to any Acquisition Proposal.
Without limiting the generality of the foregoing, Company
acknowledges and agrees that any violation of any of the restrictions
set forth in this Section by any Representative of Company, whether or
not such Representative is purporting to act on behalf of Company,
shall be deemed to constitute a breach of this Section 6.7 by Company.
In addition to the foregoing, Company shall provide Parent with at
least five business days prior written notice of any meeting of
Company's Board of Directors at which Company's Board of Directors is
reasonably expected to consider a Superior Offer.
Nothing in this Section 6.7(a) shall prevent the Company from
filing with the SEC a report on Form 8-K with respect to this
Agreement.
(b) Nothing in Section 6.7(a) shall prevent Company, prior to
the adoption and approval of this Agreement by Company's stockholders,
from furnishing non-public information regarding Company to, or
entering into discussions with, any person in response to a Superior
Offer that is submitted by such person and not withdrawn if, in either
case:
(i) neither Company nor any Representative of Company
shall have breached any of the covenants set forth in this
Section 6.7;
(ii) the Board of Directors of Company concludes in
good faith, after and based upon consultation with its outside
legal counsel, that such action is required in order for the
Board of Directors of Company to comply with its fiduciary
obligations to Company's stockholders under applicable law;
(iii) at least five business days prior to furnishing
any such non-public information to, or entering into
discussions with, such person, Company gives Parent written
notice of the discussions with such person;
(iv) Company receives from such person an executed
confidentiality agreement containing customary limitations on
the use and disclosure of all non-public written and oral
information furnished to such person by or on behalf of
Company, including standstill provisions no less favorable to
Company then such agreements between Company and Parent; and
(v) five business days prior to furnishing any such
non-public information to such person, Company furnishes such
non-public information to Parent or, if such non-public
information has previously been provided to Parent,
specifically identifies the non-public information to be
furnished to such third party.
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(c) Company shall promptly (and in any event, within 24 hours)
advise Parent orally and in writing of any request for information or
of any Acquisition Proposal, or any inquiry with respect to or which
could reasonably be expected to lead to any Acquisition Proposal, the
material terms and conditions of such request, Acquisition Proposal or
inquiry, and the identity of the person making any such Acquisition
Proposal or inquiry. Company shall keep Parent fully informed of the
status and details of any such request, Acquisition Proposal or
inquiry.
SECTION 6.8 CONSENTS, APPROVALS AND FILINGS. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall (a) make
promptly its respective filings, and thereafter make any other required
submissions under the Securities Act and the Exchange Act, with respect to the
Merger and the other transactions contemplated hereby, and (b) use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, and assist and cooperate with the other Parties
in doing, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the Merger and the other
transactions contemplated hereby, including without limitation using its
reasonable best efforts to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of Governmental Entities and parties
to contracts with Company and its Subsidiaries as are necessary for the
consummation of the Merger and the other transactions contemplated hereby and to
fulfill the conditions to the Merger; provided, however, that in no event shall
Parent or any of its Subsidiaries be required to agree or commit to divest, hold
separate, offer for sale, abandon, limit its operation or similar action with
respect to any material assets (tangible or intangible) or any business interest
of it or any of its Subsidiaries (including, without limitation, the Surviving
Corporation after consummation of the Merger) in connection with or as a
condition to receiving the consent or approval of any Governmental Entity
(including, without limitation, under the HSR Act). In case at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of each party to
this Agreement shall use their reasonable best efforts to take all such action.
SECTION 6.9 COMPANY OPTIONS.
(a) Company shall use its best efforts (without the
expenditure of funds) to encourage all holders of Company Options to
exercise their vested Company Options prior to the Effective Time. To
the extent that Parent in its discretion deems it appropriate to grant
options to purchase Parent Common Stock ("Parent Options") as of the
Effective Time to a person holding Company Options prior to the
Effective Time, Company shall use its best efforts (without the
expenditure of funds) to encourage such holder of Company Options to
accept the Parent Options on the terms and conditions proposed by
Parent and agree to forfeit and cancel all unexercised Company Options
held by such holder as of the Effective Time. Parent agrees to identify
to Company the holders of Company Options to be granted Parent Options
contingent upon the cancellation of Company Options as of the Effective
Time, and the material terms of the Parent Options to be granted,
sufficiently prior to the Effective Time to communicate this
information to the holders of such Company Options.
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(b) Subject to the terms of this Agreement, at the Effective
Time, all remaining rights with respect to Shares of Company under each
Company Option then outstanding, whether vested or unvested, 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
terms (as in effect as of the date of this Agreement) 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 subject to such Company Option immediately prior to the
Effective Time multiplied by the Option Exchange Ratio (as defined
below), rounded down to the nearest whole 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
Option Exchange Ratio and rounded 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 6.9(b) shall, in accordance with
its terms, be subject to further adjustment as appropriate to reflect
any stock split, division or subdivision of shares, stock dividend,
reverse stock split, consolidation of shares, reclassification,
recapitalization or other similar transaction subsequent to the
Effective Time. For purposes of this Section, "Option Exchange Ratio"
means the ratio of (x) the sum of $4.00, plus the product of the
Exchange Ratio multiplied by the Average Trading Price, divided by (y)
the Average Trading Price.
(c) 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 6.9 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 6.9. Following the Closing Date,
Parent will send to each holder of an assumed Company Option a written
notice setting forth (i) the number of shares of Parent Common Stock
subject to each assumed Company Option and (ii) the exercise price per
share of Parent Common Stock issuable upon exercise of the assumed
Company Option. It is the intention of the Parties that the Company
Options assumed by Parent qualify following the Effective Time as
incentive stock options (as defined in Section 422 of the Code) to the
extent that such Company Options qualified as incentive stock options
immediately prior to the Effective Time. Parent shall take all
necessary corporate action to reserve for issuance a sufficient number
of shares of Parent Common Stock for delivery upon exercise of Company
Options assumed in accordance with this Section 6.9. Within 60 days
following the Effective Time, Parent shall file with the SEC a
registration statement on Form S-8 relating to the shares of Parent
Common Stock issuable with respect to Company Options assumed by Parent
in accordance with this Section 6.9.
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SECTION 6.10 EMPLOYEE BENEFIT MATTERS.
(a) Participants in any Company Plans that have been disclosed
in Section 4.1(p) of the Disclosure Schedule and are in effect at the
Effective Time will continue to be sponsored by and maintained without
material change (except as required by law) by the Parent and Surviving
Corporation until such time as those Company Plans are merged into
Parent's benefit plans or the participants in the Company Plan
otherwise become covered under the Parent's benefit plans. Parent
shall, and shall cause its Subsidiaries following the Effective Time
(including the Surviving Corporation) to, honor and provide for prompt
payment of all accrued obligations and benefits under all Company Plans
and employment or severance agreements between Company and persons who
are or had been employees of Company or any of its Subsidiaries at or
prior to the Effective Time ("Covered Employees") that are specifically
identified in the Disclosure Schedule, all in accordance with their
respective terms.
(b) If Covered Employees are included in any benefit plan of
Parent or its Subsidiaries, Parent agrees that the Covered Employees
shall receive credit under such plan (other than any such plan
providing for sabbaticals) for service prior to the Effective Time with
Company and its Subsidiaries to the same extent such service was
counted under similar Company Plans for purposes of eligibility,
vesting, eligibility for retirement (but not for benefit accrual) and,
with respect to vacation, disability and severance, benefit accrual. If
Covered Employees are included in any medical, dental or health plan
other than the plan or plans they participated in at the Effective
Time, Parent agrees that any such plans shall not include pre-existing
condition exclusions, except to the extent such exclusions were
applicable under the similar Company Plan at the Effective Time, and
shall provide credit for any deductibles and co-payments applied or
made with respect to each Covered Employee in the calendar year of the
change.
(c) Notwithstanding anything in this Agreement to the
contrary, from and after the Effective Time, the Surviving Corporation
will have sole discretion over the hiring, promotion, retention, firing
and other terms and conditions of the employment of employees of the
Surviving Corporation. Except as otherwise provided in this Section
6.10, nothing herein shall prevent Parent or the Surviving Corporation
from amending or terminating any Company Plan in accordance with its
terms.
SECTION 6.11 AFFILIATES AND CERTAIN STOCKHOLDERS. Prior to the Closing
Date, Company shall deliver to Parent a letter identifying all persons who are,
at the time the Merger is submitted for approval to the stockholders of Company,
"affiliates" of Company for purposes of Rule 145 under the Securities Act.
Company shall use its best efforts to cause each such person to deliver to
Parent on or prior to the Closing Date a written agreement substantially in the
form attached as Exhibit A hereto. Parent shall not be required to maintain the
effectiveness of the Form S-4 or any other registration statement under the
Securities Act for the purposes of resale of Common Stock by such affiliates,
and the certificates representing Common Stock received by such affiliates in
the Merger shall bear a customary legend regarding applicable Securities Act
restrictions.
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SECTION 6.12 NASDAQ LISTING. Parent shall use its best efforts to cause
the shares of Common Stock to be issued in the Merger to be approved for listing
on The Nasdaq Stock Market, subject to official notice of issuance, prior to the
Closing Date.
SECTION 6.13 RIGHTS AGREEMENT. The Board of Directors of Company shall
take all further action (in addition to that referred to in Section 4.1(s))
requested in writing by Parent in order to render the Rights inapplicable to (a)
the Merger and the other transactions contemplated by this Agreement and the
Stockholders Agreement, and (b) Company following the Effective Time. Except as
provided above with respect to the Merger and the other transactions
contemplated by this Agreement and the Stockholders Agreement, the Board of
Directors of Company shall not, without the consent of Parent (i) amend the
Rights Agreement, or (ii) take any action with respect to, or make any
determination under, the Rights Agreement, including a redemption of the rights
or any action to facilitate an Acquisition Proposal.
SECTION 6.14 INDEMNIFICATION AND INSURANCE.
(a) From and after the Effective Time, Parent will cause the
Surviving Corporation to fulfill and honor in all respects the
obligations of Company pursuant to (i) each indemnification agreement
currently in effect between Company and each person who is or was a
director or officer of Company at or prior to the Effective Time and
(ii) any indemnification provision under Company's articles of
incorporation or bylaws as each is in effect on the date hereof (the
persons to be indemnified pursuant to the agreements or provisions
referred to in clauses (i) and (ii) of this Section 6.14 shall be
referred to as, collectively, the "Indemnified Parties"). The
certificate of incorporation and bylaws of Merger Sub will provide for
indemnification to the fullest extent permitted by law.
(b) For six years after the Effective Time, Parent shall
maintain in effect the current level and scope of directors' and
officers' liability insurance covering those persons who are currently
covered by Company's directors' and officers' liability insurance
policy; provided, however, that in no event shall Parent be required to
expend in any one year an amount in excess of 125% of the annual
premium currently paid by Company for such insurance, and provided,
further, that if the annual premiums of such insurance coverage exceed
such amount, Parent shall be obligated to obtain a policy with the
greatest coverage available for a cost not exceeding such amount.
(c) This Section 6.14 shall survive the consummation of the
Merger and the Effective Time, is intended to benefit and may be
enforced by Company, Parent, the Surviving Corporation and the
Indemnified Parties, and shall be binding on all successors and assigns
of Parent and the Surviving Corporation.
SECTION 6.15 TAX TREATMENT. Except as may be required by the terms of
this Agreement, each of Parent and Company shall not (before or after the
Effective Time) take any action and shall not (before or after the Effective
Time) fail to take any action which action or failure to act would prevent, or
would be reasonably likely to prevent, the Merger from qualifying as a
reorganization within the meaning of Section 368 of the Code. At or prior to the
filing of the Form S-4, Company and Parent shall execute and deliver to Cooley
Godward LLP and to Powell, Goldstein, Frazer & Murphy LLP tax representation
letters in customary form. Parent, Merger Sub and Company shall each confirm to
Cooley Godward LLP
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and to Powell, Goldstein, Frazer & Murphy LLP the accuracy and completeness as
of the Effective Time of the tax representation letters delivered pursuant to
the immediately preceding sentence. Following delivery of such tax
representation letters, each of Parent and Company shall use its reasonable best
efforts to cause Cooley Godward LLP and Powell, Goldstein, Frazer & Murphy LLP
to deliver to it a tax 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
referred to in this Section 6.15.
SECTION 6.16 SUBSIDIARIES' DIRECTORS AND OFFICERS. To the extent
requested by Parent, Company shall use its reasonable best efforts to obtain and
deliver to Parent prior to the Closing Date the resignation of each director and
officer of each of Company's Subsidiaries.
SECTION 6.17 STOCKHOLDERS AGREEMENT. Company shall use its reasonable
best efforts to cause Alcatel, N.V. to execute the Stockholders Agreement
promptly.
SECTION 6.18 FINANCING. Parent shall use its reasonable best efforts to
obtain, and Company shall use its reasonable best efforts to cooperate with
Parent in obtaining, the Financing described in the Commitment Letter.
SECTION 6.19 EMPLOYMENT AGREEMENTS AND NONCOMPETITION AGREEMENTS.
Company shall use its reasonable best efforts to cause the persons listed in
Section 6.19 of the Disclosure Schedule to execute and deliver, prior to the
Effective Time, Employment Agreements and Noncompetition Agreements on terms
reasonably satisfactory to Parent and such persons.
SECTION 6.20 TAX MATTERS. Parent shall use its reasonable best efforts
to provide Parent and Merger Sub with the documentation described in Section
7.2(k) with respect to the full amount of the federal income tax deduction
referred to in Section 7.2(k).
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger is subject
to the satisfaction or written waiver on or prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been
adopted by the affirmative vote of holders of the requisite number of
Shares, and the issuance of Parent Common Stock in the Merger pursuant
to this Agreement and an increase in the number of shares of Parent
Common Stock subject to awards under Parent's 1997 Stock Option Plan
shall have been approved by the affirmative vote of holders of the
requisite number of shares of
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Parent Common Stock, each in the manner required pursuant to each of
Parent's and Company's respective certificate or articles of
incorporation and the DGCL, the VSCA, the rules of The Nasdaq Stock
Market and other applicable laws.
(b) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect, and there
shall not be pending or threatened by any Governmental Entities any
suit, action or proceeding seeking to restrain or prohibit the Merger;
provided, however, that the party invoking this condition shall have
complied with its obligations under Section 6.8.
(c) Nasdaq Listing. The shares of Common Stock issuable to
Company's stockholders pursuant to the Merger shall have been approved
for listing on The Nasdaq Stock Market, subject to official notice of
issuance.
(d) Form S-4. The Form S-4 shall have been declared effective
under the Securities Act and shall not be the subject of any stop order
or proceedings seeking a stop order.
SECTION 7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB. The
obligation of each of Parent and Merger Sub to effect the Merger is further
subject to satisfaction or written waiver on or prior to the Closing Date of the
following conditions:
(a) Representations and Warranties. Representations and
warranties of Company contained in this Agreement (other than
representations and warranties expressly made only as of a specific
date, which shall be accurate as of such date) shall have been 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 (it being understood that, for purposes of determining the
accuracy of such representations and warranties, all materiality
qualifications contained in such representations and warranties shall
be disregarded), except for any such failure which, individually or in
the aggregate, could not reasonably be expected to have a Material
Adverse Effect on Company, and Parent and Merger Sub shall have
received a certificate signed on behalf of Company by an authorized
officer of Company to such effect.
(b) Performance of Obligations of Company. Company shall have
performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date,
and Parent and Merger Sub shall have received a certificate signed on
behalf of Company by an authorized officer of Company to such effect.
(c) No Material Adverse Change. Since the date of this
Agreement, Company and its Subsidiaries, taken as a whole, shall not
have experienced any change, event or occurrence that has had or could
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Company.
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(d) Consents. All consents, authorizations, orders and
approvals of (or filings or registrations with) any Governmental Entity
or any other person required to be obtained or made prior to the
Effective Time in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made, except
for the filing of the articles of merger pursuant to Section 1.3 and
except where the failure to have obtained or made such consents,
authorizations, orders, approvals, filings or registrations could not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent or the Surviving Corporation.
(e) Affiliate Letters. Parent shall have received from each
person identified as an "affiliate" of Company pursuant to Section 6.11
an executed copy of an agreement in the form attached as Exhibit B
hereto.
(f) Comfort Letters. Parent shall have received "comfort"
letters from PricewaterhouseCoopers LLP, Company's independent public
accountants, dated a date within two business days before the date on
which the Form S-4 shall become effective, and a date within two
business days of the Closing Date (or such other date reasonably
acceptable to Parent) with respect to certain financial statements and
other financial information included in the Form S-4 in customary form.
(g) Tax Opinion. The opinion of Powell, Goldstein, Frazer &
Murphy LLP, counsel to Parent, in form and substance reasonably
satisfactory to Parent, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code, and
based on the letters referred to in Section 6.15, shall have been
delivered to Parent and not have been withdrawn or modified in any
material respect; provided, however, that if Powell, Goldstein, Frazer
& Murphy LLP does not render such opinion or withdraws or modifies such
opinion, this condition shall nonetheless be deemed to be satisfied if
counsel to Company or special tax counsel reasonably acceptable to
Parent renders such opinion to Parent. In rendering such opinion, such
firm may rely on such representations, warranties and certificates as
it deems reasonable or appropriate under the circumstances.
(h) Government Contracts. No authorized representative of a
Governmental Entity shall have notified Parent or Company that such
Governmental Entity (i) intends to terminate any of the Government
Contracts or does not intend to renew any Government Contract, or (ii)
anticipates that facility security clearances will not be granted to
the Surviving Corporation following the Effective Time for Company
facilities currently having such clearance, nor shall any Party have a
good faith reason to believe that any existing Government Contract will
be terminated for convenience of the government or not renewed or
facility security clearances withheld from the Surviving Corporation,
assuming that in each case Parent complies with applicable rules and
regulations and uses its reasonable best efforts to maintain the
Government Contracts and obtain facility security clearances. Parent
shall have received a certificate signed on behalf of Company by Joseph
M. Fox and Joseph Kelly Brown to such effect, as it relates to Company.
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(i) Additional Closing Documents. Company shall have furnished
to Parent and Merger Sub such additional certificates, opinions and
other documents as Parent may have reasonably requested as to any of
the conditions set forth in this Section 7.2.
(j) Dissenting Shares. Holders of not more than one percent
(1%) of the outstanding Shares shall have perfected dissenters' rights
of their Shares in the manner required by the VSCA.
(k) Tax Matters. The Company shall have provided Parent and
Merger Sub with evidence establishing that an amount equal to at least
60% of the total claimed by Company as a federal income tax deduction
on the Company's U.S. corporation income tax return (Form 1120) for its
taxable year ended November 30,1997, for income recognized by employees
of the Company from disqualifying dispositions (within the meaning of
Section 422(a) of the Code) of Company stock that was acquired by such
employees upon the exercise of incentive stock options (as defined in
Section 422(b) of the Code) that were granted to the employees by the
Company has either been included (a) on one or more Forms W-2 or W-2c
(for the calendar year 1996) issued by the Company to its employees or
(b) in one or more affidavits executed by Company employees, which
state, under penalties of perjury, that the signatory has included the
income from the disqualifying disposition on his or her federal income
tax return for the calendar year 1996 and paid the proper amount of tax
with respect thereto.
SECTION 7.3 CONDITIONS TO OBLIGATION OF COMPANY. The obligation of
Company to effect the Merger is further subject to satisfaction or written
waiver on or prior to the Closing Date of the following conditions:
(a) The representations and warranties of Parent and Merger
Sub contained in this Agreement (other than representations and
warranties expressly made as of a certain date, which shall be accurate
as of such date) shall have been 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 (it being
understood that, for purposes of determining the accuracy of such
representations and warranties, all materiality qualifications
contained in such representations and warranties shall be disregarded),
except for any such failure which, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on
Parent, and Company shall have received a certificate signed on behalf
of Parent and Merger Sub by an authorized officer of Parent to such
effect.
(b) Performance of Obligations of Parent and Merger Sub. Each
of Parent and Merger Sub shall have performed in all material respects
all obligations required to be performed by it under this Agreement at
or prior to the Closing Date, and Company shall have received a
certificate signed on behalf of Parent by an authorized officer of
Parent to such effect.
(c) No Material Adverse Change. Since the date of this
Agreement, Parent and its Subsidiaries, taken as a whole, shall not
have experienced any change, event or
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occurrence that has had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent.
(d) Tax Opinion. The opinion of Cooley Godward LLP, counsel to
Company, in form and substance reasonably satisfactory to Company, to
the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code, and based on the letters
referred to in Section 6.15, shall have been delivered to Company and
not have been withdrawn or modified in any material respect; provided,
however, that if Cooley Godward LLP does not render such opinion or
withdraws or modifies such opinion, this condition shall nonetheless be
deemed to be satisfied if counsel to Parent or special tax counsel
reasonably acceptable to Company renders such opinion to Company. In
rendering such opinion, such firm may rely on such representations,
warranties and certificates as it deems reasonable or appropriate under
the circumstances.
(e) Additional Closing Documents. Parent and Merger Sub
shall have furnished to Company such additional certificates and other
documents as Company may have reasonably requested as to any of the
conditions set forth in this Section 7.3.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 TERMINATION.
(a) This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Effective
Time, notwithstanding adoption thereof by the stockholders of Parent
and Company, in any one of the following circumstances:
(i) By mutual written consent duly authorized by
the Boards of Directors of Parent and Company;
(ii) By Parent or Company, if the Effective Time
shall not have occurred on or before April 19, 2000, otherwise
than as a result of any material breach of any provision of
this Agreement by the party seeking to effect such
termination;
(iii) By Parent or Company, if any federal or state
court of competent jurisdiction or other Governmental Entity
shall have issued an order, decree or ruling, or taken any
other action permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other
action shall have become final and non-appealable, provided
that neither party may terminate this Agreement pursuant to
this Section 8.1 (a)(iii) unless such party has used its
reasonable best efforts to remove such order, decree, ruling
or injunction;
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(iv) By Parent, if the Company Stockholders Meeting
shall have been held and this Agreement shall not have been
adopted by the affirmative vote of the holders of the
requisite number of Shares;
(v) By Parent or Company, if the Parent
Stockholders Meeting shall have been held and either the
issuance of Parent Common Stock in the Merger pursuant to this
Agreement or the proposed increase in the number of shares of
Parent common stock subject to options under Parent's 1997
Stock Option Plan shall not have been approved by the
affirmative vote of the requisite number of shares of Parent
Common Stock;
(vi) By Parent, if a Triggering Event shall have
occurred. A "Triggering Event" shall be deemed to have
occurred if (A) the Board of Directors of Company or any
committee thereof 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, (B) Company
shall have failed to include in the Joint Proxy
Statement/Prospectus the unanimous recommendation of the Board
of Directors of Company in favor of the adoption and approval
of the Agreement and the approval of the Merger, (C) the Board
of Directors of 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 Parent requests in writing that such
recommendation be reaffirmed at any time following the
announcement of an Acquisition Proposal, (D) taken any of the
actions described in Section 6.7(a), whether or not permitted
by Section 6.7(b), (E) the Board of Directors of Company or
any committee thereof shall have approved, endorsed or
recommended any Acquisition Proposal or (F) a tender or
exchange offer relating to securities of Company shall have
been commenced by a person unaffiliated with Parent and
Company shall not have sent to its securityholders pursuant to
Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act
within ten (10) business days after such tender or exchange
offer is first published, sent or given, a statement
disclosing that Company recommends rejection of such tender or
exchange offer.
(vii) By Parent if any of Company's representations
and warranties contained in this Agreement shall have been
materially inaccurate as of the date of this Agreement or
shall have become materially inaccurate as of the Closing Date
as if made on such date, or if any of Company's covenants and
agreements contained in this Agreement shall have been
breached in any material respect, provided, however, that
Parent may not terminate this Agreement under this Section
8.1(vii) on account of an inaccuracy in Company's
representations and warranties that is curable by Company or
on account of a breach of covenant or agreement by Company
that is curable by Company unless Company fails to cure such
inaccuracy or breach within twenty (20) days after receiving
written notice from Parent of such inaccuracy or breach;
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(viii) By Company if any of the Parent's
representations and warranties contained in this Agreement
shall have been materially inaccurate as of the date of this
Agreement or shall have become materially inaccurate as of the
Closing Date as if made on such date, or if any of the
Parent's covenants and agreements contained in this Agreement
shall have been breached in any material respect, provided,
however, that Company may not terminate this Agreement under
this Section 8.1(viii) on account of an inaccuracy in the
Parent's representations and warranties that is curable by the
Parent or on account of a breach of covenant or agreement by
the Parent that is curable by the Parent unless the Parent
fails to cure such inaccuracy or breach within twenty (20)
days after receiving written notice from Company of such
inaccuracy or breach.
(ix) By Company, following the determination by
Company's Board of Directors that an Acquisition Proposal
constitutes a Superior Offer and prior to the adoption and
approval of this Agreement and the Merger at Company
Stockholders Meeting, if: (A) Company is not in material
breach of its obligations under Section 6.7 of this Agreement,
(B) each of the conditions set forth in Section 6.3(c) have
been satisfied and (C) concurrent with Company's notice of
termination pursuant to this subsection, Company shall pay
Parent the termination fee described in paragraph (b) below.
No termination pursuant to this subsection shall be effective
until such termination fee is paid to Parent.
(x) By Parent or Company if neither of the
conditions set forth in Section 7.2(g) nor Section 7.3(d)
relating to the delivery of tax opinions have been satisfied
within 60 days following the date of the later of the Parent
Stockholders Meeting or the Company Stockholders Meeting,
provided that the party seeking to effect such termination is
not in material breach of any provision of this Agreement.
(b) If this Agreement is terminated pursuant to Section
8.1(a)(vii) or (ix) then, in such event, Company shall pay to Parent a
fee in the amount of $2,000,000 (the "Fee"), payable in immediately
available funds within one business day after termination in the case
of termination pursuant to Section 8.1(a)(vii) or concurrent with
termination in the case of termination by Company pursuant to Section
8.1(a)(ix). If this Agreement is terminated:
(A) pursuant to Section 8.1(a)(ii) or (iv), and an
Acquisition Proposal has been made after the date hereof and
(unless the party making such Acquisition Proposal or an
affiliate thereof ultimately consummates a transaction or
enters into an agreement that would otherwise require the
payment of the Fee pursuant to this sentence) is not withdrawn
prior to the termination of this Agreement; or
(B) pursuant to Section 8(a)(vi), and
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in either the case of (A) or (B), within nine (9) months after such
termination (1) an Acquisition Proposal relating to Company is
consummated, or (2) Company enters into a definitive agreement with
respect to an Acquisition Proposal, then Company shall pay the Fee to
Parent in immediately available funds at or prior to the consummation
of such Acquisition Proposal, or within one business day following the
date of execution of such definitive agreement, whichever is earlier.
If this Agreement is terminated pursuant to Section 8.1(a)(viii) then,
in such event, Parent shall pay to Company the Fee in immediately
available funds within one business day after termination. Both Company
and Parent agree that the payment of the Fee, either by Company or by
Parent as appropriate under this Section 8.1(b), shall be the sole and
exclusive remedy upon termination of this Agreement pursuant to Section
8.1(a)(vii) or (viii), except in the case of violation of Sections 6.3
or 6.7 of this Agreement or willful or intentional breach of this
Agreement.
SECTION 8.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 8.1(a) hereof, this Agreement
(except for the provisions of Section 4.1(t), Section 4.2(f), the last sentence
of Section 6.4(a), the last sentence of 6.4(b), Section 6.6, paragraph (b) of
Section 8.1, this Section 8.2 and Article IX) shall forthwith become void and
cease to have any force or effect, without any liability on the part of any
party hereto or any of its affiliates; provided, however, that nothing in this
Section 8.2 shall relieve any party to this Agreement of liability for any
willful or intentional breach of this Agreement.
SECTION 8.3 AMENDMENT. Subject to applicable provisions of the DGCL and
the VSCA, at any time prior to the Effective Time, the Parties hereto may modify
or amend this Agreement by written agreement executed and delivered by duly
authorized officers of the respective parties; provided, however, that after
adoption of this Agreement by the stockholders of either of Parent or Company,
no amendment shall be made which would reduce the amount or change the type of
consideration into which each Share shall be converted upon consummation of the
Merger. This Agreement may not be modified or amended except by written
agreement executed and delivered by duly authorized officers of each of the
respective parties.
SECTION 8.4 EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement, or (c)
subject to Section 8.3, waive compliance with any of the agreements or
conditions of the other parties contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall be valid only if set
forth in a written instrument executed and delivered by a duly authorized
officer on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
SECTION 8.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER.
A termination of this Agreement pursuant to Section 8.1, an amendment of this
Agreement pursuant to Section 8.3 or an extension or waiver pursuant to Section
8.4 shall, in order to be
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effective, require in the case of Parent, Merger Sub or Company, action by its
Board of Directors or the duly authorized designee of its Board of Directors.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as
contemplated in Section 8.2, none of the representations and warranties in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time. This Section 9.1 shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Effective Time.
SECTION 9.2 FEES AND EXPENSES. Each party hereto shall pay its own
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby, except
that Parent and Company shall share equally all of the costs and expenses (other
than attorneys' and accountants' fees and expenses) incurred in connection with
(a) the preparation, filing, printing and mailing of the Form S-4 and the Joint
Proxy Statement/Prospectus (excluding SEC filing fees, which shall be paid by
Parent).
SECTION 9.3 DEFINITIONS. For purposes of this Agreement:
(a) an "Affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first person;
(b) "Business day" means any day other than Saturday, Sunday
or any other day on which banks in the City of New York are required or
permitted to close;
(c) "Disclosure Schedule" means the disclosure schedule
delivered by each party to the other simultaneously with the execution
of this Agreement;
(d) "Environmental Laws" means any federal, state or local
law, rule, regulation or decision relating to: (i) releases or
threatened releases of Hazardous Substances or materials containing
Hazardous Substances; (ii) the manufacture, handling, transport, use,
treatment, storage or disposal of Hazardous Substances or materials
containing Hazardous Substances; or (iii) otherwise relating to
pollution of the environment or the protection of human health;
(e) "Hazardous Substances" means: (i) those substances defined
as "hazardous substances," "pollutants" or "contaminants," "hazardous
waste," "hazardous chemicals" and the like in or regulated under the
following federal statutes and their state counterparts, as each may be
amended from time to time, and all regulations thereunder: the
Hazardous Materials Transportation Act, the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation
and Liability Act, the
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Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act,
the Federal Insecticide, Fungicide and Rodenticide Act and the Clean
Air Act; (ii) petroleum and petroleum products including crude oil and
any fractions thereof; (iii) natural gas, synthetic gas and any
mixtures thereof usable for fuel, (iv) radon; (v) asbestos; and (vi)
any other substance, regardless of physical form, that is subject to
any Environmental Laws;
(f) "Knowledge" means the actual knowledge of any executive
officer of Company or Parent, as the case may be;
(g) "Liens" means, collectively, all pledges, claims, liens,
charges, mortgages, conditional sale or title retention agreements,
hypothecations, collateral assignments, security interests, easements
and other encumbrances of any kind or nature whatsoever;
(h) "Material Adverse Effect" or "Material Adverse Change"
means any event, occurrence, failure of event or occurrence, change,
effect, state of affairs, breach, default, violation, fine, penalty or
failure to comply (each, a "circumstance"), individually or taken
together with all other circumstances contemplated by or in connection
with any or all of the applicable representations and warranties made
in this Agreement which could reasonably be expected to: (i) materially
adversely effect the business, properties, assets, condition (financial
or otherwise), or results of operations of Parent or Company, in each
case, including its respective Subsidiaries together with it taken as a
whole, or (ii) impair Parent or Company, as the case may be, of its
ability to perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. In no event shall any
of the following constitute a Material Adverse Effect or a Material
Adverse Change: (i) a change in the trading prices of either of
Parent's or Company's equity securities between the date of this
Agreement and the Effective Time, in and of itself; (ii) effects,
changes, events, circumstances or conditions generally affecting the
business application integration industry in which either Parent or
Company operate or arising from changes in general business or economic
condition, and not specifically relating to such party; (iii) effects,
changes, events, circumstances or conditions directly attributable to
(A) out-of-pocket fees and expenses (including, without limitation,
legal, accounting, investigatory, investment banking, and other fees
and expenses) incurred in connection with the transactions contemplated
by the Agreement or (B) the payment by Parent or Company of all amounts
due to any officers or employees of Company under employment contracts,
non-competition agreements, employee benefit plans or severance
arrangements as specified in the Disclosure Schedule; (iv) any effects,
changes, events, circumstances or conditions resulting from any change
in law or generally accepted accounting principles, which affect
generally entities such as Parent and Company; and (v) any effects,
changes, events, circumstances or conditions resulting from compliance
by Parent or Company with the express terms of this Agreement or action
taken with the prior informed written consent of the other party.
(i) "Person" means an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other
entity;
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(j) a "Subsidiary" of any person means any other person of
which (i) the first mentioned person or any Subsidiary thereof is a
general partner, (ii) voting power to elect a majority of the board of
directors or others performing similar functions with respect to such
other person is held by the first mentioned person and/or by any one or
more of its Subsidiaries, or (iii) at least 50% of the equity interests
of such other person is, directly or indirectly, owned or controlled by
such first mentioned person and/or by any one or more of its
Subsidiaries.
SECTION 9.4 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(i) if to Parent or to Merger Sub, to
Level 8 Systems, Inc.
8000 Regency Parkway
Cary, N.C. 27511
Attention: W. Dennis McKinnie, Esq.
Telecopy: (919) 380-5121
with a copy (which shall not constitute notice) to:
Powell, Goldstein, Frazer & Murphy LLP 191
Peachtree Street, N.E.
Suite 1600
Atlanta, GA 30303
Attention: Scott D. Smith, Esq.
Eliot W. Robinson, Esq.
Telecopy: (404) 572-6999
(ii) if to Company, to
Template Software, Inc.
45365 Vintage Park Plaza
Suite 100
Dulles, VA 20166
Attention: Joseph M. Fox
Telecopy: (703) 318-8325
with a copy (which shall not constitute notice) to:
Cooley Godward LLP
2002 Edmund Halley Drive, Suite 300
Reston, VA 20191-3436
Attention: Joseph W. Conroy, Esq.
Mark D. Spoto, Esq.
Telecopy: (703) 262-8100
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SECTION 9.5 INTERPRETATION. When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for convenience of reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
SECTION 9.6 ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES. This Agreement
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement (except for the Stockholders Agreement and the
letter agreement referenced in the last sentence of Section 6.4(a) and 6.4(b)).
Except for the provisions of Article II and Section 6.14, this Agreement is not
intended to confer upon any person (including without limitation any employees
or former employees of Company), other than the parties hereto, any rights or
remedies.
SECTION 9.7 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof, except to the extent the internal laws of the Commonwealth of
Virginia expressly apply to the Merger as it relates to Company.
SECTION 9.8 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, and any such assignment without
such prior written consent shall be null and void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
SECTION 9.9 ENFORCEMENT. Irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. Accordingly, the parties
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this Agreement
in the Court of Chancery in and for New Castle County in the State of Delaware
(or, if such court lacks subject matter jurisdiction, any appropriate state or
federal court in New Castle County in the State of Delaware), this being in
addition to any other remedy to which they are entitled at law or in equity.
Each of the parties hereto (a) shall submit itself to the personal jurisdiction
of the Court of Chancery in and for New Castle County in the State of Delaware
(or, if such court lacks subject matter jurisdiction, any appropriate state or
federal court in New Castle County in the State of Delaware) in the event any
dispute arises out of this Agreement or any of the transactions contemplated
hereby, (b) shall not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court, and (c) shall not bring
any action relating to this Agreement or any of the transactions contemplated
hereby in any court other than the Court of Chancery in and for New Castle
County in the State of Delaware (or, if such court lacks subject matter
jurisdiction, any appropriate state or federal court in New Castle County in the
State of Delaware).
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SECTION 9.10 SEVERABILITY. Whenever possible, each provision or portion
of any provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
SECTION 9.11 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same instrument
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
[signature page follows]
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IN WITNESS WHEREOF, Parent, Merger Sub and Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
LEVEL 8 SYSTEMS, INC.
By: /s/ Steven Dmiszewicki
----------------------------------------
Name: Steven Dmiszewicki
---------------------------------------
Title: President
--------------------------------------
TSAC, INC.
By: /s/ Dennis McKinnie
---------------------------------------
Name: Dennis McKinnie
---------------------------------------
Title: Senior Vice President, Chief Legal and
Administrative Officer
TEMPLATE SOFTWARE, INC.
By: /s/ Joseph M. Fox
---------------------------------------
Name: Joseph M. Fox
---------------------------------------
Title: Chairman
--------------------------------------
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EXHIBIT 10.1
STOCKHOLDERS AGREEMENT
This Stockholders Agreement, dated as of October 19, 1999 (this
"Agreement"), is entered into by and among Level 8 Systems, Inc., a Delaware
corporation (the "Parent"), Template Software, Inc., a Virginia corporation (the
"Company"), the parties listed on the signature pages hereto as "Parent
Stockholders" (each, a "Parent Stockholder") and the parties listed on the
signature pages hereto as "Company Stockholders" (each, a "Company Stockholder")
RECITALS:
WHEREAS, each Company Stockholder is the beneficial owner of shares of
common stock, par value $0.01 per share (the "Company Common Stock"), of the
Company;
WHEREAS, each Parent Stockholder is the beneficial owner of shares of
common stock, par value $0.01 per share (the "Parent Common Stock") and/or
shares of Series A 4% Convertible Redeemable Preferred Stock, par value $0.01
per share (the "Parent Preferred Stock" and, together with the Parent Common
Stock, the "Parent Stock"), of the Parent;
WHEREAS, in conjunction with this Agreement, Parent, Company and Level
8 Acquisition Sub, Inc., a Delaware corporation and wholly owned subsidiary of
the Parent (the "Subsidiary"), intend to enter into an Agreement and Plan of
Merger dated as of the date hereof (as the same may be amended or supplemented,
the "Merger Agreement") with respect to the merger of the Company with and into
the Subsidiary (the "Merger"), with the Subsidiary surviving the Merger;
WHEREAS, each Company Stockholder is executing this Agreement as an
inducement to the Parent and the Subsidiary to enter into, execute and deliver
the Merger Agreement; and
WHEREAS, each of Parent and each Parent Stockholder is executing this
Agreement as an inducement to the Company to enter into, execute and deliver the
Merger Agreement.
NOW, THEREFORE, in consideration of the execution and delivery by the
parties thereto of the Merger Agreement and the mutual covenants, conditions and
agreements contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. VOTING AGREEMENTS OF COMPANY STOCKHOLDERS. In connection with
the efforts of the Company to cause the Merger Agreement and the Merger to
receive the required approval of the stockholders of the Company and to be
consummated, each Company Stockholder, severally and not jointly, agrees with,
and covenants to, the Parent as follows:
<PAGE> 2
(a) At any meeting of stockholders of the Company called
to vote upon the Merger and the Merger Agreement or in any other
circumstance upon which a vote, consent or other approval of
stockholders of the Company is sought with respect to the Merger and
the Merger Agreement, such Company Stockholder shall (i) appear or
otherwise take appropriate action to ensure that such Company
Stockholder's Shares (as defined in the Merger Agreement) are present
at such meeting for the purpose of obtaining a quorum and (ii) vote (or
cause to be voted) or execute a written consent with respect to such
Company Stockholder's Shares in favor of the Merger, the execution and
delivery by the Company of the Merger Agreement and each of the other
transactions contemplated by or in any way related to the Merger
Agreement.
(b) At any meeting of stockholders of the Company or in
any other circumstance upon which the vote, consent or other approval
of stockholders of the Company is sought, such Company Stockholder
shall vote (or cause to be voted) or execute a written consent in
connection with such Company Stockholder's Shares against (i) any
merger agreement or merger (other than the Merger Agreement and the
Merger), consolidation, combination, sale of substantial assets,
reorganization, recapitalization, dissolution, liquidation or winding
up of or by the Company or (ii) any action or agreement, including any
proposed amendment of the Company's Articles of Incorporation or Bylaws
or other proposal or transaction involving the Company or any of its
subsidiaries which action, agreement, amendment or other proposal or
transaction would in any manner impede, interfere with, delay, or
attempt to frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions contemplated thereby (each
of the foregoing in clauses (i) or (ii) above, a "Competing
Transaction").
2. VOTING AGREEMENTS OF PARENT STOCKHOLDERS AND THE PARENT. In
connection with the efforts of the Parent and the Subsidiary to cause the
issuance of Parent Common Stock pursuant to the Merger Agreement to receive the
required approval of the stockholders of the Parent, each Parent Stockholder,
severally and not jointly, agrees with, and covenants to, the Company as
follows:
(a) At any meeting of stockholders of the Parent called
to vote upon the Merger and the Merger Agreement or in any other
circumstance upon which a vote, consent or other approval of
stockholders of the Parent is sought with respect to the Merger and the
Merger Agreement, each Parent Stockholder shall (i) appear or otherwise
take appropriate action to ensure that such Parent Stockholder's shares
of Parent Stock are present at such meeting for the purpose of
obtaining a quorum and (ii) vote (or cause to be voted) or execute a
written consent with respect to such Parent Stockholder's shares of
Parent Stock in favor of the Merger, the execution and delivery by the
Parent of the Merger Agreement and each of the other transactions
contemplated by or in any way related to the Merger Agreement.
(b) At any meeting of stockholders of the Parent or in
any other circumstance upon which the vote, consent or other approval
of stockholders of the Parent is sought, each Parent Stockholder shall
vote (or cause to be voted) or execute a written consent in connection
with such Parent Stockholder's shares of Parent Stock held by such
Parent
2
<PAGE> 3
Stockholder against any action or agreement, including any proposed
amendment of the Parent's Certificate of Incorporation or Bylaws or
other proposal or transaction involving the Parent or any of its
subsidiaries which action, agreement, amendment or other proposal or
transaction would in any manner impede, interfere with, delay, or
attempt to frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions contemplated thereby.
3. PARENT VOTING AGREEMENT.
(a) Parent shall direct each WCAS Party (as defined in
the Agreement dated November 23, 1998 between Parent and Welch, Carson,
Anderson & Stowe VI, L.P. and the other signatories thereto relating to
the acquisition of Seer Technologies, Inc.) to grant a proxy to vote
all that WCAS Party's shares of Parent Common Stock to one or more
individuals designated by Parent, and Parent shall cause such designee
to vote all the shares of Parent Common Stock for which such proxies
have been granted as set forth in Section 2 hereof.
(b) The Parent, in its capacity as the holder of all of
the issued and outstanding shares of capital stock of the Subsidiary,
hereby agrees that during the time that this Agreement is in effect,
the Parent will vote or execute a written consent in connection with
such shares of capital stock in favor of the Merger, the execution and
delivery by the Subsidiary of the Merger Agreement and each of the
other transactions contemplated by or in any way related to the Merger
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF COMPANY STOCKHOLDERS. Each
Company Stockholder, severally and not jointly, represents and warrants to the
Parent as follows:
(a) As of the date hereof, such Company Stockholder is
the record and beneficial owner of, or is a trustee of a trust that is
the record holder of, the number of Shares set forth opposite such
Company Stockholder's name in Schedule A hereto. Except for such
Company Stockholder's Shares, such Company Stockholder is not the
record or beneficial owner of any shares of Company Common Stock.
(b) This Agreement has been duly executed and delivered
by such Company Stockholder and such Company Stockholder intends for
this to be a valid and binding agreement and will not take any action
to contest the valid and binding nature of this Agreement. If such
Company Stockholder is a natural person, such Company Stockholder (i)
has the full power and capacity necessary to enter into and perform his
or her obligations under this Agreement, (ii) has read all provisions
of this Agreement, has reviewed such provisions with counsel to the
extent such Company Stockholder deemed appropriate, understands each of
such provisions and voluntarily agrees to be bound thereby and (iii) if
such Company Stockholder is married and such Company Stockholder's
Shares constitute community property, this Agreement has been duly
executed and delivered by and constitutes a valid and binding agreement
of such Company Stockholder's spouse and such Company Stockholder's
spouse intends for this to be a valid and binding agreement and will
not take any action to contest the valid and
3
<PAGE> 4
binding nature of this Agreement. If such Company Stockholder is an
entity, such Company Stockholder is duly organized, validly existing
and in good standing under the laws of the state of its organization
with full power and authority necessary to enter into this Agreement
and to perform its obligations hereunder. If such Company Stockholder
is a partnership, such partnership is duly formed, validly existing and
in good standing under the laws of the state of its organization with
full partnership power and authority necessary to enter into this
Agreement and to perform its obligations hereunder.
(c) Neither the execution and delivery of this Agreement
nor the consummation by such Company Stockholder of the transactions
contemplated hereby will result in a violation of, or a default under,
or conflict with, any contract, trust, commitment, agreement,
understanding, arrangement or restriction of any kind to which such
Company Stockholder is a party or bound or to which such Company
Stockholder's Shares are subject. Neither the execution and delivery of
this Agreement nor the consummation by such Company Stockholder of the
transactions contemplated hereby will violate, or require any consent,
approval or notice under any provision of any judgment, order, consent,
approval or notice applicable to such Company Stockholder or such
Company Stockholder's Shares, except for any necessary consent,
approval or notice under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, or Section 13 of the Securities Exchange Act
of 1934, as amended.
(d) Company Stockholder's Shares and the certificates
representing such Shares are now and at all times during the term
hereof will be held by such Company Stockholder, or by a nominee or
custodian for the benefit of such Company Stockholder, free and clear
of all liens, claims, security interests, proxies, voting trusts or
agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any such encumbrances or proxies arising from
this Agreement and except with respect to the rights granted by certain
of the Company Stockholders in favor of Alcatel, N.V. pursuant to the
terms of that certain Shareholders Agreement dated as of November 27,
1996, by and among such parties.
(e) No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of
such Company Stockholder.
(f) Such Company Stockholder understands and acknowledges
that the Parent is entering into the Merger Agreement in reliance upon
such Company Stockholder's execution and delivery of this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF PARENT STOCKHOLDERS. Each
Parent Stockholder, severally and not jointly, represents and warrants to the
Company as follows:
(a) As of the date hereof, such Parent Stockholder is the
record and beneficial owner of, or is a trustee of a trust that is the
record holder of, the number and class of shares of Parent Stock set
forth opposite such Parent Stockholder's name in Schedule B
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<PAGE> 5
hereto. Except for such Parent Stockholder's shares of Parent Stock set
forth on Schedule B, such Parent Stockholder is not the record or
beneficial owner of any shares of Parent Stock.
(b) This Agreement has been duly executed and delivered
by such Parent Stockholder, and such Parent Stockholder intends for
this to be a valid and binding agreement and will not take any action
to contest the valid and binding nature of this Agreement. If such
Parent Stockholder is a natural person, such Parent Stockholder (i) has
the full power and capacity necessary to enter into and perform his or
her obligations under this Agreement, (ii) has read all provisions of
this Agreement, has reviewed such provisions with counsel to the extent
such Parent Stockholder deemed appropriate, understands each of such
provisions and voluntarily agrees to be bound thereby and (iii) if such
Parent Stockholder is married and such Parent Stockholder's shares of
Parent Stock constitute community property, this Agreement has been
duly executed and delivered by and constitutes a valid and binding
agreement of such Parent Stockholder's spouse and such Parent
Stockholder's spouse intends for this to be a valid and binding
agreement and will not take any action to contest the valid and binding
nature of this Agreement. If such Parent Stockholder is an entity, such
Parent Stockholder is duly organized, validly existing and in good
standing under the laws of the state of its organization with full
power and authority necessary to enter into this Agreement and to
perform its obligations hereunder. If such Parent Stockholder is a
partnership, such partnership is duly formed, validly existing and in
good standing under the laws of the state of its organization with full
partnership power and authority necessary to enter into this Agreement
and to perform its obligations hereunder. Parent is duly organized,
validly existing and in good standing under the laws of the state of
its organization with full power and authority necessary to enter into
this Agreement and to perform its obligations hereunder.
(c) Neither the execution and delivery of this Agreement
nor the consummation by such Parent Stockholder of the transactions
contemplated hereby will result in a violation of, or a default under,
or conflict with, any contract, trust, commitment, agreement,
understanding, arrangement or restriction of any kind to which such
Parent Stockholder is a party or bound or to which such Parent
Stockholder's shares of Parent Stock are subject. Neither the execution
and delivery of this Agreement nor the consummation by such Parent
Stockholder of the transactions contemplated hereby will violate, or
require any consent, approval or notice under any provision of any
judgment, order, consent, approval or notice applicable to such Parent
Stockholder or such Parent Stockholder's shares of Parent Stock, except
for any necessary consent, approval or notice under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or
Section 13 of the Securities Exchange Act of 1934, as amended.
(d) Parent Stockholder's shares of Parent Stock and the
certificates representing such shares are now and at all times during
the term hereof will be held by such Parent Stockholder, or by a
nominee or custodian for the benefit of such Parent Stockholder, free
and clear of all liens, claims, security interests, proxies, voting
trusts or
5
<PAGE> 6
agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any such encumbrances or proxies arising from
this Agreement.
(e) Parent's shares of capital stock of the Subsidiary
and the certificates representing such shares are now and at all times
during the term hereof will be held by Parent free and clear of all
liens, claims, security interests, proxies, voting trusts or
agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any such encumbrances or proxies arising from
this Agreement.
(f) No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of
such Parent Stockholder.
(g) Such Parent Stockholder understands and acknowledges
that the Company is entering into the Merger Agreement in reliance upon
such Parent Stockholder's execution and delivery of this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent represents
and warrants to the Company as follows:
(a) As of the date hereof, Parent is the record and
beneficial owner of all shares of capital stock of the Subsidiary.
(b) This Agreement has been duly executed and delivered
by Parent and Parent intends for this to be a valid and binding
agreement and will not take any action to contest the valid and binding
nature of this Agreement. Parent is duly organized, validly existing
and in good standing under the laws of the state of its organization
with full power and authority necessary to enter into this Agreement
and to perform its obligations hereunder.
(c) Neither the execution and delivery of this Agreement
nor the consummation by the Parent of the transactions contemplated
hereby will result in a violation of, or a default under, or conflict
with, any contract, trust, commitment, agreement, understanding,
arrangement or restriction of any kind to which Parent is a party or is
subject. Neither the execution and delivery of this Agreement nor the
consummation by Parent of the transactions contemplated hereby will
violate, or require any consent, approval or notice under any provision
of any judgment, order, consent, approval or notice applicable to,
except for any necessary consent, approval or notice under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or
Section 13 of the Securities Exchange Act of 1934, as amended.
(d) Parent's shares of capital stock of the Subsidiary
and the certificates representing such shares are now and at all times
during the term hereof will be held by Parent free and clear of all
liens, claims, security interests, proxies, voting trusts or
6
<PAGE> 7
agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any such encumbrances or proxies arising from
this Agreement.
(f) Parent understands and acknowledges that the Company
is entering into the Merger Agreement in reliance upon such Parent's
execution and delivery of this Agreement.
7. COVENANTS OF COMPANY STOCKHOLDERS. Each Company Stockholder,
severally and not jointly, agrees with, and covenants to, the Parent as follows:
(a) Such Company Stockholder shall not (i) transfer
(which terms shall include, without limitation, for the purposes of
this Agreement, any sale, gift, pledge, alienation, assignment or other
disposition, directly or indirectly, by operation of law, in connection
with any merger or otherwise (collectively, a "Transfer")), or consent
to any Transfer of, any or all of such Company Stockholder's Shares or
any interest therein, except pursuant to the Merger, (ii) enter into
any contract, option or other agreement or understanding with respect
to any Transfer of any or all of such Company Stockholder's Shares or
any interest therein, (iii) grant any proxy, power of attorney or other
authorization in or with respect to such Company Stockholder's Shares,
except for this Agreement and any proxy granted in connection with any
meeting of stockholders of the Company called to vote upon the Merger
and the Merger Agreement or at any adjournment thereof which contains
voting instructions consistent with such Company Stockholder's
obligations under this Agreement, or (iv) deposit such Company
Stockholder's Shares into a voting trust or enter into a voting
agreement or any other arrangement with respect to such Shares;
provided, that any such Company Stockholder may, subject to the
provisions of Section 9 hereof, Transfer any of such Company
Stockholder's Shares to any other Company Stockholder who is on the
date hereof a party to this Agreement, or to any family member of a
Company Stockholder, charitable institution or affiliate (as defined in
the Securities Act (as defined in the Merger Agreement)) of such
Company Stockholder which prior to such Transfer becomes a party to
this Agreement bound by all obligations of a "Company Stockholder"
hereunder.
(b) If a majority of the holders of Shares approve the
Merger and the Merger Agreement, upon consummation of the Merger such
Company Stockholder's Shares shall, subject to the terms and conditions
of the Merger Agreement, be converted into the right to receive the
consideration provided in the Merger Agreement. Such Company
Stockholder hereby waives any rights of appraisal, or rights to dissent
from the Merger, that such Company Stockholder may have.
(c) Such Company Stockholder shall not, in its, his or
her capacity as a stockholder of the Company, and shall instruct any
investment banker, attorney or other adviser or representative of such
Company Stockholder not to, directly or indirectly, (i) solicit,
initiate, facilitate, or encourage any Competing Transactions or (ii)
participate in any discussions or negotiations regarding, or furnish to
any person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, a Competing
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<PAGE> 8
Transaction. Each Company Stockholder shall immediately cease and cause
to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the
foregoing. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by an
investment banker, attorney or other adviser or representative of such
Company Stockholder, whether or not such person is purporting to act on
behalf of such Company Stockholder or otherwise, shall be deemed to be
a violation of this Section 7 by such Company Stockholder.
8. COVENANTS OF PARENT AND PARENT STOCKHOLDERS.
(a) Parent agrees with, and covenants to, the Company
that Parent shall not (i) Transfer or consent to any Transfer of any or
all of the shares of capital stock of Subsidiary held by Parent or any
interest therein, (ii) enter into any contract, option or other
agreement or understanding with respect to any Transfer of any or all
of such shares of capital stock of Subsidiary or any interest therein,
(iii) grant any proxy, power of attorney or other authorization in or
with respect to such shares of capital stock of Subsidiary, except for
this Agreement, or (iv) deposit such shares of capital stock of
Subsidiary into a voting trust or enter into a voting agreement or any
other arrangement with respect to such shares.
(b) Each Parent Stockholder, severally and not jointly,
agrees with, and covenants to, the Company that such Parent Stockholder
shall not (i) Transfer, or consent to any Transfer of, any or all of
such Parent Stockholder's shares of Parent Stock or any interest
therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any Transfer of any or all of such Parent
Stockholder's shares of Parent Stock or any interest therein, (iii)
grant any proxy, power of attorney or other authorization in or with
respect to such Parent Stockholder's shares of Parent Stock, except for
this Agreement and any proxy granted in connection with any meeting of
stockholders of the Parent called to vote upon the Merger and the
Merger Agreement or at any adjournment thereof which contains voting
instructions consistent with such Parent Stockholder's obligations
under this Agreement, or (iv) deposit such Parent Stockholder's shares
of Parent Stock into a voting trust or enter into a voting agreement or
any other arrangement with respect to such shares; provided, that any
such Parent Stockholder may, subject to the provisions of Section 9
hereof, Transfer any of such Parent Stockholder's shares of Parent
Stock to any other Parent Stockholder who is on the date hereof a party
to this Agreement, or to any family member of a Parent Stockholder,
charitable institution or affiliate (as defined in the Securities Act)
of such Parent Stockholder which prior to such Transfer becomes a party
to this Agreement bound by all obligations of a "Parent Stockholder"
hereunder.
9. CERTAIN EVENTS. Each of the Parent, each Company Stockholder
and each Parent Stockholder agrees that this Agreement and the obligations
hereunder shall attach to the shares of capital stock of the Subsidiary, such
Company Stockholder's Shares or each Parent Stockholder's shares of Parent
Stock, respectively, and shall be binding upon any person or entity to which
legal or beneficial ownership of such shares of capital stock shall pass,
whether
8
<PAGE> 9
by operation of law or otherwise, including without limitation, such
Stockholder's heirs, guardians, administrators or successors. In the event of
any stock split, stock dividend, merger, reorganization, recapitalization or
other change in the capital structure of the Subsidiary, the Company or the
Parent, or the acquisition of additional shares of Company Common Stock or other
voting securities of the Company by any Company Stockholder, or the acquisition
of additional shares of Parent Stock or other voting securities of the Parent by
any Parent Stockholder, Schedule A or Schedule B shall be adjusted appropriately
and this Agreement and the obligations hereunder shall attach to any additional
shares of the Company Common Stock or other voting securities of the Company
issued to or acquired by such Company Stockholder and to any additional shares
of the Parent Stock or other voting securities of the parent issued to or
acquired by such Parent Stockholder. Without limiting the generality of the
foregoing, the term "Such Company Stockholder's Shares" shall include any such
additional shares of Company Common Stock, and the term "Such Parent
Stockholder's shares of Parent Stock" shall include any such additional shares
of Parent Stock.
10. VOIDABILITY. If prior to the execution hereof, the Board of
Directors of the Company shall not have duly and validly authorized and approved
by all necessary corporate action the Merger Agreement and the transactions
contemplated thereby, so that by the execution and delivery hereof the Parent
would become, or could reasonably be expected to become, an "interested
shareholder" with whom the Company would be prevented for any period pursuant to
Section 13.1-725.1 of the Virginia Stock Corporation Act ("VSCA") from engaging
in any "affiliated transaction" (as such terms are defined in Section 13.1-725
of the VSCA), then this Agreement shall be void and unenforceable until such
time as such authorization and approval shall have been duly and validly
obtained.
11. FURTHER ASSURANCES. Each Company Stockholder shall, upon
request of the Parent, execute and deliver any additional documents and take
such further actions as may reasonably be deemed by the Parent to be necessary
or desirable to carry out the provisions hereof. Each of the Parent and each
Parent Stockholder shall, upon request of the Company, execute and deliver any
additional documents and take such further actions as may reasonably be deemed
by the Company to be necessary or desirable to carry out the provisions hereof.
12. TERMINATION. It is a condition precedent to the effectiveness
of this Agreement that the Merger Agreement shall have been executed and
delivered and be in full force and effect. In the event the Merger is terminated
in accordance with its terms, this Agreement shall automatically terminate and
be of no further force and effect. This Agreement shall also terminate upon the
occurrence of the Effective Time of the Merger. Upon any such termination,
except for any rights any party may have in respect of any breach by any other
party of its or his obligations hereunder, none of the parties hereto shall have
any further obligation or liability hereunder.
13. MISCELLANEOUS.
(a) Capitalized terms used and not otherwise defined in
this Agreement shall have the respective meanings assigned to them in
the Merger Agreement.
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<PAGE> 10
(b) All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be
deemed given upon the same terms as set forth in Section 9.4 of the
Merger Agreement, except that notices to the undersigned Company
Stockholders shall be sent to the address set forth in Schedule A
hereto opposite each such Company Stockholder's name, and notices to
the undersigned Parent Stockholders shall be sent to the address set
forth in Schedule B hereto opposite each such Parent Stockholder's
name.
(c) No person executing this Agreement who is, or becomes
during the term hereof, a director or officer of the Company or Parent
makes any agreement or understanding herein in his or her capacity as
such director or officer. Each Company Stockholder and each Parent
Stockholder signs solely in his capacity as the record holder and
beneficial holder of shares of Company Common Stock or Parent Stock,
respectively, and nothing contained herein shall limit or affect any
actions taken by such stockholder in his capacity as an officer or
director of Company or Parent to the extent permitted by the Merger
Agreement.
(d) The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(e) This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same
agreement and shall become effective (i) as to any Company Stockholder
when one or more counterparts have been signed by each of Parent and
such Company Stockholder and delivered to Parent and (ii) as to any
Parent Stockholder when one or more counterparts have been signed by
each of the Company and such Parent Stockholder and delivered to
Company.
(f) This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement, and
supersedes all prior agreements and undertakings, both written and
oral, among the parties with respect to the subject matter hereof.
(g) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the
laws that might otherwise govern under applicable principles of
conflicts of laws thereof.
(h) Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in
whole or in part, through any merger, by operation of law or otherwise,
by any of the parties without the prior written consent of the other
parties, except by laws of descent or as expressly contemplated by
Sections 5(a), 8(a) or 8(b) hereof. Any assignment in violation of the
foregoing shall be void.
(i) The parties agree that irreparable damage would occur
and that the other parties hereto would not have any adequate remedy at
law in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled
to
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<PAGE> 11
an injunction or injunctions to prevent breaches or threatened breaches
by any party of this Agreement and to enforce specifically the terms
and provisions of this Agreement in any court of the United States
located in the State of Delaware or in Delaware state court, this being
in addition to any other remedy to which they may be entitled at law or
in equity. In addition, each of the parties hereto irrevocably and
unconditionally (i) consents to be subject to the personal jurisdiction
of any Federal court located in the State of Delaware or any Delaware
state court in the event any dispute arises out of this Agreement or
any of the transactions contemplated hereby, (ii) agrees that such
party will not attempt to deny or defeat the personal jurisdiction of
such courts by motion or other request for leave from any such court,
(iii) agrees that such party will not bring any action relating to this
Agreement or any of the transactions contemplated hereby in any court
other than a Federal court sitting in the State of Delaware or a
Delaware state court and (iv) that service of process may also be made
on such party by prepaid certified mail with a proof of mailing receipt
validated by the United States Postal Service constituting evidence of,
valid service, and that service made pursuant to this clause (iv) shall
have the same legal force and effect as if served upon such party
personally within the State of Delaware.
(j) If any term, provision, covenant or restriction
herein, or the application thereof to any circumstance, shall, to any
extent, be held by a court of competent jurisdiction to be invalid,
void, or unenforceable, the remainder of the terms, provisions,
covenants and restrictions herein and the application thereof to any
other circumstances, shall remain in full force and effect, shall not
in any way be affected, impaired, or invalidated, and shall be enforced
to the fullest extent permitted by law and the provision found to be
invalid, void or unenforceable shall be immediately revised by the
parties hereto so as to be valid, binding and enforceable to the
greatest extent then permitted by applicable law.
(k) No amendment, modification or waiver in respect of
this Agreement shall be effective against any party unless it shall be
in writing and signed by such party.
(l) A facsimile of this Agreement containing signatures
of the parties hereto shall constitute an original document for all
purposes.
[BALANCE OF PAGE INTENTIONALLY OMITTED]
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<PAGE> 12
IN WITNESS WHEREOF, the Parent, the Company, each Company Stockholder
and each Parent Stockholder have caused this Stockholders Agreement to be duly
executed and delivered on day and year first above written.
LEVEL 8 SYSTEMS, INC.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
TEMPLATE SOFTWARE, INC.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
COMPANY STOCKHOLDERS:
-------------------------------------------
Name: J. Kelly Brown
Individually
-------------------------------------------
Name: Andrew B. Ferrentino
Individually
-------------------------------------------
Name: Joseph M. Fox
Individually
-------------------------------------------
Name: David Kiker
Individually
-------------------------------------------
Name: E. Linwood Pearce
Individually
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<PAGE> 13
PARENT STOCKHOLDERS:
Liraz Systems Ltd.
By:
----------------------------------
Name:
----------------------------------
Title:
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By:
Name:
Title:
Liraz Export (1990) Ltd.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
By:
Name:
Title:
Advanced Systems Europe B.V.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
13
<PAGE> 14
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMPANY
COMPANY STOCKHOLDER ADDRESS OF COMPANY STOCKHOLDER COMMON STOCK
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
J. Kelly Brown 12700 Springfield Court o 1,000 shares of Common
Dunkirk, MD 20754 Stock
o Options to purchase
97,000 shares of Common Stock
Andrew B. Ferrentino 7904 Horseshoe Lane o 404,857 shares of
Potomac, MD 20859 Common Stock
Joseph M. Fox 45365 Vintage Park Plaza
Suite 100 o 356,167 shares of
Dulles, VA 20166 Common Stock
David Kiker 20485 McGees Ferry Way o 20,000 shares of Common
Sterling, VA 20165 Stock
o Options to purchase
137,500 shares of Common
Stock
E. Linwood Pearce 10831 Barnwood Lane o 62,464 shares of Common
Rockville, MD 20854 Stock
o Options to purchase
549,680 shares of Common
Stock
</TABLE>
<PAGE> 15
SCHEDULE B
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PARENT
PARENT STOCKHOLDER ADDRESS OF PARENT STOCKHOLDER CAPITAL STOCK(*)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Liraz Systems Ltd. 5 Hatzoref Street 2,861,863 shares of Common Stock
Holon, 58856
Israel
Liraz Export (1990) Ltd. 5 Hatzoref Street
Holon, 58856 2,071,257 shares of Common Stock
Israel
Advanced Systems Europe B.V. 5 Hatzoref Street 10,000 shares of Preferred Stock
Holon, 58856
Israel
</TABLE>
(*) Excluding shares held by other Parent Stockholders. Liraz Systems Ltd.,
may be deemed to be the beneficial owner of securities held by its
subsidiaries, Liraz Export (1990) Ltd. and Advanced Systems Europe B.V.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference into Level 8 Systems,
Inc.'s Registration Statement on Form S-3 (File number 333-84681) of our
report, dated December 31, 1998, which appears in Seer Technologies, Inc.'s
Annual Report on Form 10-K for the year ended September 30, 1998. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Washington, D.C.
November 4, 1999
-6-
<PAGE> 1
EXHIBIT 99.1
LEVEL 8 TAKES LEAD IN EAI MARKET
BY AGREEING TO ACQUIRE TEMPLATE SOFTWARE
COMBINED ORGANIZATION WILL DELIVER NEXT GENERATION
ENTERPRISE APPLICATION INTEGRATION SOLUTIONS FOR ECOMMERCE AND EBUSINESS
CARY, NC AND DULLES, VA -- OCTOBER 20, 1999 - Level 8 Systems, Inc.
(NASDAQ:LVEL), a premier provider of rapid business integration solutions that
enable eBusiness and eCommerce, today announced an agreement to acquire Template
Software, Inc. (NASDAQ:TMPL) for approximately $49 million USD in cash and Level
8 common stock. Template is a leading provider of business process automation
and application integration solutions with a substantial customer base in the
government, telecommunications, and financial services markets.
The acquisition of Template will make Level 8 one of the first to offer next
generation enterprise application integration (EAI) solutions. Level 8's fully
integrated and open next generation solutions will provide the robust enterprise
infrastructure required to enable companies to finally realize the full promise
of eCommerce and eBusiness. By combining Template's ERP integration, component
development, high performance data integration engine, and business workflow and
process management products with Level 8's middleware, EAI, and application
development technologies, Level 8 can deliver the most comprehensive, end-to-end
enterprise solutions available.
"Competitive pressures are driving companies to move as quickly as possible
toward eBusiness models," said Ed Acly, International Data Corporation's (IDC)
director of middleware research. "These new business models require not only
integrating across a wide range of existing applications but also effectively
automating business processes. Conducting business on the Internet mandates
robust, scalable infrastructure that is capable of supporting the massive
transaction volumes and dynamic response times demanded by the online business
and information consumer. The merger of Level 8 and
<PAGE> 2
Template is significant because the combination of their respective technologies
will enable Level 8 to be among the first to address such a broad spectrum of
eBusiness infrastructure requirements in order to better assist customers
competing in the eEconomy."
"We believe the combination of Level 8's and Template's technologies will allow
us to bring a powerful next generation EAI solution to market very quickly,"
stated Level 8 Chairman and CEO Arik Kilman. "While both of our companies
focused on business integration, we approached different aspects of the problem.
Template created an outstanding set of technologies that are extremely
complementary to Level 8's product suite. Putting our products and expertise
together creates an unparalleled `big picture' solution. What will clearly
differentiate our offering is its flexible, adaptable enterprise infrastructure
capable of effectively handling the high transaction volumes and dynamic demands
of eBusiness and eCommerce. We are setting the bar for next generation EAI
solutions, and we intend to be a major long term player in the global market."
"We're excited about joining forces with Level 8 because we feel that it is not
only an excellent fit, but because it is a merger in which the result will be
far greater than the sum of its parts," said Joseph Fox, chairman of Template
Software. "Integrating Template's business-level software products with Level
8's powerful Geneva family of products should dramatically accelerate the
availability of solutions that offer unprecedented depth and breadth of
functionality to our customers. We look forward to seeing our technology become
a cornerstone of Level 8's cutting edge, next generation solution."
TERMS OF THE AGREEMENT
In the merger, each share of Template common stock will be exchanged for $4.00
in cash plus $3.90 worth of Level 8 common stock. The actual number of shares of
Level 8 common stock to be exchanged for each Template share will be based on
the average trading price of Level 8 stock prior to stockholder approval, but
will not be less than 0.2838 Level 8 shares per Template share (if Level 8's
average trading price exceeds
Page 2
<PAGE> 3
$13.74) or more than 0.3672 Level 8 shares per Template share (if Level 8's
average trading price is less than $10.62). The merger is intended to qualify as
a tax-free reorganization, which means that Template stockholders would
generally be permitted to defer taxes on the Level 8 stock portion of the
purchase price. In connection with the merger, Level 8 has received a commitment
for additional financing. The financing will be guaranteed by Liraz Systems,
Ltd., Level 8's controlling stockholder, in return for a number of shares of
Level 8 common stock to be determined by the independent directors of Level 8
based on market conditions and Level 8's financing needs at the closing.
The transaction is subject to certain conditions to closing, including
stockholder approval, regulatory approval, and necessary consents and filings.
Management stockholders of Template, representing approximately 17.2 percent of
the outstanding Template shares, and Liraz and other Level 8 stockholders,
representing 52.6 percent of the outstanding Level 8 shares, have agreed to vote
their shares in favor of the transaction.
As a result of this transaction, Level 8 will nearly double in size to a company
with over 500 employees worldwide.
A STRATEGIC AND BENEFICIAL MERGER
"This is a particularly strategic acquisition for Level 8 for a number of other
reasons, as well," added Kilman. "In addition to the product synergies,
Template's highly skilled consulting force will nicely augment our own. Also,
through this acquisition, Level 8 will add many new high profile customers,
including industry leaders such Bell Atlantic, Siemens, Alcatel, Enron, and
United Health Care to our current blue-chip customer list for a combined base of
more than 700 customers worldwide."
"Our current and future customers will clearly benefit from this merger.
Companies around the world are facing increasing competitive pressure to move
quickly into eBusiness and eCommerce," continued Kilman. "Time to market and
adaptability are critical success factors in eBusiness and eCommerce. By
leveraging the collective
Page 3
<PAGE> 4
strengths of our combined companies, we can deliver all these benefits to our
customers to help them rapidly achieve competitive advantage."
"Not only do our customers benefit, however. Employees of the combined company
worldwide will have new opportunities to grow with a dynamic company and expand
their skills working with a very exciting, market-leading, next generation set
of technologies. To ensure that we not only take, but sustain, a significant
market leadership position, we intend to invest substantially in sales and
marketing to grow the top line as well as the bottom line," concluded Kilman.
"Our goal is to make our stockholders the ultimate beneficiaries of this
merger."
NEXT GENERATION EAI SOLUTIONS
The integrated solution approach Level 8 is taking is clearly in line with
industry analysts' view of next generation trends. According to analyst Dave
Kelly with the Hurwitz Group, "Second generation EAI solutions will combine
traditional first generation functionality such as messaging, transformation,
rules and adapters with component development for new functionality, business
process, and workflow capabilities to enable business-level changes, a rich
array of communications options for both enterprise and web-based
business-to-business deployment, and an integrated management platform."
MORE ABOUT LEVEL 8
Level 8 Systems is a premier provider of rapid business integration solutions
through a combination of software products and services that enable eBusiness
and eCommerce. Level 8's software product set includes enterprise application
integration (EAI) and eCommerce enablement products, message-oriented middleware
(MOM), and enterprise application development tools. Level 8 has over 250
employees worldwide with corporate headquarters in Cary, North Carolina, and
offices in North America, Europe, and Australia. Please visit the company's web
site at www.level8.com for more information on Level 8 and its products and
services.
Page 4
<PAGE> 5
MORE ABOUT TEMPLATE SOFTWARE
Template Software is a leading provider of software products and solutions for
business integration. Template's object-based integration architecture and
innovative software templates enable organizations to integrate critical
business processes across the enterprise, providing a unified view of key
business assets and reducing the costs and risks of implementing business
solutions. Template Software, headquartered in Dulles, Virginia, has over 300
employees worldwide with offices in North America, the UK, France, Austria, and
Germany. Please visit the company's web site at www.template.com for more
information on Template's products and services.
Except for any historical information contained herein, this news release
contains forward looking statements on such matters as anticipated financial
performance, business prospects, the development and capabilities of next
generation EAI solutions, new products, research and development activities and
similar matters. The company notes that a variety of factors could cause its
actual results to differ materially from the anticipated results or other
expectations expressed in this release. The company's performance, development
and results of operations may be affected by the risks presented by market
acceptance of the company's strategic direction; continued market acceptance of
the company's existing technology; the integration of Template's operations;
transfer and continuation of customer contracts including government contracts;
compliance with government contracts' requirements and practices; fluctuations
in quarterly operating results and volatility of the price of the company's
common stock; competition; customer concentration; the potential failure to meet
product delivery dates; matters relating to international operations;
intellectual property and proprietary rights; an inability to attract and retain
consultants, development professionals, and trained qualified sales
professionals and the ability of those sales professionals to perform to quota;
the sufficiency of the company's liquidity and capital resources; and the risks
more fully described in Level 8's form S-3 filed with the Securities and
Exchange Commission (File Number 333-84681)
# # #
Level 8, Level 8 Systems, and Geneva are trademarks of Level 8 Systems, Inc.
Template and Template Software are trademarks of Template Software, Inc. All
other company and product names are for identification purposes only and are the
property of, and may be trademarks of, their respective owners.
Contact: LEVEL 8
In North America
Eileen Ibenhard Liz Bazini / Susan Verrecchia
Level 8 Verrecchia Group
919-380-5354 514-733-5529
[email protected] [email protected] / [email protected]
In Europe:
Lucy Thomas
Brodeur A Plus
44-(0)-1753-790-700
[email protected]
Page 5
<PAGE> 6
TEMPLATE SOFTWARE
Mary Ann Stoops
Template Software, Inc
703-318-1232
[email protected]
Page 6
