EXHIBIT 2.4
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AGREEMENT AND PLAN OF REORGANIZATION
among
ZHONE TECHNOLOGIES, INC.,
a Delaware corporation,
OPT ACQUISITION CORPORATION,
a California corporation and
wholly-owned subsidiary of Zhone,
and
OPTAPHONE SYSTEMS, INC.,
a California corporation
Dated February 8, 2000
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TABLE OF CONTENTS
Page
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1. Definitions................................................. 1
2. Plan of Reorganization...................................... 5
2.1 Merger; Effective Time of the Merger................... 5
2.2 Closing................................................ 5
2.3 Effects of the Merger.................................. 5
2.4 Accounting Treatment................................... 5
2.5 Effect on Capital Stock; Escrow Amount................. 5
2.6 Appraisal Rights....................................... 6
2.7 Exchange Procedures.................................... 6
3. Representations and Warranties of Optaphone................. 7
3.1 Organization.......................................... 7
3.2 Capitalization........................................ 8
3.3 Power, Authorization and Validity..................... 8
3.4 No Violation of Existing Agreements................... 9
3.5 Subsidiaries.......................................... 9
3.6 Financial Statements.................................. 9
3.7 Tax Matters........................................... 10
3.8 Absence of Certain Changes or Events.................. 11
3.9 Title and Related Matters; Inventory.................. 12
3.10 Intellectual Property................................. 13
3.11 Employee Benefit Plans................................ 15
3.12 Contracts............................................. 17
3.13 Compliance with Law................................... 18
3.14 Labor Difficulties.................................... 18
3.15 Certain Transactions.................................. 19
3.16 Employees and Consultants............................. 19
3.17 Insurance............................................. 19
3.18 Litigation............................................ 19
3.19 Corporate Minutes, Etc................................ 20
3.20 Compliance with Environmental Requirements............ 20
3.21 No Brokers............................................ 20
3.22 Optaphone Options..................................... 20
3.23 Government Contracts.................................. 21
3.24 Restrictions on Business Activities................... 21
3.25 Disclosure............................................ 21
3.26 No Material Adverse Effect............................ 21
3.27 No Misrepresentation.................................. 21
4. Representations and Warranties of Zhone and Sub............. 21
4.1 Organization and Good Standing......................... 21
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TABLE OF CONTENTS
(Continued)
Page
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4.2 Power, Authorization and Validity...................... 22
4.3 Capitalization......................................... 22
4.4 No Violation of Existing Agreements.................... 23
4.5 No Brokers............................................. 23
4.6 Litigation............................................. 23
5. Covenants of Optaphone...................................... 24
5.1 Conduct of Business; Interim Operations................ 24
5.2 Access to Information.................................. 26
5.3 Shareholder Consent.................................... 26
5.4 Regulatory Approvals................................... 26
5.5 Satisfaction of Conditions Precedent................... 26
5.6 Other Negotiations..................................... 27
6. Covenants of Zhone and Sub.................................. 27
6.1 Advice of Changes...................................... 27
6.2 Regulatory Approvals................................... 27
6.3 Satisfaction of Conditions Precedent................... 27
6.4 Issuance of Options.................................... 28
7. Additional Covenants of the Parties......................... 28
7.1 Confidentiality........................................ 28
7.2 Publicity.............................................. 29
7.3 Employment Matters..................................... 29
7.4 Voting Agreements...................................... 30
7.5 Continuing Cooperation................................. 30
8. The Closing................................................. 30
8.1 Delivery of Documents.................................. 30
8.2 Delivery of Cash Payment............................... 30
9. Conditions to the Closing................................... 30
9.1 Conditions to Each Party's Obligations................ 30
9.2 Conditions to Obligations of Optaphone................ 31
9.3 Conditions to Obligations of Zhone and Sub............ 31
10. Termination of Agreement.................................... 32
10.1 Termination by Zhone.................................. 32
10.2 Termination by Optaphone.............................. 33
10.3 Mutual Consent........................................ 33
10.4 Effect of Termination................................. 33
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TABLE OF CONTENTS
(Continued)
Page
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11. Survival of Representations and Warranties; Indemnification. 33
11.1 Survival of Representations and Warranties............ 33
11.2 Indemnification....................................... 33
11.3 Escrow Fund........................................... 34
11.4 Claims Upon Escrow Fund............................... 35
11.5 Resolution of Conflicts............................... 35
11.6 Shareholder Agent..................................... 36
11.7 Third-Party Claims.................................... 37
12. Miscellaneous............................................... 37
12.1 Governing Law......................................... 37
12.2 Dispute Resolution.................................... 37
12.3 Assignment; Binding upon Successors and Assigns....... 37
12.4 Severability.......................................... 38
12.5 Entire Agreement...................................... 38
12.6 Counterparts.......................................... 38
12.7 Expenses.............................................. 38
12.8 Other Remedies........................................ 38
12.9 Amendment and Waivers................................. 38
12.10 Waiver................................................ 38
12.11 Notices............................................... 39
12.12 Construction and Interpretation of Agreement.......... 40
12.13 No Joint Venture...................................... 40
12.14 Further Assurances.................................... 40
12.15 Absence of Third Party Beneficiary Rights............. 40
iii
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is entered
into on February 8, 2000 by and among ZHONE TECHNOLOGIES, INC., a Delaware
corporation ("Zhone"), OPT ACQUISITION CORPORATION, a California corporation and
wholly-owned subsidiary of Zhone ("Sub"), and OPTAPHONE SYSTEMS, INC., a
California corporation ("OptaPhone").
Recitals
A. The parties intend that, pursuant to the terms and subject to the
conditions set forth below, Sub shall be merged with and into OptaPhone, with
OptaPhone the surviving corporation (the "Merger") pursuant to an Agreement of
Merger substantially in the form attached hereto as Exhibit A (the "Agreement of
Merger") and the applicable provisions of the laws of the State of California;
and
B. The parties desire to set forth certain representations, warranties
and covenants made by each to the other as an inducement to the consummation of
the Merger.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and agreements set forth herein, the parties agree as follows:
1. Definitions. The following terms when used herein have the meanings
set forth below:
1.1 "Acquisition Proposal" has the meaning set forth in Section
5.6.
1.2 "Affiliate" has the meaning set forth in the rules and
regulations promulgated by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
1.3 "Agreement of Merger" has the meaning set forth in Recital A.
1.4 "COBRA" has the meaning set forth in Section 3.11(c).
1.5 "California Law" means the California General Corporation Law.
1.6 "Certificates" has the meaning set forth in Section 2.7(b).
1.7 "Closing" and "Closing Date" have the respective meanings set
forth in Section 2.2.
1.8 "Code" means the Internal Revenue Code of 1986, as amended.
1.9 "Common Stock" has the meaning set forth in Section 4.3.
1.10 "Common Stock Per Share Amount" means $0.05746.
1
1.11 "Confirmation Date" has the meaning set forth in Section 2.1.
1.12 "Constituent Corporations" has the meaning set forth in
Section
2.3.
1.13 "DOL" has the meaning set forth in Section 3.11(b).
1.14 "Dissenting Shareholder" has the meaning set forth in Section
2.6.
1.15 "Dissenting Shares" has the meaning set forth in Section 2.6.
1.16 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.17 "ERISA Affiliate" has the meaning set forth in Section
3.11(a).
1.18 "Effective Time of the Merger" has the meaning set forth in
Section 2.1.
1.19 "Encumbrances" means, with respect to an item, claims,
liabilities, liens, pledges, mortgages, restrictions, options, charges and
encumbrances of any kind, whether accrued, absolute, contingent or otherwise,
affecting that item.
1.20 "Escrow Agent," "Escrow Agreement," "Escrow Amount," "Escrow
Fund" and "Escrow Period" have the respective meanings set forth in Section
11.3.
1.21 "Exchange Agent" has the meaning set forth in Section 2.7(a).
1.22 "GAAP" means generally accepted accounting principles,
consistently applied.
1.23 "Government Contract Party" means any independent or executive
agency, division, subdivision, audit group, or procuring office of the federal
government, including any prime contractor of the federal government and any
higher level subcontractor of a prime contractor of the federal government, and
including any employees or agents thereof, in each case acting in such capacity.
1.24 "Governmental Entity" means any court, administrative agency
or or other governmental authority or agency, domestic or foreign.
1.25 "IRS" has the meaning set forth in Section 3.11(b).
1.26 "Information Technology" has the meaning set forth in Section
3.10(j).
1.27 "Letter of Transmittal" has the meaning set forth in Section
2.7(b).
1.28 "Licensed Intellectual Property" has the meaning set forth in
Section 3.10(a).
1.29 "Material Adverse Effect" with respect to an entity means a
material adverse effect on the business, assets (including intangible assets),
financial condition, or results of operations of such entity and its
Subsidiaries, taken as a whole.
1.30 "Merger" has the meaning set forth in Recital A.
1.31 "Officer's Certificate" has the meaning set forth in Section
11.4.
1.32 "OptaPhone 1999 Financial Statements" means OptaPhone's
balance sheet as of December 31, 1999 and its statements of operations and
statement of cash flows for the fiscal year then ended.
1.33 "OptaPhone Common Stock" means the common stock of OptaPhone.
1.34 "OptaPhone Components" has the meaning set forth in Section
3.10(e).
1.35 "OptaPhone Disclosure Schedule" means Exhibit B hereto.
1.36 "OptaPhone Employee Plan(s)" has the meaning set forth in
Section 3.11(a).
1.37 "OptaPhone Expense Schedule" has the meaning set forth in
Section 12.7.
1.38 "OptaPhone Intellectual Property Rights" has the meaning set
forth in Section 3.10(a).
1.39 "OptaPhone's Knowledge" has the meaning set forth in Section
12.12(c).
1.40 "OptaPhone Option Agreements" means the agreements between
OptaPhone and each holder of OptaPhone Options representing such holder's
OptaPhone Options which have been issued under the OptaPhone Option Plans.
1.41 "OptaPhone Option Plans" means the OptaPhone Systems, Inc.
1996 Stock Option Plan and the OptaPhone Systems, Inc. 1999 Stock Option Plan.
1.42 "OptaPhone Options" means options to acquire OptaPhone Common
Stock issued and outstanding under the OptaPhone Option Plans.
1.43 "OptaPhone Preferred Stock" means the Series A Preferred Stock
of OptaPhone.
1.44 "OptaPhone Products" means all products and services of
OptaPhone that have been and are currently being distributed or provided by
OptaPhone, and all products currently under development by OptaPhone including,
but not limited to those products currently under development by OptaPhone and
identified internally at OptaPhone as "Product B" and "Product Z."
1.45 "OptaPhone Registered Intellectual Property" has the meaning
set forth in Section 3.10(h).
1.46 "OptaPhone Shareholders" means the holders of OptaPhone Common
Stock and OptaPhone Preferred Stock immediately prior to the Effective Time of
the Merger.
1.47 "Optionees" means the holders of OptaPhone Options outstanding
immediately prior to the Effective Time of the Merger.
1.48 "Preferred Stock" has the meaning set forth in Section 4.3.
1.49 "Preferred Stock Per Share Amount" means $0.59746.
1.50 "Shareholder Agent" has the meaning set forth in Section 11.6.
1.51 "Shareholders Agent Notice" has the meaning set forth in
Section 11.4.
1.52 "Subsidiary" means, with respect to any parent corporation or
other entity, a corporation or other entity in which a percentage of its voting
securities sufficient to elect at least a majority of the Board of Directors or
other managers is owned or otherwise controlled, directly or indirectly, by such
parent corporation or other entity.
1.53 "Surviving Corporation" has the meaning set forth in Section
2.3.
1.54 "Tax" means all federal, state, local and foreign income,
property, employment, sales, use, license, payroll, occupation, franchise,
occupation, recording, value added, transfer, excise and other taxes, fees,
levies or assessments of any nature whatsoever (whether payable directly or by
withholding) and, with respect to such tax, any estimated tax, interest,
penalties and additions and related charges of Governmental Entities.
1.55 "Total Merger Consideration" means $2,000,000, less the
aggregate amount of all legal and accounting fees and other expenses paid or
incurred by OptaPhone incident to the negotiation and carrying out of the
transactions contemplated by this Agreement in excess of $50,000.
1.56 "Transaction Documents" means this Agreement, the Agreement of
Merger and the option agreements described on Exhibit C.
1.57 "Year 2000 Compliant" has the meaning set forth in Section
3.10(j).
1.58 "Zhone Group" has the meaning set forth in Section 11.2(a).
1.59 "Zhone Losses" has the meaning set forth in Section 11.2(a).
2. Plan of Reorganization.
2.1 Merger; Effective Time of the Merger. Subject to the terms and
conditions of this Agreement and the Agreement of Merger, Sub will be merged
into OptaPhone
in accordance with California Law. The Agreement of Merger will be executed by
Sub and OptaPhone prior to or on the Closing Date. Subject to the provisions of
this Agreement and the Agreement of Merger, on the Closing Date the Agreement of
Merger, together with required officers' certificates, shall be duly executed
and filed in accordance with the California Law. The Merger shall become
effective upon the filing of the Agreement of Merger with the California
Secretary of State, subject, however, to the issuance of a certified copy of the
Agreement of Merger with respect to the Merger by the California Secretary of
State (the effective time of such filing being hereinafter referred to as the
"Effective Time of the Merger" and the date the certified copy of the Agreement
of Merger is issued being hereinafter referred to as the "Confirmation Date").
2.2 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. California time on the second business day after the
satisfaction or waiver of the conditions set forth in Section 9 (the "Closing
Date") at the offices of Xxxx Xxxx Xxxx & Freidenrich LLP, 000 Xxxxxxxx Xxxxxx,
Xxxx Xxxx, Xxxxxxxxxx 00000-0000, unless another date or place is agreed to in
writing by Zhone and OptaPhone.
2.3 Effects of the Merger. At the Effective Time of the Merger,
(i) the separate existence of Sub shall cease and Sub shall be merged with and
into OptaPhone (Sub and OptaPhone are sometimes referred to herein as the
"Constituent Corporations" and OptaPhone, after the Merger, is sometimes
referred to herein as the "Surviving Corporation"); (ii) the Articles of
Incorporation of the Surviving Corporation shall be amended to provide that the
authorized capital stock of the Surviving Corporation shall be 1,000 shares of
Common Stock; (iii) the form of Bylaws of the Surviving Corporation shall be
amended to be substantially the same as the form of Bylaws of Sub, with all
references to Sub replaced by references to the Surviving Corporation; (iv) the
directors of Sub shall be the directors of the Surviving Corporation; (v) the
officers of Sub shall be the officers of the Surviving Corporation; and (vi) the
Merger shall, from and after the Effective Time of the Merger, have all the
effects provided by applicable law.
2.4 Accounting Treatment. The Merger is intended to be treated as
a purchase for accounting purposes.
2.5 Effect on Capital Stock; Escrow Amount. As of the Effective
Time of the Merger, by virtue of the Merger and without any action on the part
of any of the parties hereto and subject to Section 2.6 hereof:
(a) The outstanding shares of capital stock of Sub shall be
converted into a total of 1,000 shares of common stock of the Surviving
Corporation. From and after the Effective Time of the Merger, each stock
certificate of Sub evidencing ownership of any shares of capital stock of Sub
shall evidence ownership of the shares of capital stock of the Surviving
Corporation into which the shares of capital stock of Sub are converted in the
Merger.
(b) Each share of OptaPhone Common Stock outstanding
immediately prior to the Effective Time of the Merger that is not a Dissenting
Share shall be converted into the right to receive a cash payment equal to the
Common Stock Per Share Amount.
(c) Each share of OptaPhone Preferred Stock outstanding
immediately prior to the Effective Time of the Merger that is not a Dissenting
Share shall be converted into the right to receive a cash payment equal to the
Preferred Stock Per Share Amount.
The aggregate Common Stock Per Share Amount and/or Preferred Stock Per
Share Amount owed to an OptaPhone Shareholder shall be referred to herein as the
"Cash Payment." Notwithstanding anything herein to the contrary, $200,000 of the
Total Merger Consideration otherwise payable to the OptaPhone Shareholders
pursuant to this Section 2.5 shall be segregated and deducted therefrom and
established as an escrow amount to be held in accordance and subject to the
provisions of Section 11 of this Agreement, and the aggregate Cash Payment to be
made to each OptaPhone Shareholder at the Closing shall be reduced by such
OptaPhone Shareholder's proportionate interest in such escrow amount.
2.6 Appraisal Rights. If any holders of OptaPhone capital stock
exercise appraisal rights in connection with the Merger under the California
Law, any shares of OptaPhone capital stock with respect to which such rights
have been duly demanded and perfected ("Dissenting Shares") shall not be
converted into the right to receive the consideration described in Sections 2.5
but shall be converted into the right to receive such consideration as may be
determined to be due with respect to such Dissenting Shares pursuant to the
California Law. OptaPhone shall give Zhone prompt notice of any demand received
by OptaPhone for appraisal of or payment for OptaPhone capital stock, and Zhone
shall have the right to participate in all negotiations and proceedings with
respect to such demand. OptaPhone agrees that, except with the prior written
consent of Zhone, or as required under the California Law, it will not
voluntarily make any payment with respect to, or settle or offer to settle, any
such demand for appraisal or payment. Each holder of Dissenting Shares (a
"Dissenting Shareholder") who, pursuant to the provisions of the California Law,
becomes entitled to payment of the fair market value of any shares of OptaPhone
capital stock shall receive payment therefor (but only after the fair market
value therefor shall have been agreed upon or finally determined pursuant to
such provisions). In the event that any holder of any shares of OptaPhone
capital stock fails to make an effective demand for payment or otherwise loses
his status as a Dissenting Shareholder, Zhone shall, as of the later of the
Effective Time of the Merger or the occurrence of such event, issue and deliver,
upon surrender by such Dissenting Shareholder of his certificate or certificates
representing shares of OptaPhone capital stock, the consideration to which such
Dissenting Shareholder would have been entitled to under Sections 2.5 of this
Agreement and the Agreement of Merger.
2.7 Exchange Procedures.
(a) Prior to the Effective Time of the Merger, Zhone shall
designate an agent to act as exchange agent for the Merger (in such capacity,
the "Exchange Agent"), and Zhone shall take all steps necessary to provide, or
to cause the Surviving Corporation to provide, the Exchange Agent with
sufficient funds to make the Cash Payment on a timely basis to the OptaPhone
Shareholders. At Zhone's election, the Surviving Corporation may act as the
Exchange Agent.
(b) On the Confirmation Date, the Surviving Corporation
shall cause the Exchange Agent to deliver to each record holder of a certificate
or certificates which immediately prior to the Effective Time of the Merger
represented outstanding shares of OptaPhone Common Stock or OptaPhone Preferred
Stock (the "Certificates"), a form of letter of transmittal (the "Letter of
Transmittal"), together with instructions for its use in effecting the surrender
of the Certificates for payment. Upon each such holder's proper completion, due
execution and delivery of the Letter of Transmittal to the Exchange Agent,
together with such holder's Certificates and any other required documentation,
such holder shall be entitled to receive the Cash Payment with respect to the
number of shares represented by such Certificate, and such Certificate shall be
forthwith canceled.
(c) At the Effective Time of the Merger, the stock transfer
books of OptaPhone shall be closed and no transfer of any OptaPhone Common Stock
or OptaPhone Preferred Stock shall thereafter be made. Until delivered as
contemplated by this Section, each Certificate which immediately prior to the
Effective Time of the Merger represented any OptaPhone Common Stock or OptaPhone
Preferred Stock (other than Certificates representing Dissenting Shares) shall
be deemed at and after the Effective Time of the Merger to represent for all
purposes only the right to receive the Cash Payment deliverable in exchange for
the shares evidenced by such Certificate, without interest thereon, or, in the
case of Dissenting Shares, the consideration provided under the California Law.
(d) The instructions for effecting the surrender of the
Certificates for payment shall set forth procedures that must be taken by the
holder of any Certificate representing shares of OptaPhone Common Stock or
OptaPhone Preferred Stock that has been lost, destroyed or stolen. It shall be a
condition to the payment of the Cash Payment to any such holder that the
Exchange Agent shall have received, along with the Letter of Transmittal, a duly
executed lost Certificate affidavit, including an agreement to indemnify the
Surviving Corporation, signed exactly as the name or names of the registered
holder or holders of the lost Certificate appeared on the books of OptaPhone
immediately prior to the Merger (or by the legal representative(s) of such
holder or holders), together with such other documents as the Surviving
Corporation or the Exchange Agent may reasonably require in connection
therewith.
3. Representations and Warranties of OptaPhone. Except as set forth in
the optaphone disclosure schedule attached hereto as Exhibit B, which refers to
the Section of such representations and warranties as are thereby qualified,
OptaPhone represents and warrants to Zhone and Sub as set forth below.
3.1 Organization. OptaPhone is a corporation duly organized,
validly existing and in good standing under the laws of the State of California
and has all requisite corporate power and authority to own, operate and lease
its properties and to carry on its business as it is now being conducted.
OptaPhone is duly qualified or licensed to do business and in good standing in
each jurisdiction in which the nature of its business or properties makes such
qualification or licensing necessary except where the lack of such qualification
or licensing (individually or in the aggregate) would not have a Material
Adverse Effect on OptaPhone or the Surviving Corporation. True, correct and
complete copies of OptaPhone's Articles of
Incorporation and Bylaws, as in effect on the date hereof and as will be in
effect immediately prior to the Closing, have been delivered to counsel for
Zhone.
3.2 Capitalization. The issued and outstanding capital stock of
OptaPhone consists of, and immediately prior to the Closing will consist of,
5,848,679 shares of OptaPhone Common Stock and 2,784,954 shares of OptaPhone
Preferred Stock. All such issued and outstanding shares have been duly
authorized, are validly issued, fully paid and nonassessable and were issued and
sold in compliance with all applicable securities laws. As of the date of this
Agreement there are no outstanding options to purchase shares of OptaPhone
Common Stock. Except for the foregoing, there are no outstanding rights,
options, warrants, conversion rights or other agreements for the purchase or
acquisition from OptaPhone of any shares of its capital stock or securities
convertible into or exchangeable for any shares of such capital stock. There are
no preemptive rights to purchase or otherwise acquire any securities of
OptaPhone pursuant to any provision of law or the Articles of Incorporation or
Bylaws of OptaPhone, any agreement to which OptaPhone is a party or otherwise.
There is no voting or stock restriction agreement, proxy or similar agreement to
which OptaPhone is a party. There are no outstanding contractual obligations,
commitments, understandings or arrangements of OptaPhone to repurchase, redeem
or otherwise acquire or make any payment in respect of any shares of capital
stock of OptaPhone and, except as contemplated by this Agreement, there are no
irrevocable proxies with respect to shares of capital stock of OptaPhone.
3.3 Power, Authorization and Validity.
(a) OptaPhone has the corporate right, power, legal capacity
and authority to execute and deliver, and to consummate the transactions
contemplated by, the Transaction Documents to which OptaPhone is or will be a
party and, subject to such approval of the same by the OptaPhone Shareholders as
may be required by law, to perform its obligations under each of them. The
execution and delivery of, and the consummation of the transactions contemplated
by, each of the Transaction Documents to which OptaPhone is or will be a party
has been duly and validly approved and authorized by the Board of Directors of
OptaPhone and all other necessary corporate action on the part of OptaPhone,
except for approval by the OptaPhone Shareholders.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to OptaPhone in connection with the execution and delivery
of, and the consummation by OptaPhone of the transactions contemplated by, any
of the Transaction Documents to which OptaPhone is or will be a party, except
for the filing of the Agreement of Merger and officers' certificates with the
office of the Secretary of State of the State of California and the filing of
appropriate documents with the relevant authorities of other states in which
OptaPhone is qualified to do business.
(c) Each of the Transaction Documents to which OptaPhone is
or will be a party has been, or upon its execution and delivery by OptaPhone
will have been, duly executed and delivered by OptaPhone and, subject to any
required OptaPhone Shareholder approval of that Transaction Document,
constitutes or will constitute upon its execution and
delivery, a valid and binding obligation of OptaPhone, enforceable against
OptaPhone in accordance with its terms.
3.4 No Violation of Existing Agreements. The execution and
delivery of this Agreement and each of the other Transaction Documents do not,
and the consummation of the transactions contemplated hereby and thereby and
compliance with the provisions hereof and thereof will not, conflict with, or
result in any violation of or default under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
benefit under, (i) any provision of the Articles of Incorporation or Bylaws of
OptaPhone, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or license
to which OptaPhone is a party or by which OptaPhone or any of its properties or
assets is bound or affected, or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to OptaPhone or its properties or
assets. The consummation of the Merger and the assumption by the Surviving
Corporation of all rights, licenses, franchises, leases and agreements of
OptaPhone will not require the consent of any third party or have a material
adverse effect upon any such right, license, franchise, lease or agreement.
3.5 Subsidiaries. OptaPhone (i) has no Subsidiaries, (ii) does not
own or control (directly or indirectly) any capital stock, bonds or other
securities of, and does not have any proprietary interest in, any other
corporation, general or limited partnership, firm, association or business
organization, entity or enterprise, and (iii) does not control (directly or
indirectly) the management or policies of any other corporation, partnership,
firm, association or business organization, entity or enterprise.
3.6 Financial Statements.
(a) OptaPhone has delivered to Zhone the OptaPhone 1999
Financial Statements. Except as expressly set forth in the notes, exhibits or
schedules thereto, the OptaPhone 1999 Financial Statements have been prepared in
accordance with GAAP and present fairly the financial position of OptaPhone as
of their respective dates and the results of operations, equity transactions and
cash flow of OptaPhone for the periods indicated.
(b) OptaPhone has no debt, liability, or obligation of any
nature, whether accrued, absolute, contingent, or otherwise, and whether due or
to become due, that is not reflected or reserved against on the OptaPhone
balance sheet as of December 31, 1999 included in the OptaPhone 1999 Financial
Statements (the "OptaPhone Balance Sheet"), except for those that are not
required by GAAP to be included in a balance sheet or the notes thereto. The
reserves, if any, reflected on the OptaPhone Balance Sheet are adequate in light
of the contingencies with respect to which they are made.
(c) The accounts receivable shown on the OptaPhone Balance
Sheet arose in the ordinary course of business and have been collected or are
reasonably expected to be collectible in the book amounts thereof, less an
amount not in excess of the allowance for doubtful accounts and returns provided
for in the OptaPhone Balance Sheet. The accounts receivable of OptaPhone arising
after the date of the OptaPhone Balance Sheet and before the
date of this Agreement are scheduled on Section 3.6(c) of the OptaPhone
Disclosure Schedule, arose in the ordinary course of business and have been
collected or will be collectible in the book amounts thereof, less allowances
for doubtful accounts and returns determined in accordance with the past
practices of OptaPhone. None of such accounts receivable is subject to any valid
and material claim of offset or recoupment or counterclaim, and OptaPhone has no
knowledge of any specific facts that would be likely to give rise to any such
claim; no material amount of such accounts receivable is contingent upon the
performance by OptaPhone of any obligation; and no agreement for deduction or
discount has been made with respect to any such accounts receivable.
(d) The inventories shown on the OptaPhone Balance Sheet, or
thereafter acquired by OptaPhone consist of items of a quantity and quality
usable or salable in the ordinary course of OptaPhone's business. Changes to the
inventories of OptaPhone arising after the date of the OptaPhone Balance Sheet
and before the date of this Agreement are scheduled in Section 3.6(d) of the
OptaPhone Disclosure Schedule. The value at which inventories are carried
reflect the inventory valuation policy of OptaPhone, which is consistent with
its past practice and in accordance with GAAP. Due provision has been made on
the books of OptaPhone, consistent with past practices, to provide for all slow-
moving, obsolete, or unusable inventories at their estimated useful or scrap
values, and such inventory reserves are adequate to provide for such slow-
moving, obsolete or unusable inventory and inventory shrinkage.
3.7 Tax Matters.
(a) OptaPhone has duly filed all tax returns, reports and
estimates required to be filed by it, for all years and periods (and portions
thereof) for which any such returns, reports or estimates were due on or prior
to the Closing Date. All such returns, reports and estimates, as filed, were
complete, correct and accurate in all material respects. All taxes due from
OptaPhone have been paid with respect to years and periods ending on or prior to
the Closing Date. OptaPhone has received no notice of any pending assessments,
asserted deficiencies or claims for additional taxes that are payable and have
not been paid, except to the extent that they are subject to a bona fide dispute
with the relevant taxing authority. The reserves for taxes, if any, reflected on
the OptaPhone Balance Sheet included in the OptaPhone 1999 Financial Statements
are adequate and there are no tax liens on any property or asset of OptaPhone
other than liens for taxes not yet due. There have been no examinations of any
of OptaPhone's tax returns or reports by any Governmental Entity. There are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any tax return or report for any period and no request for such an
agreement or waiver is pending.
(b) All taxes that OptaPhone has been required to collect or
withhold have been duly collected or withheld and, to the extent required, have
been paid to the proper taxing authority.
(c) OptaPhone is not a party to any tax-sharing agreement or
similar arrangement with any other party.
(d) At no time has OptaPhone been included in the federal
consolidated income tax return of any affiliated group of corporations.
(e) OptaPhone is not obligated to make any "parachute
payment," as defined in Section 280G of the Code.
(f) OptaPhone will not be required to include any material
adjustment in taxable income for any tax period (or portion thereof) ending
after the Closing Date pursuant to Section 481(c) of the Code or any provision
of the tax laws of any jurisdiction requiring tax adjustments as a result of a
change in method of accounting implemented by OptaPhone prior to the Closing
Date for any tax period (or portion thereof) ending on or before the Closing
Date or pursuant to the provisions of any agreement entered into by OptaPhone
prior to the Closing Date with any taxing authority with regard to the tax
liability of OptaPhone for any tax period (or portion thereof) ending on or
before the Closing Date.
(g) OptaPhone is not under any contractual obligation to pay
any tax obligations of any other person, or any tax obligation with respect to
any transaction of any other person or to indemnify any other person with
respect to any tax.
(h) OptaPhone has not at any time filed a consent to the
application of Section 341(f)(2) of the Code to any property or assets held,
acquired or to be acquired by it, and will not file any such consent before the
Closing Date.
3.8 Absence of Certain Changes or Events. Since December 31, 1999,
OptaPhone has conducted its business in the ordinary and usual course and,
without limiting the generality of the foregoing, has not:
(a) suffered any event or occurrence that has had a Material
Adverse Effect on OptaPhone;
(b) suffered any damage, destruction or loss, whether or not
covered by insurance, that had a Material Adverse Effect on OptaPhone;
(c) granted any increase in the compensation payable or to
become payable by OptaPhone to its officers or employees;
(d) declared, set aside or paid any dividend or made any
other distribution on or in respect of the shares of its capital stock or
declared any direct or indirect redemption, retirement, purchase or other
acquisition of such shares;
(e) made any change in the accounting methods or practices
it follows, whether for general financial or tax purposes, or any change in
depreciation or amortization policies or rates except as may be required by any
modification or change in GAAP;
(f) sold, assigned, transferred, or otherwise disposed of
any patent, trademark, tradename, brand name, copyright (or pending application
for any patent, trademark
or copyright), invention, process, know-how, formula or trade secret or interest
therein or other intangible asset or licensed any of the foregoing;
(g) suffered any labor dispute;
(h) entered into any material commitment or obligation,
except with Zhone;
(i) incurred any material liability (including, without
limitation, any contingent liability with respect to the obligation of others),
except in connection with the transactions contemplated by this Agreement;
(j) permitted or allowed any of its property or assets to be
subjected to any Encumbrance, except in the ordinary course of its business and
except for liens of current taxes not yet due;
(k) made any capital expenditure or commitment for additions
to property, plant or equipment in excess of $10,000 in the aggregate;
(l) paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets to, or entered into any agreement
or arrangement with, any of its Affiliates, officers, directors or shareholders
or any Affiliate of any of the foregoing, other than salary or benefits to
OptaPhone employees in the ordinary course of business; or
(m) agreed to take any action described in this Section 3.8
or outside of the ordinary course of its business or that would constitute a
breach of any of the representations or warranties of OptaPhone contained in the
Transaction Documents.
3.9 Title and Related Matters; Inventory.
(a) OptaPhone has good and marketable title to all the
properties and assets, real and personal, reflected on the OptaPhone Balance
Sheet as of December 31, 1999 included in the OptaPhone 1999 Financial
Statements or acquired after the date of such OptaPhone Balance Sheet (except
properties and assets sold or otherwise disposed of since the date of such
balance sheet in the ordinary course of business or property which is leased),
free and clear of all Encumbrances, except for purchase money security interests
and the lien of current taxes not yet due and payable and Encumbrances which are
immaterial in the aggregate. Section 3.9(a) of the OptaPhone Disclosure Schedule
lists all material items of equipment owed or leased by OptaPhone, and such
equipment is (i) adequate for the conduct of the business of OptaPhone as
currently conducted and as proposed to be conducted, and (ii) in good operating
condition, regularly and properly maintained, subject to normal wear and tear.
(b) All real and personal property leases to which OptaPhone
is a party are valid, binding, enforceable and effective in accordance with
their respective terms. There is not any existing default by OptaPhone under any
of such leases or any event of default or event that, with notice or lapse of
time or both, would constitute an event of default by OptaPhone or, to
OptaPhone's Knowledge, by any other party to any of such leases which could be
expected to
have a Material Adverse Effect on OptaPhone. True, correct and complete copies
of each OptaPhone lease described in this Section 3.9(b) have been provided to
counsel for Zhone.
3.10 Intellectual Property.
(a) OptaPhone owns, or is licensed (including pursuant to
licenses, sublicenses or other agreements, collectively referred to herein as
"Licensed Intellectual Property") or otherwise possesses a legal right to use,
all (i) issued patents and patent applications, (ii) all trademarks, trade
names, service marks and domain names, (iii) copyrights and mask works, and (iv)
other processes, formulae, methods, schematics, technology, know-how, inventions
(whether or not patentable), computer software programs or applications,
tangible or intangible proprietary and confidential information or materials and
trade secrets, to the extent any of such rights are material to the conduct of
the business of OptaPhone as currently conducted or as proposed to be conducted
(all of which are referred to as the "OptaPhone Intellectual Property Rights")
(b) Section 3.10(b) of the OptaPhone Disclosure Schedule
contains an accurate and complete list of (i) all patents and patent
applications and all trademarks, trade names, service marks and registered
copyrights, included in the OptaPhone Intellectual Property Rights, including
the jurisdictions in which each such OptaPhone Intellectual Property Right has
been issued or registered or in which any such application for such issuance and
registration has been filed, (ii) all licenses, sublicenses, distribution
agreements and other agreements to which OptaPhone is a party and pursuant to
which any person is authorized to use any OptaPhone Intellectual Property Rights
or has the right to manufacture, reproduce, market or exploit any OptaPhone
Product or any adaptation, translation or derivative work based on any OptaPhone
Product or any portion thereof, (iii) all licenses, sublicenses and other
agreements to which OptaPhone is a party and pursuant to which OptaPhone is
authorized to use any Licensed Intellectual Property, which is incorporated in
or forms a part of any OptaPhone Product, (iv) all joint development or joint
venture agreements to which OptaPhone is a party, and (v) all agreements with
Governmental Entities or other third parties pursuant to which OptaPhone has
obtained funding for research and development activities.
(c) OptaPhone is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement, in breach of any license, sublicense or other agreement
relating to the OptaPhone Intellectual Property Rights or Licensed Intellectual
Property.
(d) OptaPhone: (i) has not received notice that is has been
sued in any suit, action or proceedings which involves a claim of infringement
or misappropriation of any patent, trademark, service xxxx, copyright, trade
secret or other proprietary right of any third party; (ii) has not received any
communications alleging that OptaPhone has violated, or by conducting its
business as proposed, would violate any patent, trademark, service xxxx,
copyright, trade secret or other proprietary right of any third party; (iii) has
no reason to believe that the manufacturing, marketing, licensing or sale of any
OptaPhone Product or the provision of services in the course of OptaPhone's
business infringes or misappropriates any patent, trademark, service xxxx,
copyright, trade secret or other proprietary right of any third party; and
(iv) has no knowledge of any claim challenging or questioning the validity or
effectiveness of any license or agreement relating to any OptaPhone Intellectual
Property Rights or Licensed Intellectual Property.
(e) All designs, drawings, specifications, source code,
object code, documentation, flow charts and diagrams incorporating, embodying or
reflecting any of the OptaPhone Products at any stage of their development (the
"OptaPhone Components") were written, developed and created solely and
exclusively by employees of OptaPhone without the assistance of any third party
or were created by third parties who assigned exclusive ownership of all their
rights to OptaPhone pursuant to valid and enforceable agreements. Each person
currently or formerly employed by OptaPhone (including independent contractors,
if any) that has or had access to confidential information of OptaPhone has
executed and delivered to OptaPhone a confidentiality and non-disclosure
agreement substantially in the form previously provided to Zhone's legal
counsel. OptaPhone has at all times used commercially reasonable efforts to
treat the OptaPhone Products and OptaPhone Components as containing trade
secrets and have not disclosed or otherwise dealt with such items in such a
manner as to cause the loss of such trade secrets by their release into the
public domain. OptaPhone has taken all reasonable steps that are required to
protect OptaPhone's rights in confidential information and trade secrets of
OptaPhone or provided by any other person to OptaPhone.
(f) Neither the execution and delivery of any such
agreement, nor the carrying on of OptaPhone's business as currently conducted
and as currently proposed to be conducted by any such person as an employee,
consultant or independent contractor, as the case may be, has conflicted or will
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any of such persons is obligated.
(g) To the knowledge of OptaPhone, no person is infringing
or misappropriating any OptaPhone Intellectual Property Rights.
(h) Each (i) patent, (ii) trademark, (iii) copyright, (iv)
service xxxx or (v) other OptaPhone Intellectual Property Right that has been
registered, filed certified or otherwise perfected by recordation with any
Governmental Entity ("OptaPhone Registered Intellectual Property") is
valid and subsisting, and all necessary registration, maintenance and renewal
fees in connection with such OptaPhone Registered Intellectual Property which
are due before the Closing have been or will be paid prior to the Closing and
all necessary documents and certificates in connection with such OptaPhone
Registered Intellectual Property which are due before the Closing have been or
will be filed prior to the Closing with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such OptaPhone Registered
Intellectual Property. For each product, technology or service of OptaPhone that
constitutes or includes a copyrightable work, OptaPhone has registered the
copyright in the latest version of such work with the United States Copyright
Office. In each case in which OptaPhone has acquired any OptaPhone Intellectual
Property rights from any person, OptaPhone has obtained a valid assignment
sufficient to irrevocably transfer all rights in such OptaPhone Intellectual
Property Rights (including the right to seek past and future damages with
respect thereto) to OptaPhone and, to
the maximum extent provided for by, and in accordance with, applicable laws and
regulations, OptaPhone has recorded each such assignment with the relevant
governmental authorities, including the United States Patent and Trademark
Office, the U.S. Copyright Office, or their respective equivalents in any
relevant foreign jurisdiction, as the case may be.
(i) There are no contracts, licenses or agreements between
OptaPhone and any other person with respect to OptaPhone Intellectual Property
Rights under which there is any dispute known to OptaPhone regarding the scope
of such agreement, or performance under such agreement including with respect to
any payments to be made or received by OptaPhone.
(j) All of OptaPhone's current products (i) will record,
store, process, calculate and present calendar dates falling on and after (and
if applicable, spans of time including) January 1, 2000, and will calculate any
information dependent on or relating to such dates with the same functionality,
data integrity and performance, as the products record, store, process,
calculate and present calendar dates on or before December 31, 1999, or
calculate any information dependent on or relating to such dates (collectively,
"Year 2000 Compliant"), and (ii) will lose no functionality with respect to the
introduction of records containing dates falling on or after January 1, 2000.
With respect to products currently in development by OptaPhone, OptaPhone
represents and warrants that all such products have been designed to be Year
2000 Compliant within the foregoing definition. To OptaPhone's Knowledge, all
versions of Information Technology (as defined below) are Year 2000 Compliant,
and will not cause a material interruption in the ongoing operations of
OptaPhone's business on or after January 1, 2000. For purposes of the foregoing,
the term "Information Technology" shall mean and include all versions of
software, hardware, firmware, telecommunications systems, network systems,
embedded systems and other systems, components and/or services (other than
general utility services including gas, electric, telephone and postal) that are
currently owned or used by OptaPhone in the conduct of its business, or
purchased by OptaPhone from third party suppliers.
3.11 Employee Benefit Plans.
(a) Section 3.11 of the OptaPhone Disclosure Schedule lists,
with respect to OptaPhone and any trade or business (whether or not
incorporated) which is treated as a single employer with OptaPhone (an "ERISA
Affiliate") within the meaning of Section 414(b), (c), (m) or (o) of the Code,
each plan, program, policy, practice, contract, agreement or other arrangement
providing for employment, compensation, severance, relocation, termination pay,
deferred compensation, sabbatical, performance awards, bonus, stock or stock-
related awards, fringe benefit, cafeteria benefit, dependent care, including,
without limitation, each "employee benefit plan" as defined in Section 3(3) of
ERISA which is maintained, contributed to, or required to be contributed to by
OptaPhone or any ERISA Affiliate or with respect to which OptaPhone or any ERISA
Affiliate has or may have any liability (collectively, the "OptaPhone Employee
Plan(s)"). None of the OptaPhone Employee Plans promise or provide retiree
medical or other retiree welfare benefits to any person. OptaPhone does not have
any plan or commitment to establish any new OptaPhone Employee Plans or amend
any OptaPhone Employee Plan which would materially increase the expense of
maintaining such Plan above the level of expense incurred with respect to that
Plan for the most recent fiscal year included in OptaPhone's financial
statements, except for such amendments as may be required by law.
(b) Documents. Except for such items the nondisclosure of
which would not have a Material Adverse Effect on OptaPhone, OptaPhone has
furnished to Zhone true and complete copies of the current documents relating to
each of the OptaPhone Employee Plans, including (without limitation) plan
documents, trust documents, the most recent determination or opinion letter
issued by the Internal Revenue Service ("IRS"), group annuity contracts, plan
amendments that have not yet been incorporated into the current version of a
restated plan document, insurance policies or contracts, employee booklets,
administrative service agreements, summary plan descriptions, Form 5500 reports
filed for the last three plan years, standard COBRA forms and notices, all
registration statements and prospectuses, any correspondence or inquiry by the
IRS (other than that relating to any determination letter application) or
Department of Labor ("DOL"), and any material employee communications relating
to any --- OptaPhone Employee Plan that is materially inconsistent with the
terms of any OptaPhone Employee Plan.
(c) Compliance. Each OptaPhone Employee Plan has been
administered in accordance with its terms and is in material compliance with the
requirements prescribed by any and all statutes, rules and regulations
(including ERISA and the Code) in all material respects, and OptaPhone and each
ERISA Affiliate have performed all material obligations required to be performed
by them under, are not in material default under or violation of and have no
knowledge of any material default or violation by any other party to, any of the
OptaPhone Employee Plans. Any OptaPhone Employee Plan intended to be qualified
under Section 401(a) of the Code has obtained from the Internal Revenue Service
a favorable determination letter or opinion letter as to its qualified status
under the Code and nothing has occurred since the issuance of each such letter
which could reasonably be expected to cause the loss of the tax-qualified status
of any OptaPhone Employee Plan subject to Code Section 401(a). There are no
suits, administrative proceedings, including any audit or inquiry by the IRS or
DOL, actions or other litigation pending, or to the knowledge of OptaPhone
threatened against or with respect to any OptaPhone Employee Plan, other than
routine claims for benefits and those relating to Qualified Domestic Relations
Orders. OptaPhone and each of its United States subsidiaries have complied in
all material respects with the health care continuation and notice provisions of
the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), or any
applicable state continuation coverage requirements, the Family and Medical
Leave Act of 1993, the Health Insurance Portability and Accountability Act and
the Cancer Rights Act of 1998.
(d) No Title IV or Multiemployer Plan. OptaPhone does not
now, nor has it ever, maintained, established, sponsored, participated in, or
contributed to, any pension plan which is subject to Title IV of ERISA or
Section 412 of the Code. Neither OptaPhone nor any ERISA Affiliate is a party
to, has made or is required to make any contribution to, or otherwise incurred
any obligation or liability under any "multiemployer plan" as defined in Section
3(37) of ERISA. Neither OptaPhone nor any ERISA Affiliate has any actual or
potential withdrawal liability for any complete or partial withdrawal from any
multiemployer plan.
(e) Effect of Transaction. The consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee or other service provider of OptaPhone to severance benefits or
any other payment (including, without limitation, unemployment compensation,
golden parachute or bonus), except as expressly
provided in Exhibit D to this Agreement, or (ii) accelerate the time of payment
or vesting of any such benefits, or increase the amount of compensation due any
such employee or service provider. No benefit payable or which may become
payable by OptaPhone pursuant to any OptaPhone Employee Plan or as a result of
or arising under this Agreement shall constitute an "excess parachute payment"
(as defined in Section 280G(b)(1) of the Code) which is subject to the
imposition of an excise tax under Section 4999 of the Code or the deduction for
which would be disallowed by reason of Section 280G of the Code.
3.12 Contracts.
(a) Except as set forth in the OptaPhone Disclosure
Schedule, OptaPhone is not a party or subject to any agreement, obligation or
commitment, written or oral:
(i) that calls for any fixed or contingent payment or
expenditure or any related series of fixed and/or contingent payments or
expenditures by or to OptaPhone totaling more than $10,000 in any year;
(ii) with agents, advisors, salesmen, sales
representatives, independent contractors or consultants that are not cancelable
by it on no more than thirty (30) days' notice and without liability, penalty or
premium;
(iii) to provide funds to or to make any investment in
any other person or entity (in the form of a loan, capital contribution or
otherwise);
(iv) with respect to obligations as guarantor, surety,
co-signer, endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any other person or entity;
(v) for any line of credit, standby financing,
revolving credit or other similar financing arrangement;
(vi) for the sale or lease of any real property
involving more than $10,000 per annum;
(vii) to provide any warranty or indemnity relating to
products or services provided by OptaPhone, other than any warranties or
indemnities contained in OptaPhone's standard terms and conditions of sale
provided to Zhone's legal counsel and warranties implied by law; or
(viii) with any distributor, original equipment
manufacturer, value added remarketer or other person for the distribution of any
of the OptaPhone Products.
(b) To OptaPhone's Knowledge, no party to any such contract,
agreement or instrument intends to cancel, withdraw, modify or amend such
contract, agreement or instrument.
(c) Section 3.12(c) of the OptaPhone Disclosure Schedule
lists each vendor that (i) manufactures for or supplies to OptaPhone any
material product or component of any OptaPhone Product and to which OptaPhone
paid more than $50,000 in 1997, 1998 or 1999, or (ii) is the sole source for any
product or component of any OptaPhone Product.
(d) OptaPhone is not in default under or in breach or
violation of, nor, to OptaPhone's knowledge, is there any valid basis for any
claim of default by OptaPhone under, or breach or violation by OptaPhone of, any
contract, commitment or restriction to which OptaPhone is a party or by which it
or any of its properties or assets is bound or affected, where such defaults,
breaches, or violations would, in the aggregate, have a Material Adverse Effect
on OptaPhone. To OptaPhone's Knowledge, no other party is in default under or in
breach or violation of, nor, to OptaPhone's Knowledge, is there any valid basis
for any claim of default by any other party under, or any breach or violation by
any other party of, any contract, commitment, or restriction to which OptaPhone
is a party or by which any of its properties or assets is bound or affected,
where such defaults, breaches, or violations would, individually or in the
aggregate, have a Material Adverse Effect on OptaPhone.
3.13 Compliance with Law. OptaPhone possesses all regulatory
consents, authorizations, approvals, licenses and permits required by any
Governmental Entity in connection with the conduct of all aspects of its
business as presently conducted. OptaPhone has complied with all such consents,
authorizations, approvals, licenses and permits and with all applicable laws,
regulations and other requirements of each Governmental Entity having
jurisdiction over OptaPhone. OptaPhone has not received any (i) notification of
any asserted present or past failure by OptaPhone to comply with such laws,
rules or regulations, or (ii) written complaint, inquiry or request for
information from any Governmental Entity relating thereto.
3.14 Labor Difficulties. To OptaPhone's Knowledge, OptaPhone is not
engaged in any unfair labor practice and is not in violation of any applicable
laws respecting employment and employment practices, terms and conditions of
employment, and wages and hours. There are no proceedings pending or, to
OptaPhone's Knowledge, reasonably expected or threatened, between OptaPhone and
any of its current or former employees. There are no claims pending or, to
OptaPhone's Knowledge, reasonably expected or threatened, against OptaPhone
under any workers' compensation or disability plan or policy. OptaPhone has
provided all employees with all wages, benefits and compensation earned up
through the date of this Agreement. There is no unfair labor practice complaint
against OptaPhone pending, or, to OptaPhone's Knowledge, threatened, nor are
there any grievances which could form the basis for such a complaint before the
National Labor Relations Board. To OptaPhone's Knowledge, (i) the consummation
of the transactions contemplated by the Transaction Documents will not have a
Material Adverse Effect on its relations with OptaPhone employees, and (ii) none
of the OptaPhone employees intends to leave its employment, whether as a result
of the transactions contemplated by the Transaction Documents or otherwise.
3.15 Certain Transactions.
(a) No Affiliate of OptaPhone has any interest in (i) any
material equipment or other property or asset, real or personal, tangible or
intangible, including, without limitation, any of the OptaPhone Intellectual
Property Rights, used in connection with or pertaining to the business of
OptaPhone, (ii) any creditor, supplier, customer, manufacturer, agent,
representative, or distributor of any of the OptaPhone Products, (iii) any
entity that competes with OptaPhone, or with which OptaPhone is affiliated or
has a business relationship, or (iv) any agreement, obligation or commitment,
written or oral, to which OptaPhone is a party; provided, however, that no
Affiliate of OptaPhone or other person shall be deemed to have such an interest
solely by virtue of the ownership of less than 5% of the outstanding stock or
debt securities of any publicly held company, the stock or debt securities of
which are traded on a recognized stock exchange or quoted on Nasdaq.
(b) Except as contemplated by the Transaction Documents,
OptaPhone is not a party to any (i) agreement with any officer or other employee
of OptaPhone (x) the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving OptaPhone in
the nature of any of the transactions contemplated by the Transaction Documents,
(y) providing any term of employment or compensation guaranty, or (z) except as
set forth in Exhibit D, providing severance benefits or other benefits after the
termination of employment of such officer or other employee regardless of the
reason for such termination of employment, or (ii) agreement or plan, including,
without limitation, any stock option plan, stock appreciation right plan or
stock purchase plan (other than such plans with respect to the OptaPhone
Options), any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by the Transaction Documents or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by the Transaction Documents.
3.16 Employees and Consultants. True, correct and complete copies
of all written agreements and descriptions of all oral agreements with
individual employees and consultants to which OptaPhone is a party have been
delivered to Zhone. The OptaPhone Disclosure Schedule lists the names of all
OptaPhone employees.
3.17 Insurance. Section 3.17 of the OptaPhone Disclosure Schedule
lists all forms of insurance held by OptaPhone. To OptaPhone's Knowledge,
OptaPhone has not done anything, either by way of action or inaction, that would
invalidate any insurance policies and other forms of insurance held by OptaPhone
in whole or in part. There is no claim by OptaPhone pending under any of such
policies.
3.18 Litigation. There is no action, proceeding, claim or
investigation pending against OptaPhone or affecting any of its properties,
assets or operations before any court or administrative agency, and, to
OptaPhone's Knowledge, no such action, proceeding, claim or investigation has
been threatened, nor is there any reasonable basis therefor. Without limiting
the generality of the preceding sentence, there is no basis for any shareholder
or former shareholder of OptaPhone, or any other person, firm, corporation or
entity, to assert a claim
against OptaPhone, Zhone or Sub based upon (i) issuance or rights to issuance by
OptaPhone of any shares of OptaPhone capital stock, (ii) any rights as a
OptaPhone Shareholder, including any option or preemptive rights or rights to
notice or to vote, or (iii) any rights under any agreement between OptaPhone and
any of its shareholders or former shareholders, or option holders or former
option holders in their capacity as such, except in each case as set forth in
Section 3.22. There is no judgment, decree, injunction, rule or order of any
Governmental Entity outstanding against OptaPhone or, to OptaPhone's Knowledge,
affecting any of its properties, assets or operations. No product liability or
warranty claim has been asserted or threatened against OptaPhone nor, to
OptaPhone's Knowledge, is there any specific situation, set of facts or
occurrence that provides a basis for any such claim.
3.19 Corporate Minutes, Etc. OptaPhone has made available to
counsel for Zhone true, correct and complete copies of (i) its its shareholders,
Board of Directors and any committees thereof, (ii) all material permits, minute
book containing complete records of all proceedings, consents, actions, and
meetings of orders, and consents issued by any Governmental Entity with respect
to OptaPhone, or any securities of OptaPhone, and all applications for such
permits, orders, and consents, and (iii) the stock certificate and transfer
books and the stock register of OptaPhone setting forth all issuances and
transfers of any capital stock of OptaPhone. The corporate minute books, stock
certificate books, stock registers and other corporate records of OptaPhone and
the copies thereof provided to counsel for Zhone are complete and accurate in
all material respects, and the signatures appearing on all documents contained
therein are the true signatures of the persons purporting to have signed the
same.
3.20 Compliance with Environmental Requirements. OptaPhone has
complied with and not violated any laws, regulations or requirements of any
Governmental Entity related to pollution or protection of the environment,
including those relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, or hazardous or toxic materials,
substances, or wastes into air, surface water, groundwater, or land, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials, substances, or wastes. To OptaPhone's Knowledge,
there are no conditions, circumstances, activities, practices, incidents, or
actions which are likely to form the basis of any claim, action, suit,
proceeding, hearing or investigation against OptaPhone based on or related to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or threatened
release into the environment, of any pollutant, contaminant, or hazardous or
toxic materials, substances or wastes.
3.21 No Brokers. OptaPhone is not obligated for the payment of fees
or expenses of any broker, finder or other person in connection with the
origination, negotiation or execution of this Agreement or any of the
Transaction Documents or in connection with any transaction contemplated hereby
or thereby.
3.22 OptaPhone Options. Section 3.22 of the OptaPhone Disclosure
Schedule contains a list of all Optionees and the OptaPhone Options held by each
Optionee. All OptaPhone Options that will be outstanding immediately prior to
the Effective Time of the
Merger have been issued in accordance with the terms of the OptaPhone Option
Plans and pursuant to the standard forms of option agreement previously provided
to counsel for Zhone.
3.23 Government Contracts. All agreements pursuant to which
OptaPhone has sold or licensed any of its products to, or performed services
for, any Government Contract Party are listed in Section 3.23 of the OptaPhone
Disclosure Schedule. All of OptaPhone's technical data and computer software was
developed exclusively at private expense.
3.24 Restrictions on Business Activities. Except for Agreements
with Zhone, there is no agreement (non-compete or otherwise), commitment,
judgment, injunction, order or decree to which OptaPhone is a party or otherwise
binding upon OptaPhone which has or may reasonably be expected to have the
effect of prohibiting or impairing any business practice of OptaPhone, any
acquisition of property (tangible or intangible) by OptaPhone, the conduct of
business by OptaPhone or otherwise limiting the freedom of OptaPhone to engage
in any line of business or to compete with any person. Without limiting the
generality of the foregoing, OptaPhone has not entered into any agreement under
which OptaPhone is restricted from selling, licensing or otherwise distributing
any of its technology or products to or providing services to, customers or
potential customers or any class of customers, in any geographic area, during
any period of time or in any segment of the market.
3.25 Disclosure. OptaPhone has delivered to counsel for Zhone a
true, complete and correct copy of each document referred to in the OptaPhone
Disclosure Schedule or otherwise required by this Section 3 to be delivered.
3.26 No Material Adverse Effect. There has been no Material Adverse
Effect on OptaPhone since December 31, 1999, and to OptaPhone's Knowledge, since
December 31, 1999 there has not occurred any event which could reasonably be
expected to have a Material Adverse Effect on OptaPhone.
3.27 No Misrepresentation. No representation or warranty by
OptaPhone in this Agreement, or any statement, certificate or schedule furnished
or to be furnished by OptaPhone pursuant to this Agreement, when taken together,
contains or shall contain any untrue statement of a material fact or omits or
shall omit to state a material fact required to be stated therein or necessary
in order to make such statements, in light of the circumstances under which they
were made, not misleading.
4. Representations and Warranties of Zhone and Sub. Zhone and Sub
jointly and severally represent and warrant to OptaPhone that:
4.1 Organization and Good Standing. Zhone and Sub are corporations
duly organized, validly existing and in good standing under the laws of the
jurisdiction of their incorporation, and have all requisite corporate power and
authority to carry on their respective businesses as it is now being conducted.
Zhone and Sub are duly qualified or licensed to do business and in good standing
in each jurisdiction in which the nature of its business or properties makes
such qualification or licensing necessary, except where the lack of such
qualification or licensing (individually or in the aggregate) would not have a
Material Adverse Effect on Zhone or Sub.
4.2 Power, Authorization and Validity.
(a) Zhone and Sub each has the corporate right, power, legal
capacity and authority to execute and deliver, and to consummate the
transactions contemplated by, the Transaction Documents to which it is or will
be a party and to perform its obligations under each of them. The execution and
delivery of, and the consummation of the transactions contemplated by, each of
the Transaction Documents to which Zhone or Sub is or will be a party, the Zhone
1999 Stock Option Plan, and each Zhone Stock Option Agreement has been duly and
validly approved and authorized by all necessary corporate action.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to Zhone or Sub in connection with the execution and delivery
of, and the consummation by them of the transactions contemplated by, any of the
Transaction Documents to which either of them is or will be a party, or the
Zhone 1999 Stock Option Plan or any Zhone Stock Option Agreement, except for the
filing of the Agreement of Merger and officers' certificates with the office of
the Secretary of State of the State of California, the filing of appropriate
documents with the relevant authorities of other states in which OptaPhone is
qualified to do business, and such filings under federal and state securities
laws as have already been completed or which are not yet due.
(c) Each of the Transaction Documents to which Zhone or Sub
is or will be a party, the Zhone 1999 Stock Option Plan, and each Zhone Stock
Option Agreement has been, or upon its execution and delivery by Zhone or Sub
will have been, duly executed and delivered by it and constitutes or will
constitute upon its execution and delivery, a valid and binding obligation of
Zhone or Sub, enforceable in accordance with its terms.
4.3 Capitalization. The authorized capital stock of Zhone consists
of 300,000,000 shares of Common Stock, $0.001 par value per share ("Common
Stock"), of which 80,631,000 shares are issued and outstanding, and 125,000,000
shares of Preferred Stock, $0.001 par value per share ("Preferred Stock"),
38,750,000 of which shares have been designated as Series A-1 Preferred,
37,500,000 of which shares have been designated as Series A-2 Preferred Stock,
13,750,000 of which shares have been designated as Series A-3 Preferred Stock,
12,500,000 of which shares have been designated as Series A-4 Preferred Stock,
6,250,000 of which shares have been designated as Series A-5 Preferred Stock,
7,868,750 of which shares have been designated as Series A-6 Preferred Stock.
2,500,000 of which shares have been designated as Series A-7 Preferred Stock,
1,075,000 of which shares have been designated as Series A-8 Preferred Stock,
1,750,000 of which shares have been designated as Series A-Preferred Stock,
1,056,250 of which shares have been designated as Series A-10 Preferred Stock,
1,000,000 of which shares have been designated as Series A-11 Preferred Stock
and 1,000,000 of which shares have been designated as Series A-12 Preferred
Stock. As of the date of this Agreement all 125,000,000 shares of such Preferred
Stock are issued and outstanding. All of the issued and outstanding shares of
Common Stock and Preferred Stock have been duly authorized and validly issued
and are fully paid and nonassessable. There is (i) no subscription, warrant,
option, convertible security or other right (contingent or otherwise) to
purchase or acquire any shares of capital stock of the Company authorized or
outstanding, (ii) no obligation (contingent or otherwise) to issue any
subscription, warrant, option, convertible security or other such right or to
issue or distribute to holders of any shares of its capital stock any evidences
of indebtedness or assets of the Company, and (iii) no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any shares of the Company's
capital stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof except that (A) 38,750,000 shares of Common
Stock have been reserved for issuance upon conversion of the Series A-1
Preferred Stock, (B) 37,500,000 shares of Common Stock have been reserved for
issuance upon conversion of the Series A-2 Preferred Stock, (C) 13,750,000
shares have been reserved for issuance upon conversion of the Series A-3
Preferred Stock, (D) 12,500,000 shares of Common Stock have been reserved for
issuance upon conversion of the Series A-4 Preferred Stock, (E) 6,250,000 shares
of Common Stock have been reserved for issuance upon conversion of the Series X-
0 Xxxxxxxxx Xxxxx, (X) 7,868,750 shares of Common Stock have been reserved for
issuance upon conversion of the Series A-6 Preferred Stock, (G) 2,500,000 shares
of Common Stock have been reserved for issuance upon conversion of the Series A-
7 Preferred Stock, (H) 1,075,000 shares of Common Stock have been reserved for
issuance upon conversion of the Series A-8 Preferred Stock, (I) 1,750,000 shares
of Common Stock have been reserved for issuance upon conversion of the Series X-
0 Xxxxxxxxx Xxxxx, (X) 1,056,250 shares of Common Stock have been reserved for
issuance upon conversion of the Series A-10 Preferred Stock, (K) 1,000,000
shares of Common Stock have been reserved for issuance upon conversion of the
Series A-11 Preferred Stock, (L) 1,000,000 shares of Common Stock have been
reserved for issuance upon conversion of the Series A-12 Preferred Stock. Zhone
has reserved 50,000,000 shares of Common Stock for issuance under the Zhone 1999
Stock Option Plan.
4.4 No Violation of Existing Agreements. The execution and
delivery of this Agreement and each of the other Transaction Documents do not,
and the consummation of the transactions contemplated hereby and thereby and
compliance with the provisions hereof and thereof will not, conflict with, or
result in any violation of or default under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
benefit under, (i) any provision of the Certificate of Incorporation or Bylaws
of Zhone, or the Articles of Incorporation or Bylaws of Sub, as currently in
effect, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or license
to which Zhone or Sub is a party or by which Zhone or Sub or any of its
properties or assets is bound or affected, or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Zhone, Sub or their
properties or assets.
4.5 No Brokers. Neither Zhone nor Sub is obligated for the payment
of fees or expenses of any broker or finder in connection with the origination,
negotiation or execution of this Agreement or the Agreement of Merger or in
connection with any transaction contemplated hereby or thereby.
4.6 Litigation. There is no litigation pending, or to the
knowledge of Zhone or Sub threatened, against Zhone, Sub or any of their
officers and directors which, if determined adversely, would result in an
injunction against the Merger or have an adverse effect on Zhone's ability to
deliver the Total Merger Consideration or any Stock Option Agreement.
5. Covenants of OptaPhone. Optaphone Covenants to and agrees with each
of Zhone and Sub as follows:
5.1 Conduct of Business; Interim Operations. During the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time of the Merger, OptaPhone
agrees, subject to the limitations described in Section 5.1(r) below, to carry
on its business in the usual, regular and ordinary course in substantially the
same manner as previously conducted, to pay its debts and taxes when due,
subject to good faith disputes over such debts or taxes, to pay or perform its
other obligations when due, and, to the extent consistent with such business, to
use all commercially reasonable efforts consistent with past practices and
policies to (i) preserve intact its present business organization, (ii) keep
available the services of its present officers and key employees, and (iii)
preserve its relationships with customers, suppliers, distributors, licensors,
licensees and others having business dealings with it. OptaPhone shall promptly
notify Zhone of any event or occurrence where such event or occurrence would
result in a breach of any covenant of OptaPhone set forth in this Agreement or
cause any representation or warranty of OptaPhone set forth in this Agreement to
be untrue as of the date of, or giving effect to, such event or occurrence.
Except as expressly contemplated by this Agreement, OptaPhone shall not, without
the prior written consent of Zhone:
(a) transfer or license to any person or entity or otherwise
extend, amend or modify any rights to the OptaPhone Intellectual Property
Rights;
(b) declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock except from
former employees, directors and consultants in accordance with agreements
providing for the repurchase of shares in connection with any termination of
service by such party;
(c) issue, deliver or sell or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or securities
convertible into shares of its capital stock, or subscriptions, rights, warrants
or options to acquire, or other agreements or commitments of any character
obligating it to issue any such shares or other convertible securities (except
upon the exercise or conversion of securities outstanding on the date of this
Agreement);
(d) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership or other business organization or division;
(e) sell, lease, license or otherwise dispose of any of its
properties or assets except for transactions entered into in the ordinary course
of business consistent with past practice;
(f) take any action to: (i) increase or agree to increase
the compensation payable or to become payable to its officers or employees, (ii)
grant any severance or termination pay to, or enter into any employment or
severance agreements with, any officer or employee, (iii) enter into any
collective bargaining agreement, or (iv) establish, adopt, enter into or amend
in any material respect any bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees;
(g) revalue any of its assets, including writing down the
value of inventory or writing off notes or accounts receivable other than in the
ordinary course of business consistent with past practice or as required by
GAAP;
(h) incur any indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities or warrants or rights
to acquire any debt securities or guarantee any debt securities of others, other
than indebtedness incurred under outstanding lines of credit in the ordinary
course of business consistent with past practice;
(i) amend or propose to amend its Articles of Incorporation
or Bylaws;
(j) incur or commit to incur any individual capital
expenditure in excess of $5,000 or aggregate capital expenditures in excess of
$10,000;
(k) amend or terminate any material contract, agreement or
license to which it is a party except in the ordinary course of business;
(l) waive or release any material right or claim, except in
the ordinary course of business;
(m) initiate any litigation or arbitration proceeding;
(n) accelerate, amend or change the period of exercisability
of any options or restricted stock granted to employees of OptaPhone or
authorize cash payments in exchange for any options granted under any of such
plans;
(o) compromise or otherwise settle or adjust any assertion
or claim of a deficiency in taxes (or interest thereon or penalties in
connection therewith), extend the statute of limitations with any tax authority
or file any pleading in court in any tax litigation or any appeal from an
asserted deficiency;
(p) change any of OptaPhone's accounting policies or
practices except as may be required by any modification or change in GAAP;
(q) change any of OptaPhone's personnel policies in any
material respect (except for changes contemplated by the Severance Plan);
(r) grant any person a power of attorney or similar
authority; or
(s) agree in writing or otherwise to take any of the actions
described in subsections (a) through (r) above, or any action which is
reasonably likely to make any of its representations or warranties contained in
this Agreement untrue or incorrect in any material respect on the date made (to
the extent so limited) or as of the Closing Date.
5.2 Access to Information. Until the Closing, OptaPhone will allow
Zhone and its agents free access upon reasonable notice and during normal
working hours to its files, books, records, and offices, including, without
limitation, any and all information relating to taxes, commitments, contracts,
leases, licenses, OptaPhone Intellectual Property Rights, personal property and
financial condition. Until the Closing, OptaPhone shall cause its accountants to
cooperate with Zhone and its agents in making available all financial
information reasonably requested, including, without limitation, the right to
examine all working papers pertaining to OptaPhone in the possession, custody or
control of such accountants, subject to the execution by Zhone of a customary
agreement with such accountants with respect to the use of such working papers.
5.3 Shareholder Consent. OptaPhone shall promptly after the date
hereof take all action necessary in accordance with the California Law and its
Articles of Incorporation and Bylaws to solicit and obtain shareholder consent
and approval to consummate the transactions contemplated by this Agreement and
the Agreement of Merger. OptaPhone shall use commercially reasonable efforts to
solicit such consent and approval from the shareholders of OptaPhone at the
earliest practicable date and not later than February 7, 2000. The Board of
Directors of OptaPhone will recommend to the OptaPhone Shareholders that the
Merger and the other transactions contemplated by this Agreement be approved and
will use commercially reasonable efforts to solicit the approval of such matters
by the OptaPhone Shareholders. OptaPhone will provide to Zhone copies of all
documents and other information furnished to the shareholders of OptaPhone, if
applicable, in connection with such solicitation.
5.4 Regulatory Approvals. Prior to the Closing, OptaPhone will
execute and file, or join in the execution and filing of, any application or
other document that may be necessary in order to obtain the authorization,
approval or consent of any Governmental Entity that may be reasonably required
in connection with the consummation of the transactions contemplated by the
Transaction Documents. OptaPhone will use commercially reasonable efforts to
obtain or, as applicable, to assist Zhone in obtaining all such authorizations,
approvals and consents.
5.5 Satisfaction of Conditions Precedent. OptaPhone will use
commercially reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent that are set forth in Sections 9.1 and 9.3 and to cause the
transactions contemplated by the Transaction Documents to be consummated, and,
without limiting the generality of the foregoing, to obtain all consents and
authorizations of third parties and to make all filings with, and give all
notices to, third parties which may be necessary or reasonably required on its
part in order to effect the transactions contemplated hereby.
5.6 Other Negotiations. From and after the date of this Agreement
until the earlier of the Effective Time of the Merger or the termination of this
Agreement by its terms, OptaPhone shall not, directly or indirectly through any
officer, director, employee, representative or agent of OptaPhone or otherwise,
(i) solicit, initiate, or encourage any inquiries or proposals that constitute,
or could reasonably be expected to lead to, a proposal or offer for a merger,
consolidation, share exchange, business combination, sale of all or a material
portion of assets, sale of shares of capital stock (including without limitation
by way of a tender offer) or similar transactions involving OptaPhone other than
the transactions contemplated by this Agreement (any of the foregoing inquiries
or proposals being referred to in this Agreement as an "Acquisition Proposal"),
(ii) engage or participate in negotiations or discussions concerning, or provide
any information to any person or entity relating to, any Acquisition Proposal,
or (iii) agree to, enter into, accept, approve or recommend any Acquisition
Proposal.
6. Covenants of Zhone and Sub. Zhone and Sub hereby covenant and agree
with Optaphone as follows:
6.1 Notice of Changes. Zhone will promptly notify OptaPhone in
writing of any event occurring subsequent to the date of this Agreement that
would render any representation or warranty of Zhone or Sub contained in any of
the Transaction Documents, if made on or as of the date of that event or the
Closing Date, untrue or inaccurate in any material respect. Zhone shall further
notify OptaPhone of any event or circumstance which has had, or could reasonably
be expected to have, a Material Adverse Effect on Zhone; provided, however, that
any such notice shall not constitute an admission that a Material Adverse Effect
on Zhone has occurred.
6.2 Regulatory Approvals. Prior to the Closing, Zhone and Sub will
execute and file, or join in the execution and filing of, any application or
other document that may be necessary in order to obtain the authorization,
approval or consent of any Governmental Entity that may be reasonably required
in connection with the consummation of the transactions contemplated by the
Transaction Documents. Zhone and Sub will use commercially reasonable efforts to
obtain, or, as applicable, to assist OptaPhone in obtaining all such
authorizations, approvals and consents.
6.3 Satisfaction of Conditions Precedent. Zhone will use
commercially reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent that are set forth in Sections 9.1 and 9.2 and to cause the
transactions contemplated by the Transaction Documents to be consummated, and,
without limiting the generality of the foregoing, to assist OptaPhone in
obtaining all consents and authorizations of third parties and to make all
filings with, and give all notices to, third parties which may be necessary or
reasonably required on its part in order to effect the transactions contemplated
hereby.
6.4 Issuance of Options. At the Closing, Zhone will issue options
to purchase an aggregate of 365,000 shares of Zhone Common Stock in the amounts,
under the terms, and to the employees set forth in the schedule attached hereto
as Exhibit C.
7. Additional Covenants of the Parties. In addition to the foregoing,
the parties covenant and agree as follows:
7.1 Confidentiality.
(a) In connection with the Merger and the transactions
contemplated by this Agreement, OptaPhone has provided to Zhone and Zhone has
provided to OptaPhone (in each case the providing party is herein referred to as
the "Disclosing Company" and the receiving party is herein referred to as the
"Receiving Party") certain documents and information (including information in
verbal, visual, written and/or electronic format) relating to the Disclosing
Company's business, which are not generally available to others, and are
protected by the Disclosing Company against unrestricted disclosure to others
("Evaluation Material"). Evaluation Material shall not include any document or
information that (a) was known to the Receiving Company prior to the
commencement of any disclosure of Evaluation Material by the Disclosing Company
or its Representatives (as defined below) to the Receiving Company; (b) was or
is independently developed by the Receiving Company without use of Evaluation
Material; (c) is now or hereafter becomes available to the public other than as
a consequence of a breach by the Receiving Party of its obligations under this
Section 7.1 and (d) is or becomes available to the Receiving Company on a
nonconfidential basis from a source (other than the Disclosing Company) which,
to the best of the Receiving Company's knowledge after due inquiry, is not
prohibited from disclosing such information to the Receiving Company by a legal,
contractual or fiduciary obligation to the Disclosing Company.
(b) Unless and until the Merger is consummated, all
Evaluation Material will be used solely for the purpose of evaluating the Merger
and the transactions contemplated by this Agreement and the planning for the
implementation of the Merger and such Evaluation Material shall be kept strictly
confidential by the Receiving Company and those of its directors, officers,
employees and advisors to whom disclosure is necessary for the performance of
such evaluation and such planning (collectively referred to as the
"Representatives"), it being understood that these Representatives have been or
shall be informed of the confidential nature of the Evaluation Material and
shall agree to be bound by the provisions of this Section 7.1, and to refrain
from disclosing and to not disclose the Evaluation Material to any other person.
Without limiting the generality of the foregoing, upon the consummation of the
Merger, only Zhone shall be permitted to disclose the Evaluation Material of
both Zhone and OptaPhone. The Receiving Company shall cause its Representatives
to observe the terms of this Section 7.1, and the Receiving Company shall be
responsible for any breach of this Section 7.1 by any of its Representatives.
(c) In the event that the Receiving Company or any of its
Representatives become legally compelled (by deposition, interrogatory, request
for documents, subpoena, civil investigative demand, other demand or request by
a governmental agency or other application of statutes, rules and regulations
under the Federal securities laws or similar process) to disclose any of the
Evaluation Material, the Receiving Company shall provide the Disclosing Company
with prompt prior written notice of such requirement prior to such disclosure.
In the event that a protective order or other remedy is not obtained, or that
the Disclosing Company waives compliance with the provisions hereof, the
Receiving Company
agrees to furnish only that portion of the Evaluation Material which the
Receiving Company is legally required to furnish and, where appropriate, to
exercise its best efforts to obtain assurances that confidential treatment will
be accorded such Evaluation Material.
(d) If a Merger is not consummated or if the Disclosing
Company so requests, the Receiving Company shall promptly return to the
Disclosing Company all copies of Evaluation Material in its possession or in the
possession of its Representatives which consists of written or visual material,
and the Receiving Company shall destroy all copies of any analyses,
compilations, studies or other documents prepared by the Receiving Company or
for the Receiving Company's use containing any Evaluation Material.
Notwithstanding the return or destruction of the Evaluation Material, each party
and its Representatives shall continue to be bound by its obligations of
confidentiality and other obligations hereunder. Any destruction required
pursuant to this Section 7.1 shall be certified in writing to the applicable
party by an authorized officer supervising such destruction.
7.2 Publicity. Neither OptaPhone, on the one hand, nor Zhone or
Sub, on the other, shall issue any press release or other public announcement or
communication regarding the transactions contemplated by this Agreement without
the prior written approval of the other as to the content thereof, which
approval shall not be unreasonably withheld; provided, however, that the
foregoing shall not be deemed to prohibit any disclosure which is required by
any applicable law or by any Governmental Entity or any disclosure made to
OptaPhone Shareholders in connection with soliciting shareholder consent to the
Merger.
7.3 Employment Matters.
(a) At or prior to the Closing, OptaPhone will terminate the
employment of all of the employees of OptaPhone. Zhone shall offer employment at
the Closing to all employees of OptaPhone. Each such person shall be offered
"at-will" employment by Zhone subject to and in compliance with Zhone's standard
human resources policies and procedures, and the terms of such employment,
including the position, salary and responsibilities, will be determined in
Zhone's sole discretion.
(b) Prior to the Closing, Zhone shall adopt the severance
benefit policy adopted by OptaPhone as described on Exhibit D and shall not
modify this policy for a period of at least 180 days after the Closing.
(c) For all purposes of determining eligibility and any and
all entitlements under any employment benefit plan provided by Zhone or the
Surviving Corporation in the future, service performed by employees of OptaPhone
prior to the Closing Date shall be credited; provided, however, that such credit
shall not apply to any vesting of any Zhone options, nor shall such credit apply
with respect to Zhone's vacation benefits to the extent OptaPhone employees have
been compensated for their vacation accruals on or prior to the Closing.
7.4 Voting Agreements. OptaPhone shall cause each director and
officer of OptaPhone and (and the affiliates thereof) to execute and deliver to
Zhone, by the date of this
Agreement, voting agreements and irrevocable proxies in the forms annexed hereto
as Exhibit E (the "Voting Agreements"), agreeing, among other things, to vote in
favor of the Merger.
7.5 Continuing Cooperation. In case at any time after the
Effective Time of the Merger any further action is reasonably necessary or
desirable to carry out the purposes of this Agreement or to vest the Surviving
Corporation with full title to all properties, assets, rights, approvals,
immunities and franchises of either of the Constituent Corporations, the proper
officers and directors of each corporation which is a party to this Agreement
shall take all such necessary action.
8. The Closing.
8.1 Delivery of Documents. At the Closing, each party shall
deliver to the others all documents, certificates, schedules, agreements and
instruments required by this Agreement to be delivered at such time, such
delivery to be deemed effective at the Effective Time of the Merger.
8.2 Delivery of Cash Payment. Not later than two (2) business days
after the Confirmation Date, Zhone and the Surviving Corporation shall cause the
Exchange Agent to effect the exchange of Certificates representing the OptaPhone
Common Stock and OptaPhone Preferred Stock for the applicable Cash Payment in
accordance with the procedures specified in Section 2.8 and the Agreement of
Merger.
9. Conditions to the Closing.
9.1 Conditions to Each Party's Obligations. The respective
obligations of each party to effect the transactions to be performed by such
party at the Closing are, at the option of such party, subject to the
satisfaction at or prior to the Closing of the following conditions (unless
waived in writing if permitted by applicable law):
(a) This Agreement, the Merger and the other transactions
contemplated hereby shall have been duly approved by the shareholders of
OptaPhone in the manner required under the California Law.
(b) No order shall have been entered, and not vacated, by a
court or administrative agency of competent jurisdiction, in any action or
proceeding which enjoins, restrains or prohibits the consummation of the Merger.
(c) There shall be no litigation pending or threatened by
any regulatory body or private party in which (i) an injunction is or may be
sought against the transactions contemplated by the Transaction Documents, or
(ii) relief is or may be sought against any party hereto as a result of this
Agreement and in which, in the good faith judgment of the Board of Directors of
either OptaPhone or Zhone (relying on the advice of their respective legal
counsel), such regulatory body or private party has a reasonable likelihood of
prevailing.
(d) All authorizations, consents, permits and approvals of
all federal, state and local governmental agencies and authorities required to
be obtained in order to permit consummation of the transactions contemplated by
this Agreement shall have been obtained.
9.2 Conditions to Obligations of OptaPhone. The obligations of
OptaPhone to effect the transactions to be performed by it at the Closing are,
at the option of OptaPhone, subject to the satisfaction at or prior to the
Closing of the following additional conditions:
(a) All of the representations and warranties of Zhone and
Sub set forth in Section 4 hereof shall be true in all material respects on and
as of the Closing Date, except for representations and warranties which are as
of a certain date which shall be true in all material respects as of such date,
with the same force and effect as if they had been made at the Closing, except
for changes contemplated by this Agreement, and Zhone and Sub shall have
delivered to OptaPhone certificates to such effect dated the Closing Date and
signed by authorized representatives of Zhone and Sub, respectively.
(b) All of the terms, covenants and conditions of this
Agreement to be complied with and performed by Zhone and Sub at or prior to the
Closing shall have been duly complied with and performed in all material
respects, and Zhone and Sub shall have delivered to OptaPhone certificates to
such effect dated the Closing Date and signed by authorized representatives of
Zhone and Sub, respectively.
(c) There shall not have occurred a Material Adverse Effect
on Zhone.
9.3 Conditions to Obligations of Zhone and Sub. The obligations of
Zhone and Sub to effect the transactions to be performed by them at the Closing
are, at the option of Zhone, subject to the satisfaction at or prior to the
Closing of the following additional conditions:
(a) All the representations and warranties of OptaPhone set
forth in Sections 3 shall be true in all material respects on and as of the
Closing Date, except for representations and warranties which are as of a
certain date which shall be true in all material respects as of such date, with
the same force and effect as if they had been made at the Closing, except for
changes contemplated by this Agreement, and OptaPhone shall have delivered to
Zhone a certificate to such effect dated the Closing Date and signed by the
President and Chief Financial Officer of OptaPhone.
(b) All of the terms, covenants and conditions of this
Agreement to be complied with and performed by OptaPhone at or prior to the
Closing Date shall have been duly complied with and performed in all material
respects, and OptaPhone shall have delivered to Zhone certificates to such
effect dated the Closing Date and signed by the President and Chief Financial
Officer of OptaPhone.
(c) There shall have been no material adverse change in the
financial condition, results of operations, business or properties of OptaPhone
from the date hereof, through the Closing Date, other than changes disclosed in
the OptaPhone Disclosure Schedule.
(d) Xxxxx Xxxxxxx, Xxx Xxxxxxxxxx and Xxx Xxxxxxx each shall
have (i) accepted the offer of employment with Zhone and (ii) executed and
delivered to Zhone a non-competition agreement in the form attached hereto as
Exhibit F.
(e) All persons serving as directors or officers of
OptaPhone shall have resigned all such positions effective as of the Closing.
(f) All OptaPhone Option Agreements shall have been
terminated by all parties to those agreements.
(g) This Agreement, the Merger and the other transactions
contemplated by this Agreement shall have been duly approved by the OptaPhone
Shareholders holding (i) at least ninety-five percent (95%) of the OptaPhone
capital stock held by OptaPhone Shareholders and (ii) that number of shares as
may be required to approve the Merger under applicable law.
(h) Any and all consents from third parties to OptaPhone's
material contracts, including but not limited to unvested OptaPhone Options, and
other instruments required to allow the consummation of the Merger and the other
transactions contemplated by the Transaction Documents shall have been obtained.
(i) OptaPhone shall have received and delivered to Zhone
certificates of good standing from the Secretary of State of the State of
California and the Franchise Tax Board of the State of California, each dated
within 3 business days prior to the Closing. OptaPhone shall have delivered to
Zhone a certificate, validly executed by the Secretary of OptaPhone, certifying
as to the terms and effectiveness of the Articles of Incorporation and By-laws
of OptaPhone and the valid adoption of resolutions of the Board of Directors of
OptaPhone and the OptaPhone Shareholders approving this Agreement and the
consummation of the transactions contemplated hereby.
10. Termination of Agreement.
10.1 Termination by Zhone. This Agreement may be terminated, and
the Merger abandoned, at any time before the Closing by Zhone upon written
notice to OptaPhone, specifying the basis for such termination, if (a)(i)
OptaPhone shall have breached in any material respect any of its covenants or
agreements contained in this Agreement or (ii) an event has occurred which would
cause a failure of any of the conditions in Section 9.3(a), (b) or (c) and such
breach or failure of condition (x) cannot be cured or (y) shall not have been
cured within fifteen (15) days after notice thereof to the breaching party from
Zhone, (b) any representation or warranty of OptaPhone contained in this
Agreement shall have been materially inaccurate when made, or (c) through no
breach of this Agreement by Zhone, the Closing shall not have occurred on or
before February 29, 2000.
10.2 Termination by OptaPhone. This Agreement may be terminated,
and the Merger abandoned, at any time before the Closing by action of the Board
of Directors of OptaPhone upon written notice to Zhone, specifying the basis for
such termination, if (i) Zhone or Sub shall have breached in any material
respect any of their respective covenants or
agreements contained in this Agreement and shall not have cured such breach
within fifteen (15) days after notice thereof to the breaching party from
OptaPhone, (ii) any representation or warranty of Zhone or Sub contained in this
Agreement shall have been materially inaccurate when made, or (iii) through no
breach of this Agreement by OptaPhone, the Closing shall not have occurred on or
before February 29, 2000.
10.3 Mutual Consent. This Agreement may be terminated, and the
Merger abandoned, at any time before the Closing, by the mutual written consent
of Zhone and OptaPhone.
10.4 Effect of Termination. Upon any termination of this Agreement
pursuant to the provisions of this Section 10, all parties hereto shall be
relieved of all further obligations under this Agreement, except for the
provisions of this paragraph and Section 12.7 regarding the payment of expenses
and the continuing obligations of the parties under Section 7.1. If such
termination shall result from the failure of a party to carry out its
obligations under this Agreement, such party shall be liable for losses incurred
by the other parties. The provisions of this Section 10.4 shall survive any such
termination.
11. Survival of Representations and Warranties; Indemnification.
11.1 Survival of Representations and Warranties. If the Merger
occurs, the representations and warranties of OptaPhone contained in this
Agreement or in any certificate or other writing delivered pursuant hereto or in
connection herewith shall survive until the date that is the first anniversary
of the Closing Date (the "Termination Date"). Notwithstanding the preceding
sentence, any claim for indemnity for breach of a representation or warranty in
respect of which indemnity may be sought under this Agreement shall survive the
time at which such representation or warranty otherwise would terminate pursuant
to the preceding sentence, if notice of the inaccuracy or breach thereof giving
rise to such right of indemnity shall have been given to the Shareholder Agent
(as defined below) prior to such time.
11.2 Indemnification.
(a) Subject to the terms, conditions and limitations
contained herein, the OptaPhone Shareholders (the "OptaPhone Indemnitor") shall
defend and hold harmless Zhone, its stockholders, officers, directors, employees
and attorneys, all Subsidiaries, including the Surviving Corporation, and
affiliates of Zhone, and the respective officers, directors, employees and
attorneys of such entities (all such persons and entities being collectively
referred to as the "Zhone Group") from, against, for and in respect of any and
all losses, damages, costs and expenses (including reasonable legal fees and
expenses) net of any directly related insurance payments or recoveries
previously received from third party insurers by members of the Zhone Group
prior to final resolution of, and relating to, such claim, losses, damages,
costs and expenses (collectively, the "Zhone Losses") which any member of the
Zhone Group may sustain or incur and which are caused by or arise out of any
inaccuracy in or breach of any of the representations, warranties or covenants
made by OptaPhone in this Agreement, including the OptaPhone Disclosure
Schedule.
(b) Zhone shall also be entitled to claim as Zhone Losses
all amounts which would be required to be included on the OptaPhone Expense
Schedule described in Section 12.7 which are in excess of the amounts actually
included on such Schedule.
(c) The obligation of the OptaPhone Shareholders to
indemnify members of the Zhone Group for a Zhone Loss is subject to the
condition that the OptaPhone Shareholders shall have received a claim for such
Zhone Loss on or before the applicable survival period set forth in Section 11.1
hereof.
(d) Each of the parties hereto acknowledges and agrees that
from and after the Effective Time, Zhone's sole and exclusive monetary remedy,
with respect to any and all claims relating to this Agreement shall be pursuant
to the indemnification provisions set forth in this Section 11 and that Zhone
shall have no recourse to any of the OptaPhone Shareholders other than with
respect to their portion of the Escrow Fund (as defined below); except that
nothing in this Agreement shall be deemed to constitute a waiver of any
injunctive or other equitable remedies or any tort claims of, or causes of
action arising from, fraud or intentional misrepresentation.
11.3 Escrow Fund. At the Effective Time, the OptaPhone Shareholders
will be deemed to have received and deposited with the Escrow Agent (as defined
below) an aggregate of $200,000 of the Total Merger Consideration (the "Escrow
Amount"). As soon as practicable after the Effective Time, the Escrow Amount,
without any act of any OptaPhone Shareholder, will be deposited with an
institution designated by Zhone and reasonably acceptable to the Shareholder
Agent (as defined in Section 11.6 below)) as escrow agent (the "Escrow Agent").
The Escrow Amount shall constitute an escrow fund (the "Escrow Fund") and shall
be governed by the terms set forth herein and in an escrow agreement to be
entered into by and among, Zhone, the Shareholder Agent and the Escrow Agent on
terms which are reasonably acceptable to Zhone and the Shareholder Agent (the
"Escrow Agreement"), and at Zhone's cost and expense. The portion of the Escrow
Amount contributed on behalf of each OptaPhone Shareholder shall be in
proportion to the portion of the Total Merger Consideration that such holder
would otherwise be entitled to receive under Section 2.5. The Escrow Fund shall
be the sole and exclusive remedy available to compensate any member of the Zhone
Group for Zhone Losses. Subject to the following requirements, the Escrow Fund
shall be in existence immediately following the Effective Time and shall
terminate at 5:00 p.m., California time, on the first anniversary of the Closing
Date (the "Escrow Period"); provided, however, that the Escrow Period shall not
terminate with respect to such amount (or some portion thereof) that is
necessary in the reasonable judgment of Zhone to satisfy any unsatisfied claims
concerning facts and circumstances existing prior to the contemplated date of
the termination of such Escrow Period, each as specified in an Officer's
Certificate (as defined below) delivered to the Escrow Agent prior to the
contemplated date of the termination of such Escrow Period. As soon as all such
claims have been resolved, the Escrow Agent shall deliver to the shareholders of
OptaPhone the remaining portion of the Escrow Fund not required to satisfy such
claims. Deliveries of Escrow Amounts to the OptaPhone Shareholders pursuant to
this Section 11.3 shall be made in proportion to their respective original
contributions to the Escrow Fund.
11.4 Claims Upon Escrow Fund. Upon receipt by the Escrow Agent at
any time on or before the last day of the Escrow Period of a certificate signed
by any officer of Zhone (an "Officer's Certificate"): (A) stating that a member
of the Zhone Group has paid or properly accrued or reasonably anticipates that
it will have to pay or accrue Zhone Losses, and (B) specifying in reasonable
detail the individual items of Zhone Loss included in the amount so stated, the
date each such item was paid or properly accrued, or the basis for such
anticipated liability, and the nature of the misrepresentation, breach of
warranty or covenant to which such item is related, the Escrow Agent shall,
subject to the provisions of this section, pay to Zhone out of the Escrow Fund,
as promptly as practicable, an amount equal to such Zhone Losses. At the time of
delivery of any Officer's Certificate to the Escrow Agent, a duplicate copy of
such certificate shall be delivered by Zhone to the Shareholder Agent and for a
period of thirty (30) days after such delivery, the Escrow Agent shall make no
payment to Zhone of any Escrow Amounts pursuant to this section unless the
Escrow Agent shall have received written authorization from the Shareholder
Agent to make such delivery. After the expiration of such thirty (30) day
period, the Escrow Agent shall make such payment from the Escrow Fund in
accordance with this section, provided that no such payment may be made if the
Shareholder Agent shall object in a written statement (the "Shareholders Agent
Notice") to the claim made in the Officer's Certificate, and such statement
shall have been delivered to the Escrow Agent, with a copy to Zhone, prior to
the expiration of such thirty (30) day period.
11.5 Resolution of Conflicts. In case the Shareholder Agent shall
so object in writing to any claim or claims made in any Officer's Certificate,
the Shareholder Agent and Zhone shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims. If the
Shareholder Agent and Zhone should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties and shall be furnished to
the Escrow Agent. The Escrow Agent shall be entitled to rely on any such
memorandum and pay amounts from the Escrow Fund in accordance with the terms
thereof. If no such agreement is reached within thirty (30) days following
receipt by the Escrow Agent of the Shareholders Agent Notice, either Zhone or
the Shareholder Agent may demand arbitration of the matter unless the amount of
the Zhone Loss is at issue in pending litigation with a third party, in which
event arbitration shall not be commenced until such amount is ascertained or
both parties agree to arbitration; and in either such event the matter shall be
settled by arbitration conducted by three arbitrators. Zhone and the Shareholder
Agent shall each select one arbitrator, and the two arbitrators so selected
shall select a third arbitrator, each of which arbitrators shall be independent
and have at least ten years relevant experience. The arbitrators shall set a
limited time period and establish procedures designed to reduce the cost and
time for discovery while allowing the parties an opportunity, adequate in the
sole judgment of the arbitrators, to discover relevant information from the
opposing parties about the subject matter of the dispute. The arbitrators shall
rule upon motions to compel or limit discovery and shall have the authority to
impose sanctions, including attorneys fees and costs, to the same extent as a
court of competent law or equity, should the arbitrators determine that
discovery was sought without substantial justification or that discovery was
refused or objected to without substantial justification. The decision of a
majority of the three arbitrators as to the validity and amount of any claim in
such Officer's Certificate shall be binding and conclusive upon the parties to
this Agreement, and notwithstanding anything in this section, the Escrow Agent
shall be entitled to act in accordance with such decision and make or withhold
payments out of the Escrow Fund in accordance
therewith. Such decision shall be written and shall be supported by written
findings of fact and conclusions which shall set forth the award, judgment,
decree or order awarded by the arbitrators. Judgment upon any award rendered by
the arbitrators may be entered in any court having jurisdiction. Any such
arbitration shall be held in San Mateo or Santa Xxxxx County, California under
the rules then in effect of Judicial Arbitration and Mediation Services, Inc.
For purposes of this section, in any arbitration hereunder in which any claim or
the amount thereof stated in the Officer's Certificate is at issue, Zhone shall
be deemed to be the Non-Prevailing Party in the event that the arbitrators award
Zhone less than the sum of one-half (1/2) of the disputed amount plus any
amounts not in dispute; otherwise, the shareholders of OptaPhone as represented
by the Shareholder Agent shall be deemed to be the Non-Prevailing Party. The
Non-Prevailing Party to an arbitration shall pay its own expenses, the fees of
each arbitrator, the administrative costs of the arbitration, and the expenses,
including without limitation, reasonable attorneys' fees and costs, incurred by
the other party to the arbitration.
11.6 Shareholder Agent. At the Effective Time, and without further
act of any party, Xxxx X. Xxxxxx shall be appointed as agent and attorney-in-
fact (the "Shareholder Agent") for each shareholder of OptaPhone (except such
shareholders, if any, as shall have perfected their appraisal or dissenters'
rights under the California Law), for and on behalf of shareholders of
OptaPhone, to give and receive notices and communications, to authorize payment
to Zhone of amounts from the Escrow Fund in satisfaction of claims by Zhone, to
object to such payments, to agree to, negotiate, enter into settlements and
compromises of, and demand arbitration and comply with orders of courts and
awards of arbitrators with respect to such claims, and to take all actions
necessary or appropriate in the judgment of Shareholder Agent for the
accomplishment of the foregoing. Such agency may be changed by the shareholders
of OptaPhone from time to time upon not less than thirty (30) days prior written
notice to Zhone; provided that the Shareholder Agent may not be removed unless
holders of at least a majority in an interest of the Escrow Fund agree to such
removal and to the identity of the substituted agent. Any vacancy in the
position of Shareholder Agent may be filled by approval of the holders of a
majority in interest of the Escrow Fund. No bond shall be required of the
Shareholder Agent, and the Shareholder Agent shall not receive compensation for
his or her services. Notices or communications to or from the Shareholder Agent
relating to the Escrow Fund shall constitute notice to or from each of the
shareholders of OptaPhone. The Shareholder Agent shall not be liable for any act
done or omitted hereunder as Shareholder Agent while acting in good faith. The
shareholders of OptaPhone on whose behalf the Escrow Amount was contributed to
the Escrow Fund shall severally indemnify the Shareholder Agent and hold the
Shareholder Agent harmless against any loss, liability or expense incurred
without negligence or bad faith on the part of the Shareholder Agent and arising
out of or in connection with the acceptance or administration of the Shareholder
Agent's duties hereunder, including the reasonable fees and expenses of any
legal counsel retained by the Shareholder Agent. A decision, act, consent or
instruction of the Shareholder Agent relating to the Escrow Fund shall
constitute a decision of all OptaPhone Shareholders, and shall be final, binding
and conclusive upon each of such shareholders, and the Escrow Agent and Zhone
may rely upon any such decision, act, consent or instruction of the Shareholder
Agent as being the decision, act, consent or instruction of each shareholder of
OptaPhone. In the absence of bad faith, the Escrow Agent and Zhone are hereby
relieved from any liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of the Shareholder
Agent.
11.7 Third-Party Claims. In the event Zhone becomes aware of a
third-party claim which Zhone believes may result in a demand against the Escrow
Fund, Zhone shall notify the Shareholder Agent of such claim, and the
Shareholder Agent, as representative for the shareholders of OptaPhone, shall be
entitled, at their expense, to participate in any defense of such claim. Zhone
shall have the right in its sole discretion to settle any such claim; provided,
however, that except with the consent of the Shareholder Agent, no settlement of
any such claim with third-party claimants shall alone be determinative of the
amount of any claim against the Escrow Fund. In the event that the Shareholder
Agent has consented to any such settlement and acknowledged that the claim is a
valid claim against the Escrow Fund, the Shareholder Agent shall have no power
or authority to object under any provision of this Section 11 to the amount of
any claim by Zhone against the Escrow Fund with respect to such settlement.
12. Miscellaneous.
12.1 Governing Law. It is the intention of the parties hereto that
the internal laws of the State of California (irrespective of its choice of law
principles) shall govern the validity of this Agreement, the construction of its
terms, and the interpretation and enforcement of the rights and duties of the
parties hereto.
12.2 Dispute Resolution.
(a) In the event of any controversy or claim arising out of
or relating to this Agreement, including without limitation, controversies or
claims arising out of the provisions of Section 11 hereof, any party may send
another party written notice identifying the matter in dispute. Within fifteen
(15) days after such written notice is given, one or more principals of each
party involved in the dispute shall meet at a mutually agreeable location for
the purpose of determining whether they can resolve the dispute themselves and,
if not, whether they can agree upon an impartial third-party arbitrator to whom
to submit the matter in dispute for final and binding arbitration.
(b) If such parties fail to resolve the dispute by written
agreement or to agree upon the selection of an arbitrator within said fifteen
(15) day period, any such party may thereafter commence appropriate legal action
with respect to such dispute.
(c) The prevailing party in any such dispute shall be
entitled to recovery of the reasonable fees and expenses of one (1) counsel for
such party in such dispute.
12.3 Assignment; Binding upon. None of the parties hereto may
assign any of its rights or obligations hereunder without the Successors and
Assigns prior written consent of the other parties. This Agreement will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
12.4 Severability. If any provision of this Agreement, or the
application thereof, shall for any reason and to any extent be held to be
invalid or unenforceable, the remainder of this Agreement and the application of
such provision to other persons or circumstances shall be interpreted so as best
to reasonably effect the intent of the parties hereto. The parties further agree
to replace such invalid or unenforceable provision of this Agreement
with a valid and enforceable provision which will achieve, to the extent
possible, the economic, business and other purposes of the invalid or
unenforceable provision.
12.5 Entire Agreement. This Agreement, the exhibits hereto, the
documents referenced herein, and the exhibits thereto, constitute the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and thereof and supersede all prior and contemporaneous agreements
or understandings, inducements or conditions, express or implied, written or
oral, between the parties with respect hereto and thereto. The express terms
hereof control and supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof. The letter of intent dated January
14, 2000 between Zhone and OptaPhone is hereby terminated.
12.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument.
12.7 Expenses. The parties shall each pay their own legal,
accounting and financial advisory fees and other out-of-pocket expenses incurred
incident to the negotiation, preparation and carrying out of this Agreement and
the transactions herein contemplated. In the event that the Merger is
consummated, all legal, accounting and financial advisory fees and expenses and
other out-of-pocket expenses incurred by OptaPhone incident to the negotiation,
preparation and carrying out of this Agreement and the transactions herein
contemplated shall be borne by the Surviving Corporation; provided, however,
that a schedule of all such fees and expenses to be incurred through the Closing
(the "OptaPhone Expense Schedule") shall be submitted to Zhone not later than
two (2) business days prior to the Closing for purposes of calculating the
amount of the Total Merger Consideration.
12.8 Other Remedies. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party shall be deemed cumulative
with and not exclusive of any other remedy conferred hereby or by law on such
party, and the exercise of any one remedy shall not preclude the exercise of any
other.
12.9 Amendment and Waivers. Any term or provision of this Agreement
may be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof for default in payment of any amount due
hereunder or default in the performance hereof shall not be deemed to constitute
a waiver of any other default or any succeeding breach or default.
12.10 Waiver. Any party hereto may, by written notice to the others:
(i) waive any of the conditions to its obligations hereunder or extend the time
for the performance of any of the obligations or actions of the others; (ii)
waive any inaccuracies in the representations of the others contained in this
Agreement or in any documents delivered pursuant to this Agreement; (iii) waive
compliance with any of the covenants of the others contained in this Agreement;
or (iv) waive or modify performance of any of the obligations of the others. No
action taken pursuant to this Agreement, including without limitation any
investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party taking
such action of compliance with any representation, warranty, condition or
agreement contained herein. Waiver of the breach of any one or more provisions
of this Agreement shall not be deemed or construed to be a waiver of other
breaches or subsequent breaches of the same provisions.
12.11 Notices. All notices and other communications hereunder will
be in writing and will be deemed given (i) upon receipt if delivered personally
(or if mailed by registered or certified mail), (ii) the day after dispatch if
sent by overnight courier, or (iii) upon dispatch if transmitted by facsimile
(and confirmed by a copy delivered in accordance with clause (i) or (ii)),
addressed to the parties at the following addresses:
OptaPhone: OptaPhone Systems, Inc.
0000 Xxxxx Xxxx Xxxxx
Xxxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xx. Xxxxxxx Xxxxxxx
with a copy to: Xxxxxxx & Xxxxxxx LLP
(which shall not 0000 Xxxxx Xxxx Xxxxxxxxx, Xxxxx 000
constitute notice) Xxxxx Xxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Zhone or Sub: Zhone Technologies, Inc.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xx. Xxxx Xxxxxx
with a copy to: Xxxx Xxxx Xxxx & Freidenrich LLP
(which shall not 000 Xxxxxxxx Xxxxxx
constitute notice) Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxx, Esq.
Any party may change its address for such communications by giving notice
thereof to the other parties in conformity with this Section 12.11.
12.12 Construction and Interpretation of Agreement.
(a) This Agreement has been negotiated by the respective
parties hereto and their attorneys and the language hereof shall not be
construed for or against any party. The titles and headings herein are for
reference purposes only and shall not in any manner limit the construction of
this Agreement, which shall be considered as a whole.
(b) As used in this Agreement, any reference to any state of
facts, event, change or effect being "material" with respect to any entity means
a state of facts, event, change or effect, as the case may be, that is material
to the current or expected condition (financial or otherwise), properties,
assets, liabilities, business, operations or prospects of such entity.
(c) As used in this Agreement, the term "OptaPhone's
Knowledge" means the actual knowledge of any of the executive officers or
directors of OptaPhone, in each case after due inquiry of those OptaPhone
employees who could reasonably be expected to have information relating to the
subject matter of the particular representation.
(d) Whenever the term "enforceable in accordance with its
terms" or like expression is used, it is understood that excepted therefrom are
any limitations on enforceability under applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting the
enforcement of creditor's rights.
12.13 No Joint Venture. Nothing contained in this Agreement shall be
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. Except as specifically provided herein (i) no party is by
virtue of this Agreement authorized as an agent, employee or legal
representative of any other party, (ii) no party shall have the power to control
the activities and operations of any other and their status is, and at all
times, will continue to be, that of independent contractors with respect to each
other and (iii) no party shall have any power or authority to bind or commit any
other. No party shall hold itself out as having any authority or relationship in
contravention of this Section 12.13.
12.14 Further Assurances. Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances, as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.
12.15 Absence of Third Party Beneficiary Rights. No provisions of
this Agreement are intended, nor shall be interpreted, to provide or create any
third party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, partner of any party hereto or any other
person or entity unless specifically provided otherwise herein, and, except as
so provided, all provisions hereof shall be solely between the parties to this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Reorganization as of the date first set forth above.
ZHONE TECHNOLOGIES, INC.
By: /s/ Xxxx Xxxxxx
---------------------------
Xxxx Xxxxxx
Chief Executive Officer
OPT ACQUISITION CORPORATION
By: /s/ Xxxx Xxxxxx
---------------------------
Xxxx Xxxxxx
President
OPTAPHONE SYSTEMS, INC.
By:____________________________
Xxxxxxx Xxxxxxx
President
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Reorganization as of the date first set forth above.
ZHONE TECHNOLOGIES, INC.
By:___________________________
Xxxx Xxxxxx
Chief Executive Officer
OPT ACQUISITION CORPORATION
By:___________________________
Xxxx Xxxxxx
President
OPTAPHONE SYSTEMS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------
Xxxxxxx Xxxxxxx
President
EXHIBITS
Exhibit Description
A Form of Agreement of Merger
B OptaPhone Disclosure Schedule
C Option Grant List
D Severance Benefits
E Form of Voting Agreement
F Form of Non-Competition Agreement
Exhibit A
Form of Agreement of Merger
Exhibit B
OptaPhone Disclosure Schedule
Exhibit C
Options to be Granted to Purchase an Aggregate of
365,000 Shares of Zhone Common Stock
--------------------------------------------------------
Name Amount
--------------------------------------------------------
Xxxxxxx, Xxxxx 50,000
--------------------------------------------------------
Xxxxx, Xxxxx 15,000
--------------------------------------------------------
Ch'Ng, Shok Ting 15,000
--------------------------------------------------------
Xxxx, Xxxx 15,000
--------------------------------------------------------
L'Herogan, Matt 10,000
--------------------------------------------------------
Xxxxxxx, Xxxxxxx 10,000
--------------------------------------------------------
Xxxxx, Sun 10,000
--------------------------------------------------------
Xxxxxx, Xxx 10,000
--------------------------------------------------------
Xxxxxx, Xxxx 5,000
--------------------------------------------------------
Xxxxxxx, Xxxxxxx 150,000
--------------------------------------------------------
Xxxxxxxxxx, Xxx 50,000
--------------------------------------------------------
Xxxxxx, Xxxxxxx 5,000
--------------------------------------------------------
Xxxxxxx, Xxxxxx 15,000
--------------------------------------------------------
Xxxxxx, Xxxxxxxx 5,000
--------------------------------------------------------
TOTAL 365,000
--------------------------------------------------------
Zhone will issue options to purchase an aggregate of 365,000 shares of Zhone
Common Stock to certain employees of OptaPhone. The options shall be subject to
continued employment by Zhone and shall vest over a four-year period, with 25%
vesting on the first anniversary of the Closing of the Merger and 1/36th of the
balance at the end of each one-month period thereafter. Such options shall be
immediately exercisable with the shares of Zhone Common Stock issuable on such
exercise subject to repurchase by Zhone at the original purchase price and such
repurchase rights shall lapse in accordance with the option vesting schedule.
Exhibit D
Severance Benefit to OptaPhone Employees
1. Participants. Full-time employees of OptaPhone as of the Closing
Date.
2. Eligibility. Any employee terminated by Zhone post-Closing will
receive severance, unless terminated for cause as determined in good faith by
Zhone management. Receipt of a benefit shall be conditioned on the employee's
execution of a general release in favor of Zhone and OptaPhone.
3. Amount of Severance. The amount of the severance payment shall be
three (3) months' salary. Zhone may elect to pay severance in a lump sum or on a
regular payroll schedule, provided that no payment shall be made until all
rights to revoke the general release have expired.
4. Term of this Exhibit. Severance shall be available for employees
terminated within 180 days of Closing, after which time Zhone's standard
employee benefit package shall govern severance (if any) available to former
OptaPhone employees.
Exhibit E
FORM OF VOTING AGREEMENT
Exhibit F
FORM OF NON-COMPETITION AGREEMENT
