Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 20, 1999
AMONG
ZHONE TECHNOLOGIES, INC.,
ZHONE ACQUISITION CORP.
AND
PREMISYS COMMUNICATIONS, INC.
TABLE OF CONTENTS
PAGE
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GLOSSARY OF DEFINED TERMS.......................................................................................iii
ARTICLE I. THE TENDER OFFER.......................................................................................2
1.1 The Offer................................................................................................2
1.2 SEC Filings..............................................................................................3
1.3 Company Action...........................................................................................4
1.4 Composition of the Company Board.........................................................................5
ARTICLE II. THE MERGER............................................................................................6
2.1 The Merger...............................................................................................6
2.2 Closing..................................................................................................6
2.3 Effective Time...........................................................................................6
2.4 Effects of the Merger....................................................................................6
2.5 Articles of Incorporation................................................................................6
2.6 Bylaws...................................................................................................7
2.7 Officers and Directors of Surviving Corporation..........................................................7
2.8 Effect on Capital Stock..................................................................................7
2.9 Treatment of Stock Options...............................................................................7
2.10 Surrender and Payment...................................................................................8
2.11 Adjustment of Merger Consideration......................................................................9
2.12 Further Assurances.....................................................................................10
ARTICLE III. REPRESENTATIONS AND WARRANTIES......................................................................10
3.1 Representations and Warranties of the Company...........................................................10
3.2 Representations and Warranties of Parent................................................................24
ARTICLE IV. COVENANTS RELATING TO CONDUCT OF BUSINESS............................................................27
4.1 Conduct of Business Pending Closing.....................................................................27
4.2 Prohibited Actions Pending Closing......................................................................27
4.3 Other Actions...........................................................................................29
4.4 Advice of Changes; Government Filings...................................................................29
i
ARTICLE V. ADDITIONAL AGREEMENTS.................................................................................30
5.1 Preparation of Proxy Statement; the Company Stockholders Meeting........................................30
5.2 Access to Information...................................................................................30
5.3 Approvals and Consents; Cooperation.....................................................................31
5.4 No Solicitation.........................................................................................31
5.5 Employee Benefits.......................................................................................33
5.6 Fees and Expenses.......................................................................................34
5.7 Indemnification; Insurance..............................................................................34
5.8 Company Stock Purchase Plan.............................................................................35
5.9 Public Announcements....................................................................................35
5.10 Takeover Statutes......................................................................................35
5.11 Rights Agreement.......................................................................................35
5.12 Short-Term Investments.................................................................................35
ARTICLE VI. CONDITIONS PRECEDENT.................................................................................36
6.1 Conditions to Each Party's Obligations to Effect the Merger.............................................36
ARTICLE VII. TERMINATION AND AMENDMENT...........................................................................36
7.1 Termination.............................................................................................36
7.2 Effect of Termination...................................................................................38
7.3 Amendment...............................................................................................39
7.4 Extension; Waiver.......................................................................................39
ARTICLE VIII. GENERAL PROVISIONS.................................................................................39
8.1 Non-Survival of Representations, Warranties and Agreements..............................................39
8.2 Notices.................................................................................................39
8.3 Interpretation..........................................................................................40
8.4 Counterparts............................................................................................40
8.5 Entire Agreement; No Third Party Beneficiaries..........................................................40
8.6 Governing Law...........................................................................................40
8.7 Severability............................................................................................41
8.8 Assignment..............................................................................................41
8.9 Enforcement.............................................................................................41
8.10 Definitions............................................................................................41
ii
GLOSSARY OF DEFINED TERMS
DEFINITION LOCATION
Affiliated Group....................................................................................Section 8.10(a)
Agreement..................................................................................................Preamble
Alternative Transaction..............................................................................Section 5.4(a)
Articles of Merger......................................................................................Section 2.3
Board of Directors..................................................................................Section 8.10(b)
Business Day........................................................................................Section 8.10(c)
Cap Amount...........................................................................................Section 5.7(b)
Certificate of Merger...................................................................................Section 2.3
Certificates........................................................................................Section 2.10(b)
Closing.................................................................................................Section 2.2
Closing Date............................................................................................Section 2.2
Code.................................................................................................Section 3.1(k)
Company....................................................................................................Preamble
Company Acquisition Agreement........................................................................Section 5.4(c)
Company Benefit Plans.............................................................................Section 3.1(r)(i)
Company Board........................................................................................Section 1.3(a)
Company Common Stock.......................................................................................Recitals
Company Disclosure Schedule.............................................................................Section 3.1
Company Option.............................................................................................Recitals
Company Option Agreement...................................................................................Recitals
Company Patent Rights................................................................................Section 3.1(o)
Company Permits......................................................................................Section 3.1(i)
Company Preferred Stock...........................................................................Section 3.1(c)(i)
Company Returns...................................................................................Section 3.1(k)(i)
Company Rights Agreement .........................................................................Section 3.1(c)(i)
Company SEC Reports...............................................................................Section 3.1(e)(i)
Company Stock Option Plans..........................................................................Section 8.10(d)
Company Stock Purchase Plan.......................................................................Section 3.1(c)(i)
Company Stockholders Meeting.........................................................................Section 5.1(a)
Company Subs.........................................................................................Section 3.1(a)
Company Takeover Proposal............................................................................Section 5.4(a)
Confidentiality Agreement ..............................................................................Section 5.2
Continuing Directors.................................................................................Section 1.4(c)
CSFB.................................................................................................Section 3.2(d)
DGCL.......................................................................................................Recitals
Effective Time..........................................................................................Section 2.3
Environmental Laws...................................................................................Section 3.1(s)
ERISA.............................................................................................Section 3.1(r)(i)
Exchange Act....................................................................................Section 3.1(d)(iii)
Exchange Agent......................................................................................Section 2.10(a)
Fairness Opinion.....................................................................................Section 1.3(a)
iii
Financial Advisor....................................................................................Section 1.3(a)
Fully Diluted Shares................................................................................Section 8.10(e)
GAAP..............................................................................................Section 3.1(e)(i)
Governmental Entity.............................................................................Section 3.1(d)(iii)
HSR Act.........................................................................................Section 3.1(d)(iii)
Indemnified Party....................................................................................Section 5.7(a)
Intellectual Property Rights...................................................................Section 3.1(o)(viii)
Interim Balance Sheet.............................................................................Section 3.1(e)(i)
Interim Financial Statements......................................................................Section 3.1(e)(i)
Leased Real Property.................................................................................Section 3.1(h)
Legal Proceeding....................................................................................Section 8.10(f)
Legal Requirement...................................................................................Section 8.10(g)
Liens............................................................................................Section 3.1(c)(ii)
Material Adverse Effect.............................................................................Section 8.10(h)
Merger.....................................................................................................Recitals
Merger Consideration.................................................................................Section 2.8(c)
Merger Sub.................................................................................................Preamble
Minimum Shares.......................................................................................Section 1.1(a)
Nasdaq..........................................................................................Section 3.1(d)(iii)
Offer................................................................................................Section 1.1(a)
Offer Documents......................................................................................Section 1.2(a)
Organizational Documents............................................................................Section 8.10(i)
Outside Date.........................................................................................Section 7.1(b)
Parent.....................................................................................................Preamble
Pending Marks....................................................................................Section 3.1(o)(ii)
Person..............................................................................................Section 8.10(j)
Price Per Share......................................................................................Section 1.1(a)
Principal Stockholders.....................................................................................Recitals
Proxy Statement...................................................................................Section 3.1(f)(i)
Registered Marks.................................................................................Section 3.1(o)(ii)
Required Company Vote................................................................................Section 3.1(m)
Required Regulatory Approvals........................................................................Section 6.1(d)
Rights............................................................................................Section 3.1(c)(i)
Schedule 14D-1.......................................................................................Section 1.2(a)
Schedule 14D-9.......................................................................................Section 1.2(b)
SEC..................................................................................................Section 1.2(a)
Securities Act..................................................................................Section 3.1(d)(iii)
Short-Term Investments.................................................................................Section 5.12
Stockholders Agreement.....................................................................................Recitals
Subsidiary..........................................................................................Section 8.10(k)
Superior Proposal....................................................................................Section 5.4(a)
Surviving Corporation...................................................................................Section 2.1
Tax.................................................................................................Section 8.10(l)
Tax Return..........................................................................................Section 8.10(m)
TBCA.......................................................................................................Recitals
iv
Third Party..........................................................................................Section 5.4(a)
Violation........................................................................................Section 3.1(d)(ii)
v
This AGREEMENT AND PLAN OF MERGER, dated as of October 20,
1999 (this "AGREEMENT"), is by and among Zhone Technologies, Inc., a Delaware
corporation ("PARENT"), Zhone Acquisition Corp., a Texas corporation and a
wholly owned subsidiary of Parent ("MERGER SUB"), and Premisys Communications,
Inc., a Delaware corporation (the "COMPANY").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of Parent, Merger
Sub and the Company have each determined that the Merger (as defined below) is
in the best interests of their respective stockholders and have approved the
Merger upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, in order to effectuate the foregoing, the Company,
upon the terms and subject to the conditions of this Agreement and in accordance
with the Delaware General Corporation Law (the "DGCL") and the Texas Business
Corporation Act (the "TBCA"), will merge with and into Merger Sub (the
"MERGER");
WHEREAS, in order to facilitate the Merger, the Boards of
Directors of Parent, Merger Sub and the Company have each approved the Offer (as
defined below) to purchase for cash all of the issued and outstanding shares of
Common Stock, par value $.01 per share, of the Company together with the
associated rights to purchase shares of Series A Junior Participating Preferred
Stock, par value $.01 per share, of the Company (collectively, the "COMPANY
COMMON STOCK"), at a price per share equal to the Price Per Share (as defined
below) subject to the terms and conditions set forth herein and in ANNEX A
hereto;
WHEREAS, concurrently with the execution of this Agreement and
as a condition to the willingness of Parent and Merger Sub to enter into this
Agreement, Parent, Merger Sub and the Company have entered into a Company Option
Agreement dated as of the date hereof (the "COMPANY OPTION AGREEMENT") pursuant
to which the Company has granted Merger Sub an option (the "COMPANY OPTION") to
purchase newly issued shares of Company Common Stock under certain
circumstances;
WHEREAS, concurrently with the execution of this Agreement and
as a condition to the willingness of Parent and Merger Sub to enter into this
Agreement, Parent, Merger Sub and certain principal stockholders of the Company
(the "PRINCIPAL STOCKHOLDERS") have entered into a stockholders agreement dated
as of the date hereof (the "STOCKHOLDERS AGREEMENT") pursuant to which, among
other things, the Principal Stockholders have agreed to (a) tender their shares
of Company Common Stock into the Offer and (b) vote their shares of Company
Common Stock in favor of the Merger, in each case upon the terms and subject to
the conditions set forth in the Stockholders Agreement; and
WHEREAS, Parent, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Offer and the Merger and also to prescribe various conditions to the Offer
and the Merger.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
1
ARTICLE I.
THE TENDER OFFER
1.1 THE OFFER
(a) Subject to the provisions of this Agreement, (i) not later than the
first Business Day after execution of this Agreement, Parent and the Company
shall issue a public announcement of the execution of this Agreement and (ii)
Merger Sub shall, as soon as practicable, but in no event later than five
Business Days after the date of such announcement, commence (within the meaning
of Rule 14d-2(a) of the Exchange Act) a tender offer (the "OFFER") to purchase
all of the outstanding shares of Company Common Stock at a price of $10.00 per
share, net to the seller in cash without interest (the "PRICE PER SHARE"),
subject to reduction only for any applicable withholding taxes. The Offer shall
be made pursuant to an Offer to Purchase and related Letter of Transmittal
containing the terms and conditions set forth in this Agreement. The obligation
of Merger Sub to accept for payment, purchase and pay for shares of Company
Common Stock tendered pursuant to the Offer shall be subject only to (i) at
least that number of shares of Company Common Stock equivalent to 75% of the
Fully Diluted Shares (as defined below) of Company Common Stock on the date such
shares are purchased pursuant to the Offer (subject to reduction as described
below, the "MINIMUM SHARES") being validly tendered and not withdrawn prior to
the expiration of the Offer and (ii) the satisfaction of the other conditions
set forth in ANNEX A hereto, any of which conditions may be waived by Merger Sub
in its sole discretion; provided, however, that Merger Sub shall not reduce the
Minimum Shares below a majority of the Fully Diluted Shares of Company Common
Stock without the prior written consent of the Company. The Company agrees that
no shares of Company Common Stock held by the Company or any of its Subsidiaries
will be tendered to Merger Sub pursuant to the Offer.
(b) Without the prior written consent of the Company, neither Parent
nor Merger Sub shall (i) decrease the Price Per Share payable in the Offer, (ii)
decrease the number of shares of Company Common Stock sought pursuant to the
Offer below a majority of the Fully Diluted Shares of Company Common Stock or
change the form of consideration payable in the Offer, (iii) change or amend the
conditions to the Offer (including the conditions set forth in ANNEX A hereto)
or impose additional conditions to the Offer, (iv) except as provided below,
change the expiration date of the Offer, or (v) otherwise amend, add or waive
any term or condition of the Offer in any manner adverse to the holders of
shares of Company Common Stock; provided, however, that if on any scheduled
expiration date of the Offer, which shall initially be 20 Business Days after
the commencement date of the Offer, all conditions to the Offer have not been
satisfied or waived, Merger Sub may, from time to time, extend the expiration
date of the Offer for up to 10 additional Business Days (but in no event shall
such extensions exceed, in the aggregate, 30 Business Days without the Company's
prior written consent, and in no event shall Merger Sub be required to extend
the expiration date of the Offer beyond the Outside Date); provided further that
if on any scheduled expiration date of the Offer all conditions to the Offer
(other than the Minimum Shares) have been satisfied or waived, and the number of
shares of Company Common Stock that have been validly tendered and not withdrawn
represent at least a majority of the Fully Diluted Shares of Company Common
Stock, and Merger Sub does not elect
2
to reduce the Minimum Shares and consummate the Offer, then Merger Sub shall, at
the Company's request, on up to three occasions, extend the expiration date of
the Offer for up to 10 additional Business Days (but in no event shall such
extensions exceed, in the aggregate, 30 Business Days, and in no event shall
Merger Sub be required to extend the expiration date of the Offer beyond the
Outside Date); and provided further that Merger Sub may, (x) without the consent
of the Company, extend the Offer for any period required by any rule,
regulation, interpretation or position of the SEC applicable to the Offer and
(y) extend the Offer if (1) the conditions to the Offer shall have been
satisfied or waived and (2) the number of shares of Company Common Stock that
have been validly tendered and not withdrawn represent less than 90% of the
issued and outstanding shares of Company Common Stock; provided, however, that
in no event shall the extensions permitted under the foregoing clause (y)
exceed, in the aggregate, 10 Business Days. Assuming the prior satisfaction or
waiver of all the conditions to the Offer set forth in ANNEX A, and subject to
the terms and conditions of this Agreement, Merger Sub shall, and Parent shall
cause Merger Sub to, accept for payment, purchase and pay for, in accordance
with the terms of the Offer, all shares of Company Common Stock validly tendered
and not withdrawn pursuant to the Offer as soon as reasonably practicable after
the expiration of the Offer. Parent shall provide, or cause to be provided, to
Merger Sub, on a timely basis, the funds necessary to purchase any shares of
Company Common Stock that Merger Sub becomes obligated to purchase pursuant to
the Offer.
1.2 SEC FILINGS
(a) As soon as reasonably practicable on the commencement date of the
Offer, Parent and Merger Sub shall file with the Securities and Exchange
Commission (the "SEC") and disseminate to the Company's stockholders, with
respect to the Offer, a Tender Offer Statement on Schedule 14D-1 (the "SCHEDULE
14D-1"). The Schedule 14D-1 shall comply as to form and content in all material
respects with the applicable provisions of the federal securities laws and shall
contain or incorporate by reference the Offer to Purchase, the related Letter of
Transmittal and other ancillary documents and agreements pursuant to which the
Offer will be made (the Schedule 14D-1, the Offer to Purchase, the Letter of
Transmittal and such other documents being collectively referred to herein as
the "OFFER DOCUMENTS"). The Company and its counsel shall be given a reasonable
opportunity to review and comment upon the Offer Documents and any amendment or
supplement thereto prior to the filing thereof with the SEC. Parent and Merger
Sub agree to provide to the Company and its counsel any comments which Parent,
Merger Sub or their counsel may receive from the Staff of the SEC with respect
to the Offer Documents promptly after receipt thereof. Parent, Merger Sub and
the Company agree to correct promptly any information provided by any of them
for use in the Offer Documents which shall have become false or misleading in
any material respect, and Parent and Merger Sub further agree to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC
and disseminated to the Company's stockholders, in each case as and to the
extent required by the applicable provisions of the federal securities laws.
(b) On the date the Offer Documents are filed with the SEC, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 (as amended from time to time, the "SCHEDULE 14D-9") containing the
recommendation of the Company Board
3
described in Section 5.1(a), which shall comply as to form and content in all
material respects with the applicable provisions of the federal securities laws.
The Company shall cooperate with Parent and Merger Sub in mailing or otherwise
disseminating the Schedule 14D-9 with the appropriate Offer Documents to the
stockholders of the Company. Parent and its counsel shall be given a reasonable
opportunity to review and comment upon the Schedule 14D-9 and any amendment or
supplement thereto prior to the filing thereof with the SEC. The Company agrees
to provide to Parent and Merger Sub and their counsel any comments which the
Company or its counsel may receive from the Staff of the SEC with respect to the
Schedule 14D-9 promptly after receipt thereof. The Company, Parent and Merger
Sub agree to correct promptly any information provided by any of them 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
such Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to
the Company's stockholders, in each case as and to the extent required by the
applicable provisions of the federal securities laws. Parent, Merger Sub and the
Company each hereby agree to provide promptly such information necessary to the
preparation of the exhibits and schedules to the Schedule 14D-9 and the Offer
Documents which the respective party responsible therefor shall reasonably
request.
1.3 COMPANY ACTION
(a) The Company hereby approves of and consents to the Offer and
represents that the Board of Directors of the Company (the "COMPANY BOARD"), at
a meeting duly called and held, duly adopted resolutions approving this
Agreement, the Company Option Agreement, the Stockholders Agreement, the Offer
and the Merger, determining, as of the date of such resolutions, that the terms
of the Offer and the Merger are fair to, and in the best interests of, the
Company's stockholders, recommending that the Company's stockholders accept the
Offer, tender their shares pursuant to the Offer and approve this Agreement (if
required), and approving the acquisition of shares of Company Common Stock by
Merger Sub pursuant to the Offer and the other transactions contemplated by this
Agreement. The Company hereby consents to the inclusion in the Offer Documents,
the Schedule 14D-9 and the Proxy Statement (if any) of such recommendation of
the Company Board. The Company hereby represents that the Company Board has
received the written opinion (the "FAIRNESS OPINION") of Broadview Associates
LLC (the "FINANCIAL ADVISOR") that the consideration to be received by the
holders of Company Common Stock pursuant to the Offer and the Merger is fair to
such holders from a financial point of view. The Company has been authorized by
the Financial Advisor to permit the inclusion of the Fairness Opinion in the
Offer Documents, the Schedule 14D-9 and the Proxy Statement (if any). The
Company has been advised by each of its directors and executive officers that
each such person currently intends to tender all shares of Company Common Stock
owned by such person pursuant to the Offer.
(b) Promptly upon execution of this Agreement and in connection with
the Offer, the Company shall furnish Merger Sub with such information (including
a list of the stockholders of the Company, mailing labels and a list of
securities positions, each as of a recent date), and shall thereafter render
such assistance, as Parent or Merger Sub may reasonably request in communicating
the Offer to the Company's stockholders.
4
1.4 COMPOSITION OF THE COMPANY BOARD
(a) Promptly upon the acceptance for payment of, and payment by Merger
Sub in accordance with the Offer and the Company Option for, not less than the
Minimum Shares, Merger Sub shall be entitled to designate such number of members
of the Company Board, rounded up to the next whole number, 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 elected pursuant to this sentence)
multiplied by the percentage that such number of shares of Company Common Stock
owned in the aggregate by Parent or Merger Sub, upon such acceptance for
payment, bears to the number of shares of Company Common Stock outstanding;
provided, however, that until the Effective Time there shall be at least one
Continuing Director. To effect the foregoing, the Company shall, on the
expiration date of the Offer, (i) either increase the size of the Company Board
or secure the resignations of such number of its incumbent directors as is
necessary to enable Parent's designees to be so elected to the Company Board,
and (ii) cause Parent's designees to be so elected, in each case as may be
necessary to comply with the foregoing provisions of this Section 1.4(a).
(b) The Company's obligation to cause designees of Parent to be elected
or appointed to the Company Board shall be subject to Section 14(f) of the
Exchange Act and Rule l4f-1 promulgated thereunder. The Company shall promptly
take all actions required pursuant to Section 14(f) and Rule l4f-1 in order to
fulfill its obligations under this Section 1.4, and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1. Parent and Merger
Sub shall supply to the Company any information with respect to any of them and
their nominees, officers, directors and affiliates required by Section 14(f) and
Rule l4f-1 and applicable rules and regulations.
(c) After the time that Parent's designees constitute at least a
majority of the Company Board and until the Effective Time, any amendment or
termination of this Agreement shall require the approval of a majority of the
then serving directors, if any, who are directors as of the date hereof (the
"CONTINUING DIRECTORS"), except to the extent that applicable law requires that
such action be acted upon by the full Company Board, in which case such action
shall require the concurrence of a majority of the Company Board, which majority
shall include each of the Continuing Directors. If there is more than one
Continuing Director and prior to the Effective Time, the number of Continuing
Directors is reduced for any reason, the remaining Continuing Director or
Directors shall be entitled to designate persons to fill such vacancies who
shall be deemed Continuing Directors for purposes of this Agreement. In the
event there is only one Continuing Director and he or she resigns or is removed
or if all Continuing Directors resign or are removed, he, she or they, as
applicable, shall be entitled to designate his, her or their successors, as the
case may be, each of whom shall be deemed a Continuing Director for purposes of
this Agreement.
5
ARTICLE II.
THE MERGER
2.1 THE MERGER. Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the DGCL and the TBCA, the Company shall be
merged with and into Merger Sub at the Effective Time. Following the Merger, the
separate corporate existence of the Company shall cease and Merger Sub shall
continue as the surviving corporation (the "SURVIVING CORPORATION") in
accordance with the DGCL and the TBCA. Notwithstanding the foregoing, Parent may
elect at any time prior to the Merger to merge Merger Sub with and into the
Company instead of merging the Company with and into Merger Sub as provided
above. In such event, this Agreement shall be deemed automatically amended by
the parties as appropriate to give effect to the revised form of the Merger with
each party executing a written amendment to this Agreement as necessary to
reflect the foregoing and to provide that the Company shall be the Surviving
Corporation.
2.2 CLOSING. At the closing of the Merger (the "CLOSING"), which shall take
place as soon as practicable after satisfaction or waiver (as permitted by this
Agreement and applicable law) of the conditions set forth in Article VI (the
"CLOSING DATE"), unless another time or date is agreed to in writing by the
parties hereto, Parent shall effect the Merger in accordance with Section 2.1.
The Closing shall be held at the offices of Xxxxxx & Xxxxxxx, 000 Xxxxxxxxxxxx
Xxxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000, unless another place is agreed to in
writing by the parties hereto.
2.3 EFFECTIVE TIME. Upon the Closing, the parties shall file (a) with the
Secretary of State of the State of Delaware a certificate of merger or other
appropriate documents (in any such case, the "CERTIFICATE OF MERGER") executed
in accordance with the relevant provisions of the DGCL and shall make all other
filings, recordings or publications required under the DGCL in connection with
the Merger, and (b) with the Secretary of State of the State of Texas articles
of merger or other appropriate documents (in any such case, the "ARTICLES OF
MERGER") executed in accordance with the relevant provisions of the TBCA and
shall make all other filings, recordings or publications required under the TBCA
in connection with the Merger. The Merger shall become effective at such time as
the Certificate of Merger and the Articles of Merger are duly filed with the
Delaware and Texas Secretaries of State, respectively, or at such other time as
the parties may agree and specify in the Certificate of Merger and the Articles
of Merger (the time the Merger becomes effective being the "EFFECTIVE TIME").
2.4 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger shall
have the effects set forth in Section 259 of the DGCL and Section 5.06 of the
TBCA.
2.5 ARTICLES OF INCORPORATION. The articles of incorporation of Merger Sub as in
effect immediately prior to the Effective Time in the form attached hereto as
ANNEX B shall be the articles of incorporation of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law,
provided that such articles of incorporation may be amended to reflect "Premisys
Communications, Inc." as the name of the Surviving Corporation.
6
2.6 BYLAWS. The bylaws of Merger Sub as in effect immediately prior to the
Effective Time shall be the bylaws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
2.7 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION. The officers and directors
of Merger Sub shall be the officers and directors of the Surviving Corporation,
until the earlier of their resignation or removal or otherwise ceasing to be an
officer or director or until their respective successors are duly elected and
qualified, as the case may be.
2.8 EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of the Merger
and without any action on the part of the holder of any shares of Company Common
Stock or any shares of capital stock of Merger Sub:
(a) CAPITAL STOCK OF MERGER SUB. Each issued and outstanding share of
capital stock of Merger Sub shall be converted into and become one fully paid
and nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK. Each share
of Company Common Stock that is owned by the Company or by a wholly owned
subsidiary of the Company and each share of Company Common Stock that is owned
by Parent, Merger Sub or any other wholly owned subsidiary of Parent shall
automatically be canceled and retired and shall cease to exist, and no Merger
Consideration shall be delivered in exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Subject to Section 2.10(h),
each issued and outstanding share of Company Common Stock (other than shares to
be canceled in accordance with Section 2.8(b)) shall be converted into the right
to receive in cash, without interest, the Price Per Share (the "MERGER
CONSIDERATION"). As of the Effective Time, all such shares of Company Common
Stock 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 of Company Common Stock shall cease to have any rights with
respect thereto, except the right to receive upon the surrender of such
certificates, the Merger Consideration.
2.9 TREATMENT OF STOCK OPTIONS. Simultaneously with the Merger, each outstanding
option to purchase a share of Company Common Stock under the Company Stock
Option Plans shall be canceled, and each holder of any such vested option shall
be paid by the Surviving Corporation promptly after the Effective Time for each
such vested option an amount determined by multiplying (a) the excess, if any,
of the Merger Consideration over the applicable exercise price of such option by
(b) the number of shares of Company Common Stock such holder could have
purchased had such holder exercised such option immediately prior to the
Effective Time. Any such payment shall be subject to all applicable federal,
state and local tax withholding requirements. No unvested options shall be
accelerated or otherwise become exercisable as a result of the Offer or the
Merger, except to the extent that the Company's 1995 Directors Stock Option Plan
or any of the employment or severance agreements listed in ITEM 5.5 of the
Company Disclosure Schedule provide otherwise. Except as otherwise agreed to by
the parties, the Company Stock Option Plans and the Company Stock Purchase Plan
shall terminate as of the
7
Effective Time and any and all rights under any provisions in any other plan,
program or arrangement providing for the issuance or grant of any interest in
respect of the capital stock of the Company or any Company Sub shall be canceled
as of the Effective Time. The Company and each relevant committee of the Company
Board shall take any and all actions necessary to effectuate the actions
contemplated by this Section 2.9 and Section 5.8, including without limitation
amending the Company Stock Option Plans or the Company Stock Purchase Plan and
using their best efforts to obtain any necessary consents or waivers from the
holders of outstanding options.
2.10 SURRENDER AND PAYMENT.
(a) EXCHANGE AGENT. Prior to the Effective Time, Parent shall appoint
an agent (the "EXCHANGE AGENT") for the purpose of exchanging certificates
representing shares of Company Common Stock for the Merger Consideration. Merger
Sub shall deposit with the Exchange Agent the Merger Consideration to be paid in
respect of the shares of Company Common Stock. For purposes of determining the
Merger Consideration to be made available, Merger Sub shall assume that no
holder of shares of Company Common Stock will perfect its right to appraisal of
such shares.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates (the "CERTIFICATES") which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock, other
than shares to be canceled or retired in accordance with Section 2.8(b), (i) a
Letter of Transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by Parent, together
with such Letter of Transmittal, duly executed, and such other documents as may
be reasonably required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor the Merger Consideration, and
the Certificate so surrendered shall forthwith be canceled. If any portion of
the Merger Consideration is to paid to a Person other than the registered holder
of the shares represented by the Certificate or Certificates surrendered in
exchange therefor, it shall be a condition to such payment that the Certificate
or Certificates so surrendered shall be properly endorsed or otherwise be in
proper form for transfer and that the Person requesting such payment shall pay
to the Exchange Agent any transfer or other taxes required as a result of such
payment to a Person other than the registered holder of such shares or establish
to the satisfaction of the Exchange Agent that such tax has been paid or is not
payable. Until surrendered as contemplated by this Section 2.10, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive, upon such surrender, the Merger Consideration.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All Merger
Consideration paid upon the surrender for exchange of Certificates in accordance
with the terms of this Article II shall be deemed to have been paid in full
satisfaction of all rights pertaining to
8
the shares of Company Common Stock theretofore represented by such Certificates,
and there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or the
Exchange Agent for any reason, they shall be canceled and exchanged as provided
in this Article II, except as otherwise provided by law.
(d) UNCLAIMED FUNDS. Any portion of the Merger Consideration made
available to the Exchange Agent pursuant to Section 2.10(a) that remains
unclaimed by holders of the Certificates for six months after the Effective Time
shall be delivered to the Surviving Corporation, upon demand, and any holders of
Certificates who have not theretofore complied with this Article II shall
thereafter look only to the Surviving Corporation for payment of their claim for
Merger Consideration.
(e) NO LIABILITY. None of Parent, Merger Sub, the Company or the
Exchange Agent shall be liable to any Person in respect of any Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) LOST CERTIFICATES. In the event that any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the Person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent, the posting by such Person of a bond in such reasonable
amount as Parent may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
with respect to such Certificate, to which they are entitled pursuant hereto.
(g) MERGER CONSIDERATION. Any portion of the Merger Consideration made
available to the Exchange Agent pursuant to Section 2.10(a) to pay for shares of
Company Common Stock for which appraisal rights have been perfected shall be
returned to the Surviving Corporation, upon demand.
(h) DISSENTING SHARES. Notwithstanding Section 2.8, shares of Company
Common Stock, outstanding immediately prior to the Effective Time and held by a
holder who has not voted in favor of the Merger or consented thereto in writing
and who has demanded appraisal for such shares in accordance with the DGCL,
shall not be converted into the right to receive the Merger Consideration,
unless such holder fails to perfect or withdraws or otherwise loses its right to
appraisal. If after the Effective Time such holder fails to perfect or withdraws
or loses its right to appraisal, such shares shall be treated as if they had
been converted as of the Effective Time into the right to receive the Merger
Consideration. The Company shall give Parent (i) prompt notice of any demands
received by the Company for appraisal of shares of Company Common Stock, and
(ii) the opportunity to participate in and direct all negotiations and
proceedings with respect to such demands. The Company shall not, without the
prior written consent of Parent, make any payment with respect to, or settle or
offer to settle, any such demands.
2.11 ADJUSTMENT OF MERGER CONSIDERATION. In the event that, subsequent to the
date of this Agreement but prior to the Effective Time, any stock split,
combination, reclassification or stock
9
dividend with respect to the outstanding shares of Company Common Stock, any
change or conversion of outstanding shares of Company Common Stock into other
securities or any other dividend or distribution with respect to the outstanding
shares of Company Common Stock should occur, appropriate and proportionate
adjustments shall be made to the Merger Consideration, and thereafter all
references to the Merger Consideration shall be deemed to be to the Merger
Consideration as so adjusted.
2.12 FURTHER ASSURANCES. If at any time after the Effective Time the Surviving
Corporation shall consider or be advised that any deeds, bills of sale,
assignments or assurances or any other acts or things are necessary, desirable
or proper (a) to vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of either the
Company or Merger Sub or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either the Company or Merger Sub, all such deeds, bills of sale,
assignments and assurances and do, in the name and on behalf of the Company or
Merger Sub, all such other acts and things necessary, desirable or proper to
vest, perfect or confirm its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of the Company or
Merger Sub, as applicable, and otherwise to carry out the purposes of this
Agreement.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth in the
Company Disclosure Schedule delivered by the Company to Parent at or prior to
the execution of this Agreement (the "COMPANY DISCLOSURE SCHEDULE") or the
Company SEC Reports (as defined below), the Company represents and warrants to
Parent and Merger Sub as follows:
(a) ORGANIZATION, STANDING AND POWER. Each of the Company and its
Subsidiaries ("COMPANY SUBS") has been duly incorporated and is validly existing
and in good standing under the laws of its jurisdiction of incorporation. Each
of the Company and the Company Subs is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to so qualify could not reasonably be expected, either
individually or in the aggregate, to have a Material Adverse Effect on the
Company. The copies of the Organizational Documents of the Company and the
Company Subs which were previously furnished or made available to Parent are
true, complete and correct copies of such documents as in effect on the date of
this Agreement and no amendments thereto are pending. The Company is not in
violation of any term of the Organizational Documents of the Company.
(b) COMPANY SUBS. The only Company Subs are those named in Exhibit 21.1
to the Company's Annual Report on Form 10-K for the fiscal year ended June 25,
1999, as filed with the SEC and heretofore furnished or made available to
Parent. The Company is, directly or indirectly, the record and beneficial owner
of all of the outstanding shares of capital stock of each
10
of the Company Subs. All references herein to the Company, unless the context
indicates otherwise, shall be deemed to mean the Company and the Company Subs.
(c) CAPITAL STRUCTURE.
(i) As of October 15, 1999, the authorized capital stock of
the Company consisted of (A) 100,000,000 shares of Company Common Stock, of
which 24,215,117 shares were issued and outstanding, and (B) 2,000,000 shares of
preferred stock, par value $.01 per share ("Company Preferred Stock"), of which
500,000 shares had been designated Series A Junior Participating Preferred
Stock. As of the date of this Agreement, no shares of Company Preferred Stock
are issued or outstanding. All issued and outstanding shares of capital stock of
the Company are duly authorized, validly issued, fully paid and nonassessable,
and were issued in compliance with applicable securities laws. No class of the
Company's capital stock is entitled to preemptive rights. As of October 15,
1999, there were no outstanding options, warrants or other rights to acquire
capital stock from the Company other than (C) rights to purchase an aggregate of
500,000 shares of Series A Junior Participating Preferred Stock (the "Rights")
issued pursuant to the Rights Agreement dated as of September 18, 1998 between
the Company and ChaseMellon Shareholder Services LLC (the "Company Rights
Agreement"), (D) options representing in the aggregate the right to purchase
4,948,500 shares of Company Common Stock under the Company Stock Option Plans,
and (E) options to purchase in the aggregate 83,997 shares of Company Common
Stock under the Company's 1995 Employee Stock Purchase Plan (the "Company Stock
Purchase Plan").
(ii) All of the issued and outstanding shares of capital stock
of the Company Subs are duly authorized, validly issued, fully paid and
nonassessable and are owned by the Company, free and clear of any liens, claims,
encumbrances, restrictions, preemptive rights or any other claims of any third
party ("Liens"). Except for the capital stock of the Company Subs, the Company
does not own, directly or indirectly, any capital stock or other ownership
interest in any Person.
(iii) As of the date of this Agreement, no bonds, debentures,
notes or other indebtedness of the Company having the right to vote on any
matters on which stockholders may vote are issued or outstanding.
(iv) Except as otherwise set forth in this Section 3.1(c), as
of the date of this Agreement, there are no securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any kind
to which the Company or any of the Company Subs is a party or by which any of
them is bound obligating the Company or any of the Company Subs to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of the Company or any of the Company
Subs or obligating the Company or any of the Company Subs to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. As of the date of this
Agreement, there are no outstanding obligations of the Company or any of the
Company Subs to repurchase, redeem or otherwise acquire any shares of capital
stock of the Company or any of the Company Subs.
11
(v) The Company has taken all actions necessary such that, for
all purposes under the Rights Agreement, neither Parent nor Merger Sub shall be
deemed an Acquiring Person (as defined in the Rights Agreement), the
Distribution Date (as defined in the Rights Agreement) shall not be deemed to
occur, and the Rights will not separate from the Company Common Stock, as a
result of Parent's or Merger Sub's entering into this Agreement, the Company
Option Agreement or the Stockholders Agreement or consummating the Offer, the
Merger and/or the other transactions contemplated hereby or thereby. The Company
has taken all necessary action with respect to all of the outstanding Rights so
that, as of immediately prior to the Effective Time and immediately prior to the
consummation of the Offer, (A) the Company will not have any obligations under
the Rights or the Rights Agreement with respect to the Offer, the Merger and/or
the other transactions contemplated hereby or thereby and (B) the holders of
Rights will have no rights under the Rights or the Rights Agreement with respect
to the Offer, the Merger and/or the other transactions contemplated hereby or
thereby.
(d) AUTHORITY; NO CONFLICTS.
(i) The Company has all requisite corporate power and
corporate authority to enter into this Agreement and, subject to the adoption of
this Agreement by the requisite vote of the holders of Company Common Stock, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company, subject in the case of the consummation of the Merger to the adoption
of this Agreement by the stockholders of the Company. This Agreement has been
duly executed and delivered by the Company and constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting creditors
generally and by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(ii) The execution and delivery of this Agreement does not or
will not, as the case may be, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of, or
constitute a default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, amendment, cancellation or acceleration
of any obligation or the loss of a material benefit under, or the creation of a
lien, pledge, security interest, charge or other encumbrance on any assets (any
such conflict, violation, default, right of termination, amendment, cancellation
or acceleration, loss or creation, a "Violation") pursuant to: (A) any provision
of the Organizational Documents of the Company or the Company Subs or (B) except
as could not reasonably be expected to have a Material Adverse Effect on the
Company and, subject to obtaining or making the consents, approvals, orders,
authorizations, registrations, declarations and filings referred to in paragraph
(iii) below, any material indenture or loan or credit agreement or any other
material contract, agreement, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which the Company or
any of the Company Subs is a party or by which the property of the Company or
Company Subs is bound or affected, or result in the creation or imposition of
any mortgage, pledge, lien, security interest or other charge or encumbrance on
any of the Company's or
12
Company Subs' assets or shares of capital stock, except where such breach,
default, acceleration or exercise of right of termination would not have a
Material Adverse Effect.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any supranational, national, state,
municipal or local government, any instrumentality, subdivision, court,
administrative agency or commission or other authority thereof, or any
quasi-governmental or private body exercising any regulatory, taxing, or other
governmental or quasi-governmental authority (a "Governmental Entity"), is
required by or with respect to the Company or any of the Company Subs in
connection with the execution and delivery of this Agreement by the Company or
the consummation by the Company of the transactions contemplated hereby, except
for (x) those required under or in relation to (A) the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (B) state
securities or "blue sky" laws, (C) the Securities Act of 1933, as amended (the
"Securities Act"), (D) the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (E) the DGCL and the TBCA with respect to the filing and
recordation of appropriate merger or other documents, (F) rules and regulations
of the Nasdaq National Market ("Nasdaq"), and (G) antitrust or other competition
laws of other jurisdictions, and (y) such consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of which to
make or obtain could not reasonably be expected to have a Material Adverse
Effect on the Company.
(e) REPORTS AND FINANCIAL STATEMENTS.
(i) The Company has timely filed all required reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC prior to the date of this Agreement (collectively, including all
exhibits thereto, the "Company SEC Reports"). None of the Company Subs is
required to file any form, report or other document with the SEC. None of the
Company SEC Reports, as of their respective dates (and, if amended or superseded
by a filing prior to the date of this Agreement or of the Closing Date, then on
the date of such filing), contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The Company has provided to Parent and Merger Sub a true,
accurate and complete copy of the balance sheet of the Company and the Company
Subs as of September 24, 1999 (the "Interim Balance Sheet") and the statement of
operations and statement of cash flows of the Company and the Company Subs for
the three month period ended September 24, 1999 (together with the Interim
Balance Sheet, the "Interim Financial Statements"). Each of the financial
statements (including the related notes) included in the Company SEC Reports and
the Interim Financial Statements (including the related notes) present fairly,
in all material respects, the consolidated financial position and consolidated
results of operations and cash flows of the Company and the Company Subs as of
the respective dates or for the respective periods set forth therein, all in
conformity with U.S. generally accepted accounting principles ("GAAP")
consistently applied during the periods involved except as otherwise noted
therein, and subject, in the case of the unaudited interim financial statements,
to normal and recurring year-end adjustments that have not been and are not
expected to be material in amount. All of such Company SEC Reports, as of their
respective dates (and as of the date of any amendment to the respective Company
SEC Report), complied as to form in all material
13
respects with the applicable requirements of the Securities Act and the Exchange
Act and the rules and regulations promulgated thereunder.
(ii) Except as set forth in the Company SEC Reports filed
prior to the date of this Agreement, and except for liabilities and obligations
incurred in the ordinary course of business since June 25, 1999 and except for
liabilities and obligations reflected in the Interim Balance Sheet, neither the
Company nor any of the Company Subs has any liabilities or obligations of any
nature required by GAAP to be set forth on a consolidated balance sheet of the
Company and the Company Subs which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on the Company.
(iii) Schedule 3.1(e)(iii) sets forth the Company's fiscal
year 2000 operating budget. Such operating budget has been prepared in good
faith on the basis of assumptions which the Company believes are reasonable.
(f) INFORMATION SUPPLIED.
(i) None of (A) the proxy statement related to the meeting of
the Company's stockholders to be held in connection with the Merger and the
transactions contemplated by this Agreement (or the written consents in lieu
thereof) (the "Proxy Statement"), (B) the Schedule 14D-9 or (C) the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in the Offer Documents and any other documents to be filed with the
SEC in connection with the transactions contemplated hereby, including any
amendment or supplement to such documents, will, at the respective times such
documents are filed, and, with respect to the Offer Documents and the Proxy
Statement, if any, when first published, sent or given to the stockholders of
the Company, 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 are made,
not false or misleading or, in the case of the Offer Documents and the Proxy
Statement, if any, or any amendment thereof or supplement thereto, at the time
of the Company Stockholders Meeting (as defined below), if any, and at the
Effective Time, 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 made therein, in light of the circumstances under which they are
made, not false or misleading or necessary to correct any statement in any
earlier communication with respect to the Offer or the solicitation of proxies
for the Company Stockholders Meeting, if any, which shall have become false or
misleading.
(ii) Notwithstanding the foregoing provisions of this Section
3.1(f), no representation or warranty is made by the Company with respect to
statements made or incorporated by reference in the Proxy Statement or Schedule
14D-9 based on information supplied by Parent or Merger Sub for inclusion or
incorporation by reference therein.
(g) TITLE TO AND CONDITION OF ASSETS.
(i) All tangible properties and assets owned or leased by the
Company are, except for changes in the ordinary course of business, reflected in
the Interim Balance Sheet, a
14
true, accurate and complete copy of which has been provided to Parent and Merger
Sub. The Company owns good and marketable fee, or valid leasehold, title to the
real and personal property owned or leased by it, free and clear of all Liens,
except for Liens that do not impair the current use or diminish the value of any
material item of property to any material extent.
(ii) Except as set forth on Schedule 3.1(g)(ii) and except as
could not reasonably be expected to have a Material Adverse Effect on the
Company, all of the equipment and tangible personal property owned or leased by
the Company is in good operating condition and repair, subject to normal wear
and tear, and none of such assets is in need of maintenance or repairs except
for ordinary, routine maintenance.
(h) REAL PROPERTY. The Company does not own any real property. All of
the real property leased by the Company is identified in the Company SEC Reports
(herein referred to as the "LEASED REAL PROPERTY").
(i) LEASES. Each lease of Leased Real Property has been duly
authorized and executed by the Company and is in full force and effect and
binding and enforceable against the parties thereto. The Company is not in
default under any of said leases, nor has any event occurred which, with notice
or the passage of time, or both, would give rise to such a default. To the
knowledge of the Company, the other party to each of said leases is not in
default under any of said leases and there is no event which, with notice or the
passage of time, or both, would give rise to such a default.
(ii) CONDITION OF LEASED REAL PROPERTY. To the Company's
knowledge, (i) there are no material defects in the physical condition of any of
the Leased Real Property and (ii) all such Leased Real Property is in good
operating condition and repair and has been well maintained.
(iii) COMPLIANCE WITH THE LAW. The Company has not received
any notice from any Governmental Entity of any violation of any regulation,
license, permit or authorization issued with respect to the Leased Real Property
that has not been heretofore corrected. The Company has not received any notice
of any real estate tax deficiency or assessment and is not aware of any proposed
deficiency, claim or assessment with respect to any of the Leased Real Property,
or any pending or threatened condemnation thereof.
(i) COMPLIANCE WITH APPLICABLE LAWS; REGULATORY MATTERS. The Company
and the Company Subs hold all permits, licenses, certificates, franchises,
registrations, variances, exemptions, orders and approvals of all Governmental
Entities which are material to the operation of their businesses, taken as a
whole (the "COMPANY PERMITS"). The Company and the Company Subs are in
compliance with the terms of the Company Permits, except where the failure so to
comply, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on the Company. Except as disclosed in the
Company SEC Reports, the businesses of the Company and the Company Subs are not
being and have not been conducted in violation of any law, ordinance,
regulation, judgment, decree, injunction, rule or order of any Governmental
Entity, except for violations which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on the Company. As of
the date of this
15
Agreement, no investigation by any Governmental Entity with
respect to the Company or any of the Company Subs is pending or, to the
knowledge of the Company, threatened, other than investigations which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Company.
(j) LITIGATION. Except as disclosed in the Company SEC Reports, there
is no litigation, arbitration, claim, suit, action, investigation or proceeding
pending or, to the knowledge of the Company, threatened, against or affecting
the Company or any of the Company Subs, nor to the knowledge of the Company is
there any basis therefor, which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on the Company, nor is
there any judgment, award, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against the Company or any of the Company Subs
which, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on the Company.
(k) TAXES.
(i) Each Tax Return required to be filed by or on behalf of
the Company and each Company Sub either on a separate or combined or
consolidated basis with respect to any taxable period ending on or before the
Closing Date (the "Company Returns") (A) has been or will be filed on or before
the applicable due date with the appropriate Governmental Entity, and (B) has
been, or will be when filed, prepared in all material respects in compliance
with all applicable Legal Requirements. All Company Returns are complete and
accurate in all material respects. All Taxes owed by any of the Company and the
Company Subs (whether or not shown on any Company Return) have been paid.
(ii) The Company has delivered or made available to Parent
correct and complete copies of all federal income Tax Returns, examination
reports and statements of deficiencies assessed against, or agreed to by any of
the Company and the Company Subs since December 31, 1997.
(iii) The unpaid Taxes of the Company and the Company Subs (A)
did not, as of September 24, 1999, exceed by any material amount the reserve for
Tax liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and tax income) set forth on the face of the
Interim Balance Sheet (rather than in any notes thereto) and (B) will not exceed
by any material amount that reserve as adjusted for operations and transactions
through the Closing Date in accordance with the past customs and practice of the
Company and the Company Subs in filing their income Tax Returns.
(iv) The Company has not distributed the stock of a
"controlled corporation" (within the meaning of that term as used in Section
355(a) of the Code) in a transaction subject to Section 355 of the Code within
the past two years.
(v) No written claim, and to the best knowledge of the
Company, no claim, has ever been made by an authority in a jurisdiction where
any of the Company and the
16
Company Subs does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction.
(vi) None of the Company and the Company Subs has any
unrecognized gains relating to deferred intercompany transactions.
(vii) There are no excess loss accounts, as defined in
Treasury Regulations 1.1502-19, between or among any members of the affiliated
group of corporations of which Company is the common parent.
(viii) Schedule 3.1(k) lists all Company Returns that have
been audited since January 1, 1995 and indicates those Company Returns that
currently are the subject of an audit.
(ix) Since June 25, 1999, the Company has not incurred any
liability or obligation for any Tax other than in the ordinary course of its
business.
(x) None of the Company and the Company Subs has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency, and no written requests for
waivers of the time to assess any Taxes of the Company or the Company Subs are
pending.
(xi) None of the Company and the Company Subs currently is the
beneficiary of any extension of time within which to file any Tax Return.
(xii) Except as set forth on Schedule 3.1(k), no claim or
Legal Proceeding is pending or, to the best knowledge of the Company, has been
overtly threatened against or with respect to the Company or any of the Company
Subs in respect of any Tax. There are no unsatisfied liabilities for Taxes
(including liabilities for interest, additions to tax and penalties thereon and
related expenses) with respect to any notice of deficiency or similar document
received by the Company or any of the Company Subs with respect to any Tax
(other than liabilities for Taxes asserted under any such notice of deficiency
or similar document which are being contested in good faith by the Company or
any of the Company Subs and with respect to which adequate reserves for payment
have been established on the Interim Balance Sheet). There are no Liens for
Taxes upon any of the assets of the Company or any of the Company Subs except
Liens for current Taxes not yet due and payable. Neither the Company nor any of
the Company Subs has entered into or become bound by any agreement or consent
pursuant to Section 341(f) of the Code (or any comparable provision of state or
foreign Tax laws). Neither the Company nor any of the Company Subs has been nor
will it be required to include any adjustment in taxable income for any tax
period (or portion thereof) pursuant to Section 481 or 263A of the Code (or any
comparable provision under state or foreign Tax laws) as a result of
transactions or events occurring, or accounting methods employed, prior to the
Closing.
(xiii) There is no agreement, plan, arrangement or other
contract covering any employee or independent contractor or former employee or
independent contractor of the Company or any of the Company Subs that,
considered individually or considered collectively with any other such
contracts, will, or could reasonably be expected to, give rise directly or
17
indirectly to the payment of any amount that would not be deductible pursuant to
Section 280G or Section 162 of the Code (or any comparable provision under state
or foreign Tax laws). Neither the Company nor any of the Company Subs is, nor
has it ever been, a party to or bound by any tax indemnity agreement, tax
sharing agreement, tax allocation agreement or similar contract.
(xiv) None of the Company and the Company Subs (A) has been a
member of an Affiliated Group filing a consolidated federal income Tax Return
(other than a group the common parent of which was the Company), or (B) has any
liability or obligation for the Taxes of any Person (other than any of the
Company and the Company Subs) under Treasury Regulations Section 1.1502-6 (or
any similar provision of state, local or foreign law), as a transferee or
successor, by contract, or otherwise.
(xv) Neither the Company nor any of the Company Subs is
subject to any joint venture, partnership or other arrangement or contract that
is treated as a partnership for U.S. federal income tax purposes.
(l) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the Interim
Balance Sheet, the Company and the Company Subs have conducted their respective
businesses only in the ordinary course consistent with past practice, and there
has not been:
(i) Any change in the business, properties, assets, results of
operations, financial condition, liabilities, or prospects of the Company, which
change by itself or in conjunction with all other such changes, whether or not
arising in the ordinary course of business, has had or could reasonably be
expected to have a Material Adverse Effect on the Company;
(ii) Any material contingent liability incurred by the Company
as guarantor or otherwise with respect to the obligations of others or any
cancellation of any material debt or claim owing to, or waiver of any material
right of, the Company;
(iii) Any material obligation or liability of any nature,
whether accrued, absolute or contingent (including without limitation
liabilities for Taxes due or to become due or contingent or potential
liabilities relating to products or services provided by the Company or the
conduct of the business of the Company regardless of whether claims in respect
thereof have been asserted), incurred by the Company other than obligations and
liabilities incurred in the ordinary course of business consistent with past
practice (it being understood that claims relating to the failure to perform or
the improper performance of services shall not be deemed to be incurred in the
ordinary course of business);
(iv) Any purchase, sale or other disposition, or any agreement
or other arrangement for the purchase, sale or other disposition, of any of the
properties or assets of the Company other than in the ordinary course of
business consistent with past practice;
(v) Any damage, destruction or loss, whether or not covered by
insurance, materially adversely affecting the properties, assets or business of
the Company;
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(vi) Any declaration, setting aside or payment of any dividend
by the Company, or the making of any other distribution in respect of the
capital stock of the Company, or any direct or indirect redemption, purchase or
other acquisition by the Company of its capital stock;
(vii) Any split, combination or reclassification of any of the
Company's capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock;
(viii) Any labor trouble or claim of unfair labor practices
involving the Company; any material change in the compensation payable or to
become payable by the Company to any of its directors, officers, employees,
agents or independent contractors; any material bonus payment or arrangement
made to or with any of such directors, officers, employees, agents or
independent contractors; or any entry by the Company into any material
employment, consulting, severance, termination or similar agreement with any of
such directors, officers, employees, agents or independent contractors;
(ix) Any change with respect to the officers or management
of the Company;
(x) Any payment or discharge of a material Lien or liability
of the Company which was not shown in the Interim Financial Statements or
incurred in the ordinary course of business thereafter;
(xi) Any material obligation or liability incurred by the
Company to any of its directors, officers, stockholders or employees, or any
material loans or advances made by the Company to any of its directors,
officers, stockholders or employees, except normal compensation and expense
reimbursement payable to officers or employees;
(xii) Any change in accounting methods or practices, credit
practices or collection policies used by the Company (provided that this
representation (xii) shall relate back to, and shall be made with respect to any
such changes since, June 25, 1999);
(xiii) Any change in any Tax election of the Company under
federal, state, local or foreign Tax law;
(xiv) Any other material transaction entered into by the
Company other than transactions in the ordinary course of business; or
(xv) Any agreement or understanding whether in writing or
otherwise, for the Company to take any of the actions specified in paragraphs
(i) through (xiv) above.
(m) VOTE REQUIRED. The affirmative vote of the holders of a majority of
the outstanding shares of Company Common Stock (the "REQUIRED COMPANY VOTE") is
the only vote of the holders of any class or series of the Company capital stock
necessary to approve this Agreement and the transactions contemplated hereby.
19
(n) STATE TAKEOVER STATUTES. The Company Board has approved the Offer,
the Merger, this Agreement, the Company Option Agreement and the Stockholders
Agreement and such approval is sufficient to render inapplicable to the Offer,
the Merger, this Agreement, the Company Option Agreement, the Stockholders
Agreement and the transactions contemplated by this Agreement, the Company
Option Agreement and the Stockholders Agreement the provisions of Section 203 of
the DGCL to the extent, if any, such Section is applicable to the Offer, the
Merger, this Agreement, the Company Option Agreement, the Stockholders Agreement
and the transactions contemplated by this Agreement, the Company Option
Agreement and the Stockholders Agreement. To the Company's knowledge, no other
state takeover statute or similar statute or regulation applies to or purports
to apply to the Offer, the Merger, this Agreement, the Company Option Agreement,
the Stockholders Agreement or the transactions contemplated by this Agreement,
the Company Option Agreement or the Stockholders Agreement.
(o) INTELLECTUAL PROPERTY.
(i) The list of patents and patent applications (collectively,
the "Company Patent Rights") as listed on Schedule 3.1(o)(i) is a complete and
correct listing of all the patents and patent applications owned solely or
jointly by the Company, and, to the Company's knowledge, there are no unpaid
maintenance fees, patents that have lapsed, or abandonment of patent
applications, or any reason why any patent application should not be allowed.
(ii) The Company is the sole and exclusive owner of all right,
title, and interest in the trademarks ("Registered Marks") and trademark
applications ("Pending Marks") listed on Schedule 3.1(o)(ii), and to the
Company's knowledge, the Company has not allowed any of the Registered Marks or
Pending Marks to be abandoned, canceled, or to expire.
(iii) Except as set forth on Schedule 3.1(o)(iii), to the
knowledge of the Company, other than patent and trademark prosecution by the
Company, there are no legal or governmental proceedings pending relating to
patents, trade secrets, trademarks, service marks or other proprietary
information or materials of the Company, and to the Company's knowledge, no such
proceedings are overtly threatened or contemplated by any Governmental Entity or
other Person.
(iv) The Company has made available to Parent true and correct
copies of all material license agreements relating to the Intellectual Property
Rights to which the Company is a party listed on Schedule 3.1(o)(iv).
(v) Except as set forth on Schedule 3.1(o)(v), the Company
owns, or is licensed or otherwise has the right to use (in each case, clear of
any Liens of any kind), all material Intellectual Property Rights used in or
necessary for the conduct of its business as currently conducted, and no claims
are pending or, to the Company's knowledge, threatened that the Company is
infringing on or otherwise violating the rights of any Person with regard to any
Intellectual Property Rights owned by and/or licensed to the Company, and to the
Company's knowledge, no Person is infringing on or otherwise violating any right
of the Company with respect to any Intellectual Property Rights owned by and/or
licensed to the Company.
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(vi) None of the former or current members of management or
key personnel of the Company, including all former and current employees,
agents, consultants and contractors who have contributed to or participated in
the conception and development of Intellectual Property Rights of the Company,
have any valid claim against the Company in connection with the involvement of
such Persons in the conception and development of any Intellectual Property
Rights of the Company, and to the Company's knowledge, no such claim has been
asserted or threatened.
(vii) The Company has taken reasonable and necessary steps to
protect its Intellectual Property Rights, and to the knowledge of the Company,
no material Intellectual Property Rights have been lost or are in jeopardy of
being lost through failure to act by the Company.
(viii) For purposes of this Agreement, "Intellectual Property
Rights" shall mean inventions, discoveries and ideas, whether patented,
patentable or not in any jurisdiction, patents, patent applications (including
reexaminations, reissues, extensions and the like), trademarks (registered or
unregistered), service marks, brand names, certification marks, trade dress,
assumed names, trade names and other indications of origin, the goodwill
associated with the foregoing and registrations in any jurisdiction of, and
applications in any jurisdiction to register, the foregoing, including any
extension, modification or renewal of any such registration or application;
trade secrets, know-how and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any Person; writings and
other works, whether copyrighted, copyrightable or not in any jurisdiction;
registration or applications for registration of copyrights in any jurisdiction,
and any renewals or extensions thereof; computer programs and software
(including source code, object code and data); licenses, immunities, covenants
not to xxx and the like relating to the foregoing; any similar intellectual
property or proprietary rights and any claims or causes of action arising out of
or related to any infringement or misappropriation of any of the foregoing.
(p) CONTRACTS.
(i) CONTRACTS. Except as set forth on the exhibit index to the
Company's Annual Report on Form 10-K for the fiscal year ended June 25, 1999 or
on Schedule 3.1(p)(i), the Company is not a party to or subject to any oral or
written:
(A) Contracts not made in the ordinary course of
business which are material to the Company;
(B) Employment contracts, severance contracts or
other similar contracts, including without limitation contracts that will result
in the payment by, or the creation of any obligation or liability to pay on
behalf of the Company any severance, termination, "golden parachute" or other
similar payments to any present or former personnel following termination of
employment or otherwise as a result of the consummation of the transactions
contemplated by this Agreement;
21
(C) Contracts involving future expenditures or
liabilities, actual or potential, in excess of $150,000 or otherwise material to
the Company;
(D) Promissory notes, loans, agreements, indentures,
evidences of indebtedness, letters of credit, guarantees, or other instruments
relating to an obligation to pay money in excess of $150,000, whether the
Company shall be the borrower, lender or guarantor thereunder; or
(E) Contracts containing provisions limiting the
freedom of the Company or any of its affiliates to sell or license products to,
or otherwise conduct business with, or compete against, any Person.
(ii) ABSENCE OF DEFAULTS. The Company has fulfilled, or taken
all action necessary to enable it to fulfill when due, all of its material
obligations under such contracts. To the Company's knowledge, all other parties
to such contracts are currently in compliance in all material respects with the
provisions thereof, no party is in default thereunder and no notice of any claim
of default has been given to the Company. To the Company's knowledge, the
services or products called for by any unfinished contract can be supplied in
accordance with the terms of such contract, including time specifications, and
the Company has no reason to believe that any unfinished contract will upon
performance by the Company result in a loss to the Company.
(iii) WARRANTY. To the Company's knowledge, the Company has
committed no act, and there has been no omission, which may result in, and there
has been no occurrence which may give rise to, liability in excess of the
Company's warranty reserves reflected in the Interim Balance Sheet for breach of
warranty (whether covered by insurance or not) on the part of the Company, with
respect to services rendered prior to or on the Closing Date. There are no
existing or threatened material product or service liability, warranty or other
similar claims, or any facts upon which a material claim of such nature could be
based, against the Company for products or services which are defective or fail
to meet any product or service warranties. No request has been made to the
Company to lower the previously agreed to price for products that have been
shipped by the Company or services that have been provided by the Company which
has not been resolved, and to the Company's knowledge, there are no facts upon
which any such claim could be based.
(q) INSURANCE. The physical properties, assets and business of the
Company are insured to the extent disclosed on SCHEDULE 3.1(q) and all such
insurance policies and arrangements are disclosed on said Schedule. Said
insurance policies and arrangements are in full force and effect, all premiums
with respect thereto are currently paid, and the Company is in compliance in all
material respects with the terms thereof. Said insurance is sufficient for
compliance by the Company with all requirements of law and all agreements and
leases to which the Company is a party. The Company reasonably believes that
said insurance is adequate and customary for the business engaged in by the
Company.
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(r) EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(i) With respect to each employee benefit plan, program,
arrangement and contract (including, without limitation, any "employee benefit
plan," as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") and any bonus, deferred compensation, stock bonus,
stock purchase, restricted stock, stock option, employment, termination, change
in control and severance plan, program, arrangement and contract), to which the
Company or any of the Company Subs is a party, which is maintained or
contributed to by the Company or any of the Company Subs, or with respect to
which the Company or any of the Company Subs could incur material liability
under Section 4069, 4201 or 4212(c) of ERISA (the "Company Benefit Plans"), the
Company has made available to Parent a true and complete copy of such Company
Benefit Plan.
(ii) Each of the Company Benefit Plans that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the IRS, and the Company is not aware of any
circumstances likely to result in the revocation of any such favorable
determination letter that could reasonably be expected to have a Material
Adverse Effect on the Company.
(iii) With respect to the Company Benefit Plans, no event has
occurred and, to the knowledge of the Company, there exists no condition or set
of circumstances in connection with which the Company or any of the Company Subs
could be subject to any liability under the terms of such Company Benefit Plans,
ERISA, the Code or any other applicable law which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on the
Company.
(iv) Neither the Company nor any of the Company Subs is a
party to any collective bargaining or other labor union contracts and no
collective bargaining agreement is being negotiated by the Company or any of the
Company Subs. There is no pending labor dispute, strike or work stoppage against
the Company or any of the Company Subs which may interfere with the respective
business activities of the Company or any of the Company Subs, except where such
dispute, strike or work stoppage could not reasonably be expected to have a
Material Adverse Effect on the Company. There is no pending charge or complaint
against the Company or any of the Company Subs by the National Labor Relations
Board or any comparable state agency, except where such unfair labor practice,
charge or complaint could not reasonably be expected to have a Material Adverse
Effect on the Company.
(s) ENVIRONMENTAL MATTERS. Except in all cases as, in the aggregate,
have not had and would not reasonably be expected to have a Material Adverse
Effect on the Company, the Company (a) has obtained all applicable permits,
consents, licenses and other authorizations which are required to be obtained
under all applicable federal, state, local or foreign laws or any regulation,
code, plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants,
23
contaminants, or hazardous or toxic wastes into ambient air, surface water,
ground water, or land or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants or hazardous or toxic materials or wastes
("ENVIRONMENTAL LAWS") by the Company; (b) is in compliance with all terms and
conditions of such required permits, consents, licenses and other
authorizations, and also is in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in applicable Environmental Laws; (c) has not
received notice of any past or present violations of Environmental Laws or any
event, condition, circumstance, activity, practice, incident, action or plan
which is reasonably likely to interfere in any material respect with or prevent
continued compliance with or which could give rise to any common law or
statutory liability, or otherwise form the basis of any material claim, action,
suit or proceeding against the Company based on or resulting from the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge or release into the
environment, of any pollutant, contaminant or hazardous or toxic material or
waste; and (d) has taken all actions necessary under applicable Environmental
Laws to register any products or materials required to be registered by the
Company thereunder.
(t) YEAR 2000 COMPLIANCE. Except as set forth in the Company SEC
Reports and except in all cases as, in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect on the Company, the
Company has all systems and software solutions necessary or appropriate to
address and accommodate Year 2000 computer systems issues, and the Company's
products and software programs, systems and applications used in the operation
of its business have been tested and are fully capable of providing accurate
results using data having date ranges spanning the twentieth and twenty-first
centuries. Without limiting the generality of the foregoing, except as set forth
in the Company SEC Reports and except in all cases as, in the aggregate, have
not had and would not reasonably be expected to have a Material Adverse Effect
on the Company, all of the Company's products and software programs, systems and
applications are able to: (a) consistently handle date information before,
during and after January 1, 2000, including but not limited to accepting date
input, providing date output, and performing calculations on dates or portions
of dates; (b) function accurately and without interruption before, during and
after January 1, 2000 (including leap year computations), without any change in
operations associated with the advent of the new century; (c) respond to
two-digit date input in a way that resolves any ambiguity as to century in a
disclosed defined and predetermined manner (as designed and represented by the
manufacturer(s)); and (d) store and provide output of date information in ways
that are unambiguous as to century (four digit date formats).
(u) BROKERS OR FINDERS. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company, except the Financial Advisor. A true and correct
copy of the engagement letter of the Financial Advisor is attached hereto as
SCHEDULE 3.1(u).
24
(v) OPINION OF FINANCIAL ADVISOR. The Company has received the Fairness
Opinion dated the date of this Agreement from the Financial Advisor to the
effect that, as of such date, the consideration to be received by the holders of
Company Common Stock pursuant to the Offer and the Merger is fair to such
holders from a financial point of view.
3.2 REPRESENTATIONS AND WARRANTIES OF PARENT. Parent represents and warrants to
the Company as follows:
(a) ORGANIZATION, STANDING AND POWER. Each of Parent and Merger Sub
has been duly incorporated and is validly existing and in good standing under
the laws of its jurisdiction of incorporation. Each of Parent and Merger Sub is
duly qualified and in good standing to do business in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification necessary, except where the failure so to qualify could not
reasonably be expected, either individually or in the aggregate, to have a
Material Adverse Effect on Parent. The copies of the Organizational Documents of
Parent and Merger Sub which were previously furnished or made available to the
Company are true, complete and correct copies of such documents as in effect on
the date of this Agreement.
(b) AUTHORITY; NO CONFLICTS.
(i) Each of Parent and Merger Sub has all requisite corporate
power and corporate authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Merger
Sub. This Agreement has been duly executed and delivered by Parent and Merger
Sub and constitutes a valid and binding agreement of Parent and Merger Sub,
enforceable against each of them in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors generally,
or by general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(ii) The execution and delivery of this Agreement does not or
will not, as the case may be, and the consummation of the transactions
contemplated hereby will not, result in any Violation of: (A) any provision of
the Organizational Documents of Parent or Merger Sub or (B) except as could not
reasonably be expected to have a Material Adverse Effect on Parent and subject
to obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph (iii) below,
any material loan or credit agreement, note, mortgage, bond, indenture, lease,
benefit plan or other material agreement, obligation, instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent, Merger Sub or their
respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Parent or Merger Sub in connection with the execution and
delivery of this Agreement by Parent or Merger Sub or the consummation by Parent
or Merger Sub of the transactions contemplated hereby, except for
25
(A) the consents, approvals, orders, authorizations, registrations, declarations
and filings required under or in relation to clause (x) of Section 3.1(d)(iii)
and (B) such consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to make or obtain could not
reasonably be expected to have a Material Adverse Effect on Parent.
(c) INFORMATION SUPPLIED.
(i) None of (A) the Offer Documents, (B) the Schedule 14D-1 or
(C) the information supplied or to be supplied by Parent or Merger Sub for
inclusion or incorporation by reference in the Proxy Statement, if any, the
Schedule 14D-9 and any other documents to be filed with the SEC in connection
with the transactions contemplated hereby, including any amendment or supplement
to such documents, will, at the respective times such documents are filed, and,
with respect to the Proxy Statement, if any, and the Offer Documents, when first
published, sent or given to stockholders of the Company, 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 made therein, in
light of the circumstances under which they are made, not false or misleading
or, in the case of the Proxy Statement, if any, or any amendment thereof or
supplement thereto, at the time of the Company Stockholders Meeting, if any, and
at the Effective Time, 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 made therein, in light of the circumstances under which
they are made, not false or misleading or necessary to correct any statement in
any earlier communication with respect to the Offer or the solicitation of
proxies for the Company Stockholders Meeting, if any, which shall have become
false or misleading.
(ii) Notwithstanding the foregoing provisions of this Section
3.2(c), no representation or warranty is made by Parent or Merger Sub with
respect to statements made or incorporated by reference in the Offer Documents
or Schedule 14D-1 based on information supplied by the Company for inclusion or
incorporation by reference therein.
(d) BROKERS OR FINDERS. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent or Merger Sub, except Credit Suisse First Boston
Corporation ("CSFB").
(e) NO BUSINESS ACTIVITIES. Neither Parent nor Merger Sub has conducted
any material business activities (with respect to Intellectual Property Rights
or otherwise) other than in connection with their organization and
capitalization, the negotiation and execution of this Agreement and the
consummation of the transactions contemplated hereby.
(f) AVAILABLE FUNDS. At the expiration of the Offer and at the
Effective Time, Parent and Merger Sub will have available all funds necessary to
satisfy their obligations under this Agreement and in connection with the
transactions contemplated hereby, including, without limitation, the obligation
to purchase all outstanding shares of Company Common Stock validly tendered into
the Offer as well as all shares of Company Common Stock outstanding at the
Effective Time.
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(g) LITIGATION. There is no litigation, arbitration, claim, suit,
action, investigation or proceeding pending or, to the knowledge of Parent,
threatened, against or affecting Parent or Merger Sub, nor to the knowledge of
Parent is there any basis therefor, which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on Parent, nor is
there any judgment, award, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against Parent or Merger Sub which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on Parent.
ARTICLE IV.
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 CONDUCT OF BUSINESS PENDING CLOSING. From the date hereof until the Closing,
the Company shall (and shall cause each of the Company Subs to):
(a) maintain its existence in good standing;
(b) maintain the general character of its business and properties and
conduct its business in the ordinary and usual manner consistent with past
practice, except as expressly permitted by this Agreement;
(c) maintain business and accounting records consistent with past
practice; and
(d) use its best efforts (i) to preserve its business intact, (ii) to
keep available to the Company the services of its present officers and
employees, and (iii) to preserve for the Company or such Subsidiary the goodwill
of its suppliers, customers and others having business relations with the
Company or such Subsidiary.
4.2 PROHIBITED ACTIONS PENDING CLOSING. Unless otherwise provided for herein or
approved by Parent in writing, or unless otherwise set forth in ITEM 4.2 of the
Company Disclosure Schedule, from the date hereof until the Closing, the Company
shall not (and shall not permit any of the Company Subs to):
(a) amend or otherwise change any of its Organizational Documents;
(b) except as contemplated by Section 3.1(c)(v), amend the Rights
Agreement or take any action with respect to, or make any determination under,
the Rights Agreement, including a redemption of the Rights to facilitate an
Alternative Transaction (as defined below);
(c) except as contemplated by Section 4.2(o), issue or sell or
authorize for issuance or sale (other than any issuance of Company Common Stock
upon the exercise of any outstanding option to purchase Company Common Stock
which option was issued prior to the date hereof in accordance with the terms of
the relevant stock option agreement), or grant any options or make other
agreements with respect to, any shares of its capital stock or any other of its
securities;
(d) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise with respect to any of its capital
stock;
27
(e) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(f) 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 (i) short-term borrowings incurred in the ordinary course of
business consistent with past practice and (ii) intercompany indebtedness
between the Company and any of the Company Subs or between the Company Subs;
(g) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation, partnership,
other business organization or any division thereof or any material amount of
assets; (ii) except as contemplated by Section 4.2(o), enter into any contract
or agreement other than in the ordinary course of business consistent with past
practice; (iii) authorize any capital commitment which is in excess of $100,000
or capital expenditures which are, in the aggregate, in excess of $250,000; or
(iv) enter into or amend any contract, agreement, commitment or arrangement with
respect to any matter set forth in Section 4.2(f) or this Section 4.2(g);
(h) sell, lease, license, mortgage, pledge or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or assets,
other than sales or licenses of products in the ordinary course of business
consistent with past practice;
(i) take any action, other than in the ordinary course of business
consistent with past practice, with respect to accounting policies or procedures
(including, without limitation, procedures with respect to the payment of
accounts payable and collection of accounts receivables);
(j) make any Tax election or settle or compromise any federal, state,
local or foreign Tax liability;
(k) settle or compromise any pending or threatened suit, action or
claim which is material or which relates to any of the transactions contemplated
by this Agreement;
(l) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice, of liabilities reflected or reserved against in
the Interim Balance Sheet or subsequently incurred in the ordinary course of
business consistent with past practice;
(m) except in connection with the sale or license of the Company's
products in the ordinary course of business consistent with past practice, sell,
assign, transfer, license, sublicense, pledge or otherwise encumber any of the
Company's Intellectual Property Rights;
(n) except as required by law or as contemplated by Section 4.2(o),
enter into, adopt, amend or terminate any Company Benefit Plan or
28
any other agreement, arrangement, plan or policy involving the Company or any of
the Company Subs, and one or more of its directors, officers, employees or
consultants, or materially change any actuarial or other assumption used to
calculate funding obligations with respect to any pension plan, or change the
manner in which contributions to any pension plan are made or the basis on which
such contributions are determined; provided, however, that the Company shall be
permitted to submit to its stockholders for their consideration and approval the
amendments to the Company Stock Options Plans and the Company Stock Purchase
Plan described in the Company Disclosure Schedule if the Offer has not been
consummated within 50 Business Days after the commencement date of the Offer;
(o) except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not materially increase
benefits or compensation expenses of the Company or the Company Subs, or as
contemplated hereby or by the terms of any employment agreement in existence on
the date hereof, increase the cash compensation of any director, officer or
other key employee or pay any benefit or amount not required by a plan or
arrangement as in effect on the date of this Agreement to any such person;
except that the Company may hire up to 20 persons (none of whom shall be
officers of the Company) on an at will basis (with no employment, severance or
similar agreements) and grant to such persons options to purchase up to 200,000
shares of Company Common Stock in the aggregate; provided that no portion of any
such options shall vest or otherwise become exercisable (including, without
limitation, as a result of the Offer or the Merger) within one year of the date
of hire; provided further that the Company shall notify each such person prior
to hiring that the options being granted shall be canceled for no value upon the
consummation of the transactions contemplated by this Agreement; and provided
further that any such hiring at an annual salary in excess of $110,000 shall be
subject to the prior approval of Parent, which approval shall not be
unreasonably withheld; or
(p) announce an intention, commit or agree to do any of the foregoing.
4.3 OTHER ACTIONS. The Company shall not take any action that would reasonably
be expected to result in (a) any of the representations and warranties of the
Company set forth in this Agreement that are qualified as to materiality
becoming untrue, (ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect or (iii) any of the conditions
to the Offer or the Merger not being satisfied.
4.4 ADVICE OF CHANGES; GOVERNMENT FILINGS. Each party shall (a) confer on a
regular and frequent basis with the other, (b) report (to the extent permitted
by law, regulation and any applicable confidentiality agreement) to the other on
operational matters and (c) promptly advise the other orally and in writing of
(i) any representation or warranty made by it contained in this Agreement that
is qualified as to materiality becoming untrue or inaccurate in any respect or
any such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it (A) to comply with or
satisfy in any respect any covenant, condition or agreement required to be
complied with or satisfied by it under this
29
Agreement that is qualified as to materiality or (B) to comply with or satisfy
in any material respect any covenant, condition or agreement required to be
complied with or satisfied by it under this Agreement that is not so qualified
as to materiality or (iii) any change, event or circumstance that has had or
could reasonably be expected to have a Material Adverse Effect on such party or
materially adversely affect its ability to consummate the Offer or the Merger in
a timely manner; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement. The Company
and Parent shall file all reports required to be filed by each of them with the
SEC (and all other Governmental Entities) between the date of this Agreement and
the Effective Time and shall (to the extent permitted by law or regulation or
any applicable confidentiality agreement) deliver to the other party copies of
all such reports promptly after the same are filed. Each party agrees that, to
the extent practicable, it shall consult with the other party with respect to
the obtaining of all permits, consents, approvals and authorizations of all
third parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party shall keep the other
party apprised of the status of matters relating to completion of the
transactions contemplated hereby.
ARTICLE V.
ADDITIONAL AGREEMENTS
5.1 PREPARATION OF PROXY STATEMENT; THE COMPANY STOCKHOLDERS MEETING
(a) The Company shall, as soon as practicable following the acquisition
by Merger Sub of the Minimum Shares pursuant to the Offer, to the extent
necessary to consummate the Merger, duly call, give notice of, convene and hold
a meeting (or obtain the written consents) of its stockholders (the "COMPANY
STOCKHOLDERS MEETING") for the purpose of obtaining the Required Company Vote,
and the Company shall, through the Company Board, recommend to its stockholders
that they accept the Offer and tender all of their shares of Company Common
Stock to Merger Sub and approve the transactions contemplated by this Agreement;
provided, however, that the Company Board may withdraw or modify such
recommendation in accordance with Section 5.4. Parent shall vote or cause to be
voted all shares of Company Common Stock owned of record by Parent or Merger Sub
in favor of the transactions contemplated by this Agreement.
(b) Notwithstanding the preceding paragraph or any other provision of
this Agreement, in the event Merger Sub owns 90% or more of the outstanding
shares of Company Common Stock following the expiration of the Offer and any
exercise of the Company Option, the Company shall not be required to call the
Company Stockholders Meeting or to file or mail the Proxy Statement, and the
parties hereto shall, at the request of Parent and subject to Article VI, take
all necessary and appropriate action to cause the Merger to become effective as
soon as practicable following such expiration without a meeting of stockholders
of the Company in accordance with Section 253 of the DGCL and Section 5.16 of
the TBCA.
(c) If required by applicable law, as soon as practicable following
Parent's request, the Company shall prepare and file with the SEC the Proxy
Statement. The Company shall use its best efforts to cause the Proxy Statement
to be mailed to the Company's stockholders as promptly as practicable.
30
5.2 ACCESS TO INFORMATION. The Company shall, and shall cause the Company Subs
to, afford to the officers, employees, accountants, counsel, financial advisors
and other representatives of Parent reasonable access during normal business
hours, during the period prior to the Effective Time, to all of its properties,
books, contracts, commitments and records and its officers, employees and
representatives and, during such period, the Company shall, and shall cause the
Company Subs to, furnish promptly to Parent (a) a copy of each report, schedule,
registration statement and other document filed, published, announced or
received by it during such period pursuant to the requirements of federal or
state securities laws, as applicable, and (b) consistent with its legal
obligations, all other information concerning its business, properties and
personnel as Parent may reasonably request. Such information shall be held in
confidence to the extent required by, and in accordance with, the provisions of
the agreement (the "CONFIDENTIALITY AGREEMENT") dated September 20, 1999 between
the Company and Parent, which Confidentiality Agreement shall remain in full
force and effect.
5.3 APPROVALS AND CONSENTS; COOPERATION. Each of the Company and Parent shall
cooperate with each other and use (and shall cause their respective Subsidiaries
to use) its best efforts to take or cause to be taken all actions, and do or
cause to be done all things, necessary, proper or advisable on their part under
this Agreement and applicable laws to consummate and make effective the Merger
and the other transactions contemplated by this Agreement, the Company Option
Agreement and the Stockholders Agreement as soon as practicable, including (i)
preparing and filing as promptly as practicable all documentation to effect all
necessary applications, notices, petitions, filings, tax ruling requests and
other documents and to obtain as promptly as practicable all consents, waivers,
licenses, orders, registrations, approvals, permits, tax rulings and
authorizations necessary or advisable to be obtained from any third party and/or
any Governmental Entity in order to consummate the Merger or any of the other
transactions contemplated by this Agreement, the Company Option Agreement or the
Stockholders Agreement and (ii) taking all reasonable steps as may be necessary
to obtain all such consents, waivers, licenses, registrations, permits,
authorizations, tax rulings, orders and approvals. Without limiting the
generality of the foregoing, each of the Company and Parent agrees to make all
necessary filings in connection with the Required Regulatory Approvals as
promptly as practicable after the date of this Agreement, and to use its best
efforts to furnish or cause to be furnished, as promptly as practicable, all
information and documents requested with respect to such Required Regulatory
Approvals and shall otherwise cooperate with the applicable Governmental Entity
in order to obtain any Required Regulatory Approvals in as expeditious a manner
as possible. Each of the Company and Parent shall use its best efforts to
resolve such objections, if any, as any Governmental Entity may assert with
respect to this Agreement, the Company Option Agreement, the Stockholders
Agreement or the transactions contemplated hereby or thereby in connection with
the Required Regulatory Approvals.
5.4 NO SOLICITATION
(a) The Company and the Company Subs and their respective directors and
officers shall not, and the Company shall direct and use its best efforts to
cause the employees, representatives and agents of the Company and the Company
Subs not to, directly or indirectly, solicit or encourage the initiation of
(including by way of furnishing information) any inquiries
31
or proposals regarding any merger, sale of assets, sale of shares of capital
stock (including without limitation by way of a tender offer) or similar
transaction involving the Company or any Company Subs that if consummated would
constitute an Alternative Transaction (as defined below) (any of the foregoing
inquiries or proposals being referred to herein as a "COMPANY TAKEOVER
PROPOSAL"). Nothing contained in this Agreement shall prevent the Company Board
from (i) furnishing information to a third party which has made a bona fide
Company Takeover Proposal that is a Superior Proposal (as defined below) not
solicited in violation of this Agreement, provided that such third party has
executed an agreement with confidentiality provisions substantially similar to
those then in effect between the Company and Parent or (ii) subject to
compliance with the other terms of this Section 5.4, considering and negotiating
a bona fide Company Takeover Proposal that is a Superior Proposal not solicited
in violation of this Agreement; provided that, as to each of clauses (i) and
(ii), the Company Board reasonably determines in good faith (after due
consultation with independent counsel) that it is or is reasonably likely to be
required to do so in order to discharge properly its fiduciary duties. For
purposes of this Agreement, a "SUPERIOR PROPOSAL" means any proposal made by a
third party to acquire, directly or indirectly, for consideration consisting of
cash and/or securities, all of the equity securities of the Company entitled to
vote generally in the election of directors or all or substantially all the
assets of the Company, on terms which the Company Board reasonably believes
(after consultation with a financial advisor of nationally recognized
reputation) to be more favorable from a financial point of view to its
stockholders than the Offer and the Merger taking into account at the time of
determination all factors relating to such proposed transaction deemed relevant
by the Company Board, including, without limitation, the financing thereof, the
proposed timing thereof and all other conditions thereto and any changes to the
financial terms of this Agreement proposed by Parent and Merger Sub.
"ALTERNATIVE TRANSACTION" means any of (i) a transaction pursuant to which any
Person (or group of Persons) other than Parent or its affiliates (a "THIRD
PARTY") acquires or would acquire more than 10% of the outstanding shares of any
class of equity securities of the Company, whether from the Company or pursuant
to a tender offer or exchange offer or otherwise, (ii) a merger or other
business combination involving the Company pursuant to which any Third Party
acquires more than 10% of the outstanding equity securities of the Company or
the entity surviving such merger or business combination, (iii) any transaction
pursuant to which any Third Party acquires or would acquire control of assets
(including for this purpose the outstanding equity securities of Company Subs
and securities of the entity surviving any merger or business combination
including any of the Company Subs) of the Company or any Company Subs having a
fair market value (as determined by the Company Board in good faith) equal to
more than 10% of the fair market value of all the assets of the Company and the
Company Subs, taken as a whole, immediately prior to such transaction, or (iv)
any other consolidation, business combination, recapitalization or similar
transaction involving the Company or any of the Company Subs, other than the
transactions contemplated by this Agreement.
(b) The Company shall immediately notify Parent and Merger Sub after
receipt of any Company Takeover Proposal, or any modification of or amendment to
any Company Takeover Proposal, or any request for nonpublic information relating
to the Company or any of the Company Subs in connection with a Company Takeover
Proposal or for access to the properties, books or records of the Company or any
Subsidiary by any Person that informs the Company
32
Board or such Subsidiary that it is considering making, or has made, a Company
Takeover Proposal. Such notice to Parent and Merger Sub shall be made orally and
in writing, and shall indicate the identity of the Person making the Company
Takeover Proposal or intending to make the Company Takeover Proposal or
requesting nonpublic information or access to the books and records of the
Company, the terms of any such Company Takeover Proposal or modification or
amendment to a Company Takeover Proposal, and whether the Company is providing
or intends to provide the Person making the Company Takeover Proposal with
access to information concerning the Company as provided in Section 5.4(a). The
Company shall also immediately notify Parent and Merger Sub, orally and in
writing, if it enters into negotiations concerning any Company Takeover
Proposal.
(c) Except as set forth in this Section 5.4, neither the Company Board
nor any committee thereof shall (i) withdraw or modify, or indicate publicly its
intention to withdraw or modify, in a manner adverse to Parent, the approval or
recommendation by such Board of Directors or such committee of the Offer or the
Merger, (ii) approve or recommend, or indicate publicly its intention to approve
or recommend, any Company Takeover Proposal or (iii) cause the Company to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement (each, a "COMPANY ACQUISITION AGREEMENT") related to any
Company Takeover Proposal. Notwithstanding the foregoing, in the event that
prior to the Effective Time the Company Board determines in good faith, with the
advice of outside counsel, that the failure to do so could reasonably be
determined to be a breach of its fiduciary duties to the Company's stockholders
under applicable law, the Company Board may (subject to this and the following
sentences) approve or recommend a Superior Proposal and, in connection
therewith, withdraw or modify its approval or recommendation of the Offer or the
Merger and/or terminate this Agreement (and concurrently with or after such
termination, if it so chooses, cause the Company to enter into any Company
Acquisition Agreement with respect to any Superior Proposal); provided that (i)
the Company gives Parent at least five Business Days advance notice of its
intent to take any of the foregoing actions and (ii) during such five Business
Day period, the Company, if requested by Parent, negotiates in good faith with
Parent to make such adjustments to the terms and conditions of this Agreement as
would enable the Company to proceed with the Offer and the Merger on such
adjusted terms. After such five Business Day period, the Company Board may then
(and only then) withdraw or modify its approval or recommendation of the Offer
or the Merger and/or terminate this Agreement.
(d) The Company shall advise the directors, officers and employees of
the Company and the Company Subs and any investment banker, attorney or other
advisor retained by the Company or any of the Company Subs in connection with
the transactions contemplated by this Agreement of the restrictions set forth in
this Section 5.4. It is understood that any violation of the restrictions set
forth in this Section 5.4 by any director or officer of the Company or any of
the Company Subs, or any such violation by any employee, representative or agent
of the Company or any of the Company Subs where the Company shall have failed to
use its best efforts to prevent such violation, shall be deemed to be a breach
of this Section 5.4 by the Company.
33
(e) Upon the execution of this Agreement, the Company, the Company Subs
and their respective directors, officers, employees, representatives and agents
shall immediately cease any and all existing activities, discussions or
negotiations with any Third Parties conducted previously with respect to any
Company Takeover Proposal or Alternative Transaction. For so long as this
Agreement shall not have been terminated in accordance with its terms, the
Company Board shall not redeem the Rights or waive or amend any provision of the
Rights Agreement, in any such case to permit or facilitate the consummation of
any Company Takeover Proposal or Alternative Transaction.
5.5 EMPLOYEE BENEFITS
(a) As of the Effective Time, Parent shall cause the Surviving
Corporation to honor and satisfy all obligations and liabilities with respect to
the Company Benefit Plans, including all employment and severance agreements
listed in ITEM 5.5 of the Company Disclosure Schedule. Notwithstanding the
foregoing, the Surviving Corporation shall not be required to continue any
particular Company Benefit Plan after the Effective Time, and any Company
Benefit Plan may be amended or terminated in accordance with its terms and
applicable law. To the extent that any Company Benefit Plan (other than the
Company Stock Option Plans or the Company Stock Purchase Plan) is terminated or
amended after the Effective Time so as to reduce in any material respect the
benefits that are then being provided with respect to participants thereunder,
Parent shall arrange for each individual who is then a participant in such
terminated or amended plan to participate in a comparable Parent benefit plan at
a level commensurate with other similarly situated employees of Parent in
accordance with the eligibility criteria thereof. Parent shall pro rate any
portion of a premium or deductible with respect to employee benefit plans of
Parent in which employees of the Company and the Company Subs (and their
beneficiaries) participate after the Effective Time for the portion of the
calendar year prior to their participation in such plans. Parent shall take all
steps necessary to cause each employee benefit plan of Parent which is an
"employee welfare benefit plan" under Section 3(1) of ERISA to waive any
restrictions or limitations with respect to "pre-existing conditions" or prior
medical history which would apply in preventing an employee or beneficiary
thereof who is otherwise eligible to participate in such employee benefit plan
of Parent from participating in such plan without restriction or limitation.
(b) For purposes of determining eligibility to participate, vesting and
accrual or entitlement to benefits where length of service is relevant under any
employee benefit plan or arrangement of Parent, the Surviving Corporation or any
of their respective Subsidiaries, employees of the Company and the Company Subs
as of the Effective Time shall receive service credit for service with the
Company and the Company Subs to the same extent such service credit was granted
under the Company Benefit Plans, subject to offsets for previously accrued
benefits and no duplication of benefits.
5.6 FEES AND EXPENSES. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with this Agreement, the Company Option
Agreement, the Stockholders Agreement and the transactions contemplated hereby
and thereby shall be paid by the party incurring such fees and expenses, except
as provided in Section 7.2, and except that, promptly following the Closing,
Parent shall cause the Surviving Corporation to pay all reasonable legal,
34
accounting and investment banker fees incurred by the Company in connection with
this Agreement and the transactions contemplated hereby.
5.7 INDEMNIFICATION; INSURANCE
(a) Parent shall, and shall cause the Surviving Corporation to,
maintain in effect for a period of six years after the Effective Time the
current provisions regarding indemnification of current or former officers and
directors (each an "INDEMNIFIED PARTY") contained in the Organizational
Documents of the Company or any of the Company Subs and in any agreements
between an Indemnified Party and the Company or any of the Company Subs.
(b) Parent shall, and shall cause the Surviving Corporation to,
maintain in effect for a period of six years after the Effective Time the
Company's current directors' and officers' insurance policies with respect to
acts or failures to act prior to or as of the Effective Time (other than to the
extent the available limit of any such insurance policy may be reduced or
exhausted by reason of the payment of claims thereunder); provided, however,
that in order to maintain or procure such coverage, neither Parent nor the
Surviving Corporation shall be required to pay an annual premium in excess of
150% of the current annual premium paid by the Company for its existing coverage
(the "CAP AMOUNT"); and provided, further, that if equivalent coverage cannot be
obtained, or can be obtained only by paying an annual premium in excess of the
Cap Amount, Parent and the Surviving Corporation shall only be required to
obtain as much coverage as can be obtained by paying an annual premium equal to
the Cap Amount.
5.8 COMPANY STOCK PURCHASE PLAN. Prior to the Effective Time, the Company shall
take all actions necessary to (a) shorten the offering period under the Company
Stock Purchase Plan in which the Effective Time occurs so that such offering
period terminates on the day immediately prior to the Effective Time and (b)
terminate the Company Stock Purchase Plan effective as of the Effective Time.
5.9 PUBLIC ANNOUNCEMENTS. The Company and Parent shall agree on the form and
content of the initial press release regarding the transactions contemplated
hereby and thereafter shall consult with each other before issuing any press
release or other public statement with respect to any of the transactions
contemplated hereby and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by law or
obligations pursuant to any listing agreement with, or rules of, any national
securities exchange.
5.10 TAKEOVER STATUTES. If Section 203 of the DGCL or any other takeover statute
shall become applicable to the transactions contemplated by this Agreement, the
Company Option Agreement or the Stockholders Agreement, the Company shall grant
such approvals and take such actions as are necessary so that the transactions
contemplated hereby and thereby may be consummated as promptly as practicable on
the terms contemplated hereby and thereby and otherwise act to eliminate or
minimize the effects of such takeover statute on the transactions contemplated
hereby and thereby.
5.11 RIGHTS AGREEMENT. The Company shall take all further action (in addition to
that referred to in Section 3.1(c)(v)), if any, necessary in order to render the
Rights inapplicable to the
35
Offer, the Merger and the other transactions contemplated by this Agreement, the
Company Option Agreement and the Stockholders Agreement.
5.12 SHORT-TERM INVESTMENTS. Not later than five days prior to the earliest
expiration date of the Offer, the Company shall open an account in the name of
the Company at CSFB and shall deposit at least $75 million into such account
consisting of cash and all of the short-term investments of the Company and the
Company Subs (including, without limitation, municipal bonds and other
securities) (collectively, "SHORT-TERM INVESTMENTS"). The assets held in the
CSFB account shall remain the property of the Company, and the Company shall
have absolute control over such account and shall be entitled to all interest
earned on the Short-Term Investments held in the such account. The Company shall
take all actions necessary to convert all of the Short-Term Investments into
cash or liquid investments readily convertible into cash on demand not later
than the first Business Day following the expiration date of the Offer. To the
extent that any Short-Term Investments mature prior to the expiration date of
the Offer, the Company shall deposit the funds obtained thereby into the CSFB
account in the form of cash or liquid investments readily convertible into cash
on demand.
ARTICLE VI.
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER. The obligations
of the Company, Parent and Merger Sub to effect the Merger are subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) STOCKHOLDER APPROVAL. The Company shall have obtained all approvals
of holders of shares of capital stock of the Company necessary to approve this
Agreement and all of the transactions contemplated hereby (including the
Merger); provided that this condition shall be deemed satisfied upon the
consummation of the Offer.
(b) HSR ACT. The waiting period (and any extension thereof) applicable
to the Merger under the HSR Act shall have been terminated or shall have
expired.
(c) NO INJUNCTIONS OR RESTRAINTS, ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction or other order issued by a court or
other Governmental Entity of competent jurisdiction shall be in effect and have
the effect of making the Merger illegal or otherwise prohibiting consummation of
the Merger; provided, however, that the provisions of this Section 6.1(c) shall
not be available to any party whose failure to fulfill its obligations pursuant
to Section 5.3 shall have been the cause of, or shall have resulted in, such
order or injunction.
(d) REQUIRED REGULATORY APPROVALS. All authorizations, consents, orders
and approvals of, and declarations and filings with, and all expirations of
waiting periods imposed by, any Governmental Entity which, if not obtained in
connection with the consummation of the transactions contemplated hereby, could
reasonably be expected to have a Material Adverse Effect on the Company
(collectively, "REQUIRED REGULATORY APPROVALS"), shall have been
36
obtained, have been declared or filed or have occurred, as the case may be, and
all such Required Regulatory Approvals shall be in full force and effect.
(e) OFFER. Merger Sub shall have consummated the Offer; provided,
however, that neither Parent nor Merger Sub shall be entitled to rely on this
condition if either of them shall have failed to purchase shares of Company
Common Stock pursuant to the Offer in breach of their obligations under this
Agreement.
ARTICLE VII.
TERMINATION AND AMENDMENT
7.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, by action taken or authorized by the Board of Directors of the
terminating party or parties, whether before or after approval of the matters
presented in connection with the Merger by the stockholders of the Company:
(a) By mutual written consent of Parent and the Company;
(b) By either Parent or the Company if the Merger shall not have been
consummated by March 31, 2000 (the "OUTSIDE DATE"); provided, however, that the
right to terminate this Agreement under this Section 7.1(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;
(c) By either Parent or the Company if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action (which order,
decree, ruling or other action the parties shall have used their best efforts to
resist, resolve or lift, as applicable, subject to the provisions of Section
5.3) permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, the Company Option Agreement or the
Stockholders Agreement and such order, decree, ruling or other action shall have
become final and nonappealable;
(d) By either Parent or the Company if any approval by the stockholders
of the Company required for the consummation of the Merger or the other
transactions contemplated hereby shall not have been obtained at the Company
Stockholders Meeting or any adjournment thereof by reason of the failure to
obtain the required vote at a duly held meeting of stockholders or at any
adjournment thereof;
(e) By Parent, prior to the acceptance for payment of the Minimum
Shares pursuant to the Offer, if (i) the Company Board or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent or Merger Sub its
approval or recommendation of the Offer or the Merger, (ii) the Company Board or
any committee thereof shall have approved or recommended to the stockholders of
the Company any Company Takeover Proposal or Alternative Transaction, (iii) the
Company Board or any committee thereof shall have approved or recommended that
the stockholders of the Company tender their shares of Company Common Stock in
any tender or exchange offer that is an Alternative Transaction, (iv) the
Company Board
37
or any committee thereof shall have resolved to take any of the foregoing
actions, or (v) the Company Board or any committee thereof shall have redeemed
the Rights, or waived or amended any provision of the Rights Agreement, in any
such case to permit or facilitate the consummation of any Company Takeover
Proposal or Alternative Transaction;
(f) By the Company, prior to the acceptance for payment of the Minimum
Shares pursuant to the Offer, in accordance with Section 5.4(c) hereof;
provided, however, that the right to terminate this Agreement pursuant to this
Section 7.1(f) shall not be available (x) if the Company has breached in any
material respect its obligations under Section 5.4 or (y) if the Company shall
fail to pay when due the fees contemplated by Section 7.2(b);
(g) By Parent, prior to the acceptance for payment of the Minimum
Shares pursuant to the Offer, upon a breach of any covenant or agreement on the
part of the Company set forth in this Agreement which could reasonably be
expected to have a Material Adverse Effect on the Company or a material adverse
effect on the consummation of the Offer or the Merger, or if any representation
or warranty of the Company shall have become inaccurate and such inaccuracy
could reasonably be expected to have a Material Adverse Effect on the Company or
a material adverse effect on the consummation of the Offer or the Merger;
(h) By the Company, upon a breach of any covenant or agreement on the
part of Parent or Merger Sub set forth in this Agreement which could reasonably
be expected to have a Material Adverse Effect on Parent or a material adverse
effect on the consummation of the Offer or the Merger, or if any representation
or warranty of Parent or Merger Sub shall have become inaccurate and such
inaccuracy could reasonably be expected to have a Material Adverse Effect on
Parent or a material adverse effect on the consummation of the Offer or the
Merger; or
(i) By Parent or the Company, if the Offer terminates or expires on
account of the failure of any condition specified in ANNEX A without Merger Sub
having purchased any shares of Company Common Stock thereunder (provided that
the right to terminate this Agreement pursuant to this Section 7.1(i) 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 any such
condition).
7.2 EFFECT OF TERMINATION
(a) In the event of termination of this Agreement by either Parent or
the Company as provided in Section 7.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of Parent or the
Company or their respective officers or directors except (i) with respect to
Section 5.6, this Section 7.2 and Article VIII, (ii) with respect to any
liabilities or damages incurred or suffered by a party as a result of the
willful breach by the other party of any of its covenants or other agreements
set forth in this Agreement and (iii) the Confidentiality Agreement shall remain
in full force and effect.
(b) In the event that (i) this Agreement is terminated pursuant to
Section 7.1(e) or 7.1(f), or pursuant to Section 7.1(g) in the case of a
material breach of the Company's obligations under Section 5.4, or (ii)(A) any
Third Party makes a Company Takeover Proposal to the
38
Company or its stockholders and thereafter this Agreement is terminated by
either party pursuant to Section 7.1(b) or 7.1(d) and (B)(x) within 12 months
after the termination of this Agreement any Alternative Transaction is
consummated or the Company enters into any Company Acquisition Agreement, in
either case with the Third Party (or any affiliate of the Third Party) that made
the Company Takeover Proposal to the Company or its stockholders, or (y) within
9 months after the termination of this Agreement any Alternative Transaction is
consummated or the Company enters into any Company Acquisition Agreement, in
either case with any other Third Party, then the Company shall pay Parent a cash
fee of $10,000,000, which amount shall be payable by wire transfer of
immediately available funds no later than (1) two Business Days after such
termination in the case of a termination described in clause (i) above or (2)
the date of consummation of such Alternative Transaction in the case of a
termination described in clause (ii) above. The Company acknowledges that the
agreements contained in this Section 7.2(b) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
Parent and Merger Sub would not enter into this Agreement; accordingly, if the
Company fails to promptly pay the amount due pursuant to this Section 7.2(b),
and in order to obtain such payment Parent commences a suit which results in a
judgment against the Company, the Company shall pay to Parent its costs and
expenses (including attorneys' fees) arising in connection with such suit.
7.3 AMENDMENT. This Agreement may be amended by the parties hereto, by action
taken or authorized by their respective Boards of Directors, at any time before
or after approval of the matters presented in connection with the Merger by the
stockholders of the Company, but, after any such approval, no amendment shall be
made which by law requires further approval by such stockholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
7.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective Boards of Directors,
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party. No delay on the part of any
party hereto in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any waiver on the part of any party hereto of any
right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder. Unless
otherwise provided, the rights and remedies herein provided are cumulative and
are not exclusive of any rights or remedies which the parties hereto may
otherwise have at law or in equity. The failure of any party to this Agreement
to assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of those rights.
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ARTICLE VIII.
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of the
representations, warranties, covenants and other agreements in this Agreement or
in any instrument delivered pursuant to this Agreement, including any rights
arising out of any breach of such representations, warranties, covenants and
other agreements, shall survive the Effective Time, except for those covenants
and agreements contained herein and therein that by their terms apply or are to
be performed in whole or in part after the Effective Time and this Article VIII.
8.2 NOTICES. All notices and other communications hereunder shall be in writing
and shall be deemed duly given (a) on the date of delivery if delivered
personally, (b) on the first Business Day following the date of dispatch if
delivered by a nationally recognized next-day courier service, (c) on the fifth
Business Day following the date of mailing if delivered by registered or
certified mail, return receipt requested, postage prepaid or (d) if sent by
facsimile transmission, with a copy mailed on the same day in the manner
provided in (a) or (b) above, when transmitted and receipt is confirmed by
telephone. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice:
(a) if to Parent or Merger Sub, to Zhone Technologies, Inc., 0000
Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, XX 00000, Attention: Xxxx Xxxxxx, Telecopy:
(000) 000-0000, with a copy to Xxxxxx & Xxxxxxx, 000 "X" Xxxxxx, Xxxxx 0000, Xxx
Xxxxx, XX 00000, Attention: Xxxxx X. Xxxxx, Esq., Telecopy: (000) 000-0000; and
(b) if to the Company, to Premisys Communications, Inc., 00000 Xxxxxxx
Xxxxx, Xxxxxxx, XX 00000, Attention: Xxxxxxxx X. Xxxxxxxx, Telecopy: (510)
353-2321, with a copy to Fenwick & West LLP, Xxx Xxxx Xxxx Xxxxxx, Xxxx Xxxx, XX
00000, Attention: Xxxxx X. Xxxxx, Esq., Telecopy: (000) 000-0000.
8.3 INTERPRETATION. When a reference is made in this Agreement to Sections,
Exhibits or Schedules, such reference shall be to a Section of or Exhibit or
Schedule to this Agreement unless otherwise indicated. The table of contents,
glossary of defined terms and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
40
8.4 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.
8.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES
(a) This Agreement (including the Schedules and Exhibits), the Company
Option Agreement, the Stockholders Agreement and the Confidentiality Agreement
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, 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.
8.6 GOVERNING LAW. This Agreement shall be governed and construed in accordance
with the laws of the State of Delaware, without regard to the laws that might be
applicable under conflicts of laws principles.
8.7 SEVERABILITY. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any law or public policy, all other
terms 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 materially 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 in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible. Any provision of this Agreement held invalid or
unenforceable only in part, degree or certain jurisdictions shall remain in full
force and effect to the extent not held invalid or unenforceable. To the extent
permitted by applicable law, each party waives any provision of law which
renders any provision of this Agreement invalid, illegal or unenforceable in any
respect.
8.8 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole
or in part (whether by operation of law or otherwise), without the prior written
consent of the other parties, except that Merger Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly-owned subsidiary of Parent. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
8.9 ENFORCEMENT. The parties agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. Accordingly, the parties shall be entitled
to an injunction or injunctions to prevent
41
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in the Court of Chancery in and for New Castle County in the
State of Delaware (or, if such court lacks subject matter jurisdiction, any
appropriate state or federal court in New Castle County in the State of
Delaware), this being in addition to any other remedy to which they are entitled
at law or in equity. Each of the parties hereto (a) shall submit itself to the
personal jurisdiction of the Court of Chancery in and for New Castle County in
the State of Delaware (or, if such court lacks subject matter jurisdiction, any
appropriate state or federal court in New Castle County in the State of
Delaware) in the event any dispute arises out of this Agreement or any of the
transactions contemplated hereby, (b) shall not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
and (c) shall not bring any action relating to this Agreement or any of the
transactions contemplated hereby in any court other than the Court of Chancery
in and for New Castle County in the State of Delaware (or, if such court lacks
subject matter jurisdiction, any appropriate state or federal court in New
Castle County in the State of Delaware).
8.10 DEFINITIONS. As used in this Agreement:
(a) "AFFILIATED GROUP" means any affiliated group within the meaning of
Code Section 1504(a) or any similar group defined under a similar provision of
state, local or foreign law.
(b) "BOARD OF DIRECTORS" means the Board of Directors of any specified
Person and any properly serving and acting committees thereof.
(c) "BUSINESS DAY" means any day on which banks are not required or
authorized to close in the City of New York.
(d) "COMPANY STOCK OPTION PLANS" means the Company's 1992 Stock Option
Plan, 1994 Stock Option Plan and 1995 Directors Stock Option Plan.
(e) "FULLY DILUTED SHARES" means all outstanding shares of Company
Common Stock on a fully diluted basis, after giving effect to the exercise or
conversion of all outstanding options, rights and other securities which are
then exercisable or convertible into shares of Company Common Stock, but only to
the extent that any such options, rights or other securities are exercisable or
convertible into shares of Company Common Stock at a per share price less than
the Price Per Share.
(f) "LEGAL PROCEEDING" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding), hearing, inquiry, audit, examination or
investigation commenced, brought, conducted or heard by or before, or otherwise
involving, any court or other Governmental Entity or any arbitrator or
arbitration panel.
(g) "LEGAL REQUIREMENT" means any federal, state, local, municipal,
foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree,
42
rule, regulation, ruling or requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any
Governmental Entity.
(h) "MATERIAL ADVERSE EFFECT" means, with respect to any entity, any
adverse change, circumstance or effect that, individually or in the aggregate
with all other adverse changes, circumstances and effects, is or is reasonably
likely to be materially adverse to the condition (financial or other), business,
operations, assets, liabilities or results of operations of such entity and its
Subsidiaries taken as a whole, except that (i) a change in the market price of
the Company Common Stock shall not, in and of itself, be deemed a "Material
Adverse Effect" with respect to the Company and (ii) a "Material Adverse Effect"
with respect to the Company shall not include any adverse change, circumstance
or effect as to which the Company sustains the burden of reasonably
demonstrating that any such adverse change, circumstance or effect is primarily
attributable to the transactions contemplated by this Agreement or the pendency
or announcement of the Offer or the Merger (with all parties acknowledging that
postponement, modification or cancellation of product orders by customers of the
Company and employee attrition of the Company are possible results from the
transactions contemplated by this Agreement or the pendency or announcement of
the Offer or the Merger). Parent and Merger Sub may conclude that a Material
Adverse Effect on the Company has occurred only if Parent and Merger Sub make
such determination in good faith after consulting with their own, and the
Company's, respective Chief Financial Officer or Chief Executive Officer,
auditors and other financial advisors.
(i) "ORGANIZATIONAL DOCUMENTS" means, with respect to any entity, the
certificate of incorporation, articles of incorporation, bylaws or other
governing documents of such entity.
(j) "PERSON" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, entity or
group (as defined in the Exchange Act).
(k) "SUBSIDIARY" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated, (i)
of which such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by such
party or any Subsidiary of such party do not have a majority of the voting and
economic interests in such partnership) or (ii) at least a majority of the
securities or other interests of which having by their terms ordinary voting
power to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries.
(l) (i) "TAX" (including, with correlative meaning, the terms "TAXES"
and "TAXABLE") means all federal, state, local and foreign income, profits,
franchise, capital gains, business, gross receipts, environmental, customs duty,
capital stock, severance, stamp, payroll, sales, employment, unemployment,
disability, use, property, withholding, excise, production, value added,
occupancy, surtax, estimated, national health insurance, ad valorem, transfer
and other taxes, duties, levies, tariffs, deficiencies, fees or assessments of
any nature whatsoever, together with all interest, penalties, fines and
additions to tax imposed with respect to such amounts and
43
any interest in respect of such penalties and additions to tax, and (ii) "TAX
RETURN" means all federal, state, local and foreign returns and reports
(including elections, claims, declarations, disclosures, schedules, estimates,
computations, statements, notices, notifications, forms, certificates,
information returns or other documents or information) required to be supplied
to a Tax authority in any jurisdiction relating to the determination,
assessment, collection, payment, administration, implementation, or enforcement
of any Tax.
[signature page follows]
44
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
ZHONE TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ Xxxx Xxxxxx
--------------------------------------------
Name: Xxxx Xxxxxx
------------------------------------------
Title: Chairman and Chief Executive Officer
-----------------------------------------
ZHONE ACQUISITION CORP.,
a Texas corporation
By: /s/ Xxxx Xxxxxx
--------------------------------------------
Name: Xxxx Xxxxxx
------------------------------------------
Title: Chairman and Chief Executive Officer
-----------------------------------------
PREMISYS COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ Xxxxxxxx X. Xxxxxxxx
--------------------------------------------
Name: Xxxxxxxx X. Xxxxxxxx
------------------------------------------
Title: President and Chief Executive Officer
-----------------------------------------
45
ANNEX A
CONDITIONS TO THE OFFER
The Offer shall be conditioned upon at least that number of
shares of Company Common Stock equivalent to 75% of the Fully Diluted Shares of
Company Common Stock on the date such shares are purchased pursuant to the Offer
(subject to reduction as described below, the "MINIMUM SHARES") being validly
tendered and not withdrawn prior to the date which is 20 Business Days following
the commencement of the Offer in accordance with the terms hereof or such later
date as the Offer may be extended by an amendment to this Agreement; provided,
however, that Merger Sub may reduce the Minimum Shares to not less than a
majority of the Fully Diluted Shares of Company Common Stock without the prior
written consent of the Company. Moreover, notwithstanding any other provision of
the Offer, and subject to the terms and conditions of this Agreement, Merger Sub
shall not be obligated to accept for payment any shares of Company Common Stock
until expiration of all applicable waiting periods under the HSR Act, and Merger
Sub shall not be required to accept for payment, purchase or pay for, and may
delay the acceptance for payment of or payment for, any shares of Company Common
Stock tendered in the Offer, or terminate or amend the Offer, if, prior to the
time of acceptance for payment of any such shares of Company Common Stock
(whether or not any other shares of Company Common Stock have theretofore been
accepted for payment or paid for pursuant to the Offer), any of the following
shall occur and remain in effect:
(a) there shall be instituted or pending by any Governmental
Entity any suit, action or proceeding (i) challenging the acquisition by Parent
or Merger Sub of any shares of Company Common Stock pursuant to the Offer,
seeking 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 Company Option Agreement or the Stockholders Agreement or seeking
to obtain from the Company, Parent or Merger Sub any damages that are material
in relation to the Company or Parent, (ii) seeking to prohibit or materially
limit the ownership or operation by the Company or Parent of a material portion
of the business or assets of the Company or Parent, or to compel the Company or
Parent to dispose of or hold separate a material portion of the business or
assets of the Company or Parent, in each case as a result of the Offer or any of
the other transactions contemplated by this Agreement, the Company Option
Agreement or the Stockholders Agreement, (iii) seeking to impose material
limitations on the ability of Parent or Merger Sub to acquire or hold, or
exercise full rights of ownership of, any shares of Company Common Stock to be
accepted for payment pursuant to the Offer including, without limitation, the
right to vote such shares on all matters properly presented to the stockholders
of the Company, (iv) seeking to prohibit Parent or Merger Sub from effectively
controlling in any material respect any material portion of the business or
operations of the Company, (v) that could reasonably be expected to require the
divestiture by Parent or Merger Sub of any shares of Company Common Stock, or
(vi) that could reasonably be expected to result in a Material Adverse Effect on
the Company or Parent;
(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, by any Governmental Entity or court, that would
result in any of the consequences referred to in clauses (i) through (vi) of
paragraph (a) above;
1
(c) there shall have occurred (i) any general suspension of,
or limitation on prices for, trading in securities on Nasdaq, (ii) a declaration
of a banking moratorium or any general suspension of payments in respect of
banks in the United States or (iii) in the case of any of the foregoing existing
at the time of the execution of this Agreement, a material acceleration or
worsening thereof;
(d) there shall have occurred any event or change since the
date of the Interim Balance Sheet that could reasonably be expected to have a
Material Adverse Effect on the Company, other than any event or change
specifically set forth in the Company Disclosure Schedule;
(e) any of the representations and warranties of the Company
set forth in this Agreement shall not be true and correct at the date of this
Agreement and at the scheduled or extended expiration of the Offer, unless the
effect of all such failures to be true and correct could not reasonably be
expected to have a Material Adverse Effect on the Company or a material adverse
effect on the consummation of the Offer or the Merger;
(f) the Company shall have failed to perform any obligation or
to comply with any agreement or covenant of the Company to be performed or
complied with by it under this Agreement or the Company Option Agreement, unless
the effect of all such failures to perform or comply could not reasonably be
expected to have a Material Adverse Effect on the Company or a material adverse
effect on the consummation of the Offer or the Merger;
(g) any Required Regulatory Approval or other third party
consent, authorization or approval which, if not obtained in connection with the
consummation of the transactions contemplated hereby, could reasonably be
expected to have a Material Adverse Effect on the Company, shall not have been
obtained, declared or filed or have occurred, as the case may be, or any such
Required Regulatory Approval or other third party consent, authorization or
approval shall not be in full force and effect;
(h) the Company Board (i) shall have withdrawn, or modified or
changed in a manner adverse to Parent or Merger Sub (including by amendment of
the Schedule 14D-9) its recommendation of the Offer, this Agreement or the
Merger, (ii) shall have recommended a Company Takeover Proposal or Alternative
Transaction, (iii) shall have adopted any resolution to effect any of the
foregoing or (iv) upon the request of Parent or Merger Sub, shall have failed to
reaffirm its approval or recommendation of the Offer, this Agreement or the
Merger within two Business Days;
(i) any Person or "group" (within the meaning of Section
13(d)(3) of the Exchange Act), other than Parent, Merger Sub or their affiliates
or any group of which any of them is a member, shall have acquired or announced
its intention to acquire beneficial ownership (as determined pursuant to Rule
13d-3 promulgated under the Exchange Act) of 10% or more of the Company Common
Stock and, in the good faith judgment of Parent or Merger Sub in its sole
discretion, made it inadvisable to proceed with such acceptance of shares for
payment or the payment therefor; provided that this condition shall not apply
upon satisfaction and maintenance of the Minimum Shares;
2
(j) the Company shall have commenced a case under any chapter
of Title XI of the United States Code or any similar law or regulation; or a
petition under any chapter of Title XI of the United States Code or any similar
law or regulation shall have been filed against the Company which is not
dismissed within two days;
(k) the Stockholders Agreement shall not have been executed by
each of the parties thereto other than Parent and Merger Sub;
(l) a Distribution Date shall have occurred under the Rights
Agreement; or
(m) this Agreement shall have been terminated by Parent or the
Company pursuant to its terms.
The foregoing conditions are for the sole benefit of
Parent and Merger Sub and may be asserted by Parent and Merger Sub regardless of
the circumstances giving rise to any such condition or may be waived by Parent
and Merger Sub in whole or in part at any time and from time to time; provided,
however, that Merger Sub shall not reduce the Minimum Shares below a majority of
the Fully Diluted Shares of Company Common Stock without the prior written
consent of the Company. The failure by Parent or Merger Sub at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances, and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
3
ANNEX B
ARTICLES OF INCORPORATION
OF
ZHONE ACQUISITION CORP.
I, the undersigned, a natural person of the age of eighteen years or more,
acting as the incorporator of a corporation (the "Company"), under the Texas
Business Corporation Act (the "Act"), do hereby adopt the following Articles of
Incorporation (the "Articles") for the Company:
ARTICLE ONE
The name of the Company is Zhone Acquisition Corp.
ARTICLE TWO
The period of duration of the Company is perpetual.
ARTICLE THREE
The purpose for which the Company is organized is to engage in the
transaction of any and all lawful business for which a corporation may be
incorporated under the Act.
ARTICLE FOUR
The aggregate number of shares of capital stock which the Company has
authority to issue is 1,000, par value $0.01 per share, designated Common Stock.
Each share of such Common Stock will have identical rights and privileges in
every respect.
ARTICLE FIVE
No holder of any shares of capital stock of the Company, whether now or
hereafter authorized may, as such holder, have any preemptive or preferential
right to receive, purchase, or subscribe to (a) any unissued or treasury
shares of any class of stock (whether now or hereafter authorized) of the
Company, (b) any obligations, evidences of indebtedness, or other securities
of the Company convertible into or exchangeable for, or carrying or
accompanied by any rights to receive, purchase, or subscribe to, any such
unissued or treasury shares, (c) any right of subscription to or to receive,
or any warrant or option for the purchase of, any of the foregoing
securities, or (d) any other securities that may be issued or sold by the
Company.
ARTICLE SIX
The Company will not commence business until it has received for the
issuance of its shares consideration equal to or exceeding the value of
$1,000, consisting of money, labor done or property actually received.
1
ARTICLE SEVEN
Cumulative voting for the election of directors is expressly denied and
prohibited.
ARTICLE EIGHT
Any action of the Company which, under the provisions of the Act or any
other applicable law, is required to be authorized or approved by the holders
of any specified fraction which is in excess of one-half or any specified
percentage which is in excess of fifty percent of the outstanding shares (or
of any class or series thereof) of the Company will, notwithstanding any law,
be deemed effectively and properly authorized or approved if authorized or
approved by the vote of the holders of more than fifty percent of the
outstanding shares entitled to vote on that matter (or, if the holders of any
class or series of the Company's shares are entitled by the Act or any other
applicable law to vote on that matter separately as a class, by the vote of
the holders of more than fifty percent of the outstanding shares of each such
class or series). Without limiting the generality of the foregoing, the
provisions of this Article Eight will be applicable to any required
shareholder authorization or approval of: (a) any amendment to these
Articles; (b) any plan of merger, share exchange, or reorganization
involving the Company; (c) any transfer of all, or substantially all, the
property and assets of the Company; and (d) any voluntary dissolution of the
Company.
Nothing contained in this Article Eight is intended to require shareholder
authorization or approval of any action of the Company whatsoever unless such
approval is specifically required by the other provisions of these Articles, the
Company's Bylaws or by the Act or other applicable law.
ARTICLE NINE
The street address of the initial registered office of the Company is 000
Xxxx 00xx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000 and the name of its initial
Registered Agent at such address is Lawyer's Aid Service, Inc.
ARTICLE TEN
The number of directors constituting the initial Board of Directors is
three and the names and addresses of the persons who are to serve as directors
until the first annual meeting of shareholders or until their earlier
resignation or removal and until their successor or successors shall have been
duly elected and qualified are as follows:
Name Address
Xxxx Xxxxxx 0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Xxxxxxxx Xxxxxx 0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
2
Xxxxxx Xxxx 0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
ARTICLE ELEVEN
The name and address of the Incorporator are as follows:
NAME ADDRESS
Xxxxx X. Xxxxxxxx 000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, XX 00000
ARTICLE TWELVE
To the fullest extent permitted by applicable law, a director of the
Company will not be liable to the Company or its shareholders for an act or
omission in the director's capacity as a director. A director will not be
liable to the Company or its shareholders to such extent as permitted by any law
hereafter enacted, including, without limitation any subsequent amendment to
the Texas Miscellaneous Corporation Laws Act or the Act. This Article Twelve
does not eliminate or limit the liability of a director to the extent that
applicable law prohibits elimination or limitation of liability.
Any repeal or amendment of this Article Twelve by the Company's
shareholders will be prospective only and may not adversely affect any
limitation on the personal liability or alleged liability of a director arising
from an act or omission of such director occurring prior to the time of such
repeal or amendment.
ARTICLE THIRTEEN
Any action which may be taken, or which is required by law, the
Articles, or Bylaws to be taken, at any annual or special meeting of
shareholders may be taken without a meeting, without prior notice, and
without a vote, of a consent in writing, setting for the action so taken, is
signed by the holder or holders of shares having not less than the minimum
number of votes that would be necessary to take such action at a meeting at
which the holders of all shares entitled to vote on the action were present
and voted.
THE UNDERSIGNED INCORPORATOR, for the purposes of forming the Company,
does make and file these Articles of Incorporation, hereby declaring and
certifying that the facts stated here are true and accordingly has set his
hand on October 19, 1999.
/s/ Xxxxx X. Xxxxxxxx
---------------------------------
Xxxxx X. Xxxxxxxx
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