Document/Exhibit Description Pages Size
1: 8-K Current Report 5 15K
2: EX-2.1 Plan of Acquisition, Reorganization, Arrangement, 70 282K
Liquidation or Succession
3: EX-20.1 Other Document or Statement to Security Holders 3 12K
EX-2.1 — Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
Exhibit Table of Contents
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
POLYCOM, INC.,
VENICE ACQUISITION CORPORATION
AND
VIAVIDEO COMMUNICATIONS, INC.
JUNE 11, 1997
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Closing; Effective Time . . . . . . . . . . . . . . . . . . . 2
1.3 Effect of the Merger. . . . . . . . . . . . . . . . . . . . . 2
1.4 Certificate of Incorporation; Bylaws. . . . . . . . . . . . . 2
1.5 Directors and Officers. . . . . . . . . . . . . . . . . . . . 3
1.6 Effect on Capital Stock . . . . . . . . . . . . . . . . . . . 3
1.7 Surrender of Certificates . . . . . . . . . . . . . . . . . . 5
1.8 No Further Ownership Rights in Target Capital Stock . . . . . 7
1.9 Lost, Stolen or Destroyed Certificates. . . . . . . . . . . . 7
1.10 Tax and Accounting Consequences . . . . . . . . . . . . . . . 7
1.11 Taking of Necessary Action; Further Action. . . . . . . . . . 8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF TARGET. . . . . . . . . . . 8
2.1 Organization, Standing and Power. . . . . . . . . . . . . . . 8
2.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.4 Financial Statements. . . . . . . . . . . . . . . . . . . . . 11
2.5 Absence of Certain Changes. . . . . . . . . . . . . . . . . . 11
2.6 Absence of Undisclosed Liabilities. . . . . . . . . . . . . . 11
2.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.8 Restrictions on Business Activities . . . . . . . . . . . . . 12
2.9 Governmental Authorization. . . . . . . . . . . . . . . . . . 12
2.10 Title to Property . . . . . . . . . . . . . . . . . . . . . . 12
2.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . 13
2.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . 14
2.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.14 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . 16
2.15 Certain Agreements Affected by the Merger . . . . . . . . . . 19
2.16 Employee Matters. . . . . . . . . . . . . . . . . . . . . . . 19
2.17 Interested Party Transactions . . . . . . . . . . . . . . . . 19
2.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.19 Compliance With Laws. . . . . . . . . . . . . . . . . . . . . 20
2.20 Minute Books. . . . . . . . . . . . . . . . . . . . . . . . . 20
2.21 Complete Copies of Materials. . . . . . . . . . . . . . . . . 20
2.22 Pooling of Interests. . . . . . . . . . . . . . . . . . . . . 20
2.23 Brokers' and Finders' Fees. . . . . . . . . . . . . . . . . . 20
2.24 Registration Statement; Proxy Statement/Prospectus. . . . . . 20
2.25 Affiliate's Agreement; Stockholder's Representation
Agreement; Irrevocable Proxies. . . . . . . . . . . . . . . . 21
2.26 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . 21
2.27 Board Approval. . . . . . . . . . . . . . . . . . . . . . . . 21
2.28 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.30 Preliminary Pooling Letter. . . . . . . . . . . . . . . . . . 22
2.31 Representations Complete. . . . . . . . . . . . . . . . . . . 23
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ACQUIROR
AND MERGER SUB 23
3.1 Organization, Standing and Power. . . . . . . . . . . . . . . 23
3.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . 24
3.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.4 SEC Documents; Financial Statements . . . . . . . . . . . . . 25
3.5 Absence of Certain Changes. . . . . . . . . . . . . . . . . . 26
3.6 Absence of Undisclosed Liabilities. . . . . . . . . . . . . . 27
3.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.8 Restrictions on Business Activities . . . . . . . . . . . . . 27
3.9 Opinion of Financial Advisor. . . . . . . . . . . . . . . . . 27
3.10 Intellectual Property . . . . . . . . . . . . . . . . . . . . 27
3.11 Governmental Authorization. . . . . . . . . . . . . . . . . . 28
3.12 Compliance With Laws. . . . . . . . . . . . . . . . . . . . . 28
3.13 Pooling of Interests. . . . . . . . . . . . . . . . . . . . . 28
3.14 Broker's and Finders' Fees. . . . . . . . . . . . . . . . . . 28
3.15 Registration Statement; Proxy Statement/Prospectus. . . . . . 28
3.16 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . 29
3.17 Board Approval. . . . . . . . . . . . . . . . . . . . . . . . 29
3.18 Preliminary Pooling Letter. . . . . . . . . . . . . . . . . . 29
3.19 Representations Complete. . . . . . . . . . . . . . . . . . . 29
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME . . . . . . . . . . . . . 30
4.1 Conduct of Business of Acquiror . . . . . . . . . . . . . . . 30
4.2 Conduct of Business of Target . . . . . . . . . . . . . . . . 31
4.3 Limitations on Business of Target . . . . . . . . . . . . . . 32
ii.
4.4 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE V ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . 35
5.1 Proxy Statement/Prospectus; Registration Statement. . . . . . 35
5.2 Meeting of Stockholders . . . . . . . . . . . . . . . . . . . 36
5.3 Access to Information . . . . . . . . . . . . . . . . . . . . 36
5.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 37
5.5 Public Disclosure . . . . . . . . . . . . . . . . . . . . . . 37
5.6 Consents; Cooperation . . . . . . . . . . . . . . . . . . . . 37
5.7 Pooling Accounting. . . . . . . . . . . . . . . . . . . . . . 38
5.8 Affiliate Agreements. . . . . . . . . . . . . . . . . . . . . 39
5.9 Voting Agreement. . . . . . . . . . . . . . . . . . . . . . . 39
5.10 Legal Requirements. . . . . . . . . . . . . . . . . . . . . . 39
5.11 Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . . . 40
5.12 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . 40
5.13 Escrow Agreement. . . . . . . . . . . . . . . . . . . . . . . 41
5.14 Letter of Acquiror's and Target's Accountants . . . . . . . . 41
5.15 Form S-8. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.16 Stockholder's Representation Agreements . . . . . . . . . . . 41
5.17 Listing of Additional Shares. . . . . . . . . . . . . . . . . 42
5.18 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.19 Pooling Letters . . . . . . . . . . . . . . . . . . . . . . . 42
5.20 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 42
5.21 Reorganization. . . . . . . . . . . . . . . . . . . . . . . . 43
5.22 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.25 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . 43
5.26 Reasonable Commercial Efforts and Further Assurances. . . . . 44
ARTICLE VI CONDITIONS TO THE MERGER. . . . . . . . . . . . . . . . . . . 44
6.1 Conditions to Obligations of Each Party to Effect the
Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.2 Additional Conditions to Obligations of Target. . . . . . . . 45
6.3 Additional Conditions to the Obligations of
Acquiror and Merger Sub . . . . . . . . . . . . . . . . . . . 47
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . 49
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . 51
7.3 Expenses and Termination Fees . . . . . . . . . . . . . . . . 51
7.4 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 53
iii.
7.5 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE VIII ESCROW AND INDEMNIFICATION. . . . . . . . . . . . . . . . . . 54
8.1 Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 54
8.3 Damage Threshold. . . . . . . . . . . . . . . . . . . . . . . 55
8.4 Escrow Period . . . . . . . . . . . . . . . . . . . . . . . . 55
8.5 Claims upon Escrow Fund . . . . . . . . . . . . . . . . . . . 56
8.6 Objections to Claims. . . . . . . . . . . . . . . . . . . . . 56
8.7 Resolution of Conflicts; Arbitration. . . . . . . . . . . . . 57
8.8 Stockholders' Agent . . . . . . . . . . . . . . . . . . . . . 58
8.9 Actions of the Stockholders' Agent. . . . . . . . . . . . . . 58
8.10 Third-Party Claims. . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE IX GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 59
9.1 Survival at Effective Time. . . . . . . . . . . . . . . . . . 59
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.3 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . 61
9.4 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 61
9.5 Entire Agreement; Nonassignability; Parties in Interest . . . 61
9.6 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 61
9.7 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . 62
9.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 62
9.9 Rules of Construction . . . . . . . . . . . . . . . . . . . . 62
iv.
SCHEDULES
Target Disclosure Schedule
Acquiror Disclosure Schedule
Schedule 1.6 - Exchange Ratio
Schedule 2.10 - Target Real Property
Schedule 2.11 - Target Intellectual Property
Schedule 2.14 - Target Employee Benefit Plans
Schedule 2.21 - Material Agreements
Schedule 5.8(a) - Target Affiliates
Schedule 5.8(b) - Acquiror Affiliates
Schedule 5.9(a) - Target Voting Agreement Signatories
Schedule 5.9(b) - Acquiror Voting Agreement Signatories
Schedule 5.13 - Outstanding Options
Schedule 5.18 - List of Employees
Schedule 6.2(g) - Acquiror Third Party Consents
Schedule 6.3(c) - Target Third Party Consents
EXHIBITS
Exhibit A - Certificate of Merger
Exhibit B-1 - Target's Affiliate Agreement
Exhibit B-2 - Acquiror's Affiliate Agreement
Exhibit C-1 - Target Voting Agreement
Exhibit C-2 - Acquiror Voting Agreement
Exhibit D - FIRPTA Notice
Exhibit E - Escrow Agreement
Exhibit F - Stockholder's Representation Agreement
Exhibit G-1, et. seq. - Form of Employment Agreements
Exhibit H - Services Agreement
v.
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
and entered into as of June 11, 1997, by and among Polycom, Inc., a Delaware
corporation ("Acquiror"), Venice Acquisition Corporation, a Delaware corporation
and wholly-owned subsidiary of Acquiror ("Merger Sub"), and ViaVideo
Communications, Inc., a Delaware corporation ("Target").
RECITALS
A. The Boards of Directors of Target, Acquiror and Merger Sub
believe it is in the best interests of their respective companies and
stockholders that Target and Merger Sub combine into a single company through
the statutory merger of Merger Sub with and into Target (the "Merger") and, in
furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, the outstanding
shares of Target Common Stock (assuming the conversion of all outstanding Target
Preferred Stock into Common Stock prior to the Effective Time, as defined below)
shall be converted into shares of Acquiror Common Stock, $.0005 par value
("Acquiror Common Stock"), and all outstanding options to purchase Target Common
Stock shall be assumed by Acquiror and shall be exercisable into Acquiror Common
Stock at the rate set forth herein. Target Common Stock (assuming the
conversion of all outstanding Target Preferred Stock into Common Stock prior to
the Effective Time) and all outstanding options to purchase Target Common Stock
shall hereinafter to referred to as Target Capital Stock.
C. Target, Acquiror and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
D. The parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code.
E. The parties intend to cause the Merger to be accounted for as a
pooling of interests pursuant to APB Opinion No. 16, Staff Accounting Series
Releases 130, 135 and 146 and Staff Accounting Bulletins Topic Two.
F. Concurrent with the execution of this Agreement and as an
inducement to Acquiror and Merger Sub to enter into this Agreement, certain of
the affiliates of Target who are stockholders, officers or directors have on the
date hereof entered into an agreement to vote the
shares of Target's Common Stock owned by such persons to approve the Merger
and against any competing proposals.
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the parties
agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2)
and subject to and upon the terms and conditions of this Agreement, the
Certificate of Merger attached hereto as EXHIBIT A (the "Certificate of Merger")
and the applicable provisions of the Delaware General Corporation Law ("Delaware
Law"), Merger Sub shall be merged with and into Target, the separate corporate
existence of Merger Sub shall cease and Target shall continue as the surviving
corporation. Target as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "Surviving Corporation."
1.2 CLOSING; EFFECTIVE TIME. The closing of the transactions
contemplated hereby (the "Closing") shall take place as soon as practicable
after the satisfaction or waiver of each of the conditions set forth in Article
VI hereof or at such other time as the parties hereto agree (the "Closing
Date"). The Closing shall take place at the offices of Brobeck, Phleger &
Harrison LLP, Two Embarcadero Place, 2200 Geng Road, Palo Alto, California, or
at such other location as the parties hereto agree. In connection with the
Closing, the parties hereto shall cause the Merger to be consummated by filing
the Certificate of Merger with the Secretary of State of the State of Delaware,
in accordance with the relevant provisions of Delaware Law (the time of such
filing being the "Effective Time").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Target and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Target and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the Certificate of Incorporation
of Merger Sub, 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 Delaware Law and such Certificate of Incorporation;
provided, however, that Article I of the Certificate of Incorporation of
2.
the Surviving Corporation shall be amended to read as follows: "The name of
the corporation is Acquiror, Inc."
(b) The Bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter amended.
1.5 DIRECTORS AND OFFICERS. At the Effective Time, the directors
of Merger Sub, as in effect immediately prior to the Effective Time, shall be
the directors of the Surviving Corporation, until their respective successors
are duly elected or appointed and qualified. The officers of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the initial officers of
the Merger Sub, until their respective successors are duly elected or appointed
and qualified.
1.6 EFFECT ON CAPITAL STOCK. By virtue of the Merger and without
any action on the part of Merger Sub, Target or the holders of any of the
following securities:
(a) SHARES TO BE ISSUED; CONVERSION OF TARGET COMMON STOCK.
The number of shares of Acquiror Common Stock to be issued (including
Acquiror Common Stock to be reserved for issuance upon exercise of Target
options assumed by Acquiror and all ungranted options under the Target Stock
Option Plan, as defined below) in exchange for the acquisition by Acquiror of
all outstanding Target Capital Stock and all reserved but ungranted options
to acquire Target Common Stock shall be Ten Million (10,000,000) shares of
Acquiror Common Stock, reduced as a result of any Dissenting Shares. At the
Effective Time, each share of Target Common Stock (assuming the conversion of
all outstanding Target Preferred Stock into Common Stock prior to the
Effective Time) issued and outstanding immediately prior to the Effective
Time will be canceled and extinguished and be converted automatically into
the right to receive that number of shares of Acquiror Common Stock obtained
by dividing Ten Million (10,000,000) by the total amount of shares of Target
Capital Stock, plus all reserved but ungranted options to purchase Target
Common Stock, issued and outstanding immediately prior to the Effective Time
as set forth on SCHEDULE 1.6 hereto (the "Exchange Ratio"). Notwithstanding
the foregoing, if, based on the average of the closing prices of Acquiror's
Common Stock as quoted on the Nasdaq National Market System for the ten (10)
trading days immediately preceding (and including) the second trading day
prior to the Effective Time (the "Closing Price"), the product of (x) the
total number of shares of Acquiror Common Stock to be issued (including
Acquiror Common Stock to be reserved for issuance upon exercise of Target
options issued by Acquiror under the Target Stock Option Plan) and (y) the
Closing Price (such product defined herein as the "Total Value") exceeds
$87,015,303, the Exchange Ratio shall be reduced such that the Total Value
shall be $87,015,303. The limit on the Total Value herein shall be
recalculated in accordance with the preceding formula based upon the total
number of shares of Acquiror Common Stock to be issued (including Acquiror
Common Stock to be reserved for issuance upon exercise of Target options
issued by Acquiror under the Target Stock Option Plan) as calculated
immediately prior to the Effective Time; in no event shall the Total Value
exceed $90,000,000. No other adjustment shall be made in the
3.
Exchange Ratio as a result of any cash proceeds received by Target from the
date hereof to the Closing Date pursuant to the exercise of currently
outstanding options to acquire Target Common Stock.
(b) CANCELLATION OF TARGET COMMON STOCK OWNED BY ACQUIROR
OR TARGET. At the Effective Time, all shares of Target Common Stock that are
owned by Target as treasury stock and each share of Target Common Stock owned by
Acquiror or any direct or indirect wholly-owned subsidiary of Acquiror or of
Target immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) TARGET STOCK OPTION PLANS. At the Effective Time,
Target's 1996 Stock Option/Stock Issuance Plan (the "Target Stock Option Plan")
and all options to purchase Target Common Stock then outstanding under the
Target Stock Option Plan shall be assumed by Acquiror in accordance with Section
5.13.
(d) CAPITAL STOCK OF MERGER SUB. At the Effective Time,
each share of Common Stock, $.0001 par value, of Merger Sub ("Merger Sub Common
Stock") issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock, $.0001 par value, of the Surviving
Corporation. Each stock certificate of Merger Sub evidencing ownership of any
such shares shall continue to evidence ownership of such shares of capital stock
of the Surviving Corporation.
(e) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio
shall be adjusted to reflect fully the effect of any stock split, reverse split,
stock dividend (including any dividend or distribution of securities convertible
into Acquiror Common Stock or Target Common Stock), reorganization,
recapitalization or other like change with respect to Acquiror Common Stock or
Target Common Stock occurring after the date hereof and prior to the Effective
Time.
(f) FRACTIONAL SHARES. No fraction of a share of Acquiror
Common Stock will be issued, but in lieu thereof each holder of shares of Target
Common Stock who would otherwise be entitled to a fraction of a share of
Acquiror Common Stock (after aggregating all fractional shares of Acquiror
Common Stock to be received by such holder) shall receive from Acquiror an
amount of cash (rounded to the nearest whole cent) equal to the product of (i)
such fraction, multiplied by (ii) the average of the closing prices of a share
of Acquiror Common Stock for the ten most recent days that Acquiror Common Stock
has traded ending on the trading day immediately prior to the Effective Time, as
reported on the Nasdaq National Market.
(g) DISSENTERS' RIGHTS. Any shares held by persons who
have not voted in favor of the Merger and with respect to which such persons
shall become entitled to exercise dissenters' rights under Delaware Law
("Dissenting Shares") shall not be converted into Acquiror
4.
Common Stock but shall instead be converted into the right to receive such
consideration as may be determined to be due with respect to such Dissenting
Shares pursuant to Delaware Law. Target agrees that, except with the prior
written consent of Acquiror, which shall not be unreasonably withheld, or as
required under Delaware Law, it will not voluntarily make any payment with
respect to, or settle or offer to settle, any such purchase demand. Each
holder of Dissenting Shares ("Dissenting Stockholder") who, pursuant to the
provisions of Delaware Law, becomes entitled to payment of the fair value for
shares of Target Capital Stock shall receive payment therefor (but only after
the value therefor shall have been agreed upon or finally determined pursuant
to such provisions). If, after the Effective Time, any Dissenting Shares
shall lose their status as Dissenting Shares, Acquiror shall issue and
deliver, upon surrender by such stockholder of certificate or certificates
representing shares of Target Capital Stock, the number of shares of Acquiror
Common Stock to which such stockholder would otherwise be entitled under this
Section 1.6 and the Certificate of Merger less the number of shares allocable
to such stockholder that have been deposited in the Escrow Fund (as defined
below) in respect of such shares of Acquiror Common Stock pursuant to Section
2.2(c) and Article VIII hereof.
1.7 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. The First National Bank of Boston
shall act as exchange agent (the "Exchange Agent") in the Merger.
(b) ACQUIROR TO PROVIDE COMMON STOCK AND CASH. Promptly after
the Effective Time, Acquiror shall make available to the Exchange Agent for
exchange in accordance with this Article I, through such reasonable
procedures as Acquiror may adopt, (i) the shares of Acquiror Common Stock
issuable pursuant to Section 1.6(a) in exchange for shares of Target Capital
Stock outstanding immediately prior to the Effective Time less the number of
shares of Acquiror Common Stock to be deposited into an escrow fund (the
"Escrow Fund") pursuant to the requirements of Article VIII and (ii) cash in
an amount sufficient to permit payment of cash in lieu of fractional shares
pursuant to Section 1.6(g).
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time,
the Surviving Corporation shall cause to be mailed to each holder of record
of a certificate or certificates (the "Certificates") which immediately prior
to the Effective Time represented outstanding shares of Target Capital Stock,
whose shares were converted into the right to receive shares of Acquiror
Common Stock (and cash in lieu of fractional shares) pursuant to Section 1.6,
(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 receipt of the Certificates by the Exchange Agent, and shall be in such
form and have such other provisions as Acquiror may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Acquiror Common Stock (and
cash in lieu of fractional shares). Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Acquiror, together with such letter of transmittal, duly
completed and validly
5.
executed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing the number of whole shares of Acquiror Common Stock less the
number of shares of Acquiror Common Stock to be deposited in the Escrow Fund
on such holder's behalf pursuant to Article VIII hereof and payment in lieu
of fractional shares which such holder has the right to receive pursuant to
Section 1.6, and the Certificate so surrendered shall forthwith be canceled.
Until so surrendered, each outstanding Certificate that, prior to the
Effective Time, represented shares of Target Capital Stock will be deemed
from and after the Effective Time, for all corporate purposes, other than the
payment of dividends, to evidence the ownership of the number of full shares
of Acquiror Common Stock into which such shares of Target Capital Stock shall
have been so converted and the right to receive an amount in cash in lieu of
the issuance of any fractional shares in accordance with Section 1.6. As soon
as practicable after the Effective Time, and subject to and in accordance
with the provisions of Article VIII hereof, Acquiror shall cause to be
distributed to the Escrow Agent (as defined in Article VIII hereof) a
certificate or certificates representing shares of Acquiror Common Stock
which shall be registered in the name of the Escrow Agent as nominee for the
holders of Certificates cancelled pursuant to this Section 1.7. Such shares
shall be beneficially owned by such holders and shall be held in escrow and
shall be available to compensate Acquiror for certain damages as provided in
Article VIII. To the extent not used for such purposes, such shares shall be
released, all as provided in Article VIII hereof.
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions with respect to Acquiror Common Stock with a
record date after the Effective Time will be paid to the holder of any
unsurrendered Certificate with respect to the shares of Acquiror Common Stock
represented thereby until the holder of record of such Certificate shall
surrender such Certificate. Subject to applicable law, following surrender
of any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Acquiror Common Stock issued in
exchange therefor, without interest, at the time of such surrender, the
amount of any such dividends or other distributions with a record date after
the Effective Time theretofore payable (but for the provisions of this
Section 1.7(d)) with respect to such shares of Acquiror Common Stock.
(e) TRANSFERS OF OWNERSHIP. If any certificate for shares of
Acquiror Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will have paid to Acquiror or any agent
designated by it any transfer or other taxes required by reason of the
issuance of a certificate for shares of Acquiror Common Stock in any name
other than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of Acquiror or any agent designated by it
that such tax has been paid or is not payable.
6.
(f) NO LIABILITY. Notwithstanding anything to the contrary in
this Section 1.7, none of the Exchange Agent, the Surviving Corporation or
any party hereto shall be liable to any person for any amount properly paid
to a public official pursuant to and in compliance with any applicable
abandoned property, escheat or similar law.
(g) DISSENTING SHARES. The provisions of this Section 1.7
shall also apply to Dissenting Shares that lose their status as such, except
that the obligations of Acquiror under this Section 1.7 shall commence on the
date of loss of such status and the holder of such shares shall be entitled
to receive in exchange for such shares the number of shares of Acquiror
Common Stock to which such holder is entitled pursuant to Section 1.6 hereof.
1.8 NO FURTHER OWNERSHIP RIGHTS IN TARGET CAPITAL STOCK. All
shares of Acquiror Common Stock issued upon the surrender for exchange of
shares of Target Capital Stock in accordance with the terms hereof (including
any cash paid in lieu of fractional shares) shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Target
Capital Stock and there shall be no further registration of transfers on the
records of the Surviving Corporation of shares of Target Capital Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article
I.
1.9 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof, such shares of
Acquiror Common Stock (and cash in lieu of fractional shares) as may be
required pursuant to Section 1.6; provided, however, that Acquiror may, in
its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed Certificates to deliver a bond in
such sum as it may reasonably direct as indemnity against any claim that may
be made against Acquiror, the Surviving Corporation or the Exchange Agent
with respect to the Certificates alleged to have been lost, stolen or
destroyed.
1.10 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the
parties hereto that the Merger shall (i) constitute a reorganization within
the meaning of Section 368 of the Code and (ii) qualify for accounting
treatment as a pooling of interests.
1.11 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time
after the Effective Time, any further action is necessary or desirable to
carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of Target and Merger Sub, the
officers and directors of Target and Merger Sub are fully authorized in the
name of third respective corporations or otherwise to take, and will take,
all such lawful and necessary action, so long as such action is not
inconsistent with this Agreement.
7.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TARGET
In this Agreement, any reference to any event, change, condition or
effect being "material" with respect to any entity or group of entities means
any material event, change, condition or effect related to the financial
condition, properties, assets (including intangible assets), liabilities,
business, operations or results of operations of such entity or group of
entities. In this Agreement, any reference to a "Material Adverse Effect"
with respect to any entity or group of entities means any event, change or
effect that is materially adverse to the financial condition, properties,
assets, liabilities, business, operations or results of operations of such
entity and its subsidiaries, taken as a whole.
In this Agreement, any reference to a party's "knowledge" means such
party's actual knowledge after due and diligent inquiry of officers,
directors and other employees of such party reasonably believed to have
knowledge of such matters.
Except as disclosed in a document of even date herewith and
delivered by Target to Acquiror prior to the execution and delivery of this
Agreement and referring to the representations and warranties in this
Agreement (the "Target Disclosure Schedule"), Target represents and warrants
to Acquiror and Merger Sub as follows:
2.1 ORGANIZATION, STANDING AND POWER. Target is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Target has the corporate power to own its
properties and to carry on its business as now being conducted and as
proposed to be conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified and in
good standing would have a Material Adverse Effect on Target. Target has
delivered a true and correct copy of the Certificate of Incorporation and
Bylaws or other charter documents, as applicable, of Target, each as amended
to date, to Acquiror. Target is not in violation of any of the provisions of
its Certificate of Incorporation or Bylaws or equivalent organizational
documents. Target does not directly or indirectly own any equity or similar
interest in, or any interest convertible or exchangeable or exercisable for,
any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity.
2.2 CAPITAL STRUCTURE. The authorized capital stock of Target
consists of 14,000,000 shares of Common Stock and 6,000,000 shares of
Preferred Stock, of which there were issued and outstanding as of the close
of business on June 10, 1997, 2,190,554 shares of Common Stock, 2,574,310
shares of Series A Preferred Stock (the "Series A Preferred") that are
convertible
8.
into 2,574,310 shares of Common Stock, and 2,333,334 shares of Series B
Preferred Stock (the "Series B Preferred") that are convertible into
2,333,334 shares of Common Stock. There are no other outstanding shares of
capital stock or voting securities and no outstanding commitments to issue
any shares of capital stock or voting securities after June 10, 1997 other
than pursuant to the exercise of options outstanding as of such date under
the Target Stock Option Plan. All outstanding shares of Target Capital Stock
are duly authorized, validly issued, fully paid and non-assessable and are
free of any liens or encumbrances other than any liens or encumbrances
created by or imposed upon the holders thereof, and are not subject to
preemptive rights or rights of first refusal created by statute, the
Certificate of Incorporation or Bylaws of Target or any agreement to which
Target is a party or by which it is bound. As of the close of business on
June 10, 1997, Target has reserved (i) 1,350,000 shares of Target Common
Stock for issuance to employees, officers, directors and consultants pursuant
to the Target Stock Option Plan, of which no shares have been issued pursuant
to option exercises or direct stock purchases, 1,069,833 shares are subject
to outstanding, unexercised options, and no shares are subject to outstanding
stock purchase rights. Since June 10, 1997, Target has not (i) issued or
granted additional options under the Target Stock Option Plan or (ii) granted
additional warrants or options (other than Target Options) to acquire Target
Capital Stock. Except for (i) the rights created pursuant to this Agreement
and the Target Stock Option Plan, (ii) Target's right to repurchase any
unvested shares under the Target Stock Option Plan and (iii) options and
warrants referred to in this Section 2.2, there are no other options,
warrants, calls, rights, commitments or agreements of any character to which
Target is a party or by which it is bound obligating Target to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of capital stock of Target or obligating
Target to grant, extend, accelerate the vesting of, change the price of, or
otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. There are no other contracts, commitments or
agreements relating to voting, purchase or sale of Target's capital stock (i)
between or among Target and any of its stockholders and (ii) to Target's
knowledge, between or among any of Target's stockholders, except for the
stockholders delivering Irrevocable Proxies (as defined below). The terms of
the Target Stock Option Plan permit the assumption or substitution of options
or warrants, as applicable, to purchase Acquiror Common Stock as provided in
this Agreement, without the consent or approval of the holders of such
securities, the Target stockholders, or otherwise and without any
acceleration of the exercise schedule or vesting provisions in effect for
those options. True and complete copies of all agreements and instruments
relating to or issued under the Target Stock Option Plan have been made
available to Acquiror and such agreements and instruments have not been
amended, modified or supplemented, and there are no agreements to amend,
modify or supplement such agreements or instruments in any case from the form
made available to Acquiror. All outstanding Target Capital Stock was issued
in compliance with all applicable federal and state securities laws.
2.3 AUTHORITY. Target has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Target, subject
only to the
9.
approval of the Merger by Target's stockholders as contemplated by Section
6.1(a). This Agreement has been duly executed and delivered by Target and
constitutes the valid and binding obligation of Target enforceable against
Target in accordance with its terms, except that such enforceability may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting
or relating to creditors' rights generally, and is subject to general
principles of equity. The execution and delivery of this Agreement by Target
does not, and the consummation of the transactions contemplated hereby will
not, conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any material obligation or loss
of any material benefit under (i) any provision of the Certificate of
Incorporation or Bylaws of Target or any of its subsidiaries, as amended, or
(ii) any material mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Target or any of
its subsidiaries or any of their properties or assets except where such
conflict, violation, default, termination, cancellation or acceleration with
respect to the foregoing provisions of (ii) would not be reasonably expected
to have a Material Adverse Effect on Target. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality ("Governmental Entity") is required by or with respect to
Target or any of its subsidiaries in connection with the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the Certificate of Merger
as provided in Section 1.2, (ii) the filing with the Securities and Exchange
Commission (the "SEC") and the National Association of Securities Dealers,
Inc. (the "NASD") of the Proxy Statement (as defined in Section 2.24)
relating to the Acquiror Stockholders Meeting (as defined in Section 2.24)
and the Target Stockholders Meeting (as defined in Section 2.24), (iii) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state securities laws and the
securities laws of any foreign country; (iv) such filings as may be required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
("HSR"); and (v) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material
Adverse Effect on Target and would not prevent, or materially alter or delay
any of the transactions contemplated by this Agreement or the Option
Agreement.
2.4 FINANCIAL STATEMENTS. Target has delivered to Acquiror its
unaudited financial statements for the fiscal year ended December 31, 1996,
and its unaudited financial statements (balance sheet, statement of
operations and statement of cash flows) on a consolidated basis as at, and
for the five-month period ended May 31, 1997 (collectively, the "Financial
Statements"). The Financial Statements are complete and correct in all
material respects and have been prepared in accordance with generally
accepted accounting principles (except that the unaudited financial
statements do not have notes thereto) applied on a consistent basis
throughout the periods indicated and with each other. The Financial
Statements fairly present the financial condition and operating results of
Target as of the dates, and for the periods, indicated therein, subject to
normal year-end audit adjustments. Target maintains a standard system of
accounting established and administered in accordance with generally accepted
accounting principles.
10.
2.5 ABSENCE OF CERTAIN CHANGES. Since May 31, 1997 (the "Target
Balance Sheet Date"), Target has conducted its business in the ordinary
course consistent with past practice and there has not occurred: (i) any
change, event or condition (whether or not covered by insurance) that has
resulted in, or might reasonably be expected to result in, a Material Adverse
Effect on Target; (ii) any acquisition, sale or transfer of any material
asset of Target or any of its subsidiaries other than in the ordinary course
of business and consistent with past practice; (iii) any change in accounting
methods or practices (including any change in depreciation or amortization
policies or rates) by Target or any revaluation by Target of any of its or
any of its subsidiaries' assets; (iv) any declaration, setting aside, or
payment of a dividend or other distribution with respect to the shares of
Target, or any direct or indirect redemption, purchase or other acquisition
by Target of any of its shares of capital stock; (v) any material contract
entered into by Target or any of its subsidiaries, other than in the ordinary
course of business and as provided to Acquiror, or any material amendment or
termination of, or default under, any material contract to which Target or
any of its subsidiaries is a party or by which it is bound; (vi) any
amendment or change to the Certificate of Incorporation or Bylaws of Target;
(vii) any increase in or modification of the compensation or benefits payable
or to become payable by Target to any of its directors or employees or (viii)
any negotiation or agreement by Target to do any of the things described in
the preceding clauses (i) through (vii) (other than negotiations with
Acquiror and its representatives regarding the transactions contemplated by
this Agreement).
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. Target has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet for the period ended May 31, 1997 (the "Target Balance Sheet"),
(ii) those incurred in the ordinary course of business and not required to be
set forth in the Target Balance Sheet under generally accepted accounting
principles, (iii) those incurred in the ordinary course of business since the
Target Balance Sheet Date and consistent with past practice, and (iv) those
incurred in connection with the execution of this Agreement.
2.7 LITIGATION. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency,
court or tribunal, foreign or domestic, or, to the knowledge of Target or any
of its subsidiaries, threatened against Target or any of its subsidiaries or
any of their respective properties or any of their respective officers or
directors (in their capacities as such) that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on
Target. There is no judgment, decree or order against Target or any of its
subsidiaries, or, to the knowledge of Target and its subsidiaries, any of
their respective directors or officers (in their capacities as such), that
could prevent, enjoin, or materially alter or delay any of the transactions
contemplated by this Agreement, or that could reasonably be expected to have
a Material Adverse Effect on Target. All litigation to which Target is a
party (or, to the knowledge of Target, threatened to become a party) is
disclosed in the Target Disclosure Schedule.
11.
2.8 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
judgment, injunction, order or decree binding upon Target which has or could
reasonably be expected to have the effect of prohibiting or materially
impairing any current or future business practice of Target, any acquisition
of property by Target or the conduct of business by Target as currently
conducted or as proposed to be conducted by Target.
2.9 GOVERNMENTAL AUTHORIZATION. Target has obtained each federal,
state, county, local or foreign governmental consent, license, permit, grant,
or other authorization of a Governmental Entity (i) pursuant to which Target
currently operates or holds any interest in any of its properties or (ii)
that is required for the operation of Target's business or the holding of any
such interest ((i) and (ii) herein collectively called "Target
Authorizations"), and all of such Target Authorizations are in full force and
effect, except where the failure to obtain or have any such Target
Authorizations could not reasonably be expected to have a Material Adverse
Effect on Target.
2.10 TITLE TO PROPERTY. Target has good and marketable title to
all of its properties, interests in properties and assets, real and personal,
reflected in the Target Balance Sheet or acquired after the Target Balance
Sheet Date (except properties, interests in properties and assets sold or
otherwise disposed of since the Target Balance Sheet Date in the ordinary
course of business), or with respect to leased properties and assets, valid
leasehold interests in, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except (i) the lien of
current taxes not yet due and payable, (ii) such imperfections of title,
liens and easements as do not and will not materially detract from or
interfere with the use of the properties subject thereto or affected thereby,
or otherwise materially impair business operations involving such properties
and (iii) liens securing debt which is reflected on the Target Balance Sheet.
The plants, property and equipment of Target and its subsidiaries that are
used in the operations of their businesses are in all material respects in
good operating condition and repair subject to reasonable wear and tear. All
properties used in the operations of Target are reflected in the Target
Balance Sheet to the extent generally accepted accounting principles require
the same to be reflected. SCHEDULE 2.10 identifies each parcel of real
property owned or leased by Target.
2.11 INTELLECTUAL PROPERTY.
(a) Target owns, licenses or otherwise possesses legally
enforceable rights to use all patents, trademarks, trade names, service
marks, copyrights, and any applications therefor, maskworks, net lists,
schematics, technology, know-how, trade secrets, inventory, ideas,
algorithms, processes, computer software programs or applications (in both
source code and object code form), and tangible or intangible proprietary
information or material ("Intellectual Property") that are used or currently
proposed to be used in the business of Target as currently conducted or as
proposed to be conducted by Target, except to the extent that the failure to
have such rights have not had and would not reasonably be expected to have a
Material Adverse Effect on Target.
12.
(b) SCHEDULE 2.11 lists (i) all patents and patent
applications and all registered and unregistered trademarks, trade names and
service marks, registered copyrights, included in the Intellectual Property,
including the jurisdictions in which each such Intellectual Property right
has been issued or registered or in which any application for such issuance
and registration has been filed, (ii) all licenses, sublicenses and other
agreements as to which Target is a party and pursuant to which any person is
authorized to use any Intellectual Property of Target, and (iii) all
licenses, sublicenses and other agreements as to which Target is a party and
pursuant to which Target is authorized to use any third party patents,
trademarks or copyrights, including software ("Third Party Intellectual
Property Rights") which are incorporated in, are, or form a part of any
Target product that is material to its business.
(c) There is no material unauthorized use, disclosure,
infringement or misappropriation of any Intellectual Property rights of
Target, any trade secret material to Target, or any Intellectual Property
right of any third party to the extent licensed by or through Target, by any
third party, including any employee or former employee of Target. Target has
not entered into any agreement to indemnify any other person against any
charge of infringement of any Intellectual Property, other than
indemnification provisions contained in sales invoices arising in the
ordinary course of business.
(d) Target is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations under
this Agreement, in breach of any license, sublicense or other agreement
relating to the Intellectual Property or Third Party Intellectual Property
Rights, the breach of which would have a Material Adverse Effect on Target.
(e) All patents, registered trademarks, service marks and
copyrights held by Target are valid and subsisting. Target (i) has not been
sued in any suit, action or proceeding which involves a claim of infringement
of any patents, trademarks, service marks, copyrights or violation of any
trade secret or other proprietary right of any third party; and (ii) has not
brought any action, suit or proceeding for infringement of Intellectual
Property or breach of any license or agreement involving Intellectual
Property against any third party. The manufacturing, marketing, licensing or
sale of its product does not infringe any patent, trademark, service mark,
copyright, trade secret or other proprietary right of any third party, where
such infringement would have a Material Adverse Effect on Target.
(f) Target has secured valid written assignments from all
consultants and employees who contributed to the creation or development of
Intellectual Property of the rights to such contributions that Target does
not already own by operation of law, the absence of which would have a
Material Adverse Effect on Target.
(g) All use, disclosure or appropriation of Intellectual
Property not otherwise protected by patents, patent applications or copyright
("Confidential Information"),
13.
owned by Target by or to a third party has been pursuant to the terms of a
written agreement between Target and such third party. All use, disclosure
or appropriation of Confidential Information not owned by Target has been
pursuant to the terms of a written agreement between Target and the owner of
such Confidential Information, or is otherwise lawful.
2.12 ENVIRONMENTAL MATTERS.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any
federal, state or local laws, ordinances, codes, regulations, rules, policies
and orders that are intended to assure the protection of the environment, or
that classify, regulate, call for the remediation of, require reporting with
respect to, or list or define air, water, groundwater, solid waste, hazardous
or toxic substances, materials, wastes, pollutants or contaminants, or which
are intended to assure the safety of employees, workers or other persons,
including the public.
(ii) "Hazardous Materials" shall mean any toxic or
hazardous substance, material or waste or any pollutant or contaminant, or
infectious or radioactive substance or material, including without
limitation, those substances, materials and wastes defined in or regulated
under any Environmental and Safety Laws.
(iii) "Property" shall mean all real property leased or
owned by Target or its subsidiaries either currently or in the past.
(iv) "Facilities" shall mean all buildings and
improvements on the Property of Target or its subsidiaries.
(b) Except in all cases as, in the aggregate, have not had
and would not be reasonably expected to have a Material Adverse Effect on
Target, Target represents and warrants as follows: (i) to Target's knowledge,
no methylene chloride or asbestos is contained in or has been used at or
released from the Facilities; (ii) to Target's knowledge, all Hazardous
Materials and wastes have been disposed of in accordance with all
Environmental and Safety Laws; and (iii) Target and its subsidiaries have
received no written notice of any noncompliance of the Facilities or its past
or present operations with Environmental and Safety laws; (iv) no notices,
administrative actions or suits are pending, or, to Target's knowledge,
threatened relating to a violation of any Environmental and Safety Laws; (v)
to Target's knowledge, neither Target nor its subsidiaries are a potentially
responsible party under the federal Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA), or state analog statute, arising out
of events occurring prior to the Closing Date; (vi) to Target's knowledge,
there have not been in the past, and are not now, any Hazardous Materials on,
under or migrating to or from the Facilities or Property; (vii) to Target's
knowledge, there have not been in the past, and are not now, any underground
tanks or
14.
underground improvements at, on or under the Property including without
limitation, treatment or storage tanks, sumps, or water, gas or oil wells;
(viii) Target has not deposited, stored, disposed of or located
polychlorinated biphenyls (PCB) on the Property or Facilities or any
equipment on the Property containing PCBs at levels in excess of 50 parts per
million; (ix) to Target's knowledge, there is no formaldehyde on the Property
or in the Facilities, nor any insulating material containing urea
formaldehyde in the Facilities; (x) to Target's knowledge, the Facilities and
Target's and its subsidiaries uses and activities therein have at all times
complied with all Environmental and Safety Laws; and (xi) Target and its
subsidiaries have all the permits and licenses required to be issued and are
in full compliance with the terms and conditions of those permits.
2.13 TAXES.
(a) Target and any consolidated, combined or unitary group
for Tax purposes of which Target is or has been a member have timely filed
all Tax Returns required to be filed by them and have paid all Taxes shown
thereon to be due. The Financial Statements (i) fully accrue all actual and,
except in the case of unaudited Financial Statements, contingent liabilities
for Taxes with respect to all periods through May 31, 1997 and Target has not
and will not incur any Tax liability in excess of the amount reflected on the
Financial Statements with respect to such periods. No material Tax liability
has accrued or been incurred or will be accrued or incurred by Target for
periods after May 31, 1997, through the Effective Time, other than in the
ordinary course of business. The Financial Statements and the Target Closing
Disclosure Schedule properly reflects the amount of any net operating loss
and tax credit carryforwards available with respect to Target and a
limitation on the use of such losses or credits, subject to any limitations
arising from the Merger. Target has withheld and paid to the applicable
financial institution or Tax Authority all amounts required to be withheld.
No notice of deficiency or similar document of any Tax Authority has been
received by Target, and there are no liabilities for Taxes with respect to
the issues that have been raised (and are currently pending) by any Tax
Authority that could, if determined adversely to Target, materially and
adversely affect the liability of Target for Taxes. There is (i) no material
claim for Taxes that is a lien against the property of Target other than
liens for Taxes not yet due and payable, (ii) Target has received no
notification of any audit of any Tax Return of Target being conducted pending
or threatened by a Tax authority, (iii) no extension or waiver of the statute
of limitations on the assessment of any Taxes granted by Target and currently
in effect, and (iv) no agreement, contract or arrangement to which Target is
a party that may result in the payment of any material amount that would not
be deductible by reason of Sections 162(m), 280G or 404 of the Code. Target
will not be required to include any material adjustment in Taxable income for
any Tax period (or portion thereof) pursuant to Section 481 or 263A of the
Code or any comparable provision under state or foreign Tax laws as a result
of transactions, events or accounting methods employed prior to the Merger.
Target is not a party to any tax sharing or tax allocation agreement nor does
Target owe any amount under any such agreement. For purposes of this
Agreement, the following terms have the following meanings: "Tax" (and, with
correlative meaning, "Taxes" and "Taxable") means (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license,
15.
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, environmental or windfall profit tax, customs duty or
other tax governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or any penalty, addition to tax or
additional amount imposed by any Governmental Entity (a "Tax Authority")
responsible for the imposition of any such tax (domestic or foreign), (ii)
any liability for the payment of any amounts of the type described in (i) as
a result of being a member of an affiliated, consolidated, combined or
unitary group for any Taxable period and (iii) any liability for the payment
of any amounts of the type described in (i) or (ii) as a result of any
express or implied obligation to indemnify any other person. As used herein,
"Tax Return" shall mean any return, statement, report or form (including,
without limitation,) estimated Tax returns and reports, withholding Tax
returns and reports and information reports and returns required to be filed
with respect to Taxes. Target and each of its subsidiaries are in full
compliance with all terms and conditions of any Tax exemptions or other
Tax-sparing agreement or order of a foreign government applicable to them and
the consummation of the Merger shall not have any adverse effect on the
continued validity and effectiveness of any such Tax exemptions or other
Tax-sparing agreement or order.
2.14 EMPLOYEE BENEFIT PLANS.
(a) SCHEDULE 2.14 lists, with respect to Target and any trade
or business (whether or not incorporated) which is treated as a single
employer with Target (an "ERISA Affiliate") within the meaning of Section
414(b), (c), (m) or (o) of the Code, (i) all material employee benefit plans
(as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), (ii) each loan to a non-officer employee in
excess of $10,000, loans to officers and directors and any stock option,
stock purchase, phantom stock, stock appreciation right, supplemental
retirement, severance, sabbatical, medical, dental, vision care, disability,
employee relocation, cafeteria benefit (Code section 125) or dependent care
(Code section 129), life insurance or accident insurance plans, programs or
arrangements, (iii) all bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements, (iv) other fringe
or employee benefit plans, programs or arrangements that apply to senior
management of Target and that do not generally apply to all employees, and
(v) any current or former employment or executive compensation or severance
agreements, written or otherwise, as to which unsatisfied obligations of
Target of greater than $10,000 remain for the benefit of, or relating to, any
present or former employee, consultant or director of Target (together, the
"Target Employee Plans").
(b) Target has furnished to Acquiror a copy of each, if any,
of the Target Employee Plans and related plan documents (including trust
documents, insurance policies or contracts, employee booklets, summary plan
descriptions and other authorizing documents, and, to the extent still in its
possession, any material employee communications relating thereto) and has,
with respect to each Target Employee Plan which is subject to ERISA reporting
requirements, provided copies of the Form 5500 reports filed for the last
three plan years. Any Target Employee Plan intended to be qualified under
Section 401(a) of the Code has either obtained from the Internal
16.
Revenue Service a favorable determination letter as to its qualified status
under the Code, including all amendments to the Code effected by the Tax
Reform Act of 1986 and subsequent legislation, or has applied to the Internal
Revenue Service for such a determination letter prior to the expiration of
the requisite period under applicable Treasury Regulations or Internal
Revenue Service pronouncements in which to apply for such determination
letter and to make any amendments necessary to obtain a favorable
determination, or has been established under a standardized prototype plan
for which an Internal Revenue Service opinion letter has been obtained by the
plan sponsor and is valid as to the adopting employer. Target has also
furnished Acquiror with the most recent Internal Revenue Service
determination or opinion letter issued with respect to each such Target
Employee Plan, and nothing has occurred since the issuance of each such
letter which could reasonably be expected to cause the loss of the
tax-qualified status of any Target Employee Plan subject to Code Section
401(a).
(c) (i) None of the Target Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person,
except as required by the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA"); (ii) there has been no "prohibited transaction," as such term
is defined in Section 406 of ERISA and Section 4975 of the Code, with respect
to any Target Employee Plan, which could reasonably be expected to have, in
the aggregate, a Material Adverse Effect on Target; (iii) each Target
Employee Plan has been administered in accordance with its terms and in
compliance with the requirements prescribed by any and all statutes, rules
and regulations (including ERISA and the Code), except as would not have, in
the aggregate, a Material Adverse Effect on Target, and Target and each ERISA
Affiliate have performed all material obligations required to be performed by
them under, are not in any material respect in default under or violation of,
and have no knowledge of any material default or violation by any other party
to, any of the Target Employee Plans; (iv) neither Target nor any ERISA
Affiliate is subject to any liability or penalty under Sections 4976 through
4980 of the Code or Title I of ERISA with respect to any of the Target
Employee Plans which have a Material Adverse Effect on any parties; (v) all
material contributions required to be made by Target or any ERISA Affiliate
to any Target Employee Plan have been made on or before their due dates and a
reasonable amount has been accrued for contributions to each Target Employee
Plan for the current plan years; (vi) with respect to each Target Employee
Plan, no "reportable event" within the meaning of Section 4043 of ERISA
(excluding any such event for which the thirty (30) day notice requirement
has been waived under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 or ERISA has occurred; and (vii) no
Target Employee Plan is covered by, and neither Target nor any ERISA
Affiliate has incurred or expects to incur any liability under Title IV of
ERISA or Section 412 of the Code. With respect to each Target Employee Plan
subject to ERISA as either an employee pension plan within the meaning of
Section 3(2) of ERISA or an employee welfare benefit plan within the meaning
of Section 3(l) of ERISA, Target has prepared in good faith and timely filed
all requisite governmental reports (which were true and correct as of the
date filed) and has properly and timely filed and distributed or posted all
notices and reports to employees required to be filed, distributed or posted
with respect to each such Target Employee Plan except as would not have a
Material Adverse Effect. No suit, administrative proceeding,
17.
action or other litigation has been brought, or to the knowledge of Target is
threatened, against or with respect to any such Target Employee Plan,
including any audit or inquiry by the IRS or United States Department of
Labor. Neither Target nor any Target subsidiary or other ERISA Affiliate is
a party to, or has made any contribution to or otherwise incurred any
obligation under, any "multiemployer plan" as defined in Section 3(37) of
ERISA.
(d) With respect to each Target Employee Plan, Target has
complied with (i) the applicable health care continuation and notice
provisions of COBRA and the proposed regulations thereunder and (ii) the
applicable requirements of the Family and Medical Leave Act of 1993 and the
regulations thereunder, except to the extent that such failure to comply
would not, in the aggregate, have a Material Adverse Effect on Target.
(e) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other
service provider of Target or any other ERISA Affiliate to severance benefits
or any other payment (including, without limitation, unemployment
compensation, golden parachute or bonus), except as expressly provided in
this Agreement, or (ii) accelerate the time of payment or vesting of any such
benefits, or increase the amount of compensation due any such employee or
service provider.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by Target or other ERISA Affiliate
relating to, or change in participation or coverage under, any Target
Employee Plan which would materially increase the expense of maintaining such
Plan above the level of expense incurred with respect to that Plan for the
most recent fiscal year included in Target's financial statements.
2.15 CERTAIN AGREEMENTS AFFECTED BY THE MERGER. Neither the
execution and delivery of this Agreement nor the consummation of the
transaction contemplated hereby will (i) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute,
bonus or otherwise) becoming due to any director or employee of Target, (ii)
materially increase any benefits otherwise payable by Target or (iii) result
in the acceleration of the time of payment or vesting of any such benefits.
2.16 EMPLOYEE MATTERS. Target is in compliance in all material
respects with all currently applicable laws and regulations respecting
employment, discrimination in employment, terms and conditions of employment,
wages, hours and occupational safety and health and employment practices, and
are not engaged in any unfair labor practice, except where failure to be in
compliance or the engagement in such unfair labor practices would not
reasonably be expected to have a Material Adverse Effect on Target. There
are no pending claims against Target under any workers compensation plan or
policy or for long term disability. Target has no material obligations under
COBRA with respect to any former employees or qualifying beneficiaries
thereunder except for obligations that would not reasonably be expected to
have a Material Adverse Effect on Target.
18.
There are no proceedings pending or, to the knowledge of Target, threatened,
between Target and its employees, which proceedings have or could reasonably
be expected to have a Material Adverse Effect on Target. Target is not a
party to any collective bargaining agreement or other labor unions contract
nor does Target know of any activities or proceedings of any labor union to
organize any such employees. In addition, Target has provided all employees,
with all relocation benefits, stock options, bonuses and incentives, and all
other compensation that such employee has earned up through the date of this
Agreement or that such employee was otherwise promised in their employment
agreements with Target.
2.17 INTERESTED PARTY TRANSACTIONS. Target is not indebted to any
director, officer, employee or agent of Target (except for amounts due as
normal salaries and bonuses and in reimbursement of ordinary expenses), and
no such person is indebted to Target.
2.18 INSURANCE. Target has policies of insurance and bonds of the
type and in amounts customarily carried by persons conducting businesses or
owning assets similar to those of Target. There is no material claim pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All
premiums due and payable under all such policies and bonds have been paid and
Target is otherwise in compliance with the terms of such policies and bonds.
Target has no knowledge of any threatened termination of, or material premium
increase with respect to, any of such policies.
2.19 COMPLIANCE WITH LAWS. Target has complied with, is not in
violation of, and has not received any notices of violation with respect to,
any federal, state, local or foreign statute, law or regulation with respect
to the conduct of its business, or the ownership or operation of its
business, except for such violations or failures to comply as could not be
reasonably expected to have a Material Adverse Effect on Target.
2.20 MINUTE BOOKS. The minute books of Target made available to
Acquiror contain a complete and accurate summary of all meetings of directors
and stockholders or actions by written consent since the time of
incorporation of Target through the date of this Agreement, and reflect all
transactions referred to in such minutes accurately in all material respects.
2.21 COMPLETE COPIES OF MATERIALS. Target has delivered or made
available true and complete copies of each document which has been requested
by Acquiror or its counsel in connection with their legal and accounting
review of Target. All the material contracts and agreements (as such terms
are defined in Regulation S-K promulgated under the Act) to which Target is a
party are listed in SCHEDULE 2.21 hereto.
2.22 POOLING OF INTERESTS. Neither Target nor, to the knowledge of
Target, any of its respective directors, officers or stockholders, has taken
any action which would interfere with Acquiror's ability to account for the
Merger as a pooling of interests.
19.
2.23 BROKERS' AND FINDERS' FEES. Target has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
2.24 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The
information supplied by Target for inclusion in the registration statement on
Form S-4 (or such other or successor form as shall be appropriate) pursuant
to which the shares of Acquiror Common Stock to be issued in the Merger will
be registered with the SEC (the "Registration Statement") shall not, at the
time the Registration Statement (including any amendments or supplements
thereto) is declared effective by the SEC, 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. The information
supplied by Target for inclusion in the proxy statement/prospectus to be sent
to the stockholders of Target and Acquiror in connection with the meeting of
Target's stockholders to consider the Merger (the "Target Stockholders
Meeting") and in connection with the meeting of Acquiror's stockholders to
consider the Merger (the "Acquiror Stockholders Meeting") (such proxy
statement/prospectus as amended or supplemented is referred to herein as the
"Proxy Statement") shall not, on the date the Proxy Statement is first mailed
to Target's stockholders and Acquiror's stockholders, at the time of the
Target Stockholders Meeting, at the time of the Acquiror Stockholders Meeting
and at the Effective Time, contain any statement which, at such time, is
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made therein, in
light of the circumstances under which they are made, not false or
misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Target Stockholders Meeting or the Acquiror Stockholders
Meeting which has become false or misleading. Notwithstanding the foregoing,
Target makes no representation, warranty or covenant with respect to any
information supplied by Acquiror or Merger Sub which is contained in any of
the foregoing documents.
2.25 AFFILIATE'S AGREEMENT; STOCKHOLDER'S REPRESENTATION AGREEMENT;
IRREVOCABLE PROXIES. All of the persons and/or entities deemed "Affiliates"
of Target within the meaning of Rule 145 promulgated under the Securities Act
and holders of more than 51% of the sum of (i) all shares of Target Common
Stock issued and outstanding and (ii) all shares of Target Preferred Stock
issued and outstanding, have agreed in writing to vote for approval of the
Merger pursuant to stockholder agreements attached hereto as EXHIBIT B-1 and
EXHIBIT F ("Target Affiliate's Agreement" and "Stockholder's Representation
Agreement", respectively), and pursuant to Irrevocable Proxies attached as
EXHIBIT A ("Irrevocable Proxies") to the Voting Agreement attached hereto as
EXHIBIT C-1 (the "Target Voting Agreement").
2.26 VOTE REQUIRED. The affirmative vote of (i) the holders of a
majority of the shares of Target's Common Stock and Preferred Stock voting
together as a single class outstanding
20.
on the record date set for the Target Stockholders Meeting and (ii) the
holders of a majority of the shares of Target's Preferred Stock voting
together as a single class outstanding on the record date set for the Target
Stockholder Meeting are the only votes of the holders of any of Target's
Capital Stock necessary to approve this Agreement and the transactions
contemplated hereby.
2.27 BOARD APPROVAL. The Board of Directors of Target has
unanimously approved this Agreement and the Merger, (ii) determined that in
its opinion the Merger is in the best interests of the stockholders of Target
and is on terms that are fair to such stockholders and (iii) recommended that
the stockholders of Target approve this Agreement and the Merger.
2.28 INVENTORY. The inventories shown on the Financial Statements
or thereafter acquired by Target, consisted of items of a quantity and
quality usable or salable in the ordinary course of business. Since May 31,
Target has, subject to any reasonable reserves contained in the Financial
Statements, continued to replenish inventories in a normal and customary
manner consistent with past practices. Target has not received notice that
it will experience in the foreseeable future any difficulty in obtaining, in
the desired quantity and quality and at a reasonable price and upon
reasonable terms and conditions, the raw materials, supplies or component
products required for the manufacture, assembly or production of its
products. The values at which inventories are carried reflect the inventory
valuation policy of Target, which is consistent with its past practice and in
accordance with generally accepted accounting principles applied on a
consistent basis. Since May 31, 1997, due provision was made on the books of
Target in the ordinary course of business consistent with past practices to
provide for all slow-moving, obsolete, or unusable inventories to their
estimated useful or scrap values and such inventory reserves are adequate to
provide for such slow-moving, obsolete or unusable inventory and inventory
shrinkage.
2.29 CUSTOMERS AND SUPPLIERS. As of the date hereof, no customer
which individually accounted for more than 10% of Target's gross revenues
during the 12 month period preceding the date hereof, and no supplier of
Target, has canceled or otherwise terminated, or made any written threat to
Target to cancel or otherwise terminate its relationship with Target, or has
at any time on or after May 31, 1997 decreased materially its services or
supplies to Target in the case of any such supplier, or its usage of the
services or products of Target in the case of such customer, and to Target's
knowledge, no such supplier or customer has indicated either orally or in
writing that it will cancel or otherwise terminate its relationship with
Target or to decrease materially its services or supplies to Target or its
usage of the services or products of Target, as the case may be. Target has
not knowingly breached, so as to provide a benefit to Target that was not
intended by the parties, any agreement with, or engaged in any fraudulent
conduct with respect to, any customer or supplier of Target.
2.30 PRELIMINARY POOLING LETTER. Target has caused Coopers &
Lybrand L.L.C., Target's independent auditors, to deliver to Acquiror on or
prior to the date hereof a draft letter setting forth the preliminary conclusion
of Coopers & Lybrand L.L.C. that, assuming Acquiror is a corporation eligible to
be a party to a transaction seeking pooling of interests accounting treatment
21.
and that the participation of Acquiror in the Merger will not, in and of
itself, disqualify the Merger from qualifying for pooling of interests
accounting treatment, the Merger will qualify for pooling of interests
accounting treatment if consummated in accordance with this Agreement.
2.31 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by Target herein or in any Schedule or Exhibit hereto,
including the Target Disclosure Schedule, or certificate furnished by Target
pursuant to this Agreement or any written statement furnished to Acquiror
pursuant hereto or in connection with the transactions contemplated hereby,
when all such documents are read together in their entirety, contains or will
contain at the Effective Time any untrue statement of a material fact, or
omits or will omit at the Effective Time to state any material fact necessary
in order to make the statements contained herein or therein, in the light of
the circumstances under which made, not misleading; provided, however, that
(a) for purposes of this representation, any document attached hereto and any
document specifically referenced in the Target Disclosure Schedule as a
"Superseding Document" (even if not attached hereto) that provides
information inconsistent with or in addition to any other written statement
furnished to Acquiror in connection with the transaction contemplated hereby,
shall be deemed to supersede any other document or written statement
furnished to Acquiror with respect to such inconsistent or additional
information, and (b) it is understood that the financial projections
delivered by Target represent only Target's best estimate under the
circumstances of what it reasonably believes (although it is not aware of any
fact or information that would lead it to believe that such projections are
misleading in any material respect) and are based upon assumptions set forth
in such projections that Target believes were reasonable as of the time such
projections were made. Target does not make any other representation or
warranty regarding such projections or Target's possible or anticipated
operating performance other than as set forth in this Section 2.31.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Except as disclosed in a document of even date herewith and
delivered by Acquiror to Target prior to the execution and delivery of this
Agreement and referring to the representations and warranties in this
Agreement (the "Acquiror Disclosure Schedule"), Acquiror and Merger Sub
represent and warrant to Target as follows:
3.1 ORGANIZATION, STANDING AND POWER. Each of Acquiror and its
subsidiaries, including Merger Sub, is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. Each of Acquiror and its subsidiaries has the corporate power to
own its properties and to carry on its business as now being conducted and as
proposed to be conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified and in
good standing would have a Material Adverse Effect on Acquiror. Acquiror has
delivered a true and correct copy of the Certificate of Incorporation and Bylaws
or other charter documents, as applicable, of Acquiror and each of its
subsidiaries, each as
22.
amended to date, to Target. Neither Acquiror nor any of its subsidiaries is
in violation of any of the provisions of its Certificate of Incorporation or
Bylaws or equivalent organizational documents. Acquiror is the owner of all
outstanding shares of capital stock of each of its subsidiaries and all such
shares are duly authorized, validly issued, fully paid and nonassessable.
All of the outstanding shares of capital stock of each such subsidiary are
owned by Acquiror free and clear of all liens, charges, claims or
encumbrances or rights of others. There are no outstanding subscriptions,
options, warrants, puts, calls, rights, exchangeable or convertible
securities or other commitments or agreements of any character relating to
the issued or unissued capital stock or other securities of any such
subsidiary, or otherwise obligating Acquiror or any such subsidiary to issue,
transfer, sell, purchase, redeem or otherwise acquire any such securities.
Except as disclosed in the Acquiror SEC Documents (as defined in Section
3.4), Acquiror does not directly or indirectly own any equity or similar
interest in, or any interest convertible or exchangeable or exercisable for,
any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity.
3.2 CAPITAL STRUCTURE. The authorized capital stock of Acquiror
consists of 50,000,000 shares of Common Stock, $0.0005 par value, and
18,095,690 shares of Preferred Stock, $0.001 par value, of which there were
issued and outstanding as of the close of business on June 10, 1997,
19,111,647 shares of Common Stock and no shares of Preferred Stock. There
are no other outstanding shares of capital stock or voting securities of
Acquiror other than shares of Acquiror Common Stock issued after June 10,
1997 upon the exercise of options issued under the Acquiror 1996 Stock
Incentive Plan (the "Acquiror Stock Option Plan"). The authorized capital
stock of Merger Sub consists of 1,000 shares of Common Stock, $.0001 par
value, all of which are issued and outstanding and are held by Acquiror. All
outstanding shares of Acquiror and Merger Sub have been duly authorized,
validly issued, fully paid and are nonassessable and free of any liens or
encumbrances other than any liens or encumbrances created by or imposed upon
the holders thereof. As of the close of business on June 10, 1997, Acquiror
has reserved 5,377,393 shares of Common Stock for issuance to employees,
directors and independent contractors pursuant to the Acquiror Stock Option
Plan, of which 2,347,525 shares have been issued pursuant to option
exercises, and 2,352,456 shares are subject to outstanding, unexercised
options. In addition, as of the close of business on June 10, 1997, Acquiror
had also issued a warrant to purchase 2,000,000 shares of Acquiror's Common
Stock. Other than pursuant to this Agreement, the Acquiror Stock Option Plan
and the Acquiror Employee Stock Purchase Plan there are no other options,
warrants, calls, rights, commitments or agreements of any character to which
Acquiror or Merger Sub is a party or by which either of them is bound
obligating Acquiror or Merger Sub to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of the capital stock of Acquiror or Merger Sub or obligating Acquiror
or Merger Sub to grant, extend or enter into any such option, warrant, call,
right, commitment or agreement. The shares of Acquiror Common Stock to be
issued pursuant to the Merger will be duly authorized, validly issued, fully
paid, and non-assessable.
3.3 AUTHORITY. Acquiror and Merger Sub have all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby.
23.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Acquiror and Merger Sub, subject only to the
approval of the Merger by the Acquiror stockholders as contemplated by
Section 6.1(a). This Agreement has been duly executed and delivered by
Acquiror and Merger Sub and constitutes the valid and binding obligations of
Acquiror and Merger Sub. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
benefit under (i) any provision of the Certificate of Incorporation or Bylaws
of Acquiror or any of its subsidiaries, as amended, or (ii) any material
mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Acquiror or any of its
subsidiaries or their properties or assets, except where such conflict,
violation, default, termination, cancellation or acceleration with respect to
the foregoing provisions of (ii) would not have had and would not reasonably
be expected to have a Material Adverse Effect on Acquiror. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity, is required by or, to the knowledge of
Acquiror with respect to, Acquiror or any of its subsidiaries in connection
with the execution and delivery of this Agreement by Acquiror and Merger Sub
or the consummation by Acquiror and Merger Sub of the transactions
contemplated hereby, except for (i) the filing of the Certificate of Merger
as provided in Section 1.2, (ii) the filing with the SEC and NASD of the
Registration Statement and the Proxy Statement relating to the Acquiror
Stockholders Meeting, (iii) the filing of a Form 8-K with the SEC and NASD
within 15 calendar days after the Closing Date, (iv) any filings as may be
required under applicable state securities laws and the securities laws of
any foreign country, (v) such filings as may be required under HSR, (vi) the
filing with the Nasdaq National Market System of a Notification Form for
Listing of Additional Shares with respect to the shares of Acquiror Common
Stock issuable upon conversion of the Target Common Stock in the Merger and
upon exercise of the options under the Target Stock Option Plans assumed by
Acquiror, and (vii) such other consents, authorizations, filings, approvals
and registrations which, if not obtained or made, would not have a Material
Adverse Effect on Acquiror and would not prevent or materially alter or delay
any of the transactions contemplated by this Agreement.
3.4 SEC DOCUMENTS; FINANCIAL STATEMENTS. Acquiror has made
available to Target a true and complete copy of each statement, report,
registration statement (with the prospectus in the form filed pursuant to Rule
424(b) of the Securities Act), definitive proxy statement, and other filing
filed with the SEC by Acquiror since April 29, 1996, and, prior to the Effective
Time, Acquiror will have furnished Target with true and complete copies of any
additional documents filed with the SEC by Acquiror prior to the Effective Time
(collectively, the "Acquiror SEC Documents"). In addition, Acquiror has made
available to Target all exhibits to the Acquiror SEC Documents filed prior to
the date hereof, and will promptly make available to Target all exhibits to any
additional Acquiror SEC Documents filed prior to the Effective Time. All
documents required to be filed as exhibits to the Target SEC Documents have been
so filed, and all
24.
material contracts so filed as exhibits are in full force and effect, except
those which have expired in accordance with their terms, and neither Acquiror
nor any of its subsidiaries is in default thereunder. As of their respective
filing dates, the Acquiror SEC Documents complied in all material respects
with the requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the Securities Act, and none of the Acquiror SEC
Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were
made, not misleading, except to the extent corrected by a subsequently filed
Acquiror SEC Document prior to the date hereof. The financial statements of
Acquiror, including the notes thereto, included in the Acquiror SEC Documents
(the "Acquiror Financial Statements") were complete and correct in all
material respects as of their respective dates, complied as to form in all
material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto as of their
respective dates, and have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent throughout the
periods indicated and consistent with each other (except as may be indicated
in the notes thereto or, in the case of unaudited statements included in
Quarterly Reports on Form 10-Qs, as permitted by Form 10-Q). The Acquiror
Financial Statements fairly present the consolidated financial condition and
operating results of Acquiror and its subsidiaries at the dates and during
the periods indicated therein (subject, in the case of unaudited statements,
to normal, recurring year-end adjustments). There has been no change in
Acquiror accounting policies except as described in the notes to the Acquiror
Financial Statements.
3.5 ABSENCE OF CERTAIN CHANGES. Since March 29, 1997 (the
"Acquiror Balance Sheet Date"), Acquiror has conducted its business in the
ordinary course consistent with past practice and there has not occurred: (i)
any change, event or condition (whether or not covered by insurance) that has
resulted in, or might reasonably be expected to result in, a Material Adverse
Effect to Acquiror; (ii) any acquisition, sale or transfer of any material
asset of Acquiror or any of its subsidiaries other than in the ordinary
course of business and consistent with past practice; (iii) any change in
accounting methods or practices (including any change in depreciation or
amortization policies or rates) by Acquiror or any revaluation by Acquiror of
any of its assets; (iv) any declaration, setting aside, or payment of a
dividend or other distribution with respect to the shares of Acquiror, or any
direct or indirect redemption, purchase or other acquisition by Acquiror of
any of its shares of capital stock; (v) any material contract entered into by
Acquiror, other than in the ordinary course of business and as provided to
Target, or any material amendment or termination of, or default under, any
material contract to which Acquiror is a party or by which it is bound; (vi)
any amendment or change to Acquiror's Certificate of Incorporation or Bylaws;
or (vii) any negotiation or agreement by Acquiror or any of its subsidiaries
to do any of the things described in the preceding clauses (i) through (vi)
(other than negotiations with Target and its representatives regarding the
transactions contemplated by this Agreement).
3.6 ABSENCE OF UNDISCLOSED LIABILITIES. Acquiror has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or
25.
adequately provided for in the Balance Sheet included in Acquiror's Quarterly
Report on Form 10-Q for the period ended March 29, 1997 (the "Acquiror
Balance Sheet"), (ii) those incurred in the ordinary course of business and
not required to be set forth in the Acquiror Balance Sheet under generally
accepted accounting principles, and (iii) those incurred in the ordinary
course of business since the Acquiror Balance Sheet Date and consistent with
past practice.
3.7 LITIGATION. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency,
court or tribunal, foreign or domestic, or, to the knowledge of Acquiror or
any of its subsidiaries, threatened against Acquiror or any of its
subsidiaries or any of their respective properties or any of their respective
officers or directors (in their capacities as such) that, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect
on Acquiror. There is no judgment, decree or order against Acquiror or any
of its subsidiaries or, to the knowledge of Acquiror or any of its
subsidiaries, any of their respective directors or officers (in their
capacities as such) that could prevent, enjoin, or materially alter or delay
any of the transactions contemplated by this Agreement, or that could
reasonably be expected to have a Material Adverse Effect on Acquiror.
3.8 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no material
agreement, judgment, injunction, order or decree binding upon Acquiror or any
of its subsidiaries which has the effect of prohibiting or materially
impairing any current or future business practice of Acquiror or any of its
subsidiaries, any acquisition of property by Acquiror or any of its
subsidiaries or the conduct of business by Acquiror or any of its
subsidiaries as currently conducted or as proposed to be conducted by
Acquiror or any of its subsidiaries.
3.9 OPINION OF FINANCIAL ADVISOR. Acquiror has been advised in
writing by its financial advisor, Montgomery Securities, that in such
advisor's opinion as of the date hereof, the consideration to be paid by
Acquiror pursuant to the Merger is fair to Acquiror from a financial point of
view.
3.10 INTELLECTUAL PROPERTY. Acquiror and its subsidiaries own, or
are licensed or otherwise possess legally enforceable rights to use all
patents, trademarks, trade names, service marks, copyrights, and any
applications therefor, maskworks, net lists, schematics, technology,
know-how, trade secrets, inventory, ideas, algorithms, processes, computer
software programs or applications (in both source code and object code form),
and tangible or intangible proprietary information or material ("Acquiror
Intellectual Property") that are used or proposed to be used in the business
of Acquiror and its subsidiaries as currently conducted or as proposed to be
conducted by Acquiror and its subsidiaries, except to the extent that the
failure to have such rights have not had and would not reasonably be expected
to have a Material Adverse Effect on Acquiror.
3.11 GOVERNMENTAL AUTHORIZATION. Acquiror and each of its
subsidiaries have obtained each federal, state, county, local or foreign
governmental consent, license, permit, grant, or
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other authorization of a Governmental Entity (i) pursuant to which Acquiror
or any of its subsidiaries currently operates or holds any interest in any of
its properties or (ii) that is required for the operation of Acquiror's or
any of its subsidiaries' business or the holding of any such interest ((i)
and (ii) herein collectively called "Acquiror Authorizations"), and all of
such Acquiror Authorizations are in full force and effect, except where the
failure to obtain or have any of such Acquiror Authorizations could not
reasonably be expected to have a Material Adverse Effect on Acquiror.
3.12 COMPLIANCE WITH LAWS. Each of Acquiror and its subsidiaries
has complied with, are not in violation of, and have not received any notices
of violation with respect to, any federal, state, local or foreign statute,
law or regulation with respect to the conduct of its business, or the
ownership or operation of its business, except for such violations or
failures to comply as could not be reasonably expected to have a Material
Adverse Effect on Acquiror.
3.13 POOLING OF INTERESTS. Neither Acquiror nor any of its
subsidiaries nor, to the knowledge of Acquiror, any of their respective
directors, officers or stockholders has taken any action which would
interfere with Acquiror's ability to account for the Merger as a pooling of
interests.
3.14 BROKER'S AND FINDERS' FEES. Acquiror has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or investment bankers' fees or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
3.15 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The
information supplied by Acquiror and Merger Sub for inclusion in the
Registration Statement shall not, at the time the Registration Statement
(including any amendments or supplements thereto) is declared effective by
the SEC, contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The
information supplied by Acquiror for inclusion in the Proxy Statement shall
not, on the date the Proxy Statement is first mailed to Target's stockholders
and Acquiror's stockholders, at the time of the Target Stockholders Meeting,
at the time of the Acquiror Stockholders Meeting and at the Effective Time,
contain any statement which, at such time, is false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under
which they are made, not false or misleading; or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of proxies for the Target Stockholders Meeting or
the Acquiror Stockholders Meeting which has become false or misleading. If
at any time prior to the Effective Time any event or information should be
discovered by Acquiror or Merger Sub which should be set forth in an
amendment to the Registration Statement or a supplement to the Proxy
Statement, Acquiror or Merger Sub will promptly inform Target.
Notwithstanding the
27.
foregoing, Acquiror and Merger Sub make no representation, warranty or
covenant with respect to any information supplied by Target which is
contained in any of the foregoing documents.
3.16 VOTE REQUIRED. The affirmative vote of the holders of a
majority of the shares of Acquiror's Common Stock outstanding on the record
date set for the Target Stockholders Meeting is the only vote of the holders
of any of Acquiror's Common Stock necessary to approve this Agreement and the
transactions contemplated hereby.
3.17 BOARD APPROVAL. The Boards of Directors of Acquiror and
Merger Sub have prior to the date hereof unanimously (i) approved this
Agreement and the Merger, (ii) determined that the Merger is in the best
interests of their respective stockholders and is on terms that are fair to
such stockholders and (iii) determined to recommend that the stockholder of
Merger Sub approve this Agreement and the consummation of the Merger.
3.18 PRELIMINARY POOLING LETTER. Acquiror has on or prior to the
date hereof received a draft letter from Coopers & Lybrand, L.L.P.,
Acquiror's independent auditors, setting forth its preliminary conclusion,
based in part upon the conclusions set forth in the letter referred to in
Section 2.31, that the Merger will qualify for pooling of interests
accounting treatment if consummated in accordance with this Agreement.
3.19 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by Acquiror or Merger Sub herein or in any Schedule hereto,
including the Acquiror Disclosure Schedule, or certificate furnished by
Acquiror or Merger Sub pursuant to this Agreement, or the Acquiror SEC
Documents, or any written statement furnished to Target pursuant hereto or in
connection with the transactions contemplated hereby, when all such documents
are read together in their entirety, contains or will contain at the
Effective Time any untrue statement of a material fact, or omits or will omit
at the Effective Time to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which made, not misleading; provided, however, that for purposes of
this representation, any document attached hereto and any document
specifically referenced in the Acquiror Disclosure Schedule as a "Superseding
Document" (even if not attached hereto) that provides information
inconsistent with or in addition to any other written statement furnished to
Target in connection with the transaction contemplated hereby, shall be
deemed to supersede any other document or written statement furnished to
Target with respect to such inconsistent or additional information.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
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4.1 CONDUCT OF BUSINESS OF ACQUIROR. Except as expressly
contemplated by this Agreement, Acquiror shall neither cause, nor permit any
of the following, or allow, cause or permit any of its subsidiaries to do,
cause or permit any of the following, without the prior written consent of
Target, which consent shall not be unreasonably withheld:
(a) DIVIDENDS; CHANGES IN CAPITAL STOCK. Declare or pay any
dividends on or make any other distributions (whether in cash, stock or
property) with respect to any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
its capital stock, or repurchase or otherwise acquire, directly or
indirectly, any shares of its capital stock except from former employees,
directors and consultants in accordance with agreements providing for the
repurchase of shares in connection with any termination of service to it or
its subsidiaries;
(b) MATERIAL ACQUISITIONS. Acquire or agree to acquire by
merging or consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof,
or otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to its and its subsidiaries' business,
taken as a whole, or acquire or agree to acquire any equity securities of any
corporation, partnership, association or business organization (any of the
foregoing referred to herein as a "Material Acquisition") which Material
Acquisition would require Acquiror to file a Form 8-K pursuant to Item 2 of
Form 8-K under Section 13 or 15(d) of the Securities and Exchange Act of 1934;
(c) STOCK OPTION PLANS, ETC. Grant in excess of 1,300,000
options under the Acquiror's Stock Option Plan after the date hereof, in the
ordinary course of business.
(d) OTHER. Take, or agree in writing or otherwise to take,
any of the actions described in Sections 4.1(a) through (c) above, or any
action which would make any of its representations or warranties contained in
this Agreement untrue or incorrect or prevent it from performing or cause it
not to perform its covenants hereunder.
4.2 CONDUCT OF BUSINESS OF TARGET. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, Target agrees (except to the extent
expressly contemplated by this Agreement or as consented to in writing by
Acquiror, which consent shall not be unreasonably withheld), to carry on its
and its subsidiaries' business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, to pay debts and Taxes
when due subject (i) to good faith disputes over such debts or Taxes and (ii)
to Acquiror's consent (which will not be unreasonably withheld) to the filing
of material Tax Returns if applicable, to pay or perform other obligations
when due, and to use all reasonable commercial efforts consistent with past
practice and policies to preserve intact its present business organizations,
keep available the services of its and its subsidiaries'
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present officers and key employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it, to the end that its goodwill and ongoing
businesses shall be materially unimpaired at the Effective Time. Each of
Target and Acquiror agrees to promptly notify the other of (x) any event or
occurrence not in the ordinary course of its or its subsidiaries' business,
and of any event which could have a Material Adverse Effect and (y) any
material change in its capitalization as set forth in Section 2.2 or Section
3.3, as applicable. Without limiting the foregoing, except as expressly
contemplated by this Agreement or the Target Disclosure Schedule, Target,
shall not do, cause or permit any of the following, without the prior written
consent of the Acquiror which consent shall not be unreasonably withheld:
(a) CHARTER DOCUMENTS. Cause or permit any amendments to its
Certificate of Incorporation or Bylaws;
(b) DIVIDENDS; CHANGES IN CAPITAL STOCK. Declare or pay any
dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
its capital stock, or repurchase or otherwise acquire, directly or
indirectly, any shares of its capital stock except from former employees,
directors and consultants in accordance with agreements providing for the
repurchase of shares in connection with any termination of service to it;
(c) STOCK OPTION PLANS, ETC. Accelerate, amend or change the
period of exercisability or vesting of options or other rights granted under
its stock plans or authorize cash payments in exchange for any options or
other rights granted under any of such plans.
(d) POOLING. Take any action, which would interfere with
Acquiror's ability to account for the Merger as a pooling of interests; or
(e) OTHER. Take, or agree in writing or otherwise to take,
any of the actions described in Sections 4.1(a) through (d) above, or any
action which would cause a material breach of its representations or
warranties contained in this Agreement or prevent it from materially
performing or cause it not to materially perform its covenants hereunder.
4.3 LIMITATIONS ON BUSINESS OF TARGET. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, except as expressly contemplated by
this Agreement or the Target Disclosure Schedule, Target shall not do, cause
or permit any of the following, or allow, cause or permit any of its
subsidiaries to do, cause or permit any of the following, without the prior
written consent of Acquiror which consent shall not be unreasonably withheld:
30.
(a) MATERIAL CONTRACTS. Enter into any material contract or
commitment, or violate, amend or otherwise modify or waive in any material
fashion any of the terms of any of its material contracts, other than in the
ordinary course of business. Among other things, the ordinary course of
business shall include non-exclusive distribution agreements;
(b) ISSUANCE OF SECURITIES. Issue, deliver, sell, authorize
or propose the issuance, delivery or sale of, or purchase or propose the
purchase of, any shares of its capital stock or securities convertible into,
or subscriptions, rights, warrants or options to acquire, or other agreements
or commitments of any character obligating it to issue any such shares or
other convertible securities, other than (i) the issuance of shares of its
Common Stock pursuant to the exercise of stock options, warrants or other
rights therefor outstanding as of the date of this Agreement, (ii) the grant
of stock options to service providers in the ordinary course of business, or
(iii) issuances and option exercises to service providers pursuant to the
grants in (ii) above, in the ordinary course of business, provided that the
aggregate of (ii) and (iii) above shall not exceed 77,667 shares after the
date hereof;
(c) INTELLECTUAL PROPERTY. Transfer to any person or entity
any rights to its Intellectual Property other than in the ordinary course of
business consistent with past practice;
(d) EXCLUSIVE RIGHTS. Enter into or amend any agreements
pursuant to which any other party is granted exclusive marketing or other
exclusive rights of any type or scope with respect to any of its products or
technology;
(e) DISPOSITIONS. Sell, lease, license or otherwise dispose
of or encumber any of its properties or assets which are material,
individually or in the aggregate, to its and its parent's/subsidiaries'
business, taken as a whole, except in the ordinary course of business;
(f) INDEBTEDNESS. Incur any indebtedness for borrowed money
or guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others in excess of $1,000,000 at an
interest rate of no greater than prime rate plus 1%;
(g) LEASES. Enter into any operating lease in excess of
$50,000;
(h) PAYMENT OF OBLIGATIONS. Pay, discharge or satisfy in an
amount in excess of $10,000 in any one case or $50,000 in the aggregate, any
claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than in the ordinary course of
business, other than the payment, discharge or satisfaction of liabilities
reflected or reserved against in the Target Financial Statements;
(i) CAPITAL EXPENDITURES. Make any capital expenditures,
capital additions or capital improvements except in the ordinary course of
business;
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(j) INSURANCE. Materially reduce the amount of any material
insurance coverage provided by existing insurance policies;
(k) TERMINATION OR WAIVER. Terminate or waive any right of
substantial value, other than in the ordinary course of business;
(l) EMPLOYEE BENEFIT PLANS; NEW HIRES; PAY INCREASES. Adopt
or amend any employee benefit plan, except if such Plan, as adopted or
amended, is not materially more favorable than Acquiror's benefit plans, or
adopt or amend any stock purchase or option plan, or hire any new officer
level employee (except that it may hire a replacement for any current
director level or officer level employee if it first provides Acquiror
advance notice regarding such hiring decision), pay any special bonus or
special remuneration to any employee or director (except payments made
pursuant to written agreements outstanding on the date hereof), or increase
the salaries or wage rates of its employees except in the ordinary course of
business in accordance with its standard past practice;
(m) SEVERANCE ARRANGEMENTS. Except as set forth on the
Target Disclosure Schedule, grant any severance or termination pay (i) to any
director or officer or (ii) to any other employee except (A) payments made
pursuant to written plans or agreements outstanding on the date hereof or (B)
grants which are made in the ordinary course of business in accordance with
its standard past practice;
(n) LAWSUITS. Commence a lawsuit other than (i) for the
routine collection of bills, (ii) in such cases where it in good faith
determines that failure to commence suit would result in the material
impairment of a valuable aspect of its business, provided that it consults
with Acquiror prior to the filing of such a suit, or (iii) for a breach of
this Agreement or otherwise in connection with interpretation or enforcement
of any provision of this Agreement or any agreement or transaction
contemplated hereby;
(o) ACQUISITIONS. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of,
or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to its and its parent's/subsidiaries' business, taken as a
whole;
(p) TAXES. Other than in the ordinary course of business,
make or change any material election in respect of Taxes, adopt or change any
accounting method in respect of Taxes, file any material Tax Return or any
amendment to a material Tax Return, enter into any closing agreement, settle
any material claim or assessment in respect of Taxes, or consent to any
32.
extension or waiver of the limitation period applicable to any material claim
or assessment in respect of Taxes;
(q) REVALUATION. Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; or
(r) OTHER. Take or agree in writing or otherwise to take,
any of the actions described in Sections 4.2(a) through (q) above, or any
action which would cause a material breach of its representations or
warranties contained in this Agreement or prevent it from materially
performing or cause it not to materially perform its covenants hereunder.
4.4 NO SOLICITATION. Target and its officers, directors,
employees or other agents will not, directly or indirectly, (i) take any
action to solicit, initiate or encourage any Takeover Proposal (defined
below) or (ii) engage in negotiations with, or disclose any nonpublic
information relating to Target to, or afford access to the properties, books
or records of Target to, any person that has advised Target that it may be
considering making, or that has made, a Takeover Proposal. Target will
promptly notify Acquiror after receipt of any Takeover Proposal or any notice
that any person is considering making a Takeover Proposal or any request for
nonpublic information relating to Target for access to the properties, books
or records of Target by any person that has advised Target that it may be
considering making, or that has made, a Takeover Proposal and will keep
Acquiror fully informed of the status and details of any such Takeover
Proposal notice or request. For purposes of this Agreement, "Takeover
Proposal" means any offer or proposal for, or any indication of interest in
15% or more of the outstanding shares of capital stock of Target, a merger or
other business combination involving Target or the acquisition of any
significant equity interest in, or a significant portion of the assets of,
Target other than the transactions contemplated by this Agreement.
Notwithstanding the foregoing, if on or after December 31, 1997 Target
delivers a written notice to Acquiror (with appropriate backup documentation
provided) which states that Target projects that it will run out of cash and
cash equivalents on or before June 1, 1998, Target may initiate discussions
with venture funds and other non-corporate investors for the purpose of
raising equity funding for Target's operations. Target may not close any of
such transactions prior to March 31, 1998, and must keep Acquiror fully
informed of the details of such discussions, including, without limitation,
the identities of all parties with whom Target has such discussions. The
foregoing shall in no way limit any of Target's other obligations and
covenants in this Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
33.
5.1 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. As
promptly as practicable after the execution of this Agreement, Target and
Acquiror shall prepare, and Acquiror shall file with the SEC, preliminary
proxy materials relating to the approval of the Merger and the transactions
contemplated hereby by the stockholders of Acquiror and, as promptly as
practicable following receipt of SEC comments thereon, Acquiror shall file
with the SEC a Registration Statement on Form S-4 (or such other or successor
form as shall be appropriate) (the "S-4"), which complies in form with
applicable SEC requirements and shall use all reasonable efforts to cause the
Registration Statement to become effective as soon thereafter as practicable;
provided, however, that neither Acquiror nor Target shall be obligated to
agree to account for the Merger as a "purchase" in order to cause the
Registration Statement to become effective. Subject to the provisions of
Section 4.4 hereof, the Proxy Statement shall include, if requested by
Acquiror, the recommendation of the Target's Board of Directors in favor of
the Merger. The Proxy Statement shall include the recommendation of the
Acquiror's Board of Directors in favor of the Merger; provided that such
recommendation may not be included, or may be withdrawn if previously
included, if Acquiror's Board of Directors believes in good faith and, upon
written advice of its outside legal counsel, shall determine that to include
such recommendation, or not withdraw such recommendation if previously
included, would constitute a breach of Acquiror's Board of Directors'
fiduciary duty under applicable law. The Acquiror will update and amend the
S-4 to the extent necessary prior to the Closing.
5.2 MEETING OF STOCKHOLDERS.
(a) Target shall promptly after the date hereof take all
action necessary in accordance with Delaware Law and its Certificate of
Incorporation and Bylaws to convene the Target Stockholders Meeting within 45
days of the Registration Statement being declared effective by the SEC.
Target shall consult with Acquiror and use all reasonable efforts to hold the
Target Stockholders Meeting on the same day as the Acquiror Stockholders
Meeting and shall not postpone or adjourn (other than for the absence of a
quorum) the Target Stockholders Meeting without the consent of Acquiror,
which consent shall not be unreasonably withheld. Subject to Section 5.1,
Target shall use its best efforts to solicit from stockholders of Target
proxies in favor of the Merger and shall take all other action necessary or
advisable to secure the vote or consent of stockholders required to effect
the Merger.
(b) Acquiror shall promptly after the date hereof take all
action necessary in accordance with Delaware Law and its Certificate of
Incorporation and Bylaws to convene the Acquiror Stockholders Meeting within 45
days of the Registration Statement being declared effective by the SEC. Acquiror
shall consult with Target and use all reasonable efforts to hold the Acquiror
Stockholders Meeting on the same day as the Target Stockholders Meeting and
shall not postpone or adjourn (other than for the absence of a quorum) the
Acquiror Stockholders Meeting without the consent of Target, which consent shall
not be unreasonably withheld. Subject to Section 5.1, Acquiror shall use its
best efforts to solicit from stockholders of Acquiror proxies in
34.
favor of the Merger and shall take all other action necessary or advisable to
secure the vote or consent of stockholders required to effect the Merger.
5.3 ACCESS TO INFORMATION.
(a) Target shall afford Acquiror and its accountants, counsel
and other representatives, reasonable access during normal business hours
during the period prior to the Effective Time to (i) all of Target's
properties, books, contracts, commitments and records, and (ii) all other
information concerning the business, properties and personnel of Target as
Acquiror may reasonably request. Target agrees to provide to Acquiror and
its accountants, counsel and other representatives copies of internal
financial statements promptly upon request. Acquiror shall afford Target and
its accountants, counsel and other representatives, reasonable access during
normal business hours during the period prior to the Effective Time to (i)
all of Acquiror's and its subsidiaries' properties, books, contracts,
commitments and records, and (ii) all other information concerning the
business, properties and personnel of Acquiror and its subsidiaries as Target
may reasonably request. Acquiror agrees to provide to Target and its
accountants, counsel and other representatives copies of internal financial
statements promptly upon request.
(b) Subject to compliance with applicable law, from the date
hereof until the Effective Time, each of Acquiror and Target shall confer on
a regular and frequent basis with one or more representatives of the other
party to report operational matters of materiality and the general status of
ongoing operations.
(c) No information or knowledge obtained in any investigation
pursuant to this Section 5.3 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.4 CONFIDENTIALITY. The parties acknowledge that each of
Acquiror and Target have previously executed a non-disclosure agreement dated
March 11, 1997 (the "Confidentiality Agreement"), which Confidentiality
Agreement shall continue in full force and effect in accordance with its
terms.
5.5 PUBLIC DISCLOSURE. Unless otherwise permitted by this
Agreement, Acquiror and Target shall consult with each other before issuing any
press release or otherwise making any public statement or making any other
public (or non-confidential) disclosure (whether or not in response to an
inquiry) regarding the terms of this Agreement and the transactions contemplated
hereby, and neither shall issue any such press release or make any such
statement or disclosure without the prior approval of the other (which approval
shall not be unreasonably withheld), except as may be required by law, or in
exercise of the fiduciary duties of the Board of Directors, or by obligations
pursuant to any listing agreement with any national securities exchange or with
the
35.
NASD. Notwithstanding the foregoing, Acquiror and Target intend to issue a
mutually agreeable press release upon execution of this Agreement.
5.6 CONSENTS; COOPERATION.
(a) Each of Acquiror and Target shall promptly apply for or
otherwise seek, and use its reasonable commercial efforts to obtain, all
consents and approvals required to be obtained by it for the consummation of
the Merger, including those required under HSR, and shall use its reasonable
commercial efforts to obtain all necessary consents, waivers and approvals
under any of its material contracts in connection with the Merger for the
assignment thereof or otherwise, except where the failure to obtain such
consents under material contracts would not have a Material Adverse Effect on
Target. The parties hereto will consult and cooperate with one another, and
consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions
and proposals made or submitted by or on behalf of any party hereto in
connection with proceedings under or relating to HSR or any other federal or
state antitrust or fair trade law.
(b) Each of Acquiror and Target shall use all reasonable
efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the transactions contemplated by this
Agreement under HSR, the Sherman Act, as amended, the Clayton Act, as
amended, the Federal Trade Commission Act, as amended, and any other Federal,
state or foreign statutes, rules, regulations, orders or decrees that are
designed to prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade (collectively, "Antitrust
Laws"). In connection therewith, if any administrative or judicial action or
proceeding is instituted (or threatened to be instituted) challenging any
transaction contemplated by this Agreement as violative of any Antitrust Law,
each of Acquiror and Target shall cooperate and use all reasonable commercial
efforts to vigorously contest and resist any such action or proceeding and to
have vacated, lifted, reversed, or overturned any decree, judgment,
injunction or other order, whether temporary, preliminary or permanent (each
an "Order"), that is in effect and that prohibits, prevents, or restricts
consummation of the Merger or any such other transactions, unless by mutual
agreement Acquiror and Target decide that such litigation is not in their
respective best interests. Notwithstanding the provisions of the immediately
preceding sentence, it is expressly understood and agreed that Acquiror shall
have no obligation to litigate or contest any administrative or judicial
action or proceeding or any Order beyond the earlier of (i) March 31, 1998 or
(ii) the date of a ruling preliminary enjoining the Merger issued by a court
of competent jurisdiction (the "Injunction Date"). Each of Acquiror and
Target shall use all reasonable efforts to take such action as may be
required to cause the expiration of the notice periods, under the HSR or
other Antitrust Laws with respect to such transactions, to occur as promptly
as possible after the execution of this Agreement.
(c) Notwithstanding anything to the contrary in Section 5.6(a)
or (b), (i) neither Acquiror nor any of it subsidiaries shall be required to
divest any of their respective businesses, product lines or assets, or to take
or agree to take any other action or agree to any
36.
limitation that could reasonably be expected to have a Material Adverse
Effect on Acquiror or on Acquiror combined with the Surviving Corporation
after the Effective Time, and (ii) Target shall not be required to divest any
of its businesses, product lines or assets, or to take or agree to take any
other action or agree to any limitation that could reasonably be expected to
have a Material Adverse Effect on Target.
5.7 POOLING ACCOUNTING. Acquiror and Target shall each use its
reasonable commercial efforts to cause the business combination to be
effected by the Merger to be accounted for as a pooling of interests. Each
of Acquiror and Target shall use its reasonable commercial efforts to cause
its "Affiliates" (as defined in Section 5.8) not to take any action that
would adversely affect the ability of Acquiror to account for the business
combination to be effected by the Merger as a pooling of interest.
5.8 AFFILIATE AGREEMENTS.
(a) SCHEDULE 5.8(A) sets forth those persons who may be
deemed "Affiliates" of Target within the meaning of Rule 145 promulgated
under the Securities Act ("Rule 145"). Target shall provide Acquiror such
information and documents as Acquiror shall reasonably request for purposes
of reviewing such list. Target shall use its reasonable commercial efforts
to deliver or cause to be delivered to Acquiror, concurrently with the
execution of this Agreement (and in each case prior to the Effective Time)
from each of the Affiliates of Target, an executed Affiliate Agreement in the
form attached hereto as EXHIBIT B-1. Acquiror and Merger Sub shall be
entitled to place appropriate legends on the certificates evidencing any
Acquiror Common Stock to be received by such Affiliates of Target pursuant to
the terms of this Agreement, and to issue appropriate stop transfer
instructions to the transfer agent for Acquiror Common Stock, consistent with
the terms of such Affiliate Agreements.
(b) SCHEDULE 5.8(B) sets forth those persons who may be
deemed "Affiliates" of Acquiror within the meaning of Rule 145. Acquiror
shall provide Target such information and documents as Target shall
reasonably request for purposes of reviewing such list. Acquiror shall use
its reasonable commercial efforts to deliver or cause to be delivered to
Target, concurrently with the execution of this Agreement (and in each case
prior to the Effective Time) from each of the Affiliates of Acquiror, an
executed Affiliate Agreement in the form attached hereto as EXHIBIT B-2.
5.9 VOTING AGREEMENT.
(a) Target shall use its reasonable commercial efforts, on
behalf of Acquiror and pursuant to the request of Acquiror, to cause each
Target stockholder named in SCHEDULE 5.9(A) to execute and deliver to
Acquiror a Voting Agreement substantially in the form of EXHIBIT C-1 attached
hereto concurrent with the execution of this Agreement.
37.
(b) Acquiror shall use its reasonable commercial efforts, on
behalf of Target and pursuant to the request of Target, to cause each
Acquiror stockholder named in SCHEDULE 5.9(B) to execute and deliver to
Target a Voting Agreement substantially in the form of EXHIBIT C-2 attached
hereto concurrent with the execution of this Agreement.
5.10 LEGAL REQUIREMENTS. Each of Acquiror, Merger Sub and Target
will, and will cause their respective subsidiaries to, take all reasonable
actions necessary to comply promptly with all legal requirements which may be
imposed on them with respect to the consummation of the transactions
contemplated by this Agreement and will promptly cooperate with and furnish
information to any party hereto necessary in connection with any such
requirements imposed upon such other party in connection with the
consummation of the transactions contemplated by this Agreement and will take
all reasonable actions necessary to obtain (and will cooperate with the other
parties hereto in obtaining) any consent, approval, order or authorization
of, or any registration, declaration or filing with, any Governmental Entity
or other person, required to be obtained or made in connection with the
taking of any action contemplated by this Agreement.
5.11 BLUE SKY LAWS. Acquiror shall take such steps as may be
necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable to the issuance of the Acquiror Common
Stock in connection with the Merger. Target shall use its best efforts to
assist Acquiror as may be necessary to comply with the securities and blue
sky laws of all jurisdictions which are applicable in connection with the
issuance of Acquiror Common Stock in connection with the Merger.
5.12 EMPLOYEE BENEFIT PLANS.
(a) At the Effective Time, the Target Stock Option Plan and
each outstanding option to purchase shares of Target Common Stock under the
Target Stock Option Plan, whether vested or unvested, will be assumed by
Acquiror. SCHEDULE 5.13 hereto sets forth a true and complete list as of the
date hereof of all holders of outstanding options under the Target Stock
Option Plan, including the number of shares of Target capital stock subject
to each such option, the exercise or vesting schedule, the exercise price per
share and the term of each such option. On the Closing Date, Target shall
deliver to Acquiror an updated SCHEDULE 5.13 hereto current as of such date.
Each such option so assumed by Acquiror under this Agreement shall continue
to have, and be subject to, the same terms and conditions set forth in the
Target Stock Option Plan, immediately prior to the Effective Time, except
that (i) such option will be exercisable for that number of whole shares of
Acquiror Common Stock equal to the product of the number of shares of Target
Common Stock that were issuable upon exercise of such option immediately
prior to the Effective Time multiplied by the Exchange Ratio and rounded down
to the nearest whole number of shares of Acquiror Common Stock, and (ii) the
per share exercise price for the shares of Acquiror Common Stock issuable
upon exercise of such assumed option will be equal to the quotient determined
by dividing the exercise price per share of Target Common Stock at which
38.
such option was exercisable immediately prior to the Effective Time by the
Exchange Ratio, rounded up to the nearest whole cent. Consistent with the
terms of the Target Stock Option Plan and the documents governing the
outstanding options under that Plan, the Merger will not terminate any of the
outstanding options under such Plan or accelerate the exercisability or
vesting of such options except as disclosed in the Target Disclosure Schedule
or the shares of Acquiror Common Stock which will be subject to those options
upon the Acquiror's assumption of the options in the Merger. It is the
intention of the parties that the options so assumed by Acquiror qualify
following the Effective Time as incentive stock options as defined in Section
422 of the Code to the extent such options qualified as incentive stock
options prior to the Effective Time. Within 10 business days after the
Effective Time, Acquiror will issue to each person who, immediately prior to
the Effective Time was a holder of an outstanding option under the Target
Stock Option Plan a document in form and substance satisfactory to Target
evidencing the foregoing assumption of such option by Acquiror.
5.13 ESCROW AGREEMENT. On or before the Effective Time, the Escrow
Agent and the Stockholders' Agent (as defined in Article VIII hereto) will
execute the Escrow Agreement contemplated by Article VIII in the form
attached hereto as EXHIBIT E ("Escrow Agreement").
5.14 LETTER OF ACQUIROR'S AND TARGET'S ACCOUNTANTS.
(a) Acquiror shall use all reasonable efforts to cause to be
delivered to Target a Procedures Letter of Acquiror's independent auditors,
dated a date within two business days before the date on which the
Registration Statement shall become effective and addressed to Target, in
form reasonably satisfactory to Target and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
(b) Target shall use all reasonable efforts to cause to be
delivered to Acquiror a Procedures Letter of Target's independent auditors,
dated a date within two business days before the date on which the
Registration Statement shall become effective and addressed to Acquiror, in
form reasonably satisfactory to Acquiror and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
5.15 FORM S-8. Acquiror agrees to file, as soon as practicable but
in no event later than thirty (30) days after the Closing, a registration
statement on Form S-8 covering the shares of Acquiror Common Stock issuable
pursuant to outstanding options under the Target Stock Option Plan assumed by
Acquiror and use reasonable commercial efforts to cause such registration
statement to be declared effective as soon as practicable thereafter. Target
shall cooperate with and assist Acquiror in the preparation of such
registration statement.
39.
5.16 STOCKHOLDER'S REPRESENTATION AGREEMENTS. Target will use
reasonable commercial efforts to cause all Target stockholders who are not
also Affiliates of Target to execute and deliver to Acquiror a Stockholder's
Representation Agreement substantially in the form attached hereto as EXHIBIT
F (the "Stockholder's Representation Agreement") which imposes certain
restrictions regarding the resale of Acquiror Common Stock received in the
Merger.
5.17 LISTING OF ADDITIONAL SHARES. Prior to the Effective Time,
Acquiror shall file with the Nasdaq National Market a Notification Form for
Listing of Additional Shares with respect to the shares referred to in
Section 6.1(f) and use reasonable commercial efforts to ensure that all such
shares are listed for trading thereof.
5.18 EMPLOYEES. Concurrently with the execution of this Agreement,
each of the individuals set forth on SCHEDULE 5.18 shall have delivered to
Acquiror an executed Employment and Non-Competition Agreement in the form of
EXHIBIT G-1, et. seq., as applicable. Target shall cooperate with Acquiror
to assist Acquiror in employing such employees.
5.19 POOLING LETTERS.
(a) Target shall use all reasonable efforts to cause to be
delivered to Acquiror a letter of Coopers & Lybrand L.L.P., Target's
independent auditors, dated on or prior to the date of this Agreement and
confirmed in writing two business days before the date of the Proxy Statement
to the effect that the Merger qualifies for pooling-of-interest accounting
treatment if consummated in accordance with this Agreement. Such letter
shall be in a form reasonably satisfactory to Acquiror and customary in scope
and substance for letters delivered by independent public accountants in
connection with transactions of this type.
(b) Acquiror shall use all reasonable efforts to cause to be
delivered to Target a letter of Coopers & Lybrand L.L.P., Acquiror's
independent auditors, dated on or prior to the date of this Agreement and
confirmed in writing two business days before the date of the Proxy Statement
to the effect that the Merger qualifies for pooling-of-interest accounting
treatment if consummated in accordance with this Agreement. Such letter
shall be in a form reasonably satisfactory to Target and customary in scope
and substance for letters delivered by independent public accountants in
connection with transactions of this type.
5.20 INDEMNIFICATION.
(a) After the Effective Time, Acquiror will cause the
Surviving Corporation to indemnify and hold harmless the present and former
officers, directors, employees and agents of Target (the "Indemnified
Parties") in respect of acts or omissions occurring on or prior to the
Effective Time to the extent provided under Target's then effective
Certificate of Incorporation and Bylaws or any indemnification agreement with
Target officers and directors to
40.
which Target is a party, in each case in effect on March 1, 1997; provided
that such indemnification shall be subject to any limitation imposed from
time to time under applicable law.
(b) The provisions of this Section 5.21 are intended to be
for the benefit of and shall be enforceable by, each Indemnified Party, and
his or her heirs and representatives.
5.21 REORGANIZATION. Acquiror and Target shall each use its
reasonable commercial efforts to cause the business combination to be
effected by the Merger to be qualified as a "reorganization" described in
Section 368(a) of the Code.
5.22 EXPENSES. Whether or not the Merger is consummated, all costs
and expenses incurred in connection with this Agreement, the Certificate of
Merger and the transactions contemplated hereby and thereby shall be paid by
the party incurring such expense; provided, however, that any out-of-pocket
expenses incurred by Target (including, without limitation, fees and expenses
of one legal counsel to the Company, financial advisors and accountants) in
excess of $150,000.00 (which amount shall be subject to reasonable increases
in the event of unexpected and material changes in the scope of work required
by such counsel, advisors or accounts, approval of which shall not be
unreasonably withheld) in addition to fees and expenses of more than one
legal counsel shall remain an obligation of Target's stockholders.
5.23 TERMINATION OF REGISTRATION RIGHTS. Target shall use
commercially reasonable efforts to terminate any and all rights granted by
that certain Amended and Restated Investors Rights Agreement, dated May 28,
1997, by and among Target and each of the parties listed on Exhibit A
thereto, from all holders of Registrable Securities thereunder.
5.24 SERVICES AGREEMENT. Acquiror and Target shall have entered
into a Services Agreement in the form attached hereto as EXHIBIT H.
5.25 EMPLOYEE BENEFIT PLANS. As soon as practicable after
Effective Time, Acquiror shall merge Target's 401(k) plan into the 401(k)
plan maintained by Acquiror. Acquiror shall, and shall cause the Surviving
Corporation to, permit the employees of the Surviving Corporation to
participate in all employee benefit plans offered to similarly situated
employees of Acquiror. Acquiror shall cause the employee benefit plans and
vacation programs of Acquiror or the Surviving Corporation that are offered
to the employees of the Surviving Corporation to recognize service with
Target to the same extent as service with Acquiror for purposes of
determining eligibility, vesting and seniority, but service with Target need
not be recognized for purposes of benefit accrual under any defined-benefit
pension plan maintained by Acquiror or the Surviving Corporation. Acquiror
shall absorb any deferred sales charges associated with the termination of
Target's 401(k) plan not to exceed $10,000.
41.
5.26 REASONABLE COMMERCIAL EFFORTS AND FURTHER ASSURANCES. Each of
the parties to this Agreement shall use reasonable commercial efforts to
effectuate the transactions contemplated hereby and to fulfill and cause to
be fulfilled the conditions to closing under this Agreement. Each party
hereto, at the reasonable request of another party hereto, shall execute and
deliver such other instruments and do and perform such other acts and things
as may be necessary or desirable for effecting completely the consummation of
this Agreement and the transactions contemplated hereby.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each party to this Agreement to consummate and
effect this Agreement and the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, by agreement of
all the parties hereto:
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger
shall have been approved and adopted by (i) the holders of at least
ninety-one percent (91%) of the stockholders of Target (as described in
Section 2.26) under Delaware Law, (ii) the requisite vote of the stockholders
of Acquiror (as described in Section 3.16) and (iii) Acquiror as the sole
stockholder of Merger Sub.
(b) REGISTRATION STATEMENT EFFECTIVE. The SEC shall have
declared the Registration Statement effective. No stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose, and no similar proceeding in
respect of the Proxy Statement, shall have been initiated or threatened by
the SEC and all requests for additional information on the part of the SEC
shall have been complied with to the reasonable satisfaction of the parties
thereto.
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal or regulatory restraint
or prohibition preventing the consummation of the Merger shall be and remain
in effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending, which would have a Material
Adverse Effect on such party. Nor shall there be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which makes the consummation of the Merger illegal.
In the event an injunction or other order shall have been
42.
issued, each party agrees to use its reasonable diligent efforts to have such
injunction or other order terminated or lifted.
(d) GOVERNMENTAL APPROVAL. Acquiror, Target and Merger Sub
and their respective subsidiaries shall have timely obtained from each
Governmental Entity all approvals, waivers and consents, if any, necessary
for consummation of or in connection with the Merger and the several
transactions contemplated hereby, including such approvals, waivers and
consents as may be required under the Securities Act, under state Blue Sky
laws, and under HSR other than filings and approvals relating to the Merger
or affecting Acquiror's ownership of Target or any of its properties if
failure to obtain such approval, waiver or consent would not have a Material
Adverse Effect to either party.
(e) ESCROW AGREEMENT. Acquiror, Target, Escrow Agent and the
Stockholder's Agent (as defined in Article VIII hereto) shall have entered
into an Escrow Agreement substantially in the form attached hereto as EXHIBIT
E.
(f) TAX OPINIONS. Each of Acquiror and Target shall have
received substantially identical written opinions from their respective
counsel, in form and substance reasonably satisfactory to them, to the effect
that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code. In rendering such opinions, counsel shall be
entitled to rely upon representations of Acquiror, Merger Sub and Target and
certain stockholders of Target.
(g) LISTING OF ADDITIONAL SHARES. The filing with the Nasdaq
National Market of a Notification Form for Listing of Additional Shares with
respect to the shares of Acquiror Common Stock issuable upon conversion of
the Target Common Stock in the Merger and upon exercise of the options under
the Target Stock Option Plan assumed by Acquiror shall have been made and
shares so listed.
(h) LETTER FROM ACCOUNTANTS. Each of Acquiror and Target
shall have received a letter from Coopers & Lybrand L.L.P., independent
auditors of both Acquiror and Target, confirming that the Merger qualifies
for pooling of interests accounting treatment if consummated in accordance
with this Agreement.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF TARGET. The
obligations of Target to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Target:
43.
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) Except as
set forth on a schedule to be delivered to Target prior to the Effective Time
(the "Acquiror Closing Disclosure Schedule"), the representations and
warranties of Acquiror and Merger Sub in this Agreement shall be true and
correct in all material respects (except for such representations and
warranties that are qualified by their terms by a reference to materiality
which representations and warranties as so qualified shall be true in all
respects) on and as of the Effective Time as though such representations and
warranties were made on and as of such time, except to the extent that the
failure to be so true would not and would not reasonably be expected to have
a Material Adverse Effect on Acquiror and (ii) Acquiror and Merger Sub shall
have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by them as of the Effective Time.
(b) CERTIFICATE OF ACQUIROR. Target shall have been provided
with a certificate executed on behalf of Acquiror by its President and its
Chief Financial Officer to the effect that, as of the Effective Time:
(i) except as set forth on Acquiror Closing Disclosure
Schedule delivered prior to the Effective Time, all representations and
warranties made by Acquiror and Merger Sub under this Agreement are true and
complete in all material respects; and
(ii) all covenants, obligations and conditions of this
Agreement to be performed by Acquiror and Merger Sub on or before such date
have been so performed in all material respects.
(c) NO MATERIAL ADVERSE CHANGES. There shall not have
occurred any material adverse change in the financial condition, properties,
assets (including intangible assets), liabilities, business, operations or
results of operations of Acquiror and its subsidiaries, taken as a whole.
(d) LETTER FROM ACCOUNTANTS. Target shall have received the
letters referred to in Section 5.20 from Coopers & Lybrand L.L.C., Acquiror's
independent auditors.
(e) AFFILIATE AGREEMENTS. Target shall have received from
each of the Affiliates of Acquiror an executed Affiliate Agreement in
substantially the form attached hereto as EXHIBIT B-2.
(f) CLOSING PRICE. The Closing Price (as defined in Section
1.6(a)) shall be at least $3.00 per share, as adjusted for any stock splits,
stock dividends or recapitalizations.
(g) THIRD PARTY CONSENTS. SCHEDULE 6.2(G) hereto sets forth
all consents or approvals required in connection with the Merger under the
contracts of Acquiror. Target shall
44.
have been furnished with evidence satisfactory to it of the consent or
approval of those persons whose consent or approval shall be required in
connection with the Merger under the contracts of Acquiror set forth on
SCHEDULE 6.2(G) hereto, if failure to obtain such consents or approvals would
or would reasonably be expected to have a Material Adverse Effect on Acquiror.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF ACQUIROR AND
MERGER SUB. The obligations of Acquiror and Merger Sub to consummate and
effect this Agreement and the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, by Acquiror:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. Except as set
forth on a schedule to be delivered to Acquiror prior to the Effective Time
(the "Target Closing Disclosure Schedule"), the representations and
warranties of Target in this Agreement shall be true and correct in all
material respects (except for such representations and warranties that are
qualified by their terms by a reference to materiality which representations
and warranties as so qualified shall be true in all respects) on and as of
the Effective Time as though such representations and warranties were made on
and as of such time except to the extent that the failure to be so true would
not and would not reasonably be expected to have a Material Adverse Effect on
Target and (ii) Target shall have performed and complied in all material
respects with all covenants, obligations and conditions of this Agreement
required to be performed and complied with by it as of the Effective Time.
(b) CERTIFICATE OF TARGET. Acquiror shall have been provided
with a certificate executed on behalf of Target by its President and Chief
Financial Officer to the effect that, as of the Effective Time:
(i) except as set forth on the Target Closing Disclosure
Schedule delivered prior to the Effective Time, all representations and
warranties made by Target under this Agreement are true and complete in all
material respects; and
(ii) all covenants, obligations and conditions of this
Agreement to be performed by Target on or before such date have been so
performed in all material respects.
(c) THIRD PARTY CONSENTS. SCHEDULE 6.3(C) hereto sets forth
all consents or approvals required in connection with the Merger under the
contracts of Target. Acquiror shall have been furnished with evidence
satisfactory to it of the consent or approval of those persons whose consent
or approval shall be required in connection with the Merger under the
contracts of Target set forth on SCHEDULE 6.3(C) hereto, if failure to obtain
such consents or approvals would or would reasonably be expected to have a
Material Adverse Effect on Target.
(d) INJUNCTIONS OR RESTRAINTS ON CONDUCT OF BUSINESS. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of
45.
competent jurisdiction or other legal or regulatory restraint provision
limiting or restricting Acquiror's conduct or operation of the business of
Target, following the Merger shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other Governmental
Entity, domestic or foreign, seeking the foregoing be pending.
(e) NO MATERIAL ADVERSE CHANGES. There shall not have
occurred any material adverse change in the financial condition, properties,
assets (including intangible assets), liabilities, business, operations or
results of operations of Target.
(f) LETTER OF ACCOUNTANTS. Acquiror shall have received the
letters referred to in Section 5.19 from Coopers & Lybrand L.L.C., Acquiror's
independent auditors.
(g) AFFILIATE'S AGREEMENTS. Acquiror shall have received
from each of the Affiliates of Target an executed Affiliate's Agreement in
substantially the form attached hereto as EXHIBIT B-1.
(h) FIRPTA CERTIFICATE. Target shall, prior to the Closing
Date, provide Acquiror with a properly executed FIRPTA Notification Letter,
substantially in the form of EXHIBIT D attached hereto, which states that
shares of capital stock of Target do not constitute "United States real
property interests" under Section 897(c) of the Code, for purposes of
satisfying Acquiror's obligations under Treasury Regulation Section
1.1445-2(c)(3). In addition, simultaneously with delivery of such
Notification Letter, Target shall have provided to Acquiror, as agent for
Target, a form of notice to the Internal Revenue Service in accordance with
the requirements of Treasury Regulation Section 1.897-2(h)(2) and
substantially in the form of EXHIBIT D attached hereto along with written
authorization for Acquiror to deliver such notice form to the Internal
Revenue Service on behalf of Target upon the Closing of the Merger.
(i) STOCKHOLDER'S REPRESENTATION AGREEMENTS. Acquiror shall
have received from holders of at least ninety percent (90%) of the Target
Capital Stock, outstanding immediately prior to the Effective Time, a duly
executed and delivered Stockholder's Representation Agreement in
substantially the form attached hereto as EXHIBIT F.
(j) RESIGNATION OF DIRECTORS. The directors of Target in
office immediately prior to the Effective Time shall have resigned as
directors of the Surviving Corporation effective as of the Effective Time.
(k) EMPLOYMENT AND NON-COMPETITION AGREEMENTS. The employees
of Target set forth on Schedule 5.18 shall have accepted employment with
Acquiror and shall have entered into an Employment and Non-Competition
Agreement substantially in the form attached hereto as EXHIBITS G-1, et. seq.
46.
(l) EXPENSE STATEMENT. Acquiror shall have received from
Target a statement of all out-of-pocket expenses incurred by Target which are
subject to the limitation described in Section 5.23 hereto.
(m) TERMINATION OF REGISTRATION RIGHTS. Acquiror shall have
received an agreement of termination of any and all rights granted by that
certain Amended and Restated Investors Rights Agreement, dated May 28, 1997,
as amended, by and among Target and each of the parties listed on EXHIBIT A
thereto.
(n) CONVERSION OF PREFERRED STOCK. All holders of Target
Preferred Stock shall have converted all such shares of Preferred Stock into
Common Stock of Target prior to the Closing. There shall be no outstanding
shares of Target Preferred Stock immediately prior to the Closing.
(o) PRODUCT DELIVERY. Target shall have made shipments of
commercially available Products, as that term is defined and pursuant to the
specifications detailed in a product acceptance criteria letter provided by
the Target and approved by Acquiror as of the date hereof, to bona fide
customers bookable in accordance with Acquiror's revenue recognition policy
of at least Seventy-Five Thousand dollars ($75,000) by March 31, 1998.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. At any time prior to the Effective Time, whether
before or after approval of the matters presented in connection with the
Merger by the stockholders of Target, this Agreement may be terminated:
(a) by mutual consent duly authorized by the Boards of
Directors of Acquiror and Target;
(b) by either Acquiror or Target, if, without fault of the
terminating party, the Closing shall not have occurred on or before March 31,
1998 (provided a later date may be agreed upon in writing by the parties
hereto, and provided further that the right to terminate this Agreement under
this Section 7.1(b) shall not be available to any party whose action or
failure to act has been the cause or resulted in the failure of the Merger to
occur on or before such date and such action or failure to act constitutes a
breach of this Agreement);
(c) by Acquiror, if (i) Target shall breach any
representation, warranty, obligation or agreement hereunder and such breach
shall not have been cured within ten (10)
47.
business days of receipt by Target of written notice of such breach and such
breach would have or would reasonably be expected to have a Material Adverse
Effect on Target, or Target or shall take any action that would preclude the
Merger to be accounted for as a pooling of interests, provided that the right
to terminate this Agreement by Acquiror under this Section 7.1(c)(i) shall
not be available to Acquiror where Acquiror is at that time in willful breach
of this Agreement, (ii) the Board of Directors of Target shall have withdrawn
or modified its recommendation of this Agreement or the Merger in a manner
adverse to Acquiror or shall have resolved to do any of the foregoing,
provided that the right to terminate this Agreement by Acquiror under this
Section 7.1(c)(ii) shall not be available to Acquiror where Acquiror is at
that time in willful breach of this Agreement, (iii) for any reason Target
fails to call and hold the Target Stockholders Meeting or obtain appropriate
written consent of Target's stockholders by March 31, 1998 or (iv) holders of
more than nine percent (9%) of Target Capital Stock have not voted in favor
of the Merger by March 31, 1998.
(d) by Target, if (i) Acquiror shall breach any
representation, warranty, obligation or agreement hereunder and such breach
shall not have been cured within ten (10) days following receipt by Acquiror
of written notice of such breach and such breach would have or would
reasonably be expected to have a Material Adverse Effect on Target, provided
that the right to terminate this Agreement by Target under this Section
7.1(d) shall not be available to Target where Target is at that time in
willful breach of this Agreement, (ii) the Board of Directors of Acquiror
shall have withdrawn or modified its recommendation of this Agreement or the
Merger in a manner adverse to Target or shall have resolved to do any of the
foregoing, provided that the right to terminate this Agreement by Target
under this Section 7.1(d)(ii) shall not be available to Target where Target
is at that time in willful breach of this Agreement, (iii) for any reason
Acquiror fails to call and hold the Acquiror Stockholders Meeting or obtain
appropriate written consent of Acquiror's stockholders by March 31, 1998 or
(iv) Acquiror's stockholders do not approve the Merger and this Agreement by
the requisite vote at the Acquiror Stockholders Meeting;
(e) by either Acquiror or Target (i) if any permanent
injunction or other order of a court or other competent authority preventing
the consummation of the Merger shall have become final and nonappealable or
(ii) if any required approval of the stockholders of Target shall not have
been obtained by reason of the failure to obtain the required vote upon a
vote held at a duly held meeting of stockholders or at any adjournment
thereof or by written consent;
(f) by Target, in the event (i) of the acquisition, by any
person or group of persons (other than persons or groups of persons who (A)
acquired shares of Acquiror Common Stock pursuant to any merger of Acquiror in
which Acquiror was the surviving corporation or any acquisition by Acquiror of
all or substantially all of the capital stock or assets of another person or (B)
disclose their beneficial ownership of shares of Acquiror Common Stock on
Schedule 13G under the Exchange Act) of beneficial ownership of 30% or more of
the outstanding shares of Acquiror Common Stock (the terms "person," "group" and
"beneficial ownership" having the meanings ascribed thereto in Section 13(d) of
the Exchange Act and the regulations promulgated
48.
thereunder), or (ii) the Board of Directors of Acquiror accepts or publicly
recommends acceptance of an offer from a third party to acquire 50% or more
of the outstanding shares of Acquiror Common Stock or of Acquiror's
consolidated assets; or
7.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of Acquiror,
Merger Sub or Target or their respective officers, directors, stockholders or
affiliates, except to the extent that such termination results from the
breach by a party hereto of any of its representations, warranties or
covenants set forth in this Agreement; provided that, the provisions of
Section 5.4 (Confidentiality), Section 7.3 (Expenses and Termination Fees)
and this Section 7.2 shall remain in full force and effect and survive any
termination of this Agreement.
7.3 EXPENSES AND TERMINATION FEES.
(a) Subject to Sections 7.3(b), 7.3(c), 7.3(d) and 7.3(e),
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby
(including, without limitation, the fees and expenses of its advisers,
accountants and legal counsel) shall be paid by the party incurring such
expense.
(b) In the event that (i) either Acquiror or Target shall
terminate this Agreement pursuant to Section 7.1(e)(ii) following a failure
of the stockholders of Target to approve this Agreement and, prior to the
time of the Target Stockholders Meeting, there shall have been (A) a Trigger
Event with respect to Target or (B) a Takeover Proposal which at the time of
the meeting of Target's stockholders shall not have been (x) rejected by
Target and (y) withdrawn by the third party, or (ii) Acquiror shall terminate
this Agreement pursuant to Section 7.1(c), due in whole or in part to any
failure by Target to use its reasonable commercial efforts to perform and
comply with all agreements and conditions required by this Agreement to be
performed or complied with by Target prior to or on the Closing Date or any
failure by Target's Affiliates to take any actions required to be taken
hereby, and prior thereto there shall have been (A) a Trigger Event or (B) a
Takeover Proposal which shall not have been (x) rejected by Target and (y)
withdrawn by the third party, then Target shall reimburse Acquiror for all of
the reasonable out-of-pocket costs and expenses incurred by Acquiror in
connection with this Agreement and the transactions contemplated hereby
(including, without limitation, the fees and expenses of its advisors,
accountants and legal counsel) and, in addition, Target shall promptly pay to
Acquiror the sum of $4,000,000 (the "Termination Fee").
(c) In the event that Acquiror shall terminate this Agreement
pursuant to Section 7.1(c) or Section 7.1(e)(ii), Target shall promptly
reimburse Acquiror for all of the reasonable out-of-pocket costs and expenses
incurred by Acquiror in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, the fees and
49.
expenses of its advisors, accountants and legal counsel); and, in the event
any Takeover Proposal or Trigger Event is consummated (as defined in Section
7.3(h) within six months of the later of (x) such termination of this
Agreement and (y) the payment of the above-described expenses, Target shall
promptly pay to Acquiror the additional sum of $4,000,000 (provided that no
Termination Fee had been previously paid pursuant to Section 7.3(b)).
(d) In the event that Target shall terminate this Agreement
pursuant to Section 7.1(d) or Section 7.1(f), Acquiror shall promptly
reimburse Target for all of the reasonable out-of-pocket costs and expenses
incurred by Target in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, the fees and expenses of
its advisors, accountants and legal counsel).
(e) The parties hereto agree that the Termination Fees due
pursuant to Section 7.3(b) and Section 7.3(c) shall not be deemed to be
liquidated damages and that Acquiror's right to the payment of such
Termination Fees shall be in addition to any other rights or remedies under
contract, at law or in equity to which Acquiror may be entitled. Nothing in
this Article VII shall be interpreted as limiting Acquiror's rights and
remedies under any circumstance in the event of Target's breach of this
Agreement.
(f) As used herein, a "Trigger Event" shall occur if any
Person (as that term is defined in Section 13(d) of the Exchange Act and the
regulations promulgated thereunder) acquires securities representing 15% or
more, or commences a tender or exchange offer following the successful
consummation of which the offeror and its affiliate would beneficially own
securities representing 15% or more, of the voting power of Target; PROVIDED,
HOWEVER, a Trigger Event shall not be deemed to include the acquisition by
any Person of securities representing 15% or more of Target if such Person
has acquired such securities not with the purpose nor with the effect of
changing or influencing the control of Target, nor in connection with or as a
participant in any transaction having such purpose or effect, including
without limitation not in connection with such Person (i) making any public
announcement with respect to the voting of such shares at any meeting to
consider any merger, consolidation, sale of substantial assets or other
business combination or extraordinary transaction involving Target, (ii)
making, or in any way participating in, any "solicitation" of "proxies" (as
such terms are defined or used in Regulation 14A under the Exchange Act) to
vote any voting securities of Target (including, without limitation, any such
solicitation subject to Rule 14a-11 under the Exchange Act) or seeking to
advise or influence any Person with respect to the voting of any voting
securities of Target, directly or indirectly, relating to a merger or other
business combination involving Target or the sale or transfer of a
significant portion of assets (excluding the sale or disposition of assets in
the ordinary course of business) of Target, (iii) forming, joining or in any
way participating in any "group" within the meaning of Section 13(d)(3) of
the Exchange Act with respect to any voting securities of Target, directly or
indirectly, relating to a merger or other business combination involving
Target or the sale or transfer of a significant portion of assets (excluding
the sale or disposition of assets in the ordinary
50.
course of business) of Target, or (iv) otherwise acting, alone or in concert
with others, to seek control of Target or to seek to control or influence the
management or policies of Target.
(g) For purposes of Section 7.3(c) above, (A) "consummation"
of a Takeover Proposal shall occur on the date a written agreement is entered
into with respect to a merger or other business combination involving Target
or the acquisition of any significant equity interest in 15% or more of the
outstanding shares of capital stock of Target, or sale or transfer of any
material assets (excluding the sale or disposition of assets in the ordinary
course of business) of Target or any of its subsidiaries and (B)
"consummation" of a Trigger Event shall occur on the date any Person or any
of its affiliates or associates would beneficially own securities
representing 15% or more of the voting power of Target following a tender or
exchange offer. Additionally, for the purposes of this Section 7.3(g), a
Takeover Proposal shall not include an equity investment by financial
investors, including venture capitalists, which does not result in a change
of control of Target.
7.4 AMENDMENT. The boards of directors of the parties hereto may
cause this Agreement to be amended at any time by execution of an instrument
in writing signed on behalf of each of the parties hereto; provided that an
amendment made subsequent to adoption of the Agreement by the stockholders of
Target or Merger Sub shall not (i) alter or change the amount or kind of
consideration to be received on conversion of the Target Capital Stock, (ii)
alter or change any term of the Certificate of Incorporation of the Surviving
Corporation to be effected by the Merger, or (iii) alter or change any of the
terms and conditions of the Agreement if such alteration or change would
adversely affect the holders of Target Common Stock or Merger Sub Common
Stock.
7.5 EXTENSION; WAIVER. At any time prior to the Effective Time
any party hereto may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
made to such party contained herein or in any document delivered pursuant
hereto and (iii) waive compliance with any of the agreements or conditions
for the benefit of such party contained herein. Any agreement on the part of
a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
51.
ARTICLE VIII
ESCROW AND INDEMNIFICATION
8.1 ESCROW FUND. As soon as practicable after the Effective Time,
10% of the shares of Acquiror Common Stock issued at the Closing (the "Escrow
Shares") shall be registered in the name of, and be deposited with, State
Street Bank and Trust Company of California, N.A. (or other institution
selected by Acquiror with the reasonable consent of Target) as escrow agent
(the "Escrow Agent"), such deposit to constitute the Escrow Fund and to be
governed by the terms set forth herein and in the Escrow Agreement attached
hereto EXHIBIT E. The Escrow Fund (but only up to a maximum of ten percent
(10%) of the shares of Acquiror Common Stock issued at the Closing) shall be
available to compensate Acquiror pursuant to the indemnification obligations
of the stockholders of Target.
8.2 INDEMNIFICATION.
(a) Subject to the limitations set forth in this Article
VIII, the stockholders of Target will indemnify and hold harmless Acquiror
and the Surviving Corporation and its respective officers, directors, agents
and employees, and each person, if any, who controls or may control Acquiror
or the Surviving Corporation within the meaning of the Securities Act
(hereinafter referred to individually as an "Indemnified Person" and
collectively as "Indemnified Persons") from and against any and all losses,
costs, damages, liabilities and expenses arising from claims, demands,
actions, causes of action, including, without limitation, reasonable legal
fees, net of any recoveries under existing insurance policies, tax benefit
received by Acquiror or its affiliates as a result of such damages,
indemnities from third parties or in the case of third party claims, by any
amount actually recovered by Acquiror or its affiliates pursuant to
counterclaims made by any of them directly relating to the facts giving rise
to such third party claims (collectively, "Damages") arising out of (i)
breach by Target of the Confidentiality Agreement and (ii) any
misrepresentation or breach of or default in connection with any of the
representations, warranties, covenants and agreements given or made by Target
in this Agreement, the Target Disclosure Schedules or any exhibit or schedule
to this Agreement. Acquiror and its affiliates shall act in good faith and
in a commercially reasonable manner to mitigate any Damages they may suffer.
The Escrow Fund shall be the sole and exclusive remedy for any claims,
demands, actions or other causes of action brought against Target or its
affiliates, stockholders, officers, directors or agents.
(b) Nothing in this Agreement shall limit the liability (i)
of Target for any breach of any representation, warranty or covenant if the
Merger does not close, or (ii) of any Target stockholder in connection with
any breach by such stockholder of the Affiliate and Stockholder Agreement,
Stockholder's Representation Agreement, Irrevocable Proxy or continuity of
interest certificate(s) delivered in connection with the tax opinions to be
rendered pursuant to Section 6.2(g); provided, however, that resort to the
Escrow Fund shall be the exclusive remedy of Acquiror for any such breaches
and misrepresentations following the Effective Time of the Merger.
52.
8.3 DAMAGE THRESHOLD.
(a) Notwithstanding Section 8.2, Acquiror may not receive any
shares from the Escrow Fund with respect to the indemnification obligations
of the stockholders of Target set forth in Section 8.2(a)(i) unless and until
an Officer's Certificate or Certificates (as defined in Section 8.5 below)
satisfying the requirements of Section 8.5(a)(ii) and identifying Damages has
been delivered to the Escrow Agent as provided in Section 8.5 below and such
amount is determined pursuant to this Article VIII to be payable, in which
case Acquiror shall receive shares equal in value to the full amount of
Damages; provided, however, that in no event shall Acquiror receive more than
the Escrow Shares.
(b) Notwithstanding Section 8.2, Acquiror may not receive any
shares from the Escrow Fund with respect to the indemnification obligations
of the stockholders of Target set forth in Section 8.2(a)(ii) unless and
until an Officer's Certificate or Certificates (as defined in Section 8.5
below) satisfying the requirements of Section 8.5(a)(i) and (ii) and
identifying Damages the aggregate amount of which exceeds $100,000 (which
aggregate amount cannot include any individual Damage items of $5,000 or
less) has been delivered to the Escrow Agent as provided in Section 8.5 below
and such amount is determined pursuant to this Article VIII to be payable, in
which case Acquiror shall receive shares equal in value to the full amount of
Damages in excess of $100,000; provided, however, that in no event shall
Acquiror receive more than the Escrow Shares. In determining the amount of
any Damage attributable to a breach, any materiality standard contained in a
representation, warranty or covenant of Acquiror shall be disregarded.
8.4 ESCROW PERIOD. The Escrow Period shall terminate upon the
expiration the earlier to occur of (i) twelve (12) months after the Effective
Time or (ii) the issuance of Acquiror's audited financial statements for the
year ending December 31, 1997 or December 31, 1998, depending on the Closing
Date, which include the results of Target; provided, however, that a portion
of the Escrow Shares, which, in the reasonable judgment of Acquiror, subject
to the objection of the Stockholders' Agent and the subsequent arbitration of
the matter in the manner provided in Section 8.7 hereof, are necessary to
satisfy any unsatisfied claims specified in any Officer's Certificate
theretofore delivered to the Escrow Agent prior to termination of the Escrow
Period with respect to facts and circumstances existing prior to expiration
of the Escrow Period, shall remain in the Escrow Fund until such claims have
been resolved.
8.5 CLAIMS UPON ESCROW FUND.
(a) Upon receipt by the Escrow Agent on or before the last
day of the Escrow Period of a certificate signed by any officer of Acquiror
(an "Officer's Certificate"):
53.
(i) stating that, with respect to the indemnification
obligations of the stockholders of Target set forth in Section
8.2(a)(ii), Damages exist in an aggregate amount greater than
$100,000, (which aggregate amount cannot include any individual Damage
items of $5,000 or less), and
(ii) specifying in reasonable detail the individual items of
such Damages included in the amount so stated, the date each such item
was paid, or properly accrued or arose, the nature of the
misrepresentation, breach of warranty or claim to which such item is
related,
the Escrow Agent shall, subject to the provisions of this Article VIII,
deliver to Acquiror out of the Escrow Fund, as promptly as practicable,
Acquiror Common Stock or other assets held in the Escrow Fund having a value
equal to (x) such Damages with respect to the indemnification obligations of
the stockholders of Target set forth in Section 8.2(a)(i) and (y) such
Damages in excess of $100,000 with respect to the indemnification obligations
of the stockholders of Target set forth in Section 8.2(a)(ii).
(b) For the purpose of compensating Acquiror for its Damages
pursuant to this Agreement, the Acquiror Common Stock in the Escrow Fund
shall be valued at the Closing Price.
8.6 OBJECTIONS TO CLAIMS. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such Officer's
Certificate shall be delivered to the Stockholders' Agent (defined in Section
8.8 below) and for a period of forty-five (45) days after such delivery, the
Escrow Agent shall make no delivery of Acquiror Common Stock or other
property pursuant to Section 8.5 hereof unless the Escrow Agent shall have
received written authorization from the Stockholders' Agent to make such
delivery. After the expiration of such forty-five (45) day period, the
Escrow Agent shall make delivery of the Acquiror Common Stock or other
property in the Escrow Fund in accordance with Section 8.5 hereof, provided
that no such payment or delivery may be made if the Stockholders' Agent shall
object in a written statement to the claim made in the Officer's Certificate,
and such statement shall have been delivered to the Escrow Agent and to
Acquiror prior to the expiration of such forty-five (45) day period.
54.
8.7 RESOLUTION OF CONFLICTS; ARBITRATION.
(a) In case the Stockholders' Agent shall so object in
writing to any claim or claims by Acquiror made in any Officer's Certificate,
Acquiror shall have forty-five (45) days to respond in a written statement to
the objection of the Stockholders' Agent. If after such forty-five (45) day
period there remains a dispute as to any claims, the Stockholders' Agent and
Acquiror shall attempt in good faith for thirty (30) days to agree upon the
rights of the respective parties with respect to each of such claims. If the
Stockholders' Agent and Acquiror should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties and shall be
furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on
any such memorandum and shall distribute the Acquiror Common Stock or other
property from the Escrow Fund in accordance with the terms thereof.
(b) If no such agreement can be reached after good faith
negotiation, either Acquiror or the Stockholders' Agent may, by written
notice to the other, demand arbitration of the matter unless the amount of
the damage or loss is at issue in pending litigation with a third party, in
which event arbitration shall not be commenced until such amount is
ascertained or both parties agree to arbitration; and in either such event
the matter shall be settled by arbitration conducted by three arbitrators.
Within fifteen (15) days after such written notice is sent, Acquiror and the
Stockholders' Agent shall each select one arbitrator, and the two arbitrators
so selected shall select a third arbitrator. The decision of the arbitrators
as to the validity and amount of any claim in such Officer's Certificate
shall be binding and conclusive upon the parties to this Agreement, and
notwithstanding anything in Section 8.6 hereof, the Escrow Agent shall be
entitled to act in accordance with such decision and make or withhold
payments out of the Escrow Fund in accordance therewith.
(c) Judgment upon any award rendered by the arbitrators may
be entered in any court having jurisdiction. Any such arbitration shall be
held in Santa Clara County or San Mateo County, California under the
commercial rules then in effect of the American Arbitration Association. For
purposes of this Section 8.7(c), in any arbitration hereunder in which any
claim or the amount thereof stated in the Officer's Certificate is at issue,
Acquiror shall be deemed to be the Non-Prevailing Party unless the
arbitrators award Acquiror more than one-half (1/2) of the amount in dispute,
plus any amounts not in dispute; otherwise, the Target stockholders for whom
shares of Target Common Stock otherwise issuable to them have been deposited
in the Escrow Fund shall be deemed to be the Non-Prevailing Party. The
Non-Prevailing Party to an arbitration shall pay its own expenses, the fees
of each arbitrator, the administrative fee of the American Arbitration
Association, and the expenses, including without limitation, attorneys' fees
and costs, reasonably incurred by the other party to the arbitration.
55.
8.8 STOCKHOLDERS' AGENT.
(a) Craig Malloy shall be constituted and appointed as agent
("Stockholders' Agent") for and on behalf of the Target stockholders to give
and receive notices and communications, to authorize delivery to Acquiror of
the Acquiror Common Stock or other property from the Escrow Fund in
satisfaction of claims by Acquiror, to object to such deliveries, to agree
to, negotiate, enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of arbitrators with
respect to such claims, and to take all actions necessary or appropriate in
the judgment of the Stockholders' Agent for the accomplishment of the
foregoing. Such agency may be changed by the holders of a majority in
interest of the Escrow Fund from time to time upon not less than 10 days
prior written notice to Acquiror. No bond shall be required of the
Stockholders' Agent, and the Stockholders' Agent shall receive no
compensation for his services. Notices or communications to or from the
Stockholders' Agent shall constitute notice to or from each of the Target
stockholders.
(b) The Stockholders' Agent shall not be liable for any act
done or omitted hereunder as Stockholders' Agent while acting in good faith
and in the exercise of reasonable judgment, and any act done or omitted
pursuant to the advice of counsel shall be conclusive evidence of such good
faith. The Target stockholders shall severally indemnify the Stockholders'
Agent and hold him harmless against any loss, liability or expense incurred
without gross negligence or bad faith on the part of the Stockholders' Agent
and arising out of or in connection with the acceptance or administration of
his duties hereunder.
(c) The Stockholders' Agent shall have reasonable access to
information about Target and the reasonable assistance of Target's officers
and employees for purposes of performing its duties and exercising its rights
hereunder, provided that the Stockholders' Agent shall treat confidentially
and not disclose any nonpublic information from or about Target to anyone
(except on a need to know basis to individuals who agree to treat such
information confidentially).
8.9 ACTIONS OF THE STOCKHOLDERS' AGENT. A decision, act, consent
or instruction of the Stockholders' Agent shall constitute a decision of all
Target stockholders for whom shares of Acquiror Common Stock otherwise
issuable to them are deposited in the Escrow Fund and shall be final, binding
and conclusive upon each such Target stockholder, and the Escrow Agent and
Acquiror may rely upon any decision, act, consent or instruction of the
Stockholders' Agent as being the decision, act, consent or instruction of
each and every such Target stockholder. The Escrow Agent and Acquiror are
hereby relieved from any liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of the
Stockholders' Agent.
8.10 THIRD-PARTY CLAIMS. In the event Acquiror becomes aware of a
third-party claim which Acquiror believes may result in a demand against the
Escrow Fund, Acquiror
56.
shall notify the Stockholders' Agent of such claim, and the Stockholders'
Agent and the Target stockholders for whom shares of Acquiror Common Stock
otherwise issuable to them are deposited in the Escrow Fund shall be
entitled, at their expense, to participate in any defense of such claim.
Acquiror shall have the right in its sole discretion to settle any such
claim; provided, however, that Acquiror may not affect the settlement of any
such claim without the consent of the Stockholders' Agent, which consent
shall not be unreasonably withheld. In the event that the Stockholders'
Agent has consented to any such settlement, the Stockholders' Agent shall
have no power or authority to object under Section 8.6 or any other provision
of this Article VIII to the amount of any claim by Acquiror against the
Escrow Fund for indemnity with respect to such settlement.
ARTICLE IX
GENERAL PROVISIONS
9.1 SURVIVAL AT EFFECTIVE TIME. The representations, warranties
and agreements set forth in this Agreement shall survive after the Effective
Time and shall terminate at the earlier of (i) twelve (12) months after the
Effective Time or (ii) the issuance of Acquiror's audited financial
statements for the year ending December 31, 1997 or December 31, 1988,
depending on the Closing Date, which include the results of Target (the
"Termination Date"), except that the agreements set forth in Article I,
Section 5.4 (Confidentiality), 5.7 (Pooling Accounting), 5.8 (Affiliate
Agreements), 5.13 (Employee Benefit Plans), 5.16 (Form S-8), 5.17
(Stockholder's Representation Agreement), 5.22 (Reorganization), 5.25
(Reasonable Commercial Efforts and Further Assurances), 7.3 (Expenses and
Termination Fees), 7.4 (Amendment), Article VIII and this Article IX shall
survive the Termination Date.
9.2 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by
commercial delivery service, or mailed by registered or certified mail
(return receipt requested) or sent via facsimile (with confirmation of
receipt) to the parties at the following address (or at such other address
for a party as shall be specified by like notice):
(a) if to Acquiror or Merger Sub, to:
Polycom, Inc.
2584 Junction Avenue
San Jose, CA 95134
Attention: President
Fax: (408) 526-9100
Tel: (408) 526-9000
57.
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
Attention: Jeffrey P. Higgins, Esq.
Fax: (415) 496-2885
Tel: (415) 424-0160
(b) if to Target, to
ViaVideo Communications, Inc.
8900 Shoal Creek
Building 300
Austin, TX 78757
Attention: President
Fax: (512) 342-7179
Tel: (512) 923-9633
with a copy to:
Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP
155 Constitution Drive
Menlo Park, CA 94025
Attention: Scott Dettmer, Esq.
Fax: (415) 321-2400
Tel: (415) 321-2800
9.3 INTERPRETATION. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The phrase "made available" in this Agreement shall mean that
the information referred to has been made available if requested by the party
to whom such information is to be made available. The phrases "the date of
this Agreement," "the date hereof," and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to June
58.
11, 1997. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
9.5 ENTIRE AGREEMENT; NONASSIGNABILITY; PARTIES IN INTEREST. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Target Disclosure Schedule and the Acquiror
Disclosure Schedule (a) constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements
and understandings, both written and oral, among the parties with respect to
the subject matter hereof, except for the Confidentiality Agreement, which
shall continue in full force and effect, and shall survive any termination of
this Agreement or the Closing, in accordance with its terms; (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as set forth in Sections 1.6(a)-(d) and (h), 1.7-1.9, and 5.13; and
(c) shall not be assigned by operation of law or otherwise except as
otherwise specifically provided.
9.6 SEVERABILITY. In the event that any provision of this
Agreement, or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with
a valid and enforceable provision that will achieve, to the extent possible,
the economic, business and other purposes of such void or unenforceable
provision.
9.7 REMEDIES CUMULATIVE. Except as otherwise provided herein, any
and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy.
9.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of California that might otherwise
govern under applicable principles of conflicts of law. Each of the parties
hereto irrevocably consents to the exclusive jurisdiction of any court
located within Santa Clara County, State of California, in connection with
any matter based upon or arising out of this Agreement or the matters
contemplated herein, agrees that process may be served upon them in any
manner authorized by the laws of the State of California for such
59.
persons and waives and covenants not to assert or plead any objection which
they might otherwise have to such jurisdiction and such process.
9.9 RULES OF CONSTRUCTION. The parties hereto agree that they
have been represented by counsel during the negotiation, preparation and
execution of this Agreement and, therefore, waive the application of any law,
regulation, holding or rule of construction providing that ambiguities in an
agreement or other document will be construed against the party drafting such
agreement or document.
60.
IN WITNESS WHEREOF, Target, Acquiror and Merger Sub have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized, all as of the date first written above.
TARGET
By: /s/ Craig B. Malloy
----------------------------------
ACQUIROR
By: /s/ Brian L. Hinman
----------------------------------
MERGER SUB
By: /s/ Brian L. Hinman
----------------------------------
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
SCHEDULE 1.6
EXCHANGE RATIO
An aggregate of up to 10,000,000 shares of Acquiror Common Stock
shall be available for the exchange of all outstanding Target Capital Stock
as set forth in Section 1.6 of the Agreement. The exact exchange ratio for
Target Capital Stock shall be determined by dividing 10,000,000 by the number
of shares of outstanding Target Capital Stock plus all reserved but ungranted
options to purchase Target Common Stock; accordingly, each share of Target
Stock issued and outstanding immediately prior to the Effective Time shall be
exchanged for 1.183684 of a share of Acquiror Common Stock.
Based on the capitalization of Target as of the date of the
Agreement and Plan of Reorganization, assuming such capitalization was
unchanged at the Effective Time, 8,402,023 shares of Acquiror Common Stock
would be exchanged for all issued and outstanding shares of Target Common
Stock (assuming conversion of all Target Preferred Stock into Common Stock
prior to the Effective Time) and 1,266,344 shares of Acquiror Common Stock
would be reserved for issuance upon the exercise of outstanding Target stock
options. Of the 8,402,023 shares of Acquiror Common Stock to be issued at
the Closing, 840,202 shares would be deposited in the Escrow Fund as set
forth in Section 8.1 of the Agreement.
Dates Referenced Herein and Documents Incorporated by Reference
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