UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): March 20,
2005
AVID
TECHNOLOGY, INC.
(Exact Name of Registrant as
Specified in Its Charter)
Delaware
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0-21174
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04-2977748
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(State or Other Jurisdiction of Incorporation)
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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Avid Technology Park, One Park West, Tewksbury, MA
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01876
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(Address of Principal Executive Offices)
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(zip code)
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Registrants telephone number, including area code: (978) 640-6789
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(Former Name or Former Address, if Changed Since Last Report)
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Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General
Instruction A.2. below):
ý Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
ý Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item 1.01 Entry Into a Material Definitive Agreement
Merger Agreement
On March 20, 2005, Avid Technology, Inc., a
Delaware corporation (Avid), entered into an Agreement and Plan of Merger
(the Merger Agreement), by and among Avid, Highest Mountain Corporation, a
California corporation and a wholly-owned subsidiary of Avid (the Merger Sub),
and Pinnacle Systems, Inc., a California corporation (Pinnacle). The Merger Agreement provides for the merger
of the Merger Sub with and into Pinnacle.
Upon completion of this transaction, Pinnacle will be a wholly-owned
subsidiary of Avid. At the effective
time, each issued and outstanding share of common stock of Pinnacle will be
converted into the right to receive 0.0869 share of Avids common stock plus
$1.00 in cash.
The Merger Agreement has been approved by the
Board of Directors of each party, and the transactions contemplated by the
Merger Agreement are subject to the approval of Avids stockholders, Pinnacles
shareholders, any required antitrust clearance and other customary closing
conditions. The foregoing description of
the Merger Agreement is not complete and is qualified in its entirety by
reference to the Merger Agreement, which is filed as Exhibit 2.1 hereto and is
incorporated herein by reference.
Voting
Agreements
In connection with the execution of the
Merger Agreement, certain directors and executive officers of Pinnacle executed
a voting agreement with Avid and Pinnacle to vote their shares of Pinnacles
common stock in favor of the proposed merger and against any other proposal or
offer to acquire Pinnacle (the Pinnacle Voting Agreement). The foregoing description of the Pinnacle
Voting Agreement is not complete and is qualified in its entirety by reference
to the Pinnacle Voting Agreement, which is filed as Exhibit 10.1 hereto and is
incorporated herein by reference.
In connection with the execution of the
Merger Agreement, certain directors and executive officers of Avid executed a
voting agreement with Avid and Pinnacle to vote their shares of Avids common
stock in favor of an amendment to Avids certificate of incorporation to
increase the authorized shares of common stock for issuance in connection with
the proposed merger (the Avid Voting Agreement). The foregoing description of
the Avid Voting Agreement is not complete and is qualified in its entirety by
reference to the Avid Voting Agreement, which is filed as Exhibit 10.2 hereto
and is incorporated herein by reference.
Item 8.01 Other Events
On March 21, 2005, Avid and Pinnacle issued a
joint press release announcing the execution of the Merger Agreement. The press
release is attached as Exhibit 99.1 and is incorporated herein by reference.
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Important Additional Information Will Be Filed With
The SEC
Avid plans to file with the SEC a
Registration Statement on Form S-4 in connection with the transaction, and Avid
and Pinnacle plan to file with the SEC and mail to their respective
stockholders a Joint Proxy Statement/Prospectus in connection with the
transaction. The Registration Statement and the Joint Proxy
Statement/Prospectus will contain important information about Avid, Pinnacle,
the transaction and related matters.
Investors and security holders are urged to read the Registration
Statement and the Joint Proxy Statement/Prospectus carefully when they are
available.
Investors and security holders will be able
to obtain free copies of the Registration Statement and the Joint Proxy
Statement/Prospectus (when available) and other documents filed with the SEC by
Avid through the website maintained by the SEC at www.sec.gov.
In addition, investors and security holders
will be able to obtain free copies of the Registration Statement and the Joint
Proxy Statement/Prospectus (when available) and other documents filed with the
SEC from Avid by contacting Dean Ridlon, Investor Relations Director for Avid,
at 978-640-3172.
Avid and Pinnacle, and their respective
directors and executive officers, may be deemed to be participants in the
solicitation of proxies in respect of the transactions contemplated by the
Merger Agreement. Information regarding
Avids directors and executive officers is contained in Avids Form 10-K for the
year ended December 31, 2004 and its proxy statement dated April 16, 2004,
which are filed with the SEC. Information regarding Pinnacles directors and executive officers is
contained in Pinnacles Form 10-K for the year ended June 30, 2004 and its proxy
statement dated September 30, 2004, which are filed with the SEC.
The interests of their respective directors and
executive officers in
the solicitations with respect to the transactions in particular will be more
specifically set forth in the Registration Statement and the Joint Proxy
Statement/Prospectus filed with the SEC, which will be available free of charge
as indicated above.
Safe
Harbor For Forward-Looking Statements
Some statements in this Current Report on
Form 8-K may be forward-looking statements for the purposes of the Private
Securities Litigation Reform Act of 1995.
Avid cautions that these forward-looking statements are subject to risks
and uncertainties that may cause actual results to differ materially from those
indicated in the forward-looking statements, including but not limited to: (i) the possibility that the transaction will
not close or that the closing will be delayed due to antitrust regulatory
review or other factors, (ii) the challenges and costs of assimilating the operations
and personnel of Pinnacle; (iii) the ability to attract and retain highly
qualified employees; (iv) competitive factors, including pricing pressures; (v)
reaction of customers of Pinnacle and Avid and related risks of maintaining
pre-existing relationships of Pinnacle; (vi)
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fluctuating currency exchange rates; (vii)
adverse changes in general economic or market conditions, particularly in the
content-creation industry; and (viii) other one-time events and other
important factors disclosed previously and from time to time in Avids and
Pinnacles filings with the SEC and to be more specifically set forth in the
Joint Proxy Statement/Prospectus to be filed by Avid and Pinnacle with the SEC.
Avid disclaims any obligation to update any forward-looking statements after
the date of this release.
Item
9.01. Financial Statements and Exhibits
(c) Exhibits
See
Exhibit Index attached hereto.
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SIGNATURE
Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly authorized.
Date:
March 21, 2005
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AVID
TECHNOLOGY, INC.
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By:
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/s/ Paul J. Milbury
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Paul
J. Milbury
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Chief
Financial Officer
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(Principal
Financial Officer)
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5
EXHIBIT INDEX
Exhibit No.
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Description
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2.1
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Agreement and Plan of
Merger, dated as of March 20, 2005, by and among, Avid Technology, Inc.,
Highest Mountain Corporation and Pinnacle Systems, Inc.
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10.1
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Voting Agreement, dated as
of March 20, 2005, among Avid Technology, Inc., Pinnacle Systems, Inc. and
officers and directors of Pinnacle Systems, Inc.
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10.2
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Voting Agreement, dated as
of March 20, 2005, among Avid Technology, Inc., Pinnacle Systems, Inc. and
officers and directors of Avid Technology, Inc.
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99.1
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Press Release dated March
21, 2005.
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Exhibit 2.1
EXECUTION VERSION
AGREEMENT AND PLAN OF
MERGER
by and among
AVID TECHNOLOGY, INC.,
HIGHEST MOUNTAIN
CORPORATION
and
PINNACLE SYSTEMS, INC.
Dated as of March 20, 2005
TABLE OF DEFINED
TERMS
Terms
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Reference in
Agreement
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Acquisition Proposal
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Section 6.1(f)
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Affiliate
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Section 3.2(d)
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Agreement
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Preamble
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Agreement of Merger
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Section 1.1
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Alternative Acquisition
Agreement
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Section 6.1(b)
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Antitrust Laws
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Section 6.6(b)
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Antitrust Order
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Section 6.6(b)
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Buyer
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Preamble
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Buyer Balance Sheet
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Section 4.4(b)
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Buyer Board
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Section 4.3(a)
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Buyer Charter Approval
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Section 4.3(a)
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Buyer Closing Price
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Section 2.2(e)
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Buyer Common Stock
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Section 2.1(c)
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Buyer Disclosure
Schedule
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Article IV
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Buyer Material Adverse
Effect
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Section 4.1
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Buyer Preferred Stock
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Section 4.2
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Buyer SEC Reports
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Section 4.4(a)
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Buyer Stockholder
Approvals
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Section 4.3(a)
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Buyer Stockholders
Meeting
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Section 3.4(d)
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Buyer Stockholder
Voting Agreement
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Preamble
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Buyer Transaction
Approval
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Section 4.3(a)
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Buyer Voting Proposals
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Section 3.4(d)
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Certificates
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Section 2.2(a)
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CGCL
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Preamble
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Closing
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Section 1.2
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Closing Date
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Section 1.2
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Code
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Preamble
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Company
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Preamble
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Company Balance Sheet
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Section 3.4(b)
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Company Board
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Section 3.3(a)
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Company Common Stock
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Section 2.1(b)
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Company Confidentiality
Agreement
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Section 5.2
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Company Disclosure
Schedule
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Article III
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Company Employee Plans
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Section 3.13(a)
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Company ESPP
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Section 2.3(e)
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Company Insiders
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Section 6.15(c)
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Company Intellectual
Property
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Section 3.9(b)
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Company Leases
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Section 3.8(b)
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Company Material
Adverse Effect
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Section 3.1(a)
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Company Material
Contract
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Section 3.10(a)
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Company Obligations
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Section 3.5
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iv
Terms
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Reference in
Agreement
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Company Permits
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Section 3.15
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Company Preferred Stock
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Section 3.2(a)
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Company Rights
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Section 3.2(d)
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Company Rights Plan
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Section 3.2(d)
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Company SEC Reports
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Section 3.4(a)
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Company Shareholder
Approval
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Section 3.3(a)
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Company Shareholders
Meeting
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Section 3.4(d)
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Company Shareholder
Voting Agreement
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Preamble
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Company Standard Form
Contract
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Section 3.10(e)
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Company Stock Options
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Section 2.3(a)(i)
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Company Stock Plans
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Section 2.3(a)(i)
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Company Voting Proposal
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Section 3.3(a)
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Confidentiality
Agreements
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Section 5.2
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Contamination
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Section 3.12(c)
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Continuing Employees
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Section 6.13
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Control
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Section 7.2(c)
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Control Test
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Section 7.2(c)
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Customer Deliverables
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Section 3.9(b)
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Dissenting Shares
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Section 2.4(a)
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Effective Time
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Section 1.1
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Employee Benefit Plan
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Section 3.13(a)
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Environmental Law
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Section 3.12(b)
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ERISA Affiliate
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Section 3.13(a)
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ERISA
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Section 3.13(a)
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Exchange Agent
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Section 2.2(a)
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Exchange Fund
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Section 2.2(a)
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Exchange Act
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Section 3.3(c)
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Exchange Ratio
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Section 2.1(c)
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Foreign Employees
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Section 3.16(b)
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GAAP
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Section 3.4(b)
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German Financial Statements
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Section 3.4(c)
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Governmental Entity
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Section 3.3(c)
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Hazardous Substance
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Section 3.12(e)
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HSR Act
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Section 3.3(c)
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Indemnified Parties
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Section 6.12(a)
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Insurance Policies
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Section 3.17
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Intellectual Property
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Section 3.9(a)
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Joint Proxy Statement/Prospectus
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Section 3.4(d)
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Liens
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Section 3.2(f)
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Major Customers
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Section 3.10(a)
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Major Customer
Contracts
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Section 3.10(a)
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Merger
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Preamble
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v
Terms
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Reference in
Agreement
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Merger Consideration
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Section 2.1(c)
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Open Source Materials
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Section 3.9(e)
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Ordinary Course of
Business
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Section 3.2(d)
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Outside Date
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Section 8.1(b)
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Per Share Cash Payment
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Section 2.1(c)
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Person
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Section 2.2(b)
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Registration Statement
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Section 3.4(d)
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Regulation M-A Filing
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Section 3.4(d)
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Release
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Section 3.12(d)
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Representatives
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Section 6.1(a)
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Rights Agreement
Amendment
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Section 3.24
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Rule 145 Affiliates
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Section 6.9
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Sarbanes-Oxley Act
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Section 3.4(f)
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SEC
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Section 3.3(c)
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Section 16 Information
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Section 6.15(b)
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Securities Act
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Section 3.2(d)
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Specified Time
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Section 6.1(a)
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Subsidiary
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Section 3.1(b)
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Superior Proposal
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Section 6.1(f)
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Surviving Corporation
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Section 1.3
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Tail Transaction
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Section 8.3(c)
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Tax Returns
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Section 3.7(a)
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Taxes
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Section 3.7(a)
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Third Party Intellectual
Property
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Section 3.9(b)
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Transitory Subsidiary
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Preamble
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UK Employees
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Section 3.13(k)
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UK Subsidiary
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Section 3.7(v)
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Unit
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Section 2.3(b)
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vi
AGREEMENT AND PLAN
OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER (this Agreement) is entered into as of March 20,
2005 by and among Avid Technology, Inc., a Delaware corporation (the Buyer),
Highest Mountain Corporation, a California corporation and a wholly owned
subsidiary of the Buyer (the Transitory Subsidiary), and Pinnacle Systems,
Inc., a California corporation (the Company).
WHEREAS,
the Boards of Directors of the Buyer and the Company deem it advisable and in
the best interests of each corporation and their stockholders and shareholders,
respectively, that the Buyer acquire the Company in order to advance the
long-term business interests of the Buyer and the Company;
WHEREAS,
the acquisition of the Company shall be effected through a merger (the Merger)
of the Transitory Subsidiary with and into the Company in accordance with the
terms of this Agreement and the California General Corporation Law (the CGCL),
as a result of which the Company shall become a wholly owned subsidiary of the
Buyer;
WHEREAS,
concurrently with the execution and delivery of this Agreement and as a
condition and inducement to the Buyers and the Companys willingness to enter
into this Agreement, the shareholders of the Company listed on Schedule A
have entered into the voting agreement, dated as of the date of this Agreement,
in the form attached hereto as Exhibit A (the Company Shareholder
Voting Agreement), pursuant to which such shareholders have, among other
things, granted the Buyer a proxy to vote all of the shares of capital stock of
the Company that such shareholders own in favor of the Company Voting Proposal
and the stockholders of the Buyer listed on Schedule A have entered into
the voting agreement, dated as of the date of this Agreement, in the form
attached hereto as Exhibit B (the Buyer Stockholder Voting Agreement),
pursuant to which such stockholders have, among other things, granted the
Company a proxy to vote all of the shares of capital stock of the Buyer that
such stockholders own in favor of the Buyer Voting Proposals; and
WHEREAS,
for United States federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the Code);
NOW,
THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Buyer, the Transitory Subsidiary and the Company agree
as follows:
ARTICLE I
1.1 Effective Time of the Merger. Subject to the provisions of this Agreement,
prior to the Closing, the Buyer shall prepare, and on the Closing Date or as
soon as practicable
thereafter the Buyer
shall cause to be filed with the Secretary of State of the State of California,
an Agreement of Merger (the Agreement of Merger) in such form as is required
by, and executed by the Transitory Subsidiary and the Company in accordance
with, the relevant provisions of the CGCL and shall make all other filings or
recordings required under the CGCL. The Merger shall become effective upon the
filing of the Agreement of Merger with the Secretary of State of the State of
California or at such later time as is established by the Buyer and the Company
and set forth in the Agreement of Merger (the Effective Time).
1.2 Closing. The
closing of the Merger (the Closing) shall take place at 1:00 p.m.,
Eastern time, on a date to be specified by the Buyer and the Company (the Closing
Date), which shall be no later than the second business day after satisfaction
or waiver of the conditions set forth in Article VII (other than delivery of
items to be delivered at the Closing and other than satisfaction of those
conditions that by their nature are to be satisfied at the Closing, it being
understood that the occurrence of the Closing shall remain subject to the
delivery of such items and the satisfaction or waiver of such conditions at the
Closing), at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State
Street, Boston, Massachusetts, unless another date, place or time is agreed to
in writing by the Buyer and the Company.
1.3 Effects of the Merger. At the Effective Time (i) the separate
existence of the Transitory Subsidiary shall cease and the Transitory
Subsidiary shall be merged with and into the Company (the Company following the
Merger is sometimes referred to herein as the Surviving Corporation),
(ii) the Articles of Incorporation of the Company as in effect on the date
of this Agreement shall be amended so that Article III of such Articles of
Incorporation reads in its entirety as follows:
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 1,000, all of which shall consist
of common stock, no par value per share, and, as so amended, such Articles of
Incorporation shall be the Articles of Incorporation of the Surviving
Corporation, until further amended in accordance with the CGCL and
(iii) the By-laws of the Company as in effect immediately prior to the
Effective Time shall be amended and restated to read the same as the By-laws of
the Transitory Subsidiary, except that all references to the name of the
Transitory Subsidiary shall be amended to refer to the name of the Company,
and, as so amended, such By-laws shall be the By-laws of the Surviving
Corporation, until further amended in accordance with the CGCL. The Merger shall have the effects set forth
in Section 1107 of the CGCL.
(a) The
directors of the Transitory Subsidiary immediately prior to the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the Articles of Incorporation and By-laws of the
Surviving Corporation.
(b) The
officers of the Transitory Subsidiary immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Articles of Incorporation and By-laws of the Surviving
Corporation.
2
ARTICLE II
2.1 Conversion of Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of the
capital stock of the Company or capital stock of the Transitory Subsidiary:
(a) Capital
Stock of the Transitory Subsidiary.
Each share of the common stock of the Transitory Subsidiary issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one fully paid and nonassessable share of common stock, without par
value per share, of the Surviving Corporation.
(b) Cancellation
of Buyer-Owned Stock. All shares of
common stock, without par value per share, of the Company (Company Common
Stock) that are owned by the Company or any wholly owned Subsidiary of the
Company and any shares of Company Common Stock owned by the Buyer, the
Transitory Subsidiary or any other wholly owned Subsidiary (as defined in
Section 3.1(b) hereof) of the Buyer immediately prior to the Effective
Time shall be cancelled and shall cease to exist and no stock of the Buyer or
other consideration shall be delivered in exchange therefor.
(c) Exchange
Ratio and Per Share Cash Consideration for Company Common Stock. Subject to Section 2.1(d) and Section 2.2,
each share of Company Common Stock (other than shares to be cancelled in
accordance with Section 2.1(b) and Dissenting Shares (as defined in
Section 2.4 below)) issued and outstanding immediately prior to the Effective
Time shall be automatically converted into the right to receive (i) 0.0869
share (the Exchange Ratio) of common stock, $.01 par value per share, of the
Buyer (Buyer Common Stock) plus (ii) $1.00 in cash (the Per Share Cash
Payment and, together with the foregoing Buyer Common Stock, the Merger
Consideration) upon surrender of the certificate representing such share of
Company Common Stock in the manner provided in Section 2.2. As of the Effective Time, all such shares of
Company Common Stock shall no longer be outstanding and shall automatically be
cancelled and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration, without interest on the Per Share Cash Payment, and any cash in
lieu of fractional shares of Buyer Common Stock to be issued or paid in
consideration therefor upon the surrender of such certificate in accordance
with Section 2.2, without interest.
(d) Changes
in Capitalization. The Exchange
Ratio shall be adjusted to reflect fully the effect of any reclassification,
stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Buyer Common Stock),
reorganization, recapitalization or other like change with respect to Buyer
Common Stock occurring (or for which a record date is established) after the
date hereof and prior to the Effective Time.
The Exchange Ratio and the Per Share Cash Payment shall be adjusted to
reflect fully the effect of any reclassification, stock split, reverse split,
stock dividend (including any dividend or distribution of securities
convertible into Company Common Stock), reorganization, recapitalization or
other like change with respect to Company Common Stock occurring (or for which
a record date is established) after the date hereof and prior to the Effective
Time.
3
2.2 Exchange of Certificates. The procedures for exchanging outstanding
shares of Company Common Stock for Merger Consideration pursuant to the Merger
are as follows:
(a) Exchange
Agent. As of the Effective Time, the
Buyer shall deposit with the Buyers transfer agent or another bank or trust
company designated by the Buyer and reasonably acceptable to the Company (the Exchange
Agent), for the benefit of the holders of shares of Company Common Stock, for
exchange in accordance with this Section 2.2, through the Exchange Agent,
(i) certificates representing the shares of Buyer Common Stock payable with
respect to the Company Common Stock outstanding as of the Effective Time
and the aggregate Per Share Cash Payment payable with respect to the Company
Common Stock outstanding as of the Effective Time (such shares of Buyer Common
Stock, together with any dividends or distributions with respect thereto with a
record date after the Effective Time, and such Per Share Cash Payment being
hereinafter referred to as the Exchange Fund) issuable pursuant to
Section 2.1 in exchange for outstanding shares of Company Common Stock,
(ii) cash in an amount sufficient to make payments for fractional shares
required pursuant to Section 2.2(e), and (iii) any dividends or
distributions to which holders of certificates that immediately prior to the
Effective Time represented outstanding shares of Company Common Stock (the Certificates)
whose shares were converted pursuant to Section 2.1 into the right to receive
shares of Buyer Common Stock may then be entitled pursuant to
Section 2.2(c).
(b) Exchange
Procedures. As soon as reasonably
practicable after the Effective Time (and in any event, no later than five
business days after the Effective Time), the Exchange Agent shall mail to each
holder of record of a Certificate (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as the Buyer may
reasonably specify) and (ii) instructions for effecting the surrender of
the Certificates in exchange for (A) certificates representing shares of Buyer
Common Stock (plus cash in lieu of fractional shares, if any, of Buyer Common
Stock and any dividends or distributions as provided below) plus (B) the Per
Share Cash Payment payable with respect such Certificate. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by the Buyer, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor (and the Exchange Agent shall transmit to such holder no
later than five business days after receipt of the foregoing items from such
holder) a certificate representing that number of whole shares of Buyer Common
Stock and the Per Share Cash Payment that such holder has the right to receive
pursuant to the provisions of this Article II plus cash in lieu of
fractional shares pursuant to Section 2.2(e) and any dividends or
distributions then payable pursuant to Section 2.2(c), and the Certificate
so surrendered shall immediately be cancelled.
No interest will accrue or be paid on any payment payable upon the
surrender of any Certificate for the benefit of the holder of such Certificate. In the event of a transfer of ownership of
Company Common Stock that is not registered in the transfer records of the
Company, a certificate representing the proper number of shares of Buyer Common
Stock and the Per Share Cash Payment, plus cash in lieu of fractional shares
pursuant to Section 2.2(e) and any dividends or distributions then payable
pursuant to Section 2.2(c) may be issued or paid to a Person (as defined
below) other than the Person in whose name the Certificate so surrendered is
registered,
4
if such Certificate is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and, if applicable, by evidence that any
stock transfer taxes have been paid.
Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the certificate representing
shares of Buyer Common Stock and the Per Share Cash Payment payable with respect
such Certificate, plus cash in lieu of fractional shares pursuant to
Section 2.2(e) and any dividends or distributions then payable pursuant to
Section 2.2(c) as contemplated by this Section 2.2. For purposes of this Agreement, the term Person
shall mean an individual, corporation, partnership, limited liability company,
joint venture, association, trust, unincorporated organization or other entity.
(c) Distributions
with Respect to Unexchanged Shares.
No dividends or other distributions declared or made after the Effective
Time with respect to Buyer Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate until the
holder of record of such Certificate shall surrender such Certificate. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be issued and paid to
the record holder of the Certificate, at the time of such surrender, the amount
of dividends or other distributions with a record date after the Effective Time
previously paid with respect to such whole shares of Buyer Common Stock,
without interest, and, at the appropriate payment date, the amount of dividends
or other distributions having a record date after the Effective Time but prior
to surrender and a payment date subsequent to surrender that are payable with
respect to such whole shares of Buyer Common Stock.
(d) No
Further Ownership Rights in Company Common Stock. All shares of Buyer Common Stock issued upon
the surrender for exchange of Certificates in accordance with the terms hereof
(including any cash or dividends or other distributions paid pursuant to
Sections 2.2(c) or 2.2(e)) shall be deemed to have been issued (and paid)
in full satisfaction of all rights pertaining to such shares of Company Common
Stock, and from and after the Effective Time there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock that were outstanding
immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Exchange Agent for any reason, they shall be
cancelled and exchanged as provided in this Article II.
(e) No
Fractional Shares. No certificate or
scrip representing fractional shares of Buyer Common Stock shall be issued upon
the surrender for exchange of Certificates, and such fractional share interests
shall not entitle the owner thereof to vote or to any other rights of a
stockholder of the Buyer.
Notwithstanding any other provision of this Agreement, each holder of
shares of Company Common Stock converted pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Buyer Common
Stock (after taking into account all Certificates delivered by such holder and
the aggregate number of shares of Company Common Stock represented thereby)
shall receive, in lieu thereof, cash (without interest) in an amount equal to
such fractional part of a share of Buyer Common Stock multiplied by the Buyer
Closing Price. Buyer Closing Price
shall mean the last reported sales price of Buyer Common Stock at 4:00 p.m.,
Eastern time, end of regular trading hours on The Nasdaq Stock Market on
5
the Effective Date (or,
if the Effective Date is not a trading day, the last trading day preceding the
Effective Date).
(f) Termination
of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of Company Common
Stock for a period of one year after the Effective Time shall be delivered to
the Buyer, upon demand, and any former holder of Company Common Stock who has
not previously complied with this Section 2.2 shall thereafter look only
to the Buyer, as a general unsecured creditor, for payment of its claim for
Buyer Common Stock, the Per Share Cash Payment, any cash in lieu of fractional
shares of Buyer Common Stock and any dividends or distributions with respect to
Buyer Common Stock.
(g) No
Liability. To the extent permitted
by applicable law, none of the Buyer, the Transitory Subsidiary, the Company,
the Surviving Corporation or the Exchange Agent shall be liable to any holder
of shares of Company Common Stock or Buyer Common Stock, as the case may be, for
such shares (or dividends or distributions with respect thereto) delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificate shall
not have been surrendered prior to three years after the Effective Time (or
immediately prior to such earlier date on which any shares of Buyer Common
Stock, the Per Share Cash Payment and any cash payable to the holder of such
Certificate or any dividends or distributions payable to the holder of such
Certificate pursuant to this Article II would otherwise escheat to or become
the property of any Governmental Entity), any such shares of Buyer Common
Stock, the Per Share Cash Payment or cash, dividends or distributions in
respect of such Certificate shall, to the extent permitted by applicable law,
become the property of the Surviving Corporation, free and clear of all claims
or interest of any Person previously entitled thereto.
(h) Withholding
Taxes. Notwithstanding any other provision in this Agreement, the
Buyer, the Company, the Surviving Corporation, the Transitory Subsidiary and
the Exchange Agent shall have the right to deduct and withhold Taxes from any
payments to be made hereunder if such withholding is required by law and to
collect any necessary Tax forms, including Form W-9 or the appropriate series
of Form W-8, as applicable, or any similar information, from the holders of
shares of Company Common Stock and any other recipients of payments hereunder.
To the extent that amounts are so withheld, such withheld amounts shall be
treated for all purposes of this Agreement as having been delivered and paid to
the holder of the shares of Company Common Stock or other recipient of payments
in respect of which such deduction and withholding was made.
(i) Lost
Certificates. If any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such Certificate to be lost, stolen or
destroyed and, if required by the Surviving Corporation, the posting by such
Person of a bond in such reasonable amount as the Surviving Corporation may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificate the shares of Buyer Common Stock, the Per Share
Cash Payment and any cash in lieu of fractional shares, and unpaid dividends
and distributions on shares of Buyer Common Stock deliverable in respect
thereof pursuant to this Agreement.
6
(a) The
Company shall take such action as shall be required:
(i) with
respect to each option (the Company Stock Options) to purchase Company Common
Stock granted under any stock option plans or other equity-related plans of the
Company (the Company Stock Plans) outstanding immediately prior to the
Effective Time, to cause the vesting of any unvested portion of such Company
Stock Options to be accelerated in full effective immediately prior to the
Effective Time; and
(ii) to
cause each Company Stock Option outstanding immediately prior to the Effective
Time to be (A) exercised for shares of Company Common Stock prior to the
Effective Time, (B) converted into the right to receive shares of Buyer Common
Stock in accordance with Section 2.3(b) as of or immediately prior to the
Effective Time or (C) cancelled in accordance with 2.3(c) as of or immediately
prior to the Effective Time.
(b) Each holder of a Company Stock Option
outstanding immediately prior to the Effective Time with an exercise price per
share of Company Common Stock less than the sum of (i) the Exchange Ratio
multiplied by the Buyer Closing Price plus (ii) $1.00 shall receive from the
Buyer, in respect and in consideration of each Company Stock Option so
cancelled, upon surrender of such option, a number of Units per share of
Company Common Stock subject to such Company Stock Option equal to a fraction
(i) the numerator of which is (A) the Exchange Ratio multiplied by the Buyer
Closing Price plus (B) $1.00 less (C) the exercise price per share of Company
Common Stock subject to such Company Stock Option, and (ii) the denominator of
which is (A) the Exchange Ratio multiplied by the Buyer Closing Price plus (B)
$1.00. Each Unit shall consist of a
fraction of a share of Buyer Common Stock equal to the Exchange Ratio plus
$1.00 in cash.
(c) Each
Company Stock Option outstanding immediately prior to the Effective Time with
an exercise price per share of Company Common Stock greater than or equal to
the sum of (i) the Exchange Ratio multiplied by Buyer Closing Price plus (ii)
$1.00 shall be cancelled and have no further force or effect as of the
Effective Time.
(d) As
soon as practicable following the execution of this Agreement, the Company
shall mail to each Person who is a holder of a Company Stock Option a letter
describing the treatment of such Company Stock Option pursuant to this Section
2.3 and providing instructions for use in (i) exercising such Company Stock
Options for shares of Company Common Stock prior to the Effective Time or (ii)
if not exercised prior to the Effective Time, receiving Buyer Common Stock and
cash pursuant to Section 2.3(b) in exchange for the cancellation of such
Company Stock Option.
(e) The
Company shall terminate its 2004 Employee Stock Purchase Plan (the Company
ESPP) in accordance with its terms as of or prior to the Effective Time.
7
(a) Notwithstanding
anything to the contrary contained in this Agreement, shares of Company Common
Stock outstanding on the date for determination of shareholders entitled to
vote on the Merger and not voted in favor of the approval of the principal
terms of the Merger (or in the case of shares described in Section
1300(b)(i)(A) or (B) of the CGCL (without regard to the provisions in that
paragraph) that were voted against the Merger) and with respect to which
appraisal shall have been duly demanded and perfected in accordance with
Chapter 13 of the CGCL and not effectively withdrawn or forfeited prior to the
Effective Time (Dissenting Shares) shall not be converted into or represent
the right to receive shares of Buyer Common Stock in accordance with Section
2.1 unless the rights of the holder of such Dissenting Shares to appraisal
shall have ceased in accordance with Section 1309 of the CGCL. If the holder of Dissenting shares has so
forfeited or withdrawn such holders rights to appraisal of Dissenting Shares,
then (i) as of the occurrence of such event, such holders Dissenting
Shares shall cease to be Dissenting Shares and shall be converted into and
represent the right to receive shares of Buyer Common Stock in accordance with
Section 2.1, and (ii) following the occurrence of such event, upon proper
surrender of the Certificate in accordance with Section 2.2 the Buyer
shall deliver to such the holder of the Dissenting Shares the shares of Buyer
Common Stock to which such holder is entitled pursuant to Section 2.1.
(b) The
Company shall give the Buyer (i) prompt notice of any written demands for
appraisal of any Company Common Stock, withdrawals of such demands, and any
other instruments that relate to such demands received by the Company and
(ii) the opportunity to determine the statement of price required by
Section 1301(a) of the CGCL and to direct all negotiations and proceedings with
respect to demands for appraisal under the CGCL. The Company shall not, except with the prior
written consent of the Buyer, make any payment with respect to any demands for
appraisal of Company Common Stock or offer to settle or settle any such
demands.
The
Company represents and warrants to the Buyer and the Transitory Subsidiary that
the statements contained in this Article III are true and correct, except
as expressly set forth in the disclosure schedule delivered by the Company to
the Buyer and the Transitory Subsidiary on or before the date of this Agreement
(the Company Disclosure Schedule). The
Company Disclosure Schedule shall be arranged in sections and paragraphs
corresponding to the numbered and lettered sections and paragraphs contained in
this Article III, and the disclosure in any section or paragraph shall
qualify (a) the corresponding section or paragraph in this Article III and (b)
the other sections and paragraphs in this Article III only to the extent
that it is clear from a reading of such disclosure that it also qualifies or
applies to such other sections and paragraphs.
(a) Each
of the Company and its Subsidiaries is a corporation or limited partnership, as
applicable, duly organized, validly existing and in good standing under the
laws
8
of the jurisdiction of
its incorporation, has all requisite corporate power and authority to own,
lease and operate its properties and assets and to carry on its business as now
being conducted and as proposed to be conducted, and is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
listed in Section 3.1(a) of the Company Disclosure Schedule, which
jurisdictions constitute the only jurisdictions in which the character of the
properties it owns, operates or leases or the nature of its activities makes
such qualification necessary, except for such failures to be so organized,
qualified or in good standing, individually or in the aggregate, that have not
had, and may not reasonably be expected to have, a Company Material Adverse
Effect. The Company has delivered or
made available to the Buyer correct and complete copies of the minutes of all
meetings of the shareholders, the Board of Directors and each committee of the
Boards of Directors of the Company and each of its Subsidiaries held since
January 1, 2002 (excluding all names and information required to be redacted in
compliance with applicable laws governing the sharing of information or in
accordance with existing nondisclosure agreements). For purposes of this Agreement, the term Company
Material Adverse Effect means any material adverse change, event, circumstance
or development with respect to, or material adverse effect on, (i) the
business, assets, liabilities, capitalization, condition (financial or other),
or results of operations of the Company and its Subsidiaries, taken as a whole,
(ii) the ability of the Company to consummate the transactions contemplated by
this Agreement or (iii) the ability of the Buyer to operate the business of the
Company and each of its Subsidiaries immediately after the Closing; provided,
however, none of the following in and of itself or themselves shall be deemed
to constitute a Company Material Adverse Effect: (w) any decrease in the market
price or trading volume of the Company Common Stock after the date hereof
(provided, however, that the exception in this clause shall not in any way
prevent or otherwise affect a determination that any change, event,
circumstance, development or effect underlying such decrease has resulted in,
or contributed to, a Company Material Adverse Effect); (x) any failure by the
Company to meet internal projections or forecasts or published revenue or
earnings predictions for any period ending (or for which revenues or earnings are
released) on or after the date of this Agreement (provided, however, that the
exception in this clause shall not in any way prevent or otherwise affect a
determination that any change, event, circumstance, development or effect
underlying such failure has resulted in, or contributed to, a Company Material
Adverse Effect); (y) any cancellation or deferral of customer orders,
reductions in sales, disruption in supplier, distributor, partner or similar
relationships or loss of broadcast employees, in each case to the extent
attributable to the public announcement or pendency of the Merger; or (z) any
adverse change, event, circumstance, development or effect that results from
changes attributable to conditions affecting the industries in which the
Company participates or the economy as a whole in the United States or the
other countries in which the Company conducts its principal operations or
derives significant sales (which changes in each case do not disproportionately
adversely affect the Company and its Subsidiaries compared to other companies
of similar size operating in the industry in which the Company and its
Subsidiaries operate). For the avoidance
of doubt, the parties agree that the terms material, materially or materiality
as used in this Agreement with an initial lower case m shall have their
respective customary and ordinary meanings, without regard to the meanings
ascribed to Company Material Adverse Effect in the prior sentence of this
paragraph or Buyer Material Adverse Effect in Section 4.1.
9
(b) Section
3.1(b) of the Company Disclosure Schedule sets forth a complete and accurate
list of all of the Companys Subsidiaries and the Companys direct or indirect
equity interest therein. Except as set
forth in Section 3.1(b) of the Company Disclosure Schedule, neither the Company
nor any of its Subsidiaries directly or indirectly owns any equity, membership,
partnership or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity, membership, partnership or similar
interest in, any corporation, partnership, joint venture, limited liability
company or other business association or entity, whether incorporated or
unincorporated, and neither the Company, nor any of its Subsidiaries, has, at
any time, been a general partner or managing member of any general partnership,
limited partnership, limited liability company or other entity. As used in this Agreement, the term Subsidiary
means, with respect to a party, any corporation, partnership, joint venture,
limited liability company or other business association or entity, whether
incorporated or unincorporated, of which (i) such party or any other
Subsidiary of such party is a general partner or a managing member (excluding
partnerships, the general partnership interests of which held by such party
and/or one or more of its Subsidiaries do not have a majority of the voting
interest in such partnership), (ii) such party and/or one or more of its
Subsidiaries holds voting power to elect a majority of the board of directors
or other governing body performing similar functions, or (iii) such party
and/or one or more of its Subsidiaries, directly or indirectly, owns or
controls more than 50% of the equity, membership, partnership or similar
interests.
(c) The
Company has delivered or made available to the Buyer complete and accurate
copies of the Articles of Incorporation and By-laws of the Company and of the
charter, by-laws, memorandum or articles of association or other organizational
documents of each Subsidiary of the Company.
(a) The
authorized capital stock of the Company consists of 120,000,000 shares of
Company Common Stock and 5,000,000 shares of preferred stock, no par value per share
(Company Preferred Stock), of which 25,000 shares are designated Series A
Participating Preferred Stock. The
rights and privileges of each class of the Companys capital stock are as set
forth in the Companys Articles of Incorporation. As of March 18, 2005, (i) 70,059,873
shares of Company Common Stock were issued and outstanding, (ii) no shares of
Company Common Stock were held by the Company or by Subsidiaries of the
Company, and (iii) no shares of Company Preferred Stock were issued or outstanding.
(b) Section
3.2(b) of the Company Disclosure Schedule lists all issued and outstanding
shares of Company Common Stock that constitute restricted stock or that are
otherwise subject to a repurchase or redemption right or right of first refusal
in favor of the Company; the name of the applicable shareholder, the lapsing
schedule for any such shares, including the extent to which any such repurchase
or redemption right or right of first refusal has lapsed as of the date of this
Agreement and whether (and to what extent) the lapsing will be accelerated in
any way by the transactions contemplated by this Agreement or by termination of
employment or change in position following consummation of the Merger.
(c) Section
3.2(c) of the Company Disclosure Schedule lists the number of shares of Company
Common Stock reserved for future issuance pursuant Company Stock Plans
10
and sets forth a complete
and accurate list of all holders of Company Stock Options under the Company
Stock Plans, indicating with respect to each Company Stock Option, the number
of shares of Company Common Stock subject to such Company Stock Option, the
exercise price, the date of grant, vesting schedule and the expiration date
thereof, including the extent to which any vesting has occurred as of the date
of this Agreement, and whether (and to what extent) the vesting of such Company
Stock Options will be accelerated in any way by the transactions contemplated
by this Agreement or by the termination of employment or engagement or change
in position of any holder thereof following consummation of the Merger. There are no warrants or other outstanding
rights (other than Company Stock Options) to purchase shares of Company Common
Stock outstanding as of the date of this Agreement. The Company has delivered or made available
to the Buyer accurate and complete copies of all Company Stock Plans and the
forms of all stock option agreements evidencing Company Stock Options.
(d) Except
(x) as set forth in this Section 3.2, (y) as reserved for future grants under
Company Stock Plans, and (z) the rights (the Company Rights) issued and
issuable under the Amended and Restated Preferred Stock Rights Agreement dated
as of October 20, 2004, between the Company and Mellon Investor Services LLC
f/k/a ChaseMellon Shareholder Services, L.L.C. (the Company Rights Plan), (i)
there are no equity securities of any class of the Company or any of its
Subsidiaries (other than equity securities of any such Subsidiary that are
directly or indirectly owned by the Company), or any security exchangeable into
or exercisable for such equity securities, issued, reserved for issuance or
outstanding and (ii) there are no options, warrants, equity securities, calls,
rights, commitments or agreements of any character to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound obligating the Company or any of its Subsidiaries to
issue, exchange, transfer, deliver or sell, or cause to be issued, exchanged,
transferred, delivered or sold, additional shares of capital stock or other
equity interests of the Company or any of its Subsidiaries or any security or
rights convertible into or exchangeable or exercisable for any such shares or
other equity interests, or obligating the Company or any of its Subsidiaries to
grant, extend, accelerate the vesting of, otherwise modify or amend or enter
into any such option, warrant, equity security, call, right, commitment or
agreement. Neither the Company nor any
of its Subsidiaries has outstanding any stock appreciation rights, phantom
stock, performance based equity rights or similar rights or obligations. There are no obligations, contingent or otherwise,
of the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any shares of Company Common Stock or the capital stock of the Company
or any of its Subsidiaries or to provide funds to or make any investment (in
the form of a loan, capital contribution or otherwise) in the Company or any
Subsidiary of the Company or any other entity, other than guarantees of bank
obligations of Subsidiaries of the Company entered into in the Ordinary Course
of Business and listed in Section 3.2(d) of the Company Disclosure Schedule. Other than the Company Shareholder Voting
Agreement, neither the Company nor any of its Affiliates is a party to or is
bound by any, and to the knowledge of the Company, there are no, agreements or
understandings with respect to the voting (including voting trusts and proxies)
or sale or transfer (including agreements imposing transfer restrictions) of
any shares of capital stock or other equity interests of the Company or any of
its Subsidiaries. For purposes of this
Agreement, the term Affiliate when used with respect to any party shall mean
any Person who is an affiliate of that party within the meaning of Rule 405
promulgated under the Securities Act of 1933, as amended (the Securities
Act). Except as contemplated by this
Agreement, there are no
11
registration rights, and
there is no rights agreement, poison pill anti-takeover plan or other
agreement or understanding to which the Company or any of its Subsidiaries is a
party or by which it or they are bound with respect to any equity security of
any class of the Company or any of its Subsidiaries or with respect to any
equity security, partnership interest or similar ownership interest of any
class of any of its Subsidiaries. For
the purposes of this Agreement, Ordinary Course of Business means the
ordinary course of business consistent with past custom and practice (including
with respect to frequency and amount).
(e) All
outstanding shares of Company Common Stock are, and all shares of Company
Common Stock subject to issuance as specified in Section 3.2(c) above, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be, duly authorized, validly issued, fully paid
and nonassessable and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of the CGCL, the Companys
Articles of Incorporation or By-laws or any agreement to which the Company is a
party or is otherwise bound.
(f) All
of the outstanding shares of capital stock and other equity securities or
interests of each of the Companys Subsidiaries are duly authorized, validly
issued, fully paid, not repaid (in the case of the Companys Subsidiaries
incorporated in foreign jurisdictions), nonassessable and free of preemptive
rights and all such shares (other than nominee shareholdings or directors
qualifying shares in the case of non-U.S. Subsidiaries, all of which the
Company has the power to cause to be transferred for no or nominal
consideration to the Buyer or the Buyers designee) are owned, of record and
beneficially, by the Company or another Subsidiary of the Company free and
clear of all mortgages, security interests, pledges, liens, charges or
encumbrances of any nature (Liens) and agreements in respect of, or
limitations on, the Companys voting rights. The Company has made available to
the Buyer complete and accurate copies of the charter, by-laws, memorandum or
articles of association or other organizational documents of each Subsidiary of
the Company, and all such documents so delivered or made available are in full
force and effect. The Company does not
control directly or indirectly or have any direct or indirect equity
participation or similar interest in any corporation, partnership, limited
liability company, joint venture, trust or other business association or entity
that is not a Subsidiary of the Company.
No consent of the holders of Company Stock Options is
required in connection with the actions contemplated by Section 2.3.
(a) The
Company has all requisite corporate power and authority to enter into this
Agreement and, subject only to the approval of the principal terms of the
Merger (the Company Voting Proposal) by the Companys shareholders under the
CGCL (the Company Shareholder Approval), to consummate the transactions
contemplated by this Agreement. Without
limiting the generality of the foregoing, the Board of Directors of the Company
(the Company Board), at a meeting duly called and held, by the unanimous vote
of all directors (i) determined that the Merger is fair and in the best
interests of the Company and its shareholders, (ii) approved this Agreement and
approved the Agreement of Merger in
12
accordance with the
provisions of the CGCL, (iii) directed that this Agreement and the
principal terms of the Merger be submitted to the shareholders of the Company
for their approval and resolved to recommend that the shareholders of the
Company vote in favor of the approval of the principal terms of the Merger, and
(iv) to the extent necessary, adopted a resolution having the effect of causing
the Company not to be subject to any state takeover law or similar law that
might otherwise apply to the Merger and any other transactions contemplated by
this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement by the Company have been duly authorized by all
necessary corporate action on the part of the Company, subject only to the
required receipt of the Company Shareholder Approval. This Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding obligation of
the Company, enforceable in accordance with its terms.
(b) The
execution and delivery of this Agreement by the Company do not, and the
consummation by the Company of the transactions contemplated by this Agreement
shall not, (i) conflict with, or result in any violation or breach of, any
provision of the Articles of Incorporation or By-laws of the Company or of the
charter, by-laws, memorandum or articles of association or other organizational
document of any Subsidiary of the Company, (ii) conflict with, or result
in any violation or breach of, or constitute (with or without notice or lapse
of time, or both) a default (or give rise to a right of termination, cancellation
or acceleration of any obligation or loss of any benefit) under, or require a
consent or waiver under, constitute a change in control under, require the
payment of a penalty under or result in the imposition of any Lien on the
Companys or any of its Subsidiarys assets under, any of the terms, conditions
or provisions of any Company Material Contract (as defined in Section 3.10
hereof), or (iii) subject to obtaining the Company Shareholder Approval
and compliance with the requirements specified in clauses (i) through (v) of
Section 3.3(c), conflict with or violate any permit, concession, franchise,
license, judgment, injunction, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or any of its Subsidiaries or any of its
or their properties or assets, except in the case of clauses (ii) and (iii) of
this Section 3.3(b) for any such conflicts, violations, breaches,
defaults, terminations, cancellations, accelerations or losses that,
individually or in the aggregate, may not reasonably be expected to have a
Company Material Adverse Effect. Section
3.3(b) of the Company Disclosure Schedule lists all material consents, waivers
and approvals under any Company Material Contract required to be obtained in
connection with the consummation of the transactions contemplated hereby.
(c) No
consent, approval, license, permit, order or authorization of, or registration,
declaration, notice or filing with, any court, arbitrational tribunal,
administrative agency or commission or other governmental or regulatory
authority, agency or instrumentality or any stock market or stock exchange on
which shares of Company Common Stock are listed for trading (a Governmental
Entity) is required by or with respect to the Company or any of its Subsidiaries
in connection with the execution and delivery of this Agreement by the Company
or the consummation by the Company of the transactions contemplated by this
Agreement, except for (i) the pre-merger notification requirements under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act)
and compliance with other applicable Antitrust Laws, (ii) the filing of the
Agreement of Merger with the California Secretary of State and appropriate
corresponding documents with the appropriate authorities of other states in
13
which the Company is
qualified as a foreign corporation to transact business, (iii) the filing of
the Joint Proxy Statement/Prospectus with the Securities and Exchange Commission
(the SEC) in accordance with the Securities Exchange Act of 1934, as amended
(the Exchange Act), (iv) the filing of such reports, schedules or materials
under Section 13 of or Rule 14a-12 under the Exchange Act and materials under
Rule 165 and Rule 425 under the Securities Act as may be required in connection
with this Agreement and the transactions contemplated hereby, (v) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state securities laws and the
securities laws of any foreign country and (vi) such other consents, licenses,
permits, orders, authorizations, filings, approvals and registrations which, if
not obtained or made, could not reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect.
(d) The
affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock on the record date for the Company Shareholders Meeting is
the only vote of the holders of any class or series of the Companys capital
stock or other securities necessary for the approval of the principal terms of
the Merger and for the consummation by the Company of the other transactions
contemplated by this Agreement. There
are no bonds, debentures, notes or other indebtedness of the Company having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which shareholders of the Company may vote.
(a) The
Company has filed all registration statements, forms, reports and other
documents required to be filed by the Company with the SEC since July 1, 2001,
and has made available to the Buyer copies of all registration statements,
forms, reports and other documents filed by the Company with the SEC since such
date, all of which are publicly available on the SECs EDGAR system. All such registration statements, forms,
reports and other documents (including those that the Company files after the
date hereof until the Effective Time) are referred to herein as the Company
SEC Reports. The Company SEC Reports
(i) were, and with respect to Company SEC Reports filed after the date of this
Agreement and prior to the Effective Time will be, filed on a timely basis,
(ii) at the time filed, were, and with respect to Company SEC Reports filed
after the date of this Agreement and prior to the Effective Time will be,
prepared in compliance in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to such Company
SEC Reports, and (iii) did not at the time they were filed, and with
respect to Company SEC Reports filed after the date of this Agreement and prior
to the Effective Time will not at the time they are filed, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such Company SEC Reports or necessary in order to make the statements
in such Company SEC Reports, in the light of the circumstances under which they
were made, not misleading. No Subsidiary
of the Company is subject to the reporting requirements of Section 13(a) or
Section 15(d) of the Exchange Act. There
are no off-balance sheet structures or transactions with respect to the Company
or any of its Subsidiaries that would be required to be reported or set forth
in the Company SEC Reports.
(b) Each
of the consolidated financial statements (including, in each case, any related
notes and schedules) contained or incorporated by reference in the Company SEC
14
Reports at the time filed
(i) complied, and with respect to Company SEC Reports filed after the date of
this Agreement and prior to the Effective Time will comply, as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, (ii) were, and with
respect to Company SEC Reports filed after the date of this Agreement and prior
to the Effective Time will be, prepared in accordance with United States
generally accepted accounting principles (GAAP) applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to
such financial statements or, in the case of unaudited interim financial
statements, as permitted by the SEC on Form 10-Q under the Exchange Act)
and (iii) fairly presented, and with respect to Company SEC Reports filed
after the date of this Agreement and prior to the Effective Time will fairly
present, the consolidated financial position of the Company and its
Subsidiaries as of the dates indicated and the consolidated results of its
operations and cash flows for the periods indicated, consistent with the books
and records of the Company and its Subsidiaries, except that the unaudited
interim financial statements were or are subject to normal and recurring year-end
adjustments that were not or are not expected to be material in amount. The consolidated, unaudited balance sheet of
the Company as of December 31, 2004 is referred to herein as the Company
Balance Sheet.
(c) Section
3.4(c) of the Company Disclosure Schedule contains complete and correct copies
of the unaudited financial statements of Pinnacle Systems GmbH, Braunschweig,
as of June 30, 2004, the audited financial statements of PS Miro Holdings Inc.
& Co. KG, Munich, as of June 30, 2004 (collectively, the German Financial
Statements). The German Financial
Statements (i) have been prepared in accordance with German Generally Accepted
Accounting Principles (Grundsätze ordnungsgemäßer Buchführung und
Bilanzierung), including without limitation having regard to the principles of
accounting and valuation continuity and in compliance with the pertinent
commercial law provisions, applied on a consistent basis throughout the periods
involved, (ii) fairly present the asset, financial and earnings situation
of Pinnacle Systems GmbH, Braunschweig, and PS Miro Holdings Inc. & Co. KG,
Munich, as of the dates indicated, consistent with the books and records of
Pinnacle Systems GmbH, Braunschweig, and PS Miro Holdings Inc. & Co. KG,
Munich, (iii) observe the principle of the minimum valuation (Niederstwertprinzip)
and (iv) accurately and completely reflect all liabilities and contingent
liabilities (including but not limited to taxes and accruals for severance
payments under Articles 89b of the German Commercial Code and/or the Council
Directive 86/653/EEC of December 18, 1986 on the coordination of the laws of
the Member States relating to self-employed commercial agents) of Pinnacle
Systems GmbH, Braunschweig, and PS Miro Holdings Inc. & Co. KG, Munich.
(d) The
information to be supplied by or on behalf of the Company for inclusion or
incorporation by reference in the registration statement on Form S-4 to be
filed by the Buyer pursuant to which shares of Buyer Common Stock issued in
connection with the Merger shall be registered under the Securities Act (the Registration
Statement), or to be included or supplied by or on behalf of the Company for
inclusion in any filing pursuant to Rule 165 and Rule 425 under the Securities
Act or Rule 14a-12 under the Exchange Act (each a Regulation M-A Filing),
shall not at the time the Registration Statement or any Regulation M-A Filing
is filed with the SEC, at any time the Registration Statement is amended or
supplemented, or at the time the Registration Statement is declared effective
by the SEC (as
15
applicable), 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. The information to be
supplied by or on behalf of the Company for inclusion in the joint proxy
statement/prospectus to be sent to the shareholders and stockholders,
respectively, of the Company and the Buyer (the Joint Proxy
Statement/Prospectus) in connection with (i) the meeting of the Companys
shareholders to consider the Company Voting Proposal (the Company Shareholders
Meeting) (which shall be deemed to include all information about or relating
to the Company, the Company Voting Proposal and the Company Shareholders
Meeting), and (ii) the meeting of the Buyers stockholders (the Buyer
Stockholders Meeting) to consider the issuance of shares of Buyer Common Stock
and the amendment to the Buyers Certificate of Incorporation (the Buyer
Voting Proposals), on the date the Joint Proxy Statement/Prospectus is first
mailed to shareholders and stockholders, respectively, of the Company or the
Buyer, or at the time of the Company Shareholders Meeting or the Buyer
Stockholders Meeting or at the Effective Time, contain any statement which, at
such time and in light of the circumstances under which it shall be made, is
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made in the Joint Proxy
Statement/Prospectus not false or misleading; or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of proxies for the Company Shareholders Meeting or
the Buyer Stockholders Meeting that has become false or misleading. If at any time prior to the Effective Time
any fact or event relating to the Company or any of its Affiliates that should
be set forth in an amendment to the Registration Statement or a supplement to
the Joint Proxy Statement/Prospectus should be discovered by the Company or
should occur, the Company shall promptly inform the Buyer of such fact or
event.
(e) The Company maintains disclosure controls and
procedures required by Rule 13a-15(e) or 15d-15(e) under the Exchange Act. Such disclosure controls and procedures are
effective to provide reasonable assurance that information the Company is
required to disclose in reports that it files or submits under the Exchange Act
is recorded, processed, summarized and reported within the time periods
specified in SEC rules and forms, and that such information is accumulated and
communicated to the Companys management as appropriate, to allow timely
decisions regarding required disclosure.
The Company has disclosed, based on its most recent evaluation of
internal control over financial reporting prior to the date hereof, to
the Companys auditors and the Audit Committee of the Companys Board of
Directors (A) any significant deficiencies or material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect in any material respect the Companys ability to
record, process, summarize and report financial data and (B) any fraud,
whether or not material, that involves management or other employees of the
Company or its Subsidiaries who have a significant role in the Companys
internal control over financial reporting.
Since January 1, 2002, neither the Company nor any of its Subsidiaries
nor, to the knowledge of the Company, any director, officer, employee, auditor,
accountant or representative of the Company or any of its Subsidiaries has
received or otherwise had or obtained knowledge of any material complaint,
allegation, assertion or claim, whether written or oral, regarding the
accounting or auditing practices, procedures, methodologies or methods of the
Company or any of its Subsidiaries or their respective internal accounting
controls including any material complaint, allegation, assertion or claim that
the Company or any of its Subsidiaries has
16
engaged in questionable
accounting or auditing practices. No attorney representing the Company or any
of its Subsidiaries, whether or not employed by the Company or any of its Subsidiaries,
has reported evidence of a violation of securities laws, breach of fiduciary
duty or similar violation by the Company or any of its officers, directors,
employees or agents to the Companys Board of Directors or any committee
thereof or to any director or officer of the Company.
(f) The
Company is in compliance in all material respects with the applicable
provisions of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act) and
with the applicable listing and other rules and regulations of The Nasdaq
National Market and has not since January 1, 2002 received any notice from The
Nasdaq National Market asserting any non-compliance with such rules and
regulations. Each required form, report
and document containing financial statements that the Company has filed with or
submitted to the SEC since August 29, 2002 was accompanied by the
certifications required to be filed or submitted by the Companys principal
executive officer and principal financial officer pursuant to the
Sarbanes-Oxley Act and, at the time of filing or submission of each such
certification, such certification was true and accurate and complied with the
Sarbanes-Oxley Act and the rules and regulations promulgated thereunder. Except as permitted by the Exchange Act,
including, without limitation, Sections 13(k)(2) and (3), since the enactment
of the Sarbanes-Oxley Act, neither the Company nor any of its affiliates has
made, arranged or modified (in any material way) personal loans to any
executive officer or director of the Company.
3.5 No Undisclosed Liabilities. Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement and except for obligations or
liabilities incurred in the Ordinary Course of Business after the date of the
Company Balance Sheet, as of the date hereof the Company and its Subsidiaries
do not have any obligations or liabilities of any nature, whether or not
accrued, contingent or otherwise and whether or not required to be disclosed in
the Company SEC Reports, including those relating to matters involving any
Environmental Law (any such obligations or liabilities, Company Obligations),
that are material, individually or in the aggregate, and that are required by
GAAP to be shown as a liability on a consolidated balance sheet of the
Company. To the knowledge of the
Company, as of the date hereof, the Company and its Subsidiaries do not have
any other Company Obligations, except (a) as disclosed in the Company SEC
Reports filed prior to the date of this Agreement and (b) for such Company
Obligations that, individually or in the aggregate, have not had, and may not
reasonably be expected to have, a Company Material Adverse Effect.
3.6 Absence of Certain Changes or Events. Since the date of the Company Balance Sheet,
the Company and its Subsidiaries have conducted their respective businesses
only in the Ordinary Course of Business and, since such date, there has not
been any change, event, circumstance, development or effect that, individually
or in the aggregate, has had, or would reasonably be expected to have, a
Company Material Adverse Effect. Between
the date of the Company Balance Sheet and the date of this Agreement, there has
not been any other action or event that would have required the consent of the
Buyer pursuant to Section 5.1 of this Agreement (other than actions or
events that would have required consent solely pursuant to Section 5.1(b) to
the extent such option grants are in the Ordinary Course of Business, Section
5.1(j), Section 5.1(n) (for purposes of this Section 3.6 only, the term material
contract or agreement in Section 5.1(n) shall have the meaning ascribed to the
term material definitive
17
agreement in Item 1.01
of Form 8-K)), subclause (A) of Section 5.1(o) to the extent in the Ordinary
Course of Business, subclause (B) of Section 5.1(o) to the extent such increase
is in the Ordinary Course of Business, subclause (D) of Section 5.1(o),
subclause (E) of Section 5.1(o) or Section 5.1(v)) had such action or event
occurred after the date of this Agreement.
(a) Each
of the Company and the Subsidiaries has properly filed on a timely basis all
Tax Returns that it was required to file, and all such Tax Returns were true,
correct and complete in all respects.
Neither the Company nor any Subsidiary is or has ever been a member of a
group of corporations for the purposes of any Taxes or with which it has filed
(or been required to file) consolidated, combined or unitary Tax Returns, other
than a group of which only the Company and the Subsidiaries are or were
members. Each of the Company and the
Subsidiaries has paid on a timely basis all Taxes that were due and
payable. The unpaid Taxes of the Company
and each Subsidiary for Tax periods through the date of the Company Balance
Sheet do not exceed the accruals and reserves for Taxes (excluding accruals and
reserves for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the Company Balance Sheet and all unpaid
Taxes of the Company and each Subsidiary for all Tax periods commencing after
the date of the Company Balance Sheet arose in the Ordinary Course of Business
and are of a type and amount commensurate with Taxes attributable to prior
similar periods. Neither the Company nor
any Subsidiary (i) has any actual or potential liability under Treasury
Regulations Section 1.1502-6 (or any comparable or similar provision of
federal, state, local or foreign law), as a transferee or successor, pursuant
to any contractual obligation, or otherwise for any Taxes of any Person other
than the Company or any Subsidiary, or (ii) is a party to or bound by any Tax
indemnity, Tax sharing, Tax allocation or similar agreement. All Taxes that the Company or any Subsidiary
was required by law to withhold or collect have been duly withheld or collected
and, to the extent required, have been properly paid to the appropriate
Governmental Entity. For purposes of
this Agreement, (i) Taxes shall mean any and all taxes, charges, fees, duties,
contributions, levies or other similar assessments or liabilities in the nature
of a tax, including, without limitation, income, gross receipts, corporation,
ad valorem, premium, value-added, net worth, capital stock, capital gains,
documentary, recapture, alternative or add-on minimum, disability, estimated,
registration, recording, excise, real property, personal property, sales, use,
license, lease, service, service use, transfer, withholding, employment,
unemployment, insurance, social security, national insurance, business license,
business organization, environmental, workers compensation, payroll, profits,
severance, stamp, occupation, windfall profits, customs, duties, franchise and
other taxes of any kind whatsoever imposed by the United States of America or
any state, local or foreign government, or any agency or political subdivision
thereof, and any interest, fines, penalties, assessments or additions to tax
imposed with respect to such items or any contest or dispute thereof, and (ii) Tax
Returns shall mean any and all reports, returns, computations, declarations,
or statements relating to Taxes, including any schedule or attachment thereto
and any related or supporting workpapers or information with respect to any of
the foregoing, including any amendment thereof.
(b) The
Company has delivered or made available to the Buyer or made available to the
Buyer for inspection (i) complete and correct copies of all Tax Returns of the
18
Company or any Subsidiary
relating to Taxes for all taxable periods for which the applicable statute of
limitations has not yet expired and (ii) complete and correct copies of all
private letter rulings, revenue agent reports, information document requests,
notices of proposed deficiencies, deficiency notices, protests, petitions,
closing agreements, settlement agreements, pending ruling requests and any
similar documents submitted by, received by or agreed to by or on behalf of the
Company or any Subsidiary relating to Taxes for all taxable periods for which
the statute of limitations has not yet expired.
The federal income Tax Returns of the Company and each Subsidiary have
never been audited by the Internal Revenue Service. No examination or audit of any Tax Return of
the Company or any Subsidiary by any Governmental Entity is currently in
progress or, to the knowledge of the Company, threatened or contemplated. Neither the Company nor any Subsidiary has
been informed by any jurisdiction that the jurisdiction believes that the
Company or any Subsidiary was required to file any Tax Return that was not
filed. Neither the Company nor any
Subsidiary has (i) waived any statute of limitations with respect to Taxes or
agreed to extend the period for assessment or collection of any Taxes, (ii)
requested any extension of time within which to file any Tax Return, which Tax
Return has not yet been filed, or (iii) executed or filed any power of attorney
with any taxing authority.
(c) Neither
the Company nor any Subsidiary (i) has made any payments, is obligated to
make any payments, or is a party to any agreement that could obligate it to
make any payments that may be treated as an excess parachute payment under
Section 280G of the Code (without regard to Sections 280G(b)(4) and
280G(b)(5) of the Code) as a result of or arising under the transactions
contemplated by this Agreement or as a result of the Merger and any subsequent
event or (ii) is or has been required to make a basis reduction pursuant
to Treasury Regulation Section 1.1502-20(b) or Treasury Regulation
Section 1.337(d)-2(b).
(d) None
of the assets of the Company or any Subsidiary (i) is property that is required
to be treated as being owned by any other Person pursuant to the provisions of
former Section 168(f)(8) of the Internal Revenue Code of 1954, (ii) is tax-exempt
use property within the meaning of Section 168(h) of the Code, (iii) directly
or indirectly secures any debt the interest on which is tax exempt under
Section 103(a) of the Code or (iv) is subject to a lease under Section 7701(h)
of the Code or under any predecessor section.
(e) There
are no adjustments under Section 481 of the Code (or any similar adjustments
under any provision of the Code or the corresponding foreign, state or local
Tax laws) that are required to be taken into account by the Company or any
Subsidiary in any period ending after the Closing Date by reason of a change in
method of accounting in any taxable period ending on or before the Closing
Date.
(f) Neither
the Company nor any Subsidiary (i) is a consenting corporation within the
meaning of former Section 341(f) of the Code, and none of the assets of
the Company or any Subsidiary is subject to an election under former
Section 341(f) of the Code, or (ii) has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(l)(A)(ii) of the
Code.
(g) Neither
the Company nor any Subsidiary has ever participated in an international
boycott as defined in Section 999 of the Code.
19
(h) Neither
the Company nor any Subsidiary has distributed to its shareholders or security
holders stock or securities of a controlled corporation, nor has stock or
securities of the Company or any Subsidiary been distributed, in a transaction
to which Section 355 of the Code applies (i) in the two years prior
to the date of this Agreement or (ii) in a distribution that could
otherwise constitute part of a plan or series of related transactions
(within the meaning of Section 355(e) of the Code) that includes the
transactions contemplated by this Agreement.
(i) Neither
the Company nor any Subsidiary owns any interest in an entity that is
characterized as a partnership for federal income Tax purposes.
(j) Neither
the Company nor any Subsidiary is or has been a passive foreign investment
company within the meaning of Sections 1291-1297 of the Code.
(k) Neither
the Company nor any Subsidiary has incurred (or been allocated) an overall
foreign loss as defined in Section 904(f)(2) of the Code which has
not been previously recaptured in full as provided in Sections 904(f)(1) and/or
904(f)(3) of the Code.
(l) Neither
the Company nor any Subsidiary is a party to a gain recognition agreement under
Section 367 of the Code.
(m) Neither
the Company nor any Subsidiary will be required to include any item of income
in, or exclude any item of deduction from, taxable income for any period (or
any portion thereof) ending after the Closing Date as a result of any (i) deferred
intercompany gain or any excess loss account described in Treasury Regulations
under Section 1502 of the Code (or any corresponding provision of state,
local or foreign Tax law), (ii) closing
agreement as described in Section 7121 of the Code (or any corresponding
or similar provision of state, local or foreign Tax law) executed on or prior
to the Closing Date, (iii) installment sale or other open
transaction disposition made on or prior to the Closing Date or (iv) prepaid
amount received on or prior to the Closing Date.
(n) There
are no liens or other encumbrances with respect to Taxes upon any of the assets
or properties of the Company or any Subsidiary, other than with respect to
Taxes not yet due and payable.
(o) Neither
the Company nor any Subsidiary is or ever has been a party to a transaction or
agreement that is in conflict with the Tax rules on transfer pricing in
any relevant jurisdiction.
(p) Section 3.7(p)
of the Company Disclosure Schedule sets forth a complete and accurate list
of any Subsidiaries for which a check-the-box election under Section 7701
has been made.
(q) Section 3.7(q)
of the Company Disclosure Schedule sets forth a complete and accurate list
of all material agreements, rulings, settlements or other Tax documents
relating to Tax incentives between the Company or any Subsidiary and a
Governmental Entity.
20
(r) Any
nonqualified deferred compensation plan (within the meaning of Section 409A
of the Code) to which the Company or any Subsidiary is a party complies with
the requirements of paragraphs (2), (3) and (4) of Section 409A(a) by
its terms (or is exempt from those paragraphs) and, if not exempt, has been
operated in accordance with such requirements.
No event has occurred that would be treated by Section 409A(b) as
a transfer of property for purposes of Section 83 of the Code.
(s) Neither
the Company nor any of its Subsidiaries shall be liable for any Taxes in
relation to any options granted prior to the Closing to any directors or
employees resident for Tax purposes in the United Kingdom as a result of the
assumption, cancellation, exercise, assignment or release of such options,
except where such Taxes can be recovered from the directors or employees in
question.
(t) All
documents in the enforcement of which the Company or any of its Subsidiaries
may be interested and which are liable to any form of stamp duty (or any
corresponding Taxes) have been duly stamped.
(u) The
UK Subsidiary has never repaid nor agreed to repay, nor redeemed nor agreed to
redeem, nor purchased nor agreed to purchase, nor granted an option under which
it may become liable to purchase, any shares of any class of its issued share
capital. The UK Subsidiary has never
capitalized nor agreed to capitalize in the form of shares or debentures any
profits or reserves of any class or description. The UK Subsidiary has never issued or agreed
to issue any share capital other than for the receipt of new
consideration. The UK Subsidiary has
never issued or agreed to issue any debt securities. For the purposes of this Agreement, the UK
Subsidiary means Pinnacle Systems Limited.
(a) Neither
the Company nor any of its Subsidiaries owns or has ever owned any real
property.
(b) Section 3.8(b) of
the Company Disclosure Schedule sets forth a complete and accurate list of
all real property leased, subleased or licensed by the Company or any of its
Subsidiaries (collectively Company Leases) and the location of the
premises. Neither the Company nor any of
its Subsidiaries nor, to the Companys knowledge, any other party to any
Company Lease, is in default under any of the Company Leases, except where the
existence of such defaults, individually or in the aggregate, has not had, and
may not reasonably be expected to have, a Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries leases, subleases or licenses any real property to any Person
other than the Company and its Subsidiaries. The Company has delivered or made
available to the Buyer complete and accurate copies of all Company Leases.
(a) The
Company and its Subsidiaries exclusively own or otherwise possess legally
enforceable rights to use, without any obligation to make any fixed or
contingent payments, including any royalty payments, all Intellectual Property
used or necessary to conduct
21
the business of the Company and its Subsidiaries as currently conducted
(excluding generally commercially available, off-the-shelf software programs
licensed pursuant to shrinkwrap or click-and-accept licenses), the absence of
which, individually or in the aggregate, may not reasonably be expected to have
a Company Material Adverse Effect. For
purposes of this Agreement, the term Intellectual Property means (i) patents,
patent applications, patent disclosures and all related continuation,
continuation-in-part, divisional, reissue, reexamination, utility model,
certificate of invention and design patents, patent applications, registrations
and applications for registrations; (ii) trademarks, service marks, trade
dress, Internet domain names, logos, trade names and corporate names and
registrations and applications for registration thereof; (iii) copyrights,
database rights and designs and registrations and applications for registration
thereof; (iv) computer software, algorithms, file structures, data and
documentation, including preparatory design materials; (v) inventions,
trade secrets and confidential business information, whether patentable or
nonpatentable and whether or not reduced to practice, know-how, manufacturing
and product processes and techniques, research and development information,
copyrightable works, financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and supplier lists and
information; (vi) other proprietary rights relating to or having
equivalent effect to any of the foregoing (including remedies against
infringements thereof and rights of protection of interest therein under the
laws of all jurisdictions); and (vii) copies and tangible embodiments
thereof.
(b) The
execution and delivery of this Agreement and consummation of the Merger will
not result in the breach of, or create on behalf of any third party the right
to terminate or modify, (i) any license, sublicense or other agreement
relating to any material Intellectual Property owned by the Company, including
software that is used in the manufacture of, incorporated in, or forms a part
of any Customer Deliverable (the Company Intellectual Property) or (ii) any
license, sublicense and other agreement as to which the Company or any of its
Subsidiaries is a party and pursuant to which the Company or any of its
Subsidiaries is authorized to use any material third party Intellectual
Property, including software, that is used in the manufacture of, incorporated
in, or forms a part of any Customer Deliverable (the Third Party Intellectual
Property). Section 3.9(b)(i) of
the Company Disclosure Schedule sets forth a complete and accurate list of
the Company Intellectual Property (other than unregistered copyrights,
unregistered trademarks that are not currently being used by the Company or any
of its Subsidiaries, and all trade secrets and confidential information) and Section 3.9(b)(ii) sets
forth a complete and accurate list of all Third Party Intellectual Property
that is incorporated into any Customer Deliverable. For the purposes of this Agreement, Customer
Deliverables means (A) the products that the Company or any Subsidiary
currently manufactures, markets, sells or licenses or has manufactured,
marketed, sold or licensed within the previous two years and (B) the
services that the Company or any Subsidiary currently provides or has provided
within the previous two years.
(c) All
patents, copyrights, trademarks (other than unregistered trademarks that are
not currently being used by the Company or any of its Subsidiaries) and service
marks that are held by the Company or any of its Subsidiaries and that are
material to the business of the Company and its Subsidiaries are valid and
subsisting. The Company and its
Subsidiaries have taken reasonable measures to protect the proprietary nature
of the Company Intellectual Property. To
the knowledge of the Company, no other Person or entity is infringing,
violating or
22
misappropriating any of the Company Intellectual Property or Third
Party Intellectual Property, except for infringements, violations or
misappropriations that, individually or in the aggregate, may not reasonably be
expected to have a Company Material Adverse Effect. There have not been any claims made from any
person retained, commissioned, employed or otherwise engaged by the Company or
any of its Subsidiaries pursuant to section 40 of the Patents Act 1977 or
equivalent legislation anywhere in the world, and, to the knowledge of the
Company, no circumstances exist which will result in any liability to the
Company or any of its Subsidiaries thereunder.
(d) None
of the (i) products previously or currently sold by the Company or any of
its Subsidiaries or (ii) business or activities previously or currently
conducted by the Company or any of its Subsidiaries infringes, violates or
constitutes a misappropriation of, any Intellectual Property of any third
party, except for such infringements, violations and misappropriation that,
individually or in the aggregate, may not reasonably be expected to have a
Company Material Adverse Effect. Neither
the Company nor any of its Subsidiaries has received any complaint, claim or
notice alleging any such infringement, violation or misappropriation.
(e) Section 3.9(e) of
the Company Disclosure Schedule lists all Open Source Materials that the
Company or any Subsidiary has incorporated into any Customer Deliverable and
describes the manner in which such Open Source Materials have been used,
including, without limitation, whether and how the Open Source Materials have
been modified and/or distributed by the Company or any Subsidiary. Except as set forth on 3.9(e) of the
Company Disclosure Schedule, neither the Company nor any Subsidiary has (i) incorporated
Open Source Materials into, or combined Open Source Materials with, software
developed and/or distributed by the Company or any Subsidiary; (ii) distributed
Open Source Materials in conjunction with any other software developed or
distributed by the Company or any Subsidiary; or (iii) used Open Source
Materials that create, or purport to create, obligations for the Company or any
Subsidiary with respect to software developed or distributed by the Company or
any Subsidiary or grant, or purport to grant, to any third party, any rights or
immunities under Company Intellectual Property (including but not limited to
using any Open Source Materials that require, as a condition of use,
modification and/or distribution of such Open Source Materials, that other
software incorporated into, derived from or distributed with such Open Source
Materials be (A) disclosed or distributed in source code form, (B) be
licensed for the purpose of making derivative works or (C) be
redistributable at no charge). Open
Source Materials means all software or other material that is distributed as free
software, open source software or under a similar licensing or distribution
model, including but not limited to the GNU General Public License (GPL), GNU
Lesser General Public License (LGPL), Mozilla Public License (MPL), BSD
Licenses, the Artistic License, the Netscape Public License, Filezilla, the
ActiveState License, the Sun Community Source License (SCSL), the Sun Industry
Standards License (SISL) and the Apache License.
(f) The
Company, each of its Subsidiaries, and each current and former employee of the
Company and each of its Subsidiaries, have complied with all requirements under
applicable law and applicable written agreements with regard to the transfer of
Intellectual Property from such employees to the Company or its Subsidiaries,
as applicable, including but
23
not limited to, the mandatory provisions of the German Act on Employees
Inventions with regard to the licensing of Intellectual Property.
(a) For
purposes of this Agreement, Company Material Contract shall mean all of the
following agreements (written or oral):
(i) any
material contract (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC) with respect to the Company and its Subsidiaries;
(ii) any
employment, service or consulting agreement with any current or former
executive officer, employee or consultant of the Company or any of its
Subsidiaries or member of the Companys Board of Directors contemplating
payment in excess of $150,000 in any year, other than those that are terminable
by the Company or any of its Subsidiaries on no more than 30 days notice
without liability or financial obligation to the Company or any of its
Subsidiaries;
(iii) any agreement containing
any covenant (A) prohibiting or limiting in any respect the right of the
Company or any of its Affiliates to engage in any line of business, make, sell
or distribute any material product or service, or compete with any Person in
any line of business or to compete with any party or the manner or locations in
which any of them engage, (B) granting any exclusivity rights or most
favored nation status that, following the Merger, would in any way apply to
the Buyer or any of its Subsidiaries, or (C) prohibiting or limiting the
right of the Company to enforce any Company Intellectual Property;
(iv) any
agreement relating to the disposition or acquisition by the Company or any of
its Subsidiaries after the date of this Agreement of a material amount of
assets not in the Ordinary Course of Business or pursuant to which the Company
or any of its Subsidiaries has any material ownership interest in any Person
other than the Companys Subsidiaries;
(v) any
agreement to provide source code to any third party for any product or
technology;
(vi) any
agreement to license any third party to manufacture, reproduce, develop or
modify any portion of the Companys products, services or technology or any
agreement to sell or distribute any of the Companys products, services or
technology, except (A) agreements with original equipment manufacturers,
distributors, sales representatives or other resellers in the Ordinary Course
of Business or (B) agreements allowing internal backup copies to be made
by end-user customers in the Ordinary Course of Business;
(vii) any note, bond, mortgages,
indentures, guarantees, loans or credit agreements, security agreements or
other contracts relating to the borrowing of money or extension of credit,
other than accounts receivables and payables in the Ordinary Course of
Business;
24
(viii) any settlement agreement
(including any compromise agreement or other form of release) entered into
within three years prior to the date of this Agreement, other than (A) releases
or settlement agreements immaterial in nature or amount entered into with
former employees or independent contractors of the Company in the Ordinary
Course of Business in connection with the routine cessation of such employees
or independent contractors employment or engagement with the Company or (B) settlement
agreements for cash only (which has been paid) and does not exceed $50,000 as
to such settlement;
(ix) any
agreement not described in clause (iii) above under which the Company or
any Subsidiaries has licensed or otherwise made available any Company
Intellectual Property or Third Party Intellectual Property to a third party,
other than to original equipment manufacturers, customers, distributors and
other resellers in the Ordinary Course of Business;
(x) any
agreement under which the Company or any Subsidiaries has received a license to
any material Third Party Intellectual Property but excluding generally
commercially available, off-the-shelf software programs with an individual purchase
price of less than $50,000;
(xi) any
agreement between the Company or any of its Subsidiaries and any of the top 10
customers of the Company and its Subsidiaries (determined on the basis of total
revenues received by the Company and its Subsidiaries during the year ended December 31,
2004) (the Major Customers, and each such Contract, a Major Customer
Contract);
(xii) any agreement which has
aggregate future sums due from the Company or any of its Subsidiaries in excess
of $250,000 and is not terminable by the Company or any such Subsidiary
(without penalty or payment) on 90 (or fewer) days notice;
(xiii) any Company Lease or lease,
sublease or license by the Company or any of its Subsidiaries of any real
property; or
(xiv) any other agreement of the
Company or any of its Subsidiaries (i) with any Affiliate of the Company
(other than the Company or any other of its Subsidiaries), (ii) with a
Governmental Authority (other than ordinary course agreements with Governmental
Authorities as a customer) which imposes any material obligation or restriction
on the Company or any of its Affiliates, (iii) with investment bankers,
financial advisors, attorneys, accountants or management consultants retained
by the Company or any of its Subsidiaries involving payments by or to the
Company or any of its Subsidiaries of more than $100,000 on an annual basis, (iv) providing
for indemnification by the Company or the relevant Subsidiaries of any Person,
except for any such agreement that is (A) not material to the Company or
any of its Subsidiaries and (B) entered into in the Ordinary Course of
Business, or (v) containing a standstill or similar agreement pursuant to
which the Company or any of its Subsidiaries have agreed not to acquire assets
or securities of another Person.
(b) Section 3.10(b) of
the Company Disclosure Schedule sets forth a list (arranged in clauses
corresponding to the numbered and lettered clauses and sub-clauses set forth in
Section 3.10(b)) of all Company Material Contracts to which the Company or
any of its Subsidiaries is a party or bound by as of the date hereof, and
complete and correct copies
25
(including all amendments, modifications, extensions, renewals,
guarantees or other contracts with respect thereto, but excluding all names,
terms and conditions that have been redacted in compliance with applicable laws
governing the sharing of information) of each Company Material Contract has
been made available to Buyer.
(c) All
Company Material Contracts are legal, valid and binding and in full force and
effect, except for such failures to be legal, valid and binding or in full
force and effect that, individually or in the aggregate, have not had, and are
not reasonably likely to have, a Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has violated, and, to the knowledge of the Company, no other party
to any of the Company Material Contracts have violated, any provision of, or
committed or failed to perform any act which, with or without notice, lapse of
time or both, would constitute a default under the provisions of any Company
Material Contract, except in each case for those violations and defaults which,
individually or in the aggregate, have not had, and may not reasonably be
expected to have, a Company Material Adverse Effect.
(d) During
the last six months, none of the Major Customers has terminated or requested
any material amendment to, or provided written notice of non-renewal of, any of
its Major Customer Contracts, or any of its existing relationships, with the
Company or any of its Subsidiaries, and neither the Company nor any of its
Subsidiaries has received any written notices of termination or, to the Companys
knowledge, any threats of termination from any of the Major Customers.
(e) The
Company has made available to Buyer a copy of each of its standard form
contracts currently in use by the Company or any of its Subsidiaries in
connection with their respective businesses (each, a Company Standard Form Contract).
Neither the Company nor any of its Subsidiaries is a
party to any agreement under which a third party would be entitled to receive a
license or any other right to Intellectual Property of the Buyer or any of the
Buyers Affiliates following the Closing; provided however that the Company and
its Subsidiaries shall not be considered Affiliates of the Buyer for the
purposes of this Section 3.10(f).
3.11 Litigation; Product Liability. Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement, there is no civil, criminal
or administrative action, suit, proceeding, claim, arbitration, hearing or
investigation pending or, to the knowledge of the Company, threatened against
or affecting the Company or any of its Subsidiaries that (a) seeks either
damages in excess of $50,000 or equitable relief or (b) in any manner
challenges or seeks to prevent, enjoin, alter or delay the transactions
contemplated by this Agreement. There
are no material judgments, orders, awards or decrees outstanding or pending
against the Company or any of its Subsidiaries.
No product liability claims have been asserted or, to the knowledge of
the Company, threatened against the Company or any of its Subsidiaries relating
to products or product candidates developed, tested, manufactured, marketed,
distributed or sold by the Company or any of its Subsidiaries.
26
(a) Except
as disclosed in the Company SEC Reports filed prior to the date of this
Agreement and except for such matters which, individually or in the aggregate,
have not had, and may not reasonably be expected to have a Company Material
Adverse Effect:
(i) the
Company and each of its Subsidiaries have at all times complied with, and is
not currently in violation of, any applicable Environmental Laws;
(ii) the
Company and each of its Subsidiaries have all permits, licenses and approvals
required under Environmental Laws to operate and conduct their respective businesses
as currently operated and conducted;
(iii) there is no
Contamination of or at the properties currently leased or operated by the
Company or any of its Subsidiaries (including soils, groundwater, surface
water, buildings or other structures);
(iv) there
was no Contamination of or at the properties formerly leased or operated by the
Company or any of its Subsidiaries prior to or during the period of time such
properties were leased or operated by the Company or any of its Subsidiaries;
(v) neither
the Company nor any of its Subsidiaries are subject to liability for a Release
of any Hazardous Substance or Contamination on the property of any third party;
(vi) neither
the Company nor any of its Subsidiaries has Released any Hazardous
Substance to the environment;
(vii) neither the Company nor any
of its Subsidiaries has received any notice, demand, letter, claim or request
for information, nor is the Company or any of its Subsidiaries aware of any
pending or threatened notice, demand, letter, claim or request for information,
alleging that the Company or any of its Subsidiaries may be in violation of,
liable under or have obligations under any Environmental Law;
(viii) neither the Company nor any of
its Subsidiaries is subject to any orders, decrees, injunctions or other
arrangements with any Governmental Entity or is subject to any indemnity or
other agreement with any third party relating to liability or obligation under
any Environmental Law or relating to Hazardous Substances;
(ix) to
the Companys knowledge, there are no circumstances or conditions involving the
Company or any of its Subsidiaries that could reasonably be expected to result
in any claims, liability, obligations, investigations, costs or restrictions on
the ownership, use or transfer of any property of the Company or any of its
Subsidiaries pursuant to any Environmental Law;
(x) none
of the properties currently or formerly owned, leased or operated by the
Company or any of its Subsidiaries is listed in the National Priorities List or
any other list, schedule, log, inventory or record maintained by any federal,
state or local
27
governmental agency with respect to sites from which there is or has
been a Release of any Hazardous Substance or any Contamination;
(xi) none
of the properties currently or formerly owned, leased or operated by the
Company or any of its Subsidiaries is used, nor to the Companys knowledge was ever used, (A) as a landfill, dump
or other disposal, storage, transfer or handling area for Hazardous Substances,
excepting, however, for the routine storage and use of Hazardous Substances
from time to time in the Ordinary Course of Business, in compliance with
Environmental Laws and in compliance with good commercial practice; (B) for
industrial, military or manufacturing purposes; or (C) as a gasoline
service station or a facility for selling, dispensing, storing, transferring or
handling petroleum and/or petroleum products;
(xii) to the Companys
knowledge, there are no underground or above ground storage tanks (whether or
not currently in use), urea-formaldehyde materials, asbestos, asbestos
containing materials, polychlorinated biphenyls (PCBs) or nuclear fuels or
wastes, located on or under any of the properties currently or formerly owned,
leased or operated by the Company or any of its Subsidiaries, and no
underground tank previously located on these properties has been removed
therefrom; and
(xiii) there are no liens against
any of the properties currently owned, leased or operated by the Company or any
of its Subsidiaries arising under any Environmental Law.
(b) For
purposes of this Agreement, Environmental Law means any law, national or
local statute, regulation, order, decree, permit, authorization, directive,
opinion, subordinate legislation, common law or agency requirement, mandatory
codes, regulations, decrees, injunctions, judgments and notices issued,
promulgated or approved thereunder (and all judicial and administrative
interpretation of the foregoing) of any jurisdiction relating to: (i) the
protection, investigation or restoration of the environment, human health and
safety, or natural resources, (ii) the handling, use, storage, treatment,
manufacture, transportation, presence, disposal, release or threatened release
of any Hazardous Substance or (iii) noise, odor, wetlands, pollution,
contamination or any injury or threat of injury to Persons or property.
(c) For
purposes of this Agreement, Contamination means the presence of, or Release
on, under, from or to, any property of any Hazardous Substance, except the
routine storage and use of Hazardous Substances from time to time in the
Ordinary Course of Business, in compliance with Environmental Laws and in
compliance with good commercial practice.
(d) For
purposes of this Agreement, Release or Released means the spilling,
leaking, disposing, discharging, emitting, depositing, injecting, leaching,
escaping or any other release, however defined, and whether intentional or
unintentional, of any Hazardous Substance.
The term Release shall include any threatened release.
(e) For
purposes of this Agreement, Hazardous Substance means any substance that is: (A) listed,
classified, regulated or which falls within the definition of a hazardous
substance, hazardous waste or hazardous material pursuant to any
Environmental Law; (B) any petroleum product or by-product,
asbestos-containing material,
28
lead-containing paint, pipes or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (C) any other substance which is the
subject of regulatory action by any Governmental Entity pursuant to any
Environmental Law.
(f) There
are no documents (whether in hard copy or electronic form) known to the Company
that contain any environmental, human health and safety, or natural resources
reports, investigations and audits relating to premises currently or previously
owned or operated by the Company or any of its Subsidiaries (whether conducted
by or on behalf of the Company or any of its Subsidiaries or a third party, and
whether done at the initiative of the Company or any of its Subsidiaries or
directed by a Governmental Entity or other third party) which were issued or
conducted during the past five years and of which the Company or any of its
Subsidiaries has possession or to which the Company or any of its Subsidiaries
has access.
(a) Section 3.13(a) of
the Company Disclosure Schedule sets forth a complete and accurate list of
all Employee Benefit Plans maintained, or contributed to or with respect to
which there is any liability, by the Company, any of the Companys Subsidiaries
or any of their ERISA Affiliates (together, the Company Employee Plans). For purposes of this Agreement, the following
terms shall have the following meanings:
(i) Employee Benefit Plan means any employee pension benefit
plan (as defined in Section 3(2) of ERISA), whether contractual or
discretionary, any employee welfare benefit plan (as defined in Section 3(1) of
ERISA), and any other written or oral plan, agreement or arrangement (whether
or not subject to ERISA) involving direct or indirect compensation on
retirement or death, including insurance coverage (whether life, private
medical or dental, long-term disability or otherwise), life assurance,
vacation, loans, fringe benefits, retential or change in control benefits,
severance benefits, disability benefits, deferred compensation, bonuses,
commissions, stock options, stock purchase, phantom stock, stock appreciation
or other forms of incentive compensation or post-retirement compensation or
benefits and all unexpired severance agreements, written or otherwise, for the
benefit of, or relating to, any current or former employee of the Company or
any of its Subsidiaries or an ERISA Affiliate;
(ii) ERISA means the Employee Retirement Income Security Act of
1974, as amended; and (iii) ERISA Affiliate means any entity which is,
or at any applicable time was, a member of (1) a controlled group of
corporations (as defined in Section 414(b) of the Code), (2) a
group of trades or businesses under common control (as defined in Section 414(c) of
the Code), or (3) an affiliated service group (as defined under Section 414(m)
of the Code or the regulations under Section 414(o) of the Code), any of
which includes or included the Company or a Subsidiary.
(b) With
respect to each Company Employee Plan, the Company has delivered or made
available to the Buyer a complete and accurate copy of (i) such Company
Employee Plan (or a written summary of any unwritten plan), (ii) the most
recent annual report (Form 5500) filed with the IRS, (iii) each trust
agreement, group annuity contract and summary plan description, if any,
relating to such Company Employee Plan, (iv) the most recent financial
statements for each Company Employee Plan that is funded, (v) all
personnel, payroll and employment manuals and policies, (vi) all employee
handbooks and (vii) all reports regarding the satisfaction of the
nondiscrimination requirements of Sections 410(b), 401(k) and 401(m) of the
Code.
29
(c) Each
Company Employee Plan has been administered in all material respects in
accordance with ERISA, the Code and all other applicable laws and the
regulations thereunder and in accordance with its terms and each of the
Company, the Companys Subsidiaries and their ERISA Affiliates has in all
material respects met its obligations with respect to such Company Employee
Plan and has made all required contributions thereto (or reserved such
contributions on the Company Balance Sheet).
The Company, each Subsidiary of the Company, each ERISA Affiliate and
each Company Employee Plan are in compliance in all material respects with the
currently applicable provisions of ERISA and the Code and the regulations
thereunder (including Section 4980 B of the Code, Subtitle K, Chapter 100
of the Code and Sections 601 through 608 and Section 701 et seq. of ERISA)
and all other applicable legislation and regulations. All filings and reports as to each Company
Employee Plan required to have been submitted to the Internal Revenue Service,
to the United States Department of Labor or any similar non-US equivalent body
or organization have been timely submitted.
With respect to the Company Employee Plans, no event has occurred, and
to the knowledge of the Company, there exists no condition or set of
circumstances in connection with which the Company or any of its Subsidiaries
could be subject to any material liability under ERISA, the Code or any other
applicable law.
(d) With
respect to the Company Employee Plans, there are no benefit obligations for
which contributions have not been made or properly accrued and there are no
benefit obligations which have not been accounted for by reserves, or otherwise
properly footnoted in accordance with GAAP, on the financial statements of the
Company. The assets of each Company
Employee Plan which is funded are reported at their fair market value on the
books and records of such Employee Benefit Plan.
(e) All
the Company Employee Plans that are intended to be qualified under Section 401(a) of
the Code have received determination letters from the Internal Revenue Service
to the effect that such Company Employee Plans are qualified and the plans and
trusts related thereto are exempt from federal income taxes under Sections 401(a) and
501(a), respectively, of the Code, no such determination letter has been
revoked and revocation has not been threatened, and no such Employee Benefit
Plan has been amended or operated since the date of its most recent
determination letter or application therefor in any respect, and no act or
omission has occurred, that would adversely affect its qualification or
materially increase its cost. Each
Company Employee Plan which is required to satisfy Section 401(k)(3) or
Section 401(m)(2) of the Code has been tested for compliance with,
and satisfies the requirements of Section 401(k)(3) and Section 401(m)(2) of
the Code, as the case may be, for each plan year ending prior to the Closing
Date.
(f) Neither
the Company, any of the Companys Subsidiaries nor any of their ERISA
Affiliates has (i) ever maintained a Company Employee Plan which was ever
subject to Section 412 of the Code or Title IV of ERISA or (ii) ever
been obligated to contribute to a multiemployer plan (as defined in Section 4001(a)(3) of
ERISA). No Company Employee Plan is
funded by, associated with or related to a voluntary employees beneficiary
association within the meaning of Section 501(c)(9) of the
Code. No Company Employee Plan holds
securities issued by the Company, any of the Companys Subsidiaries or any of
their ERISA Affiliates.
30
(g) Each
Company Employee Plan is amendable and terminable unilaterally by the Company
and any of the Companys Subsidiaries which are a party thereto or covered
thereby at any time without liability to the Company or any of its Subsidiaries
as a result thereof (other than for benefits accrued through the date of
termination or amendment and reasonable administrative expenses related
thereto) and no Company Employee Plan, plan documentation or agreement, summary
plan description or other written communication distributed generally to
employees by its terms prohibits the Company or any of its Subsidiaries from
amending or terminating any such Company Employee Plan.
(h) Neither
the Company nor any of its Subsidiaries is a party to any oral or written
agreement with any shareholder or director of the Company, Company Insiders (as
defined in Section 6.15(c)) or any officer, director or stockholder of any
Subsidiary (A) the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving the
Company or any of its Subsidiaries of the nature of any of the transactions
contemplated by this Agreement, (B) providing any term of employment or
compensation guarantee or (C) providing severance benefits or other
benefits after the termination of employment of such director or executive
officer. The Company has made available
to the Buyer the information necessary to calculate any excise tax due under Section 4999
of the Code as a result of the transactions contemplated by this Agreement for
which the Company or the Buyer may directly or indirectly become liable and the
amount of deductions that may be disallowed under Section 280G of the Code
as a result of the transactions contemplated by this Agreement.
(i) None
of the Company Employee Plans promises or provides retiree medical or other
retiree welfare benefits to any Person, except as required by applicable law.
(j) In
respect of all current and former employees of the Company and any of its
Subsidiaries who are or have at any time been resident in the United Kingdom (UK
Employees), all pension arrangements provide and have provided only money
purchase benefits (as defined in section 181 of the United Kingdoms
Pension Schemes Act 1993) and the Company, any Subsidiary or any trustee of any
plan or arrangement established by the Company or any Subsidiary have never
given any promise or assurance (oral or written and whether legally enforceable
or not) to any UK Employee (or any person related to or associated with any UK
Employee) that any retirement, death or disability benefits will be calculated
wholly or partly by reference to any persons remuneration or equate
(approximately or exactly) to any particular level or amount.
3.14 Compliance With Laws. The Company and each of its Subsidiaries has
complied with, is not in violation of, and has not received any notice alleging
any violation with respect to, any applicable provisions of any statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its properties or assets, except for failures to comply or
violations that, individually or in the aggregate, have not had, and may not
reasonably be expected to have, a Company Material Adverse Effect. To its knowledge, neither the Company nor any
Subsidiary is under investigation by any Governmental Entity or state, federal
or local regulatory body or agency.
31
3.15 Permits. The
Company and each of its Subsidiaries have all permits, licenses and franchises
from Governmental Entities required to conduct their businesses as now being
conducted or as presently contemplated to be conducted (the Company Permits),
except for such permits, licenses and franchises the absence of which, individually
or in the aggregate, has not had, and may not reasonably be expected to have, a
Company Material Adverse Effect. The
Company and each of its Subsidiaries are in compliance with the terms of the
Company Permits, except for such failures to comply that, individually or in
the aggregate, have not had, and may not reasonably be expected to have, a
Company Material Adverse Effect. No
Company Permit shall cease to be effective as a result of the consummation of
the transactions contemplated by this Agreement.
(a) Section 3.16(a) of
the Company Disclosure Schedule contains a list of all employees and
consultants of the Company and each of its Subsidiaries whose annual rate of
compensation exceeds $150,000 per year, along with the position, date of
employment commencement, notice period (if any), age (as of the respective
dates indicated) and the annual rate of compensation of each such Person
together with like details in relation to any Person who has an outstanding
offer of employment or engagement with the Company or any Subsidiary, or who
has accepted an offer of employment or engagement but has yet to commence
working pursuant to it. Each current or
past employee of the Company or any of its Subsidiaries has entered into a
confidentiality and assignment of inventions agreement with the Company, a copy
or form of which has previously been delivered to the Buyer. The German Subsidiary of the Company and its
employees have complied with the mandatory provisions of the German Act on Employees
Inventions. Except as set forth in Section 3.16(a) of
the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor or trade
union, labor organization, staff association or works council, including any
works council under the German Works Council Constitution Act, or similar
grouping of employee representatives. Section 3.16(a) of
the Company Disclosure Schedule contains a list of all members of any
labor or trade union, labor organization, staff association or works council,
or similar grouping of employee representations, including the substitute
members. Neither the Company nor any of
its Subsidiaries is the subject of any proceeding asserting that the Company or
any of its Subsidiaries has committed an unfair labor practice or which is
seeking to compel the Company or any Subsidiary to bargain with or recognize
any labor or trade union or labor organization, nor is there pending or, to the
knowledge of the Company, threatened, any labor strike, dispute, walkout, work
stoppage, slow-down or lockout involving the Company or any of its
Subsidiaries. Each employee of the
Company and its Subsidiaries working in a country other than one of which such
employee is a national, has a valid work permit or visa enabling them to work
lawfully in the country in which such employee is employed.
(b) Except
as disclosed in the Company SEC Reports filed prior to the date of this
Agreement, no employee of the Company or any of its Subsidiaries (i) has
an employment agreement, other than the employees of the Company and its
Subsidiaries located in France, Germany, India, Korea, Singapore and the United
Kingdom (the Foreign Employees) substantially all of whom, to the Companys
knowledge, have employment agreements, (ii) to
32
the Companys knowledge is in violation of any term of any patent
disclosure agreement, non-competition agreement or any restrictive covenant to
a former employer relating to the right of any such employee to be employed by
the Company or any of its Subsidiaries because of the nature of the business
conducted or presently proposed to be conducted by the Company or any of its
Subsidiaries or relating to the use of trade secrets or proprietary information
of others, or has violated any notice period agreed with a previous employer by
taking up employment with the Company or any Subsidiary, or (iii) in the
case of any Company Insiders (as defined in Section 6.15(c)) or any
officer of any Subsidiary, has terminated their employment with the Company or
any Subsidiary, or had their employment terminated by the Company or
Subsidiary, nor given or is in receipt of notice to terminate their employment
with the Company or any of its Subsidiaries within the past twelve months.
(c) All
employment terms and conditions of the Foreign Employees are covered by written
employment agreements and shop agreements.
To the Companys knowledge, there are no oral side agreements.
(d) The
Company and each Subsidiary have complied with the terms of employment and
engagement of all their respective officers, employees, workers and consultants
and with all laws, orders, declarations, regulations, codes of practice and
collective bargaining agreements relating to the employment or engagement of
such officers, employees, workers and consultants, and no claim has been made
or threatened against the Company or any Subsidiary by any officer, employee,
worker or consultant or by any person claiming to represent the same.
(e) No
proposal, assurance or commitment has been communicated to any executive
officer regarding any change to his or her terms of employment or engagement or
working conditions or regarding the continuance, introduction, increase or
improvement of any benefit or any discretionary arrangement and no negotiations
have commenced for any such matter.
(f) The
Company and its Subsidiaries have no liability as of the Closing to any present
or former employee, consultant, worker or officer or any representative of the
same to pay compensation, damages (including without limitation damages in
connection with professional illness and work accidents), a redundancy payment,
a protective award, a severance payment or any other payment other than amounts
due in the Ordinary Course of Business under an employment or consulting
agreement, and no such claims are pending or, to their knowledge, have been
threatened.
(g) The
Company and its Subsidiaries do no have any obligation to make any payments on
redundancy in excess of any statutory redundancy pay or other payments mandated
by applicable law.
3.17 Insurance. Section 3.17
of the Company Disclosure Schedule sets forth the insurance policies (the Insurance
Policies) maintained by the Company and its Subsidiaries. Each Insurance Policy is in full force and
effect and is valid, outstanding and enforceable, and all premiums due thereon
have been paid in full. None of the
Insurance Policies shall terminate or lapse (or be affected in any other
materially adverse manner) by reason of the transactions contemplated by this
Agreement. The Company and each of its
Subsidiaries have complied in
33
all material respects with the provisions of each Insurance Policy
under which it is the insured party. No
insurer under any Insurance Policy has canceled or generally disclaimed
liability under any such policy or indicated any intent to do so or not to
renew any such policy. All material
claims under the Insurance Policies have been filed in a timely fashion.
3.18 Inventory.
All inventory of the Company and each of its Subsidiaries, whether or
not reflected on the Company Balance Sheet, consists of a quality and quantity
usable and saleable in the Ordinary Course of Business of the Company and its
Subsidiaries, except for obsolete items and items of below-standard quality,
all of which have been written-off or written-down to net realizable value on
the Company Balance Sheet. All
inventories not written-off have been priced on the accounting basis (i.e. LIFO
or FIFO) described in the Companys audited financial statements for the year
ended June 30, 2004.
3.19 Assets. The
Company or one of its Subsidiaries owns or leases all tangible assets necessary
for the conduct of their businesses as presently conducted. All of such tangible assets which are owned,
are owned free and clear of all Liens except for Liens that, individually and
in the aggregate, do not materially interfere with the ability of the Company
or its Subsidiaries to conduct their business as currently conducted and have
not resulted in, and may not reasonably be expected to have, a Company Material
Adverse Effect.
3.20 Warranty.
The financial statements included in the Company SEC Reports include all
expenses incurred by the Company and its Subsidiaries in fulfilling their
obligations under their guaranty, warranty, right of return and similar
provisions during each of the fiscal years and the interim period included in
the Company SEC Reports. The Company is
not aware of any reason why such expenses should significantly increase in the
future.
3.21 Customers and Suppliers. The Company has previously supplied to the
Buyer a list that (a) accurately identifies, and provides an accurate and
complete breakdown of the revenues received from, each of the 50 largest
customers of the Company or any of its Subsidiaries based on consolidated
revenues in the one year period ended December 31, 2004, and (b) accurately
identifies each material supplier to the Company or any Subsidiary, including
each supplier that is the sole supplier of any significant product or service
to the Company or a Subsidiary. No such
customer has notified the Company or any of its Subsidiaries in writing or, to
the Companys knowledge, otherwise indicated to the Company or any of its
Subsidiaries that it will stop, or decrease the rate of, buying materials,
products or services from the Company or any of its Subsidiaries. No such supplier has notified the Company or
any of its Subsidiaries in writing or, to the Companys knowledge, otherwise
indicated to the Company or any of its Subsidiaries that it will stop, or
decrease the rate of, supplying materials, products or services to them except
for notices of the end of life of products received from suppliers in the
Ordinary Course of Business.
3.22 No Existing Discussions. As of the date of this Agreement, neither the
Company nor any of its Subsidiaries is engaged, directly or indirectly, in any
discussions or negotiations with any other party with respect to an Acquisition
Proposal.
3.23 Opinion of Company Financial
Advisor. The financial advisor
of the Company, Lazard Frères & Co. LLC, has delivered to the Company
an opinion dated the date of this
34
Agreement to the effect, as of such date, that the Merger Consideration
is fair to the holders of Company Common Stock from a financial point of view,
a signed copy of which opinion has been delivered to the Buyer.
3.24 Rights Agreement. The Company has duly entered into an
amendment to the Company Rights Plan, a signed copy of which has been delivered
to the Buyer (the Rights Agreement Amendment), and taken all other action
necessary or appropriate so that the entering into of this Agreement or the
Company Shareholder Voting Agreement do not and will not result in the ability
of any Person to exercise any of the Company Rights under the Company Rights
Plan or enable or require the Company Rights issued thereunder to separate from
the shares of Company Common Stock to which they are attached or to be
triggered or become exercisable or cease to be redeemable.
3.25 Privacy Policies. The Company and its Subsidiaries, and each of
their respective employees, (i) have complied with the Companys privacy
policy substantially in the form provided to the Buyer with respect to
personally identifiable information, and (ii) have taken all appropriate
and industry standard measures to protect and maintain the confidential nature
of any personally identifiable information that the Company or any of its
Subsidiaries has collected or otherwise acquired.
(a) No
agent, broker, investment banker, financial advisor or other firm or Person is
or shall be entitled, as a result of any action, agreement or commitment of the
Company or any of its Affiliates, to any brokers, finders, financial advisors
or other similar fee or commission in connection with any of the transactions
contemplated by this Agreement, except Lazard Frères & Co. LLC, whose
fees and expense shall be paid by the Company.
The Company has delivered to the Buyer a complete and accurate copy of
all agreements pursuant to which Lazard Frères & Co. LLC is entitled
to any fees and expenses in connection with any of the transactions
contemplated by this Agreement.
(b) Section 3.26(b) of
the Company Disclosure Schedule sets forth a good faith estimate of the
fees and expenses incurred by the Company and any of its Subsidiaries through
the date of this Agreement for legal and accounting services in connection with
this Agreement and the transactions contemplated hereby. Section 3.26(b) of the Company
Disclosure Schedule sets forth a good faith estimate of all other fees and
expenses incurred and to be incurred by the Company and any of its Subsidiaries
in connection with this Agreement and the transactions contemplated hereby,
including the fees and expenses of Lazard Frères & Co. LLC. All such fees incurred and to be incurred by
the Company and any of its Subsidiaries for legal and accounting services shall
be at such professionals regular hourly rates and without premiums, success
fees or similar fee arrangements.
35
ARTICLE IV
TRANSITORY SUBSIDIARY
The Buyer and the Transitory Subsidiary represent and
warrant to the Company that the statements contained in this Article IV
are true and correct, except as expressly set forth in the disclosure schedule delivered
by the Buyer and the Transitory Subsidiary to the Company on or before the date
of this Agreement (the Buyer Disclosure Schedule). The Buyer Disclosure Schedule shall be
arranged in sections and paragraphs corresponding to the numbered and lettered
sections paragraphs contained in this Article IV and the disclosure in any
paragraph shall qualify (a) the corresponding sections and paragraphs in
this Article IV and (b) the other paragraphs in this Article IV
only to the extent that it is clear from a reading of such disclosure that it
also qualifies or applies to such other sections and paragraphs.
4.1 Organization, Standing and Power. Each of the Buyer and the Transitory Subsidiary
is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, has all requisite corporate
power and authority to own, lease and operate its properties and assets and to
carry on its business as now being conducted and as proposed to be conducted,
and is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the character of the properties it
owns, operates or leases or the nature of its activities makes such
qualification necessary, except for such failures to be so organized, qualified
or in good standing, individually or in the aggregate, that have not had, and
may not reasonably be expected to have, a Buyer Material Adverse Effect. For purposes of this Agreement, the term Buyer
Material Adverse Effect means any material adverse change, event, circumstance
or development with respect to, or any material adverse effect on, (i) the
business, assets, liabilities, capitalization, condition (financial or other),
or results of operations of the Buyer and its Subsidiaries, taken as a whole,
or (ii) the ability of the Buyer or the Transitory Subsidiary to
consummate the transactions contemplated by this Agreement; provided, however,
none of the following in and of itself or themselves shall be deemed to
constitute a Buyer Material Adverse Effect:
(w) any decrease in the market price or trading volume of the Buyer
Common Stock after the date hereof (provided, however, that the exception in this
clause shall not in any way prevent or otherwise affect a determination that
any change, event, circumstance, development or effect underlying such decrease
has resulted in, or contributed to, a Buyer Material Adverse Effect);
(x) any failure by the Buyer to meet forecasts or published revenue or
earnings predictions for any period ending (or for which revenues or earnings
are released) on or after the date of this Agreement (provided, however, that
the exception in this clause shall not in any way prevent or otherwise affect a
determination that any change, event, circumstance, development or effect
underlying such failure has resulted in, or contributed to, a Buyer Material
Adverse Effect); (y) any cancellation or deferral of customer orders, reductions
in sales, disruption in supplier, distributor, partner or similar relationships
or loss of broadcast employees, in each case to the extent attributable to the
public announcement or pendency of the Merger; or (z) any adverse change,
event, circumstance, development or effect that results from changes
attributable to conditions affecting the industries in which the
36
Buyer participates or the economy as a whole in the United States or
the other countries in which the Buyer conducts its principal operations or
derives significant sales (which changes in each case do not disproportionately
adversely affect the Buyer and its Subsidiaries compared to other companies of
similar size operating in the industry in which the Buyer and its Subsidiaries
operate).
4.2 Capitalization. The authorized capital stock of the Buyer
consists of 50,000,000 shares of Buyer Common Stock and 1,000,000 shares of
preferred stock, $.01 par value per share (the Buyer Preferred Stock), of
which 500,000 shares are designated Series A Junior Participating
Preferred Stock. The rights and
privileges of each class of the Buyers capital stock are set forth in the
Buyers Certificate of Incorporation. As
of the close of business on March 18, 2005, 35,128,678 shares of Buyer
Common Stock were issued and outstanding and no shares of Buyer Preferred Stock
were issued or outstanding. No material
change in such capitalization has occurred between December 31, 2004 and
the date of this Agreement. All shares
of Buyer Common Stock issuable pursuant to Section 2.1(c) in
connection with the Merger, when issued on the terms and conditions of this
Agreement, will be, duly authorized, validly issued, fully paid and
nonassessable and not subject to or issued in violation of any purchase option,
call option, right of first refusal, preemptive right, subscription right or
any similar right under any provision of the Delaware General Corporation Law,
the Buyers Certificate of Incorporation or By-laws or any agreement to which
the Buyer is a party or is otherwise bound.
(a) Each
of the Buyer and the Transitory Subsidiary has all requisite corporate power
and authority to enter into this Agreement and, subject only to (A) if
applicable, the approval of the Buyer Voting Proposal by the Buyers
stockholders under the rules of The Nasdaq Stock Market (the Buyer
Transaction Approval), and (B) the approval of the Buyers stockholders
of an amendment to the Certificate of Incorporation of the Buyer to increase
the number of authorized shares of Buyer Common Stock from 50,000,000 to
100,000,000 (the Buyer Charter Approval, and collectively with the Buyer
Transaction Approval, the Buyer Stockholder Approvals) to consummate the
transactions contemplated by this Agreement.
Without limiting the generality of the foregoing, the Board of Directors
of the Buyer (the Buyer Board), at a meeting duly called and held, by the
unanimous vote of all directors (i) determined that the Merger is fair and
in the best interests of the Buyer and its stockholders, (ii) directed
that the Buyer Voting Proposals be submitted to the stockholders of the Buyer
for their approval and resolved to recommend that the stockholders of the Buyer
vote in favor of the Buyer Voting Proposals and (iii) to the extent
necessary, adopted a resolution having the effect of causing the Buyer not to
be subject to any state takeover law or similar law that might otherwise apply
to the Merger and any other transactions contemplated by this Agreement. The execution and delivery of this Agreement
and the consummation of the transactions contemplated by this Agreement by the
Buyer and the Transitory Subsidiary have been duly authorized by all necessary
corporate action on the part of each of the Buyer and the Transitory Subsidiary
(including the approval of the Merger by the Buyer in its capacity as the sole
stockholder of the Transitory Subsidiary), subject only to the required receipt
of the Buyer Stockholder Approvals. This
Agreement has been duly executed and delivered by each of the Buyer and the
Transitory Subsidiary and constitutes the valid and binding obligation of each
of the Buyer and the Transitory Subsidiary, enforceable in accordance with its
terms.
37
(b) The
execution and delivery of this Agreement by each of the Buyer and the
Transitory Subsidiary do not, and the consummation by the Buyer and the
Transitory Subsidiary of the transactions contemplated by this Agreement shall
not, (i) conflict with, or result in any violation or breach of, any
provision of the Certificate of Incorporation or By-laws of the Buyer or of the
Articles of Incorporation or By-laws of the Transitory Subsidiary, (ii) conflict
with, or result in any violation or breach of, or constitute (with or without
notice or lapse of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
material benefit) under, require a consent or waiver under, constitute a change
in control under, require the payment of a penalty under or result in the
imposition of any Lien on the Buyers or the Transitory Subsidiarys assets
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract or other agreement, instrument or
obligation to which the Buyer or the Transitory Subsidiary is a party or by
which any of them or any of their properties or assets may be bound, or (iii) subject
to obtaining the Buyer Stockholder Approvals and compliance with the
requirements specified in clauses (i) through (ix) of Section 4.3(c),
conflict with or violate any permit, concession, franchise, license, judgment,
injunction, order, decree, statute, law, ordinance, rule or regulation
applicable to the Buyer or the Transitory Subsidiary or any of its or their
properties or assets, except in the case of clauses (ii) and (iii) of
this Section 4.3(b) for any such conflicts, violations, breaches, defaults,
terminations, cancellations, accelerations or losses that, individually or in
the aggregate, may not reasonably be expected to have a Buyer Material Adverse
Effect.
(c) No
consent, approval, license, permit, order or authorization of, or registration,
declaration, notice or filing with, any Governmental Entity is required by or
with respect to the Buyer or the Transitory Subsidiary in connection with the
execution and delivery of this Agreement by the Buyer or the Transitory
Subsidiary or the consummation by the Buyer or the Transitory Subsidiary of the
transactions contemplated by this Agreement, except for (i) the pre-merger
notification requirements under the HSR Act and compliance with other
applicable Antitrust Laws, (ii) the filing of the Agreement of Merger with
the California Secretary of State and appropriate corresponding documents with
the appropriate authorities of other states in which the Company is qualified
as a foreign corporation to transact business, (iii) the filing of the
Registration Statement with the SEC in accordance with the Securities Act, (iv) the
filing of the Joint Proxy Statement/Prospectus with the SEC in accordance with
the Exchange Act, (v) the filing of such reports, schedules or materials
under Section 13 of or Rule 14a-12 under the Exchange Act and
materials under Rule 165 and Rule 425 under the Securities Act as may
be required in connection with this Agreement and the transactions contemplated
hereby, (vi) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state and foreign
securities laws; (vii) such other consents, licenses, permits, orders,
authorizations, filings, approvals and registrations which, if not obtained or
made, could not reasonably be expected, individually or in the aggregate, to
have a Buyer Material Adverse Effect, (viii) the filing of the Certificate
of Amendment to the Certificate of Incorporation of the Buyer with the Delaware
Secretary of State increasing the number of authorized shares of Buyer Common
Stock to 100,000,000, and (ix) the filing with The Nasdaq Stock Market of
a Notification Form for Listing of Additional Shares with respect to the
shares of Buyer Common Stock issuable in connection with the Merger.
38
(d) The
affirmative vote of the holders of (i) a majority of the shares of Buyer
Common Stock present or represented by proxy and voting at the Buyer
Stockholders Meeting is the only vote of the holders of any class or series of
the Buyers capital stock or other securities necessary to obtain the Buyer
Transaction Approval and (ii) a majority of the shares of Buyer Common
Stock outstanding as of the record date for the Buyer Stockholders Meeting is
the only vote of the holders of any class or series of the Buyers capital
stock or other securities necessary to obtain the Buyer Charter Approval, and
such votes are the only votes of the holders of any class or series of the
Buyers capital stock or other securities necessary for the consummation by the
Buyer of the other transactions contemplated by this Agreement. There are no bonds, debentures, notes or
other indebtedness of the Buyer having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on
which stockholders of the Buyer may vote.
(a) The
Buyer has filed all registration statements, forms, reports and other documents
required to be filed by the Buyer with the SEC since January 1, 2002 and
has made available to the Company copies of all registration statements, forms,
reports and other documents filed by the Buyer with the SEC since such date,
all of which are publicly available on the SECs EDGAR system. All such registration statements, forms,
reports and other documents (including those that the Buyer may file after the
date hereof until the Effective Time) are referred to herein as the Buyer SEC
Reports. The Buyer SEC Reports (i) were,
and with respect to Buyer SEC Reports filed after the date of this Agreement
and prior to the Effective Time will be, filed on a timely basis, (ii) at
the time filed, were, and with respect to Buyer SEC Reports filed after the
date of this Agreement and prior to the Effective Time will be, be prepared in
compliance in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Buyer SEC Reports, and (iii) did
not at the time they were filed, and with respect to Buyer SEC Reports filed
after the date of this Agreement and prior to the Effective Time will not at
the time they are filed, contain any untrue statement of a material fact or
omit to state a material fact required to be stated in such Buyer SEC Reports
or necessary in order to make the statements in such Buyer SEC Reports, in the
light of the circumstances under which they were made, not misleading. No Subsidiary of the Buyer is subject to the
reporting requirements of Section 13(a) or Section 15(d) of
the Exchange Act. There are no
off-balance sheet structures or transactions with respect to the Buyer or any
of its Subsidiaries that would be required to be reported or set forth in the
Buyer SEC Reports.
(b) Each
of the consolidated financial statements (including, in each case, any related
notes and schedules) contained or incorporated in the Buyer SEC Reports at the
time filed (i) complied, and with respect to Buyer SEC Reports filed after
the date of this Agreement and prior to the Effective Time will comply, as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, (ii) were,
and with respect to Buyer SEC Reports filed after the date of this Agreement
and prior to the Effective Time will be, prepared in accordance with GAAP
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements or, in the case of
unaudited statements, as permitted by the SEC on Form 10-Q under
39
the Exchange Act) and (iii) fairly presented, and with respect to
Buyer SEC Reports filed after the date of this Agreement and prior to the
Effective Time will fairly present, the consolidated financial position of the
Buyer and its Subsidiaries as of the dates thereof and the consolidated results
of its operations and cash flows for the periods indicated, consistent with the
books and records of the Buyer and its Subsidiaries, except that the unaudited
interim financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount. The consolidated, unaudited balance sheet of
the Buyer as of December 31, 2004 is referred to herein as the Buyer
Balance Sheet.
(c) The
information in the Registration Statement or in any Regulation M-A Filing
(except, in each case, for information supplied by or on behalf of the Company
for inclusion or incorporation by reference in the Registration Statement or
Regulation M-A Filing, as to which the Buyer makes no representation and which
shall not constitute part of the Buyer SEC Reports for purposes of this
Agreement), shall not at the time the Registration Statement or any Regulation
M-A Filing is filed with the SEC, at any time the Registration Statement is
amended or supplemented, or at the time the Registration Statement is declared
effective by the SEC (as applicable), 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. The information to be supplied by or on
behalf of the Buyer for inclusion in the Joint Proxy Statement/Prospectus
(which shall be deemed to include all information about or relating to the
Buyer, the Buyer Voting Proposal and the Buyer Stockholders Meeting) shall not,
on the date the Joint Proxy Statement/Prospectus is first mailed to
stockholders of the Company or the Buyer, or at the time of the Company
Shareholders Meeting or the Buyer Stockholders Meeting or at the Effective
Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements made in the Joint Proxy Statement/Prospectus not false or
misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Shareholders Meeting or the Buyer Stockholders Meeting
that has become false or misleading. If at
any time prior to the Effective Time any fact or event relating to the Buyer or
any of its Affiliates that should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy Statement/Prospectus
should be discovered by the Buyer or should occur, the Buyer shall promptly
inform the Company of such fact or event.
(d) The
Buyer maintains disclosure controls and procedures required by Rule 13a-15(e) or
15d-15(e) under the Exchange Act.
Such disclosure controls and
procedures are effective to provide reasonable assurance that information the
Buyer is required to disclose in reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in SEC rules and forms, and that such information is
accumulated and communicated to the Buyers management as appropriate, to allow
timely decisions regarding required disclosure.
The Buyer has disclosed, based on its most recent evaluation of
internal control over financial reporting prior to the date hereof, to the
Buyers auditors and the Audit Committee of the Buyers Board of Directors (A) any
significant deficiencies or material weaknesses in the design or operation of
internal control over financial reporting which are likely to adversely affect
in any material respect the Buyers ability to record, process, summarize and
report financial data and (B) any fraud, whether or not material,
40
that involves management or other employees of the Buyer or its
Subsidiaries who have a significant role in the Buyers internal control over
financial reporting. Since January 1,
2002, neither the Buyer nor any of its Subsidiaries nor, to the knowledge of
the Buyer, any director, officer, employee, auditor, accountant or
representative of the Buyer or any of its Subsidiaries has received or
otherwise had or obtained knowledge of any material complaint, allegation,
assertion or claim, whether written or oral, regarding the accounting or
auditing practices, procedures, methodologies or methods of the Buyer or any of
its Subsidiaries or their respective internal accounting controls including any
material complaint, allegation, assertion or claim that the Buyer or any of its
Subsidiaries has engaged in questionable accounting or auditing practices. No
attorney representing the Buyer or any of its Subsidiaries, whether or not
employed by the Buyer or any of its Subsidiaries, has reported evidence of a
violation of securities laws, breach of fiduciary duty or similar violation by
the Buyer or any of its officers, directors, employees or agents to the Buyers
Board of Directors or any committee thereof or to any director or officer of
the Buyer.
(e) The
Buyer is in compliance in all material respects with the applicable provisions
of the Sarbanes-Oxley Act and with the applicable listing and other rules and
regulations of The Nasdaq National Market and has not since January 1,
2002 received any notice from The Nasdaq National Market asserting any
non-compliance with such rules and regulations. Each required form, report and document
containing financial statements that the Buyer has filed with or submitted to
the SEC since August 29, 2002 was accompanied by the certifications
required to be filed or submitted by the Buyers principal executive officer
and principal financial officer pursuant to the Sarbanes-Oxley Act and, at the
time of filing or submission of each such certification, such certification was
true and accurate and complied with the Sarbanes-Oxley Act and the rules and
regulations promulgated thereunder.
Except as permitted by the Exchange Act, including, without limitation,
Sections 13(k)(2) and (3), since the enactment of the Sarbanes-Oxley Act,
neither the Buyer nor any of its affiliates has made, arranged or modified (in
any material way) personal loans to any executive officer or director of the
Buyer.
4.5 Absence of Certain Changes or Events. Except as disclosed in the Buyer SEC Reports
filed prior to the date of this Agreement, since the date of the Buyer Balance
Sheet, there has not been any event, change, circumstance, development or
effect that, individually or in the aggregate, has had, or would reasonably be
expected to have, a Buyer Material Adverse Effect.
4.6 Tax Matters.
To the Buyers knowledge, after consulting with its independent auditors
and tax advisors, neither the Buyer nor any of its Affiliates has taken or
agreed to take any action that would prevent the Merger from constituting a
transaction qualifying as a reorganization under Section 368(a) of
the Code; provided that the Buyer shall not be in breach of this representation
if the Merger fails to qualify as a reorganization under Section 368(a) of
the Code by reason of the Buyers failing to acquire control of the Company
for its voting stock as required by Section 368(a)(2)(E)(ii) of the
Code.
4.7 Operations of the Transitory
Subsidiary. The Transitory
Subsidiary was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement, has engaged in no other business activities and
has conducted its operations only as contemplated by this Agreement.
41
4.8 Opinion of Buyer Financial Advisor. The financial advisor of the Buyer, Piper
Jaffray & Co., has delivered to the Buyer an opinion dated the date of
this Agreement to the effect, as of such date, that the Merger Consideration is
fair to the Buyer from a financial point of view, a signed copy of which
opinion has been delivered to the Company.
ARTICLE V
5.1 Covenants of the Company. Except as consented to in writing by the
Buyer or as set forth in Section 5.1 of the Company Disclosure Schedule,
from and after the date of this Agreement until the earlier of the termination
of this Agreement in accordance with its terms or the Effective Time, the
Company shall, and shall cause each of its Subsidiaries to, act and carry on
its business in the usual, regular and ordinary course in substantially the
same manner as previously conducted, pay its debts and Taxes and perform its
other obligations when due (subject to good faith disputes over such debts,
Taxes or obligations), comply with all applicable laws, rules and
regulations, and use all commercially reasonable efforts, consistent with past
practices, to maintain and preserve its and each Subsidiarys business
organization, assets and properties, keep available the services of its present
officers and employees and preserve its advantageous business relationships
with customers, strategic partners, suppliers, distributors and others having
business dealings with it to the end that its goodwill and ongoing business
shall be materially unimpaired at the Effective Time. Without limiting the generality of the foregoing,
from and after the date of this Agreement until the earlier of the termination
of this Agreement in accordance with its terms or the Effective Time, except as
set forth in Section 5.1 of the Company Disclosure Schedule, the Company
shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, do any of the following without the prior written consent of the
Buyer:
(a) (A)
declare, set aside or pay any dividends on, or make any other distributions
(whether in cash, securities or other property) in respect of, any of its
capital stock (other than dividends and distributions by a direct or indirect
wholly owned Subsidiary of the Company to its parent); (B) split, combine
or reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock or any of its other securities; or (C) purchase, redeem
or otherwise acquire any shares of its capital stock or any other of its
securities or any rights, warrants or options to acquire any such shares or
other securities;
(b) except
as permitted by Section 5.1(o), issue, deliver, sell, grant, pledge or
otherwise dispose of or encumber any shares of its capital stock, any other
voting securities or any securities convertible into or exchangeable for, or
any rights, warrants or options to acquire, any such shares, voting securities
or convertible or exchangeable securities (other than the issuance of shares of
Company Common Stock upon the exercise of Company Stock Options outstanding on
the date of this Agreement in accordance with their present terms, and other
than the issuance of Company Common Stock prior to or upon termination of the
Company ESPP in accordance with its terms as of or prior to the Effective
Time);
42
(c) amend
its articles of incorporation, by-laws or other comparable charter or
organizational documents, except as expressly provided by this Agreement;
(d) acquire
(A) by merging or consolidating with, or by purchasing all or a
substantial portion of the assets or any stock of, or by any other manner, any
business or any corporation, partnership, joint venture, limited liability
company, association or other business organization or division thereof or (B) any
assets that are material, in the aggregate, to the Company and its
Subsidiaries, taken as a whole, except purchases of inventory, components or,
subject to clause Section 5.1(j) below, property, plant or equipment
(including engineering development equipment) in the Ordinary Course of
Business or licenses of technology in the Ordinary Course of Business;
(e) except
in the Ordinary Course of Business, sell, lease, license, pledge, or otherwise
dispose of or encumber any properties or assets of the Company or of any of its
Subsidiaries;
(f) whether
or not in the Ordinary Course of Business, sell, dispose of or otherwise
transfer any assets material to the Company and its Subsidiaries, taken as a
whole (including any accounts, leases, contracts or intellectual property or
any assets or the stock of any of its Subsidiaries, but excluding the sale or
non-exclusive license of products in the Ordinary Course of Business);
(g) adopt
or implement any shareholder rights plan or, except as provided in Section 3.24,
alter or further amend the Company Rights Plan or the Company Rights;
(h) except
for a confidentiality agreement as permitted by Section 6.1, enter into an
agreement with respect to any merger, consolidation, liquidation or business
combination, or any acquisition or disposition of all or substantially all of
the assets or securities of the Company or any of its Subsidiaries;
(i) (A) incur
or suffer to exist any indebtedness for borrowed money other than such
indebtedness which existed as of December 31, 2004 as reflected on the
Company Balance Sheet or guarantee any such indebtedness of another Person, (B) issue,
sell or amend any debt securities or warrants or other rights to acquire any
debt securities of the Company or any of its Subsidiaries, guarantee any debt
securities of another Person, enter into any keep well or other agreement to
maintain any financial statement condition of another Person or enter into any
arrangement having the economic effect of any of the foregoing, (C) make
any loans, advances (other than routine advances to employees of the Company
and its Subsidiaries in the Ordinary Course of Business) or capital
contributions to, or investment in, any other Person, other than the Company or
any of its direct or indirect wholly owned Subsidiaries or (D) other than
in the Ordinary Course of Business, enter into any hedging agreement or other
financial agreement or arrangement, intended to protect the Company or its
Subsidiaries against fluctuations in commodities prices or exchange rates;
(j) make
any capital expenditures or other expenditures with respect to property, plant
or equipment except for up to $500,000 per month for the Company and its
Subsidiaries, taken as a whole, in the Ordinary Course of Business;
43
(k) make
any changes in accounting methods, principles or practices, except insofar as
may have been required by a change in GAAP or, except as so required, change
any assumption underlying, or method of calculating, any bad debt, contingency
or other reserve;
(l) (A) pay,
discharge, settle or satisfy any claims, liabilities or obligations (whether
absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction, in the Ordinary Course of Business or in
accordance with their terms as in effect on the date of this Agreement, of
claims, liabilities or obligations reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the
notes thereto) of the Company included in the Company SEC Reports filed prior
to the date of this Agreement (to the extent so reflected or reserved against)
or incurred since the date of such financial statements in the Ordinary Course
of Business, or (B) waive any material benefits of, release or eliminate
any rights under or otherwise modify in any material adverse respect, fail to
enforce, or consent to any matter with respect to which its consent is required
under, any confidentiality, standstill or similar agreements to which the Company
or any of its Subsidiaries is a party;
(m) except
in the Ordinary Course of Business, modify, amend or terminate any material
contract or agreement to which the Company or any of its Subsidiaries is party
or, except in the Ordinary Course of Business, knowingly waive, release or
assign any material rights or claims (including any write-off or other
compromise of any accounts receivable of the Company or any of its
Subsidiaries);
(n) except
in the Ordinary Course of Business (A) enter into any material contract or
agreement or (B) license any material intellectual property rights to or
from any third party;
(o) except
as required to comply with applicable law or agreements or pursuant to plans or
arrangements existing on the date hereof, (A) take any action with respect
to, adopt, enter into, terminate or amend any employment, severance,
retirement, retention, incentive or similar agreement, arrangement or benefit
plan for the benefit or welfare of any current or former director, officer,
employee or consultant or any collective bargaining agreement (provided,
however, that the Company may hire employees or independent contractors (i) for
the sole purpose of replacing employees who have terminated their employment,
provided that the hired employees must be hired on terms and conditions,
including compensation, which are the same in all material respects as the
terms and conditions of the employees being replaced, (ii) with respect to
any open requisitions for employment existing on the date hereof or (iii) other
than temporary employees or independent contractors hired in the Ordinary
Course of Business terminable at will with no more than 10 business days notice
without severance or ongoing benefit obligations), (B) increase in any
respect the compensation or fringe benefits of, or pay any bonus to, any
director, officer, employee or consultant, (C) amend or accelerate the
payment, right to payment or vesting of any compensation or benefits, including
any outstanding options or restricted stock awards, (D) pay any material
benefit not provided for as of the date of this Agreement under any benefit
plan, (E) grant any awards under any bonus, incentive, performance or
other compensation plan or arrangement or benefit plan, including the grant of
stock options, stock appreciation rights, stock based or stock related awards,
performance units or restricted stock, or the removal of existing restrictions
in any
44
benefit plans or
agreements or awards made thereunder, except for the grant of options to
purchase Company Common Stock to new hires, which grants shall not exceed
125,000 shares in the aggregate or 20,000 shares to any one Person, and which
options shall have an exercise price equal to the fair market value of the
Company Common Stock on the date of grant (determined in a manner consistent
with the Companys existing practice for establishing fair market value for
option grants) and which options shall otherwise be upon the Companys
customary terms), or (F) take any action other than in the Ordinary Course
of Business to fund or in any other way secure the payment of compensation or
benefits under any employee plan, agreement, contract or arrangement or benefit
plan;
(p) make
or rescind any Tax election, settle or compromise any Tax liability or amend
any Tax return;
(q) commence
any offering of shares of Company Common Stock pursuant to the Companys
Employee Stock Purchase Plan;
(r) initiate,
compromise or settle any material litigation or arbitration proceeding;
(s) open
or close any facility or office;
(t) fail
to maintain insurance at levels substantially comparable to levels existing as
of the date of this Agreement;
(u) except
with respect any amounts disputed in good faith by the Company, fail to pay
accounts payable and other obligations in the Ordinary Course of Business; or
(v) authorize
any of, or commit or agree, in writing or otherwise, to take any of, the
foregoing actions or any action that would materially impair or prevent the satisfaction
of any conditions in Article VII hereof other than as specifically
provided for in Section 6.1 or Section 8.1(h).
5.2 Confidentiality. The parties acknowledge that the Buyer and
Lazard Frères & Co. LLC (on behalf of the Company) have previously
executed a confidentiality agreement dated as of January 5, 2005, as
amended by letter dated March 14, 2005 between the Buyer and the Company
(the Company Confidentiality Agreement), and that the Buyer and the Company
have previously executed a confidentiality agreement dated as of March 9,
2005 (collectively, the Confidentiality Agreements), which Confidentiality
Agreements shall continue in full force and effect in accordance with their
terms, except as expressly modified herein.
(a) No
Solicitation or Negotiation. Except
as set forth in this Section 6.1, the Company shall not, nor shall it
authorize or permit any of its Subsidiaries or any of its or their
45
directors, officers,
employees, investment bankers, attorneys, accountants or other advisors or
representatives (such directors, officers, employees, investment bankers,
attorneys, accountants, other advisors and representatives, collectively, Representatives)
to directly or indirectly:
(i) solicit,
initiate, knowingly or intentionally encourage, or take any other action to
facilitate any inquiries or the making of any proposal or offer that
constitutes, or could reasonably be expected to lead to, any Acquisition
Proposal, including without limitation amending or granting any waiver or
release under any standstill or similar agreement with respect to any Company
Common Stock; or
(ii) enter
into, continue or otherwise participate in any discussions or negotiations
regarding, furnish to any Person any information with respect to, assist or
participate in any effort or attempt by any Person with respect to, or
otherwise cooperate in any way with, any Acquisition Proposal (provided,
however, that providing notice of the restrictions set forth in this Section 6.1
to a third party in response to any such inquiry, request or Acquisition
Proposal shall not, in and of itself, be deemed a breach of this Section 6.1).
Notwithstanding the foregoing, prior to the approval
of the principal terms of the Merger at the Company Shareholders Meeting (the Specified
Time), the Company may, to the extent required by the fiduciary obligations of
the Company Board, as determined in good faith by the Company Board after
consultation with outside counsel, in response to a bona fide written
Acquisition Proposal made or received after the date of this Agreement that the
Company Board determines in good faith after consultation with outside counsel
and a nationally recognized independent financial advisor is reasonably likely
to lead to a Superior Proposal, in each case that did not result from a breach
by the Company of, or actions by its Representatives inconsistent with, this Section 6.1,
and subject to compliance with Section 6.1(c), (x) furnish
information with respect to the Company to the Person making such Acquisition
Proposal and its Representatives pursuant to a customary confidentiality
agreement not less restrictive of the other party than the Company Confidentiality
Agreement and (y) participate in discussions or negotiations with such
Person and its Representatives regarding such Acquisition Proposal. Without limiting the foregoing, it is agreed
that any violation of the restrictions set forth in this Section 6.1(a) by
any Representative of the Company or any of its Subsidiaries, whether or not
such Person is purporting to act on behalf of the Company or otherwise, shall
be deemed to be a breach of this Section 6.1(a) by the Company.
(b) No
Change in Recommendation or Alternative Acquisition Agreement. Neither the Company Board nor any committee
thereof shall:
(i) except
as set forth in this Section 6.1, withdraw or modify, or propose to
withdraw or modify, in a manner adverse to the Buyer or the Transitory
Subsidiary, the approval or recommendation by the Company Board or any such
committee of this Agreement or the Merger;
(ii) cause
or permit the Company to enter into any letter of intent, memorandum of
understanding, agreement in principle, acquisition agreement, merger agreement
or similar agreement (an Alternative Acquisition Agreement) constituting or
46
relating to any
Acquisition Proposal (other than a confidentiality agreement referred to in Section 6.1(a) entered
into in the circumstances referred to in Section 6.1(a)); or
(iii) adopt, approve or
recommend, or propose to adopt, approve or recommend, any Acquisition Proposal.
Notwithstanding the foregoing, the Company Board may,
in response to a Superior Proposal that did not result from a breach by the
Company of this Section 6.1, withdraw or modify the recommendation by the
Company Board or any committee thereof of this Agreement and the Merger, if the
Company Board determines in good faith, after consultation with outside
counsel, that its fiduciary obligations require it to do so, but only at a time
that is prior to the Specified Time and is after the third business day
following the Buyers receipt of written notice advising the Buyer that the
Company Board desires to withdraw or modify the recommendation due to the
existence of a Superior Proposal (or any material change in the terms of such
Superior Proposal), specifying the material terms and conditions of such
Superior Proposal (including any such material changes) and identifying the
Person making such Superior Proposal.
Such three business day period shall be required for each and every
Superior Proposal or modification thereto, as applicable. Nothing in this Section 6.1 shall be
deemed to (A) permit the Company to take any action described in clauses (ii) or
(iii) of the first sentence of this Section 6.1(b), or (B) affect
any obligation of the Company under this Agreement or (C) except upon a
termination of this Agreement pursuant to Section 8.1(h), limit the
Companys obligation to call, give notice of, convene and hold the Company
Shareholders Meeting, regardless of whether the Company Board has withdrawn or
modified its recommendation of this Agreement and the Merger.
(c) Notices
to the Buyer; Additional Negotiations.
The Company shall immediately advise the Buyer orally, with written
confirmation to follow promptly (and in any event within 24 hours), of any
Acquisition Proposal or any request for nonpublic information in connection
with any Acquisition Proposal, or of any inquiry with respect to, or that would
reasonably be expected to lead to, any Acquisition Proposal, the material terms
and conditions of any such Acquisition Proposal or inquiry and the identity of
the Person making any such Acquisition Proposal or inquiry. The Company shall not provide any information
to or participate in discussions or negotiations with the Person or entity
making any Superior Proposal until after the Company has first notified the
Buyer of such Acquisition Proposal as required by the preceding sentence. The Company shall (i) promptly notify
the Buyer if it has begun to furnish information to, or to participate in
discussions or negotiations with, a Person making any such Acquisition Proposal
or inquiry and shall immediately advise the Buyer orally, with written
confirmation to follow promptly (and in any event within 24 hours), of any
material change in the terms of any such Acquisition Proposal or inquiry, (ii) provide
to the Buyer as soon as practicable after receipt or delivery thereof copies of
all correspondence and other written material sent or provided to the Company
from any third party in connection with any Acquisition Proposal and (iii) if
the Buyer shall make a counterproposal (including without limitation following
delivery of a written notice to the Buyer pursuant to Section 6.1(b)),
consider and cause its financial and legal advisors to consider in good faith
the terms of such counterproposal.
Contemporaneously with providing any correspondence, other written
materials or other information to a third party in connection with any such
Superior Proposal or
47
inquiry, the Company
shall furnish a copy of such information to the Buyer (to the extent not
already previously provided).
(d) Certain
Permitted Disclosure. Nothing
contained in this Section 6.1 or in Section 6.5 shall be deemed to
prohibit the Company from taking and disclosing to its shareholders a position
with respect to a tender offer contemplated by Rule 14e-2(a) promulgated
under the Exchange Act or from making any required disclosure to the Companys
shareholders if, in the good faith judgment of the Company Board, after
consultation with outside counsel, failure to so disclose would be inconsistent
with its obligations under applicable law.
(e) Cessation
of Ongoing Discussions. The Company
shall, and shall cause its Subsidiaries and its and their Representatives to,
cease immediately all discussions and negotiations regarding any proposal that
constitutes, or could reasonably be expected to lead to, an Acquisition
Proposal.
(f) Definitions. For purposes of this Agreement:
Acquisition Proposal
means (i) any inquiry, proposal or offer for a merger, consolidation, dissolution,
tender offer, recapitalization, share exchange or other business combination
involving the Company or any of its Subsidiaries, (ii) any proposal for
the issuance by the Company or any of its Subsidiaries of over 20% of its
equity securities (other than pursuant to any underwritten or broadly
distributed offering) or (iii) any proposal or offer to acquire (including
without limitation through any license) in any manner, directly or indirectly,
over 20% of the equity securities or assets that constitute or account for over
20% of the consolidated net revenues, net income or assets of the Company, in
each case other than the transactions contemplated by this Agreement.
Superior Proposal means
any bona fide written proposal made by a third party (other than one made in
response to any solicitation by the Company or its Representatives that is in
violation of or inconsistent with the terms of this Agreement) to acquire
substantially all the equity securities or assets of the Company, pursuant to a
tender or exchange offer, a merger, a consolidation or a sale of its assets, (i) on
terms which the Company Board determines in its good faith judgment to be more
favorable from a financial point of view to the holders of Company Common Stock
than the transactions contemplated by this Agreement following consultation
with a nationally recognized independent financial advisor, taking into account
all the terms and conditions of such proposal and this Agreement (including any
proposal by the Buyer to amend the terms of this Agreement) and (ii) that
in the good faith judgment of the Company Board is reasonably capable of being
completed on the terms proposed, taking into account all financial, regulatory,
legal and other aspects of such proposal; provided, however, that no
Acquisition Proposal shall be deemed to be a Superior Proposal if any financing
required to consummate the Acquisition Proposal is not then committed unless in
the good faith judgment of the Company Board such financing is reasonably
likely to be committed.
(a) As
promptly as practicable after the execution of this Agreement, the Buyer, in
cooperation with the Company, shall prepare and file with the SEC the
Registration
48
Statement, in which the
Joint Proxy Statement/Prospectus shall be included as a prospectus. Each of the Buyer and the Company shall
respond to any comments of the SEC and shall use all commercially reasonable
efforts to have the Registration Statement declared effective under the
Securities Act as promptly as practicable after such filings, and the Buyer and
the Company shall cause the Joint Proxy Statement/Prospectus to be mailed to
their respective shareholders or stockholders, as the case may be, at the
earliest practicable time after the Registration Statement is declared
effective under the Securities Act. Each
of the Buyer and the Company shall notify the other promptly upon the receipt
of any comments from the SEC or its staff or any other government officials and
of any request by the SEC or its staff or any other government officials for
amendments or supplements to the Registration Statement, the Joint Proxy
Statement/Prospectus or any filing pursuant to Section 6.2(b) or for
additional information and shall supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Registration Statement, the Joint Proxy
Statement/Prospectus, the Merger or any filing pursuant to Section 6.2(b). Each of the Buyer and the Company shall use
all commercially reasonable efforts to cause all documents that it is
responsible for filing with the SEC or other regulatory authorities under this Section 6.2
to comply in all material respects with all applicable requirements of law and
the rules and regulations promulgated thereunder. Whenever any event occurs which is required
to be set forth in an amendment or supplement to the Joint Proxy
Statement/Prospectus, the Registration Statement or any filing pursuant to Section 6.2(b),
the Buyer or the Company, as the case may be, shall promptly inform the other
of such occurrence and cooperate in filing with the SEC or its staff or any
other government officials, and/or mailing to shareholders of the Company, such
amendment or supplement.
(b) The
Buyer and the Company shall promptly make all necessary filings with respect to
the Merger under the Securities Act, the Exchange Act, applicable state blue
sky laws and the rules and regulations thereunder.
6.3 Nasdaq Quotation. The Buyer and the Company each agree to
continue the quotation of Buyer Common Stock and Company Common Stock, respectively,
on The Nasdaq Stock Market during the term of this Agreement.
6.4 Access to Information. Each of the Buyer and the Company shall (and
shall cause each of its Subsidiaries to) afford to each others officers,
employees, accountants, counsel and other representatives, reasonable access
(subject to applicable law regarding the sharing of information), during normal
business hours during the period prior to the Effective Time, to all its
properties, books, contracts, commitments, personnel and records and, during
such period, each of the Buyer and the Company shall (and shall cause each of
its Subsidiaries to) furnish promptly to the each other (a) a copy of each
report, schedule, registration statement and other document filed or received
by it during such period pursuant to the requirements of federal or state
securities laws and (b) all other information concerning its business,
properties, assets and personnel as the other may reasonably request. Each of the Buyer and the Company will hold
any such information which is nonpublic in confidence in accordance with the
Confidentiality Agreements. No
information or knowledge obtained in any investigation pursuant to this Section
49
or otherwise shall affect
or be deemed to modify any representation or warranty contained in this
Agreement or the conditions to the obligations of the parties to consummate the
Merger.
(a) The
Company, acting through the Company Board, shall take all actions in accordance
with applicable law, its Articles of Incorporation and By-laws and the rules of
The Nasdaq Stock Market to promptly and duly call, give notice of, convene and
hold as promptly as practicable, and in any event within 45 days after the
declaration of effectiveness of the Registration Statement, the Company
Shareholders Meeting for the purpose of considering and voting upon the Company
Voting Proposal. Subject to Section 6.1(b),
to the fullest extent permitted by applicable law, (i) the Company Board
shall recommend approval and adoption of the Company Voting Proposal by the
shareholders of the Company and include such recommendation in the Joint Proxy
Statement/Prospectus, and (ii) neither the Company Board nor any committee
thereof shall withdraw or modify, or propose or resolve to withdraw or modify
in a manner adverse to the Buyer, the recommendation of the Company Board that
the Companys shareholders vote in favor of the Company Voting Proposal. Subject to Section 6.1(b), the Company
shall take all action that is both reasonable and lawful to solicit from its
shareholders proxies in favor of the Company Voting Proposal and shall take all
other action necessary or advisable to secure the vote or consent of the shareholders
of the Company required by the rules of The Nasdaq Stock Market or the
CGCL to obtain such approvals.
Notwithstanding anything to the contrary contained in this Agreement,
the Company, after consultation with the Buyer, may adjourn or postpone the
Company Shareholders Meeting to the extent necessary to ensure that any
required supplement or amendment to the Joint Proxy Statement/Prospectus is
provided to the Companys shareholders or, if as of the time for which the
Company Shareholders Meeting is originally scheduled (as set forth in the Joint
Proxy Statement/Prospectus) there are insufficient shares of Company Common
Stock represented (either in person or by proxy) to constitute a quorum
necessary to conduct the business of the Company Shareholders Meeting.
(b) The
Buyer, acting through the Buyer Board, shall take all actions in accordance
with applicable law, its Certificate of Incorporation and By-laws and the rules of
The Nasdaq Stock Market to promptly and duly call, give notice of, convene and
hold as promptly as practicable, and in any event within 45 days after the
declaration of effectiveness of the Registration Statement, the Buyer
Stockholders Meeting for the purpose of considering and voting upon the Buyer
Voting Proposals. To the fullest extent
permitted by applicable law, unless the Buyer Board determines in good faith,
after consultation with outside counsel, that its fiduciary obligations require
it to do otherwise, (i) the Buyer Board shall recommend approval and
adoption of the Buyer Voting Proposals by the stockholders of the Buyer and
include such recommendation in the Joint Proxy Statement/Prospectus, and (ii) neither
the Buyer Board nor any committee thereof shall withdraw or modify, or propose
or resolve to withdraw or modify in a manner adverse to the Company, the
recommendation of the Buyer Board that the Buyers stockholders vote in favor
of the Buyer Voting Proposals. Unless
the Buyer Board determines in good faith, after consultation with outside
counsel, that its fiduciary obligations require it to do otherwise, the Buyer
shall take all action that is both reasonable and lawful to solicit from its
stockholders proxies in favor of the Buyer Voting Proposals and shall take all
other action
50
necessary or advisable to
secure the vote or consent of the shareholders of the Buyer required by the rules of
The Nasdaq Stock Market to obtain such approvals. Notwithstanding anything to the contrary
contained in this Agreement, the Buyer, after consultation with the Company,
may adjourn or postpone the Buyer Stockholders Meeting to the extent necessary
to ensure that any required supplement or amendment to the Joint Proxy
Statement/Prospectus is provided to the Buyers stockholders or, if as of the
time for which the Buyer Stockholders Meeting is originally scheduled (as set
forth in the Joint Proxy Statement/Prospectus) there are insufficient shares of
Buyer Common Stock represented (either in person or by proxy) to constitute a
quorum necessary to conduct the business of the Buyer Stockholders Meeting.
(c) The
Company shall call, give notice of, convene and hold the Company Shareholders
Meeting in accordance with this Section 6.5 and shall submit the Company
Voting Proposal to its shareholders for the purpose of acting upon such
proposal.
The Buyer shall call, give notice of, convene and hold
the Buyer Stockholders Meeting in accordance with this Section 6.5 and
shall submit the Buyer Voting Proposals to its stockholders for the purpose of
acting upon such proposals.
(a) Subject
to the terms hereof, including Section 6.6(b), the Company and the Buyer
shall each use all commercially reasonable efforts to (i) take, or cause
to be taken, all actions, and do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated hereby
as promptly as practicable, (ii) as promptly as practicable, obtain from
any Governmental Entity or any other third party any consents, licenses,
permits, waivers, approvals, authorizations, or orders required to be obtained
or made by the Company or the Buyer or any of their Subsidiaries in connection
with the authorization, execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, (iii) as promptly as
practicable, make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the Merger required under (A) the
Securities Act, the Exchange Act and any other applicable federal or state
securities laws, (B) the HSR Act, any foreign antitrust laws or
regulations, and any related governmental request thereunder, and (C) any
other applicable law, and (iv) execute or deliver any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement. The Company and the Buyer shall cooperate
with each other in connection with the making of all such filings (subject to
applicable law regarding the sharing of information), including providing
copies of all such documents to the non-filing party and its advisors prior to
filing and, if requested, accepting all reasonable additions, deletions or
changes suggested in connection therewith.
The Company and the Buyer shall each use all commercially reasonable
efforts (subject to applicable law regarding the sharing of information) to
furnish to each other all information required for any application or other
filing to be made pursuant to the rules and regulations of any applicable
law (including all information required to be included in the Joint Proxy
Statement/Prospectus and the Registration Statement) in connection with the
transactions contemplated by this Agreement.
For the avoidance of doubt, the Buyer and the Company agree that nothing
contained in this Section 6.6(a) shall modify or affect their
respective rights and responsibilities under Section 6.6(b).
51
(b) Subject
to the terms hereof, the Buyer and the Company agree, and shall cause each of
their respective Subsidiaries, to cooperate and to use all commercially
reasonable efforts to obtain any government clearances or approvals required
for Closing under the HSR Act, the Sherman Act, as amended, the Clayton Act, as
amended, the Federal Trade Commission Act, as amended, and any other federal,
state or foreign law, regulation or decree designed to prohibit, restrict or
regulate actions for the purpose or effect of monopolization or restraint of
trade and/or competition (collectively, Antitrust Laws), to respond to any
government requests for information under any Antitrust Law, and to contest and
resist any action, including any legislative, administrative or judicial
action, and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) (an Antitrust Order) that restricts, prevents or prohibits the
consummation of the Merger or any other transactions contemplated by this
Agreement under any Antitrust Law. The
parties hereto will consult and cooperate with one another, and consider in
good faith the views of one another, in connection with any analyses,
appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto in connection
with proceedings under or relating to any Antitrust Law. The Buyer shall be entitled to direct any
proceedings or negotiations with any Governmental Entity relating to any of the
foregoing, provided that it shall afford the Company a reasonable opportunity
to participate therein. Notwithstanding
anything in this Agreement to the contrary, neither the Buyer nor any of its
Affiliates shall be under any obligation to (i) make proposals, execute or
carry out agreements or submit to orders providing for the sale or other
disposition or holding separate (through the establishment of a trust or
otherwise) of any assets of the Buyer or any of its Affiliates or the Company
or any of its Affiliates or the holding separate of the shares of Company
Common Stock (or shares of stock of the Surviving Corporation) or imposing or
seeking to impose any material limitation on the ability of the Buyer or any of
its Affiliates to conduct their business or own such assets or to acquire, hold
or exercise full rights of ownership of the shares of Company Common Stock (or
shares of stock of the Surviving Corporation) or (ii) take any action
under this Section if the United States Department of Justice or the
United States Federal Trade Commission, or any Governmental Entity
administering any other applicable Antitrust Law, authorizes its staff to seek
a preliminary injunction or restraining order to enjoin consummation of the
Merger.
(c) Each
of the Company and the Buyer shall give (or shall cause their respective
Subsidiaries to give) any notices to third parties, and use, and cause their
respective Subsidiaries to use, all commercially reasonable efforts to obtain
any third party consents related to or required in connection with the Merger
that are (A) necessary to consummate the transactions contemplated hereby,
(B) disclosed or required to be disclosed in the Company Disclosure Schedule or
the Buyer Disclosure Schedule, as the case may be, or (C) required to
prevent the occurrence of an event that may have a Company Material Adverse
Effect or a Buyer Material Adverse Effect prior to or after the Effective Time,
it being understood that neither the Company nor the Buyer shall be required to
make materially burdensome payments in connection with the fulfillment of its
obligations under this Section 6.6.
6.7 Public Disclosure. Except as may be required by law or stock
market regulations, (i) the press release announcing the execution of this
Agreement shall be issued only in such form as shall be mutually agreed upon by
the Company and the Buyer and (ii) the Buyer and the
52
Company shall each use
all commercially reasonable efforts to consult with the other party before
issuing any other press release or otherwise making any public statement with
respect to the Merger or this Agreement.
6.8 Section 368(a) Reorganization. The Buyer and the Company shall each use all
commercially reasonable efforts to cause the Merger to be treated as a
reorganization within the meaning of Section 368(a) of the Code,
provided that neither party shall be in breach of this covenant if the Merger
fails to qualify as a reorganization under Section 368(a) of the Code
by reason of the Buyers failing to acquire control of the Company for its
voting stock as required by Section 368(a)(2)(E)(ii) of the
Code. The parties hereto hereby adopt
this Agreement as a plan of reorganization.
6.9 Affiliate Legends. Section 6.9 of the Company Disclosure Schedule sets
forth a list of those Persons who are, in the Companys reasonable judgment, affiliates
of the Company within the meaning of Rule 145 promulgated under the
Securities Act (Rule 145 Affiliates).
The Company shall notify the Buyer in writing regarding any change in
the identity of its Rule 145 Affiliates prior to the Closing Date. The Buyer shall be entitled to place appropriate
legends on the certificates evidencing any shares of Buyer Common Stock to be
received by Rule 145 Affiliates of the Company in the Merger reflecting
the restrictions set forth in Rule 145 promulgated under the Securities
Act and to issue appropriate stop transfer instructions to the transfer agent
for Buyer Common Stock (provided that such legends or stop transfer
instructions shall be removed upon the request of any holder of shares of Buyer
Common Stock issued in the Merger if (i) such request is made more than
one year after the Effective Time and (ii) such holder is not then a Rule 145
Affiliate of the Buyer).
6.10 Nasdaq Stock Market Listing. The Buyer shall, if required by the rules of
The Nasdaq Stock Market, file with The Nasdaq Stock Market a Notification Form for
Listing Additional Shares with respect to the shares of Buyer Common Stock
issuable in connection with the Merger.
6.11 Shareholder Litigation. Until the earlier of the termination of this
Agreement in accordance with its terms or the Effective Time, the Company shall
give the Buyer the opportunity to participate in the defense or settlement of
any shareholder litigation against the Company or the Company Board relating to
this Agreement or any of the transactions contemplated by this Agreement, and
shall not settle any such litigation without the Buyers prior written consent,
which will not be unreasonably withheld or delayed.
(a) From
and after the Effective Time, the Buyer shall, to the fullest extent permitted
by law, cause the Surviving Corporation, for a period of six years from the
Effective Time, to honor all of the Companys obligations to indemnify and hold
harmless each present and former director and officer of the Company (the Indemnified
Parties), against any costs or expenses (including attorneys fees),
judgments, fines, losses, claims, damages, liabilities or amounts paid in
settlement incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
arising out of or pertaining to matters existing or occurring at or prior to
the Effective Time, whether asserted or claimed
53
prior to, at or after the
Effective Time, to the extent that such obligations to indemnify and hold
harmless exist on the date of this Agreement.
(b) For
a period of six years after the Effective Time, the Buyer shall cause the
Surviving Corporation to maintain (to the extent available in the market) in
effect a directors and officers liability insurance policy covering those
Persons who are currently covered by the Companys directors and officers
liability insurance policy (a complete and accurate copy of which has been
delivered or made available to the Buyer prior to the date of this Agreement)
with coverage in amount and scope at least as favorable to such Persons as the
Companys existing coverage; provided, that in no event shall the Buyer or the
Surviving Corporation be required to expend in excess of 150% of the annual
premium currently paid by the Company for such coverage.
(c) The
provisions of this Section 6.12 are intended to be in addition to the
rights otherwise available to the current officers and directors of the Company
by law, charter, statute, by-law or agreement, and shall operate for the
benefit of, and shall be enforceable by, each of the Indemnified Parties, their
heirs and their representatives. The
Buyer shall guarantee the obligations of the Surviving Corporation with respect
to any and all amounts payable under this Section 6.12.
6.13 Employee Matters. With respect to the employees of the Company
and its Subsidiaries who remain employed after the Effective Time by the
Company or any Subsidiary for a period of at least 180 days following the
Effective Time (the Continuing Employees), and to the extent permitted under
the terms of the Buyers applicable benefit plans, the Buyer shall treat and
cause its applicable benefit plans to treat the service of the Continuing Employees
with the Company and its Subsidiaries prior to the Effective Time as service
rendered to the Buyer or any affiliate of the Buyer for purposes of eligibility
to participate and vesting, including applicability of minimum waiting periods
for participation, but not for benefit accrual.
The Buyer shall use commercially reasonable efforts to provide that no
such Continuing Employee, or any of his or her eligible dependents, who, at the
Effective Time, are participating in the Companys group health plan shall be
excluded from the Buyers group health plan, or limited in coverage thereunder,
by reason of any waiting period restriction or pre-existing condition
limitation. Notwithstanding the
foregoing, the Buyer shall not be required to provide any coverage, benefits or
credit inconsistent with the terms of any Buyer benefit plans. Furthermore, nothing contained in this Section 6.13
shall require or imply that the employment of the employees of the Company and
its Subsidiaries who are employed at the Effective Time will continue for any
particular period of time following the Effective Time. This Section 6.13 is not intended, and
shall not be deemed, to confer any rights or remedies upon any Person other
than the parties to this Agreement and their respective successors and
permitted assigns, to create any agreement of employment with any Person or to
otherwise create any third-party beneficiary hereunder.
6.14 Notification of Certain Matters. The Buyer shall give prompt notice to the
Company, and the Company shall give prompt notice to the Buyer, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be reasonably likely to cause (a) (i) any representation
or warranty of such party contained in this Agreement that is qualified as to
materiality to be untrue or inaccurate in any respect or (ii) any other
representation or
54
warranty of such party
contained in this Agreement to be untrue or inaccurate in any material respect,
in each case at any time from and after the date of this Agreement until the
Effective Time, or (b) any material failure of the Buyer and the
Transitory Subsidiary or the Company, as the case may be, or of any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement. Notwithstanding the above,
the delivery of any notice pursuant to this Section will not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice or the conditions to such partys obligation to consummate the Merger.
(a) The
Board of Directors of the Buyer, or a committee thereof consisting of
non-employee directors (as such term is defined for purposes of Rule 16b-3(d) under
the Exchange Act), shall adopt a resolution in advance of the Effective Time
providing that the receipt by the Company Insiders of Buyer Common Stock and
cash in exchange for shares of Company Common Stock and of options to purchase
Company Common Stock pursuant to the transactions contemplated hereby and to
the extent such securities are listed in the Section 16 Information, is
intended to be exempt pursuant to Rule 16b-3 under the Exchange Act.
(b) For
purposes of this Agreement, Section 16 Information means information
regarding the Company Insiders and the number of shares of Company Common Stock
or other Company equity securities deemed to be beneficially owned by each such
Company Insider and expected to be exchanged for Buyer Common Stock and cash,
in connection with the Merger, which shall be provided by the Company to the
Buyer within 10 business days after the date of this Agreement.
(c) For
purposes of this Agreement, Company Insiders means those officers and
directors of the Company who are subject to the reporting requirements of Section 16(a) of
the Exchange Act as listed in the Section 16 Information.
7.1 Conditions to Each Partys
Obligation To Effect the Merger.
The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the satisfaction on or prior to the Closing Date of
the following conditions:
(a) Stockholder
Approval. The Company Voting
Proposal shall have been approved at the Company Shareholders Meeting, at which
a quorum is present, by the requisite vote of the shareholders of the Company
under applicable law and the Companys Articles of Incorporation and By-laws. The Buyer Voting Proposals shall have been
approved at the Buyer Stockholders Meeting, at which a quorum is present, by
the requisite vote of the stockholders of the Buyer under applicable law, the rules of
The Nasdaq Stock Market and the Buyers Certificate of Incorporation and
By-laws.
55
(b) HSR
Act and other Antitrust Laws. The
waiting period applicable to the consummation of the Merger under the HSR Act
shall have expired or been terminated, and all other necessary approvals under
applicable Antitrust Laws shall have been obtained except with respect to
jurisdictions in which neither the Company nor Buyer derives significant sales.
(c) Governmental
Approvals. Other than the filing of
the Agreement of Merger, all authorizations, consents, orders or approvals of,
or declarations or filings with, or expirations of waiting periods imposed by,
any Governmental Entity in connection with the Merger and the consummation of
the other transactions contemplated by this Agreement, shall have been filed,
been obtained or occurred on terms and conditions which may not reasonably be
expected to have a Buyer Material Adverse Effect or a Company Material Adverse
Effect.
(d) Registration
Statement; Joint Proxy Statement/Prospectus. The Registration Statement shall have become
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose, and no similar proceeding with respect to the
Joint Proxy Statement/Prospectus, shall have been initiated or threatened in
writing by the SEC or its staff.
(e) No
Injunctions. No Governmental Entity
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any order, executive order, stay, decree, judgment or injunction
(preliminary or permanent) or statute, rule or regulation which is in
effect and which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger or the other transactions contemplated
by this Agreement.
(f) No
Restraints. There shall not be
instituted or pending any action or proceeding by any Governmental Entity (i) seeking
to restrain, prohibit or otherwise interfere with the ownership or operation by
the Buyer or any of its Subsidiaries of all or any portion of the business of
the Company or any of its Subsidiaries or of the Buyer or any of its
Subsidiaries or to compel the Buyer or any of its Subsidiaries to dispose of or
hold separate all or any portion of the business or assets of the Company or
any of its Subsidiaries or of the Buyer or any of its Subsidiaries, (ii) seeking
to impose or confirm limitations on the ability of the Buyer or any of its
Subsidiaries effectively to exercise full rights of ownership of the shares of
Company Common Stock (or shares of stock of the Surviving Corporation)
including the right to vote any such shares on any matters properly presented
to stockholders or (iii) seeking to require divestiture by the Buyer or
any of its Subsidiaries of any such shares.
7.2 Additional
Conditions to Obligations of the Buyer and the Transitory
Subsidiary. The obligations of the
Buyer and the Transitory Subsidiary to effect the Merger shall be subject to
the satisfaction on or prior to the Closing Date of each of the following
additional conditions, any of which may be waived, in writing, exclusively by
the Buyer and the Transitory Subsidiary:
(a) Representations
and Warranties. The representations
and warranties of the Company set forth in this Agreement and in any
certificate or other writing delivered by the Company pursuant hereto shall be
true and correct (i) as of the date of this Agreement (except in the case
of this clause (i), (y) to the extent such representations and warranties are
specifically made as of a particular date, in which case such representations
and warranties shall be true and correct as of such date, or (z) where the
failure to be true and correct (without regard to any
56
materiality or Company
Material Adverse Effect qualifications contained therein), individually or in
the aggregate, has not had, and would not be reasonably likely to have, a
Company Material Adverse Effect) and (ii) as of the Closing Date as though
made on and as of the Closing Date (except in the case of this
clause (ii), (x) to the extent such representations and warranties are
specifically made as of a particular date, in which case such representations
and warranties shall be true and correct as of such date, (y) for changes
contemplated by this Agreement or (z) where the failure to be true and correct
(without regard to any materiality or Company Material Adverse Effect
qualifications contained therein), individually or in the aggregate, has not
had, and would not be reasonably likely to have, a Company Material Adverse
Effect); and the Buyer shall have received a certificate signed on behalf of
the Company by the chief executive officer and the chief financial officer of
the Company to such effect.
(b) Performance
of Obligations of the Company. The
Company shall have performed in all material respects all obligations required
to be performed by it under this Agreement on or prior to the Closing Date; and
the Buyer shall have received a certificate signed on behalf of the Company by
the chief executive officer and the chief financial officer of the Company to
such effect.
(c) Tax
Opinion. Provided the Control Test
(as defined below) is satisfied, the Buyer shall have received a written
opinion from Wilmer Cutler Pickering Hale and Dorr LLP, counsel to the Buyer,
to the effect that the Merger will be treated for U.S. federal income tax
purposes as a reorganization within the meaning of Section 368(a) of
the Code; provided further that if the Control Test is satisfied but Wilmer
Cutler Pickering Hale and Dorr LLP does not render such opinion, this condition
shall nonetheless be deemed satisfied if DLA Piper Rudnick Gray Cary US LLP
renders such opinion to the Buyer (it being agreed that the Buyer and the
Company shall each provide reasonable cooperation, including making reasonable
representations, to Wilmer Cutler Pickering Hale and Dorr LLP or DLA Piper
Rudnick Gray Cary US LLP, as the case may be, to enable them to render such
opinion). This condition shall be of no
force or effect if the Control Test is not satisfied, as evidenced by the
inability of both Wilmer Cutler Pickering Hale and Dorr LLP and DLA Piper
Rudnick Gray Cary US LLP to render such opinion.
For
purposes of this Agreement, the Control Test will be satisfied if, pursuant
to the Merger, shares of Company capital stock representing Control of the
Company will be exchanged solely for Buyer Common Stock, and Control means
stock of the Company possessing at least 80% of the total combined voting power
of all classes of stock of the Company entitled to vote and at least 80% of the
total number of shares of all other classes of stock of the Company. For purposes of the Control Test: (i) the
fair market value of the Buyer Common Stock at the Effective Time will equal
the last reported sales price of Buyer Common Stock at 4:00 p.m., Eastern
time, end of regular trading hours on The Nasdaq Stock Market on the Effective
Date; and (ii) shares of Company Common Stock exchanged in the Merger for
cash (including, without limitation, cash paid to shareholders perfecting
appraisal rights or in lieu of
fractional shares of Buyer Common Stock) will be treated as shares of
Company Common Stock outstanding on the date of the Merger but not exchanged
for Buyer Common Stock.
57
7.3 Additional
Conditions to Obligations of the Company.
The obligation of the Company to effect the Merger shall be subject to
the satisfaction on or prior to the Closing Date of each of the following
additional conditions, any of which may be waived, in writing, exclusively by
the Company:
(a) Representations
and Warranties. The representations
and warranties of the Buyer and the Transitory Subsidiary set forth in this
Agreement and in any certificate or other writing delivered by the Buyer or the
Transitory Subsidiary pursuant hereto shall be true and correct (i) as of
the date of this Agreement (except in the case of this clause (i), (y) to the
extent such representations and warranties are specifically made as of a
particular date, in which case such representations and warranties shall be
true and correct as of such date, or (z) where the failure to be true and
correct (without regard to any materiality or Buyer Material Adverse Effect
qualifications contained therein), individually or in the aggregate, has not
had, and would not be reasonably likely to have, a Buyer Material Adverse
Effect) and (ii) as of the Closing Date as though made on and as of the
Closing Date (except in the case of this clause (ii), (x) to the extent such
representations and warranties are specifically made as of a particular date,
in which case such representations and warranties shall be true and correct as
of such date, (y) for changes contemplated by this Agreement or (z) where the
failure to be true and correct (without regard to any materiality or Buyer
Material Adverse Effect qualifications contained therein), individually or in
the aggregate, has not had, and would not be reasonably likely to have, a Buyer
Material Adverse Effect); and the Company shall have received a certificate
signed on behalf of the Buyer by the chief executive officer or the chief
financial officer of the Buyer to such effect.
(b) Performance
of Obligations of the Buyer and the Transitory Subsidiary. The Buyer and the Transitory Subsidiary shall
have performed in all material respects all obligations required to be
performed by them under this Agreement on or prior to the Closing Date; and the
Company shall have received a certificate signed on behalf of the Buyer by the
chief executive officer or the chief financial officer of the Buyer to such
effect.
(c) Tax
Opinion. Provided the Control Test
is satisfied, the Company shall have received the opinion of DLA Piper Rudnick
Gray Cary US LLP, counsel to the Company, to the effect that the Merger will be
treated for U.S. federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code; provided further that if the
Control Test is satisfied but DLA Piper Rudnick Gray Cary US LLP does not
render such opinion, this condition shall nonetheless be deemed satisfied if
Wilmer Cutler Pickering Hale and Dorr LLP renders such opinion to the Company
(it being agreed that the Buyer and the Company shall each provide reasonable
cooperation, including making reasonable representations, to DLA Piper Rudnick
Gray Cary US LLP or Wilmer Cutler Pickering Hale and Dorr LLP, as the case may
be, to enable them to render such opinion).
This condition shall be of no force or effect if the Control Test is not
satisfied, as evidenced by the inability of both DLA Piper Rudnick Gray Cary US
LLP and Wilmer Cutler Pickering Hale and Dorr LLP to render such opinion.
(d) Nasdaq. The Buyer, if required by the rules of
The Nasdaq Stock Market, shall have filed with The Nasdaq Stock Market a
Notification Form for Listing of Additional Shares with respect to the
shares of Buyer Common Stock issuable in connection with the Merger.
58
8.1 Termination.
This Agreement may be terminated at any time prior to the Effective Time
(with respect to Sections 8.1(b) through 8.1(j), by written notice by
the terminating party to the other party), whether before or, subject to the
terms hereof, after the approval of the principal terms of the Merger by the
shareholders of the Company, the stockholders of the Buyer or the sole
shareholder of the Transitory Subsidiary:
(a) by
mutual written consent of the Buyer, the Transitory Subsidiary and the Company;
or
(b) by
either the Buyer or the Company if the Merger shall not have been consummated
by the five-month anniversary of the date of this Agreement, which date shall
be extended, upon written notice of either Buyer or the Company to the other
party on or prior to the five-month anniversary of the date of this Agreement,
to the eight-month anniversary of the date of this Agreement in the event that (i) all
waiting periods (and any extensions thereof) applicable to the consummation of
the Merger under the HSR Act shall not have expired or been terminated or (ii) any
other approval under applicable Antitrust Laws as set forth in Section 7.1(b) shall
not have been obtained on or prior to the five-month anniversary of the date of
this Agreement (such date, as it may have been extended pursuant to the
preceding clause (ii), the Outside Date) (provided that the right to
terminate this Agreement under this Section 8.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been a principal cause of or resulted in the failure of the
Merger to occur on or before the Outside Date); or
(c) by
either the Buyer or the Company if a Governmental Entity of competent
jurisdiction shall have issued a nonappealable final order, decree or ruling or
taken any other nonappealable final action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger; or
(d) by
either the Buyer or the Company if at the Company Shareholders Meeting
(including any adjournment or postponement thereof permitted by this Agreement)
at which a vote on the Company Voting Proposal is taken, the requisite vote of
the shareholders of the Company in favor of the Company Voting Proposal shall
not have been obtained (provided that the right to terminate this Agreement
under this Section 8.1(d) shall not be available to any party seeking
termination if, at such time, such party is in breach of or has failed to
fulfill its obligations under this Agreement); or
(e) by
either the Buyer or the Company if at the Buyer Stockholders Meeting (including
any adjournment or postponement thereof permitted by this Agreement) at which a
vote on the Buyer Voting Proposal is taken, the requisite vote of the
stockholders of the Buyer in favor of the Buyer Voting Proposal shall not have
been obtained (provided the right to terminate this Agreement under this Section 8.1(e) shall
not be available to any party seeking termination
59
if, at such time, such
party is in breach of or has failed to fulfill its obligations under this
Agreement); or
(f) by
the Buyer, if: (i) the Company Board (or any committee thereof) shall have
failed to recommend approval of the Company Voting Proposal in the Joint Proxy
Statement/Prospectus or shall have withdrawn or modified its recommendation of
the Company Voting Proposal; (ii) the Company Board (or any committee
thereof) shall have failed to reconfirm its recommendation of the Company
Voting Proposal within ten business days after the Buyer requests in writing
that the Company Board (or any committee thereof) do so, provided such request
may only be made in the event the Company has received an Acquisition Proposal
or any amendment to an Acquisition Proposal; (iii) the Company Board (or
any committee thereof) shall have approved or recommended to the shareholders
of the Company an Acquisition Proposal (other than the Merger); (iv) a
tender offer or exchange offer for outstanding shares of Company Common Stock
shall have been commenced (other than by the Buyer or an Affiliate of the
Buyer) and the Company Board (or any committee thereof) recommends that the
shareholders of the Company tender their shares in such tender or exchange
offer or, within 10 business days after the commencement of such tender or
exchange offer, fails to recommend against acceptance of such offer; (v) the
Company shall have materially breached its obligations under Section 6.1
or Section 6.5; or (vi) for any reason the Company shall have failed
to hold the Company Shareholders Meeting and submit the Company Voting Proposal
to the Companys shareholders by the date which is one business day prior to
the Outside Date; or
(g) by
the Company, if: (i) the Buyers Board of Directors (or any committee
thereof) shall have failed to recommend approval of the Buyer Voting Proposal
in the Joint Proxy Statement/Prospectus or shall have withdrawn or modified its
recommendation of the Buyer Voting Proposal; (ii) the Buyer shall have
materially breached its obligations under Section 6.5; or (iii) for
any reason the Buyer shall have failed to hold the Buyer Stockholders Meeting
and submit the Buyer Voting Proposals to the Buyers stockholders by the date
which is one business day prior to the Outside Date; or
(h) by
the Company, if prior to the Company Shareholders Meeting: (i) the Company
has received an Acquisition Proposal constituting a Superior Proposal, the
Board of Directors of the Company has determined that it desires to approve
entering into a written agreement providing for such Superior Proposal and has
notified the Buyer in writing of its desire; (ii) two business days have
elapsed following the Buyers receipt of such written notification (which
notification shall include a description of the material terms of such Superior
Proposal and a copy of the current version of any written agreement providing
for such Superior Proposal), and during such two business day period the Company
has reasonably cooperated with the Buyer with the intent of enabling the Buyer
to make an offer that is at least as favorable to the shareholders of the
Company as such Superior Proposal; (iii) prior to 5:00 p.m.
California time on the second business day of such two business day period the
Buyer has not made an offer that is at least as favorable to the Companys
shareholders as such Superior Proposal; (iv) at the end of such two
business day period the Board of Directors of the Company reasonably believes
that such Acquisition Proposal continues to be a Superior Proposal; and (v) the
Company prior to or concurrently with such termination pays to the Buyer in
immediately available funds all amounts required to be paid pursuant to Section 8.3(b);
or
60
(i) by
the Buyer, if there has been a breach of or failure to perform any
representation, warranty, covenant or agreement on the part of the Company set
forth in this Agreement, which breach or failure to perform (i) would
cause the conditions set forth in Section 7.2(a) or 7.2(b) not
to be satisfied, and (ii) shall not have been cured within 20 days
following receipt by the Company of written notice of such breach or failure to
perform from the Buyer; or
(j) by
the Company, if there has been a breach of or failure to perform any
representation, warranty, covenant or agreement on the part of the Buyer or the
Transitory Subsidiary set forth in this Agreement, which breach or failure to
perform (i) would cause the conditions set forth in Section 7.3(a) or
7.3(b) not to be satisfied, and (ii) shall not have been cured within
20 days following receipt by the Buyer of written notice of such breach or
failure to perform from the Company.
8.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 8.1, this Agreement shall immediately become void
and there shall be no liability or obligation on the part of the Buyer, the
Company, the Transitory Subsidiary or their respective officers, directors,
shareholders, stockholders or Affiliates; provided that (i) any such
termination shall not relieve any party from liability for any willful breach
of this Agreement, fraud or knowing misrepresentation and (ii) the
provisions of Sections 3.26, 5.2 and 8.3 and Article IX of this Agreement
and the Confidentiality Agreements shall remain in full force and effect and
survive any termination of this Agreement.
(a) Except
as set forth in this Section 8.3, all fees and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such fees and expenses, whether or not the
Merger is consummated; provided however, that the Company and the Buyer shall
share equally (i) the filing fee of the Buyers pre-merger notification
report under the HSR Act and all fees and expenses incurred by the Buyer or the
Company in seeking approvals under all other applicable Antitrust Laws, and (ii) all
fees and expenses, other than accountants and attorneys fees, incurred with
respect to the printing, filing and mailing of the Joint Proxy
Statement/Prospectus (including any related preliminary materials) and the
Registration Statement and any amendments or supplements thereto.
(b) The
Company shall pay the Buyer a termination fee of $15,000,000 in the event of
the termination of this Agreement:
(i) by
the Buyer pursuant to Section 8.1(f) or Section 8.1(h); or
(ii) by
the Buyer or the Company pursuant to Section 8.1(d) if, at or prior
to the time of such failure, there shall have been announced an Acquisition
Proposal relating to the Company that shall not have been absolutely and
unconditionally withdrawn and abandoned, and within 12 months after such
termination there shall have been consummated any transaction, or any
agreement shall have been entered into providing for, (A) the merger or
combination of the Company (other than solely with a wholly owned Subsidiary of
the Company), (B) the issuance by the Company or any of its Subsidiaries
of over 20% of its equity
61
securities (other than
pursuant to any underwritten or broadly distributed offering) or (C) the
acquisition (including without limitation through any license) in any manner,
directly or indirectly, of more than 20% of the equity securities or assets
that constitute or account for over 20% of the consolidated net revenues, net
income or assets of the Company (a Tail Transaction).
Any
fee due under Section 8.3(b)(i) shall be paid by wire transfer of same-day
funds within one business day after the date of termination of this
Agreement. Any fee due under Section
8.3(b)(ii) shall be paid by wire transfer of the same-day funds within one
business day after the consummation of the Tail Transaction.
(c) The
Buyer shall pay the Company a termination fee of $15,000,000 in the event of
the termination of this Agreement by the Company pursuant to Section 8.1(g). Any fee due under this Section 8.3(c) shall
be paid by wire transfer of same-day funds within one business day after the
date of termination of this Agreement.
(d) The
parties acknowledge that the agreements contained in this Section 8.3 are
an integral part of the transactions contemplated by this Agreement, and that,
without these agreements, the parties would not enter into this Agreement. If one party fails to promptly pay to the
other any expense reimbursement or fee due hereunder, the defaulting party
shall pay the costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on the amount of any
unpaid fee at the publicly announced prime rate of Bank of America, N.A. plus
two percent per annum, compounded quarterly, from the date such expense
reimbursement or fee was required to be paid.
Payment of the fees and expenses described in this Section 8.3
shall not be in lieu of damages incurred in the event of a breach of this
Agreement described in clause (i) of Section 8.2.
8.4 Amendment.
This Agreement may be amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors, at any time before or after
approval of the matters presented in connection with the Merger by the
stockholders of any party, but, after any such approval, no amendment shall be
made which by law requires further approval by such stockholders without such
further approval. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.5 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
Such extension or waiver shall not be deemed to apply to any time for
performance, inaccuracy in any representation or warranty, or noncompliance
with any agreement or condition, as the case may be, other than that which is
specified in the extension or waiver.
The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.
62
9.1 Nonsurvival of Representations
and Warranties. The
respective representations and warranties of the Company, the Buyer and the
Transitory Subsidiary contained in this Agreement or in any instrument
delivered pursuant to this Agreement shall expire with, and be terminated and
extinguished upon, the Effective Time.
This Section 9.1 shall have no effect upon any other obligations of
the parties hereto, whether to be performed before or after the consummation of
the Merger.
9.2 Notices. All
notices and other communications hereunder shall be in writing and shall be
deemed duly delivered (i) four business days after being sent by
registered or certified mail, return receipt requested, postage prepaid, or (ii) one
business day after being sent for next business day delivery, fees prepaid, via
a reputable nationwide overnight courier service, in each case to the intended
recipient as set forth below:
(a) if
to the Buyer or the Transitory Subsidiary, to:
Avid Technology, Inc.
Avid Technology Park
One Park West
Tewksbury, MA 01876
Attn: General
Counsel
Telecopy: (978) 851-7216
with a
copy to:
Wilmer Cutler Pickering Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: David
A. Westenberg, Esq.
Jay E. Bothwick, Esq.
Facsimile:
(617) 526-5000
if to the Company, to:
Pinnacle Systems, Inc.
280 North Bernardo Avenue
Mountain View, CA 94043
Attn: Chief
Executive Officer
Facsimile: (650) 930-2424
63
with a copy to:
DLA Piper Rudnick Gray Cary US LLP
2000 University Avenue
East Palo Alto, CA 94303
Attn: Gregory
M. Gallo, Esq.
Diane Holt Frankle, Esq.
Facsimile:
(650) 833-2001
Any party to this Agreement may give any notice or
other communication hereunder using any other means (including personal
delivery, messenger service, telecopy, ordinary mail or electronic mail), but
no such notice or other communication shall be deemed to have been duly given
unless and until it actually is received by the party for whom it is
intended. Any party to this Agreement
may change the address to which notices and other communications hereunder are
to be delivered by giving the other parties to this Agreement notice in the
manner herein set forth.
9.3 Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto and the documents and instruments referred to herein that are
to be delivered at the Closing) constitutes the entire agreement among the
parties to this Agreement and supersedes any prior understandings, agreements
or representations by or among the parties hereto, or any of them, written or oral,
with respect to the subject matter hereof; provided that the Confidentiality
Agreements shall remain in effect in accordance with their respective terms.
9.4 No Third Party Beneficiaries. Except as provided in Section 6.12 for
Indemnified Parties, this Agreement is not intended, and shall not be deemed,
to confer any rights or remedies upon any Person other than the parties hereto
and their respective successors and permitted assigns, to create any agreement
of employment with any Person or to otherwise create any third-party
beneficiary hereunder.
9.5 Assignment.
No party may assign any of its rights or delegate any of its performance
obligations under this Agreement, in whole or in part, by operation of law or
otherwise without the prior written consent of the other parties, and any such
assignment without such prior written consent shall be null and void, except
that the Transitory Subsidiary may assign this Agreement to any other direct or
indirect wholly owned Subsidiary of the Buyer in lieu of the Transitory
Subsidiary without consent of the Company, provided that the Buyer and the
Transitory Subsidiary shall remain liable for all of the Transitory Subsidiarys
obligations under this Agreement.
Subject to the preceding sentence, this Agreement shall be binding upon,
inure to the benefit of, and be enforceable by, the parties hereto and their
respective successors and permitted assigns.
Any purported assignment of rights or delegation of performance obligations
in violation of this Section 9.5 is void.
9.6 Severability.
Any term or provision of this Agreement that is invalid or unenforceable
in any situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction. If the final
judgment of a court of competent jurisdiction declares that any term or
provision hereof is invalid or unenforceable, the
64
parties hereto agree that
the court making such determination shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid
or unenforceable term or provision, and this Agreement shall be enforceable as
so modified. In the event such court
does not exercise the power granted to it in the prior sentence, the parties
hereto agree to replace such invalid or unenforceable term or provision with a
valid and enforceable term or provision that will achieve, to the extent
possible, the economic, business and other purposes of such invalid or
unenforceable term.
9.7 Counterparts and Signature. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties hereto and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart. This
Agreement may be executed and delivered by facsimile transmission.
9.8 Interpretation. When reference is made in this Agreement to
an Article or a Section, such reference shall be to an Article or Section of
this Agreement, unless otherwise indicated.
The table of contents, table of defined terms and headings contained in
this Agreement are for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any
party. Whenever the context may require,
any pronouns used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural, and vice versa. Any
reference to any federal, state, local or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise.
Whenever the words include, includes or including are used in this
Agreement, they shall be deemed to be followed by the words without limitation. No summary of this Agreement prepared by any
party shall affect the meaning or interpretation of this Agreement.
9.9 Governing Law.
All matters arising out of or relating to this Agreement and the
transactions contemplated hereby (including without limitation its
interpretation, construction, performance and enforcement) shall be governed by
and construed in accordance with the internal laws of the State of Delaware
without giving effect to any choice or conflict of law provision or rule (whether
of the State of Delaware or any other jurisdiction) that would cause the
application of laws of any jurisdictions other than those of the State of
Delaware.
9.10 Remedies.
Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. The
parties hereto agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this
65
Agreement, this being in
addition to any other remedy to which they are entitled at law or in equity.
9.11 Submission to Jurisdiction. Each of the parties to this Agreement (a) consents
to submit itself to the personal jurisdiction of any state or federal court
sitting in the State of Delaware in any action or proceeding arising out of or
relating to this Agreement or any of the transactions contemplated by this
Agreement, (b) agrees that all claims in respect of such action or
proceeding may be heard and determined in any such court, (c) agrees that
it shall not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court, and (d) agrees not to bring
any action or proceeding arising out of or relating to this Agreement or any of
the transaction contemplated by this Agreement in any other court. Each of the parties hereto waives any defense
of inconvenient forum to the maintenance of any action or proceeding so brought
and waives any bond, surety or other security that might be required of any
other party with respect thereto. Any
party hereto may make service on another party by sending or delivering a copy
of the process to the party to be served at the address and in the manner
provided for the giving of notices in Section 9.2. Nothing in this Section 9.11, however,
shall affect the right of any party to serve legal process in any other manner
permitted by law.
9.12 WAIVER OF JURY TRIAL. EACH OF THE BUYER, THE TRANSITORY SUBSIDIARY
AND THE COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THE ACTIONS OF THE BUYER, THE TRANSITORY SUBSIDIARY OR
THE COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF
THIS AGREEMENT.
IN WITNESS WHEREOF, the Buyer, the Transitory
Subsidiary and the Company have caused this Agreement to be signed by their
respective officers thereunto duly authorized as of the date first written
above.
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AVID TECHNOLOGY, INC.
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By:
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/s/ David A. Krall
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Title:
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President and Chief Executive Officer
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HIGHEST MOUNTAIN CORPORATION
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By:
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/s/ Ethan E. Jacks
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Title:
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President
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PINNACLE SYSTEMS, INC.
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By:
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/s/ Patti S. Hart
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Title:
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President, Chief Executive Officer and Chairman
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66
SCHEDULE A
Parties to Company
Shareholder Voting Agreement
Patti S. Hart
Ajay Chopra
Mary Dotz
Scott E. Martin
L. Gregory Ballard
Robert J. Finocchio, Jr.
L. William Krause
John C. Lewis
Harry Motro
Parties to Buyer
Stockholder Voting Agreement
David A. Krall
William J. Warner
Charles L. Smith
David M. Lebolt
Paul J. Milbury
Michael J. Rockwell
Joseph Bentivegna
Patricia A. Baker
Ethan E. Jacks
67
Exhibit 10.1
VOTING AGREEMENT
VOTING AGREEMENT, dated as of March 20, 2005
(this Agreement), among the shareholders listed on the signature page(s)
hereto (collectively, the Shareholders and each individually, a Shareholder),
Pinnacle Systems, Inc., a California corporation (the Company) and Avid
Technology, Inc., a Delaware corporation (the Buyer). Capitalized terms used and not otherwise
defined herein shall have the respective meanings assigned to them in the
Merger Agreement referred to below.
WHEREAS, as of the date hereof, the Shareholders own
of record and beneficially the shares of capital stock of the Company set forth
on Schedule I hereto (such shares, or any other voting or equity of
securities of the Company hereafter acquired by any Shareholder prior to the
termination of this Agreement, being referred to herein collectively as the Shares);
WHEREAS, concurrently with the execution of this
Agreement, the Buyer and the Company are entering into an Agreement and Plan of
Merger, dated as of the date hereof (the Merger Agreement), pursuant to
which, upon the terms and subject to the conditions thereof, a subsidiary of
the Buyer will be merged with and into the Company, and the Company will be the
surviving corporation (the Merger); and
WHEREAS, as a condition to the willingness of the
Buyer to enter into the Merger Agreement, the Buyer has required that the
Shareholders agree, and in order to induce the Buyer to enter into the Merger
Agreement the Shareholders are willing, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants and agreements contained herein, and intending to be
legally bound hereby, the parties hereby agree, severally and not jointly, as
follows:
Section 1. Voting of Shares.
(a) Each
Shareholder covenants and agrees that until the termination of this Agreement
in accordance with the terms hereof, at the Company Shareholders Meeting or any
other meeting of the shareholders of the Company, however called, and in any
action by written consent of the shareholders of the Company, such Shareholder
will vote, or cause to be voted, all of such Shareholders respective Shares
(a) in favor of the approval of the principal terms of the Merger contemplated
by the Merger Agreement, as the Merger Agreement may be modified or amended
from time to time in a manner not adverse to the Shareholders, and (b) against
any other Acquisition Proposal or Alternative Transaction.
(b) Each
Shareholder hereby irrevocably grants to, and appoints, the Buyer, and any
individual designated in writing by it, and each of them individually, as his
or her proxy and attorney-in-fact (with full power of substitution), for and in
his or her name, place and stead, to vote such Shareholders Shares at any meeting
of the shareholders of the Company called with respect to any of the matters
specified in, and in accordance and consistent with, this Section 1. Each Shareholder understands and acknowledges
that the Buyer is entering into the Merger Agreement in reliance upon the
Shareholders execution and delivery of this Agreement. Each Shareholder hereby affirms that the
irrevocable proxy set forth in this Section 1(b) is given in
connection with the execution of
the Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of such Shareholder under this Agreement. Except as otherwise provided for herein, each
Shareholder hereby (i) affirms that the irrevocable proxy is coupled with an
interest and may under no circumstances be revoked, (ii) ratifies and
confirms all that the proxies appointed hereunder may lawfully do or cause to
be done by virtue hereof and (iii) affirms that such irrevocable proxy is
executed and intended to be irrevocable in accordance with the provisions of Section 705
of the California General Corporation Law.
Notwithstanding any other provisions of this Agreement, the irrevocable
proxy granted hereunder shall automatically terminate upon the termination of
this Agreement.
Section 2. Transfer of Shares. Each Shareholder covenants and agrees that
such Shareholder will not directly or indirectly (i) sell, assign, transfer,
pledge, encumber or otherwise dispose of any of the Shares, (ii) deposit any of
the Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares or grant any proxy or power of attorney with respect
thereto that is inconsistent with this Agreement or (iii) enter into any
contract, option or other arrangement or undertaking with respect to the direct
or indirect sale, assignment, transfer or other disposition of any Shares;
provided, however, that notwithstanding the foregoing a Shareholder may
transfer Shares or agree to transfer Shares by testamentary disposition,
interspousal disposition pursuant to a domestic relations proceeding or
otherwise by operation of law, provided that in each such case the transferee
agrees in writing to be bound by this Agreement.
Section 3. Representations and
Warranties of the Shareholders. Each
Shareholder on his or her own behalf hereby severally represents and warrants
to the Buyer with respect to such Shareholder and such Shareholders ownership
of the Shares as follows:
(a) Ownership
of Shares. The Shareholder
beneficially owns all of the Shares as set forth on Schedule I hereto and
has good and marketable title to such Shares, free and clear of any claims,
liens, encumbrances and security interests whatsoever. The Shareholder owns no shares of Company
Common Stock other than the Shares as set forth on Schedule I hereto. The Shareholder has sole voting power,
without restrictions, with respect to all of the Shares.
(b) Power,
Binding Agreement. The Shareholder
has the legal capacity and all requisite power and authority to enter into and
perform all of his or her obligations under this Agreement. This Agreement has been duly and validly
executed and delivered by the Shareholder and constitutes a valid and binding
obligation of the Shareholder, enforceable against the Shareholder in
accordance with its terms.
(c) No
Conflicts. The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated hereby will not, conflict with or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, any provision of any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Shareholder, the Shares or any
of the Shareholders properties or assets.
Except as expressly contemplated hereby, the Shareholder is not a party
to, and the Shares are not subject to or bound in any manner by, any contract
or
2
agreement relating to the Shares, including without limitation, any
voting agreement, option agreement, purchase agreement, shareholders
agreement, partnership agreement or voting trust. Except for the expiration or
termination of the waiting period under the HSR Act and informational filings
with the Securities and Exchange Commission, no consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic, foreign or supranational, is required by or with
respect to the Shareholder in connection with the execution and delivery of
this Agreement or the consummation by the Shareholder of the transactions
contemplated hereby.
Section 4. No Solicitation. Prior to the termination of this
Agreement in accordance with its terms, each Shareholder agrees, in his or her
individual capacity as a shareholder of the Company, that he or she (i) will
not, nor will he or she authorize or permit any of his or her employees, agents
and representatives to, directly or indirectly, (a) solicit, initiate or
intentionally encourage any inquiries or the making of any Acquisition
Proposal, (b) enter into any agreement with respect to any Acquisition Proposal
or (c) participate in any discussions or negotiations regarding, or furnish to
any person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal or offer that constitutes, or could
reasonably be expected to lead to, any Acquisition Proposal, and (ii) will notify the Buyer as soon as possible
if any such inquiries or proposals are received by, any information or
documents is requested from, or any negotiations or discussions are sought to
be initiated or continued with, him or her or any of his or her affiliates.
Section 5. Termination. This Agreement shall terminate upon the first
to occur of:
(i) the Effective Time;
(ii) written notice of termination of this Agreement by the Buyer
to the Shareholders; or
(iii) the
date of termination of the Merger Agreement; provided that no such termination
shall relieve any party of liability for a willful breach hereof prior to
termination.
Section 6. Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 7. Fiduciary Duties. Each Shareholder is signing this Agreement
solely in such Shareholders capacity as an owner of such Shareholders
respective Shares, and nothing herein shall prohibit, prevent or preclude such
Shareholder from taking or not taking any action in such Shareholders capacity
as an officer or director of the Company to the extent permitted by the Merger
Agreement.
Section 8. Consent and Waiver. Each Shareholder hereby gives any consents or
waivers that are reasonably required for the consummation of the Merger under
the terms of any
3
agreement to which such Shareholder is a party or pursuant
to any rights such Shareholder may have in his or her capacity as a Shareholder
of the Company.
Section 9. Miscellaneous.
(a) Entire
Agreement. This Agreement constitutes
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect thereto. This Agreement may
not be amended, modified or rescinded except by an instrument in writing signed
by each of the parties hereto.
(b) Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in a mutually acceptable manner in order that the
terms of this Agreement remain as originally contemplated to the fullest extent
possible.
(c) Governing
Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of
California without regard to the principles of conflicts of law thereof.
(d) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
(e) Notices. All notices and other communications
hereunder shall be in writing and shall be deemed duly delivered (i) three
business days after being sent by registered or certified mail, return receipt
requested, postage prepaid, or (ii) one business day after being sent for next
business day delivery, fees prepaid, via a reputable nationwide overnight
courier service, in each case to the intended recipient as set forth below:
(i) if to a Shareholder in care of the Company at the address
set forth below;
(ii) if to the Buyer to:
Avid Technology,
Inc.
Avid Technology Park
One Park West
Tewksbury, MA 01876
Attn: General
Counsel
Telecopy: (978) 851-7216
4
with
a copy to:
Wilmer Cutler
Pickering Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: David A.
Westenberg, Esq.
Jay E. Bothwick, Esq.
Facsimile: (617)
526-5000
(iii) if
to the Company to:
Pinnacle Systems,
Inc.
280 North Bernardo
Avenue
Mountain View, CA 94043
Attn: Chief
Executive Officer
Facsimile: (650) 930-2424
with
a copy to:
DLA Piper Rudnick
Gray Cary US LLP
2000 University
Avenue
East Palo Alto, CA
94303
Attn: Gregory M.
Gallo, Esq.
Diane Holt Frankle, Esq.
Facsimile: (650)
833-2001
(f) No
Third Party Beneficiaries. This
Agreement is not intended, and shall not be deemed, to confer any rights or
remedies upon any person other than the parties hereto and their respective
successors and permitted assigns, to create any agreement of employment with
any person or to otherwise create any third-party beneficiary hereto.
(g) Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise by any of the parties hereto
without the prior written consent of the other parties, and any such assignment
without such prior written consent shall be null and void, except that the
Buyer may assign this Agreement to any direct or indirect wholly owned
subsidiary of the Buyer without the consent of the Company or the Shareholders,
provided that the Buyer shall remain liable for all of its obligations under
this Agreement. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and permitted
assigns.
(h) Interpretation. When reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement, unless
otherwise indicated. The headings
contained in this Agreement are for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any
party. Whenever the context may require,
5
any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns and pronouns shall include the plural, and vice
versa. Any reference to any federal,
state, local or foreign statute or law shall be deemed also to refer to all
rules and regulations promulgated thereunder, unless the context requires
otherwise. Whenever the words include,
includes or including are used in this Agreement, they shall be deemed to
be followed by the words without limitation.
No summary of this Agreement prepared by the parties shall affect in any
way the meaning or interpretation of this Agreement.
(i) Submission
to Jurisdiction. Each of the parties
to this Agreement (i) consents to submit itself to the personal
jurisdiction of any state or federal court sitting in the State of California
in any action or proceeding arising out of or relating to this Agreement or any
of the transactions contemplated by this Agreement, (ii) agrees that all
claims in respect of such action or proceeding may be heard and determined in
any such court, (iii) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court
and (iv) agrees not to bring any action or proceeding arising out of or
relating to this Agreement or any of the transactions contemplated by this
Agreement in any other court. Each of
the parties hereto waives any defense of inconvenient forum to the maintenance
of any action or proceeding so brought and waives any bond, surety or other
security that might be required of any other party with respect thereto. Any party hereto may make service on another
party by sending or delivering a copy of the process to the party to be served
at the address and in the manner provided for the giving of notices in Section 9(e). Nothing in this Section, however, shall
affect the right of any party to serve legal process in any other manner
permitted by law.
(j) WAIVER
OF JURY TRIAL. EACH OF THE BUYER,
THE COMPANY AND EACH SHAREHOLDER HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF THE BUYER, THE COMPANY OR
EACH SHAREHOLDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT OF THIS AGREEMENT.
[remainder of page left blank intentionally]
6
IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be signed individually or by its respective duly
authorized officer as of the date first written above.
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PINNACLE SYSTEMS, INC.
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By:
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/s/ Patti S. Hart
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Name: Patti
S. Hart
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Title: President and Chief Executive Officer
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AVID TECHNOLOGY, INC.
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By:
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/s/ Paul J. Milbury
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Name: Paul J. Milbury
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Title: Vice President and Chief Financial Officer
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SHAREHOLDERS:
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/s/ Patti S. Hart
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Patti S. Hart
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/s/ Ajay Chopra
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Ajay Chopra
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/s/ Mary Dotz
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Mary Dotz
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/s/ Scott E. Martin
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Scott E. Martin
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/s/ L. Gregory Ballard
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|
|
L. Gregory
Ballard
|
|
|
|
/s/ Robert J. Finocchio, Jr.
|
|
|
Robert J.
Finocchio, Jr.
|
|
|
|
/s/ L. William Krause
|
|
|
L. William
Krause
|
|
|
|
/s/ John C. Lewis
|
|
|
John C. Lewis
|
|
|
|
/s/ Harry Motro
|
|
|
Harry Motro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
Schedule I
|
|
Number of Shares
|
|
Number of Shares
|
|
|
|
Shareholder Name
|
|
Underlying Options
|
|
of Common Stock
|
|
Total
|
|
|
|
|
|
|
|
|
|
Patti S. Hart
|
|
775,000
|
|
3,101
|
|
778,101
|
|
|
|
|
|
|
|
|
|
Ajay Chopra
|
|
759,000
|
|
165,033
|
|
924,033
|
|
|
|
|
|
|
|
|
|
Mary Dotz
|
|
200,000
|
|
0
|
|
200,000
|
|
|
|
|
|
|
|
|
|
Scott E. Martin
|
|
230,000
|
|
0
|
|
230,000
|
|
|
|
|
|
|
|
|
|
L. Gregory Ballard
|
|
91,000
|
|
5,000
|
|
96,000
|
|
|
|
|
|
|
|
|
|
Robert J. Finocchio, Jr.
|
|
60,000
|
|
0
|
|
60,000
|
|
|
|
|
|
|
|
|
|
L. William Krause
|
|
130,000
|
|
0
|
|
130,000
|
|
|
|
|
|
|
|
|
|
John C. Lewis
|
|
125,000
|
|
15,000
|
|
140,000
|
|
|
|
|
|
|
|
|
|
Harry Motro
|
|
80,000
|
|
0
|
|
80,000
|
|
8
Exhibit 10.2
VOTING AGREEMENT
VOTING AGREEMENT, dated as of March 20, 2005
(this Agreement), among the stockholders listed on the signature page(s)
hereto (collectively, the Stockholders and each individually, a Stockholder),
Pinnacle Systems, Inc., a California corporation (the Company) and Avid
Technology, Inc., a Delaware corporation (the Buyer). Capitalized terms used and not otherwise
defined herein shall have the respective meanings assigned to them in the
Merger Agreement referred to below.
WHEREAS, as of the date hereof, the Stockholders own
of record and beneficially the shares of capital stock of the Buyer set forth
on Schedule I hereto (such shares, or any other voting or equity of
securities of the Buyer hereafter acquired by any Stockholder prior to the
termination of this Agreement, being referred to herein collectively as the Shares);
WHEREAS, concurrently with the execution of this
Agreement, the Buyer and the Company are entering into an Agreement and Plan of
Merger, dated as of the date hereof (the Merger Agreement), pursuant to
which, upon the terms and subject to the conditions thereof, a subsidiary of
the Buyer will be merged with and into the Company, and the Company will be the
surviving corporation (the Merger); and
WHEREAS, as a condition to the willingness of the
Company to enter into the Merger Agreement, the Company has required that the
Stockholders agree, and in order to induce the Company to enter into the Merger
Agreement the Stockholders are willing, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants and agreements contained herein, and intending to be
legally bound hereby, the parties hereby agree, severally and not jointly, as
follows:
Section 1. Voting of Shares.
(a) Each
Stockholder covenants and agrees that until the termination of this Agreement
in accordance with the terms hereof, at the Buyer Stockholders Meeting or any
other meeting of the stockholders of the Buyer, however called, and in any action
by written consent of the stockholders of the Buyer, such Stockholder will
vote, or cause to be voted, all of such Stockholders respective Shares in
favor of the Buyer Voting Proposals.
(b) Each
Stockholder hereby irrevocably grants to, and appoints, the Company, and any
individual designated in writing by it, and each of them individually, as his
or her proxy and attorney-in-fact (with full power of substitution), for and in
his or her name, place and stead, to vote such Stockholders Shares at any
meeting of the stockholders of the Buyer called with respect to any of the
matters specified in, and in accordance and consistent with, this Section 1. Each Stockholder understands and acknowledges
that the Company is entering into the Merger Agreement in reliance upon the
Stockholders execution and delivery of this Agreement. Each Stockholder hereby affirms that the
irrevocable proxy set forth in this Section 1(b) is given in connection
with the execution of the Merger Agreement, and that such irrevocable proxy is
given to secure the performance of the duties of such Stockholder under this
Agreement. Except as otherwise
provided for herein, each Stockholder hereby (i) affirms that the irrevocable
proxy is coupled with an interest and may under no circumstances be revoked,
(ii) ratifies and confirms all that the proxies appointed hereunder may
lawfully do or cause to be done by virtue hereof and (iii) affirms that
such irrevocable proxy is executed and intended to be irrevocable in accordance
with the Delaware General Corporation Law.
Notwithstanding any other provisions of this Agreement, the irrevocable
proxy granted hereunder shall automatically terminate upon the termination of
this Agreement.
Section 2. Transfer of Shares.
(a) Each
Stockholder covenants and agrees that such Stockholder will not directly or
indirectly (i) sell, assign, transfer, pledge, encumber or otherwise dispose of
any of the Shares, (ii) deposit any of the Shares into a voting trust or enter
into a voting agreement or arrangement with respect to the Shares or grant any
proxy or power of attorney with respect thereto that is inconsistent with this
Agreement or (iii) enter into any contract, option or other arrangement or
undertaking with respect to the direct or indirect sale, assignment, transfer
or other disposition of any Shares; provided, however, that notwithstanding the
foregoing a Stockholder may transfer Shares or agree to transfer Shares by
testamentary disposition, interspousal disposition pursuant to a domestic relations
proceeding or otherwise by operation of law, provided that in each such case
the transferee agrees in writing to be bound by this Agreement.
(b) Each
Stockholder agrees to submit to the Buyer contemporaneously with or promptly
following execution of this Agreement all certificates representing the Shares
(unless such Shares are held in street name or otherwise not issued and
certificated in the individual name of the Stockholder) so that the Buyer may
place thereon a legend referring to the transfer restrictions set forth in this
Agreement.
Section 3. Representations and Warranties of the Stockholders. Each
Stockholder on his or her own behalf hereby severally represents and warrants
to the Buyer with respect to such Stockholder and such Stockholders ownership
of the Shares as follows:
(a) Ownership
of Shares. The Stockholder
beneficially owns all of the Shares as set forth on Schedule I hereto and
has good and marketable title to such Shares, free and clear of any claims,
liens, encumbrances and security interests whatsoever. The Stockholder owns no shares of Buyer
Common Stock other than the Shares as set forth on Schedule I hereto. The Stockholder has sole voting power,
without restrictions, with respect to all of the Shares.
(b) Power,
Binding Agreement. The Stockholder
has the legal capacity and all requisite power and authority to enter into and
perform all of his or her obligations under this Agreement. This Agreement has been duly and validly
executed and delivered by the Stockholder and constitutes a valid and binding
obligation of the Stockholder, enforceable against the Stockholder in
accordance with its terms.
(c) No
Conflicts. The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated hereby will not, conflict with or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a
2
right of termination, cancellation or acceleration of any obligation or
to loss of a material benefit under, any provision of any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Stockholder, the
Shares or any of the Stockholders properties or assets. Except as expressly contemplated hereby, the
Stockholder is not a party to, and the Shares are not subject to or bound in
any manner by, any contract or agreement relating to the Shares, including
without limitation, any voting agreement, option agreement, purchase agreement,
stockholders agreement, partnership agreement or voting trust. Except for the
expiration or termination of the waiting period under the HSR Act and
informational filings with the Securities and Exchange Commission, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic, foreign or supranational,
is required by or with respect to the Stockholder in connection with the
execution and delivery of this Agreement or the consummation by the Stockholder
of the transactions contemplated hereby.
Section 4. Termination. This Agreement shall terminate
upon the first to occur of:
(i) the
Effective Time;
(ii) written
notice of termination of this Agreement by the Company to the Stockholders; or
(iii) the date of termination
of the Merger Agreement; provided that no such termination shall relieve any
party of liability for a willful breach hereof prior to termination.
Section 5. Specific Performance. The
parties hereto agree that irreparable damage would occur in the event any provision
of this Agreement was not performed in accordance with the terms hereof and
that the parties shall be entitled to specific performance of the terms hereof,
in addition to any other remedy at law or in equity.
Section 6. Fiduciary Duties. Each Stockholder is signing this
Agreement solely in such Stockholders capacity as an owner of such Stockholders
respective Shares, and nothing herein shall prohibit, prevent or preclude such
Stockholder from taking or not taking any action in such Stockholders capacity
as an officer or director of the Buyer to the extent permitted by the Merger
Agreement.
Section 7. Consent and Waiver. Each
Stockholder hereby gives any consents or waivers that are reasonably required
for the consummation of the Merger under the terms of any agreement to which
such Stockholder is a party or pursuant to any rights such Stockholder may have
in his or her capacity as a Stockholder of the Company.
Section 8. Miscellaneous.
(a) Entire
Agreement. This Agreement
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
both written and oral, between the parties with respect thereto.
3
This Agreement may not be amended, modified or rescinded except by an
instrument in writing signed by each of the parties hereto.
(b) Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in a mutually acceptable manner in order that the
terms of this Agreement remain as originally contemplated to the fullest extent
possible.
(c) Governing
Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
without regard to the principles of conflicts of law thereof.
(d) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
(e) Notices. All notices and other communications
hereunder shall be in writing and shall be deemed duly delivered (i) three
business days after being sent by registered or certified mail, return receipt
requested, postage prepaid, or (ii) one business day after being sent for next
business day delivery, fees prepaid, via a reputable nationwide overnight
courier service, in each case to the intended recipient as set forth below:
(i) if
to a Stockholder, in care of the Buyer at the address set forth below;
(ii) if
to the Buyer to:
Avid Technology,
Inc.
Avid Technology Park
One Park West
Tewksbury, MA 01876
Attn: General
Counsel
Telecopy: (978) 851-7216
with a copy to:
Wilmer Cutler
Pickering Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: David A.
Westenberg, Esq.
Jay E. Bothwick, Esq.
Facsimile: (617)
526-5000
4
(iii) if to the Company to:
Pinnacle Systems,
Inc.
280 North Bernardo
Avenue
Mountain View, CA 94043
Attn: Chief
Executive Officer
Facsimile: (650) 930-2424
with a copy to:
DLA Piper Rudnick
Gray Cary US LLP
2000 University
Avenue
East Palo Alto, CA
94303
Attn: Gregory M. Gallo, Esq.
Diane Holt Frankle, Esq.
Facsimile: (650)
833-2001
(f) No
Third Party Beneficiaries. This
Agreement is not intended, and shall not be deemed, to confer any rights or remedies
upon any person other than the parties hereto and their respective successors
and permitted assigns, to create any agreement of employment with any person or
to otherwise create any third-party beneficiary hereto.
(g) Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise by any of the parties hereto
without the prior written consent of the other parties, and any such assignment
without such prior written consent shall be null and void. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable
by, the parties hereto and their respective successors and permitted assigns.
(h) Interpretation. When reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement, unless
otherwise indicated. The headings
contained in this Agreement are for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any
party. Whenever the context may require,
any pronouns used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall include
the plural, and vice versa. Any
reference to any federal, state, local or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise.
Whenever the words include, includes or including are used in this
Agreement, they shall be deemed to be followed by the words without
limitation. No summary of this
Agreement prepared by the parties shall affect in any way the meaning or
interpretation of this Agreement.
(i) Submission
to Jurisdiction. Each of the parties
to this Agreement (i) consents to submit itself to the personal
jurisdiction of any state or federal court sitting in the State of Delaware in
any action or proceeding arising out of or relating to this Agreement or any of
the transactions contemplated by this Agreement, (ii) agrees that all
claims in respect of such
5
action or proceeding may be heard and determined in any such court,
(iii) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and
(iv) agrees not to bring any action or proceeding arising out of or
relating to this Agreement or any of the transactions contemplated by this
Agreement in any other court. Each of
the parties hereto waives any defense of inconvenient forum to the maintenance
of any action or proceeding so brought and waives any bond, surety or other
security that might be required of any other party with respect thereto. Any party hereto may make service on another
party by sending or delivering a copy of the process to the party to be served
at the address and in the manner provided for the giving of notices in Section 8(e). Nothing in this Section, however, shall
affect the right of any party to serve legal process in any other manner
permitted by law.
(j) WAIVER
OF JURY TRIAL. EACH OF THE BUYER,
THE COMPANY AND EACH STOCKHOLDER HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF THE BUYER, THE COMPANY OR
EACH STOCKHOLDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT OF THIS AGREEMENT.
[remainder of page left
blank intentionally]
6
IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be signed individually or by its respective duly
authorized officer as of the date first written above.
|
PINNACLE SYSTEMS, INC.
|
|
|
|
|
|
By:
|
/s/ Scott E. Martin
|
|
|
|
|
Title:
|
Senior Vice-President
|
|
|
|
|
|
|
|
|
AVID TECHNOLOGY, INC.
|
|
|
|
|
|
By:
|
/s/ Paul J. Milbury
|
|
|
|
|
Title:
|
Vice President and Chief Financial Officer
|
|
|
|
|
|
|
SHAREHOLDERS:
|
|
|
|
|
|
/s/ David A. Krall
|
|
|
David A. Krall
|
|
|
|
/s/ William J. Warner
|
|
|
William J.
Warner
|
|
|
|
/s/ Charles L. Smith
|
|
|
Charles L. Smith
|
|
|
|
/s/ David M. Lebolt
|
|
|
David M. Lebolt
|
|
|
|
/s/ Paul J. Milbury
|
|
|
Paul J. Milbury
|
|
|
|
/s/ Michael J. Rockwell
|
|
|
Michael J.
Rockwell
|
|
|
|
/s/ Joseph Bentivegna
|
|
|
Joseph
Bentivegna
|
|
|
|
/s/ Patricia A. Baker
|
|
|
Patricia A.
Baker
|
|
|
|
/s/ Ethan E. Jacks
|
|
|
Ethan E. Jacks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
Schedule I
|
|
Number of Shares
|
|
Number of Shares
|
|
|
|
Stockholder Names
|
|
Underlying Options
|
|
of Common Stock
|
|
Total
|
|
|
|
|
|
|
|
|
|
Patricia A. Baker
|
|
59,354
|
|
3,871
|
|
63,225
|
|
|
|
|
|
|
|
|
|
Joseph Bentivegna
|
|
71,436
|
|
9,076
|
|
80,512
|
|
|
|
|
|
|
|
|
|
Ethan E. Jacks
|
|
39,528
|
|
8,221
|
|
47,749
|
|
|
|
|
|
|
|
|
|
David A. Krall
|
|
646,425
|
|
37,455
|
|
683,880
|
|
|
|
|
|
|
|
|
|
David M. Lebolt
|
|
103,874
|
|
0
|
|
103,874
|
|
|
|
|
|
|
|
|
|
Paul J. Milbury
|
|
3,000
|
|
90,940
|
|
93,940
|
|
|
|
|
|
|
|
|
|
Michael J. Rockwell
|
|
92,975
|
|
0
|
|
92,975
|
|
|
|
|
|
|
|
|
|
Charles L. Smith
|
|
105,581
|
|
25,468
|
|
131,049
|
|
|
|
|
|
|
|
|
|
William J. Warner
|
|
136,700
|
|
10,000
|
|
146,700
|
|
8
Exhibit 99.1
Contacts:
|
|
Avid
press:
|
Carter
Holland, 978/640-3172, carter_holland@avid.com
|
|
|
Avid
investors:
|
Dean
Ridlon, 978/640-5309, dean_ridlon@avid.com
|
|
|
Pinnacle
press:
|
Toni
Werner, 650/237-1610, twerner@pinnaclesys.com
|
|
|
Pinnacle
investors:
|
Brooke
Deterline, 650/930-3113, bdeterline@pinnaclesys.com
|
Avid
Technology, Inc. to Acquire Pinnacle Systems, Inc.
Combination to provide Avid
with immediate presence in consumer video and expand professional broadcast
offerings
Tewksbury, MA, and Mountain View, CA March 21, 2005 Avid
Technology, Inc. (NASDAQ: AVID) and Pinnacle Systems, Inc. (NASDAQ: PCLE) today
announced that Avid has entered into a definitive agreement to acquire Pinnacle
in a cash and stock transaction. Under the terms of the agreement, Pinnacle
shareholders will receive .0869 shares of Avid stock and $1.00 in cash for each
Pinnacle share. At closing, it is expected that Avid will issue approximately
6.2 million shares and pay $71.3 million in cash, for a total estimated value of
$462 million based on Avids stock price of $62.95 at market close on Friday,
March 18, 2005. Upon completion of the
transaction, the 6.2 million shares to be issued to Pinnacles former
shareholders will represent approximately 15% of Avids outstanding common
stock. The acquisition is subject to satisfying a number of closing conditions,
including shareholder and regulatory approvals, and is expected to close in the
second or third quarter of 2005.
The purchase price represents a 30% premium over Pinnacles closing
stock price of $4.97 on March 18, 2005. Assuming a closing date of July 1,
2005, Avid expects the transaction, excluding acquisition-related charges, to
be dilutive to its pro-forma earnings per share in the third quarter and
accretive in the fourth quarter, resulting in full-year 2005 pro forma earnings
per share of approximately $2.70 per diluted share. In 2006, Avid expects the
transaction to be approximately 10 cents accretive, resulting in pro forma
earnings per share of approximately $3.20 per diluted share. After payment of
the cash portion of the purchase price, Avid expects its cash position to be
$280-$300 million at the end of 2005.
Following the closing, the parties expect that Pinnacles award-winning
professional products such as the MediaStream broadcast playout server and
the Deko on-air graphics system will enhance Avids end-to-end broadcast
production pipeline, which has helped Avid become a global leader in that
industry. In addition, Pinnacles consumer video business which to date has
shipped more than 10 million units
will form the basis for a new
consumer video division at Avid, providing the company with an immediate avenue
into that segment.
Avid president and CEO David Krall said, We see this acquisition as
the next logical step in our long-term strategy. Just as our acquisition of M-Audio in 2004
brought us into the consumer audio business, by acquiring Pinnacles consumer
video business, Avid will be able to tap into the next generation of video
editors while they are still learning their craft. This creates a very large
potential customer base for Avids future. At the same time, we believe that
Pinnacles professional broadcast offerings will fit seamlessly with Avids
business, extending our end-to-end broadcast solutions with servers and on-air
graphics products. We think it would be hard to find a more complementary match
for these two businesses than what this combination provides.
Krall added: As a result of this transaction, we expect to derive
savings from a number of sources, including reducing public company expenses,
combining infrastructure functions where appropriate, and providing our global
sales teams with a broader portfolio of product offerings. Over the past five
years, Avid has increased its profitability and shareholder value by growing
our top line, expanding our gross margins, and leveraging our talent and
technology across the entire company. By working with the dedicated team at
Pinnacle, were confident that, together, we can succeed with this same
strategy following the completion of the transaction.
Pinnacle chairman and CEO Patti Hart said, We believe that
this transaction creates significant value for our shareholders and provides
excellent opportunities for continued growth for the combined company. Avid has built a strong, well-deserved
reputation for efficient business management while continuing
to live up to its tradition of technological innovation in the video and audio
industries. By bringing our own award-winning products to the table including
Pinnacle Studio, Pinnacle Liquid Edition, and our broad array of broadcast
systems were confident that Pinnacle will strengthen and diversify Avids
business. Our customers can also anticipate a richer set of offerings within an
organization that will be even better positioned moving ahead. We see this as
the right move for Pinnacle, and we look forward to joining the Avid family.
The Boards of Directors of both Avid and Pinnacle have approved the
definitive agreement. Avid will seek
stockholder approval of the transaction at its annual meeting, and Pinnacle
will hold a special meeting of shareholders to consider approval of the
transaction. The dates of the
shareholder meetings will be announced following completion of initial
regulatory filings.
Conference
Call
Avid and Pinnacle will hold a joint conference call and simultaneous
webcast to discuss the transaction, including the estimated impact on Avids
future results. The joint conference call will take place on March 21 at 8:30
a.m., EST, and will be open to the public. The conference call can be accessed
from any U.S. or international location by dialing (913) 981-5558 and
referencing confirmation code 7229543. The call and subsequent replay will also
be available on the Avid and Pinnacle Web sites. To listen to the call or
replay on Avids Web site, go to the Investors page under the Company menu at
www.avid.com for complete details 10-15 minutes prior to the start of the
conference call. To listen to the call or replay on Pinnacles Web site, go to
the Investor Relations page under the About Us menu at www.pinnaclesys.com.
IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC
Avid plans to file with the SEC a Registration Statement on Form S-4 in
connection with the transaction and Avid and Pinnacle plan to file with the SEC
and mail to their respective stockholders a Joint Proxy Statement/Prospectus in
connection with the transaction. The Registration Statement and the Joint Proxy
Statement/Prospectus will contain important information about Avid, Pinnacle,
the transaction and related matters.
Investors and security holders are urged to read the Registration
Statement and the Joint Proxy Statement/Prospectus carefully when they are
available.
Investors and security holders will be able to obtain free copies of
the Registration Statement and the Joint Proxy Statement/Prospectus (when
available) and other documents filed with the SEC by Avid and Pinnacle
through the web site maintained by the SEC at www.sec.gov.
In addition, investors and security holders will be able to obtain free
copies of the Registration Statement and the Joint Proxy Statement/Prospectus (when
available) and other documents filed with the SEC from Avid by
contacting Dean Ridlon, Investor Relations Director for Avid at telephone
number 978.640.5309, or from Pinnacle by contacting Deborah B. Demer of Demer IR Counsel, Inc. at
telephone number 925.938.2678, extension 224.
Avid and Pinnacle, and their respective directors and executive
officers, may be deemed to be participants in the solicitation of proxies in
respect of the transactions contemplated by the merger agreement. Information regarding Avids directors and
executive officers is contained in Avids Form 10-K for the year ended December
31, 2004 and its proxy statement dated April 16, 2004, which are filed with the
SEC and available free of charge as indicated above. Information
regarding Pinnacles directors and executive officers is contained in Pinnacles
Form 10-K for the year ended June 30, 2004 and its proxy statement dated
September 30, 2004, which are filed with the SEC and available free of charge as indicated above. The interests of Avids and Pinnacles respective
directors and executive officers in the
solicitations with respect to the transactions in particular will be more
specifically set forth in the Registration Statement and the Joint Proxy
Statement/Prospectus filed with the SEC, which will be available free of charge
as indicated above.
About Avid Technology, Inc.
Avid Technology, Inc. is a world leader in digital nonlinear media
creation, management, and distribution solutions, enabling film, video, audio,
animation, games, and broadcast professionals to work more efficiently,
productively, and creatively. For more
information about the companys Oscarâ,
Grammyâ, and Emmyâ
award-winning products and services, please visit: www.avid.com.
About Pinnacle Systems, Inc.
Pinnacle Systems provides broadcasters and consumers with cutting-edge
digital media creation, storage, and play-back solutions for use at Home, in
the Studio and on the Air. Pinnacle Systems award winning digital media
solutions are in use around the world for broadcast, video and audio editing,
DVD and CDR authoring and on the Internet. A recognized industry leader,
Pinnacle Systems has received nine prestigious Emmy® Awards for its technical
innovations and carries this commitment throughout all of its product lines.
For more information about Pinnacle Systems products and services, please
visit: www.pinnaclesys.com. Pinnacle Systems, MediaStream, Deko,
Pinnacle Studio, and Pinnacle Liquid Edition are trademarks or registered
trademarks of Pinnacle Systems, Inc. or its subsidiaries in the United States
and other countries.
©
2005 Avid Technology, Inc. All rights reserved. Avid, Digidesign, Film
Composer, and Pro Tools are either registered trademarks or trademarks of Avid
Technology, Inc. in the United States and/or other countries. Avid received an
Oscar statuette representing the 1998 Scientific and Technical Award for the
concept, design, and engineering of the Avid® Film Composer® system for motion
picture editing. Digidesign, Avids audio division, received an Oscar statuette
representing the 2003 Scientific and Technical Award for the design,
development, and implementation of its Pro Tools® digital audio workstation.
Oscar is a trademark and service mark of the Academy of Motion Picture Arts and
Sciences. Emmy is a registered trademark of ATAS/NATAS. Grammy is a trademark
of the National Academy of Recording Arts and Sciences, Inc. All other
trademarks contained herein are the property of their respective owners.
Some statements in this announcement may be forward-looking
statements for the purposes of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially from those
indicated in the forward-looking statements, including but not limited to:
(i) the possibility that the transaction will not close or that the
closing will be delayed due to antitrust regulatory review or other factors,
(ii) the challenges and costs of assimilating the operations and personnel of
Pinnacle; (iii) the ability to attract and retain highly qualified employees;
(iv) competitive factors, including pricing pressures; (v) reaction of
customers of Pinnacle and Avid and related risks of maintaining pre-existing
relationships of Pinnacle; (vi) fluctuating currency exchange rates; (vii)
adverse changes in general economic or market conditions, particularly in the
content-creation industry; and (viii) other one-time events and other
important factors disclosed previously and from time to time in Avids and
Pinnacles filings with the SEC and to be more specifically set forth in the
Joint Proxy Statement/Prospectus to be filed by Avid and Pinnacle with the SEC.
Avid and Pinnacle disclaim any obligation to update any forward-looking
statements after the date of this release.