AGREEMENT AND PLAN OF MERGER
AMONG
CONCORD EFS, INC.,
ORION ACQUISITION CORP.
AND
STAR SYSTEMS, INC.
Dated as of October 6, 2000
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TABLE OF CONTENTS
Page
ARTICLE I THE MERGER 2
Section 1.1 The Merger. 2
Section 1.2 Effective Time. 2
Section 1.3 Effects of the Merger. 2
Section 1.4 Charter and Bylaws; Directors and Officers. 2
Section 1.5 Conversion of Securities. 3
Section 1.6 Delivery of Certificates and Payment of Cash. 4
Section 1.7 Dividends; Transfer Taxes; Withholding. 5
Section 1.8 No Fractional Securities. 6
Section 1.9 Return of Exchange Fund. 6
Section 1.10 Adjustment of Exchange Ratio. 7
Section 1.11 No Further Ownership Rights in Company Common Stock. 7
Section 1.12 Closing of Company Transfer Books. 7
Section 1.13 Lost Certificates. 7
Section 1.14 Further Assurances. 7
Section 1.15 Closing; Closing Deliveries. 8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB 9
Section 2.1 Organization, Standing and Power. 10
Section 2.2 Capital Structure. 10
Section 2.3 Authority. 11
Section 2.4 Consents and Approvals; No Violation. 12
Section 2.5 SEC Documents and Other Reports. 13
Section 2.6 Actions and Proceedings. 13
Section 2.7 Required Vote of Parent Stockholders. 14
Section 2.8 Pooling of Interests; Reorganization. 14
Section 2.9 Tax Matters. 14
Section 2.10 Brokers. 15
Section 2.11 Operations of Sub. 15
Section 2.12 Permits and Compliance; Defaults. 15
Section 2.13 Certain Agreements. 15
Section 2.14 ERISA. 16
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 17
Section 3.1 Organization, Standing and Power. 17
Section 3.2 Capital Structure. 17
Section 3.3 Authority. 19
Section 3.4 Consents and Approvals; No Violation. 19
Section 3.5 Financial Statements. 20
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Section 3.6 No Dividends; Absence of Certain Changes or Events. 21
Section 3.7 Governmental Permits. 23
Section 3.8 Tax Matters. 24
Section 3.9 Actions and Proceedings. 25
Section 3.10 Certain Agreements. 25
Section 3.11 ERISA. 25
Section 3.12 Worker Safety and Environmental Laws. 27
Section 3.13 Labor Matters. 27
Section 3.14 Intellectual Property; Software. 27
Section 3.15 Availability of Assets and Legality of Use. 30
Section 3.16 Real Property. 31
Section 3.17 Real Property Leases. 31
Section 3.18 Personal Property Leases. 31
Section 3.19 Title to Assets. 31
Section 3.20 Contracts. 32
Section 3.21 Status of Contracts. 33
Section 3.22 Insurance. 33
Section 3.23 Budgets. 33
Section 3.24 Takeover Statutes and Charter Provisions. 34
Section 3.25 Required Vote of Company Stockholders. 34
Section 3.26 Opinion of Financial Advisor. 34
Section 3.27 Pooling of Interests; Reorganization. 34
Section 3.28 Brokers. 34
Section 3.29 Hart-Scott-Rodino 34
Section 3.30 Stockholder Information. 34
Section 3.31 Investor Qualifications. 35
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS 36
Section 4.1 Conduct of Business Pending the Merger. 36
Section 4.2 No Solicitation. 38
Section 4.3 Third Party Standstill Agreements. 39
Section 4.4 Pooling of Interests; Reorganization. 40
ARTICLE V ADDITIONAL AGREEMENTS 40
Section 5.1 Stockholder Consent. 40
Section 5.2 Access to Information. 41
Section 5.3 Fees and Expenses. 41
Section 5.4 Company Stock Plan. 41
Section 5.5 Commercially Reasonable Efforts; Pooling of Interests. 42
Section 5.6 Public Announcements. 44
Section 5.7 Real Estate Transfer and Gains Tax. 44
Section 5.8 Transfer Tax Filings. 44
Section 5.9 Other Transfer Taxes. 44
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Section 5.10 State Takeover Laws. 44
Section 5.11 Indemnification; Directors and Officers Insurance. 45
Section 5.12 Notification of Certain Matters. 45
Section 5.13 Compliance with the Securities Act. 46
Section 5.14 Registration Rights Agreement. 46
Section 5.15 Employee Matters. 46
Section 5.16 Advisory Committee. 47
Section 5.17 Directorship 48
ARTICLE VI CONDITIONS PRECEDENT TO THE MERGER 48
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger. 48
Section 6.2 Condition to Obligation of the Company to Effect the Merger. 49
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the
Merger. 49
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER 51
Section 7.1 Termination. 51
Section 7.2 Effect of Termination. 55
Section 7.3 Amendment. 55
Section 7.4 Waiver. 55
ARTICLE VIII GENERAL PROVISIONS 55
Section 8.1 Non-Survival of Representations and Warranties. 55
Section 8.2 Notices. 56
Section 8.3 Interpretation. 57
Section 8.4 Counterparts. 57
Section 8.5 Entire Agreement; No Third-Party Beneficiaries. 57
Section 8.6 Governing Law. 58
Section 8.7 Assignment. 58
Section 8.8 Severability. 58
Section 8.9 Enforcement of this Agreement. 58
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EXHIBITS
Exhibit A
Form of Stockholder Agreement
Exhibit B
Form of Company Affiliate Letter
Exhibit C
Form of Parent Affiliate Letter
Exhibit D
Form of Registration Rights Agreement
Exhibit E
Form of Employment Agreement Amendment
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TABLE OF DEFINED TERMS
Defined Term Section
--------------------------------------------------------------------------------
Advisory Board Section 5.16(a)
Affiliate Section 3.15
Agreement First paragraph
Audited Financial Statements Section 3.5
Balance Sheet Section 3.5
Balance Sheet Date Section 3.5
Bank Act Section 2.4
Blue Sky Laws Section 2.4
Calculation Period Section 7.1(g)
Certificates Section 1.6(a)
Certificate of Merger Section 1.2
Class A Shares Recital
Class B Shares Recital
Closing Section 1.15(a)
Closing Date Section 1.15(a)
Code Recitals
Company First paragraph
Company Affiliate Letter Section 5.13(a)
Company Agreements Section 3.21
Company Ancillary Agreements Section 3.3
Company Business Personnel Section 3.13
Company Bylaws Section 1.15(d)
Company Charter Section 1.4(a)
Company Common Stock Recitals
Company Diluted Share Number Section 1.5(c)
Company Letter Section 3.2(c)
Company Multiemployer Plan Section 3.11(c)
Company Permits Section 3.7
Company Plan Section 3.11(c)
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Company Stockholders Section 1.6(a)
Company Stock Options Section 3.2(a)
Company Stock Plan Section 3.2(a)
Confidentiality Agreement Section 5.2
Constituent Corporations First paragraph
Copyrights Section 3.14(a)(iii)
D&O Insurance Section 5.11(a)
DGCL Section 1.1
Determination Date Section 7.1(g)
Dissenting Shares Section 1.5(d)
Domain Names Section 3.14(a)(iv)
Effective Time Section 1.2
Employment Agreements Section 6.3(j)
Employment Agreement Amendments Section 6.3(j)
Encumbrance Section 3.6(c)(vii)
Environmental Laws Section 3.12
ERISA Section 2.14(a)
ERISA Affiliate Section 2.14(c)
Exchange Act Section 2.5
Exchange Agent Section 1.6(a)
Exchange Fund Section 1.6(a)
Exchange Ratio Section 1.5(c)
Financial Statements Section 3.5
GAAP Section 2.5
Gains Taxes Section 5.7
Governmental Entity Section 2.4
HSR Act Section 2.4
Indemnified Party Section 5.11(a)
Index Company Price Section 7.1(g)
Index Company Ratios Section 7.1(g)
Index Group Section 7.1(g)
Intellectual Property Section 3.14(a)
IRS Section 3.8(a)
Joint Venture Section 3.2(d)
Knowledge of Parent Section 2.6
Knowledge of the Company Section 3.6(e)
Leased Real Property Section 3.17
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Material Adverse Change Section 2.1
Material Adverse Effect Section 2.1
Member Agreements Section 3.20(xiii)
Merger Recitals
Nasdaq Section 1.8
Network Section 5.16(a)
Owned Software Section 3.14(j)
Parent First paragraph
Parent Affiliate Letter Section 5.13(b)
Parent Ancillary Agreements Section 2.3
Parent Annual Report Section 2.2(c)
Parent Average Price Section 7.1(g)
Parent Bylaws Section 2.4
Parent Charter Section 1.15(b)
Parent Common Stock Recitals
Parent Letter Section 2.2(a)
Parent Multiemployer Plan Section 2.14(c)
Parent Permits Section 2.12
Parent Plan Section 2.14(c)
Parent SEC Documents Section 2.5
Parent Stock Options Section 2.2(a)
Parent Stock Plans Section 2.2(a)
Parent Transactions Section 2.2(a)
Patent Rights Section 3.14(a)(i)
PBGC Section 2.14(a)
Permitted Encumbrance Section 3.6(c)(vii)
Person Section 3.15
Real Property Leases Section 3.17
Registered Intellectual Property Section 3.14(f)
Registration Rights Agreement Section 5.14
Requirements of Laws Section 3.9
Rule 145 Affiliates Section 5.13(a)
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SEC Section 2.2(c)
Securities Act Section 2.5
Share Issuance Section 2.3
Software Section 3.14(b)
Starting Date Section 7.1(g)
State Takeover Approvals Section 2.4
Stockholder Agreements Recitals
Stockholder Consent Section 5.1
Stockholder Information Section 3.30
Sub First paragraph
Subsidiary Section 2.2(d)
Substitute Option Section 5.4(a)
Superior Proposal Section 4.2(a)
Surviving Corporation Section 1.1
Takeover Proposal Section 4.2(a)
Taxes Section 2.9
Tax Return Section 2.9
Trademarks Section 3.14(a)(ii)
Trade Secrets Section 3.14(a)(v)
Transfer Taxes Section 5.8
Transmittal Letter Section 1.6(a)
Unaudited Financial Statements Section 3.5
Worker Safety Laws Section 3.12
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 6, 2000 (this
"Agreement"), among Concord EFS, Inc ., a Delaware corporation ("Parent"), Orion
Acquisition Corp., a Delaware corporation and a direct wholly-owned subsidiary
of Parent ("Sub"), and Star Systems, Inc., a Delaware corporation (the
"Company") (Sub and the Company being hereinafter collectively referred to as
the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved and declared advisable the merger of Sub with and into the Company
with the Company surviving (the "Merger"), upon the terms and subject to the
conditions set forth herein, whereby each issued and outstanding Class A Share
of Common Stock, par value $0.01 per share ("Class A Shares"), of the Company
and each issued and outstanding Class B Share of Common Stock, par value $0.01
per share of the Company (the "Class B Shares" and collectively with the Class A
Shares, the "Company Common Stock"), not owned directly or indirectly by the
Company, will be converted into shares of Common Stock, par value $0.33 1/3 per
share, of Parent ("Parent Common Stock");
WHEREAS, the respective Boards of Directors of Parent and the Company have
determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is in the best interest of their
respective stockholders;
WHEREAS, in order to induce Parent and Sub to enter into this Agreement,
concurrently herewith certain stockholders of the Company are entering into
agreements with Parent dated as of the date hereof (the "Stockholder
Agreements"), in the form of the attached Exhibit A, pursuant to which, among
other things, each such stockholder has agreed to vote in favor of this
Agreement and the Merger;
WHEREAS, it is intended that the Merger will qualify as a reorganization
within the meaning of section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"); and
WHEREAS, it is intended that the Merger shall be recorded for accounting
purposes as a pooling of interests.
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NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger.
Upon the terms and subject to the conditions set forth in this Agreement,
and in accordance with the Delaware General Corporation Law (the "DGCL"), Sub
shall be merged with and into the Company at the Effective Time (as hereinafter
defined). Following the Merger, the separate corporate existence of Sub shall
cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the DGCL. Notwithstanding anything to the
contrary herein, at the election of Parent, any direct wholly-owned Subsidiary
(as hereinafter defined) of Parent may be substituted for Sub as a Constituent
Corporation in the Merger; provided that such substituted corporation is a
Delaware corporation which is formed solely for the purpose of engaging in the
transactions contemplated by this Agreement and has engaged in no other business
activities. In such event, the parties agree to execute an appropriate amendment
to this Agreement, in form and substance reasonably satisfactory to Parent and
the Company, in order to reflect such substitution.
Section 1.2 Effective Time. The Merger shall become effective when a
Certificate of Merger (the "Certificate of Merger"), executed in accordance with
the relevant provisions of the DGCL, is filed with the Secretary of State of the
State of Delaware; provided, however, that, upon mutual written consent of the
Constituent Corporations, the Certificate of Merger may provide for a later date
of effectiveness of the Merger not more than 30 days after the date the
Certificate of Merger is filed. When used in this Agreement, the term "Effective
Time" shall mean the date and time at which the Certificate of Merger is
accepted for recording or such later time established by the Certificate of
Merger. The filing of the Certificate of Merger shall be made on the date of the
Closing (as hereinafter defined).
Section 1.3 Effects of the Merger. The Merger shall have the effects set
forth in Sections 259 through 261 of the DGCL.
Section 1.4 Charter and Bylaws; Directors and Officers. (a) At the
Effective Time, the Certificate of Incorporation, as amended, of the Company
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(the "Company Charter"), as in effect immediately prior to the Effective Time,
shall be amended so that (i) Article FOURTH reads in its entirety as follows:
"The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 1,000 shares of Common Stock, par
value $.01 per share" (ii) subsection (7) of Article SIXTH reads in its entirety
as follows: "Intentionally deleted" and (iii) Article SEVENTH reads in its
entirety as follows: "Intentionally deleted". As so amended, the Company Charter
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law. At the
Effective Time, the Bylaws of Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter changed or amended as provided therein or in the Certificate of
Incorporation of the Surviving Corporation. (b) The directors of Sub and the
employee officers of the Company at the Effective Time shall be the directors
and officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
Section 1.5 Conversion of Securities. As of the Effective Time, by virtue
of the Merger and without any action on the part of Sub, the Company or the
holders of any securities of the Constituent Corporations: (a) Each issued and
outstanding share of common stock, par value $0.01 per share, of Sub shall be
converted into one validly issued, fully paid and nonassessable share of common
stock of the Surviving Corporation. (b) All shares of Company Common Stock that
are held in the treasury of the Company or by any wholly owned Subsidiary of the
Company shall be canceled and no capital stock of Parent or other consideration
shall be paid or delivered in exchange therefor. (c) Subject to the provisions
of Sections 1.8, 1.10 and 7.1(g) hereof, each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time (other than
Dissenting Shares (as hereinafter defined) and shares to be canceled in
accordance with Section 1.5(b)) shall be converted into the right to receive
4.6452 (such number being the "Exchange Ratio") validly issued, fully paid and
nonassessable shares of Parent Common Stock (the Exchange Ratio being determined
by dividing (i) 24,750,000 by (ii) the aggregate number of shares of Company
Common Stock outstanding determined on a fully diluted basis assuming all
options are fully exercised (the "Company Diluted Share Number") as of the date
hereof). In the event the Company Diluted Share Number immediately prior to the
Effective Time shall be greater than 5,328,036, the Exchange Ratio shall be
proportionately reduced and all references to the Exchange Ratio in this
Agreement shall be deemed to be to the Exchange Ratio, as so reduced. All shares
of Company Stock outstanding immediately prior to the Effective Time, when so
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converted, shall no longer be outstanding and shall automatically be canceled
and retired and each holder of a certificate representing any such shares shall
cease to have any rights with respect thereto, except the right to receive (i)
subject to Section 1.6, certificates representing the shares of Parent Common
Stock into which such shares are converted, (ii) dividends and other
distributions in accordance with Section 1.7, and (iii) any cash, without
interest, in lieu of fractional shares to be issued or paid in consideration
therefor in accordance with Section 1.8. (d) Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time which are held of record by stockholders
who shall not have voted such shares in favor of the Merger and who shall have
demanded properly in writing appraisal of such shares in accordance with Section
262 of the DGCL ("Dissenting Shares") shall not be converted into the right to
receive Parent Common Stock and cash as set forth in Section 1.5(c), but the
holders thereof instead shall be entitled to, and the Dissenting Shares shall
only represent the right to receive, payment of the fair value of such shares in
accordance with the provisions of Section 262 of the DGCL; provided, however,
that (i) if such a holder fails to demand properly in writing from the Surviving
Corporation the appraisal of his or its shares in accordance with Section 262(d)
of the DGCL or, after making such demand, subsequently delivers an effective
written withdrawal of such demand, or fails to establish his or its entitlement
to appraisal rights as provided in Section 262 of the DGCL, if so required, or
(ii) if a court shall determine that such holder is not entitled to receive
payment for his or its shares or such holder shall otherwise lose his or its
appraisal rights, then, in any such case, each share of Company Common Stock
held of record by such holder or holders shall automatically be converted into
and represent only the right to receive Parent Common Stock and cash as set
forth in Section 1.5(c), upon surrender of the certificate or certificates
representing such Dissenting Shares. Any cash paid in respect of Dissenting
Shares shall be paid by the Company solely with its own funds, and the Company
shall not be reimbursed therefor by Parent or any of its Subsidiaries either
directly or indirectly. (e) In calculating the consideration payable under this
Section 1.5, Parent shall be entitled to rely on the representations and
warranties contained in Section 3.2(a) and the certificate delivered pursuant to
Section 6.3(f). If such representations, warranties and certificate are not
correct, Parent shall have the right to adjust the Exchange Ratio accordingly
and, notwithstanding anything else to the contrary contained in this Agreement,
in no event shall the aggregate merger consideration payable by Parent, Sub or
the Surviving Corporation to the holders of equity interests in the Company
(including, without limitation, holders of options) in connection with the
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Merger or the transactions contemplated hereby exceed such consideration payable
assuming such representations, warranties and certificate are correct. Section
1.6 Delivery of Certificates and Payment of Cash. (a) At or after the Effective
Time, each holder of record of a certificate or certificates (collectively, the
"Certificates") representing shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time (collectively, the "Company
Stockholders"), may surrender such Certificate or Certificates to Parent's
designee as the exchange agent (the "Exchange Agent"), together with a letter of
transmittal in the form prepared by Parent (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon actual delivery of the Certificates to the Exchange Agent and shall
contain instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock and cash in
lieu of fractional shares) (the "Transmittal Letter"). Promptly after the
Effective Time, Parent shall deposit with the Exchange Agent certificates
representing the shares of Parent Common Stock issuable pursuant to Section
1.5(c) for exchange with outstanding shares of Company Common Stock, and cash as
required to make payments in lieu of any fractional shares pursuant to Section
1.8 (such cash and shares of Parent Common Stock, together with any dividends or
distributions with respect hereto, being hereinafter referred to as the
"Exchange Fund"). The Exchange Agent shall deliver the Parent Common Stock
contemplated to be issued pursuant to Section 1.5(c) out of the Exchange Fund.
Upon surrender for cancellation to the Exchange Agent of all Certificates held
by any Company Stockholder, together with the Transmittal Letter, duly executed,
such Company Stockholder shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock into
which the shares represented by the Certificate or Certificates so surrendered
shall have been converted at the Effective Time pursuant to Section 1.5(c), cash
in lieu of any fractional share in accordance with Section 1.8 and certain
dividends and other distributions in accordance with Section 1.7, and any
Certificate so surrendered shall forthwith be canceled. (b) Each Transmittal
Letter shall contain representations and warranties by the Person (as
hereinafter defined) surrendering any Certificates similar to those contained in
Section 3.31. Each certificate delivered pursuant to Section 1.6 evidencing any
Parent Common Stock shall bear a legend substantially as follows: "THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. SUCH
SECURITIES HAVE BEEN ACQUIRED BY THE HOLDER HEREOF NOT WITH A VIEW TO, OR FOR
RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE OFFERED, SOLD OR
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OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS (A) THE SECURITIES HAVE
BEEN REGISTERED UNDER SUCH ACT AND ANY AND ALL SUCH OTHER APPLICABLE LAWS, OR
(B) PARENT RECEIVES AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO PARENT, TO THE EFFECT THAT REGISTRATION OF SUCH SECURITIES IS
NOT REQUIRED."
Section 1.7 Dividends; Transfer Taxes; Withholding. No dividends or other
distributions that are declared on or after the Effective Time on Parent Common
Stock, or are payable to the Company Stockholders on or after the Effective
Time, will be paid to any Person entitled by reason of the Merger to receive a
certificate representing Parent Common Stock until such Person surrenders the
related Certificate or Certificates, as provided in Section 1.6, and no cash
payment in lieu of fractional shares will be paid to any such Person pursuant to
Section 1.8 until such Person shall so surrender the related Certificate or
Certificates. Subject to the effect of applicable law, there shall be paid to
each record holder of a new certificate representing such Parent Common Stock:
(i) at the time of such surrender or as promptly as practicable thereafter, the
amount of any dividends or other distributions theretofore paid with respect to
the shares of Parent Common Stock represented by such new certificate and having
a record date on or after the Effective Time and a payment date prior to such
surrender; (ii) at the appropriate payment date or as promptly as practicable
thereafter, the amount of any dividends or other distributions payable with
respect to such shares of Parent Common Stock and having a record date on or
after the Effective Time but prior to such surrender and a payment date on or
subsequent to such surrender; and (iii) at the time of such surrender or as
promptly as practicable thereafter, the amount of any cash payable with respect
to a fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 1.8. In no event shall the Person entitled to receive such
dividends or other distributions or cash in lieu of fractional shares be
entitled to receive interest on such dividends or other distributions or cash in
lieu of fractional shares. If any cash or certificate representing shares of
Parent Common Stock is to be paid to or issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it shall
be a condition of such exchange that the Certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the Person
requesting such exchange shall pay to Parent any transfer or other taxes
required by reason of the issuance of certificates for such shares of Parent
Common Stock in a name other than that of the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of Parent that
such tax has been paid or is not applicable. Parent shall be entitled to deduct
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and withhold from the consideration otherwise payable pursuant to this Agreement
to any Person such amounts as Parent is required to deduct and withhold with
respect to the making of such payment under the Code or under any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
Parent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the Person who otherwise would have received
the payment in respect of which such deduction and withholding was made by
Parent.
Section 1.8 No Fractional Securities. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates pursuant to this Article I, and no Parent dividend or
other distribution or stock split shall relate to any fractional share, and no
fractional share shall entitle the owner thereof to vote or to any other rights
of a securityholder of Parent. In lieu of any such fractional share, each holder
of Company Common Stock who would otherwise have been entitled to a fraction of
a share of Parent Common Stock upon surrender of Certificates for exchange
pursuant to this Article I will be paid an amount in cash (without interest),
rounded down to the nearest cent, determined by multiplying (i) the last
reported sale price per share of Parent Common Stock on the Nasdaq National
Market System ("Nasdaq") on the Closing Date (or, if the shares of Parent Common
Stock do not trade on Nasdaq on such date, the trading day immediately preceding
the Closing Date) by (ii) the fractional interest to which such holder would
otherwise be entitled. As promptly as practicable after the determination of the
amount of cash, if any, to be paid to holders of fractional share interests, the
Exchange Agent shall so notify Parent, and Parent shall deposit such amount with
the Exchange Agent and shall cause the Exchange Agent to forward payments to
such holders of fractional share interests subject to and in accordance with the
terms of Section 1.7 and this Section 1.8.
Section 1.9 Return of Exchange Fund. Any portion of the Exchange Fund
deposited with the Exchange Agent which remains undistributed to the Company
Stockholders for 60 days after the Effective Time shall be delivered to Parent,
upon demand of Parent, and any such Company Stockholders who have not
theretofore complied with this Article I shall thereafter look only to Parent
for payment of their claim for Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock and any dividends or distributions with
respect to Parent Common Stock. Neither Parent nor the Surviving Corporation
shall be liable to any former holder of Company Common Stock for any
consideration payable in accordance with this Article I which is delivered to a
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public official pursuant to any applicable abandoned property, escheat or
similar law.
Section 1.10 Adjustment of Exchange Ratio. In the event of any
reclassification, stock split or stock dividend with respect to Parent Common
Stock or any change or conversion of Parent Common Stock into other securities
(or if a record date with respect to any of the foregoing should occur) prior to
the Effective Time, appropriate and proportionate adjustments, if any, shall be
made to the Exchange Ratio, and all references to the Exchange Ratio in this
Agreement shall be deemed to be to the Exchange Ratio, as so adjusted.
Section 1.11 No Further Ownership Rights in Company Common Stock. All
shares of Parent Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms hereof (including any cash paid
pursuant to Section 1.8) shall be deemed to have been issued in full
satisfaction of all rights pertaining to the shares of Company Common Stock
represented by such Certificates.
Section 1.12 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock shall thereafter be made on the records of the Company. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation or Parent, such Certificates shall be canceled and exchanged as
provided in this Article I.
Section 1.13 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
Parent or the Exchange Agent, the posting by such Person of a bond, in such
amount as Parent or the Exchange Agent may direct, as indemnity against any
claim that may be made against Parent, the Surviving Corporation or the Exchange
Agent with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate, the shares of Parent
Common Stock to which the holder thereof is entitled pursuant to Section 1.5,
any cash in lieu of fractional shares of Parent Common Stock to which the holder
thereof is entitled pursuant to Section 1.8 and any dividends or other
distributions to which the holder thereof is entitled pursuant to Section 1.7.
Section 1.14 Further Assurances. If at any time after the Effective Time
the Surviving Corporation shall consider or be advised that any deeds, bills of
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sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations, or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either of the Constituent Corporations, all such deeds, bills of sale,
assignments and assurances and to do, in the name and on behalf of either
Constituent Corporation, all such other acts and things as may be necessary,
desirable or proper to vest, perfect or confirm the Surviving Corporation's
right, title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of such Constituent Corporation and otherwise
to carry out the purposes of this Agreement.
Section 1.15 Closing; Closing Deliveries. (a) The closing of the
transactions contemplated by this Agreement (the "Closing") and all actions
specified in this Agreement to occur at the Closing shall take place at the
offices of Sidley & Austin, Bank One Plaza, 10 South Dearborn Street, Chicago,
Illinois, at 10:00 a.m., local time, no later than the fifth business day
following the day on which the last of the conditions set forth in Article VI
shall have been fulfilled or waived (if permissible) or at such other time and
place as Parent and the Company shall agree (the date of the Closing is referred
to herein as the "Closing Date"). (b) Subject to fulfillment or waiver of the
conditions set forth in Article VI, at the Closing Parent shall deliver to the
Company all of the following: (i) a copy of the Restated Certificate of
Incorporation, as amended, of Parent (the "Parent Charter"), certified as of a
recent date by the Secretary of State of the State of Delaware; (ii) a
certificate of good standing of Parent, issued as of a recent date by the
Secretary of State of the State of Delaware; (iii) a certificate of the
Secretary or an Assistant Secretary of Parent, dated the Closing Date, in form
and substance reasonably satisfactory to the Company, as to (a) no amendments to
the Parent Charter since a specified date, (b) the Bylaws of Parent, (c) the
resolutions of the Board of Directors of Parent authorizing the execution and
performance of this Agreement and the transactions contemplated herein, and (d)
the incumbency and signatures of the officers of Parent executing this Agreement
and any other agreement or certificate executed by Parent in connection with the
Closing; (iv) the certificate contemplated by Section 6.2(a); and (v) all
consents, waivers or approvals obtained by Parent with respect to the
consummation of the transactions contemplated by this Agreement. (c) Subject to
<PAGE>
fulfillment or waiver of the conditions set forth in Article VI, at the Closing
Sub shall deliver to the Company all of the following: (i) a copy of the
Certificate of Incorporation of Sub certified as of a recent date by the
Secretary of the State of Delaware; (ii) a certificate of good standing of Sub,
issued as of a recent date by the Secretary of State of the State of Delaware;
and (iii) a certificate of the Secretary or an Assistant Secretary of Sub, dated
the Closing Date, in form and substance reasonably satisfactory to the Company,
as to (a) no amendments to the Certificate of Incorporation of Sub since a
specified date, (b) the Bylaws of Sub, (c) the resolutions of the Board of
Directors of Sub authorizing the execution and performance of this Agreement and
the transactions contemplated herein and the written consent of Parent in its
capacity as sole stockholder of Sub adopting this Agreement in accordance with
Section 251 of the DGCL, and (d) the incumbency and signatures of the officers
of Sub executing this Agreement and any other agreement or certificate executed
by Sub in connection with the Closing. (d) Subject to fulfillment or waiver of
the conditions set forth in Article VI, at the Closing the Company shall deliver
to Parent all of the following: (i) a copy of the Company Charter, certified as
of a recent date by the Secretary of State of the State of Delaware; (ii) a
certificate of good standing of the Company, issued as of a recent date by the
Secretary of State of the State of Delaware; (iii) a certificate of the
Secretary or an Assistant Secretary of the Company, dated the Closing Date, in
form and substance reasonably satisfactory to Parent, as to (i) no amendments to
the Company Charter since a specified date, (ii) the Bylaws of the Company, as
amended (the "Company Bylaws"), (iii) the resolutions of the Board of Directors
of the Company authorizing the execution and performance of this Agreement and
the transactions contemplated herein and the resolutions of the stockholders of
the Company approving and adopting this Agreement in accordance with Section 251
of the DGCL, and (iv) the incumbency and signatures of the officers of the
Company executing this Agreement and any other agreement or certificate executed
by the Company in connection with the Closing; (iv) all consents, waivers or
approvals obtained by the Company with respect to the consummation of the
transactions contemplated by this Agreement; (v) the certificates contemplated
by Sections 6.3(a), 6.3(c), 6.3(f), 6.3(g), 6.3(h) and 6.3(j); and (vi) the
written confirmations contemplated by Section 6.3(k).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant, jointly and severally, to the Company
as follows:
<PAGE>
Section 2.1 Organization, Standing and Power. Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
carry on its business as now being conducted. Each of Parent and Sub is duly
qualified to do business and is in good standing in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification or good standing necessary, except where the
failure to be so qualified or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. For purposes of this
Agreement, "Material Adverse Change" or "Material Adverse Effect" means, when
used with respect to Parent or the Company, as the case may be, any event,
change or effect that individually or when taken together with all other such
events, changes or effects is or could reasonably be expected to be materially
adverse to the business, prospects, assets, liabilities, financial condition or
results of operations of Parent and its Subsidiaries, taken as a whole, or the
Company and its Subsidiaries, taken as a whole, as the case may be. None of the
following shall be deemed by itself or by themselves, to constitute a Material
Adverse Change or Material Adverse Effect: (i) conditions affecting the industry
in which the Company and its Subsidiaries or Parent and its Subsidiaries, as the
case may be, operates or the U.S. economy as a whole, or (ii) any effect arising
from the public announcement of this Agreement.
Section 2.2 Capital Structure. (a) As of the date hereof, the authorized
capital stock of Parent consists of 500,000,000 shares of Parent Common Stock.
At the close of business on September 29, 2000, (i) 215,364,106 shares of Parent
Common Stock were issued and outstanding, all of which were validly issued,
fully paid and nonassessable and free of preemptive rights, (ii) no shares of
Parent Common Stock were held in the treasury of Parent or by Subsidiaries of
Parent, and (iii) 24,220,513 shares of Parent Common Stock were reserved for
issuance pursuant to outstanding options, warrants, convertible securities and
rights ("Parent Stock Options"), to purchase or otherwise acquire shares of
Parent Common Stock under Parent's benefit plans or other arrangements or
pursuant to any plans or arrangements assumed by Parent in connection with any
acquisition, business combination or similar transaction (collectively, the
"Parent Stock Plans"). As of the date of this Agreement, except as set forth in
Section 2.2(a) of the letter dated as of the date hereof from Parent to the
Company, which letter relates to this Agreement and is designated therein as the
Parent Letter (the "Parent Letter"), except as set forth above, except for the
issuance of shares of Parent Common Stock pursuant to the Parent Stock Plans and
<PAGE>
except in connection with acquisitions, mergers or other business combinations
involving Parent or its Subsidiaries (the "Parent Transactions"), no shares of
capital stock or other voting securities of Parent were issued, reserved for
issuance or outstanding. All of the shares of Parent Common Stock issuable in
exchange for Company Common Stock at the Effective Time in accordance with this
Agreement will be, when so issued, duly authorized, validly issued, fully paid
and nonassessable and free of preemptive rights. As of the date of this
Agreement, except for (i) this Agreement and (ii) as set forth above, there are
no options, warrants, calls, rights, puts or agreements to which Parent or any
of its Subsidiaries is a party or by which any of them is bound obligating
Parent or any of its Subsidiaries to issue, deliver, sell or redeem, or cause to
be issued, delivered, sold or redeemed, any additional shares of capital stock
(or other voting securities or equity equivalents) of Parent or any of its
Subsidiaries or obligating Parent or any of its Subsidiaries to grant, extent or
enter into any such option, warrant, call, right, put or agreement. (b) As of
the date of this Agreement, each outstanding share of capital stock (or other
voting security or equity equivalent) of each Subsidiary of Parent is duly
authorized, validly issued, fully paid and nonassessable and each such share (or
other voting security or equity equivalent) is owned by Parent or another
Subsidiary of Parent, free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on voting
rights, charges and other encumbrances of any nature whatsoever, except where
any failure(s) be so duly authorized, valid issued, fully paid and nonassessable
or owned would not have, individually or in the aggregate, a Material Adverse
Effect on Parent. (c) Except as set forth in Section 2.2(c) of the Parent
Letter, Exhibit 21 to Parent's Annual Report on Form 10-K for the year ended
December 31, 1999, as filed with the Securities and Exchange Commission (the
"SEC") (the "Parent Annual Report"), contained a true, accurate and correct
statement in all material respects of all of the information required to be set
forth therein by the regulations of the SEC. (d) For purposes of this Agreement,
"Subsidiary" means any corporation, partnership, limited liability company,
joint venture, trust, association or other entity of which Parent or the
Company, as the case may be (either alone or through or together with any other
Subsidiary), owns, directly or indirectly, 50% or more of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation,
partnership, limited liability company, joint venture or other entity.
Section 2.3 Authority. On or prior to the date of this Agreement (i) the
Board of Directors of Sub approved this Agreement and declared this Agreement
<PAGE>
and the Merger advisable and fair to and in the best interest of Sub and its
sole stockholder, and (ii) the Board of Directors of Parent approved and adopted
this Agreement and approved the issuance of Parent Common Stock in connection
with the Merger (the "Share Issuance"), both in accordance with the DGCL. The
Board of Directors of Parent has approved the other agreements to be entered
into by it as contemplated hereby (such other agreements, the "Parent Ancillary
Agreements"). Parent has the requisite corporate power and authority to enter
into this Agreement and the Parent Ancillary Agreements, to consummate the
transactions contemplated hereby and thereby and to effect the Share Issuance.
Sub has all corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Sub and the Parent Ancillary Agreements by Parent,
and the consummation by Parent and Sub of the transactions contemplated hereby
and thereby, have been duly authorized by all necessary corporate action on the
part of Parent and Sub, subject to the filing of appropriate Merger documents as
required by the DGCL. This Agreement and the consummation of the transactions
contemplated hereby have been approved by the sole stockholder of Sub. This
Agreement has been duly executed and delivered by Parent and Sub and the Parent
Ancillary Agreements executed as of the date hereof have been duly executed and
delivered by Parent. Assuming the valid authorization, execution and delivery by
the other parties thereto and the validity and binding effect hereof and thereof
on the other parties thereto, this Agreement constitutes the valid and binding
obligation of Parent and Sub enforceable against each of them in accordance with
its terms, and each of the Parent Ancillary Agreements, upon execution and
delivery thereof by Parent, will constitute the valid and binding obligation of
Parent enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
Section 2.4 Consents and Approvals; No Violation. Assuming that all
consents, approvals, authorizations and other actions described in this Section
2.4 have been obtained and all filings and obligations described in this Section
2.4 have been made, except as set forth in Section 2.4 of the Parent Letter, the
execution and delivery of this Agreement by Parent and Sub, and the Parent
Ancillary Agreements by Parent, do not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions hereof and
thereof will not, result in any violation of, or default (with or without notice
<PAGE>
or lapse of time, or both) under, or give to others a right of termination,
cancellation or acceleration of any obligation or the loss of a material benefit
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Parent or any of its
Subsidiaries under, any provision of (i) the Parent Charter or the Bylaws of
Parent (the "Parent Bylaws") or the Certificate of Incorporation or Bylaws of
Sub, (ii) the comparable charter or organization documents of any of Parent's
Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to Parent or any of its Subsidiaries or any of their
respective properties or assets, or (iv) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Parent or any of its
Subsidiaries or any of their respective properties or assets, other than, in the
case of clauses (ii), (iii) and (iv), any such violations, defaults, rights,
liens, security interests, charges or encumbrances that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent, materially impair
the ability of Parent or Sub to perform their respective obligations hereunder
or, in the case of Parent, under the Parent Ancillary Agreements, or prevent the
consummation of any of the transactions contemplated hereby or thereby by Parent
or Sub. Except as set forth in Section 2.4 of the Parent Letter, no filing or
registration with, or authorization, consent or approval of, any domestic
(federal and state), foreign or supranational court, commission, governmental
body, regulatory agency, authority or tribunal (a "Governmental Entity") is
required by or with respect to Parent or any of its Subsidiaries in connection
with the execution and delivery of this Agreement by Parent or Sub or the Parent
Ancillary Agreements by Parent or is necessary for the consummation by Parent or
Sub of the Merger and the other transactions contemplated by this Agreement or
the Parent Ancillary Agreements, except for (i) in connection, or in compliance
with the provisions of the Bank Holding Company Act of 1956, as amended
(together with the rules and regulations promulgated thereunder, the "Bank
Act"), and the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(together with the rules and regulations promulgated thereunder, the "HSR Act"),
(ii) the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware and appropriate documents with the relevant authorities of
other states in which the Company or any of its Subsidiaries is qualified to do
business, (iii) such filings, authorizations, orders and approvals as may be
required by state takeover laws (the "State Takeover Approvals"), (iv) such
filings as may be required in connection with the taxes described in Sections
5.7, 5.8 and 5.9, (v) applicable requirements, if any, of state securities or
"blue sky" laws ("Blue Sky Laws") and Nasdaq, (vi) applicable requirements, if
<PAGE>
any, under foreign laws and (vii) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not, individually or in the aggregate, have a Material Adverse Effect
on Parent, materially impair the ability of Parent or Sub to perform its
obligations hereunder or, in the case of Parent, under the Parent Ancillary
Agreements, or prevent the consummation of any of the transactions contemplated
hereby or thereby by Parent or Sub.
Section 2.5 SEC Documents and Other Reports. Parent has filed all required
documents with the SEC between January 1, 2000 and the date hereof (the "Parent
SEC Documents"). As of their respective dates or, if amended, as of the date of
the last amendment, the Parent SEC Documents complied in all material respects
with the requirements of the Securities Act of 1933, as amended (together with
the rules and regulations promulgated thereunder, the "Securities Act") or the
Securities Exchange Act of 1934, as amended (together with the rules and
regulations promulgated thereunder, to "Exchange Act"), as the case may be, and,
at the respective times they were filed, none of the Parent SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
consolidated financial statements (including, in each case, any notes thereto)
of Parent included in the Parent SEC Documents complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles ("GAAP") (except, in
the case of the unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and fairly presented in all material
respects the consolidated financial position of Parent and its consolidated
Subsidiaries as at the respective dates thereof and the consolidated results of
their operations and their consolidated cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein). Except as disclosed
in the Parent SEC Documents or as required by GAAP, Parent has not, since
December 31, 1999, made any material change in the accounting practices or
policies applied in the preparation of financial statements included in the
Parent SEC Documents.
Section 2.6 Actions and Proceedings. Except as set forth in the Parent SEC
Documents filed prior to the date of this Agreement and except as set forth in
<PAGE>
Section 2.6 of the Parent Letter, as of the date hereof, there are no actions,
suits, labor disputes or other litigation, legal or administrative proceedings
or governmental investigations pending or, to the Knowledge of Parent,
threatened against Parent or any of its Subsidiaries or, to the Knowledge of
Parent, any of its or their present or former officers, directors, employees,
consultants, agents or stockholders, as such, or any of its or their properties,
assets or business relating to the transactions contemplated by this Agreement
and the Parent Ancillary Agreements. Except as set forth in the Parent SEC
Documents filed prior to the date of this Agreement, and except as set forth in
Section 2.6 of the Parent Letter, as of the date hereof, there are no
outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against Parent or any of its Subsidiaries, or, to the
Knowledge of Parent (as hereinafter defined), against any of the present or
former directors or officers of Parent or any of its Subsidiaries, as such, or
any of its or their properties, assets or businesses that, individually or in
the aggregate, would have a Material Adverse Effect on Parent. For purposes of
this Agreement, "Knowledge of Parent" means the actual knowledge of the
individuals identified in Section 2.6 of the Parent Letter.
Section 2.7 Required Vote of Parent Stockholders. No vote of the
securityholders of Parent is required by law, the Parent Charter or the Parent
Bylaws or otherwise in order for Parent to consummate the Merger and the
transactions contemplated hereby.
Section 2.8 Pooling of Interests; Reorganization. To the Knowledge of
Parent, neither Parent nor any of its Subsidiaries has (i) taken any action or
failed to take any action which action or failure would jeopardize the treatment
of the Merger as a pooling of interests for accounting purposes or (ii) taken
any action or failed to take any action which action or failure would prevent
the Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code.
Section 2.9 Tax Matters. Except as otherwise set forth in Section 2.9 of
the Parent Letter, as of the date hereof, (i) Parent and each of its
Subsidiaries have filed all federal, and all material state, local and foreign,
Tax Returns (as hereinafter defined) required to have been filed or appropriate
extensions therefor have been properly obtained, and such Tax Returns are
correct and complete, except to the extent that any failure to so file or any
failure to be correct and complete would not, individually or in the aggregate,
have a Material Adverse Effect on Parent; (ii) all Taxes (as hereinafter
<PAGE>
defined) shown to be due on such Tax Returns have been timely paid or extensions
for payment have been properly obtained, except to the extent that any failure
to so pay or so obtain such an extension would not, individually or in the
aggregate, have a Material Adverse Effect on Parent; (iii) Parent and each of
its Subsidiaries have complied in all material respects with all rules and
regulations relating to the withholding of Taxes except to the extent that any
failure to comply with such rules and regulations would not, individually or in
the aggregate, have a Material Adverse Effect on Parent; and (iv) all
deficiencies asserted or assessments made as a result of any examination of such
Tax Returns by any taxing authority have been paid in full or are being timely
and properly contested other than any deficiencies or assessments that would
not, individually or in the aggregate, have a Material Adverse Effect on Parent.
For purposes of this Agreement: (i) "Taxes" means any federal, state, local,
foreign or provincial income, gross receipts, property, sales, use, license,
excise, franchise, employment, payroll, withholding, alternative or added
minimum, ad valorem, value-added, transfer or excise tax, or other tax, custom,
duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty imposed by any Governmental
Entity with respect thereto, and (ii) "Tax Return" means any return, report or
similar statement (including the attached schedules) required to be filed with
respect to any Tax, including, without limitation, any information return, claim
for refund, amended return or declaration of estimated Tax.
Section 2.10 Brokers. No broker, investment banker or other Person, other
than William Blair & Company, L.L.C., the fees and expenses of which will be
paid by Parent, is entitled to any broker's, finder's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent or Sub.
Section 2.11 Operations of Sub. Sub is a direct, wholly-owned subsidiary of
Parent, was formed solely for the purpose of engaging in the transactions
contemplated hereby, has engaged in no other business activities and has
conducted its operations only as contemplated hereby.
Section 2.12 Permits and Compliance; Defaults. Each of Parent and its
Subsidiaries is in possession of all licenses, franchises, permits, privileges,
immunities, approvals and other authorizations from Governmental Entities which
are necessary to entitle Parent or any of its Subsidiaries to own, lease or
possess, and operate and use its assets and to carry on its business
substantially as currently conducted (herein collectively called the "Parent
<PAGE>
Permits"), and each of the material Parent Permits are valid and in full force
and effect, except where the failure to be in possession of any of the Parent
Permits or the failure of any such Parent Permit to be in full force and effect
would not, individually or in the aggregate, have a Material Adverse Effect on
Parent. Parent and its Subsidiaries are in compliance in all material respects
with their respective obligations under the Parent Permits, with only such
exceptions as, individually or in the aggregate, would not have a Material
Adverse Effect on Parent.
Section 2.13 Certain Agreements. Except as set forth in Section 2.13 of the
Parent Letter, as of the date of this Agreement, neither Parent nor any of its
Subsidiaries is a party to any contract, agreement or arrangement which is a
"material contract" (as such term is defined in Item 601(b)(10) of Regulation
S-K under the Securities Act) to be performed after the date of this Agreement
that has not been filed or incorporated by reference in the Parent SEC
Documents. As of the date of this Agreement, each contract, agreement or
arrangement of Parent or its Subsidiaries which is a "material contract" (as
such term is defined in Item 601(b)(10) of Regulation S-K under the Securities
Act) is valid and binding on Parent or its respective Subsidiary, as applicable,
and in full force and effect and Parent and each Subsidiary has performed in all
material respects its obligations required to be performed by it to the date
hereof under each such contract, agreement or arrangement, except where the
failure of any such contract to be valid and binding or in full force and effect
or the failure of any such obligation to have been performed would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
Section 2.14 ERISA. (a) Except as would not, individually or in the
aggregate, have a Material Adverse Effect on Parent, each Parent Plan (as
hereinafter defined) complies in all material respects with Title IV of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the Code
and all other applicable statutes and governmental rules and regulations, and
(ii) to the Knowledge of Parent, no "reportable event" (within the meaning of
Section 4043 of ERISA) for which the 30-day notice requirement to the Pension
Benefit Guaranty Corporation ("PBGC") has occurred prior to the date hereof with
respect to any Parent Plan. Except as would not, individually or in the
aggregate, have a Material Adverse Effect on Parent, neither Parent nor any of
its ERISA Affiliates (as hereinafter defined) has, within the five years
preceding the date hereof, withdrawn from any Parent Plan or Parent
Multiemployer Plan (as hereinafter defined) or instituted, or is currently
considering taking, any action to do so. Except as would not, individually or in
<PAGE>
the aggregate, have a Material Adverse Effect on Parent, no Parent Plan, nor any
trust created thereunder, has incurred any "accumulated funding deficiency" (as
defined in Section 301 of ERISA), whether or not waived. (b) Except as listed in
Section 2.14 of the Parent Letter, with respect to the Parent Plans, no event
has occurred and, to the Knowledge of Parent, there exists no condition or set
of circumstances in connection with which Parent or any of its ERISA Affiliates
would be subject to any material liability under the terms of such Parent Plans,
ERISA, the Code or any other applicable law, other than liabilities for benefits
payable in the normal course or premiums to the PBGC and other than any
liability that would not, individually or in the aggregate, have a Material
Adverse Effect on Parent. (c) As used herein, (i) "Parent Plan" means a "pension
plan" (as defined in Section 3(2) of ERISA (other than a Parent Multiemployer
Plan)), a "welfare plan" (as defined in Section 3(1) of ERISA), or any bonus,
profit sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, holiday pay, vacation, severance,
death benefit, sick leave, fringe benefit, insurance or other plan, or
arrangement, in each case established or maintained by Parent or any of its
ERISA Affiliates or as to which Parent or any of its ERISA Affiliates has
contributed or otherwise has any material liability, (ii) "Parent Multiemployer
Plan" means a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA)
to which Parent or any of its ERISA Affiliates is or has been obligated to
contribute within the five years preceding the date hereof, or otherwise has
material liability, and (iii) "ERISA Affiliate" means any trade or business
(whether or not incorporated) which is under common control or would be
considered a single employer with such Person in either case, pursuant to
Section 414(b), (c), (m) or (o) of the Code and the regulations promulgated
under those sections or pursuant to Section 4001(b) of ERISA and the regulations
promulgated thereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization, Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to carry
on its business as now being conducted. Each Subsidiary of the Company is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate (in the
<PAGE>
case of a Subsidiary that is a corporation) or other power and authority to
carry on its business as now being conducted. The Company and each of its
Subsidiaries are duly qualified to do business, and are in good standing, in
each jurisdiction where the character of their properties owned or held under
lease or the nature of their activities makes such qualification or good
standing necessary, except where any such failure to be so qualified or licensed
and in good standing would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
Section 3.2 Capital Structure. (a) The authorized capital stock of the
Company consists of 8,000,000 shares of Company Common Stock, 6,000,000 of which
are designated as Class A Shares and 2,000,000 of which are designated as Class
B Nonvoting Shares. At the close of business on October 4, 2000, (i) 5,160,333
shares of Company Common Stock were issued and outstanding, all of which were
validly issued, fully paid and nonassessable and none of which has been issued
in violation of, or is subject to any preemptive or subscription rights, (ii) no
shares of Company Common Stock were held in the treasury of the Company or by
Subsidiaries of the Company, (iii) 258,000 shares of Company Common Stock were
reserved for issuance pursuant to the Star Systems, Inc. 2000 Equity Incentive
Plan (the "Company Stock Plan"), and (iv) 167,703 options (the "Company Stock
Options") to purchase shares of Company Common Stock pursuant to the Company
Stock Plan were outstanding. The Company Stock Plan is the only benefit plan of
the Company or its Subsidiaries under which any securities of the Company or any
of its Subsidiaries are issuable. Since October 4, 2000, except as set forth
above, no shares of capital stock or other voting securities of the Company were
issued, reserved for issuance or outstanding. Except as set forth in Section
3.2(a)(i) of the Company Letter (as hereinafter defined), there will be no
acceleration in the vesting of the Company Stock Options as a result of the
execution of this Agreement or consummation of the transactions contemplated
hereby. Except as set forth in Section 3.2(a)(ii) of the Company Letter and
except for the Company Stock Options there are no agreements, arrangements,
options, warrants, calls, rights, puts or commitments of any character relating
to the issuance, sale, purchase or redemption of any shares of capital stock or
other equity interests or equity equivalents of the Company or any of its
Subsidiaries, whether on conversion of other securities or otherwise, or
obligating the Company or any of its Subsidiaries to grant, extend or enter into
any such agreement, arrangement, option, warrant, call, right, put or
commitment. Except as set forth in Section 3.2(a)(iii) of the Company Letter,
the Company is not a party to, and does not otherwise have any Knowledge of the
current existence of, any stockholder agreement, voting trust agreement or any
<PAGE>
other similar contract, agreement, arrangement, commitment, plan or
understanding restricting or otherwise relating to the voting, dividend,
ownership or transfer rights of any shares of capital stock of the Company. True
and complete copies of the Company Charter, Company Bylaws, and the agreements
and other instruments referred to in Section 3.2(a) of the Company Letter have
been delivered to Parent. (b) Each outstanding share of capital stock (or other
equity interest or equity equivalent, as the case may be) of each Subsidiary of
the Company is duly authorized, validly issued, fully paid and nonassessable,
and each such share (or other equity interest or equity equivalent, as the case
may be) is owned by the Company or another Subsidiary of the Company, free and
clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreements, limitations on voting rights, charges and other
encumbrances of any nature whatsoever. The Company does not have any outstanding
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or convertible into or exercisable for securities having the
right to vote) with the stockholders of the Company on any matter. (c) Section
3.2(c)(i) of the letter dated the date hereof and delivered on the date hereof
by the Company to Parent, which letter relates to this Agreement and is
designated the Company Letter (the "Company Letter") sets forth the name and
address of each holder of record of shares of capital stock of the Company
outstanding on the date hereof, together, in each case, with the number of
shares of Company Common Stock held by such holder. Section 3.2(c)(ii) of the
Company Letter sets forth each Company Stock Option issued by the Company,
together, in each case, with the number of shares issuable upon exercise
thereof, the grant date, the exercise price, the expiration date, the vesting
schedule and any early vesting provisions and the name and address of the record
owner thereof. Other than Ronald V. Congemi who holds the Company Stock Options
set forth in Section 3.2(c)(ii) of the Company Letter, none of the directors of
the Company holds, is eligible to hold or will hold, between the date hereof and
the Effective Time, any shares of Company Common Stock or any Company Stock
Options. True and complete copies of (i) the Company Stock Plan, and (ii) each
instrument governing any Company Stock Option has been delivered by the Company
to Parent. (d) Section 3.2(d) of the Company Letter sets forth a list of all
Subsidiaries and Joint Ventures of the Company and the jurisdiction in which
such Subsidiary or Joint Venture is organized. Section 3.2(d) of the Company
Letter also sets forth the nature and extent of the ownership and voting
interests held by the Company in each such Joint Venture. The Company has no
obligation to make any capital contributions, or otherwise provide assets or
cash, to any Joint Venture. Except as set forth in Section 3.2(d) of the Company
Letter, the Company does not, directly or indirectly, (i) own, of record or
<PAGE>
beneficially, any outstanding voting securities or other equity interests in any
corporation, partnership, joint venture or other entity or (ii) control any
corporation, partnership, joint venture or other entity. For purposes of this
Agreement, "Joint Venture" means any corporation, limited liability company,
partnership, joint venture, trust, association or other entity which is not a
Subsidiary of the Company, as the case may be, and in which (a) the Company,
directly or indirectly, owns or controls any shares of any class of the
outstanding voting securities or other equity interests, or (b) the Company or
one of its Subsidiaries is a general partner. (e) All issued and outstanding
shares of Company Common Stock have been issued in compliance with all
appropriate securities laws and are subject to all appropriate restrictions on
transfer in connection with such laws.
Section 3.3 Authority. On or prior to the date of this Agreement, the Board
of Directors of the Company approved this Agreement, declared this Agreement and
the Merger advisable and fair to and in the best interest of the Company and its
stockholders, resolved to recommend the approval and adoption of this Agreement
by the Company's stockholders, directed that this Agreement be submitted to the
Company's stockholders for approval and adoption, all in accordance with the
DGCL, approved the Stockholder Agreements and approved the other agreements to
be entered into by it as contemplated hereby (such other agreements, the
"Company Ancillary Agreements"). The Company has the requisite corporate power
and authority to enter into this Agreement and the Company Ancillary Agreements,
to consummate the transactions contemplated by the Company Ancillary Agreements
and, subject to approval by the stockholders of the Company of this Agreement,
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Company Ancillary Agreements by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of the Company, subject, in the case of this Agreement, to (x)
approval and adoption of this Agreement by the stockholders of the Company and
(y) the filing of appropriate Merger documents as required by the DGCL. This
Agreement has been duly executed and delivered by the Company. The Company
Ancillary Agreements executed as of the date hereof have each been duly executed
and delivered by the Company and no other corporate action on the part of the
Company is necessary in connection therewith. Assuming the valid authorization,
execution and delivery by the other parties thereto and the validity and binding
effect hereof and thereof on the other parties thereto, this Agreement
constitutes the valid and binding obligation of the Company enforceable against
it in accordance with its terms and each of the Company Ancillary Agreements
<PAGE>
upon execution and delivery thereof by the Company will constitute the valid and
binding obligation of the Company enforceable against it in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
Section 3.4 Consents and Approvals; No Violation. Assuming that all
consents, approvals, authorizations and other actions described in this Section
3.4 have been obtained and all filings and obligations described in this Section
3.4 have been made, except as set forth in Section 3.4 of the Company Letter,
the execution and delivery of this Agreement and the Company Ancillary
Agreements by the Company do not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions hereof and
thereof will not, result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give to others a right of termination,
cancellation or acceleration of any obligation or the loss of a material benefit
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any of its
Subsidiaries under, any provision of (i) the Company Charter or the Company
Bylaws, (ii) the comparable charter or organizational documents of any of the
Company's Subsidiaries, (iii) any loan or credit agreement, note, bond,
mortgage, indenture, guaranty, lease or other agreement, instrument, permit,
concession, franchise or license applicable to the Company or any of its
Subsidiaries or any of their respective properties or assets, or (iv) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or any of its Subsidiaries or any of their respective properties
or assets except, in the case of clauses (iii) or (iv), any such violations,
defaults, rights, liens, security interests, charges or encumbrances that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company, materially impair the ability of the Company to perform its
obligations hereunder or under the Company Ancillary Agreements or prevent the
consummation of the transactions contemplated hereby or thereby by the Company.
No filing or registration with, or authorization, consent or approval of, any
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 or
the Company Ancillary Agreements by the Company or is necessary for the
consummation by the Company of the Merger and the other transactions
contemplated by this Agreement or the Company Ancillary Agreements, except for
<PAGE>
(i) in connection, or in compliance with, the provisions of the Bank Act and the
HSR Act, (ii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company or any of its Subsidiaries is
qualified to do business, (iii) State Takeover Approvals, (iv) such filings as
may be required in connection with the taxes described in Sections 5.7, 5.8 and
5.9, (v) applicable requirements, if any, under foreign laws, and (vi) such
other consents, orders, authorizations, registrations, declarations and filings
the failure of which to be obtained or made would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, materially impair the
ability of the Company to perform its obligations hereunder or under the Company
Ancillary Agreements, or prevent the consummation of any of the transactions
contemplated hereby or thereby by the Company.
Section 3.5 Financial Statements. Section 3.5 of the Company Letter
contains (i) the balance sheet (the "Balance Sheet") of the Company and its
subsidiaries as of December 31, 1999 (the "Balance Sheet Date") and the related
statements of income, stockholders' equity and cash flows for the year then
ended, together with the appropriate notes to such financial statements,
accompanied by the report thereon of Deloitte & Touche, LLP, independent public
accountants (the "Audited Financial Statements"), and (ii) the unaudited balance
sheet of the Company and its Subsidiaries as of July 31, 2000 and the related
unaudited statements of income, stockholders' equity and cash flows for the
seven months then ended (the "Unaudited Financial Statements" and together with
the Audited Financial Statements, the "Financial Statements"). Except as
disclosed in the notes thereto, the Financial Statements have been prepared in
conformity with GAAP consistently applied and fairly present in all material
respects the financial position of the Company and its Subsidiaries at the dates
of such balance sheets and the results of its operations and cash flows for the
respective periods indicated (except that the Unaudited Financial Statements are
subject to normal year-end audit adjustments and do not contain footnotes).
Section 3.6 No Dividends; Absence of Certain Changes or Events. (a) Except
as set forth in Section 3.6(a) of the Company Letter, since December 31, 1999,
the Company has not declared or made, or agreed to declare or make, any payment
of dividends or distributions to its stockholders (and no record date with
respect to any of the foregoing has occurred) or purchased or redeemed, or
agreed to purchase or redeem, any of its capital stock or other equity interest.
(b) Except as set forth in Section 3.6(b) of the Company Letter, since the
Balance Sheet Date there has been: (i) no Material Adverse Change with respect
<PAGE>
to the Company; and (ii) no material damage, destruction, loss or claim, whether
or not covered by insurance, or condemnation or other taking adversely affecting
any material assets or business of the Company or any of its Subsidiaries. (c)
Except as set forth in Section 3.6(c) of the Company Letter, since the Balance
Sheet Date, the Company and its Subsidiaries have conducted their respective
businesses in all material respects only in the ordinary course and in
conformity with past practice. Without limiting the generality of the foregoing,
since the Balance Sheet Date, except as set forth in Section 3.6(c) of the
Company Letter, neither the Company nor any of its Subsidiaries has: (i) issued,
delivered or agreed (conditionally or unconditionally) to issue or deliver, or
granted any option, warrant or other right to purchase, any of its capital stock
or other equity interest or any security convertible into its capital stock or
other equity interest; (ii) issued, delivered or agreed (conditionally or
unconditionally) to issue or deliver any of its bonds, notes or other debt
securities or borrowed or agreed to borrow any funds, other than in the ordinary
course of business consistent with past practice; (iii) paid any obligation or
liability (absolute or contingent) other than current liabilities reflected on
the Balance Sheet and current liabilities incurred since the Balance Sheet Date
in the ordinary course of business consistent with past practice or liabilities
and obligations not exceeding $50,000 in the aggregate; (iv) except in the
ordinary course of business consistent with past practice, made or permitted any
material amendment or termination of any Company Agreement (as hereinafter
defined); (v) undertaken or committed to undertake capital expenditures
exceeding $50,000 for any single project or related series of projects or
$200,000 in the aggregate; (vi) made charitable donations in excess of $10,000
in the aggregate; (vii) sold, leased (as lessor), transferred or otherwise
disposed of (including any transfers from the Company or any of its Subsidiaries
to any of the stockholders of the Company or any of their respective Affiliates
(as hereinafter defined)), or mortgaged or pledged, or imposed or suffered to be
imposed any lien, claim, charge, security interest, mortgage, pledge, easement,
conditional sale or other title retention agreement, defect in title, covenant
or other restriction of any kind (an "Encumbrance"), on any of the assets
reflected on the Balance Sheet or any assets acquired by the Company or any of
its Subsidiaries after the Balance Sheet Date, except for inventory and
immaterial amounts of personal property sold or otherwise disposed of for fair
value in the ordinary course of its business consistent with past practice and
except for (A) liens for taxes and other governmental charges and assessments
which are not yet due and payable, (B) liens of landlords and liens of carriers,
warehousemen, mechanics and materialmen and other like liens arising in the
ordinary course of business for sums not yet due and payable and (C) other liens
<PAGE>
or imperfections on property which are not material in amount, do not interfere
with, and are not violated by the consummation of the transactions contemplated
by, this Agreement, and do not materially detract from the value or
marketability of, or materially impair the existing use of, the property
affected by such lien or imperfection (each, a "Permitted Encumbrance"); (viii)
canceled any debts owed to or claims held by the Company or any of its
Subsidiaries (including the settlement of any claims or litigation) other than
in the ordinary course of its business consistent with past practice or debts or
claims not exceeding $50,000 in the aggregate; (ix) created, incurred or
assumed, or agreed to create, incur or assume, any indebtedness for borrowed
money or entered into, as lessee, any capitalized lease obligations (as defined
in Statement of Financial Accounting Standards No. 13); (x) accelerated or
delayed collection of notes or accounts receivable in advance of or beyond their
regular due dates or the dates when the same would have been collected in the
ordinary course of its business consistent with past practice; (xi) delayed or
accelerated payment of any account payable or other liability beyond or in
advance of its due date or the date when such liability would have been paid in
the ordinary course of its business consistent with past practice; (xii)
instituted any increase in any compensation payable to any employee, director or
consultant of the Company or any of its Subsidiaries or in any profit-sharing,
bonus, incentive, deferred compensation, insurance, pension, retirement,
medical, hospital, disability, welfare or other benefits made available to
employees of the Company or any of its Subsidiaries except, in case of employees
other than directors or officers, salary increases in connection with annual or
periodic compensation reviews in the ordinary course of business consistent with
the Company's past practice; (xiii) settled or compromised any material federal,
state, local or foreign income tax liability; (xiv) prepared or filed any Tax
Return inconsistent with past practice or, on any such Tax Return, took any
position, made any election, or adopted any method that is inconsistent with
positions taken, elections made or methods used in preparing or filing similar
Tax Returns in prior periods; (xv) made any change in the accounting principles
and practices used by the Company from those applied in the preparation of the
Financial Statements; or (xvi) entered into or become committed to enter into
any other material transaction except in the ordinary course of business
consistent with past practice. (d) Except as set forth in Section 3.6(d) of the
Company Letter, neither the Company nor any of its Subsidiaries is subject to
any liability (including, without limitation, unasserted claims), whether
absolute, contingent, accrued or otherwise, which is not shown or which is in
excess of amounts shown or reserved for in the Balance Sheet, other than
liabilities of the same nature as those set forth in the Balance Sheet and the
<PAGE>
notes thereto and reasonably incurred in the ordinary course of its business
consistent with past practice after the Balance Sheet Date or which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company. (e) For purposes of this Agreement, "Knowledge of the Company"
means the actual knowledge of the individuals identified in Section 3.6(e) of
the Company Letter.
Section 3.7 Governmental Permits. Each of the Company and its Subsidiaries
owns, holds or possesses all licenses, franchises, permits, privileges,
immunities, approvals and other authorizations from Governmental Entities which
are necessary to entitle the Company or any of its Subsidiaries to own, lease or
possess, and operate and use its assets and to carry on and conduct its business
substantially as currently conducted (herein collectively called the "Company
Permits"), except where the failure to be in possession of any of the Company
Permits would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. Complete and correct copies of all of the material
Company Permits have been made available to Parent. Each of the Company and its
Subsidiaries has substantially fulfilled and performed its obligations under
each of the Company Permits as of the date hereof and no suspension or
cancellation of any of the Company Permits is pending or, to the Knowledge of
the Company, threatened and each of the material Company Permits is valid,
subsisting and in full force and effect, except where the failure of any such
Company Permit to be in full force and effect would not, individually or in the
aggregate, have a Material Adverse Effect on the Company and will continue in
full force and effect after the Effective Time, in each case without (x) the
occurrence of any breach, default or forfeiture of rights thereunder, or (y) the
consent, approval, or act of, or the making of any filing with, any Governmental
Entity.
Section 3.8 Tax Matters. (a) Except as otherwise set forth in Section
3.8(a) of the Company Letter, (i) the Company and each of its Subsidiaries have
filed all federal, and all material state, local and foreign, Tax Returns
required to have been filed or appropriate extensions therefor have been
properly obtained, and such Tax Returns are correct and complete, except to the
extent that any failure to so file or any failure to be correct and complete
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company; (ii) all Taxes shown to be due on such Tax Returns have been timely
paid or extensions for payment have been properly obtained, except to the extent
that any failure to so pay or so obtain such an extension would not,
individually or in the aggregate, have a Material Adverse Effect on the Company;
<PAGE>
(iii) the Company and each of its Subsidiaries have complied in all respects
with all rules and regulations relating to the withholding of Taxes except to
the extent that any failure to comply with such rules and regulations would not,
individually or in the aggregate, have a Material Adverse Effect on the Company;
(iv) all Tax Returns referred to in clause (i) have been examined by the
Internal Revenue Service ("IRS") or the period for assessment of the Taxes in
respect of which such Tax Returns were required to be filed has expired; (v) no
material issues that have been raised in writing by the relevant taxing
authority in connection with the examination of the Tax Returns referred to in
clause (i) are currently pending; (vi) all deficiencies asserted or assessments
made as a result of any examination of such Tax Returns by any taxing authority
have been paid in full or are being timely and properly contested; (vii) no
withholding is required under Section 1445 of the Code in connection with the
Merger; (viii) neither the Company nor any of its Subsidiaries is a party to any
tax allocation or sharing agreement and neither the Company nor any of its
Subsidiaries has been a member of an affiliated group filing a consolidated
federal income tax return (other than a group the common parent of which was the
Company) or has any material liability for Taxes of any Person (other than the
Company and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign law) as a transferee or successor
or by contract or otherwise; (ix) there are no liens for Taxes upon the assets
of the Company or any of its Subsidiaries except liens relating to current Taxes
not yet due; and (x) none of the Company or any of its Subsidiaries has waived
or been requested to waive any statute of limitations in respect of Taxes, which
waiver or request is currently in effect. (b) Except as otherwise set forth in
Section 3.8(b) of the Company Letter, as a result of the transactions
contemplated by this Agreement, none of the Company, any Subsidiary of the
Company, or Parent has made, or will be obligated to make, a payment to an
individual that would be an "excess parachute payment" to a "disqualified
individual" as those terms are defined in Section 280G of the Code, without
regard to whether such payment is reasonable compensation for personal services
performed or to be performed in the future. (c) None of the Company, any
predecessor of the Company or any Subsidiary of the Company is (and none thereof
has ever been), a member of (i) any "affiliated group" (as defined in Section
1504(a) of the Code without regard to the limitations contained in Section
1504(b) of the Code) or (ii) any other group of corporations or entities which
files or has filed Tax Returns on a combined, consolidated or unitary basis.
Section 3.9 Actions and Proceedings. Except as set forth in Section 3.9 of
the Company Letter, there are no outstanding orders, judgments, injunctions,
<PAGE>
awards or decrees of any Governmental Entity or actions, suits, labor disputes
or other litigation or claims or legal, administrative or arbitration
proceedings or investigations pending or, to the Knowledge of the Company,
threatened against or involving the Company or any of its Subsidiaries, or
against or involving any of the present or former directors, officers, employees
or, to the Knowledge of the Company, consultants, agents or stockholders of the
Company or any of its Subsidiaries, as such, or any of its or their properties,
assets or business or any Company Plan (as hereinafter defined). The Company and
each of its Subsidiaries has complied in all material respects with all
Requirements of Laws which are applicable to the Company's assets or business.
There are no actions, suits, labor disputes or other litigation, legal or
administrative proceedings or governmental investigations pending or, to the
Knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries or any of its or their present or former officers, directors,
employees, or, to the Knowledge of the Company, consultants, agents or
stockholders, as such, or any of its or their properties, assets or business
relating to the transactions contemplated by this Agreement and the Company
Ancillary Agreements. For purposes of this Agreement, "Requirements of Laws"
means any foreign, federal, state and local laws, statutes, regulations, rules,
codes or ordinances enacted, adopted, issued or promulgated by any Governmental
Entity (including, without limitation, those pertaining to electrical, building,
zoning, environmental and occupational safety and health requirements) or common
law.
Section 3.10 Certain Agreements. Except as set forth in Section 3.10 of the
Company Letter, neither the Company nor any of its Subsidiaries is a party to
any oral or written agreement or plan, including any employment agreement,
severance agreement, stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan, any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement. Except as set forth in Section
3.10 of the Company Letter, no holder of any option or warrant to purchase
shares of Company Common Stock, or shares of Company Common Stock granted in
connection with the performance of services for the Company or its Subsidiaries,
is or will be entitled to receive cash from the Company or any Subsidiary in
lieu of or in exchange for such option, warrant or shares.
Section 3.11 ERISA. (a) Each Company Plan (as hereinafter defined) is
<PAGE>
listed in Section 3.11(a) of the Company Letter, true and complete copies of
which have heretofore been delivered to Parent. Except as set forth in Section
3.11(a) of the Company Letter, (i) each Company Plan complies in all material
respects with Title IV of ERISA, the Code and all other applicable statutes and
governmental rules and regulations, and (ii) no "reportable event" (within the
meaning of Section 4043 of ERISA) has occurred with respect to any Company Plan
for which the 30-day notice requirement to the PBGC has not been waived. Neither
the Company nor any of its ERISA Affiliates has within the five years preceding
the date hereof withdrawn from any Company Plan that is a defined benefit plan
qualified under Section 401(a) of the Code or any Company Multiemployer Plan (as
hereinafter defined) or instituted, or is currently considering taking, any
action to do so. No action has been taken, or is currently being considered, to
terminate any Company Plan subject to Title IV of ERISA. No Company Plan, nor
any trust created thereunder, has incurred any "accumulated funding deficiency"
(as defined in Section 302 of ERISA), whether or not waived. (b) Except as
listed in Section 3.11(b) of the Company Letter, with respect to the Company
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 its
ERISA Affiliates or Company Plan fiduciary could be subject to any material
liability under the terms of such Company Plans, ERISA, the Code or any other
applicable law, other than liabilities for benefits payable in the normal course
or premiums to the PBGC that are not yet due. All Company Plans that are
intended to be qualified under Section 401(a) of the Code have been determined
by the IRS to be so qualified or, if no such determination has been made, all
such Company Plans qualify in form with Section 401(a) of the Code, and the
Company is not aware of any reason why any such Company Plan is not so qualified
in operation. Neither the Company nor any of its ERISA Affiliates has been
notified by any Company Multiemployer Plan that such Company Multiemployer Plan
is currently in reorganization or insolvency under and within the meaning of
Section 4241 or 4245 of ERISA or that such Company Multiemployer Plan intends to
terminate or has been terminated under Section 4041A of ERISA. Except as
disclosed in Section 3.11(b) of the Company Letter, neither the Company nor any
of its ERISA Affiliates has any liability or obligation under any welfare plan
to provide benefits after termination of employment to any employee or dependent
other than as required by Section 4980B of the Code. (c) As used herein, (i)
"Company Plan" means a "pension plan" (as defined in Section 3(2) of ERISA
(other than a Company Multiemployer Plan)), a "welfare plan" (as defined in
Section 3(1) of ERISA), or any bonus, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, holiday pay, vacation, severance, death benefit, sick leave, fringe
<PAGE>
benefit, insurance or other plan, arrangement or understanding, in each case
established or maintained by the Company or any of its ERISA Affiliates or as to
which the Company or any of its ERISA Affiliates has contributed or otherwise
may have any liability, and (ii) "Company Multiemployer Plan" means a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) to which the
Company or any of its ERISA Affiliates is or has been obligated to contribute
within the five years preceding the date hereof or otherwise may have any
liability. (d) Section 3.11(d) of the Company Letter contains a list, and the
Company has heretofore provided to Parent a true and complete copy, of all (i)
severance, employment and consulting agreements with employees and consultants
of the Company and each of its ERISA Affiliates and (ii) severance programs and
policies of the Company and each of its ERISA Affiliates with or relating to its
employees.
Section 3.12 Worker Safety and Environmental Laws. The properties, assets
and past and present operations of the Company and its Subsidiaries have been
and are in all material respects in compliance with all applicable federal,
state, local and foreign laws, rules and regulations, orders, decrees,
judgments, permits and licenses relating to public and worker health and safety
(collectively, "Worker Safety Laws") and the protection and clean-up of the
environment and activities or conditions related thereto, including, without
limitation, those relating to the generation, handling, disposal, transportation
or release of hazardous materials (collectively, "Environmental Laws"), except
as would not, individually or in the aggregate, have a Material Adverse Effect
on the Company.
Section 3.13 Labor Matters. The Company has complied in all material
respects with all applicable laws, rules and regulations which relate to prices,
wages, hours, discrimination in employment and collective bargaining and to the
operation of its business and is not liable for any arrears of wages or any
withholding taxes or penalties for failure to comply with any of the foregoing,
except as would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. Neither the Company nor any of its Subsidiaries is a
party to any collective bargaining agreement or labor contract. Neither the
Company nor any of its Subsidiaries has engaged in any unfair labor practice
with respect to any Persons employed by or otherwise performing services
primarily for the Company or any of its Subsidiaries (the "Company Business
Personnel"), and there is no unfair labor practice complaint or grievance
against the Company or any of its Subsidiaries by the National Labor Relations
Board or any comparable state agency pending or threatened in writing with
<PAGE>
respect to the Company Business Personnel. There is no labor strike, dispute,
slowdown or stoppage pending or, to the Knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries which may interfere
with the respective business activities of the Company or any of its
Subsidiaries.
Section 3.14 Intellectual Property; Software. (a) For purposes of this
Agreement, the term "Intellectual Property" means the intellectual property
owned by, licensed to, or used by the Company or any Subsidiary of the Company
that relate to either the Company's or such Subsidiary's business, including
without limitation: (i) all United States and foreign patents, patent
applications, continuations, continuations-in-part, divisions, reissues, patent
disclosures, inventions (whether or not patentable) or improvements thereto
("Patent Rights"); (ii) all United States, state and foreign trademarks, service
marks, logos, trade dress and trade names (including all assumed or fictitious
names under which the Company or any Subsidiary of the Company is conducting its
business or has within the previous five years conducted its business), and any
other source-identifying designations or devices, including any combinations and
variations thereof, and associated goodwill, whether registered or unregistered,
and pending applications to register the foregoing ("Trademarks"); (iii) all
United States and foreign copyrights, whether registered or unregistered, and
pending applications to register the same ("Copyrights"); (iv) all Internet
domain names and registrations thereof ("Domain Names"); and (v) all
confidential ideas, trade secrets, computer software, including source code,
know-how, works-in-progress, concepts, methods, processes, inventions, invention
disclosures, formulae, reports, data, customer lists, mailing lists, business
plans, or other proprietary information ("Trade Secrets"). Section 3.14(a) of
the Company Letter sets forth all Patent Rights, Trademarks, Copyrights and
Domain Names owned by, licensed to, or used by the Company or any Subsidiary of
the Company that are material to the conduct of the Company's or such
Subsidiary's business as presently conducted. (b) For purposes of this
Agreement, the term "Software" means computer software programs and software
systems, including, without limitation, all databases, compilations, tool sets,
compilers, higher level or proprietary languages, related documentation and
materials, whether in source code, object code or human readable form, owned by,
licensed to, or used by the Company or any Subsidiary of the Company that are
material to the conduct of the Company's or such Subsidiary's business as
presently conducted. Section 3.14(b) of the Company Letter sets forth such
Software. (c) Section 3.14(c) of the Company Letter contains a list and
description of all agreements, commitments, contracts, understandings, licenses,
<PAGE>
sublicenses, assignments and indemnities which relate or pertain to any
Intellectual Property or Software and are material to the conduct of the Company
or any Subsidiary's business as currently conducted, to which the Company or any
Subsidiary is a party, showing in each case the parties thereto. (d) Except as
disclosed in Section 3.14(d) of the Company Letter, and except with respect to
software licensed to the Company that is subject to "shrink-wrap" license
agreements, either the Company or a Subsidiary of the Company has, through
ownership or licensing, all perpetual, unrestricted and royalty-free rights to
use the Intellectual Property as are material to the conduct of the business of
the Company and its Subsidiaries, taken as a whole. (e) Except as disclosed in
Section 3.14(e) of the Company Letter, neither the Company nor any Subsidiary of
the Company is in breach of or is aware of any allegation (communicated orally
or in writing) that the Company or any Subsidiary of the Company is in breach of
any material provision of any material agreement, commitment, contract,
understanding, license, sublicense, assignment or indemnity which relates to any
of the Intellectual Property or Software and the Company has not taken any
action which would impair or otherwise materially adversely affect its rights in
any of the Intellectual Property or Software. The transactions contemplated by
this Agreement and the Company Ancillary Agreements shall have no material
adverse effect on the validity and enforceability of any of the Intellectual
Property, Software or materials identified in Sections 3.14(a) and (b) of the
Company Letter, and, except as disclosed in Section 3.14(e) of the Company
Letter, the right, title and interest thereto of the Company or any Subsidiary
of the Company immediately after the Effective Time shall be identical to that
of the Company or such Subsidiary immediately prior to the Effective Time. (f)
Section 3.14(a) of the Company Letter includes a complete list of all issued
patents, pending patent applications, trademark registrations, pending trademark
registration applications, registered copyrights and pending copyright
registration applications owned by the Company or any Subsidiary (collectively,
the "Registered Intellectual Property"). Except as disclosed in Section 3.14(a)
of the Company Letter: (i) the Registered Intellectual Property has not been
sold, assigned or transferred to a third party, or abandoned or permitted to
lapse, and is not the subject of any pending opposition proceedings, office
actions, pending cancellation proceedings, pending interference proceedings,
pending lawsuit naming the Company or any Subsidiary as a party, or other
pending challenges or proceedings of which the Company or any Subsidiary has
knowledge; (ii) all registrations for Intellectual Property identified as being
owned by the Company are valid and in force, and all applications to register
any unregistered Intellectual Property are pending and in good standing, all
without challenge of any kind; (iii) the Intellectual Property owned by the
<PAGE>
Company is valid and enforceable; and (iv) each of the Company and its
Subsidiaries has the sole and exclusive right to bring actions for infringement
or unauthorized use of the Intellectual Property and Software owned by the
Company and such Subsidiaries, and to the Knowledge of the Company, there is no
basis for any such action. (g) Except as disclosed in Section 3.14(g) of the
Company Letter, each of the employees, agents, consultants, contractors or
others who have contributed to or participated in the discovery, creation or
development of any Intellectual Property on behalf of the Company or its
Subsidiaries: (i) has executed an assignment or an agreement to assign to the
Company of all right, title and interest in such Intellectual Property; (ii) is
a party to a valid "work-for-hire" agreement under which the Company or any
Subsidiary is deemed to be the original owner/author of all copyrightable
subject matter included in such Intellectual Property; or (iii) is otherwise
deemed by operation of law to have vested in the Company or any Subsidiary all
right, title and interest in such Intellectual Property by virtue of his
employment relationship with the Company or any such Subsidiary. (h) Except as
disclosed in Section 3.14(h) of the Company Letter, to the Knowledge of the
Company, no infringement of any copyright, trademark, service mark, trade name,
patent, patent right, or trade secret or other property right of any third
Person has occurred or results in any way, no claim of any such infringement has
been made or asserted against the Company or any Subsidiary of the Company, and
neither the Company nor any Subsidiary has had notice of, nor to the Knowledge
of the Company, does any basis for such a claim exist, in connection with the
operations, products (including software, equipment, machinery or other
devices), processes, methods or activities of the business of the Company or any
Subsidiary of the Company as presently conducted. (i) Except as disclosed in
Section 3.14(i) of the Company Letter, neither the Company nor any Subsidiary of
the Company, nor their respective employees or agents, have taken any of the
following actions such that a Material Adverse Effect on its rights in the
Intellectual Property or Software would result: disclosing or providing access
to source code for the Software except to employees of the Company or its
Subsidiaries bound by confidentiality obligations to the Company or its
Subsidiaries, or to third party consultants bound by confidentiality agreements;
disclosing any Trade Secrets without an appropriate non-disclosure agreement;
providing access to the Software without restrictions on use (including against
copying, sale, transfer, decompilation, disassembly or reverse-engineering); or
embedding, incorporating or modifying third-party software or other material
without adequate permission. (j) Except as disclosed in Section 3.14(j) of the
Company Letter: (i) the Software is not subject to any transfer, assignment,
site, equipment, or other operational limitations; (ii) the Company has
<PAGE>
maintained and protected the Software it owns (the "Owned Software") (including,
without limitation, all source code and system specifications) with appropriate
proprietary notices (including, without limitation, the notice of copyright in
accordance with the requirements of 17 U.S.C. Sec. 401), confidentiality and
non-disclosure agreements and such other measures as are necessary to protect
the proprietary, trade secret or confidential information contained therein;
(iii) the Owned Software has been registered or is eligible for protection and
registration under applicable copyright law and has not been forfeited to the
public domain; (iv) the Company has copies of all releases or separate versions
of the Owned Software so that the same may be subject to registration in the
United States Copyright Office; (v) the Company has complete and exclusive
right, title and interest in and to the Owned Software; (vi) to the Knowledge of
the Company, the Owned Software does not infringe any copyright, trademark,
service mark, trade name, patent, patent right, trade secret or other property
right of any other Person; (vii) any Owned Software includes the source code,
system documentation, statements of principles of operation and schematics, as
well as any pertinent commentary, explanation, program (including compilers),
workbenches, tools, and higher level or proprietary language used for the
development, maintenance, implementation and use thereof, so that a trained
computer programmer could develop, maintain, support, compile and use all
releases or separate versions of the same that are currently subject to
maintenance obligations by the Company; (viii) there are no agreements or
arrangements in effect with respect to the marketing, distribution, licensing or
promotion of the Owned Software by any other Person; (ix) the Owned Software
complies with all applicable Requirements of Laws relating to the export or
reexport of the same; and (x) to the Knowledge of the Company, the Owned
Software licensed to third parties in the ordinary course of the Company's
business may be exported or reexported to all countries without the necessity of
any license, other than to those countries specified as prohibited destinations
pursuant to applicable regulations of the U.S. Department of Commerce and/or the
United States State Department.
Section 3.15 Availability of Assets and Legality of Use. Except as set
forth in Section 3.15 of the Company Letter, the assets owned or leased by the
Company and its Subsidiaries constitute all the assets used in its business
(including, but not limited to, all books, records, computers and computer
programs and data processing systems) and are in good condition (subject to
normal wear and tear and immaterial impairments of value and damage) and
serviceable condition and are generally suitable for the uses for which
intended. Except as set forth in Section 3.15 of the Company Letter, there are
<PAGE>
no material services provided by any of the stockholders of the Company or any
of their Affiliates to the Company or any Subsidiary of the Company utilizing
either (i) assets not owned by the Company or its Subsidiaries as of the
Effective Time or (ii) Persons not employed by the Company or its Subsidiaries.
For purposes of this Agreement, "Affiliate" means, with respect to any Person,
any other Person which directly or indirectly controls, is controlled by or is
under common control with such Person. For purposes of this Agreement, "Person"
means any individual, corporation, partnership, joint venture, association,
joint-stock company, trust or unincorporated organization.
Section 3.16 Real Property. Neither the Company nor any of its Subsidiaries
owns any real property or holds any option to acquire any real property.
Section 3.17 Real Property Leases. Section 3.17 of the Company Letter sets
forth a list of each lease or similar agreement (the "Real Property Leases")
under which the Company or any Subsidiary of the Company is lessee of, or holds
or operates, any real property owned by any third Person (the "Leased Real
Property") as of the date hereof. Except as set forth in Section 3.17 of the
Company Letter each of the Company and its Subsidiaries has the right to quiet
enjoyment of all the real property described in such Schedule of which it is the
lessee for the full term of each such lease or similar agreement (and any
related renewal option) relating thereto, and the leasehold or other interest of
the Company or any Subsidiary in such real property is not subject or
subordinate to any Encumbrance except for Permitted Encumbrances and except for
such Encumbrances as would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. Complete and correct copies of the Real
Property Leases have been made available by the Company to Parent.
Section 3.18 Personal Property Leases. Section 3.18 of the Company Letter
sets forth a list of each lease or other agreement or right, whether written or
oral, under which the Company or any Subsidiary of the Company is lessee of, or
holds or operates, any machinery, equipment, vehicle or other tangible personal
property owned by a third Person, except for any such lease, agreement or right
that is terminable by the Company or any Subsidiary of the Company without
penalty or payment on notice of 30 days or less, or which involves the payment
by the Company or any Subsidiary of the Company of rentals of less than $100,000
per year.
Section 3.19 Title to Assets. Each of the Company and its Subsidiaries has
good title to all of its assets reflected on the Balance Sheet as being owned by
<PAGE>
it and all of the assets thereafter acquired by it (except to the extent that
such assets have been disposed of after the Balance Sheet Date in the ordinary
course of business consistent with past practice), free and clear of all
Encumbrances, except for Permitted Encumbrances and except as set forth in
Section 3.19 of the Company Letter.
Section 3.20 Contracts. Except as set forth in Section 3.20 of the Company
Letter, and except for those contracts expressly permitted by Section 4.1 which
are entered into after the date of this Agreement, neither the Company nor any
Subsidiary of the Company is a party to or bound by: (i) any contract for the
purchase, sale or lease of real property other than the Real Property Leases;
(ii) any contract for the purchase of raw materials, other than in the ordinary
course of business; (iii) any contract for the sale of goods or services, other
than in the ordinary course of business; (iv) any contracts relating to the
marketing, distribution or manufacturing of products, services, processes or
technology individually involving more than $50,000; (v) any contract for the
purchase, licensing or development of software to be used by the Company or any
Subsidiary of the Company individually involving more than $50,000, other than
software licensed to the Company that is subject to "shrink-wrap" license
agreements; (vi) any guarantee of the obligations or liabilities of customers,
suppliers, officers, directors, employees, Affiliates of the Company or its
Subsidiaries, or any other Persons other than guarantees that are immaterial in
amount; (vii) any agreement which provides for, or relates to, the incurrence by
the Company or any Subsidiary of the Company of debt for borrowed money or the
extension of credit by the Company or any Subsidiary of the Company to any other
Person other than routine extensions of trade credit in the ordinary course of
business; (viii) any agreement or understanding with a third Person that
restricts the Company or any Subsidiary from carrying on its business anywhere
in the world; (ix) any contract which provides for, or relates to, any
non