EXHIBIT 99-a
AGREEMENT
AND PLAN OF MERGER
BY AND AMONG
ADC TELECOMMUNICATIONS, INC.,
ROMAN ACQUISITION CORP.
AND
PAIRGAIN TECHNOLOGIES, INC.
___________________
February 22, 2000
___________________
TABLE OF CONTENTS
ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.1. THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.2. EFFECT OF MERGER . . . . . . . . . . . . . . . . . . . . . . . .2
1.3. EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . . . . .2
1.4. CERTIFICATE OF INCORPORATION; BYLAWS . . . . . . . . . . . . . .2
1.5. DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . .3
1.6. TAKING OF NECESSARY ACTION; FURTHER ACTION . . . . . . . . . . .3
1.7. THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . .3
ARTICLE II CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . . . . .3
2.1. CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . . . . .3
2.2. STOCK OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . .5
2.3. EMPLOYEE STOCK PURCHASE PLAN . . . . . . . . . . . . . . . . . .6
2.4. EXCHANGE OF CERTIFICATES . . . . . . . . . . . . . . . . . . . .6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . .8
3.1. ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . . . . . .8
3.2. CAPITAL STOCK OF SUBSIDIARIES . . . . . . . . . . . . . . . . .9
3.3. CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . .9
3.4. AUTHORITY RELATIVE TO THIS AGREEMENT . . . . . . . . . . . . . 10
3.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS . . . . . . . . . . 11
3.6. SEC FILINGS; FINANCIAL STATEMENTS . . . . . . . . . . . . . . 12
3.7. ABSENCE OF CHANGES OR EVENTS . . . . . . . . . . . . . . . . . 13
3.8. ABSENCE OF CERTAIN DEVELOPMENTS . . . . . . . . . . . . . . . 13
3.9. LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.10. TITLE TO PROPERTIES . . . . . . . . . . . . . . . . . . . . . 13
3.11. CERTAIN CONTRACTS . . . . . . . . . . . . . . . . . . . . . . 14
3.12. COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . . . 14
3.13. INTELLECTUAL PROPERTY RIGHTS; YEAR 2000 . . . . . . . . . . . 15
3.14. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.15. EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.16. EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . 19
3.17. ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . 21
3.18. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.19. FOREIGN CORRUPT PRACTICES ACT . . . . . . . . . . . . . . . . 22
3.20. EXPORT CONTROL LAWS . . . . . . . . . . . . . . . . . . . . . 22
3.21. FINDERS OR BROKERS . . . . . . . . . . . . . . . . . . . . . . 22
3.22. BOARD RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . 23
3.23. VOTE REQUIRED . . . . . . . . . . . . . . . . . . . . . . . . 23
3.24. OPINION OF FINANCIAL ADVISOR . . . . . . . . . . . . . . . . . 23
3.25. TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.26. STATE TAKEOVER STATUTES; RIGHTS AGREEMENT . . . . . . . . . . 23
3.27. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS . . . . . . 24
3.28. FIRST QUARTER PERFORMANCE . . . . . . . . . . . . . . . . . . 24
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MERGER
SUBAND PARENT . . . . . . . . . . . . . . . . . . . . . . . . 24
4.1. ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . . . . . 24
4.2. CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . 25
4.3. AUTHORITY RELATIVE TO THIS AGREEMENT . . . . . . . . . . . . . 26
4.4. NO CONFLICTS; REQUIRED FILINGS AND CONSENTS. . . . . . . . . . 26
4.5. SEC FILINGS; FINANCIAL STATEMENTS. . . . . . . . . . . . . . . 27
4.6. ABSENCE OF CHANGES OR EVENTS . . . . . . . . . . . . . . . . . 28
4.7. LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.8. COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . . 28
4.9. FINDERS OR BROKERS . . . . . . . . . . . . . . . . . . . . . . 28
4.10. TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.11. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS . . . . . . 29
ARTICLE V COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . 29
5.1. CONDUCT OF BUSINESS OF THE COMPANY PENDING THE MERGER . . . . 29
5.2 PREPARATION OF REGISTRATION STATEMENT; PROXY
STATEMENT/PROSPECTUS; BLUE SKY LAWS . . . . . . . . . . . . . 32
5.3 MEETING OF STOCKHOLDERS . . . . . . . . . . . . . . . . . . . 33
5.4. ADDITIONAL AGREEMENTS, COOPERATION . . . . . . . . . . . . . . 33
5.5. PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.6. NO SOLICITATION . . . . . . . . . . . . . . . . . . . . . . . 34
5.7. ACCESS TO INFORMATION . . . . . . . . . . . . . . . . . . . . 35
5.8. NOTIFICATION OF CERTAIN MATTERS . . . . . . . . . . . . . . . 36
5.9. RESIGNATION OF OFFICERS AND DIRECTORS . . . . . . . . . . . . 36
5.10. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 36
5.11. STOCKHOLDER LITIGATION . . . . . . . . . . . . . . . . . . . . 37
5.12. EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . 37
5.13. DETERMINATION OF OPTIONHOLDERS . . . . . . . . . . . . . . . . 38
5.14. PREPARATION OF TAX RETURNS . . . . . . . . . . . . . . . . . . 38
5.15. POOLING AFFILIATES . . . . . . . . . . . . . . . . . . . . . . 39
5.16. POOLING ACTIONS . . . . . . . . . . . . . . . . . . . . . . . 39
5.17 TAX-FREE REORGANIZATION . . . . . . . . . . . . . . . . . . . 39
5.18. SEC FILINGS; COMPLIANCE . . . . . . . . . . . . . . . . . . . 39
5.19. LISTING OF ADDITIONAL SHARES . . . . . . . . . . . . . . . . . 39
5.20. RIGHTS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 40
5.21. STOCK REPURCHASE PLAN . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VI CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . 40
6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER . . 40
6.2. CONDITIONS TO OBLIGATIONS OF PARENT . . . . . . . . . . . . . 40
6.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY . . . . . . . . . . . 42
ARTICLE VII TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.1. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.2. EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . 45
7.3. FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . 45
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ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 47
8.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . . . . . . 47
8.2. WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.3. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.4. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.5. INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . 48
8.6. AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.7. NO THIRD PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . 49
8.8. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 49
8.9. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 49
8.10. VALIDITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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EXHIBITS
EXHIBITS
--------
A Stock Option Agreement
B Voting Agreement
C Certificate of Merger
D Form of Company Affiliate Letter
E Form of Parent Affiliate Letter
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated February
22, 2000, is made and entered into by and among ADC Telecommunications, Inc.,
a Minnesota corporation ("PARENT"), Roman Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of Parent ("MERGER SUB"), and
PairGain Technologies, Inc., a Delaware corporation (the "COMPANY"). Merger
Sub and the Company are sometimes collectively referred to as the
"Constituent Corporations."
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have determined that it is advisable and in the best interests of
the respective corporations and their stockholders that Merger Sub be merged
with and into the Company in accordance with the General Corporation Law of
the State of Delaware (the "DGCL") and the terms of this Agreement, pursuant
to which the Company will be the surviving corporation and will be a wholly
owned subsidiary of Parent (the "MERGER"); and
WHEREAS, for financial reporting purposes the parties intend that the
Merger shall be accounted for as a "pooling of interests." The Company has
provided to Parent an opinion letter from its independent accountants,
Deloitte & Touche LLP, addressed to the Company, stating that, based on its
familiarity with the Company, the Company will qualify as a party to a
pooling-of-interests transaction under Opinion 16 of the Accounting
Principles Board and applicable rules and regulations of the Securities and
Exchange Commission (collectively, "OPINION 16"). Parent has provided to the
Company an opinion letter from its independent accountants, Xxxxxx Xxxxxxxx
LLP, addressed to Parent, stating that, as of the date of such letter, based
on its familiarity with Parent, Parent will qualify as a party to a
pooling-of-interests transaction under Opinion 16; and
WHEREAS, for United States federal income tax purposes, the parties
intend that the Merger shall qualify as a "reorganization" under Section
368(a) of the Internal Revenue Code of 1986, as amended (the "CODE"), and
that this Agreement constitute a "plan of reorganization" within the meaning
of the Code; and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants, and agreements in connection with,
and establish various conditions precedent to, the Merger; and
WHEREAS, as a condition to, and immediately after the execution of,
this Agreement, Parent and the Company are concurrently entering into a Stock
Option Agreement (the "COMPANY OPTION AGREEMENT"), in substantially the form
attached hereto as EXHIBIT A, pursuant to which the Company will grant Parent
an option exercisable upon the occurrence of certain events; and
WHEREAS, as an inducement to Parent to enter into this Agreement,
certain principal stockholders of the Company are concurrently herewith
entering into a Voting Agreement (the "VOTING AGREEMENT") in substantially
the form attached hereto as EXHIBIT B, whereby each such stockholder agrees
to vote in favor of the Merger and all other transactions contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth in this Agreement and in the Certificate
of Merger (as defined in Section 1.3 hereof), the parties hereto, intending
to be legally bound, agree as follows:
ARTICLE I
THE MERGER
1.1. THE MERGER. At the Effective Time (as defined in Section 1.3
hereof), subject to the terms and conditions of this Agreement and the
Certificate of Merger (as defined in Section 1.3 hereof), Merger Sub shall be
merged with and into the Company, the separate existence of Merger Sub shall
cease, and the Company shall continue as the surviving corporation. The
Company, in its capacity as the corporation surviving the Merger, is
hereinafter sometimes referred to as the "SURVIVING CORPORATION."
1.2. EFFECT OF MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of the DGCL. Without limiting the generality of
the foregoing, the Surviving Corporation shall succeed to and possess all the
properties, rights, privileges, immunities, powers, franchises and purposes,
and be subject to all the duties, liabilities, debts, obligations,
restrictions and disabilities, of the Constituent Corporations, all without
further act or deed.
1.3. EFFECTIVE TIME. Subject to the terms and conditions of this
Agreement, the parties hereto will cause a copy of the Certificate of Merger,
attached hereto as EXHIBIT C (the "CERTIFICATE OF MERGER") to be executed,
delivered and filed with the Secretary of State of the State of Delaware in
accordance with the applicable provisions of the DGCL at the time of the
Closing (as defined in Section 1.7 hereof). The Merger shall become
effective upon filing of the Certificate of Merger with the Secretary of
State of the State of Delaware, at such later time as may be agreed to by the
parties and set forth in the Certificate of Merger. The time of
effectiveness is herein referred to as the "EFFECTIVE TIME." The day on
which the Effective Time shall occur is herein referred to as the "EFFECTIVE
DATE."
1.4. CERTIFICATE OF INCORPORATION; BYLAWS. From and after the
Effective Time and until further amended in accordance with applicable law,
the Certificate of Incorporation of the Company, as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation, as amended as set forth in an exhibit to the
Certificate of Merger. From and after the Effective Time and until further
amended in
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accordance with law, the Bylaws of Merger Sub as in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation.
1.5. DIRECTORS AND OFFICERS. From and after the Effective Time, the
directors of the Surviving Corporation shall be the persons who were the
directors of Merger Sub immediately prior to the Effective Time, and the
officers of the Surviving Corporation shall be the persons who were the
officers of Merger Sub immediately prior to the Effective Time. Said
directors and officers of the Surviving Corporation shall hold office for the
term specified in, and subject to the provisions contained in, the
Certificate of Incorporation and Bylaws of the Surviving Corporation and
applicable law. If, at or after the Effective Time, a vacancy shall exist on
the Board of Directors or in any of the offices of the Surviving Corporation,
such vacancy shall be filled in the manner provided in the Certificate of
Incorporation and Bylaws of the Surviving Corporation.
1.6. TAKING OF NECESSARY ACTION; FURTHER ACTION. Parent, Merger Sub
and the Company, respectively, shall each use its or their best efforts to
take all such action as may be necessary or appropriate to effectuate the
Merger under the DGCL at the time specified in Section 1.3 hereof. If, at
any time after the Effective Time, any further action is necessary or
desirable to carry out the purposes of this Agreement and to vest the
Surviving Corporation with full right, title and possession to all
properties, rights, privileges, immunities, powers and franchises of either
of the Constituent Corporations, the officers of the Surviving Corporation
are fully authorized in the name of each Constituent Corporation or otherwise
to take, and shall take, all such lawful and necessary action.
1.7. THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "CLOSING") will take place at the offices of Xxxxxx &
Xxxxxxx LLP, Xxxxxxxxx Center South, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx,
Xxxxxxxxx, within three business days after the date on which the last of the
conditions set forth in Article VI shall have been satisfied or waived, or at
such other place and on such other date as is mutually agreeable to Parent
and the Company (the "CLOSING DATE"). The Closing will be effective as of
the Effective Time.
ARTICLE II
CONVERSION OF SECURITIES
2.1. CONVERSION OF SECURITIES. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Merger Sub, the
Company, the holder of any shares of Company Common Stock (defined below) or
the holder of any options, warrants or other rights to acquire or receive
shares of Company Common Stock, the following shall occur:
(a) CONVERSION OF COMPANY COMMON STOCK. At the Effective
Time, each share of common stock, par value $.0005 per share, of the Company
(the "COMPANY COMMON STOCK") issued and outstanding immediately prior to the
Effective Time (other than any shares of Company Common Stock to be canceled
pursuant to Section 2.1(b)) will be canceled and extinguished and be
converted automatically into the right to receive 0.43 shares (the "EXCHANGE
RATIO") of common stock, par value $.20 per share, of the Parent (the "PARENT
COMMON STOCK").
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All references in this Agreement to Parent Common Stock to be issued pursuant
to the Merger shall be deemed to include the corresponding rights to purchase
shares of Parent Common Stock pursuant to the Parent SRP Plan (defined in
Section 4.2 hereof), except where the context otherwise requires.
(b) CANCELLATION OF COMPANY COMMON STOCK OWNED BY PARENT OR
COMPANY. At the Effective Time, all shares of Company Common Stock that are
owned by Company as treasury stock and each share of Company Common Stock
owned by Parent or any direct or indirect wholly owned subsidiary of Parent
or of Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) COMPANY STOCK OPTION PLANS. At the Effective Time, the
Company's 1990 Stock Plan, 1993 Stock Option/Stock Issuance Plan, as amended,
the Company's 1996 Non-Employee Directors Stock Option Plan and the Avidia
Stock Option and Incentive Award Plan (collectively, the "COMPANY STOCK
OPTION PLANS") and all options to purchase Company Common Stock then
outstanding under the Company Stock Option Plans shall be assumed by Parent
in accordance with Section 2.2 hereof.
(d) CAPITAL STOCK OF MERGER SUB. At the Effective Time,
each share of common stock, $0.01 par value, of Merger Sub ("MERGER SUB
COMMON STOCK") issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, $0.01 par value, of the Surviving
Corporation, and the Surviving Corporation shall be a wholly owned subsidiary
of Parent. Each stock certificate of Merger Sub evidencing ownership of any
such shares shall continue to evidence ownership of such shares of capital
stock of the Surviving Corporation.
(e) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall
be adjusted in the event of (i) any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible
into Parent Common Stock or Company Common Stock), reorganization,
recapitalization or other like change with respect to Parent Common Stock or
Company Common Stock occurring after the date hereof and prior to the
Effective Time or (ii) any increase in the number of shares of Company Common
Stock on a fully diluted, as-converted basis relative to such number of
shares as derived from Section 3.3 hereof (other than increases resulting
from transactions permitted in Section 5.1(b)(ii) or (iii) hereof), so as to
provide holders of Company Common Stock and Parent the same economic effect
as contemplated by this Agreement prior to such stock split, reverse split,
stock dividend, reorganization, recapitalization, like change or increase.
(f) FRACTIONAL SHARES. No fraction of a share of Parent
Common Stock will be issued, but in lieu thereof each holder of shares of
Company Common Stock who would otherwise be entitled to a fraction of a share
of Parent Common Stock (after aggregating all fractional shares of Parent
Common Stock to be received by such holder) shall receive from Parent an
amount of cash (rounded to the nearest whole cent) equal to the product of
(i) such fraction, multiplied by (ii) the closing price for a share of Parent
Common Stock on the Nasdaq National Market on the last full trading day prior
to the Effective Time.
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2.2. STOCK OPTIONS.
(a) At the Effective Time, each outstanding option to
purchase shares of Company Common Stock under the Company Stock Option Plans
(each, a "COMPANY OPTION"), whether vested or unvested, shall be assumed by
Parent and converted into an option (each, a "PARENT OPTION") to acquire, on
substantially the same terms and conditions, including but not limited to any
performance criteria set forth in the applicable stock option agreements, as
were applicable under such Company Option, the number of whole shares of
Parent Common Stock equal to the number of shares of Company Common Stock
that were issuable upon exercise of such Company Option immediately prior to
the Effective Time multiplied by the Exchange Ratio (rounded down to the
nearest whole number of shares of Parent Common Stock), and the per share
exercise price of the shares of Parent Common Stock issuable upon exercise of
such Parent Option shall be equal to the exercise price per share of Company
Common Stock at which such Company Option was exercisable immediately prior
to the Effective Time divided by the Exchange Ratio (rounded to the nearest
whole cent). Other than pursuant to the terms of existing commitments (all
of which commitments are identified in Section 2.2 of the Company Disclosure
Letter (as defined in the preamble to Article III hereof)), the Company shall
not, and shall cause any Company Stock Option Plan administrator not to, take
any action prior to the Effective Time that will extend the exercise period
of any Company Option or cause the vesting period of any Company Option to
accelerate under any circumstances, regardless of whether such circumstances
are to occur before or after the Effective Time, or otherwise amend the terms
of outstanding Company Options.
(b) All outstanding rights of the Company which it may hold
immediately prior to the Effective Time to repurchase unvested shares of
Company Common Stock (the "REPURCHASE OPTIONS") shall continue in effect
following the Merger and shall continue to be exercisable by the Parent upon
the same terms and conditions in effect immediately prior to the Effective
Time, except that the shares purchasable pursuant to the Repurchase Options
and the purchase price per shall be adjusted to reflect the conversion to
Parent Common Stock and the Exchange Ratio.
(c) Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery upon exercise of the Parent Options and to file all documents
required to be filed to cause the shares of Parent Common Stock issuable upon
exercise of the Parent Options to be listed on the Nasdaq National Market.
As soon as practicable after the Effective Time, but no later than five
business days after the Effective Time, Parent shall file a registration
statement with the U.S. Securities and Exchange Commission (the "SEC") on
Form S-8 (or any successor form) or another appropriate form with respect to
the Parent Common Stock subject to such Parent Options, and shall use all
commercially reasonable efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as
such Parent Options remain outstanding. As soon as practicable after the
Effective Time, Parent shall inform in writing the holders of Company Options
of their rights pursuant to the Company Stock Option Plans and the agreements
evidencing the grants of
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such Company Options shall continue in effect on the same terms and
conditions (subject to the adjustments required by Section 2.2(a) hereof),
after giving effect to the Merger and the assumption by Parent of the Company
Options as set forth herein.
(d) In the case of any Company Option to which Section 421
of the Code applies by reason of Section 422 of the Code ("INCENTIVE STOCK
OPTIONS"), the option exercise price, the number of shares of Parent Common
Stock purchasable pursuant to such option and the terms and conditions of
exercise of such option shall be determined in order to comply with Section
424(a) of the Code.
(e) Parent will make good faith efforts to ensure, to the
extent permitted by the Code and to the extent required by and subject to the
terms of any such Incentive Stock Options, that Company Options which
qualified as Incentive Stock Options prior to the Closing Date continue to
qualify as Incentive Stock Options of Parent after the Closing. Parent makes
no representation regarding the qualification of such Company Options as
Incentive Stock Options. Parent gives no guarantee or assurances of any
particular result with respect to Taxes (as defined in Section 3.14 hereof)
for any holder of Company Options.
2.3. EMPLOYEE STOCK PURCHASE PLAN. The parties acknowledge that the
Company's Employee Stock Purchase Plan (the "ESPP") shall continue to operate
in accordance with its terms following the execution of this Agreement,
except as provided below. Effective as of one business day prior to the
Effective Time, the Company shall cause each outstanding purchase right to be
automatically exercised in accordance with Section VII.G of the ESPP, the
Company shall cause the ESPP to terminate, and no purchase rights shall be
subsequently granted or exercised under the ESPP. The Company shall take all
actions necessary to ensure that the ESPP will not be amended or modified in
any respect after the date hereof, except to effect the terms of this Section
2.3. Notwithstanding the foregoing, the Company shall cause such amendments
to be made to the ESPP such that, following such amendments, the operation of
the ESPP will not cause "pooling-of-interests" accounting treatment to be
unavailable for the transactions contemplated by the Agreement.
2.4. EXCHANGE OF CERTIFICATES.
(a) Prior to the Effective Time, Parent shall designate a
commercial bank, trust company or other financial institution, which may
include Parent's stock transfer agent, to act as exchange agent ("EXCHANGE
AGENT") in the Merger.
(b) Promptly after the Effective Time, Parent shall make
available to the Exchange Agent for exchange in accordance with this Article
II, (i) the aggregate number of shares of Parent Common Stock issuable
pursuant to Section 2.1 in exchange for outstanding shares of Company Common
Stock, and (ii) cash in an amount sufficient to permit payment of cash in
lieu of fractional shares pursuant to Section 2.1(f) (the "EXCHANGE FUND").
(c) Promptly, and in any event no later than ten business
days after the Effective Time, the Parent shall cause to be mailed to each
holder of record of a certificate or
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certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "CERTIFICATES") (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon proper delivery
of the Certificates to the Exchange Agent, and shall be in such form and have
such other provisions as Parent may reasonably specify and which shall be
reasonably acceptable to the Company) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock (and cash in lieu of fractional
shares). Upon surrender of a Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal, duly completed and validly
executed, and such other documents as may be reasonably required pursuant to
such instructions, the holder of such Certificate shall be entitled to
receive in exchange a certificate representing the number of whole shares of
Parent Common Stock, plus cash lieu of fractional shares in accordance with
Section 2.1(f), to which such holder is entitled pursuant to Section 2.1, and
the Certificate so surrendered shall forthwith be canceled. Until
surrendered as contemplated by this Section 2.4, each Certificate that, prior
to the Effective Time, represented shares of Company Common Stock will be
deemed from and after the Effective Time, for all corporate purposes, other
than the payment of dividends, to evidence the right to receive the number of
full shares of Parent Common Stock into which such shares of Company Common
Stock shall have been so converted and the right to receive an amount of cash
in lieu of the issuance of any fractional shares in accordance with Section
2.1(f).
(d) No dividends or other distributions declared or made
after the Effective Time with respect to Parent Common Stock with a record
date after the Effective Time will be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock represented
thereby until the holder of record of such Certificate shall surrender such
Certificate. 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 Parent 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
paid with respect to such whole shares of Parent Common Stock.
(e) None of Parent, the Surviving Corporation or the
Exchange Agent shall be liable to any holder of shares of Company Common
Stock for any amount properly delivered to a public official in compliance
with any abandoned property, escheat or similar law.
(f) At the Effective Time, the stock transfer books of the
Company shall be closed and there shall be no further registration of
transfers of shares of Company Common Stock thereafter on the records of the
Company. From and after the Effective Time, the holders of certificates
representing shares of Company Common Stock outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such shares
of Company Common Stock except as otherwise provided in this Agreement or by
law.
(g) Subject to any applicable escheat or similar laws, any
portion of the Exchange Fund that remains unclaimed by the former
stockholders of the Company for one year after the Effective Time shall be
delivered by the Exchange Agent to Parent, upon demand of Parent, and any
former stockholders of the Company shall thereafter look only to Parent for
7
satisfaction of their claim for certificates representing shares of Parent
Common Stock in exchange for their shares of Company Common Stock pursuant to
the terms of Section 2.1 hereof.
(h) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact, in form and
substance acceptable to the Exchange Agent, by the person claiming such
Certificate to be lost, stolen or destroyed, and complying with such other
conditions as the Exchange Agent may reasonably impose (including the
execution of an indemnification undertaking or the posting of an indemnity
bond or other surety in favor of the Exchange Agent and Parent with respect
to the Certificate alleged to be lost, stolen or destroyed), the Exchange
Agent will deliver to such person, such shares of Parent Common Stock and
cash in lieu of fractional shares, if any, as may be required pursuant to
Section 2.1.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Merger Sub and Parent that the
statements contained in this Article III are true and correct, except as set
forth in the letter delivered by the Company to Merger Sub on the date hereof
(the "COMPANY DISCLOSURE LETTER") (which Company Disclosure Letter sets forth
the exceptions to the representations and warranties contained in this
Article III under captions referencing the Sections to which such exceptions
apply):
3.1. ORGANIZATION AND QUALIFICATION. Each of the Company and its
Subsidiaries (as defined below) is a company (or similar entity with
corporate characteristics including limited liability of stockholders or
other owners) duly organized, validly existing, duly registered and, if
applicable, in good standing under the laws of the jurisdiction of its
organization and each such entity has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified or licensed to carry on its business as it is now being
conducted, and is qualified to conduct business, in each jurisdiction where
the character of its properties owned or leased or the nature of its
activities makes such qualification necessary, except for failures to be so
qualified that would not, individually or in the aggregate, have, or would
not reasonably be expected to have, a Company Material Adverse Effect (as
defined below). Neither the Company nor any of its Subsidiaries is in
violation of any of the provisions of its Certificate of Incorporation or
other applicable charter document (any such document of any business entity
hereinafter referred to as its "CHARTER DOCUMENT") or its Bylaws, or other
applicable governing document (any such documents of any business entity
hereinafter referred to as its "GOVERNING DOCUMENT"). The Company has
delivered to Merger Sub accurate and complete copies of the respective
Charter Documents and Governing Documents, as currently in effect, of each of
the Company and its Subsidiaries. As used in this Agreement, the term
"COMPANY MATERIAL ADVERSE EFFECT" means any change, effect, event or
condition that (i) has a material adverse effect on the assets, business,
results of operations or financial condition of the Company and its
Subsidiaries, taken as a whole (other than any such change, effect, event or
condition that arises (A) as a result of the transactions contemplated
hereby, or (B) from changes in general economic conditions, except to
8
the extent such changes disproportionately affect the Company and its
Subsidiaries, taken as a whole), or (ii) would prevent or materially delay
the Company's ability to consummate the transactions contemplated hereby. As
used in this Agreement, the term "SUBSIDIARY" when used with respect to any
party means any corporation or other organization, whether incorporated or
unincorporated, of which such party directly or indirectly owns or controls
at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the board of directors or
others performing similar functions.
3.2. CAPITAL STOCK OF SUBSIDIARIES. Neither the Company nor any of
its Subsidiaries owns, controls or holds with the power to vote, directly or
indirectly, of record, beneficially or otherwise, any share capital, capital
stock or any equity or ownership interest in any company, corporation,
partnership, association, joint venture, business, trust or other entity,
except for the Subsidiaries described in the Company SEC Reports (as defined
in Section 3.6(a) hereof) or listed in Section 3.2 of the Company Disclosure
Letter, and except for ownership of securities in any publicly traded company
held for investment by the Company or any of its Subsidiaries and comprising
less than five percent of the outstanding stock of such company. Except as
set forth in Section 3.2 of the Company Disclosure Letter, the Company is
directly or indirectly the registered, record and beneficial owner of all of
the outstanding share capital or shares of capital stock (or other ownership
interests having by their terms ordinary voting power to elect a majority of
directors or others performing similar functions with respect to such
Subsidiary) of each of its Subsidiaries, there are no proxies with respect to
such shares, and no equity securities of any of such Subsidiaries are or may
be required to be issued by reason of any options, warrants, scrip, rights to
subscribe for, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for, share capital
or shares of any capital stock of any such Subsidiary, and there are no
contracts, commitments, understandings or arrangements by which the Company
or any such Subsidiary is bound to issue, transfer or sell any share capital
or shares of such capital stock or securities convertible into or
exchangeable for such shares. Other than as set forth in Section 3.2 of the
Company Disclosure Letter, all of such shares so owned by the Company are
validly issued, fully paid and nonassessable and are owned by it free and
clear of any claim, lien, pledge, security interest or other encumbrance of
any kind (collectively "LIENS") with respect thereto other than restrictions
on transfer pursuant to applicable securities laws.
3.3. CAPITALIZATION. The authorized capital stock of the Company
consists of 175,000,000 shares of Company Common Stock and 2,000,000 shares
of preferred stock, $.001 par value per share (of which 200,000 shares are
designated Series A Junior Participating Preferred Stock) (the "COMPANY
PREFERRED STOCK"). As of the close of business on February 18, 2000 (the
"COMPANY MEASUREMENT DATE"), (a) 72,813,826 shares of Company Common Stock
were issued and outstanding, (b) no shares of Company Preferred Stock were
issued and outstanding, (c) the Company had no shares of Company Common Stock
held in its treasury, (d) 12,665,428 shares of Company Common Stock were
reserved for issuance under the Company Stock Option Plans and the ESPP, (e)
Company Options to purchase 10,687,839 shares of Company Common Stock in the
aggregate had been granted and remained outstanding under the Company Stock
Option Plans, (f) no warrants to purchase shares of Company Common Stock were
outstanding and (g) except for the Company Options, rights to the issuance of
199,786
9
shares of Company Common Stock in the aggregate under the ESPP and rights to
purchase shares of Series A Junior Participating Preferred Stock pursuant to
the Company Rights Agreement (defined in Section 3.26 hereof), there were no
outstanding Rights (defined below). Except as permitted by Section 5.1(b),
since the Company Measurement Date, no additional shares in the Company have
been issued, except pursuant to the exercise of Company Options listed in
Section 3.3 of the Company Disclosure Letter and the ESPP, and no Rights have
been granted. Except as described in the preceding sentence or as set forth
in Section 3.3 of the Company Disclosure Letter, the Company has no
outstanding bonds, debentures, notes or other securities or obligations the
holders of which have the right to vote or which are convertible into or
exercisable for securities having the right to vote on any matter on which
any stockholder of the Company has a right to vote. All issued and
outstanding shares of Company Common Stock are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights. There are
not as of the date hereof any existing options, warrants, stock appreciation
rights, stock issuance rights, calls, subscriptions, convertible securities
or other rights which obligate the Company or any of its Subsidiaries to
issue, exchange, transfer or sell any shares in the capital of the Company or
any of its Subsidiaries, other than rights to purchase shares of Series A
Junior Participating Preferred Stock pursuant to the Company Rights
Agreement, Company Common Stock issuable under the Company Stock Option Plans
and the ESPP, or awards granted pursuant thereto (collectively, "RIGHTS").
As of the date hereof, there are no outstanding contractual obligations of
the Company or any of its Subsidiaries to repurchase, reprice, redeem or
otherwise acquire any shares of the capital of the Company or any of its
Subsidiaries. As of the date hereof, there are no outstanding contractual
obligations of the Company to vote or to dispose of any shares in the capital
of any of its Subsidiaries.
3.4. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has the
requisite corporate power and authority to execute and deliver, and perform
its obligations under, this Agreement and the Company Option Agreement and,
subject to obtaining the necessary approval of its stockholders, to
consummate the Merger and the other transactions contemplated hereby and
thereby under applicable law. The execution and delivery of this Agreement
and the Company Option Agreement and the consummation of the Merger and other
transactions contemplated hereby and thereby have been duly and validly
authorized by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or the Company Option Agreement or to consummate the Merger or
other transactions contemplated hereby and thereby (other than approval by
the Company's stockholders required by applicable law). This Agreement and
the Company Option Agreement have been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery hereof by Parent and Merger Sub, each constitutes a valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except to the extent that its enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting the enforcement of creditors rights generally or by
general equitable principles.
10
3.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming that all filings, permits, authorizations,
consents and approvals or waivers thereof have been duly made or obtained as
contemplated by Section 3.5(b) hereof, neither the execution and delivery of
this Agreement or the Company Option Agreement by the Company nor the
consummation of the Merger or other transactions contemplated hereby or
thereby nor compliance by the Company with any of the provisions hereof will
(i) violate, conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination or
suspension of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
Lien upon any of the properties or assets of the Company or any of its
Subsidiaries under, any of the terms, conditions or provisions of (x) their
respective Charter Documents or Governing Documents, (y) any note, bond,
charge, lien, pledge, mortgage, indenture or deed of trust to which the
Company or any such Subsidiary is a party or to which they or any of their
respective properties or assets may be subject, or (z) any license, lease,
agreement or other instrument or obligation to which the Company or any such
Subsidiary is a party or to which they or any of their respective properties
or assets may be subject, or (ii) violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or
any of its Subsidiaries or any of their respective properties or assets,
except, in the case of clauses (i) (y) and (z) and (ii) above, for such
violations, conflicts, breaches, defaults, terminations, suspensions,
accelerations, rights of termination or acceleration or creations of liens,
security interests, charges or encumbrances which would not, individually or
in the aggregate, reasonably be expected to have a Company Material Adverse
Effect.
(b) No filing or registration with or notification to and no
permit, authorization, consent or approval of any court, commission,
governmental body, regulatory authority, agency or tribunal wherever located
(a "GOVERNMENTAL ENTITY") is required to be obtained, made or given by the
Company in connection with the execution and delivery of this Agreement or
the Company Option Agreement or the consummation by the Company of the Merger
or other transactions contemplated hereby or thereby except (i) (A) the
filing of the Certificate of Merger as provided in Section 1.3 hereof, (B) in
connection with the applicable requirements of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), (C) the
filing of the Proxy Statement/Prospectus (as defined in Section 3.27 hereof)
and such reports under Sections 13(a), 13(d), 15(d) or 16(a) with the SEC in
accordance with the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the "EXCHANGE ACT") and the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "SECURITIES ACT"), as may be required in connection with this
Agreement, the Company Option Agreement and the transactions contemplated
hereby or thereby, (D) in connection with the applicable requirements of the
Communications Act of 1934, as amended (the "COMMUNICATIONS ACT"), or the
rules, regulations or policies of the Federal Communications Commission (the
"FCC"), (E) in connection with the applicable requirements of the Fair
Trading Act in the United Kingdom (the "FAIR TRADING ACT"), (F) in connection
with the applicable requirements of the Investment Canada Act, (G) in
connection with the applicable requirements of the Competition Act (Canada)
or (H) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state
11
securities laws and the laws of any country other than the United States, or
(ii) where the failure to obtain any such consents, approvals, authorizations
or permits, or to make such filings or notifications, would not, individually
or in the aggregate, reasonably be expected to have a Company Material
Adverse Effect.
3.6. SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has filed all forms, reports, schedules,
statements and other documents required to be filed by it since January 1,
1997 to the date hereof (collectively, as supplemented and amended since the
time of filing, the "COMPANY SEC REPORTS") with the SEC. The Company SEC
Reports (i) were prepared in all material respects with all applicable
requirements of the Securities Act and the Exchange Act, as the case may be
and (ii) did not at the time they were filed 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 representation
in clause (ii) of the preceding sentence does not apply to any misstatement
or omission in any Company SEC Report filed prior to the date of this
Agreement which was superseded by a subsequent Company SEC Report filed prior
to the date of this Agreement. No Subsidiary of the Company is required to
file any report, form or other document with the SEC.
(b) The audited consolidated financial statements and
unaudited consolidated interim financial statements of the Company and its
Subsidiaries included or incorporated by reference in such Company SEC
Reports (collectively, the "FINANCIAL STATEMENTS") have been prepared in
accordance with United States generally accepted accounting principles
applied on a consistent basis during the periods involved (except as may be
otherwise indicated in the notes thereto) and present fairly, in all material
respects, the financial position and results of operations and cash flows of
the Company and its Subsidiaries on a consolidated basis at the respective
dates and for the respective periods indicated (except, in the case of all
such financial statements that are interim financial statements, for
footnotes and normal year-end adjustments).
(c) Neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature, whether absolute, accrued,
unmatured, contingent or otherwise whether due or to become due, known or
unknown, or any unsatisfied judgments or any leases of personalty or realty
or unusual or extraordinary commitments that are required to be disclosed
under United States generally accepted accounting principles, except (i) as
set forth in the Company SEC Reports or in Section 3.6(c) of the Company
Disclosure Letter, (ii) the liabilities recorded on the Company's
consolidated balance sheet at September 30, 1999 (the "BALANCE SHEET")
included in the financial statements referred in Section 3.6(a) hereof and
the notes thereto, (iii) liabilities or obligations incurred since September
30, 1999 (whether or not incurred in the ordinary course of business and
consistent with past practice) that would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect,
or (iv) liabilities that would not be required by United States generally
accepted accounting principles to be disclosed in financial statements or in
the notes thereto and that would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
12
3.7. ABSENCE OF CHANGES OR EVENTS. Except as set forth in Section
3.7 of the Company Disclosure Letter or in the Company SEC Reports, since
September 30, 1999 through the date of this Agreement, the Company and its
Subsidiaries have not incurred any liability or obligation that has resulted
or would reasonably be expected to result in a Company Material Adverse
Effect, and there has not been any change in the business, financial
condition or results of operations of the Company or any of its Subsidiaries
which has had, or would reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect, and the Company and its
Subsidiaries have conducted their respective businesses in the ordinary
course consistent with their past practices.
3.8. ABSENCE OF CERTAIN DEVELOPMENTS. Except as disclosed in the
Company SEC Reports or as set forth in Section 3.8 of the Company Disclosure
Letter, since September 30, 1999, the Company has not taken any of the
actions set forth in Section 5.1 hereof.
3.9. LITIGATION. Except as disclosed in the Company SEC Reports or
as set forth in Section 3.9 of the Company Disclosure Letter, there is no (a)
claim, action, suit or proceeding pending or, to the Knowledge of the Company
or any of its Subsidiaries, threatened against or relating to the Company or
any of its Subsidiaries before any Governmental Entity, or (b) outstanding
judgment, order, writ, injunction or decree (collectively, "ORDERS"), or
application, request or motion therefor, of any Governmental Entity in a
proceeding to which the Company, any Subsidiary of the Company or any of
their respective assets was or is a party except actions, suits, proceedings
or Orders that, individually or in the aggregate, has not had or would not
reasonably be expected to have a Company Material Adverse Effect, and neither
the Company nor any Subsidiary is in default in any material respect with
respect to any such Order.
3.10. TITLE TO PROPERTIES. The Company has heretofore made available
to Parent correct and complete copies of all deeds and other instruments (as
recorded) by which the Company has acquired any real property, as well as all
title insurance policies, abstracts and surveys in the possession of the
Company and relating to such real property. The Company has heretofore made
available to Parent correct and complete copies of all leases, subleases and
other agreements (collectively, the "REAL PROPERTY LEASES") under which the
Company or any of its Subsidiaries uses or occupies or has the right to use
or occupy, now or in the future, any real property or facility (the "LEASED
REAL PROPERTY"), including without limitation all modifications, amendments
and supplements thereto. Except in each case where the failure would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect or except as otherwise set forth in Section 3.10 of
the Company Disclosure Letter, (i) the Company or one of its Subsidiaries has
a valid leasehold interest in each parcel of Leased Real Property free and
clear of all Liens except liens of record and other permitted liens and each
Real Property Lease is in full force and effect, (ii) all rent and other sums
and charges due and payable by the Company or its Subsidiaries as tenants
thereunder are current in all material respects, (iii) no termination event
or condition or uncured default of a material nature on the part of the
Company or any such Subsidiary or, to the Knowledge of the Company or any
such Subsidiary, the landlord, exists under any Real Property Lease, (iv) the
Company or one of its Subsidiaries is in actual possession of each Leased
Real Property and is entitled to quiet enjoyment thereof in
13
accordance with the terms of the applicable Real Property Lease and
applicable law, and (v) the Company and its Subsidiaries own outright all of
the real and personal property (except for leased property or assets for
which it has a valid and enforceable right to use) which is reflected on the
Balance Sheet, except for property since sold or otherwise disposed of in the
ordinary course of business and consistent with past practice and except for
liens of record and other permitted liens. The plant, property and equipment
of the Company and its Subsidiaries that are used in the operations of their
businesses are in good operating condition and repair, subject to ordinary
wear and tear, and, subject to normal maintenance, are available for use.
3.11. CERTAIN CONTRACTS. Neither the Company nor any of its
Subsidiaries has breached, or received in writing any claim or notice that it
has breached, any of the terms or conditions of (i) any agreement, contract
or commitment required to be filed as an exhibit to the Company SEC Reports
(including any agreements, contracts or commitments entered into since
September 30, 1999 that will be required to be filed by the Company with the
SEC in any report), (ii) any agreements, contracts or commitments with
manufacturers, suppliers, sales representatives, distributors, OEM strategic
partners or customers of the Company pursuant to which the Company recognized
revenues or payments in excess of $500,000 for the twelve-month period ended
December 31, 1999, or (iii) any agreements, contracts or commitments
containing covenants that limit the ability of the Company or any of its
Subsidiaries to compete in any line of business or with any Person (as
defined in Section 8.5 hereof), or that include any exclusivity provision or
involve any restriction on the geographic area in which the Company or any of
its Subsidiaries may carry on its business (collectively, "COMPANY MATERIAL
CONTRACTS"), in such a manner as, individually or in the aggregate, has had
or would reasonably be expected to have a Company Material Adverse Effect.
Section 3.11 of the Company Disclosure Letter lists each Company Material
Contract described in clauses (ii) and (iii) of the preceding sentence. Each
Company Material Contract that has not expired by its terms is in full force
and effect and is the legal, valid and binding obligation of the Company
and/or its Subsidiaries, enforceable against them in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors rights and remedies generally
and subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity), except where the failure of such Company Material Contract to be in
full force and effect or to be legal, valid, binding or enforceable against
the Company and/or its Subsidiaries has not had and would not, individually
or in the aggregate, reasonably be expected to have a Company Material
Adverse Effect. Except as set forth in Section 3.11 of the Company Disclosure
Letter, no consent, approval, waiver or authorization of, or notice to any
Person is needed in order that each such Company Material Contract shall
continue in full force and effect in accordance with its terms without
penalty, acceleration or rights of early termination by reason of the
consummation of the Merger and the other transactions contemplated by this
Agreement.
3.12. COMPLIANCE WITH LAW. All activities of the Company and its
Subsidiaries have been, and are currently being, conducted in compliance in
all material respects with all applicable United States federal, state,
provincial and local and other foreign laws, ordinances, regulations,
interpretations, judgments, decrees, injunctions, permits, licenses,
certificates, governmental requirements, Orders and other similar items of
any court or other Governmental Entity or any
14
nongovernmental self-regulatory agency, and no notice has been received by
the Company or any Subsidiary of any claims filed against the Company or any
Subsidiary alleging a violation of any such laws, regulations or other
requirements which would be required to be disclosed in any Company SEC
Report or any New SEC Report (as defined in Section 5.20 hereof). The
Company Stock Option Plans and the ESPP have been duly authorized, approved
and operated in compliance in all material respects with all applicable
securities, corporate and other laws of each jurisdiction in which
participants of such plans are located. The Company and its Subsidiaries
have all permits, licenses and franchises from Governmental Entities required
to conduct their businesses as now being conducted (including, but not
limited to, permits issued under or pursuant to the Communications Act or the
rules or regulations of the FCC), except for such permits, licenses and
franchises the absence of which has not had and would not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse
Effect.
3.13. INTELLECTUAL PROPERTY RIGHTS; YEAR 2000.
(a) The Company and its Subsidiaries own, or are validly
licensed or otherwise possess legally enforceable rights to use, all patents,
trademarks, trade names, service marks, domain names and copyrights, any
applications for and registrations of such patents, trademarks, trade names,
service marks, domain names and copyrights, and all database rights, net
lists, processes, formulae, methods, schematics, technology, know-how,
computer software programs or applications and tangible or intangible
proprietary information or material that are necessary to conduct the
business of the Company and its Subsidiaries as currently conducted, or
presently planned to be conducted, except for such rights the absence of
which would not be reasonably expected to have a Company Material Adverse
Effect (the "COMPANY INTELLECTUAL PROPERTY RIGHTS"). The Company and its
Subsidiaries have taken all action reasonably necessary to protect the
Company Intellectual Property Rights which is customary in the industry,
including without limitation, use of reasonable secrecy measures to protect
the trade secrets included in the Company Intellectual Property Rights.
(b) The execution and delivery of this Agreement and
consummation of the transactions contemplated hereby will not result in the
breach of, or create on behalf of any third party the right to terminate or
modify, any license, sublicense or other agreement relating to the Company
Intellectual Property Rights, or any material licenses, sublicenses or other
agreements as to which the Company or any of its Subsidiaries is a party and
pursuant to which the Company or any of its Subsidiaries is authorized to use
any third party patents, trademarks, copyrights or trade secrets ("COMPANY
THIRD PARTY INTELLECTUAL PROPERTY RIGHTS"), including software that is used
in the manufacture of, incorporated in, or forms a part of any product sold
by or expected to be sold by the Company or any of its Subsidiaries, the
breach of which would, individually or in the aggregate, be reasonably likely
to have a Company Material Adverse Effect. The Company Disclosure Letter,
under the caption referencing this Section 3.13, lists all royalties, license
fees, sublicense fees or similar obligations reasonably expected to have a
value in excess of $500,000 per year payable by the Company or any Subsidiary
for any Company Third Party Intellectual Property Rights that are used in the
manufacture of, incorporated in, or forms a part of any product sold by or
expected to be sold by the Company or any of its Subsidiaries.
15
(c) All patents, registered trademarks, service marks,
domain names and copyrights which are held by the Company or any of its
Subsidiaries, the loss or invalidity of which would reasonably be expected to
cause a Company Material Adverse Effect, are valid and subsisting. The
Company (i) has not been sued in any suit, action or proceeding, or received
in writing any claim or notice, which involves a claim of infringement or
misappropriation of any patents, trademarks, service marks, domain names,
copyrights or violation of any trade secret or other proprietary right of any
third party; and (ii) has no Knowledge that the manufacturing, marketing,
licensing or sale of its products or services infringe upon, misappropriate
or otherwise come into conflict with any patent, trademark, service xxxx,
copyright, trade secret or other proprietary right of any third party, which
infringement, misappropriation or conflict in the cases of clause (i) and
(ii) would, individually or in the aggregate, reasonably be expected to have
a Company Material Adverse Effect. To the Knowledge of the Company, no other
Person has interfered with, infringed upon, or otherwise come into conflict
with any Company Intellectual Property Rights or other proprietary
information of the Company or any of its Subsidiaries which has or would,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
(d) Each employee, agent, consultant or contractor who has
materially contributed to or participated in the creation or development of
any copyrightable, patentable or trade secret material on behalf of the
Company, any of its Subsidiaries or any predecessor in interest thereto
either: (i) is a party to an agreement under which the Company or such
Subsidiary is deemed to be the original owner/author of all property rights
therein; or (ii) has executed an assignment or an agreement to assign in
favor of the Company, such Subsidiary or such predecessor in interest, as
applicable, all right, title and interest in such material.
(e) The Company and its Subsidiaries have experienced no
material disruption or interruption of their business or operations as a
result of or related to any of their information systems, data processing and
other hardware, software and other systems, facilities, programs and
procedures used or sold by the Company or any of its Subsidiaries
(collectively, "INFORMATION SYSTEMS") failing to be Y2K Compliant. "Y2K
COMPLIANT" means, with respect to any Information System, that such
Information System (i) handles date information involving any and all dates
before, during and/or after January 1, 2000, including accepting input,
providing output and performing date calculations in whole or in part; (ii)
operates accurately without interruption on and in respect of any and all
dates before, during and/or after January 1, 2000 and without any change in
performance; (iii) responds to and processes two-digit year input without
creating any ambiguity as to the century; and (iv) stores and provides date
input information without creating any ambiguity as to the century, in each
case without utilizing bridges, gateways and the like while still preserving
the level of functionality, usability, reliability, efficiency, performance
and accessibility of such data and associated programs as existed prior to
any modification to such Information System and its constituent elements to
make the same Y2K Compliant.
16
3.14. TAXES.
(a) "TAX" or "TAXES" shall mean all United States federal,
state, provincial, local or foreign taxes and any other applicable duties,
levies, fees, charges and assessments that are in the nature of a tax,
including income, gross receipts, property, sales, use, license, excise,
franchise, ad valorem, value-added, transfer, social security payments, and
health taxes and any deductibles relating to wages, salaries and benefits and
payments to subcontractors for any jurisdiction in which the Company or any
of its Subsidiaries does business (to the extent required under applicable
Tax law), together with all interest, penalties and additions imposed with
respect to such amounts.
(b) Except as set forth in (or resulting from matters set
forth in) Section 3.14 of the Company Disclosure Letter or as could not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect:
(i) the Company and its Subsidiaries have prepared and
timely filed with the appropriate governmental agencies all franchise,
income and all other material Tax returns and reports required to be
filed on or before the Effective Time (collectively "RETURNS"), taking
into account any extension of time to file granted to or obtained on
behalf of the Company and/or its Subsidiaries;
(ii) all Taxes of the Company and its Subsidiaries shown
on such Returns or otherwise known by the Company to be due or payable
have been timely paid in full to the proper authorities, other than such
Taxes as are being contested in good faith by appropriate proceedings or
which are adequately reserved for in accordance with generally accepted
accounting principles;
(iii) all deficiencies resulting from Tax examinations of
income, sales and franchise and all other material Returns filed by the
Company and its Subsidiaries in any jurisdiction in which such Returns
are required to be so filed have either been paid or are being contested
in good faith by appropriate proceedings;
(iv) no deficiency has been asserted or assessed against
the Company or any of its Subsidiaries which has not been satisfied or
otherwise resolved, and no examination of the Company or any of its
Subsidiaries is pending or, to the Knowledge of the Company, threatened
for any material amount of Tax by any taxing authority;
(v) no extension of the period for assessment or
collection of any material Tax is currently in effect and no extension of
time within which to file any material Return has been requested, which
Return has not since been filed;
(vi) all Returns filed by the Company and its
Subsidiaries are correct and complete or adequate reserves have been
established with respect to any additional Taxes that may be due (or may
become due) as a result of such Returns not being correct or complete;
17
(vii) to the Knowledge of the Company, no Tax liens have
been filed with respect to any Taxes;
(viii) neither the Company nor any of its Subsidiaries have
made since January 1, 1997, and none will make, any voluntary adjustment
by reason of a change in their accounting methods for any pre-Merger
period;
(ix) the Company and its Subsidiaries have made timely
payments of the Taxes required to be deducted and withheld from the wages
paid to their employees;
(x) the Company and its Subsidiaries are not parties to
any Tax sharing or Tax matters agreement;
(xi) to the Knowledge of the Company, neither the Company
nor any of its Subsidiaries is liable to suffer any recapture, clawback
or withdrawal of any relief or exemption from Tax howsoever arising
(including the entering into and the consummation of the Merger), and
whether by virtue of any act or omission by the Company or any of its
Subsidiaries or by any other person or persons; and
(xii) to the Knowledge of the Company, neither the Company
nor any of its Subsidiaries is liable to be assessed for or made
accountable for any Tax for which any other person or persons may be
liable to be assessed or made accountable whether by virtue of the
entering into or the consummation of the Merger or by virtue of any act
or acts done by or which may be done by or any circumstance or
circumstances involving or which may involve any other person or persons.
(c) The Company and its Subsidiaries are not parties to any
agreement, contract, or arrangement that would, as a result of the
transactions contemplated hereby, result, separately or in the aggregate, in
(i) the payment of any "excess parachute payments" within the meaning of
Section 280G of the Code by reason of the Merger or (ii) the payment of any
form of compensation or reimbursement for any Tax incurred by any Person
arising under Section 280G of the Code.
3.15. EMPLOYEES. Neither the Company nor any of its Subsidiaries is
a party to any collective bargaining agreement, arrangement or labor contract
with a labor union or labor organization, whether formal or otherwise. The
Company Disclosure Letter, under the caption referencing this Section 3.15,
lists all employment, severance and change of control agreements (or any
other agreements that may result in the acceleration of outstanding options)
of the Company or its Subsidiaries. Each of the Company and its Subsidiaries
is in compliance with all applicable laws (including, without limitation, all
applicable extension orders) respecting employment and employment practices,
terms and conditions of employment, equal opportunity, anti-discrimination
laws, and wages and hours, except where such noncompliance has not had and
would not, individually or in the aggregate, reasonably be expected to have,
a Company Material Adverse Effect. There is no labor strike, slowdown or
stoppage pending (or, to the
18
Knowledge of the Company or any of its Subsidiaries, any unfair labor
practice complaints, labor disturbances or other controversies respecting
employment which are pending or threatened which, if they actually occurred,
would materially disrupt the operations of the Company or its Subsidiaries)
against the Company or any of its Subsidiaries.
3.16. EMPLOYEE BENEFIT PLANS.
(a) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and "PLAN" means every plan, fund, contract, program
and arrangement (whether written or not) which is maintained or contributed
to by the Company for the benefit of present or former employees or with
respect to which the Company otherwise has current or potential liability.
"Plan" includes any arrangement intended to provide: (i) medical, surgical,
health care, hospitalization, dental, vision, workers' compensation, life
insurance, death, disability, legal services, severance, sickness, accident,
or cafeteria plan benefits (whether or not defined in Section 3(1) of ERISA),
(ii) pension, profit sharing, stock bonus, retirement, supplemental
retirement or deferred compensation benefits (whether or not tax qualified
and whether or not defined in Section 3(2) of ERISA), (iii) bonus, incentive
compensation, stock option, stock appreciation right, phantom stock or stock
purchase benefits, change in control benefits or (iv) salary continuation,
unemployment, supplemental unemployment, termination pay, vacation or holiday
benefits (whether or not defined in Section 3(3) of ERISA). The Company
Disclosure Letter, under the caption referencing this Section 3.16(a), sets
forth all material Plans by name and brief description identifying: (i) the
type of Plan, including a specific reference to any Plan which provides
benefits (or increased benefits or vesting) as a result of a change in
control of the Company, and (ii) the participating employers in the Plan.
(b) To the extent required (either as a matter of law or to
obtain the intended tax treatment and tax benefits), all Plans comply with
the requirements of ERISA and the Code, except where such noncompliance has
not had and would not, individually or in the aggregate, reasonably be
expected to have, a Company Material Adverse Effect. With respect to the
Plans, (i) all required contributions which are due have been made and an
accrual required by generally accepted accounting principles has been made on
the books and records of the Company for all future contribution obligations;
(ii) there are no actions, suits or claims pending, other than routine
uncontested claims for benefits; and (iii) there have been no nonexempt
prohibited transactions (as defined in Section 406 of ERISA or Section 4975
of the Code), except for such transactions, if any, which have not had and
would not, individually or in the aggregate, reasonably be expected to have,
a Company Material Adverse Effect. Except as otherwise disclosed in the
Company Disclosure Letter under the caption referencing this Section 3.16(b),
all benefits under the Plans (other than Code Section 125 cafeteria plans)
are payable either through a fully-funded trust or an insurance contract and
no welfare benefit Plan (as defined in Section 3(1) of ERISA) is self-funded.
(c) Parent has received true and complete copies of (i) all
Plan documents, including related trust agreements or funding arrangements;
(ii) the most recent determination letter, if any, received by the Company
from the Internal Revenue Service (the "IRS") regarding the Plans and any
amendment to any Plan made subsequent to any Plan amendments covered by
19
any such determination letter; (iii) the most recent financial statements for
the Plans, if any; (iv) the most recently prepared actuarial valuation
reports, if any; (v) current summary plan descriptions; (vi) annual
returns/reports on Form 5500 and summary annual reports for each of the most
recent three plan years, and (vii) any filings with the IRS or the Department
of Labor ("DOL") within the last five years preceding the date of this
Agreement. To the knowledge of the Company, nothing has occurred that could
materially adversely affect the qualification of the Plans and their related
trusts.
(d) Except as set forth in Section 3.16 of the Company
Disclosure Letter, the Company does not maintain or contribute to (and has
never contributed to) any multi-employer plan, as defined in Section 3(37) of
ERISA. The Company has no actual or potential material liabilities under
Title IV of ERISA, including under Section 4201 of ERISA for any complete or
partial withdrawal from a multi-employer plan.
(e) The Company has no actual or potential material
liability for death or medical benefits after separation from employment,
other than (i) death benefits under the employee benefit plans or programs
(whether or not subject to ERISA) set forth in Section 3.16 of the Company
Disclosure Letter and (ii) health care continuation benefits described in
Section 4980B of the Code.
(f) Neither the Company nor any of its directors, officers,
employees or other "fiduciaries", as such term is defined in Section 3(21) of
ERISA, has committed any breach of fiduciary responsibility imposed by ERISA
or any other applicable law with respect to the Plans which would subject the
Company, Parent or any of their respective directors, officers or employees
to any liability under ERISA or any applicable law, except for such breaches,
if any, which have not had and would not, individual or in the aggregate,
reasonably be expected to have, a Company Material Adverse Effect.
(g) There are no other trades or businesses (other than
Subsidiaries of the Company), whether or not incorporated, which, together
with the Company, would be deemed to be a "single employer" within the
meaning of Code Sections 414(b), (c) or (m).
(h) Except with respect to Taxes on benefits paid or
provided, no Tax has been waived or excused, has been paid or is owed by any
person (including, but not limited to, any Plan, any Plan fiduciary or the
Company) with respect to the operations of, or any transactions with respect
to, any Plan which would, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. No action has been taken
by the Company, nor has there been any failure by the Company to take any
action, nor is any action or failure to take action contemplated by the
Company (including all actions contemplated under this Agreement), that would
subject any person or entity to any liability or Tax imposed by the IRS or
DOL in connection with any Plan, except for such liability or Tax that has
not had and would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. No reserve for any Taxes
has been established with respect to any Plan by the Company nor has any
advice been given to the Company with respect to the need to establish
20
such a reserve, except for such reserves which would not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse
Effect.
(i) There are no (i) legal, administrative or other
proceedings or governmental investigations or audits, or (ii) complaints to
or by any Governmental Entity, which are pending, anticipated or, to the
Knowledge of the Company, threatened, against any Plan or its assets, or
against any Plan fiduciary or administrator, or against the Company or its
officers or employees with respect to any Plan which would, individually or
in the aggregate, reasonably be expected to have a Company Material Adverse
Effect.
(j) There are no leased employees, as defined in Section
414(n) of the Code, providing services to the Company, that must be taken
into account with respect to the requirements under Section 414(n)(3) of the
Code.
(k) Each Plan may be terminated directly or indirectly by
Parent and the Company, in their sole discretion, at any time before or after
the Effective Date in accordance with its terms, without causing the Parent
or the Company to incur any liability to any person, entity or government
agency for any conduct, practice or omission of the Company which occurred
prior to the Effective Date, except for liabilities to, and the rights of,
the employees thereunder accrued prior to the Effective Date, or if later,
the time of termination, and except for continuation rights required by the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or other
applicable law, reasonably expected to have a cost to the Company in excess
of $500,000.
3.17. ENVIRONMENTAL MATTERS.
(a) The Company and its Subsidiaries (i) have been in
compliance and are presently complying with all applicable health, safety and
Environmental Laws (defined below), and (ii) have obtained all material
permits, licenses and authorizations which are required under all applicable
health, safety and Environmental Laws and are in compliance in all material
respects with such permits, licenses and authorizations, except in each case
for such failure to comply or to obtain permits, licenses or authorizations
that would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect. To the Knowledge of the Company, (i)
none of the real property owned by the Company or its Subsidiaries or the
Leased Real Property (including without limitation soils and surface and
ground waters) are contaminated with any Hazardous Materials in quantities
which require investigation or remediation under Environmental Laws, (ii)
neither the Company nor any of its Subsidiaries is liable for any off-site
contamination, and (iii) there is no environmental matter which could
reasonably be expected to expose the Company or any of its Subsidiaries to a
claim to clean-up any Hazardous Materials or otherwise to remedy any
pollution or damage at any of the properties utilized in the Company's
business under any Environmental Laws, that would, with respect to any of
(i), (ii) or (iii) above, be required to be disclosed in the Company SEC
Reports.
21
(b) For purposes of this Agreement, the term (i)
"ENVIRONMENTAL LAWS" means all applicable United States federal, state,
provincial, local and other foreign laws, rules, regulations, codes,
ordinances, orders, decrees, directives, permits, licenses and judgments
relating to pollution, contamination or protection of the environment
(including, without limitation, all applicable United States federal, state,
provincial, local and other foreign laws, rules, regulations, codes,
ordinances, orders, decrees, directives, permits, licenses and judgments
relating to Hazardous Materials in effect as of the date of this Agreement),
and (ii) "HAZARDOUS MATERIALS" means any dangerous, toxic or hazardous
pollutant, contaminant, chemical, waste, material or substance as defined in
or governed by any United States federal, state, provincial, local or other
foreign law, statute, code, ordinance, regulation, rule or other requirement
relating to such substance or otherwise relating to the environment or human
health or safety, including without limitation any waste, material,
substance, pollutant or contaminant that might cause any injury to human
health or safety or to the environment or might subject the Company or any of
its Subsidiaries to any imposition of costs or liability under any
Environmental Law.
3.18. INSURANCE. The Company has made available to Parent copies of
all material policies of insurance and bonds in force on the date hereof
covering the businesses, properties and assets of the Company and its
Subsidiaries, and all such policies are currently in effect and all premiums
with respect thereto have been duly paid to date. Except as disclosed in
Section 3.18 of the Company Disclosure Letter, there are no claims
outstanding under any insurance policy which could, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect
and, to the Knowledge of the Company or any of its Subsidiaries, neither the
Company nor any of its Subsidiaries has failed to give any notice or to
present any such claim with respect to its business under any such policy in
due and timely fashion, except where such failure would not, individually or
in the aggregate, reasonably be expected to have a Company Material Adverse
Effect.
3.19. FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor any of
its Subsidiaries (nor any person representing the Company or any of its
Subsidiaries) has at any time during the last five years (a) made any payment
in violation of the Foreign Corrupt Practices Act or similar laws of other
countries where the Company engages in business, or (b) made any payment to
any foreign, federal or state governmental officer or official, or other
person charged with similar public or quasi-public duties, other than
payments required or permitted by the laws of the United States or any
jurisdiction thereof.
3.20. EXPORT CONTROL LAWS. The Company has conducted its export
transactions in accordance in all material respects with applicable
provisions of United States export control laws and regulations, including
but not limited to the Export Administration Act and implementing Export
Administration Regulations.
3.21. FINDERS OR BROKERS. Except for such Persons as set forth in
Section 3.21 of the Company Disclosure Letter, whose fees will be paid by the
Company, none of the Company, the Subsidiaries of the Company, the Board of
Directors of the Company (the "COMPANY BOARD") or any member of the Company
Board has employed any agent, investment banker, broker, finder or
intermediary in connection with the transactions contemplated hereby who
might be entitled to a
22
fee or any commission in connection with the Merger or the other transactions
contemplated hereby.
3.22. BOARD RECOMMENDATION. The Company Board has, at a meeting of
such Company Board duly held on February 20, 2000, approved and adopted this
Agreement, the Merger, the Company Option Agreement and the other
transactions contemplated hereby and thereby, declared the advisability of
the Merger and recommended that the stockholders of the Company approve the
Merger and the other transactions contemplated hereby, and has not as of the
date hereof rescinded or modified in any respect any of such actions.
3.23. VOTE REQUIRED. The affirmative vote of the holders of a
majority of the shares of Company Common Stock outstanding on the record date
set for the Company Stockholders Meeting (as defined in Section 3.27 hereof)
is the only vote of the holders of any of the Company's capital stock
necessary to approve this Agreement and the transactions contemplated hereby.
3.24. OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of Broadview International LLC dated the date of the meeting of the
Company Board referenced in Section 3.22 above, to the effect that, as of
such date, the Exchange Ratio is fair, from a financial point of view, to the
holders of Company Common Stock.
3.25. TAX MATTERS. Neither the Company nor, to its Knowledge, any of
its affiliates has taken or agreed to take any action, or knows of any
circumstances, that (without regard to any action taken or agreed to be taken
by Parent or any of its affiliates) would prevent the business combination to
be effected by the Merger from constituting a transaction qualifying as a
reorganization within the meaning of Section 368 of the Code.
3.26. STATE TAKEOVER STATUTES; RIGHTS AGREEMENT. The Company Board
has taken all actions so that the restrictions contained in Section 203 of
the DGCL applicable to a "business combination" (as defined in Section 203 of
the DGCL) will not apply to the execution, delivery of performance of this
Agreement or the Company Option Agreement or the consummation of the Merger
or the other transactions contemplated by this Agreement or by the Company
Option Agreement. The Company has taken all actions and completed all
amendments, if any, necessary or appropriate so that (a) the Rights
Agreement, dated as of December 3, 1998, between the Company and U.S. Stock
Transfer Corp. (the "COMPANY RIGHTS AGREEMENT"), is inapplicable to the
transactions contemplated by this Agreement or the Company Option Agreement,
and (b) the execution of this Agreement or the Company Option Agreement and
the consummation of the transactions contemplated hereby or thereby, do not
and will not (i) result in Parent being an "Acquiring Person" (as such term
is defined in the Company Rights Agreement), (ii) result in the ability of
any person to exercise any Rights under the Company Rights Agreement, (iii)
enable or require the "Rights" (as such term is defined in the Company Rights
Agreement) to separate from the shares of Company Common Stock to which they
are attached or to be triggered or become exercisable, or (iv) otherwise
result in the occurrence of a "Distribution Date" or "Shares Acquisition
Date" (as such terms are defined in the Company Rights Agreement).
23
3.27. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The
information supplied by the Company 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 Parent Common Stock to be issued in the Merger will be
registered with the SEC (the "REGISTRATION STATEMENT") shall not at the time the
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 the Company for
inclusion in the proxy statement/prospectus to be sent to the stockholders of
Company in connection with the meeting of Company's stockholders to consider the
Merger (the "COMPANY STOCKHOLDERS MEETING") (such proxy statement/prospectus as
amended or supplemented is referred to herein as the "PROXY
STATEMENT/PROSPECTUS") shall not, on the date the Proxy Statement/Prospectus is
first mailed to Company's stockholders, at the time of the Company 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 Company
Stockholders Meeting which has become false or misleading. If at any time prior
to the Effective Time any event or information should be discovered by the
Company which should be set forth in an amendment to the Registration Statement
or a supplement to the Proxy Statement/Prospectus, the Company shall promptly
inform Parent. Notwithstanding the foregoing, the Company makes no
representation, warranty or covenant with respect to any information supplied by
Parent or Merger Sub which is contained in any of the foregoing documents.
3.28 FIRST QUARTER PERFORMANCE. The Company has no Knowledge of any
events, circumstances or other information that would cause the Company not to
achieve substantially the internal projections of financial performance (other
than fees and expenses relating to this Agreement or the transactions
contemplated hereby) for the Company's first fiscal quarter (ending March 31,
2000) previously delivered to Parent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGER SUB AND PARENT
Merger Sub and Parent represent and warrant to the Company that the
statements contained in this Article IV are true and correct:
4.1. ORGANIZATION AND QUALIFICATION. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota, with the corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Merger Sub is a
corporation validly existing and in good standing under the laws of the State of
Delaware. Each of Merger Sub and Parent is duly qualified or licensed to carry
on its business as it is now being conducted, and is qualified to conduct
business, in each jurisdiction
24
where the character of its properties owned or leased or the nature of its
activities makes such qualification necessary, except for failures to be so
qualified that would not, individually or in the aggregate, have, or would
not reasonably be expected to have, a Parent Material Adverse Effect (as
defined below). Neither Parent nor Merger Sub is in violation of any of the
provisions of its Charter Document or its Governing Document. As used in
this Agreement, the term "PARENT MATERIAL ADVERSE EFFECT" means any change,
effect, event or condition that (i) has a material adverse effect on the
assets, business, results of operations or financial condition of Parent and
its Subsidiaries, taken as a whole (other than any such change, effect, event
or condition that arises from: (A) changes in general economic conditions,
except to the extent such changes disproportionately affect Parent and its
Subsidiaries, taken as a whole; or (B) changes in the market price of Parent
Common Stock, in and of itself and not specifically related to any breach by
Parent of any representation, warranty or covenant hereunder), or (ii) would
prevent or materially delay Merger Sub's or Parent's ability to consummate
the transactions contemplated hereby.
4.2. CAPITALIZATION. The authorized capital stock of Parent consists
of 600,000,000 shares of Parent Common Stock and 10,000,000 shares of preferred
stock, no par value (the "PARENT PREFERRED STOCK"). As of the close of business
on February 18, 2000 (the "PARENT MEASUREMENT DATE"), (a) 303,334,825 shares of
Parent Common Stock were issued and outstanding, (b) no shares of Parent
Preferred Stock were issued and outstanding, (c) 69,355,717 shares of Parent
Common Stock were reserved for issuance under the stock-based benefit plans of
the Parent (the "PARENT STOCK PLANS"), (d) options to purchase 40,499,483 shares
of Parent Common Stock in the aggregate had been granted and remained
outstanding under the Parent Stock Plans, and (e) except for the options, rights
to acquire shares of Parent Common Stock under Parent's Employee Stock Purchase
Plan (the "PARENT ESPP") and rights to acquire shares of Parent Common Stock
pursuant to the Second Amended and Restated Rights Agreement, dated as of
November 28, 1995, as amended, between Parent and Norwest Bank, Minnesota,
National Association (the "PARENT SRP PLAN"), there were no outstanding Parental
Rights (as defined below). Since the Parent Measurement Date, no additional
shares of Parent Common Stock have been issued and are outstanding, except
pursuant to the exercise of options and the Parent ESPP, and no Parental Rights
have been granted (other than additional Parent SRP Rights issued upon the
issuance of shares of Parent Common Stock). All issued and outstanding shares
of Parent Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights created by the Minnesota Business
Corporation Act or Parent's Charter Document or Governing Document, or any other
agreement with the Company. There are not at the date of this Agreement any
existing options, warrants, calls, subscriptions, convertible securities or
other rights which obligate Parent or any of its Subsidiaries to issue,
exchange, transfer or sell any shares of capital stock of Parent or any of its
Subsidiaries, other than shares of Parent Common Stock issuable under the Parent
Stock Plans and the Parent ESPP, or awards granted pursuant thereto, and other
than Parent SRP Rights issued upon the issuance of additional shares of Parent
Common Stock (collectively, "PARENTAL RIGHTS").
25
4.3. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and Merger
Sub has the requisite corporate power and authority to execute and deliver, and
to perform its obligations under, this Agreement and the Company Option
Agreement, under applicable law. The execution and delivery by Parent and
Merger Sub of this Agreement and the Company Option Agreement, and the
consummation of the Merger and the transactions contemplated hereby and thereby,
have been duly and validly authorized by all necessary corporate action on the
part of Parent and Merger Sub. This Agreement and the Company Option Agreement
have been duly and validly executed and delivered by Parent and Merger Sub and,
assuming the due authorization, execution and delivery of this Agreement and the
Company Option Agreement by the Company, is a valid and binding obligation of
Parent and Merger Sub, enforceable against them in accordance with its terms,
except to the extent that its enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors rights generally or by general equitable principles.
The shares of Parent Common Stock to be issued by Parent pursuant to the Merger,
as well as the Parent Options and the shares of Parent Common Stock to be issued
upon exercise thereof: (i) have been duly authorized, and, when issued in
accordance with the terms of the Merger and this Agreement (or the applicable
option agreements), will be validly issued, fully paid and nonassessable and
will not be subject to preemptive rights, (ii) will, when issued in accordance
with the terms of the Merger and this Agreement (or the applicable option
agreements), be registered under the Securities Act, and registered or exempt
from registration under applicable United States "Blue Sky" laws and (iii) will,
when issued in accordance with the terms of the Merger and this Agreement (or
the applicable option agreements), be listed on the Nasdaq National Market.
4.4. NO CONFLICTS; REQUIRED FILINGS AND CONSENTS.
(a) Neither the execution, delivery or performance of this
Agreement by Merger Sub or Parent, nor the consummation of the transactions
contemplated hereby, nor compliance by Merger Sub or Parent with any provision
hereof will (i) conflict with or result in a breach of any provision of the
Charter Documents or Governing Documents of Merger Sub or Parent, (ii) cause a
default or give rise to any right of termination, cancellation or acceleration
or loss of a material benefit under, or result in the creation of any lien,
charge or other encumbrance upon any of the properties of Merger Sub or Parent
under any of the terms, conditions or provisions of any note, bond, mortgage or
indenture, or any other material instrument, obligation or agreement to which
Merger Sub or Parent is a party or by which its properties or assets may be
bound or (iii) violate any law applicable to Merger Sub or Parent or binding
upon any of its properties, except for, in the case of clauses (ii) and (iii),
such defaults or violations which would not, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect.
(b) No filing or registration with or notification to and no
permit, authorization, consent or approval of any Governmental Entity is
required to be obtained, made or given by Merger Sub or Parent in connection
with the execution and delivery of this Agreement or the consummation by Merger
Sub of the Merger or other transactions contemplated hereby except (i) (A) in
connection with the applicable requirements of the HSR Act, (B) the filing of a
Registration Statement (defined in Section 5.3 hereof) with the SEC, in
26
accordance with the Securities Act, as further described in Section 5.3 hereof,
(C) in connection with the applicable requirements of the Fair Trading Act, (D)
in connection with the applicable requirements of the Investment Canada Act, (E)
in connection with the applicable requirements of the Competition Act, (Canada),
(F) in connection with the applicable requirements of the Brazilian Federal Law
No. 8884 of June 11, 1994 or (G) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable state securities laws and the laws of any country other than the
United States, or (ii) where the failure to obtain any such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect.
4.5. SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has filed all forms, reports, schedules, statements
and other documents required to be filed by it since November 1, 1997 to the
date hereof (collectively, as supplemented and amended since the time of filing,
the "PARENT SEC REPORTS") with the SEC. The Parent SEC Reports (i) were
prepared in all material respects with all applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and (ii) did not at the
time they were filed 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 representation in clause (ii) of the preceding
sentence does not apply to any misstatement or omission in any Parent SEC Report
filed prior to the date of this Agreement which was superseded by a subsequent
Parent SEC Report filed prior to the date of this Agreement.
(b) The audited consolidated financial statements and unaudited
consolidated interim financial statements of Parent and its Subsidiaries
included or incorporated by reference in such Parent SEC Reports have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may otherwise be indicated in the notes thereto) and present fairly, in all
material respects, the financial position and results of operations and cash
flows of Parent and its Subsidiaries on a consolidated basis at the respective
dates and for the respective periods indicated (except, in the case of all such
financial statements that are interim financial statements, for normal year-end
adjustments).
(c) Neither Parent nor any of its Subsidiaries has any
liabilities or obligations of any nature, whether absolute, accrued, unmatured,
contingent or otherwise, whether due or to become due, known or unknown, or any
unsatisfied judgments or any leases of personalty or realty or unusual or
extraordinary commitments that are required to be disclosed under United States
generally accepted accounting principles, except (i) as set forth in the Parent
SEC Reports, (ii) the liabilities recorded on Parent's consolidated balance
sheet at October 31, 1999 included in the financial statements referred in
Section 4.5(a) hereof and the notes thereto, (iii) liabilities or obligations
incurred since October 31, 1999 (whether or not incurred in the ordinary course
of business and consistent with past practice) that would not, individually or
in the aggregate, reasonably be expected to have a Parent Material Adverse
Effect, or (iv) liabilities that would not
27
be required by United States generally accepted accounting principles to be
disclosed in financial statements or in the notes thereto and that would not,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect.
4.6. ABSENCE OF CHANGES OR EVENTS. Except as set forth in the Parent
SEC Reports, since October 31, 1999 through the date of this Agreement, Parent
and its Subsidiaries have not incurred any liability or obligation that has
resulted or would reasonably likely be expected to result in a Parent Material
Adverse Effect, and there has not been any change in the business, financial
condition or results of operations of Parent or any of its Subsidiaries which
has had, or is reasonably expected to have, individually or in the aggregate, a
Parent Material Adverse Effect, and Parent and its Subsidiaries have conducted
their respective businesses in the ordinary course consistent with their past
practices.
4.7. LITIGATION. Except as disclosed in the Parent SEC Reports, there
is no (i) claim, action, suit or proceeding pending or, to the Knowledge of
Parent, threatened against or relating to Parent or any of its Subsidiaries
before any Governmental Entity, or (ii) outstanding Orders, or application,
request or motion therefor, of any Governmental Entity in a proceeding to which
Parent, any Subsidiary of Parent or any of their respective assets was or is a
party except actions, suits, proceedings or Orders that, individually or in the
aggregate, has not had or would not reasonably be expected to have a Parent
Material Adverse Effect, and neither Parent nor any Subsidiary is in default in
any material respect with respect to any such Order.
4.8. COMPLIANCE WITH LAW. All activities of Merger Sub and Parent have
been, and are currently being, conducted in compliance in all material respects
with all applicable United States federal, state and local and other foreign
laws, ordinances, regulations, interpretations, judgments, decrees, injunctions,
permits, licenses, certificates, governmental requirements, Orders and other
similar items of any court or other Governmental Entity or any nongovernmental
self-regulatory agency, and no notice has been received by Parent of any claims
filed against either Merger Sub or Parent alleging a violation of any such laws,
regulations or other requirements which would be required to be disclosed in the
Parent SEC Reports. Merger Sub and Parent have all permits, licenses and
franchises from Governmental Entities required to conduct their businesses as
now being conducted, except for such permits, licenses and franchises the
absence of which would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect.
4.9. FINDERS OR BROKERS. Except for Xxxxxx Brothers, whose fees will
be paid by Parent, none of Parent, Merger Sub, the other Subsidiaries of Parent,
the Boards of Directors of Parent and Merger Sub or any member of such Boards of
Directors has employed any agent, investment banker, broker, finder or
intermediary in connection with the transactions contemplated hereby who might
be entitled to a fee or any commission in connection with the Merger or the
other transactions contemplated hereby.
4.10. TAX MATTERS. Neither Parent nor, to its Knowledge, any of its
affiliates has taken or agreed to take any action, or knows of any
circumstances, that (without regard to any action taken or agreed to be taken by
the Company or any of its affiliates) would prevent the business
28
combination to be effected by the Merger from constituting a transaction
qualifying as a reorganization within the meaning of Section 368 of the Code.
4.11. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The
information supplied by Parent and Merger Sub for inclusion in the Registration
Statement shall not, at the time the 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 necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The information supplied by Parent for
inclusion in the Proxy Statement/Prospectus shall not, on the date the Proxy
Statement/Prospectus is first mailed to the Company's stockholders, at the time
of the Company 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 therein, in light of the circumstances under which it is made, not
false or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Stockholders Meeting which has become false or
misleading. If at any time prior to the Effective Time any event or information
should be discovered by Parent or Merger Sub which should be set forth in an
amendment to the Registration Statement or a supplement to the Proxy
Statement/Prospectus, Parent or Merger Sub will promptly inform the Company.
Notwithstanding the foregoing, Parent and Merger Sub make no representation,
warranty or covenant with respect to any information supplied by the Company
which is contained in any of the foregoing documents.
ARTICLE V
COVENANTS AND AGREEMENTS
5.1. CONDUCT OF BUSINESS OF THE COMPANY PENDING THE MERGER. Except as
contemplated by this Agreement or as expressly agreed to in writing by Parent,
during the period from the date of this Agreement to the earlier of (i) the
termination of this Agreement or (ii) the Effective Time, each of the Company
and its Subsidiaries will conduct their respective operations according to its
ordinary course of business consistent with past practice, and will use
commercially reasonable efforts consistent with past practice and policies to
preserve intact its business organization, to keep available the services of its
officers and employees and to maintain satisfactory relationships with
suppliers, distributors, customers and others having business relationships with
it and will take no action which would adversely affect the ability of the
parties to consummate the transactions contemplated by this Agreement, or the
timing thereof. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, prior to the Effective Time, the
Company will not nor will it permit any of its Subsidiaries to, without the
prior written consent of Parent:
(a) amend any of its Charter Documents or Governing Documents;
(b) authorize for issuance, issue, sell, deliver, grant any
options, warrants, stock appreciation rights, or stock issuance rights for, or
otherwise agree or commit to issue, sell,
29
deliver, pledge, dispose of or otherwise encumber any shares of any class of
its share capital or any securities convertible into shares of any class of
its share capital, except (i) pursuant to and in accordance with the terms of
Company Options outstanding on the Company Measurement Date or granted
pursuant to clause (iii) below, (ii) pursuant to the ESPP (to the extent
shares of Company Common Stock have been paid for with payroll deductions),
or (iii) the grant of Company Options consistent with past practices to new
employees, which Company Options will represent the right to acquire no more
than 10,000 shares of Company Common Stock per new employee;
(c) subdivide, cancel, consolidate or reclassify any shares of
its share capital, issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its share capital,
declare, set aside or pay any dividend or other distribution (whether in cash,
shares or property or any combination thereof) in respect of its share capital
or purchase, redeem or otherwise acquire any shares of its own share capital or
of any of its Subsidiaries, except as otherwise expressly provided in this
Agreement;
(d) (i) incur or assume any long-term or short-term debt or
issue any debt securities except for borrowings under existing lines of credit
in the ordinary course of business consistent with past practice; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the material obligations of any other person
(other than Subsidiaries of the Company); or (iii) make any material loans,
advances or capital contributions to, or investments in, any other person (other
than to Subsidiaries of the Company), except as set forth in Section 5.1(d) of
the Company Disclosure Letter or pursuant to existing commitment, all of which
commitments are disclosed in Section 5.1(d) of the Company Disclosure Letter;
(e) except as otherwise expressly contemplated by this
Agreement, (i) increase in any manner the compensation of (A) any employee who
is not an officer of the Company or any Subsidiary (a "NONEXECUTIVE EMPLOYEE"),
except in the ordinary course of business consistent with past practice or (B)
any of its directors or officers, except in the ordinary course of business,
consistent with past practice, after consultation with Parent, (ii) pay or agree
to pay any pension, retirement allowance or other employee benefit not required,
or enter into, amend or agree to enter into or amend any agreement or
arrangement with any such director or officer or employee, whether past or
present, relating to any such pension, retirement allowance or other employee
benefit, except as required to comply with law or under currently existing
agreements, plans or arrangements or with respect to NonExecutive Employees, in
the ordinary course of business consistent with past practice; (iii) grant any
rights to receive any severance or termination pay to, or enter into or amend
any employment or severance agreement with, any employee or any of its directors
or officers, except as required by applicable law or with respect to severance
or termination pay to NonExecutive Employees in the ordinary course of business,
consistent with past practices; or (iv) except as may be required to comply with
applicable law, become obligated (other than pursuant to any new or renewed
collective bargaining agreement) under any new pension plan, welfare plan,
multiemployer plan, employee benefit plan, benefit arrangement, or similar plan
or arrangement, which was not in existence on the date hereof, including any
bonus, incentive, deferred compensation, share purchase, share option, share
30
appreciation right, group insurance, severance pay, retirement or other benefit
plan, agreement or arrangement, or employment or consulting agreement with or
for the benefit of any person, or amend any of such plans or any of such
agreements in existence on the date hereof; PROVIDED, HOWEVER, that this clause
(iv) shall not prohibit the Company from renewing any such plan, agreement or
arrangement already in existence on terms no more favorable to the parties to
such plan, agreement or arrangement;
(f) except as otherwise expressly contemplated by this
Agreement, enter into, amend in any material respect or terminate any Company
Material Contracts other than in the ordinary course of business consistent with
past practice;
(g) sell, lease, license, mortgage or dispose of any of its
properties or assets, other than (i) transactions in the ordinary course of
business consistent with past practice, (ii) sales of assets, for the fair
market value thereof, which sales do not individually or in the aggregate exceed
$1,000,000, (iii) as may be required or contemplated by this Agreement or
(iv) as set forth in Section 5.1(g) of the Company Disclosure Letter;
(h) except as otherwise contemplated by the Merger, acquire or
agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of or equity in, or by any other manner, any
business or any corporation, limited liability company, partnership, association
or other business organization or division thereof or otherwise acquire or agree
to acquire any assets, other than transactions set forth in Section 5.1(h) of
the Company Disclosure Letter the acquisition of assets that are in the ordinary
course of business consistent with past practice and not material to the Company
and its Subsidiaries taken as a whole;
(i) alter (through merger, liquidation, reorganization,
restructuring or in any fashion) the corporate structure or ownership of the
Company or any Subsidiary;
(j) authorize or commit to make any material capital
expenditures not reflected in the budget previously provided in writing by the
Company to Parent without the prior written consent of Parent, which consent
shall not be unreasonably withheld;
(k) make any change in the accounting methods or accounting
practices followed by the Company, except as required by generally accepted
accounting principles or applicable law;
(l) make any election under United States, Canadian, Brazilian,
U.K. or Swiss Tax law which would, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect;
(m) take any action that (without regard to any action taken or
agreed to be taken by Parent or any of its Affiliates) would prevent Parent from
accounting for the business combination to be effected by the Merger as a
pooling-of-interests;
31
(n) settle any action, suit, claim, investigation or proceeding
(legal, administrative or arbitrative) requiring a payment by the Company or its
Subsidiaries in excess of $500,000 without the consent of Parent, which consent
shall not be unreasonably withheld or delayed;
(o) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of claims, liabilities or obligations reflected or reserved against in,
or contemplated by, the most recent financial statements (or the notes thereto)
of the Company included in the Company SEC Reports or incurred in the ordinary
course of business consistent with past practice; or
(p) authorize, recommend, propose, agree or announce an
intention to do any of the foregoing or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing; PROVIDED, HOWEVER, that
nothing contained herein shall limit the ability of Parent to exercise its
rights under the Company Option Agreement; PROVIDED, FURTHER, that the Company
may continue to proceed with its proposed acquisition of assets, the terms and
conditions of which have been fully disclosed to Parent in Section 5.1 of the
Company Disclosure Letter, provided that the Company shall not close such
transaction without the prior approval of Parent, which approval shall not be
unreasonably withheld.
5.2. PREPARATION OF REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS;
BLUE SKY LAWS. As promptly as practicable and no later than 20 business days
after the date hereof, Parent and the Company shall prepare, and Parent shall
file with the SEC, the Registration Statement, in which the Proxy
Statement/Prospectus will be included as part thereof. Parent and the Company
shall use all commercially reasonable efforts to have such Registration
Statement declared effective under the Securities Act as promptly as practicable
after filing. The Proxy Statement/Prospectus will, when prepared pursuant to
this Section 5.2 and mailed to the Company's stockholders, comply in all
material respects with the applicable requirements of the Exchange Act and the
Securities Act. Each of Parent and the Company shall indemnify and hold
harmless the other from any obligations, claims or liabilities arising from any
statement supplied by such party for inclusion in the Registration Statement or
in the Proxy Statement/Prospectus which, at the time such statement was made, is
false or misleading with respect to any material fact, or omits to state any
material fact necessary in order to make the statement, in light of the
circumstances under which is was made, not false or misleading. Subject to
Section 5.6, the Proxy Statement/Prospectus shall include the declaration of the
Company Board of the advisability of the Merger and its recommendation that the
Company's stockholders approve the Merger. The Proxy Statement/Prospectus shall
be reviewed and approved by Parent and Parent's counsel prior to the mailing of
such Proxy Statement/Prospectus to the Company's stockholders. Parent shall
also take any action required to be taken under any applicable provincial or
state securities laws (including "Blue Sky" laws) in connection with the
issuance of the Parent Common Stock in the Merger; PROVIDED, HOWEVER, that
neither Parent nor the Company shall be required to register or qualify as a
foreign corporation or to take any action that would subject it to service of
process in any jurisdiction where any such entity is not now so subject, except
as to
32
matters and transactions arising solely from the offer and sale of Parent
Common Stock or the Parent Options.
5.3 MEETING OF STOCKHOLDERS. The Company shall, promptly after the
date hereof, take all action necessary in accordance with the DGCL and its
Certificate of Incorporation and Bylaws to convene the Company Stockholders
Meeting within 45 days of the Registration Statement being declared effective by
the SEC, whether or not the Company Board determines at any time after the date
hereof that the Merger is no longer advisable. The Company shall consult with
Parent regarding the date of the Company Stockholders Meeting. Subject to
Section 5.2 and Section 5.6 hereof, the Company shall use commercially
reasonable efforts to solicit from stockholders of the Company proxies in favor
of the Merger and shall take all other commercially reasonable action necessary
or advisable to secure the vote or consent of stockholders required to effect
the Merger.
5.4. ADDITIONAL AGREEMENTS, COOPERATION.
(a) Subject to the terms and conditions herein provided, each
of the parties hereto agrees to use its best efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, and to cooperate, subject to
compliance with applicable law, with each other in connection with the
foregoing, including using its best efforts (i) to obtain all necessary waivers,
consents and approvals from other parties to loan agreements, material leases
and other material contracts, (ii) to obtain all necessary consents, approvals
and authorizations as are required to be obtained under any United States
federal or state, Canadian, Brazilian, United Kingdom, Swiss or other foreign
law or regulations, (iii) to defend all lawsuits or other legal proceedings
challenging this Agreement or the Company Option Agreement or the consummation
of the transactions contemplated hereby or thereby, (iv) to lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby, (v) to effect
all necessary registrations and filings and submissions of information requested
by Governmental Entities, and (vi) to fulfill all conditions to this Agreement.
(b) Each of the parties hereto agrees, subject to compliance
with applicable law, to furnish to each other party hereto such necessary
information and reasonable assistance as such other party may request in
connection with its preparation of necessary filings or submissions to any
regulatory or governmental agency or authority, including, without limitation,
any filing necessary under the provisions of the HSR Act, the Communications
Act, the Exchange Act, the Securities Act or any other United States federal or
state, or foreign statute or regulation. Each party hereto shall promptly
inform each other party of any material communication from the U.S. Federal
Trade Commission, the FCC or any other government or governmental authority
regarding any of the transactions contemplated thereby.
5.5. PUBLICITY. Except as otherwise required by law or the rules of
any applicable securities exchange or the Nasdaq National Market, so long as
this Agreement is in effect, Parent and the Company will not, and will not
permit any of their respective affiliates or representatives
33
to, issue or cause the publication of any press release or make any other
public announcement with respect to the transactions contemplated by this
Agreement without the consent of the other party, which consent shall not be
unreasonably withheld or delayed. Parent and the Company will cooperate with
each other in the development and distribution of all press releases and
other public announcements with respect to this Agreement and the
transactions contemplated hereby, and will furnish the other with drafts of
any such releases and announcements as far in advance as possible.
5.6. NO SOLICITATION.
(a) Immediately upon execution of this Agreement, the Company
shall (and shall cause its officers, directors, employees, investment bankers,
attorneys and other agents or representatives to) cease all discussions,
negotiations, responses to inquiries (except as set forth in the proviso to this
sentence) and other communications relating to any potential business
combination with all third parties who, prior to the date hereof, may have
expressed or otherwise indicated any interest in pursuing an Acquisition
Proposal (as hereinafter defined) with the Company; PROVIDED that, if any such
inquiries are made after the date hereof, the Company shall respond by stating
that it is a party to a binding agreement with Parent and is prohibited thereby
from further responding to such inquiries.
(b) Prior to termination of this Agreement pursuant to
Article VII hereof, the Company and its Subsidiaries shall not, nor shall the
Company authorize or permit any officers, directors or employees of, or any
investment bankers, attorneys or other agents or representatives retained by or
acting on behalf of, the Company or any of its Subsidiaries to, (i) initiate,
solicit or encourage, directly or indirectly, any inquiries or the making of any
proposal that constitutes an Acquisition Proposal, (ii) except as permitted
below, engage or participate in negotiations or discussions with, or furnish any
information or data to, or take any other action to, facilitate any inquiries or
making any proposal by, any third party relating to an Acquisition Proposal, or
(iii) except as permitted below, enter into any agreement with respect to any
Acquisition Proposal or approve an Acquisition Proposal. Notwithstanding
anything to the contrary contained in this Section 5.6 or in any other provision
of this Agreement, prior to the Company Stockholders Meeting, the Company Board
may participate in discussions or negotiations with or furnish information to
any third party making an unsolicited Acquisition Proposal (a "POTENTIAL
ACQUIROR") or approve or recommend an unsolicited Acquisition Proposal if both
(A) a majority of the directors of the Company Board, without including
directors who may be considered Affiliates (as defined in Rule 405 under the
Securities Act) of any person making an Acquisition Proposal ("DISINTERESTED
DIRECTORS") determines in good faith, after receiving advice from its
independent financial advisor, that a Potential Acquiror has submitted to the
Company an Acquisition Proposal that is a Superior Proposal (as hereinafter
defined), and (B) a majority of the disinterested directors of the Company Board
determines in good faith, after receiving advice from reputable outside legal
counsel experienced in such matters (and the parties hereto agree that the law
firm of Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx is so experienced), that the failure to
participate in such discussions or negotiations or to furnish such information
or to approve or recommend such unsolicited Acquisition Proposal is inconsistent
with the Company Board's fiduciary duties under applicable law. In the event
that the Company shall receive any
34
Acquisition Proposal, it shall promptly (and in no event later than 24 hours
after receipt thereof) furnish to Parent the identity of the recipient of the
Acquisition Proposal and of the Potential Acquiror, the terms of such
Acquisition Proposal, copies of all information requested by the Potential
Acquiror, and shall further promptly inform Parent in writing as to the fact
such information is to be provided after compliance with the terms of the
preceding sentence. Nothing contained herein shall prevent the Company from
complying with Rules 14d-9 and 14e-2 promulgated under the Exchange Act with
regard to an Acquisition Proposal or making any disclosure to the Company's
stockholders if, in the good faith judgment of the Company Board, after
receiving advice from reputable outside legal counsel experienced in such
matters (and the parties hereto agree that the law firm of Xxxxxxxxx Xxxxx
Xxxxxxx & Xxxxx is so experienced), such disclosure is required by applicable
law. Without limiting the foregoing, the Company understands and agrees that
any violation of the restrictions set forth in this Section 5.6(b) by the
Company or any of its Subsidiaries, or by any director or officer of the
Company or any of its Subsidiaries or any financial advisor, attorney or
other advisor or representative of the Company or any of its Subsidiaries,
whether or not such person is purporting to act on behalf of the Company or
any of its Subsidiaries or otherwise, shall be deemed to be a breach of this
Section 5.6(b) sufficient to enable Parent to terminate this Agreement
pursuant to Section 7.1(d)(i) hereof.
(c) For the purposes of this Agreement, "ACQUISITION PROPOSAL"
shall mean any proposal, whether in writing or otherwise, made by any person
other than Parent and its Subsidiaries to acquire "beneficial ownership" (as
defined under Rule 13(d) of the Exchange Act) of 20% or more of the assets of,
or 20% or more of the outstanding capital stock of any of the Company or its
Subsidiaries pursuant to a merger, consolidation, exchange of shares or other
business combination, sale of shares of capital stock, sales of assets, tender
offer or exchange offer or similar transaction involving the Company or its
Subsidiaries.
(d) The term "SUPERIOR PROPOSAL" means any BONA FIDE
Acquisition Proposal to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, more than 50% of the Company Common Stock
then outstanding or all or substantially all the assets of the Company, and
otherwise on terms that a majority of the disinterested directors determines, in
good faith, to be more favorable to the Company and its stockholders than the
Merger (after receiving advice from the Company's independent financial advisor
that the Acquisition Proposal is more favorable to the Company's stockholders,
from a financial point of view, than the Merger) and for which financing, to the
extent required, is then committed.
5.7. ACCESS TO INFORMATION. From the date of this Agreement until the
Effective Time, and upon reasonable notice, the Company will give Parent and its
authorized representatives (including counsel, other consultants, accountants
and auditors) reasonable access during normal business hours to all facilities,
personnel and operations and to all books and records of it and its
Subsidiaries, will permit Parent to make such inspections as it may reasonably
require, will cause its officers and those of its Subsidiaries to furnish Parent
with such financial and operating data and other information with respect to its
business and properties as Parent may from time to time reasonably request and
confer with Parent to keep it reasonably informed with respect to operational
and other business matters relating to the Company and its Subsidiaries and the
status
35
of satisfaction of conditions to the Closing. All information obtained by
Parent pursuant to this Section 5.7 shall be kept confidential in accordance
with the Reciprocal Confidentiality Agreement, dated September 25, 1998,
between Parent and the Company.
5.8. NOTIFICATION OF CERTAIN MATTERS. The Company or Parent, as the
case may be, shall promptly notify the other of (a) its obtaining of Knowledge
as to the matters set forth in clauses (i), (ii) and (iii) below, or (b) the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be likely to cause (i) any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at any time
from the date hereof to the Effective Time, (ii) any material failure of the
Company or Parent, as the case may be, or of any officer, director, employee or
agent thereof, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement or (iii) the
institution of any claim, suit, action or proceeding arising out of or related
to the Merger or the transactions contemplated hereby; PROVIDED, HOWEVER, that
no such notification shall affect the representations or warranties of the
parties or the conditions to the obligations of the parties hereunder.
5.9. RESIGNATION OF OFFICERS AND DIRECTORS. At or prior to the
Effective Time, the Company shall deliver to Parent the resignations of such
officers and directors of the Company and shall use its best efforts to deliver
to Parent the resignations of such officers and directors of its Subsidiaries
(in each case, in their capacities as officers and directors, but not as
employees if any of such persons are employees of the Company or any Subsidiary)
as Parent shall specify, which resignations shall be effective at the Effective
Time and shall contain an acknowledgment that the relevant individual has no
outstanding claims for compensation for loss of office, redundancy, unfair
dismissal or otherwise, other than those claims specified on Section 5.9 of the
Company Disclosure Letter.
5.10. INDEMNIFICATION.
(a) As of the Effective Time and for a period of seven years
following the Effective Time, Parent will indemnify and hold harmless from and
against all claims, damages, losses, obligations or liabilities ("LOSSES") any
persons who were directors or officers of the Company or any Subsidiary prior to
the Effective Time (the "INDEMNIFIED PERSONS") to the fullest extent such person
could have been indemnified for such Losses under applicable law, under the
Governing Documents of the Company or any Subsidiary or under the
indemnification agreements listed on Schedule 5.10 (a true and accurate form of
which has been filed as Exhibit 10.27 to the Company's Form S-1) in effect
immediately prior to the date hereof, with respect to any act or failure to act
by any such Indemnified Person prior to the Effective Time.
(b) Any determination required to be made with respect to
whether an Indemnified Person's conduct complies with the standards set forth
under the DGCL or other applicable law shall be made by independent counsel
selected by Parent and reasonably acceptable to the Indemnified Persons. Parent
shall pay such counsel's fees and expenses so long as the Indemnified Persons do
not challenge any such determination by such independent counsel).
36
(c) In the event that Parent or any of its successors or
assigns (i) consolidates with or merges into any other person, and Parent or
such successor or assign is not the continuing or surviving corporation or
entity of such consolidation or merger, or (ii) transfers all or substantially
all of its properties and assets to any person, then, and in each case, proper
provision shall be made so that such person or the continuing or surviving
corporation assumes the obligations set forth in this Section 5.10 and none of
the actions described in clauses (i) and (ii) above shall be taken until such
provision is made.
(d) Parent shall maintain in effect for not less than five
years from the Effective Time the current policies of directors' and
officers' liability insurance maintained by the Company (provided that Parent
may substitute therefor policies of at least comparable coverage containing
terms and conditions which are no less advantageous to the Indemnified
Parties in all material respects so long as no lapse in coverage occurs as a
result of such substitution) with respect to all matters, including the
transactions contemplated hereby, occurring prior to, and including the
Effective Time; PROVIDED that, in the event that any Claim is asserted or
made within such five-year period, such insurance shall be continued in
respect of any such Claim until final disposition of any and all such Claims;
and PROVIDED, FURTHER, that Parent shall not be obligated to make annual
premium payments for such insurance to the extent such premiums exceed 150%
of the premiums paid as of the date hereof by the Company or any Subsidiary
for such insurance. In such case, Parent shall purchase as much coverage as
possible for 150% of the premiums paid as of the date hereof for such
insurance, which coverage shall be at least as favorable as that provided by
Parent to its directors.
5.11. STOCKHOLDER LITIGATION. The Company shall give Parent the
reasonable opportunity to participate in the defense of any stockholder
litigation against or in the name of the Company and/or its respective directors
relating to the transactions contemplated by this Agreement.
5.12. EMPLOYEE BENEFIT PLANS.
(a) 401(k) PLAN. Company shall take the following steps with
respect to the XX Xxxxxx Multiple Employer 401(k) Plan: (i) as soon as
administratively feasible after the parties have entered into this Agreement,
the Company shall cause its portion of such plan to be spun off and established
as a separate 401(k) Plan ("Spinoff 401(k) Plan"); (ii) the Company shall cause
its counsel to deliver, coincident with the spinoff, a written opinion that the
form of the Spinoff 401(k) Plan complies in all material respects with ERISA and
the Code; (iii) at least three days prior to the Effective Time, the Company
shall terminate the Spinoff 401(k) Plan pursuant to written resolutions, the
form and substance of which shall be satisfactory to Parent. Individuals
employed by the Company at the Effective Time ("Company Employees") shall be
allowed to participate in Parent's 401(k) plan effective as of the first payroll
following the Effective Time; and all service with the Company shall be
considered service with Parent for purposes of determining eligibility, vesting,
and benefit accural (i.e., matching contributions) under Parent's 401(k) plan.
As soon as administratively feasible after assets are distributed from
37
the Spinoff 401(k) Plan, Company Employees shall be offered an opportunity to
roll their Spinoff 401(k) Plan account balances into Parent's 401(k) Plan.
(b) WELFARE PLANS. Company Employees shall be eligible to
participate in Parent's short term disability plan, long term disability plan,
group life insurance plan, medical plan, dental plan, and section 125 cafeteria
plan as soon as administratively feasible after the Effective Time but in no
event later than January 1, 2001. Prior to such time, Company Employees shall
remain eligible for Company's welfare plans, as applicable, and such plans will
not be amended or changed by Parent or Company. Parent shall include service
and prior earnings with the Company for purposes of determining eligibility,
participation, and benefit accrual under its short term disability plan, group
life insurance plan medical plan, dental plan, and section 125 cafeteria plan.
Parent shall include such service for purposes of determing benefit eligibility
or participation in Parent's long term disability plan; however, such
participation shall be subject to the insurer's twelve month preexisting
condition exclusion.
(c) VACATION AND PTO. Company Employees shall be eligible to
participate in Parent's vacation or PTO policy, as applicable, as soon as
administratively feasible after the Effective Time but in no event later than
January 1, 2001. Prior to such date Company Employees shall remain eligible for
Company's vacation pay or sick pay policies, as applicable, and such plans or
policies will not be amended or changed by Parent or Company. Parent shall
include service with the Company for purposes of determining eligility,
participation, and calculation of vacation pay, sick pay, or paid time off (PTO)
under Parent's vacation or PTO policy, as applicable. Subject to the terms of
the Company plans or policies, each Company Employee will be entitled to carry
over all vacation days and sick leave acrued but unused as of the Effective
Time.
5.13. DETERMINATION OF OPTIONHOLDERS . At least ten business days
before the Effective Time, the Company shall provide Parent with a true and
complete list of (a) the holders of Company Options, (b) the number of shares of
Company Common Stock subject to Company Options held by each such optionholder
and (c) the address of each such optionholder as set forth in the books and
records of the Company or any Subsidiary, following upon which there shall be no
additional grants of Company Options without Parent's prior consent. From the
date such list is provided to Parent until the Effective Time, the Company shall
provide a daily option activity report to Parent containing such information as
Parent shall reasonably request.
5.14. PREPARATION OF TAX RETURNS. The Company shall file (or cause to
be filed) at its own expense, on or prior to the due date thereof, all Returns
required to be filed on or before the Closing Date. The Company shall provide
Parent with a copy of appropriate workpapers, schedules, drafts and final copies
of each foreign and domestic, federal, provincial and state income Tax return or
election of the Company (including returns of all Employee Benefit Plans) at
least ten days before filing such return or election and shall consult with
Parent with respect thereto prior to such filing.
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5.15. POOLING AFFILIATES.
(a) Promptly following the date of this Agreement, the Company
shall deliver to Parent a list of names and addresses of those persons who are
affiliates within the meaning of Rule 145 of the rules and regulations
promulgated under the Securities Act or otherwise applicable SEC accounting
releases with respect to the Company (the "COMPANY POOLING AFFILIATES"). The
Company shall provide Parent such information and documents as Parent shall
reasonably request for purposes of reviewing such list. The Company shall
deliver to Parent, on or prior to the Closing, an affiliate letter in the form
attached hereto as EXHIBIT D, executed by each of the Company Pooling Affiliates
identified in the foregoing list. Parent shall be entitled to place legends as
specified in such affiliate letters on the certificates evidencing any of the
Parent Common Stock to be received by such Company Pooling Affiliates pursuant
to the terms of this Agreement, and to issue appropriate stop transfer
instructions to the transfer agent for the Parent Common Stock, consistent with
the terms of such letters.
(b) Parent shall procure, on or prior to the Effective Time, an
affiliate letter in the form attached hereto as EXHIBIT E, executed by
appropriate affiliates of Parent.
(c) For so long as resales of shares of Parent Common Stock
issued pursuant to the Merger are subject to the resale restrictions set forth
in Rule 145 under the Securities Act, Parent will use good faith efforts to
comply with Rule 144(c)(1) under the Securities Act.
5.16. POOLING ACTIONS. Between the date of this Agreement and the
Effective Time, the parties will each take all actions reasonably necessary for
Parent to account for the business combination to be effected by the Merger as a
pooling of interests.
5.17 TAX-FREE REORGANIZATION. Parent and the Company shall each use
all commercially reasonable efforts to cause the Merger to qualify as a
reorganization within the meaning of Section 368(a) of the Code. Neither Parent
nor the Company shall take or fail to take, or cause any third party to take or
fail to take, any action that would cause the Merger to fail to qualify as a
"reorganization" within the meaning of Section 368(a) of the Code.
5.18. SEC FILINGS; COMPLIANCE. The Company and Parent shall each cause
the forms, reports, schedules, statements and other documents required to be
filed with the SEC by the Company and Parent, respectively, between the date of
this Agreement and the Effective Time (with respect to either the Company or
Parent, the "NEW SEC REPORTS") to be prepared in all material respects with all
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and such New SEC Reports will not at the time they are filed contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
5.19. LISTING OF ADDITIONAL SHARES. Prior to the Effective Time, Parent
shall file with the Nasdaq National Market a Notification Form for Listing of
Additional Shares with respect to the shares of Parent Common Stock to be issued
in the Merger.
39
5.20. RIGHTS AGREEMENT. Prior to the Effective Time, the Company Board
shall not take any action in contravention of the actions required by Section
3.26 of this Agreement.
5.21. STOCK REPURCHASE PLAN. As of the date of this Agreement, the
Company shall terminate its stock repurchase plan, if any.
ARTICLE VI
CONDITIONS TO CLOSING
6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Effective Date of the following
conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger shall
have been approved and adopted by the requisite vote of the stockholders of the
Company under the DGCL and the Company's Charter Document and Governing
Documents.
(b) GOVERNMENTAL ACTION; NO INJUNCTION OR RESTRAINTS. No
action or proceeding shall be instituted by any Governmental Entity seeking to
prevent consummation of the Merger, asserting the illegality of the Merger or
this Agreement or seeking material damages directly arising out of the
transactions contemplated hereby which continues to be outstanding. No
judgment, order, decree, statute, law, ordinance, rule or regulation entered,
enacted, promulgated, enforced or issued by any court or other Governmental
Entity of competent jurisdiction or other legal restraint or prohibition shall
be in effect (i) imposing or seeking to impose material sanctions, damages, or
liabilities directly arising out of the Merger on the Company or any of its
officers or directors; or (ii) preventing the consummation of the Merger.
(c) GOVERNMENTAL CONSENTS. All necessary authorizations,
consents, orders or approvals of, or declarations or filings with, or expiration
or waiver of waiting periods imposed by, any Governmental Entity of any
applicable jurisdiction required for the consummation of the transactions
contemplated by this Agreement shall have been filed, expired or obtained, as to
which the failure to obtain, make or occur would have the effect of making the
Merger or this Agreement or any of the transactions contemplated hereby illegal
or which, individually or in the aggregate, would have a Parent Material Adverse
Effect (assuming the Merger had taken place), including, but not limited to:
the expiration or termination of the applicable waiting period, or any
extensions thereof, pursuant to the HSR Act.
6.2. CONDITIONS TO OBLIGATIONS OF PARENT. The obligation of Parent to
effect the Merger is further subject to satisfaction or waiver of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company set forth herein shall be true and correct both when
made and at and as of the Effective Date, as if made at and as of such time
(except to the extent expressly made as of an
40
earlier date, in which case as of such date), except where the failure of
such representations and warranties to be so true and correct (without giving
effect to any limitation as to materiality or material adverse effect set
forth therein) does not have, and would not, individually or in the
aggregate, reasonably be expected to have, a Company Material Adverse Effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Date.
(c) NO MATERIAL ADVERSE EFFECT. Since the date of this
Agreement, there has not been a Company Material Adverse Effect nor has there
been any change, event or condition that, with the passage of time, would
reasonably be expected to result in a Company Material Adverse Effect. Without
limitation of the foregoing, (i) if (A) there has been any breach or
misrepresentation of the representation and warranty set forth in Section 3.28
hereof (with respect to the Company's first fiscal quarter 2000 financial
results) or (B) the Company fails to achieve the composite Wall Street research
analysts estimates for total consolidated revenue of at least $55,000,000,
Avidia product revenue of at least $5,000,000, and loss per share of no greater
than $0.03 per share for the Company's first fiscal quarter (ending March 31,
2000), then, such breach or misrepresentation or failure shall, in and of
itself, constitute a Company Material Adverse Effect for purposes of this
Section 6.2(c), and (ii) the termination of employment prior to the Effective
Time of more than 50% of the Avidia product engineers employed by the Company as
of the date hereof shall, in and of itself, be deemed to be a Company Material
Adverse Effect for purposes of this Section 6.2(c)).
(d) NO INJUNCTIONS OR RESTRAINTS. No judgment, order, decree,
statute, law, ordinance, rule or regulation entered, enacted, promulgated,
enforced or issued by any court or other Governmental Entity of competent
jurisdiction or other legal restraint or prohibition shall be in effect (i)
imposing or seeking to impose material limitations on the ability of Parent to
acquire or hold or to exercise full rights of ownership of any securities of the
Company; (ii) imposing or seeking to impose material limitations on the ability
of Parent or its Affiliates to combine and operate the business and assets of
the Company; (iii) imposing or seeking to impose other material sanctions,
damages, or liabilities directly arising out of the Merger on Parent or any of
its officers or directors; or (iv) requiring or seeking to require divestiture
by Parent of any significant portion of the business, assets or property of the
Company or of Parent.
(e) DELIVERY OF CLOSING DOCUMENTS. At or prior to the
Effective Time, the Company shall have delivered to Parent all of the following:
(i) a certificate of the President and the Chief
Financial Officer of the Company, dated as of the Effective Date, stating
that the conditions precedent set forth in Sections 6.2(a), (b) and (c)
hereof have been satisfied; and
(ii) a copy of (A) the Certificate of Incorporation of
the Company, dated as of a recent date, certified by the Secretary of
State of the State of Delaware, and (B) the Bylaws of the Company and the
resolutions of the Company Board and
41
stockholders authorizing the Merger and the other transactions
contemplated by this Agreement, certified by the Secretary of the
Company.
(f) DIRECTOR AND OFFICER RESIGNATIONS. Merger Sub shall have
received the resignation of the directors and officers of the Company as are
described in Section 5.9 hereof.
(g) KEY EMPLOYEE AGREEMENTS. Four out of the five persons
identified in Section 6.2(g) of the Company Disclosure Letter shall have entered
into employment agreements with Parent, and such agreements shall be in full
force and effect, and none of such employees shall have indicated any intention
of not fulfilling his or her obligations thereunder.
(h) POOLING LETTERS. Parent and the Company shall have
received the letters described in the third Recital to this Agreement from
Deloitte & Touche LLP and Xxxxxx Xxxxxxxx LLP and such letters shall not have
been withdrawn, modified or qualified in any material respect as of the
Effective Time, as certified by Deloitte & Touche LLP and Xxxxxx Xxxxxxxx LLP,
respectively, in a writing addressed to their respective addresses and dated as
of the Effective Date, and Parent shall have received the letter of Xxxxxx
Xxxxxxxx LLP, addressed to Parent and dated as of the Effective Date, stating
that, in reliance on the letter and the certificate of Deloitte & Touche LLP
described in this paragraph (h) and based on its familiarity with Parent, the
Merger will qualify as a pooling-of-interests transaction under Opinion 16.
(i) COMPANY AFFILIATE LETTERS. Parent shall have received all
of the letters described in Section 5.15(a) hereof executed by each of the
Company Pooling Affiliates.
(j) EMPLOYEES. From the list of employees identified by the
Company on Annex F to Section 3.15 of the Company Disclosure Letter as having
change of control agreements in place as of the date hereof, Parent shall
specify thirty (30) of such employees who will be offered positions by Parent
providing equal or better duties, responsibilities and base compensation, of
whom at least twenty-two (22) shall have executed and delivered to Parent
waivers of certain terms of such change of control agreements to the
satisfaction of Parent as specified below, and such waivers shall not have been
in any way amended or rescinded; such waivers shall include (i) a waiver of all
change in control benefits provided in Part Two of such agreements, other than
the accelerated vesting provisions set forth in Section 1 of Part Two, PROVIDED
that such employees acknowledge that the position and duties as may be initially
assigned to them immediately following the Effective Time by Parent do not
represent a material reduction in the position, duties, responsibilities and
management reporting relationships that such employees had when employed at the
Company for purposes of determining Involuntary Termination as defined in such
change of control agreements, and (ii) an irrevocable waiver of the second
paragraph of the introduction of Part Two of such agreements.
6.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of the
Company to effect the Merger is further subject to satisfaction or waiver of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Sub set forth herein shall be true and correct
both when made and at and as of
42
the Effective Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date), except
where the failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to materiality or
material adverse effect set forth therein) does not have, and would not,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT. Parent shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Date.
(c) DELIVERY OF CLOSING DOCUMENTS. At or prior to the
Effective Time, the Parent shall have delivered to the Company a certificate of
the President and the Chief Financial Officer of Parent, dated as of the
Effective Date, stating that the conditions precedent set forth in Sections
6.3(a) and (b) hereof have been satisfied.
(d) TAX OPINION. The Company shall have received the opinion
of Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx, counsel to the Company, in form and
substance satisfactory to the Company, to the effect that the Merger will be
treated for U.S. federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code; PROVIDED that, if Xxxxxxxxx Xxxxx Xxxxxxx
& Xxxxx does not render such opinion, this condition shall nonetheless be deemed
satisfied if Xxxxxx & Whitney LLP renders such opinion to the Company (it being
agreed that Parent and the Company shall each provide reasonable cooperation,
including making reasonable representations, to Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
or Xxxxxx & Xxxxxxx LLP, as the case may be, to enable them to render such
opinion).
(e) NO PARENT MATERIAL ADVERSE EFFECT. Since the date of this
Agreement, there has not been a Parent Material Adverse Effect nor has there
been any change, event or condition that, with the passage of time, would
reasonably be expected to result in a Parent Material Adverse Effect.
ARTICLE VII
TERMINATION
7.1. TERMINATION. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of the Merger by the
Company's stockholders:
(a) by mutual written consent of the Company and Parent (on
behalf of Parent and Merger Sub);
43
(b) by either the Company or Parent (on behalf of Parent and
Merger Sub):
(i) if the Merger shall not have been completed by
August 31, 2000; PROVIDED, HOWEVER, that the right to terminate this
Agreement pursuant to this Section 7.1(b)(i) shall not be available to
any party whose failure to perform any of its obligations under this
Agreement results in the failure of the Merger to be consummated by such
time;
(ii) if stockholder approval shall not have been obtained
at the Company Stockholders Meeting duly convened therefor or at any
adjournment or postponement thereof; PROVIDED, HOWEVER, that the right to
terminate this Agreement pursuant to this Section 7.1(b)(ii) shall not be
available to any party whose failure to perform any of its obligations
under this Agreement results in the failure to obtain stockholder
approval.
(iii) if any restraint having any of the effects set forth
in Section 6.1(b) or Section 6.2(d) hereof shall be in effect and shall
have become final and nonappealable; PROVIDED, HOWEVER, that the right to
terminate this Agreement pursuant to this Section 7.1(b)(iii) shall not
be available to any party whose failure to perform any of its obligations
under this Agreement results in such restraint to continue in effect; or
(iv) if the Company enters into a merger, acquisition or
other agreement (including an agreement in principle) or understanding to
effect a Superior Proposal or the Company Board or a committee thereof
resolves to do so; PROVIDED, HOWEVER, that the Company may not terminate
this Agreement pursuant to this Section 7.1(b)(iv) unless (a) the Company
has delivered to Parent and Merger Sub a written notice of the Company's
intent to enter into such an agreement to effect such Acquisition
Proposal, which notice shall include, without limitation, the material
terms and conditions of the Acquisition Proposal and the identity of the
Person making the Acquisition Proposal, (b) three business days have
elapsed following delivery to Parent and Merger Sub of such written
notice by the Company and (c) during such three-business-day period, the
Company has fully cooperated with Parent and Merger Sub to allow Parent
and Merger Sub within such three-business-day period to propose
amendments to the terms of this Agreement to be at least as favorable as
the Superior Proposal; PROVIDED, FURTHER, that the Company may not
terminate this Agreement pursuant to this Section 7.1(b)(iv) unless, at
the end of such three-business-day-period, the Company Board continues
reasonably to believe that the Acquisition Proposal constitutes a
Superior Proposal;
(c) by the Company, if Parent or Merger Sub shall have breached
any of its representations and warranties contained in Article IV hereof which
breach has or is reasonably likely to have a Parent Material Adverse Effect or
Parent or Merger Sub shall have breached or failed to perform in any material
respect any of its covenants or other agreements contained in
44
this Agreement, in each case, which breach or failure to perform has not been
cured by Parent or Merger Sub within thirty days following receipt of notice
thereof from the Company; or
(d) by Parent (on behalf of Parent and Merger Sub):
(i) if the Company shall have breached any of its
representations and warranties contained in Article III hereof which
breach has or is reasonably likely to have a Company Material Adverse
Effect or the Company shall have breached or failed to perform in any
material respect any of its covenants or other agreements contained in
this Agreement, in each case (other than a breach of Section 5.6(b)
hereof, as to which no cure period shall apply), which breach or failure
to perform has not been cured by the Company within thirty days following
receipt of notice thereof from Parent;
(ii) if (a) the Company Board or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent its
approval or recommendation of the Merger or this Agreement, or approved
or recommended an Acquisition Proposal (including a Superior Proposal),
or (b) the Company Board or any committee thereof shall have resolved to
take any of the foregoing actions; or
(iii) at any time after 6:00 a.m. Minneapolis time on
February 23, 2000, if the Company Option Agreement shall not have been
executed and delivered by the Company to Parent prior to such
termination.
7.2. EFFECT OF TERMINATION. The termination of this Agreement pursuant
to the terms of Section 7.1 hereof shall become effective upon delivery to the
other party of written notice thereof. In the event of the termination of this
Agreement pursuant to the foregoing provisions of this Article VII, there shall
be no obligation or liability on the part of any party hereto (except as
provided in Section 7.3 hereof) or its stockholders or directors or officers in
respect thereof, EXCEPT for agreements which survive the termination of this
Agreement, EXCEPT for liability that Parent or Merger Sub or the Company might
have to the other party or parties arising from a breach of this Agreement due
to termination of this Agreement in accordance with Sections 7.1(c) or 7.1(d) or
due to the fraudulent or willful misconduct of such party, and EXCEPT that any
termination shall not affect the Company Option Agreement.
7.3. FEES AND EXPENSES.
(a) Except as provided in this Section 7.3, whether or not the
Merger is consummated, the Company, on the one hand, and Parent and Merger Sub,
on the other, shall bear their respective expenses incurred in connection with
the Merger, including, without limitation, the preparation, execution and
performance of this Agreement and the transactions contemplated hereby, and all
fees and expenses of investment bankers, finders, brokers, agents,
representatives, counsel and accountants, except that the registration and
filing fees incurred in connection with the Registration Statement and Proxy
Statement/Prospectus shall be shared equally by the Company and Parent.
45
(b) Notwithstanding any provision in this Agreement to the
contrary, if this Agreement is terminated (x) by the Company or Parent
pursuant to Section 7.1(b)(ii) and if, after the date hereof and prior to the
termination date, an Acquisition Proposal occurs, or (y) by Parent pursuant
to Section 7.1(b)(iv), 7.1(d)(i) or 7.1(d)(ii) hereof, then, in each case,
the Company shall (without prejudice to any other rights Parent may have
against the Company for breach of this Agreement), reimburse Parent upon
demand for all out-of-pocket fees and expenses incurred or paid by or on
behalf of Parent or any Affiliate of Parent in connection with this
Agreement, the Merger and transactions contemplated herein, including all
fees and expenses of counsel, investment banking firm, accountants and
consultants.
(c) Notwithstanding any other provision in this Agreement to
the contrary, if (x) this Agreement is terminated by the Company or Parent at a
time when Parent is entitled to terminate this Agreement pursuant to Section
7.1(b)(ii) (except if, immediately prior to the Company Stockholder Meeting, an
event or condition exists that would result in a Parent Material Adverse Effect)
or 7.1(d)(i) (other than due to a breach of Section 5.6(b) hereof) and,
concurrently with or within nine months after such a termination, the Company
shall enter into an agreement, arrangement or binding understanding with respect
to an Acquisition Proposal (which shall include, for this purpose, the
commencement by a third party of a tender offer or exchange offer or similar
transaction directly with the Company's stockholders) with a third party
(collectively, a "THIRD PARTY DEAL") or (y) this Agreement is terminated
pursuant to Section 7.1(b)(iv), Section 7.1(d)(i) (if such termination results
from a breach of Section 5.6(b) hereof), 7.1(d)(ii) (except, in the case of
7.1(d)(ii) only, if the Company Board's withdrawal or modification of its
approval or recommendation of this Agreement or the Merger occurs after the
occurrence of a Parent Material Adverse Effect) or 7.1(d)(iii), then, in each
case, the Company shall (in addition to any obligation under Section 7.3(b)
hereof and as liquidated damages and not as a penalty or forfeiture) pay to
Parent U.S. $43,000,000 (the "TERMINATION FEE") in cash, such payment to be made
promptly, but in no event later than the second business day following, in the
case of clause (x), the later to occur of such termination and the entry into of
such Third Party Deal, or, in the case of clause (y), such termination.
(d) Notwithstanding any provision in this Agreement to the
contrary, if this Agreement is terminated by the Company pursuant to Section
7.1(c) hereof, then Parent shall (without prejudice to any other rights the
Company may have against Parent for breach of this Agreement), reimburse the
Company upon demand for all out-of-pocket fees and expenses incurred or paid by
or on behalf of the Company or any Affiliate of the Company in connection with
this Agreement, the Merger and the transactions contemplated herein, including
all fees and expenses of counsel, investment banking firm, accountants and
consultants.
(e) The parties acknowledge that the agreements contained in
Sections 7.3(b), (c) and (d) hereof are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent and
Merger Sub on the one hand, and the Company on the other, would not enter into
this Agreement. Accordingly, if the Company fails promptly to pay the amounts
due pursuant to Sections 7.3(b) and/or (c) hereof, or if Parent fails promptly
to pay the amounts due pursuant to Section 7.3(d) hereof, (i) the party failing
to so pay shall pay interest on such amounts at the prime rate announced by U.S.
Bank National Association, Minneapolis
46
office, in effect on the date the Termination Fee (or fees and expenses) were
required to be paid, and (ii) if, in order to obtain such payment, a party
commences a suit or takes other action which results in a judgment or other
binding determination against the nonpaying party for the fees and expenses
in Sections 7.3(b) or 7.3(d) hereof or the Termination Fee, the nonpaying
party shall also pay to the party entitled to receive payment its costs and
expenses (including reasonable attorneys' fees) in connection with such suit,
together with interest payable under the preceding clause (i).
ARTICLE VIII
MISCELLANEOUS
8.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
8.2. WAIVER. At any time prior to the Effective Date, any party hereto
may (a) extend the time for the performance of any of the obligations or other
acts of any other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements of any other party or with any conditions to its own obligations
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
duly authorized by and signed on behalf of such party.
8.3. NOTICES.
(a) Any notice or communication to any party hereto shall be
duly given if in writing and delivered in person or mailed by first class mail
and airmail, if overseas (registered or return receipt requested), facsimile
(with receipt electronically acknowledged) or overnight air courier guaranteeing
next day delivery, to such other party's address.
If to Parent:
ADC Telecommunications, Inc.
00000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: General Counsel
47
with a copy to:
Xxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
If to the Company:
PairGain Technologies, Inc.
00000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention:
with copies to:
Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxx X. Xxxxx, Esq.
(b) All notices and communications will be deemed to have been
duly given: at the time delivered by hand, if personally delivered; three
business days after being deposited in the mail, if mailed; when sent, if sent
by facsimile; and one business day after timely delivery to the courier, if sent
by overnight air courier guaranteeing next day delivery.
8.4. COUNTERPARTS. This Agreement may be executed via facsimile in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8.5. INTERPRETATION. The language used in this Agreement and the other
agreements contemplated hereby shall be deemed to be the language chosen by the
parties to express their mutual intent, and no rule of strict construction shall
be applied against any party. The headings of articles and sections herein are
for convenience of reference, do not constitute a part of this Agreement, and
shall not be deemed to limit or affect any of the provisions hereof. As used in
this Agreement, "PERSON" means any individual, corporation, limited liability
company, limited or general partnership, joint venture, association, joint stock
company, trust, unincorporated organization or other entity; "KNOWLEDGE" means
the actual knowledge of a director or any executive officer of the applicable
party or any of its Subsidiaries, as such knowledge has been
48
obtained or would have been obtained after reasonable inquiry by such person
in the normal conduct of the business; and all amounts shall be deemed to be
stated in U.S. dollars, unless specifically referenced otherwise.
8.6. AMENDMENT. This Agreement may be amended by the parties at any
time before or after any required approval of matters presented in connection
with the Merger by the stockholders of the Company; PROVIDED, HOWEVER, that
after any such approval, there shall not be made any amendment that by law
requires further approval by such stockholders without obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties.
8.7. NO THIRD PARTY BENEFICIARIES. Except for the provisions of Section
5.10 hereof (which is intended to be for the benefit of the persons referred to
therein, and may be enforced by such persons) nothing in this Agreement shall
confer any rights upon any person or entity which is not a party or permitted
assignee of a party to this Agreement.
8.8. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware.
8.9. ENTIRE AGREEMENT. This Agreement (together with the Exhibits and
the Company Disclosure Letter, and the other documents delivered pursuant hereto
or contemplated hereby) 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, between the parties with
respect to the subject matter hereof, in each case other than the Company Option
Agreement and the Reciprocal Confidentiality Agreement.
8.10. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
* * * * *
49
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers all as of the day and year first
above written.
ADC TELECOMMUNICATIONS, INC.
By: /s/ Xxxx Xxxxx
--------------------------------------
Xxxx Xxxxx
Senior Vice President,
President Broadband Access and
Transport Group
ROMAN ACQUISITION CORP.
By: /s/ Xxxx Xxxxx
--------------------------------------
Xxxx Xxxxx
President
PAIRGAIN TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------
Xxxxxxx X. Xxxxxxx
Chairman of the Board of Directors
