AGREEMENT AND PLAN OF MERGER
BY AND AMONG
WHITTMAN-HART, INC.
UNIWHALE, INC.,
AND
USWEB CORPORATION
DATED AS OF DECEMBER 12, 1999
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TABLE OF CONTENTS
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ARTICLE I The Merger; Effective Time; Closing....................................... 1
1.1 The Merger............................................................. 1
1.2 Effective Time......................................................... 2
1.3 Closing................................................................ 2
1.4 Effect of the Merger................................................... 2
ARTICLE II Certificate of Incorporation and By-Laws of the Surviving Corporation.... 2
2.1 Certificate of Incorporation; Name..................................... 2
2.2 By-Laws................................................................ 2
ARTICLE III Directors and Officers of the Surviving Corporation..................... 3
3.1 Directors.............................................................. 3
3.2 Officers............................................................... 3
ARTICLE IV Merger Consideration; Conversion or Cancellation of Shares in the Merger. 3
4.1 Share Consideration for the Merger; Conversion or
Cancellation of Shares in the Merger................................... 3
4.2 Payment for Shares in the Merger....................................... 4
4.3 Cash For Fractional Parent Shares...................................... 5
4.4 Transfer of Shares after the Effective Time............................ 6
ARTICLE V Representations and Warranties............................................ 6
5.1 Representations and Warranties of Parent and Merger Sub................ 6
5.2 Representations and Warranties of the Company.......................... 7
ARTICLE VI Additional Covenants and Agreements...................................... 7
6.1 Conduct of Business.................................................... 7
6.2 No Solicitation by the Company......................................... 7
6.3 No Solicitation by Parent.............................................. 7
6.4 Meeting of Stockholders................................................ 7
6.5 Registration Statement................................................. 7
6.6 Reasonable Efforts..................................................... 7
6.7 Access to Information.................................................. 7
6.8 Publicity.............................................................. 7
6.9 Indemnification of Directors and Officers.............................. 7
6.10 Affiliates of the Company and Parent................................... 7
6.11 Maintenance of Insurance............................................... 7
6.12 Representations and Warranties......................................... 7
6.13 Filings; Other Action.................................................. 7
6.14 Tax-Free Reorganization Treatment...................................... 7
6.15 Company Options; Company ESPPs......................................... 7
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6.16 Stockholders Agreements................................................ 48
6.17 Board Composition...................................................... 48
6.18 Officers of Combined Company........................................... 49
6.19 Change of Name......................................................... 49
6.20 Contemplated Termination of 401(k) Plan(s)............................. 49
6.21 Crediting Service and Providing Other Benefits......................... 49
6.22 Earn-Out Shares........................................................ 50
6.23 Exemption from Liability Under Section 16(b)........................... 50
ARTICLE VII Conditions.............................................................. 51
7.1 Conditions to Each Party's Obligations................................. 51
7.2 Conditions to the Obligations of the Company........................... 51
7.3 Conditions to the Obligations of Parent................................ 52
ARTICLE VIII Termination............................................................ 53
8.1 Termination by Mutual Consent.......................................... 53
8.2 Termination by either the Company or Parent............................ 53
8.3 Termination by the Company............................................. 54
8.4 Termination by Parent.................................................. 55
8.5 Effect of Termination; Termination Fee................................. 55
ARTICLE IX Miscellaneous and General................................................ 57
9.1 Payment of Expenses.................................................... 57
9.2 Non-Survival of Representations and Warranties......................... 57
9.3 Modification or Amendment.............................................. 57
9.4 Waiver of Conditions................................................... 58
9.5 Counterparts........................................................... 58
9.6 Governing Law.......................................................... 58
9.7 Notices................................................................ 58
9.8 Entire Agreement; Assignment........................................... 59
9.9 Parties in Interest.................................................... 59
9.10 Certain Definitions.................................................... 59
9.11 Obligation of the Company.............................................. 61
9.12 Severability........................................................... 61
9.13 Specific Performance................................................... 61
9.14 Recovery of Attorney's Fees............................................ 61
9.15 Captions............................................................... 61
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DEFINED TERMS
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Agreement.............................................. Introduction
Authorized Representatives............................. Section 6.6
Certificate of Merger.................................. Section 1.2
Certificates........................................... Section 4.2(b)
Closing................................................ Section 1.3
Closing Date........................................... Section 1.3
COBRA.................................................. Section 5.1(m)(iii)(6)
Code................................................... Recitals
Codification of Financing Reporting Policies........... Section 6.9
Company................................................ Introduction
Company Acquisition Agreement.......................... Section 6.2(b)
Company Acquisition Proposal........................... Section 6.2(a)
Company Affiliate...................................... Section 6.10
Company Affiliate Letter............................... Section 6.10
Company Contract....................................... Section 5.2(o)
Company Directors...................................... Section 6.18
Company Disclosure Schedule............................ Section 5.2
Company ESPPs.......................................... Section 6.16(b)
Company Financial Statements........................... Section 5.2(h)(ii)
Company Insiders....................................... Section 6.23(c)
Company Intellectual Property Rights................... Section 5.2(n)(i)
Company International Employee Plans................... Section 5.2(m)(iii)(13)
Company Key Employees.................................. Section 5.2(o)(ii)
Company Option......................................... Section 4.1(c)
Company Option Plans................................... Section 4.1(c)
Company SEC Reports.................................... Section 5.2(h)(i)
Company Scheduled Plans................................ Section 5.2(m)(i)
Company Shares......................................... Section 4.1(a)
Confidentiality Agreement.............................. Section 6.6
DGCL................................................... Section 1.1
Effective Time......................................... Section 1.2
Environmental Costs and Liabilities.................... Section 5.1(s)
Environmental Laws..................................... Section 5.1(s)
ERISA.................................................. Section 9.10(a)
Exchange Act........................................... Section 5.1(f)
Exchange Agent......................................... Section 4.2(a)
Exchange Ratio......................................... Section 4.1(a)
Fractional Securities Fund............................. Section 4.3
Governmental Entity.................................... Section 9.10(b)
Hazardous Material..................................... Section 5.1(s)
HSR Act................................................ Section 5.1(f)
Indemnified Parties.................................... Section 6.8(a)
Joint Proxy Statement.................................. Section 6.4
Knowledge.............................................. Section 9.10(c)
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KPMG................................................... Section 5.1(p)
Malfunction............................................ Section 9.10(d)
Material Adverse Effect................................ Section 9.10(e)
Material Adverse Effect Exception...................... Section 9.10(f)
Merger................................................. Recitals
Merger Sub............................................. Introduction
NNM.................................................... Section 4.3
Parent................................................. Introduction
Parent Acquisition Proposal............................ Section 6.3(a)
Parent Contract........................................ Section 5.1(o)
Parent Superior Proposal............................... Section 6.3(a)
Parent Directors....................................... Section 6.18
Parent Disclosure Schedule............................. Section 5.1
Parent Financial Statements............................ Section 5.1(h)(ii)
Parent Intellectual Property Rights.................... Section 5.1(n)(i)
Parent International Employee Plans.................... Section 5.1(m)(iii)(13)
Parent Key Employees................................... Section 5.1(o)(iv)
Parent SEC Reports..................................... Section 5.1(h)(i)
Parent Scheduled Plans................................. Section 5.1(m)(i)
Parent Shares.......................................... Section 4.1(a)
Parties................................................ Introduction
PBGC................................................... Section 5.1(m)(iii)(7)
Person................................................. Section 9.10(g)
Plan Affiliate......................................... Section 5.1(m)(v)
Requisite Stockholder Approval......................... Section 6.3
Restraints............................................. Section 7.1(c)
Returns................................................ Section 5.1(l)(i)
S-4 Registration Statement............................. Section 6.4
SEC.................................................... Section 5.1(h)(i)
Section 16 Information................................. Section 6.23(b)
Securities Act......................................... Section 5.1(f)
Share Consideration.................................... Section 4.2(a)
Significant Tax Agreement.............................. Section 9.10(h)
Software............................................... Section 9.10(i)
Stock Merger Exchange Fund............................. Section 4.2(a)
Stockholder Meetings................................... Section 6.4
Stockholders Agreement................................. Recitals
Subsidiary............................................. Section 9.10(j)
Substitute Option...................................... Section 4.1(c)
Subsidiary Shares...................................... Section 6.22
Surviving Corporation.................................. Section 1.1
Tax.................................................... Section 9.10(k)
Taxes.................................................. Section 9.10(k)
Termination Fee........................................ Section 8.5(b)
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United States Real Property Holdings Corporation....... Section 5.1(l)(ix)
Voting Stockholder..................................... Recitals
Voting Stockholders.................................... Recitals
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EXHIBITS
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Stockholders Agreement (Company)........................ Exhibit A-1
Stockholders Agreement (Parent)......................... Exhibit A-2
Certificate of Merger................................... Exhibit B
Company Affiliate Letter................................ Exhibit C
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of December 12,
1999, by and among WHITTMAN-HART, INC., a Delaware corporation ("Parent"),
UNIWHALE, INC., a Delaware corporation and a direct wholly-owned subsidiary of
Parent ("Merger Sub"); and USWEB CORPORATION, a Delaware corporation (the
"Company"). Parent, Merger Sub and the Company are referred to collectively
herein as the "Parties".
RECITALS
WHEREAS, the Board of Directors of each of Parent, Merger Sub and the
Company have determined that it is in the best interests of each corporation and
their respective stockholders that the Company and Parent enter into a strategic
"merger of equals" business combination by means of the merger of Merger Sub
with and into the Company (the "Merger") and, in furtherance thereof, have
approved the Merger and declared the Merger advisable;
WHEREAS, pursuant to the Merger, the outstanding shares of common stock of
the Company shall be converted into shares of common stock of Parent at the rate
determined herein;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, it is intended that the Merger shall be treated for accounting
purposes as a purchase;
WHEREAS, concurrently with the execution hereof, certain holders (each a
"Voting Stockholder" and collectively the "Voting Stockholders") of Company
Shares and of Parent Shares are entering into a stockholder voting agreement, in
each case in the forms attached as Exhibit A-1 and A-2 hereto (each, a
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"Stockholders Agreement").
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, the Parties hereby agree as follows:
ARTICLE I
The Merger; Effective Time; Closing
1.1 The Merger. Upon the terms and subject to the conditions set forth in
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this Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL"), at the Effective Time, Merger Sub shall be merged with and into the
Company, the separate corporate existence of Merger Sub shall thereupon cease
and the Company shall be the successor or surviving corporation. The Company, as
the surviving corporation after the consummation of the Merger, is sometimes
hereinafter referred to as the "Surviving Corporation."
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1.2 Effective Time. Subject to the provisions of this Agreement, the
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Parties shall cause the Merger to be consummated by filing the certificate of
merger of Merger Sub and the Company (the "Certificate of Merger") with the
Secretary of State of the State of Delaware in such form as required by, and
executed in accordance with, the relevant provisions of the DGCL as soon as
practicable on or before the Closing Date. The Merger shall become effective
upon such filing or at such time thereafter as is provided in the Certificate of
Merger (the "Effective Time"). The Certificate of Merger is attached hereto as
Exhibit B.
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1.3 Closing. Unless this Agreement shall have been terminated and the
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transactions herein contemplated shall have been abandoned pursuant to Article
VIII, the closing of the Merger (the "Closing") shall take place at 10:00 a.m.,
local time, at the offices of counsel for Parent, on the second business day
after all of the conditions to the obligations of the Parties to consummate the
Merger as set forth in Article VII have been satisfied or waived, or such other
date, time or place as is agreed to in writing by the Parties (the "Closing
Date").
1.4 Effect of the Merger. At the Effective Time, the effect of
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the Merger shall be as provided in this Agreement and the applicable provisions
of the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
ARTICLE II
Certificate of Incorporation and By-Laws of the Surviving Corporation
2.1 Certificate of Incorporation; Name. At the Effective Time, the
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Certificate of Incorporation of the Company immediately prior to the Effective
Time shall remain the Certificate of Incorporation of the Surviving Corporation,
and the name of the Surviving Corporation shall be the Company's name.
2.2 By-Laws. At the Effective Time, the by-laws of the Company in effect
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immediately prior to the Effective Time shall remain the by-laws of the
Surviving Corporation.
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ARTICLE III
Directors and Officers of the Surviving Corporation
3.1 Directors. The directors of Merger Sub shall be the initial directors
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of the Surviving Corporation, until their respective successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Articles of Incorporation
and By-Laws.
3.2 Officers. The officers of Merger Sub shall be the initial officers
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of the Surviving Corporation, until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Articles of Incorporation and By-
Laws.
ARTICLE IV
Merger Consideration; Conversion or Cancellation of Shares in the Merger
4.1 Share Consideration for the Merger; Conversion or Cancellation of
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Shares in the Merger. At the Effective Time, the manner of converting or
--------------------
canceling shares of the Company and Parent shall be as follows:
(a) Conversion of Company Stock. Each share of common stock, $0.001
---------------------------
par value ("Company Shares"), of the Company issued and outstanding immediately
prior to the Effective Time (excluding any Company Shares described in Section
4.1(d)), shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted automatically into the right to receive 0.865
shares of common stock, $0.001 par value, of Parent (collectively, "Parent
Shares"). All Company Shares to be converted into Parent Shares pursuant to this
Section 4.1(a) shall, by virtue of the Merger and without any action on the part
of the holders thereof, cease to be outstanding, be canceled and cease to exist,
and each holder of a certificate representing any such Company Shares shall
thereafter cease to have any rights with respect to such Company Shares, except
the right to receive for each of the Company Shares, upon the surrender of such
certificate in accordance with Section 4.2, the number of Parent Shares
specified above and cash in lieu of fractional shares. The ratio of Company
Shares per share of Parent Shares is sometimes hereinafter referred to as the
"Exchange Ratio."
(b) Stock of Merger Sub. Each share of common stock, $0.01 par value,
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of Merger Sub issued and outstanding immediately prior to the Effective Time,
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted automatically into and exchanged for one (1) validly
issued, fully paid and nonassessable share of common stock, $0.001 par value, of
the Surviving Corporation. Each stock certificate representing any shares of
Merger Sub shall continue to represent ownership of such shares of capital stock
of the Surviving Corporation.
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(c) Outstanding Options and Warrants. Each outstanding option or
--------------------------------
warrant to purchase Company Shares (each, a "Company Option") shall be assumed
by Parent (in accordance with the further provisions contained in Section 6.17)
and each such assumed option shall be converted into and represent an option to
purchase the number of Parent Shares (a "Substitute Option") (rounded down to
the nearest full share) determined by multiplying (i) the number of Company
Shares subject to such Company Option immediately prior to the Effective Time by
(ii) the Exchange Ratio, at an exercise price per share of Parent Shares
(rounded up to the nearest tenth of a cent) equal to the exercise price per
share of Company Shares immediately prior to the Effective Time divided by the
Exchange Ratio. It is the intent of the parties that the Company Options assumed
by Parent shall qualify following the Effective Time as "incentive stock
options" as defined in Section 422 of the Code to the extent such Company
Options qualified as incentive stock options immediately prior to the Effective
Time and the provisions of this Section 4.1(c) shall be applied consistent with
such intent. Parent will reserve a sufficient number of Parent Shares for
issuance under this Section 4.1(c).
(d) Cancellation of Parent Owned and Treasury Stock. All of the
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Company Shares that are owned by Parent, any direct or indirect wholly-owned
subsidiary of Parent or by the Company as treasury stock shall automatically
cease to be outstanding, shall be canceled and shall cease to exist and no
Parent Shares shall be delivered in exchange therefor.
4.2 Payment for Shares in the Merger. The manner of making payment for
--------------------------------
Shares in the Merger shall be as follows:
(a) Exchange Agent. On or prior to the Closing Date, Parent shall make
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available to EquiServe, or other entity mutually agreed upon by the Parties (the
"Exchange Agent"), for the benefit of the holders of Company Shares, a
sufficient number of certificates representing the Parent Shares required to
effect the delivery of the aggregate consideration in Parent Shares and cash for
the Fractional Securities Fund required to be issued pursuant to Section 4.1
(collectively, the "Share Consideration" and the certificates representing the
Parent Shares comprising such aggregate Share Consideration being referred to
hereinafter as the "Stock Merger Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, deliver the Share Consideration out of the
Stock Merger Exchange Fund and the Fractional Securities Fund. The Stock Merger
Exchange Fund and the Fractional Securities Fund shall not be used for any other
purpose than as set forth herein.
(b) Exchange Procedures. Promptly after the Effective Time, the
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Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Company Shares (the "Certificates") (i) a form of letter of
transmittal, in a form reasonably satisfactory to the Parties (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent) and (ii) instructions for use in effecting the surrender of the
Certificates for payment therefor. Upon surrender of Certificates for
cancellation to the Exchange Agent, together with such letter of transmittal
duly executed and any other required documents, the holder of such Certificates
shall be entitled to receive for each of the Company Shares represented by such
Certificates the Share Consideration, without interest, allocable to such
Certificates and the
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Certificates so surrendered shall forthwith be canceled. Until so surrendered,
such Certificates shall represent solely the right to receive the Share
Consideration allocable to such Certificates.
(c) Distributions with respect to Unexchanged Shares. No dividends or
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other distributions that are declared after the Effective Time on Parent Shares
and payable to the holders of record thereof after the Effective Time will be
paid to Persons entitled by reason of the Merger to receive Parent Shares until
such Persons surrender their Certificates as provided above. Upon such
surrender, there shall be paid to the Person in whose name the Parent Shares are
issued any dividends or other distributions having a record date after the
Effective Time and payable with respect to such Parent Shares between the
Effective Time and the time of such surrender. After such surrender there shall
be paid to the Person in whose name the Parent Shares are issued any dividends
or other distributions on such Parent Shares which shall have a record date
after the Effective Time. In no event shall the Persons entitled to receive such
dividends or other distributions be entitled to receive interest on such
dividends or other distributions.
(d) Transfers of Ownership. If any certificate representing Parent
----------------------
Shares is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of such
exchange that the Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and that the Person requesting such
exchange shall pay to the Exchange Agent any transfer or other taxes required by
reason of the issuance of certificates for such Parent Shares in a name other
than that of the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not applicable.
(e) No Liability. Neither the Exchange Agent nor any of the Parties
------------
shall be liable to a holder of Company Shares for any Parent Shares or dividends
thereon, or, in accordance with Section 4.3, cash in lieu of fractional Parent
Shares, delivered to a public official pursuant to applicable escheat law. The
Exchange Agent shall not be entitled to vote or exercise any rights of ownership
with respect to the Parent Shares held by it from time to time hereunder, except
that it shall receive and hold all dividends or other distributions paid or
distributed with respect to such Parent Shares for the account of the Persons
entitled thereto.
(f) Termination of Funds. Subject to applicable law, any portion of
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the Stock Merger Exchange Fund and the Fractional Securities Fund which remains
unclaimed by the former stockholders of the Company for one (1) year after the
Effective Time shall be delivered to Parent, upon demand of Parent, and any
former stockholder of the Company shall thereafter look only to Parent for
payment of their applicable claim for the Share Consideration for their Company
Shares.
4.3 Cash For Fractional Parent Shares. No fractional Parent Shares shall
---------------------------------
be issued in the Merger. Each holder of Parent Shares shall be entitled to
receive in lieu of any fractional Parent Shares to which such holder otherwise
would have been entitled pursuant to Section 4.2 (after taking into account all
Parent Shares then held of record by such holder) a cash payment in an amount
equal to the product of (i) the fractional interest of a Parent Share to which
such holder otherwise would have been entitled and (ii) the closing price of a
Parent Share on the NASDAQ National Market ("NNM") on the trading day
immediately prior to the Effective Time (the cash comprising such
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aggregate payments in lieu of fractional Parent Shares being hereinafter
referred to as the "Fractional Securities Fund").
4.4 Transfer of Shares after the Effective Time. No transfers of Company
--------------------------------------------
Shares shall be made on the stock transfer books of the Company after the close
of business on the day prior to the date of the Effective Time.
ARTICLE V
Representations and Warranties
5.1 Representations and Warranties of Parent and Merger Sub. Parent and
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Merger Sub hereby represent and warrant to the Company that the statements
contained in this Section 5.1 are true and correct, except to the extent
specifically set forth on the disclosure schedule previously delivered by Parent
to the Company (the "Parent Disclosure Schedule"). The Parent Disclosure
Schedule shall be arranged in sections and paragraphs corresponding to the
letter and numbered paragraphs contained in this Section 5.1, and the disclosure
in any paragraph shall qualify only the corresponding paragraph in this Section
5.1 or other paragraphs or sections to which it is clearly apparent (from a
plain reading of the disclosure) that such disclosure relates.
(a) Corporate Organization and Qualification. Each of Parent and its
----------------------------------------
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of incorporation and is qualified
and in good standing as a foreign corporation in each jurisdiction where the
properties owned, leased or operated, or the business conducted, by it require
such qualification, except where failure to so qualify or be in good standing as
a foreign corporation would not have a Material Adverse Effect on Parent. Each
of Parent and its subsidiaries has all requisite power and authority (corporate
or otherwise) to own its properties and to carry on its business as it is now
being conducted. All of the subsidiaries of Parent are set forth in Section
5.1(a) of the Parent Disclosure Schedule. Parent has heretofore made available
to the Company complete and correct copies of its Certificate of Incorporation
and Bylaws and the charter documents of its subsidiaries, each as amended.
Merger Sub is a direct, wholly-owned subsidiary of Parent, was formed solely for
the purpose of engaging in the transactions contemplated hereby, has engaged in
no other business activities and has conducted its operations only as
contemplated hereby.
(b) Capitalization. The authorized capital stock of Parent consists of (i)
--------------
75,000,000 shares of common stock, $0.001 par value per share, of which
61,784,097 shares were issued and outstanding on December 9, 1999 and (ii)
3,000,000 shares of preferred stock, $0.001 par value per share, none of which
are issued or outstanding. All of the outstanding shares of capital stock of
Parent and its subsidiaries have been duly authorized and validly issued and are
fully paid and nonassessable. Parent has no outstanding stock appreciation
rights, phantom stock or similar rights. No Parent Shares are owned by any
subsidiary of Parent. All outstanding shares of capital stock or other equity
interests of the subsidiaries of Parent are owned by Parent or a direct or
indirect wholly-owned subsidiary of Parent, free and clear of all liens,
pledges, charges, encumbrances, claims and options of any nature. Except for
options to purchase 16,831,629 Parent Shares as of December 9, 1999 under the
1995 Incentive Stock Plan (the "Parent Option Plans") and rights under
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Parent Employee Stock Purchase Plan, there are no outstanding or authorized
options, warrants, calls, rights (including preemptive rights), commitments or
any other agreements of any character which Parent or any of its subsidiaries is
a party to, or may be bound by, requiring it to issue, transfer, grant, sell,
purchase, redeem or acquire any shares of capital stock or any securities or
rights convertible into, exchangeable for, or evidencing the right to subscribe
for, any shares of capital stock of Parent or any of its subsidiaries. There are
not as of the date hereof and there will not be at the Effective Time any
stockholder agreements, voting trusts or other agreements or understandings to
which Parent is a party or to which it is bound relating to the voting of any
shares of the capital stock of Parent.
(c) Fairness Opinion. The Board of Directors of Parent has received
----------------
an opinion in writing from Credit Suisse First Boston Corporation to the effect
that as of the date hereof and based upon and subject to the matters stated
therein, the Exchange Ratio is fair to Parent from a financial point of view. As
of the date hereof, such opinion has not been withdrawn, revoked or modified.
(d) Authority Relative to this Agreement. The Board of Directors of
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Merger Sub has declared the Merger advisable and Merger Sub has the requisite
corporate power and authority to approve, authorize, execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The Board of
Directors of Parent has declared the issuance of Parent Shares advisable and
Parent has the requisite corporate power and authority to approve, authorize,
execute and deliver this Agreement and, subject to the approval by the
stockholders of Parent of the amendment to Parent's Certificate of Incorporation
to increase Parent's authorized capital stock in order to allow for the issuance
of Parent Shares by virtue of the Merger and the approval of the issuance of
Parent Shares by the stockholders of Parent in accordance with the NNM listing
requirements, to consummate the transactions contemplated hereby. This Agreement
and the consummation by Parent of the transactions contemplated hereby have been
duly and validly authorized by the Boards of Directors of Parent and Merger Sub
and no other corporate proceedings on the part of Parent or Merger Sub
(including, in the case of Merger Sub, all stockholder action by Parent as its
sole stockholder) are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than the approval by the stockholders of
Parent of the amendment to Parent's Certificate of Incorporation to increase
Parent's authorized capital stock in order to allow for the issuance of Parent
Shares by virtue of the Merger and the approval of the issuance of Parent Shares
by the stockholders of Parent in accordance with the NNM listing requirements).
This Agreement has been duly and validly executed and delivered by Parent and
Merger Sub and, assuming this Agreement constitutes the valid and binding
agreement of the Company, constitutes the valid and binding agreement of Parent
and Merger Sub, enforceable against Parent and Merger Sub in accordance with its
terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting creditors'
rights and to general principles of equity .
(e) Present Compliance with Obligations and Laws. Neither Parent nor
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any of its subsidiaries is: (i) in violation of its Certificate of Incorporation
or Bylaws or similar documents; (ii) in default in the performance of any
obligation, agreement or condition of any debt instrument which (with or without
the passage of time or the giving of notice, or both) affords to any Person the
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right to accelerate any indebtedness or terminate any right; (iii) in default
under or breach of (with or without the passage of time or the giving of notice)
any other contract to which it is a party or by which it or its assets are
bound; or (iv) in violation of any law, regulation, administrative order or
judicial order, decree or judgment (domestic or foreign) applicable to it or its
business or assets, except where any violation, default or breach under items
(ii), (iii), or (iv) would not, individually or in the aggregate, have a
Material Adverse Effect on Parent.
(f) Consents and Approvals; No Violation. Neither the execution and
------------------------------------
delivery of this Agreement nor the consummation by Parent of the transactions
contemplated hereby will (i) conflict with or result in any breach of any
provision of the respective Certificate of Incorporation (or other similar
documents) or Bylaws (or other similar documents) of Parent or any of its
subsidiaries; (ii) require any consent, approval, authorization or permit of, or
registration or filing with or notification to, any governmental or regulatory
authority, except (A) in connection with the applicable requirements, if any, of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (B) pursuant to the applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), and the rules and regulations
promulgated thereunder, and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated thereunder, (C) the
filing of the Certificate of Merger pursuant to the DGCL and appropriate
documents with the relevant authorities of other states in which Parent is
authorized to do business, (D) as may be required by any applicable state
securities laws, (E) the consents, approvals, orders, authorizations,
registrations, declarations and filings required under the antitrust laws of
foreign countries, as set forth in Section 5.1(f) of the Parent Disclosure
Schedule, or (F) where the failure to obtain such consent, approval,
authorization or permit, or to make such filing or notification, would not in
the aggregate have a Material Adverse Effect on Parent or adversely affect the
ability of Parent to consummate the transactions contemplated hereby; (iii)
result in a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration or lien or other charge or encumbrance) under any
of the terms, conditions or provisions of any indenture, note, license, lease,
agreement or other instrument or obligation to which Parent or any of its
subsidiaries is a party or by which any of their assets may be bound, except for
such violations, breaches and defaults (or rights of termination, cancellation
or acceleration or lien or other charge or encumbrance) as to which requisite
waivers or consents have been obtained or which, in the aggregate, would not
have a Material Adverse Effect on Parent or adversely affect the ability of
Parent to consummate the transactions contemplated hereby; (iv) cause the
suspension or revocation of any authorizations, consents, approvals or licenses
currently in effect which would have a Material Adverse Effect on Parent; or (v)
assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in this Section 5.1(f) are duly and timely obtained or
made and the approval by the stockholders of Parent of the amendment to Parent's
Certificate of Incorporation to increase parent's authorized capital stock in
order to allow for the issuance of Parent Shares by virtue of the Merger and
approval of the issuance of the Parent Shares by the stockholders of Parent in
accordance with the NNM listing requirements have been obtained, violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Parent or any of its subsidiaries or to any of their respective assets, except
for violations which would not in the aggregate have a Material Adverse Effect
on Parent or adversely affect the ability of Parent to consummate the
transactions contemplated hereby.
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<PAGE>
(g) Litigation. There are no actions, suits, claims, investigations
----------
or proceedings pending or, to the knowledge of Parent, threatened against Parent
or any of its subsidiaries that, alone or in the aggregate would be reasonably
likely to result in obligations or liabilities of Parent or any of its
subsidiaries that, alone or in the aggregate, would have a Material Adverse
Effect on Parent or a material adverse effect on the parties' ability to
consummate the transactions contemplated by this Agreement. Neither Parent nor
any of its subsidiaries is subject to any outstanding order, writ, injunction or
decree which (i) has or may have the effect of prohibiting or impairing any
business practice of Parent or any of its subsidiaries, any acquisition of
property (tangible or intangible) by Parent or any of its subsidiaries, the
conduct of the business by Parent or any of its subsidiaries, or Parent's
ability to perform its obligations under this Agreement or (ii) insofar as can
be reasonably foreseen, individually or in the aggregate, would have a Material
Adverse Effect on Parent.
(h) SEC Reports; Financial Statements.
---------------------------------
(i) Since January 1, 1997, Parent has filed all forms, reports
and documents with the Securities and Exchange Commission (the "SEC") required
to be filed by it pursuant to the federal securities laws and the SEC rules and
regulations thereunder, all of which complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act and the rules
and regulations promulgated thereunder (collectively, the "Parent SEC Reports").
None of the Parent SEC Reports, including, without limitation, any financial
statements or schedules included therein, at the time filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of Parent's subsidiaries is required to file any
forms, reports or other documents with the SEC.
(ii) The consolidated balance sheets and the related consolidated
statements of income, stockholders' equity (deficit) and cash flows (including
the related notes thereto) of Parent included in the Parent SEC Reports
(collectively, "Parent Financial Statements") comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles applied on a basis consistent
throughout the periods involved (except as otherwise noted therein or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q under the Exchange Act), and present fairly the consolidated
financial position of Parent and its consolidated subsidiaries as of their
respective dates, and the consolidated results of their operations and their
cash flows for the periods presented therein (subject, in the case of the
unaudited interim financial statements, to normal and recurring year-end
adjustments). Since January 1, 1999, there has not been any material change, by
Parent or any of its subsidiaries, in accounting principles, methods or policies
for financial accounting purposes except as required by concurrent changes in
generally accepted accounting principles.
(i) No Liabilities; Absence of Certain Changes or Events. Neither
----------------------------------------------------
Parent nor any of its subsidiaries has any material indebtedness, obligations or
liabilities of any kind (whether
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accrued, absolute, contingent or otherwise, and whether due or to become due or
asserted or unasserted), and, to knowledge of Parent, there is no reasonable
basis for the assertion of any material claim or liability of any nature against
Parent or any of its subsidiaries, except for liabilities (i) which are fully
reflected in, reserved against or otherwise described in the Parent Financial
Statements for the period ending September 30, 1999, (ii) which have been
incurred after September 30, 1999 in the ordinary course of business, consistent
with past practice, or (iii) which are obligations to perform under executory
contracts in the ordinary course of business (none of which is a liability
resulting from a breach of contract or warranty, tort, infringement or legal
action). Since September 30, 1999, the business of Parent and its subsidiaries
has been carried on only in the ordinary and usual course, and there has not
been any Material Adverse Effect on Parent and no event has occurred and no fact
or set of circumstances has arisen which has resulted in or could reasonably be
expected to result in a Material Adverse Effect on Parent. Since September 30,
1999, to the knowledge of Parent, no material customer or supplier of Parent or
its subsidiaries has threatened, in writing, to alter materially its
relationship with Parent or its subsidiaries. Since September 30, 1999, neither
Parent nor any of its subsidiaries has agreed to a waiver or release of any
material right or claim (including without limitation to any write off or other
compromise of any material account receivable) outside of the ordinary course of
business consistent with past practice.
(j) Brokers and Finders. Except for the fees and expenses payable to
-------------------
Credit Suisse First Boston or Launchpad Consulting, LLC, which fees and expenses
are reflected in their agreements with Parent, a true and complete copy of which
(including all amendments) has been furnished to the Company, neither Parent nor
any of its subsidiaries has employed any investment banker, broker, finder,
consultant or intermediary in connection with the transactions contemplated by
this Agreement which would be entitled to any investment banking, brokerage,
finder's or similar fee or commission in connection with this Agreement or the
transactions contemplated hereby.
(k) S-4 Registration Statement and Proxy Statement/Prospectus. None
---------------------------------------------------------
of the information supplied or to be supplied by Parent for inclusion or
incorporation by reference in the S-4 Registration Statement or the Joint Proxy
Statement will (i) in the case of the S-4 Registration Statement, at the time it
becomes effective or at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading, or (ii) in
the case of the Joint Proxy Statement, at the time of the mailing of the Joint
Proxy Statement and at the time of the Stockholder Meetings, 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. If at any time
prior to the Effective Time any event with respect to Parent, Merger Sub or any
of their respective affiliates, officers and directors or any of its
subsidiaries should occur which is required to be described in an amendment of,
or a supplement to, the Joint Proxy Statement or the S-4 Registration Statement,
Parent should promptly inform the Company, such event shall be so described, and
such amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of Parent and the Company. The
S-4 Registration Statement will (with respect to Parent and Merger Sub)
comply as to form in all material respects with the requirements of the
Securities Act and the rules and regulations promulgated thereunder. The Joint
Proxy Statement will (with respect to Parent and Merger Sub)
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<PAGE>
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations promulgated thereunder.
(l) Taxes.
-----
(i) Parent and each of its subsidiaries has timely filed all federal,
state, local and foreign returns, information statements and reports relating to
Taxes ("Returns") required by applicable Tax law to be filed by Parent and each
of its subsidiaries, except for any such failures to file that could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent. All Taxes owed by Parent or any of its subsidiaries to
a taxing authority, or for which Parent or any of its subsidiaries is liable,
whether to a taxing authority or to other Persons or entities under a
Significant Tax Agreement, as of the date hereof, have been paid and, as of the
Effective Time, will have been paid, except for any such failure to pay that
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent. Parent has made accruals for Taxes on the
Parent Financial Statements which are adequate to cover any Tax liability of
Parent and each of its subsidiaries determined in accordance with generally
accepted accounting principles through the date of the Parent Financial
Statements, except where failures to make such accruals or provisions could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent.
(ii) Except to the extent that any such failure to withhold could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent, Parent and each of its subsidiaries have withheld with
respect to its employees all federal and state income taxes, FICA, FUTA and
other Taxes required to be withheld.
(iii) There is no Tax deficiency outstanding, proposed or assessed
against Parent or any of its subsidiaries, except any such deficiency that, if
paid, could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent. Neither Parent nor any of its
subsidiaries executed or requested any waiver of any statute of limitations on
or extending the period for the assessment or collection of any federal or
material state Tax that is still in effect.
(iv) No federal or state Tax audit or other examination of Parent or
any of its subsidiaries is presently in progress, nor has Parent or any of its
subsidiaries been notified in writing of any request for such federal or
material state Tax audit or other examination, except in all cases for Tax
audits and other examinations which could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent.
(v) Neither Parent nor any of its subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by Parent.
(vi) Neither Parent nor any of its subsidiaries is a party to (A) any
agreement with a party other than Parent or any of its subsidiaries providing
for the allocation or
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<PAGE>
payment of Tax liabilities or payment for Tax benefits with respect to a
consolidated, combined or unitary Return which Return includes or included
Parent or any subsidiary or (B) any Significant Tax Agreement other than any
Significant Tax Agreement described in (A).
(vii) Except for the group of which Parent and its subsidiaries are
now presently members, neither Parent nor any of its subsidiaries has ever been
a member of an affiliated group of corporations within the meaning of Section
1504 of the Code.
(viii) Neither Parent nor any of its subsidiaries has agreed to make
nor is it required to make any adjustment under Section 481(a) of the Code by
reason of a change in accounting method or otherwise which have not yet been
taken into account.
(ix) Parent is not, and has not at any time been, a "United States
Real Property Holding Corporation" within the meaning of Section 897(c)(2) of
the Code.
(m) Employee Benefits.
-----------------
(i) Section 5.2(m)(i) of the Parent Disclosure Schedule lists each
"employee pension benefit plan" (as such term is defined in Section 3(2) of
ERISA), "employee welfare benefit plan" (as such term is defined in Section 3(1)
of ERISA), material personnel or payroll policy (including vacation time,
holiday pay, service awards, moving expense reimbursement programs and sick
leave) or material fringe benefit, severance agreement or plan or any medical,
hospital, dental, life or disability plan, excess benefit plan, bonus, stock
option, stock purchase, or other incentive plan (including any equity or equity-
based plan), tuition reimbursement, automobile use, club membership, parental or
family leave, top hat plan or deferred compensation plan, salary reduction
agreement, change-of-control agreement, employment agreement, consulting
agreement, collective bargaining agreement, indemnification agreement, or
retainer agreement, or any other material benefit plan, policy, program,
arrangement, agreement or contract, whether or not written or terminated, with
respect to any employee, former employee, director, independent contractor, or
any beneficiary or dependent thereof maintained, sponsored, adopted or
administered by Parent or any current or former Plan Affiliate or to which
Parent or any current or former Plan Affiliate has made contributions to,
obligated itself or had any liability with respect to (all such plans, policies,
programs, arrangements, agreements and contracts, whether or not set forth in
Section 5.1(m) of the Parent Disclosure Schedule or on the Parent Financial
Statements are referred to in this Agreement as "Parent Scheduled Plans").
(ii) Parent has delivered or made available to the Company a complete
and accurate copy of each written Parent Scheduled Plan, together with, if
applicable, a copy of audited financial statements, actuarial reports and Form
5500 Annual Reports (including required schedules), if any, for the three (3)
most recent plan years, the most recent IRS determination letter or IRS
recognition of exemption; each other material letter, ruling or notice issued by
a governmental body with respect to each such plan, a copy of each trust
agreement, insurance contract or other funding vehicle, if any, with respect to
each such plan, the most recent PBGC Form 1 with respect to each such plan, if
any, the current summary plan description and summary of material modifications
thereto with respect to each such plan, Form 5310 and any related filings with
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<PAGE>
the PBGC and with respect to the last six (6) Plan years, for each Plan subject
to Title IV of ERISA, general notification to employees of their rights under
Code Section 4980B and form of letter(s) distributed upon the occurrence of a
qualifying event described in Code Section 4980B, in the case of a Parent
Scheduled Plan that is a "group health plan" as defined in Code Section 162(i),
and a copy or description of each other general explanation or written or oral
communication which describes a material term of each Parent Scheduled Plan that
has not previously been disclosed to the Company pursuant to this Section.
Section 5.1(m) of the Parent Disclosure Schedule contains a description of the
material terms of any unwritten Parent Scheduled Plan as comprehended to the
Closing Date. Except as set forth in Section 5.1(m) of the Parent Disclosure
Schedule, there are no negotiations, demands or proposals which are pending or
threatened which concern matters now covered, or that would be covered, by the
foregoing types of unwritten Plans.
(iii) Except as could not reasonably give rise, whether individually
or in the aggregate, to a Material Adverse Effect to Parent or Merger Sub:
(1) Each Parent Scheduled Plan (A) has been and currently
complies in form and in operation in all material respects with all applicable
requirements of ERISA and the Code, and any other legal requirements; (B) has
been and is operated and administered in material compliance with its terms
(except as otherwise required by law); (C) has been and is operated in
compliance with applicable legal requirements in such a manner as to qualify,
where appropriate, for both Federal and state purposes, for income tax
exclusions to its participants, tax-exempt income for its funding vehicle, and
the allowance of deductions and credits with respect to contributions thereto;
and (D) where appropriate, has received a favorable determination letter or
recognition of exemption from the Internal Revenue Service.
(2) With respect to each Parent Scheduled Plan, there are no
claims or other proceedings pending or, to the knowledge of Parent, threatened
with respect to the assets thereof (other than routine claims for benefits), and
there are no facts which could reasonably give rise to any material liability,
claim or other proceeding against any Parent Scheduled Plan, any fiduciary or
plan administrator or other Person dealing with any Parent Scheduled Plan or the
assets of any such Parent Scheduled Plan.
(3) With respect to each Parent Scheduled Plan, to the knowledge
of Parent, no Person: (A) has entered into any "prohibited transaction," as such
term is defined in ERISA or the Code and the regulations, administrative rulings
and case law thereunder that is not otherwise exempt under Code Section 4975 or
ERISA Section 408 (or any administrative class exemption issued thereunder); (B)
has materially breached a fiduciary obligation or violated Sections 402, 403,
405, 503, 510 or 511 of ERISA; (C) has any material liability for any failure to
act or comply in connection with the administration or investment of the assets
of such plans; or (D) engaged in any transaction or otherwise acted with respect
to such plans in such a manner which could subject the Company, or any fiduciary
or plan administrator or any other Person dealing with any such plan, to
material liability under Section 409 or 502 of ERISA or Sections 4972 or 4976
through 4980B of the Code.
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<PAGE>
(4) Each Parent Scheduled Plan (other than any stock option
plan) may be amended, terminated, modified or otherwise revised by Parent, on
and after the Closing, without further material liability to Parent (other than
ordinary administrative expenses or routine claims for benefit plans),
including, but not limited to, any withdrawal liability under ERISA for any
multi-employer plan or any liability under any Parent Scheduled Plan subject to
Title IV of ERISA.
(5) None of Parent or any current or former Parent Plan
Affiliate has at any time participated in, made contributions to or had any
other liability with respect to any Parent Scheduled Plan which is a "multi-
employer plan" as defined in Section 4001 of ERISA, a "multi-employer plan"
within the meaning of Section 3(37) of ERISA, a "multiple employer plan" within
the meaning of Section 413(c) of the Code, a "multiple employer welfare
arrangement" within the meaning of Section 3(40) of ERISA or a plan that is
subject to Title IV of ERISA.
(6) No Parent Scheduled Plan provides, or reflects or represents
any liability to provide retiree health to any person for any reason, except as
may be required by COBRA or other applicable statute, and neither Parent nor any
Plan Affiliate has ever represented, promised or contracted (whether in oral or
written form) to any current or former employee, consultant or director (either
individually or as a group) or any other person that such current or former
employee(s) or other person would be provided with retiree health, except to the
extent required by applicable continuation coverage statute.
(7) No Parent Scheduled Plan has incurred an "accumulated
funding deficiency" as such term is defined in Section 302 of ERISA or Section
412 of the Code, whether or not waived, or has posted or is required to provide
security under Code Section 401(a)(29) or Section 307 of ERISA; no event has
occurred which has or could result in the imposition of a lien under Code
Section 412 or Section 302 of ERISA, nor has any liability to the Pension
Benefit Guaranty Corporation (the "PBGC") (except for payment of premiums) been
incurred or reportable event within the meaning of Section 4043 of ERISA
occurred with respect to any such plan; and the PBGC has not threatened or taken
steps to institute the termination of any such plan;
(8) The requirements of COBRA and the Health Insurance
Portability and Accountability Act, the requirements of the Family Medical Leave
Act of 1993, as amended, the requirements of the Women's Health and Cancer
Rights Act, the requirements of the Newborns' and Mothers' Health Protection Act
of 1996, or any amendment to each such act, or any similar provisions of state
law applicable to its employees, have, in all material respects, been satisfied
with respect to each Parent Scheduled Plan.
(9) All contributions, payments, premiums, expenses,
reimbursements or accruals for all periods ending prior to or as of the Closing
for each Parent Scheduled Plan (including periods from the first day of the then
current plan year to the Closing) shall have been made or accrued on Parent
financial statements (in accordance with generally applied accounting
principles, including FAS 87, 88, 106 and 112) and each such plan otherwise does
not have nor could have any unfunded liability (including benefit liabilities as
defined in Section 4001(a)(16) of ERISA) which is not reflected on Parent
financial statements. Any
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<PAGE>
contribution made or accrued with respect to any Parent Scheduled Plan has been
or, to the knowledge of Parent, will be intended to be, fully deductible by
Parent.
(10) Neither Parent nor a Plan Affiliate has any material
liability (A) for the termination of any single employer plan under Section 4062
of ERISA or any multiple employer plan under Section 4063 of ERISA, (B) for any
lien imposed under Section 302(f) of ERISA or Section 412(n) of the Code, (C)
for any interest payments required under Section 302(e) of ERISA or Section
412(m) of the Code, (D) for any excise tax imposed by Code Sections 4971, 4972,
4977, or 4979, or (E) for any minimum funding contributions under Section
302(c)(11) of ERISA or Code Section 412(c)(11).
(11) All Parent Scheduled Plans to the extent applicable, are in
compliance with Section 1862(b)(1)(A)(i) of the Social Security Act and neither
Parent nor any Plan Affiliate has any liability for any excise tax imposed by
Code Section 5000.
(12) With respect to any Parent Scheduled Plan which is a
welfare plan as defined in Section 3(1) of ERISA; (A) each such welfare plan
which is intended to meet the requirements for tax-favored treatment under
Subchapter B of Chapter 1 of the Code materially meets such requirements; and
(B) there is no disqualified benefit (as such term is defined in Code Section
4976(b)) which would subject Parent or any Plan Affiliate to a tax under Code
Section 4976(a).
(13) Each Parent Scheduled Plan that has been adopted or
maintained by Parent or any Plan Affiliate, whether informally or formally, or
with respect to which Parent or any Plan Affiliate will or may have any
liability, for the benefit of Parent Employees who perform services outside the
United States (the "Parent International Employee Plans") has been established,
maintained and administered in material compliance with its terms and conditions
and with the requirements prescribed by any and all statutory or regulatory laws
that are applicable to such Parent International Employee Plan. Furthermore, no
Parent International Employee Plan has unfunded liabilities, that, as of the
Effective Time, will not be offset by insurance or fully accrued. Except as
required by law, no condition exists that would prevent Parent or any Plan
Affiliate from terminating or amending any Parent International Employee Plan at
any time for any reason without material liability to Parent or any Plan
Affiliate (other than ordinary administration expenses or routine claims for
benefits). To the extent any such Parent International Employee Plan has not
been disclosed or provided prior to the date of this Agreement, Parent agrees to
use its best efforts to disclose and provide such plan prior to the Effective
Time.
(iv) Other than by reason of actions taken by Parent following the
Closing, the consummation of the transactions contemplated by this Agreement
will not (A) entitle any current or former employee of Parent to severance pay,
unemployment compensation or any other payment, (B) accelerate the time of
payment or vesting of any payment (other than for a terminated or frozen tax-
qualified plan, pursuant to a requirement herein to freeze or terminate such
plan), cause the forgiveness of any indebtedness, or increase the amount of any
compensation due to any such employee or former employee, (C) result in any
prohibited transaction described in Section 406 of ERISA or Section 4975 of the
Code for which an exemption is not available, or (D) give rise to the
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payment of any amount that would not be deductible pursuant to the terms of
Section 280G of the Code.
(v) As used in this Agreement, with respect to any Person the term
"Plan Affiliate" shall mean each other Person with whom such Person constitutes
or has constituted all or part of a controlled group, or which would be treated
or has been treated with such Person as under common control or whose employees
would be treated or have been treated as employed by such Person, under Section
414 of the Code and any regulations, administrative rulings and case law
interpreting the foregoing.
(n) Parent Intangible Property.
--------------------------
(i) Parent and its subsidiaries own, or are licensed or otherwise
possess legally enforceable rights to use, all patents, trademarks, trade names,
service marks, copyrights and mask works, all applications for and registrations
of such patents, trademarks, trade names, service marks, copyrights and mask
works, and all processes, formulae, methods, schematics, technology, know-how,
computer software programs or applications and tangible or intangible
proprietary information or material that are necessary to conduct the business
of Parent and its subsidiaries as currently conducted or planned to be conducted
(the "Parent Intellectual Property Rights"). Section 5.1(n) of the Parent
Disclosure Schedule sets forth a list of the material software licenses to which
Parent or its subsidiaries is a party.
(ii) Neither Parent nor any of its subsidiaries is or will be as a
result of the execution and delivery of this Agreement or the performance of its
obligations under this Agreement, in breach in any material respect of any
material license, sublicense or other agreement relating to the Parent
Intellectual Property Rights or any license, sublicense or other agreement
pursuant to which Parent or any of its subsidiaries is authorized to use any
third party patents, trademarks or copyrights, including software, which are
used in the manufacture of, incorporated in, or form a part of any product of
Parent or any of its subsidiaries.
(iii) To Parent's knowledge, all patents, registered trademarks,
service marks and copyrights held by Parent or any of its subsidiaries which are
material to its business are valid and enforceable. Neither Parent nor any of
its subsidiaries has been sued in any suit, action or proceeding which involves
a claim of infringement of any patent, trademark, service mark or copyright or
the violation of any trade secret or other proprietary rights of any third
party, which infringement would be reasonably likely to have a Material Adverse
Effect on Parent.
(iv) Parent and its subsidiaries have taken reasonable security
measures to safeguard and maintain their property rights in all Parent
Intellectual Property Rights owned by Parent or its subsidiaries. Parent and its
subsidiaries maintain and in all material respects abide by a policy that
officers, employees and consultants of Parent or any of its subsidiaries, except
for clerical and other lower level support personnel (e.g. mail room,
messengers, etc.), execute an agreement, in a form or forms previously provided
to the Company, regarding (i) the protection of proprietary information, (ii)
the assignment to Parent (or an applicable subsidiary) of all Parent
Intellectual Property Rights arising from services performed for Parent or any
of its subsidiaries by such
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Persons, (iii) the ownership by Parent or one of its subsidiaries of all Parent
Intellectual Property Rights arising from the services performed for Parent or
one of its subsidiaries by such Persons and (iv) limitations on the individual's
ability to solicit or hire Parent's or its subsidiaries' employees or
consultants.
(o) Agreements, Contracts and Commitments; Material Contracts. Except
---------------------------------------------------------
as set forth in the Section 5.1(o) of the Parent Disclosure Schedule, as of the
date hereof, neither Parent nor any of its subsidiaries is a party to or is
bound by:
(i) any contract relating to the borrowing of money, the
guaranty of another Person's borrowing of money, or the creation of an
encumbrance or lien on the assets of the Parent or any of its subsidiaries and
with outstanding obligations in excess of $1,000,000;
(ii) any employment or consulting agreement, contract or
commitment with any officer or director level employee or member of Parent's
Board of Directors or any other employee who is one of the fifty (50) most
highly compensated employees, including base salary and bonuses, (the "Parent
Key Employees"), other than those that are terminable by Parent or any of its
subsidiaries on no more than thirty (30) days notice without liability or
financial obligation or benefits generally available to employees of Parent,
except to the extent general principles of wrongful termination law may limit
Parent's or any of its subsidiaries' ability to terminate employees at will;
(iii) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(iv) any agreement of indemnification or guaranty by Parent or
any of its subsidiaries not entered into in the ordinary course of business
other than indemnification agreements between Parent or any of its subsidiaries
and any of its officers or directors in standard forms as filed by Parent with
the SEC;
(v) any agreement, contract or commitment containing any
covenant limiting the freedom of Parent or any of its subsidiaries to engage in
any line of business or conduct business in any geographical area, compete with
any person or granting any exclusive distribution rights;
(vi) any joint venture, partnership, and other contract (however
named) involving a sharing of profits or losses by the Parent or any subsidiary
with any other Person;
(vii) any contract for capital expenditures in excess of
$1,000,000;
(viii) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary course
of business;
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<PAGE>
(ix) any agreement, contract or commitment for the purchase of
any ownership interest in any corporation, partnership, joint venture or other
business enterprise for consideration in excess of $2,500,000, in any case which
includes all escrow and earn-out agreements with outstanding obligations; or
(x) any material joint marketing, distribution or development
agreement or any other material contract of the Parent or any of its
subsidiaries not previously filed with the SEC and not otherwise listed in any
other section of the Parent Disclosure Schedule.
A true and complete copy (including all amendments) of each Parent
Contract (or if standard forms are used, copies of the applicable forms with an
indication of any material differences from the actual listed Parent Contract),
or a summary of each oral contract, has been made available to the Company,
excluding those Parent Contracts referenced in clause (vii). Each contract set
forth in Section 5.1(o)(i)-(x) of the Parent Disclosure Schedule (a "Parent
Contract") and each Parent Material Contract (as defined below) is in full force
and effect, and is a legal, valid and binding obligation of Parent or a
subsidiary of Parent and, to the knowledge of Parent, each of the other parties
thereto, enforceable in accordance with its terms, except (a) that the
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law) and (b) as would not, individually or in the aggregate, be reasonably
expected to result in a Material Adverse Effect on Parent. No condition exists
or event has occurred which (whether with or without notice or lapse of time or
both, or the happening or occurrence of any other event) would constitute a
default by Parent or a subsidiary of Parent or, to the knowledge of Parent, any
other party thereto under, or result in a right in termination of, any Parent
Contract or Parent Material Contract, except as would not, individually or in
the aggregate, be reasonably expected to result in a Material Adverse Effect on
Parent. The term "Parent Material Contract" shall mean any contract that is
material to Parent and its subsidiaries, taken as a whole. Except as provided
for herein, at the Effective Time, no Person will have the right, by contract or
otherwise, to become, nor does any entity have the right to designate or cause
Parent to appoint a Person as, a director of Parent or any subsidiary of Parent.
(p) Unlawful Payments and Contributions. To the knowledge of Parent,
-----------------------------------
neither Parent, any subsidiary of Parent nor any of their respective directors,
officers, employees or agents has, with respect to the businesses of Parent or
its subsidiaries, (i) used any funds for any unlawful contribution, endorsement,
gift, entertainment or other unlawful expense relating to political activity;
(ii) made any direct or indirect unlawful payment to any foreign or domestic
government official or employee; (iii) violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv) made
any bribe, rebate, payoff, influence payment, kickback or other unlawful payment
to any Person or entity.
(q) Listings. Parent's securities are not listed, or quoted, for
--------
trading on any U.S. domestic or foreign securities exchange, other than the NNM.
(r) Environmental Matters. Except as disclosed in Parent's SEC
---------------------
Reports filed prior to the date hereof, (i) Parent and its subsidiaries and the
operations, assets and properties
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<PAGE>
thereof are in material compliance with all Environmental Laws; (ii) there are
no judicial or administrative actions, suits, proceedings or investigations
pending or, to the knowledge of Parent, threatened against Parent or any
subsidiary of Parent alleging the violation of any Environmental Law and neither
Parent nor any subsidiary of Parent has received notice from any governmental
body or Person alleging any violation of or liability under any Environmental
Laws, in either case which could reasonably be expected to result in material
Environmental Costs and Liabilities; (iii) to the knowledge of Parent, there are
no facts, circumstances or conditions relating to, arising from, associated with
or attributable to Parent or its subsidiaries or any real property currently or
previously owned, operated or leased by Parent or its subsidiaries that could
reasonably be expected to result in material Environmental Costs and
Liabilities; and (iv) to the knowledge of Parent, neither Parent nor any of its
subsidiaries has ever generated, transported, treated, stored, handled or
disposed of any Hazardous Material (as hereinafter defined) at any site,
location or facility in a manner that could create any material Environmental
Costs and Liabilities under any Environmental Law, and no such Hazardous
Material has been or is currently present on, in, at or under any real property
owned or used by Parent or any of its subsidiaries in a manner that could create
any Environmental Costs and Liabilities (including without limitation,
containment by means of any underground or aboveground storage tank). For the
purpose of Sections 5.1(s) and 5.2(s), the following terms have the following
definitions: (X) "Environmental Costs and Liabilities" means any losses,
liabilities, obligations, damages, fines, penalties, judgments, actions, claims,
costs and expenses (including, without limitation, fees, disbursements and
expenses of legal counsel, experts, engineers and consultants and the costs of
investigation and feasibility studies, remedial or removal actions and cleanup
activities) arising from or under any Environmental Law; (Y) "Environmental
Laws" means any applicable federal, state, local, or foreign law (including
common law), statute, code, ordinance, rule, regulation or other requirement
relating to the environment, natural resources, or public or employee health and
safety; and (Z) "Hazardous Material" means any substance, material or waste
regulated by federal, state or local government, including, without limitation,
any substance, material or waste which is defined as a "hazardous waste,"
"hazardous material," "hazardous substance," "toxic waste" or "toxic substance"
under any provision of Environmental Law and including but not limited to
petroleum and petroleum products.
(s) Title to Properties; Liens; Condition of Properties.
---------------------------------------------------
(i) Parent and its subsidiaries have good and marketable title to, or
a valid leasehold interest in, the real and personal property, located on their
premises or shown on their most recent balance sheet or acquired after the date
thereof. None of the property owned or used by Parent or any of its subsidiaries
is subject to any mortgage, pledge, deed of trust, lien (other than for taxes
not yet due and payable), conditional sale agreement, security title,
encumbrance, or other adverse claim or interest of any kind. Since September 30,
1999, there has not been any sale, lease, or any other disposition or
distribution by Parent or any of its subsidiaries of any of its assets or
properties, material to Parent and its subsidiaries, taken as a whole, except
transactions in the ordinary and regular course of business.
(ii) Parent has delivered to the Company a schedule of all material
leases, subleases, rental agreements, contracts of sale, tenancies or licenses
related to any of the real
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property used by Parent or any of its subsidiaries in their respective
businesses. All such leases are valid, binding and enforceable in accordance
with their terms against the parties thereto, and each such lease is subsisting
and no default exists under any thereof. Neither Parent nor any of its
subsidiaries has received notice that any party to any such lease intends to
cancel, terminate or refuse to renew the same or to exercise or decline to
exercise any option or any right thereunder.
(t) Labor and Employee Relations.
----------------------------
(i) Neither Parent nor any of its subsidiaries is party to any
employment, consulting, non-competition, severance, golden parachute,
indemnification agreement or any other material employment or consulting
agreement providing for payments or benefits or the acceleration of payments or
benefits upon the change of control of Parent (including, without limitation,
any contract to which Parent is a party involving employees of Parent).
(ii) Except as required by applicable law in non-U.S. jurisdictions,
(A) none of the employees of Parent or any of its subsidiaries is represented in
his or her capacity as an employee of such company by any labor organization;
(B) neither Parent nor any of its subsidiaries has recognized any labor
organization nor has any labor organization been elected as the collective
bargaining agent of any of their employees, nor has Parent or any of its
subsidiaries signed any collective bargaining agreement or union contract
recognizing any labor organization as the bargaining agent of any of their
employees; and (C) to the knowledge of Parent there is no active or current
union organization activity involving the employees of Parent or any of its
subsidiaries, nor has there ever been union representation involving employees
of Parent or any of its subsidiaries.
(iii) Except for complaints which, in the aggregate, do not represent
claims which could reasonably involve liabilities in excess of $2,000,000, there
are no complaints against Parent or any of its subsidiaries pending or, to the
knowledge of Parent, overtly threatened before the National Labor Relations
Board or any similar foreign, state or local labor agencies, or before the Equal
Employment Opportunity Commission or any similar foreign, state or local agency,
or before any other governmental agency or entity by or on behalf of any
employee or former employee of Parent or any of its subsidiaries.
(iv) Parent has provided to the Company a description of all written
employment policies under which Parent and each subsidiary is operating.
(v) Parent and each of its subsidiaries is in compliance with all
Federal, foreign (as applicable), and state laws regarding employment practices,
including laws relating to workers' safety, sexual harassment or discrimination,
except where the failure to so be in compliance, individually or in the
aggregate, would not have a Material Adverse Effect on Parent.
(vi) To the knowledge of Parent, as of the date hereof, no executive,
key employee or group of employees has any plans to terminate his or her
employment with Parent or any of its subsidiaries.
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<PAGE>
(u) Permits. Parent and each of its subsidiaries hold all licenses,
-------
permits, registrations, orders, authorizations, approvals and franchises which
are required to permit it to conduct its businesses as presently conducted,
except where the failure to hold such licenses, permits, registrations, orders,
authorizations, approvals or franchises would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. All such material licenses,
permits, registrations, orders, authorizations, approvals and franchises are
now, and will be after the Closing, valid and in full force and effect, and
Parent shall have full benefit of the same, except where the failure to be valid
and in full force and effect or to have the benefit of any such license, permit,
registration, order, authorization, approval or franchise would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
Neither Parent nor any of its subsidiaries has received any notification of any
asserted present failure (or past and unremedied failure) by it to have obtained
any such license, permit, registration, order, authorization, approval or
franchise except where such failures would not, in the aggregate, have a
Material Adverse Effect on Parent.
(v) Warranty or Other Claims. Parent has provided to the Company a copy of
------------------------
its standard form agreement for services. It is Parent's practice and policy to
adhere to the form terms, except to the extent not commercially practicable.
(w) Transactions with Affiliates. Except as set forth in the Parent SEC
----------------------------
Reports filed prior to the date of this Agreement, since the date of Parent's
last proxy statement to its stockholders, no event has occurred that would be
required to be reported by Parent as a Certain Relationship or Related
Transaction, pursuant to Item 404 of Regulation S-K promulgated by the SEC.
(x) Computer Software. The occurrence in or use by any material Software
-----------------
used by Parent and its subsidiaries of dates on or after January 1, 2000 will
not result in any Malfunction.
(y) State Takeover Laws. The Board of Directors of Parent has taken all
-------------------
necessary action so that the restrictions contained in Section 203 of the DGCL
applicable to a "business combination" (as defined in Section 203) will not
apply to the execution, delivery or performance of this Agreement or the
Stockholder Agreements or the consummation of the Merger or the other
transactions contemplated by this Agreement or the Stockholder Agreements. No
other state takeover statute or similar statute or regulation is applicable to
this Agreement or the Stockholder Agreements.
5.2 Representations and Warranties of the Company The Company hereby.
---------------------------------------------
represents and warrants to Parent and Merger Sub that the statements contained
in this Section 5.2 are true and correct, except to the extent specifically set
forth on the disclosure schedule previously delivered by the Company to Parent
and Merger Sub (the "Company Disclosure Schedule"). The Company Disclosure
Schedule shall be arranged in sections and paragraphs corresponding to the
letter and numbered paragraphs contained in this Section 5.2, and the disclosure
in any paragraph shall qualify only the corresponding paragraph in this Section
5.2 or other paragraphs or sections to which it is clearly apparent (from a
plain reading of the disclosure) that such disclosure relates.
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<PAGE>
(a) Corporate Organization and Qualification. Each of the Company and its
----------------------------------------
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of incorporation and is qualified
and in good standing as a foreign corporation in each jurisdiction where the
properties owned, leased or operated, or the business conducted, by it require
such qualification, except where failure to so qualify or be in good standing as
a foreign corporation would not have a Material Adverse Effect on the Company.
Each of the Company and its subsidiaries has all requisite power and authority
(corporate or otherwise) to own its properties and to carry on its business as
it is now being conducted. All of the subsidiaries of the Company are set forth
in Section 5.2(a) of the Company Disclosure Schedule. The Company has heretofore
made available to Parent complete and correct copies of its Certificate of
Incorporation and Bylaws and the charter documents of its subsidiaries, each as
amended.
(b) Capitalization. The authorized capital stock of the Company consists of
--------------
(i) 200,000,000 shares of common stock, $0.001 par value per share, of which
90,645,130 shares were issued and outstanding on November 30, 1999, and (ii)
1,000,000 shares of preferred stock, $0.001 par value per share, none of which
is issued or outstanding. All of the outstanding shares of capital stock of the
Company and its subsidiaries have been duly authorized and validly issued and
are fully paid and nonassessable. The Company has no outstanding stock
appreciation rights, phantom stock or similar rights. All outstanding shares of
capital stock or other equity interests of the subsidiaries of the Company are
owned by the Company or a direct or indirect wholly-owned subsidiary of the
Company, free and clear of all liens, pledges, charges, encumbrances, claims and
options of any nature. Except for options to purchase 35,484,796 Company Shares
(i) issued pursuant to the 1996 Stock Option Plan, 1996 Equity Compensation
Plan, the 1997 Acquisition Stock Option Plan and the 1999 Non-Qualified Stock
Option Plan of the Company (the "Company Stock Option Plans"), (ii) existing as
a result of the Company's assumption of then outstanding stock options of CKS
Group, Inc. in connection with the merger with CKS Group, Inc. consummated on
December 17, 1998, and (iii) under the Stock Option Agreement with Robert Shaw
and the Company's Bonus Plan (the plans and agreements referred to in clauses
(i), (ii) and (iii), collectively, the "Company Option Plans") and rights under
the Company ESPPs, as of November 30, 1999, there are no outstanding or
authorized options, warrants, calls, rights (including preemptive rights),
commitments or any other agreements of any character which the Company or any of
its subsidiaries is a party to, or may be bound by, requiring it to issue,
transfer, grant, sell, purchase, redeem or acquire any shares of capital stock
or any of its securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of capital stock of the
Company or any of its subsidiaries. There are not as of the date hereof and
there will not be at the Effective Time any stockholder agreements, voting
trusts or other agreements or understandings to which the Company is a party or
to which it is bound relating to the voting of any shares of the capital stock
of the Company. No existing rights with respect to the registration of Company
Shares under the Securities Act, including, but not limited to, demand rights or
piggy-back registration rights, shall apply with respect to any Parent Shares
issuable in connection with the Merger. The Company has provided to Parent a
list, as of November 30, 1999, of the outstanding options to acquire shares of
the Company's capital stock, the name of the holder of such option, the exercise
price of such option, the number of shares as to which such option will have
vested at such date and whether the exercisability of such option will be
accelerated in any way by the transactions contemplated by this
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<PAGE>
Agreement, and indicates the extent of acceleration, if any. Since November 30,
1999 through the date hereof no options have been issued or accelerated or had
their terms modified.
(c) Fairness Opinion. The Board of Directors of the Company has received an
----------------
oral opinion from Morgan Stanley Dean Witter to be confirmed in writing and
addressed to its Board of Directors, to the effect that, as of the date hereof
and based upon and subject to the matters stated therein, the consideration to
be received by the holders of Common Shares in the Merger is fair to such
holders from a financial point of view. As of the date hereof, such opinion has
not been withdrawn, revoked or modified.
(d) Authority Relative to this Agreement. The Board of Directors of the
------------------------------------
Company has declared the Merger advisable and the Company has the requisite
corporate power and authority to approve, authorize, execute and deliver this
Agreement and to consummate the transactions contemplated hereby. This Agreement
and the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of the Company and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
(other than the approval of the Merger by the stockholders of the Company in
accordance with the DGCL). This Agreement has been duly and validly executed and
delivered by the Company and, assuming this Agreement constitutes the valid and
binding agreement of Parent and Merger Sub, constitutes the valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting creditors'
rights and to general principles of equity.
(e) Present Compliance with Obligations and Laws. Neither the Company nor
--------------------------------------------
any of its subsidiaries is: (i) in violation of its Certificate of Incorporation
or Bylaws or similar documents; (ii) in default in the performance of any
obligation, agreement or condition of any debt instrument which (with or without
the passage of time or the giving of notice, or both) affords to any Person the
right to accelerate any indebtedness or terminate any right; (iii) in default
under or breach of (with or without the passage of time or the giving of notice)
any other contract to which it is a party or by which it or its assets are
bound; or (iv) in violation of any law, regulation, administrative order or
judicial order, decree or judgment (domestic or foreign) applicable to it or its
business or assets, except where any violation, default or breach under items
(ii), (iii), or (iv) would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
(f) Consents and Approvals; No Violation. Neither the execution and
------------------------------------
delivery of this Agreement by the Company nor the consummation by the Company of
the transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of its Certificate of Incorporation or Bylaws; (ii)
require any consent, approval, authorization or permit of, or registration or
filing with or notification to, any governmental or regulatory authority, except
(A) in connection with the applicable requirements, if any, of the HSR Act, (B)
pursuant to the applicable requirements of the Securities Act and the Exchange
Act, (C) the filing of the Certificate of Merger pursuant to the DGCL and
appropriate documents with the relevant authorities of other states in which the
Company is authorized to do business, (D) as may be required by any applicable
state
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<PAGE>
securities laws, (E) such filings, consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the antitrust
laws of any foreign country or, (F) where the failure to obtain such consent,
approval, authorization or permit, or to make such filing or notification, would
not in the aggregate have a Material Adverse Effect on the Company or adversely
affect the ability of the Company to consummate the transactions contemplated
hereby; (iii) result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration or lien or other charge or
encumbrance) under any of the terms, conditions or provisions of any indenture,
note, license, lease, agreement or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which any of their assets
may be bound, except for such violations, breaches and defaults (or rights of
termination, cancellation, or acceleration or lien or other charge or
encumbrance) as to which requisite waivers or consents have been obtained or
which, in the aggregate, would not have a Material Adverse Effect on the Company
or adversely affect the ability of the Company to consummate the transactions
contemplated hereby; (iv) cause the suspension or revocation of any
authorizations, consents, approvals or licenses currently in effect which would
have a Material Adverse Effect on the Company; or (v) assuming the consents,
approvals, authorizations or permits and filings or notifications referred to in
this Section 5.2(f) are duly and timely obtained or made, violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Company
or any of its subsidiaries or to any of their respective assets, except for
violations which would not in the aggregate have a Material Adverse Effect on
the Company or adversely affect the ability of the Company to consummate the
transactions contemplated hereby.
(g) Litigation. Except as disclosed in Company SEC Reports filed prior to
----------
the date hereof, there are no actions, suits, claims, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company or any of its subsidiaries that, alone or in the aggregate, would be
reasonably likely to result in obligations or liabilities of the Company or any
of its subsidiaries that would have a Material Adverse Effect on the Company or
a material adverse effect on the parties' ability to consummate the transactions
contemplated by this Agreement. Neither the Company nor any of its subsidiaries
is subject to any outstanding order, writ, injunction or decree which (i) has or
may have the effect of prohibiting or impairing any business practice of the
Company or any of its subsidiaries, any acquisition of property (tangible or
intangible) by the Company or any of its subsidiaries, the conduct of the
business by the Company or any of its subsidiaries, or Company's ability to
perform its obligations under this Agreement or (ii), insofar as can be
reasonably foreseen, individually or in the aggregate, would have a Material
Adverse Effect on the Company.
(h) SEC Reports; Financial Statements.
---------------------------------
(i) Since January 1, 1997, the Company has filed all forms, reports
and documents with the SEC required to be filed by it pursuant to the federal
securities laws and the SEC rules and regulations thereunder, all of which
complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act (the "Company SEC Reports"). None of the
Company SEC Reports, including, without limitation, any financial statements or
schedules included therein, at the time filed (or if amended or superseded by a
filing prior to the date of this
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<PAGE>
Agreement, then on the date of such filing) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the Company's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(ii) The consolidated balance sheets and the related statements of
income, stockholders' equity and cash flow (including the related notes thereto)
of the Company included in the Company SEC Reports (collectively, the "Company
Financial Statements") comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent throughout the
periods involved (except as otherwise noted therein or, in the case of unaudited
interim financial statements, as may be permitted by the SEC on Form 10-Q under
the Exchange Act), and present fairly the consolidated financial position of the
Company and its consolidated subsidiaries as of their respective dates, and the
results of its operations and its cash flow for the periods presented therein
(subject, in the case of the unaudited interim financial statements, to normal
and recurring year-end adjustments). Since January 1, 1999, there has not been
any material change, by the Company or any of its subsidiaries in accounting
principles, methods or policies for financial accounting purposes except as
required by concurrent changes in generally accepted accounting principles.
(i) No Liabilities; Absence of Certain Changes or Events. Neither the
----------------------------------------------------
Company nor any of its subsidiaries has any material indebtedness, obligations
or liabilities of any kind (whether accrued, absolute, contingent or otherwise,
and whether due or to become due or asserted or unasserted), and, to the
knowledge of the Company, there is no reasonable basis for the assertion of any
material claim or liability of any nature against the Company or any of its
subsidiaries, except for liabilities (i) which are fully reflected in, reserved
against or otherwise described in the Company Financial Statements for the
period ending September 30, 1999, (ii) which have been incurred after September
30, 1999 in the ordinary course of business, consistent with past practice, or
(iii) which are obligations to perform under executory contracts in the ordinary
course of business (none of which is a liability resulting from a breach of
contract or warranty, tort, infringement or legal action). Since September 30,
1999, the business of the Company and its subsidiaries has been carried on only
in the ordinary and usual course, and there has not been any Material Adverse
Effect on the Company and no event has occurred and no fact or set of
circumstances has arisen which has resulted in or could reasonably be expected
to result in a Material Adverse Effect on the Company. Since September 30, 1999,
to the knowledge of the Company, no material customer or supplier of the Company
or its subsidiaries has threatened, in writing, to alter materially its
relationship with the Company or its subsidiaries. Since September 30, 1999,
neither the Company nor any of its subsidiaries has agreed to a waiver or
release of any material right or claim (including without limitation to any
write off or other compromise of any material account receivable) outside of the
ordinary course of business consistent with past practice.
(j) Brokers and Finders. Except for the fees and expenses payable to Morgan
-------------------
Stanley Dean Witter, which fees and expenses are reflected in its agreement with
the Company, a
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<PAGE>
true and complete copy of which (including all amendments) has been furnished to
the Company, neither the Company nor any of its subsidiaries has employed any
investment banker, broker, finder, consultant or intermediary in connection with
the transactions contemplated by this Agreement which would be entitled to any
investment banking, brokerage, finder's or similar fee or commission in
connection with this Agreement or the transactions contemplated hereby.
(k) S-4 Registration Statement and Proxy Statement/Prospectus. None of the
---------------------------------------------------------
information supplied or to be supplied by the Company for inclusion or
incorporation by reference in the S-4 Registration Statement or the Joint Proxy
Statement will (i) in the case of the S-4 Registration Statement, at the time it
becomes effective or at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading, or (ii) in
the case of the Joint Proxy Statement, at the time of the mailing of the Joint
Proxy Statement and at the time of the Stockholder Meetings, 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. If at any time
prior to the Effective Time any event with respect to the Company, its officers
and directors or any of its subsidiaries should occur which is required to be
described in an amendment of, or a supplement to, the Joint Proxy Statement or
the S-4 Registration Statement, the Company shall promptly inform Parent such
event shall be so described, and such amendment or supplement shall be promptly
filed with the SEC and, as required by law, disseminated to the stockholders of
the Company and Parent. The S-4 Registration Statement will (with respect to the
Company) comply as to form in all material respects with the requirements of the
Securities Act and the rules and regulations promulgated thereunder. The Joint
Proxy Statement will (with respect to the Company) comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder.
(l) Taxes.
-----
(i) The Company and each of its subsidiaries has timely filed all
Returns required by applicable Tax law to be filed by the Company and each of
its subsidiaries, except for any such failures to file that could not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company. All Taxes owed by the Company or any of its subsidiaries to a
taxing authority, or for which the Company or any of its subsidiaries is liable,
whether to a taxing authority or to other Persons or entities under a
Significant Tax Agreement, as of the date hereof, have been paid and, as of the
Effective Time, will have been paid, except for any such failure to pay that
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company. The Company has made accruals for Taxes
on the Company Financial Statements which are adequate to cover any Tax
liability of the Company and each of its subsidiaries determined in accordance
with generally accepted accounting principles through the date of the Company
Financial Statements, except where failures to make such accruals or provisions
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
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<PAGE>
(ii) Except to the extent that any such failure to withhold could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company, the Company and each of its subsidiaries have
withheld with respect to its employees all federal and state income taxes, FICA,
FUTA and other Taxes required to be withheld.
(iii) There is no Tax deficiency outstanding, proposed or assessed
against the Company or any of its subsidiaries, except any such deficiency that,
if paid, could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. Neither the Company nor any
of its subsidiaries executed or requested any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
federal or material state Tax that is still in effect.
(iv) No federal or state Tax audit or other examination of the Company
or any of its subsidiaries is presently in progress, nor has the Company or any
of its subsidiaries been notified in writing of any request for such federal or
material state Tax audit or other examination, except in all cases for Tax
audits and other examinations which could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
(v) Neither the Company nor any of its subsidiaries has filed any
consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by the Company.
(vi) Neither the Company nor any of its subsidiaries is a party to (A)
any agreement with a party other than the Company or any of its subsidiaries
providing for the allocation or payment of Tax liabilities or payment for Tax
benefits with respect to a consolidated, combined or unitary Return which Return
includes or included the Company or any subsidiary or (B) any Significant Tax
Agreement other than any Significant Tax Agreement described in (A).
(vii) Except for the group of which the Company and its subsidiaries
are now presently members, neither the Company nor any of its subsidiaries has
ever been a member of an affiliated group of corporations within the meaning of
Section 1504 of the Code.
(viii) Neither the Company nor any of its subsidiaries has agreed to
make nor is it required to make any adjustment under Section 481(a) of the Code
by reason of a change in accounting method or otherwise which have not yet been
taken into account.
(ix) The Company is not, and has not at any time been, a United States
Real Property Holding Corporation.
(m) Employee Benefits.
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(i) Section 5.2(m)(i) of the Company Disclosure Schedule lists each
"employee pension benefit plan" (as such term is defined in Section 3(2) of
ERISA), "employee welfare benefit plan" (as such term is defined in Section 3(1)
of ERISA), material personnel or
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payroll policy (including vacation time, holiday pay, service awards, moving
expense reimbursement programs and sick leave) or material fringe benefit,
severance agreement or plan or any medical, hospital, dental, life or disability
plan, excess benefit plan, bonus, stock option, stock purchase or other
incentive plan (including any equity or equity-based plan), tuition
reimbursement, automobile use, club membership, parental or family leave, top
hat plan or deferred compensation plan, salary reduction agreement, change-of-
control agreement, employment agreement, consulting agreement, or collective
bargaining agreement, indemnification agreement, retainer agreement, or any
other material benefit plan, policy, program, arrangement, agreement or
contract, whether or not written or terminated, with respect to any employee,
former employee, director, independent contractor, or any beneficiary or
dependent thereof maintained, sponsored, adopted or administered by the Company
or any current or former Plan Affiliate or to which the Company or any current
or former Plan Affiliate has made contributions to, obligated itself or had any
liability with respect to (all such plans, policies, programs, arrangements,
agreements and contracts, are referred to in this Agreement as "Company
Scheduled Plans").
(ii) The Company has delivered or made available to Parent a complete
and accurate copy, as of the Closing, of each written Company Scheduled Plan,
together with, if applicable, a copy of audited financial statements, actuarial
reports and Form 5500 Annual Reports (including required schedules), if any, for
the three (3) most recent plan years, the most recent IRS determination letter
or IRS recognition of exemption; each other material letter, ruling or notice
issued by a governmental body with respect to each such plan, a copy of each
trust agreement, insurance contract or other funding vehicle, if any, with
respect to each such plan, the most recent PBGC Form 1 with respect to each such
plan, if any, the current summary plan description and summary of material
modifications thereto with respect to each such plan, Form 5310 and any related
filings with the PBGC and with respect to the last six (6) Plan years, for each
Plan subject to Title IV of ERISA, general notification to employees of their
rights under Code Section 4980B and form of letter(s) distributed upon the
occurrence of a qualifying event described in Code Section 4980B, in the case of
a Company Scheduled Plan that is a "group health plan" as defined in Code
Section 162(i), and a copy or description of each other general explanation or
written or oral communication which describes a material term of each Company
Scheduled Plan that has not previously been disclosed to Parent pursuant to this
Section. Section 5.2(m) of the Company Disclosure Schedule contains a
description of the material terms of any unwritten Company Scheduled Plan as
comprehended to the Closing Date. Except as set forth in Section 5.2(m) of the
Company Disclosure Schedule, there are no negotiations, demands or proposals
which are pending or threatened which concern matters now covered, or that would
be covered, by the foregoing types of unwritten Plans.
(iii) Except as could not reasonably give rise, whether individually
or in the aggregate, to a Material Adverse Effect to the Company, Parent, or
Merger Sub:
(1) Each Company Scheduled Plan (A) has been and currently
complies in form and in operation in all material respects with all applicable
requirements of ERISA and the Code, and any other legal requirements; (B) has
been and is operated and administered in material compliance with its terms
(except as otherwise required by law); (C) has been and is
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operated in compliance with applicable legal requirements in such a manner as to
qualify, where appropriate, for both Federal and state purposes, for income tax
exclusions to its participants, tax-exempt income for its funding vehicle, and
the allowance of deductions and credits with respect to contributions thereto;
and (D) where appropriate, has received a favorable determination letter or
recognition of exemption from the Internal Revenue Service.
(2) With respect to each Company Scheduled Plan, there are no
claims or other proceedings pending or, to the knowledge of the Company,
threatened with respect to the assets thereof (other than routine claims for
benefits), and there are no facts which could reasonably give rise to any
material liability, claim or other proceeding against any Company Scheduled
Plan, any fiduciary or plan administrator or other Person dealing with any
Company Scheduled Plan or the assets of any such Company Scheduled Plan.
(3) With respect to each Company Scheduled Plan, to the
knowledge of the Company, no Person: (A) has entered into any "prohibited
transaction," as such term is defined in ERISA or the Code and the regulations,
administrative rulings and case law thereunder that is not otherwise exempt
under Code Section 4975 or ERISA Section 408 (or any administrative class
exemption issued thereunder); (B) has materially breached a fiduciary obligation
or violated Sections 402, 403, 405, 503, 510 or 511 of ERISA; (C) has any
material liability for any failure to act or comply in connection with the
administration or investment of the assets of such plans; or (D) engaged in any
transaction or otherwise acted with respect to such plans in such a manner which
could subject Parent, or any fiduciary or plan administrator or any other Person
dealing with any such plan, to material liability under Section 409 or 502 of
ERISA or Sections 4972 or 4976 through 4980B of the Code.
(4) Each Company Scheduled Plan (other than any stock option
plan) may be amended, terminated, modified or otherwise revised by the Company
or Parent, on and after the Closing, without further material liability to the
Company or Parent (other than ordinary administrative expenses or routine claims
for benefit plans), including, but not limited to, any withdrawal liability
under ERI