1
Exhibit 1
KOMAG, INCORPORATED
MERGER AGREEMENT CONCERNING TRANSACTION INVOLVING
KOMAG, INCORPORATED AND HMT TECHNOLOGY CORP.
[FINAL EXECUTION COPY]
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
KOMAG, INCORPORATED,
KHM, INC.
AND
HMT TECHNOLOGY CORP.
DATED AS OF APRIL 26, 2000
2
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER.............................................................................2
1.1 The Merger........................................................................2
1.2 Effective Time; Closing...........................................................2
1.3 Effect of the Merger..............................................................2
1.4 Certificate of Incorporation and Bylaws of Surviving Corporation..................2
1.5 Board of Directors; Officers......................................................2
1.6 Effect on Capital Stock...........................................................3
1.7 Surrender of Certificates.........................................................4
1.8 No Further Ownership Rights in Company Common Stock...............................5
1.9 Lost, Stolen or Destroyed Certificates............................................5
1.10 Tax and Accounting Consequences...................................................6
1.11 Taking of Necessary Action; Further Action........................................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................6
2.1 Organization of the Company.......................................................6
2.2 The Company Capital Structure.....................................................7
2.3 Obligations With Respect to Capital Stock.........................................7
2.4 Authority.........................................................................7
2.5 SEC Filings; The Company Financial Statements.....................................8
2.6 Absence of Certain Changes or Events..............................................9
2.7 Taxes............................................................................10
2.8 Company Intellectual Property....................................................11
2.9 Compliance; Permits; Restrictions................................................13
2.10 Litigation.......................................................................13
2.11 Brokers' and Finders' Fees.......................................................13
2.12 Employee Benefit Plans...........................................................14
2.13 Absence of Liens and Encumbrances................................................15
2.14 Environmental Matters............................................................15
2.15 Labor Matters....................................................................16
2.16 Agreements, Contracts and Commitments............................................16
2.17 Statements; Proxy Statement/Prospectus...........................................17
2.18 Board Approval...................................................................18
2.19 State Takeover Statutes..........................................................18
2.20 Fairness Opinion.................................................................18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.............................18
3.1 Organization of Parent...........................................................18
3.2 Parent Capital Structure.........................................................19
3.3 Obligations With Respect to Capital Stock........................................19
3.4 Authority........................................................................20
3.5 SEC Filings; Parent Financial Statements.........................................21
-i-
3
TABLE OF CONTENTS
(CONTINUED)
PAGE
3.6 Absence of Certain Changes or Events.............................................22
3.7 Taxes............................................................................22
3.8 Parent Intellectual Property.....................................................23
3.9 Compliance; Permits; Restrictions................................................24
3.10 Litigation.......................................................................24
3.11 Brokers' and Finders' Fees.......................................................25
3.12 Employee Benefit Plans...........................................................25
3.13 Absence of Liens and Encumbrances................................................26
3.14 Environmental Matters............................................................26
3.15 Labor Matters....................................................................27
3.16 Agreements, Contracts and Commitments............................................27
3.17 Statements; Proxy Statement/Prospectus...........................................28
3.18 Board Approval...................................................................28
3.19 State Takeover Statutes..........................................................29
3.20 Fairness Opinion.................................................................29
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME..................................................29
4.1 Conduct of Business..............................................................29
ARTICLE V ADDITIONAL AGREEMENTS.................................................................32
5.1 Proxy Statement/Prospectus; Registration Statement; Other Filings................32
5.2 Meetings of Stockholders.........................................................32
5.3 Access to Information; Confidentiality...........................................34
5.4 No Solicitation..................................................................34
5.5 Public Disclosure................................................................38
5.6 Legal Requirements...............................................................38
5.7 Third Party Consents.............................................................39
5.8 FIRPTA...........................................................................39
5.9 Notification of Certain Matters..................................................39
5.10 Reasonable Efforts and Further Assurances........................................39
5.11 Stock Options; Employee Stock Purchase Plans.....................................40
5.12 Form S-8.........................................................................41
5.13 Indemnification..................................................................41
5.14 Tax-Free Reorganization..........................................................41
5.15 Nasdaq Qualification.............................................................41
5.16 Action by Boards of Directors....................................................41
5.17 The Company Affiliate Agreement..................................................41
5.18 Regulatory Filings; Reasonable Efforts...........................................42
5.19 Board of Directors; Officers.....................................................42
ARTICLE VI CONDITIONS TO THE MERGER.............................................................43
6.1 Conditions to Obligations of Each Party to Effect the Merger.....................43
6.2 Additional Conditions to Obligations of the Company..............................44
6.3 Additional Conditions to the Obligations of Parent and Merger Sub................44
-ii-
4
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER...................................................45
7.1 Termination......................................................................45
7.2 Notice of Termination; Effect of Termination.....................................48
7.3 Fees and Expenses................................................................48
7.4 Amendment........................................................................50
7.5 Extension; Waiver................................................................50
ARTICLE VIII GENERAL PROVISIONS.................................................................51
8.1 Non-Survival of Representations and Warranties...................................51
8.2 Notices..........................................................................51
8.3 Interpretation; Knowledge........................................................52
8.4 Counterparts.....................................................................52
8.5 Entire Agreement.................................................................53
8.6 Severability.....................................................................53
8.7 Other Remedies; Specific Performance.............................................53
8.8 Governing Law....................................................................53
8.9 Rules of Construction............................................................53
8.10 Assignment.......................................................................53
8.11 WAIVER OF JURY TRIAL.............................................................54
-iii-
5
INDEX OF EXHIBITS
Exhibit A Parent Stock Option Agreement
Exhibit B Company Stock Option Agreement
Exhibit C Parent Voting Agreement
Exhibit D Company Voting Agreement
Exhibit E Company Affiliate Agreement
6
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "AGREEMENT") is made and entered
into as of April 26, 2000 among KOMAG, INCORPORATED, a Delaware corporation
("PARENT"), KHM, INC., a Delaware corporation and a wholly-owned subsidiary of
Parent ("MERGER SUB"), and HMT TECHNOLOGY CORP., a Delaware corporation (the
"COMPANY").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law ("DELAWARE LAW"), Parent
and the Company will enter into a business combination transaction pursuant to
which Merger Sub will merge with and into the Company (the "MERGER").
B. The Board of Directors of Parent (i) has determined that the Merger
is consistent with and in furtherance of the long-term business strategy of
Parent and fair to, advisable and in the best interests of, Parent and its
stockholders, (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement and (iii) has determined to
recommend that the stockholders of Parent vote to approve the issuance of shares
of Parent Common Stock (as defined below) to the stockholders of the Company
pursuant to the terms of the Merger.
C. The Board of Directors of the Company (i) has determined that the
Merger is consistent with and in furtherance of the long-term business strategy
of the Company and fair to, advisable and in the best interests of, the Company
and its stockholders, (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement and (iii) has determined to
recommend the adoption of this Agreement by the stockholders of the Company.
D. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's and the Company's willingness to enter into this
Agreement, Parent shall execute and deliver a Stock Option Agreement in favor of
the Company in substantially the form attached hereto as Exhibit A (the "PARENT
STOCK OPTION AGREEMENT") and the Company shall execute and deliver a Stock
Option Agreement in favor of Parent in substantially the form attached hereto as
Exhibit B (the "COMPANY STOCK OPTION AGREEMENT" and, together with the Parent
Stock Option Agreement, the "STOCK OPTION AGREEMENTS"). The Board of Directors
of Parent and the Company have each approved the Stock Option Agreements.
E. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's and the Company's willingness to enter into this
Agreement, certain affiliates of Parent shall enter into a Voting Agreement in
substantially the form attached hereto as Exhibit C (the "PARENT VOTING
AGREEMENTS"), and certain affiliates of the Company shall enter into a Voting
Agreement in substantially the form attached hereto as Exhibit D (the "COMPANY
VOTING AGREEMENTS" and, collectively with the Parent Voting Agreements, the
"VOTING AGREEMENTS").
F. Parent, the Company and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
7
G. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "CODE").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Merger Sub shall be merged with and into
the Company, the separate corporate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation. The Company as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "SURVIVING CORPORATION."
1.2 Effective Time; Closing. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
a Certificate of Merger (the "CERTIFICATE OF MERGER") with the Secretary of
State of Delaware in accordance with the relevant provisions of Delaware Law
(the time of such filing (or such later time as may be agreed in writing by the
parties and specified in the Certificate of Merger) being the "EFFECTIVE TIME")
as soon as practicable on or after the Closing Date (as herein defined). The
closing of the Merger (the "CLOSING") shall take place at the offices of Xxxxxx
Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, at a time and date to be
specified by the parties, which shall be no later than the second business day
after the satisfaction or waiver of the conditions set forth in Article VI, or
at such other time, date and location as the parties hereto agree in writing
(the "CLOSING DATE").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation and Bylaws of Surviving Corporation.
(a) The Certificate of Incorporation of Merger Sub as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation; provided, however, that the name
of the Surviving Corporation shall be the Company's current name.
(b) The Bylaws of Merger Sub as in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 Board of Directors; Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving
-2-
8
Corporation shall be the officers of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly appointed.
1.6 Effect on Capital Stock. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Merger Sub, the Company or the holders of any of the following
securities, the following shall occur:
(a) Conversion of Company Common Stock. Each share of Common
Stock, $0.001 par value per share, of the Company (the "COMPANY COMMON STOCK")
issued and outstanding immediately prior to the Effective Time (other than any
shares of Company Common Stock to be canceled pursuant to Section 1.6(b)) will
be canceled and extinguished and automatically converted (subject to Sections
1.6(e) and (f)) into 0.9094 (the "EXCHANGE RATIO") shares of Common Stock, par
value $0.01 per share, of Parent (the "PARENT COMMON STOCK") at the Effective
Time.
(b) Cancellation of Parent-Owned Stock. Each share of Company
Common Stock held in the treasury of the Company or owned by Merger Sub, Parent
or any direct or indirect wholly-owned subsidiary of the Company or of Parent
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
(c) Stock Options; Employee Stock Purchase Plan. At the Effective
Time, all options to purchase Company Common Stock then outstanding under the
Company's 1995 Management Stock Option Plan, 1995 Stock Option Plan, 1996
Non-Employees Directors' Stock Option Plan and 1996 Equity Incentive Plan
(collectively, the "COMPANY STOCK OPTION PLANS") shall be assumed by Parent in
accordance with Section 5.11 hereof. At the Effective Time, in accordance with
the terms of the Company's Employee Stock Purchase Plan (the "COMPANY ESPP"),
all rights to purchase shares of Company Common Stock under the Company ESPP
shall be converted (in accordance with the Exchange Ratio) into rights to
purchase shares of Parent Common Stock (with the number of shares rounded down
to the nearest whole share and the purchase price rounded up to the nearest
whole cent) and all such converted rights shall be assumed by Parent and the
offering periods in effect under the Company ESPP immediately prior to the
Effective Time shall be continued substantially in accordance with the terms of
the Company ESPP until the end of the offering periods in effect as of the
Effective Time.
(d) Capital Stock of Merger Sub. Each share of Common Stock,
$0.001 par value per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and exchanged for one
validly issued, fully paid and nonassessable share of Common Stock, $0.001 par
value, of the Surviving Corporation. Each stock certificate of Merger Sub
evidencing ownership of any such shares shall continue to evidence ownership of
such shares of capital stock of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio and any
other applicable numbers or amounts shall be adjusted to reflect appropriately
the effect of any stock split, reverse stock split, stock dividend (including
any dividend or distribution of securities convertible into Parent Common Stock
or Company Common Stock), extraordinary cash dividends, reorganization,
recapitalization, reclassification, combination, exchange of shares or other
like
-3-
9
change with respect to Parent Common Stock or Company Common Stock occurring or
having a record date on or after the date hereof and prior to the Effective
Time.
(f) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Common Stock who would otherwise be entitled to a fraction of
a share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock to be received by such holder) shall receive from Parent an
amount of cash (rounded to the nearest whole cent), without interest, equal to
the product of (i) such fraction, multiplied by (ii) the closing price of one
share of Parent Common Stock on the trading day immediately prior to the
Effective Time, as reported on the Nasdaq National Market System ("NASDAQ").
(g) 5 3/4% Convertible Subordinated Notes. At the Effective Time,
Parent shall execute and deliver to State Street Bank and Trust Company of
California, N.A., as trustee ("Trustee") pursuant to the indenture, dated as of
January 15, 1997, to which the Company is a party ("Indenture"), a supplemental
indenture in form satisfactory to the Trustee providing that the holder of each
of the Company's outstanding 5 3/4% Convertible Subordinated Notes due 2004
("Company Note") shall have the right to convert such Company Note into Parent
Common Stock, and that as of the Effective Time, the Conversion Price (as
defined in the Indenture) will be divided by the Exchange Ratio, as required by
the Indenture.
1.7 Surrender of Certificates.
(a) Exchange Agent. At or prior to the Effective Time, Parent
shall select an institution reasonably satisfactory to the Company to act as the
exchange agent (the "EXCHANGE AGENT") in the Merger.
(b) Parent to Provide Common Stock. Promptly after the Effective
Time, Parent shall make available to the Exchange Agent for exchange in
accordance with this Article I, the shares of Parent Common Stock issuable
pursuant to Section 1.6 in exchange for outstanding shares of Company Common
Stock, and cash in an amount sufficient for payment in lieu of fractional shares
pursuant to Section 1.6(f) and any dividends or distributions to which holders
of shares of Company Common Stock may be entitled pursuant to Section 1.7(d).
(c) Exchange Procedures. Promptly after the Effective Time,
Parent shall cause the Exchange Agent to mail to each holder of record (as of
the Effective Time) of a certificate or certificates (the "CERTIFICATES") which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock whose shares were converted into shares of Parent Common
Stock pursuant to Section 1.6, cash in lieu of any fractional shares pursuant to
Section 1.6(f) and any dividends or other distributions pursuant to Section
1.7(d), (i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock, cash in lieu of any
fractional shares pursuant to Section 1.6(f) and any dividends or other
distributions pursuant to Section 1.7(d). Upon surrender of Certificates for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto, the holders of
such Certificates shall be entitled to receive in exchange therefor certificates
-4-
10
representing the number of whole shares of Parent Common Stock, payment in lieu
of fractional shares which such holders have the right to receive pursuant to
Section 1.6(f) and any dividends or distributions payable pursuant to Section
1.7(d), and the Certificates so surrendered shall forthwith be canceled. Until
so surrendered, outstanding Certificates will be deemed from and after the
Effective Time, for all corporate purposes, subject to Section 1.7(d) as to the
payment of dividends, to evidence the ownership of the number of full shares of
Parent Common Stock into which such shares of Company Common Stock shall have
been so converted and the right to receive an amount in cash in lieu of the
issuance of any fractional shares in accordance with Section 1.6(f) and any
dividends or distributions payable pursuant to Section 1.7(d).
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date of this
Agreement with respect to Parent Common Stock with a record date after the
Effective Time will be paid to the holders of any unsurrendered Certificates
with respect to the shares of Parent Common Stock represented thereby until the
holders of record of such Certificates shall surrender such Certificates.
Subject to applicable law, following surrender of any such Certificates, the
Exchange Agent shall deliver to the record holders thereof, without interest,
certificates representing whole shares of Parent Common Stock issued in exchange
therefor along with payment in lieu of fractional shares pursuant to Section
1.6(f) hereof and the amount of any such dividends or other distributions with a
record date after the Effective Time payable with respect to such whole shares
of Parent Common Stock.
(e) Transfers of Ownership. If certificates for shares of Parent
Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of certificates
for shares of Parent Common Stock in any name other than that of the registered
holders of the Certificates surrendered, or established to the reasonable
satisfaction of Parent or any agent designated by it that such tax has been paid
or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in
this Section 1.8, neither the Exchange Agent, Parent, the Surviving Corporation
nor any party hereto shall be liable to a holder of shares of Parent Common
Stock or Company Common Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in Company Common Stock . All shares of
Parent Common Stock issued in accordance with the terms hereof (including any
cash paid in respect thereof pursuant to Section 1.6(f) and 1.7(d)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Company
Common Stock which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares
-5-
11
of Parent Common Stock, cash for fractional shares, if any, as may be required
pursuant to Section 1.6(f) and any dividends or distributions payable pursuant
to Section 1.7(d); provided, however, that Parent may, in its discretion and as
a condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against Parent
or the Exchange Agent with respect to the Certificates alleged to have been
lost, stolen or destroyed.
1.10 Tax and Accounting Consequences.
(a) It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368 of the Code. The
parties hereto adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Income Tax
Regulations.
(b) It is also intended by the parties hereto that the Merger
shall qualify for accounting treatment as a purchase transaction.
1.11 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub will take all such lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub, subject to
the exceptions specifically disclosed in the disclosure letter supplied by the
Company to Parent (the "COMPANY SCHEDULES"), as follows:
2.1 Organization of the Company
(a) The Company and each of its subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; has the corporate power and authority to own,
lease and operate its assets and property and to carry on its business as now
being conducted; and is duly qualified to do business and in good standing
(which respect to jurisdictions which recognize such concept) as a foreign
corporation in each jurisdiction in which the failure to be so qualified would
have a Material Adverse Effect (as defined in Section 8.3) on the Company.
(b) The Company has delivered to Parent a true and complete list
of all of the Company's subsidiaries, indicating the jurisdiction of
incorporation of each subsidiary and the Company's equity interest therein.
(c) The Company has delivered or made available to Parent a true
and correct copy of the Certificate of Incorporation and Bylaws of the Company
and similar governing instruments of each of its material subsidiaries, each as
amended to date, and each such instrument is
-6-
12
in full force and effect. Neither the Company nor any of its subsidiaries is in
violation of any of the provisions of its Certificate of Incorporation or Bylaws
or equivalent governing instruments.
2.2 The Company Capital Structure. The authorized capital stock of the
Company consists of 100,000,000 shares of Common Stock, par value $0.001 per
share, of which there were 46,196,238 shares issued and outstanding and
9,684,210 shares reserved for conversion of the 5_% Convertible Subordinated
Notes due 2004 as of April 24, 2000, and 9,100,000 shares of Preferred Stock,
par value $0.001 per share, of which no shares are issued or outstanding. All
outstanding shares of Company Common Stock are duly authorized, validly issued,
fully paid and nonassessable and are not subject to preemptive rights created by
statute, the Certificate of Incorporation or Bylaws of the Company or any
agreement or document to which the Company is a party or by which it is bound.
As of April 24, 2000, 5,440,016 shares of Company Common Stock were reserved for
issuance to employees, consultants and non-employee directors pursuant to
Company Stock Option Plans, under which options are outstanding for an aggregate
of 5,311,170 shares and under which 128,846 shares are available for grant as of
April 24, 2000 and 1,023,950 shares of Company Common Stock reserved for
issuance under the Company ESPP. All shares of Company Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and nonassessable.
2.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 2.2, as of March 31, 2000 there are no equity securities, partnership
interests or similar ownership interests of any class of the Company, or any
securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests issued,
reserved for issuance or outstanding. Except for securities the Company owns,
directly or indirectly through one or more subsidiaries, as of March 31, 2000
there are no equity securities, partnership interests or similar ownership
interests of any class of any subsidiary of the Company, or any security
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests issued, reserved for
issuance or outstanding. Except as set forth in Section 2.2, as of March 31,
2000 there are no options, warrants, equity securities, partnership interests or
similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which the Company or any of its
subsidiaries is a party or by which it is bound obligating the Company or any of
its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition, of any shares of capital stock of the Company or any
of its subsidiaries or obligating the Company or any of its subsidiaries to
grant, extend, accelerate the vesting of or enter into any such option, warrant,
equity security, partnership interest or similar ownership interest, call,
right, commitment or agreement. Except for the Company Voting Agreements, there
are no registration rights and, to the knowledge of the Company there are no
voting trusts, proxies or other agreements or understandings with respect to any
equity security of any class of the Company or with respect to any equity
security, partnership interest or similar ownership interest of any class of any
of its subsidiaries.
2.4 Authority.
(a) The Company has all requisite corporate power and authority
to enter into this Agreement and the Stock Option Agreements and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby, and
the execution and delivery of the Stock Option Agreements and the consummation
of the
-7-
13
transactions contemplated thereby, have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the adoption of
this Agreement by the Company's stockholders and the filing and recordation of
the Certificate of Merger pursuant to Delaware Law. A vote of the holders of at
least a majority of the outstanding shares of Company Common Stock is required
for the Company's stockholders to adopt this Agreement. This Agreement and the
Company Stock Option Agreements have been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by Parent
and, if applicable, Merger Sub, constitute the valid and binding obligations of
the Company, enforceable in accordance with their respective terms, except as
enforcement thereof may be limited by bankruptcy and other similar laws and
general principles of equity. The execution and delivery of this Agreement and
the Stock Option Agreements by the Company do not, and the performance of this
Agreement and the Stock Option Agreements by the Company will not, (i) conflict
with or violate the Certificate of Incorporation or Bylaws of the Company or the
equivalent organizational documents of any of its subsidiaries, (ii) subject to
the adoption of this Agreement by Parent's stockholders as contemplated in
Section 5.2 and compliance with the requirements set forth in Section 2.4(b)
below, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to the Company or any of its subsidiaries or by which its or
any of their respective properties is bound or affected, or (iii) result in any
breach of, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or impair the Company's rights or
alter the rights or obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of the properties or assets of the
Company or any of its subsidiaries pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or its or any of
their respective properties is bound or affected, except to the extent such
conflict, violation, breach, default, impairment or other effect would not, in
the case of clause (ii) or (iii), individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Company.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other governmental authority or instrumentality ("GOVERNMENTAL
ENTITY") is required by or with respect to the Company in connection with the
execution and delivery of this Agreement and the Stock Option Agreements or the
consummation of the transactions contemplated hereby or thereby, except for (i)
applicable requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), (ii) the filing and recordation of the Certificate of Merger
with the Secretary of State of Delaware, (iii) applicable requirements of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), (iv) the rules
and regulations of Nasdaq, (v) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws, and the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), and the laws of any
foreign country and (vi) such other consents, authorizations, filings, approvals
and registrations which, if not obtained or made, would not reasonably be
expected to have a Material Adverse Effect on the Company or Parent or have a
material adverse effect on the ability of the parties to consummate the Merger.
2.5 SEC Filings; The Company Financial Statements.
-8-
14
(a) The Company has filed all forms, reports and documents the
Company has been required to file with the SEC since January 1, 1998, and has
made available to Parent such forms, reports and documents in the form filed
with the SEC. All such required forms, reports and documents (including those
that the Company may file subsequent to the date hereof) are referred to herein
as the "COMPANY SEC REPORTS." As of their respective dates, the Company SEC
Reports (i) were prepared in accordance with the requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and regulations of
the SEC thereunder applicable to such Company SEC Reports, and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. None of
the Company's subsidiaries is required to file any forms, reports or other
documents with the SEC.
(b) Each set of consolidated financial statements (including, in
each case, any related notes thereto) contained in the Company SEC Reports (the
"COMPANY FINANCIALS"), including any Company SEC Reports filed after the date
hereof until the Closing, (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited interim financial
statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act)
and (iii) fairly presented the consolidated financial position of the Company
and its subsidiaries at the respective dates thereof and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not, or are not expected to be,
material in amount. The balance sheet of the Company contained in the Company
SEC Reports as of December 31, 1999 is hereinafter referred to as the "COMPANY
BALANCE SHEET." The operating results for the period ending March 31, 2000 in
the Company's press release dated April 20, 2000 (the "COMPANY PRESS RELEASE")
do not materially differ from the financial statements that will be contained in
the Company's next report on Form 10-K. Except as disclosed in the Company
Financials, neither the Company nor any of its subsidiaries has any liabilities
(absolute, accrued, contingent or otherwise) of a nature required to be
disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of the Company and its subsidiaries taken as a whole, except
liabilities (i) provided for in the Company Balance Sheet, or (ii) incurred
since the date of the Company Balance Sheet in the ordinary course of business
consistent with past practices and immaterial in the aggregate.
(c) The Company has heretofore furnished to Parent a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by the Company with the SEC
pursuant to the Securities Act or the Exchange Act.
2.6 Absence of Certain Changes or Events. Since the date of the Company
Balance Sheet, there has not been: (i) any Material Adverse Effect on the
Company, (ii) any material change by the Company in its accounting methods,
principles or practices, except as required by GAAP or
-9-
15
the rules and regulations promulgated by the SEC, or (iii) any revaluation by
the Company of any of its assets, including, without limitation, writing down
the value of capitalized inventory or writing off notes or accounts receivable
other than in the ordinary course of business.
2.7 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement,
"TAX" or "TAXES" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) Tax Returns and Audits.
(i) The Company and each of its subsidiaries have timely
filed all federal, state, local and foreign returns, estimates, information
statements and reports ("RETURNS") relating to Taxes required to be filed by the
Company and each of its subsidiaries with any Tax authority, except such Returns
which are not material to the Company. The Company and each of its subsidiaries
have paid all Taxes shown to be due on such Returns.
(ii) The Company and each of its subsidiaries as of the
Effective Time will have withheld with respect to its employees all federal and
state income taxes, Taxes pursuant to the Federal Insurance Contribution Act,
Taxes pursuant to the Federal Unemployment Tax Act and other Taxes required to
be withheld, except such Taxes which are not material to the Company.
(iii) Neither the Company nor any of its subsidiaries has
any material Tax deficiency outstanding, proposed or assessed against the
Company or any of its subsidiaries, nor has the Company or any of its
subsidiaries executed any unexpired waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of the
Company or any of its subsidiaries by any Tax authority is presently in
progress, nor has the Company or any of its subsidiaries been notified of any
request for such an audit or other examination.
(v) No material adjustment relating to any Returns filed
by the Company or any of its subsidiaries has been proposed in writing formally
or informally by any Tax authority to the Company or any of its subsidiaries or
any representative thereof.
(vi) Neither the Company nor any of its subsidiaries has
any liability for any material unpaid Taxes which has not been accrued for or
reserved on the Company Balance Sheet in accordance with GAAP, whether asserted
or unasserted, contingent or otherwise, which is material to the Company, other
than any liability for unpaid Taxes that may have accrued since December 31,
1999 in connection with the operation of the business of the Company and its
subsidiaries in the ordinary course.
-10-
16
(vii) There is no contract, agreement, plan or arrangement
to which the Company or any of its subsidiaries is a party as of the date of
this Agreement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of the Company or any of its
subsidiaries that, individually or collectively, would reasonably be expected to
give rise to the payment of any amount that would not be deductible pursuant to
Sections 280G, 404 or 162(m) of the Code. There is no contract, agreement, plan
or arrangement to which the Company or any of its subsidiaries is a party or by
which it or any of its subsidiaries is bound as of the date of this Agreement to
compensate any individual for excise taxes paid pursuant to Section 4999 of the
Code.
(viii) Neither the Company nor any of its subsidiaries has
filed any consent agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as defined in Section 341(f)(4) of the Code) owned by the Company or any of its
subsidiaries.
(ix) Neither the Company nor any of its subsidiaries is
party to or has any obligation under any tax-sharing, tax indemnity or tax
allocation agreement or arrangement.
(x) None of the Company's or its subsidiaries' assets are
tax exempt use property within the meaning of Section 168(h) of the Code.
(xi) Neither the Company nor any of its subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation" in
a distribution of stock qualifying for tax-free treatment under Section 355 of
the Code (x) in the two years prior to the date of this Agreement or (y) in a
distribution which could otherwise constitute part of a "plan" or "series or
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
2.8 Company Intellectual Property. For the purposes of this Agreement,
the following terms have the following definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyrights registrations
and applications therefor, and all other rights corresponding thereto throughout
the world; (iv) all industrial designs and any registrations and applications
therefor throughout the world; (v) all trade names, logos, common law trademarks
and service marks, trademark and service xxxx registrations and applications
therefor throughout the world; (vi) all databases and data collections and all
rights therein throughout the world; (vii) all moral and economic rights of
authors and inventors, however denominated, throughout the world, and (viii) any
similar or equivalent rights to any of the foregoing anywhere in the world.
"COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual Property
that is owned by, or exclusively licensed to, the Company.
-11-
17
"REGISTERED INTELLECTUAL PROPERTY" means all United States,
international and foreign: (i) patents and patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks; (iii) registered copyrights and applications for
copyright registration; and (iv) any other Intellectual Property that is the
subject of an application, certificate, filing, registration or other document
issued, filed with, or recorded by any state, government or other public legal
authority.
"COMPANY REGISTERED INTELLECTUAL PROPERTY" means all of the Registered
Intellectual Property owned by, or filed in the name of, the Company or any of
its subsidiaries.
(a) Section 2.8(a) of the Company Schedules is a complete and
accurate list of all the Company's issued patents, and the jurisdictions in
which each such patent has been issued or registered.
(b) No Company Intellectual Property or product or service of the
Company or any of its subsidiaries is subject to any judicial proceeding or
outstanding decree, order, judgment or stipulation restricting in any manner the
use, transfer, or licensing thereof by the Company or any of its subsidiaries,
or which may affect the validity, use or enforceability of such Company
Intellectual Property.
(c) The Company owns and has good and exclusive title to, or has
a license for (sufficient for the conduct of its business as currently
conducted), each material item of Company Intellectual Property or other
Intellectual Property used by the Company free and clear of any lien or
encumbrance (excluding licenses and related restrictions); and the Company is
the exclusive owner of all trademarks and trade names used in connection with
the operation or conduct of the business of the Company and its subsidiaries,
including the sale of any products or the provision of any services by the
Company and its subsidiaries.
(d) To the extent that any material Intellectual Property has
been developed or created by a third party for the Company or any of its
subsidiaries, the Company has a written agreement with such third party with
respect thereto and the Company either (i) has obtained ownership by operation
of law or by valid assignment and is the exclusive owner of, or (ii) has
obtained a license (sufficient for the conduct of its business as currently
conducted) to all such third party's Intellectual Property in such work,
material or invention by operation of law or by valid assignment.
(e) To the knowledge of the Company, the operation of the
business of the Company and its subsidiaries as such business currently is
conducted, including the Company's and its subsidiaries' design, development,
manufacture, marketing and sale of the products or services of the Company and
its subsidiaries (including products currently under development), has not, does
not and will not infringe any patent of, or infringe or misappropriate any other
Intellectual Property of, any third party.
(f) Neither the Company nor any of its subsidiaries has received
notice from any third party that the operation of the business of the Company or
any of its subsidiaries or any act,
-12-
18
product or service of the Company or any of its subsidiaries, infringes or
misappropriates the Intellectual Property of any third party.
(g) The Company and each of its subsidiaries has taken reasonable
steps to protect the Company's and its subsidiaries' rights in the Company's
confidential information and trade secrets that it wishes to protect or any
trade secrets or confidential information of third parties provided to the
Company or any of its subsidiaries, and, without limiting the foregoing, each of
the Company and its subsidiaries has and enforces a policy requiring each
employee and contractor to execute a proprietary information/confidentiality
agreement in reasonable and customary form provided to Parent and all current
and former employees and contractors of the Company and any of its subsidiaries
have executed such an agreement, except where the failure to do so is not
reasonably expected to be material to the Company.
2.9 Compliance; Permits; Restrictions.
(a) Neither the Company nor any of its subsidiaries is, in any
material respect, in conflict with, or in default or violation of (i) any law,
rule, regulation, order, judgment or decree applicable to the Company or any of
its subsidiaries or by which its or any of their respective properties is bound
or affected except for any conflicts, defaults or violations that (individually
or in the aggregate) would not cause the Company to lose any material benefit or
incur any material liability, or (ii) any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of their
respective properties is bound or affected. To the knowledge of the Company, no
investigation or review by any Governmental Entity is pending or threatened
against the Company or its subsidiaries, nor has any Governmental Entity
indicated an intention to conduct the same. There is no material agreement,
judgment, injunction, order or decree binding upon the Company or any of its
subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or materially impairing the conduct of business by the Company as
currently conducted.
(b) The Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities which
are material to the operation of the business of the Company (collectively, the
"COMPANY PERMITS"). The Company and its subsidiaries are in compliance in all
material respects with the terms of Company Permits.
2.10 Litigation. As of the date of this Agreement, and except as
disclosed in the Company SEC Documents, there is no action, suit, proceeding,
claim, arbitration or investigation pending, or as to which the Company or any
of its subsidiaries has received any notice of assertion nor, to the Company's
knowledge, is there a threatened action, suit, proceeding, claim, arbitration or
investigation against the Company or any of its subsidiaries which reasonably
would be likely to be material to the Company, or which in any manner challenges
or seeks to prevent, enjoin, alter or delay any of the transactions contemplated
by this Agreement.
2.11 Brokers' and Finders' Fees. Except for fees payable to Xxxxxxx
Xxxxx Barney Inc. pursuant to an engagement letter dated October 15, 1999, a
copy of which has been provided to Parent, the Company has not incurred, nor
will it incur, directly or indirectly, any liability for
-13-
19
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
2.12 Employee Benefit Plans.
(a) All employee compensation, incentive, fringe or benefit
plans, programs, policies, commitments, agreements or other arrangements
(whether or not set forth in a written document and including, without
limitation, all "employee benefit plans" within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
covering any active or former employee, director or consultant of the Company
("COMPANY EMPLOYEE" which shall for this purpose mean an employee of the Company
or an Affiliate (as defined below)), any subsidiary of the Company or any trade
or business (whether or not incorporated) which is a member of a controlled
group or which is under common control with the Company within the meaning of
Section 414 of the Code (an "AFFILIATE"), or with respect to which the Company
has or, to its knowledge, may in the future have liability, are listed in
Section 2.12(a) of the Company Schedules (the "COMPANY PLANS"). Company will
provide or make available correct and complete copies of all documents embodying
each Company Plan and all documents relevant to the administration of such Plans
prior to the Closing Date.
(b) Each Company Plan has been maintained and administered in all
material respects in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations (foreign or
domestic), including but not limited to ERISA and the Code, which are applicable
to such Company Plans. All contributions, reserves or premium payments required
to be made or accrued as of the date hereof to the Company Plans have been
timely made or accrued. Company has performed in all material respects all
obligations required to be performed by it under, is not in default or violation
of, and has no knowledge of any default or violation by any other party to each
Plan. No suit, action or other litigation (excluding claims for benefits
incurred in the ordinary course of Plan activities) has been brought, or to the
knowledge of Company is threatened against or with respect to any such Plan.
There are no audits, inquiries or proceedings pending or to the knowledge of the
Company, threatened by the IRS or U.S. Department of Labor with respect to any
Company Plan. Any Company Plan intended to be qualified under Section 401(a) of
the Code and each trust intended to qualify under Section 501(a) of the Code:
(i) has either obtained a favorable determination, notification, advisory and/or
opinion letter, as applicable, as to its tax-qualified status from the IRS or
still has a remaining period of time under applicable Treasury Regulations or
IRS pronouncements in which to apply for such letter and to make any amendments
necessary to obtain a favorable determination, and (ii) incorporates or has been
amended to incorporate all provisions required to comply with the Tax Reform Act
of 1986 and subsequent legislation.
(c) Neither the Company, any of its subsidiaries, nor any of
their Affiliates has at any time ever maintained, established, sponsored,
participated in, or contributed to any plan subject to Title IV of ERISA or
Section 412 of the Code and at no time has the Company contributed to or been
requested to contribute to any "multiemployer plan," as such term is defined in
ERISA. Neither the Company, any of its subsidiaries, nor any officer or director
of the Company or any of its subsidiaries is subject to any material liability
or penalty under Section 4975 through 4980B of the Code or Title I of ERISA. No
"prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 4975 of
the Code
-14-
20
and Section 408 of ERISA, has occurred with respect to any Company Plan which
could subject the Company or its Affiliates to material liability.
(d) Neither the Company nor any of its subsidiaries is bound by
or subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union. No employee of the Company or
any of its subsidiaries is represented by any labor union or covered by any
collective bargaining agreement and, to the knowledge of the Company, no
campaign to establish such representation is in progress. There is no pending
or, to the knowledge of the Company, threatened labor dispute involving the
Company or any of its subsidiaries and any group of its employees nor has the
Company or any of its subsidiaries experienced any labor interruptions over the
past three (3) years, and the Company and its subsidiaries consider their
relationships with their employees to be good. The Company is in compliance in
all material respects with all applicable material foreign, federal, state and
local laws, rules and regulations respecting employment, employment practices,
terms and conditions of employment and wages and hours.
(e) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, bonus
or otherwise) becoming due to any Company Employee under any Company Plan or
otherwise, (ii) materially increase any benefits otherwise payable under any
Company Plan, or (iii) result in the acceleration of the time of payment or
vesting of any such benefits.
(f) No Company Plan promises or provides retiree medical benefits
to any person except as required by applicable law, and neither Company nor any
of its Affiliates has represented, promised or contracted (whether in oral or
written form) to provide such retiree benefits to any Company Employee or
dependent thereof except as required by law.
2.13 Absence of Liens and Encumbrances. The Company and each of its
subsidiaries has good and valid title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of its material tangible
properties and assets, real, personal and mixed, used in its business, free and
clear of any liens or encumbrances except as reflected in the Company Financials
and except for liens for taxes not yet due and payable and such imperfections of
title and encumbrances, if any, as do not materially detract from the value of
or materially interfere with the present use of the property affected thereby.
2.14 Environmental Matters. Except as would not reasonably be likely to
result in a material liability to the Company (in any individual case or in the
aggregate), (i) neither the Company nor any of its subsidiaries has transported,
stored, used, manufactured, disposed of, released or exposed its employees or
others to any substance that has been designated by any Governmental Entity or
by applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including, without limitation,
PCBs, asbestos, petroleum, urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said laws, but
excluding office and janitorial supplies (a "HAZARDOUS MATERIAL") in violation
of any law in effect on or before the
-15-
21
Closing Date, (ii) neither the Company nor any of its subsidiaries has disposed
of, transported, sold, used, released, exposed its employees or others to or
manufactured any product containing a Hazardous Material (collectively,
"HAZARDOUS MATERIALS ACTIVITIES") in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity and (iii) as a result of the actions of the Company
or any of its subsidiaries or any affiliate of the Company, or, to the Company's
knowledge, as a result of any actions of any third party or otherwise, no
underground storage tank is present in, on or under any property that the
Company or any of its subsidiaries has at any time owned, operated, occupied or
leased and no amount of any Hazardous Material is present under any property and
in the land, ground water and surface water of any property, that the Company or
any of its subsidiaries has at any time owned, operated, occupied or leased.
2.15 Labor Matters. (i) There are no controversies pending or, to the
knowledge of each of the Company and its respective subsidiaries, threatened,
between the Company or any of its subsidiaries and any of their respective
employees, and (ii) as of the date of this Agreement, neither the Company nor
any of its subsidiaries has any knowledge of any strikes, slowdowns, work
stoppages or lockouts, or threats thereof, by or with respect to any employees
of the Company or any of its subsidiaries.
2.16 Agreements, Contracts and Commitments. As of the date of this
Agreement, neither Company nor any of its subsidiaries is a party to or is bound
by:
(a) any employment or consulting agreement, contract or
commitment with any officer or director or higher level employee or member of
the Company's Board of Directors, other than those that are terminable by the
Company or any of its subsidiaries on no more than thirty (30) days' notice
without liability or financial obligation to the Company;
(b) any agreement, contract or commitment containing any covenant
that materially limits the right of the Company or any of its subsidiaries to
engage in any line of business or to compete with any person or granting any
exclusive distribution rights;
(c) any agreement, contract or commitment currently in force
relating to the disposition or acquisition by the Company or any of its
subsidiaries after the date of this Agreement of a material amount of assets not
in the ordinary course of business or pursuant to which the Company has any
material ownership interest in any corporation, partnership, joint venture or
other business enterprise other than the Company's subsidiaries;
(d) any dealer, distributor, joint marketing or development
agreement currently in force under which the Company or any of its subsidiaries
have continuing material obligations to jointly market any product, technology
or service and which may not be canceled without penalty upon notice of ninety
(90) days or less, or any material agreement pursuant to which the Company or
any of its subsidiaries have continuing material obligations to jointly develop
any intellectual property that will not be owned, in whole or in part, by the
Company or any of its subsidiaries and which may not be canceled without penalty
upon notice of ninety (90) days or less;
-16-
22
(e) any agreement, contract or commitment currently in force to
license any third party to manufacture or reproduce any Company product or
technology or any agreement, contract or commitment currently in force to sell
or distribute any Company products, service or technology except agreements with
distributors or sales representative in the normal course of business cancelable
without penalty upon notice of ninety (90) days or less and substantially in the
form previously provided to Parent;
(f) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit;
(g) any settlement agreement entered into within three (3) years
prior to the date of this Agreement; or
(h) any other agreement, contract or commitment that has a value
of $500,000 or more individually.
Neither the Company nor any of its subsidiaries, nor to the Company's
knowledge any other party to a Company Contract (as defined below), is in
breach, violation or default under, and neither the Company nor any of its
subsidiaries has received written notice that it is in breach, violation or
default under, any of the material terms or conditions of any of the agreements,
contracts or commitments to which the Company or any of its subsidiaries is a
party or by which it is bound that are required to be disclosed in the Company
Schedules (any such agreement, contract or commitment, a "COMPANY CONTRACT") in
such a manner as would permit any other party to cancel or terminate any such
Company Contract, or would permit any other party to seek material damages (for
any or all of such breaches, violations or defaults, in the aggregate).
2.17 Statements; Proxy Statement/Prospectus. None of the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in the registration statement on Form S-4 to be filed with the SEC by
Parent in connection with the issuance of the Parent Common Stock in or as a
result of the Merger (the "REGISTRATION STATEMENT") will at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. The proxy
statement/prospectus to be sent to the stockholders of the Company and
stockholders of Parent in connection with the meeting of the Company's
stockholders to consider the adoption of this Agreement (the "COMPANY
STOCKHOLDERS' MEETING") and in connection with the meeting of Parent's
stockholders to consider the approval of the issuance of shares of Parent Common
Stock pursuant to the terms of the Merger (the "PARENT STOCKHOLDERS' MEETING")
(such proxy statement/prospectus as amended or supplemented is referred to
herein as the "PROXY STATEMENT") will not, on the date the Proxy Statement is
first mailed to the Company's stockholders or Parent's stockholders, or at the
time of the Company Stockholders' Meeting or the Parent Stockholders' Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not false or
misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Stockholders' Meeting or the Parent Stockholders'
Meeting which has become false or misleading. The Proxy Statement will comply as
to form in all material respects
-17-
23
with the provisions of the Exchange Act and the rules and regulations
thereunder. If at any time prior to the Effective Time, any event relating to
the Company or any of its affiliates, officers or directors is required to be
discovered by the Company which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement, the Company shall
promptly inform Parent. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information supplied or to be
supplied by Parent or Merger Sub which is, will be, or is required to be
contained in any of the foregoing documents.
2.18 Board Approval. The Board of Directors of the Company has, as of
the date of this Agreement, (i) determined that the Merger is fair to, advisable
and in the best interests of the Company and its stockholders, (ii) determined
to recommend that the stockholders of the Company adopt this Agreement and (iii)
duly approved the Merger, this Agreement and the transactions contemplated
hereby.
2.19 State Takeover Statutes. The Board of Directors of the Company has
approved the Merger, this Agreement, the Stock Option Agreements, the Parent
Voting Agreement and the transactions contemplated hereby and thereby, and such
approval is sufficient to render inapplicable to the Merger, this Agreement, the
Stock Option Agreements, the Parent Voting Agreement and the transactions
contemplated hereby and thereby the provisions of Section 203 of Delaware Law to
the extent, if any, such section is applicable to the Merger, this Agreement,
the Stock Option Agreements, the Parent Voting Agreement and the transactions
contemplated hereby and thereby. No other state takeover statute or similar
statute or regulation applies to or purports to apply to the Merger, this
Agreement, the Stock Option Agreements, the Parent Voting Agreement or the
transactions contemplated hereby and thereby.
2.20 Fairness Opinion. The Company has received an opinion from
Xxxxxxx Xxxxx Xxxxxx Inc., dated as of the date hereof, to the effect that as of
the date hereof, the Exchange Ratio is fair to the Company's stockholders (other
than Parent) from a financial point of view and will deliver to Parent a written
confirmation of such opinion as soon as practicable after the date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company, subject to
the exceptions specifically disclosed in the disclosure letter supplied by
Parent to the Company (the "PARENT SCHEDULES"), as follows:
3.1 Organization of Parent.
(a) Parent and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; has the corporate power and authority to own,
lease and operate its assets and property and to carry on its business as now
being conducted and as proposed to be conducted; and is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction in
which the failure to be so qualified would have a Material Adverse Effect (as
defined in Section 8.3) on Parent.
-18-
24
(b) Parent has delivered to the Company a true and complete list
of all of Parent's subsidiaries, indicating the jurisdiction of incorporation of
each subsidiary and Parent's equity interest therein.
(c) Parent has delivered or made available to the Company a true
and correct copy of the Certificate of Incorporation and Bylaws of Parent and
similar governing instruments of each of its material subsidiaries, each as
amended to date, and each such instrument is in full force and effect. Neither
Parent nor any of its subsidiaries is in violation of any of the provisions of
its Certificate of Incorporation or Bylaws or equivalent governing instruments.
3.2 Parent Capital Structure. The authorized capital stock of Parent
consists of 150,000,000 shares of Common Stock, par value $0.01 per share, of
which 66,054,041 shares are issued and outstanding as of April 19, 2000 and
1,000,000 shares of Preferred Stock, par value $0.01 per share, of which no
shares are issued or outstanding. The authorized capital stock of Merger Sub
consists of 1,000 shares of Common Stock, par value $0.001 per share, all of
which, as of the date hereof, are issued and outstanding and are held by Parent.
All outstanding shares of Parent Common Stock are duly authorized, validly
issued, fully paid and non-assessable and are not subject to preemptive rights
created by statute, the Certificate of Incorporation or Bylaws of Parent or any
agreement or document to which Parent is a party or by which it is bound. As of
April 2, 2000, 17,138,042 shares of Parent Common Stock were reserved for
issuance to employees, consultants and non-employee directors pursuant to
Parent's 1997 Supplemental Stock Option Plan, Restated 1987 Stock Option Plan
and Komag Material Technology, Inc. Stock Option Plan (the "PARENT STOCK OPTION
PLAN"), under which options are outstanding for 14,011,761 shares and under
which 3,126,281 shares are available for grant as of April 2, 2000. As of April
2, 2000, 7,400,000 shares of Parent Common Stock reserved for issuance under the
1988 Employee Stock Purchase Plan (the "PARENT ESPP"). All shares of Parent
Common Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
would be duly authorized, validly issued, fully paid and nonassessable.
3.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 3.2 as of March 31, 2000, there are no equity securities, partnership
interests or similar ownership interests of any class of Parent, or any
securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests issued,
reserved for issuance or outstanding. Except for securities Parent owns,
directly or indirectly through one or more subsidiaries, as of March 31, 2000
there are no equity securities, partnership interests or similar ownership
interests of any class of any subsidiary of Parent, or any security exchangeable
or convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests issued, reserved for issuance or
outstanding. Except as set forth in Section 3.2, as of March 31, 2000 there are
no options, warrants, equity securities, partnership interests or similar
ownership interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which Parent or any of its subsidiaries is a
party or by which it is bound obligating Parent or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, or repurchase,
redeem or otherwise acquire, or cause the repurchase, redemption or acquisition,
of any shares of capital stock of Parent or any of its subsidiaries or
obligating Parent or any of its subsidiaries to grant, extend, accelerate the
vesting of or enter into any such option, warrant, equity security, partnership
interest or similar ownership interest, call, right, commitment or agreement.
Except for the Parent Voting Agreements, there are no registration rights and,
to the knowledge of Parent there
-19-
25
are no voting trusts, proxies or other agreements or understandings with respect
to any equity security of any class of Parent or with respect to any equity
security, partnership interest or similar ownership interest of any class of any
of its subsidiaries.
3.4 Authority.
(a) Parent has all requisite corporate power and authority to
enter into this Agreement and the Stock Option Agreements and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby, and the
execution and delivery of the Stock Option Agreements and the consummation of
the transactions contemplated thereby, have been duly authorized by all
necessary corporate action on the part of Parent, subject only to the approval
of the issuance of Parent Common stock in the Merger by Parent's stockholders
and the filing and recordation of the Certificate of Merger pursuant to Delaware
Law. A vote of the holders of at least a majority of the shares of the Parent
Common Stock present at the Parent Stockholders' meeting (defined below) is
required for Parent's stockholders to approve the issuance of Parent Common
Stock in the Merger. This Agreement and the Stock Option Agreements have been
duly executed and delivered by Parent and, assuming the due authorization,
execution and delivery by the Company and, if applicable, Merger Sub, constitute
the valid and binding obligations of Parent, enforceable in accordance with
their respective terms, except as enforcement thereof may be limited by
bankruptcy and other similar laws and general principles of equity. The
execution and delivery of this Agreement and the Stock Option Agreements by
Parent do not, and the performance of this Agreement and the Stock Option
Agreements by Parent will not, (i) conflict with or violate the Certificate of
Incorporation or Bylaws of Parent the equivalent organizational documents of any
of its subsidiaries, (ii) subject to the approval of the issuance of Parent
Common Stock in the Merger by Parent's stockholders as contemplated in Section
5.2 and compliance with the requirements set forth in Section 3.4(b) below,
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Parent or any of its subsidiaries or by which its or any of their
respective properties is bound or affected, or (iii) result in any breach of, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair Parent's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Parent
or any of its subsidiaries pursuant to, any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent or any of its subsidiaries is a party
or by which Parent or any of its subsidiaries or its or any of their respective
properties is bound or affected, except to the extent such conflict, violation,
breach, default, impairment or other effect would not, in the case of clause
(ii) or (iii), individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on Parent.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity is required by
or with respect to Parent in connection with the execution and delivery of this
Agreement and the Stock Option Agreements or the consummation of the
transactions contemplated hereby or thereby, except for (i) applicable
requirements of the Securities Act, (ii) the filing and recordation of the
Certificate of Merger with the Secretary of State of Delaware, (iii) applicable
requirements of the Exchange Act, (iv) the rules and regulations of Nasdaq; (v)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable federal and state securities
laws and the HSR Act and the laws of
-20-
26
any foreign country and (vi) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not reasonably
be expected to have a Material Adverse Effect on Parent or the Company or have a
material adverse effect on the ability of the parties to consummate the Merger.
3.5 SEC Filings; Parent Financial Statements.
(a) Parent has filed all forms, reports and documents Parent has
been required to file with the SEC since January 1, 1998, and has made available
to the Company such forms, reports and documents in the form filed with the SEC.
All such required forms, reports and documents (including those that Parent may
file subsequent to the date hereof) are referred to herein as the "PARENT SEC
REPORTS." As of their respective dates, the Parent SEC Reports (i) were prepared
in accordance with the requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Parent SEC Reports, and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of Parent's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each set of consolidated financial statements (including, in
each case, any related notes thereto) contained in the Parent SEC Reports (the
"PARENT FINANCIALS"), including any Parent SEC Reports filed after the date
hereof until the Closing, (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q under the Exchange Act) and (iii) fairly presented the consolidated
financial position of Parent and its subsidiaries at the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were not, or
are not expected to be, material in amount. The balance sheet of Parent
contained in the Parent SEC Reports as of January 2, 2000 is hereinafter
referred to as the "PARENT BALANCE SHEET." Except as disclosed in the Parent
Financials, neither Parent nor any of its subsidiaries has any liabilities
(absolute, accrued, contingent or otherwise) of a nature required to be
disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of Parent and its subsidiaries taken as a whole, except liabilities
(i) provided for in the Parent Balance Sheet, or (ii) incurred since the date of
the Parent Balance Sheet in the ordinary course of business consistent with past
practices and immaterial in the aggregate.
(c) Parent has heretofore furnished to the Company a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by Parent with the SEC
pursuant to the Securities Act or the Exchange Act.
-21-
27
3.6 Absence of Certain Changes or Events. Since the date of the Parent
Balance Sheet, there has not been: (i) any Material Adverse Effect on Parent,
(ii) any material change by Parent in its accounting methods, principles or
practices, except as required by GAAP or the rules and regulations promulgated
by the SEC, or (iii) any revaluation by Parent of any of its assets, including,
without limitation, writing down the value of capitalized inventory or writing
off notes or accounts receivable other than in the ordinary course of business.
3.7 Taxes.
(a) Parent and each of its subsidiaries have timely filed all
Returns relating to Taxes required to be filed by Parent and each of its
subsidiaries with any Tax authority, except such Returns which are not material
to Parent. Parent and each of its subsidiaries have paid all Taxes shown to be
due on such Returns.
(b) Parent and each of its subsidiaries as of the Effective Time
will have withheld with respect to its employees all federal and state income
taxes, Taxes pursuant to the Federal Insurance Contribution Act, Taxes pursuant
to the Federal Unemployment Tax Act and other Taxes required to be withheld,
except such Taxes which are not material to Parent.
(c) Neither Parent nor any of its subsidiaries has any material
Tax deficiency outstanding, proposed or assessed against Parent or any of its
subsidiaries, nor has Parent or any of its subsidiaries executed any unexpired
waiver of any statute of limitations on or extending the period for the
assessment or collection of any Tax.
(d) No audit or other examination of any Return of Parent or any
of its subsidiaries by any Tax authority is presently in progress, nor has
Parent or any of its subsidiaries been notified of any request for such an audit
or other examination.
(e) No material adjustment relating to any Returns filed by
Parent or any of its subsidiaries has been proposed in writing formally or
informally by any Tax authority to Parent or any of its subsidiaries or any
representative thereof.
(f) Neither Parent nor any of its subsidiaries has any liability
for any material unpaid Taxes which has not been accrued for or reserved on
Parent Balance Sheet in accordance with GAAP, whether asserted or unasserted,
contingent or otherwise, which is material to Parent, other than any liability
for unpaid Taxes that may have accrued since December 31, 1999 in connection
with the operation of the business of Parent and its subsidiaries in the
ordinary course.
(g) There is no contract, agreement, plan or arrangement to which
Parent or any of its subsidiaries is a party as of the date of this Agreement,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of Parent or any of its subsidiaries that,
individually or collectively, would reasonably be expected to give rise to the
payment of any amount that would not be deductible pursuant to Sections 280G,
404 or 162(m) of the Code. There is no contract, agreement, plan or arrangement
to which Parent or any of its subsidiaries is a party or by which it or any of
its subsidiaries is bound as of the date hereof to compensate any individual for
excise taxes paid pursuant to Section 4999 of the Code.
-22-
28
(h) Neither Parent nor any of its subsidiaries has filed any
consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by Parent or any of its
subsidiaries.
(i) Neither Parent nor any of its subsidiaries is party to or has
any obligation under any tax-sharing, tax indemnity or tax allocation agreement
or arrangement.
(j) None of Parent's or its subsidiaries' assets are tax exempt
use property within the meaning of Section 168(h) of the Code.
(k) Neither the Parent nor any of its subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation" in
a distribution of stock qualifying for tax-free treatment under Section 355 of
the Code (x) in the two years prior to the date of this Agreement or (y) in a
distribution which could otherwise constitute part of a "plan" or "series or
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
3.8 Parent Intellectual Property. For the purposes of this Agreement,
the following terms have the following definitions:
"PARENT INTELLECTUAL PROPERTY" shall mean any Intellectual Property that
is owned by, or exclusively licensed to, Parent.
"PARENT REGISTERED INTELLECTUAL PROPERTY" means all of the Registered
Intellectual Property owned by, or filed in the name of, Parent or any of its
subsidiaries.
(a) Section 3.8(a) of the Parent Schedules is a complete and
accurate list of all Parent Registered Intellectual Property and specifies,
where applicable, and the jurisdictions in which each such item of Parent
Registered Intellectual Property has been issued or registered.
(b) No Parent Intellectual Property or product or service of
Parent or any of its subsidiaries is subject to any proceeding or outstanding
decree, order, judgment, or stipulation restricting in any manner the use,
transfer, or licensing thereof by Parent or any of its subsidiaries, or which
may affect the validity, use or enforceability of such Parent Intellectual
Property.
(c) Parent owns and has good and exclusive title to, or has a
license for (sufficient for the conduct of its business as currently conducted),
each material item of Parent Intellectual Property or other Intellectual
Property used by Parent free and clear of any lien or encumbrance (excluding
licenses and related restrictions); and Parent is the exclusive owner of all
trademarks and trade names used in connection with the operation or conduct of
the business of Parent and its subsidiaries, including the sale of any products
or the provision of any services by Parent and its subsidiaries.
(d) To the extent that any material Intellectual Property has
been developed or created by a third party for Parent or any of its
subsidiaries, Parent has a written agreement with such third party with respect
thereto and Parent either (i) has obtained ownership of, by operation of law or
by valid assignment and is the exclusive owner of, or (ii) has obtained a
license (sufficient for the
-23-
29
conduct of its business as currently conducted) to all such third party's
Intellectual Property in such work, material or invention by operation of law or
by valid assignment.
(e) To the knowledge of Parent, the operation of the business of
Parent and its subsidiaries as such business currently is conducted, including
Parent's and its subsidiaries' design, development, manufacture, marketing and
sale of the products or services of Parent and its subsidiaries (including
products currently under development) has not, does not and will not infringe
any patent of, or infringe or misappropriate any other Intellectual Property of,
any third party.
(f) Neither Parent nor any of its subsidiaries has received
notice from any third party that the operation of the business of Parent or any
of its subsidiaries or any act, product or service of Parent or any of its
subsidiaries, infringes or misappropriates the Intellectual Property of any
third party.
(g) Parent and each of its subsidiaries has taken reasonable
steps to protect Parent's and its subsidiaries' rights in Parent's confidential
information and trade secrets that it wishes to protect or any trade secrets or
confidential information of third parties provided to Parent or any of its
subsidiaries, and, without limiting the foregoing, each of Parent and its
subsidiaries has and enforces a policy requiring each employee and contractor to
execute a proprietary information/confidentiality agreement substantially in the
form provided to the Company and all current and former employees and
contractors of Parent and any of its subsidiaries have executed such an
agreement, except where the failure to do so is not reasonably expected to be
material to Parent.
3.9 Compliance; Permits; Restrictions.
(a) Neither Parent nor any of its subsidiaries is, in any
material respect, in conflict with, or in default or violation of (i) any law,
rule, regulation, order, judgment or decree applicable to Parent or any of its
subsidiaries or by which its or any of their respective properties is bound or
affected except for any conflicts, defaults or violations that (individually or
in the aggregate) would not cause Parent to lose any material benefit or incur
any material liability, or (ii) any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or any of its subsidiaries is a party or by which
Parent or any of its subsidiaries or its or any of their respective properties
is bound or affected. To the knowledge of Parent, no investigation or review by
any Governmental Entity is pending or threatened against Parent or its
subsidiaries, nor has any Governmental Entity indicated an intention to conduct
the same. There is no material agreement, judgment, injunction, order or decree
binding upon Parent or any of its subsidiaries which has or could reasonably be
expected to have the effect of prohibiting or materially impairing the conduct
of business by Parent as currently conducted.
(b) Parent and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities which
are material to the operation of the business of Parent (collectively, the
"PARENT PERMITS"). Parent and its subsidiaries are in compliance in all material
respects with the terms of the Parent Permits.
3.10 Litigation. As of the date of this Agreement, and except as
disclosed in the Parent SEC Documents, there is no action, suit, proceeding,
claim, arbitration or investigation pending, or
-24-
30
as to which Parent or any of its subsidiaries has received any notice of
assertion nor, to Parent's knowledge, is there a threatened action, suit,
proceeding, claim, arbitration or investigation against Parent or any of its
subsidiaries which reasonably would be likely to be material to Parent, or which
in any manner challenges or seeks to prevent, enjoin, alter or delay any of the
transactions contemplated by this Agreement.
3.11 Brokers' and Finders' Fees. Except for fees payable to Chase H&Q
pursuant to an engagement letter dated September 3, 1999, a copy of which has
been provided to the Company, Parent has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
3.12 Employee Benefit Plans.
(a) All employee compensation, incentive, fringe or benefit
plans, programs, policies, commitments, agreements or other arrangements
(whether or not set forth in a written document and including, without
limitation, all "employee benefit plans" within the meaning of Section 3(3) of
ERISA) covering any active or former employee, director or consultant of Parent
("PARENT EMPLOYEE" which shall for this purpose mean an employee of the Company
or any Affiliate (as defined below)), any subsidiary of Parent or any trade or
business (whether or not incorporated) which is an Affiliate, or with respect to
which Parent has or, to its knowledge, may in the future have liability, are
listed in Section 3.12(a) of the Parent Schedules (the "PARENT PLANS"). Parent
will provide or make available correct and complete copies of all documents
embodying each Parent Plan and all documents relevant to the administration of
such Plans prior to the Closing Date.
(b) Each Parent Plan has been maintained and administered in all
material respects in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations (foreign or
domestic), including but not limited to ERISA and the Code, which are applicable
to such Parent Plans. All contributions, reserves or premium payments required
to be made or accrued as of the date hereof to the Parent Plans have been timely
made or accrued. Parent has performed in all material respects all obligations
required to be performed by it under, is not in default or violation of, and has
no knowledge of any default or violation by any other party to each Plan. No
suit, action or other litigation (excluding claims for benefits incurred in the
ordinary course of Plan activities) has been brought, or to the knowledge of
Parent is threatened, against or with respect to any such Plan. There are no
audits, inquiries or proceedings pending or to the knowledge of Parent,
threatened by the IRS or U.S. Department of Labor with respect to any Parent
Plan. Any Parent Plan intended to be qualified under Section 401(a) of the Code
and each trust intended to qualify under Section 501(a) of the Code: (i) has
either obtained a favorable determination, notification, advisory and/or opinion
letter, as applicable, as to its tax-qualified status from the IRS or still has
a remaining period of time under applicable Treasury Regulations or IRS
pronouncements in which to apply for such letter and to make any amendments
necessary to obtain a favorable determination, and (ii) incorporates or has been
amended to incorporate all provisions required to comply with the Tax Reform Act
of 1986 and subsequent legislation.
(c) Neither Parent, any of its subsidiaries, nor any of their
Affiliates has at any time ever maintained, established, sponsored, participated
in, or contributed to any plan subject to Title IV of ERISA or Section 412 of
the Code and at no time has Parent contributed to or been
-25-
31
requested to contribute to any "multiemployer plan," as such term is defined in
ERISA. Neither Parent, any of its subsidiaries, nor any officer or director of
Parent or any of its subsidiaries is subject to any material liability or
penalty under Section 4975 through 4980B of the Code or Title I of ERISA. No
"prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 4975 of
the Code and Section 408 of ERISA, has occurred with respect to any Parent Plan
which could subject Parent or its Affiliates to material liability.
(d) Neither Parent nor any of its subsidiaries is bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union. No employee of Parent or any
of its subsidiaries is represented by any labor union or covered by any
collective bargaining agreement and, to the knowledge of Parent, no campaign to
establish such representation is in progress. There is no pending or, to the
knowledge of Parent, threatened labor dispute involving Parent or any of its
subsidiaries and any group of its employees nor has Parent or any of its
subsidiaries experienced any labor interruptions over the past three (3) years,
and Parent and its subsidiaries consider their relationships with their
employees to be good. Parent is in compliance in all material respects with all
applicable material foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours.
(e) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, bonus
or otherwise) becoming due to any Parent Employee under any Parent Plan or
otherwise, (ii) materially increase any benefits otherwise payable under any
Parent Plan, or (iii) result in the acceleration of the time of payment or
vesting of any such benefits.
(f) No Parent Plan promises or provides retiree medical benefits
to any person except as required by applicable law, and neither Parent nor any
of its Affiliates has represented, promised or contracted (whether in oral or
written form) to provide such retiree benefits to any Parent Employee or
dependent thereof except as required by law.
3.13 Absence of Liens and Encumbrances. Parent and each of its
subsidiaries has good and valid title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of its material tangible
properties and assets, real, personal and mixed, used in its business, free and
clear of any liens or encumbrances except as reflected in the Parent Financials
and except for liens for taxes not yet due and payable and such imperfections of
title and encumbrances, if any, which as do not materially detract from the
value of or materially interfere with the present use of the property affected
thereby.
3.14 Environmental Matters. Except as would not reasonably be likely to
result in a material liability to Parent (in any individual case or in the
aggregate), (i) neither Parent nor any of its subsidiaries has transported,
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on or before the
Closing Date, (ii) neither Parent nor any of its subsidiaries has engaged in
Hazardous Materials Activities in violation of any rule, regulation, treaty or
statute promulgated by any Governmental Entity in effect prior to or as of the
date hereof to prohibit, regulate or control Hazardous Materials or any
-26-
32
Hazardous Material Activity and (iii) as a result of the actions of the Parent
or any of its subsidiaries or any affiliate of the Parent or, to the Parent's
knowledge, as a result of any actions of any third party or otherwise, no
underground storage tank is present in, on or under any property that the Parent
or any of its subsidiaries has at any time owned, operated, occupied or leased
and no amount of any Hazardous Material is present under any property and in the
land, ground water and surface water of any property, that the Parent or any of
its subsidiaries has at any time owned, operated, occupied or leased.
3.15 Labor Matters. (i) There are no controversies pending or, to the
knowledge of each of Parent and its respective subsidiaries, threatened, between
Parent or any of its subsidiaries and any of their respective employees, and
(ii) as of the date of this Agreement, neither Parent nor any of its
subsidiaries has any knowledge of any strikes, slowdowns, work stoppages or
lockouts, or threats thereof, by or with respect to any employees of Parent or
any of its subsidiaries.
3.16 Agreements, Contracts and Commitments. As of the date hereof,
neither the Company nor any of its subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement, contract or
commitment with any officer or director or higher level employee or member of
Parent's Board of Directors, other than those that are terminable by Parent or
any of its subsidiaries on no more than thirty (30) days' notice without
liability or financial obligation to Parent;
(b) any agreement, contract or commitment containing any covenant
that materially limits the right of Parent or any of its subsidiaries to engage
in any line of business or to compete with any person or granting any exclusive
distribution rights;
(c) any agreement, contract or commitment currently in force
relating to the disposition or acquisition by Parent or any of its subsidiaries
after the date of this Agreement of a material amount of assets not in the
ordinary course of business or pursuant to which Parent has any material
ownership interest in any corporation, partnership, joint venture or other
business enterprise other than Parent's subsidiaries;
(d) any dealer, distributor, joint marketing or development
agreement currently in force under which Parent or any of its subsidiaries have
continuing material obligations to jointly market any product, technology or
service and which may not be canceled without penalty upon notice of ninety (90)
days or less, or any material agreement pursuant to which Parent or any of its
subsidiaries have continuing material obligations to jointly develop any
intellectual property that will not be owned, in whole or in part, by Parent or
any of its subsidiaries and which may not be canceled without penalty upon
notice of ninety (90) days or less;
(e) any agreement, contract or commitment currently in force to
license any third party to manufacture or reproduce any Parent product or
technology or any agreement, contract or commitment currently in force to sell
or distribute any Parent products, service or technology except agreements with
distributors or sales representative in the normal course of business cancelable
without penalty upon notice of ninety (90) days or less and substantially in the
form previously provided to the Company;
-27-
33
(f) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit;
(g) any settlement agreement entered into within three (3) years
prior to the date of this Agreement; or
(h) any other agreement, contract or commitment that has a value
of $500,000 or more individually.
Neither Parent nor any of its subsidiaries, nor to Parent's knowledge
any other party to a Parent Contract (as defined below), is in breach, violation
or default under, and neither Parent nor any of its subsidiaries has received
written notice that it is in breach, violation or default under, any of the
material terms or conditions of any of the agreements, contracts or commitments
to which Parent or any of its subsidiaries is a party or by which it is bound
that are required to be disclosed in the Parent Schedules (any such agreement,
contract or commitment, a "PARENT CONTRACT") in such a manner as would permit
any other party to cancel or terminate any such Parent Contract, or would permit
any other party to seek material damages or other remedies (for any or all of
such breaches, violations or defaults, in the aggregate).
3.17 Statements; Proxy Statement/Prospectus. None of the information
supplied or to be supplied by Parent for inclusion or incorporation by reference
in the Registration Statement will at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading. The Proxy Statement, on the date the
Proxy Statement is first mailed to Parent's stockholders and the Company's
stockholders, at the time of the Parent Stockholders' Meeting or the Company
Stockholders' Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not false or misleading, or omit to state any material fact necessary
to correct any statement in any earlier communication with respect to the
solicitation of proxies for the Parent Stockholders' Meeting or the Company
Stockholders' Meeting which has become false or misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder. If at any time prior to
the Effective Time, any event relating to Parent or any of its affiliates,
officers or directors is required to be discovered by Parent which should be set
forth in an amendment to the Registration Statement or a supplement to the Proxy
Statement, Parent shall promptly inform the Company. Notwithstanding the
foregoing, Parent makes no representation or warranty with respect to any
information supplied or to be supplied by the Company which is, will be, or is
required to be contained in any of the foregoing documents.
3.18 Board Approval. The Board of Directors of Parent has, as of the
date of this Agreement, (i) determined that the Merger is fair to and in the
best interests of Parent and its stockholders, (ii) determined to recommend that
the stockholders of Parent approve the Issuance of the Shares and (iii) duly
approved the Merger, this Agreement and the transactions contemplated hereby.
-28-
34
3.19 State Takeover Statutes. The Board of Directors of Parent has
approved the Merger, this Agreement, the Stock Option Agreements, and the
Company Voting Agreement and the transactions contemplated hereby and thereby,
and such approval is sufficient to render inapplicable to the Merger, this
Agreement, the Stock Option Agreements, the Company Voting Agreement and the
transactions contemplated hereby and thereby the provisions of Section 203 of
Delaware Law to the extent, if any, such section is applicable to the Merger,
this Agreement, the Stock Option Agreements, the Company Voting Agreement and
the transactions contemplated hereby and thereby. No other state takeover
statute or similar statute or regulation applies to or purports to apply to the
Merger, this Agreement, the Stock Option Agreements, the Company Voting
Agreement or the transactions contemplated hereby and thereby.
3.20 Fairness Opinion. Parent has received a written opinion from Chase
H&Q, dated as of the date hereof, to the effect that as of the date hereof, the
Exchange Ratio is fair to Parent from a financial point of view and will deliver
to the Company a written confirmation copy of such opinion as soon as
practicable after the date hereof.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, the Company (which for the purposes
of this Article IV shall include the Company and each of its subsidiaries) and
Parent (which for the purposes of this Article IV shall include Parent and each
of its subsidiaries) agree, except (i) as required by this Agreement, (ii) in
the case of the Company as provided in Article IV of the Company Schedules and
in the case of Parent as provided in Article IV of the Parent Schedules, or
(iii) to the extent that the other party shall otherwise consent (which consent
shall not be unreasonably withheld or delayed with regard to actions that would
be reasonably necessary to carry on the business of Parent or Company, as
applicable, in the ordinary course, as a standalone entity if the Merger were
not consummated) in writing, to carry on its business in the ordinary course, in
substantially the same manner as heretofore conducted and in compliance with all
applicable laws and regulations, to pay its debts and taxes when due subject to
good faith disputes over such debts or taxes, to pay or perform other material
obligations when due subject to good faith disputes over such obligations, and
use its commercially reasonable efforts consistent with past practices and
policies to preserve intact its present business organization, keep available
the services of its present officers and employees and preserve its
relationships with customers, suppliers, distributors, licensors, licensees and
others with which it has business dealings. In addition, except (i) in the case
of the Company as provided in Article IV of the Company Schedules, (ii) in the
case of Parent as provided in Article IV of the Parent Schedules, or (iii) as
required by this Agreement, without the prior written consent (which consent
shall not be unreasonably withheld or delayed with regard to actions that would
be reasonably necessary carry on the business of Parent or Company, as
applicable, in the ordinary course, as a standalone entity if the Merger were
not consummated) of the other, neither the Company nor Parent shall do any of
the following, and neither the Company nor Parent shall permit its subsidiaries
to do any of the following:
(a) Except as required by law or pursuant to the terms of a
Company Plan or a Parent Plan, as the case may be, in effect as of the date
hereof, waive any stock repurchase rights,
-29-
35
accelerate, amend or change the period of exercisability of options or
restricted stock, or reprice options granted under any employee, consultant or
director stock plans or authorize cash payments in exchange for any options
granted under any of such plans;
(b) Enter into any material partnership arrangements, joint
development agreements or strategic alliances other than in the ordinary course
of business consistent with past practice;
(c) Grant any severance or termination pay to any officer or
employee except pursuant to written agreements outstanding, or policies
existing, on the date hereof and as previously disclosed in writing to the
other, or adopt any new severance plan or amend or modify or alter in any manner
any severance plan, agreement or arrangement existing on the date hereof;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock (other than distributions from a subsidiary (i) of Company
to Company or (ii) of Parent to Parent as the case may be) or split, combine or
reclassify any capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for any capital stock;
(e) Purchase, redeem or otherwise acquire, directly or
indirectly, any shares of capital stock of the Company or its subsidiaries, or
Parent or its subsidiaries, as the case may be, except repurchases of unvested
shares at cost in connection with the termination of the employment relationship
with any employee pursuant to stock option or purchase agreements in effect on
the date hereof;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber
or propose any of the foregoing with respect to any shares of capital stock or
any securities convertible into shares of capital stock, or subscriptions,
rights, warrants or options to acquire any shares of capital stock or any
securities convertible into shares of capital stock, or enter into other
agreements or commitments of any character obligating it to issue any such
shares or convertible securities, other than (i) the issuance, delivery and/or
sale of shares of Company Common Stock or Parent Common Stock, as the case may
be, pursuant to the exercise of stock options therefor outstanding as of the
date of this Agreement, (ii) the granting of options to purchase shares of
Company Common Stock or Parent Common Stock, as the case may be, to be granted
at fair market value in the ordinary course of business, consistent with past
practice and in accordance with existing stock option plans in an amount not to
exceed options to purchase 500,000 shares in the aggregate, (iii) shares of
Company Common Stock or Parent Common Stock, as the case may be, issuable upon
the exercise of the options referred to in clause (ii), and (iv) shares of
Company Common Stock or Parent Common Stock, as the case may be, issuable to
participants in the Parent ESPP or Company ESPP consistent with the terms
thereof;
(g) Cause, permit or propose any amendments to any charter
document or Bylaw (or similar governing instruments of any subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any equity interest in or a material portion of the assets of,
or by any other manner, any business or any corporation, partnership,
association or other business organization or division
-30-
36
thereof, or enter into any joint ventures, strategic partnerships or alliances,
other than in the ordinary course of business consistent with past practice;
(i) Adopt a plan of complete or partial liquidation, dissolution,
consolidation, restructuring, recapitalization or other reorganization;
(j) Sell, lease, license, encumber or otherwise dispose of any
properties or assets except sales of inventory in the ordinary course of
business consistent with past practice, except for the sale, lease or
disposition (other than through licensing) of property or assets which are not
material, individually or in the aggregate, to the business of the Company or
Parent, as the case may be;
(k) Incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of the
Company or Parent, as the case may be, enter into any "keep well" or other
agreement to maintain any financial statement condition or enter into any
arrangement having the economic effect of any of the foregoing other than (i) in
connection with the financing of ordinary course trade payables consistent with
past practice or (ii) pursuant to existing credit facilities in the ordinary
course of business;
(l) Adopt or amend any employee benefit plan or employee stock
purchase or employee stock option plan, or enter into any employment contract or
collective bargaining agreement (other than offer letters and letter agreements
entered into in the ordinary course of business consistent with past practice
with employees who are terminable "at will"), pay any special bonus or special
remuneration to any director or employee other than in the ordinary course of
business consistent with past practice, or increase the salaries or wage rates
or fringe benefits (including rights to severance or indemnification) of its
directors, officers, employees or consultants;
(m) Make any individual or series of related payments outside of
the ordinary course of business in excess of $500,000;
(n) Revalue any of its assets or, except as required by GAAP,
make any change in accounting methods, principles or practices;
(o) Engage in any action that could reasonably be expected to
cause the Merger to fail to qualify as a "reorganization" under Section 368(a)
of the Code whether or not otherwise permitted by the provisions of this Article
IV;
(p) Make any tax election that individually or in the aggregate,
is reasonably likely to adversely affect in any material respect the tax
liability or tax attributes of Company or Parent, as the case may be, or settle
or compromise any material tax liability;
(q) Pay, discharge, settle or satisfy any material litigation; or
(r) Agree in writing or otherwise to take any of the actions
described in Section 4.1 (a) through (q) above.
-31-
37
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement; Other Filings.
(a) As promptly as practicable after the execution of this
Agreement, the Company and Parent will prepare and file with the SEC the Proxy
Statement, and Parent will prepare and file with the SEC the Registration
Statement in which the Proxy Statement will be included as a prospectus. Each of
the Company and Parent will respond to any comments of the SEC, will use its
respective best efforts to have the Registration Statement declared effective
under the Securities Act as promptly as practicable after such filing and will
cause the Proxy Statement to be mailed to its stockholders at the earliest
practicable time. As promptly as practicable after the date of this Agreement,
the Company and Parent will prepare and file any other filings required under
the Exchange Act, the Securities Act or any other Federal, foreign or Blue Sky
laws relating to the Merger and the transactions contemplated by this Agreement
(the "OTHER FILINGS"). Each party will notify the other promptly upon the
receipt of any comments from the SEC or its staff and of any request by the SEC
or its staff or any other government officials for amendments or supplements to
the Registration Statement, the Proxy Statement or any Other Filing or for
additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Registration Statement, the Proxy Statement, the
Merger or any Other Filing. Whenever any event occurs which is required to be
set forth in an amendment or supplement to the Proxy Statement, the Registration
Statement or any Other Filing, the Company or Parent, as the case may be, will
promptly inform the other party of such occurrence and cooperate in filing with
the SEC or its staff or any other government officials, and/or mailing to
stockholders of the Company or stockholders of Parent, such amendment or
supplement.
(b) Subject to Sections 5.2(c) and 5.2(d), the Proxy Statement
will also include the recommendations of (i) the Board of Directors of the
Company in favor of adoption of this Agreement, and (ii) the Board of Directors
of Parent in favor of the issuance of shares of Parent Common Stock in the
Merger.
5.2 Meetings of Stockholders.
(a) Promptly after the date hereof, the Company will take all
action necessary in accordance with Delaware Law and its Certificate of
Incorporation and Bylaws to convene the Company Stockholders' Meeting to be held
as promptly as practicable, for the purpose of voting upon this Agreement. The
Company will consult with Parent and use its commercially reasonable efforts to
hold the Company Stockholders' Meeting on the same day as the Parent
Stockholders' Meeting. Promptly after the date hereof, Parent will take all
action necessary in accordance with Delaware Law and its Certificate of
Incorporation and Bylaws to convene the Parent Stockholders' Meeting to be held
as promptly as practicable for the purpose of voting upon the issuance of shares
of Parent Common Stock by virtue of the Merger. Parent will consult with the
Company and will use its commercially reasonable efforts to hold the Parent
Stockholders' Meeting on the same day as the Company Stockholders' Meeting.
Subject to Sections 5.2(c) and 5.2(d), Parent and the Company will each use its
commercially reasonable efforts to solicit from its stockholders proxies in
favor of the adoption and approval of this Agreement and the approval of the
Merger and will take all other
-32-
38
action necessary or advisable to secure the vote or consent of their respective
stockholders or stockholders required by the rules of Nasdaq or Delaware Law and
all other applicable legal requirements to obtain such approvals.
(b) Subject to Sections 5.2(c) and 5.2(d): (i) the Board of
Directors of the Company shall recommend that the Company's stockholders vote in
favor of and adopt this Agreement at the Company Stockholders' Meeting, and the
Board of Directors of Parent shall recommend that Parent's stockholders vote in
favor of the issuance of shares of Parent Common Stock in the Merger at the
Parent Stockholders' Meeting; (ii) the Proxy Statement shall include a statement
to the effect that the Board of Directors of the Company has recommended that
the Company's stockholders vote in favor of and adopt this Agreement at the
Company Stockholders' Meeting, and a statement to the effect that the Board of
Directors of Parent has recommended that Parent's stockholders vote in favor of
the issuance of shares of Parent Common Stock in the Merger at the Parent
Stockholders' Meeting; and (iii) neither the Board of Directors of the Company,
the Board of Directors of Parent, nor any committee of either shall withdraw,
amend or modify, or propose or resolve to withdraw, amend or modify in a manner
adverse to the other party, the recommendations set forth in subsections
5.2(b)(i) or 5.2(b)(ii).
(c) Nothing in this Agreement shall prevent the Board of
Directors of the Company from withholding, withdrawing, amending or modifying
its recommendation in favor of the Merger if (i) a Company Superior Offer (as
defined below) is made to the Company and is not withdrawn, (ii) neither the
Company nor any of its representatives shall have violated any of the
restrictions set forth in Section 5.4(a), and (iii) the Board of Directors of
the Company concludes in good faith, after consultation with its outside
counsel, that, in light of such Company Superior Offer, the withholding,
withdrawal, amendment or modification of such recommendation is required in
order for the Board of Directors of the Company to comply with its fiduciary
obligations to the Company's stockholders under applicable law. Nothing
contained in this Section 5.2 shall limit the Company's obligation to hold and
convene the Company Stockholders' Meeting (regardless of whether the
recommendation of the Board of Directors of the Company shall have been
withdrawn, amended or modified). For purposes of this Agreement, "COMPANY
SUPERIOR OFFER" shall mean an unsolicited, bona fide written offer made by a
third party to consummate any of the following transactions: (i) a merger,
consolidation, business combination, recapitalization or similar transaction
involving the Company, pursuant to which the stockholders of the Company
immediately preceding such transaction hold less than 50% of the equity interest
in the surviving or resulting entity of such transaction; (ii) a sale or other
disposition by the Company of all or substantially all of its assets, or (iii)
the acquisition by any person or group (including by way of a tender offer or an
exchange offer or issuance by the Company), directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of shares
representing in excess of 50% of the voting power of the then outstanding shares
of capital stock of the Company, in each case on terms that the Board of
Directors of the Company determines, in its reasonable judgment (after
consultation with its financial advisor) to be more favorable to the Company
stockholders from a financial point of view than the terms of the Merger;
provided, however, that any such offer shall not be deemed to be a "COMPANY
SUPERIOR OFFER" if any financing required to consummate the transaction
contemplated by such offer is not committed and is not likely in the judgment of
the Company's Board of Directors to be obtained by such third party on a timely
basis.
-33-
39
(d) Nothing in this Agreement shall prevent the Board of
Directors of Parent from withholding, withdrawing, amending or modifying its
recommendation in favor of the Merger if (i) a Parent Superior Offer (as defined
below) is made to Parent and is not withdrawn, (ii) neither Parent nor any of
its representatives shall have violated any of the restrictions set forth in
Section 5.4(b), and (iii) the Board of Directors of Parent concludes in good
faith, after consultation with its outside counsel, that, in light of such
Parent Superior Offer, the withholding, withdrawal, amendment or modification of
such recommendation is required in order for the Board of Directors of Parent to
comply with its fiduciary obligations to Parent's stockholders under applicable
law. Nothing contained in this Section 5.2 shall limit Parent's obligation to
hold and convene the Parent Stockholders' Meeting (regardless of whether the
recommendation of the Board of Directors of Parent shall have been withdrawn,
amended or modified). For purposes of this Agreement, "PARENT SUPERIOR OFFER"
shall mean an unsolicited, bona fide written offer made by a third party to
consummate any of the following transactions: (i) a merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving Parent, pursuant to which the stockholders of Parent
immediately preceding such transaction hold less than 50% of the equity interest
in the surviving or resulting entity of such transaction; (ii) a sale or other
disposition by Parent of assets (excluding inventory and used equipment sold in
the ordinary course of business) representing in excess of 50% of the fair
market value of Parent's business immediately prior to such sale, or (iii) the
acquisition by any person or group (including by way of a tender offer or an
exchange offer or issuance by Parent), directly or indirectly, of beneficial
ownership or a right to acquire beneficial ownership of shares representing in
excess of 50% of the voting power of the then outstanding shares of capital
stock of the Parent, in each case on terms that the Board of Directors of Parent
determines, in its reasonable judgment (after consultation with its financial
advisor) to be more favorable to the Parent stockholders from a financial point
of view than the terms of the Merger; provided, however, that any such offer
shall not be deemed to be a "Parent Superior Offer" if any financing required to
consummate the transaction contemplated by such offer is not committed and is
not likely in the judgment of Parent's Board of Directors to be obtained by such
third party on a timely basis.
5.3 Access to Information; Confidentiality.
(a) Each party will afford the other party and its accountants,
counsel and other representatives reasonable access during normal business hours
to the properties (including the performance of any soil and ground water
testing thereon), books, records and personnel of the other party during the
period prior to the Effective Time to obtain all information concerning the
business, including the status of product development efforts, properties,
results of operations and personnel of such party, as the other party may
reasonably request. No information or knowledge obtained in any investigation
pursuant to this Section 5.3 will affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
(b) The parties acknowledge that the Company and Parent have
previously executed a Confidentiality Agreement, dated August 31, 1999 (the
"CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement will continue in
full force and effect in accordance with its terms.
5.4 No Solicitation.
-34-
40
(a) Restrictions on the Company.
(i) From and after the date of this Agreement until the
Effective Time or termination of this Agreement pursuant to Article VII, the
Company's and its subsidiaries' officers and directors will not and the Company
and its subsidiaries will not authorize or permit any of their respective
officers, directors, affiliates or employees or any investment banker, attorney
or other advisor or representative retained by any of them, to, directly or
indirectly (i) solicit, initiate, knowingly encourage or knowingly induce the
making, submission or announcement of any Company Acquisition Proposal (as
defined below), (ii) participate in any discussions or negotiations regarding,
or furnish to any person any non-public 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 Company Acquisition
Proposal, (iii) engage in discussions with any person with respect to any
Company Acquisition Proposal, except as to the existence of these provisions,
(iv) subject to Section 5.2(c), approve, endorse or recommend any Company
Acquisition Proposal or (v) enter into any letter of intent or similar document
or any contract, agreement or commitment contemplating or providing for any
Company Acquisition Transaction (as defined below); provided, however, until the
date on which this Agreement is adopted by the required vote of the Company
stockholders, nothing in this Section 5.4(a) or elsewhere in this Agreement
shall prohibit the Company or any of its subsidiaries or any of their respective
officers, directors, affiliates, employees, investment bankers, attorneys or
other advisors or representatives from furnishing nonpublic information
regarding the Company and its subsidiaries to, entering into a confidentiality
agreement with or entering into discussions or negotiating with, any person or
group in response to a Company Superior Offer submitted by such person or group
(and not withdrawn) if (1) neither the Company nor any representative of the
Company and its subsidiaries shall have violated any of the restrictions set
forth in this Section 5.4(a), (2) the Board of Directors of the Company
concludes in good faith, after consultation with its outside legal counsel, that
such action is required in order for the Board of Directors of the Company to
comply with its fiduciary obligations to the Company's stockholders under
applicable law, (3) (x) at least three (3) days prior to furnishing any such
nonpublic information to, or entering into discussions or negotiations with,
such person or group, the Company gives Parent written notice of the identity of
such person or group and of the Company's intention to furnish nonpublic
information to, or enter into discussions or negotiations with, such person or
group and (y) the Company receives from such person or group an executed
confidentiality agreement containing customary limitations on the use and
disclosure of all nonpublic written and oral information furnished to such
person or group by or on behalf of the Company and containing terms no less
favorable to the disclosing party than the terms of the Confidentiality
Agreement, and (4) contemporaneously with furnishing any such nonpublic
information to such person or group, the Company furnishes such nonpublic
information to Parent (to the extent such nonpublic information has not been
previously furnished by the Company to Parent). The Company and its subsidiaries
will immediately cease any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any Company
Acquisition Proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding two sentences by any
officer or director of the Company or any of its subsidiaries or any investment
banker, attorney or other advisor or representative of the Company or any of its
subsidiaries shall be deemed to be a breach of this Section 5.4(a) by the
Company. In addition to the foregoing, the Company shall (i) provide Parent with
at least forty-eight (48) hours prior notice (or such lesser prior notice as
provided to the members of the Company's Board of Directors but in no event less
than eight hours) of any meeting of the Company's Board of Directors at which
the Company's Board of
-35-
41
Directors is reasonably expected to consider a Company Superior Offer and (ii)
provide Parent with at least three (3) business days prior written notice of a
meeting of the Company's Board of Directors at which the Company's Board of
Directors is reasonably expected to recommend a Company Superior Offer to its
stockholders and together with such notice a copy of the definitive
documentation relating to such Company Superior Offer.
(ii) For purposes of this Agreement, "Company Acquisition
Proposal" shall mean any offer or proposal (other than an offer or proposal by
Parent or any of its affiliates) providing for any Company Acquisition
Transaction. For the purposes of this Agreement, "Company Acquisition
Transaction" shall mean any transaction or series of related transactions other
than the transactions contemplated by this Agreement involving: (A) any
acquisition or purchase from the Company by any person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of more than a 15% interest in the total outstanding voting
securities of the Company or any of its subsidiaries or any tender offer or
exchange offer that if consummated would result in any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 15% or more of the total outstanding voting
securities of the Company or any of its subsidiaries or any merger,
consolidation, business combination or similar transaction involving the Company
pursuant to which the stockholders of the Company immediately preceding such
transaction hold less than 85% of the equity interests in the surviving or
resulting entity of such transaction or (B) any sale, lease (other than in the
ordinary course of business), exchange, transfer, license (other than in the
ordinary course of business), acquisition or disposition of all or substantially
all of the assets of the Company.
(iii) In addition to the obligations of the Company set
forth in paragraph (i) of this Section 5.4(a), the Company as promptly as
practicable, and in any event within twenty-four (24) hours, shall advise Parent
orally and in writing of any request received by the Company for non-public
information which the Company reasonably believes would lead to a Company
Acquisition Proposal or of any Company Acquisition Proposal, the material terms
and conditions of such request, Company Acquisition Proposal or inquiry, and the
identity of the person or group making any such request, Company Acquisition
Proposal or inquiry. The Company will keep Parent informed in all material
respects of the status and details (including material amendments or proposed
amendments) of any such request, Company Acquisition Proposal or inquiry.
(iv) Nothing contained in this Section 5.4(a) or elsewhere
in this Agreement shall prohibit the Company or its Board of Directors from
complying with Rule 14d-9 or Rule 14e-2 under the Exchange Act.
(b) Restrictions on Parent.
(i) From and after the date of this Agreement until the
Effective Time or termination of this Agreement pursuant to Article VII,
Parent's and its subsidiaries' officers and directors will not and Parent and
its subsidiaries will not, nor will they authorize or permit any of their
respective officers, directors, affiliates or employees or any investment
banker, attorney or other advisor or representative retained by any of them to,
directly or indirectly (i) solicit, initiate, knowingly encourage or induce the
making, submission or announcement of any Parent Acquisition Proposal (as
defined below), (ii) participate in any discussions or negotiations regarding,
or furnish to any person any non-public information with respect to, or take any
other action to facilitate any
-36-
42
inquiries or the making of any proposal that constitutes or may reasonably be
expected to lead to, any Parent Acquisition Proposal, (iii) engage in
discussions with any person with respect to any Parent Acquisition Proposal,
except as to the existence of these provisions, (iv) subject to Section 5.2(d),
approve, endorse or recommend any Parent Acquisition Proposal or (v) enter into
any letter of intent or similar document or any contract, agreement or
commitment contemplating or providing for any Parent Acquisition Transaction (as
defined below); provided, however, until the date on which the issuance of
Parent Common Stock in the Merger is approved by the required vote of the Parent
stockholders, nothing in this Section 5.4(b) or elsewhere in this Agreement
shall prohibit Parent or any of its subsidiaries or any of their respective
officers, directors, affiliates, employees, investment bankers, attorneys or
other advisors or representatives from furnishing nonpublic information
regarding Parent and its subsidiaries to, entering into a confidentiality
agreement with or entering into discussions or negotiating with, any person or
group in response to a Parent Superior Offer submitted by such person or group
(and not withdrawn) if (1) neither Parent nor any representative of Parent and
its subsidiaries shall have violated any of the restrictions set forth in this
Section 5.4(b), (2) the Board of Directors of Parent concludes in good faith,
after consultation with its outside legal counsel, that such action is required
in order for the Board of Directors of Parent to comply with its fiduciary
obligations to Parent's stockholders under applicable law, (3) (x) at least
three (3) days prior to furnishing any such nonpublic information to, or
entering into discussions or negotiations with, such person or group, Parent
gives the Company written notice of the identity of such person or group and of
Parent's intention to furnish nonpublic information to, or enter into
discussions or negotiations with, such person or group and (y) Parent receives
from such person or group an executed confidentiality agreement containing
customary limitations on the use and disclosure of all nonpublic written and
oral information furnished to such person or group by or on behalf of Parent and
containing terms no less favorable to the disclosing party than the terms of the
Confidentiality Agreement, and (4) contemporaneously with furnishing any such
nonpublic information to such person or group, Parent furnishes such nonpublic
information to the Company (to the extent such nonpublic information has not
been previously furnished by Parent to the Company). Parent and its subsidiaries
will immediately cease any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any Parent
Acquisition Proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding two sentences by any
officer or director of Parent or any of its subsidiaries or any investment
banker, attorney or other advisor or representative of Parent or any of its
subsidiaries shall be deemed to be a breach of this Section 5.4(b) by Parent. In
addition to the foregoing, Parent shall (i) provide the Company with at least
forty eight (48) hours prior notice (or such lesser prior notice as provided to
the members of Parent's Board of Directors but in no event less than eight
hours) of any meeting of Parent's Board of Directors at which Parent's Board of
Directors is reasonably expected to consider a Parent Superior Offer and (ii)
provide the Company with at least three (3) business days prior written notice
of a meeting of Parent's Board of Directors at which Parent's Board of Directors
is reasonably expected to recommend a Parent Superior Offer to its stockholders
and together with such notice a copy of the definitive documentation relating to
such Parent Superior Offer.
(ii) For purposes of this Agreement, "PARENT ACQUISITION
PROPOSAL" shall mean any offer or proposal (other than an offer or proposal by
the Company) or any of its affiliates) providing for any Parent Acquisition
Transaction. For the purposes of this Agreement, "PARENT ACQUISITION
TRANSACTION" shall mean any transaction or series of related transactions other
than the transactions contemplated by this Agreement involving: (A) any
acquisition or purchase from
-37-
43
Parent by any person or "group" (as defined under Section 13(d) of the Exchange
Act and the rules and regulations thereunder) of more than a 15% interest in the
total outstanding voting securities of Parent or any of its subsidiaries or any
tender offer or exchange offer that if consummated would result in any person or
"group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) beneficially owning 15% or more of the total outstanding
voting securities of Parent or any of its subsidiaries or any merger,
consolidation, business combination or similar transaction involving Parent
pursuant to which the stockholders of Parent immediately preceding such
transaction hold less than 85% of the equity interests in the surviving or
resulting entity of such transaction; (B) any sale, lease (other than in the
ordinary course of business), exchange, transfer, license (other than in the
ordinary course of business), acquisition or disposition of all or substantially
all of the assets of Parent.
(iii) In addition to the obligations of Parent set forth
in paragraph (i) of this Section 5.4(b), Parent as promptly as practicable, and
in any event within twenty-four (24) hours, shall advise the Company orally and
in writing of any request received by Parent for non-public information which
Parent reasonably believes would lead to a Parent Acquisition Proposal or of any
Parent Acquisition Proposal, the material terms and conditions of such request,
Parent Acquisition Proposal or inquiry, and the identity of the person or group
making any such request, Parent Acquisition Proposal or inquiry. Parent will
keep the Company informed in all material respects of the status and details
(including material amendments or proposed amendments) of any such request,
Parent Acquisition Proposal or inquiry.
(iv) Nothing contained in this Section 5.4(b) or elsewhere
in this Agreement shall prohibit Parent or its Board of Directors from complying
with Rule 14d-9 or Rule 14e-2 under the Exchange Act.
5.5 Public Disclosure. Parent and the Company will consult with each
other and agree before issuing any press release or otherwise making any public
statement with respect to the Merger, this Agreement, a Company Acquisition
Proposal or a Parent Acquisition Proposal and will not issue any such press
release or make any such public statement prior to such agreement, except as may
be required by law or any listing agreement with a national securities exchange
or Nasdaq, in which case reasonable efforts to consult with the other party will
be made prior to such release or public statement; provided, however, that no
such consultation or agreement shall be required if, prior to the date of such
release or public statement, either party shall have withheld, withdrawn,
amended or modified in substance adverse to the other party, its recommendation
in favor of the Merger.
5.6 Legal Requirements. Each of Parent, Merger Sub and the Company will
take all reasonable actions necessary or desirable to comply promptly with all
legal requirements which may be imposed on them with respect to the consummation
of the transactions contemplated by this Agreement (including furnishing all
information required in connection with approvals of or filings with any
Governmental Entity, and prompt resolution of any litigation prompted hereby)
and will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such requirements imposed upon any of them or
their respective subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement. Each of Parent, Merger Sub and the
Company will take all reasonable steps as may be necessary to avoid any suit,
claim, action investigation or proceeding by any Governmental Entity; provided,
however, that, notwithstanding
-38-
44
any provision of this Agreement to the contrary, Parent shall not be required to
agree to any divestiture by Parent or the Company or any of Parent's
subsidiaries or affiliates of shares of capital stock or of any business, assets
or property of Parent or its subsidiaries or affiliates or of the Company, its
affiliates, or the imposition of any limitation on the ability of any of them to
conduct their businesses or to own or exercise control of such assets,
properties and stock in any case that could reasonably be expected to have a
material adverse effect on the business, financial condition or results of
operations of Parent and its subsidiaries, including the Surviving Corporation,
taken as a whole following the consummation of the Merger. Parent will use its
commercially reasonable efforts to take such steps as may be necessary to comply
with the securities and blue sky laws of all jurisdictions which are applicable
to the issuance of Parent Common Stock pursuant hereto. The Company will use its
commercially reasonable efforts to assist Parent as may be necessary to comply
with the securities and blue sky laws of all jurisdictions which are applicable
in connection with the issuance of Parent Common Stock pursuant hereto.
5.7 Third Party Consents. As soon as practicable following the date
hereof, Parent and the Company will each use its commercially reasonable efforts
to obtain all material consents, waivers and approvals under any of its or its
subsidiaries' agreements, contracts, licenses or leases required to be obtained
in connection with the consummation of the transactions contemplated hereby.
Parent shall consult with the Company regarding the terms of the Bank Consents
(as defined below).
5.8 FIRPTA. At or prior to the Closing, the Company, if requested by
Parent, shall deliver to the IRS a notice that Company Common Stock is not a
"U.S. Real Property Interest" as defined and in accordance with the requirements
of Treasury Regulation Section 1.897-2(h)(2).
5.9 Notification of Certain Matters. Parent and Merger Sub will give
prompt notice to the Company, and the Company will give prompt notice to Parent,
of the occurrence, or failure to occur, of any event, which occurrence or
failure to occur would be reasonably likely to cause (a) any representation or
warranty contained in this Agreement to be untrue or inaccurate at any time from
the date of this Agreement to the Effective Time, such that the conditions set
forth in Section 6.2(a) or 6.3(a), as the case may be, would not be satisfied as
a result thereof, or (b) any material failure of Parent and Merger Sub or the
Company, as the case may be, or of any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement such that the conditions
set forth in Section 6.2(b) or 6.3(b), as the case may be, would not be
satisfied as a result. Notwithstanding the above, the delivery of any notice
pursuant to this section will not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
5.10 Reasonable Efforts and Further Assurances. Subject to the
respective rights and obligations of Parent and the Company under this
Agreement, each of the parties to this Agreement will use all reasonable efforts
to effectuate the Merger as expeditiously as practicable and the other
transactions contemplated hereby and to fulfill and cause to be fulfilled the
conditions to closing under this Agreement. Each of Parent, Merger Sub and the
Company will take all reasonable steps as may be necessary to defend any suits,
claims, actions, investigations or proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court of other Governmental Entity
vacated or reversed. Each party hereto, at the reasonable
-39-
45
request of another party hereto, will execute and deliver such other instruments
and do and perform such other acts and things as may be necessary or desirable
for effecting completely the consummation of the transactions contemplated
hereby.
5.11 Stock Options; Employee Stock Purchase Plans.
(a) Stock Options. At the Effective Time, each outstanding option
to purchase shares of Company Common Stock (each, a "COMPANY STOCK OPTION")
under Company Stock Option Plans, whether or not vested, shall by virtue of the
Merger be assumed by Parent. Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock for
issuance upon exercise of all Company Stock Options assumed in accordance with
this Section 5.11. Each Company Stock Option so assumed by Parent under this
Agreement will continue to have, and be subject to, the same terms and
conditions of such options immediately prior to the Effective Time (including,
without limitation, any repurchase rights or vesting provisions), except that
(i) each Company Stock Option will be exercisable (or will become exercisable in
accordance with its terms) for that number of whole shares of Parent Common
Stock equal to the product of the number of shares of Company Common Stock that
were issuable upon exercise of such Company Stock Option immediately prior to
the Effective Time multiplied by the Exchange Ratio, rounded down to the nearest
whole number of shares of Parent Common Stock, (ii) the per share exercise price
for the shares of Parent Common Stock issuable upon exercise of such assumed
Company Stock Option will be equal to the quotient determined by dividing the
exercise price per share of Company Common Stock at which such Company Stock
Option was exercisable immediately prior to the Effective Time by the Exchange
Ratio, rounded up to the nearest whole cent and (iii) references to the Company
in the agreement setting forth the terms of each Company Stock Option shall mean
Parent.
(b) ESPP. At the Effective Time, in accordance with the terms of
the Company ESPP, all rights to purchase shares of Company Common Stock under
the Company ESPP shall be converted (in accordance with the Exchange Ratio) into
rights to purchase shares of Parent Common Stock (with the number of shares
rounded down to the nearest whole share and the purchase price as of the
offering date for each offering period in effect as of the Effective Time
rounded up to the nearest whole cent) and all such converted rights shall be
assumed by Parent and the offering periods in effect under the Company ESPP
immediately prior to the Effective Time shall be continued in accordance with
the terms of the Company ESPP until the end of the offering periods in effect as
of the Effective Time. The Company ESPP shall terminate with the exercise of the
last assumed right, and no additional purchase rights shall be granted under the
Company ESPP following the Effective Time except that references to the Company
in the Company ESPP and related documents shall mean Parent (except that the
purchase price as of the offering date for a relevant period shall be determined
with respect to the fair market value of the Company's common stock, as adjusted
hereby). Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for issuance upon
exercise of rights to purchase Shares of Parent Common Stock under the Company
ESPP assumed in accordance with this Section 5.11. Parent agrees that from and
after the Effective Time, the Company employees may participate in the Parent
ESPP, subject to the terms and conditions of the Parent ESPP, and service with
the Company shall be treated as service with the Parent for determining
eligibility of the Company Employees under the Parent ESPP.
-40-
46
5.12 Form S-8. Parent agrees to file a registration statement on Form
S-8 for the shares of Parent Common Stock issuable with respect to assumed
Company Stock Options or the terms of the Company ESPP as soon as is reasonably
practicable (and in any event within thirty (30) days) after the Effective Time.
5.13 Indemnification.
(a) From and after the Effective Time, the Surviving Corporation
will fulfill and honor in all respects the obligations of the Company pursuant
to any indemnification agreements between the Company and its directors and
officers existing prior to the date hereof. The Certificate of Incorporation and
Bylaws of the Surviving Corporation will contain the provisions with respect to
indemnification and elimination of liability for monetary damages set forth in
the Certificate of Incorporation and Bylaws of the Company, which provisions
will not be amended, repealed or otherwise modified for a period of six (6)
years from the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who, at the Effective Time, were directors,
officers, employees or agents of the Company, unless such modification is
required by law.
(b) For a period of six years after the Effective Time, Parent
will cause the Surviving Corporation to maintain in effect, to the extent
available, directors' and officers' liability insurance covering those persons
who are currently covered by the Company's directors' and officers' liability
insurance policy on terms comparable to those applicable to the then current
directors and officers of Parent; provided, however, that in no event will
Parent or the Surviving Corporation be required to expend in excess of $450,000
in an annual premium for such coverage (or such coverage as is available for
such annual premium).
(c) This Section 5.13 will survive the consummation of the Merger
at the Effective Time and will be binding on all successors and assigns of the
Surviving Corporation.
5.14 Tax-Free Reorganization. Parent and the Company will each use its
commercially reasonable efforts to cause the Merger to be treated as a
reorganization within the meaning of Section 368 of the Code. Parent and the
Company will each make available to the other party and their respective legal
counsel copies of all returns requested by the other party.
5.15 Nasdaq Qualification. Parent agrees to authorize for trading on
Nasdaq the shares of Parent Common Stock issuable, and those required to be
reserved for issuance, in connection with the Merger, upon official notice of
issuance.
5.16 Action by Boards of Directors. Prior to the Effective Time, the
board of directors of each of Parent and the Company shall comply as applicable
with the provisions of the SEC's no-action letter dated January 12, 1999
addressed to Skadden, Arps, Slate, Xxxxxxx and Xxxx LLP relating to Rule 16b of
the Exchange Act.
5.17 The Company Affiliate Agreement. Set forth in Section 5.17 of the
Company Schedules is a list of those persons who may be deemed to be, in the
Company's reasonable judgment, affiliates of the Company within the meaning of
Rule 145 promulgated under the Securities Act (a "COMPANY AFFILIATE"). The
Company will provide Parent with such information and documents as Parent
reasonably requests for purposes of reviewing such list. The Company will use
its best efforts to deliver or cause to be delivered to Parent as promptly as
practicable on or
-41-
47
following the date hereof from each Company Affiliate an executed affiliate
agreement in substantially the form attached hereto as Exhibit E (the "COMPANY
AFFILIATE AGREEMENT"), each of which will be in full force and effect as of the
Effective Time. Parent will be entitled to place appropriate legends on the
certificates evidencing any Parent Common Stock to be received by a Company
Affiliate pursuant to the terms of this Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for the Parent Common Stock,
consistent with the terms of the Company Affiliate Agreement.
5.18 Regulatory Filings; Reasonable Efforts. As soon as may be
reasonably practicable, the Company and Parent each shall execute and file, or
join in the execution and filing of, any application, notification (including,
without limitation, any notification or provision of information, if any, that
may be required under the HSR Act) or any other document that may be necessary
in order to obtain the authorization, approval or consent of any Governmental
Entity, whether federal, state, local or foreign, which may be reasonably
required, or which the other party hereto may reasonably request, in connection
with the consummation of the Merger or any other transactions contemplated by
this Agreement. The Company and Parent shall in good faith use their best
efforts to as expeditiously as possible obtain, and to cooperate with the other
to expeditiously obtain, all such authorizations, approvals and consents. The
Company and Parent each shall promptly (a) supply the other with any information
which may be required in order to effectuate such filings and (b) supply any
additional information which reasonably may be required by the United States
Federal Trade Commission (the "FTC"), the Antitrust Division of the United
States Department of Justice (the "DOJ") or the competition or merger control
authorities of any other jurisdiction and which the parties may reasonably deem
appropriate.
5.19 Board of Directors; Officers.
(a) At or prior to the Effective Time, each of the Company and
Parent agrees to take such action as is necessary to cause the number of
directors comprising the full Board of Directors of Parent to be nine persons,
including (i) six of the current members of Parent's Board of Directors (or, if
fewer than six of the current members of Parent's Board of Directors are
available or willing to serve as a director of Parent after the Effective Time,
such replacement directors as may be nominated by the remaining members of
Parent's Board of Directors in accordance with the Bylaws of Parent) (the
"PARENT DESIGNEES") and (ii) three of the Company's current directors nominated
by the Company (or, if fewer than three of the current members of the Company's
Board of Directors are available or willing to serve as a director of Parent
after the Effective Time, such replacement directors as may be nominated by the
remaining directors of the Company) (the "COMPANY DESIGNEES").
-42-
48
(b) From and after the Effective Time, and until successors are
duly elected or appointed and qualified in accordance with applicable law, the
following persons (the "PARENT OFFICERS") shall hold the titles indicated at
Parent and shall serve at the pleasure of the Board of Directors of Parent:
Chief Executive Officer T. H. Tan
Chief Operating Officer Xxxxxx X. Xxxxxxx
Chief Technical Officer Xxxxxxx X. Xxxxxx
Chief Financial Officer Xxxxxx Xxxxxxx
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been adopted
by the requisite vote under applicable law by the stockholders of the Company,
and the issuance of shares of Parent Common Stock by virtue of the Merger shall
have been duly approved by the requisite vote under Delaware law, the Parent
Charter Documents and the rules of the National Association of Securities
Dealers, Inc. by the stockholders of Parent.
(b) Registration Statement Effective; Proxy Statement. The SEC
shall have declared the Registration Statement effective. No stop order
suspending the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose, and no similar
proceeding in respect of the Proxy Statement shall have been initiated or
threatened in writing by the SEC.
(c) No Order; HSR Act. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger. All
waiting periods, if any, under the HSR Act relating to the transactions
contemplated hereby will have expired or terminated early.
(d) Tax Opinions. Parent and the Company shall each have received
substantially identical written opinions from their counsel, Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx, Professional Corporation, and Xxxxxx Godward LLP,
respectively, in form and substance reasonably satisfactory to them, to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and such opinions shall not have been withdrawn;
provided, however, that if the counsel to either Parent or the Company does not
render such opinion or renders but withdraws such opinion, this condition shall
nonetheless be deemed to be satisfied with respect to such party if counsel to
the other party renders and does not withdraw such opinion to such party. The
parties to
-43-
49
this Agreement agree to make reasonable representations as requested by such
counsel for the purpose of rendering such opinions.
(e) Nasdaq Qualification. The shares of Parent Common Stock
issuable to stockholders of the Company pursuant to this Agreement and such
other shares required to be reserved for issuance in connection with the Merger
shall have been authorized for trading on the Nasdaq upon official notice of
issuance.
6.2 Additional Conditions to Obligations of the Company. The obligation
of the Company to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall have been
true and correct in all material respects as of the date of this Agreement,
except where the failure to be so true and correct would not, in the aggregate,
have a Material Adverse Effect on Parent. In addition, the representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct in all material respects on and as of the Effective Time except for
changes contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such particular date), with the same force and
effect as if made on and as of the Effective Time, except in such cases (other
than the representations in Sections 3.2 and 3.3) where the failure to be so
true and correct would not, in the aggregate, have a Material Adverse Effect on
Parent. The Company shall have received a certificate with respect to the
foregoing signed on behalf of Parent by the Chief Executive Officer and the
Chief Financial Officer of Parent; and
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and the Company shall have received a certificate to such
effect signed on behalf of Parent by the Chief Executive Officer and the Chief
Financial Officer of Parent.
(c) Bank Consent. Prior to August 15, 2000, Parent shall have (a)
entered into amendments to the Credit Agreements (as described below) such that
Parent is not, at the time of entering into such amendments, in default under
the Credit Agreements, and (b) obtained all necessary approvals of the Merger
and the transactions contemplated hereby from the lenders party to each of the
following credit agreements: (i) the Amended and Restated Credit Agreement dated
as of June 20, 1997 with Fleet National Bank as agent, (ii) the Credit Agreement
dated as of October 7, 1996 with the Dai Ichi Kangyo Bank, Limited, (iii) the
Credit Agreement dated as of December 15, 1995 with The Industrial Bank of
Japan, Limited, San Francisco Agency ("IBJ") as agent, and (iv) the Credit
Agreement dated as of February 7, 1997 with IBJ as agent (the agreements
described in clauses (i) through (iv) are, collectively, the "CREDIT
AGREEMENTS"), as the Credit Agreements may be amended, modified or restructured
prior to or as of the Closing Date (the "BANK CONSENTS").
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate and effect the Merger
shall be subject to the satisfaction at
-44-
50
or prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by Parent:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall have been true and
correct in all material respects as of the date of this Agreement, except where
the failure to be so true and correct would not, in the aggregate, have a
Material Adverse Effect on the Company. In addition, the representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects on and as of the Effective Time except for changes
contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such particular date), with the same force and
effect as if made on and as of the Effective Time, except in such cases (other
than the representations in Sections 2.2 and 2.3)where the failure to be so true
and correct would not, in the aggregate, have a Material Adverse Effect on the
Company. Parent shall have received a certificate with respect to the foregoing
signed on behalf of the Company by the President and the Chief Financial Officer
of the Company; and
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time, and the Parent shall have received a certificate to such effect
signed on behalf of the Company by the President and the Chief Financial Officer
of the Company.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time of the Merger, whether before or after approval of the Merger
by the stockholders of the Company or the approval of the issuance of Parent
Common Stock in connection with the Merger by the stockholders of Parent:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company;
(b) by either the Company or Parent if the Merger shall not have
been consummated by 5:00 p.m. Pacific Time, on October 31, 2000 (the "INITIAL
END DATE"); provided, that if at the Initial End Date the only condition to the
obligation of the parties to effect the Merger that shall not then be satisfied
or waived is that described in the second sentence of Section 6.1(c), then such
date shall be automatically extended to December 31, 2000; provided, however,
that the right to terminate this Agreement under this Section 7.1(b) shall not
be available to any party whose action or failure to act has been a principal
cause of or resulted in the failure of the Merger to occur on or before such
date and such action or failure to act constitutes a breach of this Agreement;
(c) by either the Company or Parent if a Governmental Entity
shall have issued an order, decree or ruling or taken any other action, in any
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree or ruling is final and
nonappealable;
-45-
51
(d) by either the Company or Parent if the required approvals of
the stockholders of the Company or the stockholders of Parent contemplated by
this Agreement shall not have been obtained by reason of the failure to obtain
the required vote upon a vote taken at the Company Stockholders' Meeting or the
Parent Stockholders' Meeting, respectively, duly convened therefor or at any
adjournment thereof; provided, however, that the right to terminate this
Agreement under this Section 7.1(d) shall not be available to any party where
the failure to obtain stockholder approval of such party shall have been caused
by the action or failure to act of such party in breach of this Agreement;
(e) by the Company, upon (i) a breach of any representation,
warranty, covenant or agreement on the part of Parent set forth in this
Agreement, or if any representation or warranty of Parent shall have become
untrue, in either case such that the conditions set forth in Section 6.2(a) or
Section 6.2(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue, provided, that if
such inaccuracy in Parent's representations and warranties or breach by Parent
is curable by Parent through the exercise of its commercially reasonable
efforts, then the Company may not terminate this Agreement under this Section
7.1(e) for thirty (30) days after delivery of written notice from the Company to
Parent of such breach, provided Parent continues to exercise commercially
reasonable efforts to cure such breach (it being understood that the Company may
not terminate this Agreement pursuant to this paragraph (e) if such breach by
Parent is cured) or (ii) if the conditions set forth in Section 6.2(c) have not
been met prior to August 15, 2000;
(f) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Section 6.3(a) or Section
6.3(b) would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue, provided, that if such
inaccuracy in the Company's representations and warranties or breach by the
Company is curable by the Company through the exercise of its commercially
reasonable efforts, then Parent may not terminate this Agreement under this
Section 7.1(f) for thirty (30) days after delivery of written notice from Parent
to the Company of such breach, provided the Company continues to exercise
commercially reasonable efforts to cure such breach (it being understood that
Parent may not terminate this Agreement pursuant to this paragraph (f) if such
breach by the Company is cured);
(g) by the Company if a Company Triggering Event (as defined
below) shall have occurred; or
(h) by Parent if a Parent Triggering Event (as defined below)
shall have occurred.
For the purposes of this Agreement, a "COMPANY TRIGGERING EVENT" shall
be deemed to have occurred if: (i) the Board of Directors of Parent or any
committee thereof shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to the Company its recommendation in favor of the
adoption of this Agreement; (ii) Parent shall have failed to include in the
Proxy Statement the recommendation of the Board of Directors of Parent in favor
of the issuance of shares of Parent Common Stock in connection with the Merger;
(iii) Board of Directors of Parent fails to reaffirm its recommendation in favor
of the issuance of shares of Parent Common Stock in connection with the Merger
within ten (10) business days after the Company requests in writing that
-46-
52
such recommendation be reaffirmed at any time following the announcement of a
Parent Acquisition Offer; (iv) the Board of Directors of Parent or any committee
thereof shall have approved or recommended any Parent Acquisition Offer; (v)
Parent shall have entered into any letter of intent or similar document or any
agreement, contract or commitment accepting any Parent Acquisition Offer; (vi) a
tender or exchange offer relating to securities of Parent constituting an
Acquisition Proposal shall have been commenced by a person unaffiliated with the
Company and Parent shall not have sent to its securityholders pursuant to Rule
14e-2 promulgated under the Securities Act, within ten (10) business days after
such tender or exchange offer is first published sent or given, a statement
disclosing that Parent recommends rejection of such tender or exchange offer; or
(vii) Parent shall have breached in any material respect the provisions of
Section 5.4(b) of this Agreement. For purposes of this Agreement, "PARENT
ACQUISITION OFFER" shall mean any offer or proposal (other than an offer or
proposal by the Company) relating to any transaction or series of related
transactions other than the transactions contemplated by this Agreement
involving: (A) any acquisition or purchase from Parent by any person or "group"
(as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of more than a 50% interest in the total outstanding
voting securities of Parent or any of its subsidiaries or any tender offer or
exchange offer that if consummated would result in any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 50% or more of the total outstanding voting
securities of Parent or any of its subsidiaries or any merger, consolidation,
business combination or similar transaction involving Parent pursuant to which
the stockholders of Parent immediately preceding such transaction hold less than
50% of the equity interests in the surviving or resulting entity of such
transaction or (B) any sale, lease (other than in the ordinary course of
business), exchange, transfer, license (other than in the ordinary course of
business), acquisition or disposition of all or substantially all of the assets
of Parent.
(i) For the purposes of this Agreement, a "PARENT TRIGGERING
EVENT" shall be deemed to have occurred if: (i) the Board of Directors of the
Company or any committee thereof shall for any reason have withdrawn or shall
have amended or modified in a manner adverse to Parent its recommendation in
favor of adoption of this Agreement; (ii) the Company shall have failed to
include in the Proxy Statement the recommendation of the Board of Directors of
the Company in favor of adoption of the Agreement; (iii) Board of Directors of
the Company fails to reaffirm its recommendation in favor of adoption of the
Agreement within ten (10) business days after Parent requests in writing that
such recommendation be reaffirmed at any time following the announcement of a
Company Acquisition Proposal; (iv) the Board of Directors of the Company or any
committee thereof shall have approved or recommended any the Company Acquisition
Offer; (v) the Company shall have entered into any letter of intent or similar
document or any agreement, contract or commitment accepting any Company
Acquisition Offer; (vi) a tender or exchange offer relating to securities of the
Company constituting an Acquisition Proposal shall have been commenced by a
person unaffiliated with Parent and the Company shall not have sent to its
securityholders pursuant to Rule 14e-2 promulgated under the Securities Act,
within ten (10) business days after such tender or exchange offer is first
published sent or given, a statement disclosing that the Company recommends
rejection of such tender or exchange offer; or (vii) the Company shall have
breached in any material respect the provisions of Section 5.4(a) of this
Agreement. For purposes of this Agreement, "COMPANY ACQUISITION OFFER" shall
mean any offer or proposal (other than an offer or proposal by Parent) relating
to any transaction or series of related transactions other than the transactions
contemplated by this Agreement involving: (A) any acquisition or purchase from
the Company by any person or "group" (as defined under Section 13(d)
-47-
53
of the Exchange Act and the rules and regulations thereunder) of more than a 50%
interest in the total outstanding voting securities of the Company or any of its
subsidiaries or any tender offer or exchange offer that if consummated would
result in any person or "group" (as defined under Section 13(d) of the Exchange
Act and the rules and regulations thereunder) beneficially owning 50% or more of
the total outstanding voting securities of the Company or any of its
subsidiaries or any merger, consolidation, business combination or similar
transaction involving the Company pursuant to which the stockholders of the
Company immediately preceding such transaction hold less than 50% of the equity
interests in the surviving or resulting entity of such transaction; (B) any
sale, lease (other than in the ordinary course of business), exchange, transfer,
license (other than in the ordinary course of business), acquisition or
disposition of all or substantially all of the assets of the Company.
7.2 Notice of Termination; Effect of Termination. Any termination of
this Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 7.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in this Section 7.2, Section 7.3 and Article 8 (General Provisions), each of
which shall survive the termination of this Agreement, and (ii) nothing herein
shall relieve any party from liability for any willful breach of this Agreement.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section 7.3, all fees
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not the Merger is consummated; provided, however, that Parent and the Company
shall share equally all fees and expenses, other than attorneys' and
accountants' fees and expenses, incurred (i) in relation to the printing and
filing of the Proxy Statement (including any preliminary materials related
thereto) and the Registration Statement (including financial statements and
exhibits) and any amendments or supplements thereto or (ii) for the pre-merger
notification and report forms under the HSR Act.
(b) Company Payments.
(i) the Company shall pay to Parent in immediately
available funds, within two (2) business days after demand by Parent, an amount
equal to $5,000,000 (the "COMPANY TERMINATION FEE") if this Agreement is
terminated by Parent pursuant to Section 7.1(h).
(ii) the Company shall pay Parent in immediately available
funds, within two (2) business days after demand by Parent, an amount equal to
the Company Termination Fee, if this Agreement is terminated by Parent or the
Company, as applicable, pursuant to Section 7.1(b) or Section 7.1(d) as a result
of the Company's failure to obtain the required approvals of the stockholders of
the Company and any of the following shall occur:
(1) if following the date hereof and prior to the
termination of this Agreement, a third party has publicly announced (and not
publicly and irrevocably withdrawn) a Company Acquisition Offer and within the
Applicable Period (as defined below) a Company Acquisition (as defined below) is
consummated; or
-48-
54
(2) if following the date hereof and prior to the
termination of this Agreement, a third party has publicly announced (and not
publicly and irrevocably withdrawn) a Company Acquisition Offer and within the
Applicable Period the Company enters into an agreement or letter of intent
providing for a Company Acquisition.
(iii) the Company acknowledges that the agreements
contained in this Section 7.3(b) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent would
not enter into this Agreement; accordingly, if the Company fails to pay in a
timely manner the amounts due pursuant to this Section 7.3(b) and, in order to
obtain such payment, Parent commences a lawsuit that results in a judgment
against the Company for the amounts set forth in this Section 7.3(b), the
Company shall pay to Parent its reasonable costs and expenses (including
reasonable attorneys' fees and expenses) in connection with such lawsuit,
together with interest on the amounts set forth in this Section 7.3(b) at the
prime rate of The Chase Manhattan Bank in effect on the date such payment was
required to be made. Payment of the fees described in this Section 7.3(b) shall
not be in lieu of damages incurred in the event of breach of this Agreement. For
the purposes of this Agreement, "COMPANY ACQUISITION" shall mean any of the
following transactions (other than the transactions contemplated by this
Agreement): (i) a merger, consolidation, business combination, recapitalization,
or similar transaction involving the Company pursuant to which the stockholders
of the Company immediately preceding such transaction hold less than 50% of the
aggregate equity interests in the surviving or resulting entity of or Parent
Company involved in such transaction, (ii) a sale or other disposition by the
Company of all or substantially all of its assets or (iii) the acquisition by
any person or group (including by way of a tender offer or an exchange offer or
issuance by the Company), directly or indirectly, of beneficial ownership or a
right to acquire beneficial ownership of shares representing in excess of 50% of
the voting power of the then outstanding shares of capital stock of the Company.
(c) Parent Payments.
(i) Parent shall pay to the Company in immediately
available funds, within two (2) business days after demand by the Company, an
amount equal to $5,000,000 (the "PARENT TERMINATION FEE") if this Agreement is
terminated by the Company pursuant to Section 7.1(g).
(ii) Parent shall pay the Company in immediately available
funds, within two (2) business days after demand by the Company, an amount equal
to the Parent Termination Fee, if this Agreement is terminated by the Company or
Parent, as applicable, pursuant to Section 7.1(b) or Section 7.1(d) as a result
of Parent's failure to obtain the required approvals of the stockholders of
Parent and any of the following shall occur:
(1) if following the date hereof and prior to the
termination of this Agreement, a third party has publicly announced (and not
publicly and irrevocably withdrawn) a Parent Acquisition Offer and within the
Applicable Period a Parent Acquisition (as defined below) is consummated; or
(2) if following the date hereof and prior to the
termination of this Agreement, a third party has publicly announced (and not
publicly and irrevocably withdrawn) a
-49-
55
Parent Acquisition Offer, and within the Applicable Period Parent enters into an
agreement or letter of intent providing for a Parent Acquisition.
(iii) Parent acknowledges that the agreements contained in
this Section 7.3(c) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, the Company would not enter
into this Agreement; accordingly, if Parent fails to pay in a timely manner the
amounts due pursuant to this Section 7.3(c) and, in order to obtain such
payment, the Company commences a lawsuit that results in a judgment against
Parent for the amounts set forth in this Section 7.3(c), Parent shall pay to the
Company its reasonable costs and expenses (including reasonable attorneys' fees
and expenses) in connection with such lawsuit, together with interest on the
amounts set forth in this Section 7.3(c) at the prime rate of The Chase
Manhattan Bank in effect on the date such payment was required to be made.
Payment of the fees described in this Section 7.3(c) shall not be in lieu of
damages incurred in the event of breach of this Agreement. For the purposes of
this Agreement, "PARENT ACQUISITION" shall mean any of the following
transactions (other than the transactions contemplated by this Agreement): (i) a
merger, consolidation, business combination, recapitalization, or similar
transaction involving Parent pursuant to which the stockholders of Parent
immediately preceding such transaction hold less than 50% of the aggregate
equity interests in the surviving or resulting entity of or Parent Company
involved in such transaction, (ii) a sale or other disposition by Parent all or
substantially all or (iii) the acquisition by any person or group (including by
way of a tender offer or an exchange offer or issuance by Parent), directly or
indirectly, of beneficial ownership or a right to acquire beneficial ownership
of shares representing in excess of 50% of the voting power of the then
outstanding shares of capital stock of Parent.
(d) Applicable Period. For the purposes of this Agreement,
"APPLICABLE PERIOD" shall mean (i) the 12-month period following the termination
of this Agreement if the party with whom the Company (in the case of Section
7.3(b)) or Parent (in the case of Section 7.3(c)) consummates a Company
Acquisition or Parent Acquisition, respectively, or enters into an agreement or
letter of intent providing for a Company Acquisition or Parent Acquisition,
respectively, or an affiliate thereof, has publicly announced and not publicly
and irrevocably withdrawn a Company Acquisition Offer or Parent Acquisition
Offer, respectively, following the date hereof and prior to the termination of
this Agreement or (ii) the 6-month period following the termination of this
Agreement.
7.4 Amendment. Subject to applicable law, this Agreement may be amended
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of the parties hereto.
7.5 Extension; Waiver. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
-50-
56
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The representations,
warranties and pre-closing covenants of the Company, Parent and Merger Sub
contained in this Agreement or in any certificate or instrument delivered
pursuant hereto shall terminate at the Effective Time, and only the covenants
that by their terms survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given on the day of delivery, if delivered
personally or on the second business day after delivery if delivered by
commercial delivery service, or sent via facsimile (receipt confirmed), to the
parties at the following addresses or facsimile numbers (or at such other
address or facsimile numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Komag, Incorporated
0000 Xxxxxxxxxx Xxxxxxx
Xxx Xxxx, XX 00000
Attention: Chief Executive Officer
Fax No.: (000) 000-0000
with copies to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxx Xxxxxx, Esq. / Xxxxxxxx X. Xxxxx, Esq.
Fax No.: (000) 000-0000
and to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation
One Market Street
Spear Street Tower, Suite 1600
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Fax No.: (000) 000-0000
(b) if to the Company, to:
HMT Technology Corp.
0000 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Chief Executive Officer
Fax No.: (000) 000-0000
-51-
57
with a copy to:
Xxxxxx Godward LLP
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Esq.
Fax No.: (000) 000-0000
8.3 Interpretation; Knowledge.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
The words "INCLUDE," "INCLUDES" and "INCLUDING" when used herein shall be deemed
in each case to be followed by the words "WITHOUT LIMITATION." The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. When reference is made herein to "THE BUSINESS OF" an entity, such
reference shall be deemed to include the business of all direct and indirect
subsidiaries of such entity. Reference to the subsidiaries of an entity shall be
deemed to include all direct and indirect subsidiaries of such entity.
(b) For purposes of this Agreement, the term "KNOWLEDGE" means,
with respect to any matter in question, that the executive officers of the
Company or Parent, as the case may be, have actual knowledge of such matter.
(c) For purposes of this Agreement, the term "Material Adverse
Effect" when used in connection with an entity means any change, event,
violation, inaccuracy, circumstance, condition or effect which has had a
material adverse effect on the business, financial condition or results of
operations of such entity and its subsidiaries taken as a whole; provided,
however, that in no event shall any of the following constitute a Material
Adverse Effect or be taken into account in determining whether a Material
Adverse Effect has occurred: (i) a change in the trading prices of either of
Parent's or Company's equity securities between the date hereof and the
Effective Time, in and of itself; (ii) a failure of Parent or Company to meet
the publicly available forecast financial information prepared by equity
research analysts between the date hereof and the Effective Time; (iii) changes,
events, violations, inaccuracies, circumstances, conditions or effects generally
affecting the industry in which either Parent or Company operate or arising from
changes in general business or economic conditions in the United States or in
any jurisdiction in which Parent or Company transacts business; (iv) changes,
events, violations, inaccuracies, circumstances, conditions or effects resulting
from the announcement or pendency of this Agreement or of any of the
transactions contemplated by this Agreement (including, without limitation, any
delays in customer orders or reductions in sales so resulting); and (v) changes
that result directly from the unreasonable delay or withholding of consent by
the other party to actions otherwise prohibited by Section 4.1.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
-52-
58
8.5 Entire Agreement. This Agreement and the documents and instruments
and other agreements among the parties hereto as contemplated by or referred to
herein, including the Company Schedules and the Parent Schedules (a) constitute
the entire agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, it being understood
that the Confidentiality Agreement shall continue in full force and effect until
the Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as set forth herein.
8.6 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
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 hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity. In
any action at law or suit in equity to enforce this Agreement or the rights of
any of the parties hereunder, the prevailing party in such action or suit shall
be entitled to receive a reasonable sum for its attorneys' fees and all other
reasonable costs and expenses incurred in such action or suit.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the of the parties. Subject to the preceding sentence, this Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
-53-
59
8.11 WAIVER OF JURY TRIAL. EACH OF PARENT, THE COMPANY AND MERGER SUB
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, THE COMPANY OR MERGER SUB
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
-54-
60
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed by their duly authorized respective officers, as of the
date first written above.
KOMAG, INCORPORATED
By: /s/ XXXXX X. XXX
--------------------------------------
Name: Xxxxx X. Xxx
-------------------------------
Title: President and Chief
Executive Officer
------------------------------
HMT TECHNOLOGY CORP.
By: /s/ XXXXXX X. XXXXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
-------------------------------
Title: President and Chief
Operating Officer
------------------------------
KHM, INC.
By: /s/ XXXXXX X. XXXXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
-------------------------------
Title: Vice President
------------------------------
****REORGANIZATION AGREEMENT****
