EXHIBIT 2.1
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AGREEMENT AND PLAN OF REORGANIZATION
AMONG
STRATOS LIGHTWAVE, INC.,
TUNDRA ACQUISITION CORP.,
AND
TSUNAMI OPTICS, INC.
DATED JANUARY 22, 2002
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TABLE OF CONTENTS
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ARTICLE I THE MERGER ..........................................................1
1.1 Effective Time ....................................................1
1.2 Closing ...........................................................1
1.3 Effects of the Merger .............................................2
1.4 Directors and Officers ............................................2
ARTICLE II CONVERSION OF SECURITIES ...........................................2
2.1 Certain Definitions ...............................................2
2.2 Conversion of Capital Stock .......................................4
2.3 Exchange of Certificates ..........................................5
2.4 Earn-Out Shares ...................................................7
2.5 Dissenters' Rights ................................................8
2.6 Certificate Legends ...............................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF TSUNAMI .........................9
3.1 Organization, Power and Qualification .............................9
3.2 Tsunami Capital Structure .........................................9
3.3 Subsidiaries .....................................................10
3.4 Authorization ....................................................10
3.5 No Violation .....................................................10
3.6 Consents and Approvals ...........................................11
3.7 Financial Statements .............................................11
3.8 Absence of Undisclosed Liabilities ...............................11
3.9 Accounts Receivable ..............................................12
3.10 Inventories ......................................................12
3.11 Absence of Certain Changes or Events .............................12
3.12 Taxes ............................................................14
3.13 Tangible Assets and Real Property ................................15
3.14 Intellectual Property ............................................16
3.15 Bank Accounts ....................................................18
3.16 Material Contracts ...............................................18
3.17 Labor Matters ....................................................19
3.18 Trade Regulation .................................................19
3.19 Environmental Matters ............................................20
3.20 Employee Benefit Plans ...........................................20
3.21 Legal Compliance .................................................21
3.22 Employees and Consultants ........................................21
3.23 Litigation .......................................................22
3.24 Restrictions on Business Activities ..............................22
3.25 Governmental Authorization .......................................22
3.26 Insurance ....................................................... 22
3.27 Interested Party Transactions ....................................22
3.28 Returns and Warranties ...........................................23
3.29 Customers and Suppliers ..........................................23
3.30 Real Property Holding Corporation ................................23
3.31 Corporate Documents ..............................................23
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3.32 No Misrepresentation .............................................24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF STRATOS AND SUB .................24
4.1 Organization, Power and Qualification ............................24
4.2 Authorization ....................................................24
4.3 No Violation .....................................................25
4.4 Consents and Approvals ...........................................25
4.5 SEC Filings; Financial Statements ................................25
4.6 Stratos Capital Structure ........................................26
4.7 No Material Adverse Change .......................................26
4.8 S-8 Registration Statement .......................................26
4.9 Securities Law Representations ...................................26
4.10 No Misrepresentation .............................................27
ARTICLE V CONDUCT OF BUSINESS ................................................27
5.1 Covenants of Tsunami .............................................27
5.2 Cooperation ......................................................29
ARTICLE VI ADDITIONAL AGREEMENTS .............................................29
6.1 No Solicitation ..................................................29
6.2 Consents .........................................................30
6.3 Access to Information ............................................30
6.4 Notification of Certain Matters ..................................30
6.5 Legal Conditions to Merger .......................................30
6.6 Public Disclosure ................................................31
6.7 Tax-Free Reorganization ..........................................31
6.8 Nasdaq Quotation .................................................31
6.9 Shareholder Approval .............................................31
6.10 Form S-3 Registration Statement ..................................32
6.11 Stock Options ....................................................34
6.12 Stratos Plans ....................................................35
6.13 Brokers or Finders ...............................................35
6.14 Additional Agreements; Reasonable Efforts ........................36
6.15 Expenses .........................................................36
6.16 Affiliates Agreement .............................................36
6.17 Tsunami Warrants and Bridge Loans ................................37
6.18 Operation of Tsunami During Earn-Out Period ......................37
ARTICLE VII CONDITIONS TO MERGER .............................................37
7.1 Conditions to Each Party's Obligation to Effect the Merger .......37
7.2 Additional Conditions to Obligations of Stratos and Sub ..........38
7.3 Additional Conditions to Obligations of Tsunami ..................39
ARTICLE VIII TERMINATION AND AMENDMENT .......................................39
8.1 Termination ......................................................39
8.2 Effect of Termination ............................................40
8.3 Amendment ........................................................40
8.4 Extension; Waiver ................................................40
ARTICLE IX INDEMNIFICATION ...................................................41
9.1 Nature and Survival of Representations and Warranties ............41
9.2 Recovery by Stratos ..............................................41
ii
9.3 Procedures for Recovery ..........................................41
9.4 Defense of Third Party Claims ....................................42
9.5 Manner of Recovery ...............................................43
9.6 Appointment of Shareholders' Representative ......................43
ARTICLE X GENERAL PROVISIONS .................................................44
10.1 Notices ..........................................................44
10.2 Interpretation ...................................................45
10.3 Counterparts .....................................................46
10.4 Severability .....................................................46
10.5 Entire Agreement .................................................46
10.6 Assignment .......................................................46
10.7 Third Party Beneficiaries ........................................46
10.8 Waiver of Jury Trial .............................................47
10.9 Governing Law ....................................................47
EXHIBITS:
Exhibit A Calculation of Earn-Out Consideration
Exhibit B Form of Affiliate Agreement
Exhibit C Form of Opinion of Silicon Valley Law Group
Exhibit D Form of Lock-Up Agreement
Exhibit E Form of Opinion of Lord, Bissell & Brook
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AGREEMENT AND PLAN OF REORGANIZATION
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THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of January 22, 2002, by and among Stratos Lightwave, Inc., a
Delaware corporation ("Stratos"), Tundra Acquisition Corp., a California
corporation and wholly-owned subsidiary of Stratos ("Sub"), and Tsunami Optics,
Inc., a California corporation ("Tsunami").
RECITALS
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WHEREAS, the Boards of Directors of Stratos, Sub and Tsunami deem it
advisable and in the best interests of each corporation and its respective
shareholders that Stratos and Tsunami combine in order to advance the long-term
business interests of Stratos and Tsunami;
WHEREAS, the combination of Stratos and Tsunami shall be effected by the
terms of this Agreement through a transaction (the "Merger") in which Sub will
merge with and into Tsunami, Tsunami will become a wholly-owned subsidiary of
Stratos, and the shareholders of Tsunami will become shareholders of Stratos;
and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I
THE MERGER
1.1 Effective Time.
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Subject to the provisions of this Agreement, an Agreement and Plan of
Merger (the "Agreement of Merger") in such form as is required by the relevant
provisions of the California General Corporation Law ("GCL") shall be duly
prepared, executed and acknowledged by Sub and by Tsunami as the Surviving
Corporation (as defined in Section 1.3(a)) and delivered to the California
Secretary of State for filing, along with certificates of officers (the
"Officers' Certificates") of the Constituent Corporations (as defined in Section
1.3(a)), as soon as practicable on or after the Closing Date (as defined in
Section 1.2). The Merger shall become effective upon the filing of the Agreement
of Merger and the Officers' Certificates with the California Secretary of State
(the "Effective Time").
1.2 Closing.
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The closing of the Merger (the "Closing") will take place at 10:00 a.m.,
Central time, on a date to be specified by Stratos and Tsunami (the "Closing
Date"), which shall be no later than the second business day after satisfaction
of the latest to occur of the conditions set forth in Sections 7.1, 7.2(b)
(other than the delivery of the officers' certificate referred to therein) and
7.3(b) (other than the delivery of the officers' certificate referred to
therein), provided that the other closing conditions set forth in Article VII
have been met or waived as provided in Article VII at or prior to the Closing,
at the offices of Lord, Bissell & Brook, 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx 00000, unless another date or place is agreed to in writing by Stratos
and Tsunami.
1.3 Effects of the Merger.
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(a) At the Effective Time: (i) Sub shall be merged with and into Tsunami
(the "Surviving Corporation") and the separate existence of Sub shall cease,
(ii) the Amended and Restated Certificate of Incorporation of Tsunami shall be
amended and restated to read the same as the Articles of Incorporation of Sub,
as in effect immediately prior to the Effective Time, except that Article I of
the amended and restated Articles of Incorporation of Tsunami, instead of
reading the same as the Articles of Incorporation of Sub, shall read as follows:
"First: The name of the corporation is Tsunami Optics, Inc" and, as so amended
and restated, such Articles of Incorporation shall be the amended and restated
Articles of Incorporation of the Surviving Corporation, and (iii) the Bylaws of
Sub as in effect immediately prior to the Effective Time shall be the Bylaws of
the Surviving Corporation. (Sub and Tsunami are sometimes referred to herein as
the "Constituent Corporations.")
(b) At and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises of a public as well as
of a private nature, and be subject to all the restrictions, disabilities and
duties of each of the Constituent Corporations; and all and singular rights,
privileges, powers and franchises of each of the Constituent Corporations, and
all property, real, personal and mixed, and all debts due to either of the
Constituent Corporations on whatever account, as well as for stock subscriptions
and all other things in action or belonging to each of the Constituent
Corporations, shall be vested in the Surviving Corporation, and all property,
rights, privileges, powers and franchises, and all and every other interest
shall be thereafter as effectually the property of the Surviving Corporation as
they were of the Constituent Corporations, and the title to any real estate
vested by deed or otherwise, in either of the Constituent Corporations, shall
not revert or be in any way impaired but all rights of creditors and all liens
upon any property of either of the Constituent Corporations shall be preserved
unimpaired, and all debts, liabilities and duties of the Constituent
Corporations shall thereafter attach to the Surviving Corporation, and may be
enforced against it to the same extent as if such debts and liabilities had been
incurred by it.
1.4 Directors and Officers.
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The directors and officers of Sub immediately prior to the Effective Time
shall be the initial directors and officers of the Surviving Corporation, each
of whom will hold office in accordance with the amended and restated Articles of
Incorporation and Bylaws of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Certain Definitions.
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For purposes of this Agreement, the following terms shall have the meanings
set forth below:
(a) "Aggregate Liquidation Preference" shall mean the sum of (i) the Series
A Liquidation Preference, and (ii) the Series B Liquidation Preference.
(b) "Bridge Loans" shall mean those certain Convertible Promissory Notes
issued by Tsunami to various holders on August 13, 2001 in the aggregate
principal amount of $3,000,000.
(c) "Earn-Out Consideration" shall mean the amount, as determined on
Exhibit A hereto, not to exceed the lesser of: (i) $18,000,000, and (ii) the
dollar value obtained by multiplying (A) 12,750,000, less the number of shares
of Stratos Common Stock issued by Stratos to the holders of Tsunami Capital
Stock pursuant to Section 2.2(c), by (B) the Stratos Earn-Out Share Price.
(d) "Earn-Out Payment Date" shall mean the later of (i) March 15, 2003, or
(ii) five (5) days after the final determination of the amount of the Earn-Out
Consideration as provided in Exhibit A hereto.
(e) "Earn-Out Shares" shall have the meaning set forth in Section 2.4(a)
(f) "Initial Stock Consideration" shall mean $20,000,000, less the Excess
Tsunami Transactional Expenses, as determined pursuant to Section 6.15.
(g) "Per Share Earn-Out Distribution" shall mean (i) the Earn-Out
Consideration less the amount of Stratos Losses, if any, which the Stratos Group
is entitled to recover in accordance with Article IX, divided by (ii) the Total
Tsunami Common Share Equivalents.
(h) "Per Share Residual Distribution" shall mean (i) the Initial Stock
Consideration less the Aggregate Liquidation Preference, divided by (ii) the
Total Tsunami Common Share Equivalents.
(i) "Series A Liquidation Preference" shall mean $1.00 multiplied by the
Total Series A Preferred Shares.
(j) "Series B Liquidation Preference" shall mean $3.00 multiplied by the
Total Series B Preferred Shares.
(k) "Stratos Common Stock" shall mean the Common Stock, $.01 par value, of
Stratos.
(l) "Stratos Earn-Out Share Price" shall mean the average closing trading
price per share of Stratos Common Stock on the Nasdaq National Market (the
"NNM") for the twenty (20) trading days preceding the Earn-Out Payment Date.
(m) "Stratos Share Price" shall mean $6.29.
(n) "Substitute Options" shall mean options to purchase Stratos Common
Stock issued in substitution of Tsunami Options pursuant to Section 6.12.
(o) "Total Series A Preferred Shares" shall mean the number of shares of
Tsunami Series A Preferred Stock outstanding immediately prior to the Effective
Date (including the shares of Tsunami Series A Preferred Stock issuable upon the
exercise of all outstanding Tsunami Warrants and any other rights to acquire
Tsunami Series A Preferred Stock).
(p) "Total Series B Preferred Shares" shall mean the number of shares of
Tsunami Series B Preferred Stock outstanding immediately prior to the Effective
Date (including the shares of Tsunami Series B Preferred Stock issuable upon the
conversion of the Bridge Loans, the exercise of all outstanding Tsunami Warrants
and any other rights to acquire Tsunami Series B Preferred Stock).
(q) "Total Tsunami Common Share Equivalents" shall mean the number of
shares of Tsunami Common Stock outstanding immediately prior to the Effective
Time, on a fully-diluted, as converted basis, assuming that all outstanding
shares of Tsunami Preferred Stock, all Tsunami Warrants, and any other rights to
acquire Tsunami Capital Stock outstanding immediately prior to the Effective
Time (other than Tsunami Options) are converted or exercised.
(r) "Tsunami Capital Stock" shall mean, collectively, the Tsunami Common
Stock and the Tsunami Preferred Stock.
(s) "Tsunami Common Stock" shall mean the Common Stock, no par value, of
Tsunami.
(t) "Tsunami Options" has the meaning set forth in Section 2.2(d).
(u) "Tsunami Preferred Stock" shall mean, collectively, the Tsunami Series
A Preferred Stock and the Tsunami Series B Preferred Stock.
(v) "Tsunami Series A Preferred Stock" shall mean the Series A Preferred
Stock, no par value, of Tsunami.
(w) "Tsunami Series B Preferred Stock" shall mean the Series B Preferred
Stock, no par value, of Tsunami.
(x) "Tsunami Warrants" shall mean all outstanding warrants to purchase
Tsunami Capital Stock.
2.2 Conversion of Capital Stock.
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As of the Effective Time, by virtue of the Merger and without any action on
the part of the holder of any shares of capital stock of Tsunami or capital
stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of the capital
stock of Sub shall be converted into and become one fully paid and nonassessable
share of Common Stock, no par value, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Stratos-Owned Stock. Any shares of
Tsunami Capital Stock that are owned by Tsunami as treasury stock and any shares
that are owned by Stratos, Sub or any other wholly-owned Subsidiary of Stratos
shall be cancelled and retired and shall cease to exist and no stock of Stratos
or other consideration shall be delivered in exchange therefor. All shares of
Stratos Common Stock owned by Tsunami shall remain unaffected by the Merger.
(c) Exchange Ratios for Tsunami Capital Stock. Subject to Sections 2.3 and
2.5, and other than shares, if any, to be cancelled in accordance with Section
2.2(b), each issued and outstanding share of Tsunami Capital Stock shall be
converted into the right to receive that number of validly issued, fully-paid
and nonassessable shares of Stratos Common Stock determined as follows:
(i) each issued and outstanding share of Tsunami Series A Preferred
Stock shall be converted into the right to receive the number of shares of
Stratos Common Stock equal to: (A) $1.00 plus two hundred percent (200%) of
the Per Share Residual Distribution, divided by (B) the Stratos Share Price
(the "Class A Exchange Ratio").
(ii) each issued and outstanding share of Tsunami Series B Preferred
Stock shall be converted into the right to receive the number of shares of
Stratos Common Stock equal to: (A) $3.00 plus the Per Share Residual
Distribution, divided by (B) the Stratos Share Price (the "Class B Exchange
Ratio").
(iii) each issued and outstanding share of Tsunami Common Stock shall
be converted into the right to receive the number of shares of Stratos
Common Stock equal to: (A) the Per Share Residual Distribution, divided by
(B) the Stratos Share Price (the "Common Stock Exchange Ratio").
The Series A Exchange Ratio, Series B Exchange Ratio, and Common Stock
Exchange Ratio are collectively referred to herein as the "Exchange Ratios." The
Exchange Ratios shall be adjusted for any stock split, stock dividend or similar
transaction effected between the date hereof and the Effective Time.
(d) Tsunami Stock Options. At the Effective Time, all then outstanding
options to purchase Tsunami Common Stock (the "Tsunami Options") issued under
Tsunami's 2000 Stock Option Plan (the "Tsunami Option Plan") not exercised as of
the Effective Time will be assumed by Stratos and converted into Substitute
Options in accordance with Section 6.11.
2.3 Exchange of Certificates.
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The procedures for exchanging outstanding shares of Tsunami Capital Stock
for Stratos Common Stock pursuant to the Merger are as follows:
(a) Exchange Agent. At the Effective Time, Stratos shall cause to be
deposited with an exchange agent designated by Stratos (the "Exchange Agent"),
for the benefit of the holders of shares of Tsunami Capital Stock, for exchange
in accordance with this Section 2.3, through the Exchange Agent, certificates
representing the Stratos Common Stock issuable and payable to the holders of
Tsunami Capital Stock pursuant to Section 2.2 (such shares of Stratos Common
Stock deposited with the Exchange Agent, together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund"), in exchange for outstanding shares of Tsunami Capital Stock.
(b) Exchange Procedures. At the Closing or within ten (10) days thereafter,
the Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Tsunami Capital Stock (each a "Certificate," and
collectively, the "Certificates") whose shares were converted pursuant to
Section 2.2 into the right to receive shares of Stratos Common Stock: (i) a
letter of transmittal, which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Stratos and Tsunami may reasonably specify, and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for
certificates representing shares of Stratos Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Stratos, together with a duly executed letter of
transmittal, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing the number of whole shares of
Stratos Common Stock which such holder has the right to receive pursuant to the
provisions of Section 2.2(c) and cash in lieu of fractional shares in accordance
with Section 2.3(e), and the Certificate so surrendered shall immediately be
canceled. In the event of a transfer of ownership of Tsunami Capital Stock which
is not registered in the transfer records of Tsunami, a certificate representing
the shares of Stratos Common Stock to which the holder is entitled may be issued
to a transferee if the Certificate representing such Tsunami Capital Stock is
presented to the Exchange Agent accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.3, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the certificates
representing shares of Stratos Common Stock and cash in lieu of any fractional
shares of Stratos Common Stock as contemplated by this Section 2.3.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the Effective Time with respect to Stratos
Common Stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the shares of Stratos
Common Stock represented thereby and no cash payment in lieu of fractional
shares payable to any such holder pursuant to subsection (e) below shall be paid
until the holder of record of such Certificate shall surrender such Certificate.
Subject to the effect of applicable laws, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of Stratos Common Stock issued in exchange therefor,
without interest, (i) the amount of any cash payable in lieu of a fractional
share of Stratos Common Stock to which such holder is entitled pursuant to
subsection (e) below and the amount of dividends or other distributions with a
record date after the Effective Time previously paid with respect to such whole
shares of Stratos Common Stock, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to surrender
payable with respect to such whole shares of Stratos Common Stock.
(d) No Further Ownership Rights in Tsunami Capital Stock. All shares of
Stratos Common Stock issued and paid upon the surrender for exchange of shares
of Tsunami Capital Stock in accordance with the terms hereof (and any cash paid
pursuant to subsection (e) of this Section 2.3) shall be deemed to have been
issued and paid in full satisfaction of all rights pertaining to such shares of
Tsunami Capital Stock, and there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the shares of
Tsunami Capital Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Section 2.3.
(e) No Fractional Shares. No certificate or scrip representing fractional
shares of Stratos Common Stock shall be issued upon the surrender for exchange
of Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a shareholder of Stratos. Notwithstanding
any other provision of this Agreement, each holder of shares of Tsunami Capital
Stock exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Stratos Common Stock (after taking into account
all Certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of
Stratos Common Stock multiplied by the Stratos Share Price or the Stratos
Earn-Out Share Price, as applicable.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the shareholders of Tsunami after one year after the
Effective Time shall be delivered to Stratos, upon demand, and any shareholders
of Tsunami who have not previously complied with this Section 2.3 shall
thereafter look only to Stratos for payment of their claim for Stratos Common
Stock, any cash in lieu of fractional shares of Stratos Common Stock, and any
dividends or distributions with respect to Stratos Common Stock.
(g) No Liability. Neither Stratos nor Tsunami shall be liable to any holder
of shares of Tsunami Capital Stock or Stratos Common Stock, as the case may be,
for such shares (or dividends or distributions with respect thereto) delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
(h) Lost Certificates. In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed, Stratos shall issue
in exchange for such lost, stolen or destroyed Certificate the shares of Stratos
Common Stock issuable in exchange therefor pursuant to the provisions of this
Article II, together with cash, if any, in lieu of fractional shares in
accordance with Section 2.3(e) hereof. The Board of Directors of Stratos may in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificate to provide to Stratos an
indemnity agreement or bond against any claim that may be made against Stratos
with respect to the Certificate alleged to have been lost, stolen or destroyed.
2.4 Earn-Out Shares.
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(a) Subject to Section 2.5, and other than shares, if any, to be
cancelled in accordance with Section 2.2(b), each issued and outstanding share
of Tsunami Common Stock and Tsunami Preferred Stock shall have the right to
receive, as additional consideration in the Merger, that
number of validly issued, fully-paid and nonassessable shares of Stratos Common
Stock determined as follows:
(i) each issued and outstanding share of Tsunami Series A Preferred
Stock shall have the right to the number of shares of Stratos Common Stock
equal to: (A) two hundred percent (200%) of the Per Share Earn-Out
Distribution, divided by (B) the Stratos Earn-Out Share Price.
(ii) each issued and outstanding share of Tsunami Series B Preferred
Stock shall have the right to receive the number of shares of Stratos
Common Stock equal to: (A) the Per Share Earn-Out Distribution, divided by
(B) the Stratos Earn-Out Share Price.
(iii) each issued and outstanding share of Tsunami Common Stock shall
have the right to receive the number of shares of Stratos Common Stock
equal to: (A) the Per Share Earn-Out Distribution, divided by (B) the
Stratos Earn-Out Share Price.
The aggregate number of shares of Stratos Common Stock, if any, to be
issued by Stratos pursuant to subclauses (i), (ii) and (iii) above are referred
to as the Earn-Out Shares.
(b) The Earn-Out Shares (and cash in lieu of fractional shares in
accordance with Section 2.3(e)) shall be distributed by Stratos to the holders
of Tsunami Common Stock and Tsunami Preferred Stock as soon as practicable after
the Earn-Out Payment Date.
(c) The contingent right of the holders of Tsunami Capital Stock
immediately prior to the Effective Time to receive Earn-Out Shares pursuant to
in this Section 2.4 will be neither negotiable nor assignable, except by
operation of law.
2.5 Dissenters' Rights.
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In the event the Merger becomes effective without the approval of the
holders of 100% of the outstanding shares of Tsunami Capital Stock, any shares
of Tsunami Capital Stock held by shareholders who properly exercise and perfect
the dissenters' rights set forth in Chapter 13 of the GCL ("Dissenting Shares")
shall not be converted pursuant to Sections 2.2 and 2.4, but shall instead 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 provisions of the
GCL. Stratos shall have the right to control all negotiations and proceedings
with respect to the determination of the fair value of the Tsunami Capital
Stock. Tsunami agrees that, without Stratos' prior written consent or as
required under the GCL, it will not voluntarily make any payment with respect
to, or determine or offer to determine, the fair value of the Tsunami Capital
Stock. Each holder of Dissenting Shares (a "Dissenting Shareholder") who,
pursuant to the provisions of the GCL, becomes entitled to payment of the fair
value of Tsunami Capital Stock shall receive payment therefor (but only after
the fair value therefor shall have been agreed upon or finally determined
pursuant to the provisions of the GCL). In the event that any holder of Tsunami
Capital Stock fails to make an effective demand for payment or otherwise loses
his, her or its status as a Dissenting Shareholder, Stratos shall, as of the
later of the Effective Time or the occurrence of such event, issue and deliver,
upon surrender by such Dissenting Shareholder of his, her or its Certificate(s),
the shares of Stratos Common Stock and cash, including any cash payment in lieu
of fractional shares, in each case without interest thereon, to which such
Dissenting Shareholder would have been entitled under Section 2.2.
2.6 Certificate Legends.
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The shares of Stratos Common Stock to be issued pursuant to this Agreement
shall not have been registered and shall be characterized as "restricted
securities" under the Securities Act of 1933, as amended (the "Securities Act"),
and under such laws such shares may be resold without registration under the
Securities Act only in certain limited circumstances. Each certificate
evidencing shares of Stratos Common Stock to be issued pursuant to this
Agreement shall bear such legends as Stratos deems necessary or appropriate to
comply with the Securities Act and any other applicable federal and state laws.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TSUNAMI
Except as disclosed in the disclosure schedule provided to Stratos on or
before the date of this Agreement (the "Tsunami Disclosure Schedule"), Tsunami
represents and warrants to Stratos as follows:
3.1 Organization, Power and Qualification.
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Tsunami is a corporation duly organized, validly existing and in good
standing under the laws of the State of California, has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as currently being conducted and as currently proposed to be conducted.
Tsunami is duly qualified to transact business and is in good standing in each
jurisdiction in which the nature of its operations requires such qualification,
except where the failure to so qualify has not and will not have a Material
Adverse Effect (as defined in Section 10.2(a)) on Tsunami. Tsunami has delivered
true and correct copies of the amended and restated articles of incorporation
and Bylaws of Tsunami, each as amended to date, to Stratos. Tsunami is not in
violation of any of the provisions of its Amended and Restated Articles of
Incorporation, Bylaws or other charter documents.
3.2 Tsunami Capital Structure.
-------------------------
(a) The authorized capital stock of Tsunami consists of 50,000,000 shares
of Tsunami Common Stock and 3,400,000 shares of Tsunami Preferred Stock,
consisting of 3,400,000 shares of Series A Preferred Stock. As of the date
hereof, 9,289,367 shares of Tsunami Common Stock, and 3,103,000 shares of
Tsunami Series A Preferred Stock are issued and outstanding and held of record
by those persons set forth in the Tsunami Disclosure Schedule. All such
outstanding shares of Tsunami Capital Stock have been duly authorized and
validly issued, are fully paid and nonassessable, have been issued in
compliance, in all material respects, with all applicable federal and state
securities laws, and are not subject to any preemptive rights or rights of first
refusal created by statute, the charter documents of Tsunami or any agreement to
which Tsunami is a party or by which it is bound. As of the date hereof,
4,280,633 shares of Tsunami Common Stock are reserved for issuance under the
Tsunami Option Plan, of which an aggregate of 243,175 shares are subject to
outstanding options held by those persons set forth in the Tsunami Disclosure
Schedule. As of the date hereof, 250,000 shares of Tsunami Series A Preferred
Stock
are reserved for issuance upon the exercise of Tsunami Warrants. Resolutions to
amend and restate Tsunami's articles of incorporation to increase the total
number of authorized shares to 70,000,000, of which 50,000,000 shares will be
common shares and 20,000,000 will be preferred shares, increasing the number of
shares of Series A Preferred Stock to 7,000,000 and authorizing 13,000,000
shares of Series B Preferred Stock with a liquidation value of $3.00 per share
have been duly approved and authorized by all necessary corporate action on the
part of Tsunami as required by the GCL and will be filed with the California
Secretary of State and become effective prior to the Closing.
(b) Except as set forth in this Section 3.2 or the Tsunami Disclosure
Schedule, there are (i) no equity securities of any class of Tsunami, or any
securities exchangeable into or exercisable for such equity securities, issued,
reserved for issuance, or outstanding and (ii) no outstanding subscriptions,
options, warrants, puts, calls, rights, or other commitments or agreements of
any character to which Tsunami is a party or by which it is bound obligating
Tsunami to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any equity securities of Tsunami or
obligating Tsunami to grant, extend, accelerate the vesting of, change the
exercise price of, or otherwise amend or enter into any such option, warrant,
call, right, commitment or agreement. There are no contracts, commitments or
agreements relating to voting, purchase or sale of Tsunami's capital stock (i)
between or among Tsunami and any of its shareholders or (ii) to Tsunami's
knowledge, between or among any of Tsunami's shareholders.
3.3 Subsidiaries.
------------
Tsunami does not, directly or indirectly, own any equity or similar
interest in, or any interest convertible or exchangeable or exercisable for any
equity or similar interest in, any corporation, partnership, joint venture or
other business association or entity.
3.4 Authorization.
-------------
Tsunami has all requisite corporate power and authority to make, execute
and deliver this Agreement and all other documents required to be executed and
delivered by Tsunami hereunder, including the Agreement of Merger (collectively,
the "Transaction Documents"), and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the other
Transaction Documents to which Tsunami is or will be a party and the
consummation of the transactions contemplated hereby and thereby have been duly
approved and authorized by all necessary corporate action on the part of
Tsunami, subject only to the approval of the Merger by Tsunami's shareholders as
required by the GCL. This Agreement and the other Transaction Documents to which
Tsunami is a party have been or will be duly executed and delivered by Tsunami
and constitute or will constitute the valid and binding obligations of Tsunami,
enforceable against Tsunami in accordance with their respective terms, except as
such enforceability may be limited by (i) bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to creditors' rights generally, and
(ii) general principles of equity.
3.5 No Violation.
------------
The execution and delivery by Tsunami of this Agreement and the other
Transaction Documents to which it is or will be a party do not, and the
consummation of the transactions contemplated hereby and thereby will not, (i)
conflict with, or result in any violation or breach of any provision of, the
Amended and Restated Articles of Incorporation or Bylaws of Tsunami, (ii) result
in any violation or breach of or constitute (with or without notice or lapse of
time, or both) a default under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under, any
note, mortgage, indenture, lease, contract or other agreement or obligation to
which Tsunami is a party or by which Tsunami or any of its properties or assets
may be bound, or (iii) conflict with or violate any permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Tsunami or any of its properties or assets.
3.6 Consents and Approvals.
----------------------
No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") or any
other party is required by or with respect to Tsunami in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the Agreement of Merger and
Officer's Certificates with the California Secretary of State in accordance with
the GCL, (ii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws, and (iii) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not have a
Material Adverse Effect on Tsunami and would not prevent or alter or delay any
of the transactions contemplated by this Agreement.
3.7 Financial Statements.
--------------------
The Tsunami Disclosure Schedules include true and correct copies of the
following financial statements: (i) the audited balance sheet of Tsunami,
together with the related statements of operations, shareholders' equity and
cash flows for the period from January 19, 2000 (inception) to December 31,
2000, and (ii) the unaudited balance sheet of Tsunami, together with the related
statements of operations and cash flows at and for the twelve (12) month period
ended December 31, 2001 (the "Balance Sheet Date") (collectively, the "Tsunami
Financial Statements").
The Tsunami Financial Statements were prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved, except that the unaudited Tsunami Financial Statements do
not contain footnotes. The Tsunami Financial Statements present fairly the
financial position of Tsunami as of the respective dates and the results of its
operations and cash flows for the periods indicated, subject, in the case of
unaudited financial statements, to normal year-end audit adjustments, which
adjustments will not be material to such statements either individually or in
the aggregate. Tsunami maintains, and until the Effective Time will continue to
maintain its current system of accounting established and administered in
accordance with GAAP.
3.8 Absence of Undisclosed Liabilities.
----------------------------------
Tsunami does not have any liabilities, either accrued or contingent
(whether or not required to be reflected in financial statements in accordance
with GAAP), and whether due or to become due, other than (i) liabilities
reflected or provided for on the balance sheet as of the Balance Sheet Date (the
"Tsunami Balance Sheet") contained in the Tsunami Financial Statements, (ii)
liabilities contemplated by this Agreement or described in the Tsunami
Disclosure Schedule, and (iii) normal or recurring liabilities incurred since
the Balance Sheet Date in the ordinary course of business consistent with past
practices.
3.9 Accounts Receivable.
-------------------
The accounts receivable shown on the Tsunami Balance Sheet arose in the
ordinary course of business and have been collected or are collectible in the
book amounts thereof, less an amount not in excess of the allowance for doubtful
accounts and returns provided for in the Tsunami Balance Sheet. The accounts
receivable of Tsunami arising after the Balance Sheet Date and prior to the
Closing Date arose, or will arise, 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 GAAP
and the past practices of Tsunami. None of such accounts receivable is subject
to any known claim of offset or recoupment or counterclaim, and Tsunami has no
knowledge of any specific facts that would be likely to give rise to any such
claim. No amount of such accounts receivable is contingent upon the performance
by Tsunami of any obligation and no agreement for deduction or discount has been
made with respect to any such accounts receivable.
3.10 Inventories.
-----------
The inventories shown on the Tsunami Balance Sheet or thereafter acquired
by Tsunami consist of items of a quantity and quality usable or salable in the
ordinary course of business. Since the Balance Sheet Date, Tsunami has continued
to replenish inventories in a normal and customary manner consistent with past
practices. Tsunami has not received notice that it will experience in the
foreseeable future any difficulty in obtaining, in the desired quantity and
quality and at a reasonable price and upon reasonable terms and conditions, the
supplies or component products required for the manufacture, assembly or
production of its products. The value at which inventories are carried reflect
the inventory valuation policy of Tsunami, which is consistent with its past
practice and in accordance with GAAP. Due provision has been made on the books
of Tsunami, 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.
3.11 Absence of Certain Changes or Events.
------------------------------------
Since October 31, 2001, Tsunami has conducted its business in the ordinary
course and in a manner consistent with past practices and, since such date,
Tsunami has not:
(a) suffered any event or occurrence that has had a Material Adverse
Effect on Tsunami;
(b) suffered any damage, destruction or loss, whether covered by
insurance or not, having a Material Adverse Effect on Tsunami;
(c) granted any increase in the compensation payable or to become
payable by Tsunami 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) issued any shares of its capital stock or any warrants, rights, or
options for, or entered into any commitment relating to such capital stock,
other than shares of Tsunami Common Stock issued upon exercise of options
outstanding under the Tsunami Option Plans as of the date of this
Agreement;
(f) 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;
(g) sold, leased, abandoned or otherwise disposed of any real
property, machinery, equipment or other operating property other than in
the ordinary course of business;
(h) sold, assigned, transferred, licensed or otherwise disposed of any
patent, trademark, trade name, brand name, copyright (or pending
application for any patent, trademark or copyright), invention, work of
authorship, process, know-how, formula or trade secret or interest
thereunder or other material intangible asset;
(i) entered into any commitment or transaction (including, without
limitation, any borrowing or capital expenditure) other than in the
ordinary course of business;
(j) incurred any liability, except in the ordinary course of business
and consistent with past practice;
(k) permitted or allowed any of its property or assets to be subjected
to any mortgage, deed of trust, pledge, lien, security interest or other
encumbrance of any kind, except for liens for current taxes not yet due and
purchase money security interests incurred in the ordinary course of
business;
(l) made any capital expenditure or commitment for additions to
property, plant or equipment individually in excess of $10,000, or, in the
aggregate, in excess of $25,000;
(m) 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 officers, directors or shareholders or any
affiliate of any of the foregoing, other than employee compensation and
benefits and reimbursement of employment related business expenses incurred
in the ordinary course of business;
(n) agreed to take any action described in this Section 3.11 or which
would constitute a breach of any of the representations or warranties of
Tsunami contained in this Agreement; or
(o) taken any other action that would have required the consent of
Stratos pursuant to Section 5.1 of this Agreement (and which has not been
obtained) had such action occurred after the date of this Agreement.
3.12 Taxes.
-----
(a) For purposes of this Agreement, a "Tax" or, collectively, "Taxes,"
means any and all federal, state and local taxes of any country, assessments and
other governmental charges, duties, impositions and liabilities, including taxes
based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts and any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
entity.
(b) Tsunami has prepared and timely filed all returns, estimates,
information statements and reports required to be filed with any taxing
authority ("Returns") relating to any and all Taxes concerning or attributable
to Tsunami or its operations, such Returns are true and correct in all material
respects and have been completed in all material respects in accordance with
applicable law, and Tsunami has disclosed on its Returns all positions taken
therein that could give rise to a substantial understatement penalty within the
meaning of Section 6662 of the Code (or any predecessor provision or comparable
provision of state, local or foreign law).
(c) Tsunami, as of the Closing Date, (i) will have paid all Taxes it is
required to pay prior to the Closing Date and (ii) will have withheld with
respect to its employees all Taxes required to be withheld.
(d) Tsunami has not been delinquent in the payment of any Tax. There is no
Tax deficiency outstanding or assessed or proposed against Tsunami that is not
reflected as a liability on the Tsunami Balance Sheet or set forth on the
Tsunami Disclosure Schedule, nor has Tsunami executed any agreements or waivers
extending any statute of limitations on or extending the period for the
assessment or collection of any Tax.
(e) The amount of Tsunami's liability for unpaid Taxes (whether actual or
contingent) for all periods through the date hereof and the Closing Date does
not and will not, in the aggregate, exceed the amount of the current liability
accruals for Taxes (excluding reserves for deferred Taxes) reflected on the
Tsunami Balance Sheet (other than Taxes which have accrued after the date of
such Tsunami Balance Sheet).
(f) Tsunami is not a party to any tax-sharing agreement or similar
arrangement with any other party, and Tsunami has not assumed or agreed to pay
any Tax obligations of, or with respect to any transaction relating to, any
other person or agreed to indemnify any other person with respect to any Tax.
(g) Tsunami's Returns have never been audited by a government or taxing
authority, nor is any such audit in process or pending, and Tsunami has not been
notified of any request for such an audit or other examination.
(h) Tsunami has never been a member of an affiliated group of corporations
filing a consolidated federal income tax return.
(i) Tsunami has made available to Stratos copies of all Returns filed for
all periods since its inception.
(j) Tsunami has never filed any consent agreement under Section 341(f) of
the Code or agreed to have Section 341(f)(4) apply to any disposition of assets
owned by Tsunami.
(k) Tsunami is not a party to any contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of Tsunami that, individually or collectively, could
give rise to the payment of any amount that would not be deductible pursuant to
Sections 280G, 404 or 162(m) of the Code by Tsunami or Sub as an expense under
applicable law.
(l) Tsunami has not constituted either a "distributing corporation" or a
"controlled corporation" in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code (i) in the two years prior to the date
of this Agreement or (ii) in a distribution which could otherwise constitute
part of a "plan" or "series of related transactions" (within the meaning of
Section 355(e) of the Code) in conjunction with the Merger.
(m) Tsunami has not agreed to make, nor is it required to make, any
adjustment under Section 481 of the Code by reason of any change in accounting
method.
(n) None of Tsunami's assets is treated as "tax-exempt use property,"
within the meaning of Section 168(h) of the Code.
(o) Tsunami is not, nor has it been, a "reporting corporation" subject to
the information reporting and record maintenance requirements of Section 6038A
of the Code and the regulations thereunder.
(p) Tsunami has never been a party to any joint venture, partnership or
other agreement that could be treated as a partnership for Tax purposes.
(q) There are (and immediately following the Effective Time there will be)
no liens, pledges, charges, claims, restrictions on transfer, mortgages,
security interests or other encumbrances of any sort (collectively, "Liens") on
the assets of Tsunami relating to or attributable to Taxes, other than Liens for
Taxes not yet due and payable.
3.13 Tangible Assets and Real Property.
---------------------------------
(a) Tsunami owns or leases all tangible assets and properties which are
necessary to the conduct of its business as currently conducted or which are
reflected on the Tsunami Balance Sheet or acquired since the Balance Sheet Date
(the "Tangible Assets"). The Tangible Assets are
in good operating condition and repair, subject to ordinary wear and tear.
Tsunami has good and marketable title to all of the Tangible Assets that it owns
(except properties, interests in properties and assets sold or otherwise
disposed of since the Tsunami Balance Sheet Date in the ordinary course of
business), free and clear of all Liens, except for Liens for current taxes not
yet due and payable and those described in the Tsunami Disclosure Schedule.
Assuming the due execution and delivery thereof by the other parties thereto,
all leases of Tangible Assets to which Tsunami is a party are in full force and
effect and valid, binding and enforceable in accordance with their respective
terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to creditors'
rights generally, and (ii) general principles of equity. The Tsunami Disclosure
Schedule sets forth a true and correct list of all such leases, and true and
correct copies of all such leases have been provided to Stratos.
(b) Tsunami owns no real property. The Tsunami Disclosure Schedule sets
forth a true and complete list of all real property leased by Tsunami. Assuming
the due execution and delivery thereof by the other parties thereto, all such
real property leases are in full force and effect and valid, binding and
enforceable in accordance with their respective terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to creditors' rights generally, and (ii)
general principles of equity. True and correct copies all such of real property
leases have been provided to Stratos.
3.14 Intellectual Property.
---------------------
(a) Tsunami owns, or is licensed or otherwise possesses legally enforceable
rights to use, all patents, trademarks, trade names, service marks, copyrights
and mask works, and any applications for and registrations of such patents,
trademarks, trade names, service marks, copyrights and mask works and all
processes, formulas, methods, schematics, technology, know-how, computer
software programs or applications and tangible or intangible proprietary
information or material that are necessary to conduct the business of Tsunami as
currently being conducted, or as currently proposed to be conducted (all of
which are referred to as the "Tsunami Intellectual Property Rights"), free and
clear of all Liens. The foregoing representation as it relates to Licensed
Intellectual Property (as defined below) is limited to Tsunami's interest
pursuant to licenses from third parties, each of which is in full force and
effect, is valid, binding and enforceable and grants Tsunami such rights to such
intellectual property as are necessary to Tsunami's business as currently
conducted or currently proposed to be conducted.
(b) The Tsunami Disclosure Schedule contains an accurate and complete list
of (i) all patents, patent applications, trademarks, trade names, service marks
and registered copyrights and applications therefor included in the Tsunami
Intellectual Property Rights, including the jurisdictions in which each such
Tsunami Intellectual Property Right has been issued or registered or in which
any such application for such issuance or registration has been filed, (ii) all
licenses, sublicenses, distribution agreements, options, rights (including
marketing rights), and other agreements to which Tsunami is a party and pursuant
to which any person is authorized to use any Tsunami Intellectual Property
Rights or has the right to manufacture, reproduce, market or exploit any current
product of, or product under development by, Tsunami (a "Tsunami Product") or
any adaptation, translation or derivative work based on any Tsunami Product or
any portion thereof, (iii) all licenses, sublicenses and other agreements to
which
Tsunami is a party and pursuant to which Tsunami is authorized to use any third
party technology, trade secret, know-how, process, patent, trademark or
copyright, including software ("Licensed Intellectual Property"), which is used
in the manufacture of, incorporated in or forms a part of any Tsunami Product
(other than licenses for standard off-the-shelf software used in the conduct of
Tsunami's business), (iv) all joint development agreements to which Tsunami is a
party, and (v) all agreements with Governmental Entities or other third parties
pursuant to which Tsunami has obtained funding for research and development
activities.
(c) The execution and delivery of this Agreement, compliance with its terms
and the consummation of the transactions contemplated hereby do not and will not
conflict with, or result in any violation or breach of, or default (with or
without notice or lapse of time or both) or give rise to any right, license or
Lien relating to any Tsunami Intellectual Property Rights, or right of
termination, cancellation or acceleration of any Tsunami Intellectual Property
Rights, or the loss or encumbrance of any Tsunami Intellectual Property Rights
or material benefit related thereto, or result in or require the creation,
imposition or extension of any Lien upon any Tsunami Intellectual Property
Rights or otherwise impair the right of Tsunami or its customers to use the
Tsunami Intellectual Property Rights in the same manner as such Tsunami
Intellectual Property Rights are currently being used by Tsunami or the
customers of Tsunami.
(d) All patents and registered trademarks, service marks and copyrights
issued to Tsunami which relate to any Tsunami Product are valid and subsisting.
The manufacturing, marketing, licensing or sale of any Tsunami Product does not
infringe any patent, trademark, trade name, service xxxx, copyright, mask work
right, trade secret or other proprietary right of any third party. Tsunami (i)
has not received notice that it has been sued in any suit, action or proceeding
which involves a claim of infringement of any patent, trademark, trade name,
service xxxx, copyright, mask work right, trade secret or other proprietary
right of any third party and (ii) has no knowledge of any claim challenging or
questioning the validity or effectiveness of any license or agreement relating
to any Tsunami Intellectual Property Rights or Licensed Intellectual Property.
There is no outstanding order, writ, injunction, decree, judgment or stipulation
by or with any court, administrative agency or arbitration panel regarding
patent, copyright, trade secret, trademark, trade name, mask work right or other
claims relating to the Tsunami Intellectual Property Rights to which Tsunami is
a party or by which it is bound.
(e) All designs, drawings, specifications, source code, object code,
documentation, flow charts and diagrams incorporated, embodied or reflected in
any Tsunami Product at any stage of its development were written, developed and
created solely and exclusively by (i) Tsunami employees without the assistance
of any third party or (ii) third parties who assigned ownership of their rights
with respect thereto to Tsunami by means of valid and enforceable agreements,
which are listed and described in the Tsunami Disclosure Schedule and copies of
which have been provided to Stratos. Tsunami has at all times used commercially
reasonable efforts to protect its trade secrets. None of the trade secrets of
Tsunami have been published or disclosed by Tsunami or, to the knowledge of
Tsunami, by any other person, to any person except pursuant to licenses or
contracts requiring such other persons to keep such trade secrets confidential.
(f) Tsunami is not, and, to Tsunami's knowledge, no other party to any
licensing, sublicensing, distributorship or other similar arrangements with
Tsunami relating to the Tsunami
Intellectual Property Rights is, in breach of or default under any material
obligations under such arrangements.
(g) To Tsunami's knowledge, no person is infringing on or otherwise
violating any right of Tsunami with respect to any Tsunami Intellectual Property
Rights.
(h) Tsunami has not assigned, sold or otherwise transferred ownership of,
or granted an exclusive license or right to use, any patent, patent application,
trademark, mask work right or service xxxx.
(i) Neither Tsunami nor any of its officers or employees has any patents
issued or patent applications pending for any device, process, method, design or
invention of any kind now used or needed by Tsunami in the furtherance of its
business operations as currently being conducted or as currently proposed to be
conducted by Tsunami, which patents or applications have not been assigned to
Tsunami with such assignment duly recorded in the United States Patent Office or
with the applicable foreign Governmental Entity.
(j) Each person currently or formerly employed by Tsunami (including
consultants and independent contractors, if any) that has or had access to
confidential information of Tsunami has executed and delivered to Tsunami a
confidentiality and non-disclosure agreement in one of the forms previously
provided to Stratos. Neither the execution or delivery of any such agreement by
any such person, nor the carrying on by any such person, as an employee,
consultant or independent contractor, of Tsunami's business as currently
conducted and as currently proposed to be conducted, has 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.
3.15 Bank Accounts.
-------------
The Tsunami Disclosure Schedule sets forth the names and locations of all
banks and other financial institutions at which Tsunami maintains accounts of
any nature, the type of accounts maintained at each such institution and the
names of all persons authorized to draw thereon or make withdrawals therefrom.
3.16 Material Contracts.
------------------
(a) Except as set forth on the Tsunami Disclosure Schedule, Tsunami 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 or contingent payments or expenditures by or to
Tsunami in excess of $10,000, other than purchase orders issued in the
ordinary course of business in amounts not in excess of $25,000;
(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) that restricts Tsunami from carrying on anywhere in the world
its business or any portion thereof as currently conducted;
(iv) 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);
(v) 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;
(vi) for any line of credit, standby financing, revolving credit or
other similar financing arrangement;
(vii) with any distributor, original equipment manufacturer, value
added remarketer or other person for the distribution of any of the Tsunami
Products;
(viii) with any Governmental Entity or involving the provision of
products or services to a Governmental Entity; or
(ix) that is otherwise material to the business of Tsunami as
currently being conducted, or as currently proposed to be conducted.
(b) To Tsunami's knowledge, no party to any such contract, agreement or
instrument intends to cancel, withdraw, modify or amend such contract, agreement
or instrument.
(c) Tsunami is not in default under or in breach or violation of any
material contract, commitment or restriction to which Tsunami is a party or by
which Tsunami or any of its properties or assets is bound or affected. To
Tsunami's knowledge, no other party is in default under or in breach or
violation of any material contract, commitment, or restriction to which Tsunami
is a party or by which Tsunami or any of its properties or assets is bound or
affected.
3.17 Labor Matters.
-------------
Tsunami is not engaged in any unfair labor practice or in violation of any
applicable laws respecting employment, employment practices or terms and
conditions of employment. There is no unfair labor practice complaint against
Tsunami pending or, to Tsunami's knowledge, threatened before any Governmental
Entity. There is no strike, labor dispute, slowdown, or stoppage pending or, to
Tsunami's knowledge, threatened against Tsunami. Tsunami is not now and has
never been subject to any union organizing activities. Tsunami has not
experienced any work stoppage or other labor difficulty. To Tsunami's knowledge,
the consummation of the transactions contemplated by this Agreement will not
have a material adverse effect on its relations with Tsunami employees.
3.18 Trade Regulation.
----------------
Tsunami has not terminated its relationship with or refused to ship Tsunami
Products to any dealer, distributor, third party marketing entity or customer
which had theretofore paid or been obligated to pay Tsunami in excess of $10,000
over any consecutive twelve (12) month period. All of the prices charged by
Tsunami in connection with the marketing or sale of any of
its products or services have been in compliance, in all material respects, with
all applicable laws and regulations. No claims have been asserted or, to
Tsunami's knowledge, threatened against Tsunami with respect to the wrongful
termination of any dealer, distributor or any other marketing entity,
discriminatory pricing, price fixing, unfair competition, false advertising, or
any other material violation of any laws or regulations relating to
anti-competitive practices or unfair trade practices of any kind and to
Tsunami's knowledge, no specific situation, set of facts, or occurrence provides
any basis for any such claim.
3.19 Environmental Matters.
---------------------
(a) As of the date hereof, no amount of any substance that has been
designated by applicable law or regulation to be radioactive, toxic, hazardous
or otherwise a danger to health or the environment (a "Hazardous Material"), is
present, as a result of the actions or omissions of Tsunami or, to Tsunami's
knowledge, as a result of any actions or omissions of any third party or
otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water, that Tsunami has at any time
owned, operated, occupied or leased. To Tsunami's knowledge, no underground
storage tanks are or were present under any property that Tsunami has at any
time owned, operated, occupied or leased. Tsunami has never notified any
Governmental Entity or third party, nor has Tsunami been required under any law,
rule, regulation, order or agreement to notify any Governmental Entity or third
party, of any spill or release of any Hazardous Material.
(b) At all times, Tsunami has transported, stored, used, manufactured,
disposed of, released or exposed its employees or others to Hazardous Materials
(collectively, "Hazardous Materials Activities") in compliance with all laws,
rules, regulations, orders or treaties promulgated by any Governmental Entity.
(c) Tsunami currently holds all environmental approvals, permits, licenses,
clearances and consents (the "Environmental Permits") necessary for the conduct
of its business as such businesses is currently being conducted and is in
material compliance with all such Environmental Permits. Except as set forth in
the Tsunami Disclosure Schedule, no environmental report, closure activity,
investigation or assessment, and no notification to or approval, consent or
authorization from, any Governmental Entity with jurisdiction regarding
environmental matters or Hazardous Materials (including, without limitation,
ISRA) is required to be obtained, either before or after the Effective Time, in
connection with any of the transactions contemplated by this Agreement.
(d) No action, proceeding, writ, injunction or claim is pending or, to the
knowledge of Tsunami, threatened concerning any Environmental Permit or any
Hazardous Materials Activity of Tsunami. Tsunami is not aware of any fact or
circumstance which could reasonably be expected to involve Tsunami in any
environmental litigation or impose upon Tsunami any liability concerning
Hazardous Materials Activities.
3.20 Employee Benefit Plans.
----------------------
(a) Tsunami has set forth in the Tsunami Disclosure Schedule a description
of (i) all employee benefit plans, (ii) all bonus, stock option, stock purchase,
incentive, deferred
compensation, supplemental retirement, severance and other similar employee
benefit plans, and (iii) all unexpired severance agreements, written or
otherwise, which are or have been maintained, contributed to, or required to be
contributed to by Tsunami or any affiliate of Tsunami, within the meaning of
Sections 414(b), (c), (m) or (o) of the Code, for the benefit of, or relating
to, any current or former employee of Tsunami or any such affiliate
(individually, a "Tsunami Employee Plan," and collectively, the "Tsunami
Employee Plans").
(b) With respect to each Tsunami Employee Plan, Tsunami has made available
to Stratos a true and correct copy of (i) such Tsunami Employee Plan and (ii)
each trust agreement, group annuity contract and other plan document relating to
such Tsunami Employee Plan.
(c) Each Tsunami Employee Plan has been established and maintained in
accordance with its terms and all applicable laws, including the Employee
Retirement Income Security Act of 1974, as amended, and the Code. With respect
to the Tsunami Employee Plans, individually and in the aggregate, no event has
occurred, and, to Tsunami's knowledge, there exists no condition or set of
circumstances in connection with which Tsunami could be subject to any liability
which is not properly accrued on the Tsunami Balance Sheet.
(d) With respect to the Tsunami Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly footnoted
in accordance with GAAP, on the financial statements or books of Tsunami.
(e) Tsunami is not a party to any oral or written (i) union or collective
bargaining agreement, (ii) agreement with any officer or other key employee of
Tsunami, the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving Tsunami of
the nature contemplated by this Agreement, (iii) agreement with any officer of
Tsunami providing any term of employment or compensation guarantee or for the
payment of compensation in excess of $50,000 per annum, or (iv) agreement or
plan, including any stock option plan, stock appreciation right plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
3.21 Legal Compliance.
----------------
Tsunami has complied in all material respects, with, is not in violation
of, and has not received any notices of violation with respect to, any statute,
law or regulation (including, without limitation, those relating to
environmental standards, immigration, wages and hours, civil rights, and
occupational health and safety) applicable to the ownership or operation of its
business.
3.22 Employees and Consultants.
-------------------------
The Tsunami Disclosure Schedule contains a list of the names of all
employees and consultants of Tsunami as of the date of this Agreement and their
salaries or wages, other compensation, dates of employment and positions.
3.23 Litigation.
----------
There is no action, suit, proceeding, claim, arbitration or investigation
pending before any agency, court or tribunal or, to Tsunami's knowledge,
threatened against Tsunami or any of its properties or officers or directors (in
their capacities as such). There is no judgment, decree or order against Tsunami
or, to its knowledge, any of its directors or officers (in their capacities as
such) that could prevent, enjoin or alter or delay any of the transactions
contemplated by this Agreement, or that could reasonably be expected to have a
Material Adverse Effect on Tsunami.
3.24 Restrictions on Business Activities.
-----------------------------------
There is no agreement, judgment, injunction, order or decree binding upon
Tsunami which has or could reasonably be expected to have the effect of
prohibiting or impairing any current or future business practice of Tsunami, any
acquisition of property by Tsunami or the conduct of business by Tsunami as
currently being conducted or as currently proposed to be conducted.
3.25 Governmental Authorization.
--------------------------
Tsunami has obtained each governmental consent, license, permit, grant or
other authorization of a Governmental Entity that is required for the operation
of the business of Tsunami (collectively, the "Tsunami Authorizations"), and all
of such Tsunami Authorizations are in full force and effect.
3.26 Insurance.
---------
The Tsunami Disclosure Schedule contains a list of all insurance policies
currently in effect and applicable to Tsunami. There is no claim pending under
any of such policies as to which coverage has been questioned, denied or
disputed by the underwriters of such policies. All premiums due and payable
under all such policies have been paid, and Tsunami is otherwise in compliance
with the terms of such policies. Tsunami has no knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies.
3.27 Interested Party Transactions.
-----------------------------
(a) No director or officer of Tsunami nor, to Tsunami's knowledge, any
shareholder of Tsunami, has any interest in (i) any equipment or other property
or asset, real or personal, tangible or intangible, including, without
limitation, any of the Tsunami Intellectual Property Rights, used in connection
with or pertaining to the business of Tsunami, (ii) any creditor, supplier,
customer, manufacturer, agent, representative, or distributor of any of the
Tsunami Products, (iii) any entity that competes with Tsunami, or with which
Tsunami is affiliated or has a business relationship, or (iv) any agreement,
obligation or commitment, written or oral, to which Tsunami is a party;
provided, however, that no such person shall be deemed to have such an interest
solely by virtue of ownership of less than one percent (1%) of the outstanding
stock or
debt securities of any company whose stock or debt securities are traded on a
recognized stock exchange or quoted on the NNM.
(b) Except as contemplated by the Transaction Documents or otherwise set
forth in the Tsunami Disclosure Schedule, Tsunami is not a party to any (i)
agreement with any officer or other employee of Tsunami the benefits of which
are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving Tsunami in the nature of any of the
transactions contemplated by this Agreement, or (ii) agreement or plan,
including, without limitation, any stock option plan, stock appreciation right
plan or stock purchase plan, 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 this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
3.28 Returns and Warranties.
----------------------
Each product manufactured or sold by Tsunami has been produced in
conformity with all applicable contractual commitments and specifications and
all express and implied warranties (collectively, "Warranties"), and neither
Tsunami has, nor is there any basis for any present or future action, suit,
proceeding, hearing, investigation, charge complaint, claim or demand giving
rise to any liability or other damages in connection with any Warranties. Except
as disclosed in the Tsunami Disclosure Schedule, (i) no Tsunami customer has any
right to return any products for credit or refund pursuant to any formal or
informal policy or practice of Tsunami, and (ii) Tsunami has not given any
express or implied warranties in connection with the sale of any Tsunami
Product.
3.29 Customers and Suppliers.
-----------------------
The Tsunami Disclosure Schedule sets forth a separate list of the twenty
(20) largest customers of Tsunami in terms of sales during the 2001 calendar
year, and the ten (10) largest suppliers to Tsunami during the 2001 calendar
year, showing in each case the approximate total sales and purchases by or from
each such customer or supplier during such period.
Since October 31, 2001, there has not been any material adverse change in
the business relationship of Tsunami with any such named customer or supplier,
or any other customer or supplier that is material to Tsunami's business, and
there are no other customers or suppliers, respectively, who accounted for more
than 5% of sales or purchases, respectively, by Tsunami during the period shown.
To Tsunami's knowledge, no customer listed on the Tsunami Disclosure Schedule
intends to cease purchasing from or dealing with Stratos or Tsunami after the
Closing nor intends to alter in any material respect the amount of such
purchases or the extent of dealings with Tsunami after the Closing.
3.30 Real Property Holding Corporation.
---------------------------------
Tsunami is not a "United States real property holding corporation" within
the meaning of Section 897(c)(2) of the Code.
3.31 Corporate Documents.
-------------------
Tsunami has furnished to Stratos, or its representatives, for its
examination (i) its minute book containing all records required to be set forth
of all proceedings, consents, actions, and meetings of the shareholders, the
Board of Directors and any committees thereof and (ii) all permits, orders, and
consents issued by any Governmental Entity with respect to Tsunami. The
corporate minute books and other corporate records of Tsunami 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. All actions reflected in such books and records were duly and
validly taken in material compliance with the laws of the applicable
jurisdiction. Tsunami has delivered or made available to Stratos or its
representatives true and complete copies of all documents which are referred to
in this Article III or in the Tsunami Disclosure Schedule.
3.32 No Misrepresentation.
--------------------
No representation or warranty by Tsunami in this Agreement, the Tsunami
Disclosure Schedules, or any statement, certificate or schedule furnished or to
be furnished by or on behalf of Tsunami 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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF STRATOS AND SUB
Stratos and Sub, jointly and severally, represent and warrant to Tsunami as
follows:
4.1 Organization, Power and Qualification.
-------------------------------------
Each of Stratos and Sub is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
has all requisite corporate power and authority to own, lease and operate its
property and to carry on its business as now being conducted and as proposed to
be conducted. Each of Stratos and Sub is duly qualified to transact business and
is in good standing as a foreign corporation in each jurisdiction in which the
failure to be so qualified would have a Material Adverse Effect on Stratos.
Stratos is not in violation of any of the provisions of its restated certificate
of incorporation or bylaws as amended to date.
4.2 Authorization.
-------------
Each of Stratos and Sub has all requisite corporate power and authority to
make, execute and deliver this Agreement and the other Transaction Documents to
which it is or will be a party and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the other
Transaction Documents to which Stratos or Sub is or will be a party and the
consummation of the transactions contemplated hereby and thereby have been duly
approved and authorized by all necessary corporate action on the part of Stratos
and Sub, respectively. This Agreement and the other Transaction Documents to
which Stratos and/or Sub are a party have been or will be duly executed and
delivered by Stratos and/or Sub, as applicable, and constitute or will
constitute the valid and binding obligations of Stratos and/or Sub, enforceable
against Stratos and/or Sub, as the case by be, in accordance with their
respective terms, except as such enforceability may be limited by (i) bankruptcy
laws and other similar laws affecting creditors' rights generally and (ii)
general principles of equity.
4.3 No Violation.
------------
The execution and delivery by each of Stratos and Sub of this Agreement and
the other Transaction Documents to which it is or will be a party do not, and
the consummation of the transactions contemplated hereby and thereby will not,
(i) conflict with, or result in any violation or breach of any provision of the
restated certificate of incorporation or bylaws of Stratos or the articles of
incorporation or bylaws of Sub, (ii) result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default under,
or give rise to a right of termination, cancellation or acceleration of any
material obligation or loss of any benefit under, any note, mortgage, indenture,
lease, contract or other agreement, instrument or obligation to which Stratos or
Sub is a party or by which it or any of its properties or assets may be bound,
or (iii) conflict with or violate any permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to either Stratos or Sub or any of its properties or assets.
4.4 Consents and Approvals.
----------------------
No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity or other party is required
by or with respect to Stratos or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the Agreement of Merger and
Officer's Certificates with the California Secretary of State in accordance with
the GCL, (ii) if required, the filing of a report on Form 8-K with the
Securities and Exchange Commission (the "SEC"), (iii) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal and state securities laws, and (iv) such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not prevent or materially alter or delay any of the
transactions contemplated by this Agreement or be reasonably likely to have a
Material Adverse Effect on Stratos.
4.5 SEC Filings; Financial Statements.
---------------------------------
(a) Stratos has timely filed and made available to Tsunami all forms,
reports and documents required to be filed by Stratos with the SEC since April
30, 2001, other than registration statements on Form S-8 (collectively, the
"Stratos SEC Reports"). Each of the Stratos SEC Reports: (i) at the time it was
filed, complied in all material respects with the applicable requirements of the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as the case may be, and (ii) did not at the time it was filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated in such Stratos SEC
Report or necessary in order to make the statements in such Stratos SEC Report,
in the light of the circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each case,
any related notes) contained in the Stratos SEC Reports, including any Stratos
SEC Reports filed after the date of this Agreement until the Closing, complied
or will comply as to form in all material respects with the applicable published
rules and regulations of the SEC with respect thereto, was or will be prepared
in accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited statements, as permitted by Form 10-Q promulgated
by the SEC) and presented fairly or will present fairly, in all material
respects, the consolidated financial position of Stratos and its Subsidiaries as
of the respective dates, and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments.
4.6 Stratos Capital Structure.
-------------------------
(a) The authorized capital stock of Stratos consists of 200,000,000 shares
of Stratos Common Stock and 5,000,000 shares of preferred stock, $0.01 par value
(the "Stratos Preferred Stock"). As of October 31, 2001, 64,092,307 shares of
Stratos Common Stock, and no shares of Stratos Preferred Stock were issued and
outstanding. All such outstanding shares of Stratos Common Stock have been duly
authorized and validly issued, and are fully paid and nonassessable, and have
been issued in compliance, in all material respects, with all applicable federal
and state securities laws (other than the securities class action lawsuits
described in the Stratos SEC Reports as to which no representation is given).
(b) The shares of Stratos Common Stock to be issued pursuant to the Merger,
when issued in accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable.
4.7 No Material Adverse Change.
--------------------------
Since the date of the last Stratos SEC Report, their has not been any
Material Adverse Effect on Stratos.
4.8 S-8 Registration Statement.
--------------------------
A registration statement on Form S-8 under the Securities Act has been
filed by Stratos with the SEC registering the issuance of Stratos Common Stock
pursuant to the Stratos 2000 Stock Option Plan and will cover shares of Stratos
Common Stock issued upon the exercise of Substitute Options issued pursuant to
Section 6.11 hereof.
4.9 Securities Law Representations.
------------------------------
Stratos has a preexisting business relationship with Tsunami. Stratos is an
"accredited investor" as such term is defined under Regulation D of the
Securities Act. Stratos is acquiring the Tsunami Capital Stock for its own
account and not with a view to its distribution within the meaning of Section
2(11) of the Securities Act.
4.10 No Misrepresentation.
--------------------
No representation or warranty by Stratos or Sub in this Agreement, or any
statement, certificate or schedule furnished or to be furnished by or on behalf
of Stratos 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.
ARTICLE V
CONDUCT OF BUSINESS
5.1 Covenants of Tsunami.
--------------------
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, Tsunami
agrees (except to the extent that Stratos shall otherwise consent in writing),
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, to pay or perform its other obligations when due (subject to
good faith disputes with respect to such obligations), 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. Tsunami shall promptly notify Stratos of any event or
occurrence not in the ordinary course of business of Tsunami where such event or
occurrence would result in a breach of any covenant of Tsunami set forth in this
Agreement or cause any representation or warranty of Tsunami 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, or set forth on
the Tsunami Disclosure Schedule, Tsunami shall not, without the prior written
consent of Stratos:
(a) Grant or accelerate, amend or change the period of vesting or
exercisability of options, stock appreciation rights, stock purchase rights or
restricted stock granted under any employee stock plan of Tsunami or authorize
cash payments in exchange for, or in settlement of, any options or other rights
granted under any of such plans except as required by the terms of such plans or
any related agreements in effect as of the date of this Agreement;
(b) Transfer or license to any person or entity or otherwise extend, amend
or modify any rights to the Tsunami Intellectual Property Rights;
(c) 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;
(d) 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, other than the issuance
of shares of Series A Preferred Stock or shares of Series B Preferred Stock upon
the exercise of the Tsunami Warrants or conversion of the Bridge Loans as
contemplated by Section 6.17 hereof;
(e) Acquire or agree to acquire by merging or consolidating with, or by
purchasing an equity interest in or a portion of the assets of, or by any other
manner, any business or any corporation, partnership or other business
organization or division, or otherwise acquire or agree to acquire any assets;
(f) Sell, lease, license or otherwise dispose of any of its properties or
assets which are material, individually or in the aggregate, to the business of
Tsunami, except for transactions entered into in the ordinary course of
business;
(g) 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
additional severance or termination pay to, or enter into any employment or
severance agreements with, any officers, (iii) grant any severance or
termination pay to, or enter into any employment or severance agreement, with
any non-officer employee, except in accordance with past practices, (iv) enter
into any collective bargaining agreement, or (v) establish, adopt, enter into or
amend in any material respect any bonus, profit sharing, thrift, compensation,
stock option, restricted stock, stock appreciation right, pension, retirement,
deferred compensation, employment, termination, severance or other plan, trust,
fund, policy or arrangement for the benefit of any directors, officers or
employees;
(h) 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;
(i) 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 consistent with
past practice;
(j) Amend or propose to amend its Amended and Restated Articles of
Incorporation or Bylaws, except as contemplated by this Agreement;
(k) Incur or commit to incur any individual capital expenditure in excess
of $10,000 or aggregate capital expenditures in excess of $25,000, in addition
to the existing commitments set forth in the Tsunami Disclosure Schedule;
(l) Enter into or amend any agreements or amendments to existing agreements
pursuant to which any third party is granted exclusive marketing or distribution
rights with respect to any Tsunami Product;
(m) Amend or terminate any contract, agreement or license to which it is a
party, except in the ordinary course of business;
(n) Waive or release any material right or claim, except in the ordinary
course of business;
(o) Make, change or revoke any other material election with respect to
Taxes or enter into or amend any material agreement or settlement with any
taxing authority;
(p) Initiate any litigation or arbitration proceeding; or
(q) Agree, in writing or otherwise, to take any of the actions described in
paragraphs (a) through (p) above, or any action which is reasonably likely to
make any of Tsunami's 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 Effective Time.
5.2 Cooperation.
-----------
Subject to compliance with applicable law, from the date hereof until the
Effective Time, each of Stratos and Tsunami shall confer on a regular and
frequent basis with one or more representatives of the other party to report
operational matters of materiality and the general status of ongoing operations
and shall promptly provide the other party or its counsel with copies of all
filings made by such party with any Governmental Entity in connection with this
Agreement, the Merger and the transactions contemplated hereby.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 No Solicitation.
---------------
(a) During the period from the date of this Agreement until the earlier of
the termination of this Agreement or the Effective Time, Tsunami shall not,
directly or indirectly, through any officer, director, employee, representative
or agent, (i) take any action to solicit, initiate, encourage or support any
inquiries or proposals that constitute, or could reasonably be expected to lead
to, a proposal or offer for a merger, consolidation, business combination, sale
of assets, sale of shares of capital stock (including without limitation by way
of a tender offer) or similar transactions involving Tsunami, other than the
transactions contemplated or expressly permitted by this Agreement (any of the
foregoing inquiries or proposals being referred to in this Agreement as a
"Tsunami Acquisition Proposal"), (ii) engage in negotiations or discussions
concerning, or provide any non-public information to any person or entity
relating to, any Tsunami Acquisition Proposal, or (iii) agree to, approve or
recommend any Tsunami Acquisition Proposal.
(b) Tsunami shall notify Stratos no later than twenty-four (24) hours after
receipt by Tsunami (or its advisors) of any Tsunami Acquisition Proposal or any
request for nonpublic information in connection with a Tsunami Acquisition
Proposal or for access to the properties, books or records of Tsunami by any
person or entity that informs Tsunami that it is considering making, or has
made, a Tsunami Acquisition Proposal. Such notice shall be made orally and in
writing and shall indicate in reasonable detail the identity of the offeror and
the terms and conditions of such proposal, inquiry or contact.
6.2 Consents.
--------
Each of Stratos and Tsunami shall use all reasonable efforts to obtain all
necessary consents, waivers and approvals under any of Stratos' or Tsunami's
material agreements, contracts, licenses or leases as may be necessary or
advisable to consummate the Merger and the other transactions contemplated by
this Agreement.
6.3 Access to Information.
---------------------
Upon reasonable notice, Tsunami shall afford to the officers, employees,
accountants, counsel and other representatives of Stratos, reasonable access,
during normal business hours during the period prior to the Effective Time, to
all its properties, books, contracts, commitments and records and, during such
period, Tsunami shall furnish promptly to Stratos or its representatives all
other information concerning its business, properties and personnel as such
other party may reasonably request. Unless otherwise required by law, the
parties will treat any such information which is nonpublic in confidence in
accordance with the confidentiality letter dated July 19, 2001(the
"Confidentiality Agreement") between Stratos and Tsunami, which Confidentiality
Agreement shall continue in full force and effect in accordance with its terms.
No information or knowledge obtained in any investigation pursuant to this
Section 6.3 shall affect or be deemed to modify any representation or warranty
contained in this Agreement or the conditions to the obligations of the parties
to consummate the Merger.
6.4 Notification of Certain Matters.
-------------------------------
Tsunami shall give prompt notice to Stratos, and Stratos shall give prompt
notice to Tsunami, of the occurrence (or non-occurrence) of any event of which
Tsunami or Stratos, respectively, has knowledge, the occurrence (or
non-occurrence) of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
and of the occurrence of any material failure of either party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder, provided, however, that (i) delivery of any notice pursuant to
this Section 6.4 shall not limit or otherwise affect the remedies available to
either party hereunder and (ii) shall not constitute an admission by the party
delivering such notice that any such representation or warranty has been
breached. No disclosure by Tsunami pursuant to this Section 6.4, however, shall
be deemed to amend or supplement the Tsunami Disclosure Schedule or prevent or
cure any misrepresentations, breach of warranty of breach of contract.
6.5 Legal Conditions to Merger.
--------------------------
Each of Stratos and Tsunami will take all reasonable actions necessary to
comply promptly with all legal requirements which may be imposed on itself with
respect to the Merger (which actions shall include, without limitation,
furnishing all information in connection with approvals of or filings with any
Governmental Entity) and will promptly cooperate with and furnish information to
each other in connection with any such requirements imposed upon either of them
or any of their Subsidiaries in connection with the Merger. Each of Stratos and
Tsunami will take all reasonable actions necessary to obtain (and will cooperate
with each other in obtaining) any consent, authorization, order or approval of,
or any exemption by, any Governmental Entity or other third party, required to
be obtained or made by Tsunami, Stratos or any of their Subsidiaries in
connection with the Merger or the taking of any action contemplated thereby or
by this Agreement and to enable the Closing to occur as promptly as practicable.
6.6 Public Disclosure.
-----------------
Stratos and Tsunami shall consult with each other before issuing any press
release or otherwise making any public statement with respect to the Merger or
this Agreement and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by law or
by the rules or regulations of the SEC or the NNM.
6.7 Tax-Free Reorganization.
-----------------------
Stratos and Tsunami each intend that the Merger shall qualify for treatment
as a reorganization within the meaning of Section 368(a) of the Code. Stratos
and Tsunami each agree to refrain from taking any action inconsistent with such
intended treatment.
6.8 Nasdaq Quotation.
----------------
Stratos shall use its best efforts to cause the shares of Stratos Common
Stock to be issued in the Merger to be approved for quotation on the NNM,
subject to official notice of issuance, prior to the Closing Date.
6.9 Shareholder Approval.
--------------------
(a) Tsunami shall, as promptly as possible but not later than three (3)
days following the execution of this Agreement, submit this Agreement and the
transactions contemplated hereby to the Tsunami shareholders for approval and
adoption as provided by California law and its Articles of Incorporation and
Bylaws. Tsunami shall use its best efforts to solicit and obtain the consent of
the Tsunami shareholders sufficient to approve the Merger and this Agreement and
to enable the Closing to occur as promptly as practicable and, in any event, on
or before February 15, 2002. Tsunami shall ensure that any meeting of the
Tsunami shareholders called for the purpose of approving the Merger and this
Agreement, or the solicitation of written consents of the Tsunami shareholders
without a meeting, is conducted, and that all proxies solicited by Tsunami in
connection with any such meeting are solicited, in compliance with applicable
law and the Tsunami charter documents. Tsunami's obligation to call, give notice
of, convene and hold a shareholders' meeting, or to solicit the written consent
of its shareholders without a meeting, in accordance with this provision shall
not be limited to or otherwise affected by the commencement, disclosure,
announcement or submission to Tsunami of any Tsunami Acquisition Proposal.
(b) Prior to or at the time of the initial solicitation of Tsunami's
shareholders, Tsunami shall prepare and provide to its shareholders a
solicitation statement ("Solicitation Statement") describing this Agreement and
the transactions contemplated hereby and thereby for the purpose of soliciting
the approval of Tsunami shareholders. The Solicitation Statement shall
constitute a disclosure document for the offer and issuance of shares of Stratos
Common Stock to be received by the holders of Tsunami Capital Stock in the
Merger. Stratos and Tsunami shall each use reasonable commercial efforts to
cause the Solicitation Statement to comply with applicable federal and state
securities laws requirements. Each of Stratos and Tsunami will reasonably
cooperate with the other in connection with the preparation of the Solicitation
Statement and agrees to provide promptly to the other such information
concerning its business and financial statements and affairs as, in the
reasonable judgment of the providing party or its counsel, may be required or
appropriate for inclusion in the Solicitation Statement or in any amendments or
supplements thereto, which information shall be true and correct in all material
respects without the omission of any material fact which is required to make
such information not false or misleading. Tsunami will promptly advise Stratos,
and Stratos will promptly advise Tsunami, in writing if at any time prior to the
Effective Time either Tsunami or Stratos shall obtain knowledge of any facts
that might make it necessary or appropriate to amend or supplement the
Solicitation Statement in order to make the statements contained or incorporated
by reference therein not misleading or to comply with applicable law. The
Solicitation Statement shall contain the unanimous recommendation of the Board
of Directors of Tsunami that the Tsunami shareholders approve the Merger and
this Agreement and the unanimous conclusion of the Board of Directors of Tsunami
that the terms and conditions of the Merger are fair and reasonable to the
Tsunami shareholders. Anything to the contrary contained herein notwithstanding,
Tsunami shall not include in the Solicitation Statement any information with
respect to Stratos or its affiliates or associates, the form and content of
which information shall not have been approved by Stratos prior to such
inclusion.
6.10 Form S-3 Registration Statement
-------------------------------
(a) Stratos shall use its best efforts to cause the shares of Stratos
Common Stock issued in the Merger (the "Registrable Securities") to be
registered under the Securities Act so as to permit the resale thereof and in
connection therewith shall use its best efforts to prepare and file with the SEC
within thirty (30) days following the Closing Date, and shall use its best
efforts to cause to become effective no later than sixty (60) days thereafter, a
registration statement (the "Registration Statement") on Form S-3 or on such
other form as is then available under the Securities Act covering the
Registrable Securities; provided, however, that each holder of Registrable
Securities ("Holder") shall provide all such information and materials to
Stratos and take all such action as may be required in order to permit Stratos
to comply with all applicable requirements of the SEC and to obtain any desired
acceleration of the effective date of such Registration Statement. Such
provision of information and materials is a condition precedent to the
obligations of Stratos pursuant to this Section 6.10. Stratos shall not be
required to effect more than one (1) registration under this Section 6.10. The
offering made pursuant to such registration shall not be underwritten.
(b) Notwithstanding Section 6.10(a), Stratos shall be entitled to postpone
the filing or declaration of effectiveness of the Registration Statement for a
reasonable period of time up to sixty (60) calendar days after the deadlines
therefore set forth in Section 6.10(a), if Stratos
determines that there exists material nonpublic information about Stratos which
would be required by the Securities Act to be disclosed in the Registration
Statement, the disclosure of which, in the good faith determination of the Board
of Directors of Stratos, would be detrimental to Stratos.
(c) Subject to the limitations of Section 6.10(b), Stratos shall: (i)
prepare and file the Registration Statement with the SEC in accordance with
Section 6.10(a) with respect to the Registrable Securities and shall use its
best efforts to cause the Registration Statement to become effective as promptly
as practicable after filing and to keep the Registration Statement effective
until one (1) year after the Effective Time; (ii) prepare and file with the SEC
such amendments and supplements to the Registration Statement and the prospectus
used in connection therewith as may be necessary, and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all securities proposed to be registered in the Registration Statement until
one (1) year after the Effective Time; and (iii) furnish to each Holder such
number of copies of any prospectus (including any preliminary prospectus and any
amended or supplemented prospectus) in conformity with the requirements of the
Securities Act, and such other documents, as each Holder may reasonably request
in order to effect the offering and sale of the Registrable Securities to be
offered and sold.
(d) Notwithstanding any other provision of this Section 6.10, Stratos shall
have the right at any time to require that all Holders suspend further open
market offers and sales of Registrable Securities pursuant to the Registration
Statement whenever, and for so long as, in the reasonable judgment of Stratos in
good faith after consultation with counsel, there is or may be in existence
material undisclosed information or events with respect to Stratos (the
"Suspension Right"). In the event Stratos exercises the Suspension Right, such
suspension will continue for the period of time reasonably necessary for
disclosure to occur at a time that is not materially detrimental to Stratos and
its stockholders or until such time as the information or event is no longer
material, each as determined in good faith by Stratos after consultation with
counsel. Stratos will use all reasonable efforts to limit the length of the
suspension to thirty (30) calendar days or less. Stratos agrees to notify the
Holders promptly upon termination of the suspension.
(e) Stratos will indemnify each Holder, each of its officers and directors
and partners, and each person controlling such Holder within the meaning of
Section 15 of the Securities Act against all expenses, claims, losses, damages
or liabilities (or actions an respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, preliminary
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any registration, qualification or compliance effected
pursuant to this Section 6.10, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or any violation or any alleged violation by Stratos of any rule
or regulation promulgated under the Securities Act or the Exchange Act in
connection with any such registration, qualification or compliance, and Stratos
will reimburse each such Holder, each of its officers and directors, and each
person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage,
liability or action, as such expenses are incurred, provided that Stratos will
not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to Stratos by such Holder or
controlling person and specifically for use therein.
(f) It shall be a condition to Stratos' obligations hereunder to register
the Registrable Securities of any Holder that such Holder agrees to indemnify
Stratos, each of Stratos' directors and officers, each person who controls
Stratos within the meaning of Section 15 of the Securities Act, and each other
such Holder, each of its officers and directors and each person controlling such
Holder within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse Stratos, such other
Holders, directors, officers, persons or control persons for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, as such expenses are
incurred, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to Stratos by such Holder specifically for use therein.
(g) Each party entitled to indemnification under Section 6.10(e) or 6.10(f)
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense; provided, however, that an Indemnified Party (together with all
other Indemnified Parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees and
expenses to be paid by the Indemnifying Party, if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to differing or potentially differing interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding. The failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under Section
6.8(e) or 6.8(f) unless the failure to give such notice is materially
prejudicial to an Indemnifying Party's ability to defend such action. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
6.11 Stock Options.
-------------
(a) At the Effective Time, each outstanding Tsunami Option which has not
been exercised prior to the Closing, whether vested or unvested, shall be
substituted for an option (a "Substitute Option") to acquire such number of
shares of Stratos Common Stock which the holder of such Tsunami Option would
have been entitled to receive pursuant to the Merger at the Common Stock
Exchange Ratio had such holder exercised such option in full immediately prior
to the Effective Time (rounded down to the nearest whole share), at a price per
share (rounded up to the nearest whole cent) equal to (i) the aggregate exercise
price of the Tsunami Common Stock purchasable pursuant to such Tsunami Option
immediately prior to the Effective Time divided by (ii) the number of full
shares of Stratos Common Stock purchasable pursuant to the Substitute Option.
Each Substitute Option shall be granted pursuant to the terms and conditions of
the Stratos 2000 Stock Plan, except that the vesting schedule of each Substitute
Option shall be the same as the vesting schedule set forth in the option
agreement for each Tsunami Option and such vesting schedule shall not be
accelerated in contemplation of or as a consequence of the Merger.
(b) Each Substitute Option shall be evidenced by a written stock option
agreement reflecting the terms set forth in Section 6.11(a) and delivered to the
former holders of Tsunami Options as soon as practicable following the Effective
Time. Stratos shall take such actions as may be appropriate under the Code and
the regulations thereunder to cause the Substitute Options granted for Tsunami
Options which qualified as incentive stock options immediately prior the
Effective Time to qualify as incentive stock options, to the extent permitted
under the Code and the regulations thereunder.
(c) In addition, Stratos shall grant an aggregate of 500,000 options to
acquire Stratos Common Stock to Tsunami employees who remain employed at the
Closing on terms substantially similar to the Stratos 2000 Stock Option Plan.
6.12 Stratos Plans.
-------------
All Tsunami employees who remain employees of Stratos, Tsunami or any other
Subsidiary of Stratos following the Effective Time shall be entitled to
participate in all employee benefit plans and programs (the "Stratos Plans")
that are available to other Stratos employees holding comparable positions. To
the extent permitted by the Stratos Plans, each participant shall be given full
credit for such participant's period of continuous service with Tsunami prior to
the Effective Time. In the case of medical and health insurance coverage,
Stratos shall cause the Surviving Corporation to continue to insure Tsunami
employees under Tsunami's existing insurance plans or provide them with the
opportunity to participate in Stratos Plans providing generally comparable
medical and health insurance coverage.
6.13 Brokers or Finders.
------------------
Each of Stratos and Tsunami represents, as to itself, its Subsidiaries and
its Affiliates, that no agent, broker, investment banker, financial advisor or
other firm or person is or will be entitled to any broker's or finder's fee or
any other commission or similar fee in connection with any of the transactions
contemplated by this Agreement, except for U.S. Bancorp Xxxxx Xxxxxxx, Inc.,
financial advisor to Stratos and CIBC World Markets, Inc., financial advisor to
Tsunami. Subject to Section 6.15, each of Stratos and Tsunami agrees to
indemnify and hold the other
harmless from and against any and all claims, liabilities or obligations with
respect to any other fees, commissions or expenses asserted by any person on the
basis of any act or statement alleged to have been made by such party or its
Affiliate.
6.14 Additional Agreements; Reasonable Efforts.
-----------------------------------------
Subject to the terms and conditions of this Agreement, each of the parties
agrees to use all reasonable efforts to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including cooperating fully with
the other party, including by provision of information. In case at any time
after the Effective Time any further action is 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 party to this Agreement shall take all such necessary action.
6.15 Expenses.
--------
The parties shall each pay their own accounting, financial advisory and
legal fees and other out-of-pocket expenses related to the negotiation,
preparation and carrying out of this Agreement and the transactions herein
contemplated. In the event the Merger is consummated, up to $1,000,000 of the
financial advisory and legal fees and expenses incurred by Tsunami (whether paid
or accrued) relating to the negotiation, preparation and carrying out of this
Agreement and the transactions contemplated hereby (the "Tsunami Transaction
Expenses") shall be paid by Tsunami. Tsunami shall cause its financial advisor
and legal counsel to prepare and deliver final invoices for all fees and
expenses relating to the transactions contemplated by this Agreement at the
Closing. In the event that the amount of the Tsunami Transaction Expenses
exceeds $1,000,000, such excess (the "Excess Tsunami Transaction Expenses")
shall be taken into account when determining the amount of the Initial Stock
Consideration as provided in Section 2.1 hereof.
6.16 Affiliates Agreement.
--------------------
Schedule 6.16 sets forth those persons who, in Tsunami's reasonable
judgment are or may be "affiliates" of Tsunami within the meaning of Rule 145
(each such person a "Tsunami Affiliate"). Tsunami shall provide Stratos such
information and documents as Stratos shall reasonably request for purposes of
reviewing such list. Tsunami shall deliver or cause to be delivered to Stratos,
promptly following the execution of this Agreement (and in any case prior to the
Closing) from each of the Tsunami Affiliates, an executed Affiliate Agreement in
the form attached hereto as Exhibit B. Stratos shall be entitled to place
appropriate legends on the certificates evidencing any Stratos Common Stock to
be received by such Tsunami Affiliates pursuant to the terms of this Agreement,
and to issue appropriate stop transfer instructions to the transfer agent for
Stratos Common Stock, consistent with the terms of such Affiliate Agreements.
6.17 Tsunami Warrants and Bridge Loans.
---------------------------------
Tsunami shall exercise commercially reasonable efforts to cause (i) all
Tsunami Warrants that are outstanding as of the date hereof to be exercised in
full prior to the Effective Time, and shall cause the cash exercise price
therefore, if any, to be paid to Tsunami, and (ii) the Bridge Loans and any
other outstanding debt that is convertible into shares of Tsunami Capital Stock
to be converted in full prior to the Effective Time.
6.18 Operation of Tsunami During Earn-Out Period.
-------------------------------------------
During the Earn-Out Period (as defined on Exhibit A), Stratos agrees that
Tsunami will be operated as a separate subsidiary or operating division of
Stratos at its present locations in Mountain View, California, or at another
location within Santa Xxxxx County, California or any contiguous County thereto.
Until the earlier of the end of the Earn-Out Period or the termination of his
employment with Tsunami, Xxxxx X. Xxxxxxxx shall have the discretion to manage
the day-to-day operations of Tsunami, provided such business affairs and
operations are managed in the ordinary course and in a manner consistent with
the budgets and other guidelines establish by Stratos and Xxxxxxxx as provided
herein. An initial budget for Tsunami's operations during the Earn-Out Period as
agreed to by Stratos and Xxxxxxxx is attached as part of Exhibit A hereto.
Assuming that Tsunami performs substantially as indicated in such budget,
Stratos agrees to permit Tsunami to operate its business in the ordinary course
and will provide it with funds reasonably necessary to fund its operations
pursuant to said budget. During the Earn-Out Period, Xxxxxxxx and the Chief
Financial Officer of Stratos shall review Tsunami's operating results on a
monthly basis. Stratos shall have the right, after consultation with Xxxxxxxx,
to make such adjustments and changes in Tsunami's budget during the Earn-Out
Period as it determines in good faith and its reasonable business judgment are
required to be made in the best interests of Stratos.
ARTICLE VII
CONDITIONS TO MERGER
7.1 Conditions to Each Party's Obligation to Effect the Merger.
----------------------------------------------------------
The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the satisfaction on or prior to the Closing Date of
the following conditions:
(a) This Agreement and the Merger shall have been approved and adopted by
the affirmative vote of the holders of the requisite number of outstanding
shares of Tsunami Common Stock and Tsunami Preferred Stock.
(b) All other authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by, any
Governmental Entity the failure of which to obtain or comply with would be
reasonably likely to have a Material Adverse Effect on Stratos or Tsunami or a
material adverse effect on the consummation of the transactions contemplated
hereby shall have been filed, occurred or been obtained.
(c) No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal or
regulatory restraint or prohibition preventing the consummation of the Merger or
limiting or restricting Stratos' conduct or operation of the business of Stratos
or Tsunami after the Merger shall have been issued, nor
shall any proceeding brought by any Governmental Entity seeking any of the
foregoing be pending; nor shall there be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger which makes the consummation of the Merger illegal.
7.2 Additional Conditions to Obligations of Stratos and Sub.
-------------------------------------------------------
The obligation of Stratos and Sub to effect the Merger are subject to the
satisfaction of each of the following conditions, any of which may be waived in
writing exclusively by Stratos:
(a) The representations and warranties of Tsunami set forth in this
Agreement, including the Tsunami Disclosure Schedule, shall be true and correct
as of the date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date, except (i) for changes contemplated by this
Agreement, and (ii) that representations and warranties which specifically
relate to a particular date or period shall be true and correct as of such date
or for such period; and Stratos shall have received a certificate to such effect
signed on behalf of Tsunami by the chief executive officer of Tsunami.
(b) Tsunami shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Closing
Date, and Stratos shall have received a certificate to such effect signed on
behalf of Tsunami by the chief executive officer of Tsunami.
(c) Stratos shall have received from Tsunami written evidence that the
execution, delivery and performance of Tsunami's obligations under this
Agreement have been duly and validly approved and authorized by the Board of
Directors and the shareholders of Tsunami.
(d) From the date of this Agreement through the Effective Time, there shall
not have been any event or development which results in a Material Adverse
Effect on Tsunami.
(e) Stratos shall have been furnished with evidence satisfactory to it of
the consent or approval of those persons whose consent or approval shall be
required in connection with the Merger under the material contracts of Tsunami,
as set forth on Schedule 7.2(e) hereto.
(f) Stratos shall have received satisfactory assurance, as determined by
Stratos in good faith, that at least 90% of the Tsunami employees will remain
employed by the Surviving Corporation after the Merger.
(g) The Merger shall have been approved by the affirmative vote of the
holders of not less than 95% of the outstanding shares of Tsunami Common Stock
and Tsunami Preferred Stock.
(h) Stratos shall have received a legal opinion from Silicon Valley Law
Group, counsel to Tsunami, substantially in the form of Exhibit C hereto.
(i) Stratos shall have received from each of the affiliates of Tsunami an
executed Affiliate Agreement.
(j) Stratos shall have received from the holders of at least 75% of the
holders of shares of Stratos Common Stock to be issued in the Merger an executed
Lock-Up Agreement in the form attached as Exhibit D hereto.
(k) All Tsunami Warrants shall have been duly exercised and all of the
Bridge Loans or other convertible debt shall have been duly converted into
Tsunami Capital Stock.
(l) Stratos shall have determined in its reasonable discretion that the
issuance of the Stratos Common Stock to the Tsunami shareholders shall be exempt
from registration under applicable federal and state securities laws.
(m) Stratos shall have received such other documents as counsel for Stratos
and Sub shall reasonably request.
7.3 Additional Conditions to Obligations of Tsunami.
-----------------------------------------------
The obligation of Tsunami to effect the Merger is subject to the
satisfaction of each of the following conditions, any of which may be waived, in
writing, exclusively by Tsunami:
(a) The representations and warranties of Stratos and Sub set forth in this
Agreement shall be true and correct as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date, except (i) for
changes contemplated by this Agreement, and (ii) that representations and
warranties which specifically relate to a particular date or period shall be
true and correct as of such date or for such period; and Tsunami shall have
received a certificate to such effect signed on behalf of Stratos by the chief
financial officer of Stratos.
(b) Stratos and Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and Tsunami shall have received a certificate to such effect
signed on behalf of Stratos by the chief financial officer of Stratos.
(c) Tsunami shall have received from Stratos and Sub written evidence that
the execution, delivery and performance of Stratos' obligations under this
Agreement have been duly and validly approved and authorized by the Boards of
Directors of Stratos and Sub.
(d) Tsunami shall have received a legal opinion from Lord, Bissell & Brook,
counsel to Stratos, substantially in the form of Exhibit E hereto.
(e) Tsunami shall have received such other documents as counsel for Tsunami
shall reasonably request.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination.
-----------
This Agreement may be terminated at any time prior to the Effective Time
(with respect to Sections 8.1(b) through 8.1(e), by written notice by the
terminating party to the other party):
(a) by the mutual written consent of Stratos and Tsunami;
(b) by either Stratos or Tsunami if the Merger shall not have been
consummated by February 28, 2002; provided, however, that the right to terminate
this Agreement under this Section 8.1(b) shall not be available to any party
whose breached any obligation under this Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date;
(c) by either Stratos or Tsunami if a court of competent jurisdiction or
other Governmental Entity shall have issued a nonappealable final order, decree
or ruling or taken any other action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger, except,
if the party relying on such order, decree or ruling or other action has not
complied with its obligations under Section 6.5 of this Agreement; or
(d) by Stratos or Tsunami, if there has been a material breach of any
representation, warranty, covenant or agreement on the part of the other party
set forth in this Agreement, which breach (i) causes the conditions set forth in
Section 7.2(a) or (b) (in the case of termination by Stratos) or 7.3(a) or (b)
(in the case of termination by Tsunami) not to be satisfied and (ii) shall not
have been cured within ten (10) business days following receipt by the breaching
party of written notice of such breach from the other party.
8.2 Effect of Termination.
---------------------
In the event of termination of this Agreement as provided in Section 8.1,
there shall be no liability or obligation on the part of Stratos or Tsunami or
their respective officers, directors, shareholders or Affiliates, except to the
extent that such termination results from the breach by a party of any of its
representations, warranties or covenants set forth in this Agreement; provided
that the provisions of Sections 6.13 and 6.15 of this Agreement, the
confidentiality provisions set forth herein and in the Confidentiality Agreement
and the non-competition provisions set forth in the Confidentiality Agreement
shall remain in full force and effect and survive any termination of this
Agreement.
8.3 Amendment.
---------
This Agreement may be amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors, at any time before or after
approval of the matters presented in connection with the Merger by the
shareholders of Tsunami, but, after any such approval, no amendment shall be
made which by law requires further approval by such shareholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver.
-----------------
At any time prior to the Effective Time, the parties hereto, by action
taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party.
ARTICLE IX
INDEMNIFICATION
9.1 Nature and Survival of Representations and Warranties.
-----------------------------------------------------
If the Merger occurs, all of the representations and warranties contained
in this Agreement and the Tsunami Disclosure Schedules shall survive the Closing
Date as provided below. No action may be brought with respect to this Agreement
or the transactions contemplated hereby unless (i) an Indemnification Claim is
made under Section 9.3 on or before the Earn-Out Payment Date (the "Termination
Date") or (ii) except for claims under Section 9.2(d), as allowed by law.
9.2 Recovery by Stratos.
-------------------
(a) Subject to the terms and conditions contained herein, Stratos, its
officers, directors, employees and attorneys, all Subsidiaries and Affiliates of
Stratos, and the respective officers, directors, employees and attorneys of such
entities (all such persons and entities being collectively referred to as the
"Stratos Group") shall be entitled to reduce the Earn-Out Consideration for and
in respect of any and all losses, damages, costs and expenses (including
reasonable legal fees and expenses) which any member of the Stratos Group may
sustain or incur which are caused by or arise out of (i) any inaccuracy in or
breach of any of the representations, warranties or covenants made by Tsunami in
this Agreement, including the Tsunami Disclosure Schedule, (ii) any Excess
Tsunami Transaction Expenses which are not taken into account when determining
the amount of the Initial Stock Consideration as provided in Section 2.1 hereof,
or (iii) any breach of this Article IX (collectively, "Stratos Losses").
(b) No member of the Stratos Group shall be entitled to recover for any
Stratos Losses until the aggregate amount of all Stratos Losses under all claims
shall exceed $25,000 (the "Threshold Amount"), at which time the Stratos Losses
shall be recoverable in full.
(c) The right of any member of the Stratos Group to recover Stratos Losses
under this Article IX is subject to the condition that the Shareholders'
Representative (as defined in Section 9.6) shall have received written notice of
an Indemnification Claim (as defined in Section 9.3) for such Stratos Loss on or
before the Termination Date.
(d) The provisions of Section 9.2(b) above and 9.5 below shall not limit,
in any manner, (i) any remedy at law or in equity to which any member of the
Stratos Group shall be entitled against Tsunami or any director, officer or
shareholder of Tsunami as a result of willful fraud or intentional
misrepresentation by such parties or any of their respective representatives, or
(ii) any rights that Stratos may have under federal or state securities laws.
9.3 Procedures for Recovery.
-----------------------
(a) As used in this Article IX, the term "Indemnitee" means the member or
members of the Stratos Group seeking to reduce the Earn-Out Consideration.
(b) A claim for recovery against the Earn-Out Consideration (an
"Indemnification Claim") shall be made by Indemnitee by delivery of a written
notice to the Representative and the Escrow Agent requesting indemnification and
specifying in reasonable detail the basis on which indemnification is sought
(and shall include relevant documentation related to the Indemnification Claim),
the amount of the asserted Stratos Losses and, in the case of a Third Party
Claim (as defined in Section 9.4), containing (by attachment or otherwise) such
other information as Indemnitee shall have concerning such Third Party Claim.
(c) If the Indemnification Claim involves a Third Party Claim, the
procedures set forth in Section 9.4 hereof shall be observed by Indemnitee and
the Representative.
9.4 Defense of Third Party Claims.
-----------------------------
Should any claim be made or suit or proceeding be instituted against an
Indemnitee which, if prosecuted successfully, would be a matter for which such
Indemnitee is entitled to indemnification under this Article IX (a "Third Party
Claim"), the obligations and liabilities of the parties hereunder with respect
to such Third Party Claim shall be subject to the following terms and
conditions:
(a) Indemnitee shall give the Representative written notice of any such
Third Party Claim promptly after receipt by Indemnitee of notice thereof, and
the Representative may, subject to the prior written consent of Stratos,
undertake control of the defense thereof by counsel of his own choosing
reasonably acceptable to Indemnitee. Indemnitee may participate in the defense
through its own counsel at its own expense. If, however, the Representative
fails or refuses to undertake the defense of such Third Party Claim within
fifteen (15) days after written notice of such claim has been delivered to the
Representative by Indemnitee, Indemnitee shall have the right to undertake the
defense, compromise and, subject to Section 9.5, settlement of such Third Party
Claim with counsel of its own choosing. In the circumstances described in the
preceding sentence, Indemnitee shall, promptly upon its assumption of the
defense of such Third Party Claim, make an Indemnification Claim as specified in
Section 9.3(b), which shall be deemed an Indemnification Claim that is not a
Third Party Claim for the purposes of the procedures set forth herein. Failure
of Indemnitee to furnish written notice to the Representative or the Escrow
Agent of a Third Party Claim shall not release the Principal Shareholders from
their obligations hereunder, except to the extent they are prejudiced by such
failure.
(b) Indemnitee and the Representative shall cooperate with each other in
all reasonable respects in connection with the defense of any Third Party Claim,
including making available records relating to such claim and furnishing
employees of Indemnitee as may be reasonably necessary for the preparation of
the defense of any such Third Party Claim or for testimony as witness in any
proceeding relating to such claim.
(c) Unless the Representative has failed to fulfill its obligations under
this Article IX, no settlement by Indemnitee of a Third Party Claim shall be
made without the prior written consent by or on behalf of the Representative,
which consent shall not be unreasonably withheld or delayed. If the
Representative has assumed the defense of a Third Party Claim as contemplated by
this Section 9.4, no settlement of such Third Party Claim may be made by the
Representative (or the individual Principal Shareholder as the case may be)
without the prior
written consent by or on behalf of Indemnitee, which consent shall not be
unreasonably withheld or delayed.
9.5 Manner of Recovery.
------------------
(a) The Earn-Out Consideration payable pursuant to Section 2.4, shall
provide a fund against which members of the Stratos Group may assert claims of
indemnification under this Article IX. Except as specifically provided in
Section 9.2(d), the sole recourse of any member of the Stratos Group for such
indemnification claims is against the Earn-Out Consideration.
(b) Each claim for indemnification asserted pursuant to this Article IX
shall be made only in accordance with the procedures set forth in this Article
IX.
9.6 Appointment of Shareholders' Representative.
-------------------------------------------
For purposes of this Agreement, the Tsunami shareholders hereby consent to
the appointment of Xxxxxxxxx X. Lego as the representative and attorney-in-fact
for and on behalf of the Tsunami shareholders (the "Shareholders'
Representative"), and to the taking by the Shareholders' Representative of any
and all actions and the making of any decisions required or permitted to be
taken by her under this Agreement, including, without limitation, the exercise
of the power to: (i) agree to a reduction in the Earn-Out Consideration in
satisfaction of Indemnification Claims, (ii) agree to, negotiate, enter into
settlements and compromises of and comply with orders of courts and awards of
arbitrators with respect to such Indemnification Claims, (iii) resolve any
Indemnification Claims and (iv) take all actions necessary in the judgment of
the Shareholders' Representative for the accomplishment of the foregoing and all
of the other terms, conditions and limitations of this Agreement. Accordingly,
the Shareholders' Representative has unlimited authority and power to act on
behalf of each Tsunami shareholder with respect to this Agreement and the
disposition, settlement or other handling of all Indemnification Claims, rights
or obligations arising from and taken pursuant to this Agreement. The Tsunami
shareholders will be bound by all actions taken by the Shareholders'
Representative in connection with this Agreement, and Stratos shall be entitled
to rely on any action or decision of the Shareholders' Representative. The
Shareholders' Representative will incur no liability with respect to any action
taken or suffered by her in reliance upon any notice, direction, instruction,
consent, statement or other document believed by her to be genuine and to have
been signed by the proper person (and shall have no responsibility to determine
the authenticity thereof), nor for any other action or inaction, except her own
willful misconduct or bad faith. In all questions arising under this Agreement,
the Shareholders' Representative may rely on the advice of counsel, and the
Shareholders' Representative will not be liable to anyone for anything done,
omitted or suffered in good faith by the Shareholders' Representative based on
such advice. Except as expressly provided herein, the Shareholders'
Representative will not be required to take any action involving any expense
unless the payment of such expense is made or provided for in a manner
satisfactory to her. At any time prior to the Earn-Out Payment Date, the former
holders of a majority of the shares of Tsunami Capital Stock immediately prior
to the Effective Time may, by written consent, appoint a new representative as
the Shareholders' Representative by sending notice and a copy of the written
consent appointing such new representative signed by the former holders of a
majority of the shares of Tsunami Capital Stock
to Stratos. Such appointment will be effective upon the later of the date
indicated in the consent or the date such consent is received by Stratos.
ARTICLE X
GENERAL PROVISIONS
10.1 Notices.
-------
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial delivery service,
or within seventy-two (72) hours after being mailed by registered or certified
mail (return receipt requested) or sent via facsimile (with confirmation of
receipt) to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) if to Stratos, to: Stratos Lightwave, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Chief Executive Officer
Fax: (000) 000-0000
Tel: (000) 000-0000
with a copy to: Lord, Bissell & Brook
000 X. XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx Xx., Esq.
Fax: (000) 000-0000
Tel: (000) 000-0000
(b) if to Tsunami, to: Tsunami Optics, Inc.
000 Xxxxx Xxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Fax: (000) 000-0000
Tel: (000) 000-0000
with a copy to: Silicon Valley Law Group
000 X. Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
Tel: (000) 000-0000
(c) if to the Shareholders' Representative, to:
Xxxxxxxxx X. Lego
General Partner
The Photonics Fund, L.P.
0000 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
Tel: (000) 000-0000
10.2 Interpretation.
--------------
(a) For purposes of this Agreement
(i) When reference is made to an Article or Section, such reference
shall be to an Article or Section of this Agreement unless otherwise
indicated;
(ii) The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without
limitation;"
(iii) The phrase "made available" in this Agreement shall mean that
the information referred to has been made available if requested by the
party to whom such information is to be made available;
(iv) The phrases "the date of this Agreement," "the date hereof," and
terms of similar import, unless the context otherwise requires, shall be
deemed to refer to January 22, 2002;
(v) Any reference to a "Material Adverse Effect" with respect to any
entity or group of entities means a material adverse effect on the
business, assets (including intangible assets), financial condition,
prospects, or results of operations of such entity and its Subsidiaries,
taken as a whole;
(vi) Any reference to a party's "knowledge" means such party's actual
knowledge after reasonable inquiry of its directors, officers, and other
management level employees reasonably believed to have knowledge of such
matters;
(vii) Any reference to the "prospects" of Tsunami or its business, or
to Tsunami's business "as currently proposed to be conducted," means such
prospects or business without taking into account the effects of the Merger
or any changes to Tsunami's business that are initiated by Stratos
thereafter;
(viii) The word "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated,
of which (i) such party or any other Subsidiary of such party is a general
partner (excluding partnerships, the general partnership interests of which
held by such party or any Subsidiary of such party do not have a majority
of the voting interest in such partnership) or (ii) at least a majority of
the securities or other interests having ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions
with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries; and
(ix) The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement.
(b) 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.
10.3 Counterparts.
------------
For the convenience of the parties hereto, this Agreement may be executed
in any number of counterparts, each of which shall be deemed an original
instrument, and all of which shall be considered one and the same agreement.
10.4 Severability.
------------
In the event that any provision of this Agreement, or the application
thereof, becomes or is declared by a court of competent jurisdiction to be
illegal, void or unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.
10.5 Entire Agreement.
----------------
This Agreement (including the schedules and exhibits hereto and the other
documents delivered pursuant hereto) constitutes the entire agreement among the
parties concerning the subject matter hereof and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof, other than the Confidentiality Agreement.
10.6 Assignment.
----------
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.
10.7 Third Party Beneficiaries.
-------------------------
Nothing contained in this Agreement is intended to confer upon any person
other than the parties hereto and their respective successors and permitted
assigns, any rights, remedies or obligations under, or by reason of this
Agreement, except that (i) the persons who are shareholders of Tsunami
immediately prior to the Effective Time (and their successors and assigns) are
express intended third party beneficiaries of Articles I and II, (ii) the
persons who hold Tsunami Options immediately prior to the Effective Time are
express intended third party
beneficiaries of Section 6.11, and (iii) each of the foregoing persons is an
express intended third party beneficiary of Article X, to the extent relevant to
any of the foregoing, and as such are entitled to rely on the provisions hereof
as if a party hereto.
10.8 Waiver of Jury Trial.
--------------------
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION ARISING
OUT OF OR RELATING TO THIS AGREEMENT, THE MERGER OR ANY OF THE OTHER
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
10.9 Governing Law.
-------------
This Agreement shall be governed and construed in accordance with the laws
of the State of California without regard to any applicable conflicts of law
principles.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, Stratos, Sub and Tsunami have caused this Agreement to
be signed by their respective officers thereunto duly authorized, as of the date
first written above.
TSUNAMI OPTICS, INC. STRATOS LIGHTWAVE, INC.
By: /s/ Xxxxx X. Xxxxxxxx By: /s/ Xxxxx X. XxXxxxxx
------------------------- -------------------------
Xxxxx X. Xxxxxxxx Xxxxx X. XxXxxxxx
Chairman and CTO President and Chief Executive Officer
TUNDRA ACQUISITION CORP.
By: /s/ Xxxxx X. XxXxxxxx
-------------------------
Xxxxx X. XxXxxxxx
Chief Executive Officer
