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MERGER AGREEMENT AND
PLAN OF REORGANIZATION
BY AND AMONG
REDBACK NETWORKS INC.
SIARA SYSTEMS, INC.
AND
THE STOCKHOLDER AGENT
Dated as of November 28, 1999
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TABLE OF CONTENTS
PAGE
ARTICLE 1 THE MERGER....................................................................... 2
1.1 The Merger..................................................................... 2
1.2 Effective Time................................................................. 2
1.3 Effect of the Merger on Constituent Corporations............................... 3
1.4 Certificate of Incorporation and Bylaws of Surviving Corporation............... 3
1.5 Directors and Officers of Surviving Corporation................................ 3
1.6 Consideration to be Issued; Effect on Outstanding Securities of Target......... 3
1.7 Dissenting Shares.............................................................. 6
1.8 Exchange Procedures............................................................ 7
1.9 No Further Ownership Rights in Target Capital Stock............................ 8
1.10 Lost, Stolen or Destroyed Certificates........................................ 8
1.11 Further Action................................................................ 9
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF TARGET......................................... 9
2.1 Organization and Qualification................................................. 9
2.2 Authority Relative to this Agreement........................................... 9
2.3 Capitalization.................................................................10
2.4 Subsidiaries...................................................................10
2.5 No Conflicts...................................................................11
2.6 Books and Records; Organizational Documents....................................11
2.7 Target Financial Statements....................................................12
2.8 Absence of Changes.............................................................12
2.9 No Undisclosed Liabilities.....................................................13
2.10 Taxes.........................................................................13
2.11 Legal Proceedings.............................................................15
2.12 Compliance with Laws and Orders...............................................15
2.13 Employee Benefit Plans........................................................15
2.14 Title to Property.............................................................18
2.15 Intellectual Property.........................................................18
2.16 Contracts.....................................................................20
2.17 Insurance.....................................................................20
2.18 Affiliate Transactions........................................................20
2.19 Employees; Labor Relations....................................................21
2.20 Environmental Matters.........................................................22
2.21 Other Negotiations; Brokers; Third Party Expenses.............................23
2.22 Foreign Corrupt Practices Act.................................................23
2.23 Tax-Free Reorganization.......................................................23
2.24 Approvals.....................................................................23
2.25 Disclosure....................................................................24
2.26 S-4 Registration Statement; Proxy Statement...................................24
2.27 Investment Advisors...........................................................25
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF ACQUIROR.......................................25
3.1 Organization and Qualification.................................................25
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TABLE OF CONTENTS
PAGE
3.2 Authority Relative to this Agreement...........................................25
3.3 Capitalization.................................................................26
3.4 Subsidiaries...................................................................26
3.5 No Conflicts...................................................................26
3.6 SEC Documents; Aquiror Financial Statements....................................27
3.7 Absence of Changes.............................................................27
3.8 No Undisclosed Liabilities.....................................................28
3.9 Taxes..........................................................................28
3.10 Legal Proceedings.............................................................30
3.11 Compliance with Laws and Orders...............................................30
3.12 Employee Benefit Plans........................................................30
3.13 Title to Property.............................................................33
3.14 Intellectual Property.........................................................33
3.15 Contracts.....................................................................35
3.16 Insurance.....................................................................35
3.17 Affiliate Transactions........................................................35
3.18 Employees; Labor Relations....................................................36
3.19 Environmental Matters.........................................................37
3.20 Other Negotiations; Brokers; Third Party Expenses.............................37
3.21 Foreign Corrupt Practices Act.................................................38
3.22 Tax-Free Reorganization.......................................................38
3.23 Approvals.....................................................................38
3.24 Disclosure....................................................................39
3.25 S-4 Registration Statement; Proxy Statement...................................39
3.26 Investment Advisors...........................................................39
ARTICLE 4 ADDITIONAL AGREEMENTS............................................................39
4.1 Proxy Statement; S-4 Registration Statement....................................39
4.2 Stockholder Approval...........................................................40
4.3 Access to Information..........................................................41
4.4 Confidentiality................................................................41
4.5 Expenses.......................................................................41
4.6 Public Disclosure..............................................................41
4.7 Approvals......................................................................42
4.8 Notification of Certain Matters................................................42
4.9 Additional Documents and Further Assurances....................................42
4.10 Form S-8......................................................................42
4.11 NNM Listing of Additional Shares Application..................................42
4.12 Auditors......................................................................43
4.13 Directors' and Officers' Indemnification......................................43
4.14 Benefit Arrangements..........................................................43
4.15 Treatment as Reorganization...................................................44
ARTICLE 5 CONDITIONS TO THE MERGER.........................................................44
5.1 Conditions to Obligations of Each Party to Effect the Merger...................44
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TABLE OF CONTENTS
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5.2 Additional Conditions to Obligations of Target.................................46
5.3 Additional Conditions to the Obligations of Acquiror...........................47
ARTICLE 6 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS; ESCROW PROVISIONS ...................................................49
6.1 Survival of Representations, Warranties, Covenants and Agreements..............49
6.2 Escrow Provisions..............................................................49
ARTICLE 7 CONDUCT PRIOR TO THE EFFECTIVE TIME..............................................56
7.1 Conduct of Business............................................................56
7.2 No Solicitation--Target........................................................58
7.3 No Solicitation--Acquiror......................................................59
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER................................................61
8.1 Termination....................................................................61
8.2 Termination Fee................................................................62
8.3 Effect of Termination..........................................................63
8.4 Amendment......................................................................63
8.5 Extension; Waiver..............................................................63
ARTICLE 9 MISCELLANEOUS PROVISIONS.........................................................63
9.1 Notices........................................................................63
9.2 Entire Agreement...............................................................65
9.3 Further Assurances; Post-Closing Cooperation...................................65
9.4 Waiver.........................................................................65
9.5 Third Party Beneficiaries......................................................65
9.6 No Assignment; Binding Effect..................................................65
9.7 Headings.......................................................................65
9.8 Invalid Provisions.............................................................65
9.9 Governing Law..................................................................66
9.10 Construction..................................................................66
9.11 Counterparts..................................................................66
9.12 Specific Performance..........................................................66
ARTICLE 10 DEFINITIONS.....................................................................66
10.1 Definitions...................................................................66
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EXHIBITS & SCHEDULES
Exhibit A - Form of Irrevocable Proxy and Voting Agreement (Acquiror
stockholders to sign)
Exhibit B - Form of Irrevocable Proxy and Voting Agreement (Target
stockholders to sign)
Exhibit C - Form of Amendment No. 1 to Acquiror's Amended and
Restated Investors' Rights Agreement
Exhibit D - Form of Certificate of Merger
Exhibit E - Form of Acquiror Officer's Certificates
Exhibit F - Matters to be Covered by Legal Opinion of Xxxxxxxxx
Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx, LLP
Exhibit G - Form of Target Officer's Certificates
Exhibit H - Matters to be Covered by Legal Opinion of Fenwick &
West, LLP
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MERGER AGREEMENT AND
PLAN OF REORGANIZATION
This MERGER AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement")
is made and entered into as of November 28, 1999, by and among REDBACK NETWORKS
INC., a Delaware corporation ("Acquiror"), SIARA SYSTEMS, INC., a Delaware
corporation (the "Target") and, solely for purposes of Article 6, Xxxxx Xxxxxxx,
as Stockholder Agent. In the event the parties mutually agree in a writing
signed by each of them prior to the Effective Time (as defined below) to
structure this merger as a reverse triangular merger, rather than a direct
merger, a wholly-owned subsidiary of Acquiror (a "Merger Sub") shall become
party to this Agreement and this Agreement shall be amended as appropriate.
Capitalized terms used and not otherwise defined herein have the meanings set
forth in Article 10.
RECITALS
A. The respective Boards of Directors of each of Acquiror and Target
believe it is in the best interests of Acquiror and Target and their respective
stockholders that Target merge with and into Acquiror (the "Merger") and, in
furtherance thereof, have approved the Merger. Upon mutual consent from the
respective Boards of Directors of each of Acquiror and Target prior to the
Effective Time, set forth in a writing signed by each of Acquiror and Target,
the Merger may be restructured as a reverse triangular merger, as contemplated
by the first paragraph hereof.
B. The Boards of Directors of each of Acquiror and Target have
approved the Merger and this Agreement and the transactions contemplated hereby.
C. Pursuant to the Merger, among other things, and subject to the
terms and conditions of this Agreement, (i) all of the shares of capital stock
of Target which are issued and outstanding immediately prior to the Effective
Time of the Merger shall be converted into the right to receive shares of
Acquiror's Common Stock, par value $0.0001 ("Acquiror Common Stock"), (ii) all
Target Options then outstanding (whether vested or unvested) shall be converted
into options to purchase Acquiror Common Stock and (iii) all Target Warrants
then outstanding shall be converted into warrants to purchase shares of Acquiror
Common Stock, on the terms and subject to the conditions set forth herein
D. A portion of the shares of Acquiror Common Stock otherwise
issuable or reserved for issuance by Acquiror in connection with the Merger
shall be placed in escrow by Acquiror, the release of which shares shall be
contingent upon certain events and conditions, all as set forth in Article 6
herein.
E. Concurrent with the execution of this Agreement, certain
stockholders of Target and Acquiror have entered into Irrevocable Proxy and
Voting Agreements in substantially the forms attached hereto as Exhibit A for
Acquiror's stockholders to sign ("Acquiror Proxy") and Exhibit B for Target's
stockholders to sign (Target Proxy") pursuant to which, among other
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things, such stockholders have agreed to vote the shares of Target Capital Stock
and Acquiror Capital Stock owned by them in favor of the Merger.
F. Concurrent with the execution of this Agreement, Acquiror shall
extend to the holders of shares of Acquiror Common Stock who acquire such shares
in the Merger and who hold registration rights under Target's Investors' Rights
Agreement dated December 21, 1998 ("Target's Existing Investor Rights
Agreement"), certain registration rights, pursuant to the terms of Acquiror's
Amended and Restated Investors' Rights Agreement of July 2, 1998, as amended by
Amendment No. 1 thereto, in the form attached hereto as Exhibit C, and Target's
stockholders shall agree to a lock-up following the closing of the Merger and in
the event of a secondary registered offering by Acquiror.
H. Concurrent with the execution of this Agreement, as an inducement
to Acquiror to enter into this Agreement, certain employees of Target shall have
entered into employment agreements, all of which will include mutually
acceptable non-competition terms.
I. Acquiror and Target intend that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, and in furtherance thereof intend that this Agreement shall be a "Plan of
Reorganization" within the meaning of Sections 354(a) and 361(a) of the Internal
Revenue Code.
J. Target and Acquiror desire to make certain representations,
warranties, covenants and agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the covenants, promises,
representations and warranties set forth herein, and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged by
the parties), and intending to be legally bound hereby, the parties agree as
follows:
ARTICLE 1
THE MERGER
1.1 THE MERGER. At the Effective Time and subject to and upon the
terms and conditions of this Agreement and the applicable provisions of the
DGCL, and, to the extent applicable, the California Code, Target shall be merged
with and into Acquiror, the separate existence of Target shall cease, and
Acquiror shall continue as the surviving corporation of the Merger. Acquiror is
sometimes referred to herein as the "Surviving Corporation."
1.2 EFFECTIVE TIME. Unless this Agreement is earlier terminated
pursuant to Section 8.1, the closing and consummation of the Merger (the
"Closing") will take place as promptly as practicable, following satisfaction or
waiver of the conditions set forth in Article 5, at the offices of Xxxxxxxxx
Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx, LLP, unless another place or
time is agreed to by Acquiror and Target. The date upon which the Closing
actually occurs is herein referred to as the "Closing Date." On the Closing
Date, the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger in substantially the form attached hereto as Exhibit D
(the "Delaware Certificate of Merger"), in each case in accordance with the
relevant provisions of applicable law (the time of acceptance by the Secretary
of State of the State of Delaware of such filing, or such later time agreed to
by the
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parties and set forth in the Delaware Certificate of Merger, being referred to
herein as the "Effective Time").
1.3 EFFECT OF THE MERGER ON CONSTITUENT CORPORATIONS. At the
Effective Time, the effect of the Merger shall be as provided in the applicable
provisions of the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the property, rights, privileges,
powers and franchises of Target shall vest in the Surviving Corporation, and all
debts, liabilities, obligations, restrictions, disabilities and duties of Target
shall become the debts, liabilities, obligations, restrictions, disabilities and
duties of the Surviving Corporation.
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS OF SURVIVING
CORPORATION.
(a) The Certificate of Incorporation of Acquiror, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation from and after the Effective Time
until thereafter amended as provided by law and such Certificate of
Incorporation and the Bylaws of the Surviving Corporation.
(b) The Bylaws of Acquiror, as in effect immediately prior to
the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by such Bylaws, the Certificate of Incorporation
of the Surviving Corporation and applicable Law.
1.5 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. The directors
of Surviving Corporation at, and immediately after, the Effective Time shall be
Xxxxxx Xxxxxx, Xxxxxx Xxxxxxx, Xxxxx Xxxxx, Xxx Xxxxxxxxxxx, Xxxxxxx Xxxxx (the
Existing Directors"), and three (3) persons designated by Target who shall be
Xxxxx Xxxxxx, Xxxxx Xxxxxxx and one (1) other person reasonably acceptable to a
majority of the Existing Directors (the "Target Designees"), each to hold office
in accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation. If any Target Designee cannot or will not serve as a director of
the Surviving Corporation, Target may designate a replacement Target Designee,
provided such replacement is reasonably acceptable to a majority of the Existing
Directors. The officers of Surviving Corporation at, and immediately after, the
Effective Time shall be as mutually agreed to by Target and Acquiror, except
that it is agreed that Xxxxxx Xxxxxxx shall be Chief Executive Officer and Xxxxx
Xxxxxxx shall be President and Chief Operating Officer.
1.6 CONSIDERATION TO BE ISSUED; EFFECT ON OUTSTANDING SECURITIES OF
TARGET. On the terms and subject to the conditions of this Agreement, as of the
Effective Time, by virtue of the Merger and without any action on the part of
Acquiror or Target or any holder of any Target security, all of the following
shall occur:
(a) Conversion of Target Capital Stock. At the Effective Time,
each share of Target Capital Stock that is issued and outstanding immediately
prior to the Effective Time (other than any shares of Target Capital Stock to be
canceled pursuant to Section 1.6(b) and any Dissenting Shares (as provided in
Section 1.7)) will be canceled and extinguished and will be converted
automatically into the right to receive (in accordance with this Agreement) that
number of shares of Acquiror Common Stock that is equal to the Exchange Ratio,
rounded down
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to the nearest whole share of Acquiror Common Stock. The shares of Acquiror
Common Stock that are issued upon the conversion of shares of Target Capital
Stock in the Merger pursuant to this Section 1.6(a) shall, upon their issuance
at the Effective Time, be registered under the Securities Act pursuant to an
effective registration statement on Form S-4, as provided in more detail in
Section 4.1.
(b) Cancellation of Acquiror-Owned and Target-Owned Capital
Stock. Each share of Target Capital Stock owned by Acquiror or Target or any
Subsidiary of Acquiror or Target immediately prior to the Effective Time shall
be automatically canceled and extinguished without any conversion thereof and
without any further action on the part of Acquiror or Target.
(c) Target Options and Target Stock Plan. At the Effective Time
all unexpired and unexercised Target Options then outstanding, whether vested or
unvested, shall be assumed by Acquiror in accordance with provisions described
below.
(i) At the Effective Time, each unexpired and unexercised
Target Option (including without limitation each unexpired and unexercised
Target Option issued pursuant to the Siara Systems, Inc. 1998 Equity Incentive
Plan adopted on September 1, 1998, and thereafter amended (the "Target Stock
Plan")) which is then outstanding, whether or not exercisable and whether or not
vested, shall by virtue of the Merger, be assumed by Acquiror together with the
Target Stock Plan and converted into an option to purchase Acquiror Common Stock
("Acquiror Option") as provided herein and in such manner that (i) Acquiror is
"assuming a stock option in a transaction to which Section 424(a) applies"
within the meaning of Section 424 of the Internal Revenue Code, or (ii) such
transaction, to the extent that Section 424 of the Internal Revenue Code does
not apply to any such Target Options, would be a transaction within Section 424
of the Internal Revenue Code. Each Target Option so assumed by Acquiror under
this Agreement shall continue to have, and be subject to, the same terms and
conditions as were applicable to such Target Option immediately prior to the
Effective Time (including, without limitation, any repurchase rights (other than
rights of refusal) or vesting provisions), provided that (A) such Target Option
shall be exercisable for that number of whole shares of Acquiror Common Stock
equal to the product of the number of shares of Target Capital Stock that were
issuable upon exercise in full of such Target Option immediately prior to the
Effective Time (without regard to vesting) multiplied by the Exchange Ratio
(rounded down to the nearest whole number of shares of Acquiror Common Stock)
and (B) the per share exercise price for the shares of Acquiror Common Stock
issuable upon exercise of such assumed Target Option shall be equal to the
quotient determined by dividing the exercise price per share of Target Capital
Stock at which such Target Option was exercisable immediately prior to the
Effective Time by the Exchange Ratio (rounded up to the nearest whole cent).
Acquiror shall, at all times from and after the Effective Time, reserve, keep
and make available for issuance shares of Acquiror Common Stock that are
issuable upon the exercise in full of all Acquiror Options resulting from the
assumption and conversion of Target Options in accordance with this Section and
shall, as promptly as practicable after the Effective Time, issue to each holder
of a Target Option that is outstanding immediately prior to the Effective Time a
document evidencing the foregoing assumption of such Target Option by Acquiror
and the conversion of such Target Option into an Acquiror Option as provided
herein.
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(ii) It is the intention of the parties that Target Options
assumed by Acquiror and converted into Acquiror Options pursuant hereto shall
qualify following the Effective Time as incentive stock options as defined in
Section 422 of the Internal Revenue Code to the same extent Target Options
qualified as incentive stock options immediately prior to the Effective Time and
the provisions of this Section 1.6(c) shall be applied consistent with this
intent.
(iii) At the Effective Time, Acquiror shall assume Target's
obligations, and shall be assigned Target's repurchase rights and purchase
options, under any Restricted Stock Purchase Agreements entered into pursuant to
Target Stock Plan. Any and all restrictions on Target Restricted Stock issued
pursuant to Target Stock Plan or such other agreements which do not lapse in
accordance with their terms (as such terms were in effect on the date of this
Agreement) and which are not rights of refusal shall continue in full force and
effect until such restrictions lapse pursuant to the terms of such agreements,
and any repurchase rights or purchase options which Target has with respect to
Target Restricted Stock shall also continue in full force and effect. The
Acquiror Options issued in exchange for the Target Options pursuant to this
Section 1.6(c) shall be registered under the Securities Act pursuant to an
effective registration statement on Form S-8, as provided in more detail in
Section 4.10.
(d) Target Warrants. At the Effective Time each unexpired and
unexercised Target Warrant that is then outstanding, whether or not exercisable
and whether or not vested, shall be assumed by Acquiror and converted into a
warrant to purchase shares of Acquiror Common Stock ("Acquiror Warrant") as
provided herein. Each Target Warrant so assumed by Acquiror under this Agreement
shall continue to have, and be subject to, the same terms and conditions as were
applicable to such Target Warrant immediately prior to the Effective Time,
provided that (A) such Target Warrant shall be exercisable for that number of
whole shares of Acquiror Common Stock equal to the product of the number of
shares of Target Capital Stock that were issuable upon exercise in full of such
Target Warrant immediately prior to the Effective Time (without regard to
vesting) multiplied by the Exchange Ratio (rounded down to the nearest whole
number of shares of Acquiror Common Stock) and (B) the per share exercise price
for the shares of Acquiror Common Stock issuable upon exercise of such assumed
Target Warrant shall be equal to the quotient determined by dividing the
exercise price per share of Target Capital Stock at which such Target Warrant
was exercisable immediately prior to the Effective Time by the Exchange Ratio
(rounded up to the nearest whole cent). Acquiror shall, at all times from and
after the Effective Time, reserve, keep and make available for issuance all
shares of Acquiror Common Stock that are issuable upon the exercise in full of
all Acquiror Warrants resulting from the assumption and conversion of Target
Warrants in accordance with this Section and shall, as promptly as practicable
after the Effective Time, issue to each holder of a Target Warrant that is
outstanding immediately prior to the Effective Time a document evidencing the
foregoing assumption of such Target Warrant by Acquiror and the conversion of
such Target Warrant into an Acquiror Warrant as provided herein.
(e) Exchange Ratio. The "Exchange Ratio" shall be the quotient
obtained by dividing (x) 31,341,986 shares of Acquiror Common Stock by (y) the
sum of (i) the aggregate number of shares of Target Capital Stock that are
outstanding
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immediately prior to the Effective Time, plus (ii) the number of shares of
Target Capital Stock that are issuable upon the exercise, conversion or exchange
(in full) of all Target Equity Securities that are outstanding immediately prior
to the Effective Time (whether vested or unvested). The Exchange Ratio shall be
equitably adjusted to reflect fully the effect of any stock split, reverse
split, stock combination, stock dividend (including any dividend or distribution
of securities convertible into Acquiror Common Stock or Target Capital Stock),
reorganization, reclassification, recapitalization or other like change with
respect to Acquiror Common Stock or Target Capital Stock occurring after the
date hereof and prior to the Effective Time. No adjustment shall be made to the
Exchange Ratio as a result of any cancellation of any Target Equity Security or
any consideration (in any form whatsoever) received by Target as a result of any
exercise, conversion or exchange of Target Equity Securities, after the
Effective Time.
(f) Fractional Shares. No fraction of a share of Acquiror Common
Stock will be issued in the Merger, but in lieu thereof, each holder of shares
of Target Capital Stock who would otherwise be entitled to a fraction of a share
of Acquiror Common Stock but for the rounding required under Section 1.6(a)
(after aggregating all fractional shares of Acquiror Common Stock to be received
by such holder) shall be entitled to receive from Acquiror an amount of cash
(rounded up to the nearest whole cent) equal to the product of (a) such
fraction, multiplied by (b) the average of the closing prices of Acquiror's
Common Stock for the ten (10) trading days ended on the last trading day prior
to the Effective Time (the "Closing Price").
(g) Market Stand-Off. During the Market Stand-Off Period (as
defined below) each securityholder of Target who in the Merger receives Merger
Shares (as defined below), or Acquiror securities that are convertible into
Merger Shares, will not, directly or indirectly sell, offer to sell, contract to
sell (including, without limitation, any short sale), grant any option to
purchase or otherwise transfer or dispose of (other than to donees who agree to
be similarly bound) any Merger Shares held by it (the "Market Stand-Off") unless
such Merger Shares are registered by Acquiror under the Securities Act pursuant
to a registration statement (other than the S-4 Registration Statement) filed by
Acquiror. "Merger Shares" means shares of Acquiror Common Stock issued in the
Merger or upon exercise of Acquiror Options or Acquiror Warrants that were
issued in the Merger. "Market Stand-Off Period" means the time period beginning
on the Effective Time and ending on the earlier of (A) 180 days after the
Effective Time and (B) 90 days after the date on which a registration statement
(other than the S-4 Registration Statement) filed by Acquiror under the
Securities Act is declared effective by the SEC. In order to enforce the
foregoing covenant, Acquiror may impose stop-transfer instructions with respect
to the Merger Shares until the end of such Market Stand-Off Period.
1.7 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Target Capital Stock held by a holder who has demanded
and perfected dissenters' rights for such shares in accordance with the DGCL
and, if applicable, the California Code, who, as of the Effective Time, has not
effectively withdrawn or lost such dissenters' rights ("Dissenting Shares")
shall not be converted into or represent a right to receive Acquiror Common
Stock pursuant to Section 1.6 (except as provided in Section 1.7(b)) but the
holder thereof shall only be entitled to such rights as are granted by the DGCL
and, if applicable, the California Code.
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(b) Notwithstanding the provisions of Section 1.7(a) above, if
any holder of shares of Target Capital Stock who demands purchase of such shares
under the DGCL shall effectively withdraw or lose (through failure to perfect or
otherwise) such holder's dissenters' rights, then, as of the later of (i) the
Effective Time or (ii) the occurrence of such event, such holder's shares of
Target Capital Stock shall automatically be converted into and represent only
the right to receive Acquiror Common Stock as provided in Section 1.6(a),
without interest thereon, upon surrender to Target of the certificate
representing such shares in accordance with Section 1.8 of this Agreement.
(c) Target shall give Acquiror (i) prompt notice of its receipt
of any written demands for purchase of any shares of Target Capital Stock,
withdrawals of such demands, and any other instruments relating to the Merger
served pursuant to the DGCL and, if applicable, the California Code, and
received by Target and (ii) the opportunity to participate in all negotiations
and proceedings with respect to demands for purchase of any shares of Target
Capital Stock under the DGCL and, if applicable, the California Code. Target
shall not, except with the prior written consent of Acquiror, which shall not be
unreasonably withheld, or as may be required under applicable law, voluntarily
make any payment with respect to any demands for purchase of Target Capital
Stock or offer to settle or settle any such demands.
1.8 EXCHANGE PROCEDURES.
(a) Acquiror Common Stock. At the Effective Time, Acquiror shall
deposit with the Exchange Agent for exchange in accordance with this Article 1,
the aggregate number of shares of Acquiror Common Stock issuable in exchange for
outstanding shares of Target Capital Stock pursuant to Section 1.6 and cash in
an amount sufficient to permit the payment of all cash payable in lieu of
fractional shares pursuant to Section 1.6(f).
(b) Exchange Procedures. As soon as practicable after the
Effective Time, but in no event later than two (2) business days after the
Effective Time, Acquiror shall cause to be mailed to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Target Capital Stock (the "Certificates") and
which shares were converted into the right to receive shares of Acquiror Common
Stock pursuant to Section 1.6, (i) a letter of transmittal in customary form
(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
Acquiror may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of Acquiror Common Stock and cash in lieu of fractional shares. Upon surrender
of a Certificate for cancellation (or, if such Certificate is lost, of a lost
Certificate indemnity agreement in customary form) to the Exchange Agent or to
such other agent or agents as may be appointed by Acquiror, together with such
letter of transmittal, duly completed and validly executed in accordance with
the instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
shares of Acquiror Common Stock (less the number of shares of Acquiror Common
Stock to be deposited in the Escrow Fund on such holder's behalf pursuant to
Article 6 hereof), to which such holder is entitled pursuant to Section 1.6 and
cash in lieu of fractional shares pursuant to Section 1.6(f), and the
Certificate so surrendered shall be canceled. As soon as practicable after the
Effective Time, and subject to
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and in accordance with the provisions of Article 6 hereof, Acquiror shall cause
to be distributed to a depositary agent mutually agreed to by Target and
Acquiror (the "Depositary Agent") a certificate or certificates (in such
denominations as may be requested by the Depositary Agent) representing that
number of shares of Acquiror Common Stock equal to the Escrow Amount, which
certificate shall be registered in the name of the Depositary Agent. Such shares
shall be beneficially owned by the holders on whose behalf such shares were
deposited in the Escrow Fund and shall be available to compensate Acquiror as
provided in Article 6. Until surrendered, each outstanding Certificate that,
prior to the Effective Time, represented shares of Target Capital Stock will be
deemed from and after the Effective Time, for all corporate purposes, to
evidence the ownership of the number of full shares of Acquiror Common Stock
into which such shares of Target Capital Stock shall have been so converted and
the right to receive cash in lieu of fractional shares as provided herein.
(c) Distributions With Respect to Unexchanged Shares of Target
Capital Stock. No dividends or other distributions with respect to Acquiror
Common Stock declared or made after the Effective Time and with a record date
after the Effective Time will be paid to the holder of any unsurrendered
Certificate with respect to the shares of Acquiror Common Stock represented
thereby until the holder of record of such Certificate shall surrender such
Certificate as provided in Section 1.8 or otherwise accepted by Acquiror.
Subject to applicable Law, following surrender of any such Certificate, there
shall be paid to the record holder of the certificates representing whole shares
of Acquiror Common Stock issued in exchange therefor, without interest, at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore payable (but for the provisions
of this Section 1.8(c)) with respect to such whole shares of Acquiror Common
Stock.
(d) Transfers of Ownership. If any certificate for shares of
Acquiror Common Stock is to be issued pursuant to the Merger in a name other
than that in which the Certificate surrendered in exchange therefor is
registered, it will be a condition of the issuance thereof that the Certificate
so surrendered will be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange will have paid to Acquiror
or any agent designated by it any transfer or other taxes required by reason of
the issuance of a certificate for shares of Acquiror Common Stock in any name
other than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of Acquiror or any agent designated by it that
such tax has been paid or is not payable.
1.9 NO FURTHER OWNERSHIP RIGHTS IN TARGET CAPITAL STOCK. All shares
of Acquiror Common Stock issued upon the surrender for exchange of shares of
Target Capital Stock in accordance with the terms hereof (including any cash in
lieu of fractional shares) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Target Capital Stock,
and there shall be no further registration of transfers on the records of Target
of shares of Target 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 Article 1.
1.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the owner of such lost,
stolen or destroyed Certificates shall provide Acquiror with an affidavit of
that fact.
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1.11 FURTHER ACTION. If, at any time after the Effective Time, any
such further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
Target, the officers and directors of the Surviving Corporation are fully
authorized to take, and will take, all such lawful and necessary action.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF TARGET
Target hereby represents and warrants to Acquiror, subject to such
exceptions and qualifications as are specifically disclosed in the Target
disclosure schedule and schedule of exceptions of Target (the "Target Disclosure
Schedule") delivered herewith and dated as of the date hereof as follows:
2.1 ORGANIZATION AND QUALIFICATION. Each of Target and Target
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the state or province of its incorporation, and has
all requisite corporate power and authority to conduct its business as now
conducted and as currently proposed to be conducted and to own, use, license and
lease its Assets and Properties. Each of Target and Target Subsidiary is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the ownership, use, licensing or leasing of its
Assets and Properties, or the conduct or nature of its businesses, makes such
qualification, licensing or admission necessary, except for such failures to be
so duly qualified, licensed or admitted and in good standing that could not
reasonably be expected to have a Material Adverse Effect on Target. Section 2.1
of the Target Disclosure Schedule sets forth each jurisdiction where each Target
and Target Subsidiary is so qualified to do business and separately lists each
other jurisdiction in which each Target and Target Subsidiary owns, uses,
licenses or leases any material Assets or Properties, has established a local
office or other permanent local presence or has employees or engages independent
contractors.
2.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Subject only to the
requisite approval of the Merger, this Agreement and the other agreements
attached as exhibits hereto (the "Ancillary Agreements") by the stockholders of
Target, Target has all requisite corporate power and authority to execute and
deliver this Agreement and the Ancillary Agreements to which it is a party, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by
Target of this Agreement and the Ancillary Agreements to which Target is a party
and the consummation by Target of the transactions contemplated hereby and
thereby, and the performance by Target of its obligations hereunder and
thereunder, have been duly and validly authorized by all necessary action by the
Board of Directors of Target, and no other action on the part of the Board of
Directors of Target is required to authorize the execution, delivery and
performance of this Agreement and the Ancillary Agreements to which Target is a
party by Target and the consummation by Target of the transactions contemplated
hereby and thereby. This Agreement and the Ancillary Agreements to which Target
is a party have been duly and validly executed and delivered by Target and,
assuming the due authorization and valid execution and delivery of this
Agreement by Acquiror and each Ancillary Agreement by each party (other than
Target) to such Ancillary Agreement, each constitutes a legal, valid and binding
obligation of Target enforceable against
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Target in accordance with its respective terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar Laws relating to the enforcement of
creditors' rights generally and by general principles of equity.
2.3 CAPITALIZATION. The authorized capital stock of Target consists
only of 35,000,000 shares of Common Stock, $0.001 par value per share (the
"Target Common Stock"), of which 16,971,261 shares of Common Stock are issued
and outstanding, and 13,500,000 shares of Preferred Stock, $0.001 par value per
share (the "Target Preferred Stock"). The designation and status of Target
Preferred Stock is as follows: (i) 1,500,000 shares are designated Series A
Preferred Stock, all of which are issued and outstanding, (ii) 6,000,000 shares
are designated as Series B Preferred Stock, of which 5,555,905 are issued and
outstanding and (iii) 6,000,000 shares are designated Series C Preferred Stock,
none of which are issued or outstanding. All of the issued and outstanding
shares of Target Common Stock and Target Preferred Stock are validly issued,
fully paid and nonassessable, and have been issued in compliance with all
applicable federal, state and foreign securities Laws. Except as set forth in
Section 2.3 of the Target Disclosure Schedule, (a) no shares of Target Common
Stock or Target Preferred Stock are held in treasury or are authorized or
reserved for issuance and (b) no Options are outstanding. Section 2.3 of the
Target Disclosure Schedule lists the name (and, if such holder is not an
employee of Target, the address) of such holder of Target Common Stock, Target
Preferred Stock, Target Option and Target Warrant. With respect to any Target
Common Stock or Target Preferred Stock that has been issued subject to a
repurchase option on the part of Target, Section 2.3 of the Target Disclosure
Schedule sets forth the holder thereof, the number and type of securities
covered thereby, and the vesting schedule thereof (including a description of
the circumstances under which such vesting schedule can or will be accelerated).
Except as set forth Section 2.3 of the Target Disclosure Schedule, there are no
agreements, arrangements or understandings to which Target is a party (written
or oral) to issue any Options with respect to Target and there are no preemptive
rights or agreements, arrangements or understandings to issue preemptive rights
with respect to the issuance or sale of Target Capital Stock created by statute,
the Certificate of Incorporation or Bylaws of Target, or any agreement or other
arrangement to which Target is a party or to which it is bound and there are no
agreements, arrangements or understandings to which Target is a party (written
or oral) pursuant to which Target has the right to elect to satisfy any
Liability by issuing Target Common Stock or Equity Equivalents. With respect to
each Target Option and each Target Warrant, Section 2.3 of the Target Disclosure
Schedule sets forth the holder thereof, the number and type of securities
issuable thereunder, and, if applicable, the exercise price therefor, the
exercise period and vesting schedule thereof (including a description of the
circumstances under which such vesting schedule can or will be accelerated). All
Target Options and Target Warrants were issued in compliance with all applicable
federal, state and foreign securities Laws. Other than the Target Support
Agreements, Target is not a party or subject to any agreement or understanding,
and, to Target's knowledge, there is no agreement, arrangement or understanding
between or among any Persons which affects, restricts or relates to voting,
giving of written consents, dividend rights or transferability of shares with
respect to Target Capital Stock, including any voting trust agreement or proxy.
2.4 SUBSIDIARIES. Siara Research Canada, Inc., a Canadian federal
corporation ("Target Subsidiary") is a wholly-owned subsidiary of Target. Except
for Target Subsidiary, Target has (and prior to the Closing will have) no
Subsidiaries and does not (and
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prior to the Closing will not) otherwise hold any equity, membership,
partnership, joint venture or other ownership interest in any Person. There are
no outstanding options, warrants, or other rights to acquire capital stock of
Target Subsidiary or securities convertible into or exchangeable for such stock.
2.5 NO CONFLICTS. The execution and delivery by Target of this
Agreement does not, and the performance by Target of its obligations under this
Agreement and the consummation of the transactions contemplated hereby do not
and will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the Certificate of Incorporation or
Bylaws of Target or Target Subsidiary;
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Section 2.5 of the Target
Disclosure Schedule, if any, conflict with or result in a violation or breach of
any Law or Order applicable to Target or Target Subsidiary or any of their
respective Assets and Properties; or
(c) except as would not have a Material Adverse Effect on Target
(i) conflict with or result in a violation or breach of, (ii) constitute a
default (or an event that, with or without notice or lapse of time or both,
would constitute a default) under, (iii) require Target or Target Subsidiary to
obtain any consent, approval or action of, make any filing with or give any
notice to any Person (other than the filing of the Delaware Certificate of
Merger together with the required officers' certificates, any filing required
under the HSR Act in connection with the Merger and such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under state or federal securities Laws) as a result or under the terms
of, (iv) result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, (v) result in or give to any
Person any additional rights or entitlement to increased, additional,
accelerated or guaranteed payments or performance under, (vi) result in the
creation or imposition of (or the obligation to create or impose) any material
Lien upon Target or Target Subsidiary or any of their respective material Assets
or Properties under or (vii) result in the loss of a material benefit under any
material Contract or License to which Target or Target Subsidiary is a party or
by which any of Target's or Target Subsidiary's material Assets and Properties
are bound.
2.6 BOOKS AND RECORDS; ORGANIZATIONAL DOCUMENTS. The minute books
and stock record books and other similar records of Target and Target Subsidiary
have been provided or made available to Acquiror or its counsel prior to the
execution of this Agreement, are complete and correct in all material respects
and have been maintained in accordance with customary business practices. Such
minute books contain a true and complete record of all actions taken at all
meetings and by all written consents in lieu of meetings of the directors,
stockholders and committees of the Board of Directors of Target and Target
Subsidiary from the date of Target's and Target Subsidiary's respective
incorporation through the date hereof. Target has, prior to the execution of
this Agreement, delivered to Acquiror true and complete copies of its and Target
Subsidiary's Certificate of Incorporation and Bylaws, as amended through the
date hereof. Neither Target nor Target Subsidiary is in violation of any
provisions of its Certificate of Incorporation or Bylaws as so amended.
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2.7 TARGET FINANCIAL STATEMENTS. Schedule 2.7 to the Target
Disclosure Schedule sets forth the Target Financials. Target Financials
delivered to Acquiror are correct and complete in all material respects and have
been prepared in accordance with GAAP applied on a basis consistent throughout
the periods indicated (except, with respect to any Target Financials that are
unaudited, for the absence of notes thereto and the effect of the absence of
notes thereto and the effect of the absence of year-end audit adjustments) and
consistent with each other (except as indicated in the notes thereto, as
delivered to Acquiror prior to the date hereof). Target Financials present
fairly the financial condition and operating results of Target as of the dates
and during the periods indicated therein. Since the Financial Statement Date,
there has been no change in any accounting policies, principles, methods or
practices, including any material change with respect to reserves (whether for
bad debts, contingent liabilities or otherwise), of Target.
2.8 ABSENCE OF CHANGES. Since the Financial Statement Date, there
has not been any material adverse change in the Business or Condition of Target
or any occurrence or event which, individually or in the aggregate, is
reasonably expected to have Material Adverse Effect on Target. In addition,
without limiting the generality of the foregoing, except as expressly
contemplated by this Agreement, since the Financial Statement Date:
(a) neither Target nor Target Subsidiary has entered into any
material Contract or other material commitment or transaction;
(b) there has not been any material amendment or other material
modification (or agreement to do so), or material violation of the terms of, any
of the material Contracts set forth or described in Section 2.16(a)(1) of the
Target Disclosure Schedule;
(c) there has not been any amendment to Target's Certificate of
Incorporation or Bylaws;
(d) there has not been any transfer (by way of a License or
otherwise) to any Person of rights to any material Target Intellectual Property,
other than licenses in the ordinary course of business consistent with past
practice;
(e) neither Target nor Target Subsidiary has made any change in
accounting policies, principles, methods, practices or procedures (including for
bad debts, contingent liabilities or otherwise, respecting capitalization or
expense of research and development expenditures, depreciation or amortization
rates or timing of recognition of income and expense);
(f) Target has taken all commercially reasonable action required
to maintain, renew, extend or enforce any material Target Intellectual Property;
(g) there has been no physical damage, destruction or other
casualty loss (whether or not covered by insurance) affecting any of the real or
personal property or equipment of Target or in an amount exceeding one hundred
thousand dollars ($100,000) individually or two hundred fifty thousand dollars
($250,000) in the aggregate; and
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(h) neither Target nor Target Subsidiary has entered into or
approved any contract, arrangement or understanding or acquiesced in respect of
any arrangement or understanding, to do, engage in or cause or having the effect
of any of the foregoing.
2.9 NO UNDISCLOSED LIABILITIES. Except as reflected or reserved
against in Target Financials (including the notes thereto), Target has no
material Liabilities, other than Liabilities incurred in the ordinary course of
business consistent with past practice since the Financial Statement Date and
any liabilities under the Note.
2.10 TAXES.
(a) All Tax returns, statements, reports, declarations and other
forms and documents (including without limitation estimated Tax returns and
reports and material information statements, returns and reports) required to be
filed with any Tax Authority with respect to any Taxable period ending on or
before the Effective Time, by or on behalf of Target (collectively, "Tax
Returns" and individually a "Tax Return"), have been or will be completed and
filed when due (including any extensions of such due date) and all amounts shown
due on such Tax Returns on or before the Effective Time have been or will be
paid on or before such date. All such Tax Returns are true, accurate and
complete as filed. The Target September 30, 1999 unaudited balance sheet
included in the Target Financial Statements (the "Target Balance Sheet") (i)
fully accrues all Target's actual and contingent liabilities for Taxes with
respect to all periods through September 30, 1999 and Target has not and will
not incur any Tax liability in excess of the amount reflected on such Target
Balance Sheet with respect to such periods (excluding any amount thereof that
reflects timing differences between the recognition of income for purposes of
GAAP and for Tax purposes), and (ii) properly accrues in accordance with GAAP
all material liabilities for Taxes payable after September 30, 1999 with respect
to all transactions and events occurring on or prior to such date. All
information set forth in the notes to the Target Financial Statements relating
to Tax matters is true, complete and accurate in all material respects. No
material Tax liability since September 30, 1999 has been or will be incurred by
Target other than in the ordinary course of business, and adequate provision has
been made by Target for all Taxes since that date in accordance with GAAP on at
least a quarterly basis.
(b) Target has previously provided or made available to Acquiror
true and correct copies of all Tax Returns. Target has withheld and paid to the
applicable financial institution or Tax Authority all amounts required to be
withheld. Target (or any member of any affiliated or combined group of which
Target has been a member) has not granted any extension or waiver of the
limitation period applicable to any Tax Returns that is still in effect. There
is no material claim, audit, action, suit, proceeding, or (to the knowledge of
Target) investigation now pending or (to the knowledge of Target) threatened
against or with respect to Target in respect of any Tax or assessment. No notice
of deficiency or similar document of any Tax Authority asserting the Target has
unpaid Tax liability has been received by Target, and there are no liabilities
for Taxes (including liabilities for interest, additions to Tax and penalties
thereon and related expenses) with respect to the issues that have been raised
(and are currently pending) by any Tax Authority that could, if determined
adversely to Target, materially and adversely affect the liability of Target for
Taxes. There are no liens for Taxes (other than for current Taxes not yet due
and payable) upon the assets of Target. Target has never been a member of an
affiliated
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group of corporations, within the meaning of Section 1504 of the Code. Target is
in full compliance with all the terms and conditions of any Tax exemptions or
other Tax-sharing agreement or order of a foreign government and the
consummation of the Merger will not have any adverse effect on the continued
validity and effectiveness of any such Tax exemption or other Tax-sharing
agreement or order. Neither Target nor any Person on behalf of Target has
entered into or will enter into any agreement or consent pursuant to the
collapsible corporation provisions of Section 341(f) of the Code (or any
corresponding provision of state, local or foreign income tax law) or agreed to
have Section 341(f)(2) of the Code (or any corresponding provision of state,
local or foreign income tax law) apply to any disposition of any asset owned by
Target. None of the assets of Target is property that Target is required to
treat as being owned by any other Person pursuant to the so-called "safe harbor
lease" provisions of former Section 168(f)(8) of the Code. None of the assets of
Target directly or indirectly secures any debt the interest on which is
tax-exempt under Section 103(a) of the Code. None of the assets of Target is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
Target has not made and will not make a deemed dividend election under Treas.
Reg. Section 1.1502-32(f)(2) or a consent dividend election under Section 565 of
the Code. Target has never been a party (either as a distributing corporation or
as a corporation that has been distributed) to any transaction intended to
qualify under Section 355 of the Code or any corresponding provision of state
law. Neither Target nor Target Subsidiary has participated in (and will not
participate in) an international boycott within the meaning of Section 999 of
the Code. Target does not have and has not had a permanent establishment in any
foreign country, as defined in any applicable tax treaty or convention between
the United States of America and any such foreign country. Target has never
elected to be treated as an S-corporation under Section 1362 of the Code or any
corresponding provision of federal or state law. All material elections with
respect to Target's Taxes made during the fiscal year ending, December 31, 1998
are reflected on the Target Tax Returns for such period, a copy of which have
been provided or made available to Acquiror. After the date of this Agreement,
no material election with respect to Taxes not made in the ordinary course of
business will be made without the prior written consent of Acquiror, which
consent will not be unreasonably withheld or delayed. Target is not party to any
joint venture, partnership, or other arrangement or contract which could be
treated as a partnership for federal income tax purposes. Target is not
currently, and never has been, subject to the reporting requirements of Section
6038A of the Code. There is no agreement, contract or arrangement to which
Target is a party that could, individually or collectively, result in the
payment of any amount that would not be deductible by reason of Sections 280G
(as determined without regard to Section 280G(b)(4) and (5)), 162(a) (by reason
of being unreasonable in amount), 162 (b) through (p) or 404 of the Code. Target
is not a party to or bound by any Tax indemnity, Tax sharing or Tax allocation
agreement (whether written or unwritten or arising under operation of federal
law as a result of being a member of a group filing consolidated Tax returns,
under operation of certain state laws as a result of being a member of a unitary
group, or under comparable laws of other states or foreign jurisdictions) which
includes a party other than Target nor does Target owe any amount under any such
Agreement. Target is not, and has not been, a United States real property
holding corporation (as defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Other than
by reason of the Merger, Target has not been and will not be required to include
any material adjustment in Taxable income for any Tax period (or portion
thereof) pursuant to Section 481 or
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263A of the Code or any comparable provision under state or foreign Tax laws as
a result of transactions, events or accounting methods employed prior to the
Merger.
(c) For purposes of this Agreement, the following terms have the
following meanings: "Tax" (and, with correlative meaning, "Taxes" and "Taxable")
means any and all taxes including, without limitation, (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, value added, net worth, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Governmental Entity (a "Tax Authority") responsible for the
imposition of any such tax (domestic or foreign), (ii) any liability for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any Taxable
period or as the result of being a transferee or successor thereof and (iii) any
liability for the payment of any amounts of the type described in (i) or (ii) as
a result of any express or implied obligation to indemnify any other Person. As
used in this Section 2.10, the term "Target" means Target and any entity
included in, or required under GAAP to be included in, any of the Target
Financials.
2.11 LEGAL PROCEEDINGS. Except as set forth in Section 2.11 of the
Target Disclosure Schedule:
(i) there are no Actions or Proceedings pending or, to the
knowledge of Target or Target Subsidiary, threatened against, relating to or
affecting Target or Target Subsidiary or their respective Assets and Properties;
and
(ii) neither Target nor Target Subsidiary has received
notice, and does not otherwise have knowledge of any Orders outstanding against
Target or Target Subsidiary.
2.12 COMPLIANCE WITH LAWS AND ORDERS. Neither Target nor Target
Subsidiary has violated in any material respect, and is not currently in default
in any material respect under, any Law or Order applicable to Target or Target
Subsidiary or any of their respective Assets and Properties.
2.13 EMPLOYEE BENEFIT PLANS.
(a) Except for the plans and agreements listed in Section 2.13
of the Target Disclosure Schedule (collectively, the "Plans"), neither Target
nor Target Subsidiary maintains, is a party to, contributes to or is obligated
to contribute to, and neither Target's nor Target Subsidiary's employees or
former employees and their dependents or survivors receive benefits under, any
of the following (whether or not set forth in a written document):
(i) Any employee benefit plan, as defined in section 3(3) of
ERISA;
(ii) Any bonus, deferred compensation, incentive, restricted
stock, stock purchase, stock option, stock appreciation right, phantom stock,
supplemental
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pension, executive compensation, cafeteria benefit, dependent care, director or
employee loan, fringe benefit, sabbatical, severance, termination pay or similar
plan, program, policy, agreement or arrangement (other than any such item
provided solely pursuant to the terms of a written or oral contract with any
individual employee that is disclosed in Section 2.13 of the Target Disclosure
Schedule); or
(iii) Any plan, program, agreement, policy, commitment or
other arrangement relating to the provision of any benefit described in section
3(1) of ERISA to former employees or directors or to their survivors, other than
procedures intended to comply with COBRA.
(b) Neither Target nor any ERISA Affiliate has, since January 1,
1993, terminated, suspended, discontinued contributions to or withdrawn from any
employee pension benefit plan, as defined in section 3(2) of ERISA, including
(without limitation) any multiemployer plan, as defined in section 3(37) of
ERISA.
(c) Target has agreed to provide to Acquiror prior to Closing
complete, accurate and current copies of each of the following:
(i) The text (including amendments) of each of the Plans, to
the extent reduced to writing;
(ii) A summary of each of the Plans, to the extent not
previously reduced to writing;
(iii) With respect to each Plan that is an employee benefit
plan (as defined in section 3(3) of ERISA), the following:
A. The most recent summary plan description that has
been prepared, as described in section 102 of ERISA;
B. Any summary of material modifications that has been
distributed to participants or filed with the U.S. Department of Labor but that
has not been incorporated in an updated summary plan description furnished under
Subparagraph (A) above; and
C. The annual report, as described in section 103 of
ERISA, and (where applicable) actuarial reports, for the most recent plan year
for which an annual report or actuarial report has been prepared; and
(iv) With respect to each Plan that is intended to qualify
under section 401(a) of the Internal Revenue Code, the most recent determination
letter concerning the Plan's qualification under section 401(a) of the Internal
Revenue Code, as issued by the Internal Revenue Service, and any subsequent
determination letter application.
(d) With respect to each Plan that is an employee benefit plan
(as defined in section 3(3) of ERISA), the requirements of ERISA applicable to
such Plan have been
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satisfied, except to the extent that a failure to satisfy any of such
requirements would not have a Material Adverse Effect.
(e) With respect to each Plan that is subject to COBRA, the
requirements of COBRA applicable to such Plan have been satisfied, except to the
extent that a failure to satisfy any of such requirements would not have a
Material Adverse Effect.
(f) With respect to each Plan that is subject to the Family
Medical Leave Act of 1993, as amended, the requirements of such Act applicable
to such Plan have been satisfied, except to the extent that a failure to satisfy
any of such requirements would not have a Material Adverse Effect.
(g) Each Plan that is intended to qualify under section 401(a)
of the Internal Revenue Code meets the requirements for qualification under
section 401(a) of the Internal Revenue Code and the regulations thereunder,
except to the extent that such requirements may be satisfied by adopting
retroactive amendments under section 401(b) of the Internal Revenue Code and the
regulations thereunder. Each such Plan has been administered in accordance with
its terms (or, if applicable, such terms as will be adopted pursuant to a
retroactive amendment under section 401(b) of the Internal Revenue Code) and the
applicable provisions of ERISA and the Internal Revenue Code and the regulations
thereunder, except to the extent that a failure to be so administered would not
have a Material Adverse Effect.
(h) Neither Target nor any ERISA Affiliate has any accumulated
funding deficiency under section 412 of the Internal Revenue Code or any
termination or withdrawal liability under Title IV of ERISA. For purposes of
determining any accumulated funding deficiency under section 412 of the Internal
Revenue Code, the term "ERISA Affiliate" shall include any entity that is deemed
to be a member of the same "controlled group" within the meaning of section
414(m) or (o) of the Internal Revenue Code.
(i) All contributions, premiums or other payments due from
Target or Target Subsidiary to (or under) any Plan have been fully paid or
adequately provided for on the books and financial statements of Target or
Target Subsidiary. All accruals (including, where appropriate, proportional
accruals for partial periods) have been made in accordance with prior practices.
(j) Except as disclosed in Section 2.13 of the Target Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
(excluding any employment agreement with Acquiror entered into by any employee
or director of Target in connection with this Agreement) will not result in (i)
any amount becoming payable to any employee, director or independent contractor
of Target or Target Subsidiary, (ii) the acceleration of payment or vesting of
any benefit, option or right to which any employee, director or independent
contractor of Target or Target Subsidiary may be entitled, (iii) the forgiveness
of any indebtedness of any employee, director or independent contractor of
Target or Target Subsidiary or (iv) any cost becoming due or accruing to Target
or Target Subsidiary or Acquiror with respect to any employee, director or
independent contractor of Target or Target Subsidiary.
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(k) Other than routine claims for benefits under the Plans,
there are no pending, or, to the best knowledge of Target or Target Subsidiary,
threatened, Actions or Proceedings involving the Plans, or the fiduciaries,
administrators, or trustees of any of the Plans or Target or Target Subsidiary
or any of their ERISA Affiliates as the employer or sponsor under any Plan, with
any of the IRS, the Department of Labor, the PBGC, any participant in or
beneficiary of any Plan or any other Person whomsoever. Target and Target
Subsidiary know of no reasonable basis for any such claim, lawsuit, dispute,
action or controversy.
2.14 TITLE TO PROPERTY. Except for title to Target Intellectual
Property, which is covered by Section 2.15 below, Target and Target Subsidiary
have good and marketable title to all of their respective material properties,
interests in properties and assets, real and personal, reflected in Target
Financials or acquired after the Financial Statement Date (except properties,
interests in properties and assets sold or otherwise disposed of since the
Financial Statement Date in the ordinary course of business), free and clear of
all material mortgages, liens, pledges, charges or encumbrances of any kind or
character, except (i) liens for current taxes not yet due and payable, (ii) such
imperfections of title, liens and easements as do not and will not materially
detract from or interfere with the use of the properties subject thereto or
affected thereby, or otherwise materially impair business operations involving
such properties and (iii) liens securing debt which is reflected on Target
Financials. The plants, property and equipment of Target and Target Subsidiary
that are used in the operations of its businesses are in good operating
condition and repair, subject to normal wear and tear. All properties used in
the operations of Target and Target Subsidiary are reflected in Target
Financials to the extent generally accepted accounting principles required the
same to be reflected as of the dates of such Target Financials. With respect to
properties and assets leased by Target and Target Subsidiary, Target or Target
Subsidiary, as applicable, holds valid leasehold interests in such properties
and assets in accordance with the terms of the agreements governing such leases.
2.15 INTELLECTUAL PROPERTY.
(a) Target has all requisite right, title and interest in or
valid and enforceable rights under Contracts or Licenses to use all Target
Intellectual Property necessary to the conduct of its business as presently
conducted. Each item of Target Intellectual Property, either is owned
exclusively by Target, free and clear of any Liens, or is licensed to Target
under a valid License granting sufficient rights to permit Target to conduct its
business as presently conducted. To the best of its knowledge, Target owns or
has the valid right to use all trademarks, service marks and trade names used by
Target in connection with the operation or conduct of the business of Target,
including the sale of any products or technology or the provision of any
services by Target. Target owns exclusively, and has good title to, all
copyrighted works that are Target products or other works of authorship that
Target otherwise purports to own; provided, however, that such works may
incorporate copyrighted works or works of authorship, trademarks or trade names
of third parties which are licensed to Target or are in the public domain.
Except pursuant to agreements in the ordinary course of business, neither Target
nor Target Subsidiary has transferred ownership of any Target Intellectual
Property to any other Person.
(b) To the extent that any Target Intellectual Property that is
material to Target's business has been developed or created by any Person other
than Target, Target has a
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written agreement with such Person with respect thereto and Target has either
(i) obtained ownership of, and is the exclusive owner of, all such Intellectual
Property by operation of law or by valid assignment of any such rights or (ii)
obtained a License under or to such Intellectual Property.
(c) The operation of the business of Target as currently
conducted, including Target's design, development, use, import, manufacture and
sale of the products, technology or services (including products, technology or
services currently under development) of Target: (i) does not infringe the
copyright or misappropriate the trade secrets of any Person; (ii) to the best of
Target's knowledge, does not infringe the patent rights or trademark rights of
any Person; (iii) does not violate in any material respect the rights of any
Person (including rights to privacy or publicity other than patent rights or
trademark rights described above); and, (iv) does not constitute unfair
competition or an unfair trade practice under any Law. Neither Target nor Target
Subsidiary has received notice from any Person claiming that such operation or
any act, product, technology or service (including products, technology or
services currently under development) of Target or Target Subsidiary infringes
or misappropriates the Intellectual Property of any Person or constitutes unfair
competition or trade practices under any Law.
(d) Each item of Target Registered Intellectual Property is
valid and subsisting, and all necessary registration, maintenance, renewal fees,
annuity fees and taxes in connection with such Registered Intellectual Property
have been paid and all necessary documents and certificates in connection with
such Registered Intellectual Property have been filed with the relevant patent,
copyright, trademark or other authorities in the United States or foreign
jurisdictions in which such Registered Intellectual Property is registered, as
the case may be, for the purposes of maintaining such Registered Intellectual
Property.
(e) There are no Contracts or Licenses between Target and any
other Person with respect to Target Intellectual Property under which there is
any dispute known to Target regarding the scope of such Contract or License, or
performance under such Contract or License, including any dispute with respect
to any payments to be made or received by Target thereunder.
(f) Target has taken all requisite commercially reasonable steps
to maintain and preserve the confidentiality of Target's confidential
information and trade secrets of Target or any similar information provided by
any other Person to Target subject to a duty of confidentiality. Without
limiting the generality of the foregoing, Target has, and enforces, a policy
requiring each employee, consultant and independent contractor to execute
proprietary information, confidentiality and invention assignment agreements.
(g) Target has taken all commercially reasonable actions
necessary and appropriate to assure that there shall be no material adverse
change to its business or electronic systems or material interruptions in the
delivery of Target's products and services by reason of computer software errors
or miscalculations associated with the advent of the year 2000, including that
all of its products (including products currently under development) will,
without interruption or manual intervention, continue to consistently,
predictably and accurately record, store, process, calculate and present
calendar dates falling on and after (and if applicable, spans of time including)
January 1, 2000, and will consistently, predictably and accurately
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calculate any information dependent on or relating to such dates in
substantially the same manner, and with the same functionality, data integrity
and performance, as such products record, store, process, calculate and present
calendar dates on or before December 31, 1999, or calculate any information
dependent on or relating to such dates.
2.16 CONTRACTS.
(a) Section 2.16(a)(1) of the Target Disclosure Schedule
contains a true and complete list of each of Target's and Target Subsidiary's
Contracts that are material to Target's business, operations or financial
condition (true and complete copies or, if none, reasonably complete and
accurate written descriptions of which, together with all amendments and
supplements thereto and all waivers of any terms thereof, have been made
available to Acquiror prior to the execution of this Agreement).
(b) Each Contract required to be disclosed in Section 2.16(a) of
the Target Disclosure Schedule is in full force and effect and constitutes a
legal, valid and binding agreement of Target or Target Subsidiary, enforceable
against Target or Target Subsidiary in accordance with its terms (subject to the
effect of bankruptcy and other laws affecting the rights of creditors generally
and limitations on the enforcement of contracts under principles of equity),
and, to the knowledge of Target or Target Subsidiary, each other party thereto
(subject to the effect of bankruptcy and other laws affecting the rights of
creditors generally and limitations on the enforcement of contracts under
principles of equity), and, to the knowledge of Target or Target Subsidiary, no
other party to such Contract is, nor has received notice that it is, in material
violation or breach of or default under any such Contract (or with notice or
lapse of time or both, would be in material violation or breach of or default
under any such Contract).
(c) Neither Target nor Target Subsidiary is a party to or bound
by any Contract that (i) automatically terminates or allows termination by the
other party thereto upon consummation of the transactions contemplated by this
Agreement or (ii) contains any covenant or other provision which limits Target's
or Target Subsidiary's ability to compete with any Person in any line of
business or in any area or territory.
2.17 INSURANCE. Target and Target Subsidiary have policies of
insurance and bonds of the type and in amounts customarily carried by companies
conducting businesses or owning assets similar to those of Target and Target
Subsidiary. There is no material claim pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and Target and Target Subsidiary are
otherwise in compliance with the terms of such policies and bonds. Neither
Target nor Target Subsidiary has knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
2.18 AFFILIATE TRANSACTIONS. Except as disclosed in Section 2.8(f)
or 2.18(a) of the Target Disclosure Schedule, and except for any stock purchase
agreements, stock option agreements and invention assignment or confidentiality
agreements in favor of Target or Target Subsidiary, (i) there are no Contracts
or Liabilities between Target or Target Subsidiary, on the one hand, and (A) any
current or former officer, director, stockholder, or to Target's or Target
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Subsidiary's knowledge, any Affiliate or Associate of Target or Target
Subsidiary or (B) any Person who, to Target's or Target Subsidiary's knowledge,
is an Associate of any such officer, director, stockholder or Affiliate, on the
other hand, (ii) neither Target nor Target Subsidiary provides or causes to be
provided any assets, services or facilities to any such current or former
officer, director, stockholder, Affiliate or Associate, (iii) neither Target,
Target Subsidiary nor any such current or former officer, director, stockholder,
Affiliate or Associate provides or causes to be provided any assets, services or
facilities to Target or Target Subsidiary and (iv) neither Target nor Target
Subsidiary beneficially owns, directly or indirectly, any Investment Assets of
any such current or former officer, director, stockholder, Affiliate or
Associate.
2.19 EMPLOYEES; LABOR RELATIONS.
(a) Neither Target nor Target Subsidiary is a party to any
collective bargaining agreement and there are no unfair labor practice or labor
arbitration proceedings pending with respect to Target or Target Subsidiary, or,
to the knowledge of Target or Target Subsidiary, threatened, and there are no
facts or circumstances known to Target or Target Subsidiary that could
reasonably be expected to give rise to such complaint or claim. To the knowledge
of Target or Target Subsidiary, there are no organizational efforts presently
underway or threatened involving any employees of Target or Target Subsidiary or
any of the employees performing work for Target or Target Subsidiary but those
provided by an outside employment agency, if any. There has been no work
stoppage, strike or other concerted action by employees of Target or Target
Subsidiary.
(b) All employees of Target and Target Subsidiary are employed
at will. Section 2.19(b) of the Target Disclosure Schedule sets forth,
individually and by category, the name of each officer, employee and consultant,
together with such person's position or function, annual base salary or wage and
any incentive, severance or bonus arrangements with respect to such person. To
the knowledge of Target or Target Subsidiary, no employee of Target or Target
Subsidiary has made any threat, or otherwise revealed an intent, to terminate
such employee's relationship with Target or Target Subsidiary, for any reason,
including because of the consummation of the transactions contemplated by this
Agreement. Neither Target nor Target Subsidiary is a party to any agreement for
the provision of labor from any outside agency. To the knowledge of Target or
Target Subsidiary, there have been no claims by employees of such outside
agencies, if any, with regard to employees assigned to work for Target or Target
Subsidiary, and no claims by any governmental agency with regard to such
employees except as set forth in Section 2.19(b) of the Target Disclosure
Schedule.
(c) There have been no federal or state claims based on sex,
sexual or other harassment, age, disability, race or other discrimination or
common law claims, including claims of wrongful termination, by any employees of
Target or Target Subsidiary or by any of the employees performing work for
Target or Target Subsidiary but those provided by an outside employment agency,
and there are no facts or circumstances known to Target or Target Subsidiary
that could reasonably be expected to give rise to such complaint or claim. Both
Target and Target Subsidiary have complied in all material respects with all
laws related to the employment of employees and, except as set forth in Section
2.19(c) of the Target Disclosure Schedule, neither Target nor Target Subsidiary
has received any notice of any claim that it has not complied in any material
respect with any Laws relating to the employment of employees,
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including any provisions thereof relating to wages, hours, collective
bargaining, the payment of Social Security and similar taxes, equal employment
opportunity, employment discrimination, the WARN Act, employee safety, or that
it is liable for any arrearages of wages or any taxes or penalties for failure
to comply with any of the foregoing.
(d) Neither Target nor Target Subsidiary has written policies
and/or employee handbooks or manuals except as described in Section 2.19(d) of
the Target Disclosure Schedule.
(e) To the knowledge of Target or Target Subsidiary, no officer,
employee or consultant of Target or Target Subsidiary is obligated under any
Contract or other agreement or subject to any Order or Law that would interfere
with Target's or Target Subsidiary's businesses as currently conducted. To the
knowledge of Target or Target Subsidiary, neither the execution nor delivery of
this Agreement, nor the carrying on of Target's or Target Subsidiary's
businesses as presently conducted nor any activity of such officers, employees
or consultants in connection with the carrying on of Target's or Target
Subsidiary's businesses as presently conducted, will conflict with or result in
a breach of the terms, conditions or provisions of, constitute a default under,
or trigger a condition precedent to any rights under, any Contract or other
agreement under which any of such officers, employees or consultants is now
bound.
(f) Target and Target Subsidiary have complied in all material
respects with the verification requirements and the record-keeping requirements
of the Immigration Reform and Control Act of 1986 ("IRCA"); to the best
knowledge of Target or Target Subsidiary, the information and documents on which
Target and Target Subsidiary relied to comply with IRCA are true and correct;
and there have not been any discrimination complaints filed against Target or
Target Subsidiary pursuant to IRCA, and to the best knowledge of Target or
Target Subsidiary, there is no basis for the filing of such a complaint.
2.20 ENVIRONMENTAL MATTERS.
(a) Target and Target Subsidiary possess all Environmental
Permits required for the operation of their businesses.
(b) Target and Target Subsidiary are in compliance in all
material respects with (i) all terms, conditions and provisions of its
Environmental Permits; and (ii) all Environmental Laws.
(c) Neither Target nor, to the knowledge of Target, Target
Subsidiary or any predecessor of Target nor any entity previously owned by
Target has any obligation or liability with respect to any Hazardous Material,
including any Release or threatened or suspected Release of any Hazardous
Material, and there have been no events, facts or circumstances since the date
of incorporation of Target and Target Subsidiary which could reasonably be
expected to form the basis of any such obligation or liability.
(d) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by or for Target or Target
Subsidiary or, to the knowledge of Target or Target Subsidiary, by or for any
other Person with respect to any Site
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while Target or Target Subsidiary has occupied the Site, which have not been
delivered to Acquiror prior to execution of this Agreement.
2.21 OTHER NEGOTIATIONS; BROKERS; THIRD PARTY EXPENSES. Neither
Target nor, to the knowledge of Target, any of its Affiliates (nor any
investment banker, financial advisor, attorney, accountant or other Person
retained by or acting for or on behalf of Target or at Target's direction) (a)
has entered into any Contract that conflicts with any of the transactions
contemplated by this Agreement or (b) has entered into any Contract or had any
discussions with any Person regarding any transaction involving Target which
could reasonably be expected to result in Acquiror, Target or any general
partner, limited partner, manager, officer, director, employee, agent or
Affiliate of any of them being subject to any claim for liability to said Person
as a result of entering into this Agreement or consummating the transactions
contemplated hereby. Section 2.21 of the Target Disclosure Schedule sets forth
the principal terms and conditions of any Contract with respect to, and a
reasonable estimate of, all Third Party Expenses expected to be incurred by
Target in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby.
2.22 FOREIGN CORRUPT PRACTICES ACT. Neither Target, Target
Subsidiary, nor to the knowledge of Target or Target Subsidiary, any agent,
employee or other Person acting on behalf of Target or Target Subsidiary has,
directly or indirectly, used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity,
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds, violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback
or other similar unlawful payment.
2.23 TAX-FREE REORGANIZATION. To the knowledge of Target, after Good
Faith Consultation with Target's independent accountants, neither Target nor any
of its directors, officers or stockholders has taken any action which could
reasonably be expected to jeopardize the status of the Merger as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code.
2.24 APPROVALS.
(a) Section 2.24(a) of the Target Disclosure Schedule contains a
list of all material Approvals of Governmental or Regulatory Authorities
relating to the business conducted by Target which are required to be given to
or obtained by Target prior to the Closing from any and all Governmental or
Regulatory Authorities in connection with the consummation of the transactions
contemplated by this Agreement.
(b) Section 2.24(b) of the Target Disclosure Schedule contains a
list of all material Approvals which are required to be given to or obtained by
Target prior to the Closing from any and all third parties other than
Governmental or Regulatory Authorities in connection with the consummation of
the transactions contemplated by this Agreement.
(c) Target has obtained all material Approvals from Governmental
or Regulatory Authorities necessary to conduct the business conducted by Target
in the manner as it
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is currently being conducted and there has been no written notice received by
Target of any material violation or material non-compliance with any such
Approvals. All material Approvals from Governmental or Regulatory Authorities
necessary to conduct the business conducted by Target as it is currently being
conducted are set forth in Section 2.24(c) of the Target Disclosure Schedule.
(d) The affirmative vote or consent of the holders of (i) the
shares of Target Common Stock outstanding as of the applicable record date
voting separately as a class, and (ii) the shares of Target Common Stock and
Target Preferred Stock outstanding as of the applicable record date, voting
together as a single class, are the only votes of the holders of any of Target
Capital Stock necessary to approve this Agreement and the Merger and the
transactions contemplated hereby.
2.25 DISCLOSURE. No representation or warranty contained in Article
2 of this Agreement, and no statement contained in the Target Disclosure
Schedule or in any certificate, list or other writing furnished to Acquiror
pursuant to any provision of this Agreement (including Target Financials and the
notes thereto) contains any untrue statement of a material fact or omits to
state a material fact necessary to make the representations and warranties of
Target and Target Subsidiary in Article 2 (as modified by the Target Disclosure
Schedule), in the light of the circumstances under which they were made, not
misleading.
2.26 S-4 REGISTRATION STATEMENT; PROXY STATEMENT. The information
supplied in writing to Acquiror, or its counsel or auditors, by Target and
Target Stockholders for inclusion in the registration statement on Form S-4 (or
such other or successor form as shall be appropriate) pursuant to which the
shares of Acquiror Common Stock to be issued in the Merger and Target Options to
be assumed in the Merger will be registered with the SEC (the "S-4 Registration
Statement") shall not, at the time the S-4 Registration Statement (including any
amendments or supplements thereto) is declared effective by the SEC, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
information supplied by Target and Target's stockholders for inclusion in the
proxy statement/prospectus to be sent to the stockholders of Target and Acquiror
in connection with the meeting of Target's stockholders (the "Acquiror
Stockholders Meeting") to consider approval of the Merger (the "Target
Stockholders Meeting") and in connection with the meeting of Acquiror's
stockholders to consider approval of the Merger and this Agreement and the
amendment of Acquiror's Certificate of Incorporation to increase the number of
authorized shares of Acquiror Common Stock to a number sufficient to enable
Acquiror to comply with all its obligations under this Agreement and the Merger
(the "Acquiror Charter Amendment") (such proxy statement/prospectus as amended
or supplemented is referred to herein as the "Proxy Statement") shall not, on
the date the Proxy Statement is first mailed to Target's stockholders and
Acquiror's stockholders, at the time of the Target Stockholders Meeting, at the
time of the Acquiror Stockholders Meeting and at the Effective Time, contain any
statement which, at such time, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not false or misleading; or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the Target Stockholders Meeting or the Acquiror
Stockholders Meeting
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which has become false or misleading. Notwithstanding the foregoing, Target
makes no representation, warranty or covenant with respect to any information
supplied by Acquiror that is contained in the S-4 Registration Statement or the
Proxy Statement.
2.27 INVESTMENT ADVISORS. Except as set forth in Section 2.27 of the
Target Disclosure Schedule, no broker, investment banker, financial advisor or
other Person is entitled to any broker's, finder's, financial advisor's or
similar fee or commission in connection with this Agreement and the transactions
contemplated hereby based on arrangements made by or on behalf of Target.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror hereby represents and warrants to Target, subject to such
exceptions and qualifications as are specifically disclosed in the Acquiror
disclosure schedule and schedule of exceptions of Acquiror (the "Acquiror
Disclosure Schedule") delivered herewith and dated as of the date hereof as
follows:
3.1 ORGANIZATION AND QUALIFICATION. Acquiror is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware. Acquiror has all requisite corporate power and authority to conduct
its business as now conducted and as currently proposed to be conducted and to
own, use and lease its Assets and Properties. Acquiror is duly qualified,
licensed or admitted to do business and is in good standing as a foreign
corporation in each jurisdiction in which the ownership, use, licensing or
leasing of its Assets and Properties, or the conduct or nature of its business,
makes such qualification, licensing or admission necessary, except for such
failures to be so duly qualified, licensed or admitted and in good standing that
could not reasonably be expected to have a Material Adverse Effect on Acquiror.
Section 3.1 of the Acquiror Disclosure Schedule sets forth each jurisdiction
where Acquiror is so qualified to do business and separately lists each other
jurisdiction in which Acquiror owns, uses, licenses or leases any material
Assets or Properties, has established a local office or other permanent local
presence or has employees or engages independent contractors.
3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Acquiror has full
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party, to perform its respective
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by Acquiror of this
Agreement and the Ancillary Agreements to which Target is a party and the
consummation by Acquiror of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action of
Acquiror, and no other corporate action on the part of Acquiror is required to
authorize the execution, delivery and performance of this Agreement and the
Ancillary Agreements to which Target is a party by Acquiror and the consummation
by Acquiror of the transactions contemplated hereby and thereby. This Agreement
and the Ancillary Agreements to which Acquiror is a party have each been duly
and validly executed and delivered by Acquiror and, assuming the due
authorization and the valid execution and delivery of this Agreement by Target
and each Ancillary Agreement by each other party (other than Acquiror) to such
Ancillary Agreement, each constitutes a legal, valid and
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binding obligation of Acquiror enforceable against Acquiror in accordance with
its respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar Laws relating to the enforcement of creditors' rights generally
and by general principles of equity. The shares of Acquiror Common Stock to be
issued in the Merger pursuant to Section 1.6(a) shall, when issued in compliance
with this Agreement, be duly and validly issued, fully paid and non-assessable,
and the shares of Acquiror Common Stock that will be issuable upon the exercise
of Acquiror Options and Acquiror Warrants that are issued in the Merger pursuant
to Section 1.6(c) and (d), respectively, when issued upon the exercise of and in
compliance with such Acquiror Options and Acquiror Warrants, will be duly and
validly issued, fully paid and non-assessable.
3.3 CAPITALIZATION. The authorized capital stock of Acquiror
consists only of 80,000,000 shares of Common Stock, $0.0001 par value per share,
10,000,000 shares of Preferred Stock, $0.0001 par value per share. As of the
close of business on November 27, 1999, 43,602,432 shares of Common Stock, no
shares of Preferred Stock, options to purchase 8,047,963 shares of Common Stock
and warrants to purchase 60,000 shares of Common Stock were issued and
outstanding.
3.4 SUBSIDIARIES. Acquiror has one subsidiary, Redback Networks
International Inc., which is not a material subsidiary. Acquiror has no other
Subsidiaries and does not (and prior to the Closing will not) otherwise hold any
equity, membership, partnership, joint venture or other ownership interest in
any Person.
3.5 NO CONFLICTS. The execution and delivery by Acquiror of this
Agreement does not, and the performance by Acquiror of its obligations under
this Agreement and the consummation of the transactions contemplated hereby do
not and will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the Certificate of Incorporation or
Bylaws of Acquiror;
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Section 3.5 of the
Acquiror Disclosure Schedule, if any, conflict with or result in a violation or
breach of any Law or Order applicable to Acquiror or its Assets or Properties;
(c) except as would not have a Material Adverse Effect on
Acquiror, (i) conflict with or result in a violation or breach of, (ii)
constitute a default (or an event that, with or without notice or lapse of time
or both, would constitute a default) under, (iii) require Acquiror to obtain any
consent, approval or action of, make any filing with or give any notice to any
Person (other than the filing of the Delaware Certificate of Merger together
with the required officers' certificates, any filing required under the HSR Act
in connection with the Merger and such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
state or federal securities Laws) as a result of the terms of, (iv) result in or
give to any Person any right of termination, cancellation, acceleration or
modification in or with respect to, (v) result in or give to any person any
additional rights or entitlement to increased, additional, accelerated or
guaranteed payments or performance under, (vi) result in the creation or
imposition of (or the obligation to create or impose) any material Lien upon
Acquiror, any of its
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subsidiaries, or any of its material Assets or Properties, or (vii) result in
the loss of a material benefit under any material Contract or License to which
Acquiror is a party or by which any of Acquiror's material Assets and Properties
are bound.
3.6 SEC DOCUMENTS; ACQUIROR FINANCIAL STATEMENTS. Acquiror has
furnished or made available to Target or its counsel true and complete copies of
all SEC Documents filed by it with the SEC since May 17, 1999, all in the form
so filed. As of their respective filing dates, such SEC Documents filed by
Acquiror and all SEC Documents filed after the date hereof but before the
Closing complied or will comply in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
SEC thereunder, as the case may be, and none of the SEC Documents contained or
will contain any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances in which they were made, not
misleading, except to the extent such SEC Documents have been corrected, updated
or superseded by a document subsequently filed with the SEC. The financial
statements of Acquiror, including the notes thereto, included in the SEC
Documents (the "Acquiror Financial Statements") comply as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP consistently applied
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q under the Exchange Act) and present fairly
the consolidated financial position of Acquiror at the dates thereof and the
consolidated results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited financial statements, to normal year-end
adjustments). There has been no change in Acquiror's accounting policies except
as described in the notes to the Acquiror Financial Statements.
3.7 ABSENCE OF CHANGES. Since September 30, 1999, there has not been
any material adverse change in the Business or Condition of Acquiror or any
occurrence or event which, individually or in the aggregate is reasonably
expected to have Material Adverse Effect on Acquiror. In addition, without
limiting the generality of the foregoing, except as expressly contemplated by
this Agreement, since September 30, 1999:
(a) Acquiror has not entered into any material Contract or other
material commitment or transaction;
(b) there has not been any material amendment or other material
modification (or agreement to do so), or material violation of the terms of, any
of the material Contracts set forth or described in the Acquiror Disclosure
Schedule;
(c) there has not been any amendment to Acquiror's Certificate
of Incorporation or Bylaws;
(d) there has not been any transfer (by way of a License or
otherwise) to any Person of rights to any material Acquiror Intellectual
Property, other than licenses in the ordinary course of business consistent with
past practice;
(e) Acquiror has not made any change in accounting policies,
principles, methods, practices or procedures (including for bad debts,
contingent liabilities or
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otherwise, respecting capitalization or expense of research and development
expenditures, depreciation or amortization rates or timing of recognition of
income and expense);
(f) Acquiror has taken all commercially reasonable action
required to maintain, renew, extend or enforce any material Acquiror
Intellectual Property;
(g) there has been no physical damage, destruction or other
casualty loss (whether or not covered by insurance) affecting any of the real or
personal property or equipment of Acquiror or in an amount exceeding one hundred
thousand dollars ($100,000) individually or two hundred fifty thousand dollars
($250,000) in the aggregate; and
(h) Acquiror has not entered into or approved any contract,
arrangement or understanding or acquiesced in respect of any arrangement or
understanding, to do, engage in or cause or having the effect of any of the
foregoing.
3.8 NO UNDISCLOSED LIABILITIES. Except as reflected or reserved
against in Acquiror's Form 10-Q for the quarter ending September 30, 1999
(Acquiror's "September 10-Q") (including the notes thereto), Acquiror has no
material Liabilities, other than Liabilities incurred in the ordinary course of
business consistent with past practice since September 30, 1999.
3.9 TAXES.
(a) All Tax returns, statements, reports, declarations and other
forms and documents (including without limitation estimated Tax returns and
reports and material information statements, returns and reports) required to be
filed with any Tax Authority with respect to any Taxable period ending on or
before the Effective Time, by or on behalf of Acquiror (collectively, "Tax
Returns" and individually a "Tax Return"), have been or will be completed and
filed when due (including any extensions of such due date) and all amounts shown
due on such Tax Returns on or before the Effective Time have been or will be
paid on or before such date. All such Tax Returns are true, accurate and
complete as filed. The Acquiror's September 30, 1999 unaudited balance sheet
included in Acquiror's September 10-Q (the "Acquiror Balance Sheet") (i) fully
accrues all Acquiror's actual and contingent liabilities for Taxes with respect
to all periods through September 30, 1999 and Acquiror has not and will not
incur any Tax liability in excess of the amount reflected on such Acquiror
Balance Sheet with respect to such periods (excluding any amount thereof that
reflects timing differences between the recognition of income for purposes of
GAAP and for Tax purposes), and (ii) properly accrues in accordance with GAAP
all material liabilities for Taxes payable after September 30, 1999 with respect
to all transactions and events occurring on or prior to such date. All
information set forth Acquiror's September 10-Q relating to Tax matters is true,
complete and accurate in all material respects. No material Tax liability since
September 30, 1999 has been or will be incurred by Acquiror other than in the
ordinary course of business, and adequate provision has been made by Acquiror
for all Taxes since that date in accordance with GAAP on at least a quarterly
basis.
(b) Acquiror has withheld and paid to the applicable financial
institution or Tax Authority all amounts required to be withheld. Acquiror (or
any member of
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any affiliated or combined group of which Acquiror has been a member) has not
granted any extension or waiver of the limitation period applicable to any Tax
Returns that is still in effect. There is no material claim, audit, action,
suit, proceeding, or (to the knowledge of Acquiror) investigation now pending or
(to the knowledge of Acquiror) threatened against or with respect to Acquiror in
respect of any Tax or assessment. No notice of deficiency or similar document of
any Tax Authority asserting that Acquiror has unpaid Tax liability has been
received by Acquiror, and there are no liabilities for Taxes (including
liabilities for interest, additions to Tax and penalties thereon and related
expenses) with respect to the issues that have been raised (and are currently
pending) by any Tax Authority that could, if determined adversely to Acquiror,
materially and adversely affect the liability of Acquiror for Taxes. There are
no liens for Taxes (other than for current Taxes not yet due and payable) upon
the assets of Acquiror. Acquiror has never been a member of an affiliated group
of corporations, within the meaning of Section 1504 of the Code. Acquiror is in
full compliance with all the terms and conditions of any Tax exemptions or other
Tax-sharing agreement or order of a foreign government and the consummation of
the Merger will not have any adverse effect on the continued validity and
effectiveness of any such Tax exemption or other Tax-sharing agreement or order.
Neither Acquiror nor any Person on behalf of Acquiror has entered into or will
enter into any agreement or consent pursuant to the collapsible corporation
provisions of Section 341(f) of the Code (or any corresponding provision of
state, local or foreign income tax law) or agreed to have Section 341(f)(2) of
the Code (or any corresponding provision of state, local or foreign income tax
law) apply to any disposition of any asset owned by Acquiror. None of the assets
of Acquiror is property that Acquiror is required to treat as being owned by any
other person pursuant to the so-called "safe harbor lease" provisions of former
Section 168(f)(8) of the Code. None of the assets of Acquiror directly or
indirectly secures any debt the interest on which is tax-exempt under Section
103(a) of the Code. None of the assets of Acquiror is "tax-exempt use property"
within the meaning of Section 168(h) of the Code. Acquiror has not made and will
not make a deemed dividend election under Treas. Reg. Section 1.1502-32(f)(2) or
a consent dividend election under Section 565 of the Code. Acquiror has never
been a party (either as a distributing corporation or as a corporation that has
been distributed) to any transaction intended to qualify under Section 355 of
the Code or any corresponding provision of state law. Acquiror has not
participated in (and will not participate in) an international boycott within
the meaning of Section 999 of the Code. Acquiror does not have and has not had a
permanent establishment in any foreign country, as defined in any applicable tax
treaty or convention between the United States of America and such foreign
country. Acquiror has never elected to be treated as an S-corporation under
Section 1362 of the Code or any corresponding provision of federal or state law.
All material elections with respect to Acquiror's Taxes made during the fiscal
years ending, December 31, 1996, 1997 and 1998 are reflected on the Acquiror Tax
Returns for such periods. After the date of this Agreement, no material election
with respect to Taxes not made in the ordinary course of business will be made
without the prior written consent of Target, which consent will not be
unreasonably withheld or delayed. Acquiror is not party to any joint venture,
partnership, or other arrangement or contract which could be treated as a
partnership for federal income tax purposes. Acquiror is not currently, and
never has been, subject to the reporting requirements of Section 6038A of the
Code. There is no agreement, contract or arrangement to which Acquiror is a
party that could, individually or collectively, result in the payment of any
amount that would not be deductible by reason of Sections 280G (as determined
without regard to Section 280G(b)(4) and (5)), 162(a) (by reason of being
unreasonable in amount), 162 (b)
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through (p) or 404 of the Code. Acquiror is not a party to or bound by any Tax
indemnity, Tax sharing or Tax allocation agreement (whether written or unwritten
or arising under operation of federal law as a result of being a member of a
group filing consolidated Tax returns, under operation of certain state laws as
a result of being a member of a unitary group, or under comparable laws of other
states or foreign jurisdictions) which includes a party other than Acquiror nor
does Acquiror owe any amount under any such Agreement. Acquiror is not, and has
not been, a United States real property holding corporation (as defined in
Section 897(c)(2) of the Code) during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. Other than by reason of the Merger, Acquiror has
not been and will not be required to include any material adjustment in Taxable
income for any Tax period (or portion thereof) pursuant to Section 481 or 263A
of the Code or any comparable provision under state or foreign Tax laws as a
result of transactions, events or accounting methods employed prior to the
Merger.
(c) For purposes of this Agreement, the following terms have the
following meanings: "Tax" (and, with correlative meaning, "Taxes" and "Taxable")
means any and all taxes including, without limitation, (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, value added, net worth, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Tax Authority responsible for the imposition of any such tax
(domestic or foreign), (ii) any liability for the payment of any amounts of the
type described in (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any Taxable period or as the result
of being a transferee or successor thereof and (iii) any liability for the
payment of any amounts of the type described in (i) or (ii) as a result of any
express or implied obligation to indemnify any other Person. As used in this
Section 3.9, the term "Acquiror" means Acquiror and any entity included in, or
required under GAAP to be included in, any of the Acquiror Financial Statements.
3.10 LEGAL PROCEEDINGS. Except as set forth in Section 3.10 of the
Acquiror Disclosure Schedule:
(i) there are no Actions or Proceedings pending or, to the
knowledge of Acquiror, threatened against, relating to or affecting Acquiror or
its Assets and Properties; and
(ii) Acquiror has not received notice, and does not
otherwise have knowledge of any Orders outstanding against Acquiror or any of
its subsidiaries.
3.11 COMPLIANCE WITH LAWS AND ORDERS. Acquiror has not violated in
any material respect, and is not currently in default in any material respect
under, any Law or Order applicable to Acquiror or any of its Assets and
Properties.
3.12 EMPLOYEE BENEFIT PLANS.
(a) Except for the plans and agreements listed in Section 3.12
of the Acquiror Disclosure Schedule (collectively, the "Plans"), Acquiror does
not maintain, is not a
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party to, does not contribute to and is not obligated to contribute to, and
Acquiror's employees or former employees and their dependents or survivors do
not receive benefits under, any of the following (whether or not set forth in a
written document):
(i) Any employee benefit plan, as defined in section 3(3) of
ERISA;
(ii) Any bonus, deferred compensation, incentive, restricted
stock, stock purchase, stock option, stock appreciation right, phantom stock,
supplemental pension, executive compensation, cafeteria benefit, dependent care,
director or employee loan, fringe benefit, sabbatical, severance, termination
pay or similar plan, program, policy, agreement or arrangement (other than any
such item provided solely pursuant to the terms of a written or oral contract
with any individual employee that is disclosed in Section 3.12 of the Acquiror
Disclosure Schedule); or
(iii) Any plan, program, agreement, policy, commitment or
other arrangement relating to the provision of any benefit described in section
3(1) of ERISA to former employees or directors or to their survivors, other than
procedures intended to comply with COBRA.
(b) Neither Acquiror nor any ERISA Affiliate has, since January
1, 1993, terminated, suspended, discontinued contributions to or withdrawn from
any employee pension benefit plan, as defined in section 3(2) of ERISA,
including (without limitation) any multiemployer plan, as defined in section
3(37) of ERISA.
(c) Acquiror has agreed to provide to Target prior to the
Effective Time complete, accurate and current copies of each of the following:
(i) The text (including amendments) of each of the Plans, to
the extent reduced to writing;
(ii) A summary of each of the Plans, to the extent not
previously reduced to writing;
(iii) With respect to each Plan that is an employee benefit
plan (as defined in section 3(3) of ERISA), the following:
A. The most recent summary plan description that has
been prepared, as described in section 102 of ERISA;
B. Any summary of material modifications that has been
distributed to participants or filed with the U.S. Department of Labor but that
has not been incorporated in an updated summary plan description furnished under
Subparagraph (A) above; and
C. The annual report, as described in section 103 of
ERISA, and (where applicable) actuarial reports, for the three most recent plan
years for which an annual report or actuarial report has been prepared; and
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(iv) With respect to each Plan that is intended to qualify
under section 401(a) of the Internal Revenue Code, the most recent determination
letter concerning the Plan's qualification under section 401(a) of the Internal
Revenue Code, as issued by the Internal Revenue Service, and any subsequent
determination letter application.
(d) With respect to each Plan that is an employee benefit plan
(as defined in section 3(3) of ERISA), the requirements of ERISA applicable to
such Plan have been satisfied, except to the extent that a failure to satisfy
any of such requirements would not have a Material Adverse Effect.
(e) With respect to each Plan that is subject to COBRA, the
requirements of COBRA applicable to such Plan have been satisfied, except to the
extent that a failure to satisfy any of such requirements would not have a
Material Adverse Effect.
(f) With respect to each Plan that is subject to the Family
Medical Leave Act of 1993, as amended, the requirements of such Act applicable
to such Plan have been satisfied, except to the extent that a failure to satisfy
any of such requirements would not have a Material Adverse Effect.
(g) Each Plan that is intended to qualify under section 401(a)
of the Internal Revenue Code meets the requirements for qualification under
section 401(a) of the Internal Revenue Code and the regulations thereunder,
except to the extent that such requirements may be satisfied by adopting
retroactive amendments under section 401(b) of the Internal Revenue Code and the
regulations thereunder. Each such Plan has been administered in accordance with
its terms (or, if applicable, such terms as will be adopted pursuant to a
retroactive amendment under section 401(b) of the Internal Revenue Code) and the
applicable provisions of ERISA and the Internal Revenue Code and the regulations
thereunder, except to the extent that a failure to be so administered would not
have a Material Adverse Effect.
(h) Neither Acquiror nor any ERISA Affiliate has any accumulated
funding deficiency under section 412 of the Internal Revenue Code or any
termination or withdrawal liability under Title IV of ERISA. For purposes of
determining any accumulated funding deficiency under section 412 of the Internal
Revenue Code, the term "ERISA Affiliate" shall include any entity that is deemed
to be a member of the same "controlled group" within the meaning of section
414(m) or (o) of the Internal Revenue Code.
(i) All contributions, premiums or other payments due from
Acquiror to (or under) any Plan have been fully paid or adequately provided for
on the books and financial statements of Acquiror. All accruals (including,
where appropriate, proportional accruals for partial periods) have been made in
accordance with prior practices.
(j) Except as disclosed in Section 3.12 of the Acquiror
Disclosure Schedule, the consummation of the transactions contemplated herein
will not result in (i) any amount becoming payable to any employee, director or
independent contractor of Acquiror, (ii) the acceleration of payment or vesting
of any benefit, option or right to which any employee, director or independent
contractor of Acquiror may be entitled, (iii) the forgiveness of any
indebtedness of any employee, director or independent contractor of Acquiror or
(iv) any cost
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becoming due or accruing to Acquiror with respect to any employee, director or
independent contractor of Acquiror.
(k) Other than routine claims for benefits under the Plans,
there are no pending, or, to the best knowledge of Acquiror, threatened, Actions
or Proceedings involving the Plans, or the fiduciaries, administrators, or
trustees of any of the Plans or Acquiror or any of its ERISA Affiliates as the
employer or sponsor under any Plan, with any of the IRS, the Department of
Labor, the PBGC, any participant in or beneficiary of any Plan or any other
Person whomsoever. Acquiror knows of no reasonable basis for any such claim,
lawsuit, dispute, action or controversy.
3.13 TITLE TO PROPERTY. Except for title to Acquiror Intellectual
Property, which is covered by Section 3.14 below, Acquiror has good and
marketable title to all of its material properties, interests in properties and
assets, real and personal, reflected in Acquiror's September 10-Q or acquired
after the date of Acquiror's September 10-Q (except properties, interests in
properties and assets sold or otherwise disposed of since the date of Acquiror's
September 10-Q in the ordinary course of business), free and clear of all
material mortgages, liens, pledges, charges or encumbrances of any kind or
character, except (i) liens for current taxes not yet due and payable, (ii) such
imperfections of title, liens and easements as do not and will not materially
detract from or interfere with the use of the properties subject thereto or
affected thereby, or otherwise materially impair business operations involving
such properties and (iii) liens securing debt which is reflected in Acquiror's
September 10-Q. The plants, property and equipment of Acquiror that are used in
the operations of its business are in good operating condition and repair,
subject to normal wear and tear. All properties used in the operations of
Acquiror are reflected in Acquiror's September 10-Q to the extent generally
accepted accounting principles required the same to be reflected as of the dates
of the financial statements included in Acquiror's September 10-Q. Acquiror,
with respect to properties and assets leased by Acquiror, holds valid leasehold
interests in such properties and assets in accordance with the terms of the
agreements governing such leases.
3.14 INTELLECTUAL PROPERTY.
(a) Acquiror has all requisite right, title and interest in or
valid and enforceable rights under Contracts or Licenses to use all Acquiror
Intellectual Property necessary to the conduct of its business as presently
conducted. Each item of Acquiror Intellectual Property, either is owned
exclusively by Acquiror, free and clear of any Liens, or is licensed to Acquiror
under a valid License granting sufficient rights to permit Acquiror to conduct
its business as presently conducted. To the best of its knowledge, Acquiror owns
or has the valid right to use all trademarks, service marks and trade names used
by Acquiror in connection with the operation or conduct of the business of
Acquiror, including the sale of any products or technology or the provision of
any services by Acquiror. Acquiror owns exclusively, and has good title to, all
copyrighted works that are Acquiror products or other works of authorship that
Acquiror otherwise purports to own; provided, however, that such works may
incorporate copyrighted works or works of authorship, trademarks or trade names
of third parties which are licensed to Acquiror or are in the public domain.
Except pursuant to agreements in the ordinary course of business, Acquiror has
not transferred ownership of any Acquiror Intellectual Property to any other
Person.
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(b) To the extent that any Acquiror Intellectual Property that
is material to Acquiror's business has been developed or created by any Person
other than Acquiror, Acquiror has a written agreement with such Person with
respect thereto and Acquiror has either (i) obtained ownership of, and is the
exclusive owner of, all such Intellectual Property by operation of law or by
valid assignment of any such rights or (ii) obtained a License under or to such
Intellectual Property.
(c) The operation of the business of Acquiror as currently
conducted, including Acquiror's design, development, use, import, manufacture
and sale of the products, technology or services (including products, technology
or services currently under development) of Acquiror: (i) does not infringe the
copyright or misappropriate the trade secrets of any Person; (ii) to the best of
Acquiror's knowledge, does not infringe the patent rights or trademark rights of
any Person; (iii) does not violate in any material respect the rights of any
Person (including rights to privacy or publicity other than patent rights or
trademark rights described above); and, (iv) does not constitute unfair
competition or an unfair trade practice under any Law. Acquiror has not received
notice from any Person claiming that such operation or any act, product,
technology or service (including products, technology or services currently
under development) of Acquiror infringes or misappropriates the Intellectual
Property of any Person or constitutes unfair competition or trade practices
under any Law.
(d) Each item of Acquiror Registered Intellectual Property is
valid and subsisting, and all necessary registration, maintenance, renewal fees,
annuity fees and taxes in connection with such Registered Intellectual Property
have been paid and all necessary documents and certificates in connection with
such Registered Intellectual Property have been filed with the relevant patent,
copyright, trademark or other authorities in the United States or foreign
jurisdictions in which such Registered Intellectual Property is registered, as
the case may be, for the purposes of maintaining such Registered Intellectual
Property.
(e) There are no Contracts or Licenses between Acquiror and any
other Person with respect to Acquiror Intellectual Property under which there is
any dispute known to Acquiror regarding the scope of such Contract or License,
or performance under such Contract or License, including any dispute with
respect to any payments to be made or received by Acquiror thereunder.
(f) Acquiror has taken all requisite commercially reasonable
steps to maintain and preserve the confidentiality of Acquiror's confidential
information and trade secrets of Acquiror or any similar information provided by
any other Person to Acquiror subject to a duty of confidentiality. Without
limiting the generality of the foregoing, Acquiror has, and enforces, a policy
requiring each employee, consultant and independent contractor to execute
proprietary information, confidentiality and invention assignment agreements.
(g) Acquiror has taken all commercially reasonable actions
necessary and appropriate to assure that there shall be no material adverse
change to its business or electronic systems or material interruptions in the
delivery of Acquiror's products and services by reason of computer software
errors or miscalculations associated with the advent of the year 2000, including
that all of its products (including products currently under development) will,
without interruption or manual intervention, continue to consistently,
predictably and accurately
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record, store, process, calculate and present calendar dates falling on and
after (and if applicable, spans of time including) January 1, 2000, and will
consistently, predictably and accurately calculate any information dependent on
or relating to such dates in substantially the same manner, and with the same
functionality, data integrity and performance, as such products record, store,
process, calculate and present calendar dates on or before December 31, 1999, or
calculate any information dependent on or relating to such dates.
3.15 CONTRACTS.
(a) Section 3.15(a)(1) of the Acquiror Disclosure Schedule
contains a true and complete list of Acquiror's Contracts that are material to
Acquiror's business, operations or financial condition (true and complete copies
or, if none, reasonably complete and accurate written descriptions of which,
together with all amendments and supplements thereto and all waivers of any
terms thereof, have been made available to Target prior to the execution of this
Agreement).
(b) Each Contract required to be disclosed in Section 3.15(a) of
the Acquiror Disclosure Schedule is in full force and effect and constitutes a
legal, valid and binding agreement of Acquiror, enforceable against Acquiror in
accordance with its terms (subject to the effect of bankruptcy and other laws
affecting the rights of creditors generally and limitations on the enforcement
of contracts under principles of equity), and, to the knowledge of Acquiror and
its subsidiaries, each other party thereto (subject to the effect of bankruptcy
and other laws affecting the rights of creditors generally and limitations on
the enforcement of contracts under principles of equity), and, to the knowledge
of Acquiror and its subsidiaries, no other party to such Contract is, nor has
received notice that it is, in material violation or breach of or default under
any such Contract (or with notice or lapse of time or both, would be in material
violation or breach of or default under any such Contract).
(c) Acquiror is not a party to or bound by any Contract that (i)
automatically terminates or allows termination by the other party thereto upon
consummation of the transactions contemplated by this Agreement or (ii) contains
any covenant or other provision which limits Acquiror's ability to compete with
any Person in any line of business or in any area or territory.
3.16 INSURANCE. Acquiror has policies of insurance and bonds of the
type and in amounts customarily carried by companies conducting businesses or
owning assets similar to those of Acquiror. There is no material claim pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid and Acquiror is
otherwise in compliance with the terms of such policies and bonds. Acquiror has
no knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies.
3.17 AFFILIATE TRANSACTIONS. Except as disclosed in Section 3.17 of
the Acquiror Disclosure Schedule, and except for any stock purchase agreements,
stock option agreements and invention assignment or confidentiality agreements
in favor of Acquiror, (i) there are no Contracts or Liabilities between
Acquiror, on the one hand, and (A) any current
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or former officer, director, stockholder, or to Acquiror's knowledge, any
Affiliate or Associate of Acquiror or (B) any Person who, to Acquiror's
knowledge, is an Associate of any such officer, director, stockholder or
Affiliate, on the other hand, (ii) Acquiror does not provide or cause to be
provided any assets, services or facilities to any such current or former
officer, director, stockholder, Affiliate or Associate, (iii) neither Acquiror
nor any such current or former officer, director, stockholder, Affiliate or
Associate provides or causes to be provided any assets, services or facilities
to Acquiror and (iv) Acquiror does not beneficially own, directly or indirectly,
any Investment Assets of any such current or former officer, director,
stockholder, Affiliate or Associate.
3.18 EMPLOYEES; LABOR RELATIONS.
(a) Acquiror is not a party to any collective bargaining
agreement and there are no unfair labor practice or labor arbitration
proceedings pending with respect to Acquiror, or, to the knowledge of Acquiror,
threatened, and there are no facts or circumstances known to Acquiror that could
reasonably be expected to give rise to such complaint or claim. To the knowledge
of Acquiror, there are no organizational efforts presently underway or
threatened involving any employees of Acquiror or any of the employees
performing work for Acquiror but those provided by an outside employment agency,
if any. There has been no work stoppage, strike or other concerted action by
employees of Acquiror.
(b) All employees of Acquiror are employed at will. Acquiror has
provided to Target a list that sets forth the name of each officer, employee and
consultant, together with such person's position or function, annual base salary
or wage and any incentive, severance or bonus arrangements with respect to such
person. To the knowledge of Acquiror, no employee of Acquiror has made any
threat, or otherwise revealed an intent, to terminate such employee's
relationship with Acquiror, for any reason, including because of the
consummation of the transactions contemplated by this Agreement. Acquiror is not
a party to any agreement for the provision of labor from any outside agency. To
the knowledge of Acquiror, there have been no claims by employees of such
outside agencies, if any, with regard to employees assigned to work for
Acquiror, and no claims by any governmental agency with regard to such
employees.
(c) There have been no federal or state claims based on sex,
sexual or other harassment, age, disability, race or other discrimination or
common law claims, including claims of wrongful termination, by any employees of
Acquiror or by any of the employees performing work for Acquiror but those
provided by an outside employment agency, and there are no facts or
circumstances known to Acquiror that could reasonably be expected to give rise
to such complaint or claim. Acquiror has complied in all material respects with
all laws related to the employment of employees and, except as set forth in
Section 3.18(c) of the Acquiror Disclosure Schedule, Acquiror has not received
any notice of any claim that it has not complied in any material respect with
any Laws relating to the employment of employees, including any provisions
thereof relating to wages, hours, collective bargaining, the payment of Social
Security and similar taxes, equal employment opportunity, employment
discrimination, the WARN Act, employee safety, or that it is liable for any
arrearages of wages or any taxes or penalties for failure to comply with any of
the foregoing.
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(d) Acquiror has no written policies and/or employee handbooks
or manuals except as described in Section 3.18(d) of the Acquiror Disclosure
Schedule.
(e) To the knowledge of Acquiror and its subsidiaries, no
officer, employee or consultant of Acquiror is obligated under any Contract or
other agreement or subject to any Order or Law that would interfere with
Acquiror's business as currently conducted. To Acquiror's and its subsidiaries'
knowledge, neither the execution nor delivery of this Agreement, nor the
carrying on of Acquiror's business as presently conducted nor any activity of
such officers, employees or consultants in connection with the carrying on of
Acquiror's business as presently conducted, will conflict with or result in a
breach of the terms, conditions or provisions of, constitute a default under, or
trigger a condition precedent to any rights under, any Contract or other
agreement under which any of such officers, employees or consultants is now
bound.
(f) Acquiror has complied in all material respects with the
verification requirements and the record-keeping requirements of the Immigration
Reform and Control Act of 1986 ("IRCA"); to the best knowledge of Acquiror, the
information and documents on which Acquiror relied to comply with IRCA are true
and correct; and there have not been any discrimination complaints filed against
Acquiror pursuant to IRCA, and to the best knowledge of Acquiror, there is no
basis for the filing of such a complaint.
3.19 ENVIRONMENTAL MATTERS.
(a) Acquiror possesses all Environmental Permits required for
the operation of its business.
(b) Acquiror is in compliance in all material respects with (i)
all terms, conditions and provisions of its Environmental Permits; and (ii) all
Environmental Laws.
(c) Acquiror, to the knowledge of Acquiror or any predecessor of
Acquiror nor any entity previously owned by Acquiror has any obligation or
liability with respect to any Hazardous Material, including any Release or
threatened or suspected Release of any Hazardous Material, and there have been
no events, facts or circumstances since the date of incorporation of Acquiror
which could reasonably be expected to form the basis of any such obligation or
liability.
(d) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by or for Acquiror or, to the
knowledge of Acquiror, by or for any Other Person with respect to any Site while
Acquiror has occupied the Site, which have not been delivered to Acquiror prior
to execution of this Agreement.
3.20 OTHER NEGOTIATIONS; BROKERS; THIRD PARTY EXPENSES. Neither
Acquiror nor, to the knowledge of Acquiror, any of its Affiliates (nor any
investment banker, financial advisor, attorney, accountant or other Person
retained by or acting for or on behalf of Acquiror or at Acquiror's direction)
(a) has entered into any Contract that conflicts with any of the transactions
contemplated by this Agreement or (b) has entered into any Contract or had any
discussions with any Person regarding any transaction involving Acquiror which
could reasonably be expected to result in Acquiror, or any general partner,
limited partner, manager,
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officer, director, employee, agent or Affiliate of any of them being subject to
any claim for liability to said Person as a result of entering into this
Agreement or consummating the transactions contemplated hereby. Section 3.20 of
the Acquiror Disclosure Schedule sets forth the principal terms and conditions
of any Contract with respect to, and a reasonable estimate of, all Third Party
Expenses expected to be incurred by Acquiror in connection with the negotiation
and effectuation of the terms and conditions of this Agreement and the
transactions contemplated hereby.
3.21 FOREIGN CORRUPT PRACTICES ACT. Neither Acquiror, nor to the
knowledge of Acquiror, any agent, employee or other Person acting on behalf of
Acquiror has, directly or indirectly, used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns
from corporate funds, violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment,
kickback or other similar unlawful payment.
3.22 TAX-FREE REORGANIZATION. To the knowledge of Acquiror, after
Good Faith Consultation with Acquiror's independent accountants, neither
Acquiror nor any of its directors, officers or stockholders has taken any action
which could reasonably be expected to jeopardize the status of the Merger as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code.
3.23 APPROVALS.
(a) Section 3.23(a) of the Acquiror Disclosure Schedule contains
a list of all material Approvals of Governmental or Regulatory Authorities
relating to the business conducted by Acquiror which are required to be given to
or obtained by Acquiror prior to the Closing from any and all Governmental or
Regulatory Authorities in connection with the consummation of the transactions
contemplated by this Agreement.
(b) Section 3.23(b) of the Acquiror Disclosure Schedule contains
a list of all material Approvals which are required to be given to or obtained
by Acquiror prior to the Closing from any and all third parties other than
Governmental or Regulatory Authorities in connection with the consummation of
the transactions contemplated by this Agreement.
(c) Acquiror has obtained all material Approvals from
Governmental or Regulatory Authorities necessary to conduct the business
conducted by Acquiror in the manner as it is currently being conducted and there
has been no written notice received by Acquiror of any material violation or
material non-compliance with any such Approvals. All material Approvals from
Governmental or Regulatory Authorities necessary to conduct the business
conducted by Acquiror as it is currently being conducted are set forth in
Section 3.23(c) of the Acquiror Disclosure Schedule.
(d) The affirmative vote or consent of the holders of the shares
of Acquiror Common Stock outstanding as of the applicable record date is the
only vote of the
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holders of any of Acquiror Capital Stock necessary to approve this Agreement and
the Merger and the transactions contemplated hereby.
3.24 DISCLOSURE. No representation or warranty contained in Article
3 of this Agreement, and no statement contained in the Acquiror Disclosure
Schedule or in any certificate, list or other writing furnished to Acquiror
pursuant to any provision of this Agreement (including Acquiror's September
10-Q) contains any untrue statement of a material fact or omits to state a
material fact necessary to make the representations and warranties of Acquiror
in Article 3 (as modified by the Acquiror Disclosure Schedule), in the light of
the circumstances under which they were made, not misleading.
3.25 S-4 REGISTRATION STATEMENT; PROXY STATEMENT. The information
supplied in writing to Target, or its counsel or auditors, by Acquiror and
Acquiror Stockholders for inclusion in the S-4 Registration Statement shall not,
at the time the S-4 Registration Statement (including any amendments or
supplements thereto) is declared effective by the SEC, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The information
supplied by Acquiror and Acquiror's stockholders for inclusion in the Proxy
Statement shall not, on the date the Proxy Statement is first mailed to
Acquiror's stockholders and Target's stockholders, at the time of the Acquiror
Stockholders Meeting, at the time of the Target's Stockholders Meeting and at
the Effective Time, contain any statement which, at such time, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Acquiror
Stockholders Meeting or the Target Stockholders Meeting which has become false
or misleading. Notwithstanding the foregoing, Acquiror makes no representation,
warranty or covenant with respect to any information supplied by Target that is
contained in the S-4 Registration Statement or the Proxy Statement.
3.26 INVESTMENT ADVISORS. Except as set forth in Section 3.26 of the
Acquiror Disclosure Schedule, no broker, investment banker, financial advisor or
other Person is entitled to any broker's, finder's, financial advisor's or
similar fee or commission in connection with this Agreement and the transactions
contemplated hereby based on arrangements made by or on behalf of Acquiror.
ARTICLE 4
ADDITIONAL AGREEMENTS
4.1 PROXY STATEMENT; S-4 REGISTRATION STATEMENT.
(a) As soon as practicable after the execution of this
Agreement, Target and Acquiror shall prepare, and Acquiror shall file with the
SEC, preliminary proxy materials relating to the approval of the Merger and the
transactions contemplated hereby by the stockholders of Acquiror and, as
promptly as practicable following receipt of SEC comments thereon, Acquiror
shall file with the SEC a Registration Statement on Form S-4 (or such other or
successor form as shall be appropriate) (the "S-4 Registration Statement") to
register the
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issuance in the Merger of all shares of Acquiror Common Stock, which complies in
form with applicable SEC requirements and shall use all reasonable efforts to
cause the S-4 Registration Statement to become effective as soon thereafter as
practicable. The Acquiror will update and amend the S-4 Registration Statement
to the extent necessary prior to the Closing.
(b) As soon as practicable after the execution of this
Agreement, and subject to Section 4.1(a), Acquiror shall use all commercially
reasonable efforts to prepare and file as soon as practicable, with the
cooperation of Target, the S-4 Registration Statement. Acquiror shall use
commercially reasonable efforts to cause the S-4 Registration Statement to
comply with the requirements of applicable Laws. Each of Acquiror and Target
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 S-4 Registration Statement, or in any amendments or supplements thereto, and
to cause its counsel and auditors to cooperate with the other's counsel and
auditors in the preparation of the S-4 Registration Statement. Target will
promptly advise Acquiror, and Acquiror will promptly advise Target, in writing
if at any time prior to the Effective Time either Target or Acquiror shall
obtain knowledge of any facts that might make it necessary or appropriate to
amend or supplement the S-4 Registration Statement in order to make the
statements contained or incorporated by reference therein not misleading or to
comply with applicable law. Anything to the contrary contained herein
notwithstanding, Acquiror shall not include in the S-4 Registration Statement
any information with respect to Target or its Affiliates or Associates, the form
and content of which information shall not have been approved by Target prior to
such inclusion.
4.2 STOCKHOLDER APPROVAL. Target shall promptly after the date
hereof take all action necessary in accordance with the DGCL (and, if
applicable, the California Code) and its Certificate of Incorporation and Bylaws
to convene the Target Stockholders Meeting within 45 days of the S-4
Registration Statement being declared effective by the SEC. Target shall consult
with Acquiror and use all commercially reasonable efforts to hold the Target
Stockholders Meeting on the same day as the Acquiror Stockholders Meeting and
shall not postpone or adjourn (other than for the absence of a quorum) the
Target Stockholders Meeting without the consent of Acquiror, which consent shall
not be unreasonably withheld. Subject to Section 4.1, Target shall use all
commercially reasonable efforts to solicit from stockholders of Target proxies
in favor of the Merger and shall take all other lawful action necessary or
advisable to secure the vote or consent of stockholders required to effect the
Merger. Acquiror shall promptly after the date hereof take all action necessary
in accordance with the DGCL (and, if applicable, the California Code) and its
Certificate of Incorporation and Bylaws to convene the Acquiror Stockholders
Meeting within 45 days of the S-4 Registration Statement being declared
effective by the SEC. Acquiror shall consult with Target and use all
commercially reasonable efforts to hold the Acquiror Stockholders Meeting on the
same day as the Target Stockholders Meeting and shall not postpone or adjourn
(other than for the absence of a quorum) the Acquiror Stockholders Meeting
without the consent of Target, which consent shall not be unreasonably withheld.
Subject to Section 4.1, Acquiror shall use all commercially reasonable efforts
to solicit from stockholders of Acquiror proxies in favor of this Agreement, the
Merger and the Acquiror Charter Amendment and shall take all other lawful action
necessary or advisable to secure the vote or consent of stockholders required to
effect the Merger and the Acquiror Charter Amendment. Each of Target and
Acquiror must hold its respective Stockholders Meeting and
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take the vote of its stockholders on the proposal to approve this Agreement and
the Merger at its respective Stockholders Meeting unless this Agreement has been
terminated in accordance with its terms. Target and Acquiror will take all
commercially reasonable efforts to limit the applicability of stockholders
dissenters rights to this transaction, and, to the extent that such are
applicable, will take all commercially reasonable efforts to minimize the
exercise of any such rights and will not take any action to induce stockholders
to exercise any such rights.
4.3 ACCESS TO INFORMATION. Between the date of this Agreement and
the earlier of the Effective Time or the termination of this Agreement, upon
reasonable notice Target and Acquiror shall each (i) give the other party, and
their respective officers, employees, accountants and counsel full access to all
buildings, offices, and other facilities and to all its Books and Records,
whether located on its premises or at another location; (ii) permit the other
party to make such inspections as it may reasonably require; (iii) cause its
officers to furnish the other party such financial, operating, technical and
product data and other information with respect to its business and Assets and
Properties as the other party from time to time may request, including financial
statements and schedules; (iv) allow the other party the opportunity to
interview such employees and other personnel and Affiliates of the other party
with such other party's prior written consent, which consent shall not be
unreasonably withheld or delayed; and (v) assist and cooperate with the other
party in the development of integration plans for implementation following the
Effective Time; provided, however, that no investigation pursuant to this
Section 4.3 shall affect or be deemed to modify any representation or warranty
made by such party herein.
4.4 CONFIDENTIALITY. The parties acknowledge that Acquiror and
Target have previously executed an Exclusivity and Confidentiality Agreement
dated November 8, 1999 (the "Confidentiality Agreement"), which Confidentiality
Agreement shall continue in full force and effect in accordance with its terms.
Without limiting the foregoing, all information furnished to Acquiror and its
officers, employees, accountants and counsel by Target, and all information
furnished to Target by Acquiror and its respective officers, employees,
accountants and counsel, shall be covered by the Confidentiality Agreement.
4.5 EXPENSES. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger, including all legal,
accounting, financial advisory, consulting and all other fees and expenses of
third parties ("Third Party Expenses") incurred by a party in connection with
the negotiation and effectuation of the terms and conditions of this Agreement
and the transactions contemplated hereby, shall be the obligation of the
respective party incurring such Third Party Expenses, provided, however, that if
the Merger is consummated, Acquiror shall pay all Third Party Expenses incurred
by itself and by Target.
4.6 PUBLIC DISCLOSURE. Unless otherwise required by Law (including
federal and state securities Laws) or, as to Acquiror, by the rules and
regulations of the NASD, prior to the Effective Time, no public disclosure
(whether or not in response to any inquiry) of the existence of any subject
matter of, or the terms and conditions of, this Agreement shall be made by any
party hereto unless approved by Acquiror and Target prior to release; provided,
however, that such approval shall not be unreasonably withheld or delayed; and
provided further, that if any such public disclosure is required by Law or, as
to Acquiror, by the rules and regulations of the NASD, the disclosing party will
give the other party reasonable advance notice of such
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disclosure and, if such disclosure is pursuant to a court order or subpoena or
similar process, the disclosing party will cooperate with the other party's
efforts to seek injunctive or other relief preventing or limiting such
disclosure.
4.7 APPROVALS. Acquiror and Target shall use all commercially
reasonable efforts required to obtain all Approvals from Governmental or
Regulatory Authorities or under any of the Contracts or other agreements as may
be required in connection with the Merger (all of which Approvals are set forth
in either the Target Disclosure Schedule or the Acquiror Disclosure Schedule) so
as to preserve all material rights of and benefits to Target thereunder and
Acquiror and Target shall provide each other with such assistance and
information as is reasonably required to obtain such Approvals.
4.8 NOTIFICATION OF CERTAIN MATTERS. Target shall give prompt notice
to Acquiror, and Acquiror shall give prompt notice to Target, of (i) the
occurrence or non-occurrence of any event that is likely to cause any
representation or warranty of Target or Acquiror, respectively, contained in
this Agreement to be untrue or inaccurate in any material respect at or prior to
the Closing Date and (ii) any failure of Target or Acquiror, as the case may be,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 4.8 shall not limit or otherwise affect any
remedies available to the party receiving such notice.
4.9 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto,
at the request of the other party hereto, shall use all requisite commercially
reasonable efforts to execute and deliver such other instruments (including the
execution by Target of the resolution and amendment to terminate Target's 401(k)
Plan prior to Closing) and do and perform such other acts and things (including
all action reasonably necessary to seek and obtain any and all consents and
approvals of any Government or Regulatory Authority or Person required in
connection with the Merger; provided, however, that neither party shall be
obligated to consent to any material divestitures or operational limitations or
activities in connection therewith and no party shall be obligated to make a
payment of money as a condition to obtaining any such condition or approval) as
may be necessary or desirable for effecting completely the consummation of the
Merger and the other transactions contemplated hereby.
4.10 FORM S-8. Acquiror will file, and will use its reasonable
commercial efforts to cause the shares of Acquiror Common Stock that are subject
to issuance upon exercise of the Acquiror Options that result from the
conversion of Target Options under Section 1.6(c) to be registered on a
registration statement on Form S-8 or successor form promulgated by the SEC
under the Securities Act, as soon as commercially reasonable after the Effective
Time. In any event, Acquiror will file such Form S-8 Registration Statement with
five (5) business days after the Effective Time, and will maintain the
effectiveness of such Form S-8 for so long as such Acquiror Options remain
outstanding.
4.11 NNM LISTING OF ADDITIONAL SHARES APPLICATION. Acquiror shall
cause to be authorized for listing on the NNM, effective as of the Effective
Time, all shares of Acquiror Common Stock to be issued to Target's stockholders
in the Merger pursuant to Section 1.6(a) hereof and all shares of Acquiror
Common Stock required to be reserved for issuance, in
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connection with the Merger (including without limitation all such shares to be
reserved for issuance upon all Acquiror Options and Warrants issued in or
resulting from the Merger, or upon the expiration or forfeiture of dissenters'
rights as contemplated by Section 1.7), upon official notice of issuance.
4.12 AUDITORS. Each party will use commercially reasonable efforts
to cause its respective management and independent auditors to facilitate on a
timely basis (i) the preparation of financial statements (including pro forma
financial statements if required) to comply with applicable SEC regulations,
(ii) the review of any audit or review work papers including the examination of
selected audited financial statements and data, and (iii) the delivery of such
representations from each party's independent accountants as may be reasonably
requested by the other party or its accountants.
4.13 DIRECTORS' AND OFFICERS' INDEMNIFICATION.
(a) From and after the Effective Time, Acquiror will fulfill,
honor and perform all of the Indemnification Obligations (as defined below) of
Target arising under Target's Certificate of Incorporation or Bylaws, each as
amended or of Target Subsidiary arising under Target Subsidiary's charter
documents, or under any indemnification or similar agreement between Target or
Target Subsidiary on the one hand, and any Target Covered Person (as defined
below) on the other hand that existed prior to and remains in effect on the date
hereof (copies of which agreements have been provided to Acquiror). In addition,
to the extent that any Target Covered Person would, with respect to any action
or event relating to Target or Target Subsidiary that occurs on or prior to the
Effective Time, be entitled under Acquiror's Certificate of Incorporation or
Bylaws or Target Subsidiary charter documents, each as in effect upon the
Effective Time, to any indemnification, defense of claims or advancement of
expenses by or from Acquiror, Acquiror shall provide such indemnification,
defense and advancement of expenses to such Target Covered Person. A "Target
Covered Person" means any individual who, at any time prior to the Effective
Time, was a director or officer of Target or Target Subsidiary or was a trustee
or other fiduciary of a plan administered for the benefit of employees of Target
and/or Target Subsidiary. "Indemnification Obligations" means an obligation of
Target or Target Subsidiary to provide indemnification, defense of claims or
advancement of expenses to a person.
(b) This Section 4.13 shall survive the consummation of the
Merger, is intended to benefit Target and each indemnified party, shall be
binding, jointly and severally, on all successors and assigns of the Surviving
Corporation and Acquiror, and shall be enforceable by the indemnified persons.
(c) Target hereby represents and warrants to Acquiror that no
claim for indemnification by Target or Target Subsidiary has been made by any
director or officer of Target prior to the date of this Agreement except for any
of such claims as have been paid in full and, to the knowledge of Target, no
basis exists for any such claim for indemnification.
4.14 BENEFIT ARRANGEMENTS. Acquiror and Target agree that, following
the Effective Time, Acquiror will provide (or will cause Target to provide)
benefits to Target's employees as of the Effective Time (other than with respect
to contributions by Target to the
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Target 401(k) Plan, as to which no comparable contributions are made by
Acquiror) that are at least as favorable, taken as a whole, as the benefits
currently provided to employees of Acquiror performing functions similar to
those to be performed by such Target employees after the Effective Time. As soon
as practicable after the execution of this Agreement, Target and Acquiror shall
confer and work together in good faith to agree upon mutually acceptable
employee benefit and compensation arrangements (and amend or terminate Target
employee plans immediately prior to the Effective Time, if appropriate).
Acquiror shall use commercially reasonable efforts to ensure that continuous
employment with Target shall be credited to employees of Target or Target
Subsidiary who become employees of Target or any of its subsidiaries on or after
the Effective Time for all purposes of eligibility and vesting of benefits but
not for purposes of accrual of benefits. Acquiror shall take commercially
reasonable steps to (a) cause to be waived all limitations as to preexisting
condition limitations, exclusions and waiting periods with respect to
participation and coverage requirements applicable to the employees of Target or
Target Subsidiary under any welfare benefit plan that such employees are
eligible to participate in after the Effective Time, other than limitations,
exclusions or waiting periods that are already in effect with respect to such
employees and that have not been satisfied as of the Effective Time under any
welfare benefit plan maintained for such employees immediately prior to the
Effective Time and (b) provide each employee of Target and Target Subsidiary
with credit for any co-payments and deductibles paid during the plan year
commencing immediately prior to the Effective Time in satisfying any applicable
deductible or out-or-pocket requirements under any welfare plans that such
employees are eligible to participate in after the Effective Time for such plan
year.
4.15 TREATMENT AS REORGANIZATION. Neither Acquiror nor Target shall
take any action prior to or following the Closing that would reasonably be
expected to cause the Merger to fail to qualify as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code.
ARTICLE 5
CONDITIONS TO THE MERGER
5.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction or waiver by such party, at or prior to the
Closing, of all the following conditions:
(a) S-4 Registration Statement Effective. The SEC shall have
declared the S-4 Registration Statement effective. No stop order suspending the
effectiveness of the S-4 Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose, and no similar proceeding in
respect of the Proxy Statement, shall have been initiated or threatened by the
SEC and all requests for additional information on the part of the SEC shall
have been complied with to the reasonable satisfaction of the parties thereto.
(b) Governmental and Regulatory Approvals. Approvals from any
other Governmental or Regulatory Authority (if any) necessary for consummation
of the transactions contemplated by this Agreement shall have been obtained, and
any waiting period applicable to the consummation of the Merger under the HSR
Act shall have expired or been terminated.
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(c) No Injunctions or Regulatory Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other Order
issued by any court of competent jurisdiction or Governmental or Regulatory
Authority or other legal or regulatory restraint or prohibition preventing the
consummation of the Merger shall be in effect; nor shall there be any action
taken, or any Law or Order enacted, entered, enforced or deemed applicable to
the Merger or the other transactions contemplated by the terms of this Agreement
that would prohibit the consummation of the Merger or which would permit
consummation of the Merger only if certain material divestitures were made or if
Acquiror were to agree to material limitations on its business activities or
operations.
(d) Tax Opinions. Acquiror and Target shall each have received
written opinions from their counsel, in form and substance reasonably
satisfactory to each of them, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. The parties to this Agreement agree to make such reasonable
representations as requested by such counsel for the purpose of rendering such
opinions. In the event that either Target's or Acquiror's counsel shall not
render such opinion, then the other party's counsel may render such opinion in
satisfaction of the condition set forth in this Section 5.1(d).
(e) Stockholder Approval. The Merger (and any increase in
Acquiror's authorized capital stock necessary to enable Acquiror to perform its
obligations hereunder and to carry out the Merger) shall have been approved by
the requisite votes of the stockholders of Acquiror and Target in accordance
with the DGCL and, if applicable, the California Code.
(f) NNM Listing. Acquiror shall cause to be authorized for
listing on the NNM, effective as of the Effective Time, all shares of Acquiror
Common Stock to be issued to Target's stockholders in the Merger pursuant to
Section 1.6(a) hereof and all shares of Acquiror Common Stock required to be
reserved for issuance, in connection with the Merger (including without
limitation all such shares to be reserved for issuance upon all Acquiror Options
and Acquiror Warrants issued in or resulting from the Merger, or upon the
expiration or forfeiture of dissenters' rights as contemplated by Section 1.7),
upon official notice of issuance.
(g) Registration Rights Agreement. The Amended and Restated
Investors' Rights Agreement of Acquiror dated as of July 2, 1998, shall have
been duly amended by the Amendment No. 1, attached hereto as Exhibit C, and
Target's Existing Investors' Rights Agreement shall have been terminated.
(h) Legal Proceedings. No Governmental or Regulatory Authority
shall have notified either party to this Agreement in writing that such
Governmental or Regulatory Authority intends to commence proceedings to restrain
or prohibit the transactions contemplated hereby or force rescission, unless
such Governmental or Regulatory Authority shall have withdrawn such notice and
abandoned any such proceedings prior to the time which otherwise would have been
the Closing Date.
(i) Limitation on Dissenters; Required Stockholder Vote. Holders
of no more than five percent (5%) of the outstanding shares of Target Capital
Stock shall have
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exercised, nor shall they have any right to exercise, appraisal, dissenters' or
similar rights under applicable law with respect to their shares by virtue of
the Merger.
5.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF TARGET. The obligations
of Target to consummate the Merger and the other transactions contemplated by
this Agreement shall be subject to the satisfaction, or waiver by Target, at or
prior to the Closing, of each of the following conditions, any of which may be
waived, in writing, exclusively by Target:
(a) Representations and Warranties. Each of the representations
and warranties made by Acquiror in Article 3 of this Agreement (as qualified by
the Acquiror Disclosure Schedule) shall be true and correct in all material
respects on the date of this Agreement and such representations and warranties
(as qualified by the Acquiror Disclosure Schedule, as such may be updated at the
Closing Date and prior to the Effective Time, as provided below) shall be true
and correct in all material respects on and as of the Closing Date (except, in
each case, for any such representations or warranties that, by their express
terms, speak only as of a specific date or dates, in which case such
representations and warranties need only be true and correct in all material
respects on and as of such specified date or dates); provided, that Acquiror
shall have the opportunity to update the Acquiror Disclosure Schedule as of the
Closing Date; and provided further, that notwithstanding any failure of one or
more of the representations or warranties of Acquiror (as qualified as permitted
above) to be true and correct in all material respects as of the date of this
Agreement or as of the Closing Date, the condition set forth in this Section
5.2(a) shall nevertheless be satisfied so long as such representations and
warranties of Acquiror (as qualified as permitted above), do not contain any
misstatement or omission of any fact or matter that would have a Material
Adverse Effect on the Business or Condition of Acquiror (it being agreed that in
any controversy concerning the applicability of this Section 5.2(a), the party
claiming the misstatement or omission of any fact or matter shall have the
burden of proving that such fact or matter would have a Material Adverse Effect
on the Business or Condition of Acquiror).
(b) Performance. Acquiror shall have performed and complied in
all material respects with each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by Acquiror at or before the
Closing.
(c) No Material Adverse Change. There shall have occurred no
material adverse change in the Business or Condition of Acquiror since the date
hereof; provided that for purposes of this Section 5.2(c), Section 3.7 and/or
Section 5.2(a), a change to the Business or Condition of Acquiror which is
attributable to or results from (i) the public announcement or pendency of the
transactions contemplated hereby on current or prospective customers of
Acquiror, (ii) changes in general economic conditions or changes affecting the
industry generally in which Acquiror operates, and/or (iii) changes resulting
from the acts or omissions of Target shall not be deemed to be a material
adverse change in the Business or Condition of Acquiror; provided further, that
a reduction in the market price of Acquiror's capital stock shall not, in and of
itself, constitute a material adverse change in the Business or Condition of
Acquiror (it being agreed that in any controversy concerning the applicability
of this Section 5.2(c), Section 3.7 and/or Section 5.2(a), the party claiming
that there has occurred a material adverse change in the Business or Condition
of Acquiror since the date hereof shall have the burden of proving the
occurrence of such material adverse change).
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(d) Officers' Certificates. Acquiror shall have delivered to
Target (A) a certificate, dated the Closing Date and executed by its President
and Chief Executive Officer of Acquiror and (B) a certificate, dated the Closing
Date and executed by the Secretary of Acquiror, both substantially in the forms
set forth in Exhibit E hereto.
(e) Legal Opinion. Target shall have received a legal opinion
from Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx, LLP, counsel to
Acquiror, as to the matters set forth on Exhibit F hereto.
(f) Directors and Officers. Each of the Target Designees shall
have been duly and validly elected to Acquiror's board of directors. The three
(3) persons designated by Target shall be Xxxxx Xxxxxx, Xxxxx Xxxxxxx and one
(1) other person reasonably acceptable to a majority of the Existing Directors,
each to hold office in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Corporation. If any Target Designee cannot or will not
serve as a director of the Surviving Corporation, Target may designate a
replacement Designee, provided such replacement is reasonably acceptable to a
majority of the Existing Directors. The officers of Surviving Corporation at,
and immediately after, the Effective Time shall be as mutually agreed to by
Target and Acquiror, except that it is agreed that Xxxxxx Xxxxxxx shall be Chief
Executive Officer and Xxxxx Xxxxxxx shall be President and Chief Operating
Officer.
5.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF ACQUIROR. The
obligations of Acquiror to consummate the Merger and the other transactions
contemplated by this Agreement shall be subject to the satisfaction, or waiver
by Acquiror, at or prior to the Closing, of each of the following conditions,
any of which may be waived, in writing, exclusively by Acquiror:
(a) Representations and Warranties. Each of the representations
and warranties made by Target in Article 2 of this Agreement (as qualified by
the Target Disclosure Schedule) shall be true and correct in all material
respects on the date of this Agreement and such representations and warranties
(as qualified by the Target Disclosure Schedule, as such may be updated at the
Closing Date and prior to the Effective Time, as provided below) shall be true
and correct in all material respects on and as of the Closing Date (except, in
each case, for any such representations or warranties that, by their express
terms, speak only as of a specific date or dates, in which case such
representations and warranties need only be true and correct in all material
respects on and as of such specified date or dates); provided, that Target shall
have the opportunity to update the Target Disclosure Schedule as of the Closing
Date; and provided further, that notwithstanding any failure of one or more of
the representations or warranties of Target (as qualified as permitted above) to
be true and correct in all material respects as of the date of this Agreement or
as of the Closing Date, the condition set forth in this Section 5.3(a) shall
nevertheless be satisfied so long as such representations and warranties of
Target (as qualified as permitted above), do not contain any misstatement or
omission of any fact or matter that could reasonably be anticipated to have a
Material Adverse Effect on the Business or Condition of Target (it being agreed
that in any controversy concerning the applicability of this Section 5.3(a), the
party claiming the misstatement or omission of any fact or matter shall have the
burden of proving that such fact or matter would have a Material Adverse Effect
on the Business or Condition of Target).
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(b) Performance. Target shall have performed and complied in all
material respects with each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by Target on or before the Closing
Date.
(c) No Material Adverse Change. There shall have occurred no
material adverse change in the Business or Condition of Target since the date
hereof; provided that for purposes of this Section 5.3(c), Section 2.8 and/or
Section 5.3(a), a change to the Business or Condition of Target which is
attributable to or results from (i) the public announcement or pendency of the
transactions contemplated hereby on current or prospective customers of Target,
(ii) changes in general economic conditions or changes affecting the industry
generally in which Target operates and/or (iii) changes resulting from the acts
or omissions of Acquiror shall not be deemed to be a material adverse change in
the Business or Condition of Target; provided further, that a reduction in the
market value of Target's capital stock shall not, in and of itself, constitute a
material adverse change in the Business or Condition of Target; (it being agreed
that in any controversy concerning the applicability of this Section 5.3(c),
Section 2.8 and/or Section 5.3(a), the party claiming that there has occurred a
material adverse change in the Business or Condition of Target since the date
hereof shall have the burden of proving the occurrence of such material adverse
change).
(d) Officers' Certificates. Target shall have delivered to
Acquiror (i) a certificate, dated the Closing Date and executed by its President
and Chief Executive Officer of Target and (ii) a certificate, dated the Closing
Date and executed by the Secretary of Target, both substantially in the forms
set forth in Exhibit G hereto.
(e) Third Party Consents. Acquiror shall have been furnished
with evidence satisfactory to it that Target has obtained the consents,
approvals and waivers listed in Section 2.5 of the Target Disclosure Schedule
(except for such consents, approvals and waivers the failure of which to receive
would have a Material Adverse Effect on the Surviving Corporation).
(f) Legal Opinion. Acquiror shall have received a legal opinion
from Fenwick & West, LLP, legal counsel to Target, as to the matters set forth
on Exhibit H hereto.
(g) Termination of 40l(k) Plan. If required by Acquiror in
writing at least twenty (20) business days prior to Closing, Target shall,
immediately prior to the Closing Date, have terminated the Target 401(k) Plan
and no further contributions shall have been made to the Target 401(k) Plan
after such date of termination. Target shall have provided to Acquiror (i)
executed resolutions by the Board of Directors of Target authorizing such
termination and (ii) an executed amendment to the Target 401(k) Plan containing
proposed amendments prepared by Acquiror, if any, sufficient to ensure
compliance with all applicable requirements of the Internal Revenue Code and
regulations thereunder so that the tax-qualified status of the Target 401(k)
Plan will be maintained at the time of termination.
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ARTICLE 6
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS; ESCROW PROVISIONS
6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. Notwithstanding any right of Acquiror or Target (whether or not
exercised) to investigate the affairs of Acquiror or Target or a waiver by
Acquiror or Target of any condition to Closing set forth in Article 5, each
party shall have the right to rely fully upon the representations, warranties,
covenants and agreements of the other party contained in this Agreement or in
any instrument delivered pursuant to this Agreement. Other than Target's
capitalization representation set forth in Section 2.3, which shall only survive
until the Expiration Date, none of the representations and warranties of Target
or Acquiror, and none of the other covenants and agreements of Target and
Acquiror, which by their terms are to be performed on or prior to the Closing
Date, shall survive after the Merger.
6.2 ESCROW PROVISIONS.
(a) Establishment of the Escrow Fund. As soon as practicable
after the Effective Time, the Escrow Amount, without any act of any Target
stockholder, will be deposited in escrow with a depositary agent mutually
acceptable to Target and Acquiror (the "Depositary Agent") (plus a proportionate
share of any additional shares of Acquiror Common Stock as may be issued with
respect to the Escrow Amount upon any stock splits, stock dividends or
recapitalizations effected by Acquiror following the Effective Time), such
deposit to constitute the "Escrow Fund" to be governed by the terms set forth
herein. The portion of the Escrow Amount contributed on behalf of each
stockholder of Target shall be in proportion to the aggregate number of shares
of Acquiror Common Stock which such holder would otherwise be entitled under
Section 1.6.
(b) Recourse to the Escrow Fund. The Escrow Amount shall be
available to compensate Acquiror and its officers, directors, employees or
agents, for any and all payments and disbursements made by Acquiror, its
officers, directors, employees or agents (including attorneys' fees and other
expenses of litigation, and amounts paid in settlement), directly or indirectly,
as a result of all Section 2.3 Losses (whether or not involving a Third Party
Claim) incurred or sustained by Acquiror, its officers, directors, employees or
agents, directly or indirectly. Other than for fraud, the provisions of this
Article 6 shall be the sole and exclusive remedy available to Acquiror and to
its officers, directors, employees and agents to obtain monetary recovery from
Target's stockholders with respect to any Section 2.3 Losses and there shall not
be recourse for any other Losses. Except for liability for fraud and the
liability of a Target stockholder for the loss of such stockholder's pro rata
share of the Acquiror Common Stock and other property included in the Escrow
Fund in satisfaction of Section 2.3 Losses in accordance with this Article 6, no
Target stockholders or any other Target securityholder or officer or director of
Target shall have any liability to Acquiror or to any of Acquiror's officers,
directors, stockholders, employees or agents for or in respect of any Losses or
other liability arising out of this Agreement.
(c) Escrow Period; Distribution of Escrow Fund upon Termination
of Escrow Period. Subject to the following requirements, the Escrow Fund shall
be in existence
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immediately following the Effective Time and shall terminate at 5 p.m., Pacific
Time, 180 days after the Effective Time (the "Expiration Date") (the period of
time from the Effective Time through and including the Expiration Date is
referred to herein as the "Escrow Period"); and upon expiration of the Escrow
Period all shares of Acquiror Common Stock remaining in the Escrow Fund shall be
distributed as set forth in the last sentence of this Section 6.2(c); provided,
however, that the Escrow Period shall not terminate with respect to such amount
(or some portion thereof) that is necessary in the reasonable judgment of
Acquiror, subject to the objection of the Stockholder Agent and the subsequent
arbitration of the matter in the manner as provided in Section 6.2(g) hereof, to
satisfy any unsatisfied claims for Section 2.3 Losses under this Section 6.2
concerning facts and circumstances existing prior to the termination of such
Escrow Period which claims are specified in any Officer's Certificate delivered
to the Depositary Agent prior to termination of such Escrow Period. As soon as
all such claims, if any, have been resolved, the Depositary Agent shall deliver
to the stockholders of Target the remaining portion of the Escrow Fund not
required to satisfy such claims. Deliveries of certificates for shares of
Acquiror Common Stock remaining in the Escrow Fund to the stockholders of Target
pursuant to this Section 6.2(c) shall be made ratably in proportion to their
respective contributions to the Escrow Fund and Acquiror shall use all requisite
commercially reasonable efforts to have such certificates delivered as promptly
as possible after such resolution.
(d) Protection of Escrow Fund.
(i) The Depositary Agent shall hold and safeguard the Escrow
Fund during the Escrow Period, shall treat such fund as a trust fund in
accordance with the terms of this Agreement and not as the property of Acquiror
and shall hold and dispose of the Escrow Fund only in accordance with the terms
hereof.
(ii) Any shares of Acquiror Common Stock or other Equity
Equivalents issued or distributed by Acquiror ("New Shares") in respect of
Acquiror Common Stock in the Escrow Fund which have not been released from the
Escrow Fund shall be added to the Escrow Fund. New Shares issued in respect of
shares of Acquiror Common Stock which have been released from the Escrow Fund
shall not be added to the Escrow Fund but shall be distributed to the record
holders thereof. Cash dividends on Acquiror Common Stock shall not be added to
the Escrow Fund but shall be distributed to the record holders of the Acquiror
Common Stock on the record date set for any such dividend.
(iii) Each stockholder shall have full voting rights with
respect to the shares of Acquiror Common Stock contributed to the Escrow Fund by
such stockholder (and on any voting securities added to the Escrow Fund in
respect of such shares of Acquiror Common Stock).
(e) Claims Upon Escrow Fund.
(i) Upon receipt by the Depositary Agent at any time on or
before the Expiration Date of a certificate signed by any officer of Acquiror
(an "Officer's Certificate"): (A) stating that Acquiror has paid or properly
accrued or reasonably anticipates that it will become obligated to pay or accrue
a Section 2.3 Loss and (B) specifying in reasonable detail the individual items
of Section 2.3 Losses included in the amount so stated, the date on
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which each such item was paid or properly accrued, the basis for and facts
giving rise to, such anticipated liability, and the nature of the
misrepresentation to which such item is related, the Depositary Agent shall,
subject to the provisions of Section 6.2(f) and 6.2(g) hereof, delivered to
Acquiror out of the Escrow Fund, as promptly as practicable, shares of Acquiror
Common Stock held in the Escrow Fund in an amount equal to such Section 2.3
Losses. Where the basis for a claim upon the Escrow Fund by Acquiror is that
Acquiror reasonably anticipates that it will pay or accrue a Section 2.3 Loss,
no payment will be made from the Escrow Fund for such Section 2.3 Loss unless
and until such Section 2.3 Loss is actually paid or accrued.
(ii) For the purposes of determining the number of shares of
Acquiror Common Stock to be delivered to Acquiror out of the Escrow Fund
pursuant to Section 6.2(e)(i), the shares of Acquiror Common Stock shall be
valued at the Closing Price.
(f) Objections to Claims. At the time of delivery of any
Officer's Certificate to the Depositary Agent, a duplicate copy of such
Officer's Certificate shall be concurrently delivered to the Stockholder Agent
and for a period of thirty (30) days after such delivery, the Depositary Agent
shall make no delivery to Acquiror of any Escrow Amounts pursuant to Section
6.2(e) hereof unless the Depositary Agent shall have received written
authorization from the Stockholder Agent to make such delivery. After the
expiration of such thirty (30) day period, the Depositary Agent shall make
delivery of shares of Acquiror Common Stock from the Escrow Fund in accordance
with Section 6.2(e) hereof, provided that no such payment or delivery may be
made if the Stockholder Agent shall object in a written statement to the claim
made in the Officer's Certificate, and such statement shall have been delivered
to the Depositary Agent prior to the expiration of such thirty (30) day period.
(g) Resolution of Conflicts; Arbitration.
(i) In case the Stockholder Agent shall object in writing to
any claim or claims made in any Officer's Certificate, the Stockholder Agent and
Acquiror shall attempt in good faith to agree upon the rights of the respective
parties with respect to each of such claims. If the Stockholder Agent and
Acquiror should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both parties and shall be furnished to the Depositary
Agent. The Depositary Agent shall be entitled to rely on any such memorandum and
distribute shares of Acquiror Common Stock from the Escrow Fund in accordance
with the terms thereof.
(ii) If no such agreement can be reached after good faith
negotiation, or in any event, no such agreement has been reached within
forty-five (45) days after the delivery of the Officer's Certificate to the
Stockholder Agent, then either Acquiror or the Stockholder Agent may demand
arbitration of the dispute unless the amount of the damage or loss is at issue
in a pending Action or Proceeding involving a Third Party Claim, in which event
arbitration shall not be commenced until such amount is ascertained (provided
Acquiror acts diligently to resolve such Third-Party Claim and allows the
Stockholder Agent to participate in the defense of such Third-Party Claim) or
both parties agree to arbitration; and in either event the matter shall be
settled by arbitration conducted by three (3) arbitrators, one (1) selected by
Acquiror and one (1) selected by the Stockholder Agent, and the two (2)
arbitrators selected by Acquiror and the Stockholder Agent shall select a third
arbitrator. The Arbitration shall be
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governed by the Commercial Arbitration Rules of the American Arbitration
Association. The arbitrators shall set a limited time period and establish
procedures designed to reduce the cost and time for discovery of information
relating to any dispute while allowing the parties an opportunity, adequate as
determined in the sole judgment of the arbitrators, to discover relevant
information from the opposing parties about the subject matter of the dispute.
The arbitrators shall rule upon motions to compel, limit or allow discovery as
they shall deem appropriate given the nature and extent of the disputed claim.
The arbitrators shall also have the authority to impose sanctions, including
attorneys' fees and other costs incurred by the parties, to the same extent as a
court of law or equity, should the arbitrators determine that discovery was
sought without substantial justification or that discovery was refused or
objected to by a party without substantial justification. The decision of a
majority of the three (3) arbitrators as to the validity and amount of any claim
in such Officer's Certificate shall be binding and conclusive upon the parties
to this Agreement, and notwithstanding anything in Section 6.2(f) hereof, the
Depositary Agent shall be entitled to act in accordance with such decision and
make or withhold payments out of the Escrow Fund in accordance therewith. Such
decision shall be written and shall be supported by written findings of fact and
conclusions regarding the dispute which shall set forth the award, judgment,
decree or order awarded by the arbitrators. Each party agrees to confirm any
such arbitration decision to the Depositary Agent in order to facilitate any
release of shares of Acquiror Common Stock or other property from the Escrow
Fund.
(iii) Judgment upon any award rendered by the arbitrators
may be entered in any court having competent jurisdiction. Any such arbitration
shall be held in the county of Santa Clara, California under the commercial
rules of arbitration then in effect of the American Arbitration Association. For
purposes of this Section 6.2(g), in any arbitration hereunder in which any claim
or the amount thereof stated in the Officer's Certificate is at issue, Acquiror
shall be deemed to be the Non-Prevailing Party in the event that the arbitrators
award Acquiror less than the sum of one-half ( 1/2) of the disputed amount of
any Section 2.3 Losses plus any amounts not in dispute; otherwise, the
stockholders of Target as represented by the Stockholder Agent shall be deemed
to be the Non-Prevailing Party. The Non-Prevailing Party to an arbitration shall
pay its own expenses, the fees of each arbitrator, the administrative costs of
the arbitration and the expenses, including reasonable attorneys' fees and
costs, incurred by the other party to the arbitration ("Arbitration Related
Fees"), provided, however, that any Arbitration Related Fees due from Target
shall be delivered to Acquiror out of the Escrow Fund, as promptly as
practicable, in the form of shares of Acquiror Common Stock held in the Escrow
Fund in an amount equal to such Arbitration Related Fees. For the purposes of
determining the number of shares of Acquiror Common Stock to be delivered to
Acquiror out of the Escrow Fund to cover any Arbitration Related Fees, the
shares of Acquiror Common Stock shall be valued at the Closing Price.
(h) Stockholder Agent of the Stockholders; Power of Attorney.
(i) In the event that the Merger is approved by the
stockholders of Target, effective upon such vote, and without further act of any
stockholder, Xxxxx Xxxxxxx shall be appointed as agent and attorney-in-fact (the
"Stockholder Agent") for each stockholder of Target (except such stockholders,
if any, as shall have perfected their appraisal or dissenters' rights under the
DGCL or California Code, if applicable), for and on behalf of stockholders of
Target, to give and receive notices and communications, to authorize
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delivery to Acquiror of shares of Acquiror Common Stock from the Escrow Fund in
satisfaction of claims by Acquiror, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of the
Stockholder Agent for the accomplishment of the foregoing and to participate in
the defense of Third-Party Claim. Such agency may be changed by the stockholders
of Target from time to time upon not less than thirty (30) days prior written
notice to Acquiror; provided, however, that the Stockholder Agent may not be
removed unless holders of a two-thirds (2/3) interest in the Escrow Fund agree
to such removal and to the identity of the substituted Stockholder Agent. Any
vacancy in the position of Stockholder Agent may be filled by approval of the
holders of a majority in interest of the Escrow Fund. No bond shall be required
of the Stockholder Agent, and the Stockholder Agent shall not receive
compensation for his services. Notices or communications to or from the
Stockholder Agent shall constitute notice to or from each of the stockholders of
Target.
(ii) The Stockholder Agent shall not be liable for any act
done or omitted hereunder as Stockholder Agent while acting in good faith, or
acting on the advice of counsel. The Stockholder Agent shall have no duty,
obligation or responsibility to expend his personal funds in support of his
activities as Stockholder Agent.
(iii) The Stockholder Agent shall have reasonable access to
information about Target and the reasonable assistance of Target's officers and
employees for purposes of performing its duties and exercising its rights
hereunder, provided that the Stockholder Agent shall treat confidentially and
not disclose any nonpublic information from or about Target to anyone (except on
a need to know basis to individuals who agree to treat such information
confidentially).
(i) Actions of the Stockholder Agent. A decision, act, consent
or instruction of the Stockholder Agent shall constitute a decision of all the
stockholders for whom a portion of the Escrow Amount otherwise issuable to them
in the Merger are deposited in the Escrow Fund and shall be final, binding and
conclusive upon each of such stockholders, and the Depositary Agent and Acquiror
may rely upon any such decision, act, consent or instruction of the Stockholder
Agent as being the decision, act, consent or instruction of every such
stockholder of Target. The Depositary Agent and Acquiror are hereby relieved
from any liability to any person for any acts done by them in accordance with
such decision, act, consent or instruction of the Stockholder Agent.
(j) Third-Party Claims. In the event Acquiror becomes aware of a
third-party claim (a "Third Party Claim") which Acquiror reasonably expects may
result in a Section 2.3 Loss and a demand against the Escrow Fund, Acquiror
shall notify the Stockholder Agent of such claim, and the Stockholder Agent, as
representative for the stockholders of Target, shall be entitled, at their
expense, to participate in any defense of such claim. Acquiror shall promptly
defend any such Third-Party Claim and shall have the right in its sole
discretion to settle any Third Party Claim; provided, however, that if Acquiror
settles any Third Party Claim without the Stockholder Agent's consent (which
consent shall not be unreasonably withheld or delayed), Acquiror may not make a
claim against the Escrow Fund with respect to the amount of Losses incurred by
Acquiror in such settlement. In the event that the Stockholder Agent has
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consented to any such settlement, the Stockholder Agent shall have no power or
authority to object under any provision of this Article 6 to the amount of any
claim by Acquiror against the Escrow Fund with respect to the amount of Losses
incurred by Acquiror in such settlement.
(k) Depositary Agent's Duties.
(i) The Depositary Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Depositary Agent
may receive after the date of this Agreement which are signed by an officer of
Acquiror and the Stockholder Agent, and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper party or parties. The
Depositary Agent shall not be liable for any act done or omitted hereunder as
Depositary Agent while acting in good faith and in the exercise of reasonable
judgment, and any act done or omitted pursuant to the advice of counsel shall be
conclusive evidence of such good faith.
(ii) The Depositary Agent is hereby expressly authorized to
comply with and obey Orders of any court of law or Governmental or Regulatory
Authority, notwithstanding any notices, warnings or other communications from
any party or any other person to the contrary. In case the Depositary Agent
obeys or complies with any such Order, the Depositary Agent shall not be liable
to any of the parties hereto or to any other person by reason of such
compliance, notwithstanding any such Order being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction or proper authority.
(iii) The Depositary Agent shall not be liable in any
respect on account of the identity, authority or rights of the parties executing
or delivering or purporting to execute or deliver this Agreement or any
documents or papers deposited or called for hereunder.
(iv) The Depositary Agent shall not be liable for the
expiration of any rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Depositary Agent.
(v) In performing any duties under this Agreement, the
Depositary Agent shall not be liable to any party for damages, losses, or
expenses, except for gross negligence or willful misconduct on the part of the
Depositary Agent. The Depositary Agent shall not incur any such liability for
(A) any act or failure to act made or omitted in good faith, or (B) any action
taken or omitted in reliance upon any instrument, including any written
statement or affidavit provided for in this Agreement that the Depositary Agent
shall in good faith believe to be genuine, nor will the Depositary Agent be
liable or responsible for forgeries, fraud, impersonations or determining the
scope of any representative authority. In addition, the Depositary Agent may
consult with legal counsel in connection with the Depositary Agent's duties
under this Agreement and shall be fully protected in any act taken, suffered, or
permitted by it in good faith in accordance with the advice of counsel. The
Depositary Agent is not responsible for determining and verifying the authority
of any person acting or purporting to act on behalf of any party to this
Agreement.
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(vi) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Depositary Agent will not be required to
determine the controversy or to take any action regarding it, except to comply
with any arbitration decision, order or award as provided in Section 6.2(g). The
Depositary Agent may hold all documents and shares of Acquiror Common Stock and
may wait for settlement of any such controversy by final appropriate legal
proceedings or other means as, in the Depositary Agent's discretion, the
Depositary Agent may be required to wait for, despite what may be set forth
elsewhere in this Agreement. In such event, the Depositary Agent will not be
liable for any damages. Furthermore, the Depositary Agent may at its option,
file an action of interpleader requiring the parties to answer and litigate any
claims and rights among themselves. The Depositary Agent is authorized to
deposit with the clerk of the court all documents and shares of Acquiror Common
Stock held in escrow, except all costs, expenses, charges and reasonable
attorney fees incurred by the Depositary Agent due to the interpleader action
and which the parties jointly and severally agree to pay. Upon initiating such
action, the Depositary Agent shall be fully released and discharged of and from
all obligations and liability imposed by the terms of this Agreement.
(vii) The parties and their respective successors and
assigns agree jointly and severally to indemnify and hold the Depositary Agent
harmless against any and all Losses incurred by the Depositary Agent in
connection with the good faith performance by the Depositary Agent of his or her
duties under this Agreement, including any litigation arising from this
Agreement or involving its subject matter.
(viii) The Depositary Agent may resign at any time upon
giving at least 30 days written notice to the parties; provided, however, that
no such resignation shall become effective until the appointment of a successor
depositary agent which shall be accomplished as follows: the parties shall use
their commercially reasonable efforts to mutually agree on a successor
depositary agent within thirty (30) days after receiving such notice. If the
parties fail to agree upon a successor depositary agent within such time, the
Depositary Agent shall have the right to appoint a successor depositary agent
authorized to do business in the State of California that is a bank or financial
institution. The successor Depositary Agent shall execute and deliver an
instrument accepting such appointment and it shall, without further acts, be
vested with all the estates, properties, rights, powers, and duties of the
predecessor depositary agent as if originally named as escrow agent. The
Depositary Agent shall be discharged from any further duties and liability under
this Agreement.
(ix) All fees of the Depositary Agent for performance of its
duties hereunder shall be paid by Acquiror. In the event that the conditions of
this Agreement are not promptly fulfilled, or if the Depositary Agent renders
any service not provided for in this Agreement, or if the parties request a
substantial modification of its terms, or if any controversy arises, or if the
Depositary Agent is made a party to, or intervenes in, any Action or Proceeding
pertaining to this escrow or its subject matter, the Depositary Agent shall be
reasonably compensated for such extraordinary services and reimbursed for all
costs, attorney's fees, and expenses occasioned by such default, delay,
controversy or Action or Proceeding. Acquiror agrees to pay these sums upon
demand.
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ARTICLE 7
CONDUCT PRIOR TO THE EFFECTIVE TIME
7.1 CONDUCT OF BUSINESS.
(a) During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement and the
Effective Time, Target and Acquiror each agree (unless such party receives prior
consent in writing from the other party, which consent shall not be unreasonably
withheld) to carry on its business in the ordinary and usual course and
consistent with its past practices, to pay its Liabilities and Taxes consistent
with its past practices (and in any event when due), to pay or perform other
obligations when due consistent with its past practices (other than Liabilities,
Taxes and other obligations, if any, contested in good faith through appropriate
proceedings), and, to the extent consistent with such business, to use
commercially reasonable efforts to preserve intact its present business
organization, keep available the services of its present officers and key
employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, independent contractors and other Persons
having business dealings with it, all with the express purpose and intent of
preserving unimpaired its goodwill and ongoing businesses at the Effective Time.
(b) Without limiting Section 7.1(a), and except as otherwise
specifically provided in this Agreement, Target will not, directly or
indirectly, prior to the Effective Time, without the prior written consent of
Acquiror:
(i) enter into any material Contract or other material
commitment or transaction, except in the ordinary course of its business
consistent with past practice;
(ii) amend or otherwise modify (or agree to do so), except
in the ordinary course of business, or violate the terms of, any material
Contract;
(iii) amend its Certificate of Incorporation or Bylaws;
(iv) transfer (by way of a License or otherwise) to any
Person rights to any of its material Intellectual Property other than pursuant
to licenses granted in the ordinary course of its business consistent with past
practice;
(v) make any change in its accounting policies, principles,
methods, practices or procedures (including for bad debts, contingent
liabilities or otherwise, respecting capitalization or expense of research and
development expenditures, depreciation or amortization rates or timing of
recognition of income and expense);
(vi) commence or settle any material litigation;
(vii) declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock or property) in respect of any
shares 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 (except upon the
conversion of shares of Target Preferred Stock into shares of Target Common
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Stock in accordance with the terms of such Target Preferred Stock), or
repurchase, redeem or otherwise acquire, directly or indirectly, any shares of
its Capital Stock or Equity Securities (except that Target may repurchase or
redeem shares of its capital stock at the original purchase price of such shares
in connection with the termination of employment with Target or Target
Subsidiary of the Person whose shares are being repurchased or redeemed);
(viii) acquire any business, company or corporation, whether
through the purchase of stock, a purchase, lease or License of assets, a merger,
consolidation, tender offer or any other form of business combination;
(ix) dispose of any significant assets, other than in the
ordinary course of its business, consistent with its past practices; or
(x) enter into or approve any contract, arrangement or
understanding or acquiesce in respect of any arrangement or understanding, to
do, engage in or cause or having the effect of any of the foregoing.
(c) Without limiting Section 7.1(a), and except as otherwise
specifically provided in this Agreement, Acquiror will not, directly or
indirectly, prior to the Effective Time, without the prior written consent of
Target:
(i) enter into any material Contract or other material
commitment or transaction, except in the ordinary course of its business
consistent with past practice;
(ii) amend or otherwise modify (or agree to do so), except
in the ordinary course of business, or violate the terms of, any material
Contract;
(iii) amend its Certificate of Incorporation or Bylaws;
(iv) transfer (by way of a License or otherwise) to any
Person rights to any of its material Intellectual Property other than pursuant
to licenses granted in the ordinary course of its business consistent with past
practice;
(v) make any change in its accounting policies, principles,
methods, practices or procedures (including for bad debts, contingent
liabilities or otherwise, respecting capitalization or expense of research and
development expenditures, depreciation or amortization rates or timing of
recognition of income and expense);
(vi) commence or settle any material litigation;
(vii) declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock or property) in respect of any
shares 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 of Acquiror, or
repurchase, redeem or otherwise acquire, directly or indirectly, any shares its
capital stock (except that Acquiror may repurchase or redeem shares of its
capital stock at the original
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purchase price of such shares in connection with the termination of employment
with Acquiror of the Person whose shares are being repurchased or redeemed);
(viii) acquire any business, company or corporation, whether
through the purchase of stock, a purchase, lease or License of assets, a merger,
consolidation, tender offer or any other form of business combination;
(ix) dispose of any significant assets, other than in the
ordinary course of its business, consistent with its past practices; or
(x) enter into or approve any contract, arrangement or
understanding or acquiesce in respect of any arrangement or understanding, to
do, engage in or cause or having the effect of any of the foregoing.
7.2 NO SOLICITATION--TARGET.
(a) Until the earlier of the Effective Time and the date of
termination of this Agreement pursuant to the provisions of Section 8.1 hereof,
Target will not , nor will Target permit any of its directors, officers, agents,
employees, affiliates, attorneys, accountants, financial advisers or other
representatives (collectively, "Representatives") to (directly or indirectly):
(i) solicit, encourage, initiate, entertain or participate in any negotiations
or discussions with respect to an offer or proposal, oral, written, or
otherwise, formal or informal, to acquire all or any substantial portion of
Target's business or assets, whether by purchase of assets, exclusive license,
joint venture formation, purchase of stock, business combination or otherwise,
(ii) disclose any information not customarily disclosed to any Person concerning
Target and which Target believes would be used for the purposes of formulating
any such offer or proposal, (iii) assist, cooperate with, facilitate or
encourage any Person to make any offer or proposal to acquire all or any
substantial portion of Target's business or assets (directly or indirectly),
(iv) agree to, enter into a contract regarding, approve, recommend or endorse
any transaction involving, the acquisition of all or any substantial portion of
Target's business or assets (an "Acquisition Proposal--Target"), or (v)
authorize or permit any of Target's Representatives to take any such action.
Target shall notify Acquiror as promptly as practical if any proposal or offer
(formal or informal, oral, written or otherwise), or any inquiry or contact with
any Person with respect thereto, regarding a Acquisition Proposal is made, such
notice to include the identity of the Person proposing such Acquisition
Proposal-Target and the terms thereof, and shall keep Acquiror apprised on a
current basis of the status of any such Acquisition Proposal--Target and of any
modifications to the terms thereof. Target immediately shall cease and cause to
be terminated all existing discussions or negotiations with any parties other
than Acquiror conducted heretofore with respect to any Acquisition
Proposal--Target. Notwithstanding the foregoing, prior to the date of the
approval of this Agreement and the Merger by the stockholders of Target (the
"Target Stockholder Approval Date"), Target may furnish information concerning
its business, properties or assets to any corporation, partnership, person or
other entity or group pursuant to appropriate confidentiality agreements, and
may negotiate and participate in discussions and negotiations with such entity
or group concerning an Acquisition Proposal--Target if:
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(i) such entity or group has on an unsolicited basis
submitted a bona fide written proposal to the Target Board of Directors relating
to any such transaction which the Target Board of Directors determines in good
faith, represents a superior transaction to the Merger (a "Competing
Proposal--Target") and in the good faith judgment of the Target Board of
Directors the person or entity making such Competing Proposal--Target appears to
have the financial means, or the ability to obtain the necessary financing to
successfully conclude such Competing Proposal--Target; and
(ii) in the opinion of the Target Board of Directors such
action is required to discharge the Target Board of Directors' fiduciary duties
to the Target's stockholders under applicable law following receipt of advice
from independent legal counsel to Target.
(b) Except as set forth below in this subsection (b), neither
the Target Board of Directors nor any committee thereof shall: (i) fail to
include, withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Acquiror, the approval or positive recommendation by such Board of
Directors or any such committee of this Agreement or the Merger, (ii) approve or
recommend or propose to approve or recommend, any Acquisition Proposal--Target,
or (iii) enter into any agreement with respect to any Acquisition
Proposal--Target, provided, however, that notwithstanding the foregoing, prior
to the Target Stockholder Approval Date, the Target Board of Directors may fail
to include or may withdraw or modify, its approval or recommendation of this
Agreement or the Merger, or may approve or recommend any Acquisition
Proposal--Target which satisfies the requirements of each of subsection (i) and
subsection (ii) of Section 7.2(a) hereof (any such Acquisition Proposal--Target,
a "Superior Proposal--Target"), or enter into an agreement with respect to a
Superior Proposal--Target, in each case at any time after the fifth business day
following Acquiror's receipt of written notice from the Target advising Acquiror
that the Target Board of Directors has received a Superior Proposal--Target
which it intends to accept, specifying the material terms and conditions of such
Superior Proposal--Target and identifying the Person making such Superior
Proposal--Target.
7.3 NO SOLICITATION--ACQUIROR.
(a) Until the earlier of the Effective Time and the date of
termination of this Agreement pursuant to the provisions of Section 8.1 hereof,
Acquiror will not take, nor will Acquiror permit any of its directors, officers,
agents, employees, affiliates, attorneys, accountants, financial advisers or
other representatives (collectively, "Representatives") to (directly or
indirectly): (i) solicit, encourage, initiate, entertain or participate in any
negotiations or discussions with respect to an offer or proposal, oral, written,
or otherwise, formal or informal to acquire all or any substantial portion of
Acquiror's business or assets, whether by purchase of assets, exclusive license,
joint venture formation, purchase of stock, business combination or otherwise,
(ii) disclose any information not customarily disclosed to any Person concerning
Acquiror and which Acquiror believes would be used for the purposes of
formulating any such offer or proposal, (iii) assist, cooperate with, facilitate
or encourage any Person to make any offer or proposal to acquire all or any
substantial portion of Acquiror's business or assets (directly or indirectly),
(iv) agree to, enter into a contract regarding, approve, recommend or endorse
any transaction involving, the acquisition of all or any substantial portion of
Acquiror's business or assets (an "Acquisition Proposal--Acquiror"), or (v)
authorize or permit any of Acquiror's
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Representatives to take any such action. Acquiror shall notify Target
as promptly as practical if any proposal or offer (formal or informal, oral,
written or otherwise), or any inquiry or contact with any Person with respect
thereto, regarding a Acquisition Proposal--Acquiror is made, such notice to
include the identity of the Person proposing such Acquisition Proposal--Acquiror
and the terms thereof, and shall keep Target apprised, on a current basis of the
status of any such Acquisition Proposal--Acquiror and of any modifications to
the terms thereof. Acquiror immediately shall cease and cause to be terminated
all existing discussions or negotiations with any parties other than Target
conducted heretofore with respect to any Acquisition Proposal--Acquiror.
Notwithstanding the foregoing, prior to the date of the approval of this
Agreement and the Merger by the shareholders of Acquiror (the "Acquiror
Stockholder Approval Date"), Acquiror may furnish information concerning its
business, properties or assets to any corporation, partnership, person or other
entity or group pursuant to appropriate confidentiality agreements, and may
negotiate and participate in discussions and negotiations with such entity or
group concerning an Acquisition Proposal--Acquiror if:
(i) such entity or group has on an unsolicited basis
submitted a bona fide written proposal to the Acquiror Board of Directors
relating to any such transaction which the Acquiror Board of Directors
determines in good faith, represents a superior transaction to the Merger (a
"Competing Proposal--Acquiror") and in the good faith judgment of the Acquiror
Board of Directors the person or entity making such Competing Proposal--Acquiror
appears to have the financial means, or the ability to obtain the necessary
financing to successfully conclude such Competing Proposal--Acquiror; and
(ii) in the opinion of the Acquiror Board of Directors such
action is required to discharge the Acquiror Board of Directors' fiduciary
duties to the Acquiror's stockholders under applicable law following receipt of
advice from independent legal counsel to Acquiror.
(b) Except as set forth below in this subsection (b), neither
the Acquiror Board of Directors nor any committee thereof shall: (i) fail to
include, withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Target, the approval or positive recommendation by such Board of
Directors or any such committee of this Agreement or the Merger, (ii) approve or
recommend or propose to approve or recommend, any Acquisition
Proposal--Acquiror, or (iii) enter into any agreement with respect to any
Acquisition Proposal--Acquiror, provided, however, that notwithstanding the
foregoing, prior to the Acquiror Stockholder Approval Date, the Acquiror Board
of Directors may fail to include or may withdraw or modify its approval or
recommendation of this Agreement or the Merger, or may approve or recommend any
Acquisition Proposal--Acquiror which satisfies the requirements of each of
subsection (i) and subsection (ii) of Section 7.3(a) hereof (any such
Acquisition Proposal--Acquiror, a "Superior Proposal--Acquiror"), or enter into
an agreement with respect to a Superior Proposal--Acquiror, in each case at any
time after the fifth business day following Target's receipt of written notice
from the Acquiror advising Target that the Acquiror Board of Directors has
received a Superior Proposal--Acquiror which it intends to accept, specifying
the material terms and conditions of such Superior Proposal--Acquiror and
identifying the Person making such Superior Proposal--Acquiror.
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ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. Except as provided in this Section 8.1, this
Agreement may be terminated and the Merger abandoned at any time prior to the
Effective Time:
(a) by mutual written consent of Target and Acquiror;
(b) by Acquiror or Target if:
(i) there shall be any statute, rule, regulation or order
enacted, promulgated or issued or deemed applicable to the Merger by any
Governmental or Regulatory Authority that would make consummation of the Merger
illegal or there shall be a final nonappealable order of a federal or state
court in effect preventing consummation of the Merger;
(ii) if the Merger is not approved and adopted by the
affirmative vote of the stockholders of Target as required by the DGCL, the
California Code (if applicable), and Target's Certificate of Incorporation and
Bylaws;
(iii) if the holders of 5% or more of the outstanding shares
of Acquiror Capital Stock shall have voted against the Merger and filed demands
for payment pursuant to the exercise of dissenters' rights under the California
Code with respect to 5% or more of the outstanding shares of Acquiror Capital
Stock by virtue of the Merger;
(iv) if the holders of 5% or more of the outstanding shares
of Target Capital Stock have not voted in favor of the Merger and filed demands
for payment pursuant to the exercise of dissenters' rights under the California
Code with respect to 5% or more of the outstanding shares of Target Capital
Stock by virtue of the Merger;
(v) the Merger, the issuance of Acquiror Common Stock in the
Merger, any increase in Acquiror's authorized capital stock necessary to enable
Acquiror to consummate, carry out and perform the Merger as contemplated by this
Agreement or any other matter necessary to enable Acquiror to consummate, carry
out and perform the Merger as contemplated by this Agreement, is not approved
and adopted by the stockholders of Acquiror in accordance with the rules of the
Nasdaq National Market, the DGCL and, if applicable, the California Code; or
(vi) the Effective Time has not occurred before 5 p.m.
(Pacific Time) on June 30, 2000, provided, however, that the right to terminate
this Agreement under this Section 8.1(b)(iii) shall not be available to any
party whose willful failure to fulfill any obligation hereunder has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date.
(c) by Target if:
(i) Target enters into a definitive agreement, as permitted
by Section 7.2 with respect to a Superior Proposal--Target, provided, however,
that Target has complied with all provisions thereof, including the notice
provisions therein, and that Target
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makes the payment to Acquiror in the amount required by, and within the time as
required by, Section 8.2(b); or
(ii) prior to the Effective Time, Acquiror's Board of
Directors shall have (A) failed to timely provide, or withdrawn, modified or
changed in a manner adverse to Target, its approval or recommendation of this
Agreement or the Merger, (B) recommended a Superior Proposal--Acquiror, (C)
failed to notice, call and hold the Acquiror Stockholder Meeting within 45 days
after the SEC has declared the S-4 Registration Statement effective, (D)
executed a letter of intent, an agreement in principle or definitive agreement
relating to a Superior Proposal--Acquiror or similar business combination with a
person or entity other than Target, or (E) exercised its rights pursuant to
Section 7.3 with respect to a Superior Proposal--Acquiror, and, directly or
through its representatives, continued discussions with any third party
concerning an Superior Proposal--Acquiror for more than ten business days after
the date of receipt of such Superior Proposal--Acquiror.
(d) by Acquiror if:
(i) Acquiror enters into a definitive agreement, as
permitted by Section 7.3 with respect to a Superior Proposal--Acquiror that
prohibits the consummation of, or requires material changes to, the Merger or
any other business combination of Acquiror and Target, provided, however, that
Acquiror has complied with all provisions thereof, including the notice
provisions therein, and that Acquiror makes simultaneous payment to Target as
required by Section 8.2(c); or
(ii) prior to the Effective Time, Target Board of Directors
shall have (A) failed to timely provide, or withdrawn, modified or changed in a
manner adverse to Acquiror, its approval or recommendation of this Agreement or
the Merger, (B) recommended a Superior Proposal--Target, (C) executed a letter
of intent, an agreement in principle or definitive agreement relating to a
Superior Proposal--Target or similar business combination with a person or
entity other than Acqurior, or (D) exercised its rights pursuant to Section 7.2
with respect to a Superior Proposal--Target, and, directly or through its
representatives, continued discussions with any third party concerning an
Superior Proposal--Target for more than ten business days after the date of
receipt of such Superior Proposal--Target.
8.2 TERMINATION FEE.
(a) In the event that this Agreement shall have been terminated
pursuant to Section 8.1(b)(iii) or Section 8.1(b)(v), then Acquiror shall
promptly, but in no event later than two (2) days after the date of the Acquiror
Stockholder Meeting, (i) pay Target $25,000,000, plus the amount of interest
that would have accrued from the date of this Agreement until payment of such
fee at the Prime Rate as reported in the Wall Street Journal in effect on the
date hereof (such payment shall be made by check, wire transfer and/or
forgiveness of debt, at Acquiror's option) and (ii) Acquiror will give Target a
promissory note (the "Second Note") for an additional $25,000,000,due on the
date that is the earlier to occur of (A) six (6) months after the date of the
Acquiror Stockholder Meeting or (B) the closing of an offering of Acquiror
securities registered under the Securities Act provided, however, that in the
event
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Acquiror does not close an offering of its securities registered under the
Securities Act within six (6) months after the date of the Acquiror Stockholder
Meeting, the Second Note shall be due and payable, at Acquiror's option, in cash
or Acquiror's Common Stock, valued at the average closing price of Acquiror's
Common Stock for the ten (10) trading days prior to the due date of the Second
Note.
(b) In the event that this Agreement shall have been terminated
by Target pursuant to Section 8.1(c)(i) or by Acquiror pursuant to Section
8.1(d)(ii), then Target shall promptly, but in no event later than two (2) days
after the date of such termination, pay Acquiror a termination fee of
$135,000,000.
(c) In the event that this Agreement shall have been terminated
by Acquiror pursuant to Section 8.1(d)(i) or by Target pursuant to Section
8.1(c)(ii), then Acquiror shall promptly, but in no event later than two (2)
days after the date of such termination, pay Target a termination fee of
$135,000,000.
8.3 EFFECT OF TERMINATION. In the event of a valid termination of
this Agreement as provided in Section 8.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of Acquiror or
Target, or their respective officers, directors or stockholders or Affiliates or
Associates; provided, however, that each party shall remain liable for any
breaches of this Agreement prior to its termination; and provided further that,
the provisions of Section 8.2 of this Agreement shall remain in full force and
effect and survive any termination of this Agreement.
8.4 AMENDMENT. Except as is otherwise required by applicable law,
this Agreement may be amended by the parties hereto at any time by execution of
an instrument in writing signed on behalf of each of the parties hereto.
8.5 EXTENSION; WAIVER. At any time prior to the Effective Time,
Acquiror and Target may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations of the other party hereto, (ii) waive
any inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto, and (iii) waive
compliance with any of the agreements, covenants or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 NOTICES. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally against written receipt or by facsimile transmission
against facsimile confirmation or mailed by prepaid first class certified mail,
return receipt requested, or mailed by overnight courier prepaid, to the parties
at the following addresses or facsimile numbers:
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If to Acquiror to:
Redback Networks Inc.
0000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
(000) 000-0000 Phone
(000) 000-0000
Attention: Xxxxx Xxxxxxx
with a copy to:
Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx
Xxxxxxxx & Xxxxxxxxx, LLP
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
(000) 000-0000 Phone
(000) 000-0000 Facsimile
Attention: Xxxxx Xxxxx
If to Target to:
Siara Systems, Inc.
000 Xxxxxxxx Xxxxx
Xxxxxxxx Xxxx, XX 00000
Attn: CEO
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Fenwick & West, LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, XX 00000
(000) 000-0000 Phone
(000) 000-0000 Facsimile
Attention: Xxxxx X. Xxxxxx, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 9.1, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided for in this Section 9.1, be deemed given upon facsimile confirmation,
(iii) if delivered by mail in the manner described above to the address as
provided for in this Section 9.1, be deemed given on the earlier of the third
Business Day following mailing or upon receipt and (iv) if delivered by
overnight courier to the address as provided in this Section 9.1, be deemed
given on the earlier of the first Business Day following the date sent by such
overnight courier or upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice is to be delivered pursuant to this Section 9.1). Any party
from time to time may change
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its address, facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other party hereto.
9.2 ENTIRE AGREEMENT. This Agreement and the Exhibits and Schedules
hereto, including the Target Disclosure Schedule and the Acquiror Disclosure
Schedule, and all agreements required to be executed and delivered pursuant
hereto, constitute the entire agreement and understanding among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, except for the Confidentiality Agreement, which shall
continue in full force and effect and shall survive any termination of this
Agreement or the Closing in accordance with its terms.
9.3 FURTHER ASSURANCES; POST-CLOSING COOPERATION. At any time or
from time to time after the Closing, the parties shall execute and deliver to
the other party such other documents and instruments, provide such materials and
information and take such other actions as the other party may reasonably
request to consummate the transactions contemplated by this Agreement and
otherwise to cause the other party to fulfill its obligations under this
Agreement and the transactions contemplated hereby. Each party agrees to use
diligent efforts to cause the conditions to its obligations to consummate the
Merger to be satisfied.
9.4 WAIVER. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
9.5 THIRD PARTY BENEFICIARIES. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person.
9.6 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any party without the prior written consent of the other party and
any attempt to do so will be void. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
9.7 HEADINGS. The headings and table of contents used in this
Agreement have been inserted for convenience of reference only and do not define
or limit the provisions hereof.
9.8 INVALID PROVISIONS. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future Law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if
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such illegal, invalid or unenforceable provision had never comprised a part
hereof, (c) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (d) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
9.9 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of California and the DGCL,
without giving effect to any choice of law or conflict of law provision or rule
that would cause the application of the laws of any other jurisdiction.
9.10 CONSTRUCTION. Ambiguities in this Agreement, if any, shall not
be construed strictly or in favor of or against any party hereto but rather
shall be given a fair and reasonable construction.
9.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
9.12 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Except where this Agreement specifically provides for arbitration, it
is agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
ARTICLE 10
DEFINITIONS
10.1 DEFINITIONS.
(a) As used in this Agreement, the following defined terms shall
have the meanings indicated below:
"Acquiror" has the meaning ascribed to it in the forepart of this
Agreement.
"Acquiror Common Stock" has the meaning ascribed to it in Recital C.
"Acquiror Financial Statements" has the meaning ascribed to it in
Section 3.3.
"Acquiror Support Agreement" has the meaning ascribed to it in
Recital D.
"Acquisition Proposal -- Acquiror" has the meaning ascribed to it in
Section 7.3(a).
"Acquisition Proposal -- Target" has the meaning ascribed to it in
Section 7.2(a).
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"Actions or Proceedings" means any action, suit, complaint,
petition, investigation, proceeding, arbitration, litigation or Governmental or
Regulatory Authority investigation, audit or other proceeding, whether civil or
criminal, in law or in equity, or before any arbitrator or Governmental
Regulatory Authority.
"Affiliate" means, as applied to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common control with,
that Person, or (b) any other Person that owns or controls (i) twenty percent
(20%) or more of any class of voting equity securities of that Person or any of
its Affiliates or (ii) twenty percent (20%) or more of any class of voting
equity securities (including any equity securities issuable upon the exercise of
any option or convertible security) of that Person or any of its Affiliates. For
the purposes of this definition, "control" (including with correlative meanings,
the terms "controlling", "controlled by", and "under common control with") as
applied to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through ownership of voting securities or by contract or
otherwise.
"Agreement" means this Merger Agreement and Plan of Reorganization,
including (unless the context otherwise requires) the Exhibits and Schedules
hereto and the certificates and instruments delivered in connection herewith, or
incorporated by reference, as the same may be amended or supplemented from time
to time in accordance with the terms hereof.
"Ancillary Agreements" has the meaning ascribed to it in Section
2.2.
"Approval" means any approval, authorization, consent, permit,
qualification or registration, or any waiver of any of the foregoing, required
to be obtained from or made with, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental or
Regulatory Authority or any other Person.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned, licensed or leased by such Person, including
cash, cash equivalents, Investment Assets, accounts and notes receivable,
chattel paper, documents, instruments, general intangibles, real estate,
equipment, inventory, goods and Intellectual Property.
"Associate" means, with respect to any Person, any corporation or
other business organization of which such Person is an officer or partner or is
the beneficial owner, directly or indirectly, of twenty percent (20%) or more of
any class of voting equity securities, any trust or estate in which such Person
has a substantial beneficial interest or as to which such Person serves as a
trustee or in a similar capacity and any relative or spouse of such Person, or
any relative of such spouse, who has the same home as such Person.
"Books and Records" means all files, documents, instruments, papers,
books and records relating to the Business or Condition of such party, including
financial statements, internal reports, Tax Returns and related work papers and
letters from accountants, budgets,
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pricing guidelines, ledgers, journals, deeds, title policies, minute books,
stock certificates and books, stock transfer ledgers, Contracts, Licenses,
customer lists, computer files and programs (including data processing files and
records), retrieval programs, operating data and plans and environmental studies
and plans.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of California are authorized or obligated to
close.
"Business or Condition" means, with respect to Acquiror, the
business, condition (financial or otherwise), results of operations or Assets
and Properties of Acquiror and each of its Subsidiaries, taking Acquiror
together with such Subsidiaries as a whole, and, with respect to Target, the
business, condition, results of operations or Assets and Properties of Target
and Target Subsidiary, taking Target together with Target Subsidiary as a whole.
"California Code" means the California Corporations Code and all
amendments and additions thereto.
"Certificates" has the meaning ascribed to it in Section 1.8(b).
"Closing" means the closing of the transactions contemplated by
Section 1.2.
"Closing Date" has the meaning ascribed to it in Section 1.2.
"Closing Price" has the meaning ascribed to it in Section 1.6(f).
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1986, as amended.
"Consideration" means 31,341,986 shares of Acquiror Common Stock.
"Contract" means any material contract, including:
(a) any distributor, sales, advertising, agency or manufacturer's
representative contract;
(b) any continuing contract for the purchase of materials, supplies,
equipment or services involving in the case of any such contact more than two
hundred thousand dollars ($200,000) over the life of the contract;
(c) any trust indenture, mortgage, promissory note, loan agreement
or other contract for the borrowing of money, any currency exchange, commodities
or other hedging arrangement or any leasing transaction of the type required to
be capitalized in accordance with generally accepted accounting principles;
(d) any contract for unexpended capital expenditures in excess of
two hundred thousand dollars ($200,000) in the aggregate;
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(e) any contract limiting the freedom of such party to engage in any
line of business or to compete with any other Person as that term is defined in
the Exchange Act, as defined herein, or any confidentiality, secrecy or
non-disclosure contract;
(f) any contract pursuant to which such party is a lessor of any
machinery, equipment, motor vehicles, office furniture, fixtures or other
personal property;
(g) any contract with any person with whom such party does not deal
at arm's length; or
(h) any agreement of guarantee, support, indemnification, assumption
or endorsement of, or any similar commitment with respect to, the obligations,
liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness
of any other Person.
"DGCL" means the General Corporation Law of the State of Delaware.
"Delaware Certificate of Merger" has the meaning set forth in
Section 1.2.
"Depositary Agent" has the meaning ascribed to it in Section 1.8(b).
"Dissenting Shares" has the meaning ascribed to it in Section
1.7(a).
"Effective Time" has the meaning ascribed to it in Section 1.2.
"Environment" means air, surface water, ground water, or land,
including land surface or subsurface, and any receptors such as persons,
wildlife, fish, biota or other natural resources.
"Environmental Clean-up Site" means any location which is listed or
proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on any
similar state list of sites relating to investigation or cleanup, or which is
the subject of any pending or threatened action, suit, proceeding, or
investigation related to or arising from any location at which there has been a
Release or threatened or suspected Release of a Hazardous Material.
"Environmental Law" means any federal, state, local or foreign
environmental, health and safety or other Law relating to of Hazardous
Materials, including the Comprehensive, Environmental Response Compensation and
Liability Act, the Clean Air Act, the Federal Water Pollution Control Act, the
Solid Waste Disposal Act, the Federal Insecticide, Fungicide and Rodenticide
Act, and the California Safe Drinking Water and Toxic Enforcement Act.
"Environmental Permit" means any permit, license, approval, consent
or authorization required under or in connection with any Environmental Law and
includes without limitation any and all orders, consent orders or binding
agreements issued or entered into by a Governmental or Regulatory Authority.
"Equity Equivalents" means securities (including Options to purchase
any shares of Target Capital Stock) which, by their terms, are or may be
exercisable, convertible or
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exchangeable for or into common stock, preferred stock or other equity
securities of Target at the election of the holder thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means each person (as defined in section 3(9) of
ERISA) that, together with Target, would be treated as a single employer under
section 4001(b) of ERISA or that would be deemed to be a member of the same
"controlled group" within the meaning of section 414(b) or (c) of the Internal
Revenue Code.
"Escrow Amount" means 5% of Consideration paid to Target
Stockholders.
"Escrow Fund" has the meaning ascribed to it in Section 6.2(a).
"Escrow Period" has the meaning ascribed to it in Section 6.2(c).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"Exchange Agent" means U.S. Stock Transfer Corporation.
"Exchange Ratio" has the meaning ascribed to it in Section 1.6(e).
"Expiration Date" shall mean the date 180 days after the Effective
Time.
"Financial Statement Date" means September 30, 1999.
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time.
"Good Faith Consultation" with a Person's independent accountants,
as used in Sections 2.23 and 3.22 of this Agreement, means consultation with
such accountants following disclosure in good faith to such accountants of all
facts requested by such accountants or which the specified Person otherwise had
reason to believe would be relevant to such accountants' assessment.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, bureau, board, commission, department, official
or other instrumentality of the United States, any foreign country or any
domestic or foreign state, county, city or other political subdivision, and
shall include any stock exchange, quotation service and the National Association
of Securities Dealers.
"Hazardous Material" means (a) any chemical, material, substance or
waste including, containing or constituting petroleum or petroleum products,
solvents (including chlorinated solvents), nuclear or radioactive materials,
asbestos in any form that is or could become friable, radon, lead-based paint,
urea formaldehyde foam insulation or polychlorinated biphenyls, (b) any
chemicals, materials, substances or wastes which are now defined as or
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included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants" or words of similar import under
any Environmental Law; or (c) any other chemical, material, substance or waste
which is regulated by any Governmental or Regulatory Authority or which could
constitute a nuisance.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the regulations promulgated thereunder.
"Indebtedness" of any Person means all obligations of such Person
(a) for borrowed money, (b) evidenced by notes, bonds, debentures or similar
instruments, (c) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(d) under capital leases and (e) in the nature of guarantees of the obligations
described in clauses (a) through (d) above of any other Person.
"Intellectual Property" means all trademarks and trademark rights,
trade names and trade name rights, service marks and service xxxx rights,
service names and service name rights, patents and patent rights, utility models
and utility model rights, copyrights, moral rights, mask work rights, brand
names, trade dress, product designs, product packaging, business and product
names, logos, slogans, rights of publicity, trade secrets, inventions (whether
patentable or not), invention disclosures, improvements, processes, formulae,
industrial models, processes, designs, specifications, technology,
methodologies, computer software (including all source code and object code),
firmware, development tools, flow charts, annotations, all Web addresses, sites
and domain names, all data bases and data collections and all rights therein,
any other confidential and proprietary right or information, whether or not
subject to statutory registration, and all related technical information,
manufacturing, engineering and technical drawings, know-how and all pending
applications for and registrations of patents, utility models, trademarks,
service marks and copyrights, and the right to xxx for past infringement, if
any, in connection with any of the foregoing, and all documents, disks, records,
files and other media on which any of the foregoing is stored.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"Investment Assets" means all debentures, notes and other evidences
of Indebtedness, stocks, securities (including rights to purchase and securities
convertible into or exchangeable for other securities), interests in joint
ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by Target or
Target Subsidiary.
"IRS" means the United States Internal Revenue Service or any
successor entity.
"Law" or "Laws" means any law, statute, order, decree, consent
decree, judgment, rule, regulation, ordinance or other pronouncement having the
effect of law whether in the United States, any foreign country, or any domestic
or foreign state, county, city or other political subdivision or of any
Governmental or Regulatory Authority.
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"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person, whether absolute, accrued, contingent (or based upon
any contingency), known or unknown, fixed or otherwise, or whether due or to
become due.
"License" means any Contract that grants a Person the right to use
or otherwise enjoy the benefits of any Intellectual Property (including any
covenants not to xxx with respect to any Intellectual Property).
"Liens" means any mortgage, pledge, assessment, security interest,
lease, lien, easement, license, covenant, condition, restriction, adverse claim,
levy, charge, option, equity, adverse claim or restriction or other encumbrance
of any kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing, except for any restrictions on transfer
generally arising under any applicable federal or state securities law.
"Loss(es)" means any and all damages, payments, fines, fees, Taxes,
penalties, deficiencies, losses (including lost profits or diminution in value),
liabilities, expenses, reasonable expenses of investigation, court costs,
reasonable fees and expenses of attorneys, accountants and other experts or
other expenses of litigation or other proceedings or of any claim, default or
assessment (such fees and expenses to include all fees and expenses, including,
but not limited to, fees and expenses of attorneys), incurred in connection with
any breach, violation, default or inaccuracy of Target's representations and
warranties contained in this Agreement.
"Material Adverse Effect" when used with reference to any entity or
group of related entities, means any event, change or effect that is (or will
with the passage of time be) materially adverse to the condition (financial or
otherwise), properties, assets, liabilities, business, operations or results of
operations of such entity and its subsidiaries, taken as a whole.
"Merger" has the meaning ascribed to it in the recitals to this
Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
"NNM" means the distinct tier of The Nasdaq Stock Market referred to
as the Nasdaq National Market.
"Non-Competition Agreement" has the meaning ascribed to it in
Section 6.3(f).
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person or (ii) receive any benefits or
rights similar to any rights enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including any rights to
participate in the equity, income or election of directors or officers of such
Person.
"Order" means any writ, judgment, decree, injunction or similar
order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
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"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA.
"Permit" means any license, permit, franchise or authorization.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability Target or partnership, proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.
"Proxy Statement" has the meaning ascribed to it in Section 2.26
"PTO" means the United States Patent and Trademark Office.
"Registered Intellectual Property" shall mean all United States,
international and foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks and servicemarks,
applications to register trademarks and servicemarks, intent-to-use
applications, other registrations or applications to trademarks or servicemarks,
or trademarks or servicemarks in which common law rights are owned or otherwise
controlled; (iii) registered copyrights and applications for copyright
registration; (iv) any mask work registrations and applications to register mask
works; and (v) any other Intellectual Property that is the subject of an
application, certificate, filing, registration or other document issued by,
filed with, or recorded by, any state, government or other public legal
authority.
"S-4 Registration Statement" has the meaning ascribed to it in
Section 2.26.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of a
Hazardous Material into the Environment.
"Representatives" has the meaning ascribed to it in Section 7.2.
"Restricted Stock Purchase Agreement" means a Restricted Stock
Purchase Agreement in one of the forms attached to Target Stock Plan pursuant to
which Target has sold Target Restricted Stock or as may otherwise been entered
into by Target prior to the date of this Agreement.
"SEC" means the Securities and Exchange Commission or any successor
entity.
"SEC Documents" means, with respect to any Person, each report,
schedule, form, statement or other document filed with the SEC by such Person
pursuant to Section 13(a) and 15(d) of the Exchange Act and all final and
effective registration statements and prospectuses filed by such Person with the
SEC pursuant to the Securities Act.
"Section 2.3 Loss(es)" means Losses arising or resulting directly
from any breach, violation, default or inaccuracy of Target's representations
and warranties set forth in Section 2.3 of this Agreement (as qualified by the
Target Disclosure Schedule, as such may be updated at the Closing Date and prior
to the Effective Time, as provided in Article 5).
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"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Site" means any of the real properties currently or previously
owned, leased, occupied, used or operated by Target or Target Subsidiary, any
predecessors of Target or Target Subsidiary, or any entities previously owned by
Target or Target Subsidiary, including all soil, subsoil, surface waters and
groundwater.
"Stockholder Agent" has the meaning ascribed to it in Section
6.2(h)(i).
"Subsidiary" means, in addition to Target Subsidiary, any Person in
which Target or Acquiror, as the context requires, directly or indirectly
through Subsidiaries or otherwise, beneficially owns at least 50% of either the
equity interest in, or the voting control of, such Person, whether or not
existing on the date hereof.
"Surviving Corporation" has the meaning ascribed to it in Section
1.1.
"Target" has the meaning ascribed to it in the forepart of this
Agreement.
"Target Capital Stock" means Target Common Stock and Target
Preferred Stock.
"Target Common Stock" has the meaning ascribed to it in Section 2.3.
"Target Equity Securities" means Target Options and Target Warrants,
collectively.
"Target Financials" means the audited consolidated balance sheets of
Target as of September 30, 1999 and the related audited consolidated statements
of operations, stockholders' equity and cash flows for the fiscal year then
ended, including the notes thereto.
"Target 401(k) Plan" means Target's 401(k) Plan.
"Target Intellectual Property" shall mean the Intellectual Property
that is (i) owned by; (ii) licensed to; or (iii) was developed or created by or
for Target or Target Subsidiary, and is used in or necessary for the conduct of
the present or anticipated business of Target or Target Subsidiary, taken as a
whole.
"Target Option" means any Option to purchase Target Capital Stock,
whether or not granted pursuant to Target Stock Plan, that is granted to an
employee, consultant or other individual service provider of Target or Target
Subsidiary.
"Target Preferred Stock" has the meaning ascribed to it in Section
2.3.
"Target Registered Intellectual Property" means all Registered
Intellectual Property owned by, or filed in the name of, Target or Target
Subsidiary.
"Target Restricted Stock" means shares of Target Capital Stock which
are subject to a repurchase option by Target.
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"Target Stockholder Meeting" has the meaning ascribed to it in
Section 2.26.
"Target Stock Plan" has the meaning ascribed to it in Section
1.6(c)(i).
"Target Warrant" means each Target warrant to purchase Target
Capital Stock (if any) listed or required to be listed in Section 2.3 of the
Target Disclosure Schedule.
"Target Subsidiary" has the meaning ascribed to it in Section 2.4.
"Tax" or "Taxes" means Income Taxes and/or Other Taxes, as the
context requires.
"Tax Authority" has the meaning ascribed to it in Section 2.10(c).
"Tax Returns" means any return, report, information return,
schedule, certificate, statement or other document (including any related or
supporting information) filed or required to be filed with, or, where none is
required to be filed with a Taxing Authority, the statement or other document
issued by, a Taxing Authority in connection with any Tax.
"Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Third Party Claim" has the meaning ascribed to it in Section
6.2(j).
"Third Party Expenses" has the meaning ascribed to it in Section
4.5.
(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender, (ii) words using the singular or
plural number also include the plural or singular number, respectively, (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement as a whole and not to any particular Article, Section or
other subdivision, (iv) the terms "Article" or "Section" or other subdivision
refer to the specified Article, Section or other subdivision of the body of this
Agreement, (v) the phrases "ordinary course of business" and "ordinary course of
business consistent with past practice" refer to the business and practice of
Target, (vi) the words "include," "includes" and "including" shall be deemed to
be followed by the phrase "without limitation," and (vii) when a reference is
made in this Agreement to Exhibits, such reference shall be to an Exhibit to
this Agreement unless otherwise indicated. All accounting terms used herein and
not expressly defined herein shall have the meanings given to them under GAAP.
The term "party" or "parties" when used herein refer to Acquiror, on the one
hand, and Target, on the other.
(c) When used herein, the phrase "to the knowledge of" any
Person, "to the best knowledge of" any Person, "known to" any Person or any
similar phrase, means (i) with respect to any Person who is an individual, the
actual knowledge of such Person, and (ii) with respect to any other Person, the
actual knowledge of the directors and officers of such Person and other
individuals that have a similar position or have similar powers and duties as
the officers and directors of such Person.
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[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Acquiror and Target have caused this Agreement
to be signed by their duly authorized representatives, all as of the date first
written above.
ACQUIROR TARGET
By: /s/ Xxxxxx Xxxxxxx By: /s/ Xxxxx Xxxxxxx
------------------- --------------------
President and Chief President and Chief
Executive Officer Executive Officer
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EXHIBIT A
IRREVOCABLE PROXY
AND
VOTING AGREEMENT
THIS IRREVOCABLE PROXY AND VOTING AGREEMENT, dated as of November 28,
1999 (this "Agreement"), is entered into by and between Siara Systems, Inc., a
Delaware corporation ("Siara"), and _____________ ("Stockholder").
W I T N E S S E T H:
WHEREAS, concurrently herewith, Siara and Redback Networks Inc., a
Delaware corporation (the "Company"), have entered into a Merger Agreement and
Plan of Reorganization, of even date herewith (as such agreement may hereafter
be amended from time to time, the "Merger Agreement"; initially capitalized and
other terms used but not defined herein shall have the meanings ascribed to them
in the Merger Agreement), pursuant to which Siara will merge with and into the
Company, with the Company to be the surviving corporation (the "Merger");
WHEREAS, Stockholder Beneficially Owns (as defined herein) ______ shares
of the Company's Common Stock and _______ options to purchase the Company's
Common Stock, par value $0.0001 ("Company Common Stock") (such shares of Company
Common Stock Beneficially Owned by Stockholder being collectively hereinafter
referred to as the "Shares");
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Siara has requested that Stockholder agree, and Stockholder has
agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained
herein, the parties hereto hereby agree as follows:
1. Voting Agreement. Stockholder hereby agrees with Siara that, (except
as may be otherwise agreed to in writing by Siara with the Company or
Stockholder) at any meeting of the Company's stockholders, however called, or in
connection with any written consent of the Company's stockholders, as to which
any of the matters described below in this Section 1 is put to the vote or
written consent of the Company's stockholders, Stockholder shall vote the Shares
Beneficially Owned by Stockholder, whether now owned or hereafter acquired prior
to such vote: (i) in favor of approval of the Merger Agreement, the Merger and
any actions required in furtherance of the transactions contemplated thereby;
(ii) against any action or agreement that would result in a breach in any
material respect of (A) any representation or warranty of the Company under the
Merger Agreement that would have a Material Adverse Effect on the Company or (B)
any other agreement, covenant or obligation of the Company under the Merger
Agreement; and (iii) against: (A) any Third Party Acquisition (as defined
below), (B) any change in a majority of the individuals who, as of the date
hereof, constitute the Board of Directors of the Company, unless such change
results from an election to replace any such individual who ceases to be a
member of the Board of Directors of the Company due to such
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individual's death, disability or resignation from the Company's Board of
Directors for reasons unrelated to any matter that Stockholder agrees to vote
against hereunder, (C) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the Company and
any Third Party (as defined below), (D) a sale, lease, transfer or disposition
of any assets of the Company's business outside the ordinary course of business,
or any assets which are material to its business whether or not in the ordinary
course of business, (E) a reorganization, recapitalization, dissolution or
liquidation of the Company, (F) any change in the present capitalization of the
Company or any amendment of the Company's Certificate of Incorporation or bylaws
not contemplated by the Merger Agreement or not consented to in writing by
Siara, (G) any other material change in the Company's corporate structure other
than the approval of stock options disclosed in the Company's representations
and warranties in the Merger Agreement or in any Disclosure Schedule thereto) or
any other change materially affecting the Company's business, or (H) any other
action which is intended, or could reasonably be expected, to impede, interfere
with, delay, postpone or materially adversely affect the Merger or any of the
other transactions contemplated by the Merger Agreement, or any of the
transactions contemplated by this Agreement. Stockholder shall not enter into
any agreement or understanding with any person the effect of which would be
inconsistent or violative of the provisions and agreements contained herein.
For purposes of this Agreement, "Third Party Acquisition" means the
occurrence of any of the following events: (i) the acquisition of the Company by
merger or otherwise by any person (which includes a "person" as such term is
defined in Section 13(d)(3) of the Exchange Act) other than Siara or any
affiliate thereof (a "Third Party"); (ii) the acquisition by a Third Party of
any material portion (which shall include ten percent (10%) or more) of the
assets of the Company, other than the sale or license of its products in the
ordinary course of business; (iii) the acquisition by a Third Party of ten
percent (10%) or more of the outstanding shares of the Company's capital stock
(other than any such acquisition resulting from the exercise or conversion of
any stock option, stock warrant, convertible debt instrument and/or other
security of the Company that is outstanding on the date of this Agreement); (iv)
the adoption by the Company of a plan of liquidation or the declaration or
payment of an extraordinary dividend; (v) the repurchase by the Company of more
than ten percent (10%) of the outstanding Shares (other than pursuant to rights
of refusal or similar rights held by the Company as of the date of this
Agreement or pursuant to repurchase options held by the Company that are
exercisable in connection with the termination of a person's employment or
services with or to the Company or any of its subsidiaries); or (vi) the
acquisition (or any group of acquisitions) by the Company by merger, purchase of
stock or assets, joint venture or otherwise, of a direct or indirect ownership
interest or investment in any business (or businesses) whose annual revenues,
net income or assets is equal to or greater than ten percent (10%) of the most
recent annual revenues, net income or assets of the Company, respectively.
For purposes of this Agreement, "Beneficially Own," "Beneficially Owned"
or "Beneficial Ownership" with respect to any Shares shall mean Stockholder's
having record or beneficial ownership of such Shares or having, through any
agreement or arrangement, the power to direct the voting with respect to, or
otherwise enables Stockholder to legally act in a binding manner with respect
to, such Shares as contemplated hereby.
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2. Irrevocable Proxy.
(a) Subject to the terms and conditions of this Agreement, the
Stockholder hereby constitutes and appoints Siara, which shall act by and
through Xxxxx Xxxxxxx and Xxxxx Xxxxxx (each, a "Proxy Holder"), or either of
them, with full power of substitution, its true and lawful proxy and
attorney-in-fact to vote at any meeting (and any adjournment or postponement
thereof) of the Company's stockholders called for purposes of considering
whether to approve the Merger Agreement, the Merger or any of the other
transactions contemplated by the Merger Agreement, or any Third Party
Acquisition, or to execute a written consent of stockholders in lieu of any such
meeting, all Shares Beneficially Owned by Stockholder as of the date of such
meeting or written consent (i) in favor of the approval of the Merger Agreement,
the Merger and the other transactions contemplated by the Merger Agreement, with
such modifications to the Merger Agreement as the parties thereto may make, or
(ii) against a Third Party Acquisition, as the case may be. Such proxy shall be
limited strictly to the power to vote the Shares Beneficially Owned by
Stockholder in the manner set forth in the preceding sentence and shall not
extend to any other matters, and shall, without limitation, not extend to any
power to vote the Shares in any manner with respect to any proposal to approve
any contract, agreement or arrangement that might constitute a "Parachute
Payment," within the meaning of Section 280G of the Internal Revenue Code and in
accordance with the requirements of Q&A Numbers 6 and 7 of the Treasury
Regulations promulgated thereunder.
(b) The proxy and power of attorney granted herein shall be
irrevocable during the term of this Agreement, shall be deemed to be coupled
with an interest sufficient in law to support an irrevocable proxy and shall
revoke all prior proxies granted by Stockholder. Stockholder shall not grant any
proxy to any person which conflicts with the proxy granted herein, and any
attempt to do so shall be void. The power of attorney granted herein is a
durable power of attorney and shall survive the death or incapacity of
Stockholder.
(c) If Stockholder fails for any reason to vote his, her or its
Shares in accordance with the requirements of Section 1 hereof, then the Proxy
Holder shall have the right to vote the Shares at any meeting of the Company's
stockholders and in any action by written consent of the Company's stockholders
in accordance with the provisions of this Section 2. The vote of the Proxy
Holder shall control in any conflict between the Proxy Holder's vote of such
Shares and a vote by Stockholder of such Shares.
3. Director Matters Excluded. Siara acknowledges and agrees that no
provision of this Agreement (including without limitation the provisions of
Section 4(d) hereof) shall limit or otherwise restrict Stockholder with respect
to any act or omission that Stockholder may undertake or authorize in his
capacity as a director of the Company, including, without limitation, any vote
that Stockholder may make as a director of the Company with respect to any
matter presented to the Board of Directors of the Company.
4. Other Covenants, Representations and Warranties. Stockholder hereby
represents and warrants to Siara as follows:
(a) Ownership of Shares. Stockholder is the Beneficial Owner of
all the Shares. On the date hereof, the Shares constitute all of the Shares
Beneficially Owned by
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Stockholder. Stockholder has voting power with respect to the matters set forth
in Section 1 hereof with respect to all of the Shares, with no limitations,
qualifications or restrictions on such rights.
(b) Power; Binding Agreement. Stockholder has the legal capacity,
power and authority to enter into and perform all of its obligations under this
Agreement. The execution, delivery and performance of this Agreement by
Stockholder will not violate any agreement or any court order to which
Stockholder is a party or is subject including, without limitation, any voting
agreement or voting trust. This Agreement has been duly and validly executed and
delivered by Stockholder.
(c) Restriction on Transfer, Proxies and Non-Interference. During
the term of this Agreement, except as expressly contemplated by this Agreement
or the Merger Agreement, Stockholder shall not, directly or indirectly: (i)
offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to, or consent to the offer for sale, sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, any or all of
the Shares or any interest therein unless the transferee shall execute a
signature page to this Irrevocable Proxy and Voting Agreement and shall agree to
be bound to the provisions hereof; (ii) grant any proxies or powers of attorney
or deposit any Shares into a voting trust or enter into a voting agreement with
respect to any Shares; or (iii) take any action that would make any
representation or warranty of Stockholder contained in this Section 4 untrue or
incorrect or have the effect of preventing or disabling Stockholder from
performing any of Stockholder's obligations under this Agreement.
(d) Other Potential Acquirors. Stockholder: (i) shall immediately
cease any existing discussions or negotiations, if any, with any persons
conducted heretofore with respect to any acquisition of all or any material
portion of the assets of, or any equity interest in, the Company, or any
business combination with the Company, in his, her or its capacity as a
stockholder of the Company; (ii) from and after the date hereof until the
earlier of (A) the termination of the Merger Agreement in accordance with its
terms and (B) the Effective Time, shall not, in such capacity as a stockholder
of the Company, directly or indirectly, initiate, solicit or knowingly encourage
(including, without limitation, by way of furnishing non-public information or
assistance), or take any other action to facilitate knowingly, any inquiries or
the making of any Third Party Acquisition; and (iii) shall promptly notify Siara
of any proposals for, or inquiries with respect to, a potential Third Party
Acquisition received by Stockholder or of which Stockholder otherwise has
knowledge.
(e) Reliance by Siara. Stockholder understands and acknowledges
that Siara is entering into the Merger Agreement in reliance upon Stockholder's
execution and delivery of this Agreement.
5. Stop Transfer. Stockholder agrees with, and covenants to, Siara that
Stockholder shall not request that the Company register the transfer (book-entry
or otherwise) of any certificate or uncertificated interest representing any
Shares, unless such transfer is made pursuant to and in compliance with this
Agreement. In the event of a dividend or distribution of capital stock of the
Company, or any change in the Company Common Stock by reason of any stock
dividend, split-up, recapitalization, combination, exchange of shares or the
like, the term
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"Shares" shall be deemed to refer to and include the Shares as well as all such
shares of the Company's capital stock issued or distributed pursuant to such
stock dividends and distributions and any shares of the Company's capital stock
into which or for which any or all of the Shares may be so changed or exchanged.
6. Termination. The proxy granted pursuant to Section 2 hereof and
Stockholder's covenants and agreements contained herein with respect to the
Shares shall terminate upon the earliest to occur of: (a) the termination of the
Merger Agreement and (b) the Effective Time.
7. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
(b) Assignment. This Agreement shall not be assigned by operation
of law or otherwise without the prior written consent of the other party;
provided, however, that Siara may, in its sole discretion, assign its rights and
obligations hereunder to any wholly-owned subsidiary of Siara.
(c) Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto. No
waiver by a party hereto of any of its rights hereunder shall be effective
unless and to the extent such waiver is set forth in a writing signed by such
party.
(d) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand
delivery, telecopy, or by mail (registered or certified mail, postage prepaid,
return receipt requested) or by any nationally-recognized overnight courier
service, such as Federal Express, providing proof of delivery. Any such notice
or communication shall be deemed to have been delivered and received (i) in the
case of hand delivery, on the date of such delivery, (ii) in the case of
telecopy, on the date sent if confirmation of receipt is received and such
notice is also promptly mailed by registered or certified mail (return receipt
requested), (iii) in the case of a nationally-recognized overnight courier
service, in circumstances under which such courier guarantees next business day
delivery, on the next business day after the date when sent, and (iv) the case
of mailing, on the third business day following that on which the piece of mail
containing such communication is posted. All communications hereunder shall be
delivered to the respective parties at the following addresses:
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88
If to Stockholder: -----------------------------------
-----------------------------------
-----------------------------------
Telephone:
Telecopier:
Attention:
with a copy to: Redback Networks Inc.
0000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
Telecopier: 000-000-0000
Attention: Xxxxx Xxxxxxx
If to Siara: Siara Systems, Inc.
000 Xxxxxxxx Xxxxx, Xxxxxx Xxxxx
Xxxxxxxx Xxxx, XX 00000
Telecopier: 000-000-0000
Attention: Xxxxx Xxxxxxx
with a copy to: Fenwick & West, LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, XX, 00000
Telecopier: (000) 000-0000
Attention: Xxxxx X. Xxxxxx
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the matter set forth above.
(e) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision had
never been contained herein.
(f) Specific Performance. Each of the parties hereto recognizes
and acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damage for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such
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89
covenants and agreements and injunctive and other equitable relief in addition
to any other remedy to which it may be entitled, at law or in equity.
(g) No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(h) Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof.
(i) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
[The Remainder of This Page Has Intentionally Been Left Blank]
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90
IN WITNESS WHEREOF, Siara and Stockholder have caused this Agreement to
be duly executed as of the day and year first above written.
Siara Systems, Inc., a Delaware corporation
By: _______________________________________
Name:
Title:
STOCKHOLDER:
By: _______________________________________
Name:
[SIGNATURE PAGE FOR REDBACK/SIARA STOCKHOLDER
IRREVOCABLE PROXY AND VOTING AGREEMENT]
91
EXHIBIT B
IRREVOCABLE PROXY
AND
VOTING AGREEMENT
THIS IRREVOCABLE PROXY AND VOTING AGREEMENT, dated as of November 28,
1999 (this "Agreement"), is entered into by and between Redback Networks Inc., a
Delaware corporation ("Redback"), and ____________________ ("Stockholder").
W I T N E S S E T H:
WHEREAS, concurrently herewith, Redback and Siara Systems, Inc., a
Delaware corporation (the "Company"), have entered into a Merger Agreement and
Plan of Reorganization, of even date herewith (as such agreement may hereafter
be amended from time to time, the "Merger Agreement"; initially capitalized and
other terms used but not defined herein shall have the meanings ascribed to them
in the Merger Agreement), pursuant to which the Company will merge with and into
Redback, with Redback to be the surviving corporation (the "Merger");
WHEREAS, Stockholder Beneficially Owns (as defined herein) the number of
shares of common stock, par value $.0001 ("Company Common Stock") of the Company
(the "Shares"), shares of Series A Preferred Stock, par value $0.001, of the
Company ("Company Preferred A Stock"), and shares of Series B Preferred Stock,
par value $0.001 ("Company Preferred B Stock"), of the Company as set forth on
the signature page to this Agreement (such shares of Company Common Stock,
Company Preferred A Stock and/or Company Preferred B Stock Beneficially Owned by
Stockholder and set forth on the signature page hereto being collectively
hereinafter referred to as the "Shares");
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Redback has requested that Stockholder agree, and Stockholder has
agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained
herein, the parties hereto hereby agree as follows:
1. Voting Agreement. Stockholder hereby agrees with Redback that,
(except as may be otherwise agreed to in writing by Redback with the Company or
Stockholder) at any meeting of the Company's stockholders, however called, or in
connection with any written consent of the Company's stockholders, as to which
any of the matters described below in this Section 1 is put to the vote or
written consent of the Company's stockholders, Stockholder shall vote the Shares
Beneficially Owned by Stockholder, whether now owned or hereafter acquired prior
to such vote: (i) in favor of approval of the Merger Agreement, the Merger and
any actions required in furtherance of the transactions contemplated thereby;
(ii) against any action or agreement that would result in a breach in any
material respect of (A) any representation or warranty of the Company under the
Merger Agreement that would have a Material Adverse Effect on the Company or (B)
any other agreement, covenant or obligation of the Company under the Merger
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92
Agreement; (iii) against: (A) any Third Party Acquisition (as defined below),
(B) any change in a majority of the individuals who, as of the date hereof,
constitute the Board of Directors of the Company, unless such change results
from an election to replace any such individual who ceases to be a member of the
Board of Directors of the Company due to such individual's death, disability or
resignation from the Company's Board of Directors for reasons unrelated to any
matter that Stockholder agrees to vote against hereunder, (C) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company and any Third Party (as defined below), (D) a
sale, lease, transfer or disposition of any assets of the Company's business
outside the ordinary course of business, or any assets which are material to its
business whether or not in the ordinary course of business, (E) a
reorganization, recapitalization, dissolution or liquidation of the Company, (F)
any change in the present capitalization of the Company or any amendment of the
Company's Certificate of Incorporation or bylaws not contemplated by the Merger
Agreement or not consented to in writing by Redback, (G) any other material
change in the Company's corporate structure (other than the approval of stock
options disclosed in the Company's representations and warranties in the Merger
Agreement or in any Disclosure Schedule thereto) or any other change materially
affecting the Company's business, or (H) any other action which is intended, or
could reasonably be expected, to impede, interfere with, delay, postpone or
materially adversely affect the Merger or any of the other transactions
contemplated by the Merger Agreement, or any of the transactions contemplated by
this Agreement; and (iv) if such Stockholder is a holder of shares of Company
Preferred A Stock or Company Preferred B Stock, in favor of the conversion of
the Company Preferred A Stock or Company Preferred B Stock, respectively, into
shares of Company Common Stock. If the Company Preferred A Stock and/or the
Company Preferred B Stock is not converted automatically by their terms prior to
the Effective Time, then by no later than immediately prior to the Effective
Time, Stockholder shall convert all shares of Company Preferred A Stock or
Company Preferred B Stock owned by such Stockholder into shares of the Company's
Common Stock. Stockholder shall not enter into any agreement or understanding
with any person the effect of which would be inconsistent or violative of the
provisions and agreements contained herein.
For purposes of this Agreement, "Third Party Acquisition" means the
occurrence of any of the following events: (i) the acquisition of the Company by
merger or otherwise by any person (which includes a "person" as such term is
defined in Section 13(d)(3) of the Exchange Act) other than Redback or any
affiliate thereof (a "Third Party"); (ii) the acquisition by a Third Party of
any material portion (which shall include ten percent (10%) or more) of the
assets of the Company, other than the sale or license of its products in the
ordinary course of business; (iii) the acquisition by a Third Party of ten
percent (10%) or more of the outstanding shares of the Company's capital stock
(other than any such acquisition resulting from the exercise or conversion of
any stock option, stock warrant, convertible debt instrument and/or other
security of the Company that is outstanding on the date of this Agreement); (iv)
the adoption by the Company of a plan of liquidation or the declaration or
payment of an extraordinary dividend; (v) the repurchase by the Company of more
than ten percent (10%) of the outstanding Shares (other than pursuant to rights
of refusal or similar rights held by the Company as of the date of this
Agreement or pursuant to repurchase options held by the Company that are
exercisable in connection with the termination of a person's employment or
services with or to the Company or any of its subsidiaries); or (vi) the
acquisition (or any group of acquisitions) by the Company by merger, purchase of
stock or assets, joint venture or otherwise, of a direct or indirect ownership
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93
interest or investment in any business (or businesses) whose annual revenues,
net income or assets is equal or greater than ten percent (10%) of the most
recent annual revenues, net income or assets of the Company, respectively.
For purposes of this Agreement, "Beneficially Own," "Beneficially Owned"
or "Beneficial Ownership" with respect to any Shares shall mean Stockholder's
having record or beneficial ownership of such Shares or having, through any
agreement or arrangement, the power to direct the voting with respect to, or
otherwise enables Stockholder to legally act in a binding manner with respect
to, such Shares as contemplated hereby.
2. Irrevocable Proxy.
(a) Subject to the terms and conditions of this Agreement, the
Stockholder hereby constitutes and appoints Redback, which shall act by and
through Xxxxxx Xxxxxxx and Xxxxx Xxxxxxx (each, a "Proxy Holder"), or either of
them, with full power of substitution, its true and lawful proxy and
attorney-in-fact to vote at any meeting (and any adjournment or postponement
thereof) of the Company's stockholders called for purposes of considering
whether to approve the Merger Agreement, the Merger or any of the other
transactions contemplated by the Merger Agreement, or any Third Party
Acquisition, or to execute a written consent of stockholders in lieu of any such
meeting, all Shares Beneficially Owned by Stockholder as of the date of such
meeting or written consent (i) in favor of the approval of the Merger Agreement,
the Merger and the other transactions contemplated by the Merger Agreement, with
such modifications to the Merger Agreement as the parties thereto may make, or
(ii) against a Third Party Acquisition, as the case may be. Such proxy shall be
limited strictly to the power to vote the Shares Beneficially Owned by
Stockholder in the manner set forth in the preceding sentence and shall not
extend to any other matters, and shall, without limitation, not extend to any
power to vote the Shares in any manner with respect to any proposal to approve
any contract, agreement or arrangement that might constitute a "Parachute
Payment," within the meaning of Section 280G of the Internal Revenue Code and in
accordance with the requirements of Q&A Numbers 6 and 7 of the Treasury
Regulations promulgated thereunder.
(b) The proxy and power of attorney granted herein shall be
irrevocable during the term of this Agreement, shall be deemed to be coupled
with an interest sufficient in law to support an irrevocable proxy and shall
revoke all prior proxies granted by Stockholder. Stockholder shall not grant any
proxy to any person which conflicts with the proxy granted herein, and any
attempt to do so shall be void. The power of attorney granted herein is a
durable power of attorney and shall survive the death or incapacity of
Stockholder.
(c) If Stockholder fails for any reason to vote his, her or its
Shares in accordance with the requirements of Section 1 hereof, then the Proxy
Holder shall have the right to vote the Shares at any meeting of the Company's
stockholders and in any action by written consent of the Company's stockholders
in accordance with the provisions of this Section 2. The vote of the Proxy
Holder shall control in any conflict between the Proxy Holder's vote of such
Shares and a vote by Stockholder of such Shares.
3. Director Matters Excluded. Redback acknowledges and agrees that no
provision of this Agreement (including without limitation the provisions of
Section 4(d) hereof) shall limit
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94
or otherwise restrict Stockholder with respect to any act or omission that
Stockholder may undertake or authorize in his capacity as a director of the
Company, including, without limitation, any vote that Stockholder may make as a
director of the Company with respect to any matter presented to the Board of
Directors of the Company.
4. Other Covenants, Representations and Warranties. Stockholder hereby
represents and warrants to Redback as follows:
(a) Ownership of Shares. Stockholder is the Beneficial Owner of
all the Shares. On the date hereof, the Shares constitute all of the Shares
Beneficially Owned by Stockholder. Stockholder has voting power with respect to
the matters set forth in Section 1 hereof with respect to all of the Shares,
with no limitations, qualifications or restrictions on such rights.
(b) Power; Binding Agreement. Stockholder has the legal capacity,
power and authority to enter into and perform all of its obligations under this
Agreement. The execution, delivery and performance of this Agreement by
Stockholder will not violate any agreement or any court order to which
Stockholder is a party or is subject including, without limitation, any voting
agreement or voting trust. This Agreement has been duly and validly executed and
delivered by Stockholder.
(c) Restriction on Transfer, Proxies and Non-Interference. During
the term of this Agreement, except as expressly contemplated by this Agreement
or the Merger Agreement, Stockholder shall not, directly or indirectly: (i)
offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to, or consent to the offer for sale, sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, any or all of
the Shares or any interest therein unless the transferee shall execute a
signature page to this Irrevocable Proxy and Voting Agreement and shall agree to
be bound to the provisions hereof; (ii) grant any proxies or powers of attorney
or deposit any Shares into a voting trust or enter into a voting agreement with
respect to any Shares; or (iii) take any action that would make any
representation or warranty of Stockholder contained in this Section 4 untrue or
incorrect or have the effect of preventing or disabling Stockholder from
performing any of Stockholder's obligations under this Agreement.
(d) Other Potential Acquirors. Stockholder: (i) shall immediately
cease any existing discussions or negotiations, if any, with any persons
conducted heretofore with respect to any acquisition of all or any material
portion of the assets of, or any equity interest in, the Company, or any
business combination with the Company, in his, her or its capacity as a
stockholder of the Company; (ii) from and after the date hereof until the
earlier of (A) the termination of the Merger Agreement in accordance with its
terms and (B) the Effective Time, shall not, in such capacity as a stockholder
of the Company, directly or indirectly, initiate, solicit or knowingly encourage
(including, without limitation, by way of furnishing non-public information or
assistance), or take any other action to facilitate knowingly, any inquiries or
the making of any Third Party Acquisition; and (iii) shall promptly notify
Redback of any proposals for, or inquiries with respect to, a potential Third
Party Acquisition received by Stockholder or of which Stockholder otherwise has
knowledge.
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95
(e) Reliance by Redback. Stockholder understands and acknowledges
that Redback is entering into the Merger Agreement in reliance upon
Stockholder's execution and delivery of this Agreement.
5. Stop Transfer. Stockholder agrees with, and covenants to, Redback
that Stockholder shall not request that the Company register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any Shares, unless such transfer is made pursuant to and in
compliance with this Agreement. In the event of a dividend or distribution of
capital stock of the Company, or any change in the Company Common Stock by
reason of any stock dividend, split-up, recapitalization, combination, exchange
of shares or the like, the term "Shares" shall be deemed to refer to and include
the Shares as well as all such shares of the Company's capital stock issued or
distributed pursuant to such stock dividends and distributions and any shares of
the Company's capital stock into which or for which any or all of the Shares may
be so changed or exchanged.
6. Termination. The proxy granted pursuant to Section 2 hereof and
Stockholder's covenants and agreements contained herein with respect to the
Shares shall terminate upon the earliest to occur of: (a) the termination of the
Merger Agreement and (b) the Effective Time.
7. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
(b) Assignment. This Agreement shall not be assigned by operation
of law or otherwise without the prior written consent of the other party;
provided, however, that Redback may, in its sole discretion, assign its rights
and obligations hereunder to any wholly-owned subsidiary of Redback.
(c) Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto. No
waiver by a party hereto of any of its rights hereunder shall be effective
unless and to the extent such waiver is set forth in a writing signed by such
party.
(d) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand
delivery, telecopy, or by mail (registered or certified mail, postage prepaid,
return receipt requested) or by any nationally-recognized overnight courier
service, such as Federal Express, providing proof of delivery. Any such notice
or communication shall be deemed to have been delivered and received (i) in the
case of hand delivery, on the date of such delivery, (ii) in the case of
telecopy, on the date sent if confirmation of receipt is received and such
notice is also promptly mailed by registered or certified mail (return receipt
requested), (iii) in the case of a nationally-recognized overnight courier
service, in circumstances under which such courier guarantees next business day
delivery, on the next business day after the date when sent, and (iv) the case
of mailing, on the third business day
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96
following that on which the piece of mail containing such communication is
posted. All communications hereunder shall be delivered to the respective
parties at the following addresses:
If to Stockholder: ---------------------------------
---------------------------------
---------------------------------
Telephone:
Telecopier:
Attention:
with a copy to: Siara Systems, Inc.
000 Xxxxxxxx Xxxxx, Xxxxxx Xxxxx
Xxxxxxxx Xxxx, XX 00000
Telecopier: 000-000-0000
Attention: Xxxxx Xxxxxxx
If to Redback: Redback Networks Inc.
0000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
Telecopier: 000-000-0000
Attention: Xxxxx Xxxxxxx
with a copy to: Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx
& Xxxxxxxxx LLP
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Xxxxx X. Xxxxx
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the matter set forth above.
(e) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision had
never been contained herein.
(f) Specific Performance. Each of the parties hereto recognizes
and acknowledges that a breach by it of any covenants or agreements contained in
this Agreement
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97
will cause the other party to sustain damage for which it would not have an
adequate remedy at law for money damages, and therefore each of the parties
hereto agrees that in the event of any such breach the aggrieved party shall be
entitled to the remedy of specific performance of such covenants and agreements
and injunctive and other equitable relief in addition to any other remedy to
which it may be entitled, at law or in equity.
(g) No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(h) Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof.
(i) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
[The Remainder of this Page Has Intentionally Been Left Blank]
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98
IN WITNESS WHEREOF, Redback and Stockholder have caused this Agreement
to be duly executed as of the day and year first above written.
Redback Networks Inc., a Delaware corporation
By: _______________________________________
Name:
Title:
STOCKHOLDER:
By: _______________________________________
Name:
Number of Shares of Company Common Stock
Owned (if any): _____________________
Number of Shares of Company Preferred A
Stock Owned (if any): ________________
Number of Shares of Company Preferred B
Stock Owned (if any): ________________
[SIGNATURE PAGE FOR REDBACK/SIARA STOCKHOLDER
IRREVOCABLE PROXY AND VOTING AGREEMENT]
99
AMENDMENT TO REDBACK NETWORKS, INC. AMENDED
AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDMENT to the Redback Networks, Inc. Amended and
Restated Investors' Rights Agreement dated July 2, 1998 (the "Prior Agreement")
is made as of _____________________, by and among Redback Networks Inc., a
Delaware corporation (the "Company"), the investors of the Company listed on
Schedule A to the Prior Agreement, each of which is herein referred to as an
"Existing Investor," the founders listed on Schedule B to the Prior Agreement,
each of which is herein referred to as a "Founder," Siara Systems, Inc., a
Delaware corporation ("Siara") and the former security holders of Siara listed
on Schedule A hereto (the "New Investors") who have received securities of the
Company in connection with that certain Merger Agreement and Plan of
Reorganization dated November __, 1999 (the "Merger Agreement") by and among the
Company and Siara. Capitalized terms used herein shall have the same meanings as
set forth in the Prior Agreement, unless otherwise specified.
RECITALS
WHEREAS, the Existing Investors have heretofore purchased
Series A, Series B, Series C and/or Series D Preferred Stock from the Company
and possess registration rights contained in the Prior Agreement;
WHEREAS, in order to induce Siara to enter into the Merger
Agreement, the Existing Investors and the Company desire to amend the Prior
Agreement in order to provide to the New Investors the same registration rights
held by the Existing Investors under the Prior Agreement;
WHEREAS, pursuant to Section 4.8 of the Prior Agreement,
the Company and the holders of a majority of the outstanding Registrable
Securities may amend the Prior Agreement on behalf of all such holders by
approving this Amendment, and the Existing Investors executing this Amendment
represent such a majority;
WHEREAS, certain of the New Investors are parties to that
Amended and Restated Investors' Rights Agreement dated December 21, 1998 between
Siara and such New Investors (the "Siara Agreement");
WHEREAS, in order to induce the Company to enter into the
Merger Agreement, the New Investors and Siara desire to terminate the rights
granted pursuant to the Siara Agreement, effective upon the Effective Time (as
defined in the Merger Agreement); and
WHEREAS, pursuant to Section 5.2 of the Siara Agreement,
Siara and the holders of a majority of the outstanding Investors' Shares (as
defined in the Siara Agreement) may amend the Prior Agreement, which amendment
shall be binding on all parties thereto, and the New Investors executing this
Amendment represent such a majority;
100
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Amendment of Prior Agreement.
Paragraph 1.1(f) of the Prior Agreement is hereby amended
to read in its entirety as follows:
(f) The term "Registrable Securities" means (i) the Common
Stock issuable or issued upon conversion of the Series A
Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock and the Series D Preferred Stock, (ii) the
shares of Common Stock issued to the Founders; provided,
however, that such shares of Common Stock shall not be
deemed Registrable Securities and the aforementioned
individuals shall not be deemed Holders for the purposes of
Sections 1.2, 1.12 and 4.8, (iii) the Common Stock issued
or issuable upon conversion, pursuant to the Merger
Agreement, of all "Registrable Securities," as defined in
that certain Siara Systems, Inc. Amended and Restated
Investors' Rights Agreement dated December 21, 1998;
provided, however, that such shares of Common Stock shall
not be deemed Registrable Securities for the purposes of
Sections 1.2 and 1.12, (iv) any Common Stock of the Company
issuable upon the conversion or exercise of warrants issued
by Siara Systems, Inc. to U.S. Telesource, Inc., Broadband
Office, Transamerica Business Credit Corporation, Comdisco,
Inc., Imperial Bank, Fenwick & West LLP, ______________,
__________________ and _____________, which are assumed by
the Company and converted into warrants to purchase shares
of the Company's Common Stock pursuant to the Merger
Agreement; provided, however, that such shares of Common
Stock shall not be deemed Registrable Securities for the
purposes of Sections 1.2 and 1.12, and (v) any Common Stock
of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security that is
issued as) a dividend or other distribution with respect
to, or in exchange for, or in replacement of the shares
referenced in (i), (ii), (iii), and (iv) of this paragraph,
excluding in all cases, however, any Registrable Securities
sold by a person in a transaction in which his rights under
this Section 1 are not assigned.
2. Amendment and Termination of Siara Agreement. Siara and
the New Investors, who hold at least a majority of the Investors' Shares (as
defined in the Siara Agreement), hereby agree to terminate the Siara Agreement
and all rights and obligations of the parties thereunder, with such termination
to become effective upon the Effective Time (as defined in the Merger
Agreement).
3. Counterparts. This Amendment may be executed by the
Company, the Existing Investors and the New Investors named below in any number
of counterparts and shall become effective when executed by the Company and
Existing Investors holding at least a majority of the outstanding Registrable
Securities. Each New Investor shall be offered the opportunity to become a party
to this Amendment, and the registration rights extended pursuant to Section 1 of
this Amendment shall become effective as to each New Investor upon execution and
delivery of this Amendment by such New Investor.
101
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
REDBACK NETWORKS INC.
By:
--------------------------------------
Xxxxxx X. Xxxxxxx, President
Address: 0000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
SIARA SYSTEMS, INC.
By:
--------------------------------------
Xxxxx Xxxxxxx, President
Address: 000 Xxxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxxx Xxxx, XX 00000
SIGNATURE PAGE TO AMENDMENT TO INVESTORS' RIGHTS AGREEMENT
102
EXISTING INVESTORS:
XXXXXXXX VIII,
A CALIFORNIA LIMITED PARTNERSHIP
By: XXXXXXXX VIII MANAGEMENT, L.L.C.
A DELAWARE LIMITED LIABILITY COMPANY,
Its General Partner
By:
---------------------------------------
XXXXXXXX ASSOCIATES FUND III,
A CALIFORNIA LIMITED PARTNERSHIP
By: XXXXXXXX VIII MANAGEMENT, L.L.C.
A DELAWARE LIMITED LIABILITY COMPANY,
Its General Partner
By:
---------------------------------------
Address: 0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
SIGNATURE PAGE TO AMENDMENT TO INVESTORS' RIGHTS AGREEMENT
103
SEQUOIA CAPITAL VII
A CALIFORNIA LIMITED PARTNERSHIP
SEQUOIA TECHNOLOGY PARTNERS VII
A CALIFORNIA LIMITED PARTNERSHIP
SEQUOIA 1995 LLC
SQP 1997
A CALIFORNIA LIMITED PARTNERSHIP
SEQUOIA 1997
A CALIFORNIA LIMITED PARTNERSHIP
By: SC VII-A Management, LLC
a California Limited Liability Company,
its General Partner
By:______________________________
_________________________________
Print Name
_________________________________
Title
Address: 0000 Xxxx Xxxx Xxxx, Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
SIGNATURE PAGE TO AMENDMENT TO INVESTORS' RIGHTS AGREEMENT
104
ACCEL V L.P.
By: Accel V Associates L.L.C.
Its General Partner
By:___________________________________
Managing Member
ACCEL INTERNET/STRATEGIC
TECHNOLOGY FUND L.P.
By: Accel Internet/Strategic Technology Fund
Associates L.L.C.
Its General Partner
By:___________________________________
Managing Member
ACCEL KEIRETSU V L.P.
By: Accel Keiretsu V Associates L.L.C.
Its General Partner
By:___________________________________
Managing Member
ACCEL INVESTORS '96 L.P.
By:_______________________________________
General Partner
XXXXXXX X. XXXXXXXXX PARTNERS
By:_______________________________________
General Partner
Address: 000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
SIGNATURE PAGE TO AMENDMENT TO INVESTORS' RIGHTS AGREEMENT
105
LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By Lighthouse Management Partners II, L.P.,
Its General Partner
By Lighthouse Capital Partners, Inc.,
Its General Partner
By:_______________________________________
Xxxxxxx X. Xxxxxxxxxxxx, Managing Director
Address: 000 Xxxxxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000-0000
XXXXXXXX XXXXX
By:_______________________________________
Address: 00000 Xxxxxx Xxxxx
Xxx Xxxxx Xxxxx, Xxxxxxxxxx 00000
XXXXXX XXXXXX
By:_______________________________________
Address: 000 Xxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
SIGNATURE PAGE TO AMENDMENT TO INVESTORS' RIGHTS AGREEMENT
106
________________________________________
Xxxxxx Xxxx
G & H Partners
By:_____________________________________
SIGNATURE PAGE TO AMENDMENT TO INVESTORS' RIGHTS AGREEMENT
107
NEW INVESTOR:
Name:__________________________________
By:____________________________________
Print Name:____________________________
Title:_________________________________
Address:____________________________________________
____________________________________________
SIGNATURE PAGE TO AMENDMENT TO INVESTORS' RIGHTS AGREEMENT
108
SCHEDULE A
SCHEDULE OF NEW INVESTORS
Xxxxxxx Xxxxxxx Xxxxxxxx & Xxxxx VII, L.P.
KPCB VIII Founders Fund, L.P.
KPCB Information Sciences Zaibatsu Fund II, L.P.
Norwest Venture Partners VII, LP
ADC Telecommunications, Inc.
Comdisco, Inc.
Xxxx Xxxxxxx
Presidio Venture Partners
Xxxx X. XxXxxxxxx
Transamerica Business Credit Corporation
Imperial Bank
U.S. Telesource, Inc.
Broadband Office
Fenwick & West LLP
_______________________________________________
_______________________________________________
_______________________________________________
109
EXHIBIT D
CERTIFICATE OF MERGER
OF
SIARA SYSTEMS, INC.
(A DELAWARE CORPORATION)
INTO
REDBACK NETWORKS INC.
(A DELAWARE CORPORATION)
UNDER SECTION 251 OF THE DELAWARE GENERAL CORPORATION LAW
1. The undersigned corporation hereby certifies that:
FIRST: The constituent corporations of the merger are SIARA
SYSTEMS, INC., a Delaware corporation, and REDBACK NETWORKS INC., a Delaware
corporation.
SECOND: A Merger Agreement and Plan of Reorganization between the
constituent corporations has been approved, adopted, certified, executed and
acknowledged by each of the constituent corporations in accordance with Section
251 of the General Corporation Law of the State of Delaware.
THIRD: The name of the surviving corporation of the merger is
REDBACK NETWORKS INC.
FOURTH: The Restated Certificate of Incorporation of the
surviving corporation shall be in the form attached hereto as Exhibit A.
FIFTH: The executed Merger Agreement and Plan of Reorganization
is on file at the surviving corporation's office. The address of said office is
0000 Xxxxxxx Xxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxxx 00000.
SIXTH: A copy of the Merger Agreement and Plan of Reorganization
will be furnished by the surviving corporation on request and without cost to
any stockholder of any constituent corporation.
2. This Certificate of Merger shall be effective on ____________.
110
IN WITNESS WHEREOF, the undersigned has executed this Certificate
of Merger on _______________.
REDBACK NETWORKS INC.
a Delaware corporation
By:__________________________________
Name:________________________________
Its:_________________________________
111
EXHIBIT E
REDBACK NETWORKS INC.
Officer's Certificate
Pursuant to Section 5.2(d) of the Merger Agreement and Plan of
Reorganization, dated as of November 28, 1999 (the "Merger Agreement";
capitalized terms used but not defined herein shall have the respective meanings
ascribed to them in the Merger Agreement), by and among Redback Networks Inc., a
Delaware corporation (the "ACQUIROR"), Siara Systems, Inc., a Delaware
corporation (the "TARGET"), and the Stockholder Agent, I, Xxxxxx X. Xxxxxxx, in
my capacity as President and Chief Executive Officer of Acquiror and on behalf
of Acquiror, and not individually, DO HEREBY CERTIFY that:
1. I am the duly elected, qualified and acting President and
Chief Executive Officer of Acquiror.
2. Each of the representations and warranties made by Acquiror in
Article 2 of the Merger Agreement, as modified by Acquiror Disclosure Schedule
(other than representations and warranties which by their express terms are made
solely as of a specified date earlier than the date of this Officer's
Certificate) is true and correct in all material respects on and as of the date
hereof as though such representation or warranty was made on and as of the date
hereof; and each of the representations and warranties made by Acquiror in the
Merger Agreement as of a specified date earlier than the date of this Officer's
Certificate is true and correct in all material respects on and as of such
earlier date, as modified by Acquiror Disclosure Schedule.
3. Acquiror has performed and complied in all material respects
with each agreement, covenant and obligation required by the Merger Agreement to
be so performed or complied with by Acquiror on or before the date hereof.
112
IN WITNESS WHEREOF, the undersigned has executed this Certificate
as of the ___ day of ___________, _____.
By:
--------------------------------------
Xxxxxx X. Xxxxxxx
President and Chief Executive Officer
Redback Networks Inc.
***REDBACK NETWORKS INC. OFFICER'S CERTIFICATE***
113
EXHIBIT F
LEGAL OPINION OF COUNSEL TO REDBACK NETWORKS INC.
[subject to standard introductory language, including qualifications,
limitations, etc. and subject to disclosures in Acquiror's Disclosure Schedule]
1. Redback Networks Inc. ("Acquiror") is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority to own its
properties and to conduct its business as presently conducted. The Company is
qualified to do business in
----------------------------------------------------
-----------------------.
2. Acquiror has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Merger Agreement and the
Ancillary Agreements to which it is a party (the "Transaction Documents"). The
execution, delivery and performance of Transaction Documents have been duly
authorized by all necessary corporate and shareholder action of Acquiror, and
the Transaction Documents have been duly executed and delivered by Acquiror.
Each of the Transaction Documents constitutes a legal, valid and binding
obligation of Acquiror, enforceable against Acquiror in accordance with its
terms.
3. The authorized capitalization of the Company is as follows:
Common Stock. 80,000,000 shares of Common Stock, $0.0001 par
value (the "Common Stock") and 10,000,000 shares of Preferred Stock, none of
which, to our knowledge, are issued or outstanding.
4. The execution and delivery by Acquiror and the performance by
Acquiror of its obligations under the Transaction Documents do not (i) violate
any provision of any federal or Delaware law, rule or regulation applicable to
Acquiror; (ii) violate any provision of the Certificate of Incorporation or
Bylaws of Acquiror, or (iii) require any consents, approvals, permits, order or
authorizations of, or any qualifications, registrations, designations,
declarations or filings with, any federal or California state governmental
authority on the part of the Acquiror except (x) as contemplated by the
Agreement or (y) as have been obtained and are effective.
114
EXHIBIT G
SIARA SYSTEMS, INC.
Officer's Certificate
Pursuant to Section 5.3(d) of the Merger Agreement and Plan of
Reorganization, dated as of November 28, 1999 (the "Merger Agreement";
capitalized terms used but not defined herein shall have the respective meanings
ascribed to them in the Merger Agreement), by and among Redback Networks Inc., a
Delaware corporation ("ACQUIROR"), Siara Systems, Inc., a Delaware corporation
(the "TARGET"), and the Stockholder Agent, I, Xxxxx Xxxxxxx, in my capacity as
President and Chief Executive Officer of Target and on behalf of Target, and not
individually, DO HEREBY CERTIFY that:
1. I am the duly elected, qualified and acting President and
Chief Executive Officer of Target.
2. Each of the representations and warranties made by Target in
Article 2 of the Merger Agreement, as modified by Target Disclosure Schedule
(other than representations and warranties which by their express terms are made
solely as of a specified date earlier than the date of this Officer's
Certificate) is true and correct in all material respects on and as of the date
hereof as though such representation or warranty was made on and as of the date
hereof; and each of the representations and warranties made by Target in the
Merger Agreement as of a specified date earlier than the date of this Officer's
Certificate is true and correct in all material respects on and as of such
earlier date, as modified by Target Disclosure Schedule.
3. Target has performed and complied in all material respects
with each agreement, covenant and obligation required by the Merger Agreement to
be so performed or complied with by Target on or before the date hereof.
115
IN WITNESS WHEREOF, the undersigned has executed this Certificate
as of the ___ day of _____________, _____.
By:______________________________________
Xxxxx Xxxxxxx
President and Chief Executive Officer
Siara Systems, Inc.
116
EXHIBIT H
LEGAL OPINION OF COUNSEL TO SIARA SYSTEMS, INC.
[subject to standard introductory language, including qualifications,
limitations, etc. and subject to disclosures in Target's Disclosure Schedule.]
1. Siara Systems, Inc. (the "Target") is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own its
properties and to conduct its business as presently conducted. The Target is
qualified to do business in
----------------------------------------------------
------------------------.
2. The Target has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Merger Agreement and the
Ancillary Agreements to which it is a party (the "Transaction Documents"). The
execution, delivery and performance of Transaction Documents by the Target have
been duly authorized by all necessary corporate and shareholder action of the
Target, and the Transaction Documents have been duly executed and delivered by
the Target. Each of the Transaction Documents constitutes a legal, valid and
binding obligation of the Target, enforceable against the Target in accordance
with its terms.
3. The authorized capitalization of the Target is as follows:
(a) Preferred Stock. _____________ shares of Preferred
Stock, _____ par value (the "Preferred Stock"), _____________ of which shares
have been designated Series A Preferred Stock, of which, to our knowledge,
_____________ are issued and outstanding, _____________ of which shares have
been designated Series B Preferred Stock, _____________ of which, to our
knowledge, are issued and outstanding and ______ of which have been designated
Series C Preferred Stock, none of which, to our knowledge, are issued and
outstanding prior to the Closing. Such _____________ shares of outstanding
Series A Preferred Stock and Series B Preferred Stock have been duly authorized
and validly issued, nonassessable, and, to our knowledge, are fully paid.
(b) Common Stock. _____________ shares of Common Stock,
______ par value (the "Common Stock"), _____________ of which, to our knowledge,
have been duly authorized and validly issued, and, to our knowledge, are fully
paid and nonassessable.
(c) Right to Acquire Stock. To our knowledge, except for (i)
the conversion privileges of the Series A Preferred Stock and Series B Preferred
Stock, (ii) [rights of first refusal set forth in the Disclosure Schedule],
(iii) warrants to purchase _____________ shares of Common Stock, and (iv)
_____________ shares of Common Stock reserved for issuance to employees,
consultants, officers, or directors of the Target pursuant to the Target Stock
Plan, of which _____________ , to our knowledge, are currently outstanding,
there are, to our knowledge, no options, warrants, conversion privileges or
other rights (or agreements for any such rights) outstanding to purchase or
otherwise obtain from the Target any of the Target's securities.
117
4. The execution, delivery and performance of the obligations of
the Target under the Transaction Documents, do not (i) to our knowledge, violate
any provision of any federal, Delaware corporate or California law, rule or
regulation applicable to the Target, (ii) violate any provision of the Target's
Restated Certificate of Incorporation or Bylaws, or (iii) require any consents,
approvals, permits, order or authorizations of, or any qualifications,
registrations, designations, declarations or filings with, any federal or
California state governmental authority on the part of the Target as of the
Closing except (i) as contemplated by the Agreement or (ii) as have been
obtained and are effective.
5. To our knowledge, there is no action, suit, proceeding or
investigation pending against the Target before any court or governmental
agency.
