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Sample Business ContractsHome: Sample Business Contracts:
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND BETWEEN
C-CUBE MICROSYSTEMS INC.
AND
HARMONIC INC.
DATED AS OF DECEMBER 9, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I. THE MERGER........................................................ A-1
SECTION 1.1 The Merger.................................................. A-1
SECTION 1.2 Effect on Common Stock...................................... A-2
SECTION 1.3 Exchange of Certificates.................................... A-3
SECTION 1.4 Stock Options............................................... A-4
SECTION 1.5 Disposition of the Semiconductor Business................... A-5
SECTION 1.6 Lost Certificates........................................... A-6
SECTION 1.7 Merger Closing.............................................. A-6
SECTION 1.8 Possible Alternative Structure.............................. A-6
ARTICLE II. THE SURVIVING CORPORATION........................................ A-7
SECTION 2.1 Certificate of Incorporation................................ A-7
SECTION 2.2 By-Laws..................................................... A-7
SECTION 2.3 Officers and Directors...................................... A-7
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... A-7
SECTION 3.1 Corporate Existence and Power............................... A-7
SECTION 3.2 Corporate Authorization..................................... A-8
SECTION 3.3 Consents and Approvals; No Violations....................... A-8
SECTION 3.4 Capitalization.............................................. A-9
SECTION 3.5 Subsidiaries................................................ A-9
SECTION 3.6 SEC Documents............................................... A-9
SECTION 3.7 Financial Statements........................................ A-10
SECTION 3.8 Absence of Undisclosed Liabilities.......................... A-10
SECTION 3.9 Joint Proxy Statement; Form S-4............................. A-10
SECTION 3.10 Absence of Material Adverse Changes, Etc.................... A-11
SECTION 3.11 Taxes....................................................... A-11
SECTION 3.12 Employee Benefit Plans...................................... A-12
SECTION 3.13 Litigation; Compliance with Laws............................ A-14
SECTION 3.14 Labor Matters............................................... A-14
SECTION 3.15 Certain Contracts and Arrangements.......................... A-15
SECTION 3.16 Environmental Matters....................................... A-15
SECTION 3.17 Intellectual Property....................................... A-16
SECTION 3.18 Opinion of Financial Advisor................................ A-17
SECTION 3.19 Board Recommendation........................................ A-17
SECTION 3.20 Tax Treatment............................................... A-17
SECTION 3.21 Finders' Fees............................................... A-17
SECTION 3.22 Section 203 of the Delaware General Corporation Law......... A-17
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT......................... A-17
SECTION 4.1 Corporate Existence and Power............................... A-18
SECTION 4.2 Authorization............................................... A-18
SECTION 4.3 Consents and Approvals; No Violations....................... A-18
SECTION 4.4 Capitalization.............................................. A-19
SECTION 4.5 Subsidiaries................................................ A-19
i
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PAGE
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SECTION 4.6 SEC Documents............................................... A-19
SECTION 4.7 Financial Statements........................................ A-20
SECTION 4.8 Absence of Undisclosed Liabilities.......................... A-20
SECTION 4.9 Proxy Statement; Form S-4................................... A-20
SECTION 4.10 Absence of Material Adverse Changes, Etc.................... A-20
SECTION 4.11 Taxes....................................................... A-21
SECTION 4.12 Employee Benefit Plans...................................... A-21
SECTION 4.13 Litigation; Compliance with Laws............................ A-23
SECTION 4.14 Labor Matters............................................... A-23
SECTION 4.15 Certain Contracts and Arrangements.......................... A-23
SECTION 4.16 Environmental Matters....................................... A-24
SECTION 4.17 Intellectual Property....................................... A-24
SECTION 4.18 Opinion of Financial Advisor................................ A-25
SECTION 4.19 Board Recommendation........................................ A-25
SECTION 4.20 Tax Treatment............................................... A-25
SECTION 4.21 Finders' Fees............................................... A-25
SECTION 4.22 Section 203 of the Delaware General Corporation Law......... A-25
ARTICLE V. COVENANTS OF THE PARTIES.......................................... A-25
SECTION 5.1 Conduct of the Business of the Company...................... A-25
SECTION 5.2 Conduct of the Business of Parent........................... A-26
SECTION 5.3 Stockholders' Meetings; Proxy Material...................... A-26
SECTION 5.4 Access to Information; Confidentiality Agreement............ A-27
SECTION 5.5 No Solicitation............................................. A-27
SECTION 5.6 Director and Officer Liability.............................. A-28
SECTION 5.7 Commercially Reasonable Efforts............................. A-28
SECTION 5.8 Certain Filings............................................. A-28
SECTION 5.9 Comfort Letters............................................. A-29
SECTION 5.10 Public Announcements........................................ A-29
SECTION 5.11 Further Assurances.......................................... A-30
SECTION 5.12 Employee Matters............................................ A-30
SECTION 5.13 Tax-Free Reorganization Treatment........................... A-30
SECTION 5.14 Blue Sky Permits............................................ A-30
SECTION 5.15 Listing..................................................... A-30
SECTION 5.16 State Takeover Laws......................................... A-30
SECTION 5.17 Certain Notifications....................................... A-30
SECTION 5.18 Affiliate Letters........................................... A-30
SECTION 5.19 Disposition of Semiconductor Business....................... A-31
SECTION 5.20 Supply, License and Development Agreement................... A-31
SECTION 5.21 Transitional Services Agreement............................. A-31
ii
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PAGE
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ARTICLE VI. CONDITIONS TO THE MERGER......................................... A-31
SECTION 6.1 Conditions to Each Party's Obligations...................... A-31
SECTION 6.2 Conditions to the Company's Obligation to Consummate the
Merger...................................................... A-32
SECTION 6.3 Conditions to Parent's Obligations to Consummate the
Merger...................................................... A-32
ARTICLE VII. TERMINATION..................................................... A-33
SECTION 7.1 Termination................................................. A-33
SECTION 7.2 Effect of Termination....................................... A-34
SECTION 7.3 Fees........................................................ A-34
ARTICLE VIII. MISCELLANEOUS.................................................. A-35
SECTION 8.1 Notices..................................................... A-35
SECTION 8.2 Survival of Representations and Warranties.................. A-35
SECTION 8.3 Interpretation.............................................. A-35
SECTION 8.4 Amendments, Modification and Waiver......................... A-36
SECTION 8.5 Successors and Assigns...................................... A-36
SECTION 8.6 Specific Performance........................................ A-36
SECTION 8.7 Governing Law............................................... A-36
SECTION 8.8 Severability................................................ A-36
SECTION 8.9 Third Party Beneficiaries................................... A-36
SECTION 8.10 Entire Agreement............................................ A-36
SECTION 8.11 Counterparts; Effectiveness................................. A-36
EXHIBITS
A Form of Certificate of Merger
B Form of Affiliate Agreement
C Form of Supply, License and Development Agreement
iii
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated
as of December 9, 1999 (this "AGREEMENT"), by and between C-Cube Microsystems
Inc., a Delaware corporation (the "COMPANY"), and Harmonic Inc., a Delaware
corporation ("PARENT").
WITNESSETH
WHEREAS, the respective Boards of Directors of Parent and the Company have
each (i) determined that the Merger (as defined in Section 1.1(a) hereof) is
advisable and fair to, and in the best interests of, their respective
stockholders and (ii) approved this Agreement and the Merger upon the terms and
subject to the conditions set forth herein, and in accordance with the Delaware
General Corporation Law (the "DGCL"), whereby each issued and outstanding share
of common stock, par value $.001 per share (the "COMMON STOCK"), of the Company
(other than shares of Common Stock owned, directly or indirectly, by the Company
or by Parent immediately prior to the Effective Time (as defined in Section
1.1(b) hereof) and Dissenting Shares (as defined in Section 1.2(c) hereof),
will, upon the terms and subject to the conditions and limitations set forth
herein, be converted into shares of Common Stock, par value $.001 per share, of
Parent (the "PARENT SHARES") and, if the Semi Sale (as defined in Section 1.5(a)
hereof) has been consummated, the Semi Sale Consideration (as defined in Section
1.5(b)) in accordance with the provisions of Article I of this Agreement;
WHEREAS, for federal income tax purposes, the Merger is intended to qualify
as a reorganization under the provisions of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "CODE"); and
WHEREAS, the parties wish to amend and restate that certain Agreement and
Plan of Merger and Reorganization, dated as of October 27, 1999 by and between
the Company and Parent.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants, agreements and conditions set forth herein, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger.
(a) Upon the terms and subject to the conditions of this Agreement, and in
accordance with the DGCL, at the Effective Time, the Company shall be merged
(the "MERGER") with and into Parent, whereupon the separate existence of the
Company shall cease, and Parent shall continue as the surviving corporation
(sometimes referred to herein as the "SURVIVING CORPORATION") and shall continue
to be governed by the laws of the State of Delaware and shall continue under the
name "Harmonic Inc."
(b) Concurrently with the Closing (as defined in Section 1.7 hereof), the
Company and Parent shall cause a certificate of merger substantially in the form
attached hereto as Exhibit A (the "CERTIFICATE OF MERGER") with respect to the
Merger to be executed and filed with the Secretary of State of the State of
Delaware (the "SECRETARY OF STATE") as provided in the DGCL. The Merger shall
become effective on the date and time at which the Certificate of Merger has
been duly filed with the Secretary of State of the State of Delaware in
accordance with Section 251 of the DGCL or at such other date and time as is
agreed between the parties and specified in the Certificate of Merger, and such
date and time is hereinafter referred to as the "EFFECTIVE TIME."
(c) The Merger shall have the effects set forth in the DGCL. Without
limiting the generality of the foregoing and subject thereto, from and after the
Effective Time, the Surviving Corporation shall possess all properties, rights,
privileges, immunities, powers and franchises and be subject to all of the
obligations, restrictions, disabilities, liabilities, debts and duties of the
Company and Parent.
A-1
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SECTION 1.2 Effect on Common Stock. At the Effective Time:
(a) Cancellation of Shares of Common Stock. Each share of Common Stock held
by the Company as treasury stock and each share of Common Stock owned by Parent
immediately prior to the Effective Time shall automatically be cancelled and
retired and cease to exist, and no consideration or payment shall be delivered
therefor or in respect thereto. All shares of Common Stock to be converted into
Merger Consideration pursuant to this Section 1.2 shall, by virtue of the Merger
and without any action on the part of the holders thereof, cease to be
outstanding, be cancelled and retired and cease to exist, and each holder of a
certificate (representing prior to the Effective Time any such shares of Common
Stock) shall thereafter cease to have any rights with respect to such shares of
Common Stock, except the right to receive (i) the Parent Shares into which such
shares of Common Stock have been converted, (ii) any dividend and other
distributions in accordance with Section 1.3(c) hereof, (iii) any cash, without
interest, to be paid in lieu of any fraction of a Parent Share in accordance
with Section 1.3(d) hereof and (iv) if the Semi Sale has been consummated, the
Semi Sale Consideration.
(b) Conversion of Shares of Common Stock. Subject to Section 1.3(d) hereof,
each share of Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares of Common Stock referred to in the first
sentence of Section 1.2(a) hereof and Dissenting Shares shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into (i) that number of Parent Shares equal to .5427 (provided, however, that
such number was calculated assuming that the Convertible Notes (as defined in
Section 1.5(b) hereof) all are converted prior to the Effective Time), and (ii)
if the Semi Sale (as defined in Section 1.5(a) below) has been consummated at or
prior to the Effective Time, the Semi Sale Consideration (collectively, the
"MERGER CONSIDERATION"); provided, however, in the event that clause (ii)
applies, to the extent that any portion of the Semi Sale Purchase Price is not
paid to the Company or any of its Subsidiaries upon the consummation of the Semi
Sale, then Parent shall only be obligated to pay to the stockholders of the
Company the portion of the Semi Sale Consideration attributable to such portion
of the Semi Sale Purchase Price ("DEFERRED SEMI SALE PURCHASE PRICE") if, as and
when paid by the purchaser of the Semi Business (the "SEMI PURCHASER") to
Parent, Company or any of its Subsidiaries (less any reserves established in
connection with the principles set forth in Schedule 1.5(a) hereto).
(c) Dissenting Shares. (i) Notwithstanding any provision of this Agreement
to the contrary, in the event of a Semi Sale, any shares of Company Common Stock
held by a holder who has demanded and perfected dissenters' rights for such
shares in accordance with the DGCL and who, as of the Effective Time, has not
effectively withdrawn or lost such dissenters' rights ("DISSENTING SHARES")
shall not be converted into or represent a right to receive Merger Consideration
pursuant to Section 1.2(b), but the holder thereof shall only be entitled to
such rights as are granted by the DGCL.
(ii) Notwithstanding the provisions of subsection (i) above, if any holder
of shares of Company Common Stock who demands purchase of such shares under the
DGCL shall effectively withdraw or lose (through failure to perfect or
otherwise) such holder's dissenters' rights, then, as of the later of (A) the
Effective Time or (B) the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive Merger
Consideration as provided in Section 1.2(b), without interest thereon, upon
surrender of the certificate representing such shares.
(iii) The Company shall give Parent (A) prompt notice of its receipt of any
written demands for purchase of any shares of Company Common Stock, withdrawals
of such demands, and any other instruments relating to the Merger served
pursuant to the DGCL and received by the Company and (B) the opportunity to
participate in all negotiations and proceedings with respect to demands for
purchase of any shares of Company Common Stock under the DGCL. The Company shall
not, except with the prior written consent of Parent or as may be required under
applicable law, voluntarily make any payment with respect to any demands for the
purchase of Company Common Stock or offer to settle or settle any such demands.
(d) Convertible Notes. At the Effective Time, the holders of the
Convertible Notes then outstanding will become entitled thereafter to convert
such Convertible Notes into the kind and amount of Merger
A-2
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Consideration which they would have been entitled to receive in the Merger had
such Convertible Notes been converted into Common Stock immediately prior to the
Merger. At or prior to the Effective Time, Parent and the Company shall execute
any supplemental indenture required in connection with the Merger by the
indenture governing the Convertible Notes.
SECTION 1.3 Exchange of Certificates.
(a) Prior to the mailing of the Proxy Statement (as defined in Section
5.3(c) hereof) such bank, trust company, Person or Persons as shall be
designated by Parent and reasonably acceptable to the Company shall act as the
depositary and exchange agent for the delivery of the Merger Consideration in
exchange for shares of Common Stock (the "EXCHANGE AGENT") in connection with
the Merger. At or promptly following the Effective Time, Parent shall deposit,
or cause to be deposited, with the Exchange Agent the Merger Consideration for
the benefit of the holders of shares of Common Stock which are converted into
Merger Consideration pursuant to Section 1.2(b) hereof (together with cash as
required to (i) pay any dividends or distributions with respect thereto in
accordance with Section 1.3(c) hereof and (ii) make payments in lieu of
fractional Parent Shares, pursuant to Section 1.3(d) hereof, being hereinafter
referred to as the "EXCHANGE FUND")); provided, however, that Parent shall only
be obligated to so deposit Deferred Semi Sale Purchase Price if, as and when
paid by the Semi Purchaser. For purposes of this Agreement, "PERSON" means any
natural person, firm, individual, corporation, limited liability company,
partnership, association, joint venture, company, business trust, trust or any
other entity or organization, whether incorporated or unincorporated, including
a government or political subdivision or any agency or instrumentality thereof.
(b) As of or promptly following the Effective Time, the Surviving
Corporation shall cause the Exchange Agent to mail (and to make available for
collection by hand) to each holder of record of a certificate or certificates,
which immediately prior to the Effective Time represented outstanding shares of
Common Stock (other than Dissenting Shares) (the "CERTIFICATES"), (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and which shall be in the form and have such
other provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration into which the number of shares of Common Stock
previously represented by such Certificate shall have been converted pursuant to
this Agreement (which instructions shall provide that at the election of the
surrendering holder, Certificates may be surrendered, and the Merger
Consideration in exchange therefor collected, by hand delivery). Upon surrender
of a Certificate for cancellation to the Exchange Agent, together with a letter
of transmittal duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration for each share of Common Stock
formerly represented by such Certificate, to be mailed (or made available for
collection by hand if so elected by the surrendering holder) within three
business days of receipt thereof (but in no case prior to the Effective Time),
and the Certificate so surrendered shall be forthwith cancelled. The Exchange
Agent shall accept such Certificates upon compliance with such reasonable terms
and conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. No interest shall be paid
or accrued for the benefit of holders of the Certificates on the cash payable
pursuant to subsections (c) and (d) below upon the surrender of the
Certificates.
(c) No dividends or other distributions with respect to Parent Shares with
a record date on or after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the Parent Shares represented thereby
by reason of the conversion of shares of Common Stock pursuant to Sections
1.2(b) hereof and no cash payment in lieu of fractional Parent Shares shall be
paid to any such holder pursuant to Section 1.3(d) hereof until such Certificate
is surrendered in accordance with this Article I. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid, without interest, to the Person in whose name the Parent Shares
representing such securities are registered (i) at the time of such surrender
the amount of any cash payable in lieu of fractional Parent Shares to which such
holder is entitled pursuant to Section 1.3(d) hereof and the proportionate
amount of
A-3
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dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to Parent Shares, and (ii) at the appropriate
payment date or as promptly as practicable thereafter, the proportionate amount
of dividends or other distributions with a record date after the Effective Time
but prior to such surrender and a payment date subsequent to such surrender
payable with respect to such Parent Shares.
(d) No fraction of a share of Parent Common Stock will be issued by virtue
of the Merger, but in lieu thereof each holder of shares of Parent Common Stock
who would otherwise be entitled to a fraction of a share of Parent Common Stock
(after aggregating all fractional shares of Parent Common Stock that otherwise
would be received by such holder) shall, upon surrender of such holder's
Certificate(s) receive from Parent an amount of cash (rounded to the nearest
whole cent), without interest, equal to the product of (i) such fraction,
multiplied by (ii) the average closing price of Parent Common Stock for the five
(5) trading days immediately preceding the last full trading day prior to the
Effective Time, as reported on the Nasdaq National Market System.
(e) Any portion of the Exchange Fund which remains undistributed to the
holders of the Certificates for one year after the Effective Time shall be
delivered to Parent, upon demand, and any holders of shares of Common Stock
prior to the Merger who have not theretofore complied with this Article I shall
thereafter look for payment of their claim, as general creditors thereof, only
to Parent for their claim for Parent Shares, any cash without interest, to be
paid, in lieu of any fractional Parent Shares and any dividends or other
distributions with respect to Parent Shares to which such holders may be
entitled.
(f) None of Parent, the Company or the Exchange Agent shall be liable to
any Person in respect of any Parent Shares held in the Exchange Fund (and any
cash, dividends and other distributions payable in respect thereof) delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificates shall not have been surrendered prior to one
year after the Effective Time (or immediately prior to such earlier date on
which (i) any Parent Shares, (ii) any cash in lieu of fractional Parent Shares
or (iii) any dividends or distributions with respect to Parent Shares in respect
of such Certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 3.3(b) hereof)), any such Parent
Shares, cash, dividends or distributions in respect of such Certificate shall,
to the extent permitted by applicable law, become the property of Parent, free
and clear of all claims or interest of any Person previously entitled thereto.
SECTION 1.4 Stock Options.
Each option granted to a Continuing Employee (as defined in Section 5.12(a)
hereof) to acquire a share of Common Stock, which is outstanding and unvested
immediately prior to the Effective Time ("OPTION"), shall become and represent
an option to purchase the Merger Consideration (a "SUBSTITUTE OPTION") at an
exercise price equal to the exercise price per share of Common Stock subject to
the Option immediately prior to the Effective Time; provided, however, that in
the case of an Option that is intended to qualify as an incentive stock option
under Section 422 of the Code, the conversion formula shall be adjusted (in lieu
of providing for any payment of cash) if necessary to conform with Section
424(a) of the Code. The parties acknowledge and agree that the number of Options
and the exercise price thereof will be adjusted in accordance with the terms
thereof upon consummation of a Semi Spin (as defined in Section 1.5(a)) so as to
preserve the option value as determined immediately prior to consummation of the
Semi Spin; provided, however, that in the case of an Option that is intended to
qualify as an incentive stock option under Section 422 of the Code, such
adjustments shall be made in a manner so that the Option shall continue to be
treated as an incentive stock option under Section 422 of the Code to the
greatest extent allowed by law. After the Effective Time, each Substitute Option
shall be exercisable upon the same terms and conditions as were applicable to
the related Option prior to the Effective Time subject to accelerated vesting if
and to the extent required by the applicable plans as of the date hereof. In the
event of any adjustment to the conversion ratio or exercise price of any Option,
such adjustments shall be made pursuant to the mutual agreement of Parent and
Company prior to the Effective Time. Parent shall take such corporate action as
may be necessary or appropriate to, at or prior to the Effective Time, file a
registration statement on Form S-8 (or any successor or other appropriate
A-4
<PAGE>
form) with respect to the Parent Shares subject to any Substitute Options to the
extent such registration is required under applicable law in order for such
Parent Shares to be sold without restriction in the United States, and Parent
shall maintain the effectiveness of such registration statement for so long as
such Substitute Options remain outstanding. Notwithstanding anything to the
contrary contained in this Agreement, the parties agree that (i) all options to
acquire shares of Common Stock that are held by Continuing Employees and that
are vested and outstanding immediately prior to the Effective Time shall be, to
the extent not exercised, cancelled as of the Effective Time, and (ii) all
options to acquire shares of Common Stock that are held by Persons who are not
Continuing Employees shall be exercised, converted into Semi (as defined in
Section 1.5(a)) or Semi Purchaser (as defined in Section 1.5(a)) options or
otherwise cancelled on or prior to the Effective Time.
SECTION 1.5 Disposition of the Semiconductor Business.
(a) It is a condition to each party's obligation to consummate the Merger
that, prior to the Effective Time, the Semiconductor Business (as defined below)
either be (i) transferred to the stockholders of the Company by transferring the
Semiconductor Business to a newly formed affiliate of the Company ("SEMI") and
distributing the ownership of Semi to the stockholders of the Company (such
transfer and distribution, the "SEMI SPIN") in a transaction that is treated as
immediately taxable in full to the Company for federal income tax purposes or
(ii) sold by the Company in its entirety (a "SEMI SALE" and, together with the
Semi Spin, a "SEMI DISPOSITION") to a purchaser (the "SEMI PURCHASER"). The
decision as to whether and under what terms to implement a Semi Spin or a Semi
Sale will be the Company's; provided, however, that Parent's consent shall be
required in connection with any material deviation from the terms and conditions
of a Semi Sale or a Semi Spin, as applicable, and the terms generally
applicable, set forth on Schedule 1.5(a). In the event the parties hereto
disagree as to whether or not the terms and conditions of a Semi Disposition
materially deviate from the terms and conditions set forth on Schedule 1.5(a) or
in the event the parties hereto disagree on the amount of cash to be reserved
for the Semi Sale Taxes (as defined in Section 1.5(b)), either party shall be
entitled to submit such dispute or disagreement for final and binding
determination to a mutually acceptable third-party arbitrator, such
determination to be made within ten (10) days of the submission to such
arbitrator by either party. If the parties are unable to mutually agree upon an
arbitrator within one week of a party's notification to the other party of its
desire to arbitrate such a dispute, then each party shall have one week to
select an arbitrator and such two arbitrators shall have one week to select a
third arbitrator who shall have final authority to resolve such dispute within
ten (10) days of such arbitrator's selection based upon the terms and conditions
set forth on Schedule 1.5(a). The parties shall share equally in the fees and
expenses of such arbitrators, and such fees and expenses shall be paid by the
parties prior to the Effective Time.
(b) The "Semiconductor Business" shall consist of the assets and
liabilities set forth on Schedule 1.5(b). The "SEMI SALE CONSIDERATION" shall
equal the quotient of (i) the Semi Sale Purchase Price less the sum of (A) all
expenses attributable to the sale of the Semiconductor Business and (B) the Semi
Sale Taxes and (ii) the sum of (a) the number of shares of Common Stock
outstanding immediately prior to consummation of the Semi Sale, (b) the number
of shares of Common Stock underlying options to purchase Common Stock that are
vested immediately prior to consummation of the Semi Sale ("VESTED OPTIONS"),
(c) the number of shares of Common Stock underlying Options not constituting
Vested Options that are issued to Continuing Employees, and (d) the number of
shares of Common Stock underlying the Company's 5 7/8% Convertible Subordinate
Notes ("CONVERTIBLE NOTES") outstanding immediately prior to the consummation of
the Semi Sale. The "SEMI SALE PURCHASE PRICE" shall equal the aggregate purchase
price for the Semiconductor Business payable to the Company or any of its
Subsidiaries in the Semi Sale, including any contingent consideration and any
consideration subject to escrow, holdback or indemnification provisions of the
Semi Sale, but excluding amounts payable with respect to, or reserved for
payment with respect to, options issued to employees of the Semiconductor
Business that are not vested as of the Effective Time. The "SEMI SALE TAXES"
shall equal the income and other Taxes (as defined in Section 3.11(b)) incurred
and to be incurred by Parent, the Company or any affiliates thereof in
connection with the Semi Sale and the distribution of the Semi Sale
Consideration pursuant to the Merger. For purposes of determining the amount of
the Semi Sale Taxes that are based on
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net income, there shall be deducted from the "amount realized" from the Semi
Sale (or corresponding amount as determined for state, local or foreign income
Tax purposes), without duplication, (i) the tax basis of the cash and other
assets recognized as assets of the Semiconductor Business pursuant to Schedules
1.5(a) and 1.5(b) (but only to the extent such cash and other assets are
transferred to the Semi Purchaser), (ii) capitalized expenses of the Company
that both reduce the income tax liability of the Company and are attributable to
the sale within the meaning of clause (i)(A) of the second sentence of this
Section 1.5(b), (iii) the amount of any deductions accrued on or prior to the
Closing Date attributable to the exercise of Company options after the date
hereof and on or prior to the Closing Date (provided that deductions that reduce
Semi Sale Taxes pursuant to this paragraph shall not also reduce other Company
taxable income, and assuming for the purposes of this subsection that a
"disqualifying disposition" occurs with respect to 80% of all Company options
that are "incentive stock options" under Section 422 of the Code that are
exercised on or prior to the Closing Date) and (iv) any other currently
deductible items of the Company attributable to the sale within the meaning of
clause (i)(A) of the second sentence of this Section 1.5(b). For purposes of
this paragraph, expenses related to the disposition of Semi incurred or accrued
by the end of the Closing Date shall not be treated as allocated to Semi's tax
period beginning on the day after Closing Date under Treas. Reg. Section
1.1502-76(b)(1)(ii)(B). The Company and Parent shall mutually determine the
amount of the Semi Sale Taxes prior to the Closing Date. If the Company and
Parent fail to reach an agreement within one (1) week prior to the scheduled
Closing Date, either party shall be entitled to submit the matter to a mutually
acceptable third-party arbitrator. If the parties are unable to mutually agree
upon an arbitrator within one (1) week of a party's notification to the other
party of its desire to arbitrate such a dispute, then each party shall have one
(1) week to select an arbitrator and such two arbitrators shall have ten (10)
days to select a third arbitrator who shall have final authority to resolve such
dispute within ten (10) days of such arbitrator's selection, but before the
Closing Date. The parties shall share equally in the fees and expenses of such
arbitrators, and such fees and expenses shall be paid by the parties prior to
the Effective Time.
SECTION 1.6 Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond, in such
reasonable amount as the Surviving Corporation may direct (but consistent with
past practice of the Company), as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Parent Shares to
which the holder thereof is entitled pursuant to this Article I.
SECTION 1.7 Merger Closing. Subject to the satisfaction or waiver of the
conditions set forth in Article VI hereof, the closing of the Merger (the
"CLOSING") will take place at 10:00 a.m., California time, on a date to be
specified by the parties hereto, and no later than the second business day after
the satisfaction or waiver of the conditions set forth in Article VI hereof that
are to be satisfied other than on the day of Closing, at the offices of Wilson
Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo
Alto, California, unless another time, date or place is agreed to in writing by
the parties hereto (such date, the "CLOSING DATE").
SECTION 1.8 Possible Alternative Structure. In the event that Parent or
the Company reasonably determines prior to the Effective Time that (i) there is
a material possibility that the transactions contemplated by this Agreement will
not constitute a "reorganization" within the meaning of Section 368(a) of the
Code, (ii) there is a material possibility that the Merger will result in a
material corporate level Tax, or (iii) there are material Tax benefits available
if the transactions contemplated by this Agreement are restructured, such party
may request that the structure of the acquisition of the Company contemplated by
this Agreement be altered in a manner so as to permit (i) the transactions
contemplated by this Agreement to qualify as a reorganization under Section 368
of the Code or a transfer under Section 351 of the Code, (ii) the avoidance of
such material corporate-level Tax, or (iii) the achievement of such Tax benefits
as applicable. In any case, corresponding changes to this Agreement shall be
made consistent with such structure but without any material adverse change in
the economic consequences to Parent, the Company or their respective
stockholders.
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ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1 Certificate of Incorporation. At the Effective Time, the
Certificate of Incorporation of Parent, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by law.
SECTION 2.2 By-Laws. The by-laws of Parent in effect at the Effective Time
shall be the by-laws of the Surviving Corporation until thereafter amended in
accordance with applicable law, the certificate of incorporation of such entity
and the by-laws of such entity.
SECTION 2.3 Officers and Directors.
(a) From and after the Effective Time, the officers of Parent at the
Effective Time shall be the officers of the Surviving Corporation, with the
following additions and exceptions: Tom Lookabaugh, until their respective
successors are duly elected or appointed and qualified in accordance with
applicable law.
(b) The Board of Directors of the Surviving Corporation effective as of,
and immediately following, the Effective Time shall consist of six (6) members
provided, further that the Board of Directors of Parent shall take all such
action as may be necessary to cause to be appointed to the Board of Directors of
the Surviving Corporation as of the Effective Time five (5) designees of Parent
and one (1) designee of the Company, each of whom shall be nominated from the
current directors of the Parent and the Company, designated in writing by the
parties prior to the mailing of the Proxy Statement (defined in Section 5.3(c)
hereof).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent, subject to such exceptions
as are specifically disclosed in writing in the disclosure letter supplied by
the Company to Parent, which disclosure shall provide an exception to or
otherwise qualify the representations or warranties of Company specifically
referred to in such disclosure and such other representations and warranties to
the extent such disclosure shall reasonably appear to be applicable to such
other representations or warranties (the "COMPANY DISCLOSURE SCHEDULE") as
follows:
SECTION 3.1 Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals (collectively, "LICENSES") required to
carry on its business as now conducted or presently proposed to be conducted
except for failures to have any such License which would not, in the aggregate,
have a Company Material Adverse Effect (as defined below). The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned, leased or operated
by it or the nature of its activities makes such qualification necessary, except
in such jurisdictions where failures to be so qualified would not reasonably be
expected to, in the aggregate, have a Company Material Adverse Effect. As used
herein, the term "COMPANY MATERIAL ADVERSE EFFECT" means a material adverse
effect on the financial condition, business, assets or results of operations of
the Company and its Subsidiaries, taken as a whole (assuming consummation of the
Semi Disposition), provided, however, that in no event shall any effect that
results from (a) the public announcement or pendency of the transactions
contemplated hereby or any actions taken in compliance with this Agreement, (b)
changes affecting the telecommunications equipment industry generally, (c)
changes affecting the United States economy generally, or (d) stockholders class
action litigation arising from allegations of a breach of fiduciary duty
relating to this Agreement, constitute a Company Material Adverse Effect. The
Company has heretofore made available to Parent true and complete copies of the
Certificate of Incorporation and the by-laws of the Company as currently in
effect.
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SECTION 3.2 Corporate Authorization.
(a) The Company has the requisite corporate power and authority to execute
and deliver this Agreement and, subject to approval of the Company's
stockholders, as set forth in Section 3.2(b) hereof and as contemplated by
Section 5.3 hereof, to perform its obligations hereunder. The execution and
delivery of this Agreement and the performance of its obligations hereunder have
been duly and validly authorized, and this Agreement has been approved, by the
Board of Directors of the Company and no other corporate proceedings, on the
part of the Company, other than the approval of the Company's stockholders, are
necessary to authorize the execution, delivery and performance of this
Agreement. This Agreement has been duly executed and delivered by the Company
and constitutes, assuming due authorization, execution and delivery of this
Agreement by Parent, a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
(b) Under applicable law, the Certificate of Incorporation and the rules of
the NASDAQ, the affirmative vote of the holders of a majority of the shares of
Common Stock outstanding on the record date, established by the Board of
Directors of the Company in accordance with the by-laws of the Company,
applicable law and this Agreement, is the vote required to approve the Merger,
adopt this Agreement and, if applicable, approve the Semi Sale.
SECTION 3.3 Consents and Approvals; No Violations.
(a) Neither the execution and delivery of this Agreement nor the
performance by the Company of its obligations hereunder will (i) conflict with
or result in any breach of any provision of the Certificate of Incorporation or
the by-laws of the Company; (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration or
obligation to repurchase, repay, redeem or acquire or any similar right or
obligation) under any of the terms, conditions or provisions of any note,
mortgage, letter of credit, other evidence of indebtedness, guarantee, license,
lease or agreement or similar instrument or obligation to which the Company or
any of its Subsidiaries is a party or by which any of them or any of their
assets may be bound or (iii) assuming that the filings, registrations,
notifications, authorizations, consents and approvals referred to in subsection
(b) below have been obtained or made, as the case may be, violate any order,
injunction, decree, statute, rule or regulation of any Governmental Entity to
which the Company or any of its Subsidiaries is subject, excluding from the
foregoing clauses (ii) and (iii) such requirements, defaults, breaches, rights
or violations that would not, in the aggregate, reasonably be expected to have a
Company Material Adverse Effect and would not have a material adverse effect on
the ability of the Company to perform its obligations hereunder.
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any government or any agency, court, tribunal,
commission, board, bureau, department, political subdivision or other
instrumentality of any government (including any regulatory or administrative
agency), whether federal, state, multinational (including, but not limited to,
the European Community), provincial, municipal, domestic or foreign (each, a
"GOVERNMENTAL ENTITY") is required in connection with the execution and delivery
of this Agreement by the Company or the performance by the Company of its
obligations hereunder, except (i) the filing of the Certificate of Merger in
accordance with the DGCL; (ii) compliance with any applicable requirements of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations thereunder (the "HSR ACT"), or any foreign laws regulating
competition, antitrust, investment or exchange controls; (iii) compliance with
any applicable requirements of the Securities Act of 1933, as amended, and the
rules and regulations thereunder (the "SECURITIES ACT") and the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder (the
"EXCHANGE ACT"); (iv) compliance with any applicable requirements of state blue
sky or takeover laws and (v) such other consents, approvals, orders,
authorizations, notifications, registrations, declarations and filings the
failure of which to be obtained or made would not, in the aggregate, reasonably
be expected to have a Company Material Adverse Effect and would not have a
material adverse effect on the ability of the Company to perform its obligations
hereunder.
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SECTION 3.4 Capitalization. The authorized capital stock of the Company
consists of 150,000,000 shares of Common Stock, par value $0.001 and 5,000,000
shares of preferred stock, par value $ 0.001 per share (the "PREFERRED STOCK").
As of September 30, 1999, there were (i) 40,476,647 shares of Common Stock
issued and outstanding and (ii) no shares of Preferred Stock issued and
outstanding. All shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable and were not
issued in violation of any preemptive rights. As of September 30, 1999, there
were outstanding options to purchase 14,475,268 shares of Common Stock. Except
as set forth in this Section 3.4, for the Convertible Notes and for changes
since September 30, 1999, resulting from the exercise of options outstanding on
such date, there are outstanding (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the Company or any Subsidiary
of the Company convertible into or exchangeable for shares of capital stock or
voting securities of the Company, (iii) no options, preemptive or other rights
to acquire from the Company or any of its Subsidiaries, and no obligation of the
Company to issue any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of the Company and
(iv) no equity equivalent interest in the ownership or earnings of the Company
or its Subsidiaries or other similar rights (the items in clauses (i), (ii),
(iii) and (iv) being referred to collectively as the "COMPANY SECURITIES").
There are no outstanding obligations of the Company or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any Company Securities. No Subsidiary
of the Company owns any capital stock or other voting securities of the Company.
SECTION 3.5 Subsidiaries.
(a) Each Subsidiary of the Company (each, a "COMPANY SUBSIDIARY") (i) is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, (ii) has all corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted and (iii) is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for failures of this
representation and warranty to be true which would not, in the aggregate, have a
Company Material Adverse Effect. For purposes of this Agreement, "SUBSIDIARY"
means with respect to any Person, any corporation or other legal entity of which
such Person owns, directly or indirectly, more than 50% of the outstanding stock
or other equity interests, the holders of which are entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity. All Company Subsidiaries and their respective
jurisdictions of incorporation are identified in Schedule 3.5 of the Company
Disclosure Schedule.
(b) All of the outstanding shares of capital stock of each Subsidiary of
the Company are duly authorized, validly issued, fully paid and nonassessable,
and such shares are owned by the Company or by a Subsidiary of the Company free
and clear of any Liens (as defined hereafter) or limitations on voting rights.
There are no subscriptions, options, warrants, calls, preemptive rights, rights,
convertible securities or other agreements or commitments of any character
relating to the issuance, transfer, sale, delivery, voting or redemption
(including any rights of conversion or exchange under any outstanding security
or other instrument) of any of the capital stock or other equity interests of
any of such Subsidiaries. There are no agreements requiring the Company or any
of its Subsidiaries to make contributions to the capital of, or lend or advance
funds to, any Subsidiaries of the Company. For purposes of this Agreement,
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset.
SECTION 3.6 SEC Documents. The Company has filed all required reports,
proxy statements, registration statements, forms and other documents with the
SEC since January 1, 1998 (the "COMPANY SEC DOCUMENTS"). As of their respective
dates, and giving effect to any amendments thereto, (a) the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the applicable rules
and regulations of the SEC promulgated thereunder and (b) none of the Company
SEC Documents contained any untrue statement of a material
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fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
SECTION 3.7 Financial Statements.
(a) The financial statements of the Company (including, in each case, any
notes and schedules thereto) included in the Company SEC Documents (a) were
prepared from the books and records of the Company and its Subsidiaries, (b)
comply as to form in all material respects with all applicable accounting
requirements and the rules and regulations of the SEC with respect thereto, (c)
are in conformity with United States generally accepted accounting principles
("GAAP"), applied on a consistent basis (except in the case of unaudited
statements, as permitted by the rules and regulations of the SEC) during the
periods involved and (d) fairly present, in all material respects, the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments which were not and are not
expected to be, individually or in the aggregate, material in amount).
(b) The unaudited financial statements of the Company (assuming
consummation of the Semi Disposition) for the nine-month period ended September
30, 1999 and attached to Schedule 3.7(b) of the Company Disclosure Schedule
(including any notes and schedules thereto) (a) were prepared from the books and
records of the Company and its Subsidiaries, (b) comply as to form in all
material respects with all applicable accounting requirements and the rules and
regulations of the SEC with respect thereto, (c) are in conformity with GAAP,
applied on a consistent basis (except as permitted by the rules and regulations
of the SEC) during the period involved and (d) fairly present, in all material
respects, the consolidated financial position of the Company and its
consolidated Subsidiaries (assuming consummation of the Semi Disposition) as of
the date thereof and the consolidated results of their operations and cash flows
for the period then ended (subject to normal year-end audit adjustments which
were not and are not expected to be, individually or in the aggregate, material
in amount).
SECTION 3.8 Absence of Undisclosed Liabilities. Except as set forth in the
Company SEC Documents filed through the date of this Agreement, and except for
liabilities and obligations incurred in the ordinary course of business since
the date of the most recent consolidated balance sheet included in the Company
SEC Documents, neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) except for those that would not, in the aggregate, reasonably be
expected to have a Company Material Adverse Effect.
SECTION 3.9 Joint Proxy Statement; Form S-4.
(a) None of the information contained in the Proxy Statement (and any
amendments thereof or supplements thereto) will at the time of the mailing of
the Proxy Statement to the stockholders of the Company or the stockholders of
Parent and at the time of the Special Meeting (as defined in Section 5.3(a)) or
the Parent Special Meeting (as defined in Section 5.3(b)), contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to statements made or omitted
in the Proxy Statement relating to Parent based on information supplied by
Parent for inclusion in the Proxy Statement. The Proxy Statement will comply as
to form in all material respects with the provisions of the Exchange Act and the
rules and regulations promulgated thereunder, except that no representation is
made by the Company with respect to the statements made or omitted in the Proxy
Statement relating to Parent based on information supplied by Parent for
inclusion in the Proxy Statement.
(b) None of the information supplied or to be supplied by the Company for
inclusion or incorporation by reference in the registration statement on Form
S-4 (and/or such other form as may be applicable and used) to be filed with the
SEC in connection with the issuance of Parent Shares by reason of the
transactions contemplated by this Agreement (such registration statement, as it
may be amended or supplemented, is herein referred to as the "FORM S-4") will,
with respect to information relating to the
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Company, at the time the Form S-4 is filed with the SEC, and at any time it is
amended or supplemented or at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
SECTION 3.10 Absence of Material Adverse Changes, Etc. Since June 30,
1999, there has not been a Company Material Adverse Effect. Without limiting the
foregoing, except as disclosed in the Company SEC Documents filed by the Company
through the date hereof or as contemplated by this Agreement, since June 30,
1999, (i) the Company and its Subsidiaries have conducted their business in the
ordinary course of business and (ii) there has not been:
(a) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or
any repurchase, redemption or other acquisition by the Company or any
Subsidiary (other than any wholly-owned Subsidiary) of the Company of any
outstanding shares of capital stock or other equity securities of, or other
ownership interests in, the Company or of any Company Securities;
(b) any amendment of any provision of the Certificate of Incorporation
or by-laws of, or of any material term of any outstanding security issued
by, the Company or any Subsidiary (other than any wholly-owned Subsidiary)
of the Company;
(c) any incurrence, assumption or guarantee by the Company or any
Subsidiary of the Company of any indebtedness for borrowed money other than
borrowings under existing short term credit facilities not in excess of
$100,000 in the aggregate;
(d) any change in any method of accounting or accounting practice by
the Company or any Subsidiary of the Company, except for any such change
required by reason of a change in GAAP;
(e) any (i) grant of any severance or termination pay to any director,
officer or employee of the Company or any Subsidiary of the Company, (ii)
employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or
employee of the Company or any Subsidiary of the Company entered into,
(iii) increase in benefits payable under any existing severance or
termination pay policies or employment agreements or (iv) increase in
compensation, bonus or other benefits payable to directors, officers or
employees of the Company or any Subsidiary of the Company, in each case
other than in the ordinary course of business;
(f) issuance of Company Securities other than pursuant to options
outstanding as of June 30, 1999 and the issuance of options after such date
in the ordinary course of business and upon the conversion of the
Convertible Notes (and the issuance of Company Securities pursuant
thereto);
(g) acquisition or disposition of assets material to the Company and
its Subsidiaries (assuming consummation of the Semi Disposition), except
for sales of inventory in the ordinary course of business consistent with
past practice, or any acquisition or disposition of capital stock of any
third party (other than acquisitions or dispositions of non-controlling
equity interests of third parties in the ordinary course of business where
the aggregate cost of all such acquisitions and dispositions does not
exceed $10,000,000), or any merger or consolidation with any third party,
by the Company or any Subsidiary;
(h) entry by the Company into any joint venture, partnership or
similar agreement with any person other than a wholly-owned Subsidiary; or
(i) any authorization of, or commitment or agreement to take any of,
the foregoing actions except as otherwise permitted by this Agreement.
SECTION 3.11 Taxes.
(a)(1) All Tax Returns (as defined below) required to be filed by or on
behalf of the Company, each of its Subsidiaries, and each affiliated, combined,
consolidated or unitary group of which the Company or
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any of its Subsidiaries is or has been a member ("COMPANY GROUP MEMBERS") have
been timely filed, and all returns filed are complete and accurate and correctly
reflect the tax liabilities required to be reported therein, (2) the Company,
its Subsidiaries, and Company Group Members have timely paid all Taxes (as
defined below) that have become due or payable and have adequately reserved for
in accordance with GAAP all Taxes (whether or not shown on any Tax Return) that
have accrued but are not yet due or payable; (3) there is no presently pending
audit examination, refund, claim or litigation, proposed adjustment or matter in
controversy with respect to any Taxes due and owing by the Company, any
Subsidiary of the Company or any Company Group Member and none of the above has
knowledge that any such action or proceeding is being contemplated, (4) neither
the Company, any Subsidiary of the Company nor any Company Group Member has
filed any waiver of the statute of limitations applicable to the assessment or
collection of any Tax which remains open; (5) all assessments for Taxes due and
owing by the Company, any Subsidiary of the Company or any Company Group Member
with respect to completed and settled examinations or concluded litigation have
been paid; (6) neither the Company, any Subsidiary of the Company nor any
Company Group Member is a party to any express or implied tax indemnity
agreement, tax sharing agreement or other agreement under which it could become
liable to another person as a result of the imposition of a Tax upon any person,
or the assessment or collection of such a Tax; (7) the Company, each of its
Subsidiaries, and each Company Group Member has complied in all material
respects with all rules and regulations relating to the withholding of Taxes;
(8) neither the Company, any Subsidiary, nor any Company Group Member is a party
to any agreement, contract, arrangement or plan that has resulted or would
result, individually or in the aggregate, in connection with this Agreement or
any change of control of the Company, any Subsidiary, or any Company Group
Member in the payment of any "excess parachute payments" within the meaning of
Section 280G of the Code; (9) neither the Company, any Subsidiary, nor any
Company Group Member has made any payments since December 31, 1998, and is not a
party to an agreement that could require it to make any payments (including any
deemed payment of compensation upon exercise of an option), that would not be
fully deductible by reason of Section 162(m) of the Code; and (10) the
liabilities of the Company will not exceed the adjusted basis of the assets of
the Company, in each case as determined for federal income tax purposes
immediately prior to the Effective Time.
(b) For purposes of this Agreement, (i) "TAXES" means (A) all taxes, levies
or other like assessments, charges or fees (including estimated taxes, charges
and fees), including, without limitation, income, corporation, advance
corporation, gross receipts, transfer, excise, property, sales, use,
value-added, license, payroll, withholding, social security and franchise or
other governmental taxes or charges, imposed by the United States or any state,
county, local or foreign government or subdivision or agency thereof, and such
term shall include any interest, penalties or additions to tax attributable to
such taxes, and (B) any liability for payment of amounts described in clause (A)
whether as a result of transferee liability, of being a member of an affiliated,
consolidated, combined or unitary group for any period, or otherwise through
operation of law, and (ii) "TAX RETURN" means any report, return, statement or
other written information required to be supplied to a taxing authority in
connection with Taxes.
SECTION 3.12 Employee Benefit Plans.
(a) Except for any plan, fund, program, agreement or arrangement that is
subject to the laws of any jurisdiction outside the United States, Schedule
3.12(a) of the Company Disclosure Schedule contains a true and complete list of
each material deferred compensation, incentive compensation, and equity
compensation plan; material "welfare" plan, fund or program (within the meaning
of section 3(1) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")); material "pension" plan, fund or program (within the meaning
of section 3(2) of ERISA); each material employment, termination or severance
agreement; and each other material employee benefit plan, fund, program,
agreement or arrangement, in each case, that is in writing and sponsored,
maintained or contributed to or required to be contributed to by the Company or
by any trade or business, whether or not incorporated (each, an "ERISA
AFFILIATE"), that together with the Company would be deemed a "single employer"
within the meaning of section 4001(b) of ERISA, or to which the Company or an
ERISA Affiliate is party, whether written or oral, for the benefit of any
employee, consultant, director or former employee, consultant or
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director of the Company or any Subsidiary of the Company. The plans, funds,
programs, agreements and arrangements listed on Schedule 3.12(a) of the Company
Disclosure Schedule are referred to herein collectively as the "PLANS".
(b) With respect to each Plan, the Company has heretofore delivered or made
available to Parent true and complete copies of the Plan and any amendments
thereto (or if the Plan is not a written Plan, a description thereof), any
related trust or other funding vehicle, the most recent reports or summaries
required under ERISA or the Code and the most recent determination letter
received from the Internal Revenue Service with respect to each Plan intended to
qualify under section 401 of the Code.
(c) No liability under Title IV or section 302 of ERISA has been incurred
by the Company or any ERISA Affiliate that has not been satisfied in full, other
than liability for premiums due the Pension Benefit Guaranty Corporation (which
premiums have been paid when due).
(d) Each Plan has been operated and administered in all material respects
in accordance with its terms and applicable law, including, but not limited to,
ERISA and the Code.
(e) Each Plan intended to be "qualified" within the meaning of section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service, or in the case of such a Plan for which a favorable
determination letter has not yet been received, the applicable remedial
amendment period under Section 401(b) of the Code has not expired.
(f) No Plan provides medical, surgical, hospitalization, death or similar
benefits (whether or not insured) for employees or former employees of the
Company or any Subsidiary for periods extending beyond their retirement or other
termination of service, other than (i) coverage mandated by applicable law, (ii)
death benefits under any "pension plan," or (iii) benefits the full cost of
which is borne by the current or former employee (or his or her beneficiary),
dependant or other covered person.
(g) There are no pending, or to the knowledge of the Company, threatened or
anticipated, claims that would reasonably be expected to have a Company Material
Adverse Effect by or on behalf of any Plan, by any employee or beneficiary
covered under any such Plan, or otherwise involving any such Plan (other than
routine claims for benefits).
(h) The consummation of the transactions contemplated by this Agreement
will not, either alone or in combination with another event, (i) entitle any
current or former employee or officer of the Company or any ERISA Affiliate to
severance pay, unemployment compensation or any other payment, except as
expressly provided in this Agreement, or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee or
officer, other than payments, accelerations or increases (x) under any employee
benefit plan that is subject to the laws of a jurisdiction outside of the United
States or (y) mandated by applicable law.
(i) To the knowledge of the Company, all employee benefit plans that are
subject to the laws of any jurisdiction outside the United States are in
material compliance with such applicable laws, including relevant Tax laws, and
the requirements of any trust deed under which they were established, except for
such exceptions to the foregoing which, in the aggregate, would not reasonably
be expected to have a Company Material Adverse Effect. Schedule 3.12(i) lists
all material employee pension benefit plans that are subject to the laws of any
jurisdiction outside the United States except for such plans that are
governmental or statutory plans.
(j) Each Plan can be amended prospectively or terminated at any time
without approval from any person, without advance notice, and without any
liability other than for benefits accrued prior to such amendment or
termination.
(k) No agreement, commitment, or obligation exists to increase any benefits
under any Plan or to adopt any new Plan.
(l) No Plan has any unfunded accrued benefits that are not fully reflected
in the Financial Statements.
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(m) No ERISA pension plan has incurred any "accumulated funding deficiency"
or "waived funding deficiency" within the meaning of Section 302 of ERISA or
Section 412 of the Internal Revenue Code of 1986, as amended (the "CODE") and
the Company has never sought to obtain any variance from the minimum funding
standards pursuant to Section 412(d) of the Code. The funding method used in
connection with each ERISA Pension Plan meets the requirements of ERISA and the
Code and the actuarial assumptions used in connection with each such plan are
reasonable, given the experience of such ERISA Pension Plan and reasonable
expectations.
The fair market value of the plan assets of each ERISA Pension Plan are at
least equal to (i) the present value of its benefit liabilities (as defined in
ERISA Section 4001(a)(16), including any unpredictable contingent event benefits
within the meaning of Code Section 412(l)(7), and determined on the basis of
assumptions prescribed by the PBGC for purposes of ERISA Section 4044), and (ii)
the Projected Benefit Obligations thereunder, as defined in Statement of
Financial Accounting Standards No. 87, including any allowance for indexation
and ad hoc increases. No ERISA Pension Plan has been completely or partially
terminated or been the subject of a Reportable Event under ERISA Section 4043.
No proceeding by the PBGC to terminate any ERISA Pension Plan has been
instituted, and the Company has not incurred any liability to the PBGC (other
than the PBGC premiums, all of which have been timely paid) or otherwise under
Title IV of ERISA with respect to any ERISA Pension Plan.
(n) The Company neither maintains nor participates in any Voluntary
Employees' Beneficiary Association ("VEBA"), under Code Sections 419 and 419A,
which is intended to be exempt from taxation under section 501(c)(9) of the
Code.
(o) The Company does not maintain, participate in, contribute to, or have
any obligation to contribute or any liability with respect to any multiple
employer or multiemployer plan, or has had any obligation with respect to such a
plan during the six (6) years immediately preceding the date of this Agreement.
SECTION 3.13 Litigation; Compliance with Laws.
(a) Except as set forth in the Company SEC Documents filed through the date
of this Agreement or otherwise fully covered by insurance, there is no action,
suit or proceeding pending against, or to the knowledge of the Company,
threatened against, the Company or any Subsidiary of the Company or any of their
respective properties before any court or arbitrator or any Governmental Entity
which would reasonably be expected to have a Company Material Adverse Effect.
(b) The Company and its Subsidiaries are in compliance with all applicable
laws, ordinances, rules and regulations of any federal, state, local or foreign
governmental authority applicable to their respective businesses and operations,
except for such violations, if any, which, in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect. All
governmental approvals, permits and licenses (collectively, "PERMITS") required
to conduct the business of the Company and its Subsidiaries have been obtained,
are in full force and effect and are being complied with except for such
violations and failures to have Permits in full force and effect, if any, which,
individually or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect.
SECTION 3.14 Labor Matters. As of the date of this Agreement (i) there is
no labor strike, dispute, slowdown, stoppage or lockout actually pending or, to
the knowledge of the Company, threatened against the Company; (ii) to the
knowledge of the Company, no union organizing campaign with respect to the
Company's employees or any of its Subsidiaries is underway; (iii) there is no
unfair labor practice charge or complaint against the Company or any of its
Subsidiaries pending or, to the knowledge of the Company, threatened before the
National Labor Relations Board or any similar state or foreign agency; (iv)
there is no written grievance pending relating to any collective bargaining
agreement or other grievance procedure; (v) to the knowledge of the Company, no
charges with respect to or relating to the Company or any of its Subsidiaries
are pending before the Equal Employment Opportunity Commission or any other
agency responsible for the prevention of unlawful employment practices; and (vi)
there are no collective bargaining agreements with any union covering employees
of the Company or any of its Subsidiaries,
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except for such exceptions to the foregoing clauses (i) through (vi) which,
individually or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect.
SECTION 3.15 Certain Contracts and Arrangements. Each material contract or
agreement to which the Company or any of its Subsidiaries is a party or by which
any of them is bound is in full force and effect, and neither the Company nor
any of its Subsidiaries, nor, to the knowledge of the Company, any other party
thereto, is in breach of, or default under, any such contract or agreement, and
no event has occurred that with notice or passage of time or both would
constitute such a breach or default thereunder by the Company or any of its
Subsidiaries, or, to the knowledge of the Company, any other party thereto,
except for such failures to be in full force and effect and such breaches and
defaults which, in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect.
SECTION 3.16 Environmental Matters.
(a) The following definitions apply to Section 3.16 and Section 4.16. (i)
"CLEANUP" means all actions required to: (A) cleanup, remove, treat or remediate
Hazardous Materials (as defined hereafter) in the indoor or outdoor environment;
(B) prevent the Release (as defined hereafter) of Hazardous Materials so that
they do not migrate, endanger or threaten to endanger public health or welfare
or the indoor or outdoor environment; (C) perform pre-remedial studies and
investigations and post-remedial monitoring and care; or (D) respond to any
government requests for information or documents in any way relating to cleanup,
removal, treatment or remediation or potential cleanup, removal, treatment or
remediation of Hazardous Materials in the indoor or outdoor environment.
(ii) "Environmental Claim" means any claim, action, cause of action,
investigation or written notice by any Person alleging potential liability
(including, without limitation, potential liability for investigatory costs,
Cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on or resulting
from (A) the presence or Release of any Hazardous Materials at any location,
whether or not owned or operated by the Company or any of its Subsidiaries or
(B) circumstances forming the basis of any violation of any Environmental Law
(as defined hereafter).
(iii) "Environmental Laws" means all federal, state, local and foreign laws
and regulations relating to pollution or protection of the environment,
including, without limitation, laws relating to Releases or threatened Releases
of Hazardous Materials or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, transport or handling of Hazardous
Materials.
(iv) "Hazardous Materials" means all substances defined as Hazardous
Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous
Substances Pollution Contingency Plan, 40 C.F.R. Section 300.5, or defined as
such by, or regulated as such under, any Environmental Law.
(v) "Release" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, dispersal, leaching or migration into the
environment (including, without limitation, ambient air, surface water,
groundwater and surface or subsurface strata) or into or out of any property,
including the movement of Hazardous Materials through or in the air, soil,
surface water, groundwater or property.
(b) (i) To the knowledge of the Company, the Company and its Subsidiaries
are in compliance with all applicable Environmental Laws (which compliance
includes, but is not limited to, the possession by the Company and its
Subsidiaries of all permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof), except where failures to be in compliance would not, in the aggregate,
reasonably be expected to have a Company Material Adverse Effect. Since January
1, 1998 and prior to the date of this Agreement, neither the Company nor any of
its Subsidiaries has received any communication (written or oral), whether from
a Governmental Entity, citizens' group, employee or otherwise, alleging that the
Company or any of its Subsidiaries is not in such compliance, except where
failures to be in compliance would not, in the aggregate, reasonably be expected
to have a Company Material Adverse Effect.
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(ii) There is no Environmental Claim pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries or, to the
knowledge of the Company, against any Person whose liability for any
Environmental Claim the Company or any of its Subsidiaries has or may have
retained or assumed either contractually or by operation of law that would
reasonably be expected to have a Company Material Adverse Effect.
(iii) There are no present or, to the knowledge of the Company, past
actions, activities, circumstances, conditions, events or incidents, including,
without limitation, the Release or presence of any Hazardous Material that could
form the basis of any Environmental Claim against the Company or any of its
Subsidiaries or, to the knowledge of the Company, against any Person whose
liability for any Environmental Claim the Company or any of its Subsidiaries has
or may have retained or assumed either contractually or by operation of law that
would, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
(iv) Neither the Company nor any of its Subsidiaries is subject to any
indemnity or other agreement relating to liability under any Environmental Laws
or relating to Hazardous Materials.
(v) The Company agrees to cooperate with Parent to effect the retention of
any permits or other governmental authorizations under Environmental Laws that
will be required to permit the Company to conduct the business as conducted by
the Company and its Subsidiaries immediately prior to the Closing Date.
SECTION 3.17 Intellectual Property.
(a) To the knowledge of the Company, the Company and its Subsidiaries own
or have the right to use all material Intellectual Property (as defined
hereafter) reasonably necessary for the Company and its Subsidiaries to conduct
their business as it is currently conducted (assuming consummation of the Semi
Disposition). All Company Registered Intellectual Property has been identified
on Schedule 3.17(a) "COMPANY REGISTERED INTELLECTUAL PROPERTY" includes a list
of United States, international and foreign (i) patents and patent applications,
(ii) registered trademarks and trademark applications, and (iii) registered
copyright applications, in each case owned by the Company and its Subsidiaries
(assuming consummation of the Semi Disposition).
(b) To the knowledge of the Company: (i) all of the registrations,
including patents, relating to material Intellectual Property owned by the
Company and its Subsidiaries (assuming consummation of the Semi Disposition) are
subsisting and unexpired, free of all liens or encumbrances, have not been
abandoned; (ii) the Company does not infringe the intellectual property rights
of any third party in any respect that would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect; (iii) no
judgment, decree, injunction, rule or order has been rendered by Governmental
Entity which would limit, cancel or question the validity of, or the Company's
or its Subsidiaries' rights (assuming consummation of the Semi Disposition) in
and to, any Intellectual Property owned by the Company (assuming consummation of
the Semi Disposition) in any respect that would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect; and (iv)
the Company has not received notice of any pending or threatened suit, action or
adversarial proceeding that seeks to limit, cancel or question the validity of,
or the Company's or its Subsidiaries' rights (assuming consummation of the Semi
Disposition) in and to, any Intellectual Property, which would reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
(c) For purposes of this Agreement "INTELLECTUAL PROPERTY" shall mean all
rights, privileges and priorities provided under U.S., state and foreign law
relating to intellectual property, including without limitation all (w)(1)
proprietary inventions, discoveries, processes, formulae, designs, methods,
techniques, procedures, concepts, developments, technology, new and useful
improvements thereof and proprietary know-how relating thereto, whether or not
patented or eligible for patent protection; (2) copyrights and copyrightable
works, including, but not limited to, computer applications, programs, software,
databases and related items; (3) trademarks, service marks, trade names, and
trade dress, the goodwill of any business symbolized thereby, and all common-law
rights relating thereto; (4) trade secrets and other
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confidential information; (x) patents and invention disclosures; (y) all
registrations, applications and recordings for any of the foregoing and (z)
licenses or other similar agreements granting to the Company or any of its
Subsidiaries the rights to use any of the foregoing.
(d) To the knowledge of the Company, the Company and its Subsidiaries have
not used and are not making use of any confidential or proprietary information
or trade secrets of any other Person in breach of any agreement to which the
Company or any of its Subsidiaries is subject or in violation of any civil or
criminal law.
(e) The Company has taken commercially reasonable security measures to
protect the secrecy, confidentiality and value of its trade secrets.
(f) To the knowledge of the Company, all employees of the Company and its
Subsidiaries have executed written agreements with the Company or its
Subsidiaries that assign to the Company or its Subsidiaries all rights to
inventions improvements, discoveries or information relating to the business of
the Company and its Subsidiaries. To the Company's knowledge, no employee of the
Company or its Subsidiaries has entered into any agreement that restricts or
limits in any way the scope or type of work in which the employee may be engaged
or requires the employee to transfer, assign or disclose any Intellectual
Property or information concerning the employee's work to anyone other than the
Company or its Subsidiaries.
SECTION 3.18 Opinion of Financial Advisor. The Company has received the
opinion of Credit Suisse First Boston Corporation ("CSFB") dated the date of the
original agreement to the effect that, as of the date of such opinion, and based
upon and subject to the matters stated therein, the Exchange Ratio is fair from
a financial point of view to the holders of Common Stock. A true and complete
copy of such opinion will be delivered to Parent as soon as practicable.
SECTION 3.19 Board Recommendation. The Board of Directors of the Company,
at a meeting duly called and held, has approved this Agreement and (i)
determined that this Agreement and the transactions contemplated hereby,
including the Merger, taken together are advisable and in the best interests of
the stockholders of the Company; and (ii) resolved to recommend that the
stockholders of the Company adopt this Agreement and approve the Merger.
SECTION 3.20 Tax Treatment. Neither the Company nor any of its affiliates
has taken any action or knows of any fact, agreement, plan or other circumstance
that could pose a material risk to the status of the Merger as a reorganization
under the provisions of Section 368(a) of the Code.
SECTION 3.21 Finders' Fees. Except for CSFB (a true and correct copy of
whose engagement agreement has been provided to Parent), whose fees will be paid
by the Company, there is no investment banker, broker, finder or other
intermediary which has been retained by, or is authorized to act on behalf of,
the Company or any Subsidiary of the Company that would be entitled to any fee
or commission from the Company, any Subsidiary of the Company, Parent or any of
Parent's affiliates upon consummation of the transactions contemplated by this
Agreement.
SECTION 3.22 Section 203 of the Delaware General Corporation Law. The
Board of Directors of the Company has taken all actions so that (a) the
restrictions contained in Section 203 of the DGCL applicable to a "business
combination" (as defined in such Section 203) will not apply to the execution,
delivery or performance of this Agreement or to the consummation of the Merger
or the other transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company subject to such exceptions as
are specifically disclosed in writing in the disclosure letter and referencing a
specific representation supplied by Parent to Company, which disclosure shall
provide an exception to or otherwise qualify the representations or warranties
of
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Parent specifically referred to in such disclosure and such other
representations and warranties to the extent such disclosure shall reasonably
appear to be applicable to such other representations or warranties (the "PARENT
DISCLOSURE SCHEDULE"), as follows:
SECTION 4.1 Corporate Existence and Power. Parent is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all corporate or other power, as the case may
be, and all Licenses required to carry on its business as now conducted or
presently proposed to be conducted except for failures to have any such License
which would not, in the aggregate, have a Parent Material Adverse Effect (as
defined below). Parent is duly qualified to do business and is in good standing
in each jurisdiction where the character of the property owned, leased or
operated by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where failures to be so qualified
would not reasonably be expected to, in the aggregate, have a Parent Material
Adverse Effect. As used herein, the term "PARENT MATERIAL ADVERSE EFFECT" means
a material adverse effect on the financial condition, business, assets or
results of operations of Parent and its Subsidiaries, taken as a whole,
provided, however, that in no event shall any effect that results from (a) the
public announcement or pendency of the transactions contemplated hereby, (b)
changes affecting the telecommunications equipment industry generally, (c)
changes affecting the United States economy generally or (d) stockholder class
action litigation arising from allegations of a breach of fiduciary duty
relating to this Agreement, constitute a Parent Material Adverse Effect. Parent
has heretofore delivered or made available to the Company true and complete
copies of the governing documents or other organizational documents of like
import, as currently in effect, of Parent.
SECTION 4.2 Authorization. Parent has the requisite power and authority to
execute and deliver this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement and the performance of its obligations
hereunder have been duly and validly authorized by the Board of Directors of
Parent, and no other proceedings on the part of Parent are necessary to
authorize the execution, delivery and performance of this Agreement. This
Agreement has been duly executed and delivered by Parent and constitutes,
assuming due authorization, execution and delivery of this Agreement by the
Company, a valid and binding obligation of Parent, enforceable against it in
accordance with its terms.
SECTION 4.3 Consents and Approvals; No Violations.
(a) Neither the execution and delivery of this Agreement nor the
performance by Parent of its obligations hereunder will (i) conflict with or
result in any breach of any provision of the Certificate of Incorporation or
by-laws (or other governing or organizational documents) of Parent, or (ii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration or obligation to repurchase, repay, redeem or
acquire or any similar right or obligation) under any of the terms, conditions
or provisions of any note, mortgage, letter of credit, other evidence of
indebtedness, guarantee, license, lease or agreement or similar instrument or
obligation to which Parent is a party or by which any of them or any of the
respective assets used or held for use by any of them may be bound or (iii)
assuming that the filings, registrations, notifications, authorizations,
consents and approvals referred to in subsection (b) below have been obtained or
made, as the case may be, violate any order, injunction, decree, statute, rule
or regulation of any Governmental Entity to which Parent is subject, excluding
from the foregoing clauses (ii) and (iii) such requirements, defaults, breaches,
rights or violations that would not, in the aggregate, reasonably be expected to
have a Parent Material Adverse Effect and would not reasonably be expected to
have a material adverse effect on the ability of Parent to consummate the
transactions contemplated hereby.
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any Governmental Entity is required in connection with
the execution and delivery of this Agreement by Parent or the performance by it
of its obligations hereunder, except (i) the filing of the Certificate of Merger
in accordance with the DGCL; (ii) compliance with any applicable requirements of
the HSR Act or any foreign laws regulating competition, antitrust, investment or
exchange controls; (iii) compliance with any applicable requirements of the
Securities Act and the Exchange Act; (iv) compliance with any
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applicable requirements of state blue sky or takeover laws and (v) such other
consents, approvals, orders, authorizations, notifications, registrations,
declarations and filings the failure of which to be obtained or made would not
reasonably be expected to have a Parent Material Adverse Effect and would not
have a material adverse effect on the ability of Parent to perform its
obligations hereunder.
SECTION 4.4 Capitalization. The authorized capital stock of Parent
consists of 50,000,000 shares of Parent Common Stock and 5,000,000 shares of
preferred stock, par value $.001 per share (the "PARENT PREFERRED STOCK"). As of
September 27, 1999 there were (i) 15,145,478 shares of Parent Common Stock
issued and outstanding and (ii) no shares of Parent Preferred Stock issued and
outstanding. All shares of capital stock of Parent have been duly authorized and
validly issued and are fully paid and nonassessable and were not issued in
violation of any preemptive rights. As of September 27, 1999 there were
outstanding Parent Options to purchase 1,910,974 shares of Parent Common Stock.
Except as set forth in this Section 4.4 and except for changes since September
27, 1999 resulting from the exercise of Parent Options outstanding on such date,
there are outstanding (i) no shares of capital stock or other voting securities
of Parent, (ii) no securities of Parent or any Subsidiary of Parent convertible
into or exchangeable for shares of capital stock or voting securities of Parent,
(iii) no options, preemptive or other rights to acquire from Parent or any of
its Subsidiaries, and no obligation of Parent to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of Parent, and (iv) no equity equivalent interest in
the ownership or earnings of Parent or its Subsidiaries or other similar rights
(the items in clauses (i), (ii), (iii) and (iv) being referred to collectively
as the "PARENT SECURITIES"). There are no outstanding obligations of Parent or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any Parent
Securities. No Subsidiary of Parent owns any capital stock or other voting
securities of Parent or the Company.
SECTION 4.5 Subsidiaries.
(a) Each Subsidiary of Parent (each, a "PARENT SUBSIDIARY") (i) is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, (ii) has all corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted and (iii) is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for failures of this
representation and warranty to be true which would not, in the aggregate, have a
Parent Material Adverse Effect. All Parent Subsidiaries and their respective
jurisdictions of incorporation are identified in Schedule 4.5 of Parent
Disclosure Schedule.
(b) All of the outstanding shares of capital stock of each Subsidiary of
Parent are duly authorized, validly issued, fully paid and nonassessable, and
such shares are owned by Parent or by a Subsidiary of Parent free and clear of
any Liens or limitations on voting rights. There are no subscriptions, options,
warrants, calls, preemptive rights, rights, convertible securities or other
agreements or commitments of any character relating to the issuance, transfer,
sale, delivery, voting or redemption (including any rights of conversion or
exchange under any outstanding security or other instrument) of any of the
capital stock or other equity interests of any of such Subsidiaries. There are
no agreements requiring Parent or any of its Subsidiaries to make contributions
to the capital of, or lend or advance funds to, any Subsidiaries of Parent.
SECTION 4.6 SEC Documents. Parent has filed all required reports, proxy
statements, registration statements, forms and other documents with the SEC
since January 1, 1998 (the "PARENT SEC DOCUMENTS"). As of their respective
dates, and giving effect to any amendments thereto, (a) the Parent SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the applicable rules and regulations
of the SEC promulgated thereunder and (b) none of the Parent SEC Documents
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
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SECTION 4.7 Financial Statements. The financial statements of Parent
(including, in each case, any notes and schedules thereto) included in the
Parent SEC Documents (a) were prepared from the books and records of Parent and
its Subsidiaries, (b) comply as to form in all material respects with all
applicable accounting requirements and the rules and regulations of the SEC with
respect thereto, (c) are in conformity with GAAP, applied on a consistent basis
(except in the case of unaudited statements, as permitted by the rules and
regulations of the SEC) and (d) fairly present, in all material respects, the
consolidated financial position of Parent and its consolidated Subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments which were not and are not expected to be,
individually or in the aggregate, material in amount).
SECTION 4.8 Absence of Undisclosed Liabilities. Except as set forth in the
Parent SEC Documents filed through the date of this Agreement, and except for
liabilities and obligations incurred in the ordinary course of business since
the date of the most recent consolidated balance sheet included in the Parent
SEC Documents, neither Parent nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
except for those that would not, in the aggregate, reasonably be expected to
have a Parent Material Adverse Effect.
SECTION 4.9 Proxy Statement; Form S-4.
(a) None of the information contained in the Proxy Statement (and any
amendments thereof or supplements thereto) will at the time of the mailing of
the Proxy Statement to the stockholders of the Company or the stockholders of
Parent and at the time of the Special Meeting or the Parent Special Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by Parent with respect to
statements made or omitted in the Proxy Statement relating to the Company based
on information supplied by the Company for inclusion in the Proxy Statement. The
Proxy Statement will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations promulgated
thereunder, except that no representation is made by Parent with respect to the
statements made or omitted in the Proxy Statement relating to the Company based
on information supplied by the Company for inclusion in the Proxy Statement.
(b) None of the information supplied or to be supplied by Parent for
inclusion or incorporation by reference in the Form S-4 will, with respect to
information relating to Parent, at the time the Form S-4 is filed with the SEC,
and at any time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
SECTION 4.10 Absence of Material Adverse Changes, Etc. Since June 30,
1999, there has not been a Parent Material Adverse Effect. Without limiting the
foregoing, except as disclosed in Parent SEC Documents filed by Parent through
the date hereof or as contemplated by this Agreement, since June 30, 1999, (i)
Parent and its Subsidiaries have conducted their business in the ordinary course
of business and (ii) there has not been:
(a) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Parent, or any
repurchase, redemption or other acquisition by Parent or any Subsidiary
(other than any wholly-owned Subsidiary) of Parent of any outstanding
shares of capital stock or other equity securities of, or other ownership
interests in, Parent or of any Company Securities;
(b) any amendment of any provision of the Certificate of Incorporation
or by-laws of, or of any material term of any outstanding security issued
by, Parent or any Subsidiary (other than any wholly-owned Subsidiary) of
Parent;
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(c) any incurrence, assumption or guarantee by Parent or any
Subsidiary of Parent of any indebtedness for borrowed money other than
borrowings under existing short term credit facilities not in excess of
$100,000 in the aggregate;
(d) any change in any method of accounting or accounting practice by
Parent or any Subsidiary of Parent, except for any such change required by
reason of a change in GAAP;
(e) issuance of Parent Securities other than pursuant to options
outstanding as of June 30, 1999 and the issuance of options after such date
in the ordinary course of business (and the issuance of securities pursuant
thereto);
(f) acquisition or disposition of assets material to Parent and its
Subsidiaries, except for sales of inventory in the ordinary course of
business consistent with past practice, or any acquisition or disposition
of capital stock of any third party (other than acquisitions or
dispositions of non-controlling equity interests of third parties in the
ordinary course of business where the aggregate cost of all such
acquisitions and dispositions does not exceed $10,000,000), or any merger
or consolidation with any third party, by Parent or any Subsidiary;
(g) entry by Parent into any joint venture, partnership or similar
agreement with any person other than a wholly-owned Subsidiary; or
(h) any authorization of, or commitment or agreement to take any of,
the foregoing actions except as otherwise permitted by this Agreement.
SECTION 4.11 Taxes.
(1) All Tax Returns required to be filed by or on behalf of Parent, each of
its Subsidiaries, and each affiliated, combined, consolidated or unitary group
of which Parent or any of its Subsidiaries is or has been a member ("PARENT
GROUP MEMBERS") have been timely filed, and all returns filed are complete and
accurate and correctly reflect the tax liabilities required to be reported
therein, (2) Parent, its Subsidiaries and Parent Group Members have timely paid
all Taxes (as defined below) that have become due or payable and have adequately
reserved for in accordance with GAAP all Taxes (whether or not shown on any Tax
Return) that have accrued but are not yet due or payable; (3) there is no
presently pending audit examination, refund claim or litigation, proposed
adjustment or matter in controversy with respect to any Taxes due and owing by
Parent, any Subsidiary of Parent or any Parent Group Member and none of the
above has knowledge that of any such action or proceeding is being contemplated;
(4) neither Parent, any Subsidiary of Parent nor any Parent Group Member has
filed any waiver of the statute of limitations applicable to the assessment or
collection of any Tax which remains open; (5) all assessments for Taxes due and
owing by Parent, any Subsidiary of Parent or any Parent Group Member with
respect to completed and settled examinations or concluded litigation have been
paid; (6) neither Parent, any Subsidiary of Parent nor any Parent Group Member
is a party to any express or implied tax indemnity agreement, tax sharing
agreement or other agreement under which it could become liable to another
person as a result of the imposition of a Tax upon any person, or the assessment
or collection of such a Tax; and (7) Parent, each of its Subsidiaries, and each
Parent Group Member has complied in all material respects with all rules and
regulations relating to the withholding of Taxes.
SECTION 4.12 Employee Benefit Plans.
(a) Except for any plan, fund, program, agreement or arrangement that is
subject to the laws of any jurisdiction outside the United States, Schedule
4.12(a) of Parent Disclosure Schedule contains a true and complete list of each
material deferred compensation, incentive compensation, and equity compensation
plan; material "welfare" plan, fund or program (within the meaning of section
3(1) of ERISA); material "pension" plan, fund or program (within the meaning of
section 3(2) of ERISA); each material employment, termination or severance
agreement; and each other material employee benefit plan, fund, program,
agreement or arrangement, in each case, that is in writing and sponsored,
maintained or contributed to or required to be contributed to by Parent or by
any trade or business, whether or not incorporated, that together with Parent
would be deemed a "single employer" within the meaning of
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section 4001(b) of ERISA, or to which Parent or an ERISA Affiliate is party,
whether written or oral, for the benefit of any employee, consultant, director
or former employee, consultant or director of Parent or any Subsidiary of
Parent. The plans, funds, programs, agreements and arrangements listed on
Schedule 4.12(a) of the Parent Disclosure Schedule are referred to herein
collectively as the "PARENT PLANS".
(b) With respect to each Parent Plan, Parent has heretofore delivered or
made available to the Company true and complete copies of the Parent Plan and
any amendments thereto (or if the Parent Plan is not a written plan, a
description thereof), any related trust or other funding vehicle, the most
recent reports or summaries required under ERISA or the Code and the most recent
determination letter received from the Internal Revenue Service with respect to
each Parent Plan intended to qualify under section 401 of the Code.
(c) No liability under Title IV or section 302 of ERISA has been incurred
by Parent or any ERISA Affiliate that has not been satisfied in full, other than
liability for premiums due the Pension Benefit Guaranty Corporation (which
premiums have been paid when due).
(d) Each Parent Plan has been operated and administered in all material
respects in accordance with its terms and applicable law, including, but not
limited to, ERISA and the Code.
(e) Each Parent Plan intended to be "qualified" within the meaning of
section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service, or in the case of such a Parent Plan for which a
favorable determination letter has not yet been received, the applicable
remedial amendment period under Section 401(b) of the Code has not expired.
(f) No Parent Plan provides medical, surgical, hospitalization, death or
similar benefits (whether or not insured) for employees or former employees of
Parent or any Subsidiary for periods extending beyond their retirement or other
termination of service, other than (i) coverage mandated by applicable law, (ii)
death benefits under any "pension plan," or (iii) benefits the full cost of
which is borne by the current or former employee (or his or her beneficiary),
dependant or other covered person.
(g) There are no pending, or to the knowledge of Parent, threatened or
anticipated, claims that would reasonably be expected to have a Parent Material
Adverse Effect by or on behalf of any Parent Plan, by any employee or
beneficiary covered under any such Parent Plan, or otherwise involving any such
Parent Plan (other than routine claims for benefits).
(h) To the knowledge of Parent, all employee benefit plans that are subject
to the laws of any jurisdiction outside the United States are in material
compliance with such applicable laws, including relevant Tax laws, and the
requirements of any trust deed under which they were established, except for
such exceptions to the foregoing which, in the aggregate, would not reasonably
be expected to have a Parent Material Adverse Effect. Schedule 4.12(i) lists all
material employee pension benefit plans that are subject to the laws of any
jurisdiction outside the United States except for such plans that are
governmental or statutory plans.
(i) Each Plan can be amended prospectively or terminated at any time
without approval from any person, without advance notice, and without any
liability other than for benefits accrued prior to such amendment or
termination.
(j) No agreement, commitment, or obligation exists to increase any benefits
under any Plan or to adopt any new Plan.
(k) No Plan has any unfunded accrued benefits that are not fully reflected
in the Financial Statements.
(l) No ERISA pension plan has incurred any "accumulated funding deficiency"
or "waived funding deficiency" within the meaning of Section 302 of ERISA or
Section 412 of the Internal Revenue Code of 1986, as amended (the "Code") and
Parent has never sought to obtain any variance from the minimum funding
standards pursuant to Section 412(d) of the Code. The funding method used in
connection with
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each ERISA Pension Plan meets the requirements of ERISA and the Code and the
actuarial assumptions used in connection with each such plan are reasonable,
given the experience of such ERISA Pension Plan and reasonable expectations.
The fair market value of the plan assets of each ERISA Pension Plan are at
least equal to (i) the present value of its benefit liabilities (as defined in
ERISA Section 4001(a)(16), including any unpredictable contingent event benefits
within the meaning of Code Section 412(l)(7), and determined on the basis of
assumptions prescribed by the PBGC for purposes of ERISA Section 4044), and (ii)
the Projected Benefit Obligations thereunder, as defined in Statement of
Financial Accounting Standards No. 87, including any allowance for indexation
and ad hoc increases. No ERISA Pension Plan has been completely or partially
terminated or been the subject of a Reportable Event under ERISA Section 4043.
No proceeding by the PBGC to terminate any ERISA Pension Plan has been
instituted, and Parent has not incurred any liability to the PBGC (other than
the PBGC premiums, all of which have been timely paid) or otherwise under Title
IV of ERISA with respect to any ERISA Pension Plan.
(m) Parent neither maintains nor participates in any Voluntary Employees'
Beneficiary Association ("VEBA"), under Code Sections 419 and 419A, which is
intended to be exempt from taxation under section 501(c)(9) of the Code.
(n) Parent does not maintain, participate in, contribute to, or have any
obligation to contribute or any liability with respect to any multiple employer
or multiemployer plan, or has had any obligation with respect to such a plan
during the six years immediately preceding the date of this Agreement.
SECTION 4.13 Litigation; Compliance with Laws.
(a) Except as set forth in either the Parent SEC Documents filed through
the date of this Agreement or otherwise fully covered by insurance, there is no
action, suit or proceeding pending against, or to the knowledge of Parent
threatened against, Parent or any Subsidiary of Parent or any of their
respective properties before any court or arbitrator or any Governmental Entity
which would reasonably be expected to have a Parent Material Adverse Effect.
(b) Parent and its Subsidiaries are in compliance with all applicable laws,
ordinances, rules and regulations of any federal, state, local or foreign
governmental authority applicable to their respective businesses and operations,
except for such violations, if any, which, in the aggregate, would not
reasonably be expected to have a Parent Material Adverse Effect. All Permits
required to conduct the business of Parent and its Subsidiaries have been
obtained, are in full force and effect and are being complied with except for
such violations and failures to have Permits in full force and effect, if any,
which, individually or in the aggregate, would not reasonably be expected to
have a Parent Material Adverse Effect.
SECTION 4.14 Labor Matters. As of the date of this Agreement (i) there is
no labor strike, dispute, slowdown, stoppage or lockout actually pending or, to
the knowledge of Parent, threatened against Parent; (ii) to the knowledge of
Parent, no union organizing campaign with respect to Parent's employees is
underway; (iii) there is no unfair labor practice charge or complaint against
Parent pending or, to the knowledge of Parent, threatened before the National
Labor Relations Board or any similar state or foreign agency; (iv) there is no
written grievance pending relating to any collective bargaining agreement or
other grievance procedure; (v) to the knowledge of Parent, no charges with
respect to or relating to Parent are pending before the Equal Employment
Opportunity Commission or any other agency responsible for the prevention of
unlawful employment practices; and (vi) there are no collective bargaining
agreements with any union covering employees of Parent, except for such
exceptions to the foregoing clauses (i) through (vi) which, individually or in
the aggregate, would not reasonably be expected to have a Parent Material
Adverse Effect.
SECTION 4.15 Certain Contracts and Arrangements. Each material contract or
agreement to which Parent or any of its Subsidiaries is a party or by which any
of them is bound is in full force and effect, and neither Parent nor any of its
Subsidiaries, nor, to the knowledge of Parent, any other party thereto, is in
breach of, or default under, any such contract or agreement, and no event has
occurred that with notice or passage of time or both would constitute such a
breach or default thereunder by Parent or any of its
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Subsidiaries, or, to the knowledge of Parent, any other party thereto, except
for such failures to be in full force and effect and such breaches and defaults
which, in the aggregate, would not reasonably be expected to have a Parent
Material Adverse Effect.
SECTION 4.16 Environmental Matters.
(a)(i) To the knowledge of Parent, Parent and its Subsidiaries are in
compliance with all applicable Environmental Laws (which compliance includes,
but is not limited to, the possession by Parent and its Subsidiaries of all
permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof),
except where failures to be in compliance would not, in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect. Since January
1, 1998 and prior to the date of this Agreement, neither Parent nor any of its
Subsidiaries has received any communication (written or oral), whether from a
Governmental Entity, citizens' group, employee or otherwise, alleging that
Parent or any of its Subsidiaries is not in such compliance, except where
failures to be in compliance would not, in the aggregate, reasonably be expected
to have a Parent Material Adverse Effect.
(ii) There is no Environmental Claim pending or, to the knowledge of
Parent, threatened against Parent or any of its Subsidiaries or, to the
knowledge of Parent, against any Person whose liability for any Environmental
Claim Parent or any of its Subsidiaries has or may have retained or assumed
either contractually or by operation of law that would reasonably be expected to
have a Parent Material Adverse Effect.
(iii) There are no present or, to the knowledge of Parent, past actions,
activities, circumstances, conditions, events or incidents, including, without
limitation, the Release or presence of any Hazardous Material that could form
the basis of any Environmental Claim against Parent or any of its Subsidiaries
or, to the knowledge of Parent, against any Person whose liability for any
Environmental Claim Parent or any of its Subsidiaries has or may have retained
or assumed either contractually or by operation of law that would, individually
or in the aggregate, reasonably be expected to have a Parent Material Adverse
Effect.
(iv) Neither the Parent nor any of its Subsidiaries is subject to any
indemnity or other agreement relating to liability under any Environmental Laws
or relating to Hazardous Materials.
SECTION 4.17 Intellectual Property.
(a) To the knowledge of Parent, Parent and its Subsidiaries own or have the
right to use all material Intellectual Property reasonably necessary for Parent
and its Subsidiaries to conduct their business as it is currently conducted.
(b) To the knowledge of Parent: (i) all of the registrations, including
patent registrations, relating to material Intellectual Property owned by Parent
and its Subsidiaries are subsisting and unexpired, free of all liens or
encumbrances, have not been abandoned; (ii) Parent does not infringe the
intellectual property rights of any third party in any respect that would
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect; (iii) no judgment, decree, injunction, rule or order
has been rendered by Governmental Entity which would limit, cancel or question
the validity of, or Parent's or its Subsidiaries' rights in and to, any
Intellectual Property owned by Parent in any respect that would reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect; and (iv) Parent has not received notice of any pending or threatened
suit, action or adversarial proceeding that seeks to limit, cancel or question
the validity of, or Parent's or its Subsidiaries' rights in and to, any
Intellectual Property, which would reasonably be expected to have, individually
or in the aggregate, a Parent Material Adverse Effect.
(c) To the knowledge of the Parent, the Parent and its Subsidiaries have
not used and are not making use of any confidential or proprietary information
or trade secrets of any other Person in breach of any agreement to which the
Parent is subject or in violation of any civil or criminal law.
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(d) The Parent has taken commercially reasonable security measures to
protect the secrecy, confidentiality and value of its trade secrets.
(e) To the knowledge of the Parent, all employees of the Parent have
executed written agreements with the Parent that assign to the Parent all rights
to inventions improvements, discoveries or information relating to the business
of the Parent. To the Parent's knowledge, no employee of the Parent has entered
into any agreement that restricts or limits in any way the scope or type of |
