1
Exhibit (c)(1)
AGREEMENT AND PLAN OF MERGER
AMONG ALCATEL,
ZEUS ACQUISITION CORP.
AND
XYLAN CORPORATION
Dated: March 1, 1999
2
TABLE OF CONTENTS
ARTICLE I THE OFFER
SECTION 1.01. The Offer. ...................................... - 2 -
SECTION 1.02. Company Action. .................................. - 4 -
SECTION 1.03. Directors......................................... - 5 -
ARTICLE II
THE MERGER......................................................... - 6 -
SECTION 2.01. The Merger........................................ - 6 -
SECTION 2.02. Effective Time.................................... - 6 -
SECTION 2.03. Effect of the Merger.............................. - 7 -
SECTION 2.04. Articles of Incorporation; By-Laws................ - 7 -
SECTION 2.05. Closing........................................... - 7 -
SECTION 2.06. Directors and Officers............................ - 7 -
SECTION 2.07. Shareholders' Meeting. .......................... - 7 -
ARTICLE III
CONVERSION OF SECURITIES........................................... - 8 -
SECTION 3.01. Effect on Capital Stock........................... - 8 -
SECTION 3.02. Exchange of Certificates.......................... - 9 -
SECTION 3.03. Dissenting Shares................................ - 11 -
SECTION 3.04. Lost, Stolen or Destroyed Certificates........... - 11 -
SECTION 3.05. Taking of Necessary Action; Further Action....... - 11 -
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................... - 11 -
SECTION 4.01. Organization and Qualification; Subsidiaries..... - 12 -
SECTION 4.02. Articles of Incorporation and By-Laws............ - 12 -
SECTION 4.03. Capitalization................................... - 12 -
SECTION 4.04. Authority Relative to This Agreement............. - 13 -
SECTION 4.05. Material Contracts; No Conflict, Required Filings
and Consents..................................... - 14 -
SECTION 4.06. Rights Plan...................................... - 15 -
SECTION 4.07. SEC Filings, Financial Statements................ - 15 -
SECTION 4.08. Absence of Certain Changes or Events............. - 16 -
SECTION 4.09. No Undisclosed Liabilities....................... - 16 -
SECTION 4.10. Absence of Litigation............................ - 16 -
SECTION 4.11. Employee Benefit Plans; Employment Agreements.... - 16 -
SECTION 4.12. Labor Matters.................................... - 19 -
SECTION 4.13. Restrictions on Business Activities.............. - 19 -
SECTION 4.14. Title to Property................................ - 19 -
SECTION 4.15. Taxes............................................ - 19 -
SECTION 4.16. Environmental Matters............................ - 21 -
SECTION 4.17. Brokers.......................................... - 23 -
SECTION 4.18. Intellectual Property............................ - 23 -
i
3
SECTION 4.19. Vote Required.................................... - 24 -
SECTION 4.20. Opinion of Financial Advisor..................... - 24 -
SECTION 4.21. Year 2000 Compliance............................. - 24 -
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER............ - 24 -
SECTION 5.01. Organization and Qualification................... - 24 -
SECTION 5.02. Authority Relative to this Agreement............. - 25 -
SECTION 5.03. No Conflict, Required Filings and Consents....... - 25 -
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER............................ - 26 -
SECTION 6.01. Conduct of Business by the Company Pending the
Merger........................................... - 26 -
SECTION 6.02. No Solicitation.................................. - 28 -
SECTION 6.03. Information Supplied............................. - 29 -
ARTICLE VII
ADDITIONAL AGREEMENTS............................................. - 30 -
SECTION 7.01. Filings, Other Actions; Notification............. - 30 -
SECTION 7.02. Access to Information; Confidentiality........... - 31 -
SECTION 7.03. Stock Options. ................................. - 31 -
SECTION 7.04. Stock Purchase Plan.............................. - 32 -
SECTION 7.06. Indemnification.................................. - 33 -
SECTION 7.07. Notification of Certain Matters.................. - 34 -
SECTION 7.08. Further Action................................... - 34 -
SECTION 7.09. Public Announcements............................. - 34 -
SECTION 7.10. Listing.......................................... - 34 -
SECTION 7.11. Expenses......................................... - 34 -
ARTICLE VIII
CONDITIONS TO THE MERGER.......................................... - 35 -
SECTION 8.01. Conditions to Obligation of Each Party to
Effect the Merger................................ - 35 -
ARTICLE IX
TERMINATION....................................................... - 35 -
SECTION 9.01. Termination...................................... - 35 -
SECTION 9.02. Effect of Termination............................ - 37 -
SECTION 9.03. Fees and Expenses................................ - 37 -
ARTICLE X
GENERAL PROVISIONS................................................ - 38 -
SECTION 10.01. Effectiveness of Representations, Warranties and
Agreements....................................... - 38 -
ii
4
SECTION 10.02. Notices.......................................... - 38 -
SECTION 10.03. Amendment........................................ - 39 -
SECTION 10.04. Waiver........................................... - 39 -
SECTION 10.05. Headings......................................... - 39 -
SECTION 10.06. Severability..................................... - 39 -
SECTION 10.07. Entire Agreement................................. - 40 -
SECTION 10.08. Assignment, Purchaser............................ - 40 -
SECTION 10.09. Parties in Interest.............................. - 40 -
SECTION 10.10. Failure or Indulgence Not Waiver; Remedies
Cumulative....................................... - 40 -
SECTION 10.11. Governing Law.................................... - 40 -
SECTION 10.12. Counterparts..................................... - 40 -
SECTION 10.13. Waiver of Jury Trial............................. - 40 -
SECTION 10.14. Certain Definitions.............................. - 41 -
iii
5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 1, 1999 (the
"Agreement"), by and among Alcatel, a French corporation ("Parent"), Zeus
Acquisition Corp., a California corporation and a wholly-owned indirect
subsidiary of Parent ("Purchaser") and Xylan Corporation, a California
corporation (the "Company"). Certain capitalized terms used in this Agreement
have the meanings ascribed to them in Article X, Section 10.14 hereof.
WHEREAS, the Boards of Directors of each of Parent, Purchaser and the
Company have approved, and deem it advisable and in the best interests of their
respective shareholders for Parent to enter into a business combination with the
Company upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such combination, it is proposed that Purchaser
make a cash tender offer (the "Offer") to acquire all of the outstanding Common
Stock, par value $.001 per share, of the Company (the "Company Common Stock") at
a price of $37.00 per share, net to the seller in cash, upon the terms and
conditions of this Agreement;
WHEREAS, prior to the approval of the business combination, the Board of
Directors of the Company approved the amendment to the Preferred Shares Rights
Agreement to permit the transactions contemplated by this Agreement to proceed
without triggering a distribution of rights under the Agreement;
WHEREAS, the Boards of Directors of each of Parent and the Company have
approved this Agreement and the merger (the "Merger"), following the
consummation of the Offer, of Purchaser with and into the Company in accordance
with the CGCL and upon the terms and subject to the conditions set forth herein;
WHEREAS, the Company Board has (i) determined that the consideration to be
paid for each Share in the Offer and the Merger is fair to the holders of such
Shares, (ii) approved the making of the Offer and (iii) resolved and agreed to
recommend that holders of such Shares tender their Shares pursuant to the Offer
and approve this Agreement, the Stock Option Agreement and each of the
Transactions (as defined in Section 1.02 hereof) upon the terms and subject to
the conditions set forth herein and therein;
WHEREAS, as a condition and inducement to Parent's and Purchaser's
entering into this Agreement and incurring the obligations set forth herein,
Parent, Purchaser and the Founding Shareholders, concurrently herewith are
entering into shareholders' agreements ("Shareholders Agreement") pursuant to
which such Founding Shareholders are agreeing to take certain actions to support
the transactions contemplated by this Agreement;
WHEREAS, as a condition and inducement to Parent's and Purchaser's
entering into this Agreement and incurring the obligations set forth herein, the
Company, concurrently herewith, is entering into a Stock Option Agreement, dated
as of the date hereof, with Parent and Purchaser,
6
pursuant to which the Company is granting Purchaser an option to purchase
Shares, all upon the terms and subject to the conditions set forth in the Stock
Option Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Purchaser and the Company hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01. The Offer. (a) Provided that this Agreement shall not have
been terminated in accordance with Article IX and none of the events set forth
in Annex A shall have occurred and be existing, as promptly as reasonably
practicable (but in no event later than five business days after the public
announcement of the execution of this Agreement), Purchaser shall commence
(within the meaning of Rule 14d-2 promulgated under the Exchange Act) the Offer
to acquire all the Shares at a price of $37.00 per Share, net to the seller in
cash, subject to applicable withholding taxes (such price, or such higher price
per Share as may be paid in the Offer, being referred to herein as the "Offer
Price"). Subject to Section 1.01(c) and (i) the satisfaction of the Minimum
Condition and (ii) the satisfaction or waiver of the other conditions set forth
in Annex A, Purchaser shall use reasonable best efforts to consummate the Offer
in accordance with its terms and to accept for payment and pay for Shares
validly tendered and not withdrawn pursuant to the Offer as soon as Purchaser is
legally permitted to do so under applicable law. The Offer shall have an initial
scheduled expiration date twenty (20) business days following commencement
thereof, unless consents, approvals, authorizations, permits, filings or
notifications are required pursuant to EC Merger Regulations or any applicable
non-United States laws regulating competition, antitrust, investment or exchange
controls, in which event the initial scheduled expiration date of the Offer
shall be a date mutually agreed by Parent and the Company. The Offer shall be
made by means of an offer to purchase (the "Offer to Purchase") and shall be
subject to the Minimum Condition (as may be amended pursuant to Section 1.01(c))
and the other conditions set forth in Annex A hereto, and shall reflect, as
appropriate, the other terms set forth in this Agreement. Subject to Section
1.01(c), Purchaser shall not (i) amend or waive the Minimum Condition, (ii)
decrease the Offer Price, (iii) decrease the number of Shares sought or (iv)
amend any other condition of the Offer in any manner adverse to the holders of
the Shares without the written consent of the Company (such consent to be
authorized by the Board of Directors of the Company or a duly authorized
committee thereof). If on the initial scheduled expiration date of the Offer, or
any extension thereof, all conditions to the Offer will not have been satisfied
or waived, Purchaser may, from time to time, in its sole discretion, extend the
expiration date of the Offer until a date not later than June 30, 1999;
provided, however, that if the HSR/Foreign Antitrust Condition (as defined in
Annex A) shall not have been satisfied or waived at the scheduled or any
extended expiration date of the Offer, Purchaser may extend the expiration date
of the Offer until a date not later than September 30, 1999 and Parent and
Purchaser shall exercise its reasonable best efforts to comply with any requests
of the DOJ, FTC or similar foreign Governmental Entity. Without limiting the
right of Purchaser to extend the Offer pursuant to the immediately preceding
sentence, at the request of the Company, Purchaser
-2-
7
shall, and Parent shall cause Purchaser to, extend the expiration date of the
Offer (i) in one or more periods of not more than five business days (but in no
event later than April 30, 1999), if (A) any of the conditions set forth in
Annex A shall not have been satisfied or waived at the scheduled or extended
expiration date of the Offer, (B) such condition is reasonably capable of being
satisfied by the Company, (C) the Company exercises its reasonable best efforts
to cause such condition to be satisfied and (D) the Company is in compliance
with all of its covenants in this Agreement, (ii) for five business days in the
event that the Minimum Condition shall not have been satisfied at the first
scheduled expiration date of the Offer or (iii) until a date not later than
September 30, 1999, only if the HSR/Foreign Antitrust Condition shall not have
been satisfied or waived at the scheduled or any extended expiration date of the
Offer and the Company exercises its reasonable best efforts to comply with any
second requests of the DOJ, FTC or similar foreign Governmental Entity. In
addition, Purchaser may increase the Offer Price and the Offer may be extended
to the extent required by law in connection with such increase in each case,
without the consent of the Company.
(b) As soon as practicable on the date the Offer is commenced, Parent and
Purchaser shall file with the SEC a Tender Offer Statement on Schedule 14D-1
(together with all amendments and supplements thereto, the "Schedule 14D-1")
with respect to the Offer. The Schedule 14D-1 shall contain or shall incorporate
by reference the Offer to Purchase and forms of the related letter of
transmittal and any related summary advertisement (the Schedule 14D-1, the Offer
to Purchase and such other documents, together with all supplements and
amendments thereto, being referred to herein collectively as the "Offer
Documents"). Parent and Purchaser shall mail the Schedule 14D-1 to the
shareholders of the Company as soon as practicable after filing with the SEC.
The Offer Documents shall comply in all material respects with the provisions of
applicable federal securities laws. Each of Parent and Purchaser, on the one
hand, and the Company, on the other hand, shall correct promptly any information
provided by it for use in the Offer Documents which shall have become false or
misleading in any material respect, and Parent and Purchaser further agree to
take all steps necessary to cause the Schedule 14D-1, as so corrected, to be
filed with the SEC and the other Offer Documents, as so corrected, to be
disseminated to holders of the Shares, in each case as and to the extent
required by applicable federal securities laws. Parent and Purchaser shall give
the Company and its counsel reasonable opportunity to review and comment upon
the Schedule 14D-1 prior to it being filed with, or sent to, the SEC. Parent and
Purchaser agree to provide the Company and its counsel any comments Parent,
Purchaser or their counsel may receive from the SEC or its staff with respect to
the Offer Documents promptly after the receipt of such comments.
(c) In the event the Minimum Condition is not satisfied on any scheduled
expiration date of the Offer and the Company shall not have given to Purchaser a
notice to extend the expiration date of the Offer pursuant to subsection (ii) of
the penultimate sentence of Section 1.01(a) above, Purchaser may, in its sole
discretion, either (i) extend the Offer pursuant to Section 1.01(a) or (ii)
amend the Offer to provide that, in the event (A) the Minimum Condition is not
satisfied at the next scheduled expiration date of the Offer (without giving
effect to the potential issuance of any Shares issuable upon exercise of the
Stock Option Agreement), and (B) the number of Shares tendered pursuant to the
Offer and not withdrawn as of such next scheduled expiration date is more than
50% of the then outstanding Shares, Purchaser shall waive the
-3-
8
Minimum Condition and amend the Offer to reduce the number of Shares subject to
the Offer to a number of Shares that, when added to the Shares then owned by
Purchaser, will equal the Revised Minimum Number, and, if a greater number of
Shares is tendered into the Offer and not withdrawn, purchase, on a pro rata
basis, the Revised Minimum Number of Shares (it being understood that Purchaser
may, but shall not in any event be required to accept for payment, and pay for,
any Shares if less than the Revised Minimum Number of Shares are tendered
pursuant to the Offer and not withdrawn at the applicable expiration date).
Notwithstanding any other provision of this Agreement, in the event that
Purchaser purchases a number of Shares equal to the Revised Minimum Number,
without the prior written consent of the Purchaser prior to the termination of
this Agreement, the Company shall take no action whatsoever to increase the
percentage of Shares owned by the Purchaser in excess of the Revised Minimum
Number.
(d) Parent has, and shall provide or cause to be provided to Purchaser on
a timely basis, the funds necessary to purchase the Shares that Purchaser
becomes obligated to purchase pursuant to the Offer.
SECTION 1.02. Company Action. (a) The Company hereby approves of and
consents to the Offer and represents that the Company Board, at a meeting duly
called and held on March 1, 1999 at which all members were present, by a
unanimous affirmative vote has (i) determined that each of the Agreement, the
Stock Option Agreement, the Offer and the Merger are, and the other transactions
contemplated hereby and thereby (the "Transactions") are, fair to and in the
best interests of the shareholders of the Company, (ii) authorized, approved,
and adopted this Agreement, the Stock Option Agreement and the Transactions and
(iii) recommended that the shareholders of the Company accept the Offer and
tender their Shares to Purchaser pursuant to the Offer and approve and adopt
this Agreement and the Transactions (provided, however, that subject to and in
accordance with the provisions of Section 6.02(b), such recommendation may be
withdrawn, modified or amended in connection with a Superior Proposal (as
defined in Section 6.02(a)). The Company hereby consents to the inclusion in the
Offer Documents of the recommendation of the Company Board described in the
immediately preceding sentence, subject to Section 6.02(b).
(b) Concurrently with the commencement of the Offer, the Company shall
file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9
(together with all amendments and supplements thereto, the "Schedule 14D-9")
containing the recommendation of the Company Board described in Section 1.02(a)
and shall disseminate the Schedule 14D-9 to the extent required by Rule 14d-9
promulgated under the Exchange Act and any other applicable federal securities
laws. The Schedule 14D-9 shall comply in all material respects with the
provisions of applicable federal securities laws. Each of the Company, on the
one hand, and Parent and Purchaser, on the other hand, shall correct promptly
any information provided by it for use in the Schedule 14D-9 which shall have
become false or misleading in any material respect, and the Company further
agrees to take all steps necessary to cause the Schedule 14D-9, as so corrected,
to be filed with the SEC and disseminated holders of the Shares, in each case as
and to the extent required by applicable federal securities laws. Parent and its
counsel shall be given reasonable opportunity to review and comment upon the
Schedule 14D-9 prior to it being filed with, or sent to, the SEC. The Company
agrees to provide Parent and Purchaser and their
-4-
9
counsel any comments the Company or its counsel may receive from the SEC or its
staff with respect to the Schedule 14D-9 promptly after the receipt of such
comments.
(c) The Company shall cause its transfer agent to promptly furnish
Purchaser with mailing labels containing the names and addresses of all record
holders of the Shares and with security position listings of shares of Company
Common Stock held in stock depositories, each as of a recent date, together with
all other available listings and computer files containing names, addresses and
security position listings of record holders and beneficial owners of Shares.
The Company shall furnish Purchaser with such additional information, including,
without limitation, updated listings and computer files of shareholders, mailing
labels and security position listings, and such other assistance as Parent,
Purchaser or their agents may reasonably request. Subject to the requirements of
applicable law, and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Offer or the
Merger, Parent and Purchaser shall (i) hold in confidence the information
contained in such labels, listings and files, (ii) use such information only in
connection with the Offer and the Merger and (iii) if this Agreement is
terminated in accordance with Article IX, upon request of the Company, deliver
or cause to be delivered to the Company all copies of such information then in
their possession or the possession of its agents or representatives.
SECTION 1.03. Directors. (a) Promptly upon the acceptance for payment by
Parent or any of its subsidiaries for Shares purchased pursuant to the Offer,
and from time to time thereafter, as Shares are acquired by Parent or any of its
subsidiaries, Parent shall be entitled, subject to compliance with Section 14(f)
of the Exchange Act, to designate such number of directors, rounded up to the
next greatest whole number, on the Company Board as will give Parent
representation on the Company Board equal to that number of directors which
equals the product of the total number of directors on the Company Board (giving
effect to the directors appointed or elected pursuant to this sentence and
including current directors serving as officers of the Company) multiplied by
the percentage that the aggregate number of shares of Company Common Stock
beneficially owned by Purchaser, Parent or any of their affiliates (including
for purposes of this Section 1.03, such shares of Company Common Stock as are
accepted for payment pursuant to the Offer, but excluding shares of Company
Common Stock held by the Company or any of its affiliates, which would not
include Parent, Purchaser or its affiliates) bears to the number of shares of
Company Common Stock outstanding; provided, however, that if Purchaser has
acquired the Revised Minimum Number of Shares in the Offer, such number of
directors shall be rounded up to the greatest whole number plus one to give
Purchaser at least a majority of the members of the Company Board; and provided,
further, that in the event that Purchaser's designees are appointed or elected
to the Company Board, until the Effective Time (as defined in Section 2.02) the
Company Board shall have at least one director who is a director on the date of
this Agreement and who is not an executive officer of the Company (the
"Independent Director"). At such times, the Company will also cause (i) each
committee of the Company Board, (ii) if requested by Parent, the board of
directors of each of the Company's subsidiaries and (iii) if requested by
Parent, each committee of such subsidiaries' boards to include persons
designated by Parent constituting the same percentage of each such committee or
board as Parent's designees are of the Company Board. The Company shall, upon
request by Parent, promptly increase the size of the Company Board or exercise
its best efforts to secure the
-5-
10
resignations of such number of directors, or both, as is necessary to enable
Parent's designees to be elected or appointed to the Company Board and shall
cause Parent's designees to be so elected or appointed.
(b) Following the election or appointment of Parent's designees pursuant
to this Section 1.03, and prior to the Effective Time, the approval of a
majority of the Independent Directors shall be required to authorize (i) any
amendment that would be adverse to the holders of Shares, (ii) any termination
of this Agreement by the Company, (iii) any consent by the Company to any
extension of the time for performance of any of the obligations or other acts of
Parent or Purchaser, (iv) any waiver by the Company of compliance with any of
the covenants or conditions contained in this Agreement for the benefit of the
Company or any other rights of the Company under this Agreement, or (v) the
exercise of any of the Company's rights, remedies or benefits hereunder.
(c) Subject to applicable law, the Company shall promptly take all action
necessary pursuant to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder in order to fulfill its obligations under this Section
1.03 and shall include in the Schedule 14D-9 mailed to shareholders promptly
after the commencement of the Offer (or an amendment thereof or an information
statement pursuant to Rule 14f-1 if Parent has not theretofore designated
directors) such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 in order to fulfill
its obligations under this Section 1.03. Subsequent to the purchase of and
payment for Shares as a result of which Parent owns beneficially at least that
number of Shares which satisfies the Minimum Condition or the Revised Minimum
Number, as applicable, Parent shall always have its designees represent at least
a majority of the Company Board. Parent and Purchaser shall furnish to the
Company and be solely responsible for any information with respect to itself and
its nominees, officers, directors and affiliates required by Section 14(f) and
Rule 14f-1. The provisions of this Section 1.03 are in addition to and shall not
limit any rights which Purchaser, Parent or any of their affiliates may have as
a holder or beneficial owner of Shares as a matter of law with respect to the
election of directors or otherwise.
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the CGCL, at the Effective Time
Purchaser shall be merged with and into the Company. As a result of the Merger,
(i) the separate corporate existence of Purchaser shall cease and the Company
shall continue as the surviving corporation of the Merger (the "Surviving
Corporation"), (ii) the Company shall succeed to and assume all the rights and
obligations of Purchaser in accordance with the CGCL and (iii) the separate
corporate existence of the Company with all its rights, privileges, immunities,
powers and franchises shall continue unaffected by the Merger, except as set
forth in Section 2.04.
SECTION 2.02. Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VIII of this
Agreement and the California Merger
-6-
11
Agreement (the form of which shall be mutually agreed by Purchaser and the
Company), the parties hereto shall file the California Merger Agreement with the
Secretary of State of the State of California, whereupon Purchaser shall be
merged with and into the Company in accordance with the applicable provisions of
this Agreement and the CGCL. The parties hereto shall make all other filings,
recordings or publications required by the CGCL in connection with the Merger.
The Merger shall become effective at such time as specified in the California
Merger Agreement (the time the Merger becomes effective being the "Effective
Time").
SECTION 2.03. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the California Merger
Agreement and the applicable provisions of the CGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of the Company and Purchaser
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of the Company and Purchaser shall become the debts, liabilities and duties of
the Surviving Corporation.
SECTION 2.04. Articles of Incorporation; By-Laws. At the Effective Time,
the Articles of Incorporation of the Purchaser as in effect immediately prior to
the Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended as provided by the CGCL and such Articles
of Incorporation. The By-Laws of Purchaser, as in effect immediately prior to
the Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by the CGCL, the Articles of Incorporation of the
Surviving Corporation and such By-Laws.
SECTION 2.05. Closing. Unless this Agreement has been terminated and the
transactions herein contemplated have been abandoned pursuant to Article IX and
subject to the satisfaction or waiver of the conditions set forth in Article
VIII, the closing of the Merger (the "Closing") will take place at 10:00 AM
(EST) as promptly as practicable (and in any event within two business days)
after satisfaction or waiver of the conditions set forth in Article VIII, at the
offices of Proskauer Rose LLP, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, unless
another date, time or place is agreed to in writing by the parties hereto.
SECTION 2.06. Directors and Officers. The directors of Purchaser
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and By-Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
SECTION 2.07. Shareholders' Meeting.
(a) If required by applicable law in order to consummate the Merger,
the Company, acting through the Company Board, shall, in accordance with
applicable law:
-7-
12
(i) duly call, give notice of, convene and hold a special
meeting of its shareholders (the "Special Meeting") as promptly as practicable
following the acceptance for payment and purchase of Shares by Purchaser
pursuant to the Offer for the purpose of considering and taking action upon the
approval of the Merger and the adoption of this Agreement;
(ii) prepare and file with the SEC a preliminary Proxy
Statement relating to the Merger and this Agreement and use its best efforts to
obtain and furnish the information required to be included by the SEC in the
Proxy Statement and, after consultation with Parent, to respond promptly to any
comments made by the SEC with respect to the preliminary Proxy Statement and
cause a definitive Proxy Statement to be mailed to its shareholders, provided
that no amendment or supplement to such Proxy Statement will be made by the
Company without consultation with Parent and its counsel;
(iii) include in the Proxy Statement the recommendation of the
Company Board that shareholders of the Company vote in favor of the approval of
the Merger and the adoption of this Agreement;
(iv) use its best efforts to solicit from holders of Shares
proxies in favor of the Merger and shall take all other action necessary or, in
the reasonable opinion of Parent, advisable to secure any vote or consent of the
shareholders required under California law to effect the Merger.
(b) Parent will provide the Company with the information concerning
Parent and Purchaser required to be included in the Proxy Statement. Parent
shall vote, or cause to be voted, all of the Shares then owned by it, Purchaser
or any of its other subsidiaries or affiliates controlled by Parent in favor of
the approval of the Merger and the approval and adoption of this Agreement.
SECTION 2.08. Merger without Meeting of Shareholders. Notwithstanding
Section 2.07 hereof, in the event that Parent, Purchaser or any other subsidiary
of Parent shall acquire in the aggregate a number of the outstanding shares of
each class of capital stock of the Company pursuant to the Offer or otherwise
sufficient to enable Purchaser or the Company to cause the Merger to become
effective without a meeting of shareholders of the Company, the parties hereto
shall, at the request of Parent and subject to Article VIII, take all necessary
and appropriate action to cause the Merger to become effective as soon as
practicable after such acquisition without a meeting of shareholders of the
Company in accordance with Section 1110 of the CGCL.
ARTICLE III
CONVERSION OF SECURITIES
SECTION 3.01. Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Purchaser, the Company
or the holders of any of the following securities:
-8-
13
(a) Cancellation. Each Share held in the treasury of the Company and each
Share owned by Parent, Purchaser or any direct or indirect wholly owned
subsidiary of the Company or Parent immediately prior to the Effective Time
("Ineligible Shares") shall, by virtue of the Merger and without any action on
the part of the holder thereof, cease to be outstanding, be canceled and retired
without payment of any consideration therefor and cease to exist.
(b) Conversion of Securities. Each issued and outstanding Share, other
than Dissenting Shares and the Ineligible Shares, shall be converted into the
right to receive the Offer Price, payable to the holder thereof, without
interest (the "Merger Consideration"), upon surrender of the certificate
formerly representing such share of Company Common Stock in the manner provided
in Section 3.02. All such shares of Company Common Stock, when so converted,
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing any such
Shares shall cease to have any rights with respect thereto, except the right to
receive the Merger Consideration therefor upon the surrender of such certificate
in accordance with Section 3.02 hereof.
(c) Stock Options. All options to purchase Company Common Stock granted
under the Company's 1993 Stock Incentive Plan, as amended to date (the "1993
Plan"), the Company's 1996 Stock Plan (the "1996 Plan") and the Company's 1998
Employee Stock Option Plan (the "1998 Plan") and the Company's 1996 Directors'
Stock Option Plan (the "Directors' Plan" and, together with the 1993 Plan, the
1996 Plan, and the 1998 Plan, the "Stock Option Plans") or pursuant to any other
arrangement adopted by the Company Board to provide options, warrants or other
rights to purchase capital stock of the Company (in any such case, an "Option")
then outstanding shall be subject to the provisions of Section 7.03.
(d) Capital Stock of Purchaser. Each share of Purchaser Common Stock
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
non-assessable share of common stock, par value $.01 per share, of the Surviving
Corporation. Each stock certificate of Purchaser evidencing ownership of any
such shares shall continue to evidence ownership of such shares of capital stock
of the Surviving Corporation.
(e) All Other Capital Stock of the Company. All other capital stock of the
Company shall be canceled and retired and shall cease to exist, and no Merger
Consideration or other consideration shall be issued or delivered in exchange
therefor.
SECTION 3.02. Exchange of Certificates.
(a) Paying Agent. Parent shall designate a bank or trust
company to act as agent for the holders of the Shares in connection with the
Merger (the "Paying Agent") to receive in trust the funds to which holders of
the Shares shall become entitled pursuant to Section 3.01(b) hereof. At the
Effective Time, Parent shall take all steps necessary to deposit or cause to be
deposited with the Paying Agent such funds for timely payment thereunder. Such
funds shall be invested by the Paying Agent as directed by Parent or the
Surviving Corporation pending payment thereof by the Paying Agent to holders of
the Shares. Earnings from such investments
-9-
14
shall be the sole and exclusive property of Purchaser and the Surviving
Corporation, and no part of such earnings shall accrue to the benefit of the
holder of Shares.
(b) Exchange Procedures. As soon as reasonably practicable
after the Effective Time, Parent shall cause the Paying Agent to mail to each
holder of record of a certificate or certificates, which immediately prior to
the Effective Time represented outstanding Shares (the "Certificates"), whose
Shares were converted pursuant to Section 3.01 hereto into the right to receive
the Merger Consideration, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Paying Agent and shall be in
such form and have such other provisions as Parent may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for payment of the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange there for the Merger Consideration for each share of Company
Common Stock formerly represented by such Certificate and the Certificate so
surrendered shall forthwith be canceled. If payment of the Merger Consideration
is to be made to a person other than the person in whose name the surrendered
Certificate is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the person requesting such payment shall have
paid any transfer and other taxes required by reason of the payment of the
Merger Consideration to a person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation that such tax either has been paid or is not applicable.
Until surrendered as contemplated by this Section 3.02(b), each Certificate
shall be deemed at any time after the Effective Time to represent only the right
to receive the Merger Consideration in cash as contemplated by this Section
3.02.
(c) Transfer Books; No Further Ownership Rights in Company
Common Stock. At the Effective Time, the stock transfer books of the Company
shall be closed and thereafter there shall be no further registration of
transfers of Shares on the records of the Company. From and after the Effective
Time, the holders of Certificates evidencing ownership of the Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Shares, except as otherwise provided for herein or by applicable
law. 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 III.
(d) Termination of Fund; No Liability. At any time following
six months after the Effective Time, the Surviving Corporation shall be entitled
to require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying Agent
and which have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the payment of any Merger Consideration that may be
payable upon surrender of any Certificates such shareholder holds, as determined
pursuant to this Agreement, without any interest thereon. Notwithstanding the
foregoing, neither the Surviving Corporation nor the
-10-
15
Paying Agent shall be liable to any holder of a Certificate for Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
SECTION 3.03. Dissenting Shares. Notwithstanding any provision of
this Agreement to the contrary, if and to the extent required by the CGCL,
Dissenting Shares shall not be exchangeable for the right to receive the Merger
Consideration, and holders of such Dissenting Shares shall be entitled to
receive only such rights as are granted by the CGCL. If, after the Effective
Time, any such holder fails to perfect or effectively withdraws or loses such
right, such Dissenting Shares shall thereupon be treated as if they had been
converted into and to have become exchangeable for, at the Effective Time, the
right to receive the Merger Consideration, without any interest thereon.
Notwithstanding anything to the contrary contained in this Section 3.03, if (i)
the Merger is rescinded or abandoned or (ii) the shareholders of the Company
revoke the authority to effect the Merger, then the right of any shareholder to
be paid the fair value of such shareholder's Dissenting Shares pursuant to
Section 1300 of the CGCL shall cease. The Company shall give Parent prompt
notice of any demands received by the Company for appraisals of Dissenting
Shares. The Company shall not, except with the prior written consent of Parent,
make any payment with respect to any demands for appraisals or offer to settle
or settle any such demands.
SECTION 3.04. Lost, Stolen or Destroyed Certificates. If any Certificates
shall have been lost, stolen or destroyed, the Paying 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 Merger Consideration as may
be required pursuant to Section 3.01; provided, however, that Parent may, in its
discretion and as a condition precedent to the issuance and delivery 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 Parent or the Paying Agent with respect to the Certificates
alleged to have been lost, stolen or destroyed.
SECTION 3.05. Taking of Necessary Action; Further Action. Each of Parent,
Purchaser and the Company in good faith shall take all such commercially
reasonable and lawful action as may be necessary or appropriate in order to
effectuate the Merger in accordance with this Agreement as promptly as possible.
If, at any time after the Effective Time, any such 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 the Company and
Purchaser, the officers and directors of the Company and Purchaser are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Purchaser that,
except as set forth in the Company Disclosure Schedule:
-11-
16
SECTION 4.01. Organization and Qualification; Subsidiaries. Each of the
Company and its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has the requisite corporate power and authority and is in possession of all
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and orders ("Approvals") necessary to own, lease and
operate the properties it purports to own, operate or lease and to carry on its
business as it is now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority and
Approvals would not reasonably be expected to have a Company Material Adverse
Effect. Each of the Company and its subsidiaries is duly qualified or licensed
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not reasonably be expected to have a Company Material
Adverse Effect. A true and complete list of all of the Company's subsidiaries,
together with the jurisdiction of incorporation of each subsidiary and the
percentage of each subsidiary's outstanding capital stock owned by the Company
or another subsidiary, is set forth in Section 4.01 of the Company Disclosure
Schedule. Except as set forth in Section 4.01 of the Company Disclosure
Schedule, the Company does not directly or indirectly own any equity or similar
interest in, or any interest convertible into or exchangeable or exercisable
for, any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity.
SECTION 4.02. Articles of Incorporation and By-Laws. The Company has
heretofore furnished to Parent a complete and correct copy of its Articles of
Incorporation and By-Laws, as amended to date, and a complete and correct copy
of the equivalent organizational documents of each of its subsidiaries. Such
Articles of Incorporation, By-Laws and equivalent organizational documents of
each of its subsidiaries are in full force and effect. The Company is not in
violation of any of the provisions of its Articles of Incorporation or By-Laws.
None of the Company's subsidiaries is in violation of any of the provisions of
its Certificate of Incorporation or By-Laws or equivalent organizational
documents.
SECTION 4.03. Capitalization. (a) The authorized capital stock of the
Company consists of 200,000,000 shares of Company Common Stock and 5,000,000
shares of preferred stock, par value $.001 per share. As of February 23, 1999,
(i) 42,486,382 shares of Company Common Stock were issued and outstanding, all
of which have been duly authorized and validly issued and are fully paid and
non-assessable, (ii) no shares of preferred stock were issued or outstanding,
(iii) no Shares were held in the treasury of the Company, and (iv) 12,042,574
Shares were issuable under outstanding Options (whether or not exercisable)
granted under the Stock Option Plans of which (A) 3,990,000 Shares were reserved
for future issuance pursuant to outstanding Options granted under the 1993 Plan,
(B) 7,163,128 Shares were reserved for future issuance pursuant to outstanding
Options granted under the 1996 Plan, (C) 839,446 Shares were reserved for future
issuance pursuant to outstanding Options granted under the 1998 Plan, and (D)
50,000 Shares were reserved for future issuance pursuant to outstanding Options
granted under the Directors' Plan. The Company has reserved 1,500,000 Shares
under its 1996 Employee Stock Purchase Plan (the "Stock Purchase Plan"), of
which 234,781 have been issued as of
-12-
17
February 23, 1999. No shares of preferred stock were reserved for issuance,
other than those shares of preferred stock reserved for issuance under the
Preferred Shares Rights Agreement. No change in such capitalization has occurred
between September 30, 1998 and the date hereof other than any change associated
with the exercise of vested Options. Except as set forth in this Section 4.03 or
Section 4.11 hereof or in Section 4.03 or Section 4.11 of the Company Disclosure
Schedule, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Company or any of its subsidiaries obligating the Company
or any of its subsidiaries to issue or sell any shares of capital stock of, or
other equity interests in, the Company or any of its subsidiaries. All Shares
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid and non-assessable. Except as is set
forth in Section 4.03 of the Company Disclosure Schedule, there are no
obligations, contingent or otherwise, of the Company or any of its subsidiaries
to repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or the capital stock of any subsidiary or to provide funds to or make
any investment (in the form of a loan, capital contribution or otherwise) in any
such subsidiary or any other entity other than guarantees of bank obligations of
subsidiaries entered into in the ordinary course of business. All of the
outstanding shares of capital stock of each of the Company's subsidiaries are
duly authorized, validly issued, fully paid and non-assessable, and are owned by
the Company or another subsidiary, free and clear of all security interests,
liens, claims, pledges, agreements, limitations in the Company's voting rights,
charges or other encumbrances of any nature whatsoever. Unless otherwise stated,
all references in this Agreement to Company Common Stock and Shares shall be
deemed to include the associated preferred share purchase rights issued pursuant
to the Preferred Shares Rights Agreement.
(b) There are no voting trusts or other agreements or understandings
to which the Company or any of its subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of the subsidiaries. None of
the Company or its subsidiaries is required to redeem, repurchase or otherwise
acquire shares of capital stock of the Company, or any of its subsidiaries,
respectively, as a result of the transactions contemplated by this Agreement.
SECTION 4.04. Authority Relative to This Agreement. (a) The Company has
all necessary corporate power and authority to execute and deliver this
Agreement and the Stock Option Agreement, to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Stock Option
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated (other than the approval and adoption of the Merger
by shareholders as contemplated by Section 2.07). This Agreement and the Stock
Option Agreement each has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery of this
Agreement and the Stock Option Agreement by Parent and Purchaser, constitutes
the legal, valid and binding obligation of the Company enforceable against the
Company in accordance with their respective terms.
-13-
18
(b) The Company Board, at a meeting duly called and held on March 1, 1999
at which all members were present, has (i) unanimously determined that each of
this Agreement, the Stock Option Agreement and the Transactions are fair to, and
in the best interests of the shareholders of the Company, (ii) authorized,
approved and adopted this Agreement, the Stock Option Agreement and the
Transactions, and (iii) recommended that the shareholders of the Company accept
the Offer and tender their Shares to Purchaser pursuant to the Offer and approve
and adopt this Agreement and the Transactions, and none of the aforesaid actions
by the Company Board has been amended, rescinded or modified. As of the date
hereof and at all times on or prior to the Effective Time, no California
takeover statute is applicable to the Offer, the Merger or the other
Transactions, other than Section 1203 of the CGCL.
SECTION 4.05. Material Contracts; No Conflict, Required Filings and
Consents. (a) All agreements which, as of the date hereof, are required to be
filed with the SEC pursuant to the requirements of the Exchange Act as "material
contracts" (collectively, the "Material Contracts") of the Company and its
subsidiaries are filed as Exhibits to the Company SEC Reports. All of the
Material Contracts are valid, binding and in full force and effect. The Company
is not in material default of any of its obligations under the Material
Contracts. No contracting party to any Material Contract has notified (whether
written or oral) the Company of its intention to terminate, cancel or modify
such Material Contract or otherwise to reduce or change its activity thereunder
so as to affect materially and adversely the benefits derived, or currently
expected to be derived, by the Company.
(b) Except as set forth in Section 4.05(b) of the Company Disclosure
Schedule (i) the execution and delivery of this Agreement and the Stock Option
Agreement by the Company does not, and (ii) the performance of this Agreement
and the Stock Option Agreement and the consummation of the Transactions by the
Company will not, (A) conflict with or violate the Articles of Incorporation or
By-Laws or equivalent organizational documents of the Company or any of its
subsidiaries, (B) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Company or any of its subsidiaries or by
which its or any of their respective properties or assets is bound or affected
or (C) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default), or impair the Company's
or any of its subsidiaries' rights or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any Material Contract, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company or any of its subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of their
respective properties is bound or affected except, in the case of clauses (B)
and (C), for such breaches, violations or defaults that would not have a Company
Material Adverse Effect.
(c) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except (i)
for applicable requirements, if any, of the Securities
-14-
19
Act, the Exchange Act, state securities laws ("Blue Sky Laws"), state takeover
laws, the pre-merger notification requirements of the HSR Act, the EC Merger
Regulations, any non-United States laws regulating competition, antitrust,
investment and exchange controls and the filing of the California Merger
Agreement or other documents as required by the CGCL, and (ii) where the failure
to obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay consummation of the Merger,
or otherwise prevent or delay the Company from performing its obligations under
this Agreement, or would not otherwise have a Company Material Adverse Effect.
SECTION 4.06. Rights Plan. The Company Board has approved, and the Company
and the Rights Agent have entered into, an amendment to the Preferred Shares
Rights Agreement, substantially in the form of Exhibit A hereto (the "Rights
Amendment"). Pursuant to the Rights Amendment, neither the execution and
delivery and performance of this Agreement or the Stock Option Agreement, or the
consummation of the Transactions will result in the distribution of separate
certificates representing rights or the occurrence of a Distribution Date (as
defined in Section 1(h) of the Preferred Shares Rights Agreement) or a "flip-in"
or "flip-over" event (that is, an event described in Sections 11(a)(ii) and 13
of the Preferred Shares Rights Agreement).
SECTION 4.07. SEC Filings, Financial Statements. (a) The Company has filed
all forms, reports and documents required to be filed by it with the SEC since
January 1, 1997. The Company has delivered or made available to Parent, in the
form filed with the SEC, the Company SEC Reports. The Company SEC Reports
(including any financial statements or schedules included therein) (i) were
prepared in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. None of the Company's subsidiaries is
required to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated therein or in the notes thereto)
and each fairly presents in all material respects the consolidated financial
position of the Company and its subsidiaries as at the respective dates thereof
and the consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments and such statements do not
contain notes thereto.
(c) The Company has heretofore furnished to Parent a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by the Company with the SEC pursuant
to the Securities Act or the Exchange Act.
-15-
20
SECTION 4.08. Absence of Certain Changes or Events. Except as set forth in
Section 4.08 of the Company Disclosure Schedule or in the Company SEC Reports,
since September 30, 1998, the Company has conducted its business in the ordinary
course and there has not occurred: (i) any amendments or changes in the Articles
of Incorporation or By-Laws of the Company; (ii) any material damage to,
destruction or loss of any assets of the Company (whether or not covered by
insurance); (iii) any change by the Company in its accounting methods,
principles or practices; (iv) any revaluation by the Company of any of its
assets, including, without limitation, writing down the value of capitalized
software or inventory or writing off notes or accounts receivable other than in
the ordinary course of business; or (v) any sale of a material amount of assets
of the Company, except for the sale of inventory in the ordinary course of
business.
SECTION 4.09. No Undisclosed Liabilities. Except as is disclosed in
Section 4.09 of the Company Disclosure Schedule or the Company SEC Reports,
neither the Company nor any of its subsidiaries has any liabilities (absolute,
accrued, contingent or otherwise) of the type that are required to be disclosed
in financial statements, including the notes thereto, prepared in accordance
with GAAP which are, in the aggregate, material to the business, operations or
financial condition of the Company and its subsidiaries taken as a whole, except
liabilities (i) adequately provided for or referred to in the Company's balance
sheet and the related notes thereto as of September 30, 1998 included in the
Company's Form 10-Q for the quarter ended September 30, 1998 (which is part of
the Company SEC Reports) (the "September 30, 1998 Balance Sheet"), (ii) incurred
in the ordinary course of business and not required under GAAP to be reflected
on the September 30, 1998 Balance Sheet or (iii) incurred since September 30,
1998 in the ordinary course of business and consistent with past practice.
SECTION 4.10. Absence of Litigation. Except as set forth in Section 4.10
of the Company Disclosure Schedule or in the Company SEC Reports filed prior to
the date of this Agreement, there are no claims, actions, suits, proceedings or
investigations pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries, or any properties or rights of the
Company or any of its subsidiaries, before any court, arbitrator or Governmental
Entity that is reasonably likely to have a Company Material Adverse Effect.
SECTION 4.11. Employee Benefit Plans; Employment Agreements. (a) Section
4.11(a) of the Company Disclosure Schedule lists all employee benefit plans (as
defined in Section 3(3) of ERISA), all other bonus, stock option, stock
purchase, incentive, deferred compensation, supplemental retirement, severance
or termination pay, post-retirement, health, welfare, sickness, accident,
vacation, medical or life insurance, disability, supplemental unemployment
benefits, retention, change-in-control or parachute plans, profit-sharing,
pension or retirement plans or agreements, commissions or sale arrangements and
other similar fringe or employee benefit plans, programs or arrangements
(whether written or unwritten, insured or self-insured, foreign or domestic),
and any employment or executive compensation or severance agreements, plans or
programs regardless of whether ERISA is applicable thereto, for the benefit of,
or relating to, any employee, director or shareholder (or any of their
beneficiaries) of the Company (whether current, former or retired) or any trade
or business (whether or not incorporated) which is a member of a controlled
group including the Company or which is under
-16-
21
common control with the Company (an "ERISA Affiliate") within the meaning of
Section 414(b), (c), (m) or (o) of the Code (the "Employee Plans").
(b) None of the Company (including any subsidiary thereof), any ERISA
Affiliate or any of their respective predecessors has ever contributed to,
contributes to, has ever been required to contribute to, or otherwise
participated in or participates in or in any way, directly or indirectly, has
any liability with respect to any plan subject to Section 412 of the Code,
Section 302 of ERISA or Title IV of ERISA, including, without limitation, any
"multiemployer plan" (within the meaning of Sections (3)(37) or 4001(a)(3) of
ERISA or Section 414(f) of the Code), or any single employer pension plan
(within the meaning of Section 4001(a)(15) of ERISA) which is subject to
Sections 4063 and 4064 of ERISA.
(c) With respect to each of the Employee Plans: (i) none of the Employee
Plans provides retiree medical, death or other retiree welfare benefits (whether
or not insured) to any current or future retiree or terminee (other than under
Section 4980B of the Code, the Federal Social Security Act or a plan qualified
under Section 401(a) of the Code); (ii) all Employee Plans are in compliance in
all material respects with the terms thereof and the requirements prescribed by
any and all applicable statutes (including, without limitation, the Code and
ERISA), orders or governmental rules and regulations currently in effect with
respect thereto, and the Company, each of its subsidiaries and any ERISA
Affiliate have performed all material obligations required to be performed by
them under, are not in any material respect in default under or in violation of,
and have no knowledge of any default or violation by any other party to, any of
the Employee Plans; (iii) each Employee Plan intended to qualify under Section
401(a) of the Code (or similar provisions for tax-registered or tax-favored
plans of foreign jurisdictions) is either (A) the subject of a favorable
determination letter from the IRS (or, if applicable, similar approvals of
governmental entities in foreign jurisdictions), (B) may rely on a favorable
determination letter from the IRS issued to a prototype plan sponsor, or (C) the
time during which the Company may apply for an IRS determination letter and make
retroactive amendments so as to assure the qualified status of the plan has not
expired, and nothing has occurred or could reasonably be expected to occur that
impaired or could impair such determination or result in the imposition of any
penalty or tax liability; (iv) all contributions required to be made prior to
the Effective Time to any Employee Plan under the terms of the Employee Plan or
any collective bargaining agreement or as required by law with respect to all
periods through the date of the Effective Time shall have been made prior to the
Effective Time or provided for by the Company as applicable, by appropriate
accruals on the Company's latest financial statements; (v) no "prohibited
transaction," within the meaning of Section 4975 of the Code or Section 406 of
ERISA, has occurred or is expected to occur with respect to any Employee Plan;
and (vi) with respect to each Employee Plan that is funded mostly or partially
through an insurance policy, neither the Company nor any ERISA Affiliate has any
liability in the nature of retroactive rate adjustment, loss sharing arrangement
or other actual or contingent liability arising wholly or partially out of
events occurring on or before the Effective Time.
(d) There are no pending audits, investigations, litigation or other
enforcement actions against the Company with respect to any of the Employee
Plans and no completed audit, if any, has resulted in the imposition of any Tax
or penalty.
-17-
22
(e) With respect to each of the Employee Plans, there are no material
actions, suits or claims pending or, threatened against any such Employee Plan,
the Company, any ERISA Affiliate, any director, officer or employee thereof, or
the trustee, assets or fiduciaries of the Employee Plans (other than
non-material routine claims for benefits) and no set of circumstances or facts
exist that could reasonably be expected to give rise to any such action, suit or
claim.
(f) Section 4.11(f) of the Company Disclosure Schedule sets forth a true
and complete list of each current or former employee, officer or director of the
Company or any of its subsidiaries who holds an Option as of the date hereof,
together with the number of shares of Company Common Stock subject to such
Option, the date of grant of such Option, the exercise price of such Option (to
the extent determined as of the date hereof), the expiration date of such Option
and whether such Option is a nonqualified stock option or an "incentive stock
option" within the meaning of Section 422(b) of the Code. Section 4.11(f) of the
Company Disclosure Schedule also sets forth the total number of outstanding
Options. No shares of restricted stock have been granted under the Stock Option
Plans.
(g) With respect to each scheme or arrangement mandated by a government
other than the United States and with respect to each Employee Plan that is not
subject to United States law, there are no material liabilities.
(h) The Company has made available to Parent: (i) copies of all employment
agreements with officers of the Company; (ii) copies of all agreements with
consultants who are individuals obligating the Company to make annual cash
payments in an amount exceeding $100,000 and which are not terminable on less
than 60 days' notice without penalty; (iii) copies of all plans, programs,
agreements and other arrangements of the Company with or relating to its
employees which contain change in control provisions; and (iv) the various forms
of employment agreements, if any, of the Company for its nonexecutive employees.
(i) Except as set forth in Section 4.11(i)(1) of the Company Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not give rise to any liability, including, without limitation, liability
for severance pay, unemployment compensation, termination pay or withdrawal
liability, or accelerate the time of payment or vesting or increase the amount
of compensation or benefits due to any employee, director or shareholder of the
Company (whether current, former or retired) or their beneficiaries solely by
reason of such transactions or by reason of a termination of employment
following such transaction. No amounts payable under any Employee Plan will fail
to be deductible for federal income tax purposes by virtue of Sections 162(m) or
280G of the Code. Neither the Company, any ERISA Affiliate, nor any officer or
employee thereof, has made any promises or commitments, whether legally binding
or not, to create any additional plan, agreement or arrangement, or to modify or
change any existing Employee Plan. No event, condition or circumstance exists
that could reasonably be expected to result in a material increase of the
benefits provided under any Employee Plan or the expense of maintaining any
Employee Plan from the level of benefits or expense incurred for the most recent
fiscal year ended before the Effective Time. Neither the Company nor any ERISA
Affiliate has any unfunded liabilities pursuant to any Employee Plan that is not
intended to be qualified under Section 401(a) of the Code, and that is an
employee
-18-
23
pension benefit plan within the meaning of Section 3(2) of ERISA, a nonqualified
deferred compensation plan, an excess benefit plan or a foreign pension plan. No
event, condition or circumstance exists that would prevent the amendment or
termination of any Employee Plan.
SECTION 4.12. Labor Matters. There are no labor disputes pending or, to
the knowledge of the Company, threatened, between the Company or any of its
subsidiaries and any of their respective employees, which disputes are
reasonably likely to have a Company Material Adverse Effect. Neither the Company
nor any of its subsidiaries is involved in or, to the knowledge of the Company,
threatened with any labor dispute, grievance, or litigation relating to labor,
safety or discrimination matters involving any persons employed by the Company
or its subsidiaries, including, without limitation, charges of unfair labor
practices or discrimination complaints that individually or in the aggregate
would reasonably be expected to have a Company Material Adverse Effect. Neither
the Company nor any of its subsidiaries has knowingly engaged in any unfair
labor practices within the meaning of the National Labor Relations Act or
similar such legislation of foreign jurisdictions. Except as set forth in
Section 4.12 of the Company Disclosure Schedule, neither the Company nor any of
its subsidiaries is presently or has been in the past a party to, or bound by,
any collective bargaining agreement or union contract with respect to any
persons employed by the Company or its subsidiaries and no collective bargaining
agreement is being negotiated by the Company or any of its subsidiaries. Neither
the Company nor any of its subsidiaries has any knowledge of any strikes,
slowdowns, work stoppages or lockouts, or threats thereof, by or with respect to
any employees of the Company or any of its subsidiaries, and there have been no
such strikes, slowdowns, work stoppages or lockouts within the past three years.
Each of the Company and its subsidiaries is in compliance in all material
respects with all applicable laws, regulations and orders relating to workers'
compensation and the Worker Adjustment and Retraining Notification Act or
similar such legislation of foreign jurisdictions.
SECTION 4.13. Restrictions on Business Activities. Other than this
Agreement, there is no material agreement, judgment, injunction, order or decree
binding upon the Company or any of its subsidiaries which has or could
reasonably be expected to have (after giving effect to the consummation of the
Offer and the Merger) the effect of prohibiting or impairing in any material
respect any material business operations of the Company or any of its
subsidiaries, as currently conducted.
SECTION 4.14. Title to Property. The Company and each of its subsidiaries
have good, marketable and defensible title to all of their properties and
assets, free and clear of all liens, charges and encumbrances except liens for
taxes not yet due and payable and such liens or other imperfections of title, if
any, as do not materially detract from the value of or interfere with the
present use of the property affected thereby or which would not be reasonably
likely to have a Company Material Adverse Effect.
SECTION 4.15. Taxes. Except as set forth in Section 4.15 of the Company
Disclosure Schedule:
-19-
24
(a) The Company and each of its subsidiaries, and any consolidated,
combined, unitary or aggregate group for Tax purposes of which the Company or
any of its subsidiaries is or has been a member, have timely filed all United
States federal income Tax Returns and all other material Tax Returns required to
be filed by them or any of them (taking into account applicable extensions), and
have timely paid and discharged all Taxes (whether or not shown on any Tax
Return) due, except with respect to which the Company is maintaining reserves in
accordance with GAAP in its financial statements that are in all material
respects adequate for their payment. All federal income Tax Returns and all
other material Tax Returns filed by the Company and each of its subsidiaries
with respect to Taxes were true, complete and correct in all material respects
as of the date on which they were filed or as subsequently amended to the date
hereof. The Company and each of its subsidiaries have disclosed to the relevant
taxing authority any position taken where the failure to make such disclosure
would enable the taxing authority to subject such person to any material
penalties or additions to Tax. Neither the IRS nor any other taxing authority or
agency is now asserting or, to the best of the Company's knowledge, threatening
to assert against the Company or any of its subsidiaries any deficiency or claim
for material additional Taxes. There are no requests for information from the
IRS or any other taxing authority or agency currently outstanding. No material
Tax Return of either the Company or any of its subsidiaries is currently being
audited by any taxing authority nor are any proceedings (whether administrative
or judicial) currently being conducted with respect to any issues relating to
Taxes. No material Tax claim has become a lien on any assets of the Company or
any subsidiary thereof. Neither the Company nor any of its subsidiaries is
required to include in income (i) any material items in respect of any change in
accounting principles or (ii) any installment sale gain, where the inclusion in
income would result in a material tax liability in excess of the reserves
therefor.
(b) (i) Neither the Company nor any of its subsidiaries is a party to any
agreement, contract or arrangement, or maintains or sponsors any Employee Plans,
that will reasonably be expected to result, separately or in the aggregate, in
the payment of any "excess parachute payment" within the meaning of Section
280G(b)(1) of the Code, determined without regard to Section 280G(b)(4) of the
Code; (ii) neither the Company nor any of its subsidiaries has been subject to
any accumulated earnings tax or personal holding company tax; (iii) none of the
Company's foreign subsidiaries have any investments in United States property
within the meaning of Section 956 of the Code, or for taxable years beginning
after September 30, 1994 and before January 1, 1998, have "excess passive
assets" as defined in former Section 956A(c) of the Code; (iv) neither the
Company nor any of its subsidiaries is obligated under any agreement with
respect to industrial development bonds or other obligations with respect to
which the excludability from gross income of the holder for United States
federal or state income tax purposes could be affected by the transactions
contemplated hereunder; (v) neither the Company nor any of its subsidiaries has
entered into any deferred intercompany transaction within the meaning of section
1.1502-13 of the United States Treasury Regulations as to which items of
deferred gain or loss has not been restored; (vi) no excess loss account within
the meaning of section 1.1502-19 of the United States Treasury Regulations
exists with respect to the stock of any of its subsidiaries; (vii) no extension
of time within which to file any material Tax Return that relates to the Company
or any of its subsidiaries has been requested which Tax Returns has not since
been filed; (viii) there are no waivers or extensions of any applicable statute
of
-20-
25
limitations for the assessment or collection of Taxes with respect to any
material Tax Return that relates to the Company or any of its subsidiaries which
remain in effect; (ix) there are no tax rulings, closing agreements or changes
of accounting method relating to the Company or any of its subsidiaries which
would affect their liability for Taxes for any period after the Effective Time;
(x) none of the federal or material state and local income Tax Returns of the
Company or any of its subsidiaries have been examined or closed or are Tax
Returns with respect to which the applicable statute of limitations has expired
without extension or waiver; (xi) neither the Company nor any subsidiary has
filed a consent under Section 341(f) of the Code or any comparable provision of
state revenue statutes; (xii) no material property of the Company or its
subsidiaries is "tax-exempt use property" within the meaning of Section 168(h)
of the Code; (xiii) neither the Company nor its subsidiaries is a party to any
lease made pursuant to Section 168(f) of the Code; (xiv) to the extent
applicable, the Company and its subsidiaries have properly and in a timely
manner documented their transfer pricing methodology in compliance with Section
482 and related provisions of the Code; and (xv) neither the Company nor any of
its subsidiaries were members of a consolidated, combined, unitary or similar
group of corporations other than such a group of which the Company is the common
parent corporation.
(c) No power of attorney has been granted by the Company or any of its
subsidiaries with respect to any material matter relating to Taxes which is
currently in force.
(d) Neither the Company nor any of its subsidiaries is a party to any
material agreement or arrangement (written or oral) providing for the allocation
or sharing of Taxes.
(e) The Company and each of its subsidiaries have withheld from each
payment made to any of their respective past or present employees, officers or
directors, or any other person, the amount of all Taxes and other deductions
required to be withheld therefrom and paid the same to the proper tax or other
receiving officers within the time required by law, except where the failure to
do so would not result in any deficiency or claim for material additional Taxes.
(f) The accruals for deferred Taxes reflected in the financial statements
of Company for the year ended December 31, 1997 are adequate in all material
respects to cover any deferred Tax liability of the Company and its subsidiaries
determined in accordance with GAAP through the date thereof.
SECTION 4.16. Environmental Matters. Except as set forth in Section 4.16
of the Company Disclosure Schedule:
(a) All of the current operations of the Company and each of its
subsidiaries and their respective assets, businesses and real property,
including any operations at or from any real property presently or formerly
owned, used, leased, occupied, managed or operated by the Company or any of its
subsidiaries (collectively, the "Real Property"), comply in all material
respects, and, to the Company's knowledge, have at all times complied in all
material respects with all applicable Environmental Laws.
-21-
26
(b) None of the assets of the Company or any of its subsidiaries, nor any
of the Real Property, contains any Hazardous Substances in, on, over, under or
at it, in concentrations which would violate in any material respect any
applicable Environmental Laws or reasonably would be likely to result in the
imposition of material liability or obligations on the Company or any of its
subsidiaries under any applicable Environmental Laws, including any material
liability or obligations for the investigation, corrective action, remediation
or monitoring of Hazardous Substances in, on, over, under or at the Real
Property.
(c) None of the Real Property is listed or proposed for listing on the
National Priorities List pursuant to CERCLA, or any similar inventory of sites
requiring investigation or remediation maintained by any state or locality.
Neither the Company, nor any of its subsidiaries has received any written notice
from any Governmental Entity or third party of any actual or threatened
Environmental Liabilities.
(d) Each of the Company and its subsidiaries has all the permits,
licenses, authorizations and approvals necessary for the conduct of their
businesses and for the operations on, in or at the Real Property which are
required under applicable Environmental Laws (the "Environmental Permits") and
they are in compliance in all material respects with the terms and conditions of
all such Environmental Permits. To the Company's knowledge, no reason exists why
the Company would not be capable of continued operation of its business in
compliance in all material respects with the Environmental Permits and the
applicable Environmental Laws.
(e) Neither the Company nor any of its subsidiaries, nor to the knowledge
of the Company and its subsidiaries, any other person or entity, has engaged in,
authorized, allowed or suffered any operations or activities upon any of the
Real Property for the purpose of or in any way involving the handling,
manufacture, treatment, processing, storage, use, generation, release,
discharge, spilling, emission, dumping or disposal of any Hazardous Substances
at, on, under or from the Real Property, except in material compliance with all
applicable Environmental Laws.
(f) There are no underground storage tanks in, on, under or at the Real
Property.
(g) There are no conditions existing at any Real Property or with respect
to any of the assets of the Company or its subsidiaries that require, or to the
Company's knowledge, which with the giving of notice or the passage of time or
both, will reasonably likely require remedial or corrective action, removal,
monitoring or closure pursuant to the Environmental Laws.
(h) The Company and its subsidiaries have provided to Purchaser all
environmental reports, assessments, audits, studies, investigations, data,
Environmental Permits and other written environmental information in its
custody, possession or control concerning the Real Property or the assets of the
Company or its subsidiaries.
(i) Neither the Company nor any of its subsidiaries has contractually, by
operation of law, by the Environmental Laws, by common law or otherwise assumed
or succeeded to any Environmental Liabilities of any predecessors or any other
person or entity.
-22-
27
SECTION 4.17. Brokers. No broker, finder or investment banker (other than
Xxxxxx Xxxxxxx & Co., Incorporated) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company. The
Company has heretofore furnished to Parent a complete and correct copy of all
agreements among the Company and Xxxxxx Xxxxxxx & Co., Incorporated pursuant to
which such firm would be entitled to any payment relating to the transactions
contemplated hereunder.
SECTION 4.18. Intellectual Property. (a) Subject to Section 4.18(b), the
Company and its subsidiaries own or have the right to use all material
Intellectual Property (as defined hereafter) reasonably necessary for the
Company and its subsidiaries to conduct their business as it is currently
conducted or currently proposed to be conducted.
(b) Except as set forth in Schedule 4.18 of the Company Disclosure
Schedule: (i) all of the registrations relating to material Intellectual
Property owned by the Company and its subsidiaries are unexpired, free of all
liens or encumbrances, and have not been abandoned; (ii) to the knowledge of the
Company, the Company does not infringe the intellectual property rights of any
third party in any respect that would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect; (iii) no
judgment, decree, injunction, rule or order has been rendered by any
Governmental Entity or third party which would limit, cancel or question the
validity of, or the Company's or its subsidiaries' rights in and to, any
Intellectual Property owned by the Company in any respect that would reasonably
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect; (iv) the Company has not received written notice of any pending
or threatened suit, action or adversarial proceeding that seeks to limit, cancel
or question the validity of, or in the Company's or its subsidiaries' rights in
and to, any Intellectual Property, which would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect and (v) to
the Company's knowledge, there is no material unauthorized use, infringement or
misappropriation of any of the Intellectual Property by any third party. The
Company is not, nor will it be as a result of the execution and delivery of this
Agreement or the performance of its obligations hereunder, in violation of any
rights to use any material Intellectual Property granted to the Company by a
third party under any license, sublicense or agreement.
(c) For purposes of this Agreement, "Intellectual Property" shall
mean all rights, privileges and priorities provided under United States, state
and foreign law relating to intellectual property, including without limitation
all (x) (1) proprietary inventions, discoveries, processes, formulae, designs,
methods, techniques, procedures, concepts, developments, technology, new and
useful improvements thereof and proprietary know-how relating thereto, whether
or not patented or eligible for patent protection; (2) copyrights and
copyrightable works, including computer applications, programs, software,
databases and related items; (3) trademarks, service marks, trade names, and
trade dress, the goodwill of any business symbolized thereby, and all common-law
rights relating thereto; (4) trade secrets and other confidential information;
(y) all registrations, applications and recordings for any of the foregoing and
(z) licenses or other similar agreements granting to the Company or any of its
subsidiaries the rights to use any of the foregoing.
-23-
28
SECTION 4.19. Vote Required. The affirmative vote of the holders of at
least a majority of the outstanding shares of Company Common Stock is the only
vote of the holders of any class or series of the Company's capital stock
necessary to approve the Merger.
SECTION 4.20. Opinion of Financial Advisor. The Company Board has been
advised by its financial advisor, Xxxxxx Xxxxxxx & Co., Incorporated, that in
its opinion, as of the date hereof, the consideration to be received by holders
of Company Common Stock in the Offer and the Merger, taken together, is fair
from a financial point of view to such holders (other than Alcatel and its
affiliates), and will delivered written copies of such opinion to Parent upon
receipt.
SECTION 4.21. Year 2000 Compliance. (a) The computer systems of the
Company and its subsidiaries (including all software, hardware, workstations and
related components, automated devices, embedded chips and other date sensitive
equipment) are Year 2000 Compliant or will be Year 2000 Compliant by December
31, 1999 except as would not reasonably be expected to have a Company Material
Adverse Effect.
(b) The Company has taken commercially reasonable affirmative steps to
fully assess, address and correct any and all potential material problems and
liabilities relating to Year 2000 Compliance and its impact on any Employee Plan
and its participants and beneficiaries, including, without limitation, having
made a formal inquiry of all third parties with whom it has contractual
relations or transactions in the ordinary course of business with respect to any
Employee Plan.
SECTION 4.22. Full Disclosure. No statement contained in any certificate
or schedule furnished or to be furnished by the Company or its subsidiaries to
Parent or Purchaser in, or pursuant to the provisions of, this Agreement
contains or shall contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary, in the light of the
circumstances under which it was made, to make the statements herein not
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser each hereby represent and warrant to the Company
that:
SECTION 5.01. Organization and Qualification. Each of Parent and Purchaser
is a corporation (or other entity) duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority and is in possession of all Approvals
necessary to own, lease and operate the properties it purports to own, operate
or lease and to carry on its business as it is now being conducted, except where
the failure to be so organized, existing and in good standing or to have such
power, authority and Approvals would not have a Parent Material Adverse Effect.
Each of Parent and Purchaser is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, leased or operated by it or the nature of
-24-
29
its activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that would not
reasonably be expected to have a Parent Material Adverse Effect.
SECTION 5.02. Authority Relative to this Agreement. Each of Parent and
Purchaser has all necessary corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the Stock Option Agreement by Parent and Purchaser and the consummation by
Parent and Purchaser of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate action on the part
of Parent and Purchaser, and no other corporate proceedings on the part of
Parent or Purchaser are necessary to authorize this Agreement or the Stock
Option Agreement or to consummate the transactions so contemplated. This
Agreement and the Stock Option Agreement each has been duly and validly executed
and delivered by Parent and Purchaser and, assuming the due authorization,
execution and delivery of this Agreement by the Company, constitutes a legal,
valid and binding obligation of Parent and Purchaser, enforceable against Parent
and Purchaser in accordance with their respective terms.
SECTION 5.03. No Conflict, Required Filings and Consents. (a) Except as
set forth in Section 5.03(b) hereof, the execution and delivery of this
Agreement by Parent and Purchaser do not, and the performance of this Agreement
and the consummation of the Transactions by Parent and Purchaser will not, (i)
conflict with or violate the statuts of Parent or Articles of Association or
By-Laws of Purchaser, (ii) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Parent or any of its subsidiaries or by
which its or their respective properties or assets are bound or affected or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or impair
Parent's or Purchaser's rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any contracts material to the business of
Parent and Purchaser taken as a whole or result in the creation of a lien or
encumbrance on any of the properties or assets of Parent or Purchaser pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent or Purchaser
is a party or by which Parent or Purchaser or any of their respective properties
are bound or affected, except in the case of clauses (ii) and (iii) for any such
breaches, defaults or other occurrences that would not have a Parent Material
Adverse Effect.
(b) The execution and delivery of this Agreement by Parent and Purchaser
does not, and the performance of this Agreement will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity except (i) for applicable requirements, if any, of the
Securities Act, the Exchange Act, the Blue Sky Laws, the NYSE, state takeover
laws, the pre-merger notification requirements of the HSR Act, the EC Merger
Regulations, any non-United States laws regulating competition, antitrust,
investment and exchange controls and the filing of the California Merger
Agreement or other documents as required by the CGCL and (ii) where the failure
to obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay
-25-
30
consummation of the Merger, or otherwise prevent Parent or Purchaser from
performing their respective obligations under this Agreement, and would not have
a Parent Material Adverse Effect.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.01. Conduct of Business by the Company Pending the Merger.
During the period from the date of this Agreement and continuing until the
earlier to occur of the termination of this Agreement or the Effective Time, the
Company covenants and agrees that, unless Parent shall otherwise agree in
writing and unless otherwise expressly permitted hereunder, the Company shall
conduct its business and shall cause the businesses of its subsidiaries to be
conducted, and the Company and its subsidiaries shall not take any action
except, in the ordinary course of business and in a manner consistent with past
practice; and the Company shall use reasonable commercial efforts to preserve
substantially intact the business organization of the Company and its
subsidiaries, to keep available the services of the present officers, employees
and consultants of the Company and its subsidiaries, and to preserve the present
relationships of the Company and its subsidiaries with customers, suppliers and
other persons with which the Company or any of its subsidiaries has significant
business relations. By way of amplification and not limitation, neither the
Company nor any of its subsidiaries shall, during the period from the date of
this Agreement and continuing until the earlier to occur of the termination of
this Agreement or the Effective Time, directly or indirectly do, or propose to
do, any of the following without the prior written consent of Parent, unless
otherwise expressly permitted hereunder:
(a) amend or otherwise change the Company's or any of its subsidiaries'
Articles of Incorporation or By-Laws, or other equivalent organizational
documents;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest) of the
Company, any of its subsidiaries or affiliates (except for the issuance of
Shares pursuant to the exercise of Options under the Stock Option Plans, which
Options are outstanding on the date hereof);
(c) sell, pledge, dispose of or encumber any assets of the Company or any
of its subsidiaries (except for (i) sales of assets in the ordinary course of
business and in a manner consistent with past practice and (ii) dispositions of
obsolete or worthless assets);
(d) amend or change the period (or permit any acceleration, amendment or
change) of exercisability of Options granted under the Stock Option Plans or the
Stock Purchase Plan or other than as expressly provided in Section 7.03(b),
authorize cash payments in exchange for any such Options;
-26-
31
(e) (i) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its capital stock, except that a wholly owned subsidiary of the Company
may declare and pay a dividend to its parent, (ii) split, combine or reclassify
any of its capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or (iii) amend the terms of, repurchase, redeem or otherwise
acquire, or permit any subsidiary to repurchase, redeem or otherwise acquire,
any of its securities or any securities of its subsidiaries, or propose to do
any of the foregoing;
(f) sell, transfer, license, sublicense or otherwise dispose of any
material Company Intellectual Property (other than in the ordinary course of
business consistent with past practice) or amend or modify any existing
agreements with respect to any material Company Intellectual Property or third
party Intellectual Property rights;
(g) (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof; (ii) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse or otherwise as an accommodation
become responsible for, the obligations of any person, or make any loans or
advances except to employees in the ordinary course consistent with past
practice; (iii) enter into or amend any contract or agreement other than in the
ordinary course of business; (iv) authorize or make any capital expenditures or
purchases of fixed assets that are not currently budgeted and that in the
aggregate, exceeds $500,000 (v) terminate any Material Contract or amend any of
its material terms (other than amendments to existing credit arrangements
designed to remedy defaults thereunder); or (vi) enter into or amend any
contract, agreement, commitment or arrangement to effect any of the matters
prohibited by this Section 6.01(g);
(h) increase the compensation payable or to become payable to its
employees, officers, directors or grant any severance or termination pay to, or
enter into any employment or severance agreement with any employee, director or
officer of the Company or any of its subsidiaries or establish, adopt, enter
into, terminate, or amend any Employee Plan (except as may otherwise be required
by applicable law);
(i) take any action, other than as required by GAAP, to change accounting
policies or procedures or cash maintenance policies or procedures (including,
without limitation, procedures with respect to revenue recognition,
capitalization of development costs, payments of accounts payable and collection
of accounts receivable);
(j) make any material Tax election inconsistent with past practice or
settle or compromise any material Tax liability, except to the extent the amount
of any such settlement or compromise has been reserved for on the consolidated
financial statements contained in the Company SEC Reports, or would not have a
Company Material Adverse Effect;
(k) pay, discharge, settle, or satisfy any lawsuits, claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of
-27-
32
liabilities reflected or reserved against in the financial statements of the
Company or incurred in the ordinary course of business and consistent with past
practice;
(l) except as may be required by law, take any action to terminate or
amend any Employee Plan;
(m) permit any material increase in the number of employees of the Company
or any of its subsidiaries employed by the Company or any of its subsidiaries,
as the case may be, on the date hereof; or
(n) take or fail to take, or agree in writing or otherwise to take or fail
to take, any of the actions described in Section 6.01(a) through (m) above, or
any action which would make any of the representations or warranties of the
Company contained in this Agreement untrue or incorrect or prevent the Company
from performing or cause the Company not to perform its covenants hereunder or
result in any of the conditions to the Merger set forth herein not being
satisfied.
SECTION 6.02. No Solicitation. (a) The Company will not, and will not
permit or cause any of its subsidiaries or any of the officers and directors of
it or its subsidiaries to, and shall direct it and its subsidiaries' employees,
agents and representatives (including any investment banker, attorney or
accountant retained by it or any of its subsidiaries) not to, directly or
indirectly, initiate, solicit, encourage, participate in or otherwise facilitate
any inquiries or the making of any proposal or offer with respect to a merger,
reorganization, share exchange, tender offer, consolidation or similar
transaction involving, or any purchase of 15% or more of the assets or any
equity securities of, the Company or any of its subsidiaries (any such proposal
or offer being hereinafter referred to as an "Acquisition Proposal"). The
Company will not, and will not permit or cause any of its subsidiaries or any of
the officers and directors of it or its subsidiaries to, and shall direct it and
its subsidiaries' employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its
subsidiaries) not to, directly or indirectly, engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, whether made
before or after the date of this Agreement, or otherwise facilitate any effort
or attempt to make or implement an Acquisition Proposal; provided, however, that
nothing contained in this Agreement shall prevent the Company or the Company
Board from (i) complying with Rules 14e-2 and 14d-9 promulgated under the
Exchange Act with regard to an Acquisition Proposal or (ii) at any time prior to
the earlier to occur of (x) payment for shares of Company Common Stock pursuant
to the Offer or (y) the approval of the Merger by the requisite vote of the
shareholders of the Company, (A) providing information in response to a request
therefor by a person who has made an unsolicited bona fide written Acquisition
Proposal (so long as such proposal did not result from a breach of this Section
6.02) if the Company Board receives from the person so requesting such
information an executed confidentiality agreement with customary terms; or (B)
engaging in any negotiations or discussions with any person who has made an
unsolicited bona fide written Acquisition Proposal, if and only to the extent
that, (x) in each such case referred to in clause (A) or (B) above, the Company
Board determines in good faith after consultation with outside legal counsel
that such action is necessary in order for its directors to comply with their
fiduciary duties under applicable law and (y) in the case referred to
-28-
33
in clause (B) above, the Board of Directors of the Company determines in good
faith (after consultation with its financial advisor) that such Acquisition
Proposal is reasonably likely to be consummated, taking into account all legal,
financial and regulatory aspects of the proposal and the person making the
proposal and would, if consummated, result in a more favorable transaction than
the transaction contemplated by this Agreement (any such more favorable
Acquisition Proposal being referred to in this Agreement as a "Superior
Proposal"); provided, however, that the Company may not, except as permitted by
Section 6.02(b) below, withdraw or modify, or propose to withdraw or modify, its
position with respect to the Offer or the Merger or approve or recommend, or
propose to approve or recommend any Acquisition Proposal, or enter into any
agreement with respect to any Acquisition Proposal. The Company will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. The Company agrees that it will take the necessary steps to promptly
inform the individuals or entities referred to in the first sentence hereof of
the obligations undertaken in this Section 6.02.
(b) Neither the Company Board nor any committee thereof shall (i) withdraw
or modify, or propose to withdraw or modify, in a manner adverse to Parent or
Purchaser, the approval or recommendation of the Offer, this Agreement or the
Merger, (ii) approve or recommend, or propose to approve or recommend any
Acquisition Proposal by a third party, or (iii) enter into a definitive
agreement regarding any third party Acquisition Proposal unless, in the case of
each of the preceding clauses, the Company Board shall have (A) determined in
good faith, based on the advise of outside counsel, that such action is
necessary in order for its directors to comply with their fiduciary duties under
applicable law and (B) determined in good faith, after receiving advice from its
financial advisor that the Acquisition Proposal is superior, from a financial
point of view, to the Offer and the Merger, that such Acquisition Proposal is a
Superior Proposal.
(c) The Company will notify Parent promptly (but in any event within 24
hours) if any such inquiries, proposals or offers are received by, any such
information requested from, or any such discussions or negotiations are sought
to be initiated or continued with, any of its representatives indicating, in
connection with such notice, the name of such person and the material terms and
conditions of any proposals or offers and thereafter shall keep Parent informed,
on a current basis, on any material changes in the status and content of any
such proposals or offers and the status of any such negotiations or discussions.
The Company also will promptly request each person that has heretofore executed
a confidentiality agreement in connection with its consideration of an
Acquisition Proposal to return all confidential information heretofore furnished
to such person by or on behalf of it or any of its subsidiaries.
SECTION 6.03. Information Supplied. Each of the Company and Parent agrees,
as to itself and its subsidiaries, that none of the information supplied or to
be supplied by it or its subsidiaries for inclusion or incorporation by
reference in (i) the Offer Documents, the Schedule 14D-1 and the Schedule 14D-9
will, at the time of filing thereof and at the time of distribution thereof,
contain any untrue statement of 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, (ii) the Proxy Statement, if any, will,
-29-
34
at the date of mailing to shareholders of the Company and at the time of the
meeting of shareholders of the Company to be held in connection with the Merger,
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.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01. Filings, Other Actions; Notification. (a) Parent and the
Company shall promptly prepare and file as soon as practicable after the date
hereof all documents required to be filed (i) with the FTC and the DOJ in order
to comply with the HSR Act and (ii) any other documents which are required under
the EC Merger Regulations or any non-United States laws regulating competition,
antitrust, exchange controls or investment. Parent and the Company shall
promptly furnish all materials thereafter required in connection therewith.
(b) Each of the Company and Parent shall cooperate with each other and use
(and shall cause its subsidiaries to use) all best efforts (i) to cause to be
done all things necessary, proper or advisable on its part under this Agreement
and applicable laws to consummate and make effective the Offer, the Merger and
the other transactions contemplated by this Agreement as soon as practicable,
including preparing and filing as promptly as practicable all documentation to
effect all necessary notices, reports and other filings and (ii) to obtain as
promptly as practicable all consents, registrations, approvals, permits and
authorizations necessary or advisable to be obtained from any third party and/or
any Governmental Entity in connection with, as a result of or in order to
consummate the Offer, the Merger or any of the other transactions contemplated
by this Agreement, including, without limitation, upon request of Parent, all
material consents required in connection with the consummation of the Offer and
the Merger; provided, however, that nothing in this Section 7.01 shall require,
or be construed to require, Parent, in connection with the receipt of any
regulatory approval, to proffer to, or agree to (i) sell or hold separate and
agree to sell or to discontinue to or limit, before or after the Effective Time,
any assets, businesses or interest in any assets or businesses of Parent, the
Company or any of their respective affiliates which would be material in
relation to the business of the Company (or to consent to any sale, or agreement
to sell, or discontinuance or limitation by the Company of any of the assets or
businesses that are material to the Company) or (ii) agree to any conditions
relating to, or changes or restriction in, the operations of any such asset or
businesses which, in either case, could, in the judgment of Parent, materially
and adversely impact the economic or business benefits to Parent of the
transactions contemplated by this Agreement. Subject to applicable laws relating
to the exchange of information, Parent and the Company shall have the right to
review in advance, and to the extent practicable each will consult the other on,
all the information relating to Parent or the Company, as the case may be, and
any of their respective subsidiaries, that appear in any filing made with, or
written materials submitted to, any third party or any Governmental Entity in
connection with the Offer, the Merger and the other transactions contemplated by
this Agreement. In exercising the foregoing right, each of the Company and
Parent shall act reasonably and as promptly as practicable.
-30-
35
(c) Each of the Company and Parent shall, upon request by the other,
furnish the other with all information concerning itself, its subsidiaries,
directors, officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with the Offer Documents, the Schedule
14D-1, the Schedule 14D-9, the Proxy Statement (if any), or any other statement,
filing, notice or application made by or on behalf of Parent, the Company or any
of their respective subsidiaries to any third party or Governmental Entity in
connection with the Offer, the Merger and the other transactions contemplated by
this Agreement.
(d) Each of the Company and Parent shall keep the other apprised of the
status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or other
communications received by Parent or the Company, as the case may be, or any of
its subsidiaries, from any third party or any Governmental Entity with respect
to the Offer, the Merger and the other transactions contemplated by this
Agreement.
SECTION 7.02. Access to Information; Confidentiality. The Company shall
(and shall cause each of its subsidiaries to) afford to the officers, employees,
accountants, counsel and other representatives of Parent, full access, during
the period prior to the Appointment Date, to all its properties, books,
contracts, commitments and records and, during such period, the Company shall
(and shall cause each of its subsidiaries to) furnish promptly to Parent all
information concerning its business, properties and personnel as such party may
reasonably request, and shall make available to the other party the appropriate
individuals (including attorneys, accountants and other professionals) for
discussion of its business, properties and personnel as Parent may reasonably
request. After the Appointment Date, the Company shall provide Parent and such
persons as Parent shall designate with all such information, at any time as
Parent shall request. Until the Appointment Date, unless otherwise required by
law or in order to comply with disclosure requirements applicable to the Offer
Documents or the Proxy Statement, Parent shall hold any such information which
is nonpublic in confidence. Notwithstanding the foregoing, no such review,
inquiry or investigation shall affect any representations or warranties of any
parties herein or the conditions to the obligations of any parties.
SECTION 7.03. Stock Options. (a) Except as provided in Section 7.03(b) and
(c), at the Effective Time, the Company's obligations with respect to each
outstanding Option, whether vested or unvested, shall, by virtue of this
Agreement and without any further action of the Company, Parent, Purchaser or
the holder of any Option, be assumed by Parent. Parent shall make such
assumption in such manner that (i) Parent is a corporation "assuming a stock
option in a transaction to which Section 424(a) applies" within the meaning of
Section 424 of the Code or (ii) to the extent that Section 424 of the Code does
not apply to such Option, Parent would be such a corporation were Section 424 of
the Code applicable to such Option; and, after the Effective Time, all
references to the Company in the Stock Option Plans and the applicable stock
option agreements shall be deemed to refer to Parent as issuer and the Company
as the employer of the holders of Options, as applicable, which shall have
assumed the Stock Option Plans as of the Effective Time by virtue of this
Agreement and without any further action. Each Option so assumed by Parent under
this Agreement shall continue to have, and be subject to, the same
-31-
36
terms and conditions set forth in the applicable Stock Option Plan and the
applicable stock option agreement as in effect immediately prior to the
Effective Time, except that (i) such Option will be exercisable for that number
of Parent American Depositary Shares ("ADSs") equal to the product of the number
of shares of Company Common Stock that were purchasable under such Option
immediately prior to the Effective Time multiplied by the quotient determined by
dividing the Merger Consideration by the fair market value of the ADSs, rounded
down to the nearest whole number of ADSs and (ii) the per share exercise price
for the ADSs issuable upon exercise of such assumed Option will be equal to the
exercise price per share of Company Common Stock at which such Option was
exercisable immediately prior to the Effective Time multiplied by the quotient
determined by dividing fair market value of the ADSs by the Merger
Consideration, and rounding the resulting exercise price up to the nearest whole
cent. For purposes of this Section 7.03, the fair market value of the ADSs is
based on the average of the closing prices per share for the five (5) trading
days immediately following (but not including) the date on which the Effective
Time occurs, as reported in The Wall Street Journal.
(b) Notwithstanding paragraph (a) of this Section 7.03, subject to such
procedures as may be established by Parent, each holder of an Option granted
under the 1993 Plan shall have the right to elect to receive with regard to such
Option either of the following amounts: (i) a cash payment equal to the product
of (x) the number of shares of Company Common Stock underlying the vested
portion of such unexercised Option and (y) the excess of the Merger
Consideration over the per share exercise price of the unexercised Option; or
(ii) the number of Options exercisable for ADSs determined under the conversion
formula set forth in paragraph (a) of this Section 7.03.
(c) Notwithstanding paragraph (a) of this Section 7.03, each outstanding
Option granted to a director under the Directors' Plan shall terminate at the
Effective Time.
SECTION 7.04. Stock Purchase Plan. (a) The Company shall take all actions
as are necessary to cause the "exercise date" (referred to as the last day of
the "Offering Period," as such term is used in the Stock Purchase Plan)
applicable to the then current Offering Period to be the last trading day on
which the Company Common Stock is traded on the NASDAQ, immediately prior to the
Effective Time (the "New Purchase Date"); provided that, such change in the
"exercise date" shall be conditioned upon the consummation of the Merger. On the
New Purchase Date, the Company shall apply the funds credited as of such date
under the Stock Purchase Plan within each participant's payroll withholdings
account to the purchase of whole Shares in accordance with the terms of the
Stock Purchase Plan. The cost to each participant in the Stock Purchase Plan for
the Shares shall be the lower of 95% of the closing sale price of Company Common
Stock, as reported on the NASDAQ on (i) the first day of the then current
Offering Period or (ii) the last trading day prior to the New Purchase Date.
(b) Prior to the Effective Time, the Company shall take (or cause to be
taken) all actions as are necessary or appropriate to effectuate the termination
of the Stock Purchase Plan prior to the Effective Time in accordance with its
terms and the Code, ERISA and other applicable law. The Company shall promptly
deliver to Parent prior to the Effective Time true
-32-
37
and complete copies of all documentation relating to or arising from the
termination of the Stock Purchase Plan.
SECTION 7.05. Intentionally Omitted
SECTION 7.06. Indemnification. (a) The Certificate of Incorporation of the
Surviving Corporation shall contain the provisions with respect to
indemnification set forth in the Articles of Incorporation and By-Laws of the
Company, which provisions shall not be amended, repealed or otherwise modified
for a period of six years from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who between the date
hereof and the Effective Time were directors or officers of the Company, unless
such modification is required by law.
(b) After the Appointment Date, the Surviving Corporation shall, and
Parent shall cause the Surviving Corporation, to the fullest extent permitted
under applicable law or under the Surviving Corporation's Articles of
Incorporation or By-Laws, to indemnify and hold harmless, each director and
officer of the Company or any of its subsidiaries (collectively, the
"Indemnified Parties") against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to any action or omission by such director or officer by
virtue of their holding the office of director or officer occurring at or prior
to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement) for a period of six years after the Effective
Time. In the event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), (i) any counsel retained
by the Indemnified Parties for any period after the Effective Time shall be
reasonably satisfactory to the Surviving Corporation and Parent and (ii) neither
the Surviving Corporation nor Parent shall be liable for any settlement effected
without its written consent (which consent shall not be unreasonably withheld).
(c) For a period of six years after the Effective Time, Parent shall cause
to be maintained in effect the current policies of directors' and officers'
liability insurance maintained by the Company (provided that Parent may
substitute therefor policies with reputable and financially sound carriers of at
least the same coverage and amounts containing terms and conditions which are no
less advantageous ) with respect to claims arising from or related to facts or
events that occurred at or before the Effective Time; provided, however, that
Parent shall not be obligated to make annual premium payments for such insurance
to the extent such premiums exceed 150% of the annual premiums paid as of the
date hereof by the Company for such insurance (such 150% amount, the "Maximum
Premium"). If such insurance coverage cannot be obtained at all, or can only be
obtained at an annual premium in excess of the Maximum Premium, Parent shall
maintain the most advantageous policies of directors' and officers' insurance
obtainable for an annual premium equal to the Maximum Premium; provided further,
if such insurance coverage cannot be obtained at all, Parent shall purchase all
available extended reporting periods with respect to pre-existing insurance in
an amount that, together with all other insurance purchased pursuant to this
Section 7.06(c), does not exceed the Maximum Premium. The Company represents to
Parent that the Maximum Premium is $228,321. Parent agrees, and
-33-
38
will cause the Company not to take any action that would have the effect of
limiting the aggregate amount of insurance coverage required to be maintained
for the individuals referred to in this Section 7.06(c).
SECTION 7.07. Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
the Company, Parent or Purchaser, as the case may be, materially to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 7.08. Further Action. Upon the terms and subject to the conditions
hereof, each of the parties hereto in good faith shall use all commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all other things necessary, proper or advisable to consummate
and make effective as promptly as practicable the Offer, the Merger and
transactions contemplated by this Agreement and the Stock Option Agreement, to
obtain in a timely manner all necessary waivers, consents and approvals and to
effect all necessary registrations and filings, and to otherwise satisfy or
cause to be satisfied all conditions precedent to its obligations under this
Agreement.
SECTION 7.09. Public Announcements. The initial press release with respect
to the execution of this Agreement shall be a joint press release acceptable to
Parent and the Company. Thereafter, so long as this Agreement is in effect,
Parent and the Company shall consult with each other before issuing any press
release or otherwise making any public statements with respect to the Offer, the
Merger or this Agreement and shall not issue any such press release or make any
such public statement without the prior consent of the other party, which shall
not be unreasonably withheld; provided, however, that a party may, without the
prior consent of the other party, issue such press release or make such public
statement as may upon the advice of counsel be required by law, the NYSE or the
NASDAQ (as applicable) if it has used all reasonable efforts to consult with the
other party.
SECTION 7.10. Listing. Parent shall use its best efforts to cause the
shares of Parent ADSs issuable upon exercise of Options assumed pursuant to
Section 7.03, to be approved for listing on the NYSE.
SECTION 7.11. Expenses. The Surviving Corporation shall pay all charges
and expenses, including those of the Paying Agent, in connection with the
transactions contemplated in Article III. Except as otherwise provided in
Section 9.03, whether or not the Merger is consummated, all other costs and
expenses incurred in connection with this Agreement, the Stock Option Agreement
and the Offer, the Merger and the other transactions contemplated by this
Agreement and the Stock Option Agreement shall be paid by the party incurring
such expense, except that expenses incurred in connection with the filing fee
for the Proxy Statement
-34-
39
and printing and mailing the Proxy Statement shall be shared equally by Parent
and the Company.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01. Conditions to Obligation of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of each of the following
conditions:
(a) Stockholder Approvals. This Agreement, the Merger and the transactions
contemplated hereby shall have been approved and adopted by the requisite vote
of the shareholders of the Company to the extent required by the CGCL and the
Articles of Incorporation of the Company;
(b) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or Governmental Entity or other similar binding legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect, and there shall not 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; and
(c) Offer. Parent, Purchaser or their affiliates shall have purchased, or
caused to be purchased, the Shares pursuant to the Offer.
ARTICLE IX
TERMINATION
SECTION 9.01. Termination. This Agreement and the Transactions may be
terminated or abandoned at any time prior to the Effective Time, notwithstanding
approval thereof by the shareholders of the Company:
(a) by mutual written consent duly authorized by the respective boards of
directors of Parent and, subject to Section 1.03, the Company; or
(b) by either Parent or the Company if the Merger shall not have been
consummated by September 1, 2000 (provided that the right to terminate this
Agreement under this Section 9.01(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date); or
-35-
40
(c) by either Parent or the Company if (i) a court of competent
jurisdiction or Governmental Entity shall have issued a non-appealable final
order, decree or ruling or taken any other action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
acceptance for payment of, or payment for, Shares pursuant to the Offer or the
Merger or (ii) any action is taken or any statute, rule, regulation or order is
enacted, entered, enforced or deemed applicable to the Offer or the Merger which
makes the consummation of the Offer or the Merger illegal; or
(d) by either Parent or the Company, if the Company Common Stock has not
been purchased pursuant to the Offer prior to June 30, 1999 (provided that the
right to terminate this Agreement under this Section 9.01(d) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure to consummate the
Offer before such date; and provided, further, that if a request for additional
information is received from a Governmental Entity pursuant to the HSR Act or
applicable nonUnited States laws regulating competition, antitrust, investment
or exchange controls, such date shall be extended to the 90th day following
acknowledgment by such Governmental Entity that Parent and the Company have
complied with such request, but in no event shall such date be extended to a
date later than September 30, 1999); or
(e) as long as Company Common Stock has not been purchased pursuant to the
Offer by Parent, if any actions described in paragraph (e) to Annex A have
occurred; or
(f) as long as Company Common Stock has not been purchased pursuant to the
Offer, by Parent, upon a breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement or if any
representation or warranty of the Company, shall have become untrue, in either
case, such that the breach would give rise to the failure of a condition set
forth in Annex A (a "Terminating Breach"), provided that, if such Terminating
Breach is curable prior to the expiration of 30 days from its occurrence (but in
no event later than April 30, 1999) by the Company through the exercise of its
reasonable best efforts and for so long as the Company continues to exercise
such reasonable best efforts, Parent may not terminate this Agreement under this
Section 9.01(f) until the expiration of such period without such Terminating
Breach having been cured; or
(g) by Parent, if, due to an occurrence, not involving a breach by Parent
or Purchaser of their obligations hereunder, which makes it impossible to
satisfy any of the conditions set forth in Annex A hereto, Parent, Purchaser, or
any of their Affiliates shall have failed to commence the Offer on or prior to
the fifth business day following the date of the initial public announcement of
the Offer; or
(h) by Parent or the Company, if the Offer has expired or has been
terminated in accordance with the terms set forth in this Agreement (including
Annex A) without any Company Common Stock having been purchased pursuant to the
Offer; or
(i) by the Company, if Parent or Purchaser shall have failed to perform or
comply in any material respect any material obligation, agreement or covenant to
be performed or complied
-36-
41
with by it under this Agreement, provided that, if such failure of performance
or compliance is curable prior to the expiration of 30 days from its occurrence
(but in no event later than June 30, 1999) by Parent or Purchaser through the
exercise of their respective reasonable best efforts, the Company may not
terminate this Agreement under this Section 9.01(i) until the expiration of such
period without such failure of performance or compliance having been cured; or
(j) by the Company to allow the Company to enter into a definitive
agreement in accordance with Section 6.02(b) with respect to a Superior
Proposal, provided, however, that the Company shall have complied with all the
provisions of Section 6.02 thereof, including the notice provision therein.
SECTION 9.02. Effect of Termination. In the event of the termination of
this Agreement and the abandonment of the Transactions pursuant to Section 9.01,
this Agreement shall forthwith become void and there shall be no liability on
the part of any party hereto (or any of its affiliates, directors, officers,
employees, agents, legal and financial advisors or other representatives) except
(i) as set forth in Sections 7.11, 9.03 and 10.01 and (ii) nothing herein shall
relieve any party from liability or damages resulting from any breach of this
Agreement.
SECTION 9.03. Fees and Expenses. (a) Except as set forth in Section 7.11
and this Section 9.03, all fees and expenses incurred in connection with this
Agreement and the Transactions shall be paid by the party incurring such
expenses, whether or not the Merger is consummated.
(b) The Company shall pay Parent a fee of $54,000,000 USD (the "Fee"),
plus actual, documented and reasonable out-of-pocket expenses of Parent, not in
excess of $3,000,000 USD, relating to the transactions contemplated by this
Agreement (including, but not limited to, fees and expenses of Parent's
counsel), upon the earliest to occur of the following events:
(i) the termination of this Agreement by Parent pursuant to Section
9.01(e); or
(ii) the termination of this Agreement by Parent or the Company
pursuant to Section 9.01(d) or (h) if, at the time of termination an
Acquisition Proposal has been publicly announced and not withdrawn, and
within six months from the date of termination pursuant to Article IX, the
Company enters into an agreement or letter of intent concerning a
transaction that would constitute an Acquisition Proposal and such
transaction is subsequently consummated
(iii) the termination of this Agreement by the Company pursuant to
Section 9.01(j).
(iv) the termination of this Agreement by Parent pursuant to Section
9.01(f) upon a Terminating Breach and (A) such Terminating Breach was
other than a breach of a representation or warranty not within the control
of the Company, (B) at the time of termination an Acquisition Proposal has
been publicly announced and not withdrawn, (C) within six months from the
date of termination pursuant to Article IX, the Company enters into an
agreement or letter of intent
-37-
42
concerning a transaction that would constitute an Acquisition Proposal and (D)
such transaction is subsequently consummated.
(c) The Fee payable pursuant to (A) Section 9.03(b)(i) or (b) (iii) shall
be paid within one business day after the first to occur of the events described
therein and (B) Section 9.03(b)(ii) or (b) (iv) shall be paid on the date on
which the transactions referred to in such subsections are subsequently
consummated.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Effectiveness of Representations, Warranties and
Agreements. Except as otherwise provided in this Section 10.01, the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any person controlling any such party or
any of their officers or directors, whether prior to or after the execution of
this Agreement. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 9.01, as the case may be, except that the agreements set
forth in Article III and in Section 7.03 (Stock Options), 7.06 (Indemnification)
and 7.10 (Listing) shall survive the consummation of the Merger and those set
forth in Section 7.11 (Expenses), Section 9.02 (Effect of Termination) and
Section 9.03 (Fees and Expenses) shall survive termination of this Agreement.
SECTION 10.02. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or mailed if delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like changes of address shall be effective upon receipt)
or sent by electronic transmission, with confirmation received, to the telecopy
number specified below:
(a) If to Parent or Purchaser:
Xxxxxxx
00, xxx Xx Xxxxxx
00000 Xxxxx
Xxxxxx
Telecopier No.: 00-0-0000-0000
Attention: Xxxxxx Xxxxxx-Xxxxxxx, Esq.
-38-
43
With a copy to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxx, Esq.
(b) If to the Company:
Xylan Corporation
00000 Xxxx Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Attention: President
With a copy to:
Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Telecopier No.: (000) 000-0000
Attention: Tae Xxx Xxxx, Esq.
Xxxxxx X. Xxxxxxxxx, Esq.
SECTION 10.03. Amendment. Subject to 1.03(b), this Agreement may be
amended by the parties hereto by action taken by or on behalf of their
respective boards of directors at any time prior to the Effective Time;
provided, however, that, after approval of the Merger by the shareholders of the
Company, no amendment may be made which by law requires further approval by such
shareholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 10.04. Waiver. Subject to Section 1.03(b), at any time prior to
the Effective Time, any party hereto may with respect to any other party hereto
(a) extend the time for the performance of any of the obligations or other acts,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto or (c) waive compliance with
any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby.
SECTION 10.05. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10.06. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other
-39-
44
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent possible.
SECTION 10.07. Entire Agreement. This Agreement (including any exhibits
hereto), the Company Disclosure Schedule, the Parent Disclosure Schedule, and
the Shareholder Agreements and the Stock Option Agreement constitute the entire
agreement and supersede all prior agreements and undertakings both written and
oral, among the parties, or any of them, with respect to the subject matter
thereof.
SECTION 10.08. Assignment, Purchaser. This Agreement shall not be assigned
by operation of law or otherwise, except that Parent and Purchaser may assign
all or any of their rights hereunder to any direct or indirect wholly owned
subsidiary, provided that no such assignment shall relieve the assigning party
of its obligations hereunder.
SECTION 10.09. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and their successors and
assigns, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, other than Article III and
Sections 7.03 (Stock Options), and 7.06 (Indemnification).
SECTION 10.10. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
SECTION 10.11. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.
SECTION 10.12. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 10.13. Waiver of Jury Trial. EACH OF PARENT, PURCHASER AND THE
COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED
UPON CONTRACT, TORT OR
-40-
45
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 10.14. Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliates" means, with respect to any specified person, any person
that directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the person specified; including,
without limitation, any partnership or joint venture in which the first
mentioned person (either alone, or through or together with any other
subsidiary) has, directly or indirectly, an interest of 10 percent or more.
(b) "Appointment Date" shall mean the time the persons designated by
Parent have been elected to, and shall constitute a majority of, the Company
Board pursuant to Section 1.03.
(c) "California Merger Agreement" shall mean the Agreement of Merger by
and among the Company, Purchaser and Parent, together with the related officers'
certificates required by Section 1103 of the CGCL.
(d) "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss.9601 et seq.
(e) "CGCL" shall mean the California General Corporation Law.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Company Board" shall mean the Board of Directors of the Company.
(h) "Company Disclosure Schedule" shall mean the written disclosure
schedule prepared and signed by the Company and previously delivered to
Purchaser.
(i) "Company SEC Reports" shall mean each form, report, schedule,
statement and other document required to be filed by the Company since January
1, 1997 under the Exchange Act or the Securities Act, including any amendment to
such document, whether or not such amendment is required to be so filed.
(j) "Company Material Adverse Effect" means any change or effect that,
individually or when taken together with all other such changes or effects that
have occurred prior to the date of determination of the occurrence of the
Company Material Adverse Effect, is materially adverse to the business, results
of operations or financial condition of the Company and its subsidiaries, taken
as a whole; provided, however, that in determining whether there has been a
Company Material Adverse Effect, any adverse effect attributable to the
following shall be disregarded: (i) general economic or business conditions;
(ii) general industry conditions; (iii) the taking of any action permitted or
required by this Agreement; (iv) a reduction in purchases of products from the
Company by International Business Machines Corporation or Parent; (v) a
reduction or delay in purchases of products from the Company as a direct result
of
-41-
46
the public announcement or pendency of the Offer; or (vi) the breach by Parent
or Purchaser of this Agreement; and in each case, to the extent that such
adverse effect is attributable to such event; provided, however, that with
respect to clause (v) of this paragraph, the Company shall bear the burden of
proof (which shall be established through documentary evidence) in any
proceeding with regard to establishing that any reduction in purchases was
attributable to or results from the direct effect of the public announcement or
pendency of the Offer.
(k) "Dissenting Shares" shall mean any Shares outstanding immediately
prior to the Effective Time and held by a holder who had not voted in favor of
the Merger or consented thereto in writing, and who has demanded appraisal for
such Shares in accordance with Section 1300 of the CGCL, if such Section 1300
provides for appraisal rights for such Shares in the Merger.
(l) "DOJ" shall mean the United States Department of Justice.
(m) "EC Merger Regulations" shall mean Council Regulation (EEC) No.
4064/89 of December 21, 1989 on the Control of Concentrations Between
Undertakings, OJ (1989) L 395/1 (as amended) and the regulations and decisions
of the Commission of the European Community or other organs of the European
Union or European Community implementing such regulations.
(n) "Environment" shall mean any surface or subsurface physical medium or
natural resources, including air, land, soil, surface waters, ground waters,
stream and river sediments, biota and any indoor area, surface or physical
medium.
(o) "Environmental Laws" shall mean federal, foreign, state, local or
common law, rule, regulation, ordinance, code, order or judgment (including any
judicial or administrative interpretations, guidances, directives, policy
statements or opinions) relating to the injury to, or the pollution or
protection of, human health and safety or the Environment.
(p) "Environmental Liabilities" shall mean any claims, judgments, damages
(including punitive damages), losses, penalties, fines, liabilities,
encumbrances, liens, violations, costs and expenses (including attorneys' and
consultants' fees) of investigation, remediation, monitoring or defense of any
matter relating to human health, safety or the Environment of whatever kind or
nature by any party, entity or authority, (A) which are incurred as a result of
(i) the existence of Hazardous Substances in, on, under, at or emanating from
any Real Property, (ii) the Company's or any of its subsidiary's offsite
transportation, treatment, storage or disposal of Hazardous Substances or (iii)
the violation of any Environmental Laws or (B) which arise under Environmental
Laws.
(q) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
(r) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
-42-
47
(s) "Founding Shareholders" shall mean Xxxxx X. Xxx, The Xxxxx X. Xxx
Living Trust, and The Xxx Irrevocable Children's Trust, and Xxxx Xxxxxxx and The
Xxxxxxx Trust and The Xxxxxxx 1995 Irrevocable Children's Trust.
(t) "FTC" shall mean the United States Federal Trade Commission.
(u) "GAAP" shall mean United States Generally Accepted Accounting
Principles.
(v) "Governmental Entity" shall mean any United States or foreign
governmental, administrative or regulatory authority, commission, body, agency
or other authority.
(w) "Hazardous Substances" shall mean petroleum, petroleum products,
petroleumderived substances, radioactive materials, hazardous wastes,
polychlorinated biphenyls, lead based paint, radon, urea formaldehyde, asbestos
or any materials containing asbestos, and any materials or substances regulated
or defined as or included in the definition of "hazardous substances,"
"hazardous materials," "hazardous constituents," "toxic substances,"
"pollutants," "contaminants" or regulated under any Environmental Law by reason
of toxicity, carcinogenicity, ignitability, corrosivity or reactivity.
(x) "HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended.
(y) "IRS" United States Internal Revenue Service.
(z) "Knowledge" means the following: an individual shall be deemed to have
"knowledge" of a particular fact or other matter if such individual is actually
aware of such fact or other matter, but without having undertaken any
independent investigation to determine the existence or absence of such fact or
other matter. A corporation shall be deemed to have "knowledge" of a particular
fact or matter only if a director or executive officer of such corporation has
"knowledge" of such fact or matter.
(aa) "Minimum Condition" shall mean at least 90% of the outstanding shares
of Company Common Stock (together with the shares of the Company Common Stock,
if any, then owned by Parent or Purchaser or their subsidiaries) shall have been
validly tendered and not withdrawn prior to the expiration of the Offer.
(bb) "NASDAQ" shall mean the NASDAQ Stock Market, Inc.
(cc) "NYSE" shall mean the New York Stock Exchange.
(dd) "Parent Material Adverse Effect" shall mean any change or effect
that, individually or when taken together with all other such changes or effects
that have occurred prior to the date of determination of the occurrence of the
Parent Material Adverse Effect, is materially adverse to the business, results
of operations or financial condition of Parent and its subsidiaries taken as a
whole; provided, however, that in determining whether there has been a Parent
Material Adverse
-43-
48
Effect, any adverse effect attributable to the following shall be disregarded:
(i) general economic or business conditions; (ii) general industry conditions;
(iii) the taking of any action permitted or required by this Agreement; or (iv)
the breach by the Company of this Agreement; and in case, to the extent that
such adverse effect is attributable to such event.
(ee) "Preferred Shares Rights Agreement" shall mean that certain Preferred
Shares Rights Agreement dated as of April 17, 1997 between the Company and The
First National Bank of Boston, as the Rights Agent.
(ff) "Proxy Statement" shall mean the proxy statement (or information
statement) to be filed by the Company with the SEC pursuant to Section 2.07
hereof, together with all amendments and supplements thereto and including the
exhibits thereto.
(gg) "Purchaser Common Stock" shall mean the common stock, par value $.01
per share, of Purchaser.
(hh) "Revised Minimum Number" shall mean that number of Shares that when
added to the Shares then owned by Purchaser would equal 49.99% of the Shares
then outstanding.
(ii) "SEC" shall mean the United States Securities and Exchange
Commission.
(jj) "Securities Act" shall mean the Securities Act of 1933, as amended.
(kk) "Shares" shall mean shares of Company Common Stock.
(ll) "Stock Option Agreement" shall mean that certain agreement among
Parent, Purchaser and the Company regarding Purchaser's ability to acquire
additional Shares from the Company.
(mm) "Tax" shall mean taxes, fees, levies, duties, tariffs, imposts and
governmental impositions or charges of any kind in the nature of (or similar to)
taxes, payable to any federal, state, provincial, local or foreign taxing
authority, including (without limitation) (i) income, franchise, profits, gross
receipts, ad valorem, net worth, value added, sales, use, service, real or
personal property, special assessments, capital stock, license, payroll,
withholding, employment, social security, workers' compensation, unemployment
compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, transfer and gains taxes and (ii) interest,
penalties, additional taxes and additions to tax imposed with respect thereto.
(nn) "Tax Returns" shall mean returns, reports and information statements
with respect to Taxes required to be filed with the IRS or any other taxing
authority, domestic or foreign, including, without limitation, consolidated,
combined and unitary tax returns.
(oo) "USD" shall mean United States dollars.
-44-
49
(pp) "Year 2000 Compliant" shall mean that the computer systems (i) are
capable of recognizing, processing, managing, representing, interpreting and
manipulating correctly date related data for dates earlier and later than
January 1, 2000, including calculating, comparing, sorting, storing, tagging and
sequencing, without resulting in or causing logical or mathematical errors or
inconsistencies in any user-interface functionalities or otherwise, including
data input and retrieval, data storage, data fields, calculations, reports,
processing or any other input or output; (ii) have the ability to provide date
recognition for any data element without limitation (including date-related data
represented without a century designation, date-related data whose year is
represented by only two digits and date fields assigned special values); (iii)
have the ability to function automatically into and beyond the year 2000 without
human intervention and without any change in operations associated with the
advent of the year 2000; (iv) have the ability to interpret data, dates and time
correctly into and beyond the year 2000; (v) have the ability not to produce
noncompliance in existing information, nor otherwise corrupt such data into and
beyond the year 2000; (vi) have the ability to process correctly after January
1, 2000 data containing dates before that date; and (vii) have the ability to
recognize all "leap years," including February 29, 2000.
-45-
50
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, all as of
the date first written above.
ALCATEL
By: /s/ Xxxxx Xxxxxxx
------------------------------------------
Name: Xxxxx Xxxxxxx
Title: Chairman & Chief Executive Officer
XYLAN CORPORATION
By: /s/ Xxxxx X. Xxx
------------------------------------------
Name: Xxxxx X. Xxx
Title: President & Chief Executive Officer
ZEUS ACQUISITION CORP.
By: /s/ Olivier Houssin
------------------------------------------
Name: Olivier Houssin
Title: Chairman
-46-
51
Annex A
Certain Conditions of the Offer.
Notwithstanding any other provision of the Offer and in addition to (and
not in limitation of) Purchaser's rights to extend and amend the Offer at any
time in its sole discretion (but subject in all cases to the provisions of the
Merger Agreement), Purchaser shall not be required to accept for payment or,
subject to any applicable rules and regulations of the SEC, including Rule 14e-
1(c) under the Exchange Act (relating to Purchaser's obligation to pay for or
return tendered Shares promptly after termination or withdrawal of the Offer),
pay for, and may delay the acceptance for payment of or, subject to the
restriction referred to above, the payment for, any tendered Shares, and may
terminate the Offer or amend the Offer as to any Shares not then paid for, if
(i) any applicable waiting period under the HSR Act, the EC Merger Regulations
or any applicable non-United States laws regulating competition, antitrust,
investment or exchange controls has not expired or terminated prior to the
expiration of the Offer (the "HSR/Foreign Antitrust Condition"), (ii) the
Minimum Condition shall not have been satisfied or waived (pursuant to the
Merger Agreement) or (iii) at any time on or after the date of the Merger
Agreement and before the time of acceptance of Shares for payment pursuant to
the Offer, any of the following events shall occur or shall be determined by
Purchaser to have occurred (other than as the result of any action or inaction
of Parent or its subsidiaries that would constitute a material breach of the
Merger Agreement (other than Article V)):
(a) there shall be instituted or pending any suit, action or proceeding by
any Governmental Entity seeking, or by any other person which would reasonably
be expected to, (i) prohibit or impose any material limitations on Parent's or
Purchaser's ownership or operation (or that of any of their respective
subsidiaries or affiliates) of all or a material portion of their or the
Company's businesses or assets, or to compel Parent or Purchaser or their
respective subsidiaries and affiliates to dispose of or hold separate any
material portion of the business or assets of the Company or Parent and their
respective subsidiaries, (ii) prohibit the acquisition by Parent or Purchaser of
any Shares under the Offer or pursuant to the Stock Option Agreement or the
Shareholder Agreements, to restrain or prohibit the making or consummation of
the Offer or the Merger or the performance of any of the other transactions
contemplated by this Agreement, the Stock Option Agreement or the Shareholder
Agreements, or to require the Company, Parent or Purchaser to pay any damages
that are material in relation to the Company taken as a whole, (iii) impose
material limitations on the ability of Purchaser, or to render Purchaser unable,
to accept for payment, pay for or purchase some or all of the Shares pursuant to
the Offer and the Merger, (iv) impose material limitations on the ability of
Purchaser or Parent effectively to exercise full rights of ownership of the
Shares, including, without limitation, the right to vote the Shares purchased by
it on all matters properly presented to the Company's shareholders, or (v) have
a Company Material Adverse Effect, or materially adversely affect the ability of
the Company or Parent to consummate the Offer or the Merger, or to perform any
of their obligations under this Agreement or the Stock Option Agreement; or
A-1
52
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to the
Offer or the Merger, or any other action shall be taken by any Governmental
Entity, other than the application to the Offer or the Merger of applicable
waiting periods under the HSR Act, EC Merger Regulations and applicable
non-United States laws regulating competition, antitrust, investment or exchange
controls that would reasonably be expected to result, directly or indirectly, in
any of the consequences referred to in clauses (i) through (v) of paragraph (a)
above; or
(c) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on the New York Stock Exchange, or in the
Nasdaq National Market System (excluding suspensions or limitations resulting
solely from physical damage or interference with such exchanges not related to
market conditions), (ii) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States (whether or not mandatory),
(iii) a commencement of a war, armed hostilities or other international or
national calamity directly or indirectly involving the United States other than
the current hostilities in Iraq, Kosovo, Bosnia or Serbia, (iv) any limitation
(whether or not mandatory) by any United States governmental authority on the
extension of credit by banks or other financial institutions, (v) a change in
general financial bank or capital market conditions which materially and
adversely affects the ability of financial institutions in the United States to
extend credit or syndicate loans, or (vi) in the case of any of the foregoing
existing at the time of the commencement of the Offer, a material acceleration
or worsening thereof; or
(d) there shall have occurred and be continuing any change, condition,
event or development that would reasonably be expected to result in a Company
Material Adverse Effect; or
(e) the Company Board or any committee thereof shall have (i) withdrawn,
modified or changed in a manner adverse to Parent or Purchaser (including by
amendment of the Schedule 14D-9) its approval or recommendation of the Offer,
this Agreement or the Merger or shall have resolved to do so, or (ii)
recommended or taken a "neutral" position with respect to the approval or
acceptance of an Acquisition Proposal from, or similar business combination
with, a person or entity other than Parent, Purchaser or their affiliates or
shall have resolved to do so; or
(f) any of the representations and warranties of the Company set forth in
this Agreement (disregarding for this purpose any qualifications with respect to
materiality or Company Material Adverse Effect) shall not be true and correct as
of the date of this Agreement and as of the scheduled expiration of the Offer
and where the failure to be true and correct would not, together with all other
such failures, have a Company Material Adverse Effect; or
(g) the Company shall have and be continuing to have failed to perform in
any material respect any obligation or to comply in any material respect with
any agreement or covenant of the Company to be performed or complied with by it
under this Agreement; or
A-2
53
(h) this Agreement shall have been terminated in accordance with its
terms;
which in the reasonable judgment of Parent or Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by Parent or
Purchaser) giving rise to such condition, makes it inadvisable to proceed with
the Offer and/or with such acceptance for payment of or payment for Shares.
The foregoing conditions are for the sole benefit of Parent and Purchaser,
and may (subject to the terms of the Merger Agreement) be waived by Parent or
Purchaser, in whole or in part, at any time and from time to time in the sole
discretion of Parent or Purchaser. The failure by Parent or Purchaser at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
A-3