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AGREEMENT AND PLAN OF MERGER
DATED AS OF MAY 31, 1999
AMONG
DIALOGIC CORPORATION,
INTEL CORPORATION
AND
INTEL LMH ACQUISITION CORPORATION
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TABLE OF CONTENTS
PAGE
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ARTICLE 1 THE OFFER............................................................. 1
SECTION 1.1. The Offer................................................... 1
SECTION 1.2. Company Actions............................................. 2
SECTION 1.3. Boards of Directors and Committees; Section 14(f) of
Exchange Act................................................ 4
ARTICLE 2 THE MERGER............................................................ 4
SECTION 2.1. The Merger.................................................. 4
SECTION 2.2. Effective Time.............................................. 4
SECTION 2.3. Closing of the Merger....................................... 5
SECTION 2.4. Effects of the Merger....................................... 5
SECTION 2.5. Certificate of Incorporation and Bylaws..................... 5
SECTION 2.6. Directors................................................... 5
SECTION 2.7. Officers.................................................... 5
SECTION 2.8. Conversion of Shares........................................ 5
SECTION 2.9. Dissenters' Rights.......................................... 5
SECTION 2.10. Exchange of Certificates.................................... 5
SECTION 2.11. Assumed Stock Options....................................... 6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................... 7
SECTION 3.1. Organization and Qualification; Subsidiaries; Investments... 7
SECTION 3.2. Capitalization of the Company and its Subsidiaries.......... 8
SECTION 3.3. Authority Relative to this Agreement; Recommendation........ 9
SECTION 3.4. SEC Reports; Financial Statements........................... 9
SECTION 3.5. Information Supplied........................................ 10
SECTION 3.6. Consents and Approvals; No Violations....................... 10
SECTION 3.7. No Default.................................................. 10
SECTION 3.8. No Undisclosed Liabilities; Absence of Changes.............. 11
SECTION 3.9. Litigation.................................................. 11
SECTION 3.10. Compliance with Applicable Law.............................. 12
SECTION 3.11. Employee Benefits........................................... 12
SECTION 3.12. Labor and Employment Matters................................ 15
SECTION 3.13. Environmental Laws and Regulations.......................... 15
SECTION 3.14. Taxes....................................................... 16
SECTION 3.15. Intellectual Property....................................... 17
SECTION 3.16. Insurance................................................... 21
SECTION 3.17. Certain Business Practices.................................. 21
SECTION 3.18. Product Warranties.......................................... 21
SECTION 3.19. Suppliers and Customers..................................... 22
SECTION 3.20. Vote Required............................................... 22
SECTION 3.21. Opinion of Financial Adviser................................ 22
SECTION 3.22. Brokers..................................................... 22
SECTION 3.23. Takeover Statutes........................................... 22
SECTION 3.24. Representations Complete.................................... 22
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION.............. 22
SECTION 4.1. Organization................................................ 22
SECTION 4.2. Authority Relative to this Agreement........................ 23
SECTION 4.3. Information Supplied........................................ 23
SECTION 4.4. Consents and Approvals; No Violations....................... 23
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PAGE
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SECTION 4.5. Litigation.................................................. 23
SECTION 4.6. Brokers..................................................... 24
SECTION 4.7. Financing................................................... 24
SECTION 4.8. Ownership of the Company.................................... 24
ARTICLE 5 COVENANTS............................................................. 24
SECTION 5.1. Conduct of Business of the Company.......................... 24
SECTION 5.2. No Solicitation or Negotiation.............................. 26
SECTION 5.3. Meeting of Stockholders..................................... 28
SECTION 5.4. Access to Information....................................... 28
SECTION 5.5. Certain Filings; Reasonable Efforts......................... 29
SECTION 5.6. Public Announcements........................................ 29
SECTION 5.7. Indemnification and Directors' and Officers' Insurance...... 30
SECTION 5.8. Notification of Certain Matters............................. 31
SECTION 5.9. Additions to and Modification of Company Disclosure
Schedule.................................................... 31
SECTION 5.10. Certain Employee Matter..................................... 31
SECTION 5.11. Company..................................................... 31
SECTION 5.12. Takeover Statutes........................................... 31
SECTION 5.13. Company Stock Options....................................... 31
SECTION 5.14. ISRA........................................................ 32
SECTION 5.15. Certain Rights of Warrant Holder............................ 32
ARTICLE 6 CONDITIONS TO CONSUMMATION OF THE MERGER.............................. 33
SECTION 6.1. Conditions to Each Party's Obligations to Effect the
Merger...................................................... 33
SECTION 6.2. Conditions to the Obligations of the Company................ 33
SECTION 6.3. Conditions to the Obligations of Parent and Acquisition..... 33
ARTICLE 7 TERMINATION; AMENDMENT; WAIVER........................................ 34
SECTION 7.1. Termination................................................. 34
SECTION 7.2. Effect of Termination....................................... 35
SECTION 7.3. Fees and Expenses........................................... 35
SECTION 7.4. Amendment................................................... 37
SECTION 7.5. Extension; Waiver........................................... 37
ARTICLE 8 MISCELLANEOUS.................................................... 38
SECTION 8.1. Nonsurvival of Representations and Warranties............... 38
SECTION 8.2. Entire Agreement; Assignment................................ 38
SECTION 8.3. Validity.................................................... 38
SECTION 8.4. Notices..................................................... 38
SECTION 8.5. Governing Law and Venue; Waiver of Jury Trial............... 39
SECTION 8.6. Descriptive Headings........................................ 40
SECTION 8.7. Parties in Interest......................................... 40
SECTION 8.8. Certain Definitions......................................... 40
SECTION 8.9. Personal Liability.......................................... 40
SECTION 8.10. Specific Performance........................................ 41
SECTION 8.11. Counterparts................................................ 41
ANNEX A CONDITIONS OF THE OFFER
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TABLE OF EXHIBITS
Exhibit A................... Form of Certificate of Merger
TABLE OF CONTENTS
TO
COMPANY DISCLOSURE SCHEDULE
[THE COMPANY AGREES TO FURNISH SUPPLEMENTALLY TO THE
SECURITIES AND EXCHANGE COMMISSION COPIES OF ANY OF THE
FOLLOWING OMITTED SCHEDULES UPON REQUEST OF THE COMMISSION]
SECTION 1.3(a)............... Exceptions Relating to Subsidiary Boards
SECTION 3.1(a)............... Subsidiaries
SECTION 3.1(c)............... Equity Investments
SECTION 3.2(a)............... Company Securities
SECTION 3.2(b)............... Certain Capitalization and Other Matters
SECTION 3.4.................. Company SEC Reports
SECTION 3.6.................. Consents and Approvals
SECTION 3.7.................. Defaults
SECTION 3.8.................. Undisclosed Liabilities; Absence of Changes
SECTION 3.9.................. Litigation
SECTION 3.11(a).............. Employee Plans
SECTION 3.11(b).............. Employment and Related Agreements
SECTION 3.11(c).............. Employee Benefits Affected by this Transaction
SECTION 3.11(d).............. Employee Benefits to Former Employees
SECTION 3.11(e).............. Employee Matters
SECTION 3.11(h).............. Stock Options
SECTION 3.11(j).............. No Events Under Compensation and Benefit Plans
SECTION 3.11(k).............. Foreign Plans
SECTION 3.11(l).............. Amendments and Actions under ERISA and other Applicable Law
SECTION 3.11(r).............. Retroactive Premiums or Payments
SCHEDULE 3.12................ Employment Matters
SECTION 3.12(b).............. Labor Strikes, Disputes, Slow Downs and Stoppages
SCHEDULE 3.12(d)............. Names and Compensation of Officers
SECTION 3.12(f).............. Withholdings
SECTION 3.14(b).............. Delinquent or Inaccurate Tax Returns
SECTION 3.14(c).............. All Taxes Paid
SECTION 3.14(d).............. Tax Claims
SECTION 3.14(e).............. Excess Parachute Payments
SECTION 3.14(f).............. Tax Sharing Agreements
SECTION 3.14(g).............. Limitations on Use of NOLs
SECTION 3.14(h).............. Section 481 Adjustments
SECTION 3.15(a).............. Intellectual Property
SECTION 3.15(b)(iii)......... Trademarks
SECTION 3.15(e)(i)........... Inbound License Agreements
SECTION 3.15(e)(ii).......... Outbound License Agreements
SECTION 3.15(h).............. No Infringement by the Company
SECTION 3.15(i).............. Pending and Threatened Infringement Claims
SECTION 3.15(j).............. Infringement Matters
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SECTION 3.15(k).............. Change in Control
SECTION 3.15(l).............. Non-Company Intellectual Property Rights
SECTION 3.15(m).............. Existing and Currently Manufactured Software
SECTION 3.15(o).............. Year 2000 Compliance
SECTION 3.15(p).............. Foundry Relationships
SECTION 3.16................. Insurance
SECTION 3.18................. Product Warranties
SECTION 3.19................. Suppliers
SECTION 5.1.................. Conduct of Business
SECTION 5.4(a)............... Access to Information
SECTION 6.3(e)............... Third Party Consents
TABLE OF DEFINED TERMS
CROSS REFERENCE
TERM IN AGREEMENT PAGE
---- --------------- ----
Acquisition................................................. Preamble.............. 1
affiliate................................................... Section 8.8(a)........ 57
Agreement................................................... Preamble.............. 1
Applicable Law.............................................. Section 8.8(b)........ 57
Assumed Option Plan......................................... Section 2.11.......... 9
business day................................................ Section 8.8(c)........ 57
Business System............................................. Section 3.15(o)(i).... 29
capital stock............................................... Section 8.8(d)........ 57
Certificate of Merger....................................... Section 2.2........... 6
Certificates................................................ Section 2.10(b)....... 8
Closing Date................................................ Section 2.3........... 7
Closing..................................................... Section 2.3........... 7
Commonly Controlled Entity.................................. Section 3.11(a)....... 17
Company Board............................................... Section 1.1(b)........ 2
Company Disclosure Schedule................................. Article 3............. 10
Company Permits............................................. Section 3.10.......... 17
Company Plans............................................... Section 8.8(e)........ 57
Company..................................................... Preamble.............. 1
Company SEC Reports......................................... Section 3.4(a)........ 13
Company Securities.......................................... Section 3.2(a)........ 11
Company Stock Option........................................ Section 3.2........... 11
Compensation and Benefit Plans.............................. Section 3.11(a)....... 17
Copyrights.................................................. Section 3.15(a)....... 25
Department of Treasury.............................................................. 6
Effective Time.............................................. Section 2.2........... 7
Environmental Laws.......................................... Section 3.13(a)....... 22
ERISA....................................................... Section 3.11(a)....... 17
ESPP........................................................ Section 2.11.......... 9
Exchange Agent.............................................. Section 2.10(a)....... 8
Exchange Fund............................................... Section 2.10(a)....... 8
Exchange Ratio.............................................. Section 2.11.......... 9
Final Date.................................................. Section 7.1(b)........ 49
Foreign Plans............................................... Section 3.11(l)....... 19
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CROSS REFERENCE
TERM IN AGREEMENT PAGE
---- --------------- ----
Governmental Entity......................................... Section 3.6........... 14
Hazardous Material.......................................... Section 3.13(a)....... 22
HSR Act..................................................... Section 3.6........... 14
Inbound License Agreements.................................. Section 3.15(e)....... 26
include..................................................... Section 8.8(g)........ 58
Indemnified Liabilities..................................... Section 5.7(a)........ 43
Indemnified Persons......................................... Section 5.7(a)........ 43
Insurance Policies.......................................... Section 3.16.......... 30
Insured Parties............................................. Section 5.7(c)........ 44
Intellectual Property....................................... Section 3.15(a)....... 25
ISRA........................................................ Section 3.6........... 14
knowledge or known.......................................... Section 8.8(f)........ 57
Lien........................................................ Section 3.2(b)........ 12
Material Adverse Effect on Parent........................... Section 4.1(b)........ 33
Material Adverse Effect on the Company...................... Section 3.1(b)........ 10
Meeting..................................................... Section 5.3(c)........ 40
Merger Consideration........................................ Section 2.8(a)........ 7
Merger...................................................... Section 2.1........... 6
NJDEP....................................................... Section 5.14.......... 46
Notice of Superior Proposal................................. Section 5.2(b)........ 39
Other Interests............................................. Section 3.1(c)........ 11
Outbound License Agreements................................. Section 3.15(e)....... 27
Parent Common Stock......................................... Section 2.11.......... 9
Parent...................................................... Preamble.............. 1
Patents..................................................... Section 3.15(a)....... 25
Pension Plans............................................... Section 3.11(a)....... 17
person...................................................... Section 8.8(h)........ 58
Proxy Statement............................................. Section 3.5........... 14
SEC......................................................... Section 3.4(a)........ 13
Securities Act.............................................. Section 3.4(a)........ 13
Software.................................................... Section 3.15(l)....... 28
Stock Option Agreement...................................... Section 8.8(i)........ 58
subsidiary or subsidiaries.................................. Section 8.8(j)........ 58
Superior Proposal........................................... Section 5.2(c)........ 39
Supply Contracts............................................ Section 3.15(p)....... 30
Surviving Corporation....................................... Section 2.1........... 6
Tax or Taxes................................................ Section 3.14(a)(i).... 23
Tax Return.................................................. Section 3.14(a)(ii)... 23
Third Party Acquisition..................................... Section 5.2(c)........ 39
Third Party................................................. Section 5.2(c)........ 39
Trade Secrets............................................... Section 3.15(a)....... 25
Trademarks.................................................. Section 3.15(a)....... 25
Year 2000 Capable........................................... Section 3.15(o)(i).... 29
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May 31,
1999, is by and among Dialogic Corporation, a New Jersey corporation (the
"Company"), Intel Corporation, a Delaware corporation ("Parent"), and Intel LMH
Acquisition Corporation, a New Jersey corporation and a wholly owned subsidiary
of Parent ("Acquisition"). Initially capitalized and certain other terms not
otherwise defined herein shall have the meanings ascribed to such terms in
Section 8.8 of this Agreement.
WHEREAS, the Boards of Directors of the Company, Parent and Acquisition
have each (i) determined that the Merger (as defined below) is advisable and
fair and in the best interests of their respective stockholders and (ii)
approved the Merger upon the terms and subject to the conditions set forth in
this Agreement; and
WHEREAS, in furtherance thereof, it is proposed that Acquisition shall,
within five (5) business days after the public announcement hereof, commence a
tender offer (the "Offer") to acquire all of the outstanding shares (the
"Shares") of common stock, no par value, of the Company (the "Company Common
Stock"), at a price of Forty-Four Dollars ($44.00) per Share, net to the seller
in cash, less any required withholding taxes (such amount, or any greater amount
per share paid pursuant to the Offer, being hereinafter referred to as the
"Offer Price"), in accordance with the terms and subject to the conditions
provided herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the Company, Parent and Acquisition hereby
agree as follows:
ARTICLE 1
THE OFFER
SECTION 1.1. The Offer.
(a) Provided that this Agreement shall not have been terminated and
subject to the terms hereof, as promptly as practicable, but in no event later
than five (5) business days after the public announcement of the execution
hereof by the parties, Acquisition shall (and Parent shall cause Acquisition to)
commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), the Offer for any and all of the Shares,
at the Offer Price. The obligation of Acquisition to accept for payment and to
pay for any Shares tendered (and the obligation of Parent to cause Acquisition
to accept for payment and to pay for any Shares tendered) shall be subject only
to (i) the condition that at least a majority of Shares on a fully-diluted basis
(including for purposes of such calculation all Shares issuable upon exercise of
all vested Company Stock Options (as defined in Section 3.2(a)) and unvested
Company Stock Options that vest prior to the Final Date, but excluding any
Shares held by the Company or any of its subsidiaries) be validly tendered (the
"Minimum Condition"), and (ii) the other conditions set forth in Annex A.
Acquisition expressly reserves the right to increase the Offer Price or to make
any other changes in the terms and conditions of the Offer; provided, however,
that unless previously approved by the Company in writing, no change may be made
that (i) decreases the Offer Price, (ii) changes the form of consideration to be
paid in the Offer, (iii) reduces the maximum number of Shares to be purchased in
the Offer, (iv) imposes conditions to the Offer in addition to those set forth
in Annex A, (v) amends the conditions set forth in Annex A to broaden the scope
of such conditions, (vi) extends the Offer except as provided in Section 1.1(b),
or (vii) amends the Minimum Condition. It is agreed that the conditions set
forth in Annex A are for the sole benefit of Parent and Acquisition and may be
waived by Parent and Acquisition, in whole or in part at any time and from time
to time, in their sole discretion, other than the Minimum Condition, as to which
prior written Company approval is required. The failure by Parent and
Acquisition at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, and each such right shall be deemed an
ongoing right that may be asserted at any time and from time to time. The
Company agrees that no Shares held by the Company or any of its subsidiaries
will be tendered in the Offer.
(b) Subject to the terms and conditions thereof, the Offer shall expire
at midnight, New York City time, on the date that is twenty (20) business days
after the date the Offer is commenced; provided, however, that without the
consent of the Company's Board of Directors (the "Company Board"), Acquisition
may (i) from time to time extend the Offer, if at the scheduled expiration date
of the Offer any of the conditions to the Offer shall not have been satisfied or
waived, until such time as such conditions are satisfied or waived; (ii) extend
the Offer for any period required by any rule, regulation, interpretation or
position of the Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer; or (iii) extend the Offer for any reason on one
or more occasions for an aggregate period of not more than twenty (20) business
days beyond the latest expiration date that would otherwise be permitted under
clause (i) or (ii) of this sentence if on such expiration date there shall not
have been tendered at least 90% of the outstanding Shares. Parent and
Acquisition agree that, if any one or more of the conditions to the Offer set
forth on Annex A are not satisfied and none of the events set forth in
paragraphs (a) through (f) of Annex A that would permit Acquisition not to
accept tendered Shares for payment has occurred and is continuing at the time of
any scheduled expiration date of the Offer, then, provided, that such conditions
are reasonably capable of being satisfied and no such event has occurred on or
prior to (and is continuing on) September 15, 1999, Acquisition shall extend the
Offer from time to time unless any such condition is no longer reasonably
capable of being satisfied or any such event has occurred; provided, however,
that in no event shall Acquisition be required to extend the Offer beyond
September 15, 1999. Subject to the terms and conditions of the Offer and this
Agreement, Acquisition shall (and Parent shall cause Acquisition to) accept for
payment, and pay for, all Shares validly tendered and not withdrawn pursuant to
the Offer, as promptly as practicable after the expiration of the Offer.
(c) As soon as practicable on the date the Offer is commenced, Parent
and Acquisition shall file with the SEC a Tender Offer Statement on Schedule
14D-1 (together with all amendments and supplements thereto, and including all
exhibits thereto, the "Schedule 14D-1") with respect to the Offer. The Schedule
14D-1 shall contain as an exhibit or incorporate by reference the Offer to
Purchase (or portions thereof) and forms of the related letter of transmittal
and summary advertisement. Parent and Acquisition agree that they shall cause
the Schedule 14D-1, the Offer to Purchase and all amendments or supplements
thereto (which together constitute the "Offer Documents") to comply in all
material respects with the Exchange Act and the rules and regulations thereunder
and other Applicable Laws. Parent and Acquisition further agree that the Offer
Documents, on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation or warranty is made by
Parent or Acquisition with respect to information supplied by the Company or any
of its stockholders in writing specifically for inclusion or incorporation by
reference in the Offer Documents. The Company agrees that the information
provided by the Company in writing specifically for inclusion or incorporation
by reference in the Offer Documents shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of Parent,
Acquisition and the Company agrees promptly to correct any information provided
by it for use in the Offer Documents if and to the extent that such information
shall have become false or misleading in any material respect, and Parent and
Acquisition further agree to take all steps necessary to cause the Schedule
14D-1 as so corrected to be filed with the SEC and the other Offer Documents as
so corrected to be disseminated to the Company's stockholders, in each case as
and to the extent required by applicable federal securities laws. The Company
and its counsel shall be given reasonable opportunity to review and comment on
the Offer Documents prior to the filing thereof with the SEC. Parent and
Acquisition agree to provide in writing the Company and its counsel with any
comments Parent, Acquisition or their counsel may receive from the SEC or its
staff with respect to the Offer Documents promptly after receipt of such
comments.
SECTION 1.2. Company Actions.
(a) The Company hereby approves of and consents to the Offer and
represents that the Company Board, at a meeting duly called and held, has,
subject to the terms and conditions set forth herein, (i) after evaluating the
Merger, determined that this Agreement and the transactions contemplated hereby,
including
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the Offer and the Merger, taken together, are at a price and on terms that are
adequate and are otherwise in the best interests of the Company and its
stockholders; (ii) approved this Agreement and the transactions contemplated
hereby, including the Offer and the Merger, in all respects and such approval
constitutes approval of the Offer, this Agreement and the Merger for purposes of
(x) Sections 14A:10A-4 and 14A:10A-5 of the New Jersey Business Corporation Act
(the "NJBCA") and (y) similar provisions of any other New Jersey statutes that
might be deemed applicable to the transactions contemplated hereby; and (iii)
resolved to recommend that the stockholders of the Company accept the Offer,
tender their Shares thereunder to Acquisition and approve and adopt this
Agreement and the Merger. The Company consents to the inclusion of such
recommendation and approval in the Offer Documents. The Company also represents
that the Company Board has received the opinion of Hambrecht & Quist LLC,
financial advisor to the Company Board (the "Financial Advisor"), that, as of
May 31, 1999, the consideration to be received pursuant to this Agreement is
fair to the stockholders of the Company from a financial point of view (the
"Fairness Opinion"). The Company has been authorized by the Financial Advisor to
permit, subject to the prior review and consent by the Financial Advisor (such
consent not to be unreasonably withheld), the inclusion of the Fairness Opinion
(or a reference thereto) in the Offer Documents, the Schedule 14D-9 and the
Proxy Statement.
(b) The Company shall file with the SEC, concurrently with the filing of
the Schedule 14D-1, a Solicitation/Recommendation Statement on Schedule 14D-9
(together with all amendments and supplements thereto, and including all
exhibits thereto, the "Schedule 14D-9") containing the recommendations described
in Section 1.2(a) and shall mail the Schedule 14D-9 to the stockholders of the
Company promptly after the commencement of the Offer. The Company agrees that it
shall cause the Schedule 14D-9 to comply in all material respects with the
Exchange Act and the rules and regulations thereunder and other Applicable Laws.
The Company further agrees that the Schedule 14D-9, on the date first published,
sent or given to the Company's stockholders, shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation or warranty is made by the Company with respect to information
supplied by Parent or Acquisition in writing specifically for inclusion or
incorporation by reference in the Schedule 14D-9. Parent and Acquisition agree
that the information provided by them specifically in writing for inclusion or
incorporation by reference in the Schedule 14D-9 shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Each of the
Company, Parent and Acquisition agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 or the Offer Documents if and to
the extent that such information shall have become false or misleading in any
material respect, and the Company further agrees to take all steps necessary to
cause the Schedule 14D-9 as so corrected to be filed with the SEC and be
disseminated to the Company's stockholders, in each case as and to the extent
required by applicable federal securities laws. Parent and its counsel shall be
given reasonable opportunity to review and comment on the Schedule 14D-9 prior
to the filing thereof with the SEC. The Company agrees to provide in writing to
Parent and its counsel any comments the Company or its counsel may receive from
the SEC or its staff with respect to the Schedule 14D-9 promptly after receipt
of such comments.
(c) In connection with the Offer, the Company shall, or shall cause its
transfer agent, promptly following a request by Parent, to furnish Parent with
such information, including updated lists of the stockholders of the Company,
mailing labels and updated lists of security positions, and such assistance as
Parent or its agents may reasonably request in communicating the Offer to the
record and beneficial holders of Shares. Subject to the requirements of
Applicable Law, and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Merger,
Parent and Acquisition and their agents shall hold in confidence the information
contained in any such labels, listings and files, will use such information only
in connection with the Offer and the Merger and, if this Agreement shall be
terminated, will deliver, and will use their reasonable efforts to cause their
agents to deliver, to the Company all copies and any extracts or summaries from
such information then in their possession or control.
(d) Solely in connection with the tender and purchase of Shares pursuant
to the Offer and the consummation of the Merger, the Company hereby waives any
and all rights of first refusal it may have with
3
respect to Shares owned by, or issuable to, any person, other than rights to
repurchase unvested shares, if any, that may be held by persons following
exercise of employee stock options.
SECTION 1.3. Boards of Directors and Committees; Section 14(f) of Exchange
Act.
(a) Promptly upon the purchase by Acquisition of Shares pursuant to the
Offer and from time to time thereafter, if the Minimum Condition has been met,
and subject to the second to last sentence of this Section 1.3(a), Parent shall
be entitled to designate up to such number of directors, rounded up to the next
whole number, on the Company Board as will give Parent representation on the
Company Board equal to the product of the number of directors on the Company
Board (giving effect to any increase in the number of directors pursuant to this
Section 1.3) and the percentage that such number of Shares so purchased bears to
the total number of outstanding Shares on a fully-diluted basis, and the Company
shall use its best efforts to, upon request by Parent, promptly, at the
Company's election, either increase the size of the Company Board or secure the
resignation of such number of directors as is necessary to enable Parent's
designees to be elected to the Company Board and to cause Parent's designees to
be so elected. At such times, and subject to the second to last sentence of this
Section 1.3(a), the Company shall use its best efforts to cause the individuals
designated by Parent to constitute the same percentage as is on the Company
Board of (i) each committee of the Company Board (other than any committee of
the Company Board established to take action under this Agreement), (ii) each
Board of Directors of each subsidiary of the Company (subject to Applicable Law
and except to the extent described in Section 1.3(a) of the Company Disclosure
Schedule) and (iii) each committee of each such Board of Directors.
Notwithstanding the foregoing, the Company shall use its best efforts to ensure
that three of the members of the Company Board as of the date hereof (the
"Continuing Directors") shall remain members of such Board until the Effective
Time. If a Continuing Director resigns from the Company Board, Parent,
Acquisition and the Company shall permit the remaining Continuing Director or
Directors to appoint the resigning Director's successor who shall be deemed to
be a Continuing Director.
(b) The Company's obligation to appoint designees to the Company Board
shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. The Company shall promptly take all action required pursuant to such
Section and Rule in order to fulfill its obligations under this Section 1.3 and
shall include in the Schedule 14D-9 such information with respect to the Company
and its officers and directors as is required under such Section and Rule in
order to fulfill its obligations under this Section 1.3. Parent shall supply to
the Company in writing and be solely responsible for any information with
respect to itself and its nominees, officers, directors and affiliates required
by such Section and Rule.
(c) Following the election or appointment of Parent's designees to the
Company Board pursuant to this Section 1.3 and prior to the Effective Time, if
there shall be any Continuing Directors, any amendment of this Agreement, any
termination of this Agreement by the Company, any extension by the Company of
the time for the performance of any of the obligations or other acts of Parent
or Acquisition or any waiver of any of the Company's rights hereunder or any
other determination with respect to any action to be taken or not to be taken by
the Company relating to this Agreement, will require the concurrence of a
majority of such Continuing Directors.
ARTICLE 2
THE MERGER
SECTION 2.1. The Merger. At the Effective Time and upon the terms and
subject to the conditions of this Agreement and in accordance with the NJBCA,
Acquisition shall be merged with and into the Company (the "Merger"). Following
the Merger, the Company shall continue as the surviving corporation (the
"Surviving Corporation") and the separate corporate existence of Acquisition
shall cease. Parent, as the sole stockholder of Acquisition, hereby approves the
Merger and this Agreement.
SECTION 2.2. Effective Time. Subject to the terms and conditions set forth
in this Agreement, on the Closing Date, (a) a Certificate of Merger
substantially in the form of Exhibit A (the "Certificate of Merger") shall be
duly executed and acknowledged by Acquisition and the Company and thereafter
delivered for filing
4
to the Department of Treasury, Division of Commercial Recording of the State of
New Jersey (the "Department of Treasury") pursuant to Section 14A:10-4.1 or 5.1
of the NJBCA; and (b) the parties shall make such other filings with any
government office of the State of New Jersey as shall be necessary to effect the
Merger. The Merger shall become effective at such time as a properly executed
copy of the Certificate of Merger is duly filed with the Department of Treasury
in accordance with Section 14A:10-4.1 or 5.1 of the NJBCA, or such later time as
Parent and the Company may agree upon and as may be set forth in the Certificate
of Merger (the time the Merger becomes effective being referred to herein as the
"Effective Time").
SECTION 2.3. Closing of the Merger. The closing of the Merger (the
"Closing") will take place at a time and on a date (the "Closing Date") to be
specified by the parties, which shall be no later than the second business day
after satisfaction (or waiver) of the latest to occur of the conditions set
forth in Article 6, at the offices of Gibson, Dunn & Crutcher LLP, One
Montgomery Street, San Francisco, California 94104, unless another time, date or
place is agreed to in writing by the parties hereto.
SECTION 2.4. Effects of the Merger. The Merger shall have the effects set
forth in the NJBCA. Without limiting the generality of the foregoing and subject
thereto, at the Effective Time, all the properties, rights, privileges, powers
and franchises of the Company and Acquisition shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and
Acquisition shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 2.5. Certificate of Incorporation and Bylaws. The Certificate of
Incorporation of Acquisition in effect at the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation until amended in
accordance with Applicable Law. The bylaws of Acquisition in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with Applicable Law.
SECTION 2.6. Directors. The directors of Acquisition at the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and bylaws of the Surviving
Corporation until such director's successor is duly elected or appointed and
qualified.
SECTION 2.7. Officers. The officers of Acquisition at the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and bylaws of the Surviving
Corporation until such officer's successor is duly elected or appointed and
qualified.
SECTION 2.8. Conversion of Shares.
(a) At the Effective Time, each Share issued and outstanding immediately
prior to the Effective Time (other than (i) Shares held in the Company's
treasury or by any of the Company's subsidiaries and (ii) Shares held by Parent,
Acquisition or any other subsidiary of Parent) shall, by virtue of the Merger
and without any action on the part of Acquisition, the Company or the holder
thereof, be converted into and shall become the right to receive an amount in
cash equal to the Offer Price, without interest (the "Merger Consideration").
(b) At the Effective Time, each outstanding share of the common stock of
Acquisition shall be converted into one share of common stock of the Surviving
Corporation.
(c) At the Effective Time, each Share held in the treasury of the
Company and each Share held by Parent, Acquisition or any subsidiary of Parent,
Acquisition or the Company immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of Acquisition, the
Company or the holder thereof, be canceled, retired and cease to exist, and no
Merger Consideration shall be delivered with respect thereto.
SECTION 2.9. Dissenters' Rights. In accordance with Section 14A:11-1 of the
NJBCA, the holders of the Shares shall not be entitled to dissenters' or
appraisal rights.
SECTION 2.10. Exchange of Certificates.
(a) From time to time following the Effective Time, Parent shall deliver
to its transfer agent, or a depository or trust institution of recognized
standing selected by Parent and Acquisition and reasonably
5
satisfactory to the Company (the "Exchange Agent"), for the benefit of the
holders of Shares for exchange in accordance with this Article 2, an amount of
cash equal to the aggregate Merger Consideration then payable pursuant to
Section 2.8 (such amount of cash is hereinafter referred to as the "Exchange
Fund"), in exchange for outstanding Shares.
(b) Promptly after the Effective Time, the Exchange Agent shall mail to
each holder of record of a certificate or certificates that immediately prior to
the Effective Time represented outstanding Shares (the "Certificates") and whose
shares were converted into the right to receive Merger Consideration pursuant to
Section 2.8: (i) a letter of transmittal (which shall specify that delivery
shall be effected and risk of loss and title to the Certificates shall pass only
upon delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as Parent and the Company may reasonably
specify) and (ii) instructions for use in effecting surrender of the
Certificates in exchange for Merger Consideration; provided, however, that such
letter of transmittal shall be substantially in the form and substance of a
letter of transmittal and instructions approved by the Company at or before the
Closing, such approval not to be unreasonably withheld. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter of
transmittal duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor a check representing the Merger Consideration, and
the Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Shares that is not registered in the transfer records
of the Company, a check representing the proper amount of Merger Consideration
may be issued to a transferee if the Certificate representing such Shares is
presented to the Exchange Agent accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.10, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger
Consideration.
(c) In the event that any Certificate for Shares shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange therefor upon
the making of an affidavit of that fact by the holder thereof the Merger
Consideration; provided, however, that Parent or the Exchange Agent may, in its
discretion, require the delivery of a suitable bond or indemnity.
(d) If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article 2.
(e) Any portion of the Exchange Fund that remains undistributed to the
stockholders of the Company upon the expiration of one hundred eighty (180) days
after the Effective Time shall be delivered to Parent upon demand and any
stockholders of the Company who have not theretofore complied with this Article
2 shall thereafter look only to Parent as general creditors for payment of their
claims for Merger Consideration.
(f) Neither Parent nor Acquisition nor the Company shall be liable to
any holder of Shares for any amount of cash from the Exchange Fund delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar Applicable Law.
SECTION 2.11. Assumed Stock Options. At the Effective Time, options to
purchase shares under the Company's Amended and Restated 1997 Incentive Benefit
Plan (the "1997 Plan"), 1988 Incentive Compensation Plan (the "1988 Plan"), the
Company's Employee Stock Purchase Plan (the "ESPP"), the GammaLink Stock Option
Plans assumed by the Company (the "GammaLink Plans"), the Spectron Microsystems,
Inc. Stock Option Plan assumed by the Company (the "Spectron Plan") and the
DianaTel Corporation Stock Plan assumed by the Company (the "DianaTel Plan", and
together with the 1997 Plan, 1988 Plan, the ESPP, Spectron Plan and GammaLink
Plans, the "Assumed Option Plans" and individually as an "Assumed Option Plan"),
which are then outstanding and unexercised, shall cease to represent a right to
acquire Shares and shall be converted automatically into options to purchase
shares of common stock, par value $.001 per share, of Parent ("Parent Common
Stock"), and Parent shall assume each such option (hereinafter, an "Assumed
Option") subject to the terms of the applicable Assumed Option Plan, in each
case as heretofore amended or restated, as the case may be, and the agreement
evidencing grants thereunder of such Assumed Option; provided, however, that
from and after the Effective Time, (i) the number of shares of
6
Parent Common Stock purchasable upon exercise of such Assumed Option shall be
equal to the number of Shares that were purchasable under such Assumed Option
immediately prior to the Effective Time multiplied by the Exchange Ratio (as
defined below), and rounded down to the nearest whole share, and (ii) the per
share exercise price under each such Assumed Option shall be adjusted by
dividing the per share exercise price of each such Assumed Option by the
Exchange Ratio, and rounding up to the nearest cent. The terms of each Assumed
Option shall, in accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, stock dividend, recapitalization or
other similar transaction with respect to Parent Common Stock on or subsequent
to the Effective Time. The "Exchange Ratio" shall be equal to the ratio obtained
by dividing the Offer Price by the closing price of one share of Parent Common
Stock on the Nasdaq National Market on the trading day immediately preceding the
Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of Parent and
Acquisition, subject to the exceptions set forth in the Disclosure Schedule (the
"Company Disclosure Schedule") delivered by the Company to Parent in accordance
with Section 5.9 (which exceptions shall specifically identify a Section or
subsection, as applicable, to which such exception relates) that:
SECTION 3.1. Organization and Qualification; Subsidiaries; Investments.
(a) Section 3.1(a) of the Company Disclosure Schedule sets forth a true
and complete list of all the Company's directly and indirectly owned
subsidiaries and branch offices, together with the jurisdiction of incorporation
of each subsidiary and the percentage of each subsidiary's outstanding capital
stock or other equity interests owned by the Company or another subsidiary of
the Company. Each of the Company and its subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
businesses as now being conducted. The Company has heretofore delivered to
Parent accurate and complete copies of the Certificate of Incorporation and
bylaws (or similar governing documents), as currently in full force and effect,
of the Company and each of its subsidiaries. Section 3.1(a) of the Company
Disclosure Schedule specifically identifies each subsidiary of the Company that
contains any material assets or through which the Company conducts any material
operations. Except as set forth in Section 3.1(a) of the Company Disclosure
Schedule, the Company has no operating subsidiaries other than those
incorporated in a state of the United States.
(b) The Company and its subsidiaries are duly qualified or licensed and
in good standing to do business in each jurisdiction in which the property
owned, leased or operated by them or the nature of the business conducted by
them makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. When used in connection with the Company or its
subsidiaries, the term "Material Adverse Effect on the Company" means any
circumstance, change in, or effect on the Company and its subsidiaries, taken as
a whole, that is, or is reasonably likely in the foreseeable future to be,
materially adverse to the operations, financial condition, earnings or results
of operations, or the business (financial or otherwise), of the Company and its
subsidiaries, taken as a whole, provided that neither of the following shall be
deemed, either alone or in combination, to constitute a Material Adverse Effect
on the Company: (i) a change in the market price or trading volume of the
Company Common Stock, (ii) conditions affecting the computer-related
communications equipment and services industry as a whole, or (iii) a failure by
the Company to meet internal earnings or revenue projections or the earnings or
revenue projections of equity analysts, provided that this Section 3.1(b)(iii)
shall not exclude any underlying change, effect, event, occurrence, state of
facts or developments that resulted in such failure to meet such projections.
(c) Section 3.1(c) of the Company Disclosure Schedule sets forth a true
and complete list of each equity investment in an amount of One Hundred Thousand
Dollars ($100,000) or more or that represents a five percent (5%) or greater
ownership interest in the subject of such investment made by the Company or any
7
of its subsidiaries in any person other than the Company's subsidiaries ("Other
Interests"). The Other Interests are owned by the Company, by one or more of the
Company's subsidiaries or by the Company and one or more of its subsidiaries, in
each case free and clear of all Liens (as defined below).
SECTION 3.2. Capitalization of the Company and its Subsidiaries.
(a) The authorized capital stock of the Company consists of 60,000,000
Shares, of which, as of the close of business on April 30, 1999, 17,002,649
Shares were issued and outstanding and 10,000,000 shares of preferred stock, no
shares of which are outstanding. All of the outstanding Shares have been validly
issued and are fully paid, nonassessable and free of preemptive rights. As of
the close of business on April 30, 1999, approximately 4,566,445 Shares were
reserved for issuance and, as of the close of business on April 30, 1999,
3,125,364 were issuable upon or otherwise deliverable in connection with the
exercise of outstanding Company Stock Options. For purposes hereof, "Company
Stock Option" means any option, warrant or other right to purchase Shares.
Between the close of business on April 30, 1999 and the date hereof, no shares
of the Company's capital stock have been issued other than pursuant to Company
Stock Options already in existence on such date and, between the close of
business on April 30, 1999 and the date hereof, no stock options have been
granted, except as set forth in Section 3.2(a) of the Company Disclosure
Schedule. Except as set forth above or in Section 3.2(a) of the Company
Disclosure Schedule, as of the date hereof, there are outstanding (i) no shares
of capital stock or other voting securities of the Company, (ii) no securities
of the Company or any of its subsidiaries convertible into or exchangeable or
exercisable for shares of capital stock or other securities of the Company,
(iii) no options, preemptive or other rights to acquire from the Company or any
of its subsidiaries, and, except as described in the Company SEC Reports (as
defined below), no obligations of the Company or any of its subsidiaries to
issue, any capital stock, voting securities or securities convertible into or
exchangeable or exercisable for capital stock or other securities of the Company
and (iv) no equity equivalent interests in the ownership or earnings of the
Company or its subsidiaries or other similar rights (collectively "Company
Securities"). As of the date hereof, there are no outstanding rights or
obligations of the Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any Company Securities. Except as set forth in Section 3.2(a)
of the Company Disclosure Schedule, there are no stockholder agreements, voting
trusts or other agreements or understandings to which the Company is a party or
by which it is bound relating to the voting or registration of any shares of
capital stock of the Company. The Company has not voluntarily accelerated the
vesting of any Company Stock Options as a result of the Offer or the Merger or
any other change in control of the Company.
(b) Except as set forth in Section 3.2(b) of the Company Disclosure
Schedule, all of the outstanding capital stock of the Company's subsidiaries is
owned by the Company, directly or indirectly, free and clear of any Lien or any
other limitation or restriction (including any restriction on the right to vote
or sell the same except as a matter of Applicable Law). Except as set forth in
Section 3.2(b) of the Company Disclosure Schedule, any directors qualifying
shares issued by a foreign subsidiary of the Company to any director of such
subsidiary are beneficially owned by the Company or another subsidiary of the
Company. Except as set forth in Section 3.2(b) of the Company Disclosure
Schedule, there are no securities of the Company or any of its subsidiaries
convertible into or exchangeable or exercisable for, or other rights to acquire
from the Company or any of its subsidiaries, any capital stock or other
ownership interests in or any other securities of any subsidiary of the Company,
and there exists no other contract, understanding, arrangement or obligation
(whether or not contingent) providing for the issuance or sale, directly or
indirectly, of any such capital stock. Except as set forth in Section 3.2(b) of
the Company Disclosure Schedule, there are no outstanding contractual
obligations of the Company or its subsidiaries to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of the Company. With respect to any exception to
ownership set forth in Section 3.2(b) of the Company Disclosure Schedule, the
schedule completely and correctly identifies the record and the beneficial owner
of any such shares, whether such record or beneficial owner is an employee,
agent or affiliate of the Company, and any agreement, arrangement or
understanding, whether written or oral, with respect to such ownership. With
respect to any exception to the contractual obligations of the Company set forth
in Section 3.2(b) of the Company Disclosure Schedule, the schedule completely
and correctly identifies the parties to such obligations and the nature of any
relationship of such party or any third party beneficiary of such obligations to
the Company and
8
any agreement, arrangement or understanding, whether written or oral, with
respect to such relationship. For purposes of this Agreement, "Lien" means, with
respect to any asset (including any security), any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset;
provided, however, that the term "Lien" shall not include (i) statutory liens
for Taxes that are not yet due and payable or are being contested in good faith
by appropriate proceedings and are disclosed in Section 3.14 of the Company
Disclosure Schedule or that are otherwise not material, (ii) statutory or common
law liens to secure obligations to landlords, lessors or renters under leases or
rental agreements confined to the premises rented, (iii) deposits or pledges
made in connection with, or to secure payment of, workers' compensation,
unemployment insurance, old age pension or other social security programs
mandated by Applicable Law, (iv) statutory or common law liens in favor of
carriers, warehousemen, mechanics and materialmen, to secure claims for labor,
materials or supplies and other like liens, and (v) restrictions on transfer of
securities imposed by applicable state and federal securities laws.
(c) The Shares constitute the only class of equity securities of the
Company or its subsidiaries registered or required to be registered under the
Exchange Act.
SECTION 3.3. Authority Relative to this Agreement; Recommendation.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and the Stock Option Agreement, to perform
its obligations under this Agreement and the Stock Option Agreement, and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the Stock Option Agreement, and the consummation of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by the Company Board, and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or the Stock Option
Agreement, or to consummate the transactions contemplated hereby or thereby,
except the approval of this Agreement by the holders of a majority of the
outstanding Shares. This Agreement and the Stock Option Agreement have been duly
and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Acquisition, constitute the
valid, legal and binding agreements of the Company, enforceable against the
Company in accordance with their terms, subject to any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditors' rights generally or to general principles of
equity.
(b) Without limiting the generality of the foregoing, the Board of
Directors of the Company has unanimously (i) approved this Agreement, the Stock
Option Agreement, the Offer, the Merger and the other transactions contemplated
hereby, (ii) resolved to recommend approval and adoption of this Agreement, the
Merger and the other transactions contemplated hereby by the Company's
stockholders, and (iii) has not withdrawn or modified such approval or
resolution to recommend (except as otherwise permitted in this Agreement).
SECTION 3.4. SEC Reports; Financial Statements.
(a) The Company has filed all required forms, reports and documents (the
"Company SEC Reports") with the SEC since January 1, 1998, each of which
complied at the time of filing in all material respects with all applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the Exchange Act, each law as in effect on the dates such forms, reports and
documents were filed, except as set forth in Section 3.4 of the Company
Disclosure Schedule. None of such Company SEC Reports, including any financial
statements or schedules included or incorporated by reference therein, contained
when filed any untrue statement of a material fact or omitted to state a
material fact required to be stated or incorporated by reference therein or
necessary in order to make the statements therein in light of the circumstances
under which they were made not misleading, except to the extent superseded by a
Company SEC Report filed subsequently and prior to the date hereof. The audited
consolidated financial statements of the Company included in the Company SEC
Reports fairly present, in conformity in all material respects with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated in the notes thereto), the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and their
consolidated results of operations and changes in financial position for the
periods then ended. Notwithstanding the foregoing, the Company shall not be
deemed to be in breach of any of the
9
representations or warranties in this Section 3.4(a) as a result of any changes
to the Company SEC Reports that the Company may make in response to comments
received from the SEC on the Proxy Statement.
(b) The Company has heretofore made, and hereafter will make, available to
Acquisition or Parent a complete and correct copy of any amendments or
modifications that are required to be filed with the SEC but have not yet been
filed with the SEC to agreements, documents or other instruments that previously
had been filed by the Company with the SEC pursuant to the Exchange Act.
SECTION 3.5. Information Supplied. None of the information supplied or to
be supplied by the Company for inclusion or incorporation by reference in the
proxy statement relating to the meeting of the Company's stockholders to be held
in connection with the Merger (the "Proxy Statement") will, at the date mailed
to stockholders of the Company and at the time of the meeting of stockholders of
the Company to be held in connection with the Merger, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein in light of
the circumstances under which they are made not misleading. The Proxy Statement
insofar as it relates to the meeting of the Company's stockholders to vote on
the Merger will comply as to form in all material respects with the provisions
of the Exchange Act and the rules and regulations thereunder. Notwithstanding
the foregoing, the Company makes no representation, warranty or covenant with
respect to any information supplied or required to be supplied by Parent or
Acquisition that is contained in or omitted from the Proxy Statement.
SECTION 3.6. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under
applicable requirements of the Securities Act, the Exchange Act, state
securities or blue sky laws, and the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), any filings under similar merger
notification laws or regulations of foreign Governmental Entities and the filing
and recordation of the Certificate of Merger as required by the NJBCA, and any
filings, authorizations, consents and approvals as may be required under the New
Jersey Industrial Site Recovery Act, 13:1K, et seq. ("ISRA"), no material filing
with or notice to and no material permit, authorization, consent or approval of
any United States (federal, state or local) or foreign court or tribunal, or
administrative, governmental or regulatory body, agency or authority (a
"Governmental Entity") is necessary for the execution and delivery by the
Company of this Agreement or the Stock Option Agreement or the consummation by
the Company of the transactions contemplated hereby or thereby. Neither the
execution, delivery and performance of this Agreement or the Stock Option
Agreement by the Company, nor the consummation by the Company of the
transactions contemplated hereby or thereby, will (a) conflict with or result in
any breach of any provision of the respective Certificate of Incorporation or
bylaws (or similar governing documents) of the Company or any of its
subsidiaries, (b) except as set forth in Section 3.6 of the Company Disclosure
Schedule, result in a violation or breach of or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration or Lien) under any of the
terms, conditions or provisions of any material note, bond, mortgage, indenture,
lease, license, contract (including any material Supply Contract), agreement or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which any of them or any of their respective properties and
assets is bound or (c) except as set forth in Section 3.6 of the Company
Disclosure Schedule, violate any material order, writ, injunction, decree, law,
statute, rule or regulation applicable to the Company or any of its subsidiaries
or any of their respective properties or assets.
SECTION 3.7. No Default. Except as set forth in Section 3.7 of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries is in
material breach, default or violation (and no event has occurred that with
notice or the lapse of time or both would constitute a material breach, default
or violation) of any term, condition or provision of (i) its Certificate of
Incorporation or bylaws (or similar governing documents), (ii) any material
note, bond, mortgage, indenture, lease, license, contract (including any
material Supply Contract), agreement or other instrument or obligation to which
the Company or any of its subsidiaries is now a party or by which it or any of
its properties and assets is bound or (iii) any material order, writ,
injunction, decree, law, statute, rule or regulation applicable to the Company
or any of its subsidiaries or any of its properties or assets.
10
SECTION 3.8. No Undisclosed Liabilities; Absence of Changes. Except as and
to the extent publicly disclosed by the Company in the Company SEC Reports or as
set forth in Section 3.8 of the Company Disclosure Schedule, neither the Company
nor any of its subsidiaries has any material liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that would be required
by generally accepted accounting principles to be reflected on a consolidated
balance sheet of the Company (including the notes thereto), other than
liabilities or obligations incurred after March 31, 1999 in the ordinary course
of business no one or group of which taken together constitutes a Material
Adverse Effect on the Company. Except as publicly disclosed by the Company in
the Company SEC Reports or as set forth in Section 3.8 of the Company Disclosure
Schedule, since March 31, 1999, there have been no events, changes or effects
with respect to the Company or its subsidiaries that, individually or in the
aggregate, constitute a Material Adverse Effect on the Company. Without limiting
the generality of the foregoing, except as and to the extent publicly disclosed
by the Company in the Company SEC Reports or as set forth in Section 3.8 of the
Company Disclosure Schedule, since March 31, 1999, the Company and its
subsidiaries have conducted their respective businesses in all material respects
only in, and have not engaged in any material transaction other than according
to, the ordinary and usual course of such businesses consistent with past
practices, and there has not been any (i) material damage, destruction or other
casualty loss with respect to any material asset or property owned, leased or
otherwise used by the Company or any of its subsidiaries, not covered by
insurance; (ii) declaration, setting aside or payment of any dividend or other
distribution in respect of the capital stock of the Company or any of its
subsidiaries (other than wholly-owned subsidiaries) or any repurchase,
redemption or other acquisition by the Company or any of its subsidiaries of any
outstanding shares of capital stock or other securities of, or other ownership
interests in, the Company or any of its subsidiaries; (iii) amendment of any
material term of any outstanding security of the Company or any of its
subsidiaries; (iv) incurrence, assumption or guarantee by the Company or any of
its subsidiaries of any indebtedness for borrowed money other than in the
ordinary course of business and in amounts and on terms consistent with past
practices; (v) creation or assumption by the Company or any of its subsidiaries
of any Lien on any material asset other than in the ordinary course of business
consistent with past practices; (vi) loan, advance or capital contributions made
by the Company or any of its subsidiaries to, or investment in, any person other
than (x) loans or advances to employees in connection with business-related
expenses incurred in the ordinary course of business consistent with past
practices, (y) loans made to employees consistent with past practices that are
not in the aggregate in excess of Fifty Thousand Dollars ($50,000), and (z)
loans, advances or capital contributions to or investments in wholly-owned
subsidiaries, and in each case made in the ordinary course of business
consistent with past practices; (vii) transaction or commitment made, or any
contract or agreement entered into, by the Company or any of its subsidiaries
relating to its assets or business (including the acquisition (by sale, license
or otherwise) or disposition (by sale, license or otherwise) of any assets) or
any relinquishment by the Company or any of its subsidiaries of any contract,
agreement or other right, in any such case, material to the Company and its
subsidiaries, taken as a whole; (viii) any exclusive license, distribution,
marketing, sales or other agreement entered into or any agreement to enter into
any exclusive license, distribution, marketing, sales or other agreement; or
(ix) change by the Company or any of its subsidiaries in any of its accounting
principles, practices or methods. Since March 31, 1999, except as disclosed in
the Company SEC Reports filed prior to the date hereof or in Section 3.8 of the
Company Disclosure Schedule or increases in the ordinary course of business
consistent with past practices, there has not been any increase in the
compensation payable or that could become payable by the Company or any of its
subsidiaries to (a) officers of the Company or any of its subsidiaries or (b)
any employee of the Company or any of its subsidiaries whose annual cash
compensation is One Hundred Thousand Dollars ($100,000) or more.
SECTION 3.9. Litigation. Except as publicly disclosed by the Company in the
Company SEC Reports or as set forth in Section 3.9 of the Company Disclosure
Schedule, there is no suit, claim, action, arbitration, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries or any of their respective properties or
assets before any Governmental Entity or brought by any person that is material
to the Company and its subsidiaries taken as a whole, or would reasonably be
expected to prevent or delay the consummation of the transactions contemplated
by this Agreement beyond the Final Date. Except as publicly disclosed by the
Company in the Company SEC Reports, neither the Company nor any of its
subsidiaries is subject to any outstanding order, writ, injunction or decree
that would
11
reasonably be expected to be material or would reasonably be expected to prevent
or delay the consummation of the transactions contemplated hereby.
SECTION 3.10. Compliance with Applicable Law. Except as publicly disclosed
and specifically identified by the Company in the Company SEC Reports, the
Company and its subsidiaries hold all material permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities necessary for the
lawful conduct of their respective businesses (the "Company Permits"). Except as
publicly disclosed and specifically identified by the Company in the Company SEC
Reports, the Company and its subsidiaries are in material compliance with the
terms of the Company Permits. Except as publicly disclosed and specifically
identified by the Company in the Company SEC Reports, the businesses of the
Company and its subsidiaries have been and are being conducted in material
compliance with all material Applicable Laws. Except as publicly disclosed by
the Company in the Company SEC Reports, no investigation or review by any
Governmental Entity with respect to the Company or any of its subsidiaries is
pending or, to the knowledge of the Company, threatened, nor, to the knowledge
of the Company, has any Governmental Entity indicated an intention to conduct
the same.
SECTION 3.11. Employee Benefits.
(a) For purposes of this Agreement, "Compensation and Benefit Plans"
means, collectively, each written bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock option, employment, termination,
severance, compensation, medical, health, or other plan, agreement, policy or
arrangement, that covers employees or directors of the Company or any of its
subsidiaries, or pursuant to which former employees or directors of the Company
or any of its subsidiaries are entitled to current or future benefits. To the
knowledge of the Company, there are no oral Compensation and Benefit Plans to
which the Company is a party. The Company has made available to Parent copies of
all "employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes
referred to herein as "Pension Plans"), "employee welfare benefit plans" (as
defined in Section 3(l) of ERISA) and all other Compensation and Benefit Plans
maintained, or contributed to, by the Company or of its subsidiaries or any
person that, together with the Company and its subsidiaries, is treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code (the Company
and each such other person, a "Commonly Controlled Entity") for the benefit of
any current employees, officers or directors of the Company or any of its
subsidiaries. The Company has also made available to Parent true, complete and
correct copies of (i) the most recent annual report on Form 5500 filed with the
Internal Revenue Service with respect to each Compensation and Benefit Plan (if
any such report was required), (ii) the most recent summary plan description for
each Compensation and Benefit Plan for which such summary plan description is
required and (iii) each trust agreement and group annuity contract related to
any Compensation and Benefit Plan. Each Compensation and Benefit Plan has been
administered in all material respects in accordance with its terms. Neither the
Company nor any Commonly Controlled Entity maintains or has ever maintained a
"defined benefit plan" (as defined in Section 415 of the Code). Each of
Company's subsidiaries and all the Compensation and Benefit Plans are all in
compliance with applicable provisions of ERISA and the Code. Section 3.11(a)
sets forth a complete and correct list of all Compensation and Benefit Plans.
(b) Except as otherwise provided in Section 3.11(b) of the Company
Disclosure Schedule, the Company and its subsidiaries have performed in all
material respects their obligations under each Compensation and Benefit Plan;
each Compensation and Benefit Plan and each trust or other funding medium, if
any, established in connection therewith has at all times been established,
maintained and operated in material compliance with its terms and the
requirements prescribed by Applicable Law, including ERISA and the Code.
(c) With respect to those Pension Plans that are intended to be
qualified under Section 401(a) of the Code, except as set forth in Section
3.11(c) of the Company Disclosure Schedule, each such Pension Plan has been the
subject of a determination letters from the Internal Revenue Service to the
effect that such Pension Plans are qualified and exempt from Federal income
taxes under Sections 401(a) and 501(a), respectively, of the Code, and no such
determination letter has been revoked nor has any event occurred since
12
the date of its most recent determination letter or application therefor that
would materially adversely affect its qualification or materially increase its
costs.
(d) At all times on and after the effective date of ERISA, neither
Company nor any of its subsidiaries nor any entity which is under "common
control" with the Company (within the meaning of Section 4001 of ERISA) has
maintained, contributed to or otherwise had any obligation with respect to any
"multiemployer plan" (as defined in Section 3(37) of ERISA).
(e) Except as disclosed in Section 3.11(e) of the Company Disclosure
Schedule, there are no suits, actions, disputes, claims (other than routine
claims for benefits), arbitrations, administrative or other proceedings pending
or, to the knowledge of Company, threatened, anticipated or expected to be
asserted with respect to any Compensation and Benefits Plan or any related trust
or other funding medium thereunder or with respect to Company or its
subsidiaries, as the sponsor or fiduciary thereof or with respect to any other
fiduciary thereof.
(f) No Compensation and Benefit Plan maintained by Company or its
subsidiaries or any related trust or other funding medium thereunder or any
fiduciary thereof is, to the knowledge of Company, the subject of a material
audit, investigation or examination by an governmental or quasi-governmental
agency.
(g) Except as provided in Section 3.11(g) of the Company Disclosure
Schedule, (i) no "reportable event" (as such term is used in Section 4043 of
ERISA) or "prohibited transaction" (as such term is used in Section 4975 of the
Code and/or Section 406 of ERISA), has occurred with respect to any Compensation
and Benefit Plan established or maintained by Company or its subsidiaries
primarily for the benefit of participants employed within the United States;
(ii) neither Company nor its subsidiaries has any commitment, intention or
understanding to create, terminate or adopt any Compensation and Benefit Plan
that would result in any additional liability to Parent, the Company or its
subsidiaries; and (iii) since the beginning of the current fiscal year of any
Compensation and Benefit Plan, no event had occurred and no condition or
circumstance has existed that could result in a material increase in the
benefits under or the expense of maintaining such Compensation and Benefit Plan
maintained by Company, and its subsidiaries from the level of benefits or
expense incurred for the most recently completed fiscal year of such
Compensation and Benefit Plan.
(h) Section 3.11(h) of the Company Disclosure Schedule lists all
outstanding Stock Options as of the date hereof, identifying for each such
option: (i) the number of shares issuable, (ii) the number of vested shares,
(iii) the date of expiration and (iv) the exercise price.
(i) All contributions required to be made under the terms of any
Compensation and Benefit Plan as of the date hereof have been timely made.
(j) Except as provided by this Agreement or in Section 3.11(j) of the
Company Disclosure Schedule, the execution of, and performance of the
transactions contemplated by, this Agreement will not (either along with or upon
the occurrence of any additional or subsequent events) constitute an event under
any Compensation and Benefit Plan or agreement that will or may reasonably be
expected to result in any payment (whether severance pay or otherwise),
acceleration, vesting or increase in benefits with respect to any employee,
former employee or director of the Company, or its subsidiaries, whether or not
any such payment would be an "excess parachute payment" (within the meaning of
Section 280G of the Code).
(k) With respect to each Compensation and Benefit Plan required to be
maintained or contributed to by the law or applicable custom or rule of the
relevant jurisdiction outside of the United States (the "Foreign Plans"), are
listed on Section 3.11(k) of the Company Disclosure Schedule. As regards each
such Foreign Plan:
(i) Each of the Foreign Plans is in compliance in all material
respects with the provisions of the laws of each jurisdiction in which each such
Foreign Plan is maintained, to the extent those laws are applicable to the
Foreign Plans;
(ii) All contributions to, and payments from, the Foreign Plans which
may have been required to be made in accordance with the terms of any such
Foreign Plan, and, when applicable, the law of the jurisdiction in which such
Foreign Plan is maintained, have been timely made or shall be made by the
13
Effective Date. All such contributions to the Foreign Plans, and all payments
under the Foreign Plans, for any period ending before the Closing Date that are
not yet, but will be, required to be made, are reflected as an accrued liability
on the balance sheet included in the most recently filed Company SEC Report;
(iii) All material reports, returns and similar documents, if any,
with respect to any Foreign Plan required to be filed with any governmental body
or distributed to any Foreign Plan participant have been duly and timely filed
or distributed or will be filed or distributed by the Closing Date, and all of
the Foreign Plans have obtained from the governmental body having jurisdiction
with respect to such plans any required determinations, if any, that such
Foreign Plans are in compliance with the laws of the relevant jurisdiction if
such determinations are required in order to give effect to the Foreign Plan;
(iv) Each of the Foreign Plans has been administered at all times,
and in all material respects, in accordance with its terms. To the knowledge of
Company, there are no pending investigations by any governmental body involving
the Foreign Plans, and no pending claims (except for claims for benefits payable
in the normal operation of the Foreign Plans), suits or proceedings against any
Foreign Plan or asserting any rights or claims to benefits under any Foreign
Plan; and
(v) The consummation of the transactions contemplated by this
Agreement will not by itself create or otherwise result in any material
liability with respect to any Foreign Plan other than the triggering of payment
to participants.
(l) Each Compensation and Benefit Plan complies in all material respects
with all applicable requirements of (i) the Age Discrimination in Employment Act
of 1967, as amended, and the regulations thereunder and (ii) Title VII of the
Civil Rights Act of 1964, as amended, and the regulations thereunder and all
other applicable laws. All amendments and actions required to bring each of the
Compensation and Benefit Plans into conformity with all of the applicable
provisions of ERISA and other applicable laws have been made or taken except to
the extent that such amendments or actions are not required by law to be made or
taken until a date after the Effective Time and are disclosed Section 3.11(l) of
the Company Disclosure Schedule or will be provided to Parent within fourteen
(14) days of the date hereof.
(m) Each group medical plan sponsored by the Company or its subsidiaries
materially complies with the Medicare Secondary Payor Provisions of Section 1826
(b) of the Social Security Act, and the regulations promulgated thereunder.
(n) Except as set forth on Section 3.11(n) of the Company Disclosure
Schedule, Parent, the Surviving Corporation, the Company and its subsidiaries
may terminate or amend any Compensation and Benefit Plan maintained by the
Company or its subsidiaries or may cease contributions to any such Compensation
and Benefit Plans without incurring any material liability other than a benefit
liability accrued in accordance with the terms of such Compensation and Benefit
Plan immediately prior to such amendment, termination or ceasing of
contributions.
(o) Neither the Company nor any of its subsidiaries maintained any
Compensation and Benefit Plan which is a "group health plan" (as such term is
defined in Section 5000(b)(1) of the Code) that has not been administered and
operated in all respects in compliance with the applicable requirements of
Section 601 of ERISA and section 4980B(b) of the Code and the Company and its
subsidiaries are not subject to any liability, including without limitation,
additional contributions, fines, penalties or loss of tax deduction as a result
of such administration and operation.
(p) Neither the Company nor any of its subsidiaries has incurred, nor
does the Company reasonably expect either it or any subsidiary to incur, any
liability for any tax imposed under Sections 4971 through 4980B of the Code or
civil liability under Section 501(i) or (1) of ERISA;
(q) Neither the Company nor any of its subsidiaries has incurred any
liability for any tax, excise tax, penalty or fee with respect to any
Compensation and Benefit Plan, including, but not limited to, taxes arising
under Section 4971, 4977, 4978, 4878B, 4979, 4980 or 4980B of the Code, and no
event has occurred and no circumstance has existed that could give rise to any
such liability.
14
(r) Except as provided in Section 3.11(r) of the Company Disclosure
Schedule, no insurance policy nor any other contract or agreement affecting any
Compensation and Benefit Plan requires or permits a retroactive increase in
premiums or payments due thereunder.
SECTION 3.12. Labor and Employment Matters. Except as set forth on Section
3.12(b) and (f) of the Company Disclosure Schedule:
(a) No collective bargaining agreement exists that is binding on the
Company or any of its subsidiaries, and the Company has not been officially
apprised that any petition has been filed or proceeding instituted by an
employee or group of employees of the Company, or any of its subsidiaries, with
the National Labor Relations Board seeking recognition of a bargaining
representative.
(b) (i) To the Company's knowledge, there is no labor strike, dispute,
slow down or stoppage pending or threatened against the Company or any of its
subsidiaries; and
(ii) Neither the Company nor any of its subsidiaries has received any
demand letters, civil rights charges, suits or drafts of suits with respect to
claims made by any of their respective employees.
(c) All individuals who are performing consulting or other services for
the Company or any of its subsidiaries are or were correctly classified by the
Company as either "independent contractors" or "employees" as the case may be,
and, at the Closing Date, will qualify for such classification.
(d) Section 3.12(d) of the Company Disclosure Schedule contains a list
of the name of each officer, employee and consultant of the Company or any of
the Company's subsidiaries, together with such person's position or function,
annual base salary or wages and any incentives or bonus arrangement with respect
to such person. As of the date hereof, the Company has not received any
information that would lead it to believe that any such person will or may cease
to be engaged by the Company or such subsidiary for any reason, including
because of the consummation of the transactions contemplated by this Agreement.
(e) The Company and each of its subsidiaries is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
employees.
(f) The Company and each of its subsidiaries has in all material
respects withheld and reported all amounts required by law or by agreement to be
withheld and reported with respect to wages, salaries and other payments to
employees.
(g) To the Company's knowledge, there are no pending or threatened
claims or actions against the Company or any of its subsidiaries under any
worker's compensation policy or long-term disability policy.
SECTION 3.13. Environmental Laws and Regulations.
(a) The term "Environmental Laws" means any applicable federal, state,
local or foreign law, statute, treaty, ordinance, rule, regulation, policy,
permit, consent, approval, license, judgment, order, decree or injunction
relating to: (i) Releases (as defined in 42 U.S.C. sec. 9601(22)) or threatened
Releases of Hazardous Material (as hereinafter defined) into the environment,
(ii) the generation, treatment, storage, disposal, use, handling, manufacturing,
transportation or shipment of Hazardous Material, (iii) the health or safety of
employees in the workplace, (iv) protecting or restoring natural resources or
(e) the environment. The term "Hazardous Material" means (1) hazardous
substances (as defined in 42 U.S.C. sec. 9601(14)), including "hazardous waste"
as defined in 42 U.S.C. sec. 6903, (2) petroleum, including crude oil and any
fractions thereof, (3) natural gas, synthetic gas and any mixtures thereof, (4)
asbestos and/or asbestos containing materials, (5) PCBs or materials containing
PCBs, (6) any material regulated as a medical waste, (7) lead containing paint,
(8) radioactive materials and (9) "Hazardous Substance" or "Hazardous Material"
as those terms are defined in any indemnification provision in any contract,
lease, or agreement to which the Company or any of its subsidiaries is a party.
(b) During the period of ownership or operation by the Company and its
subsidiaries of any of their current or previously owned or leased properties,
there have been no Releases of Hazardous Material by the Company or any of its
subsidiaries in, on, under or affecting such properties or any surrounding site,
and
15
neither the Company nor any of its subsidiaries has disposed of any Hazardous
Material in a manner that has led, or could reasonably be anticipated to lead to
a Release, except in each case for those which, individually or in the
aggregate, would not have a Material Adverse Effect on the Company. There have
been no Releases of Hazardous Material by the Company or any of its subsidiaries
in, on, under or affecting their current or previously owned or leased
properties or any surrounding site at times outside of such periods of
ownership, operation or lease, except in each case for those which, individually
on in the aggregate, would not have a Material Adverse Effect on the Company.
Since January 1, 1995, neither the Company nor any of its subsidiaries has
received any written notice of, or entered into any order, settlement or decree
relating to: (i) any violation of any Environmental Laws or the institution or
pendency of any suit, action, claim, proceeding or investigation by any
Governmental Entity or any third party in connection with any alleged violation
of Environmental Laws or (ii) the response to or remediation of Hazardous
Material at or arising from any of the Company's properties or any subsidiary's
properties. There have been no violations of any Environmental Laws by the
Company or any subsidiary which violations, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on the Company.
(c) There are no past or present events, conditions, circumstances,
activities, practices, incidents, actions, omissions or plans that constitute a
violation by the Company or any of its subsidiaries of, or are reasonably likely
to prevent or interfere with the Company's or any of its subsidiaries' future
compliance with, any Environmental Laws, other than any of the foregoing that,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Company.
SECTION 3.14. Taxes.
(a) Definitions. For purposes of this Agreement:
(i) the term "Code" means the Internal Revenue Code of 1986, as
amended;
(ii) the term "Tax" (including "Taxes") means (1) all federal, state,
local, foreign and other net income, gross income, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profits, customs, duties or other taxes, fees, assessments or
charges of any kind whatsoever, whether disputed or not, together with any
interest and any penalties, additions to tax or additional amounts with respect
thereto, (2) any liability for payment of amounts described in clause (1)
whether as a result of transferee liability, of being a member of an affiliated,
consolidated, combined or unitary group for any period, or otherwise through
operation of law, and (3) any liability for the payment of amounts described in
clauses (1) or (2) as a result of any tax sharing, tax indemnity or tax
allocation agreement or any other express or implied agreement to indemnify any
other person; and
(iii) the term "Tax Return" means any return, declaration, report,
statement, information statement and other document filed or required to be
filed with respect to Taxes.
(b) Except as set forth in Section 3.14(b) of the Company Disclosure
Schedule, the Company and its subsidiaries have duly and timely filed all Tax
Returns required to be filed; and such Tax Returns are complete and accurate and
correctly reflect the Tax liability required to be reported thereon. Such Tax
Returns do not contain a disclosure statement under Section 6662 of the Code (or
any predecessor provision or comparable provision of state, local or foreign
law).
(c) The Company and its subsidiaries have paid or adequately provided in
the financial statements included in the SEC Reports for all Taxes (whether or
not shown on any Tax Return) accrued through the date of such Company SEC
Reports; all Taxes the Company and its subsidiaries accrued following the end of
the most recent period covered by the Company SEC Report have been accrued in
the ordinary course of business of the Company and each such subsidiary and have
been paid when due in the ordinary course of business; and no material election
has been made with respect to Taxes of the Company or its subsidiaries in any
Tax Returns that have not been provided to Parent.
(d) Except as set forth in Section 3.14(d) of the Company Disclosure
Schedule, no material claim for assessment or collection of Taxes is presently
being asserted against the Company or its subsidiaries and
16
neither the Company nor any of its subsidiaries is a party to any pending
action, proceeding, or investigation by any governmental taxing authority nor
does the Company have knowledge of any such threatened action, proceeding or
investigation.
(e) Except as set forth in Section 3.14(e) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to any
agreement, contract, arrangement or plan that has resulted or would result,
individually or in the aggregate, in connection with this Agreement or any
change of control of the Company or any of its subsidiaries, in the payment of
any "excess parachute payments" within the meaning of Section 280G of the Code.
(f) Except as set forth in Section 3.14(f) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to or bound
by any obligation under any Tax sharing, Tax allocation, Tax indemnity or
similar agreement or arrangement.
(g) Except as set forth in Section 3.14(g) of the Company Disclosure
Schedule, there is currently no limitation on the utilization of net operating
losses, built-in losses, tax credits or other similar items of the Company or
its subsidiaries under Section 382, 383, 384 or 1502 of the Code and the
Treasury Regulations thereunder.
(h) Except as set forth in Section 3.14(h) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries has agreed to, or is
required to make, any adjustment under Section 481 of the Code by reason of a
change in accounting method.
(i) Neither the Company nor any of its subsidiaries are "consenting
corporations" within the meaning of Section 341(f)(1) of the Code.
SECTION 3.15. Intellectual Property.
(a) Section 3.15(a) of the Company Disclosure Schedule sets forth, for
the Intellectual Property owned, in whole or in part, including jointly with
others, by the Company or any of its subsidiaries, a complete and accurate list
of all United States and foreign (i) patents and patent applications; (ii)
Trademark registrations and applications and material unregistered Trademarks;
and (iii) copyright registrations and applications, indicating for each, the
applicable jurisdiction, registration number (or application number) and date
issued (or date filed). For purposes of this Agreement, "Intellectual Property"
means: trademarks and service marks (whether registered or unregistered), trade
names and designs, together with all goodwill related to the foregoing
(collectively, "Trademarks"); patents (including any continuations,
continuations in part, renewals and applications for any of the foregoing)
(collectively "Patents"); copyrights (including any registrations and
applications therefor and whether registered or unregistered) (collectively,
"Copyrights"); computer software; databases; works of authorship; mask works;
technology; trade secrets and other confidential information, know-how,
proprietary processes, formulae, algorithms, models, user interfaces, customer
lists, inventions, discoveries, concepts, ideas, techniques, methods, source
codes, object codes, methodologies and, with respect to all of the foregoing,
related confidential data or information (collectively, "Trade Secrets").
(b) Trademarks.
(i) All Trademark registrations are currently in compliance in all
material respects with all legal requirements (including the timely
post-registration filing of affidavits of use and incontestability and renewal
applications) other than any requirement that, if not satisfied, would not
result in a cancellation of any such registration or otherwise materially affect
the priority and enforceability of the Trademark in question.
(ii) No registered Trademark has been within the last three (3) years
or is now involved in any opposition or cancellation proceeding in the United
States Patent and Trademark Office. To the Company's knowledge, no such action
has been threatened in writing within the one (1)-year period prior to the date
of this Agreement.
17
(iii) To the Company's knowledge, except as set forth in Section
3.15(b)(iii) of the Company Disclosure Schedule, there has been no prior use of
any material Trademark by any third party that confers upon said third party
superior rights in any such Trademark.
(iv) The Company and its subsidiaries have adequately policed the
material Trademarks against third party infringement, and the material
Trademarks registered in the United States have been continuously used by the
Company or one of its subsidiaries since the date set forth in, the form
appearing in, and in connection with the goods and services listed in, their
respective registration certificates or renewal certificates, as the case may
be.
(c) Patents.
(i) All Patents are currently in compliance with legal requirements
(including payment of filing, examination, and maintenance fees and proofs of
working or use) other than any requirement that, if not satisfied, would not
result in a revocation or otherwise materially affect the enforceability of the
Patent in question.
(ii) No Patent has been or is now involved in any interference,
reissue, reexamination or opposing proceeding in the United States Patent and
Trademark Office. To the Company's knowledge, except as set forth in Section
3.15(c)(ii) of the Company Disclosure Schedule, no such action has been
threatened within the one (1)-year period prior to the date of this Agreement.
(iii) To the knowledge of the Company, there is no patent or patent
application of any person that conflicts in any material respect with any Patent
or invalidates any claim the Company or any of its subsidiaries has in any
Patent.
(d) Trade Secrets.
(i) The Company and each of its subsidiaries have taken reasonable
steps in accordance with normal industry practice to protect their respective
rights in confidential information and Trade Secrets.
(ii) Without limiting the generality of Section 3.15(d)(i) and except
as would not be materially adverse to the Company and its subsidiaries, taken as
a whole, or its business, the Company and each of its subsidiaries enforces a
policy of requiring each relevant employee, consultant and contractor to execute
proprietary information, confidentiality and assignment agreements substantially
in the Company's standard forms that assign to the Company or such subsidiary,
as the case may be, all rights to any Intellectual Property relating to the
Company's or such subsidiary's business that is developed by the employee,
consultant or contractor, as applicable, in the course of his or her activities
for the Company or any of its subsidiaries or is developed during working hours
using the resources of the Company or any such subsidiary, and, except under
confidentiality obligations, to the knowledge of the Company, there has been no
disclosure by the Company or any subsidiary of material confidential information
or Trade Secrets.
(e) License Agreements.
Section 3.15(e)(i) of the Company Disclosure Schedule sets forth a
complete and accurate list of all license agreements granting to the Company or
any of its subsidiaries any material right to use or practice any rights under
any Intellectual Property other than software commercially available on
reasonable terms to any person for a license fee of no more than One Hundred
Thousand Dollars ($100,000) (collectively, the "Inbound License Agreements"),
indicating for each the title and the parties thereto and the amount of any
future royalty or license fee payable thereunder. Section 3.15(e)(ii) of the
Company Disclosure Schedule sets forth a complete and accurate list of all
license agreements under which the Company or any of its subsidiaries licenses
software or grants other rights in to use or practice any rights under any
Intellectual Property, excluding licenses with customers that in the
twelve-month period prior to the date hereof have purchased or licensed products
for which the total payments to the Company and its subsidiaries did not exceed
One Hundred Thousand Dollars ($100,000) and otherwise are not material to the
Company (collectively, the "Outbound License Agreements"), indicating for each
the title and the parties thereto. Except as set forth in Section 3.15(e) of the
Company Disclosure Schedule, there is no material outstanding
18
or, to the Company's knowledge, threatened dispute or disagreement with respect
to any Inbound License Agreement or any Outbound License Agreement.
(f) Ownership; Sufficiency of IP Assets. The Company or one of its
subsidiaries owns or possesses adequate licenses or other rights to use, free
and clear of Liens, orders and arbitration awards, all of its Intellectual
Property used in its business. The Intellectual Property identified in Section
3.15(a) of the Company Disclosure Schedule, together with the Company's and its
subsidiaries' unregistered copyrights and the Company's and such subsidiaries'
rights under the licenses granted to the Company or any of its subsidiaries
under the Inbound License Agreements, constitute all the material Intellectual
Property rights used in the operation of the Company's and its subsidiaries'
businesses as they are currently conducted and are all the Intellectual Property
rights necessary to operate such businesses after the Effective Time in
substantially the same manner as such businesses have been operated by the
Company and its subsidiaries prior thereto.
(g) Protection of IP. The Company has taken reasonable steps to protect
the Intellectual Property of the Company and its subsidiaries.
(h) No Infringement by the Company. To the knowledge of the Company,
except as set forth on Section 3.15(h) of the Company Disclosure Schedule, the
products used, manufactured, marketed, sold or licensed by the Company and its
subsidiaries, and all Intellectual Property used in the conduct of the Company's
and its subsidiaries' businesses as currently conducted, do not infringe upon,
violate or constitute the unauthorized use of any valid and enforceable rights
owned or controlled by any third party, including any Intellectual Property of
any third party. The Company's products do not include, incorporate or otherwise
use any proprietary information (including software) that may have been provided
by Professor B.S. Manjunath or any member of his research group as part of a
collaborative agreement with Spectron Microsystems, Inc.
(i) No Pending or Threatened Infringement Claims. Except and to the
extent publicly disclosed in the Company SEC Reports or in Section 3.15(i) of
the Company Disclosure Schedule, no litigation is now or, within the three (3)
years prior to the date of this Agreement, was pending and, to the Company's
knowledge, no notice or other claim in writing has been received by the Company
within the one (1) year prior to the date of this Agreement, (i) alleging that
the Company any of its subsidiaries has engaged in any activity or conduct that
infringes upon, violates or constitutes the unauthorized use of the Intellectual
Property rights of any third party or (ii) challenging the ownership, use,
validity or enforceability of any Intellectual Property owned or exclusively
licensed by or to the Company. Except as specifically disclosed in one or more
subsections of this Section 3.15 of the Company Disclosure Schedules, no
Intellectual Property (x) that is owned by the Company or any of its
subsidiaries is subject to any outstanding order, judgment, decree, stipulation
or agreement restricting the use thereof by the Company or any such subsidiary,
except as may be specifically provided in any such Inbound License Agreement,
(y) that is the subject of an Outbound License Agreement is subject to any
outstanding order, judgment, decree, stipulation or agreement restricting the
sale, transfer, assignment or licensing thereof by the Company or any of its
subsidiaries to any person or (z) that is the subject of an Inbound License
Agreement is, to the knowledge of the Company, subject to any outstanding
judgment, decree, stipulation or agreement restricting the use thereof by the
Company or any of its subsidiaries.
(j) No Infringement by Third Parties. Except as and to the extent
publicly disclosed in the Company SEC Reports or as set forth in Section 3.15(j)
of the Company Disclosure Schedule, to the knowledge of the Company, no third
party is misappropriating, infringing, diluting or violating any Intellectual
Property owned or exclusively licensed by the Company or any of its
subsidiaries, and no such claims have been brought against any third party by
the Company or any of its subsidiaries.
(k) Assignment; Change of Control. Except as set forth in Section 3.15
(k) of the Company Disclosure Schedule, the execution, delivery and performance
by the Company of this Agreement, and the consummation of the transactions
contemplated hereby, will not result in the loss or impairment of, or give rise
to any right of any third party to terminate or alter, any of the Company's or
any of its subsidiaries' rights to own any of its Intellectual Property or their
respective rights under any Inbound License Agreement or
19
Outbound License Agreement, nor require the consent of any Governmental
Authority or third party in respect of any such Intellectual Property.
(l) Software. The Software owned or purported to be owned by the Company
or any of its subsidiaries, was either (i) developed by employees of the Company
or any of its subsidiaries within the scope of their employment; (ii) developed
by independent contractors who have assigned their rights to the Company or any
of its subsidiaries pursuant to written agreements; or (iii) otherwise acquired
by the Company or a subsidiary from a third party. Except as set forth in
Section 3.15(l) of the Company Disclosure Schedule, the Software does not
contain any programming code, documentation or other materials or development
environments that embody Intellectual Property rights of any person other than
the Company or any of its subsidiaries, except for such materials or development
environments obtained by the Company or any of its subsidiaries from other
persons who make such materials or development environments generally available
on non-discriminatory commercial terms. For purposes of this Section 3.15(l),
"Software" means any and all (i) computer programs, including any and all
software implementations of algorithms, models and methodologies, whether in
source code or object code, (ii) databases and compilations, including any and
all data and collections of data, whether machine readable or otherwise, (iii)
descriptions, schematics, flow-charts and other work product used to design,
plan, organize and develop any of the foregoing, and (iv) all documentation,
including user manuals and training materials, relating to any of the foregoing.
(m) Performance of Existing Software Products; No Real-Time Operating
Systems Software Products or Stand-Alone Products. The Company's and its
subsidiaries' existing and currently manufactured and marketed Software products
listed and described on Section 3.15(m) of the Company Disclosure Schedule
perform in all material respects, free of significant bugs, viruses or
programming errors, the functions described in any agreed specifications or end
user documentation or other information provided to customers of the Company or
any of its subsidiaries on which such customers relied when licensing or
otherwise acquiring such products. Neither the Company nor any of its
subsidiaries currently, directly or indirectly, owns, manages, operates,
controls or participates in the ownership, management, operation or control of
any business, whether in corporate, proprietorship or partnership form or
otherwise, engaged in the design, manufacturing or marketing of real time
operating systems software products as stand-alone products.
(n) Documentation. The Company and its subsidiaries have taken all
actions customary in the software industry to document the Software and its
operation, such that the materials comprising the Software, including the source
code and documentation, have been written in a clear and professional manner so
that they may be understood, modified and maintained in an efficient manner by
reasonably competent programmers.
(o) Year 2000 Capability.
(i) Except as set forth in Section 3.15(o) of the Company Disclosure
Schedule, all of the Company's and its subsidiaries' material products
(including products currently under development) will record, store, process and
calculate and present calendar dates falling on and after December 31, 1998, and
will calculate any information dependent on or relating to such dates in the
same manner and with the same functionality, data integrity and performance as
the products record, store, process, calculate and present calendar dates on or
before December 31, 1998, or calculate any information dependent on or relating
to such dates (collectively, "Year 2000 Capable"). Except as set forth in
Section 3.15(o) of the Company Disclosure Schedule, (i) all of the Company's and
its subsidiaries' material products will lose no significant functionality with
respect to the introduction of records containing dates falling on or after
December 31, 1998; and (ii) all of the Company's and its subsidiaries' internal
computer systems comprised of software, hardware, databases or embedded control
systems (microprocessor controlled, robotic or other device) related to the
Company's and its subsidiaries' businesses (collectively, a "Business System"),
that constitutes any material part of, or is used in connection with the use,
operation or enjoyment of, any material tangible or intangible asset or real
property of the Company and its subsidiaries, including its accounting systems,
are Year 2000 Capable. Except as set forth on Section 3.15(o) of the Company
Disclosure Schedule, the current versions of the Company's and its subsidiaries'
software and all other Intellectual Property may be used prior to, during and
after December 31, 1998, such that such Software and Intellectual Property will
operate prior to, during and after
20
such time period without error caused by date data that represents or references
different centuries or more than one century.
(ii) Except as set forth on Section 3.15(o) of the Company Disclosure
Schedule, the Company's material products and the conduct of the Company's
business with its material customers and suppliers will not be materially
adversely affected by the advent of the year 2000, the advent of the
twenty-first century or the transition from the twentieth century through the
year 2000 and into the twenty-first century. Except as set forth on Section
3.15(o) of the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries is reasonably likely to incur material expenses arising from or
relating to the failure of any of its Business Systems or any products
(including all products sold on or prior to the date hereof) as a result of the
advent of the year 2000, the advent of the twenty-first century or the
transition from the twentieth century through the year 2000.
(p) Foundry Relationships. Section 3.15(p) of the Company Disclosure
Schedule sets forth a complete and correct description of each and every (i)
foundry relationship, wafer or digital signal processor manufacturing and
fabricating agreement, understanding or commitment, and (ii) integrated circuit
die or device purchase, supply or service agreement, understanding or
commitment, used by or in connection with the Company's business, in whole or in
part, whether written or oral (the "Supply Contracts"). The Company has
delivered to Parent a correct and complete copy of each written Supply Contract
and provided a written summary of each material oral Supply Contract. There are
no fees, penalties, price uplifts, shortfall payments, bill backs or other
amounts outstanding under such Supply Contracts. The quantities available for
purchase under each written Supply Contract are as stated on the face of such
Supply Contract and are summarized in Section 3.15(p) of the Company Disclosure
Schedule. Each manufacturing or service site that requires qualification under
the terms of a Supply Contract is qualified, and no unresolved differences with
respect to product or process specifications remains outstanding. All
manufacturing or service terms and conditions are as they appear to be on the
face of the written Supply Contracts. The Company has not received any written
or oral notice from the other party to any Supply Contract, or from any other
supplier to the Company, to the effect that such party will not accept purchase
orders from the Company on such terms, conditions and quantities consistent with
past practices. Prices required to be paid for products or services under such
Supply Contract are summarized on Section 3.15(p) of the Company Disclosure
Schedule. No condition exists that permit a termination or a material change of
such Supply Contracts by the other party under such Supply Contract.
SECTION 3.16. Insurance. Except as set forth in Section 3.16 of the Company
Disclosure Schedule, each of the Company and its subsidiaries maintains
insurance policies (the "Insurance Policies") against all risks of a character
and in such amounts as are customarily insured against by similarly situated
companies in the same or similar businesses. Each Insurance Policy is in full
force and effect and is valid, outstanding and enforceable, and all premiums due
thereon have been paid in full. None of the Insurance Policies will terminate or
lapse (or be affected in any other materially adverse manner) by reason of the
transactions contemplated by this Agreement. Each of the Company and its
subsidiaries has complied in all material respects with the provisions of each
Insurance Policy under which it is the insured party. No insurer under any
Insurance Policy has canceled or generally disclaimed liability under any such
policy or, to the Company's knowledge, indicated any intent to do so or not to
renew any such policy. All material claims under the Insurance Policies have
been filed in a timely fashion.
SECTION 3.17. Certain Business Practices. None of the Company, any of its
subsidiaries or, to the Company's knowledge, any directors, officers, agents or
employees of the Company or any of its subsidiaries has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses related
to political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (iii) made any other unlawful payment.
SECTION 3.18. Product Warranties. Section 3.18 of the Company Disclosure
Schedule sets forth complete and accurate copies of the written warranties and
guaranties by the Company or any of its subsidiaries currently in effect with
respect to its products. There have not been any material deviations from
21
such warranties and guaranties, and neither the Company, any of its subsidiaries
nor any of their respective salesmen, employees, distributors and agents is
authorized to undertake obligations to any customer or to other third parties
materially in excess of such warranties or guaranties. Neither the Company nor
any of its subsidiaries has made any material oral warranty or guaranty with
respect to its products not described on such schedule.
SECTION 3.19. Suppliers and Customers. Section 3.19 of the Company
Disclosure Schedule sets forth the names of the twenty (20) largest customers of
the Company and its subsidiaries during the three (3) month period ended March
31, 1999. Since March 31, 1999 the Company has received no notices of
termination or written threats of termination from any of such customers of the
Company and its subsidiaries.
SECTION 3.20. Vote Required. The affirmative vote of the holders of a
majority of the votes cast by the holders of Shares at a duly constituted
meeting with a quorum present is the only vote of the holders of any class or
series of the Company's capital stock necessary to approve and adopt this
Agreement and the Merger.
SECTION 3.21. Opinion of Financial Adviser. The Fairness Opinion has not
been withdrawn, revoked or modified. A true and complete copy of such opinion
has been delivered to Parent.
SECTION 3.22. Brokers. No broker, finder or investment banker (other than
the Financial Adviser, a true and correct copy of whose engagement agreement has
been provided to Parent) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
SECTION 3.23. Takeover Statutes. No "fair price," "moratorium," "control
share acquisition" or other similar anti-takeover statute or regulation under
the laws of the State of New Jersey (each a "Takeover Statute") is applicable to
the Company, the Shares, the Offer, the Merger or any of the other transactions
contemplated by this Agreement. The Company Board has approved the Offer, the
Merger and this Agreement, and such approval is sufficient to render
inapplicable to the Offer, the Merger, this Agreement, and the Stock Option
Agreement the transactions contemplated by this Agreement and the Stock Option
Agreement the provisions of Sections 14A:10A-4 and 14A:10A-5 of the NJBCA to the
extent, if any, such Sections are applicable to the Offer, the Merger, this
Agreement, the Stock Option Agreement or any of the transactions contemplated by
this Agreement and the Stock Option Agreement.
SECTION 3.24. Representations Complete. None of the representations or
warranties made by the Company in this Agreement nor any statement made in any
Schedule or certificate furnished by the Company pursuant to this Agreement, or
furnished in or in connection with documents mailed or delivered to the
stockholders of the Company in connection with soliciting their proxy or consent
to this Agreement and the Merger, contains or will contain at the Effective
Time, any untrue statement of a material fact, or omits or will omit at the
Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
PARENT AND ACQUISITION
Parent and Acquisition hereby represent and warrant to the Company as
follows:
SECTION 4.1. Organization.
(a) Each of Parent and Acquisition is duly organized, validly existing
and in good standing under the laws of the State of Delaware and the State of
New Jersey, respectively, and has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. Parent has heretofore made available to the Company accurate and
complete copies of the Certificates of Incorporation and bylaws as currently in
full force and effect, of Parent and Acquisition. Parent owns all of the issued
and outstanding capital stock of Acquisition.
22
(b) Each of Parent and Acquisition is duly qualified or licensed and in
good standing to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except in such jurisdictions where
the failure to be so duly qualified or licensed and in good standing would not
have a Material Adverse Effect on Parent. When used in connection with Parent or
Acquisition the term "Material Adverse Effect on Parent" means any circumstance,
change in, or effect on (or circumstance, change in, or effect involving a
prospective change on) Parent and its subsidiaries, taken as a whole, that
materially and adversely affects the ability of Parent and/or Acquisition to
consummate the Offer or the Merger.
SECTION 4.2. Authority Relative to this Agreement. Each of Parent and
Acquisition has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the boards of directors of Parent and
Acquisition and by Parent as the sole stockholder of Acquisition, and no other
corporate proceedings on the part of Parent or Acquisition are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by each of
Parent and Acquisition and constitutes, assuming the due authorization,
execution and delivery hereof by the Company, a valid, legal and binding
agreement of each of Parent and Acquisition enforceable against each of Parent
and Acquisition in accordance with its terms, subject to any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally or to general
principles of equity.
SECTION 4.3. Information Supplied. None of the information supplied or to
be supplied by Parent or Acquisition for inclusion or incorporation by reference
in the Offer Documents and the Proxy Statement will at the date mailed to
stockholders and at the times of the meeting or meetings of stockholders of the
Company to be held in connection with the Merger contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein in light of the
circumstances under which they are made not misleading. Notwithstanding the
foregoing, neither Parent nor Acquisition makes any representation, warranty or
covenant with respect to any information supplied or required to be supplied by
the Company that is contained in or omitted from the Proxy Statement.
SECTION 4.4. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under and
other applicable requirements of the Securities Act, the Exchange Act, state
securities or blue sky laws, the HSR Act, and any filings under similar merger
notification laws or regulations of foreign Governmental Entities and the filing
and recordation of the Certificate of Merger as required by the NJBCA, no
material filing with or notice to, and no material permit, authorization,
consent or approval of any Governmental Entity is necessary for the execution
and delivery by Parent or Acquisition of this Agreement or the consummation by
Parent or Acquisition of the transactions contemplated hereby. Neither the
execution, delivery and performance of this Agreement by Parent or Acquisition
nor the consummation by Parent or Acquisition of the transactions contemplated
hereby will (a) conflict with or result in any breach of any provision of the
respective Certificates of Incorporation or bylaws (or similar governing
documents) of Parent or Acquisition, (b) result in a violation or breach of or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration
or Lien) under any of the terms, conditions or provisions of any material note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Parent or Acquisition or any of Parent's other
subsidiaries is a party or by which any of them or any of their respective
properties and assets is bound or (c) violate any material order, writ,
injunction, decree, law, statute, rule or regulation applicable to Parent or
Acquisition or any of Parent's other subsidiaries or any of their respective
properties or assets.
SECTION 4.5. Litigation. There is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of Parent threatened, against Parent
or any of its subsidiaries or any of their respective properties or assets
before any Governmental Entity that could reasonably be expected to prevent or
delay the consummation of the transactions contemplated by this Agreement beyond
the Final Date. Neither Parent nor any of its
23
subsidiaries is subject to any outstanding order, writ, injunction or decree
that could reasonably be expected to prevent or delay the consummation of the
transactions contemplated hereby.
SECTION 4.6. Brokers. No broker finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Acquisition.
SECTION 4.7. Financing. At the expiration of the Offer and at the Effective
Time, Parent and Acquisition will have available all the funds necessary for the
acquisition of all Shares and to perform their respective obligations under this
Agreement, including the payment in full for all Shares validly tendered or
outstanding as of the Effective Time.
SECTION 4.8. Ownership of the Company. As of the date hereof, neither
Parent nor Acquisition, nor any subsidiary of Parent, is the beneficial owner of
any shares of Company Common Stock.
ARTICLE 5
COVENANTS
SECTION 5.1. Conduct of Business of the Company. Except as contemplated by
this Agreement or as described in Section 5.1 of the Company Disclosure
Schedule, during the period from the date hereof to the Effective Time, the
Company will and will cause each of its subsidiaries to (a) conduct its
operations in the ordinary course of business consistent with past practice and,
to the extent consistent therewith, with no less diligence and effort than would
be applied in the absence of this Agreement, and (b) use all commercially
reasonable efforts to preserve intact its current business organizations, keep
available the service of its current officers and employees and preserve its
relationships with customers, suppliers, distributors, lessors, creditors,
employees, contractors and others having business dealings with it with the
intention that its goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Without limiting the generality of the foregoing, except as
otherwise expressly provided in this Agreement or in Section 5.1 of the Company
Disclosure Schedule, prior to the Effective Time, neither the Company nor any of
its subsidiaries shall, without the prior written consent of Parent:
(a) amend its Certificate of Incorporation or bylaws (or other similar
governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other debt or equity securities or equity equivalents
(including any stock options or stock appreciation rights) except for the
issuance and sale of Shares pursuant to the DSE/DP, Company Stock Options
outstanding on the date hereof and grants of shares of Company Stock Options
consistent with Section 5.13;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
make any other actual, constructive or deemed distribution in respect of its
capital stock or otherwise make any payments to stockholders in their capacity
as such, or redeem or otherwise acquire any of its securities or any securities
of any of its subsidiaries, except as may be required under the terms of any
Company Stock Option;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its subsidiaries (other than the Merger);
(e) alter through merger, liquidation, reorganization, restructuring or
any other fashion the corporate structure of any subsidiary;
(f) (i) incur or assume any long-term or short-term debt or issue any
debt securities except, in each case, for borrowings under existing lines of
credit in the ordinary course of business consistent with past practice, or
modify or agree to any material amendment of the terms of any of the foregoing;
(ii) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for
24
the obligations of any other person except for obligations of subsidiaries of
the Company incurred in the ordinary course of business consistent with past
practice, other than third-party guarantees and lease agreements not to exceed
$500,000 in the aggregate; (iii) make any loans, advances or capital
contributions to or investments in any other person (other than in accordance
with Section 5.1(m)(vii) and to subsidiaries of the Company or customary loans
or advances to employees in each case in the ordinary course of business
consistent with past practice); (iv) pledge or otherwise subject to any Lien
shares of capital stock of the Company or any of its subsidiaries; or (v)
mortgage or pledge any of its material assets, tangible or intangible, or create
or suffer to exist any material Lien thereupon;
(g) except as may be required by Applicable Law, enter into, adopt or
amend or terminate any bonus, special remuneration, profit sharing,
compensation, severance, termination, stock option, stock appreciation right,
restricted stock, performance unit, stock equivalent, stock purchase agreement,
pension, retirement, deferred compensation, employment, health, life, or
disability insurance, dependent care, severance or other employee benefit plan,
agreement, trust, fund or other arrangement for the benefit or welfare of any
director, officer, employee or consultant in any manner or increase in any
manner the compensation or fringe benefits of any director, officer or employee
or pay any benefit not required by any plan and arrangement as in effect as of
the date hereof (including the granting of stock appreciation rights or
performance units), except in accordance with Section 5.13;
(h) grant any severance or termination pay to any director, officer,
employee or consultant, except payments made pursuant to written agreements
outstanding on the date hereof or the current severance policies of the Company
described on Section 3.11(a) of the Company Disclosure Schedule, the terms of
which are in all material respects completely and correctly disclosed in Section
5.1(h) of the Company Disclosure Schedule or as required by applicable federal,
state or local law or regulations;
(i) exercise its discretion or otherwise voluntarily accelerate the
vesting of any Company Stock Option as a result of the Merger, any other "change
in control" of the Company (as defined in the Company Plans) or otherwise.
(j) except as set forth in Section 5.1(j) of the Company Disclosure
Schedule (i) sell, lease, license, transfer or otherwise dispose of any material
assets in any single transaction or series of related transactions (including in
any transaction or series of related transactions having a fair market value in
excess of $300,000 in the aggregate), other than sales of its products and
licenses of software in the ordinary course of business consistent with past
practices, (ii) enter into any exclusive license, distribution, marketing, sales
or other agreement or sell, transfer or otherwise dispose of any Intellectual
Property, or (iii) license any source code to any third party;
(k) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles, practices or methods used by it;
(l) revalue in any material respect any of its assets, including writing
down the value of inventory or writing-off notes or accounts receivable, other
than in the ordinary course of business consistent with past practice or as
required by generally accepted accounting principles;
(m) (i) except as set forth in Section 5.1(m)(i) of the Company
Disclosure Schedule, acquire (by merger, consolidation or acquisition of stock
or assets) any corporation, partnership or other person or division thereof or
any equity interest therein; (ii) enter into any contract or agreement that
would be material to the Company and its subsidiaries, taken as a whole; (iii)
amend, modify or waive any material right under any material contract of the
Company or any of its subsidiaries; (iv) modify its standard warranty terms for
its products or amend or modify any product warranties in effect as of the date
hereof in any material manner that is adverse to the Company or any of its
subsidiaries; (v) authorize any new capital expenditure or expenditures that are
not set forth in Section 5.1(m)(v) of the Company Disclosure Schedule and that
in the aggregate are in excess of $500,000 (vi) authorize any new or additional
manufacturing capacity expenditure or expenditures for any manufacturing
capacity contracts or arrangements; or (vii) acquire any other asset or related
group of assets, or make any investment, in a single transaction or series of
related transactions with a cost in
25
excess of $300,000, provided that in no event shall the aggregate of all
acquisitions and investments exceed $1,000,000;
(n) make any material tax election or settle or compromise any material
income tax liability or permit any insurance policy naming it as a beneficiary
or loss-payee to expire, or to be canceled or terminated, unless a comparable
insurance policy reasonably acceptable to Parent is obtained and in effect;
(o) fail to file any Tax Returns when due (or, alternatively, fail to
file for available extensions) or fail to cause such Tax Returns when filed to
be complete and accurate in all material respects;
(p) fail to pay any Taxes or other material debts when due;
(q) settle or compromise any pending or threatened suit, action or claim
that (i) relates to the transactions contemplated hereby or (ii) the settlement
or compromise of which would involves more than $300,000 or that would otherwise
be material to the Company or that relates to any Intellectual Property matters;
(r) take any action or fail to take any action that could reasonably be
expected to (i) limit the utilization of any of the net operating losses,
built-in losses, tax credits or other similar items of the Company or its
subsidiaries under Section 382, 383, 384 or 1502 of the Code and the Treasury
Regulations thereunder, or (ii) cause any transaction in which the Company or
any of its subsidiaries was a party that was intended to be treated as a
reorganization under Section 368(a) of the Code to fail to qualify as a
reorganization under Section 368(a) of the Code; or
(s) take or agree in writing or otherwise to take any of the actions
described in Sections 5.1(a) through 5.1(r) (and it shall use all reasonable
efforts not to take any action that would make any of the representations or
warranties of the Company contained in this Agreement untrue or incorrect in any
material respect).
SECTION 5.2. No Solicitation or Negotiation.
(a) The Company, its subsidiaries and other affiliates (as reasonably
determined by the Company) and their respective officers and other employees
with managerial responsibilities, directors, representatives (including the
Financial Advisor or any other investment banker and any attorneys and
accountants) and agents shall immediately cease any discussions or negotiations
with any other persons with respect to any Third Party Acquisition. The Company
also agrees promptly to request each person that has heretofore executed a
confidentiality agreement in connection with its consideration of acquiring
(whether by merger, acquisition of stock or assets or otherwise) the Company or
any of its subsidiaries, if any, to return all confidential information
heretofore furnished to such person by or on behalf of the Company or any of its
subsidiaries. Neither the Company nor any of its subsidiaries and other
affiliates shall, nor shall the Company authorize or permit any of its or their
respective officers, directors, employees, representatives or agents to,
directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with or provide any information to any person or
group (other than Parent and Acquisition or any designees of Parent and
Acquisition) concerning any Third Party Acquisition; provided, however,that if
the Board of Directors of the Company determines in good faith, after
consultation with legal counsel, that it is necessary to do so in order to
comply with its fiduciary duties to the Company's stockholders under the NJBCA,
the Company may, in response to a proposal or offer for a Third Party
Acquisition that was not solicited and that the Board of Directors of the
Company determines, based on consultation with the Company Financial Advisor, is
from a Third Party that is capable of consummating a Superior Proposal and only
for so long as the Board of Directors so determines that its actions are likely
to lead to a Superior Proposal, (i) furnish information only of the type and
scope with respect to the Company that the Company provided to Parent prior to
the date hereof to any such person pursuant to a customary confidentiality
agreement as was executed by Parent prior to the execution of this Agreement and
(ii) participate in the discussions and negotiations regarding such proposal or
offer; provided, further, nothing herein shall prevent the Company Board from
taking and disclosing to the Company's stockholders a position contemplated by
Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard to any
tender or exchange offer. The Company shall promptly (and in any event within
one business day after becoming aware thereof) (i) notify Parent in the event
the Company
26
or any of its subsidiaries and other affiliates or any of their respective
officers, directors, employees and agents receives any proposal or inquiry
concerning a Third Party Acquisition, including the terms and conditions thereof
and the identity of the party submitting such proposal, and any request for
confidential information in connection with a potential Third Party Acquisition,
(ii) provide a copy of any written agreements, proposals or other materials the
Company receives from any such person or group (or its representatives), and
(iii) advise Parent from time to time of the status, at any time upon Parent's
request, and promptly following any developments concerning the same.
(b) Except as set forth in this Section 5.2(b), the Company Board shall
not withdraw or modify its recommendation of the transactions contemplated
hereby or approve or recommend, or cause or permit the Company to enter into any
agreement or obligation with respect to, any Third Party Acquisition.
Notwithstanding the foregoing, if the Company Board by a majority vote
determines in its good faith judgment, after consultation with and based upon
the advice of legal counsel, that it is required to do so in order to comply
with its fiduciary duties, the Company Board may withdraw its recommendation of
the transactions contemplated hereby or approve or recommend a Superior
Proposal, but in each case only (i) after providing written notice to Parent (a
"Notice of Superior Proposal") advising Parent that the Company Board has
received a Superior Proposal, specifying the material terms and conditions of
such Superior Proposal and identifying the person or group making such Superior
Proposal and (ii) if Parent does not, within five (5) business days after
Parent's receipt of the Notice of Superior Proposal, make an offer that the
Company Board by a majority vote determines in its good faith judgment (based on
the written advice of the Financial Advisor or another financial advisor of
nationally recognized reputation) to be at least as favorable to the Company's
stockholders as such Superior Proposal; provided, however, that the Company
shall not be entitled to enter into any agreement with respect to a Superior
Proposal unless and until this Agreement is terminated pursuant to Section 7.1
and the Company has paid all amounts due to Parent pursuant to Section 7.3. Any
disclosure that the Company Board may be compelled to make with respect to the
receipt of a proposal for a Third Party Acquisition or otherwise in order to
comply with its fiduciary duties or Rule 14d-9 or 14e-2 will not constitute a
violation of this Agreement; provided, however, that such disclosure states that
no action will be taken by the Company Board in violation of this Section
5.2(b).
(c) For purposes of this Agreement, "Third Party Acquisition" means the
occurrence of any of the following events: (i) the acquisition of the Company by
merger or otherwise by any person (which includes a "person" as such term is
defined in Section 13(d)(3) of the Exchange Act) other than Parent, Acquisition
or any affiliate thereof (a "Third Party"); (ii) the acquisition by a Third
Party of any material portion (which shall include fifteen percent (15%) or
more) of the assets of the Company and its subsidiaries, taken as a whole, other
than the sale of its products in the ordinary course of business consistent with
past practices; (iii) the acquisition by a Third Party of fifteen percent (15%)
or more of the outstanding Shares; (iv) the adoption by the Company of a plan of
liquidation or the declaration or payment of an extraordinary dividend; (v) the
repurchase by the Company or any of its subsidiaries of more than ten percent
(10%) of the outstanding Shares; or (vi) the acquisition (or any group of
acquisitions) by the Company or any of its subsidiaries by merger, purchase of
stock or assets, joint venture or otherwise of a direct or indirect ownership
interest or investment in any business (or businesses) whose annual revenues,
net income or assets is equal or greater than ten percent (10%) of the annual
revenues, net income or assets of the Company, respectively. For purposes of
this Agreement, a "Superior Proposal" means any bona fide proposal (1) to
acquire, directly or indirectly, for consideration consisting solely of cash
and/or securities, all of the Shares then outstanding, or all or substantially
all the assets, of the Company, (2) that is fully-financed or financeable and
contains terms that the Company Board by a majority vote determines in its good
faith judgment (based, as to the financial terms, on the written advice of the
Financial Advisor or another financial advisor of nationally recognized
reputation) to be more favorable to the Company's stockholders than the Merger,
(3) that the Company Board by a majority vote determines in its good faith
judgment (following and based on consultation with the Financial Adviser or
another financial advisor of nationally recognized reputation and its legal and
other advisors) to be reasonably capable of being completed (taking into account
all legal, financial, regulatory and other aspects of the proposal and the
person making the proposal), (4) that does not contain a "right of first
refusal" or "right of first offer" with respect to any counter-proposal that
Parent might make and (5) that does not contain any "due diligence" condition.
27
SECTION 5.3. Meeting of Stockholders.
(a) The Company shall, following the acceptance for payment of Shares by
Acquisition pursuant to the Offer, take all actions necessary in accordance with
the NJBCA and its Certificate of Incorporation and bylaws to duly call, give
notice of, convene and hold a meeting of its stockholders as promptly as
practicable to consider and vote upon the adoption and approval of this
Agreement and the transactions contemplated hereby (the "Meeting"). The
stockholder vote required for the adoption and approval of the transactions
contemplated by this Agreement shall be the vote required by the NJBCA and the
Company's Certificate of Incorporation and bylaws. The Company will, through the
Company Board, recommend to its stockholders approval of such matters subject to
the provisions of Section 5.2(b). The Company shall, promptly after payment for
the tendered shares by Acquisition pursuant to the Offer, prepare and file with
the SEC the Proxy Statement for the solicitation of a vote of the holders of
Shares approving the Merger, which, subject to the provisions of Section 5.2(b),
shall include the recommendation of the Company Board that stockholders of the
Company vote in favor of the approval and adoption of this Agreement and the
written opinion of the Financial Advisor that the consideration to be received
by the stockholders of the Company pursuant to this Agreement is fair to such
stockholders from a financial point of view. The Company shall use all
reasonable efforts to have the Proxy Statement cleared by the SEC as promptly as
practicable after such filing, and promptly thereafter mail the Proxy Statement
to the stockholders of the Company. Whenever any event occurs which is required
to be set forth in an amendment or supplement to the Proxy Statement, the
Company will promptly inform Parent of such occurrence and cooperate in filing
with the SEC or its staff or any other government officials, and/or mailing to
stockholders of the Company, such amendment or supplement. Notwithstanding
anything to the contrary contained in this Agreement, the Company may adjourn or
postpone (i) the Meeting to the extent necessary to ensure that any necessary
supplement or amendment to the Proxy Statement is provided to the Company's
stockholders in advance of a vote on the Merger and this Agreement or (ii) the
time for which the Meeting is originally scheduled (as set forth in the Proxy
Statement), if there are insufficient Shares represented, either in person or by
proxy, to constitute a quorum necessary to conduct the business of the Meeting.
Notwithstanding the foregoing, if Parent, Acquisition and/or any other
subsidiary of Parent shall acquire at least 90% of the outstanding Shares, the
parties shall take all necessary and appropriate action to cause the Merger to
become effective as soon as practicable after the expiration of the Offer
without a Meeting in accordance with Section 14A:10-5.1 of the NJBCA.
(b) Each of Parent and Acquisition agrees to (and Parent shall cause
Acquisition to) vote in favor of the Merger all Shares purchased pursuant to the
Offer and all other Shares owned by Parent or any other subsidiary of Parent.
SECTION 5.4. Access to Information.
(a) Between the date hereof and the Effective Time, upon reasonable
notice and except as set forth on Section 5.4 of the Company Disclosure Schedule
and subject in each instance to the requirements of Applicable Law, the Company
will give Parent and its authorized representatives reasonable access to all
employees, plants, offices, warehouses and other facilities and to all books and
records and personnel files of current employees of the Company and its
subsidiaries as Parent may reasonably require, and will cause its officers and
those of its subsidiaries to furnish Parent with such financial and operating
data and other information with respect to the business and properties of the
Company and its subsidiaries as Parent may from time to time reasonably request.
Between the date hereof and the Effective Time, Parent shall make available to
the Company, as reasonably requested by the Company, a designated officer of
Parent to answer questions and make available such information regarding Parent
and its subsidiaries as is reasonably requested by the Company taking into
account the nature of the transactions contemplated by this Agreement.
(b) Between the date hereof and the Effective Time, the Company shall
furnish to Parent (i) within two (2) business days following preparation thereof
(and in any event within twenty (20) business days after the end of each
calendar month, commencing with June 1999), an unaudited balance sheet as of the
end of such month and the related statements of earnings, stockholders' equity
and cash flows, without notes to such financial statements, (ii) within two (2)
business days following preparation thereof (and in any event within twenty (20)
business days after the end of each fiscal quarter) an unaudited balance sheet
as of the end
28
of such quarter and the related statements of earnings, stockholders' equity and
cash flows for the quarter then ended, with condensed notes to such financial
statements, and (iii) within two (2) business days following preparation thereof
(and in any event within ninety (90) calendar days after the end of each fiscal
year) an audited balance sheet as of the end of such year and the related
statements of earnings, stockholders' equity (deficit) and cash flows, all of
such financial statements referred to in clauses (i), (ii) and (iii) to be
prepared in accordance with generally accepted accounting principles in
conformity with the practices consistently applied by the Company with respect
to such financial statements. All the foregoing shall be in accordance with the
books and records of the Company and shall fairly present its financial position
(taking into account the differences between the monthly, quarterly and annual
financial statements prepared by the Company in conformity with its past
practices) as of the last day of the period then ended.
(c) Each of the parties hereto will hold, and will cause its consultants
and advisers to hold, in confidence all documents and information furnished to
it by or on behalf of another party to this Agreement in connection with the
transactions contemplated by this Agreement pursuant to the terms of that
certain Corporate Nondisclosure Agreement No. 2387365 entered into between the
Company and Parent and Addendum No. 1 thereto dated May 21, 1999.
SECTION 5.5. Certain Filings; Reasonable Efforts.
(a) Subject to the terms and conditions herein provided, including
Section 5.2(b), each of the parties hereto agrees to use all reasonable efforts
to take or cause to be taken all action and to do or cause to be done all things
reasonably necessary, proper or advisable under Applicable Law to consummate and
make effective the transactions contemplated by this Agreement, including using
all reasonable efforts to do the following, (i) cooperate in the preparation and
filing of the Proxy Statement and any amendments thereto, any filings that may
be required under the HSR Act and any filings under similar merger notification
laws or regulations of foreign Governmental Entities; (ii) obtain consents of
all third parties and Governmental Entities necessary, proper, advisable or
reasonably requested by Parent or the Company, for the consummation of the
transactions contemplated by this Agreement; (iii) contest any legal proceeding
relating to the Merger; and (iv) execute any additional instruments necessary to
consummate the transactions contemplated hereby. Subject to the terms and
conditions of this Agreement, Parent and Acquisition agree to use all reasonable
efforts to cause the Effective Time to occur as soon as practicable after the
Company stockholder vote with respect to the Merger or the purchase by
Acquisition of 90% or more of the outstanding Shares pursuant to the Offer. The
Company agrees to use all reasonable efforts to encourage its employees to
accept any offers of employment extended by Parent. If at any time after the
Effective Time any further action is necessary to carry out the purposes of this
Agreement the proper officers and directors of each party hereto shall take all
such necessary action.
(b) Parent and the Company will consult and cooperate with one another,
and consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, letters, white papers, memoranda, briefs,
arguments, opinions or proposals made or submitted by or on behalf of any party
hereto in connection with proceedings under or relating to the HSR Act or any
other foreign, federal, or state antitrust, competition, or fair trade law. In
this regard but without limitation, each party hereto shall promptly inform the
other of any material communication between such party and the Federal Trade
Commission, the Antitrust Division of the United States Department of Justice,
or any other federal, foreign or state antitrust or competition Governmental
Entity regarding the transactions contemplated herein.
SECTION 5.6. Public Announcements. Neither Parent, Acquisition nor the
Company shall issue any press release or otherwise make any public statements
with respect to the transactions contemplated by this Agreement, including the
Merger, or any Third Party Acquisition, without the prior consent of Parent and
Acquisition (in the case of the Company) or the Company (in the case of Parent
or Acquisition), except (i) as may be required by Applicable Law, or by the
rules and regulations of, or pursuant to any agreement with, the Nasdaq National
Market, (ii) following a change, if any, of the Company Board's recommendation
of the Merger (in accordance with Section 5.2(b)) or (iii) only in the case of a
release or statement relating to a Third Party Acquisition, if the Company Board
has been advised by outside legal counsel that a press release or other public
statement is required by Applicable Law. The first public announcement of this
29
Agreement, the Offer and the Merger shall be a joint press release agreed upon
by Parent, Acquisition and the Company.
SECTION 5.7. Indemnification and Directors' and Officers' Insurance.
(a) From and after the Effective Time, Parent shall cause the Surviving
Corporation to indemnify, defend and hold harmless (and shall also cause the
Surviving Corporation to advance expenses as incurred to the fullest extent
permitted under Applicable Law to), to the extent not covered by insurance, each
person who is now or has been prior to the date hereof or who becomes prior to
the Effective Time an officer or director of the Company or any of the Company's
subsidiaries (the "Indemnified Persons") against (i) all losses, claims,
damages, costs, expenses (including counsel fees and expenses), settlement,
payments or liabilities arising out of or in connection with any claim, demand,
action, suit, proceeding or investigation based in whole or in part on or
arising in whole or in part out of the fact that such person is or was an
officer or director of the Company or any of its subsidiaries, whether or not
pertaining to any matter existing or occurring at or prior to the Effective Time
and whether or not asserted or claimed prior to or at or after the Effective
Time ("Indemnified Liabilities"); and (ii) all Indemnified Liabilities based in
whole or in part on or arising in whole or in part out of or pertaining to this
Agreement, the Stock Option Agreement or the transactions contemplated hereby or
thereby, in each case to the fullest extent required or permitted under
Applicable Law. Nothing contained herein shall make Parent, Acquisition, the
Company or the Surviving Corporation, an insurer, a co-insurer or an excess
insurer in respect of any insurance policies which may provide coverage for
Indemnified Liabilities, nor shall this Section 5.7 relieve the obligations of
any insurer in respect thereto. The parties hereto intend, to the extent not
prohibited by Applicable Law, that the indemnification provided for in this
Section 5.7 shall apply without limitation to negligent acts or omissions by an
Indemnified Person. Each Indemnified Person is intended to be a third party
beneficiary of this Section 5.7 and may specifically enforce its terms. This
Section 5.7 shall not limit or otherwise adversely affect any rights any
Indemnified Person may have under any agreement with the Company or under the
Company's Certificate of Incorporation or bylaws as presently in effect.
(b) From and after the Effective Time, Parent shall cause the Surviving
Corporation to fulfill and honor in all respects the obligations of the Company
pursuant to any indemnification agreements between the Company and its directors
and officers as of or prior to the date hereof (or indemnification agreements in
the Company's customary form for directors joining the Company Board prior to
the Effective Time) and any indemnification provisions under the Company's
certificate of incorporation or bylaws as in effect immediately prior to the
Effective Time. The Surviving Corporation's aggregate obligation to indemnify
and hold harmless all Indemnified Persons for all matters to which such
Indemnified Persons may be entitled to be indemnified or held harmless under
subsections (a) and (b) of this Section 5.7 shall in no event exceed the
Company's net worth as of March 31, 1999.
(c) For a period of six years after the Effective Time, Parent will
maintain or cause the Surviving Corporation to maintain in effect, if available,
directors' and officers' liability insurance covering those persons who, as of
immediately prior to the Effective Time, are covered by the Company's directors'
and officers' liability insurance policy (the "Insured Parties") on terms no
less favorable to the Insured Parties than those of the Company's present
directors' and officers' liability insurance policy; provided, however, that in
no event shall Parent or the Company be required to expend on an annual basis in
excess of 200% of the annual premium currently paid by the Company for such
coverage (or such coverage as is available for 200% of such annual premium);
provided further, that, in lieu of maintaining such existing insurance as
provided above, Parent, at its election, may cause coverage to be provided under
any policy maintained for the benefit of Parent or any of its subsidiaries, so
long as the terms are not materially less advantageous to the intended
beneficiaries thereof than such existing insurance.
(d) Neither Parent nor any of its affiliates shall be obligated to
guarantee the payment or performance of the Company's obligations under
subsection (a) or (b) of this Section 5.7, so long as the Surviving Corporation
honors such obligations to the extent of the Company's net worth at March 31,
1999. In no event, however, shall Parent or any such affiliate have any
liability or obligation to any Indemnified Person arising from the Company's
breach of, or inability to perform its obligations under, subsection (a) or (b)
of
30
this Section 5.7 in excess of the difference between the net worth of the
Company at March 31, 1999 and the aggregate of all amounts paid by the Company
in satisfaction of such obligation. The provisions of this Section 5.7 are
intended to be for the benefit of, and will be enforceable by, each person
entitled to indemnification hereunder and the heirs and representatives of such
person. Parent will not permit the Company to merge or consolidate with any
other Person unless the Company will ensure that the surviving or resulting
entity assumes the obligations imposed by this Section 5.7.
SECTION 5.8. Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which has caused or would be likely to cause any representation or warranty
contained in this Agreement by such first party to be untrue or inaccurate in
any material respect at or prior to the Effective Time and (ii) any material
failure by such first party to comply with or satisfy in any material respect
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.8 shall not cure such breach or non-compliance or limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
SECTION 5.9. Additions to and Modification of Company Disclosure
Schedule. Concurrently with the execution and delivery of this Agreement, the
Company has delivered a Company Disclosure Schedule that includes all of the
information required by the relevant provisions of this Agreement. In addition,
the Company shall deliver to Parent and Acquisition such additions to or
modifications of any Sections of the Company Disclosure Schedule necessary to
make the information set forth therein true, accurate and complete in all
material respects as soon as practicable after such information is available to
the Company after the date of execution and delivery of this Agreement;
provided, however, that such disclosure shall not be deemed to constitute an
exception to its representations and warranties under Article 3, nor limit the
rights and remedies of Parent and Acquisition under this Agreement for any
breach by the Company of such representation and warranties.
SECTION 5.10. Access to Company Employees. The Company agrees to provide
Parent with, and to cause each of its subsidiaries to provide Parent with,
reasonable access to its employees during normal working hours following the
date of this Agreement, to among other things, deliver offers of continued
employment and to provide information to such employees about Parent.
SECTION 5.11. Company Compensation and Benefit Plans. The Company agrees to
take all actions necessary to amend, merge, freeze or terminate all compensation
and benefit plans, effective at the Closing Date, as requested in writing by
Parent.
SECTION 5.12. Takeover Statutes. If any Takeover Statute or any similar
statute, law, rule or regulation in any State of the United States (including
under the NJBCA or any other law of the State of New Jersey) is or may become
applicable to the Offer, the Merger or any of the other transactions
contemplated by this Agreement or the Stock Option Agreement, the Company and
the Company Board shall promptly grant such approvals and use all reasonable
efforts to take such lawful actions as are necessary so that such transactions
may be consummated as promptly as practicable on the terms contemplated by this
Agreement or the Stock Option Agreement, as the case may be, or by the Offer or
the Merger, as the case may be, and use all reasonable efforts to otherwise take
such lawful actions to eliminate or minimize the effects of such statute, law,
rule or regulation, on such transactions.
SECTION 5.13. Company Stock Options.
(a) The Company agrees that, from and after the date hereof, it will not
take any action or refrain from taking any action, that (i) will prevent or is
inconsistent with Parent assuming any of the Assumed Options or any of the
Assumed Option Plans, (ii) results in the acceleration of the vesting or
exercisability of any Assumed Option or (iii) causes the transactions
contemplated by this Agreement to result in or cause the acceleration of the
vesting or exercisability of any Assumed Option.
(b) From and after the date hereof, the Company agrees that with respect
to each restricted stock grant and each grant of a Company Option in connection
with an offer of employment for a new employee, such grant will not include or
be subject to any change of control provisions (including the change in control
31
provisions of the 1997 Plan or 1988 Plan) and will not be in an amount in excess
of such grants made to new employees of a similar grade, consistent with past
practice, and will be within the ranges set forth in the "At-Hire Grant
Guidelines" approved by Parent and set forth in Section 5.13 of the Company
Disclosure Schedule.
(c) From and after the date hereof, the Company agrees that, with
respect to each restricted stock grant and each grant of a Company Option
granted to a continuing employee after May 25, 1999, such grant will not include
or be subject to any change in control provisions (including the change in
control provisions of the 1997 Plan or 1988 Plan), will not be in an amount in
excess of such grants made to continuing employees of a similar grade,
consistent with past practice, and will otherwise be within the ranges set forth
in the "Add-On Grant Guidelines" approved by Parent and set forth in Section
5.13 of the Company Disclosure Schedule, and the aggregate number of shares
covered by such grants shall not exceed Six Hundred Sixty Thousand (660,000).
(d) The Company agrees to cause the Company Board to adopt all
resolutions reasonably necessary or appropriate to further the purposes of
subsections (a), (b) and (c) of this Section 5.13 and provide that all options
outstanding under each Assumed Option Plan can be assumed by Parent.
(e) The Company will provide the notice described in clause II of
Section 12 of the Company's 1993 Non-Employee Director Stock Option Plan and
will take all actions necessary to effect the procedures described therein.
(f) In the event that a "DSE/DP Participant" ceases to be a member of
the Company Board as a result of the Merger, Parent shall assure that such
DSE/DP Participant receives the same benefits that he would have received had
his service on the Company Board been terminated immediately prior to the
Effective Time and had he then received shares of Company Common Stock pursuant
to the Company's 1997 Director Stock Election/Deferral Plan (the "DSE/DP") prior
to the Effective Time. The term "DSE/DP Participant" shall mean a participant in
the DSE/DP, but only to the extent that such participant has elected to receive
deferred fees in the form of Company Common Stock.
(g) The Company's actual new hires prior to Closing shall be consistent
with and within the ranges set forth in the 1999 hiring plan set forth in
Schedule 5.13.
SECTION 5.14. ISRA. The Company agrees that it shall, at its sole cost and
expense, either: (a) obtain from the New Jersey Department of Environmental
Protection (the "NJDEP") a "Letter of Non-Applicability" that the transactions
contemplated by this Agreement are exempt from the requirements of ISRA; or (b)
attain compliance with the requirements of ISRA by obtaining from the NJDEP (i)
approval of a proposed "Negative Declaration", as such term is defined at
N.J.S.A. 13:1K-8, (ii) a "no further action letter", as such term is defined at
N.J.S.A. 13:1K-8, or (iii) an equivalent final written approval of the
implementation of a "Remedial action workplan", as that term is defined at
N.J.S.A. 58:10B-1, which is acceptable to the NJDEP and Parent, such acceptance
by Parent not to be unreasonably withheld. The Company further agrees that, as
required by the NJDEP, it shall obtain and maintain a "Remediation funding
source," as such term is defined at N.J.S.A. 58:10B-1 in an amount and form
acceptable to the NJDEP. The Company shall provide Parent a reasonable
opportunity to review and comment on all proposed filings and correspondence by
the Company under this Section 5.14 prior to filing with the NJDEP, and shall
provide a copy of all filings and correspondence by the Company under this
Section 5.14 no later than two (2) business days after being filed or delivered
to the NJDEP. The Company shall provide to Parent copies of all written
correspondence received from the NJDEP promptly following receipt and shall
promptly advise Parent of any oral, electronic or other communications from the
NJDEP.
SECTION 5.15. Certain Rights of Warrant Holder. The holder of the Warrant
(as defined herein) shall have the right, on and after the Effective Time, to
purchase and receive upon the basis and upon the terms and conditions specified
in the Warrant, upon exercise of the Warrant in accordance with its terms, and
in lieu of the "Warrant Shares" (as such term is defined in the Warrant)
immediately theretofore purchasable and receivable upon the exercise of the
rights represented thereby, such amount of cash as may be payable pursuant to
the terms of this Agreement with respect to or in exchange for the number of
shares of Company
32
Common Stock immediately theretofore purchasable upon the exercise of the rights
represented by the Warrant as if such shares were outstanding immediately prior
to the Effective Time. For purposes of this Section 5.15, the term "Warrant"
shall mean the Dialogic Common Stock Purchase Warrant delivered to Microsoft
Corporation pursuant to Dialogic's Common Stock and Warrant Purchase Agreement
with Microsoft Corporation dated as of March 1, 1999.
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 6.1. Conditions to Each Party's Obligations to Effect the
Merger. The respective obligations of each party hereto to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) this Agreement shall have been approved and adopted by the requisite
vote of the stockholders of the Company, if required by Applicable Law;
(b) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States federal or state court or United States federal or state
Governmental Entity that prohibits, restrains, enjoins or restricts the
consummation of the Merger;
(c) any governmental or regulatory notices, approvals or other
requirements necessary to consummate the transactions contemplated hereby and to
operate the Business after the Effective Time in all material respects as it was
operated prior thereto (other than under the HSR Act) shall have been given,
obtained or complied with, as applicable; and
(d) the Proxy Statement, if required to be prepared and disseminated to
the Company's stockholders, shall have been cleared by the SEC and shall not be
the subject of any stop order.
SECTION 6.2. Conditions to the Obligations of the Company. The obligation
of the Company to effect the Merger is subject to the satisfaction at or prior
to the Effective Time of the following conditions:
(a) the representations and warranties of Parent and Acquisition
contained in this Agreement shall be true and correct (except to the extent that
the aggregate of all breaches thereof do not constitute a Material Adverse
Effect on Parent) at and as of the Effective Time with the same effect as if
made at and as of the Effective Time (except to the extent such representations
specifically relate to an earlier date, in which case such representations shall
be true and correct as of such earlier date, and in any event, subject to the
foregoing Material Adverse Effect qualification) and, at the Closing, Parent and
Acquisition shall have delivered to the Company a certificate to that effect,
executed by two (2) executive officers of Parent and Acquisition; and
(b) each of the covenants and obligations of Parent and Acquisition to
be performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or before
the Effective Time and, at the Closing, Parent and Acquisition shall have
delivered to the Company a certificate to that effect, executed by two (2)
executive officers of Parent and Acquisition.
SECTION 6.3. Conditions to the Obligations of Parent and Acquisition. The
respective obligations of Parent and Acquisition to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) the representations and warranties of the Company contained in this
Agreement shall be true and correct (except to the extent that the aggregate of
all breaches thereof do not constitute a Material Adverse Effect on the Company)
at and as of the Effective Time with the same effect as if made at and as of the
Effective Time (except to the extent such representations specifically relate to
an earlier date, in which case such representations shall be true and correct as
of such earlier date, and in any event, subject to the foregoing Material
Adverse Effect qualification) and, at the Closing, the Company shall have
delivered to Parent and Acquisition a certificate to that effect, executed by
two (2) executive officers of the Company;
33
(b) each of the covenants and obligations of the Company to be performed
at or before the Effective Time pursuant to the terms of this Agreement shall
have been duly performed in all material respects at or before the Effective
Time and, at the Closing, the Company shall have delivered to Parent and
Acquisition a certificate to that effect, executed by two (2) executive officers
of the Company;
(c) since March 31, 1999, there shall have been no events, changes or
effects, individually or in the aggregate, with respect to the Company or its
subsidiaries that constitutes a Material Adverse Effect on the Company; or
(d) in connection with the compliance by Parent or Acquisition with any
Applicable Law (including the HSR Act) or obtaining the consent or approval of
any Governmental Entity whose consent or approval may be required to consummate
the transactions contemplated by this Agreement, Parent shall not be (i)
required, or be construed to be required, to sell or divest any assets or
business or to restrict any business operations in order to obtain the consent
or successful termination of any review of any such Governmental Entity
regarding the transactions contemplated hereby or (ii) prohibited from owning,
and no material limitation shall be imposed on Parent's ownership of, any
material portion of the Company's business or assets.
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER
SECTION 7.1. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time whether before or after
approval and adoption of this Agreement by the Company's stockholders:
(a) by mutual written consent of Parent, Acquisition and the Company;
(b) by Parent and Acquisition or the Company if (i) any court of
competent jurisdiction in the United States or other United States federal or
state Governmental Entity shall have issued a final order, decree or ruling, or
taken any other final action, restraining, enjoining or otherwise prohibiting
the Merger and such order, decree, ruling or other action is or shall have
become nonappealable or (ii) the Merger has not been consummated by December 15,
1999 (the "Final Date"); provided, however, that no party may terminate this
Agreement pursuant to this clause (ii) if such party's failure to fulfill any of
its obligations under this Agreement shall have been a principal reason that the
Effective Time shall not have occurred on or before said date;
(c) by the Company if (i) there shall have been a breach of any
representations or warranties on the part of Parent or Acquisition set forth in
this Agreement or if any representations or warranties of Parent or Acquisition
shall have become untrue such that, in either such instance, the conditions set
forth in Section 6.2(a) would be incapable of being satisfied by the Final Date,
provided that the Company has not breached any of its obligations hereunder in
any material respect; (ii) there shall have been a breach by Parent or
Acquisition of any of their respective covenants or agreements hereunder having
a Material Adverse Effect on Parent or materially adversely affecting (or
materially delaying) the ability of the Company to consummate the Merger, and
Parent or Acquisition, as the case may be, has not cured such breach within five
(5) business days after notice by the Company thereof, provided that the Company
has not breached any of its obligations hereunder in any material respect; (iii)
the Company shall have convened the Meeting and shall have failed to obtain the
requisite vote of its stockholders thereat (including any adjournments thereof);
or (iv) the Company Board has received a Superior Proposal, has complied with
the provisions of Section 5.3(b), and has made the payment called for by Section
7.3(a);
(d) by Parent and Acquisition if (i) there shall have been a breach of
any representations or warranties on the part of the Company set forth in this
Agreement or if any representations or warranties of the Company shall have
become untrue such that, in either such instance, the conditions set forth in
Section 6.3(a) would be incapable of being satisfied by the Final Date, provided
that neither Parent nor Acquisition has breached any of their respective
obligations hereunder in any material respect; (ii) there shall have been a
breach by the Company of one or more of its covenants or agreements hereunder
having a
34
Material Adverse Effect on the Company (or, in the case of Section 5.2, any
material breach thereof) or materially adversely affecting (or materially
delaying) the ability of Acquisition to consummate the Offer or of Parent,
Acquisition or the Company to consummate the Merger, and the Company has not
cured such breach within five (5) business days after notice by Parent or
Acquisition thereof, provided that neither Parent nor Acquisition has breached
any of their respective obligations hereunder in any material respect; (iii) the
Company Board shall have recommended to the Company's stockholders a Superior
Proposal; (iv) the Company Board shall have withdrawn or adversely modified its
approval or recommendation of this Agreement, the Offer or the Merger; (v) at
any time after the date on which Acquisition has accepted Shares for payment
pursuant to the Offer, the Company Board (with the concurrence of, or because of
the vote of, one or more of the Continuing Directors) shall have ceased using
all reasonable efforts to call, give notice of, or convene or hold the Meeting
as promptly as practicable or shall have adopted a resolution not to effect any
of the foregoing; or (vi) the Company shall have convened the Meeting,
Acquisition shall have voted all of the Shares accepted by Acquisition for
payment pursuant to the Offer in favor of the Merger, and the Company shall have
failed to obtain the requisite vote of its stockholders thereat (including any
adjournments thereof);
(e) by the Company, if by the Final Date, Acquisition shall have failed
to pay for Shares pursuant to the Offer; provided, however, that the right to
terminate this Agreement pursuant to this subsection (e) shall not be available
to the Company if it has breached in any material respect its obligations under
this Agreement that in any manner shall have proximately contributed in any
material respect to the failure referenced in this subsection (e); or
(f) by Parent and Acquisition, if Acquisition shall have terminated the
Offer in accordance with the provisions of Annex A; provided, however, that the
right to terminate this Agreement pursuant to this subsection (f) shall not be
available to Parent and Acquisition if either of them has breached in any
material respect its obligations under this Agreement in any manner that shall
have proximately contributed in any material respect to the termination of the
Offer.
SECTION 7.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 7.1, this Agreement shall
forthwith become void and have no effect without any liability on the part of
any party hereto or its affiliates, directors, officers or stockholders other
than the provisions of this Section 7.2 and Sections 5.4(c) and 7.3. Nothing
contained in this Section 7.2 shall relieve any party from liability for any
breach of any covenant in this Agreement prior to such termination. The
representation and warranties made herein shall not survive beyond the Effective
Time or a termination of this Agreement, and, except for payments that may be
required under Section 7.3, no party shall have any liability for breach of any
representation or warranty. Nothing set forth herein shall limit any rights any
party may have arising out of the intentional fraudulent conduct of any other
party hereto.
SECTION 7.3. Fees and Expenses.
(a) In the event that this Agreement shall be terminated pursuant to:
(i) Section 7.1(c)(iv) or 7.1(d)(iii), (iv) or (v);
(ii) Section 7.1(d)(i) or (ii) and, at the time of such termination,
(x) there is outstanding an offer by a Third Party to consummate, or a Third
Party shall have publicly announced (and not withdrawn) a plan or proposal with
respect to, a Third Party Acquisition and such Third Party Acquisition occurs,
or (y) there is no such Third Party offer outstanding or plan or proposal
announced but within twelve (12) months after the date on which this Agreement
has been terminated the Company enters into an agreement with respect to a Third
Party Acquisition or a Third Party Acquisition occurs involving any person other
than Parent or one of its subsidiaries;
(iii) Section 7.1(f) and, at the time of such termination, there is
outstanding an offer by a Third Party to consummate, or a Third Party shall have
publicly announced (and not withdrawn) a plan or proposal with respect to a
Third Party Acquisition and the Company has entered into an agreement with
respect to such Third Party Acquisition or such Third Party Acquisition
otherwise occurs within twelve (12) months after the date on which this
Agreement has been terminated; or
35
(iv) Section 7.1(c)(iii) or 7.1(d)(vi) and at the time of the Meeting
at which the Company failed to obtain the requisite vote there shall be
outstanding at that time an offer by a Third Party to consummate, or a Third
Party shall have publicly announced (and not withdrawn) a plan or proposal with
respect to, a Third Party Acquisition;
Parent and Acquisition would suffer direct and substantial damages, which
damages cannot be determined with reasonable certainty. To compensate Parent and
Acquisition for such damages, the Company shall pay to Parent the amount of
Twenty Five Million Dollars ($25,000,000) in liquidated damages immediately upon
the occurrence of the event described in this Section 7.3(a) giving rise to such
damages. It is specifically agreed that the amount to be paid pursuant to this
Section 7.3(a) represents liquidated damages and not a penalty. The Company
hereby waives any right to set-off or counterclaim against such amount.
(b) Upon termination of this Agreement pursuant to Section 7.1(c)(iii)
or (iv), or Section 7.1(d)(i), (ii), (iii), (iv), (v) or (vi), in addition to
any other remedies that Parent, Acquisition or their affiliates may have as a
result of such termination (including pursuant to Section 7.3(a) or otherwise),
the Company shall pay to Parent the amount of Three Million Dollars ($3,000,000)
as reimbursement for the out-of-pocket costs, fees and expenses incurred by any
of them or on their behalf in connection with this Agreement, the Stock Option
Agreement, the Offer, the Merger and the consummation of all transactions
contemplated by this Agreement and the Stock Option Agreement (including fees
payable to investment bankers, counsel to any of the foregoing and accountants);
provided, however, that if Parent requests reimbursement for such costs, fees
and expenses in excess of $1,000,000, Parent shall accompany such request with
invoices or other reasonable evidence of its or Acquisitions payment of such
costs, fees and expenses. If such request for reimbursement of such costs, fees
and expenses is in excess of $1,000,000, the Company shall promptly pay to
Parent $1,000,000 after Parent has requested reimbursement pursuant to this
subsection (b), and shall pay any balance promptly following receipt of such
invoices or other evidence. Notwithstanding any of the foregoing, Parent shall
not be entitled to receive more than $3,000,000 pursuant to this subsection (b).
Nothing contained in this Section 7.3(b) shall relieve any party of any
liability for breach of this Agreement.
(c) Upon termination of this Agreement pursuant to Section 7.1(c)(i) or
(ii), in addition to any other remedies that the Company or its affiliates may
have as a result of such termination, Parent shall pay to the Company the amount
of Three Million Dollars ($3,000,000) as reimbursement for the out-of-pocket
costs, fees and expenses incurred by any of them or on their behalf in
connection with this Agreement, the Stock Option Agreement, the Offer, the
Merger and the consummation of all transactions contemplated by this Agreement
and the Stock Option Agreement (including fees payable to investment bankers,
counsel to any of the foregoing and accountants); provided, however, that if the
Company requests reimbursement for such costs, fees and expenses in excess of
$1,000,000, the Company shall accompany such request with invoices or other
reasonable evidence of the payment thereof. If the Company makes such request
for reimbursement of such costs, fees and expenses in excess of $1,000,000,
Parent shall promptly pay to the Company $1,000,000 after the Company has
requested reimbursement pursuant to this subsection (c), and shall pay any
balance promptly following receipt of such invoices or other evidence.
Notwithstanding any of the foregoing, the Company shall not be entitled to
receive more than $3,000,000 pursuant to this subsection (c). Nothing contained
in this Section 7.3(c) shall relieve any party of any liability for breach of
this Agreement.
(d) Except as specifically provided in this Section 7.3, each party
shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby. The parties acknowledge that Parent shall pay
the fees imposed in connection with its filing under the HSR Act.
(e) The parties acknowledge that the agreements contained in this
Article 7 (including this Section 7.3) are an integral part of the transactions
contemplated by this Agreement and that, without these agreements, the parties
would not enter into this Agreement. Accordingly, if any party fails promptly to
pay the amounts required pursuant to Section 7.3 when due (including
circumstances where, in order to obtain such payment a party commences a suit
that results in a final nonappealable judgment against another party for such
amounts), the defaulting party shall pay to the other party (i) their costs and
expenses (including attorneys' fees) in connection with such suit and (ii)
interest on the amount that was determined to be due
36
and payable hereunder at the rate announced by Chase Manhattan Bank as its
"reference rate" in effect on the date such payment was required to be made.
SECTION 7.4. Amendment. This Agreement may be amended by action taken by
the Company, Parent and Acquisition at any time before or after approval of the
Merger by the stockholders of the Company but after any such approval no
amendment shall be made that requires the approval of such stockholders under
Applicable Law without such approval. This Agreement (including, subject to
Section 5.9, the Company Disclosure Schedule) may be amended only by an
instrument in writing signed on behalf of the parties hereto.
Section 7.5. Extension; Waiver. At any time prior to the Effective Time,
each party hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document, certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an instrument, in writing, signed on
behalf of such party. The failure of any party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
37
ARTICLE 8
MISCELLANEOUS
SECTION 8.1. Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement. This Section 8.1 shall not
limit any covenant or agreement of the parties hereto that by its terms requires
performance after the Effective Time.
SECTION 8.2. Entire Agreement; Assignment. This Agreement (including the
Company Disclosure Schedule and the Exhibits and Annex A, all of which are
incorporated by reference into this Agreement) and the Stock Option Agreement
(a) constitute the entire agreement between the parties hereto with respect to
the subject matter hereof and supersede all other prior and contemporaneous
agreements and understandings both written and oral between the parties with
respect to the subject matter hereof and (b) shall not be assigned by operation
of law or otherwise; provided, however, that Acquisition may assign any or all
of its rights and obligations under this Agreement to any wholly owned
subsidiary of Parent, but no such assignment shall relieve Acquisition of its
obligations hereunder if such assignee does not perform such obligations.
SECTION 8.3. Validity. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby and to
such end the provisions of this Agreement are agreed to be severable.
SECTION 8.4. Notices. All notices and other communications pursuant to this
Agreement shall be in writing and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the addresses set forth below or to such other address as the party
to whom notice is to be given may have furnished to the other parties hereto in
writing in accordance herewith. Any such notice or communication shall be deemed
to have been delivered and received (i) in the case of personal delivery, on the
date of such delivery, (ii) in the case of telecopier, on the date sent if
confirmation of receipt is received and such notice is also promptly mailed by
registered or certified mail (return receipt requested), (iii) in the case of a
nationally-recognized overnight courier in circumstances under which such
courier guarantees next business day delivery, on the next business day after
the date when sent and (iv) in the case of mailing, on the third business day
following that on which the piece of mail containing such communication is
posted:
if to Parent or Acquisition: Intel Corporation
2200 Mission College Boulevard
Santa Clara, California 95052
Telecopier: (408) 765-1859
Attention: General Counsel
and
Intel Corporation
2200 Mission College Boulevard
Santa Clara, California 95052
Telecopier: (408) 765-6038
Attention: Treasurer
with a copy to: Gibson, Dunn & Crutcher LLP
One Montgomery Street
Telesis Tower
San Francisco, California 94104
Telecopier: (415) 986-5309
Attention: Kenneth R. Lamb
and
Gregory J. Conklin
38
if to the Company to: Dialogic Corporation
1515 Route 10
Parsippany, New Jersey 07054
Telecopier: (973) 993-3060
Attention: General Counsel
with a copy to: Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07068
Telecopier: (973) 597-2351
Attention: Peter H. Ehrenberg
and: Winthrop, Stimson, Putnam & Roberts
One Battery Park
New York, New York 10004
Telecopier: (212) 858-1442
Attention: Stephen R. Rusmisel
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
SECTION 8.5. Governing Law and Venue; Waiver of Jury Trial.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS
SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW
OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES
THEREOF. The parties hereby irrevocably submit to the jurisdiction of the courts
of the State of Delaware and the Federal courts of the United States of America
located in the State of Delaware solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred to
in this Agreement, and in respect of the transactions contemplated hereby, and
hereby waive, and agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action, suit or proceeding may not
be brought or is not maintainable in said courts or that the venue thereof may
not be appropriate or that this Agreement or any such document may not be
enforced in or by such courts, and the parties hereto irrevocably agree that all
claims with respect to such action or proceeding shall be heard and determined
in such a Delaware State or Federal court. The parties hereby consent to and
grant any such court jurisdiction over the person of such parties and over the
subject matter of such dispute and agree that mailing of process or other papers
in connection with any such action or proceeding in the manner provided in
Section 8.4 or in such other manner as may be permitted by Applicable Law, shall
be valid and sufficient service thereof.
(b) The parties agree that irreparable damage would occur and that the
parties 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 an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Federal court located in the State of Delaware or in Delaware
state court, this being in addition to any other remedy to which they are
entitled at law or in equity.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS IN THIS SECTION 8.5.
39
SECTION 8.6. Descriptive Headings; Article and Section References. The
descriptive headings herein are inserted for convenience of reference only and
are not intended to be part of or to affect the meaning or interpretation of
this Agreement. All Article, Section, Subsection, Schedule, Exhibit and Annex
references in this Agreement are to Articles, Sections, subsections, Schedules,
Exhibits and Annexes, respectively, of or to this Agreement unless specified
otherwise.
SECTION 8.7. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns and, except as expressly provided herein, including in
Sections 5.7 and 8.2, nothing in this Agreement is intended to or shall confer
upon any other person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
SECTION 8.8. Certain Definitions. For the purposes of this Agreement the
term:
(a) "affiliate" means a person that, directly or indirectly, through one
or more intermediaries controls, is controlled by or is under common control
with the first-mentioned person.
(b) "Applicable Law" means, with respect to any person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule, regulation,
order, writ, injunction, judgment, decree or other requirement of any
Governmental Entity existing as of the date hereof or as of the Effective Time
applicable to such Person or any of its respective properties, assets, officers,
directors, employees, consultants or agents.
(c) "business day" means any day other than a day on which the Nasdaq
National Market is closed.
(d) "capital stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof.
(e) "Company Plans" means the Assumed Option Plans, together with the
Company's 1993 Non-Employee Director Stock Option Plan, as amended and restated
through March 29, 1997, Profit Sharing Plan and 401(k) Plan and the Dialogic
Corporation 1997 Director Stock Election/Deferral Plan.
(f) "knowledge" or "known" means, with respect to any matter in
question, the actual knowledge of such matter of any member of the Board of
Directors or any officer or employee of the Company or any of its subsidiaries,
or Parent or any of its subsidiaries, as the case may be, and each of such
persons shall be deemed to have actual knowledge of all books and records in the
possession or control of the Company or any of its subsidiaries, or Parent or
any of its subsidiaries, as the case may be, and all books and records to which
he or she has reasonable access.
(g) "include" or "including" means "include, without limitation" or
"including, without limitation," as the case may be, and the language following
"include" or "including" shall not be deemed to set forth an exhaustive list.
(h) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity including any Governmental Entity.
(i) "Stock Option Agreement" means that certain Stock Option Agreement
of even date herewith between the Company and Parent.
(j) "subsidiary" or "subsidiaries" of the Company, Parent, the Surviving
Corporation or any other person means any corporation, partnership, limited
liability company, association, trust, unincorporated association or other legal
entity of which the Company, Parent, the Surviving Corporation or any such other
person, as the case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, 50% or more of the capital stock the
holders of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
SECTION 8.9. Personal Liability. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect stockholder of the Company or Parent or Acquisition or
any officer, director, employee, agent, representative or investor of any party
hereto.
40
SECTION 8.10. Specific Performance. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Offer or the Merger, will cause irreparable
injury to the other parties, for which damages, even if available, will not be
an adequate remedy. Accordingly, each party hereby consents to the issuance of
injunctive relief by any court of competent jurisdiction to compel performance
of such party's obligations and to the granting by any court of the remedy of
specific performance of its obligations hereunder; provided, however, that if a
party hereto is entitled to receive any payment or reimbursement of expenses
pursuant to Section 7.3(a), (b) or (c), it shall not be entitled to specific
performance to compel the consummation of the Offer or the Merger.
SECTION 8.11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
41
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
DIALOGIC CORPORATION, a New Jersey
corporation
By: /s/ HOWARD BUBB
--------------------------------------
Name: Howard Bubb
Title: President
Date: May 31, 1999
INTEL CORPORATION, a Delaware
corporation
By: /s/ ARVIND SODHANI
--------------------------------------
Name: Arvind Sodhani
Title: Treasurer
Date: May 31, 1999
INTEL LMH ACQUISITION CORPORATION, a
New Jersey corporation
By: /s/ ARVIND SODHANI
--------------------------------------
Name: Arvind Sodhani
Title: Treasurer
Date: May 31, 1999
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER BY AND AMONG DIALOGIC
CORPORATION, INTEL CORPORATION AND INTEL LMH ACQUISITION CORPORATION]
42
ANNEX A
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer or this Agreement, and
subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) relating to Acquisition's obligation to pay for or return tendered
shares after termination of the Offer, Acquisition shall not be required to
accept for payment or pay for any Shares tendered pursuant to the Offer, may
delay the acceptance for payment of any Shares pursuant to Section 1.1(b) of
this Agreement, may extend the Offer by one or more times, and may terminate the
Offer at any time after September 15, 1999 if (i) less than a majority of the
outstanding Shares on a fully-diluted basis (including for purposes of such
calculation all Shares issuable upon exercise of all vested Company Stock
Options and unvested Company Stock Options that vest prior to the Final Date,
but excluding any Shares held by the Company or any of its subsidiaries) has
been tendered pursuant to the Offer by the expiration of the Offer and not
withdrawn; (ii) any applicable waiting period under the HSR Act has not expired
or terminated; (iii) all necessary consents and approvals from all Governmental
Entities shall not have been obtained on terms and conditions reasonably
satisfactory to Parent; or (iv) at any time after the date of this Agreement,
and before acceptance for payment of any Shares, any of the following events
shall occur and be continuing:
(a) (1) there shall have been any action taken, or any statute, rule,
regulation, judgment, order or injunction promulgated, entered, enforced,
enacted, issued or deemed applicable to the Offer or the Merger by any domestic
or foreign court or other Governmental Entity which directly or indirectly (i)
prohibits, or makes illegal, the acceptance for payment, payment for or purchase
of Shares or the consummation of the Offer, the Merger or the other transactions
contemplated by this Agreement, (ii) renders Acquisition unable to accept for
payment, pay for or purchase some or all of the Shares, (iii) imposes material
limitations on the ability of Parent effectively to exercise full rights of
ownership of the Shares, including the right to vote the Shares purchased by it
on all matters properly presented to the Company's stockholders, or (iv)
otherwise has a Material Adverse Effect on the Company; or (2) in connection
with the compliance by Parent or Acquisition with any Applicable Law (including
the HSR Act) or obtaining the consent or approval of any Governmental Entity
whose consent or approval may be required to consummate the transactions
contemplated by this Agreement, Parent shall be (i) required, or be construed to
be required, to sell or divest any assets or business or to restrict any
business operations in order to obtain the consent or successful termination of
any review of any such Governmental Entity regarding the transactions
contemplated hereby or (ii) prohibited from owning, or any material limitation
shall be imposed on Parent's ownership of, any material portion of the Company's
business or assets.
(b) (i) the representations and warranties of the Company contained in
this Agreement shall not be true and correct (except to the extent that the
aggregate of all breaches thereof would not have a Material Adverse Effect on
the Company) at the date hereof and as of the consummation of the Offer with the
same effect as if made at and as of the consummation of the Offer (except to the
extent such representations specifically relate to an earlier date, in which
case such representations shall be true and correct as of such earlier date, and
in any event, subject to the foregoing Material Adverse Effect qualification),
(ii) the Company shall have failed to perform in all material respects its
covenants and obligations contained in this Agreement , or (iii) there shall
have occurred since March 31, 1999 any events or changes which constitute a
Material Adverse Effect on the Company;
(c) it shall have been publicly disclosed or Parent shall have otherwise
learned that (i) any person or "group" (as defined in Section l3(d)(3) of the
Exchange Act) shall have acquired or entered into a definitive agreement or
agreement in principle to acquire beneficial ownership of more than 20% of the
Shares or any other class of capital stock of the Company, through the
acquisition of stock, the formation of a group or otherwise, or shall have been
granted any option, right or warrant, conditional or otherwise, to acquire
beneficial ownership of more than 20% of the Shares and (ii) such person or
group shall not have tendered such Shares pursuant to the Offer;
(d) the Company Board shall have withdrawn, or modified or changed in a
manner adverse to Parent and Acquisition (including by amendment of the Schedule
14D-9), its recommendation of the Offer,
this Agreement or the Merger, or recommended another proposal or offer, or the
Company Board, shall have resolved to do any of the foregoing;
(e) this Agreement shall have terminated in accordance with its terms;
or
(f) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange or the
Nasdaq National Market, for a period in excess of twenty-four (24) hours, (ii)
the commencement of a war, armed hostilities or other national or international
calamity directly or indirectly involving the United States that constitutes a
Material Adverse Effect on the Company or materially adversely affects or delays
the consummation of the Offer, (iii) the average of the closing prices of the
Standard & Poor's 500 Index for any twenty (20) consecutive trading days shall
be twenty-five percent (25%) or more below the closing price of such index on
any trading day on or after the date hereof that precedes the commencement of
such 20-trading day period, or (iv) in the case of any of the foregoing existing
at the time of the commencement of the Offer, a material acceleration or
worsening thereof;
which in the good faith judgment of Parent, in any such case, and regardless of
the circumstances (including any action or inaction by Parent) giving rise to
such condition makes it inadvisable to proceed with the Offer or the acceptance
for payment of or payment for the Shares.
The foregoing conditions (other than the Minimum Condition) are for the sole
benefit of Parent and Acquisition and may be waived by Parent and Acquisition,
in whole or in part at any time and from time to time, in the sole discretion of
Parent and Acquisition. The failure by Parent and Acquisition at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
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