AGREEMENT OF MERGER
Dated as of March 11, 1996
Among
TELLABS, INC.,
TIGER MERGER CO.,
and
XXXXXXXXXXXX CORPORATION
TABLE OF CONTENTS
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . .2
1.1. Definitions . . . . . . . . . . . . . . . . . . .2
ARTICLE II THE MERGER. . . . . . . . . . . . . . . . . . . 10
2.1. Surviving Corporation . . . . . . . . . . . . . 10
2.2. Effects of the Merger . . . . . . . . . . . . . 11
2.3. Certificate of Incorporation, By-Laws,
Directors and Officers. . . . . . . . . . . . . 11
ARTICLE III CONVERSION OF SHARES; DETERMINATION OF
PURCHASE PRICE. . . . . . . . . . . . . . . . . 11
3.1. Conversion Terms. . . . . . . . . . . . . . . . 11
3.2. Dissenting Shares . . . . . . . . . . . . . . . 14
3.3. Exchange of and Payment for Shares, Options
and Warrants. . . . . . . . . . . . . . . . . . 15
3.4. Lost Certificates and Agreements. . . . . . . . 16
3.5. Unclaimed Funds . . . . . . . . . . . . . . . . 16
3.6. Withholding Rights. . . . . . . . . . . . . . . 17
3.7. Indemnity Escrow Agreement. . . . . . . . . . . 17
3.8. Further Assurances. . . . . . . . . . . . . . . 18
ARTICLE IV CLOSING . . . . . . . . . . . . . . . . . . . . 18
4.1. Closing Date. . . . . . . . . . . . . . . . . . 18
4.2. Filing Certificate of Merger and
Effectiveness . . . . . . . . . . . . . . . . . 18
4.3. Parent's Additional Deliveries. . . . . . . . . 19
4.4. Mergerco's Deliveries . . . . . . . . . . . . . 19
4.5. The Company's Deliveries. . . . . . . . . . . . 20
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE
COMPANY . . . . . . . . . . . . . . . . . . . . 21
5.1. Organization and Capital Structure. . . . . . . 21
5.2. Subsidiaries and Investments. . . . . . . . . . 23
5.3. Authority . . . . . . . . . . . . . . . . . . . 24
5.4. Financial Statements. . . . . . . . . . . . . . 25
5.5. Operations Since Balance Sheet Date . . . . . . 25
5.6. No Undisclosed Liabilities. . . . . . . . . . . 28
5.7. Taxes . . . . . . . . . . . . . . . . . . . . . 28
5.8. Availability of Assets and Legality of Use. . . 30
5.9. Governmental Permits. . . . . . . . . . . . . . 30
5.10. Real Property . . . . . . . . . . . . . . . . . 31
5.11. Real Property Leases. . . . . . . . . . . . . . 31
5.12. Condemnation. . . . . . . . . . . . . . . . . . 31
5.13. Personal Property . . . . . . . . . . . . . . . 31
5.14. Personal Property Leases. . . . . . . . . . . . 31
5.15. Intellectual Property; Software . . . . . . . . 32
5.16. Accounts Receivable; Inventories. . . . . . . . 35
5.17. Title to Property . . . . . . . . . . . . . . . 36
5.18. Employee Benefit Plans. . . . . . . . . . . . . 36
5.19. Employee Relations. . . . . . . . . . . . . . . 41
5.20. Contracts; Product Warranties . . . . . . . . . 41
5.21. Status of Contracts . . . . . . . . . . . . . . 43
5.22. No Violation, Litigation or Regulatory
Action. . . . . . . . . . . . . . . . . . . . . 43
5.23. Environmental Matters . . . . . . . . . . . . . 44
5.24. Insurance . . . . . . . . . . . . . . . . . . . 46
5.25. Customers and Suppliers . . . . . . . . . . . . 47
5.26. Budgets . . . . . . . . . . . . . . . . . . . . 47
5.27. No Finder . . . . . . . . . . . . . . . . . . . 47
5.28. Financial Projections . . . . . . . . . . . . . 47
5.29. Proxy Statement . . . . . . . . . . . . . . . . 47
5.30. Opinion of Financial Advisor. . . . . . . . . . 48
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGERCO. . . . . . . . . . . . . . . . . . 48
6.1. Organization and Capital Structure. . . . . . . 48
6.2. Authority . . . . . . . . . . . . . . . . . . . 48
6.3. No Finder . . . . . . . . . . . . . . . . . . . 50
6.4. No Litigation or Regulatory Action. . . . . . . 50
6.5. Investment Representation . . . . . . . . . . . 50
ARTICLE VII ACTION PRIOR TO THE EFFECTIVE TIME. . . . . . . 50
7.1. Investigation of the Company by Parent. . . . . 50
7.2. Preserve Accuracy of Representations and
Warranties. . . . . . . . . . . . . . . . . . . 51
7.3. Consents of Third Parties; Governmental
Approvals . . . . . . . . . . . . . . . . . . . 51
7.4. Conduct of Business Prior to the Effective
Time. . . . . . . . . . . . . . . . . . . . . . 52
7.5. Notification by the Company of Certain
Matters . . . . . . . . . . . . . . . . . . . . 55
7.6. Mutual Cooperation; Reasonable Best Efforts . . 55
7.7. No Solicitation . . . . . . . . . . . . . . . . 55
7.8. Subsequent Financial Statements . . . . . . . . 56
7.9. Antitrust Law Compliance. . . . . . . . . . . . 57
ARTICLE VIII ADDITIONAL AGREEMENTS . . . . . . . . . . . . . 57
8.1. Preparation of Proxy Statement; Action
by Company. . . . . . . . . . . . . . . . . . . 57
8.2. Restricted Parent Common Stock Pool . . . . . . 58
8.3. Indemnification and Insurance . . . . . . . . . 58
ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS OF
PARENT AND MERGERCO . . . . . . . . . . . . . . 59
9.1. No Misrepresentation or Breach of Covenants
and Warranties. . . . . . . . . . . . . . . . . 59
9.2. No Changes or Destruction of Property . . . . . 59
9.3. No Restraint or Litigation. . . . . . . . . . . 60
9.4. Necessary Governmental Approvals. . . . . . . . 60
9.5. Necessary Consents. . . . . . . . . . . . . . . 60
9.6. Stockholders' Approval; Dissenters' Rights. . . 60
9.7. Indebtedness. . . . . . . . . . . . . . . . . . 61
9.8. Warrants. . . . . . . . . . . . . . . . . . . . 61
9.9. FIRPTA Certificate. . . . . . . . . . . . . . . 61
9.10. Fairness Opinion. . . . . . . . . . . . . . . . 61
ARTICLE X CONDITIONS PRECEDENT TO OBLIGATIONS OF
THE COMPANY . . . . . . . . . . . . . . . . . . 62
10.1. No Misrepresentation or Breach of Covenants
and Warranties. . . . . . . . . . . . . . . . . 62
10.2. No Restraint or Litigation. . . . . . . . . . . 62
10.3. Necessary Governmental Approvals. . . . . . . . 62
ARTICLE XI INDEMNIFICATION . . . . . . . . . . . . . . . . 62
11.1. Indemnity Fund. . . . . . . . . . . . . . . . . 62
11.2. Indemnification from Indemnity Fund . . . . . . 63
11.3. Termination of Indemnity Fund . . . . . . . . . 64
11.4. Notice and Determination of Claims. . . . . . . 64
11.5. Stockholder Representatives . . . . . . . . . . 66
11.6. Actions of the Stockholder Representatives. . . 67
11.7. Third Person Claims . . . . . . . . . . . . . . 67
ARTICLE XII TERMINATION . . . . . . . . . . . . . . . . . . 68
12.1. Termination Rights. . . . . . . . . . . . . . . 68
12.2. Notice of Termination . . . . . . . . . . . . . 69
12.3. Effect of Termination . . . . . . . . . . . . . 69
ARTICLE XIII GENERAL PROVISIONS. . . . . . . . . . . . . . . 69
13.1. Survival of Obligations . . . . . . . . . . . . 69
13.2. Confidential Nature of Information;
Non-Solicitation. . . . . . . . . . . . . . . 69
13.3. No Public Announcement. . . . . . . . . . . . . 70
13.4. Notices . . . . . . . . . . . . . . . . . . . . 70
13.5. Successors and Assigns. . . . . . . . . . . . . 71
13.6. Entire Agreement; Amendments. . . . . . . . . . 72
13.7. Interpretation. . . . . . . . . . . . . . . . . 72
13.8. Waivers . . . . . . . . . . . . . . . . . . . . 72
13.9. Fees and Expenses . . . . . . . . . . . . . . . 73
13.10. Partial Invalidity. . . . . . . . . . . . . . . 74
13.11. Execution in Counterparts . . . . . . . . . . . 74
13.12. Further Assurances. . . . . . . . . . . . . . . 75
13.13. Governing Law . . . . . . . . . . . . . . . . . 75
AGREEMENT OF MERGER
AGREEMENT OF MERGER, dated as of March 11, 1996 (this
"Agreement"), among Tellabs, Inc., a Delaware corporation
("Parent"), Tiger Merger Co., a Delaware corporation indirectly
wholly-owned by Parent ("Mergerco"), and Xxxxxxxxxxxx
Corporation, a Delaware corporation (the "Company"), (Mergerco
and the Company being hereinafter sometimes referred to as the
"Constituent Corporations").
W I T N E S S E T H:
WHEREAS, Mergerco is a Delaware corporation having an
authorized capital of 1,000 shares of common stock, par value
$.01 per share ("Mergerco Common Stock"), all of which are issued
and outstanding and owned of record and beneficially by Tellabs
Operations, Inc., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Operations"); and
WHEREAS, the Company is a Delaware corporation having
(i) an authorized capital of 25,000,000 shares of common stock,
par value $.01 per share (the "Company Common Stock"), of which,
as of the date hereof, 1,530,679 shares are issued and
outstanding; (ii) 1,000,000 shares of special preferred stock,
$.01 par value per share (the "Special Preferred Stock"), none of
which are issued and outstanding; and (iii) 10,411,429 shares of
convertible preferred stock, $1.00 par value per share (the
"Company Preferred Stock"), of which, as of the date hereof,
9,147,548 shares are issued and outstanding; and
WHEREAS the Company also has outstanding certain
Warrants and Stock Options (as defined below); and
WHEREAS, the Company is engaged in the business of
developing, manufacturing and selling wideband wireless
communication systems; and
WHEREAS, the respective Boards of Directors of Parent
and the Constituent Corporations have approved the merger (the
"Merger") of Mergerco into the Company pursuant to the terms and
conditions of this Agreement, Operations has approved the Merger
and adopted this Agreement as the sole stockholder of Mergerco,
and the Board of Directors of the Company has directed that this
Agreement be submitted to its stockholders for adoption; and
WHEREAS, Parent, Mergerco and the Company desire to
make certain representations, warranties and agreements in
connection with the Merger and to prescribe various conditions to
the Merger.
NOW, THEREFORE, in consideration of the mutual cove-
nants and agreements hereinafter set forth, it is hereby agreed
among the parties as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. In this Agreement, the following
terms have the meanings specified or referred to in this Sec-
tion 1.1 and shall be equally applicable to both the singular and
plural forms and reference to the neuter gender includes the
masculine and feminine where appropriate. Any agreement referred
to below shall mean such agreement as amended, supplemented and
modified from time to time to the extent permitted by the
applicable provisions thereof and by this Agreement.
"Accruing Dividends" has the meaning specified in
paragraph 3 of Article FOURTH of the Company's Certificate of
Incorporation as in effect on the date hereof.
"Acquisition Expenses" has the meaning specified in
Section 13.9(a).
"Acquisition Proposal" shall have the meaning specified
in Section 7.7.
"Affiliate" means, with respect to any Person, any
other Person which directly or indirectly controls, is controlled
by or is under common control with such Person.
"Agreement" shall have the meaning specified in the
first paragraph of this Agreement of Merger.
"Aggregate Merger Consideration" has the meaning
specified in Section 3.1(k).
"Associate" has the meaning specified in Section
5.18(j).
"Audited Financial Statements" has the meaning
specified in Section 5.4.
"Balance Sheet" means the audited balance sheet of the
Company as of December 31, 1995 included in Schedule 5.4.
"Balance Sheet Date" means December 31, 1995.
"Cash Flow Projection" means the cash flow projection
from the Company's calendar year 1996 Business Plan, as amended
on January 31, 1996, a copy of which is attached as Schedule I to
the Parent Loan Agreement.
"CERCLA" means the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Subsection 9601 et
seq., any amendments thereto, any successor statutes, and any
regulations promulgated thereunder.
"Claim Notice" has the meaning specified in
Section 11.4(a).
"Closing" means the closing of the Merger of Mergerco
with and into the Company in accordance with Article IV.
"Closing Date" has the meaning specified in
Section 4.1.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Common Stock Premium" means, with respect to any date,
5% of $2.02, compounded annually, calculated from August 5, 1987
up to and including such date.
"Company" has the meaning specified in the first
paragraph of this Agreement.
"Company Agreements" has the meaning specified in
Section 5.21.
"Company Ancillary Agreements" means the Certificate of
Merger identified in Section 4.2 and all certificates to be
executed and delivered by or on behalf of the Company under this
Agreement.
"Company Common Stock" has the meaning specified in the
second WHEREAS clause of this Agreement.
"Company Group" means any "affiliated group" (as
defined in Section 1504(a) of the Code without regard to the
limitations contained in Section 1504(b) of the Code) that files
or has filed a consolidated federal income Tax Return and that,
at any time on or before the Effective Time, includes or has
included the Company or any predecessor of or successor to the
Company (or another such predecessor or successor), or any other
group of corporations which, at any time on or before the
Effective Date, files or has filed Tax Returns on a combined,
consolidated or unitary basis with the Company or any predecessor
of or successor to the Company (or another such predecessor or
successor).
"Company Preferred Stock" has the meaning specified in
the second WHEREAS clause of this Agreement.
"Company Property" means any real or personal property,
plant, building, facility, structure, underground storage tank,
equipment or unit, or other asset owned, leased or operated by
the Company (including any surface water thereon or adjacent
thereto and any soil or ground water thereunder), whether
currently or at any previous time.
"Confidentiality Agreement" means that certain Non-Disclosure
Agreement dated January 30, 1996, between Parent and the Company.
"Constituent Corporations" has the meaning specified in
the first paragraph of this Agreement.
"Contaminant" means any waste, pollutant, hazardous or
toxic substance or waste, petroleum, petroleum-based substance or
waste, special waste, or any constituent of any such substance or
waste.
"Court Order" means any judgment, order, award or
decree of any foreign, federal, state, local or other court or
tribunal and any award in any arbitration proceeding.
"DGCL" means the Delaware General Corporation Law, as
amended.
"Dissenting Consideration" has the meaning specified in
Section 3.2.
"Dissenting Shares" has the meaning specified in
Section 3.2
"Effective Date" and "Effective Time" have the
respective meanings specified in Section 4.2.
"Encumbrance" means any lien, claim, charge, security
interest, mortgage, pledge, easement, conditional sale or other
title retention agreement, defect in title, covenant or other
restriction of any kind.
"Environmental Encumbrance" means an Encumbrance in
favor of any Governmental Body for (i) any liability under any
Environmental Law, or (ii) damages arising from, or costs
incurred by such Governmental Body in response to, a Release or
threatened Release of a Contaminant into the environment.
"Environmental Law" means all Requirements of Laws
derived from or relating to all federal, state and local laws or
regulations relating to or addressing the environment, health or
safety, including but not limited to CERCLA, OSHA and RCRA and
any state equivalent thereof.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, including any
regulations promulgated thereunder.
"Expense" means any and all expenses incurred in
connection with investigating, defending or asserting any claim,
action, suit or proceeding incident to any matter indemnified
against hereunder (including, without limitation, court filing
fees, court costs, arbitration fees or costs, witness fees and
reasonable fees and disbursements of legal counsel,
investigators, expert witnesses, consultants, accountants and
other professionals).
"Extra Per Share Payment" has the meaning specified in
Section 3.1(j).
"Governmental Body" means any foreign, federal, state,
local or other governmental authority or regulatory body.
"Governmental Permits" has the meaning specified in
Section 5.9.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
"Indemnity Agent" has the meaning specified in Section
11.1.
"Indemnity Agreement" has the meaning specified in
Section 11.1.
"Indemnity Amount" has the meaning specified in Section
3.7.
"Indemnity Fund" has the meaning specified in Section
3.7.
"IRS" means the Internal Revenue Service.
"Leased Real Property" has the meaning specified in
Section 5.11.
"Loss" means any and all losses, costs, obligations,
liabilities, settlement payments, awards, judgments, fines,
penalties, damages, expenses, deficiencies or other charges.
"Material Adverse Change" or "Material Adverse Effect"
means any change or effect (or any development that, insofar as
can be reasonably foreseen, would result in any change or effect)
that is materially adverse to the assets, business, financial
condition or results of operations of the applicable Person or
Persons.
"MCRC Warrant" has the meaning specified in the
definition of "Warrants" below.
"Merger" has the meaning in the fifth WHEREAS clause of
this Agreement.
"Mergerco" has the meaning specified in the first
paragraph of this Agreement.
"Mergerco Common Stock" has the meaning specified in
the first WHEREAS clause of this Agreement.
"1988 Stock Plan" means the 1988 Incentive Stock Option
Plan adopted by the Board of Directors of the Company on October
19, 1988, as amended on August 17, 1990, July 19, 1991, February
1, 1993 and November 30, 1993.
"1994 Stock Plan" means the 1994 Stock Option/Stock
Issuance Plan adopted by the Board of Directors of the Company on
April 12, 1994, as amended on September 16, 1994.
"Option Consideration" has the meaning specified in
Section 3.1(h).
"OSHA" means the Occupational Safety and Health Act, 29
U.S.C. Subsection 651 et seq., any amendment thereto, any successor
statute, and any regulations promulgated thereunder.
"Parent" has the meaning specified in the first para-
graph of this Agreement.
"Parent Ancillary Agreements" means the Indemnity
Agreement and all certificates to be executed and delivered by or
on behalf of Parent under this Agreement.
"Parent Group Member" means Parent and its Affiliates
and their respective successors and assigns, including, after the
Effective Time, the Surviving Corporation.
"Parent Loan Agreement" means that certain Loan
Agreement, dated as of February 26, 1996, between Parent as
Lender and the Company as Borrower.
"Paying Agent" has the meaning specified in Section
3.3(a).
"Paying Agency Agreement" has the meaning specified in
Section 3.3(a).
"Per Common Share Price" has the meaning specified in
Section 3.1(c).
"Per Preferred Share Price" means the amount into which
any share of Company Preferred Stock is convertible pursuant to
Sections 3.1(d), 3.1(e), 3.1(f) or 3.1(g).
"Permitted Encumbrances" means (i) liens for Taxes not
yet due or liens for Taxes being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto
are reflected on the Balance Sheet of the Company in accordance
with generally accepted accounting principles;
(ii) liens on property or assets of the Company, such
as carriers', warehousemen's, landlord's and mechanics' liens and
other similar liens, in each case, arising in the ordinary course
of business and that do not in the aggregate materially detract
from the value of the property or assets subject thereto or
materially impair the use thereof in the operation of the
business of the Company;
(iii) pledges or deposits incurred or made in
connection with workmen's compensation, unemployment insurance
and other social security benefits, or securing the performance
of bids, tenders, leases, contracts (other than for the repayment
of borrowed money), statutory obligations, progress payments,
surety and appeal bonds and other obligations of like nature, in
each case incurred in the ordinary course of business, not
involving in excess of $100,000 in the aggregate;
(iv) liens under Article 2 of the Uniform Commercial
Code that are special property interests in goods identified as
goods to which a contract refers;
(v) liens under Article 9 of the Uniform Commercial
Code that are purchase money security interests attaching to the
assets acquired in connection therewith;
(vi) existing liens described on Schedule 5.17 and
existing liens securing lease obligations which involve the
payment by the Company of less than $10,000 per year; and
(vii) liens in favor of Parent.
"Person" means any individual, corporation, partner-
ship, limited liability company, joint venture, association,
joint-stock company, trust, unincorporated organization or
Governmental Body.
"Proxy Statement" has the meaning specified in Section
5.29.
"RCRA" means the Resource Conservation and Recovery
Act, 42 U.S.C. Subsection 6901 et seq., and any successor statute, and
any regulations promulgated thereunder.
"Release" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration of a Contaminant into the indoor or outdoor
environment or into or out of any Company Property, including the
movement of Contaminants through or in the air, soil, surface
water or groundwater of any Company Property.
"Remedial Action" means actions required to (i) clean
up, remove, treat or in any other way address Contaminants in the
indoor or outdoor environment; (ii) prevent the Release or
threatened Release or minimize the further Release of
Contaminants or (iii) investigate and determine if a remedial
response is needed and to design such a response and post-remedial
investigation, monitoring, operation and maintenance and care.
"Requirements of Laws" means any foreign, federal,
state and local laws, statutes, regulations, rules, codes or
ordinances enacted, adopted, issued or promulgated by any
Governmental Body (including, without limitation, those
pertaining to electrical, building, zoning, environmental and
occupational safety and health requirements) or common law.
"Securities" means, collectively, shares of Company
Common Stock and Company Preferred Stock, Stock Options and
Warrants.
"Series A Preferred Stock," "Series B Preferred Stock,"
"Series C Preferred Stock" and "Series D Preferred Stock" each
has the meaning set forth in Section 5.1(b).
"Software" has the meaning specified in Section
5.15(b).
"Special Preferred Stock" has the meaning specified in
the second WHEREAS clause of this Agreement.
"Stock Agreements" has the meaning specified in Section
3.3(b).
"Stock Certificates" has the meaning specified in
Section 3.3(b).
"Stock Options" means the option agreements granted
under the Company's 1988 Stock Plan or 1994 Stock Plan for the
purchase of shares of Company Common Stock.
"Stockholder Representatives" means two Persons (and an
alternate Person, to serve in the event either of them is unable
or unwilling to act) designated in writing by the Company to
Parent prior to the delivery of the Proxy Statement pursuant to
Section 8.1, or if such Person is unable or unwilling to act,
then the Person appointed by a written instrument or instruments
delivered to Parent and signed by the holders of Securities
(other than shares of Series D Preferred Stock and Dissenting
Shares) who would be entitled to receive a majority of the
Aggregate Merger Consideration at the Effective Time pursuant to
Section 3.1.
"Stockholders' Meeting" has the meaning specified in
Section 5.29.
"Subordinated Note" means that certain 8 1/2% Subordinated
Note, in the aggregate principal amount of $1,000,000, dated
March 5, 1993, issued to Massachusetts Capital Resource Company.
"Subsidiary" means, for any Person, any corporation,
partnership, joint venture or other entity of which the Person
(i) owns, directly or indirectly, 50% or more of the outstanding
voting securities or equity interests, or (ii) is a general
partner.
"Surviving Corporation" has the meaning specified in
Section 2.1.
"Surviving Corporation Common Stock" has the meaning
specified in Section 3.1(a).
"Tax" (and with correlative meaning "Taxes", "Taxing"
and "Taxable") means: (i) any federal, state, local or foreign
net income, alternative or add-on minimum, gross income, gross
receipts, property, ad valorem, value added, sales, use,
transfer, gains, license, franchise, severance, excise,
employment, payroll, environmental, windfall profit, withholding,
stamp or any other tax, custom, duty, governmental fee or other
like assessment or charge of any kind whatsoever, together with
any interest or any penalty, addition to tax or additional amount
imposed by any Governmental Body; and (ii) any liability of the
Company for the payment of amounts with respect to payments of a
type described in clause (i) of this definition as a result of
being a member of an affiliated, consolidated, combined or
unitary group, or as a result of any obligation of the Company
under any Tax Sharing Arrangement or Tax indemnity arrangement.
"Tax Return" means any return, report or similar
statement required to be filed with any Taxing authority with
respect to any Taxes (including any attached schedules),
including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
"Tax Sharing Arrangement" means any written or
unwritten agreement or arrangement for the allocation or payment
of Tax liabilities or payment for Tax benefits with respect to a
consolidated, combined or unitary Tax Return which Tax Return
includes or included the Company (or predecessors or successors
of the Company).
"Unaudited Financial Statements" has the meaning
specified in Section 5.4.
"Warrant Consideration" has the meaning specified in
Section 3.1(i).
"Warrants" means (i) that certain Common Stock Purchase
Warrant, dated March 5, 1993 (the "MCRC Warrant"), to acquire
238,095 shares of Company Common Stock issued to Massachusetts
Capital Resource Company pursuant to a certain Subordinated Note
and Warrant Purchase Agreement, dated as of March 5, 1993,
between the Company and Massachusetts Capital Resource Company,
and (ii) that certain Stock Purchase Warrant to purchase 20,000
shares of Company Common Stock issued to Financing for Science
International, Inc.
ARTICLE II
THE MERGER
2.1. Surviving Corporation. Upon the terms and subject
to the conditions contained herein and in accordance with the
provisions of this Agreement and the DGCL, at the Effective Time,
Mergerco shall be merged with and into the Company, which, as the
corporation surviving in the Merger (the "Surviving
Corporation"), shall continue to exist under and be governed by
the laws of the State of Delaware. Upon the effectiveness of the
Merger, the separate existence of Mergerco shall cease except to
the extent provided by the DGCL and the Surviving Corporation
shall succeed to and assume all the rights and obligations of
Mergerco in accordance with the DGCL.
2.2. Effects of the Merger. The Merger shall have the
effects set forth in Sections 259 through 261 of the DGCL.
2.3. Certificate of Incorporation, By-Laws, Directors
and Officers. At the Effective Time, the Certificate of
Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be amended so that Article FOURTH
thereof reads in its entirety as follows: "The authorized
capital stock of the Corporation shall be 1,000 shares of Common
Stock, $0.01 par value". As so amended, such Certificate of
Incorporation shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law. The By-Laws of the
Company, as in effect immediately prior to the Effective Time,
shall continue in full force and effect as the By-Laws of the
Surviving Corporation. The directors of Mergerco immediately
prior to the Effective Time shall be the initial directors of the
Surviving Corporation until their resignation or removal or until
their respective successors are duly elected and qualified. The
statutory officers of the Company immediately prior to the
Effective Time shall be the initial statutory officers of the
Surviving Corporation until their resignation or removal or until
their respective successors are duly elected and qualified.
ARTICLE III
CONVERSION OF SHARES; DETERMINATION OF PURCHASE PRICE
3.1. Conversion Terms. As of the Effective Time, by
virtue of the Merger and without any action on the part of any
stockholder of the Company or Mergerco:
(a) Mergerco Common Stock. Each share of Mergerco
Common Stock issued and outstanding immediately prior to the
Effective Time shall be converted into and become one fully
paid and nonassessable share of common stock, par value $.01
per share, of the Surviving Corporation ("Surviving
Corporation Common Stock"). From and after the Effective
Time, each outstanding certificate theretofore representing
shares of Mergerco Common Stock shall be deemed for all
purposes to evidence ownership of, and to represent the
number of shares of, Surviving Corporation Common Stock into
which such shares of Mergerco Common Stock shall have been
converted.
(b) Treasury Stock. All shares of Company Common
Stock and Company Preferred Stock that immediately prior to
the Effective Time are held in the treasury of the Company
shall be canceled and retired and no cash or other
consideration shall be paid or delivered in exchange
therefor and the Merger will effect no conversion thereof.
(c) Company Common Stock. Subject to the provisions
of Section 3.7 and Article XI, each share of Company Common
Stock issued and outstanding immediately prior to the
Effective Time, including any shares of Company Common Stock
issued after the date of this Agreement upon the exercise of
existing Stock Options or Warrants, or the conversion of
existing shares of Company Preferred Stock in accordance
with their respective terms (other than shares to be
canceled pursuant to Section 3.1(b)), shall be converted
into and become the right to receive, without interest,
$2.02 plus the accrued and unpaid Common Stock Premium up to
and including the Effective Date and plus (to the extent
provided in Section 3.1(j)) the Extra Per Share Payment
(such aggregate amount being hereinafter referred to as the
"Per Common Share Price"). All such shares of Company
Common Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired;
and each holder of a certificate representing any such
Company Common Stock shall cease to have any rights with
respect thereto, except the right to receive the Per Common
Share Price for each share of Company Common Stock.
(d) Series A Preferred Stock. Subject to the
provisions of Section 3.7 and Article XI, each share of
Series A Preferred Stock issued and outstanding immediately
prior to the Effective Time (other than shares to be
canceled pursuant to Section 3.1(b)) shall be converted into
and become the right to receive, without interest, $4.20
plus the unpaid Accruing Dividends with respect thereto
(whether or not declared) and plus (to the extent provided
in Section 3.1(j)) the Extra Per Share Payment times 4.20
divided by 1.26. All such shares of Series A Preferred
Stock, when so converted, shall no longer be outstanding and
shall automatically be canceled and retired; and each holder
of a certificate representing any such Series A Preferred
Stock shall cease to have any rights with respect thereto,
except the right to receive the Per Preferred Share Price
specified in the foregoing sentence for each share of Series
A Preferred Stock.
(e) Series B Preferred Stock. Subject to the
provisions of Section 3.7 and Article XI, each share of
Series B Preferred Stock issued and outstanding immediately
prior to the Effective Time (other than shares to be
canceled pursuant to Section 3.1(b)) shall be converted into
and become the right to receive, without interest, $2.02
plus the unpaid Accruing Dividends with respect thereto
(whether or not declared) and plus (to the extent provided
in Section 3.1(j)) the Extra Per Share Payment times 2.02
divided by 1.26. All such shares of Series B Preferred
Stock, when so converted, shall no longer be outstanding and
shall automatically be canceled and retired; and each holder
of a certificate representing any such Series B Preferred
Stock shall cease to have any rights with respect thereto,
except the right to receive the Per Preferred Share Price
specified in the foregoing sentence for each share of Series
B Preferred Stock.
(f) Series C Preferred Stock. Subject to the
provisions of Section 3.7 and Article XI, each share of
Series C Preferred Stock issued and outstanding immediately
prior to the Effective Time (other than shares to be
canceled pursuant to Section 3.1(b)) shall be converted into
and become the right to receive, without interest, $2.10
plus the unpaid Accruing Dividends with respect thereto
(whether or not declared) and plus (to the extent provided
in Section 3.1(j)) the Extra Per Share Payment. All such
shares of Series C Preferred Stock, when so converted, shall
no longer be outstanding and shall automatically be canceled
and retired; and each holder of a certificate representing
any such Series C Preferred Stock shall cease to have any
rights with respect thereto, except the right to receive the
Per Preferred Share Price specified in the foregoing
sentence for each share of Series C Preferred Stock.
(g) Series D Preferred Stock. Each share of Series D
Preferred Stock issued and outstanding immediately prior to
the Effective Time (other than shares to be canceled
pursuant to Section 3.1(b)) shall be converted into and
become the right to receive, without interest, $8.00. All
such shares of Series D Preferred Stock, when so converted,
shall no longer be outstanding and shall automatically be
canceled and retired; and each holder of a certificate
representing any such Series D Preferred Stock shall cease
to have any rights with respect thereto, except the right to
receive the Per Preferred Share Price specified in the
foregoing sentence for each share of Series D Preferred
Stock.
(h) Stock Options. Subject to Section 3.7 and Article
XI, each unexpired Stock Option outstanding immediately
prior to the Effective Time shall, effective as of the
Effective Time, be converted into the right to receive,
without interest, for each share of Company Common Stock
subject thereto, the Per Common Share Price less the per
share exercise price of such Stock Option (in each case, the
"Option Consideration"), as and when received by the holders
of the shares of Company Common Stock.
(i) Warrants. Subject to Section 3.7 and Article XI,
each unexpired Warrant outstanding immediately prior to the
Effective Time shall, effective as of the Effective Time, be
converted into the right to receive, without interest, for
each share of Company Common Stock subject thereto, the Per
Common Share Price less the per share exercise price of such
Warrant (but not less than $0) (in each case, the "Warrant
Consideration"), as and when received by the holders of the
Company Common Stock.
(j) Extra Per Share Payment. The "Extra Per Share
Payment" shall be an amount equal to the Aggregate Merger
Consideration minus all amounts payable under Sections
3.1(c) - (i) (excluding any portion thereof attributable to
the Extra Per Share Payments) divided by the number of all
of the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time (assuming the
exercise of the MCRC Warrants and all Stock Options
outstanding immediately prior to the Effective Time and the
conversion of all shares of Series of A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock
outstanding immediately prior to the Effective Time for
shares of Company Common Stock).
(k) Total Consideration. Notwithstanding anything in
this Agreement to the contrary, in no event shall the
aggregate merger consideration payable by Parent, Mergerco
or the Surviving Corporation to holders of Securities in
connection with the Merger exceed $76,000,000 (the
"Aggregate Merger Consideration").
3.2. Dissenting Shares. Notwithstanding anything in
this Agreement to the contrary, shares of Company Common Stock
and Company Preferred Stock issued and outstanding immediately
prior to the Effective Time which are held of record by
stockholders who shall not have voted such shares in favor of the
Merger and who shall have demanded properly in writing appraisal
of such shares in accordance with the provisions of Section 262
of the DGCL ("Dissenting Shares") shall not be converted into the
right to receive the Per Common Share Price specified in Section
3.1(c) or the Per Preferred Share Price specified in Section
3.1(d), 3.1(e), 3.1(f) or 3.1(g), as applicable, but the holders
thereof instead shall be entitled to, and the Dissenting Shares
shall only represent the right to receive, payment of the fair
value of such shares in accordance with the provisions of Section
262 of the DGCL (the "Dissenting Consideration"); provided,
however, that (i) if such a holder fails to demand properly in
writing from the Surviving Corporation the appraisal of its
shares in accordance with Section 262(d) of the DGCL or, after
making such demand, subsequently delivers an effective written
withdrawal of such demand, or fails to establish its entitlement
to appraisal rights as provided in Section 262 of the DGCL, if so
required, or (ii) if a court shall determine that such holder is
not entitled to receive payment for its shares or such holder
shall otherwise lose its appraisal rights, then in any such case,
each share of Company Common Stock or Company Preferred Stock, as
the case may be, held of record by such holder shall
automatically be converted into and represent only the right to
receive the applicable consideration specified in Sections 3.1(c)
- (g), upon the surrender of the certificate or certificates
representing such Dissenting Shares.
3.3. Exchange of and Payment for Shares, Options and
Warrants.
(a) Immediately after the Effective Time and subject
to Section 3.7 and Article XI, Parent shall make available, by
transferring to First Chicago Trust Company of New York, or
another financial institution mutually acceptable to Parent and
the Company (the "Paying Agent"), cash in an amount necessary to
make the payments provided for in Section 3.1 hereof with respect
to the outstanding Company Common Stock and Company Preferred
Stock not constituting Dissenting Shares, and all of the Stock
Options and Warrants. The Paying Agent shall hold such funds and
deliver them in accordance with the terms hereof and the terms of
a Paying Agency Agreement to be entered into by and between the
Paying Agent and Parent and reasonably acceptable to the Company
(the "Paying Agency Agreement").
(b) Subject to receipt by the Paying Agent and Parent
of sufficient information from the Company to satisfy such
obligations, the Paying Agent shall promptly mail or cause to be
mailed to each record holder (other than the Company) of a
certificate or certificates which, immediately prior to the
Effective Time, represented outstanding shares of Company Common
Stock or Company Preferred Stock except for shares to be canceled
pursuant to Section 3.1(b) (the "Stock Certificates"), and to
each holder of an agreement evidencing any Stock Options or
Warrants (collectively, the "Stock Agreements"), a form letter of
transmittal (the "Transmittal Letter") specifying that delivery
shall be effected, and risk of loss and title to the Stock
Certificates and Stock Agreements shall pass, only upon proper
delivery of the Stock Certificates and Stock Agreements to the
Paying Agent, and instructions for use in effecting the surrender
of the Stock Certificates and the Stock Agreements in exchange
for payment therefor.
(c) After the Effective Time and subject to Section
3.7 and Article XI, each holder of a Stock Certificate, except
for shares to be canceled pursuant to Section 3.1(b), and each
holder of a Stock Agreement, in each case outstanding immediately
prior to the Effective Time, may surrender such Stock Certificate
or Stock Agreement to the Paying Agent, and, subject to the
provisions of this Section 3.3, the Paying Agent shall promptly
deliver or cause to be delivered to such holder a check in an
amount equal to the consideration exchangeable therefor pursuant
to Section 3.1, minus the portion of the Indemnity Amount
allocable to each such holder as provided in Section 3.7, with
respect to such Stock Certificates and/or Stock Agreements. In
no event shall the holder of any such surrendered Stock
Certificates or Stock Agreements be entitled to receive interest
on any of the funds to be received in the Merger. If such check
is to be sent to a Person other than the Person in whose name the
Stock Certificates or Stock Agreements are registered, among
other things, it shall be a condition of the exchange that the
Person requesting such exchange shall pay to the Paying Agent the
transfer Taxes required by reason of the delivery of such check
to a Person other than the registered holder of the Stock
Certificates or Stock Agreements surrendered, or shall establish
to the satisfaction of Parent that such Tax has been paid or is
not applicable.
(d) Until so surrendered, each outstanding Stock
Certificate and each outstanding Stock Agreement, in each case
immediately prior to the Effective Time, shall not be
transferable on the books of the Surviving Corporation or Parent
after the Effective Time, but shall be deemed for all purposes to
evidence only the right to receive such Per Common Share Price,
Per Preferred Share Price, Option Consideration or Warrant
Consideration, as the case may be, as such holders are entitled
to receive pursuant to the terms of this Agreement.
3.4. Lost Certificates and Agreements. In the event
any Stock Certificate or Stock Agreement shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact
by the record holder thereof claiming such Stock Certificate or
Stock Agreement to be lost, stolen or destroyed, the Paying Agent
shall pay to such Person the amount of cash payable to the holder
of such lost, stolen or destroyed Stock Certificate or Stock
Agreement determined in accordance with Sections 3.1 and 3.3.
When authorizing such payment in exchange for any lost, stolen or
destroyed Stock Certificate or Stock Agreement, the Person to
whom the cash is to be paid shall, as a condition precedent to
the payment thereof, give the Surviving Corporation a bond
satisfactory to the Surviving Corporation in such sum as it may
direct, or otherwise indemnify the Surviving Corporation in a
manner satisfactory to the Surviving Corporation, against any
claim that may be made against Parent, Mergerco or the Surviving
Corporation with respect to the Stock Certificates or Stock
Agreements alleged to have been lost, stolen or destroyed.
3.5. Unclaimed Funds. Thirty days after the first
anniversary of the Effective Time, Parent shall be entitled to
require the Paying Agent to deliver to the Parent any funds which
have not been disbursed to holders of Stock Certificates or Stock
Agreements, and thereafter such holders shall be entitled only to
look to Parent and the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) for the cash
payable upon due surrender of their Stock Certificates or Stock
Agreements (and Parent and the Surviving Corporation shall,
subject to such laws, be required to make such cash payments).
None of Parent, Mergerco, the Surviving Corporation, the Company
or the Paying Agent shall be liable to any Person in respect of
any cash delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
3.6. Withholding Rights. Parent shall be entitled to
deduct and withhold from the Per Common Share Price, the Per
Preferred Share Price, the Option Consideration or the Warrant
Consideration (or any component thereof) otherwise payable
pursuant to this Agreement to any holder of Company Common Stock,
Company Preferred Stock, Stock Options or Warrants, or to any
designee of such holder, such amounts as may be required to be
deducted and withheld with respect to the making of such payments
under the Code, or any provision of state, local or foreign tax
law. To the extent practicable, Parent shall instruct the Paying
Agent with respect to tax matters relating to employee tax
withholding prior to the Effective Time. At least five days
before the Effective Date, the Company shall provide to Parent
all information reasonably necessary to permit Parent to
determine the amounts, if any, required to be withheld with
respect to employee tax withholding.
3.7. Indemnity Escrow Agreement. Notwithstanding
anything else to the contrary in this Agreement, $2,500,000 of
the aggregate amount payable under this Article III to the
holders of Stock Certificates (not representing Dissenting
Shares) and Stock Agreements (collectively, the "Indemnity
Amount") shall not be deposited with the Paying Agent and shall
not be paid to such holders upon the surrender of such
certificates and agreements to the Paying Agent. Instead, the
Indemnity Amount shall be deposited by Parent immediately after
the Effective Time with the Indemnity Agent and shall constitute
the initial escrow fund to be held and released in accordance
with the provisions of Article XI and the Indemnity Agreement
(the "Indemnity Fund"). The Indemnity Amount shall be allocated
among and withheld from payment to the holders of Securities,
other than holders of Series D Preferred Stock and holders of
Dissenting Shares, pro-rata based on their ownership of shares of
Company Common Stock (assuming the conversion of all shares of
Company Preferred Stock (other than shares of Series D Preferred
Stock and other than Dissenting Shares) and the exercise of the
MCRC Warrant and the Stock Options).
3.8. 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
(i) to vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its right, title and interest in, to or
under any of the rights, privileges, powers, franchises,
properties or assets of either of the Constituent Corporations or
(ii) 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 Constituent Corporation, all
such deeds, bills of sale, assignments and assurances and to do,
in the name and on behalf of either Constituent Corporation, all
such other acts and things as may be necessary, desirable or
proper to vest, perfect or confirm the Surviving Corporation's
right, title and interest in, to and under any of the rights,
privileges, powers, franchises, properties or assets of such
Constituent Corporation and otherwise to carry out the purposes
of this Agreement.
ARTICLE IV
CLOSING
4.1. Closing Date. The Closing of the Merger shall
take place at 10:00 A.M., local time, on April 17, 1996 at the
offices of Xxxxx, Xxxx & Xxxxx, Xxx Xxxx Xxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx, or as soon thereafter as reasonably practicable
consistent with the terms and provisions of this Agreement. The
date on which the Closing is actually held is hereinafter
sometimes referred to as the "Closing Date." Each party agrees
to use its reasonable best efforts to satisfy promptly all
conditions to the respective obligations of the parties hereto in
order to close the Merger on April 17, 1996, or, if the parties
are unable after using such reasonable best efforts to close on
such date, in order to close as soon thereafter as is reasonably
practicable.
4.2. Filing Certificate of Merger and Effectiveness.
Subject to the fulfillment or waiver of the conditions to the
respective obligations of each of the parties set forth in
Article IX or Article X, as the case may be, at the Closing the
parties shall cause the Merger to be consummated by filing a
Certificate of Merger (which shall be in form and substance
reasonably satisfactory to the parties hereto), executed and
acknowledged in accordance with the laws of the State of
Delaware, in the office of the Secretary of State of the State of
Delaware. The Merger shall become effective upon such filing as
provided by the DGCL. The date and time on such date of
effectiveness of the Merger are herein called, respectively, the
"Effective Date" and the "Effective Time."
4.3. Parent's Additional Deliveries. Subject to
fulfillment or waiver of the conditions set forth in Article IX,
at the Effective Time Parent shall deliver to the Company all of
the following:
(a) a copy of the Certificate of Incorporation of
Parent, certified as of a recent date by the Secretary of
State of the State of Delaware;
(b) a certificate of good standing of Parent, issued
as of a recent date by the Secretary of State of the State
of Delaware;
(c) a certificate of the Secretary or an
Assistant Secretary of Parent, dated the Effective
Date, in form and substance reasonably satisfactory to
the Company, as to (i) no amendments to the Certificate
of Incorporation of Parent since a specified date; (ii)
the By-laws of Parent; (iii) the resolutions of the
Board of Directors of Parent authorizing the execution
and performance of this Agreement and the transactions
contemplated herein; and (iv) the incumbency and
signatures of the officers of Parent executing this
Agreement and any Parent Ancillary Agreement;
(d) an opinion of internal counsel to Parent and
Mergerco, dated the Effective Date and in form and
substance reasonably satisfactory to the Company;
(e) the certificate contemplated by Section 10.1,
duly executed by the President or any Vice President of
Parent;
(f) all consents, waivers or approvals obtained by
Parent with respect to the consummation of the transactions
contemplated by this Agreement; and
(g) the Indemnity Agreement duly executed by Parent.
4.4. Mergerco's Deliveries. Subject to fulfillment or
waiver of the conditions set forth in Article IX, at the
Effective Time Mergerco shall deliver to the Company all of the
following:
(a) a copy of the Certificate of Incorporation of
Mergerco certified as of a recent date by the Secretary
of State of the State of Delaware;
(b) a certificate of good standing of Mergerco,
issued as of a recent date by the Secretary of State of
the State of Delaware;
(c) a certificate of the Secretary or an
Assistant Secretary of Mergerco, dated the Effective
Date, in form and substance reasonably satisfactory to
the Company, as to (i) no amendments to the Certificate
of Incorporation of Mergerco since a specified date;
(ii) the By-laws of Mergerco; (iii) the resolutions of
the Board of Directors of Mergerco authorizing the
execution and performance of this Agreement and the
transactions contemplated herein and the written
consent of Operations adopting this Agreement in
accordance with Section 251 of the DGCL; and (iv) the
incumbency and signatures of the officers of Mergerco
executing this Agreement; and
(d) the certificate contemplated by Section 10.1,
duly executed by the President or any Vice President of
Mergerco.
4.5. The Company's Deliveries. Subject to fulfillment
or waiver of the conditions set forth in Article X, at the
Effective Time the Company shall deliver to Parent all of the
following:
(a) a copy of the Certificate of Incorporation of
the Company, certified as of a recent date by the
Secretary of State of the State of Delaware;
(b) a certificate of good standing of the
Company, issued as of a recent date by the Secretary of
State of the State of Delaware;
(c) a certificate of the Secretary or an
Assistant Secretary of the Company, dated the Effective
Date, in form and substance reasonably satisfactory to
Parent, as to (i) no amendments to the Certificate of
Incorporation of the Company since a specified date;
(ii) the By-laws of the Company; (iii) the resolutions
of the Board of Directors of the Company authorizing
the execution and performance of this Agreement and the
transactions contemplated herein and the resolutions of
the stockholders of the Company adopting this Agreement
in accordance with Section 251 of the DGCL; and (iv)
the incumbency and signatures of the officers of the
Company executing this Agreement and any Company
Ancillary Agreement;
(d) An opinion of Xxxxx, Xxxx & Xxxxx, counsel to
the Company, dated the Effective Date and in form and
substance reasonably satisfactory to Parent;
(e) all consents, waivers or approvals obtained
by the Company with respect to the consummation of the
transactions contemplated by this Agreement;
(f) resignations of each of the directors of the
Company, effective as of the Effective Time;
(g) the certificates contemplated by Sections
9.1, 9.2, 9.6, 9.7(a) and 9.10 duly executed by the
appropriate officer of the Company;
(h) the documents contemplated by Section 9.7(b) to be
delivered to Parent;
(i) copies of the consents of Warrant holders to the
cancellation of their Warrants pursuant to the Merger to be
delivered pursuant to Section 9.8; and
(j) the Indemnity Agreement duly executed by the
Stockholder Representatives; and
(k) the FIRPTA certificate contemplated by Section
9.9.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Parent and Mergerco to enter into
this Agreement and to consummate the transactions contemplated
hereby, the Company represents and warrants to Parent and
Mergerco and agrees as follows:
5.1. Organization and Capital Structure. (a) The
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The
Company is duly qualified to transact business as a foreign
corporation and is in good standing in each of the jurisdictions
listed in Schedule 5.1(a), which are the only jurisdictions in
which the ownership or leasing of its assets or the conduct of
its business requires such qualification, and no other
jurisdiction has demanded, requested or otherwise indicated that
the Company is required to so qualify, in each case other than
those jurisdictions where the failure to be so qualified would
not have a Material Adverse Effect on the Company. The Company
has full power and authority to own or lease and to operate and
use its assets and to carry on its business as now conducted.
True and complete copies of the Certificate of Incorporation and
all amendments thereto and of the By-laws, as amended, of the
Company have been delivered to Parent.
(b) The authorized capital of the Company consists of
(i) 25,000,000 shares of Company Common Stock, of which 1,530,679
have been issued and are outstanding, none of which are held as
treasury shares and, except as set forth in Schedule 5.1(b), none
of which is reserved for any purpose; (ii) 10,411,429 shares of
Company Preferred Stock, of which 476,192 shares of Series A
convertible redeemable preferred stock, par value $1.00 per share
("Series A Preferred Stock") are issued and outstanding,
1,143,568 shares of Series B convertible redeemable preferred
stock, par value $1.00 per share ("Series B Preferred Stock") are
issued and outstanding, 3,166,669 shares of Series C convertible
redeemable preferred stock, par value $1.00 per share ("Series C
Preferred Stock") are issued and outstanding and 4,361,119 shares
of Series D convertible redeemable preferred stock, par value
$1.00 per share ("Series D Preferred Stock") are issued and
outstanding, and none of which are held as treasury shares or are
reserved for any purpose; and (iii) 1,000,000 shares of Special
Preferred Stock, none of which have been issued or are
outstanding. All of the outstanding shares of capital stock of
the Company are validly issued, fully paid and nonassessable.
Schedule 5.1(b) sets forth (i) as of February 29, 1996, the
unpaid Accruing Dividends (whether or not declared) with respect
to each holder of shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock and (ii) commencing
on March 1, 1996 and up to and including the Effective Date, the
per diem accrual rate of the Accruing Dividends (whether or not
declared) on each share of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock. Schedule 5.1(b)
also sets forth (i) as of February 29, 1996, the unpaid Common
Stock Premium and (ii) commencing on March 1, 1996 and up to and
including the Effective Date, the per diem accrual rate of the
Common Stock Premium. There are no declared but unpaid dividends
or other distributions with respect to any shares of Company
Common Stock or Company Preferred Stock.
(c) All of the Company Common Stock, Company Preferred
Stock, Stock Options and Warrants are held of record by the
holders and in the amounts identified in Schedule 5.1(c).
Schedule 5.1(c) also sets forth the number of shares of Company
Common Stock into which each share of Company Preferred Stock is
convertible, the "exercise price" per share of each Stock Option
and each Warrant, the date of grant of each Stock Option and
Warrant and the expiration date thereof and the number of shares
of Company Common Stock issuable upon the exercise of each Stock
Option or Warrant. True and complete copies of the stock record
books, agreements evidencing Warrants and, to the extent
available to the Company, agreements evidencing Stock Options
have been made available to Parent. Each Warrant and Stock
Option was duly issued, and is valid and in full force and
effect.
(d) The sum of the number of shares of outstanding
Company Common Stock, the number of shares of Company Common
Stock into which all the outstanding shares of Company Preferred
Stock are convertible and the number of shares of Company Common
Stock issuable upon the exercise of all of the Stock Options and
Warrants is 13,893,974.
(e) Except as set forth in Schedule 5.1(e), the
consideration to be received by holders of the shares of Company
Common Stock, Company Preferred Stock, Stock Options and Warrants
and the treatment of such holders pursuant to Section 3.1 is in
accordance with and consistent with the Certificate of
Incorporation of the Company, as amended to date, and the Stock
Agreements. Commencing from the Effective Time, neither Parent
nor the Surviving Corporation shall have any further obligation
with respect to Stock Options other than the payment of the
Option Consideration in accordance herewith and remitting to the
appropriate Governmental Body any amount withheld with respect
thereto under Section 3.6.
(f) Except for the Stock Options and Warrants described
in Schedule 5.1(c) and except as set forth in Schedule 5.1(f),
there are no agreements, arrangements, options, warrants, calls,
rights or commitments of any character relating to the issuance,
sale, purchase or redemption of any shares of capital stock or
other equity interest of the Company, whether on conversion of
other securities or otherwise. None of the issued and
outstanding shares of Company Common Stock or Company Preferred
Stock has been issued in violation of, or is subject to, any
preemptive or subscription rights. Except as set forth in this
Agreement or in Schedule 5.1(f), the Company is not a party to,
and does not otherwise have any knowledge of the current
existence of, any stockholder agreement, voting trust agreement
or any other similar contract, agreement, arrangement,
commitment, plan or understanding restricting or otherwise
relating to the voting, dividend, ownership or transfer rights of
any shares of capital stock of the Company. The Company has not
issued any security in breach of any applicable Requirements of
Laws of the United States of America or any state thereof.
(g) The Company is its own "ultimate parent entity"
(as defined in 16 C.F.R. Section 801.1(a)(3) (1994)).
5.2. Subsidiaries and Investments. Except as set forth
in Schedule 5.2, the Company does not own directly or indirectly
any outstanding voting securities or equity interests in any
corporation, partnership, limited liability company, joint
venture or other entity and is not a partner in any partnership
or a joint venturer in any joint venture.
5.3. Authority. (a) The Company has full power and
authority to execute, deliver and perform this Agreement and all
of the Company Ancillary Agreements. The execution, delivery and
performance of this Agreement and the Company Ancillary
Agreements by the Company have been duly authorized and approved
by the Company's Board of Directors and, except for the adoption
of this Agreement by Company's stockholders in accordance with
Section 8.1(b) and the filing contemplated by Section 4.2, no
other corporate proceedings on the part of the Company are
necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly authorized,
executed and delivered by the Company and is the legal, valid and
binding obligation of the Company enforceable in accordance with
its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and
by the effect of general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at
law), and each of the Company Ancillary Agreements has been duly
authorized by the Company and will be duly executed and delivered
at the Closing.
(b) Except as set forth in Schedule 5.3, neither the
execution and delivery of this Agreement, any of the Company
Ancillary Agreements or the consummation of any of the
transactions contemplated hereby or thereby nor compliance with
or fulfillment of the terms, conditions and provisions hereof or
thereof, in each case by the Company will:
(i) conflict with, result in a breach of the
terms, conditions or provisions of, or constitute a
default, an event of default or an event creating
rights of acceleration, termination or cancellation or
a loss of rights under, or result in the creation or
imposition of any Encumbrance upon, any of the
Company's assets, under (1) the Certificate of
Incorporation or By-laws of the Company, (2) any
Company Agreement, (3) any other material note,
instrument, agreement, mortgage, lease, license,
franchise, permit or other authorization, right,
restriction or obligation to which the Company is a
party or any of its assets or business is subject or by
which the Company is bound, (4) any Court Order to
which the Company is a party or any of its assets or
business is subject or by which the Company is bound,
other than such as do not and would not reasonably be
expected to have a Material Adverse Effect on the
Company, or (5) any Requirements of Laws affecting the
Company or its assets or business, other than such as
do not and would not reasonably be expected to have a
Material Adverse Effect on the Company; or
(ii) require the approval, consent, authorization
or act of, or the making by the Company of any
declaration, filing or registration with, any Person,
except for the applicable requirements of the HSR Act
and the filing contemplated by Section 4.2 with the
Secretary of State of the State of Delaware.
5.4. Financial Statements. Schedule 5.4 contains (i)
the audited balance sheets of the Company as of December 31, 1995
and March 31, 1995 and the related audited statements of
operations (the "Statements of Income"), stockholder's equity and
cash flows for the nine months ended December 31, 1995 and the
fiscal years ended March 31, 1995 and March 31, 1994, together
with the appropriate notes to such financial statements,
accompanied by the report thereon of Ernst & Young L.L.P.,
independent public accountants (the "Audited Financial
Statements"), and (ii) the unaudited balance sheet of the Company
as of February 24, 1996 and the related unaudited statement of
operations for the two months then ended (the "Unaudited
Financial Statements"). Except as disclosed in the notes
thereto, the Audited Financial Statements and the Unaudited
Financial Statements have been prepared in conformity with
generally accepted accounting principles consistently applied and
fairly present in all material respects the financial position of
the Company at the dates of such balance sheets and the results
of its operations and cash flows for the respective periods
indicated, except that the Unaudited Financial Statements are
subject to normal year-end audit adjustments and the addition of
footnotes. Except as set forth on Schedule 5.4 or in the
Unaudited Financial Statements, the Unaudited Financial
Statements include all adjustments, which consist only of normal
recurring accruals, necessary for such fair presentation, other
than normal year-end audit adjustments. All costs and expenses
incurred in generating the revenues reflected in the Statements
of Income during the respective periods covered thereby which are
required by generally accepted accounting principles to be
reflected in the Statements of Income are so reflected.
5.5. Operations Since Balance Sheet Date. (a) Except
as set forth in Schedule 5.5(a), since the Balance Sheet Date,
there has been:
(i) no Material Adverse Change in the assets,
business, financial condition or results of operations
of the Company, and, to the Company's knowledge, no
fact or condition exists or is threatened which might
reasonably be expected to cause such a change in the
future (other than general business and economic
conditions); and
(ii) no damage, destruction, loss or claim,
whether or not covered by insurance, or condemnation or
other taking adversely affecting in any material
respect any of the Company's assets or its business.
(b) Except as set forth in Schedule 5.5(b), since the
Balance Sheet Date, the Company has conducted its business only
in the ordinary course and in conformity with past practice.
Without limiting the generality of the foregoing, since the
Balance Sheet Date, except as set forth in such Schedule, the
Company has not:
(i) issued, delivered or agreed (conditionally or
unconditionally) to issue or deliver, or granted any option,
warrant or other right to purchase, any of its capital stock
or other equity interest or any security convertible into
its capital stock or other equity interest;
(ii) issued, delivered or agreed (conditionally or
unconditionally) to issue or deliver any of its bonds, notes
or other debt securities, or borrowed or agreed to borrow
any funds, other than from Parent under the Parent Loan
Agreement;
(iii) paid any obligation or liability (absolute or
contingent) other than current liabilities reflected on the
Balance Sheet and current liabilities incurred since the
Balance Sheet Date in the ordinary course of business
consistent with past practice;
(iv) declared or made, or agreed to declare or make,
any payment of dividends or distributions to its
stockholders or purchased or redeemed, or agreed to purchase
or redeem, any of its capital stock or other equity
interest;
(v) except in the ordinary course of business
consistent with past practice, made or permitted any
material amendment or termination of any Company Agreement;
(vi) undertaken or committed to undertake capital
expenditures other than in accordance with the Cash Flow
Projection;
(vii) made any charitable donations;
(viii) sold, leased (as lessor), transferred or
otherwise disposed of, or mortgaged or pledged, or
imposed or suffered to be imposed any Encumbrance on,
any of the assets reflected on the Balance Sheet or any
assets acquired by the Company after the Balance Sheet
Date, except for inventory and minor amounts of
personal property sold or otherwise disposed of for
fair value in the ordinary course of its business
consistent with past practice and except for Permitted
Encumbrances;
(ix) canceled any debts owed to or claims held by
the Company (including the settlement of any claims or
litigation) other than in the ordinary course of its
business consistent with past practice;
(x) created, incurred or assumed, or agreed to
create, incur or assume, any indebtedness for borrowed
money other than borrowings from Parent under the
Parent Loan Agreement or entered into, as lessee, any
capitalized lease obligations (as defined in Statement
of Financial Accounting Standards No. 13);
(xi) accelerated or delayed collection of notes
or accounts receivable in advance of or beyond their
regular due dates or the dates when the same would have
been collected in the ordinary course of its business
consistent with past practice;
(xii) delayed or accelerated payment of any
account payable or other liability beyond or in advance
of its due date or the date when such liability would
have been paid in the ordinary course of its business
consistent with past practice;
(xiii) entered into or become committed to enter into
any other material transaction except in the ordinary course
of business other than transactions with Parent;
(xiv) allowed the levels of raw materials, sup-
plies, work-in-process or other materials included in
the inventory of the Company to vary in any material
respect from the levels customarily maintained in its
business;
(xv) instituted any increase in any compensation
payable to any employee of the Company or in any
profit-sharing, bonus, incentive, deferred compensa-
tion, insurance, pension, retirement, medical, hospi-
tal, disability, welfare or other benefits made
available to employees of the Company;
(xvi) made any change in the accounting
principles and practices used by the Company from those
applied in the preparation of the Balance Sheet and the
related statements of income, stockholder's equity and
cash flow for the nine months ended on the Balance
Sheet Date; or
(xvii) prepared or filed any Tax Returns in a manner
inconsistent with past practice or, on such Tax Returns,
taken any position, made any election, or adopted any method
that is inconsistent with the positions taken, elections
made or methods used in preparing and filing similar Tax
Returns in prior periods (including positions which would
have the effect of deferring income to periods after the
Balance Sheet Date or accelerating deductions to periods on
or prior to the Balance Sheet Date).
5.6. No Undisclosed Liabilities. Except as set forth
in Schedule 5.6 or in the Audited Financial Statements or the
Unaudited Financial Statements (including the footnotes thereto)
and except for liabilities of a type required to be disclosed
elsewhere in this Article V, the Company is not subject to any
liabilities which are, in the aggregate, material to the
business, operations or financial condition of the Company,
whether absolute, contingent, accrued or otherwise, which are not
shown or which in aggregate are in excess of amounts shown or
reserved for in the Balance Sheet, other than liabilities of the
same nature as those set forth on the Balance Sheet and the
footnotes thereto, and reasonably incurred in the ordinary course
of its business consistent with past practice after the Balance
Sheet Date.
5.7. Taxes. (a) Except as set forth on Schedule 5.7,
(i) the Company and each Company Group has filed all Tax Returns
required to be filed, as of the date filed (or subsequently
amended) all such Tax Returns are complete and accurate in all
material respects, and all Taxes shown to be due on such Tax
Returns have been timely paid (ii) all Taxes (whether or not
shown on any Tax Return) owed by the Company or any Company Group
and required to be paid on or before the Effective Date have been
timely paid or, in the case of Taxes which the Company or any
Company Group is presently contesting in good faith, the Company
has established an adequate reserve for such Taxes on the Balance
Sheet or the balance sheet included in the Unaudited Financial
Statements; (iii) all Taxes (whether or not shown on any Tax
Return) that are or will be owed by the Company or any Company
Group with respect to taxable years or periods (or portions
thereof) ending on or prior to the date of the balance sheet
included in the Unaudited Financial Statements have been fully
paid or shown as a liability on the Unaudited Financial
Statements; (iv) none of the Company or any member of any Company
Group has waived any statute of limitations in respect of Taxes
(and no request for any such waiver is currently pending); (v)
the income Tax Returns referred to in clause (i) have been
examined by the IRS or the appropriate state, local or foreign
taxing authority or the period for assessment of the Taxes in
respect of which such income Tax Returns were required to be
filed has expired; (vi) there is no action, suit, investigation,
audit, claim or assessment pending or, to the Company's
knowledge, proposed or threatened with respect to Taxes of the
Company or any Company Group and, to the Company's knowledge, no
valid basis exists therefor; (vii) all material deficiencies
asserted or assessments made as a result of any examination of
the Tax Returns referred to in clause (i) have been paid in full;
(viii) all Tax Sharing Arrangements and Tax indemnity
arrangements to which the Company is or has been a party will
terminate prior to the Effective Date and the Company will not
have any liability thereunder on or after the Effective Date;
(ix) there are no liens for Taxes upon the assets of the Company
except liens relating to current Taxes not yet due; (x) all
material Taxes which the Company or any Company Group are
required by law to withhold or to collect for payment have been
duly withheld and collected, and have been paid or accrued,
reserved against and entered on the books of the Company; (xi)
the Company has never been a member of any Company Group, (xii)
as a result of a change in accounting method for a Tax period
beginning on or before the Balance Sheet Date, the Company will
not be required to include any adjustment under Section 481(c) of
the Code (or any corresponding provisions of state, local or
foreign Tax law) in taxable income for any period ending after
the Balance Sheet Date; and (xiii) there are no Tax rulings,
requests for rulings, or closing or similar agreements relating
to the Company or any Company Group which could affect the
Company's liability for Taxes for any period after the Balance
Sheet Date.
(b) The federal income tax "regular" and "alternative
minimum tax" carryforwards of the Company for each of the taxable
years of the Company ending on or prior to December 31, 1995 (the
"NOLs"), and the taxable years in which the NOLs arose, are set
forth in the footnotes to the Audited Financial Statements. None
of the NOLs constitute separate return limitation year ("SRLY")
or consolidated return change of ownership ("CRCO") losses with
respect to the Company immediately prior to the Effective Date
and, except as set forth in Schedule 5.7, none of the NOLs
constitute "dual consolidated losses" (as defined in Section 1503
of the Code and the regulations thereunder) which cannot be
offset against United States federal taxable income of the
Company.
(c) No transaction contemplated by this Agreement is
subject to withholding under Section 1445 of the Code and no
stock transfer Taxes, sales Taxes, use Taxes, real estate
transfer Taxes, or other similar Taxes will be imposed on the
Company as a result of the Merger.
(d) As a result of the transactions contemplated by
this Agreement, none of the Company or the Parent will be
obligated to make a payment to an individual that would be an
"excess parachute payment" to a "disqualified individual" as
those terms are defined in Section 280G of the Code, without
regard to whether such payment is reasonable compensation for
personal services performed or to be performed in the future.
5.8. Availability of Assets and Legality of Use.
Except as set forth in Schedule 5.8 the assets owned, leased or
licensed by the Company constitute all the assets used in its
business as currently conducted (including, but not limited to,
all books, records, computers and computer programs and data
processing systems), have been maintained in accordance with
normal industry practice and are generally suitable for the uses
for which intended.
5.9. Governmental Permits. (a) The Company owns,
holds or possesses all licenses, franchises, permits, privileges,
immunities, approvals and other authorizations from Governmental
Bodies which are necessary to entitle it to own or lease, operate
and use its assets and to carry on and conduct its business
substantially as currently conducted, except for those as to
which the failure to so own, hold or possess would not have a
Material Adverse Effect on the Company (herein collectively
called "Governmental Permits"). Schedule 5.9(a) sets forth a
list of such Governmental Permits, except for such incidental
licenses, permits and other authorizations which would be readily
obtainable by any qualified applicant without undue burden in the
event of any lapse, termination, cancellation or forfeiture
thereof. Complete and correct copies of all of the Governmental
Permits have heretofore been delivered to Parent.
(b) Except as set forth in Schedule 5.9(b), (i) the
Company has fulfilled and performed in all material respects its
obligations under each of the Governmental Permits, and to the
Company's knowledge, no event has occurred or condition or state
of facts exists which constitutes or, after notice or lapse of
time or both, would constitute a breach or default in any
material respect under any such Governmental Permit or which
permits or, after notice or lapse of time or both, would permit
revocation or termination of any such Governmental Permit, or
which could reasonably be expected to adversely affect in any
material respect the rights of the Company under any such Govern-
mental Permit, except in each case such as would not have a
Material Adverse Effect on the Company; (ii) no written notice of
cancellation, of default or of any material dispute concerning
any Governmental Permit except in each case such as would not
have a Material Adverse Effect on the Company, or of any event,
condition or state of facts described in the preceding clause,
has been received by, or is known to, the Company; and (iii)
except to an extent that would not have a Material Adverse Effect
on the Company, each of the Governmental Permits is valid,
subsisting and in full force and effect and will continue in full
force and effect after the Effective Date of the Merger, in each
case without (x) the occurrence of any breach, default or
forfeiture of rights thereunder, or (y) the consent, approval, or
act of, or the making of any filing with, any Governmental Body.
5.10. Real Property. The Company does not own any
parcel of real property and does not hold any option to acquire
any real property.
5.11. Real Property Leases. Schedule 5.11 sets forth
a list of each lease or similar agreement under which the Company
is lessee of, or holds or operates, any real property owned by
any third Person (the "Leased Real Property"). Except as set
forth in such Schedule (or in any agreement listed thereon), the
Company has the right to quiet enjoyment of all the real property
described in such Schedule of which it is the lessee for the full
term of each such lease or similar agreement (and any related
extension option) relating thereto, and the leasehold or other
interest of the Company in such real property is not subject or
subordinate to any Encumbrance except for Permitted Encumbrances.
Complete and correct copies of any such leases or similar
agreements, including amendments thereto, regarding any Leased
Real Property have heretofore been delivered to Parent.
5.12. Condemnation. Neither the whole nor any part of
any Leased Real Property is subject to any pending suit for
condemnation or other taking by any public authority or other
Person, and, to the Company's knowledge, no such condemnation or
other taking is threatened or contemplated.
5.13. Personal Property. Schedule 5.13 contains a
list of all machinery, equipment, vehicles, furniture and other
personal property owned by the Company having an original cost of
$10,000 or more.
5.14. Personal Property Leases. Schedule 5.14 sets
forth a list of each lease or agreement or under which the
Company is lessee of, or holds or operates, any machinery,
equipment, vehicle or other tangible personal property owned by a
third Person, except for any such lease or agreement that is
terminable by the Company without penalty or payment on notice of
30 days or less, or which involves the payment by the Company of
rentals of less than $10,000 per year.
5.15. Intellectual Property; Software. (a)
Schedule 5.15 contains a list and description (showing in each
case any product, device, process, service, business or
publication covered thereby, the registered or other owner,
expiration date and number, if any) of all United States and
foreign patents, patent applications, continuations,
continuations-in-part, divisions and reissues, registered
Trademarks, and registered Copyrights and applications for
registration of Trademarks and Copyrights, in each case, owned by
the Company. For purposes of this Agreement, the "Intellectual
Property" means:
(i) all United States and foreign patents, patent
applications, continuations, continuations-in-part,
divisions, reissues, patent disclosures, inventions (whether
or not patentable) or improvements thereto ("Patent
Rights");
(ii) all United States, state and foreign trademarks,
service marks, logos, trade dress and trade names (including
all assumed or fictitious names under which the Company is
conducting its business or has within the previous five
years conducted its business), whether registered or
unregistered, and pending applications to register the
foregoing ("Trademarks");
(iii) all United States and foreign copyrights, whether
registered or unregistered and pending applications to
register the same ("Copyrights"); and
(iv) all confidential ideas, trade secrets, know-how,
concepts, methods, processes, formulae, reports, data,
customer lists, mailing lists, business plans, or other
proprietary information ("Trade Secrets").
(b) Schedule 5.15 contains a list of all material
computer software programs and software systems owned by,
licensed to, or currently used by the Company in the conduct of
the Company's business, including, without limitation, all
databases, compilations, tool sets, compilers, higher level or
proprietary languages, whether in source code, object code or
human readable form ("Software"), provided, however, that
Schedule 5.15 and Schedule 5.20 may omit in all instances (i)
Software licensed to or used by the Company that is or was
available in consumer retail stores and subject to no license
agreement or to license agreements that purport to become
effective without execution by the purchaser and (ii) license
agreements for Software described in clause (i) immediately
above.
(c) Schedule 5.15 contains a list of all material
agreements, commitments, contracts, understandings, licenses,
sublicenses, assignments and indemnities which relate or pertain
to Company Intellectual Property or Software or to disclosure or
use of ideas or information of the Company or third Persons to
which the Company is a party, showing in each case the parties
thereto. For purposes of this Agreement, "Company Intellectual
Property" means any Intellectual Property owned by, currently
used by, or licensed to or by the Company.
(d) Except as disclosed on Schedule 5.15 or in any
agreement listed thereon, the Company either: (i) owns the
entire right, title and interest in and to the Company Intellec-
tual Property and Software, free and clear of any Encumbrance,
other than security interests disclosed elsewhere herein in favor
of Parent or NationsCredit Commercial Corporation and other than
Permitted Encumbrances applying generally to the assets of the
Company; or (ii) has the perpetual, royalty-free right to use the
same.
(e) Except as disclosed on Schedule 5.15, the Company
is not in breach of any material provision of any material
agreement, commitment, contract, understanding, license,
sublicense, assignment or indemnity which relates to any of the
Company Intellectual Property or Software, and the Company has
not taken any action which would impair or otherwise adversely
affect its rights in any of the Company Intellectual Property or
Software, other than any actions that, at the time they were
taken, were reasonable and customary in the Company's industry.
The Company has all right, power and authority with respect to
material Company Intellectual Property, Software and materials
identified in Section 5.15, to execute and deliver this Agreement
and the Company Ancillary Agreements, to consummate the
transactions contemplated hereby and thereby and to comply with
or fulfill the terms, conditions or provisions hereof or thereof.
The transactions contemplated by this Agreement and the Company
Ancillary Agreements shall have no adverse effect on the validity
and enforceability of any of the material Company Intellectual
Property, Software or materials identified in Section 5.15, and
the Company's right, title and interest thereto immediately after
the Effective Time shall be identical to that of the Company
immediately prior to the Effective Time.
(f) Except as disclosed on Schedule 5.15: (i) all
registrations for Intellectual Property identified as being owned
by the Company are valid and in force, and all applications to
register any unregistered Intellectual Property identified as
being owned by the Company are pending and in good standing, all
without challenge of any kind; and (ii) the Company has the sole
and exclusive right to bring actions for infringement or
unauthorized use of the Intellectual Property and Software owned
by the Company, and to the Company's knowledge, there is no basis
for any such action. Correct and complete copies of: (x)
registrations for all registered Copyrights and Trademarks, and
copies of all issued Patent Rights, identified as being owned by
the Company; (y) all pending applications for Patent Rights or to
register unregistered Copyrights or Trademarks identified as
being owned by the Company (together with any subsequent
correspondence or filings relating to the foregoing); and (z) all
items identified in Section 5.15(c), have heretofore been made
available by the Company to Parent.
(g) Except as disclosed in Schedule 5.15, no
infringement by the Company of any Patent Rights, Copyrights or
Trade Secrets or, to the knowledge of the Company, Trademarks of
any other Person has occurred or results in any way from the
operations of the Company's business. Except as disclosed in
Schedule 5.15, no claim of any infringement of any Intellectual
Property of any other Person has been made or asserted in respect
of the operations of the Company's business. Except as disclosed
in Schedule 5.15, the Company has not had notice of, or knowledge
of any basis for, a claim against the Company that its
operations, activities, products, Software, equipment, machinery
or processes of the Company's business infringe any Intellectual
Property of any other Person.
(h) Except as disclosed on Schedule 5.15 or any
agreement listed thereon: (i) the Software is not subject to any
transfer, assignment, site, equipment, or other operational
limitations; (ii) the Company has maintained and protected all
computer software programs and software systems owned by the
Company, including, without limitation, all databases,
compilations, tool sets, compilers, higher level or proprietary
languages, whether in source code, object code or human readable
form ("Owned Software") (including, without limitation, all
source code and system specifications) with appropriate
proprietary notices (including, without limitation, in the case
of published Software, the notice of copyright in accordance with
the requirements of 17 U.S.C. Section 401) and confidentiality and
non-disclosure agreements; (iii) the Owned Software has been
registered or is eligible for protection and registration under
applicable copyright law and no copyright in the Owned Software
has been forfeited to the public domain; (iv) the Company has
copies of all releases or separate published versions of the
Owned Software so that the same may be subject to registration in
the United States Copyright Office; (v) the Company has complete
and exclusive right, title and interest in and to the Owned
Software; (vi) the Company has developed the Owned Software
through its own efforts and for its own account without the aid
or use of any consultants, agents, independent contractors or
Persons (other than Persons that are employees of the Company);
(vii) the Owned Software does not infringe any Patent Rights,
Copyrights or Trade Secrets or, to the knowledge of the Company,
Trademarks of any other Person; (viii) the Company has lawful
possession of the source code, system documentation, statements
of principles of operation and schematics relating to the Owned
Software, as well as any pertinent commentary, explanation,
program (including compilers), workbenches, tools, and higher
level or proprietary language necessary for the development,
maintenance, implementation and use thereof, sufficient to permit
a trained computer programmer to develop, maintain, support,
compile and use all releases or separate versions of the same
that are currently subject to maintenance obligations by the
Company; (ix) there are no agreements or arrangements in effect
with respect to the marketing, distribution, licensing or
promotion of the Owned Software by any other Person; (x) the
Company has complied with all applicable Requirements of Laws
relating to the export or reexport of the Owned Software by the
Company; and (xi) the Owned Software may be exported or
reexported to all countries without the necessity of any license
(other than a general license), other than to those countries,
projects or persons specified as prohibited destinations or
recipients pursuant to applicable regulations of the U.S.
Department of Commerce, the United States State Department and/or
the United States Treasury Department.
(i) Except as disclosed on Schedule 5.15, each
employee, agent, consultant, or contractor who has contributed to
or participated in the creation or development of any
copyrightable, patentable or Trade Secret material on behalf of
the Company or any predecessor in interest thereto either: (i)
is a party to a "work-for-hire" agreement under which the Company
is deemed to be the original owner/author of all property rights
therein (or, by operation of law, all works he created or creates
are "works made for hire" under the Unites States Copyright Act);
or (ii) has executed an assignment or an agreement to assign in
favor of the Company (or such predecessor in interest, as
applicable) of all right, title and interest in such material.
5.16. Accounts Receivable; Inventories. All accounts
receivable of the Company have arisen from bona fide transactions
by the Company in the ordinary course of its business. All
accounts receivable reflected in the Balance Sheet have been
collected or are good and collectible in the ordinary course of
business at the aggregate recorded amounts thereof, net of any
applicable allowance for doubtful accounts reflected in the
Balance Sheet.
The inventories of the Company (including raw mate-
rials, supplies, work-in-process, finished goods and other mater-
ials) reflected in the Balance Sheet are in merchantable
condition and are reflected in the books and records of the
Company at the lower of average cost or market value. The
inventory obsolescence policies of the Company are appropriate
for the nature of the products sold and the marketing methods
used by the Company, and the reserve for inventory obsolescence
contained in the Balance Sheet fairly reflects the amount of
obsolete inventory as of the Balance Sheet Date. The Company has
heretofore delivered to Parent a list of places where material
inventories of the Company were located as of the date hereof.
5.17. Title to Property. The Company has good title
to all of its assets reflected on the Balance Sheet as being
owned by it and all of the assets thereafter acquired by it
(except to the extent that such assets have been disposed of
after the Balance Sheet Date in the ordinary course of business
consistent with past practice), free and clear of all
Encumbrances, except for Permitted Encumbrances and except as set
forth in Schedule 5.17.
5.18. Employee Benefit Plans. (a) Set forth in
Schedule 5.18(a) is a true and complete list of each "employee
pension benefit plan" (as such term is defined in Section 3(2) of
ERISA) maintained by the Company or an ERISA Affiliate (defined
in clause (j) below), or with respect to which the Company or an
ERISA Affiliate is or will be required to make any payment, or
which provides or will provide benefits to present or prior
employees of the Company or an ERISA Affiliate due to such
employment (the "Pension Plans"). Set forth in Schedule 5.18(a)
is a true and complete list of each "employee welfare benefit
plan" (as such term is defined in Section 3(1) of ERISA)
maintained by the Company, or with respect to which the Company
is or will be required to make any payment, or which provides or
will provide benefits to present or prior employees of the
Company due to such employment (the "Welfare Plans") (the Pension
Plans and Welfare Plans being the "ERISA Benefit Plans"). In
addition, set forth in Schedule 5.18(a) is a true and complete
list of each other "employee pension benefit plan" (as such term
is defined in Section 3(2) of ERISA) that is or has ever been
subject to Section 302 of ERISA and (i) maintained by the Company
or an ERISA Affiliate at any time during the six-year period
prior to the Effective Time, or (ii) with respect to which the
Company or an ERISA Affiliate was required to make any payment at
any time during such period (the "Prior Pension Plans").
(b) Other than those listed in Schedule 5.18(a), set
forth in Schedule 5.18(b) is a true and complete list of each of
the following to which the Company is a party or with respect to
which it is or will be required to make any payment (the "Non-ERISA
Commitments"):
(i) each retirement, savings, profit sharing,
deferred compensation, severance, stock ownership,
stock purchase, stock option, performance, bonus,
incentive, vacation or holiday pay, hospitalization or
other medical, disability, life or other insurance, or
other welfare, benefit or fringe benefit plan, policy,
trust, understanding or arrangement of any kind,
whether written or oral; and
(ii) each material understanding or arrangement
and each agreement, in each case in effect, whether
written or oral, with or for the benefit of any present
or prior officer, director, employee, agent or
consultant (including, without limitation, each
employment, compensation, deferred compensation,
severance or consulting agreement or arrangement,
confidentiality agreement (excluding any for the
benefit of the Company), covenant not to compete
(excluding any for the benefit of the Company) and any
agreement or arrangement associated with a change in
ownership or control of the Company, but excluding
employment agreements terminable by the Company without
premium or penalty on notice of thirty (30) days or
less under which the only monetary obligation of the
Company is to make current wage or salary payments and
provide current fringe benefits).
The Company has delivered to Parent correct and complete copies
of (i) all written Non-ERISA Commitments and (ii) all insurance
and annuity policies and contracts and other documents relevant
to any Non-ERISA Commitment. Schedule 5.18(b) contains a
complete and accurate description of all material oral Non-ERISA
Commitments. Except as disclosed in Schedule 5.18(a) or Schedule
5.18(b), none of the ERISA Benefit Plans or the Non-ERISA
Commitments is subject to the law of any jurisdiction outside of
the United States of America.
(c) The Company has delivered to Parent with respect
to each ERISA Benefit Plan and with respect to each Prior Pension
Plan, other than any ERISA Benefit Plan or Prior Pension Plan
which is a "multiemployer plan" (as such term is defined in
Section 3(37) of ERISA), correct and complete copies, where
applicable, of (i) all plan documents and amendments thereto,
trust agreements and amendments thereto and insurance and annuity
contracts and policies, (ii) the current summary plan
description, (iii) the Annual Reports (Form 5500 series) and
accompanying schedules, as filed, for the most recently completed
three plan years for which such reports have been filed, (iv) the
financial statements for the most recently completed three plan
years for which such statements have been prepared, (v) the
actuarial reports for the most recently begun three plan years
for which such reports exist, (vi) the most recent determination
letter issued by the IRS, (vii) PBGC Form 1 for the most recently
begun plan year and (viii) all correspondence with the IRS,
Department of Labor and Pension Benefit Guaranty Corporation
concerning any controversy during the last six years. Each
report described in clause (v) of the preceding sentence
accurately describes the funded status of the plan to which it
relates and subsequent to the date of such report there has been
no adverse change in the funding status or financial condition of
such plan. With respect to each Pension Plan that is a
"multiemployer plan" (the "Multiemployer Plans"), (A) the Company
has delivered to Parent correct and complete copies of all plan
documents and amendments thereto and trust agreements and
amendments thereto, the items described in clauses (ii), (iii)
and (v) of the second preceding sentence but with respect to the
reports described in such clauses (iii) and (v) only such reports
for the most recent year, and all correspondence and other
information in the Company or any ERISA Affiliate's possession
relating to any anticipated increases in contribution rates with
respect to such plan, and (B) set forth in Schedule 5.18(c) is a
true and complete list of the amounts which each of the Company
and each ERISA Affiliate paid to such plan with respect to each
of the calendar years 1994 through 1995. The Company has
delivered to Parent with respect to each of the Multiemployer
Plans and with respect to each of the Prior Pension Plans which
is a "multiemployer plan" (the "Prior Multiemployer Plans")
correct and complete copies of all correspondence and other
information in the Company's or any ERISA Affiliate's possession
relating to the amount for which the Company or any ERISA
Affiliate is or could be liable under Title IV of ERISA for a
total or partial withdrawal as of any date or for any other
reason.
(d) With respect to each Pension Plan subject to
Section 302 of ERISA other than any Multiemployer Plan, (i) no
proceeding has been initiated to terminate such plan, (ii) there
has been no "reportable event" (as such term is defined in
Section 4043(b) of ERISA), (iii) no "accumulated funding
deficiency" (within the meaning of Section 412 of the Code),
whether or not waived, has occurred, (iv) no person has failed to
make a required installment or any other payment required under
Section 412 of the Code before the applicable due date,
(v) neither the Company nor any ERISA Affiliate has provided or
is required to provide security to such plan under Section
401(a)(29) of the Code due to a plan amendment that results in an
increase in current liability, and (vi) without any additional
contributions being made to such plan, the assets of such plan
are sufficient to satisfy all obligations of the plan if the plan
were to terminate (regardless of whether the plan can legally
terminate). Each Pension Plan which is intended to qualify under
Section 401(a) of the Code has been determined to be so qualified
by the IRS, and to the Company's knowledge no circumstance has
occurred or exists which could reasonably be expected to cause
such plan to cease being so qualified.
(e) There is no pending or, to the Company's
knowledge, threatened claim in respect of any of the ERISA
Benefit Plans other than claims for benefits in the ordinary
course of business. Except as set forth in Schedule 5.18(e),
each of the ERISA Benefit Plans other than any Multiemployer
Plans (i) has been administered in accordance with its terms and
(ii) complies in form, and has been administered in accordance,
with the requirements of ERISA and, where applicable, the Code,
except for such failures to comply or be so administered that
would not individually or in the aggregate have a Material
Adverse Effect on the Company. The Company and each ERISA
Affiliate have complied, except for such failures to comply that
would not individually or in the aggregate have a Material
Adverse Effect on the Company, with the health care continuation
requirements of Part 6 of Title I of ERISA. The Company has no
obligation under any ERISA Benefit Plans or otherwise to provide
health or other welfare benefits to any prior employees or any
other person, except as required by Part 6 of Title I of ERISA.
The consummation of the transaction contemplated by this
Agreement will not result in an increase in the amount of
compensation or benefits or accelerate the vesting or timing of
payment of any compensation or benefits payable to or in respect
of any participant under any ERISA Benefit Plan. The Company is
in compliance with the requirements of the Workers Adjustment and
Retraining Notification Act ("WARN") and has no material
liabilities pursuant to WARN.
(f) To the Company's knowledge, no proceeding has been
initiated to terminate any Multiemployer Plan, and there has been
no "reportable event" (as such term is defined in Section 4043(b)
of ERISA) with respect to any such plan. No Multiemployer Plan
is in reorganization as described in Section 4241 of ERISA or
insolvent as described in Section 4245 of ERISA. Assuming the
Company and each ERISA Affiliate incurred a complete withdrawal
under Section 4203 of ERISA from each Multiemployer Plan, the
withdrawal liability arising under Section 4201 of ERISA with
respect to each such plan as a result thereof would not exceed
the amount set forth in Schedule 5.18(f). Except as described in
Schedule 5.18(f), neither the Company nor any ERISA Affiliate has
failed to make a required or disputed contribution to any
Multiemployer Plan or any Prior Multiemployer Plan. Except as
described in Schedule 5.18(f), (i) neither the Company nor any
ERISA Affiliate has incurred any liability on account of a
"partial withdrawal" or a "complete withdrawal" (within the
meaning of Sections 4205 and 4203, respectively, of ERISA) from
any multiemployer plan (as such term is defined in Section 3(37)
of ERISA), no such liability has been asserted, there are no
events or circumstances which could result in any such partial or
complete withdrawal, and neither the Company nor any ERISA
Affiliate is bound by a contract or agreement or has any
obligation or liability described in Section 4204 of ERISA. To
the Company's knowledge, each Multiemployer Plan (i) complies in
form, and has been administered in accordance, with the
requirements of ERISA and, where applicable, the Code, and (ii)
is qualified under Section 401(a) of the Code as amended to the
date hereof.
(g) Except as to Multiemployer Plans (as to which this
representation and warranty is made only to the Company's
knowledge), neither the Company nor, to the Company's knowledge,
any other "disqualified person" (within the meaning of Section
4975 of the Code) or "party in interest" (within the meaning of
Section 3(14) of ERISA) has taken any action with respect to any
ERISA Benefit Plan which could reasonably be expected to subject
any such plan (or its related trust) or the Company or any
officer, director or employee of any of the foregoing to the
penalty or tax under Section 502(i) or Section 502(l) of ERISA or
Section 4975 of the Code.
(h) The Company has no potential liability, whether
direct or indirect, contingent or otherwise, under Section 4063,
4064, 4069, 4204 or 4212(c) of ERISA.
(i) Schedule 5.18(i) contains: (i) a list of all
employees or commission salespersons of the Company as of
December 31, 1995 whose then current annual compensation was in
excess of $35,000; (ii) the then current annual compensation of,
and a description of the fringe benefits (other than those
generally available to employees of the Company) provided by the
Company to any such employees or commission salespersons; (iii) a
list of all present or former employees or commission
salespersons of the Company paid in excess of $35,000 in calendar
year 1995 who have terminated or given notice of their intention
to terminate their relationship with the Company; (iv) a list of
any increase, effective after December 31, 1995, in the rate of
compensation of any employees or commission salespersons if such
increase exceeds 6% of the previous annual salary of such
employee or commission salesperson; and (v) a list of all
substantial changes in job assignments of, or arrangements with,
or promotions or appointments of, any employees or commission
salespersons whose compensation as of December 31, 1995 was in
excess of $35,000 per annum.
(j) For purposes of this Agreement, "ERISA Affiliate"
means (i) any corporation which at any time on or before the
Effective Time is or was a member of the same controlled group of
corporations (within the meaning of Section 414(b) of the Code)
as the Company; (ii) any partnership, trade or business (whether
or not incorporated) which at any time on or before the Effective
Time is or was under common control (within meaning of Section
414(c) of the Code) with the Company; and (iii) any entity which
at any time on or before the Effective Time is or was a member of
the same affiliated service group (within the meaning of Section
414(m) of the Code) as either the Company, any corporation
described in clause (i) of this paragraph or any partnership,
trade or business described in clause (ii) of this paragraph. An
"Associate" of any Person means (i) a corporation or organization
of which such Person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of any
class of equity securities, (ii) any trust or other estate in
which such Person has a substantial beneficial interest or as to
which such Person serves as trustee or in a similar fiduciary
capacity and (iii) any relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person or
who is a director or officer of the Person or any of its parents
or Subsidiaries.
5.19. Employee Relations. (a) Except as set forth in
Schedule 5.19(a), the Company has complied in all material
respects with all applicable laws, rules and regulations which
relate to wages, hours, discrimination in employment and
collective bargaining and is not liable for any arrears of wages
or any taxes or penalties for failure to comply with any of the
foregoing. The Company believes that the Company's relations
with its employees are satisfactory. The Company is not a party
to any collective bargaining agreement and the Company is not a
party to, and, to the Company's knowledge, it is not affected by
or threatened with, any dispute or controversy with a union or
with respect to unionization or collective bargaining involving
its employees. To the Company's knowledge, the Company is not
materially affected by any dispute or controversy with a union or
with respect to unionization or collective bargaining involving
any supplier or customer of the Company. Schedule 5.19(a) sets
forth a description of any union organizing or election
activities involving any non-union employees of the Company which
have occurred since January 1, 1995 or, to the Company's
knowledge, are threatened as of the date hereof.
(b) Except as set forth in Schedule 5.19(b), to the
Company's knowledge, the Company is not involved in any
transaction with any employee, officer, director or Affiliate of
the Company (other than transactions with such Persons in their
capacities as employees, officers, directors or Affiliates of the
Company) pursuant to which the Company provides or receives any
benefit.
5.20. Contracts; Product Warranties. Except as set
forth in Schedule 5.20 or any other Schedule hereto, the Company
is not a party to or bound by:
(i) any contract for the purchase, sale or lease
of real property;
(ii) any contract for the purchase of raw mate-
rials which involved the payment of more than $50,000
in 1995, which the Company reasonably anticipates will
involve the payment of more than $50,000 in 1996 or
which extends beyond December 31, 1996;
(iii) any contract for the sale of goods or
services which involved the payment of more than
$50,000 in 1995, which the Company reasonably
anticipates will involve the payment of more than
$50,000 in 1996 or which extends beyond December 31,
1996;
(iv) any contract for the purchase, licensing or
development of Software to be used by the Company;
(v) any consignment, distributor, dealer, manu-
facturers representative, sales agency, advertising
representative or advertising or public relations
contract which involved the payment of more than
$50,000 in 1995, which the Company reasonably
anticipates will involve the payment of more than
$50,000 in 1996 or which extends beyond December 31,
1996;
(vi) any guarantee of the obligations or
liabilities of customers, suppliers, officers,
directors, employees, Affiliates of the Company or
others;
(vii) any agreement which provides for, or
relates to, the incurrence by the Company of debt for
borrowed money or the extension of credit (other than
in the ordinary course of business consistent with past
practice) by the Company to any other Person;
(viii) any agreement or understanding with a third
Person that restricts the Company from carrying on its
business anywhere in the world;
(ix) any material contract which provides for, or
relates to, any non-competition or confidentiality
arrangement with any Person, but not including any such
contract with any current or former officer or employee of
the Company for the benefit of the Company;
(x) any contract or group of related contracts for
capital expenditures other than in accordance with the Cash
Flow Projection;
(xi) any partnership, joint venture or other similar
arrangement or agreement involving a sharing of profits or
losses;
(xii) any contract which involves payments or receipts
by the Company of more than $50,000; or
(xiii) any contract for any purpose (whether or
not made in the ordinary course of the business or
otherwise not required to be listed or described in
Schedule 5.20) which is material to the Company or its
business.
The reserve for liabilities with respect to warranty
claims contained in the Balance Sheet fairly reflects in all
material respects the amount required in accordance with
generally accepted accounting principles to be shown thereon as
of the Balance Sheet Date.
5.21. Status of Contracts. Except as set forth in
Schedule 5.21 or in any other Schedule hereto, and assuming the
due authorization, execution and delivery thereof by each other
party thereto, each of the leases, contracts and other agreements
listed in Schedules 5.11, 5.14, 5.15, 5.18 and 5.20
(collectively, the "Company Agreements") constitutes a valid and
binding obligation of the Company, and to the Company's
knowledge, each other party thereto, and is in full force and
effect. The Company has fulfilled and performed in all material
respects its obligations under each of the Company Agreements in
accordance with the terms thereof, and the Company is not in, or
alleged to be in, breach or default in any material respect
under, nor is there or is there alleged to be any valid basis for
termination of, any of the Company Agreements and, to the
Company's knowledge, no other party to any of the Company Agree-
ments has breached or defaulted thereunder in any material
respect, and, to the Company's knowledge, no event has occurred
and no condition or state of facts exists which, with the passage
of time or the giving of notice or both, would constitute such a
default or breach by the Company or, to the Company's knowledge,
by any such other party. The Company is not currently
renegotiating any of the Company Agreements or paying liquidated
damages in lieu of performance thereunder. Complete and correct
copies of each of the written Company Agreements have heretofore
been made available to Parent.
5.22. No Violation, Litigation or Regulatory Action.
Except as set forth in Schedule 5.22:
(i) the Company's assets and their uses comply in all
respects with all applicable Requirements of Laws and Court
Orders, except for such failures to so comply which would
not have a Material Adverse Effect on the Company;
(ii) the Company has complied in all respects
with all Requirements of Laws and Court Orders which
are applicable to the Company's assets or its business,
except for such failures to so comply which would not
have a Material Adverse Effect on the Company;
(iii) there are no lawsuits, claims, suits,
proceedings or investigations pending or, to the
Company's knowledge, threatened against or affecting
the Company or its assets or business nor, to the
Company's knowledge, is there any valid basis for any
of the same, and there are no lawsuits, suits or
proceedings pending in which the Company is the
plaintiff or claimant; and
(iv) there is no action, suit or proceeding
pending or, to the Company's knowledge, threatened
which questions the legality or propriety of the trans-
actions contemplated by this Agreement.
5.23. Environmental Matters. Except as set forth in
Schedule 5.23:
(i) the Company's past and present operations of the
Company's business have complied and are in compliance in all
material respects with all applicable Environmental Laws;
(ii) the Company has obtained all environmental, health
and safety Governmental Permits necessary for the operation of
its business except where the failure so to obtain such
Governmental Permit would not have a Material Adverse Effect on
the Company, and all such Governmental Permits are in good
standing and the Company is in compliance in all material
respects with all terms and conditions of such permits;
(iii) neither the Company, nor any of the Company
Property that is currently leased (as lessee) by the Company
("Current Company Property"), nor, to the Company's knowledge,
any of the Company Property that was previously leased (as
lessee) or owned by the Company ("Previous Company Property"), is
subject to any on-going investigation by, order from or agreement
with any Person (including without limitation any prior owner or
operator of any Company Property) or any material liability
respecting (i) material noncompliance with any Environmental Law,
(ii) any Remedial Action or (iii) any claim of Losses and
Expenses arising from the Release or threatened Release of a
Contaminant into the environment that could reasonably be
expected to give rise to any material Loss on the part of the
Company;
(iv) The Company is not subject to any judicial or
administrative proceeding, order, judgment, decree or settlement
alleging or addressing a violation of or liability under any
Environmental Law;
(v) The Company has not:
(a) reported a Release of a hazardous substance
pursuant to Section 103(a) of CERCLA, or any state
equivalent;
(b) filed a notice pursuant to Section 103(c) of
CERCLA;
(c) filed notice pursuant to Section 3010 of
RCRA, indicating the generation of any hazardous waste,
as that term is defined under 40 CFR Part 261 or any
state equivalent; or
(d) filed any notice under any applicable
Environmental Law reporting a substantial violation of
any applicable Environmental Law;
(vi) there is not now on or in any Current Company
Property (or, to the Company's knowledge, any Previous Company
Property), nor to the Company's knowledge has there ever been, on
or in any Company Property:
(a) any treatment, recycling, storage or disposal
of any hazardous waste, as that term is defined under
40 CFR Part 261 or any state equivalent, that requires
or required a Governmental Permit pursuant to Section
3005 of RCRA; or
(b) any underground storage tank or surface
impoundment or landfill or waste pile.
(vii) there is not now on or in any Current Company
Property (or, to the Company's knowledge, any Previous Company
Property) any polychlorinated biphenyls (PCB) used in pigments,
hydraulic oils, electrical transformers or other equipment which
would give rise to any material liability under any Environmental
Law;
(viii) the Company has not received any notice or claim
to the effect that it is or may be liable to any Person as a
result of the Release or threatened Release of a Contaminant into
the environment on any Company Property or generated by the
Company;
(ix) no Current Company Property (or, to the
Company's knowledge, no Previous Company Property) has been
listed or, to the Company's knowledge, proposed for listing on
the National Priorities List pursuant to CERCLA, on the
Comprehensive Environmental Response, Compensation and Liability
Information System List or any state list of sites requiring
Remedial Action;
(x) the Company has not sent or arranged for the
transport of any Contaminant to any site listed on the National
Priorities List pursuant to CERCLA or that otherwise could
reasonably be expected to give rise to material liability on the
part of the Company for Remedial Action, Losses or Expenses;
(xi) no Environmental Encumbrance has attached to any
Current Company Property (or, to the Company's knowledge, any
Previous Company Property);
(xii) any asbestos-containing material which is on or
part of any Current Company Property (or, to the Company's
knowledge, any Previous Company Property) (excluding any raw
materials used in the manufacture of products or products
themselves) is in good repair according to the current standards
and practices governing such material, and its presence or
condition does not violate in any material respect any currently
applicable Environmental Law; and
(xiii) none of the products that the Company
manufactures, distributes or sells in connection with its
business, now or in the past, contains asbestos or asbestos-containing
material.
5.24. Insurance. Schedule 5.24 sets forth a list and
brief description (including nature of coverage, limits, deduc-
tibles, premiums and the loss experience for the most recent five
years with respect to each type of coverage) of all policies of
insurance maintained, owned or held by the Company during the
period from April 1, 1995 up to and including on the date hereof.
The Company shall keep or cause such insurance or comparable
insurance to be kept in full force and effect through the
Effective Date. The Company has complied in all material
respects with each of such insurance policies and has not failed
to give any notice or present any claim thereunder in a due and
timely manner. Except as set forth in Schedule 5.24, each of
such policies is in full force and effect and will not be
affected by or terminate or lapse by reason of the transactions
contemplated by this Agreement. The Company has delivered to
Parent correct and complete copies of the most recent inspection
reports, if any, received from insurance underwriters as to the
condition of the Company's assets.
5.25. Customers and Suppliers. Set forth in
Schedule 5.25 hereto is a list of names and addresses of the ten
largest customers and the ten largest suppliers (measured by
dollar volume of purchases or sales in each case) of the Company
during the nine months ended December 31, 1995 and the fiscal
year ended March 31, 1995. Except as set forth in Schedule 5.25,
there exists no actual or, to the Company's knowledge, threatened
termination, cancellation or limitation of, or any material
adverse modification or change in, the business relationship of
the Company with any customer or group of customers listed in
Schedule 5.25, or with any supplier or group of suppliers listed
in Schedule 5.25.
5.26. Budgets. Schedule 5.26 sets forth (a) as of
the date hereof, the budgets of capital, payroll and other
expenditures of the Company prepared in the ordinary course of
its business for the fiscal year ending December 31, 1996 and (b)
the total capital expenditures through February 24, 1996, if any,
for each capital expenditure project for which funds are proposed
to be expended during 1996.
5.27. No Finder. Neither the Company nor any Person
acting on behalf of the Company has paid or become obligated to
pay any fee or commission to any broker, finder or intermediary
for or on account of the transactions contemplated by this
Agreement, other than to Alex. Xxxxx & Sons Incorporated.
Complete and correct copies of the engagement and indemnification
agreements entered into with Alex. Xxxxx & Sons Incorporated have
been furnished to Parent.
5.28. Financial Projections. The Company has made
available to Parent certain financial projections with respect to
the Company's business which projections were prepared for
internal use only. The Company makes no representation or
warranty regarding the accuracy of such projections or as to
whether such projections will be achieved or otherwise, except
that the Company represents and warrants that such projections
were prepared in good faith and are based on assumptions believed
by them to be reasonable.
5.29. Proxy Statement. The proxy statement and
related materials (collectively, the "Proxy Statement") to be
prepared by the Company in accordance with Section 8.1 and used
in connection with the Company's meeting of stockholders
described in Section 8.1 at which the approval of the Merger and
the adoption of the Merger Agreement will be considered (the
"Stockholders' Meeting") will, when prepared by the Company and
distributed to the stockholders, comply in all material respects
with the provisions of the DGCL and will not, at the time of the
mailing of the Proxy Statement to the stockholders of the
Company, at the time of the Stockholders' Meeting or 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 therein, in the
light of the circumstances under which they are made, not
misleading; provided, that the Company makes no representation
with respect to information concerning Parent (including
information concerning Parent's intentions concerning the
operations of the business) or information as to the federal
income tax consequences of the Merger supplied by Parent to the
Company for inclusion in the Proxy Statement.
5.30. Opinion of Financial Advisor. The Company has
received the opinion of Alex. Xxxxx & Sons Incorporated dated the
date of this Agreement, to the effect that, as of the date of
this Agreement, the consideration to be received in the Merger by
the Company's stockholders is fair to the Company's stockholders
from a financial point of view, and a complete and correct signed
copy of such opinion has been, or promptly upon receipt thereof
will be, delivered to Parent.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERCO
As an inducement to the Company to enter into this
Agreement and to consummate the transactions contemplated hereby,
Parent and Mergerco hereby jointly and severally represent and
warrant to the Company and agree as follows:
6.1. Organization and Capital Structure. Parent is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has full corporate
power and authority to own or lease and to operate and use its
properties and assets and to carry on its business as now
conducted. Mergerco is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware. Mergerco has not engaged in any business since it was
incorporated which is not in connection with this Agreement. All
of the outstanding shares of capital stock of Mergerco are
validly issued, fully paid and nonassessable and owned of record
and beneficially by Operations, free from all Encumbrances.
6.2. Authority. (a) Parent has full corporate power
and authority to execute, deliver and perform this Agreement and
all of the Parent Ancillary Agreements. The execution, delivery
and performance of this Agreement and the Parent Ancillary
Agreements by Parent have been duly authorized and approved by
Parent's Board of Directors and no other corporate proceedings on
the part of Parent are necessary to authorize this Agreement, the
Parent Ancillary Agreements and the transactions contemplated
hereby and thereby. This Agreement has been duly authorized,
executed and delivered by Parent and is the legal, valid and
binding obligation of Parent enforceable in accordance with its
terms and each of the Parent Ancillary Agreements has been duly
authorized by Parent and upon execution and delivery by Parent
will be a legal, valid and binding obligation of Parent
enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and by the effect
of general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
(b) Mergerco has full corporate power and authority to
execute, deliver and perform this Agreement. The execution,
delivery and performance of this Agreement by Mergerco have been
duly authorized and approved by Mergerco's Board of Directors,
Operations has approved the Merger and adopted this Agreement as
the sole stockholder of Mergerco, and, except for the filing
contemplated by Section 4.2, no other corporate proceedings on
the part of Mergerco are necessary to authorize this Agreement
and the transactions contemplated hereby. This Agreement has
been duly authorized, executed and delivered by Mergerco and is
the legal, valid and binding agreement of Mergerco enforceable in
accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of
creditors' rights generally and by the effect of general
principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(c) Neither the execution and delivery of this
Agreement or any of the Parent Ancillary Agreements or the
consummation of any of the transactions contemplated hereby or
thereby nor compliance with or fulfillment of the terms,
conditions and provisions hereof or thereof, in each case by
Parent or Mergerco will:
(i) conflict with, result in a breach of the
terms, conditions or provisions of, or constitute a
default, an event of default or an event creating
rights of acceleration, termination or cancellation or
a loss of rights under, or result in the creation or
imposition of any Encumbrance upon any of Parent's,
Operation's or Mergerco's assets under, (1) the
Certificate of Incorporation or By-laws of Parent,
Operations or Mergerco, (2) any material note,
instrument, agreement, mortgage, lease, license,
franchise, permit or other authorization, right,
restriction or obligation to which Parent, Operations
or Mergerco is a party or any of their respective
assets or business is subject or by which Parent,
Operations or Mergerco is bound, (3) any Court Order to
which Parent, Operations or Mergerco is a party or any
of their assets or business is subject or by which
Parent, Operations or Mergerco is bound or (4) any
Requirements of Laws affecting Parent, Operations or
Mergerco or any of their assets or business; or
(ii) require the approval, consent, authorization or
act of, or the making by Parent, Operations or Mergerco of
any declaration, filing or registration with, any Person,
except for the applicable requirements of the HSR Act and
the filing contemplated by Section 4.2 with the Secretary of
State of the State of Delaware.
6.3. No Finder. Neither Mergerco, Operations or
Parent nor any Person acting on their behalf has paid or become
obligated to pay any fee or commission to any broker, finder or
intermediary for or on account of the transactions contemplated
by this Agreement other than to Xxxxxxx Sachs & Co., whose fees
and expenses, to the extent payable, shall be paid by Parent.
6.4. No Litigation or Regulatory Action. Except as
set forth in Schedule 6.4, there is no action, suit or proceeding
pending or, to Parent's knowledge, threatened against Parent
which questions the legality or propriety of the transactions
contemplated by this Agreement, or which would, if adversely
determined, impair Parent's ability to consummate the
transactions contemplated hereby.
6.5. Investment Representation. Each of Parent and
Operations is acquiring the Surviving Corporation Common Stock
for its own account for investment, and not with a view to, or
for sale in connection with, any distribution thereof, nor with
any present intention of distribution or selling the same.
Neither Parent nor Operations has any present or contemplated
agreement, undertaking, arrangement, obligation or commitment
providing for the disposition of the Surviving Corporation Common
Stock after the Closing.
ARTICLE VII
ACTION PRIOR TO THE EFFECTIVE TIME
The respective parties hereto covenant and agree to
take the following actions between the date hereof and the
Effective Time:
7.1. Investigation of the Company by Parent. The
Company shall afford to the officers, employees and authorized
representatives of Parent (including, without limitation, its
independent public accountants, attorneys, environmental
consultants and financial advisors) complete access during normal
business hours and upon reasonable advance notice to the offices,
properties, employees and business, Tax and financial records
(including, without limitation, computer files, retrieval
programs and similar documentation) of the Company to the extent
Parent shall deem necessary or desirable, and shall furnish to
Parent or its authorized representatives such additional
information concerning the operations, properties and business of
the Company as may be reasonably requested to enable Parent or
its representatives to verify the accuracy of the representations
and warranties contained in this Agreement, to verify that the
covenants of the Company contained in this Agreement have been
complied with and to determine whether the conditions set forth
in Article IX have been satisfied. Parent agrees that such
investigation shall be conducted in such a manner as not to
interfere unreasonably with the operations of the Company. With-
out limiting the foregoing, the Company shall permit Parent, or
its representatives, to conduct an environmental audit of any of
the Leased Real Property with respect to any environmental health
and safety issues deemed material by Parent. No investigation
made by Parent or its representatives hereunder shall affect the
representations and warranties of the Company hereunder.
7.2. Preserve Accuracy of Representations and
Warranties. Each of the parties hereto shall refrain from taking
any action which would render any representation or warranty con-
tained in Article V or VI and Section 7.9 of this Agreement
inaccurate as of the Effective Time. Each party shall promptly
notify the other parties of any action, suit or proceeding that
shall be instituted or threatened against such party to restrain,
prohibit or otherwise challenge the legality of any transaction
contemplated by this Agreement. Each party shall promptly notify
the other party of any lawsuit, claim, proceeding or
investigation that may be instituted or threatened against the
first party which would have been listed in Schedule 5.22 or
Schedule 6.4 if such lawsuit, claim, proceeding or investigation
had arisen prior to the date hereof.
7.3. Consents of Third Parties; Governmental
Approvals. (a) The Company will act diligently and reasonably to
secure, before the Effective Time, the consent, approval or
waiver, in form and substance reasonably satisfactory to Parent,
from any party to any Company Agreement required to satisfy the
conditions set forth in Section 9.5; provided that no party
hereto shall have any obligation to offer or pay any
consideration in order to obtain any such consents or approvals;
and provided, further, that the Company shall not make any
agreement or understanding affecting the Company or its assets or
business as a condition for obtaining any such consents or
waivers except with the prior written consent of Parent. During
the period prior to the Effective Time, Parent shall act
diligently and reasonably to cooperate with the Company to obtain
the consents, approvals and waivers contemplated by this Section
7.3(a).
(b) During the period prior to the Effective Time, the
parties hereto shall act diligently and reasonably, and shall
cooperate with each other, to secure any consents and approvals
of any Governmental Body required to be obtained by them in order
to permit the consummation of the transactions contemplated by
this Agreement or to otherwise satisfy the conditions set forth
in Section 9.4; provided that the Company shall not make any
agreement or understanding affecting the Company or its assets or
business as a condition for obtaining any such consents or
approvals except with the prior written consent of Parent.
7.4. Conduct of Business Prior to the Effective Time.
(a) Except as expressly contemplated by this Agreement, the
Company shall carry on its business in, and not enter into any
material transaction other than in accordance with, the ordinary
course consistent with past practice and, to the extent
consistent therewith, use its reasonable best efforts to preserve
intact its current business organization, keep available the
services of its current officers and key employees and preserve
its relationships with customers, suppliers and others having
business dealings with it (except, in each case, with the prior
written consent of Parent). Without limiting the generality of
the foregoing, and except as expressly contemplated by this
Agreement, the Company shall not, without the prior written
consent of Parent:
(i) (A) declare, set aside or pay any dividends on, or
make any other actual, constructive or deemed distributions
in respect of, any of its capital stock, or otherwise make
any payments to any stockholder in its capacity as such, (B)
split, combine or reclassify any of its capital stock or
issue, sell or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for
shares of its capital stock or (C) purchase, redeem or
otherwise acquire any shares of capital stock of the Company
or any other securities thereof;
(ii) issue, deliver, sell, pledge, dispose of or
otherwise encumber any shares of its capital stock or other
securities (including, without limitation, any rights,
warrants or options to acquire any shares of its capital
stock or other securities other than any issuance of shares
of Common Stock upon the exercise of Stock Options and
Warrants or the conversion of Company Preferred Stock in
accordance with the terms thereof as in effect on the date
hereof);
(iii) amend its Certificate of Incorporation or
By-laws;
(iv) acquire or agree to acquire by merging or consol-
idating with, or by purchasing a substantial portion of the
assets of or equity in, or by any other manner, any business
or any corporation, partnership, association or other busi-
ness organization or division thereof;
(v) other than incurring indebtedness to Parent under
the Parent Loan Agreement, incur or assume any indebtedness
for borrowed money, enter into (as lessee) any capitalized
lease obligation, guarantee any such indebtedness or
obligation, issue or sell any debt securities, guarantee any
debt securities of others or make any loans, advances or
capital contributions to, or investments in, any other
Person;
(vi) make or incur or agree to make or incur any new
capital expenditure or expenditures other than in accordance
with the Cash Flow Projection;
(vii) pay, discharge or satisfy any claims, liabili-
ties or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the pay-
ment, discharge or satisfaction thereof in the ordinary
course of business consistent with past practice;
(viii) alter through merger, liquidation, reorganiza-
tion, restructuring or in any other fashion its corporate
structure;
(ix) enter into or adopt, or amend, any bonus,
incentive, deferred compensation, insurance, medical, hospi-
tal, disability or severance plan, agreement or arrangement
or enter into or amend any employee benefit plan or
employment, consulting or management agreement, other than
any such amendment to an employee benefit plan that is made
to maintain the qualified status of such plan or its contin-
ued compliance with applicable law and annual renewals of
such plans that do not materially increase the benefits
accruing to plan participants or the total cost or liability
to the Company;
(x) make any change in accounting practices or
policies applied in the preparation of the financial
statements referred to in Section 5.4, except as required by
generally accepted accounting principles;
(xi) modify any Company Agreement, enter into any
agreement, understanding, obligation or commitment, or incur
any indebtedness or obligation, of the type that would have
been a Company Agreement if in existence on the date hereof,
or enter into any contract which requires any approval or
consent by any other Person to the transactions contemplated
by this Agreement;
(xii) pay or commit to pay any bonus to any officer or
employee of the Company, or make any other material change
in the compensation of its employees; provided, however,
that nothing contained herein shall preclude the Company
from adjusting salaries for its employees pursuant to the
Company's normal year-end salary review process in an
aggregate amount not to exceed 6% of the prior year's
aggregate compensation base as reflected on Form W-3 for the
employee group subject to such salary review;
(xiii) make any change in its business or operations or
make any expenditure which shall exceed the amount, as set
forth in Schedule 5.26, budgeted therefor;
(xiv) enter into any contract for the purchase of
real property or exercise any option to extend a lease
listed in Schedule 5.11;
(xv) sell, lease (as lessor), transfer or
otherwise dispose of, or mortgage or pledge, or impose
or suffer to be imposed any Encumbrance on, any of the
Company's assets, other than inventory and minor
amounts of personal property sold or otherwise disposed
of for fair value in the ordinary course of the
Company's business consistent with past practice and
other than Permitted Encumbrances;
(xvi) cancel any debts owed to or claims held by
the Company (including the settlement of any claims or
litigation) other than in the ordinary course of the
Company's business consistent with past practice;
(xvii) accelerate or delay collection of any
notes or accounts receivable in advance of or beyond
their regular due dates or the dates when the same
would have been collected in the ordinary course of its
business consistent with past practice;
(xviii) delay or accelerate payment of any
account payable or other liability beyond or in advance
of its due date or the date when such liability would
have been paid in the ordinary course of its business
consistent with past practice;
(xix) allow the levels of raw materials, sup-
plies, work-in-process or other materials included in
its inventory to vary in any material respect from the
levels customarily maintained in its business;
(xx) prepare or file any Tax Returns in a manner
inconsistent with past practice or, on such Tax Returns,
take any position, make any election, or adopt any method
that is inconsistent with the positions taken, elections
made or methods used in preparing and filing similar Tax
Returns in prior periods; or
(xxi) enter into any other transaction affecting the
business of the Company, other than in the ordinary course
of business consistent with past practice or as expressly
contemplated by this Agreement.
7.5. Notification by the Company of Certain Matters.
During the period prior to the Effective Time, the Company shall
promptly advise Parent in writing of (i) any change or event
having a Material Adverse Effect on the Company, (ii) any notice
or other communication from any third Person alleging that the
consent of such third Person is or may be required in connection
with the transactions contemplated by this Agreement, and (iii)
any material default under any Company Agreement or event which,
with notice or lapse of time or both, would become such a default
on or prior to the Effective Time and of which the Company has
knowledge.
7.6. Mutual Cooperation; Reasonable Best Efforts. The
parties hereto shall cooperate with each other, and shall use
their respective reasonable best efforts to cause as promptly as
practicable the fulfillment of the conditions to each other
party's obligations hereunder, including without limitation
Sections 9.3 and 10.2, and to obtain as promptly as practicable
all consents, authorizations, orders or approvals from each and
every third party, whether private or governmental, required in
connection with the transactions contemplated by this Agreement;
provided, however, that the foregoing shall not require Parent or
the Company to make any divestiture or consent to any divestiture
in order to obtain any consent, authorization or approval or
fulfill any condition.
7.7. No Solicitation. From and after the date of this
Agreement and prior to the Effective Time, except as provided
below, the Company agrees that (a) the Company shall not, and the
Company shall not authorize or permit its officers, directors,
Affiliates, employees or authorized agents and representatives
(including, without limitation, any investment banker, attorney
or accountant retained by it) to, initiate, solicit or encourage,
directly or indirectly, any inquiries or the making or
implementation of any proposal or offer with respect to a merger,
acquisition, consolidation or similar transaction involving, or
any purchase of all or any significant portion of the assets or
any equity securities of, the Company (excluding discussions with
holders of currently outstanding Warrants and Stock Options
relating to the exercise or termination thereof) (any such
proposal or offer being hereinafter referred to as an
"Acquisition Proposal") or engage in any negotiations concerning,
or provide any confidential information or data to, or have any
substantive discussions with, any Person relating to an
Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal; and (b) it
will notify Parent immediately if any such inquiries or proposals
are received by, any such information is requested from, or any
such negotiations or discussions are sought to be initiated or
continued with, it, including the identity of the Person making
the inquiry or proposal and the terms of any proposal; provided,
however, that nothing contained in this Section 7.7 shall
prohibit the Board of Directors of the Company from furnishing
information to or entering into discussions or negotiations with,
any Person that indicates an interest in making a Superior
Proposal (as hereinafter defined) if, and only to the extent that
the Board of Directors determines in good faith that such action
is required for the Board of Directors to comply with its
fiduciary duties to stockholders imposed by laws as advised by
the Company's outside counsel in writing. If any Person makes a
Superior Proposal, upon receipt thereof the Company shall
immediately provide written notice (a "Notice of a Superior
Proposal") to Parent of such Superior Proposal, including the
identity of the Person making such Superior Proposal and the
terms and structure thereof, and if, within five business days
following the delivery of the Notice of a Superior Proposal, the
Superior Proposal does not continue to be superior in terms of
the aggregate value to be received by the holders of Securities
in light of any improved transaction proposed by Parent prior to
the expiration of such five-day period, the Company shall cease
all discussions or negotiations with such Person. For purposes
of this Agreement, "Superior Proposal" means an unsolicited bona
fide Acquisition Proposal in writing that the Board of Directors
determines in its good faith judgment (based on the advice of a
nationally recognized investment banking firm) provides greater
aggregate value to the holders of Securities than the
transactions contemplated by this Agreement. Subject to Article
XII, nothing in this Section 7.7 shall (i) permit the Company to
terminate this Agreement, (ii) permit the Company to enter into
any agreement with respect to an Acquisition Proposal during the
term of this Agreement or (iii) affect any other obligation of
any party under this Agreement.
The Company shall enforce and not waive any
"standstill" agreement currently in effect with any Person.
7.8. Subsequent Financial Statements. Prior to the
Effective Date, the Company shall deliver to Parent, not later
than 10 business days after the end of each monthly period and in
the form customarily prepared by the Company, the unaudited
internal financial statements of the Company, including an income
statement, for the monthly period then ended and for the period
from the beginning of the current fiscal year to the end of such
monthly period.
7.9. Antitrust Law Compliance. Parent and the Company
shall use their respective reasonable best efforts to file, on or
before March 12, 1996, with the Federal Trade Commission and the
Antitrust Division of the Department of Justice the notifications
and other information required to be filed under the HSR Act, or
any rules and regulations promulgated thereunder, with respect to
the transactions contemplated hereby. Each of Parent and the
Company warrants that all such filings by it will be, as of the
date filed, true and accurate and in accordance with the
requirements of the HSR Act and any such rules and regulations.
Each of Parent and the Company agrees to make available, or cause
to be made available, to the other party such information as each
of them may reasonably request relative to its business, assets
and property as may be required of each of them to file any
additional information requested by such agencies under the HSR
Act and any such rules and regulations.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1. Preparation of Proxy Statement; Action by
Company. (a) The Company shall prepare the Proxy Statement as
promptly as practicable after the date hereof and shall submit
the proposed Proxy Statement to Parent and its counsel not less
than three days prior to submitting the Proxy Statement to its
stockholders. The Company shall use its reasonable best efforts
to mail the Proxy Statement to all holders of Securities on or
before March 18, 1996. If prior to the Effective Time either (i)
the Company determines that the Proxy Statement needs to be
amended or supplemented in order for the representation and
warranty of the Company in Section 5.29 to be correct or (ii)
Parent determines that any information included in the Proxy
Statement and supplied by Parent needs to be supplemented or
amended, the Company or Parent, as the case may be, shall notify
the other of such determination and shall deliver to the other
such amendment or supplement as such party believes is necessary.
The Company shall consider all such amendments proposed by
Parent, and shall cause all the amendments or supplements that
the Company reasonably believes are necessary to be mailed to its
stockholders as soon as practicable after such delivery.
(b) The Company shall duly call, give notice of,
convene and hold a meeting of its stockholders for the purpose of
approving the Merger and adopting this Agreement. The Company
will, through its Board of Directors, recommend to its
stockholders the adoption of this Agreement; provided, however,
that, without relieving the Company of its other obligations
under this Section 8.1(b), the Board of Directors shall not be
required to make, and shall be entitled to withdraw, such
recommendation if such Board of Directors concludes in good faith
on the basis of the written advice of its outside counsel that
the making of, or the failure to withdraw, such recommendation
would violate the fiduciary obligations of such Board of
Directors under applicable law. The Company shall use all
reasonable efforts to hold the Stockholders' Meeting on or before
April 17, 1996.
8.2. Restricted Parent Common Stock Pool.
Simultaneously with the Closing of the Merger, Parent will
establish a plan to encourage retention of key employees of the
Company. Under such plan, such key employees who continue to be
employed by the Company during the applicable vesting periods
would be eligible to receive (without payment of any
consideration by such employee) shares of Parent Common Stock
having an aggregate market value of $1 million as of the Closing.
Such shares would vest and be payable in two equal installments
on the first and second anniversary of the Closing of the Merger
and Parent will use its best commercial efforts to cause the
shares to be registered on Form S-8 under the Securities Act of
1933, as amended, on or before the first anniversary of the
Closing. The Company will be entitled to recommend, subject to
Parent's approval, the persons eligible to participate in the
plan and the amounts they may receive.
8.3. Indemnification and Insurance. (a) After the
Effective Time, the Surviving Corporation shall, to the fullest
extent provided under the Company's Certificate of Incorporation
or By-Laws as in effect on the date hereof, indemnify and hold
harmless, each present and former director, officer, employee,
fiduciary and agent of the Company (collectively, the
"Indemnified Parties") against any Losses or Expenses in
connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or
omission occurring at or prior to the Effective Time for a period
of six years after the Effective Date. In the event of any such
claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), (i) the Surviving
Corporation shall control the defense thereof, (ii) the
Indemnified Parties shall be entitled, at their expense, to
participate in any defense of such claims, (iii) the Indemnified
Parties will cooperate in the defense of any such matter, and
(iv) Parent shall have the right in its sole discretion to settle
any such claim, provided that release of all the liabilities of
the indemnified party with respect to the settled claim shall be
a condition to any settlement by Parent of such claim under this
Section 8.3(a); provided, however, that, in the event that any
claims for indemnification are asserted or made within such six-year
period, all rights to indemnification in respect of any such
claim or claims shall continue until the disposition thereof.
(b) For a period of three years after the Effective
Time, Parent shall cause the Surviving Corporation to use its
best efforts to maintain in effect, if available, directors' and
officers' liability insurance covering those persons who are
currently covered by the Company's directors' and officers'
liability insurance policy (a copy of which has been heretofore
delivered to Parent) on terms comparable to those applicable to
the current directors and officers of the Company; provided,
however, that in no event shall the Surviving Corporation be
required to expend in excess of 150% of the annual premium
currently paid by the Company for such coverage, and provided,
further, that if the premium for such coverage exceeds such
amount, the Surviving Corporation shall purchase a policy with
the greatest coverage available for such 150% of the annual
premium. To the extent that the Surviving Corporation is
unwilling or unable to make the payments contemplated by this
Section 8.3(b), Parent agrees to make such payments.
(c) This Section shall survive the consummation of the
Merger at the Effective Time, is intended to benefit the Company,
the Surviving Corporation and the Indemnified Parties, and shall
be binding on all successors and assigns of the Surviving
Corporation and shall be enforceable by the Indemnified Parties.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGERCO
The obligations of Parent and Mergerco under this
Agreement shall, at the option of Parent and Mergerco, be subject
to the satisfaction, on or prior to the Effective Time, of the
following conditions:
9.1. No Misrepresentation or Breach of Covenants and
Warranties. There shall have been no breach by the Company in
the performance of any of its covenants and agreements herein;
none of the representations and warranties of the Company
contained herein shall be untrue or incorrect in any respect and
at the Effective Time such representations and warranties shall
be true and correct in all material respects as though made at
the Effective Time except for changes therein specifically
permitted by this Agreement; and there shall have been delivered
to Parent and Mergerco a certificate or certificates to such
effect, dated the Effective Date and signed on behalf of the
Company by the President of the Company.
9.2. No Changes or Destruction of Property. Between
the date hereof and the Effective Time, there shall have been
(a) no Material Adverse Effect with respect to the Company; and
(b) no material damage to the Company's assets by fire, flood,
casualty, act of God or the public enemy or other cause,
regardless of insurance coverage for such damage; and there shall
have been delivered to Parent and Mergerco a certificate or
certificates to such effect, dated the Effective Date and signed
on behalf of the Company by the President of the Company.
9.3. No Restraint or Litigation. The waiting period
under the HSR Act shall have expired or been terminated, and no
action, suit, investigation or proceeding shall have been
instituted or threatened by any Governmental Body to restrain or
prohibit or otherwise challenge the legality or validity of the
transactions contemplated hereby. No Court Order shall be in
effect restraining or prohibiting such transactions.
9.4. Necessary Governmental Approvals. The parties
shall have received all approvals and actions of or by all
Governmental Bodies which are necessary to consummate the trans-
actions contemplated hereby, which are either specified in
Schedule 5.3 or otherwise required to be obtained prior to the
Closing by applicable Requirements of Laws or which are necessary
to prevent a Material Adverse Effect on the Company.
9.5. Necessary Consents. The Company shall have
received consents, in form and substance reasonably satisfactory
to Mergerco and Parent, to the transactions contemplated hereby
from the other parties to all contracts, leases, agreements and
permits to which the Company is a party or by which the Company
or any of its assets is affected and which are specified in
Schedule 9.5 or are otherwise necessary to prevent a Material
Adverse Effect on the Company.
9.6. Stockholders' Approval; Dissenters' Rights. (a)
This Agreement shall have been adopted by the affirmative vote of
(i) the holders of two-thirds of the issued and outstanding
Company Preferred Stock, voting as a single class, and (ii) the
holders of a majority of the issued and outstanding Company
Common Stock and Company Preferred Stock, voting together as a
single class, in each case entitled to vote thereon, as required
by the DGCL and the Certificate of Incorporation of the Company.
(b) Holders of not more than five percent (5%) of the
Company Common Stock (assuming the conversion of all of the
shares of Company Preferred Stock), shall have (i) delivered to
the Company, before the taking of the vote on the Merger, a
written demand for appraisal of their capital stock pursuant to
Section 262 of the DGCL and (ii) not voted in favor of or
consented to the Merger.
(c) The Company shall have given all notices required
to be given pursuant to subparagraph 6J of Article FOURTH of the
Company's Certificate of Incorporation and all notices required
to be given under the Warrants to the holders thereof in
connection with the Merger.
(d) There shall have been delivered to Parent and
Mergerco a certificate confirming compliance with the foregoing
requirements of this Section 9.6, dated the Effective Date and
signed on behalf of the Company by the President or any Vice
President of the Company.
9.7. Indebtedness. (a) As of the Effective Time, the
Company shall have no indebtedness for borrowed money (including
capitalized lease obligations) other than borrowings from Parent
under the Parent Loan Agreement, the Subordinated Note, and other
than existing capitalized lease obligations (i) listed on the
Schedules hereto or (ii) involving payment of less than $10,000
per year; and there shall have been delivered to Parent and
Mergerco a certificate to such effect, dated the Effective Date
and signed on behalf of the Company by the President or any Vice
President of the Company.
(b) NationsCredit Commercial Corporation (formerly
known as Greyrock Business Credit) shall have, in each case in
form and substance satisfactory to Parent, (i) issued and
delivered to Parent a pay off letter (stating among other things
that the Company owes it no indebtedness as of the Closing Date);
(ii) agreed to release all obligations of the Company, the
Surviving Corporation and Parent thereto upon payment of the
amount of indebtedness set forth in the pay off letter; and (iii)
agreed to execute and deliver all documents necessary to release
any security interest such party may have in any of the assets of
the Company and shall have returned any collateral held thereby
in respect of any indebtedness to the Company.
9.8. Warrants. (a) The Company shall have received
the written acknowledgment, in form reasonably acceptable to
Parent, of each holder of a Warrant that at the Effective Time
the Warrant shall be converted into the right described in
Section 3.1(i), and that after the Effective Time neither the
Company nor Parent has any obligations to such holders pursuant
to such Warrants, except for the obligations of Parent contained
in this Agreement with respect to payment of the Warrant
Consideration.
9.9. FIRPTA Certificate. The Company shall have
delivered to Parent, not more than 30 days prior to the Effective
Date, a statement in accordance with Treas. Reg. Subsection
1.1445-2(c)(3) and 1.897-2(h) certifying that the Company is not, and
has not been a "United States real property holding corporation"
for purposes of Sections 897 and 1445 of the Code and Parent
shall have no actual knowledge that such statement is false or
receive a notice that the statement is false pursuant to Treas.
Reg. Section 1.1445-4.
9.10. Fairness Opinion. The opinion of Alex. Xxxxx &
Sons Incorporated that the consideration to be received in the
Merger by the Company's stockholders is fair to the Company's
stockholders from a financial point of view shall not have been
withdrawn or modified in any respect; and there shall have been
delivered to Parent and Mergerco a certificate to such effect,
dated the Effective Date and signed on behalf of the Company by
the President or any Vice President of the Company.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE COMPANY
The obligations of the Company under this Agreement
shall, at the option of the Company, be subject to the
satisfaction, on or prior to the Effective Time, of the following
conditions:
10.1. No Misrepresentation or Breach of Covenants and
Warranties. There shall have been no breach by Parent or
Mergerco in the performance of any of their respective covenants
and agreements herein; none of the representations and warranties
of Parent or Mergerco contained or referred to herein shall be
untrue or incorrect in any respect and at the Effective Time such
representations and warranties shall be true and correct in all
material respects as though made at the Effective Time except for
changes therein specifically permitted by this Agreement; and
there shall have been delivered to the Company a certificate or
certificates to such effect, dated the Effective Date and signed
on behalf of Parent by the President or any Vice President of
Parent and on behalf of Mergerco by the President or any Vice
President of Mergerco.
10.2. No Restraint or Litigation. The waiting period
under the HSR Act shall have expired or been terminated, and no
action, suit or proceeding shall have been instituted or
threatened by any Governmental Body to restrain, prohibit or
otherwise challenge the legality or validity of the transactions
contemplated hereby. No Court Order shall be in effect
restraining or prohibiting such transactions.
10.3. Necessary Governmental Approvals. The parties
shall have received all approvals and actions of or by all
Governmental Bodies necessary to consummate the transactions
contemplated hereby, which are required to be obtained prior to
the Closing by applicable Requirements of Laws.
ARTICLE XI
INDEMNIFICATION
11.1. Indemnity Fund. Immediately after the Effective
Time, Parent shall transfer and deposit the Indemnity Amount with
The First National Bank of Chicago, or another financial
institution selected by Parent and reasonably acceptable to the
Company, as Indemnity Fund and escrow agent (the "Indemnity
Agent"). Such deposit shall constitute the initial Indemnity
Fund and shall be governed by the terms set forth herein and in
the Indemnity Agreement, substantially in the form of Exhibit A
hereto, among Parent, the Stockholder Representatives and the
Indemnity Agent (the "Indemnity Agreement"). All funds or other
property received by the Indemnity Agent shall be retained by it
as part of the Indemnity Fund. The Indemnity Fund shall be
available to indemnify hold harmless and reimburse the Parent
Group Members from and against any Loss or Expense indemnifiable
under this Article XI and as provided in the Indemnity Agreement.
All fees and expenses of the Indemnity Agent shall be borne by
Parent; provided that any amounts relating to indemnification of
the Indemnity Agent shall be paid one-half by Parent and one-half
from the Indemnity Fund.
11.2. Indemnification from Indemnity Fund. (a)
Subject to Section 11.1, from and after the Effective Time, each
Parent Group Member shall be indemnified, held harmless and
reimbursed from the Indemnity Fund from and against any and all
Losses and Expenses incurred by such Parent Group Member in
connection with or arising from:
(i) any breach or failure to perform by the
Company of any of its agreements, covenants or
obligations in this Agreement to be performed by the
Company up to and including the Effective Time;
(ii) any breach of any warranty or the inaccuracy
of any representation of the Company contained in
Article V or Section 7.9 of this Agreement or any
certificate delivered by or on behalf of the Company
pursuant to Articles IV or IX of this Agreement; or
(iii) incurrence by the Company of any Acquisition
Expenses in excess of $900,000 in the aggregate.
provided, however, that the Indemnity Fund shall be used to
indemnify and hold harmless hereunder with respect to any
provision of Article V (other than Sections 5.1, 5.7, 5.17, 5.27
and 5.29, as to which this proviso shall not apply) only to the
extent that the aggregate amount (without duplication) of Losses
and Expenses borne by the Parent Group Members with respect
thereto exceeds $150,000. Any payment pursuant to this Section
11.2 shall be made in the form of a transfer of funds to the
applicable Parent Group Member(s) pursuant to the Indemnity
Agreement.
(b) The indemnification provided for in this Section
11.2 shall terminate one year after the Effective Date (and no
claims shall be made by any Parent Group Member under this
Section 11.2 thereafter), except that the indemnification by the
Indemnity Fund shall continue as to any Losses or Expenses in
connection with which Parent gives a Claim Notice in accordance
with the requirements of Section 11.4 on or prior to the date
such indemnification obligation would otherwise terminate in
accordance with this Section 11.2, as to which the
indemnification obligation of the Indemnity Fund shall continue
until the liability of the Indemnity Fund shall have been
determined pursuant to this Article XI, and all Parent Group
Members shall have been reimbursed out of the Indemnity Fund for
the full amount of such Loss and Expense for which the Indemnity
Fund is responsible in accordance with this Article XI.
(c) The sole source of recovery for any claim under
this Article XI shall be the Indemnity Fund. From and after the
Effective Time, the sole and exclusive remedy of any Parent Group
Member with respect to any and all claims (other than claims of,
or causes of action arising from, fraud) for money damages or
other monetary relief relating to or arising out of any breach or
failure to perform by the Company of any of its agreements,
covenants or obligations in this Agreement or any breach of any
warranty or the inaccuracy of any representation of the Company
contained in this Agreement or in any certificate delivered
pursuant to this Agreement shall be pursuant to the
indemnification provisions set forth in this Article XI.
11.3. Termination of Indemnity Fund. Upon termination
of the Indemnity Fund's indemnification obligations under this
Article XI and reimbursement of the Parent Group Members of all
Losses and Expenses payable thereto hereunder, the Indemnity Fund
shall terminate and shall be distributed to the Paying Agent (or
if the Paying Agency Agreement then shall have terminated, to
Parent) in accordance with the Indemnity Agreement after payment
of any amounts therefrom due to the Indemnity Agent and the
Stockholder Representatives in accordance with the Indemnity
Agreement. Amounts so distributed to the Paying Agent (or in
lieu thereof to Parent) shall be allocated among all holders of
Securities (excluding Series D Preferred Stock and Dissenting
Shares) based on each such holder's ownership of shares of
Company Common Stock (assuming the conversion of all shares of
Company Preferred Stock (other than Series D Preferred Stock) and
the exercise of the MCRC Warrant and all Stock Options). To the
extent so allocated to them, such amounts shall then be
distributed to the holders of Securities who shall have complied
with the requirements of Section 3.3 to receive their portion of
the Aggregate Merger Consideration.
11.4. Notice and Determination of Claims.
(a) If any Parent Group Member wishes to make a claim
for indemnification from the Indemnity Fund, such Parent Group
Member (individually or collectively the "Claiming Party") shall
so notify the Indemnity Agent in writing (the "Claim Notice") of
the facts giving rise to such claim for indemnification
hereunder. The Claim Notice shall be accompanied by a
certificate of the Claiming Party attesting to the Claiming
Party's contemporaneous delivery of a duplicate copy of the Claim
Notice to the Stockholder Representatives. Such Claim Notice
shall describe in reasonable detail (to the extent then known)
such Losses or Expenses and the method of computation of such
Losses or Expenses and contain a reference to the provisions of
this Agreement in respect of which such Loss or Expense shall
have occurred. If the Claiming Party is not Parent, the Claim
Notice must be accompanied by a certificate from Parent
confirming that the Claiming Party is a Parent Group Member.
Subject to Section 11.4(b), the Indemnity Agent shall, on the
twentieth (20th) business day after receipt of a Claim Notice
with respect to indemnification for a specified amount, pay or
deliver to Parent, for its account or the account of each Parent
Group Member named in the Claim Notice the Indemnity Fund or the
portion thereof specified in the Claim Notice. Payment shall be
delivered as specified in the Claim Notice.
(b) At the time of delivery of any Claim Notice to the
Indemnity Agent, a duplicate copy of such Claim Notice shall be
delivered to the Stockholder Representatives. Notwithstanding
the provisions of Section 11.4(a), the Indemnity Agent shall not
make any payment of the Indemnity Fund or any portion thereof
with respect to a Claim Notice if during the twenty (20) business
days after the Indemnity Agent's receipt of such Claim Notice the
Stockholder Representatives shall have delivered to the Indemnity
Agent a written objection to the claim made in the Claim Notice
(an "Objection"). At the time of delivery of any Objection to
the Indemnity Agent, a duplicate copy of such Objection shall be
delivered to the Claiming Party.
(c) Upon receipt of an Objection pursuant to this
Agreement, the Indemnity Agent shall (1) deliver to the Claiming
Party cash out of the Indemnity Fund, in an amount equal to that
portion, if any, of the Claim which is not disputed by the
Stockholder Representatives and (2) shall designate and segregate
out of the Indemnity Fund the amount subject to the Claim which
is disputed by the Stockholder Representatives. Thereafter, the
Indemnity Agent shall not dispose of that remaining portion of
the Indemnity Fund subject to the Claim until the Indemnity Agent
shall have received a certified copy of the final decision of the
arbitrators as contemplated by this Section 11.4(c) with respect
to the Claim or Claims set forth in the Claim Notice, or the
Indemnity Agent shall have received a copy of a written agreement
between the Claiming Party and the Stockholder Representatives
resolving such dispute and setting forth the amount, if any, of
the Claim which such Claiming Party is entitled to receive. The
Indemnity Agent will pay the Claiming Party out of the Indemnity
Fund the amount that the Claiming Party is entitled to receive as
set forth in such arbitration decision after the expiration of
ten (10) business days from the receipt of such decision or, in
the event that the amount to which the Claiming Party is entitled
is established pursuant to an agreement between the Claiming
Party and the Stockholder Representatives, as soon as possible
after the Indemnity Agent's receipt of such agreement. Copies of
any written agreement between the Stockholder Representatives and
the Claiming Party confirming that the Claiming Party is entitled
to a portion but not all of the amount claimed by the Claiming
Party may be filed by the Claiming Party with the Indemnity
Agent, with the effect set forth in the preceding sentence as to
the agreed amount, but no such agreement or filing thereof shall
operate as a waiver of the Claiming Party's rights as to the
disputed amount, including without limitation its right to
recover the same, and any decision of the arbitrators as
contemplated by this Section 11.4(c) that the Claiming Party is
entitled to receive the disputed amount may be filed with the
Indemnity Agent and shall, when filed with the Indemnity Agent,
be acted on as set forth above. If the Claiming Party and the
Stockholder Representatives do not resolve a dispute regarding a
Claim within thirty (30) days after the delivery of an Objection,
either the Claiming Party or the Stockholders Representatives
may, by written notice to the other, demand arbitration of the
matter; and in such event the matter shall be settled by
arbitration conducted by three arbitrators. Within fifteen (15)
days after such written notice is sent, the Claiming Party and
the Stockholders Representatives shall each select one
arbitrator, and the two arbitrators so selected shall select a
third arbitrator. The decision of the arbitrators as to the
validity and amount of any Claim shall be binding, and conclusive
upon the parties, and the Indemnity Agent shall be entitled to
act in accordance with such decision and make or withhold
payments out of the Indemnity Fund in accordance therewith.
Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration
shall be held in Chicago, Illinois under the commercial rules
then in effect of the American Arbitration Association. The
non-prevailing party to an arbitration shall pay its own expenses,
the fees of each arbitrator, the administrative fee of the
American Arbitration Association, and the expenses, including
without limitation, attorneys' fees and costs, reasonably
incurred by the other party to the arbitration. In the case of
the Stockholder Representatives, any such payment shall be made
from the Indemnity Fund.
(d) The foregoing provisions in this Section 11.4 may
be supplemented or amended pursuant to the terms of the
definitive Indemnity Agreement.
11.5. Stockholder Representatives. (a) The
Stockholder Representatives shall act as agents of the holders of
Securities (other than Dissenting Shares and Series D Preferred
Stock) and are entitled to give and receive notices and
communications, to authorize delivery to the Parent Group Members
of the funds or other property from the Indemnity Fund in
satisfaction of claims by the Parent Group Members, to object to
such deliveries in accordance herewith and in accordance with the
Indemnity Agreement, to agree to, negotiate, enter into
settlements and compromises of, and comply with orders of courts
and awards of arbitrators with respect to such claims, and to
take all actions necessary or appropriate in the judgment of the
Stockholder Representatives for the accomplishment of the
foregoing. No bond shall be required of the Stockholder
Representatives, and the Stockholder Representatives shall
receive no compensation for their services; however, the
Stockholder Representatives shall be reimbursed for reasonable
expenses incurred in connection with their duties out of the
Indemnity Fund to the extent provided in the Indemnity Agreement.
(b) The Stockholder Representatives shall not be
liable to the holders of Securities for any act done or omitted
hereunder or under the Indemnity Agreement as Stockholder
Representatives not constituting fraud or gross negligence.
(c) The Stockholder Representatives shall treat
confidentially and not disclose any nonpublic information from or
about the Company to anyone (except on a need to know basis to
individuals who agree to treat such information confidentially).
11.6. Actions of the Stockholder Representatives. A
decision, act, consent or instruction of the Stockholder
Representatives shall constitute a decision of all holders of
Securities for whom any portion of the Indemnity Amount otherwise
issuable to them is deposited in the Indemnity Fund and shall be
final, binding and conclusive upon each such holder of
Securities, and the Indemnity Agent and Parent may rely upon any
decision, act, consent or instruction of the Stockholder
Representatives as being the decision, act, consent or
instruction of each and every such holder of Securities. The
Indemnity Agent and each Parent Group Member are hereby relieved
from any liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of the
Stockholder Representatives. For purposes of this Agreement and
the Indemnity Agreement any action by a majority of the then
Stockholder Representatives shall be deemed to be the action of
and binding upon all of the Stockholder Representatives.
11.7. Third Person Claims. In the event Parent becomes
aware of a third-party claim which Parent believes will result in
a demand against the Indemnity Fund, Parent shall notify the
Stockholder Representatives of such claim, and the Stockholder
Representatives shall be entitled, at their expense, to
participate in any defense of such claim. Parent shall have the
right in its sole discretion to settle any such claim; provided,
however, that Parent may not effect the settlement of any such
claims without the consent of the Stockholder Representatives,
which consent shall not be unreasonably withheld. In the event
that the Stockholder Representatives have consented to any such
settlement, the Stockholder Representatives shall have no power
or authority to object under Section 11.4 or any other provision
of this Article XI to the amount paid in settlement of such
claim.
ARTICLE XII
TERMINATION
12.1. Termination Rights. Anything contained in this
Agreement to the contrary notwithstanding, this Agreement may be
terminated at any time prior to the Effective Time:
(a) by mutual written consent of Parent and the
Company;
(b) by the Company if:
(i) there is a Superior Proposal and the Board of
Directors of the Company determines in good faith as advised
in writing by the Company's outside counsel that the failure
to approve such Superior Proposal would be inconsistent with
the fiduciary duties to stockholders of the Board of
Directors of the Company; provided, however, that the right
to terminate this Agreement pursuant to this clause shall
not be available (A) if the Company has breached any of its
obligations under Section 7.7, or (B) the Superior Proposal
shall not provide a greater aggregate value to the holders
of Securities than the aggregate value to such holders
pursuant to the Merger (as increased pursuant to any revised
proposal of Parent pursuant to Section 7.7); or
(ii) there has been a material breach by Parent or
Mergerco of any of their respective agreements,
representations or warranties contained herein and such
breach has not been cured within seven days following
receipt by Parent or Mergerco of notice from the Company
requesting that such breach be cured;
(c) by Parent if:
(i) the Board of Directors of the Company shall have
failed to recommend, or withdrawn, modified or amended in
any material respect its approval or recommendation of, the
Merger Agreement and the Merger or shall have resolved to do
any of the foregoing; or
(ii) there has been a material breach by the Company of
any of its agreements, representations or warranties
contained herein and such breach has not been cured within
seven days following the Company's receipt of notice from
Parent requesting that such breach be cured;
(d) by either Parent or the Company if:
(i) the Effective Time shall not have occurred on
or before June 30, 1996 (or such later date as may be
mutually agreed to by all of the parties hereto); or
(ii) at the Stockholders' Meeting, or upon any
adjournment or postponement thereof, the stockholders of the
Company shall have failed to give any approval of this
Agreement or the Merger required by applicable law.
12.2. Notice of Termination. Any party desiring to
terminate this Agreement pursuant to Section 12.1 shall give
notice of such termination to each of the other parties to this
Agreement.
12.3. Effect of Termination. In the event that this
Agreement shall be terminated pursuant to this Article XII, all
further obligations of the parties under this Agreement (other
than under Sections 13.2 and 13.9) shall be terminated without
further liability of any party to the others; provided, however,
that nothing herein shall relieve any party from liability for
its willful breach of this Agreement.
ARTICLE XIII
GENERAL PROVISIONS
13.1. Survival of Obligations. All representations,
warranties, covenants and obligations contained in this Agreement
shall survive the consummation of the transactions contemplated
by this Agreement; provided, however, that, except as otherwise
provided in Article XI, the representations and warranties
contained in Articles V and VI and in Section 7.9 shall terminate
on the first anniversary of the Effective Date. Except as
otherwise provided herein, no claim shall be made for the breach
of any representation or warranty contained in Articles V or VI
or Section 7.9 or under any certificate delivered with respect
thereto under this Agreement after the date on which such
representations and warranties terminate as set forth in this
Section.
13.2. Confidential Nature of Information; Non-Solicitation.
(a) Each party agrees that it will treat in confidence all
documents, materials and other information which it shall
have obtained regarding the other parties during the
course of the negotiations leading to the consummation of the
transactions contemplated hereby (whether obtained before or
after the date of this Agreement), the investigation provided for
herein and the preparation of this Agreement and other related
documents, and, in the event the transactions contemplated hereby
shall not be consummated, each party will return to the other
parties all copies of nonpublic documents and materials which
have been furnished in connection therewith. Such documents,
materials and information shall not be communicated to any third
Person (other than, in the case of Parent and Mergerco, to their
counsel, accountants, financial advisors or lenders, and in the
case of the Company, to its counsel, accountants or financial
advisors). No other party shall use any confidential information
in any manner whatsoever except solely for the purpose of
evaluating the proposed Merger; provided, however, that after the
Effective Time, Parent and the Surviving Corporation may use or
disclose any confidential information included in the assets of
the Company as of the Effective Time or otherwise reasonably
related to the assets or business of the Company. The obligation
of each party to treat such documents, materials and other
information in confidence shall not apply to any information
which (i) is or becomes available to such party without
restriction on disclosure from a source other than such party and
without breach of any known obligation of confidentiality, (ii)
is or becomes available to the public other than as a result of
disclosure by such party or its agents, (iii) is required to be
disclosed under applicable law or judicial process, but only to
the extent it must be disclosed, or (iv) such party reasonably
deems necessary to disclose to obtain any of the consents or
approvals contemplated hereby.
(b) Each party agrees that for a period of two years
from the date of this Agreement it will not solicit any employee
of the other parties to become an employee of or consultant to
such party or any of its Affiliates. The foregoing prohibition
on solicitation shall not apply to solicitation through general
advertisements or "head hunting" calls that are not exclusively
targeted at such employees. The provisions of this Section
13.2(b) shall cease to be effective at the Effective Time.
13.3. No Public Announcement. No party hereto shall,
without the approval of all of the other parties, make any press
release or other public announcement concerning the transactions
contemplated by this Agreement, except as and to the extent that
any such party shall be so obligated by law or the rules of any
stock exchange, in which case such party shall so advise the
other parties and all parties shall use their reasonable best
efforts to cause a mutually agreeable release or announcement to
be issued; provided that the foregoing shall not preclude
communications or disclosures necessary to implement the
provisions of this Agreement or to comply with accounting and
Securities and Exchange Commission disclosure obligations.
13.4. Notices. All notices or other communications
required or permitted hereunder shall be in writing and shall be
deemed given or delivered when delivered personally or four days
after being mailed by registered or certified mail, return
receipt requested, or one day after being sent by private
overnight prepaid courier addressed as follows:
(a) if to Parent, Mergerco or the Surviving
Corporation, to it:
c/o Tellabs International, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, XX 00000
Attention: President
and to:
Tellabs Operations, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx, XX 00000
Attention: General Counsel
with a copy to:
Sidley & Austin
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx
Xxxx X. Xxxxx
(b) if to the Company (prior to the Effective Time),
to:
Xxxxxxxxxxxx Corporation
00 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: R. Xxxxxxx Xxxxx
and to:
Xxxxxxxxxxxx Corporation
00 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxxx
with a copy to:
Xxxxx, Xxxx & Xxxxx
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
or to such other address as such party may indicate by a notice
delivered to the other parties hereto.
13.5. Successors and Assigns. (a) The rights of each
party under this Agreement shall not be assignable by such party
prior to the Effective Time without the written consent of each
of the other parties, except that the rights of Parent hereunder
may be assigned prior to the Effective Time, without the consent
of any other party hereto, to any corporation all of the
outstanding capital stock of which is owned by Parent; provided
that (i) the assignee shall assume in writing all of Parent's
obligations hereunder, (ii) Parent shall not be released from any
of its obligations hereunder by reason of such assignment and
(iii) the obligations of the Company under this Agreement shall
be subject to the delivery by such assignee, on or prior to the
Effective Time, of a certificate signed on its behalf containing
representations and warranties similar to those made by Parent in
Article VI and an opinion of internal counsel to Parent, with
respect to the assignee which is similar to the opinion with
respect to Parent to be delivered pursuant to Section 4.3.
Following the Effective Time, any party may assign any of its
rights hereunder, but no such assignment shall relieve it of its
obligations hereunder.
(b) This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their successors and per-
mitted assigns. The successors and permitted assigns hereunder
shall include without limitation, in the case of Parent, any
permitted assignee as well as the successors in interest to such
permitted assignee (whether by merger, liquidation (including
successive mergers or liquidations) or otherwise). Nothing in
this Agreement, expressed or implied, is intended or shall be
construed to confer upon any Person other than the parties and
successors and assigns permitted by this Section 13.5 any right,
remedy or claim under or by reason of this Agreement.
13.6. Entire Agreement; Amendments. This Agreement,
the Indemnity Agreement and the Exhibits and Schedules referred
to herein and the documents delivered pursuant hereto contain the
entire understanding of the parties hereto with regard to the
subject matter contained herein or therein, and supersede all
prior agreements, understandings or letters of intent between or
among any of the parties hereto, including without limitation the
Confidentiality Agreement. This Agreement shall not be amended,
modified or supplemented except by a written instrument signed by
an authorized representative of each of the parties hereto.
13.7. Interpretation. Titles to articles and headings
to sections herein are inserted for convenience of reference only
and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement. The Schedules and Exhibits
referred to herein shall be construed with and as an integral
part of this Agreement to the same extent as if they were set
forth verbatim herein. Except as expressly stated to the
contrary herein, all dollar amounts in this Agreement refer to
lawful money of the United States of America.
13.8. Waivers. Any term or provision of this Agree-
ment may be waived, or the time for its performance may be
extended, by the party or parties entitled to the benefit
thereof. Any such waiver shall be validly and sufficiently
authorized for the purposes of this Agreement if, as to any
party, it is authorized in writing by an authorized
representative of such party. The failure of any party hereto to
enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, nor in any way to
affect the validity of this Agreement or any part hereof or the
right of any party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be
held to constitute a waiver of any other or subsequent breach.
13.9. Fees and Expenses. (a) Except as otherwise
provided in this Section 13.9, each of the parties hereto shall
bear its own costs and expenses (including, without limitation,
fees and disbursements of its counsel, accountants and other
financial, legal, accounting or other advisors), incurred by it
or its Affiliates in connection with the preparation,
negotiation, execution, delivery and performance of this
Agreement and each of the documents and instruments executed in
connection with or contemplated by this Agreement and the
consummation of the transactions contemplated hereby and thereby
(collectively, "Acquisition Expenses"); provided, however, that,
except for up to $900,000 of Acquisition Expenses of the Company
relating to the transactions contemplated by this Agreement,
which $900,000 of Acquisition Expenses are attributable to and
shall be borne by the Company, the Acquisition Expenses of the
Company shall be borne entirely by the Indemnity Fund.
(b) If (A) the Company terminates this Agreement
pursuant to Section 12.1(b)(i) or Parent terminates this
Agreement pursuant to Section 12.1(c)(i) or (B) within 180 days
after either the Company or Parent terminates this Agreement
pursuant to Section 12.1(d)(ii), either an Acquisition Proposal
is consummated (other than the issuance of equity securities (i)
to generate capital for the Company's operations or (ii) not in
excess in the aggregate of 10% of the issued and outstanding
shares of Company Common Stock on the date hereof (assuming all
shares of Company Preferred Stock are converted)) or the Company
enters into an agreement with respect to an Acquisition Proposal
(other than the issuance of equity securities (i) to generate
capital for the Company's operations or (ii) not in excess in the
aggregate of 10% of the issued and outstanding shares of Company
Common Stock on the date hereof (assuming all shares of Company
Preferred Stock are converted)), then the Company shall pay
Parent $2,500,000. In the case of clause (A) above, such payment
shall occur promptly after such termination, but in no event
later than two business days after such termination, and, in the
case of clause (B) above, such payment shall occur simultaneously
with the earlier to occur of the consummation of such Acquisition
Proposal or the entry into any such agreement relating to an
Acquisition Proposal. If the Company fails to pay such amounts
when due in accordance with the immediately preceding sentence,
which failure is finally determined by a court of competent
jurisdiction, Parent shall be entitled to the payment from the
Company, in addition to such amount, of any legal fees and
expenses incurred in procuring such judicial determination. Any
termination pursuant to Section 12.1(b)(i) or Section 12.1(c)(i)
shall constitute an "Event of Default" pursuant to the Parent
Loan Agreement once 30 days shall have elapsed after such
termination.
(c) If this Agreement is terminated (i) pursuant to
Section 12.1(b)(i) or Section 12.1(c)(i), or (ii) pursuant to
Section 12.1(d)(ii) and, within 180 days of such termination
pursuant to Section 12.1(d)(ii) an Acquisition Proposal is
consummated (other than the issuance of equity securities (i) to
generate capital for the Company's operations or (ii) not in
excess in the aggregate of 10% of the issued and outstanding
shares of Company Common Stock on the date hereof (assuming all
shares of Company Preferred Stock are converted)) or the Company
enters into an agreement with respect to an Acquisition Proposal
(other than the issuance of equity securities (i) to generate
capital for the Company's operations or (ii) not in excess in the
aggregate of 10% of the issued and outstanding shares of Company
Common Stock on the date hereof (assuming all shares of Company
Preferred Stock are converted)), then the Company shall reimburse
Parent and Mergerco (not later than two business days after
submission of statements therefor) for all of their Acquisition
Expenses; provided, however, that the amount to be paid to Parent
and Mergerco pursuant to this Section 13.9(c) shall not exceed
$900,000.
13.10. Partial Invalidity. Wherever possible, each
provision hereof shall be interpreted in such manner as to be
effective and valid under applicable law, but in case any one or
more of the provisions contained herein shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such
provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability
without invalidating the remainder of such invalid, illegal or
unenforceable provision or provisions or any other provisions
hereof, unless such a construction would be unreasonable.
13.11. Execution in Counterparts. This Agreement may
be executed in two or more counterparts, each of which shall be
considered an original instrument, but all of which shall be
considered one and the same agreement, and shall become binding
when one or more counterparts have been signed by each of the
parties hereto and delivered to each of the other parties.
13.12. Further Assurances. From time to time after
the Effective Time, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the
name and on behalf of Mergerco, the Company or otherwise, such
deeds and other instruments and to take or cause to be taken such
further or other action as shall be necessary or desirable in
order to vest or perfect in or to confirm, of record or
otherwise, in the Surviving Corporation title to, and possession
of, all of the property, rights, privileges, powers, immunities
and franchises of Mergerco and the Company and otherwise carry
out the purposes of this Agreement.
13.13. Governing Law. This Agreement shall be
governed by and construed in accordance with the internal laws
(as opposed to the conflicts of law provisions) of the State of
Delaware.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed the day and year first above written.
TELLABS, INC.
By s\ Xxxxxxx X. Xxxxx
Name: Xxxxxxx X. Xxxxx
(Corporate Seal) Title: President
ATTEST:
s\ Xxxxx X. Xxxxxxxxx
Name: Xxxxx X. Xxxxxxxxx
Title: Exec. Vice President,
Treasurer, and Chief
Financial Officer
TIGER MERGER CO.
By s\ Xxxxxxx X. Xxxxx
Name: Xxxxxxx X. Xxxxx
Title: President
(Corporate Seal)
ATTEST:
s\ Xxxxx X. Xxxxxxxxx
Name: Xxxxx X. Giglielmi
Title: Vice President and
Treasurer
XXXXXXXXXXXX CORPORATION
By s\ R. Xxxxxxx Xxxxx
Name: R. Xxxxxxx Xxxxx
Title: President
(Corporate Seal)
ATTEST
s\Xxxxxxxx Xxxxxxx
Name: Xxxxxxxx Xxxxxxx
Title: Chief Financial Officer
VOTING AGREEMENT
VOTING AGREEMENT (this "Agreement"), dated as of March
__, 1996, by and among Tellabs, Inc., a Delaware corporation
("Parent"), Tiger Merger Co., a Delaware corporation and an
indirect subsidiary of Parent ("Mergerco"), and the stockholder
of Xxxxxxxxxxxx Corporation, a Delaware corporation (the
"Company"), named on the signature page hereto (the
"Stockholder").
WHEREAS, Parent, Mergerco and the Company are entering
into an Agreement of Merger of even date herewith (as the same
may be amended or supplemented, the "Merger Agreement") providing
for the merger (the "Merger") of Mergerco with and into the
Company upon the terms and subject to the conditions contained in
the Merger Agreement;
WHEREAS, the Stockholder owns the shares of capital
stock of the Company set forth on Annex I hereto (the "Subject
Shares"); and
WHEREAS, as a condition to their willingness to enter
into the Merger Agreement, Parent and Mergerco have requested
that the Stockholder enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements contained herein and other good and
valuable consideration, the adequacy of which is hereby
acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Representations and Warranties of the Stockholder.
The Stockholder hereby represents and warrants to Parent and
Mergerco as follows:
(a) Authority. The Stockholder has all requisite
power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. This Agreement
has been duly authorized, executed and delivered by the
Stockholder and constitutes a valid and binding obligation of the
Stockholder enforceable in accordance with its terms. The
execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby and
compliance with the terms hereof will not, conflict with, or
result in any violation of, or default (with or without notice or
lapse of time or both) under any provision of, any trust
agreement, loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit,
concession, franchise, license, judgment, order, notice, decree,
statute, law, ordinance, rule or regulation applicable to the
Stockholder or to the Stockholder's property or assets. No
consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality,
domestic, foreign or supranational, is required by or with
respect to the Stockholder in connection with the execution and
delivery of this Agreement or the consummation by the Stockholder
of the transactions contemplated hereby.
(b) Title. The Stockholder has good and marketable
title to the Subject Shares, free and clear of any claims, liens,
encumbrances and security interests whatsoever. The Stockholder
owns no shares of capital stock, or rights, options or warrants
to purchase shares of capital stock, of the Company except as set
forth on Annex I.
(c) No Other Rights. Except for this Agreement and
except as set forth on Schedule 5.1(f) of the Merger Agreement,
there are no voting agreements, proxies or other agreements or
instruments relating to the voting of the shares of capital stock
of the Company owned by such Stockholder.
2. Representations and Warranties of Parent and
Mergerco. Parent and Mergerco hereby represent and warrant to the
Stockholder as follows:
(a) Authority. Each of Parent and Mergerco has all
requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Parent and
Mergerco, and the consummation of the transactions contemplated
hereby, have been duly authorized by all necessary corporate
action on the part of Parent and Mergerco. This Agreement has
been duly executed and delivered by Parent and Mergerco and
constitutes a valid and binding obligation of Parent and Mergerco
enforceable in accordance with its terms.
(b) No Conflicts. The execution and delivery of this
Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will
not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time or both) under any
provision of, any trust agreement, loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment,
order, notice, decree, statute, law, ordinance, rule or
regulation applicable to Parent or Mergerco or their respective
properties or assets. No consent, approval, order or
authorization of, or registration, declaration or filing with,
any court, administrative agency or commission or other
governmental authority or instrumentality, domestic, foreign or
supranational, is required by or with respect to Parent or
Mergerco in connection with the execution and delivery of this
Agreement or the consummation by Parent and Mergerco of the
transactions contemplated hereby.
3. Covenants of the Stockholder. Up to the date of
termination of the Merger Agreement, the Stockholder agrees as
follows:
(a) Vote in Favor of Merger Agreement. At any meeting
of stockholders of the Company called to vote upon the Merger and
the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval
with respect to the Merger and the Merger Agreement is sought,
the Stockholder shall vote (or cause to be voted) the Subject
Shares in favor of the Merger, the adoption by the Company of the
Merger Agreement and the approval of the terms thereof and each
of the other transactions contemplated by the Merger Agreement.
(b) Vote Against Certain Proposals. At any meeting of
stockholders of the Company or at any adjournment thereof or in
any other circumstances upon which the Stockholder's vote,
consent or other approval is sought, the Stockholder shall vote
(or cause to be voted) the Subject Shares against (i) any merger
agreement or merger (other than the Merger Agreement and the
Merger), consolidation, combination, sale of substantial assets,
reorganization, recapitalization, dissolution, liquidation or
winding up of or by the Company or any Acquisition Proposal (as
defined in the Merger Agreement) or (ii) any amendment of the
Company's certificate of incorporation or by-laws or other
proposal or transaction involving the Company or any of its
subsidiaries, which amendment or other proposal or transaction
would in any manner impede, frustrate, prevent or nullify the
Merger Agreement, the Merger or any of the other transactions
contemplated by the Merger Agreement.
(c) No Sale, Transfer or Other Agreements. The
Stockholder agrees not to (i) other than by operation of law,
sell, transfer, pledge, assign or otherwise dispose of, or enter
into any contract, option or other arrangement (including any
profit sharing arrangement) with respect to the sale, transfer,
pledge, assignment or other disposition of, the Subject Shares to
any person other than Mergerco or Mergerco's designee or (ii)
enter into any voting arrangement, whether by proxy, voting
agreement or otherwise, in connection, directly or indirectly,
with any Acquisition Proposal.
(d) No Solicitation. The Stockholder shall not, nor
shall it permit any investment banker, attorney or other adviser
or representative of the Stockholder to, (i) directly or
indirectly solicit, initiate or encourage the submission of, any
Acquisition Proposal or (ii) directly or indirectly participate
in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal.
(e) Irrevocable Proxy. In the event that the
Stockholder shall breach its covenants set forth in this Section
3, the Stockholder (without any further action on the
Stockholder's part) shall be deemed to have hereby irrevocably
appointed Parent as the attorney and proxy of the Stockholder
pursuant to the provisions of Section 212 of the Delaware General
Corporation Law, with full power of substitution, to vote
(including by execution of any written consent or otherwise) all
of the Subject Shares that the Stockholder is entitled to vote at
any meeting of stockholders of the Company (whether annual or
special and whether or not an adjourned or postponed meeting) or
in connection with any consent in lieu of any such meeting, as
set forth in Sections 3(a) and 3(b); provided, that in any such
vote or other action pursuant to such proxy, Parent shall not
have the right (and such proxy shall not confer the right) to
vote to reduce the consideration to be paid in exchange for the
Subject Shares in the Merger or to otherwise modify or amend the
Merger Agreement to reduce the rights or benefits of the Company
or any stockholders of the Company (including the Stockholder)
under the Merger Agreement or to reduce the obligations of Parent
and/or Mergerco thereunder;
THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE AND
COUPLED WITH AN INTEREST. The Stockholder hereby revokes,
effective upon the execution and delivery of the Merger Agreement
by the parties thereto, all other proxies and powers of attorney
with respect to the Subject Shares that the Stockholder may have
heretofore appointed or granted, and no subsequent proxy or power
of attorney (except in furtherance of the Stockholder's
obligations under this Section 3) shall be given or written
consent executed (and if given or executed, shall not be
effective) by the Stockholder with respect to the matters
described in Sections 3(a) and 3(b) so long as this Agreement
remains in effect.
(f) Other Voting Agreements. The Stockholder agrees
that, during the term of this Agreement, such Stockholder will
not become a party to or cause such Stockholder's Subject Shares
to become subject to any voting agreement or other agreement
relating to the voting of such Stockholder's Subject Shares,
except for this Agreement or any amendment hereto.
(4) Further Assurances. The Stockholder will, from
time to time, execute and deliver, or cause to be executed and
delivered, such additional or further transfers, assignments,
endorsements, consents and other instruments as Parent or
Mergerco may reasonably request for the purpose of effectively
carrying out the transactions contemplated by this Agreement.
(5) Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by
any of the parties without the prior written consent of the other
parties, except that Mergerco 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 will
be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
(6) Termination. This Agreement shall terminate upon
the termination of the Merger Agreement.
(7) General Provisions.
(a) Expenses. Except as set forth in Merger
Agreement, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expense.
(b) Amendments. This Agreement may not be amended
except by an instrument in writing signed by each of the parties
hereto.
(c) Notice. All notices and other communications
hereunder shall be in writing and shall be deemed given if
delivered personally or sent by overnight courier (providing
proof of delivery) to the parties at the following addresses (or
at such other address for a party as shall be specified by like
notice):
(i) if to Parent or Mergerco, to:
c/o Tellabs International, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
Attention: President
and to:
Tellabs Operations, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attention: General Counsel
with a copy to:
Sidley & Austin
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxx
Xxxx X. Xxxxx
(ii) if to the Stockholder, to the address set forth on
Annex I hereto.
with a copy to:
Xxxxx, Xxxx & Xxxxx
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
(d) Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section to
this Agreement unless otherwise indicated. The headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement. Wherever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation".
(e) Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one
and the same agreement, and shall become effective when one or
more of the counterparts have been signed by each of the parties
and delivered to the other party, it being understood that each
party need not sign the same counterpart.
(f) Entire Agreement; No Third-Party Beneficiaries.
This Agreement (including the documents and instruments referred
to herein) (i) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof and
(ii) is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
(g) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Delaware without regard to any applicable conflicts of law.
8. Stockholder Capacity. No person executing this
Agreement who is or becomes during the term hereof a director or
officer of the Company makes any agreement or understanding
herein in his or her capacity as such director or officer. Each
Stockholder executes this Agreement solely in his or her capacity
as the record holder and beneficial owner of, or the trustee of a
trust whose beneficiaries are the beneficial owners of, such
Stockholder's Subject Shares and nothing herein shall limit or
affect any actions taken by a Stockholder in his or her capacity
as an officer or director of the Company to the extent
specifically permitted by the Merger Agreement.
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 or were otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any
court of the United States located in the State of Delaware or in
a Delaware state court, this being in addition to any other
remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (i) consents to submit such
party to the personal jurisdiction of any Federal court located
in the State of Delaware or any Delaware state court in the event
any dispute arises out of this Agreement or any of the
transactions contemplated hereby, (ii) agrees that such party
will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court, (iii)
agrees that such party will not bring any action relating to this
Agreement or any of the transactions contemplated hereby in any
court other than a Federal court sitting in the State of Delaware
or a Delaware state court and (iv) waives any right to trial by
jury with respect to any claim or proceeding related to or
arising out of this Agreement or any of the transactions
contemplated hereby.
IN WITNESS WHEREOF, each of Parent, Mergerco and the
Stockholder has caused this Agreement to be signed by its officer
thereunto duly authorized as of the date first written above.
TELLABS, INC.
By: ______________________________
Name:
Title:
TIGER MERGER CO.
By: ______________________________
Name:
Title:
[STOCKHOLDER]
By: ______________________________
Name:
Title:
INDEMNITY ESCROW AGREEMENT
This INDEMNITY ESCROW AGREEMENT (the "Indemnity
Agreement"), is dated as of _______ __, 1996 among Tellabs, Inc.,
a Delaware corporation ("Parent"), __________ and __________
(the "Stockholder Representatives"), and The First National Bank
of Chicago, as indemnity and escrow agent (the "Indemnity
Agent").
W I T N E S S E T H:
WHEREAS, Xxxxxxxxxxxx Corporation, a Delaware
corporation (the "Company), Tiger Merger Co., a Delaware
corporation ("Mergerco"), and Parent are parties to that certain
Agreement of Merger, dated as of March __, 1996 (the "Merger
Agreement"), pursuant to which Mergerco shall be merged with and
into the Company (the "Merger"), with the Company being the
surviving corporation (as such, the "Surviving Corporation");
WHEREAS, the stockholders of the Company have approved
the Merger Agreement;
WHEREAS, under the Merger Agreement all Parent Group
Members (as defined in the Merger Agreement) shall be
indemnified, held harmless and reimbursed as provided in Article
XI of the Merger Agreement;
WHEREAS, to ensure that funds will be available to
indemnify, hold harmless and reimburse the Parent Group Members
as required by Article XI of the Merger Agreement, Section 3.7 of
the Merger Agreement provides that in connection with the Merger,
$2,500,000 from the amounts payable under Article III thereof
(the "Indemnity Amount") shall be deposited with the Indemnity
Agent in an escrow account established pursuant to this Indemnity
Agreement and held, invested and subsequently disbursed in
accordance with the terms of this Indemnity Agreement (such
Indemnity Amount, together with any interest earned and gains
received thereon (net of any payment to Parent pursuant to
Paragraph 5(b)) being herein collectively referred to as the
"Indemnity Fund").
WHEREAS, the Merger Agreement provides for the
Stockholder Representatives to act in accordance herewith in
connection with this Indemnity Agreement and the indemnification
obligations contained in the Merger Agreement; and
WHEREAS, the Indemnity Agent has agreed to hold the
Indemnity Amount pursuant to the terms of this Indemnity
Agreement;
NOW, THEREFORE, in consideration of the mutual promises
and covenants herein contained, the parties hereto agree as
follows:
1. Definitions.
Capitalized terms used but not defined herein shall
have the meanings set forth in the Merger Agreement.
2. Deposit and Use of Indemnity Amount.
(a) Immediately after the Effective Time, the
Indemnity Amount shall be deposited by Parent in escrow with the
Indemnity Agent.
(b) Immediately after receipt from Parent of the
Indemnity Amount, the Indemnity Agent shall confirm to the Parent
and the Stockholder Representatives such receipt in writing.
(c) The Indemnity Agent agrees to hold, invest and
disburse the Indemnity Fund and to act as Indemnity Agent in
accordance with the terms, conditions and provisions of this
Indemnity Agreement.
3. Disposition of Indemnity Amount.
(a) Each Parent Group Member shall be entitled to
receive payment directly from the Indemnity Agent out of the
Indemnity Fund in the amount which, at any time and from time to
time, such Parent Group Member is entitled to be indemnified,
reimbursed and held harmless from the Indemnity Fund as provided
in Article XI of the Merger Agreement, in each case in accordance
with the following provisions.
(i) If any Parent Group Member (individually or
collectively, the "Claiming Party") wishes to make a claim
for indemnification from the Indemnity Fund with respect to
Losses or Expenses, the Claiming Party shall so notify the
Indemnity Agent in writing (the "Claim Notice") of the facts
giving rise to such claim for indemnification under the
Merger Agreement. The Claim Notice shall be accompanied by
a certificate of the Claiming Party attesting to the
Claiming Party's contemporaneous delivery of a duplicate
copy of the Claim Notice to the Stockholder Representatives.
Such Claim Notice shall describe in reasonable detail (to
the extent then known) such Losses or Expenses and the
method of computation of such Losses or Expenses and contain
a reference to the provisions of the Merger Agreement in
respect of which such Loss or Expense shall have occurred.
If the Claiming Party is not Parent, the Claim Notice must
be accompanied by a certificate from Parent confirming that
the Claiming Party is a Parent Group Member. Subject to
Paragraph 3(a)(ii), the Indemnity Agent shall, on the
twentieth (20th) business day after receipt of a Claim
Notice with respect to any claim for indemnification the
amount of which is specified therein, pay or deliver to the
Claiming Party, for its account the Indemnity Fund or a
portion thereof specified in the Claim Notice. Payment
shall be delivered as specified in the Claim Notice.
(ii) At the time of delivery of any Claim Notice to the
Indemnity Agent, a duplicate copy of such Claim Notice shall
be delivered to the Stockholder Representatives.
Notwithstanding the provisions of Paragraph 3(a)(i), the
Indemnity Agent shall not make any payment of the Indemnity
Fund or any portion thereof with respect to a Claim Notice
if during the twenty (20) business days after the Indemnity
Agent's receipt of such Claim Notice (the "Response Period")
the Stockholder Representatives shall have delivered to the
Indemnity Agent a written objection to the claim made in the
Claim Notice (an "Objection"). At the time of delivery of
any Objection to the Indemnity Agent, a duplicate copy of
such Objection shall be delivered to the Claiming Party.
(iii) If the Indemnity Agent does not receive an
Objection within the Response Period with respect to any
claim for indemnification the amount of which is specified,
then the Stockholder Representatives shall be deemed to have
acknowledged the correctness of such claim for the full
amount thereof as specified in the Claim Notice, and the
Indemnity Agent, shall deliver to the Claiming Party out of
the Indemnity Fund cash in the amount specified in the Claim
Notice, or the balance thereof if less than the amount so
specified in the Claim Notice, as set forth in Paragraph
3(a)(i).
(iv) Upon receipt of an Objection during the applicable
Response Period, the Indemnity Agent shall (1) deliver to
the Claiming Party cash out of the Indemnity Fund, in an
amount equal to that portion, if any, of the Claim which is
not disputed by the Stockholder Representatives and (2)
shall designate and segregate out of the Indemnity Fund the
amount subject to the Claim which is disputed by the
Stockholder Representatives. Thereafter, the Indemnity
Agent shall not dispose of that remaining portion of the
Indemnity Fund subject to the Claim until the Indemnity
Agent shall have received a certified copy of the final
decision of the arbitrators as contemplated by Paragraph (v)
immediately below with respect to the Claim or Claims set
forth in the Claim Notice, or the Indemnity Agent shall have
received a copy of a written agreement between the Claiming
Party and the Stockholder Representatives resolving such
dispute and setting forth the amount, if any, of the Claim
which such Claiming Party is entitled to receive. The
Indemnity Agent will pay the Claiming Party out of the
Indemnity Fund the amount that the Claiming Party is
entitled to receive as set forth in such arbitration
decision after the expiration of ten (10) business days from
the receipt of such decision or, in the event that the
amount to which the Claiming Party is entitled is
established pursuant to an agreement between the Claiming
Party and the Stockholder Representatives, as soon as
possible after the Indemnity Agent's receipt of such
agreement. Copies of any written agreement between the
Stockholder Representatives and the Claiming Party
confirming that the Claiming Party is entitled to a portion
but not all of the amount claimed by the Claiming Party may
be filed by the Claiming Party with the Indemnity Agent,
with the effect set forth in the preceding sentence as to
the agreed amount, but no such agreement or filing thereof
shall operate as a waiver of the Claiming Party's rights as
to the disputed amount, including without limitation its
right to recover the same, and any final decision of the
arbitrators that the Claiming Party is entitled to receive
the disputed amount may be filed with the Indemnity Agent
and shall, when filed with the Indemnity Agent, be acted on
as set forth above.
(v) If the Claiming Party and the Stockholder
Representatives do not resolve a dispute regarding a Claim
within thirty (30) days after the delivery of an Objection,
either the Claiming Party or the Stockholders
Representatives may, by written notice to the other, demand
arbitration of the matter; and in such event the matter
shall be settled by arbitration conducted by three
arbitrators. Within fifteen (15) days after such written
notice is sent, the Claiming Party and the Stockholders
Representatives shall each select one arbitrator, and the
two arbitrators so selected shall select a third arbitrator.
The decision of the arbitrators as to the validity and
amount of any Claim shall be binding, and conclusive upon
the parties, and the Indemnity Agent shall be entitled to
act in accordance with such decision and make or withhold
payments out of the Indemnity Fund in accordance therewith.
Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such
arbitration shall be held in Chicago, Illinois under the
commercial rules then in effect of the American Arbitration
Association. The non-prevailing party to an arbitration
shall pay its own expenses, the fees of each arbitrator, the
administrative fee of the American Arbitration Association,
and the expenses, including without limitation, attorneys'
fees and costs, reasonably incurred by the other party to
the arbitration. In the case of the Stockholder
Representatives, any such payment shall be made from the
Indemnity Fund.
(b) The Indemnity Agent shall not dispose of all or
any portion of the Indemnity Fund other than as provided in this
Indemnity Agreement.
4. Delivery of Indemnity Amount Upon Termination.
(a) On the first anniversary of the Effective Date
(the "Distribution Date"), the Indemnity Agent shall, subject to
the provisions of Paragraph 5 below, deliver to the Paying Agent
(as defined in the Merger Agreement) (or, if the Paying Agency
Agreement shall then have terminated, to Parent) an amount (the
"Distribution Amount") equal to (A) the amount remaining in the
Indemnity Fund, less (B) any amount designated as subject to a
Claim pursuant to a Claim Notice to the extent such Claim has not
been resolved prior to such date, less (C) any amount previously
designated in writing by the Stockholder Representatives to the
Indemnity Agent (with a copy delivered to Parent) as amounts that
should be withheld to cover their expenses incurred in connection
with their activities hereunder (to the extent the Indemnity
Agent shall then have received written notice from the
Stockholder Representatives to such effect in accordance with
Paragraph 7(c)). Upon its receipt of such Distribution Amount,
the Paying Agent or Parent, as the case may be, shall disburse
the Distribution Amount in accordance with the terms of the
Merger Agreement. Any amount retained in escrow after the
Distribution Date shall be held by the Indemnity Agent and shall
be used to indemnify the Parent Group Members subject to the
terms and conditions of this Indemnity Agreement and upon
resolution and payment out of the Indemnity Fund in satisfaction
of applicable pending Claims, any remaining amounts in escrow
shall be paid to the Stockholder Representatives with respect to
out of pocket expenses incurred by them in connection with their
activities hereunder (to the extent the Indemnity Agent shall
then have received written notice from the Stockholder
Representatives to such effect in accordance with Paragraph
7(c)), and any remaining amounts shall be distributed to the
Paying Agent (or, if the Paying Agency Agreement shall then have
terminated, to Parent), who shall disburse such portion in the
manner set forth in the preceding sentence.
(b) Upon distribution of the entire amount of the
Indemnity Fund, the Indemnity Agent shall give the Paying Agent
notice to such effect. Such notice shall be given to the
following address, or to such other address as Parent may
designate:
First Chicago Trust Company of New York
000 Xxxxxxxxxx Xxxx.
Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Tenders & Exchanges Administration
Upon such distribution, this Indemnity Agreement shall be
terminated.
(c) At any time prior to final termination of the
Indemnity as provided in Paragraph 4(b), the Indemnity Agent
shall, if so instructed in a writing signed by Parent and the
Stockholder Representatives, release from the Indemnity Fund to
Parent or the Paying Agent, as directed, the amount of cash
specified in such writing.
5. Investments; Interest.
(a) The Indemnity Agent is hereby authorized and
directed to hold the Indemnity Fund in a segregated escrow
account and to disburse such Indemnity Fund only in accordance
with the terms of this Indemnity Agreement. From the date hereof
until the date of disbursement of the Indemnity Fund pursuant to
Paragraph 4 of this Indemnity Agreement, the Indemnity Agent is
authorized and directed to invest and reinvest the Indemnity Fund
in any of the following investments in each case pursuant to
joint instructions of the Parent and the Stockholder
Representatives: (i) readily marketable obligations maturing
within six (6) months after the date of acquisition thereof
issued by the United States of America or any agency or
instrumentality thereof; (ii) readily marketable obligations
maturing within six (6) months after the date of acquisition
thereof issued by any state or municipality within the United
States of America, or any political subdivision, agency or
instrumentality thereof, rated "A" or better by either Standard &
Poor's Corporation or Xxxxx'x Investors Service Inc.; (iii)
readily marketable commercial paper maturing within one hundred
eighty (180) days after the date of issuance thereof which has
the highest credit rating of either Standard & Poor's Corporation
or Xxxxx'x Investors Service, Inc.; or (iv) 6 month certificates
of deposit issued by any bank incorporated and doing business
pursuant to the laws of the United States of America or any state
thereof having combined capital and surplus of at least
$500,000,000. In the event the Indemnity Agent does not receive
joint instructions from Parent and the Stockholder
Representatives to invest or reinvest the Indemnity Fund or any
portion thereof, the Indemnity Agent agrees to invest and
reinvest such funds in the Prairie Institutional Treasury Prime
Cash Management Fund, or a successor or similar fund agreed to by
Parent and the Stockholder Representatives in writing, which
invests in direct obligations of, or obligations fully guaranteed
as to principal and interest by the United States Government and
repurchase agreements with respect to such securities. Interest
accruing on, and any profit resulting from, such investments
shall be added to, and become a part of, the Indemnity Fund
pursuant to this Indemnity Agreement less the payments to Parent
required under Paragraph 5(b). For purposes of this Indemnity
Agreement, "interest" on the Indemnity Fund shall include all
proceeds thereof and investment earnings with respect thereto.
The Indemnity Agent shall have full power and authority to sell
any and all securities held by it under this Indemnity Agreement
as necessary to make disbursements in cash under Paragraph 3 and
this Paragraph 4 of this Indemnity Agreement. The Indemnity
Agent, Parent, the Surviving Corporation and the Stockholder
Representatives shall not be responsible for any unrealized
profit or realized loss realized on such investments.
(b) The Indemnity Agent shall promptly pay to the
Parent from funds held hereunder at the end of each calendar
quarter and immediately prior to termination of this Indemnity
Agreement an amount equal to the product of (i) the accrued
interest and net gains earned on the investments during such
calendar quarter or during the calendar quarter in which such
termination occurs, as the case may be, and (ii) 39%.
6. Liability and Compensation of Indemnity Agent.
The duties and obligations of the Indemnity Agent
hereunder shall be determined solely by the express provisions of
this Indemnity Agreement, and the Indemnity Agent shall, in
determining its duties hereunder, be under no obligation to refer
to any other documents between or among the parties related in
any way to this Indemnity Agreement, it being specifically
understood that the following provisions are accepted by all of
the parties hereto. Parent shall indemnify and hold the
Indemnity Agent harmless from and against any and all liability
and expense which may arise out of any action taken or omitted by
the Indemnity Agent in accordance with this Indemnity Agreement,
except such liability and expense as may result from the gross
negligence or willful misconduct of the Indemnity Agent. Parent
shall be entitled to be reimbursed out of the Indemnity Fund for
fifty percent (50%) of any amount that Parent is required to pay
to the Indemnity Agent pursuant to such indemnification
obligation.
(a) The Indemnity Agent shall not be liable to any
person by reason of any error of judgment or for any act done or
step taken or omitted by it, or for any mistake of fact or law or
anything which it may do or refrain from doing in connection
herewith unless caused by or arising out of its own gross
negligence or willful misconduct.
(b) The Indemnity Agent shall be entitled to rely on,
and shall be protected in acting in reliance upon, any
instructions or directions furnished to it in writing signed by
both Parent and the majority of the Stockholder Representatives
pursuant to any provision of this Indemnity Agreement and shall
be entitled to treat as genuine, and as the document it purports
to be, any letter, paper or other document furnished to it by any
Parent Group Member or the Stockholder Representatives, and
believed by the Indemnity Agent to be genuine and to have been
signed and presented by the proper party or parties. In
performing its obligations hereunder, the Indemnity Agent may
consult with counsel to the Indemnity Agent and shall be entitled
to rely on, and shall be protected in acting in reliance upon the
advice or opinion of such counsel.
(c) The Indemnity Agent shall be entitled to its
customary fee for the performance of services by the Indemnity
Agent hereunder for each year or portion thereof that any portion
of the Indemnity Fund remains in escrow and shall be reimbursed
for reasonable costs and expenses incurred by it in connection
with the performance of such services (such fees, costs and
expenses are hereinafter referred to as the "Indemnity Agent's
Compensation"). The Indemnity Agent shall render statements to
Parent setting forth in detail the Indemnity Agent's Compensation
and the basis upon which the Indemnity Agent's Compensation was
computed. The Indemnity Agent's Compensation shall be paid by
Parent.
(d) The Indemnity Agent may resign at any time by
giving sixty (60) days written notice to Parent and the
Stockholder Representatives; provided that such resignation shall
not be effective unless and until a successor Indemnity Agent has
been appointed and accepts such position pursuant to the terms of
this Paragraph 6(d). In such event, Parent and the Stockholder
Representatives shall appoint a successor Indemnity Agent or, if
Parent and the Stockholder Representatives are unable to agree
upon a successor Indemnity Agent within sixty (60) days after
such notice, the Indemnity Agent shall be entitled to appoint its
own successor, provided that such successor is a reputable
national banking association. Such appointment, whether by
Parent and the Stockholder Representatives, on the one hand, or
the Indemnity Agent, on the other hand, shall be effective on the
effective date of the aforesaid resignation (the "Indemnity
Transfer Date"). On the Indemnity Transfer Date, all right title
and interest to the Indemnity Fund, including interest thereon,
shall be transferred to the successor Indemnity Agent and this
Indemnity Agreement shall be assigned by the Indemnity Agent to
such successor Indemnity Agent, and thereafter, the resigning
Indemnity Agent shall be released from any further obligations
hereunder. The Indemnity Agent shall continue to serve until its
successor is appointed, accepts the Indemnity and receives the
transferred Indemnity Fund.
(e) The Indemnity Agent shall not have any right,
claim or interest in any portion of the Indemnity Fund except in
its capacity as Indemnity Agent hereunder.
7. Stockholder Representatives.
(a) Pursuant to the Merger Agreement, the Stockholder
Representatives are authorized to give and receive notices and
communications, to authorize delivery to Parent of all or a
portion of the Indemnity Amount in satisfaction of claims of
Parent, to object to such deliveries, to agree to, negotiate,
enter into settlements and compromises of, and comply with orders
of courts and awards of arbitrators with respect to such claims,
and to take all actions necessary or appropriate in the judgment
of the Stockholder Representatives for the accomplishment of the
foregoing.
(b) The Stockholder Representatives shall not be
liable to any holder of Securities for any act done or omitted
under the Merger Agreement or hereunder as Stockholder
Representatives not constituting fraud or gross negligence.
(c) The Stockholder Representatives shall receive no
compensation for their services hereunder. At least five (5)
days prior to thirty (30) days after the first anniversary of the
Effective Date, the Stockholder Representatives shall deliver
notice to the Indemnity Agent and Parent setting forth the amount
of the reasonable expenses incurred by the Stockholder
Representatives in connection with their duties under the Merger
Agreement and hereunder (the "Stockholder Representatives'
Expenses"), which expenses shall be reimbursed pursuant to the
terms of Paragraph 4.1(a). Any expenses of the Stockholder
Representatives not reimbursed pursuant to Paragraph 4.1(a) shall
be reimbursed by the holders of Securities entitled to
distributions under this Indemnity Agreement on a pro rata basis.
(d) Neither Parent, any Parent Group Member nor the
Indemnity Agent shall be responsible or liable for any acts or
omissions of any Stockholder Representative in such Stockholder
Representative's capacity as such, and each of them may rely on
any action or writing of majority of the Stockholder
Representatives as being binding on all Stockholder
Representatives for all purposes.
8. Taxes.
All interest and net gains earned on the Indemnity Fund
shall be accounted for by the Indemnity Agent separately from the
Indemnity Fund and shall be treated as having been received by
the Parent and included in its income for tax purposes. The
Indemnity Agent shall, consistent with such treatment, arrange
that for income tax reporting and withholding purposes Parent is
named or treated as the payee of such amounts. In this regard,
Parent shall provide the Indemnity Agent with any certification
or forms required under any applicable tax laws.
9. Representations and Warranties.
(a) Each of Parent, the Indemnity Agent and each
Stockholder Representative, to the extent any such Stockholder
Representative is a corporation or partnership, represents and
warrants to each of the other parties hereto that it is a
corporation or partnership duly organized, validly existing and
in good standing under the laws of its jurisdiction of formation;
that it has the corporate or partnership power and authority to
execute and deliver this Indemnity Agreement and to perform its
obligations hereunder; that the execution, delivery and
performance of this Indemnity Agreement by it has been duly
authorized and approved by all necessary corporate or partnership
action; that this Indemnity Agreement constitutes its legal,
valid and binding obligation, enforceable against it in
accordance with its terms; and that the execution, delivery and
performance of this Indemnity Agreement by it will not result in
a breach of or loss of rights under or constitute a default under
or a violation of any trust (constructive or other), agreement,
judgment, decree, order or other instrument to which it is a
party or it or its properties or assets may be bound.
(b) Each Stockholder Representative, to the extent
such Stockholder Representative is an individual, represents to
each of the other parties hereto that he or she has the power and
authority to execute and deliver this Indemnity Agreement and to
perform his or her obligations hereunder; that this Indemnity
Agreement constitutes his or her legal, valid and binding
obligation, enforceable against him or her in accordance with its
terms; and that the execution, delivery and performance of this
Indemnity Agreement by him or her will not result in a breach of
or loss of rights under or constitute a default under or a
violation of any trust (constructive or other), agreement,
judgment, decree, order or other instrument to which he or she is
a party or his or her properties or assets may be bound.
10. Benefit; Successor and Assigns.
This Indemnity Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and permitted assigns but shall not be assignable by
any party hereto without the written consent of all of the other
parties hereto; provided, however, that Parent may assign its
rights and delegate its obligations hereunder to any person to
whom the rights of Mergerco may be assigned under the Merger
Agreement and to any successor corporation in the event of a
merger, consolidation or transfer or sale of all or substantially
all of their respective stock or assets and that the Indemnity
Agent may assign its rights hereunder to a successor Indemnity
Agent appointed hereunder. Except for the persons specified in
the preceding sentence, this Indemnity Agreement is not intended
to confer on any person not a party hereto any rights or remedies
hereunder.
11. Notices.
All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given
or delivered when delivered personally or four days after being
mailed by registered or certified mail, return receipt requested,
or one day after being sent by private prepaid overnight courier
addressed as follows:
If to the Indemnity Agent:
The First National Bank of Chicago
One First Xxxxxxxx Xxxxx - Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Corporate Trust Administrator
If to Parent or any Parent Group Member, to it:
c/o Tellabs International, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, XX 00000
Attention: President
And to:
Tellabs Operations, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx, XX 00000
Attention: General Counsel
With copy to:
Sidley & Austin
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx
Xxxx X. Xxxxx
If to the Stockholder Representatives:
__________________
__________________
__________________
With copy to:
Xxxxx, Xxxx & Xxxxx
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
or such other address as the Indemnity Agent, Parent or the
Stockholder Representatives, as the case may be, shall designate
in writing to the parties hereto; provided that the Stockholder
Representatives may not specify more than one address at any
time.
12. Governing Law.
This Indemnity Agreement shall be governed by and
construed in accordance with the laws (as opposed to conflicts of
law provisions) of the State of Illinois.
13. Counterparts.
This Indemnity Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
14. Headings.
The section headings contained in this Indemnity
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Indemnity
Agreement.
15. Partial Invalidity.
Wherever possible, each provision hereof shall be
interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such provision shall be
ineffective in the jurisdiction involved to the extent, but only
to the extent, of such invalidity, illegality or unenforceability
without invalidating the remainder of such invalid, illegal or
unenforceable provision or provisions or any other provisions
hereof, unless such a construction would be unreasonable.
16. Entire Agreement; Modification and Waiver.
This Indemnity Agreement and the Merger Agreement
embody the entire agreement and understanding among the parties
hereto with respect to the subject matter hereof and supersede
any and all prior agreements and understandings relating to the
subject matter hereof. Notwithstanding the preceding sentence,
the parties hereto acknowledge that the Indemnity Agent is not a
party to nor is it bound by the Merger Agreement. No amendment,
modification or waiver of this Indemnity Agreement shall be
binding or effective for any purpose unless it is made in a
writing signed by the party against whom enforcement of such
amendment, modification or waiver is sought. No course of
dealing between the parties to this Indemnity Agreement shall be
deemed to affect or to modify, amend or discharge any provision
or term of this Indemnity Agreement. No delay by any party to or
any beneficiary of this Indemnity Agreement in the exercise of
any of its rights or remedies shall operate as a waiver thereof,
and no single or partial exercise by any party to or any
beneficiary of this Agreement of any such right or remedy shall
preclude any other or further exercise thereof. A waiver of any
right or remedy on any one occasion shall not be construed as a
bar to or waiver of any such right or remedy on any other
occasion.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Indemnity Agreement as of the date first above
written.
THE FIRST NATIONAL BANK OF CHICAGO
By: _______________________________
Its: ______________________________
TELLABS, INC.
By: _______________________________
Its: ______________________________
_______________________________
Stockholder Representatives
_______________________________
Stockholder Representatives
Listed below are the Schedules to the Merger Agreement which have been
omitted from this exhibit. The issuer will supplementally furnish a
copy of any omitted Schedules to the Commission upon request.
Schedules
---------
- Representations and Warranties of the Company
5.1 Organization and Capital Structure
Schedule 5.1(a)
Schedule 5.1(b)
Schedule 5.1(c)
Schedule 5.1(e)
Schedule 5.1(f)
5.2 Subsidiaries and Investments
Schedule 5.2
5.3 Authority
Schedule 5.3
5.4 Financial Statements
Schedule 5.4
5.5 Operations Since Balance Sheet Date
Schedule 5.5(a)
Schedule 5.5(b)
5.6 No Undisclosed Liabilities
Schedule 5.6
5.7 Taxes
Schedule 5.7
5.8 Availability of Assets and Legality of Use
Schedule 5.8
5.9 Governmental Permits
Schedule 5.9(a)
Schedule 5.9(b)
- Representations and Warranties of the Company
5.11 Real Property Leases
Schedule 5.11
5.13 Personal Property
Schedule 5.13
5.14 Personal Property Leases
Schedule 5.14
5.15 Intellectual Property; Software
Schedule 5.15
5.17 Title to Property
Schedule 5.17
5.18 Employee Benefit Plans
Schedule 5.18(a)
Schedule 5.18(b)
Schedule 5.18(c)
Schedule 5.18(e)
Schedule 5.18(f)
Schedule 5.18(i)
5.19 Employee Relations
Schedule 5.19(a)
Schedule 5.19(b)
5.20 Contracts; Products Warranties
Schedule 5.20
5.21 Status of Contracts
Schedule 5.21
5.22 No Violation, Litigation or Regulatory Action
Schedule 5.22
- Representations and Warranties of the Company
5.23 Environmental Matters
Schedule 5.23
5.24 Insurance
Schedule 5.24
5.25 Customers and Suppliers
Schedule 5.25
5.26 Budgets
Schedule 5.26
- Representations and Warranties of the Parent and Mergerco
6.4 No Litigation or Regulatory Action
Schedule 6.4
- Conditions Precedent to Obligations of Parent and Mergerco
9.5 Necessary Consents
Schedule 9.5
