1
AGREEMENT AND PLAN OF MERGER
AMONG
TELLABS, INC.,
WHITE OAK MERGER CORP.
AND
CIENA CORPORATION
DATED AS OF JUNE 2, 1998
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AGREEMENT OF PLAN AND MERGER
TABLE OF CONTENTS
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ARTICLE I
THE MERGER
Section 1.1 The Merger 2
Section 1.2 Effective Time 2
Section 1.3 Effects of the Merger; Directors and Officers 2
Section 1.4 Charter and Bylaws; Directors and Officers 2
Section 1.5 Conversion of Securities 3
Section 1.6 Parent to Make Certificates Available 4
Section 1.7 Dividends; Transfer Taxes; Withholding 4
Section 1.8 No Fractional Securities 5
Section 1.9 Return of Exchange Fund 6
Section 1.10 Adjustment of Exchange Ratio 6
Section 1.11 No Further Ownership Rights in Company
Common Stock 6
Section 1.12 Closing of Company Transfer Books 6
Section 1.13 Lost Certificates 7
Section 1.14 Further Assurances 7
Section 1.15 Closing 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Section 2.1 Organization, Standing and Power 8
Section 2.2 Capital Structure 9
Section 2.3 Authority 10
Section 2.4 Consents and Approvals; No Violation 11
Section 2.5 SEC Documents and Other Reports 12
Section 2.6 Registration Statement and Joint Proxy
Statement 13
Section 2.7 Absence of Certain Changes or Events 13
Section 2.8 Permits and Compliance 14
Section 2.9 Tax Matters 15
Section 2.10 Actions and Proceedings 16
Section 2.11 Certain Agreements 16
Section 2.12 ERISA 16
Section 2.13 Compliance with Worker Safety and
Environmental Laws 17
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Section 2.14 Labor Matters 18
Section 2.15 Intellectual Property 18
Section 2.16 Opinion of Financial Advisor 19
Section 2.17 Required Vote of Parent Stockholders 19
Section 2.18 Pooling of Interests; Reorganization 19
Section 2.19 Brokers 19
Section 2.20 Operations of Sub 19
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization, Standing and Power 20
Section 3.2 Capital Structure 20
Section 3.3 Authority 21
Section 3.4 Consents and Approvals; No Violation 22
Section 3.5 SEC Documents and Other Reports 23
Section 3.6 Registration Statement and Joint Proxy
Statement 24
Section 3.7 Absence of Certain Changes or Events 24
Section 3.8 Permits and Compliance 25
Section 3.9 Tax Matters 26
Section 3.10 Actions and Proceedings 27
Section 3.11 Certain Agreements 27
Section 3.12 ERISA 28
Section 3.13 Compliance with Worker Safety and
Environmental Laws 29
Section 3.14 Labor Matters 30
Section 3.15 Intellectual Property 30
Section 3.16 Opinion of Financial Advisor 31
Section 3.17 State Takeover Statutes; Certain Charter
Provisions 31
Section 3.18 Required Vote of Company Stockholders 31
Section 3.19 Pooling of Interests; Reorganization 31
Section 3.20 Brokers 31
Section 3.21 Rights Agreement 32
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger 32
Section 4.2 No Solicitation 36
Section 4.3 Third Party Standstill Agreements 37
Section 4.4 Pooling of Interests; Reorganization 37
ARTICLE V
ADDITIONAL AGREEMENTS
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Section 5.1 Stockholder Meetings 38
Section 5.2 Preparation of the Registration Statement
and the Joint Proxy Statement 39
Section 5.3 Intentionally Omitted 39
Section 5.4 Access to Information 39
Section 5.5 Compliance with the Securities Act 40
Section 5.6 Current Nasdaq Quotation 40
Section 5.7 Fees and Expenses 40
Section 5.8 Company Stock Plans. 44
Section 5.9 Reasonable Best Efforts; Pooling of
Interests 44
Section 5.10 Public Announcements 46
Section 5.11 Real Estate Transfer and Gains Tax 46
Section 5.12 State Takeover Laws 46
Section 5.13 Indemnification; Directors and Officers
Insurance 46
Section 5.14 Notification of Certain Matters 47
Section 5.15 Employee Benefit Plans and Agreements 47
Section 5.16 Rights Agreement 48
Section 5.17 Directorships. 48
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation
to Effect the Merger 49
Section 6.2 Conditions to Obligation of the Company
to Effect the Merger 50
Section 6.3 Conditions to Obligations of Parent and
Sub to Effect the Merger 52
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination 54
Section 7.2 Effect of Termination 56
Section 7.3 Amendment 57
Section 7.4 Waiver 57
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and
Warranties 57
Section 8.2 Notices 57
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Section 8.3 Interpretation 58
Section 8.4 Counterparts 58
Section 8.5 Entire Agreement; No Third-Party
Beneficiaries 58
Section 8.6 Governing Law 58
Section 8.7 Assignment 59
Section 8.8 Severability 59
Section 8.9 Enforcement of this Agreement 59
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TABLE OF DEFINED TERMS
Defined Term Section
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Affiliate 5.7(b)(i)
Agreement Forepart
Blue Sky Laws 2.4
Certificate of Merger 1.2
Certificates 1.6(b)
Closing 1.15
Code Recitals
Company Forepart
Company Affiliate Letter 5.5(a)
Company Annual Report 3.2(b)
Company Business Personnel 3.14
Company Bylaws 1.4(a)
Company Charter 1.4(a)
Company Common Stock Recitals
Company Letter 3.2(c)
Company Multiemployer Plan 3.12(c)
Company Permits 3.8(a)
Company Plan 3.12(c)
Company Preferred Stock 3.2(a)
Company SEC Documents 3.5
Company Stock Option Plans 3.2(a)
Company Stock Options 3.2(a)
Company Stock Purchase Plan 3.2(a)
Company Stockholder Meeting 5.1
Confidentiality Agreement 5.4
Constituent Corporations Forepart
D&O Insurance 5.13
DGCL 1.1
Effective Time 1.2
Environmental Laws 2.13
ERISA 2.12(a)
ERISA Affiliate 2.12(c)
Exchange Act 2.4
Exchange Agent 1.6(a)
Exchange Fund 1.6(a)
Exchange Ratio 1.5(c)
Gains Taxes 5.11
Governmental Entity 2.4
HSR Act 2.4
Intellectual Property Rights 2.15(a)
IRS 2.9
Joint Proxy Statement 2.6
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Joint Venture 2.2(c)
Knowledge of Parent 2.8(b)
Knowledge of the Company 3.8(b)
Material Adverse Change 2.1
Material Adverse Effect 2.1
Merger Recitals
NASDAQ 1.8
Noncompetition Agreements 3.12(d)
Parent Forepart
Parent Acquisition Event 5.7(d)
Parent Affiliate Letter 5.5(b)
Parent Annual Report 2.2(b)
Parent Business Personnel 2.14
Parent Bylaws 2.4
Parent Charter 2.4
Parent Common Stock recitals
Parent Letter 2.2(c)
Parent Multiemployer Plan 2.12(c)
Parent Permits 2.8(a)
Parent Plan 2.12(c)
Parent Preferred Stock 2.2(a)
Parent SEC Documents 2.5
Parent Stock Plans 2.2(a)
Parent Stockholder Meeting 5.1
Parent Takeover Proposal 5.7(b)(ii)
Registration Statement 2.3
Rights 3.2(a)
Rights Agreement 3.2(a)
Rule 145 Affiliates 5.5(a)
SEC 2.2(b)
Securities Act 2.3
Share Issuance 2.3
State Takeover Approvals 2.4
Stock Option Agreement Recitals
Stockholder Agreements Recitals
Stockholder Meetings 5.1
Sub Forepart
Subsidiary 2.1
Substitute Option 5.8
Superior Proposal 4.2(a)
Surviving Corporation 1.1
Takeover Proposal 4.2(a)
Tax Return 2.9
Taxes 2.9
Termination Fee 5.7(c)
Third Party 5.7(c)
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Third Party Acquisition Event 5.7(c)
Worker Safety Laws 2.13
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 2, 1998 (this
"Agreement"), among Tellabs, Inc., a Delaware corporation ("Parent"), White Oak
Merger Corp., a Delaware corporation and a direct wholly owned subsidiary of
Parent ("Sub"), and CIENA Corporation, a Delaware corporation (the "Company")
(Sub and the Company being hereinafter collectively referred to as the
"Constituent Corporations").
W I T N E S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company have approved and declared advisable the merger of Sub with and
into the Company (the "Merger"), upon the terms and subject to the conditions
set forth herein, whereby each issued and outstanding share of common stock,
par value $.01 per share, of the Company ("Company Common Stock") not owned
directly or indirectly by Parent or the Company will be converted into shares
of Common Stock, par value $.01 per share, of Parent ("Parent Common Stock");
WHEREAS, the respective Boards of Directors of Parent and the
Company have determined that the Merger is in furtherance of and consistent
with their respective long-term business strategies and is in the best interest
of their respective stockholders;
WHEREAS, in order to induce Parent and Sub to enter into this
Agreement, concurrently herewith Parent and the Company are entering into the
Stock Option Agreement dated as of the date hereof (the "Stock Option
Agreement") in the form of the attached Exhibit A;
WHEREAS, in order to induce Parent and Sub to enter into this
Agreement, concurrently herewith certain stockholders and each of the directors
of the Company are entering into stockholder agreements with Parent (the
"Stockholder Agreements"), pursuant to which, among other things, each such
stockholder and director (in such director's capacity as a stockholder) agrees
to vote in
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favor of this Agreement and the Merger and against any competing proposals;
WHEREAS, for federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, it is intended that the Merger shall be recorded for
accounting purposes as a pooling of interests.
NOW, THEREFORE, in consideration of the premises,
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to
the conditions hereof, and in accordance with the Delaware General Corporation
Law (the "DGCL"), Sub shall be merged with and into the Company at the
Effective Time (as hereinafter defined). Following the Merger, the separate
corporate existence of Sub shall cease and the Company shall continue as the
surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all the rights and obligations of Sub in accordance with the DGCL.
Notwithstanding anything to the contrary herein, at the election of Parent, any
direct wholly owned Subsidiary (as hereinafter defined) of Parent may be
substituted for Sub as a constituent corporation in the Merger; provided that
such substituted corporation is a Delaware corporation which is formed solely
for the purpose of engaging in the transactions contemplated by this Agreement
and has engaged in no other business activities. In such event, the parties
agree to execute an appropriate amendment to this Agreement, in form and
substance reasonably satisfactory to Parent and the Company, in order to
reflect such substitution.
Section 1.2 Effective Time. The Merger shall become
effective when a Certificate of Merger (the "Certificate of Merger"), executed
in accordance with the relevant provisions of the DGCL, is filed with the
Secretary of State of the State of Delaware; provided, however, that,
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upon mutual consent of the Constituent Corporations, the Certificate of Merger
may provide for a later date of effectiveness of the Merger not more than 30
days after the date the Certificate of Merger is filed. When used in this
Agreement, the term "Effective Time" shall mean the date and time at which the
Certificate of Merger is accepted for recording or such later time established
by the Certificate of Merger. The filing of the Certificate of Merger shall be
made on the date of the Closing (as hereinafter defined).
Section 1.3 Effects of the Merger; Directors and
Officers. The Merger shall have the effects set forth in this Agreement and in
Section 259 of the DGCL.
Section 1.4 Charter and Bylaws; Directors and Officers.
(a) At the Effective Time, the Third Restated Certificate of Incorporation, as
amended, of the Company (the "Company Charter"), as in effect immediately prior
to the Effective Time, shall be amended so that (i) Article FOURTH of the
Company Charter reads in its entirety as follows: "The total number of shares
of all classes of capital stock which the Corporation shall have authority to
issue is 1,000 shares of Common Stock, par value $.01 per share". As so
amended, the Company Charter shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein
or by applicable law. At the Effective Time, the Amended and Restated By-laws
of the Company (the "Company Bylaws"), as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter changed or amended as provided therein or by the Company Charter.
(b) The directors of Sub at the Effective Time of the Merger
shall be the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected
and qualified, as the case may be. The officers of the Company at the
Effective Time of the Merger shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
Section 1.5 Conversion of Securities. As of the
Effective Time, by virtue of the Merger and without any
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action on the part of Sub, the Company or the holders of any securities of the
Constituent Corporations:
(a) Each issued and outstanding share of common stock, par
value $.01 per share, of Sub shall be converted into one validly issued, fully
paid and nonassessable share of common stock of the Surviving Corporation.
(b) All shares of Company Common Stock, together with
associated Rights (as hereinafter defined), that are held in the treasury of
the Company or by any wholly owned Subsidiary of the Company and any shares of
Company Common Stock, together with the associated Rights, owned by Parent
shall be cancelled and no capital stock of Parent or other consideration shall
be delivered in exchange therefor.
(c) Subject to the provisions of Sections 1.8 and 1.10
hereof, each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares to be cancelled in accordance
with Section 1.5(b)), together with the associated Rights, shall be converted
into one (such number being the "Exchange Ratio") validly issued, fully paid
and nonassessable share of Parent Common Stock. All such shares of Company
Common Stock and the associated Rights, when so converted, shall no longer be
outstanding and shall automatically be cancelled and retired and each holder of
a certificate representing any such shares shall cease to have any rights with
respect thereto, except the right to receive any dividends and other
distributions in accordance with Section 1.7, certificates representing the
shares of Parent Common Stock into which such shares are converted and any
cash, without interest, in lieu of fractional shares to be issued or paid in
consideration therefor upon the surrender of such certificate in accordance
with Section 1.6.
Section 1.6 Parent to Make Certificates Available. (a)
Exchange of Certificates. Parent shall authorize a commercial bank (or such
other person or persons as shall be reasonably acceptable to Parent and the
Company) to act as Exchange Agent hereunder (the "Exchange Agent"). As soon as
practicable after the Effective Time, Parent shall deposit with the Exchange
Agent certificates representing the shares of Parent Common Stock issuable
pursuant to Section 1.5(c) for exchange with outstanding shares of Company
Common Stock and cash, as required to make
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payments in lieu of any fractional shares pursuant to Section 1.8 (such cash
and shares of Parent Common Stock, together with any dividends or distributions
with respect thereto, being hereinafter referred to as the "Exchange Fund").
The Exchange Agent shall deliver the Parent Common Stock contemplated to be
issued pursuant to Section 1.5(c) out of the Exchange Fund.
(b) Exchange Procedures. Parent shall instruct the
Exchange Agent, as soon as practicable after the Effective Time, to mail to
each record holder of a certificate or certificates which immediately prior to
the Effective Time represented outstanding shares of Company Common Stock
converted in the Merger (the "Certificates") 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 actual delivery of the Certificates to
the Exchange Agent, and shall contain 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
for cancellation to the Exchange Agent of all Certificates held by any record
holder of a Certificate, together with such letter of transmittal, duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Parent Common Stock into which the shares represented by the surrendered
Certificate shall have been converted at the Effective Time pursuant to this
Article I, cash in lieu of any fractional share in accordance with Section 1.8
and certain dividends and other distributions in accordance with Section 1.7,
and any Certificate so surrendered shall forthwith be cancelled.
Section 1.7 Dividends; Transfer Taxes; Withholding. No
dividends or other distributions that are declared on or after the Effective
Time on Parent Common Stock, or are payable to the holders of record thereof on
or after the Effective Time, will be paid to any person entitled by reason of
the Merger to receive a certificate representing Parent Common Stock until such
person surrenders the related Certificate or Certificates, as provided in
Section 1.6, and no cash payment in lieu of fractional shares will be paid to
any such person pursuant to Section 1.8 until such person shall so surrender
the related Certificate or Certificates. Subject to the effect
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of applicable law, there shall be paid to each record holder of a new
certificate representing such Parent Common Stock: (i) at the time of such
surrender or as promptly as practicable thereafter, the amount of any dividends
or other distributions theretofore paid with respect to the shares of Parent
Common Stock represented by such new certificate and having a record date on or
after the Effective Time and a payment date prior to such surrender; (ii) at
the appropriate payment date or as promptly as practicable thereafter, the
amount of any dividends or other distributions payable with respect to such
shares of Parent Common Stock and having a record date on or after the
Effective Time but prior to such surrender and a payment date on or subsequent
to such surrender; and (iii) at the time of such surrender or as promptly as
practicable thereafter, the amount of any cash payable with respect to a
fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 1.8. In no event shall the person entitled to receive such
dividends or other distributions or cash in lieu of fractional shares be
entitled to receive interest on such dividends or other distributions or cash
in lieu of fractional shares. If any cash or certificate representing shares
of Parent Common Stock is to be paid to or issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it shall
be a condition of such exchange that the Certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange shall pay to the Exchange Agent any transfer or other
taxes required by reason of the issuance of certificates for such shares of
Parent Common Stock in a name other than that of the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable. Parent or the Exchange
Agent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as Parent or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the Code or under any
provision of state, local or foreign tax law. To the extent that amounts are
so withheld by Parent or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the shares of Company Common Stock in
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respect of which such deduction and withholding was made by Parent or the
Exchange Agent.
Section 1.8 No Fractional Securities. No certificates or
scrip representing fractional shares of Parent Common Stock shall be issued
upon the surrender for exchange of Certificates pursuant to this Article I, and
no Parent dividend or other distribution or stock split shall relate to any
fractional share, and no fractional share shall entitle the owner thereof to
vote or to any other rights of a security holder of Parent. In lieu of any
such fractional share, each holder of Company Common Stock who would otherwise
have been entitled to a fraction of a share of Parent Common Stock upon
surrender of Certificates for exchange pursuant to this Article I will be paid
an amount in cash (without interest), rounded to the nearest cent, determined
by multiplying (i) the last reported sale price per share of Parent Common
Stock on The Nasdaq Stock Market ("NASDAQ") on the date of the Effective Time
(or, if the shares of Parent Common Stock do not trade on NASDAQ on such date,
the first date of trading of shares of Parent Common Stock on NASDAQ after the
Effective Time) by (ii) the fractional interest to which such holder would
otherwise be entitled. As promptly as practicable after the determination of
the amount of cash, if any, to be paid to holders of fractional share
interests, the Exchange Agent shall so notify Parent, and Parent shall deposit
such amount with the Exchange Agent and shall cause the Exchange Agent to
forward payments to such holders of fractional share interests subject to and
in accordance with the terms of Section 1.7 and this Section 1.8.
Section 1.9 Return of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the former stockholders of the
Company for six months after the Effective Time shall be delivered to Parent,
upon demand of Parent, and any such former stockholders who have not
theretofore complied with this Article I shall thereafter look only to Parent
for payment of their claim for Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock and any dividends or distributions
with respect to Parent Common Stock. Neither Parent nor the Surviving
Corporation shall be liable to any former holder of Company Common Stock for
any such shares of Parent Common Stock, cash and dividends and distributions
held in the Exchange Fund which is delivered to a public official
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pursuant to any applicable abandoned property, escheat or similar law.
Section 1.10 Adjustment of Exchange Ratio. In the event
of any reclassification, stock split or stock dividend with respect to Parent
Common Stock or any change or conversion of Parent Common Stock into other
securities (or if a record date with respect to any of the foregoing should
occur) prior to the Effective Time, appropriate and proportionate adjustments,
if any, shall be made to the Exchange Ratio, and all references to the Exchange
Ratio in this Agreement shall be deemed to be to the Exchange Ratio as so
adjusted.
Section 1.11 No Further Ownership Rights in Company Common
Stock. All shares of Parent Common Stock issued upon the surrender for
exchange of Certificates in accordance with the terms hereof (including any
cash paid pursuant to Section 1.8) shall be deemed to have been issued in full
satisfaction of all rights pertaining to the shares of Company Common Stock
represented by such Certificates.
Section 1.12 Closing of Company Transfer Books. At the
Effective Time, the stock transfer books of the Company shall be closed and no
transfer of shares of Company Common Stock shall thereafter be made on the
records of the Company. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, the Exchange Agent or the Parent, such
Certificates shall be cancelled and exchanged as provided in this Article I.
Section 1.13 Lost Certificates. If any Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Certificate to be lost, stolen or destroyed
and, if required by Parent or the Exchange Agent, the posting by such person of
a bond, in such reasonable amount as Parent or the Exchange Agent may direct as
indemnity against any claim that may be made against them with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the shares of Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock to which the holders thereof are
entitled pursuant to Section 1.8 and any dividends or other distributions to
which the holders thereof are entitled pursuant to Section 1.7.
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Section 1.14 Further Assurances. If at any time after the
Effective Time the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets
of either of the Constituent Corporations, or (b) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations, all such
deeds, bills of sale, assignments and assurances and to do, in the name and on
behalf of either Constituent Corporation, all such other acts and things as may
be necessary, desirable or proper to vest, perfect or confirm the Surviving
Corporation s right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of such Constituent
Corporation and otherwise to carry out the purposes of this Agreement.
Section 1.15 Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") and all actions specified in
this Agreement to occur at the Closing shall take place at the offices of
Sidley & Austin, One First National Plaza, Chicago, Illinois, at 10:00 a.m.,
local time, no later than the second business day following the day on which
the last of the conditions set forth in Article VI shall have been fulfilled or
waived (if permissible) or at such other time and place as Parent and the
Company shall agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as
follows:
Section 2.1 Organization, Standing and Power. Each of
Parent and Sub is a corporation duly organized, validly existing and in good
standing under the laws of the
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State of Delaware and has the requisite corporate power and authority to carry
on its business as now being conducted. Each Subsidiary (as hereinafter
defined) of Parent is duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is organized and has the
requisite corporate (in the case of a Subsidiary that is a corporation) or
other power and authority to carry on its business as now being conducted,
except where the failure to be so organized, existing or in good standing or to
have such power or authority would not, individually or in the aggregate, have
a Material Adverse Effect (as hereinafter defined) on Parent. Parent and each
of its Subsidiaries are duly qualified to do business, and are in good
standing, in each jurisdiction where the character of their properties owned or
held under lease or the nature of their activities makes such qualification
necessary, except where the failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect on Parent. For purposes of
this Agreement (a) "Material Adverse Change" or "Material Adverse Effect"
means, when used with respect to Parent or the Company, as the case may be, any
event, change or effect that individually or when taken together with all other
such events, changes or effects is or could reasonably be expected (as far as
can be foreseen at the time) to be materially adverse to the business, assets,
liabilities, financial condition or results of operations of Parent and its
Subsidiaries, taken as a whole, or the Company and its Subsidiaries, taken as a
whole, as the case may be; provided, however, that in determining whether a
Material Adverse Change or Material Adverse Effect has occurred with respect to
either referenced party, any change or effect, to the extent it is attributable
(i) to any change in general economic conditions affecting companies in
industries similar to the industries in which the Company and its Subsidiaries
or Parent and its Subsidiaries, as the case may be, operate or (ii) to the
closing or the failure to close the merger contemplated in that certain
Agreement of Plan of Merger dated as of February 16, 1998 among Parent,
Cardinal Merger Co. and Coherent Communications Systems Corporation
substantially on the terms set forth therein (so long as such closing or
failure to close does not result in any material liability to Parent), shall
not be considered when determining if a Material Adverse Change or Material
Adverse Effect has occurred; and (b) "Subsidiary" means any corporation,
partnership, limited liability company, joint venture or other legal entity of
which Parent or the
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Company, as the case may be (either alone or through or together with any other
Subsidiary), owns, directly or indirectly, 50% or more of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation,
partnership, limited liability company, joint venture or other legal entity.
Section 2.2 Capital Structure. (a) As of the date
hereof, the authorized capital stock of Parent consists of 500,000,000 shares
of Parent Common Stock and 5,000,000 shares of Preferred Stock, par value $.01
per share (the "Parent Preferred Stock"). At the close of business on May 28,
1998, (i) 182,425,765 shares of Parent Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable and
free of preemptive rights, (ii) no shares of Parent Common Stock were held in
treasury of Parent or by Subsidiaries of Parent, (iii) no shares of Parent
Preferred Stock were issued or outstanding, (iv) 10,194,606 shares of Parent
Common Stock were reserved for issuance pursuant to outstanding options or
other rights to purchase or otherwise acquire shares of Parent Common Stock
under Parent's benefit plans or arrangements or pursuant to any plans assumed
by Parent in connection with any acquisition, business combination or similar
transaction (collectively, the "Parent Stock Plans"), (v) 149,370 stock
appreciation rights granted pursuant to the Parent Stock Plans and (vi)
11,772,949 shares of Parent Common Stock were reserved for issuance in
connection with that certain Agreement and Plan of Merger dated as of February
16, 1998 among Parent, Cardinal Merger Co. and Coherent Communications Systems
Corporation. As of the date of this Agreement, except as set forth above and
except for the issuance of shares of Parent Common Stock pursuant to the Parent
Stock Plans, no shares of capital stock or other voting securities of Parent
were issued, reserved for issuance or outstanding. All of the shares of Parent
Common Stock issuable in exchange for Company Common Stock at the Effective
Time in accordance with this Agreement will be, when so issued, duly
authorized, validly issued, fully paid and nonassessable and free of preemptive
rights. As of the date of this Agreement, except for (i) this Agreement and
(ii) as set forth above, there are no options, warrants, calls, rights, puts or
agreements to which Parent or any of its Subsidiaries is a party or by which
any of them is bound obligating Parent or any of its Subsidiaries to issue,
20
deliver, sell or redeem, or cause to be issued, delivered, sold or redeemed,
any additional shares of capital stock (or other voting securities or equity
equivalents) of Parent or any of its Subsidiaries or obligating Parent or any
of its Subsidiaries to grant, extend or enter into any such option, warrant,
call, right, put or agreement.
(b) As of the date of this Agreement, each outstanding
share of capital stock (or other voting security or equity equivalent) of each
material Subsidiary of Parent is duly authorized, validly issued, fully paid
and nonassessable and, except for director or qualifying shares, each such
share (or other voting security or equity equivalent) is owned by Parent or
another Subsidiary of Parent, free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
voting rights, charges and other encumbrances of any nature whatsoever. Except
as set forth above, Parent does not have any outstanding bonds, debentures,
notes or other obligations the holders of which have the right to vote (or
convertible into or exercisable for securities having the right to vote) with
the stockholders of Parent on any matter. Exhibit 21 to Parent's Annual Report
on Form 10-K for the year ended January 2, 1998, as filed with the Securities
and Exchange Commission (the "SEC") (the "Parent Annual Report"), is a true,
accurate and correct statement in all material respects of all of the
information required to be set forth therein by the regulations of the SEC.
(c) Section 2.2 of the letter dated the date hereof and
delivered on the date hereof by Parent to the Company, which letter relates to
this Agreement and is designated the Parent Letter (the "Parent Letter"), sets
forth a list as of the date hereof of all Subsidiaries and Joint Ventures (as
defined below) of Parent and the jurisdiction in which such Subsidiary or Joint
Venture is organized. Section 2.2 of the Parent Letter also sets forth as of
the date hereof the nature and extent of the ownership and voting interests
held by Parent in each such Joint Venture. As of the date hereof, Parent has
no obligation to make any capital contributions, or otherwise provide assets or
cash, to any Joint Venture. As used in this Agreement, "Joint Venture" means,
with respect to a party, any corporation, limited liability company,
partnership, joint venture or other entity which is not a Subsidiary of such
21
party and in which (i) such party, directly or indirectly, owns or controls any
shares of any class of the outstanding voting securities or other equity
interests (other than the ownership of securities primarily for investment
purposes as part of routine cash management or investments of 1% or less in
publicly traded companies), or (ii) such party or a Subsidiary of such party is
a general partner.
Section 2.3 Authority. On or prior to the date of this
Agreement, the Boards of Directors of Parent and Sub have declared the Merger
advisable and fair to and in the best interest of Parent and Sub, respectively,
and their respective stockholders, approved and adopted this Agreement in
accordance with the DGCL, and the Board of Directors of Parent has resolved to
recommend the approval by Parent's stockholders of the issuance of Parent
Common Stock in connection with the Merger (the "Share Issuance"). Each of
Parent and Sub has all requisite corporate power and authority to enter into
this Agreement, Parent has all requisite corporate power and authority to enter
into the Stock Option Agreement, and, subject to approval by the stockholders
of Parent of the Share Issuance, to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement by Parent and
Sub, the execution and delivery of the Stock Option Agreement by Parent and the
consummation by Parent and Sub of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of Parent and Sub, subject to (x) approval by the stockholders of Parent of the
Share Issuance and (y) the filing of appropriate Merger documents as required
by the DGCL. This Agreement and the consummation of the transactions
contemplated hereby have been approved by the sole stockholder of Sub. This
Agreement has been duly executed and delivered by Parent and Sub, the Stock
Option Agreement has been duly executed and delivered by Parent, and (assuming
the valid authorization, execution and delivery of this Agreement and the Stock
Option Agreement by the Company and the validity and binding effect hereof and
thereof on the Company) this Agreement constitutes the valid and binding
obligation of Parent and Sub enforceable against each of them in accordance
with its terms and the Stock Option Agreement constitutes the valid and binding
obligation of Parent enforceable against Parent in accordance with its terms.
The Share Issuance and the filing of a registration statement on Form S-4 with
the SEC
22
by Parent under the Securities Act of 1933, as amended (together with the rules
and regulations promulgated thereunder, the "Securities Act"), for the purpose
of registering the shares of Parent Common Stock to be issued in the Merger
(together with any amendments or supplements thereto, whether prior to or after
the effective date thereof, the "Registration Statement") have been duly
authorized by Parent's Board of Directors.
Section 2.4 Consents and Approvals; No Violation.
Assuming that all consents, approvals, authorizations and other actions
described in this Section 2.4 have been obtained and all filings and
obligations described in this Section 2.4 have been made, and except as set
forth in Section 2.4 of the Parent Letter, the execution and delivery of this
Agreement and the Stock Option Agreement do not, and the consummation of the
transactions contemplated hereby and thereby and compliance with the provisions
hereof and thereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give to others a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of Parent
or any of its Subsidiaries under, any provision of (i) the Restated Certificate
of Incorporation, as amended, of Parent (the "Parent Charter") or the Amended
and Restated By-laws of Parent (the "Parent Bylaws") or the Certificate of
Incorporation or Bylaws of Sub, (ii) any provision of the comparable charter or
organization documents of any of Parent's Subsidiaries, (iii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Parent or
any of its Subsidiaries or (iv) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or any of its Subsidiaries
or any of their respective properties or assets, other than, in the case of
clauses (ii), (iii) or (iv), any such violations, defaults, rights, liens,
security interests, charges or encumbrances that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent, materially
impair the ability of Parent or Sub to perform their respective obligations
hereunder or under the Stock Option Agreement or prevent the consummation of
any of the transactions contemplated hereby or thereby. No filing
23
or registration with, or authorization, consent or approval of, any domestic
(federal and state), foreign or supranational court, commission, governmental
body, regulatory agency, authority or tribunal (a "Governmental Entity") is
required by or with respect to Parent or any of its Subsidiaries in connection
with the execution and delivery of this Agreement or the Stock Option Agreement
by Parent or Sub or is necessary for the consummation of the Merger and the
other transactions contemplated by this Agreement or the Stock Option
Agreement, except for (i) in connection, or in compliance, with the provisions
of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), the Securities Act and the Securities Exchange Act of 1934, as
amended (together with the rules and regulations promulgated thereunder, the
"Exchange Act"), (ii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate documents with the
relevant authorities of other states in which the Company or any of its
Subsidiaries is qualified to do business, (iii) such filings, authorizations,
orders and approvals as may be required by state takeover laws (the "State
Takeover Approvals"), (iv) such filings as may be required in connection with
the taxes described in Section 5.11, (v) applicable requirements, if any, of
state securities or "blue sky" laws ("Blue Sky Laws") and NASDAQ, (vi) as may
be required under foreign laws and (vii) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, have a
Material Adverse Effect on Parent, materially impair the ability of Parent or
Sub to perform its obligations hereunder or under the Stock Option Agreement or
prevent the consummation of any of the transactions contemplated hereby or
thereby.
Section 2.5 SEC Documents and Other Reports. Parent has
timely filed all required documents with the SEC since January 1, 1997 (the
"Parent SEC Documents"). As of their respective dates, the Parent SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and, at the respective
times they were filed, none of the Parent SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made,
24
not misleading. The consolidated financial statements (including, in each
case, any notes thereto) of Parent included in the Parent SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting
principles (except, in the case of the unaudited statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto) and fairly
presented in all material respects the consolidated financial position of
Parent and its consolidated Subsidiaries as at the respective dates thereof and
the consolidated results of their operations and their consolidated cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments and to any other adjustments described
therein). Except as disclosed in the Parent SEC Documents or as required by
generally accepted accounting principles, Parent has not, since January 2,
1998, made any change in the accounting practices or policies applied in the
preparation of financial statements.
Section 2.6 Registration Statement and Joint Proxy
Statement. None of the information to be supplied by Parent or Sub for
inclusion or incorporation by reference in the Registration Statement or the
joint proxy statement/prospectus included therein relating to the Stockholder
Meetings (as defined in Section 5.1) (together with any amendments or
supplements thereto, the "Joint Proxy Statement") will (i) in the case of the
Registration Statement, at the time it becomes effective, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading or (ii) in the case of the Joint Proxy Statement, at the time of the
mailing of the Joint Proxy Statement, at the time of each of the Stockholder
Meetings and at the Effective Time, 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. If at any time prior
to the Effective Time any event with respect to Parent, its officers and
directors or any of its Subsidiaries shall occur which is required to be
described in the Joint Proxy Statement or the Registration Statement,
25
such event shall be so described, and an appropriate amendment or supplement
shall be promptly filed with the SEC and, as required by law, disseminated to
the stockholders of Parent and the Company. The Registration Statement will
comply (with respect to Parent) as to form in all material respects with the
provisions of the Securities Act, and the Joint Proxy Statement will comply
(with respect to Parent) as to form in all material respects with the
provisions of the Exchange Act.
Section 2.7 Absence of Certain Changes or Events. Except
as disclosed in Parent SEC Documents filed with the SEC prior to the date of
this Agreement or as disclosed in Section 2.7 of the Parent Letter, since
January 2, 1998 (A) Parent and its Subsidiaries have not incurred any liability
or obligation (indirect, direct or contingent) that would result in a Material
Adverse Effect on Parent or, through the date hereof, entered into any material
oral or written agreement or other transaction that is not in the ordinary
course of business or that would result in a Material Adverse Effect on Parent,
(B) Parent and its Subsidiaries have not sustained any loss or interference
with their business or properties from fire, flood, windstorm, accident or
other calamity (whether or not covered by insurance) that has had a Material
Adverse Effect on Parent, (C) through the date hereof, there has been no change
in the capital stock of Parent except for the issuance of shares of Parent
Common Stock pursuant to Parent Stock Plans and no dividend or distribution of
any kind declared, paid or made by Parent on any class of its stock, and (D)
there has been no event causing a Material Adverse Effect on Parent, nor any
development that would, individually or in the aggregate, result in a Material
Adverse Effect on Parent.
Section 2.8 Permits and Compliance. (a) Each of Parent
and its Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, charters, easements, variances, exceptions,
consents, certificates, approvals and orders of any Governmental Entity
necessary for Parent or any of its Subsidiaries to own, lease and operate its
properties or to carry on its business as it is now being conducted (the
"Parent Permits"), except where the failure to have any of the Parent Permits
would not, individually or in the aggregate, have a Material Adverse Effect on
Parent, and, as of the
26
date of this Agreement, no suspension or cancellation of any of the Parent
Permits is pending or, to the Knowledge of Parent (as hereinafter defined),
threatened, except where the suspension or cancellation of any of the Parent
Permits would not, individually or in the aggregate, have a Material Adverse
Effect on Parent. Neither Parent nor any of its Subsidiaries is in violation
of (A) its charter, by-laws or other organizational documents, (B) any
applicable law, ordinance, administrative or governmental rule or regulation or
(C) any order, decree or judgment of any Governmental Entity having
jurisdiction over Parent or any of its Subsidiaries, except, in the case of
clauses (A), (B) and (C), for any violations that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent.
(b) Except as disclosed in the Parent SEC Documents filed
prior to the date of this Agreement or as disclosed in Section 2.8 of the
Parent Letter, as of the date hereof there is no contract or agreement that is
or was required to be filed by Parent as a material contract pursuant to Item
601 of Regulation S-K under the Securities Act. Except as set forth in Section
2.8 of the Parent Letter, as of the date hereof neither Parent nor any or its
Subsidiaries is a party to or bound by any agreements evidencing, or guarantees
relating to, indebtedness for borrowed money to the extent the aggregate
principal amount outstanding thereunder exceeds $10,000,000. Except as set
forth in the Parent SEC Documents filed prior to the date of this Agreement or
Section 2.8 of the Parent Letter, no event of default or event that, but for
the giving of notice or the lapse of time or both, would constitute an event of
default exists or, upon the consummation by Parent or Sub of the transactions
contemplated by this Agreement or the Stock Option Agreement, will exist under
any indenture, mortgage, loan agreement, note or other agreement or instrument
for borrowed money, any guarantee of any agreement or instrument for borrowed
money or any lease, contractual license or other agreement or instrument to
which Parent or any of its Subsidiaries is a party or by which Parent or any
such Subsidiary is bound or to which any of the properties, assets or
operations of Parent or any such Subsidiary is subject, other than any defaults
that, individually or in the aggregate, would not have a Material Adverse
Effect on Parent. For purposes of this Agreement, "Knowledge of
27
Parent" means the actual knowledge of the individuals identified in Section 2.8
of the Parent Letter.
Section 2.9 Tax Matters. Except as otherwise set forth
in Section 2.9 of the Parent Letter, (i) Parent and each of its Subsidiaries
have filed all federal, and all material state, local, foreign and provincial,
Tax Returns (as hereinafter defined) required to have been filed or appropriate
extensions therefor have been properly obtained, and such Tax Returns are
correct and complete, except to the extent that any failure to so file or any
failure to be correct and complete would not, individually or in the aggregate,
have a Material Adverse Effect on Parent; (ii) all Taxes (as hereinafter
defined) shown to be due on such Tax Returns have been timely paid or
extensions for payment have been properly obtained, except to the extent that
any failure to so pay or so obtain such an extension would not, individually or
in the aggregate, have a Material Adverse Effect on Parent, (iii) Parent and
each of its Subsidiaries have complied in all material respects with all rules
and regulations relating to the withholding of Taxes except to the extent that
any failure to comply with such rules and regulations would not, individually
or in the aggregate, have a Material Adverse Effect on Parent; (iv) any Tax
Returns referred to in clause (i) relating to federal income Taxes have been
examined by the Internal Revenue Service (the "IRS") or the period for
assessment of the Taxes in respect of which such Tax Returns were required to
be filed has expired; (v) no issues that have been raised in writing by the
relevant taxing authority in connection with the examination of the Tax Returns
referred to in clause (i) are currently pending; and (vi) all deficiencies
asserted or assessments made as a result of any examination of such Tax Returns
by any taxing authority have been paid in full or are being timely and properly
contested. For purposes of this Agreement: (i) "Taxes" means any federal,
state, local, foreign or provincial income, gross receipts, property, sales,
use, license, excise, franchise, employment, payroll, withholding, alternative
or added minimum, ad valorem, value-added, transfer or excise tax, or other
tax, custom, duty, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or penalty imposed by any
Governmental Entity, and (ii) "Tax Return" means any return, report or similar
statement (including the attached schedules) required to be filed with respect
to any Tax, including, without
28
limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
Section 2.10 Actions and Proceedings. Except as set forth
in the Parent SEC Documents filed prior to the date of this Agreement and
except as set forth in Section 2.10 of the Parent Letter, there are no
outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving Parent or any of its Subsidiaries, or
against or involving any of the present or former directors, officers,
employees or, to the Knowledge of Parent, consultants, agents or stockholders
of Parent or any of its Subsidiaries, as such, or any of its or their
properties, assets or business that, individually or in the aggregate, would
have a Material Adverse Effect on Parent or materially impair the ability of
Parent to perform its obligations hereunder. Except as set forth in Section
2.10 of the Parent Letter, there are no actions, suits or claims or legal,
administrative or arbitration proceedings or investigations pending or, to the
Knowledge of Parent, threatened against or involving Parent or any of its
Subsidiaries or any of its or their present or former directors, officers,
employees or, to the Knowledge of Parent, consultants, agents or stockholders,
as such, or any of its or their properties, assets or business that,
individually or in the aggregate, would have a Material Adverse Effect on
Parent or materially impair the ability of Parent to perform its obligations
hereunder. As of the date hereof, there are no actions, suits, labor disputes
or other litigation, legal or administrative proceedings or governmental
investigations pending or, to the Knowledge of Parent, threatened against or
affecting Parent or any of its Subsidiaries or any of its or their present or
former officers, directors, employees or, to the Knowledge of Parent,
consultants, agents or stockholders, as such, or any of its or their
properties, assets or business relating to the transactions contemplated by
this Agreement and the Stock Option Agreement.
Section 2.11 Certain Agreements. Except as set forth in
Section 2.11 of the Parent Letter, neither Parent nor any of its Subsidiaries
is a party to any material oral or written agreement or plan, including any
employment agreement, severance agreement, stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be
29
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
Stock Option Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement or the Stock Option Agreement.
Section 2.12 ERISA. (a) Except as would not have a
Material Adverse Effect on Parent, (i) each Parent Plan complies in all
respects with Title IV of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), the Code and all other applicable statutes and
governmental rules and regulations, and (ii) no "reportable event" (within the
meaning of Section 4043 of ERISA) has occurred with respect to any Parent Plan.
Neither Parent nor any of its ERISA Affiliates (as hereinafter defined) has
withdrawn from any Parent Plan or Parent Multiemployer Plan (as hereinafter
defined) or instituted, or is currently considering taking, any action to do
so. Except as would not have a Material Adverse Effect on Parent, no Parent
Plan, nor any trust created thereunder, has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived.
(b) With respect to the Parent Plans, no event has
occurred and, to the Knowledge of Parent, there exists no condition or set of
circumstances in connection with which Parent or any ERISA Affiliate or Parent
Plan fiduciary could be subject to any liability under the terms of such Parent
Plans, ERISA, the Code or any other applicable law, other than liabilities for
benefits payable in the normal course, which would have a Material Adverse
Effect on Parent.
(c) As used herein, (i) "Parent Plan" means a "pension
plan" (as defined in Section 3(2) of ERISA (other than a Parent Multiemployer
Plan)), a "welfare plan" (as defined in Section 3(1) of ERISA), or any bonus,
profit sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, holiday pay, vacation, severance,
death benefit, sick leave, fringe benefit, insurance or other plan, arrangement
or understanding, in each case established or maintained by Parent or any of
its ERISA Affiliates or as to which Parent or any of its ERISA Affiliates has
contributed or otherwise
30
may have any liability, (ii) "Parent Multiemployer Plan" means a "multiemployer
plan" (as defined in Section 4001(a)(3) of ERISA) to which Parent or any of its
ERISA Affiliates is or has been obligated to contribute or otherwise may have
any liability, and (iii) with respect to any person, "ERISA Affiliate" means
any trade or business (whether or not incorporated) which is under common
control or would be considered a single employer with such person pursuant to
Section 414(b), (c), (m) or (o) of the Code and the regulations promulgated
under those sections or pursuant to Section 4001(b) of ERISA and the
regulations promulgated thereunder.
Section 2.13 Compliance with Worker Safety and
Environmental Laws. The properties, assets and operations of Parent and its
Subsidiaries are in compliance with all applicable federal, state, local and
foreign laws, rules and regulations, orders, decrees, judgments, permits and
licenses relating to public and worker health and safety (collectively, "Worker
Safety Laws") and the protection and clean-up of the environment and activities
or conditions related thereto, including, without limitation, those relating to
the generation, handling, disposal, transportation or release of hazardous
materials (collectively, "Environmental Laws"), except for any violations that,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent. With respect to such properties, assets and operations, including any
previously owned, leased or operated properties, assets or operations, there
are no events, conditions, circumstances, activities, practices, incidents,
actions or plans of Parent or any of its Subsidiaries that may interfere with
or prevent compliance or continued compliance with applicable Worker Safety
Laws and Environmental Laws, other than any such interference or prevention as
would not, individually or in the aggregate with any such other interference or
prevention, have a Material Adverse Effect on Parent.
Section 2.14 Labor Matters. As of the date hereof,
neither Parent nor any of its Subsidiaries is a party to any collective
bargaining agreement or labor contract. Neither Parent nor any of its
Subsidiaries has engaged in any unfair labor practice with respect to any
persons employed by or otherwise performing services primarily for Parent or
any of its Subsidiaries (the "Parent Business Personnel"), and there is no
unfair labor practice
31
complaint or grievance against Parent or any of its Subsidiaries by the
National Labor Relations Board or any comparable state agency pending or
threatened in writing with respect to Parent Business Personnel, except where
such unfair labor practice, complaint or grievance would not have a Material
Adverse Effect on Parent. There is no labor strike, dispute, slowdown or
stoppage pending or, to the Knowledge of Parent, threatened against or
affecting Parent or any of its Subsidiaries which may interfere with the
respective business activities of Parent or any of its Subsidiaries, except
where such dispute, strike or work stoppage would not have a Material Adverse
Effect on Parent.
Section 2.15 Intellectual Property. (a) Except as set
forth in Section 2.15 of the Parent Letter, Parent and its Subsidiaries have
through ownership or licensing all patents, trademarks, trade names, service
marks, trade secrets, copyrights and other proprietary intellectual property
rights (collectively, "Intellectual Property Rights") as are necessary to
conduct the business of the Parent and its Subsidiaries as currently conducted
or planned to be conducted by the Parent and its Subsidiaries, taken as a
whole, except where the failure to have such Intellectual Property Rights would
not have a Material Adverse Effect on Parent. Except as set forth in Section
2.15 of the Parent Letter, neither Parent nor any of its Subsidiaries has
infringed any Intellectual Property Rights of any third party other than any
infringements that, individually or in the aggregate, would not have a Material
Adverse Effect on Parent.
(b) Except as set forth in the Parent SEC Documents filed
prior to the date of this Agreement or in Section 2.15 of the Parent Letter,
there are no actions, suits or claims or administrative proceedings or
investigations pending or, to the Knowledge of Parent, threatened that
challenge or question Parent's Intellectual Property Rights and that,
individually or in the aggregate, would have a Material Adverse Effect on
Parent.
(c) Except as set forth in Section 2.15 of the Parent Letter,
all patents, registered trademarks, service marks and copyrights which are held
by Parent or any of its Subsidiaries, and which are material to the business of
Parent and its Subsidiaries, taken as a whole, are to the Knowledge of Parent
valid and subsisting. Section 2.15 of
32
the Parent Letter contains a list as of the date hereof of (i) all material
registered United States, state and foreign trademarks, service marks, logos,
trade dress and trade names and pending applications to register the foregoing,
(ii) all United States and material foreign patents and patent applications and
(iii) all material registered United States and foreign copyrights and pending
applications to register the same, in each case owned by Parent and its
Subsidiaries.
Section 2.16 Opinion of Financial Advisor. Parent has
received the written opinion of Xxxxxxx, Xxxxx & Co., dated the date hereof, to
the effect that, as of the date hereof, the Exchange Ratio is fair to Parent
from a financial point of view.
Section 2.17 Required Vote of Parent Stockholders. The
affirmative vote of a majority of the shares present in person or by proxy at
the Parent Stockholder Meeting (as hereinafter defined) and entitled to vote on
the Share Issuance is required to approve the Share Issuance. No other vote of
the securityholders of Parent is required by law, the Parent Charter or the
Parent Bylaws or otherwise in order for Parent to consummate the Merger and the
transactions contemplated hereby.
Section 2.18 Pooling of Interests; Reorganization. To the
Knowledge of Parent, neither Parent nor any of its Subsidiaries has (i) taken
any action or failed to take any action which action or failure would
jeopardize the treatment of the Merger as a pooling of interests for accounting
purposes or (ii) taken any action or failed to take any action which action or
failure would jeopardize the qualification of the Merger as a reorganization
within the meaning of Section 368(a) of the Code.
Section 2.19 Brokers. No broker, investment banker or
other person, other than Xxxxxxx, Sachs & Co., the fees and expenses of which
will be paid by Parent (as reflected in the agreement between Xxxxxxx, Xxxxx &
Co. and Parent, a copy of which has been furnished to the Company), is entitled
to any broker's, finder's or other similar fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent.
33
Section 2.20 Operations of Sub. Sub is a direct, wholly
owned subsidiary of Parent, was formed solely for the purpose of engaging in
the transactions contemplated hereby, has engaged in no other business
activities and has conducted its operations only as contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as
follows:
Section 3.1 Organization, Standing and Power. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite corporate power
and authority to carry on its business as now being conducted. Each Subsidiary
of the Company is duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is organized and has the requisite
corporate (in the case of a Subsidiary that is a corporation) or other power
and authority to carry on its business as now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power
or authority would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. The Company and each of its Subsidiaries are
duly qualified to do business, and are in good standing, in each jurisdiction
where the character of their properties owned or held under lease or the nature
of their activities makes such qualification necessary, except where the
failure to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
Section 3.2 Capital Structure. (a) As of the date
hereof, the authorized capital stock of the Company consists of 360,000,000
shares of Company Common Stock and 20,000,000 shares of preferred stock, par
value $.01 per share ("Company Preferred Stock"). At the close of business on
May 28, 1998, (i) 101,628,989 shares of Company Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable and
free of preemptive rights, (ii) no shares of Company Common Stock were held in
34
the treasury of the Company or by Subsidiaries of the Company and (iii)
9,239,457 shares of Company Common Stock were reserved for issuance pursuant to
outstanding options (the "Company Stock Options") to purchase shares of Company
Common Stock issued pursuant to the Company's Amended and Restated 1994 Stock
Option Plan and 1996 Outside Directors Stock Option Plan (collectively, the
"Company Stock Option Plans"). There are no shares issuable pursuant to the
Company's Employee Stock Purchase Plan (the "Company Stock Purchase Plan").
The Company Stock Option Plans and the Company Stock Purchase Plan are the only
benefit plans of the Company or its Subsidiaries under which any securities of
the Company or any of its Subsidiaries are issuable. No shares of Company
Preferred Stock are issued or outstanding. As of the date of this Agreement,
except as set forth above and except for the issuance of shares of Company
Common Stock upon the exercise of Company Stock Options outstanding on May 28,
1998 in accordance with the terms thereof, no shares of capital stock or other
voting securities of the Company were issued, reserved for issuance or
outstanding. As of the date of this Agreement, except for (i) as set forth
above, (ii) the Stock Option Agreement and (iii) rights to purchase
one-one-thousandth of a share of Series A Junior Participating Preferred Stock
(the "Rights") pursuant to a Rights Agreement dated as of December 29, 1997
(the "Rights Agreement") between the Company and BankBoston, N.A., as Rights
Agent, there are no options, warrants, calls, rights, puts or agreements to
which the Company or any of its Subsidiaries is a party or by which any of them
is bound obligating the Company or any of its Subsidiaries to issue, deliver,
sell or redeem, or cause to be issued, delivered, sold or redeemed, any
additional shares of capital stock (or other voting securities or equity
equivalents) of the Company or any of its Subsidiaries or obligating the
Company or any of its Subsidiaries to grant, extend or enter into any such
option, warrant, call, right, put or agreement.
(b) Each outstanding share of capital stock (or other
voting security or equity equivalent) of each material Subsidiary of the
Company is duly authorized, validly issued, fully paid and nonassessable, and
each such share (or other voting security or equity equivalent) is owned by the
Company or another Subsidiary of the Company, free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on
35
voting rights, charges and other encumbrances of any nature whatsoever. The
Company does not have any outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or convertible into or
exercisable for securities having the right to vote) with the stockholders of
the Company on any matter. Exhibit 21 to the Company's Annual Report on Form
10-K for the year ended October 31, 1997, as filed with the SEC (the "Company
Annual Report"), is a true, accurate and correct statement in all material
respects of all of the information required to be set forth therein by the
regulations of the SEC.
(c) Section 3.2 of the letter dated the date hereof and
delivered on the date hereof by the Company to Parent, which letter relates to
this Agreement and is designated the Company Letter (the "Company Letter"),
sets forth a list of all Subsidiaries and Joint Ventures of the Company and the
jurisdiction in which such Subsidiary or Joint Venture is organized. Section
3.2 of the Company Letter also sets forth the nature and extent of the
ownership and voting interests held by the Company in each such Joint Venture.
As of the date hereof, the Company has no obligation to make any capital
contributions, or otherwise provide assets or cash, to any Joint Venture.
Section 3.3 Authority. On or prior to the date of this
Agreement, the Board of Directors of the Company has declared the Merger
advisable and fair to and in the best interest of the Company and its
stockholders, approved and adopted this Agreement in accordance with the DGCL,
approved the Stockholder Agreements and the Stock Option Agreement, resolved to
recommend the approval and adoption of this Agreement by the Company's
stockholders and directed that this Agreement be submitted to the Company's
stockholders for approval and adoption. The Company has all requisite
corporate power and authority to enter into this Agreement and the Stock Option
Agreement, to consummate the transactions contemplated by the Stock Option
Agreement and, subject to approval by the stockholders of the Company of this
Agreement, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the Stock Option Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of the Company, subject, in the case of this Agreement, to (x) approval of
36
this Agreement by the stockholders of the Company and (y) the filing of
appropriate Merger documents as required by the DGCL. This Agreement and the
Stock Option Agreement have been duly executed and delivered by the Company and
(assuming the valid authorization, execution and delivery of this Agreement by
Parent and Sub and the Stock Option Agreement by Parent and the validity and
binding effect of the Agreement on Parent and Sub and the Stock Option
Agreement on Parent) constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms. The filing of
the Joint Proxy Statement with the SEC and the issuance of the shares of
Company Common Stock pursuant to the Stock Option Agreement have been duly
authorized by the Company's Board of Directors.
Section 3.4 Consents and Approvals; No Violation.
Assuming that all consents, approvals, authorizations and other actions
described in this Section 3.4 have been obtained and all filings and
obligations described in this Section 3.4 have been made, except as set forth
in Section 3.4 of the Company Letter, the execution and delivery of this
Agreement and the Stock Option Agreement do not, and the consummation of the
transactions contemplated hereby and thereby and compliance with the provisions
hereof and thereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give to others a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company or any of its Subsidiaries under, any provision of (i) the Company
Charter or the Company Bylaws, (ii) any provision of the comparable charter or
organization documents of any of the Company's Subsidiaries, (iii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or any of its Subsidiaries or (iv) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or any of their respective properties or assets, other than, in
the case of clauses (ii), (iii) or (iv), any such violations, defaults, rights,
liens, security interests, charges or encumbrances that, individually or in the
aggregate, would not have a Material
37
Adverse Effect on the Company, materially impair the ability of the Company to
perform its obligations hereunder or under the Stock Option Agreement or
prevent the consummation of any of the transactions contemplated hereby or
thereby. No filing or registration with, or authorization, consent or approval
of, any Governmental Entity is required by or with respect to the Company or
any of its Subsidiaries in connection with the execution and delivery of this
Agreement or the Stock Option Agreement by the Company or is necessary for the
consummation of the Merger and the other transactions contemplated by this
Agreement or the Stock Option Agreement, except for (i) in connection, or in
compliance, with the provisions of the HSR Act, the Securities Act and the
Exchange Act, (ii) the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company or any of its Subsidiaries is
qualified to do business, (iii) such filings, authorizations, orders and
approvals as may be required to obtain the State Takeover Approvals, (iv) such
filings as may be required in connection with the taxes described in Section
5.11, (v) applicable requirements, if any, of Blue Sky Laws and NASDAQ, (vi) as
may be required under foreign laws and (vii) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, materially impair the ability of the
Company to perform its obligations hereunder or under the Stock Option
Agreement or prevent the consummation of any of the transactions contemplated
hereby or thereby.
Section 3.5 SEC Documents and Other Reports. The Company
has timely filed all required documents with the SEC since February 7, 1997
(the "Company SEC Documents"). As of their respective dates, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and, at the respective
times they were filed, none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements (including, in each case, any notes thereto) of the
Company included in the Company SEC Documents complied as to form in
38
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles (except, in the case
of the unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto) and fairly presented in all material respects
the consolidated financial position of the Company and its consolidated
Subsidiaries as at the respective dates thereof and the consolidated results of
their operations and their consolidated cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein). Except as
disclosed in the Company SEC Documents or as required by generally accepted
accounting principles, the Company has not, since October 31, 1997, made any
change in the accounting practices or policies applied in the preparation of
financial statements.
Section 3.6 Registration Statement and Joint Proxy
Statement. None of the information to be supplied by the Company for inclusion
or incorporation by reference in the Registration Statement or the Joint Proxy
Statement will (i) in the case of the Registration Statement, at the time it
becomes effective, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading or (ii) in the case of the Joint
Proxy Statement, at the time of the mailing of the Joint Proxy Statement, at
the time of each of the Stockholder Meetings and at the Effective Time, 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. If at any time prior to the Effective Time any event with respect
to the Company, its officers and directors or any of its Subsidiaries shall
occur which is required at that time to be described in the Joint Proxy
Statement or the Registration Statement, such event shall be so described, and
an appropriate amendment or supplement shall be promptly filed with the SEC
and, as required by law, disseminated to the stockholders of Parent and the
Company. The Registration Statement will comply (with respect to the Company)
as to form in all material respects with the
39
provisions of the Securities Act, and the Joint Proxy Statement will comply
(with respect to the Company) as to form in all material respects with the
provisions of the Exchange Act.
Section 3.7 Absence of Certain Changes or Events. Except
as disclosed in the Company SEC Documents filed with the SEC prior to the date
of this Agreement or as disclosed in Section 3.7 of the Company Letter, since
October 31, 1997 (A) the Company and its Subsidiaries have not incurred any
material liability or obligation (indirect, direct or contingent) or, through
the date hereof, entered into any material oral or written agreement or other
transaction that is not in the ordinary course of business or that would result
in a Material Adverse Effect on the Company, (B) the Company and its
Subsidiaries have not sustained any loss or interference with their business or
properties from fire, flood, windstorm, accident or other calamity (whether or
not covered by insurance) that has had a Material Adverse Effect on the
Company, (C) through the date hereof, there has been no change in the capital
stock of the Company except for the issuance of shares of the Company Common
Stock pursuant to Company Stock Options and no dividend or distribution of any
kind declared, paid or made by the Company on any class of its stock, (D) there
has not been (x) any granting by the Company or any of its Subsidiaries to any
officer of the Company or any of its Subsidiaries of any increase in
compensation, except in the ordinary course of business consistent with prior
practice or as was required under employment agreements in effect as of the
date of the most recent audited financial statements included in the Company
SEC Documents, (y) any granting by the Company or any of its Subsidiaries to
any such officer of any increase in severance or termination agreements in
effect as of the date of the most recent audited financial statements included
in the Company SEC Documents or (z) any entry by the Company or any of its
Subsidiaries into any employment, severance or termination agreement with any
such officer and (E) there has been no event causing a Material Adverse Effect
on the Company, nor any development that would, individually or in the
aggregate, result in a Material Adverse Effect on the Company.
Section 3.8 Permits and Compliance. (a) Each of the
Company and its Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits,
40
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Entity necessary for the Company or any of its Subsidiaries
to own, lease and operate its properties or to carry on its business as it is
now being conducted (the "Company Permits"), except where the failure to have
any of the Company Permits would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, and, as of the date of this Agreement,
no suspension or cancellation of any of the Company Permits is pending or, to
the Knowledge of the Company (as hereinafter defined), threatened, except where
the suspension or cancellation of any of the Company Permits would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company. Neither the Company nor any of its Subsidiaries is in violation of
(A) its charter, by-laws or other organizational documents, (B) any applicable
law, ordinance, administrative or governmental rule or regulation or (C) any
order, decree or judgment of any Governmental Entity having jurisdiction over
the Company or any of its Subsidiaries, except, in the case of clauses (A), (B)
and (C), for any violations that, individually or in the aggregate, would not
have a Material Adverse Effect on the Company.
(b) Except as disclosed in the Company SEC Documents
filed prior to the date of this Agreement or as disclosed in Section 3.8 of the
Company Letter, as of the date hereof there is no contract or agreement that is
or was required to be filed by the Company as a material contract pursuant to
Item 601 of Regulation S-K under the Securities Act. Except as set forth in
Section 3.8 of the Company Letter, as of the date hereof neither the Company
nor any of its Subsidiaries is a party to or bound by (i) any distribution,
marketing or non-competition agreement or any other agreement or obligation
which purports to materially limit the manner in which, or the localities in
which, the Company or any of its Subsidiaries is entitled to conduct its
business or (ii) any agreement evidencing, or guarantee relating to,
indebtedness for borrowed money to the extent the aggregate principal amount
outstanding thereunder exceeds $10,000,000. Except as set forth in the Company
SEC Documents filed prior to the date of this Agreement or as disclosed in
Section 3.8 of the Company Letter, no event of default or event that, but for
the giving of notice or the lapse of time or both, would constitute an event of
default exists or, upon the consummation by the Company of the
41
transactions contemplated by this Agreement or the Stock Option Agreement, will
exist under any indenture, mortgage, loan agreement, note or other agreement or
instrument for borrowed money, any guarantee of any agreement or instrument for
borrowed money or any lease, contractual license or other agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any such Subsidiary is bound or to which any of the
properties, assets or operations of the Company or any such Subsidiary is
subject, other than any defaults that, individually or in the aggregate, would
not have a Material Adverse Effect on the Company. For purposes of this
Agreement, "Knowledge of the Company" means the actual knowledge of the
individuals identified on Section 3.8 of the Company Letter.
Section 3.9 Tax Matters. Except as otherwise set forth
in Section 3.9 of the Company Letter, (i) the Company and each of its
Subsidiaries have filed all federal, and all material state, local, foreign and
provincial, Tax Returns required to have been filed or appropriate extensions
therefor have been properly obtained, and such Tax Returns are correct and
complete, except to the extent that any failure to so file or any failure to be
correct and complete would not, individually or in the aggregate, have a
Material Adverse Effect on the Company; (ii) all Taxes shown to be due on such
Tax Returns have been timely paid or extensions for payment have been properly
obtained, except to the extent that any failure to so pay or so obtain such an
extension would not, individually or in the aggregate, have a Material Adverse
Effect on the Company; (iii) the Company and each of its Subsidiaries have
complied in all material respects with all rules and regulations relating to
the withholding of Taxes except to the extent that any failure to comply with
such rules and regulations would not, individually or in the aggregate, have a
Material Adverse Effect on the Company; (iv) any Tax Returns referred to in
clause (i) relating to federal income Taxes have been examined by the IRS or
the period for assessment of the Taxes in respect of which such Tax Returns
were required to be filed has expired; (v) no issues that have been raised in
writing by the relevant taxing authority in connection with any examination of
the Tax Returns referred to in clause (i) are currently pending; (vi) all
deficiencies asserted or assessments made as a result of any examination of
such Tax Returns by any taxing authority have been paid in full or are being
timely and properly contested; and (vii) no
42
withholding is required under Section 1445 of the Code in connection with the
Merger.
Section 3.10 Actions and Proceedings. Except as set forth
in the Company SEC Documents filed prior to the date of this Agreement and
except as set forth in Section 3.10 of the Company Letter, there are no
outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving the Company or any of its
Subsidiaries, or against or involving any of the present or former directors,
officers, employees or, to the Knowledge of the Company, consultants, agents or
stockholders of the Company or any of its Subsidiaries, as such, or any of its
or their properties, assets or business or any Company Plan (as hereinafter
defined) that, individually or in the aggregate, would have a Material Adverse
Effect on the Company or materially impair the ability of the Company to
perform its obligations hereunder or under the Stock Option Agreement. Except
as set forth in the Company SEC Documents filed prior to the date of this
Agreement or in Section 3.10 of the Company Letter, there are no actions, suits
or claims or legal, administrative or arbitration proceedings or investigations
pending or, to the Knowledge of the Company, threatened against or involving
the Company or any of its Subsidiaries or any of its or their present or former
directors, officers, employees or, to the Knowledge of the Company,
consultants, agents or stockholders, as such, or any of its or their
properties, assets or business or any Company Plan that, individually or in the
aggregate, would have a Material Adverse Effect on the Company or materially
impair the ability of the Company to perform its obligations hereunder or under
the Stock Option Agreement. As of the date hereof, there are no actions,
suits, labor disputes or other litigation, legal or administrative proceedings
or governmental investigations pending or, to the Knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries or any
of its or their present or former officers, directors, employees or, to the
Knowledge of the Company, consultants, agents or stockholders, as such, or any
of its or their properties, assets or business relating to the transactions
contemplated by this Agreement and the Stock Option Agreement.
Section 3.11 Certain Agreements. Except as set forth in
Section 3.11 of the Company Letter, neither the
43
Company nor any of its Subsidiaries is a party to any oral or written agreement
or plan, including any employment agreement, severance agreement, stock option
plan, stock appreciation rights plan, restricted stock plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the Stock Option Agreement or
the value of any of the benefits of which will be calculated on the basis of
any of the transactions contemplated by this Agreement or the Stock Option
Agreement. No holder of any option to purchase shares of Company Common Stock,
or shares of Company Common Stock granted in connection with the performance of
services for the Company or its Subsidiaries, is or will be entitled to receive
cash from the Company or any Subsidiary in lieu of or in exchange for such
option or shares under this Agreement or the Stock Option Agreement. Section
3.11 of the Company Letter sets forth (i) for each officer, director, employee
or consultant who is a party to, or will receive benefits under, this Agreement
or the Stock Option Agreement, the total amount that each such person may
receive, or is eligible to receive, assuming that the transactions contemplated
by this Agreement are consummated on the date hereof, and (ii) the total amount
of indebtedness owed to the Company or its Subsidiaries from each officer or
director of the Company and its Subsidiaries. Except to the extent set forth
in Section 3.11 of the Company Letter, no "excess parachute payments" (as such
term is defined in Section 280G(b) of the Code) will be payable as a result of
the transactions contemplated by this Agreement to any employee of the Company
or its Subsidiaries who is a "disqualified individual" under Section 280G of
the Code.
Section 3.12 ERISA. (a) Each Company Plan is listed in
Section 3.12(a) of the Company Letter, true and complete copies of which have
heretofore been delivered to Parent. Except as would not have a Material
Adverse Effect on the Company, (i) each Company Plan complies in all respects
with ERISA, the Code and all other applicable statutes and governmental rules
and regulations, and (ii) no "reportable event" (within the meaning of Section
4043 of ERISA) has occurred with respect to any Company Plan. Neither the
Company nor any of its ERISA Affiliates (as defined in Section 2.12(c)) has
withdrawn from any Company
44
Plan or Company Multiemployer Plan (as hereinafter defined) or instituted, or
is currently considering taking, any action to do so. No action has been
taken, or is currently being considered, to terminate any Company Plan subject
to Title IV of ERISA. No Company Plan, nor any trust created thereunder, has
incurred any "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived.
(b) Except as listed in Section 3.12(b) of the Company
Letter, with respect to the Company Plans, no event has occurred and, to the
Knowledge of the Company, there exists no condition or set of circumstances in
connection with which the Company or any ERISA Affiliate or Company Plan
fiduciary could be subject to any liability under the terms of such Company
Plans, ERISA, the Code or any other applicable law, other than liabilities for
benefits payable in the normal course, which would have a Material Adverse
Effect on the Company. All Company Plans that are intended to be qualified
under Section 401(a) of the Code have been determined by the IRS to be so
qualified, or a timely application for such determination is now pending, and
the Company is not aware of any reason why any such Company Plan is not so
qualified in operation. Neither the Company nor any of its ERISA Affiliates
has been notified by any Company Multiemployer Plan that such Company
Multiemployer Plan is currently in reorganization or insolvency under and
within the meaning of Section 4241 or 4245 of ERISA or that such Company
Multiemployer Plan intends to terminate or has been terminated under Section
4041A of ERISA. Except as disclosed in Section 3.12(b) of the Company Letter,
neither the Company nor any of its ERISA Affiliates has any liability or
obligation under any welfare plan to provide benefits after termination of
employment to any employee or dependent other than as required by Section 4980B
of the Code.
(c) As used herein, (i) "Company Plan" means a "pension
plan" (as defined in Section 3(2) of ERISA (other than a Company Multiemployer
Plan)), a "welfare plan" (as defined in Section 3(1) of ERISA), or any bonus,
profit sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, holiday pay, vacation, severance,
death benefit, sick leave, fringe benefit, insurance or other plan, arrangement
or understanding, in each case established or maintained by
45
the Company or any of its ERISA Affiliates or as to which the Company or any of
its ERISA Affiliates has contributed or otherwise may have any liability, and
(ii) "Company Multiemployer Plan" means a "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) to which the Company or any of its ERISA
Affiliates is or has been obligated to contribute or otherwise may have any
liability.
(d) Section 3.12(d) of the Company Letter contains a
list, and the Company has heretofore provided to Parent a true and complete
copy, of all (i) severance, employment and material consulting agreements with
employees and consultants of the Company and each of its ERISA Affiliates and
(ii) severance programs and policies of the Company and each of its ERISA
Affiliates with or relating to its employees. The Company has entered into a
Proprietary Information Agreement with each of Xxxxx X. Xxxxxxxx and Xxxxx X.
Xxxxx (the "Noncompetition Agreements"), true and complete copies of which
(including all amendments thereto) are attached to Section 3.12(d) of the
Company Letter.
Section 3.13 Compliance with Worker Safety and
Environmental Laws. The properties, assets and operations of the Company and
its Subsidiaries are in compliance with all applicable Worker Safety Laws and
Environmental Laws, except for any violations that, individually or in the
aggregate, would not have a Material Adverse Effect on the Company. With
respect to such properties, assets and operations, including any previously
owned, leased or operated properties, assets or operations, there are no
events, conditions, circumstances, activities, practices, incidents, actions or
plans of the Company or any of its Subsidiaries that may interfere with or
prevent compliance or continued compliance with applicable Worker Safety Laws
and Environmental Laws, other than any such interference or prevention as would
not, individually or in the aggregate with any such other interference or
prevention, have a Material Adverse Effect on the Company.
Section 3.14 Labor Matters. Neither the Company nor any
of its Subsidiaries is a party to any collective bargaining agreement or,
except as set forth in Section 3.14 of the Company Letter, any labor contract.
Neither the Company nor any of its Subsidiaries has engaged in any unfair labor
practice with respect to any persons employed by or otherwise performing
services primarily for the
46
Company or any of its Subsidiaries (the "Company Business Personnel"), and
there is no unfair labor practice complaint or grievance against the Company or
any of its Subsidiaries by the National Labor Relations Board or any comparable
state agency pending or threatened in writing with respect to the Company
Business Personnel, except where such unfair labor practice, complaint or
grievance would not have a Material Adverse Effect on the Company. There is no
labor strike, dispute, slowdown or stoppage pending or, to the Knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
which may interfere with the respective business activities of the Company or
any of its Subsidiaries, except where such dispute, strike or work stoppage
would not have a Material Adverse Effect on the Company.
Section 3.15 Intellectual Property. (a) Except as set
forth in Section 3.15 of the Company Letter, the Company and its Subsidiaries
have through ownership or licensing all Intellectual Property Rights as are
necessary to conduct the business of the Company and its Subsidiaries as
currently conducted or planned to be conducted by the Company and its
Subsidiaries, taken as a whole, except where the failure to have such
Intellectual Property Rights would not have a Material Adverse Effect on the
Company. Except as set forth in Section 3.15 of the Company Letter, neither
the Company nor any of its Subsidiaries has infringed any Intellectual Property
Rights of any third party other than any infringements that, individually and
in the aggregate, would not have a Material Adverse Effect on the Company.
(b) Except as set forth in the Company SEC Documents
filed prior to the date of this Agreement or in Section 3.15 of the Company
Letter, there are no actions, suits or claims or administrative proceedings or
investigations pending or, to the Knowledge of the Company, threatened that
challenge or question the Company's Intellectual Property Rights and that,
individually or in the aggregate, would have a Material Adverse Effect on the
Company.
(c) All patents, registered trademarks, service marks and
copyrights which are held by the Company or any of its Subsidiaries, and which
are material to the business of the Company and its Subsidiaries, taken as a
whole, are to the Knowledge of the Company valid and subsisting. Section
47
3.15 of the Company Letter contains a list as of the date hereof of (i) all
material registered United States, state and foreign trademarks, service marks,
logos, trade dress and trade names and pending applications to register the
foregoing, (ii) all United States and material foreign patents and patent
applications and (iii) all material registered United States and foreign
copyrights and pending applications to register the same, in each case owned by
the Company and its Subsidiaries. The statements set forth in Section 3.15(c)
of the Company Letter are true and correct.
Section 3.16 Opinion of Financial Advisor. The Company
has received the written opinion of Xxxxxx Xxxxxxx & Co. Incorporated, dated
the date hereof, to the effect that, as of the date hereof, the Exchange Ratio
is fair to the Company s stockholders from a financial point of view, a copy of
which opinion has been delivered to Parent.
Section 3.17 State Takeover Statutes; Certain Charter
Provisions. The Board of Directors of the Company has, to the extent such
statutes are applicable, taken all action (including appropriate approvals of
the Board of Directors of the Company) necessary to exempt Parent, its
Subsidiaries and affiliates, the Merger, this Agreement, the Stock Option
Agreement, the Stockholder Agreements and the transactions contemplated hereby
and thereby from Section 203 of the DGCL. To the Knowledge of the Company, no
other state takeover statutes or charter or bylaw provisions are applicable to
the Merger, this Agreement, the Stock Option Agreement, the Stockholder
Agreements and the transactions contemplated hereby and thereby.
Section 3.18 Required Vote of Company Stockholders. The
affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock is required to adopt this Agreement. No other vote of the
securityholders of the Company is required by law, the Company Charter or the
Company Bylaws or otherwise in order for the Company to consummate the Merger
and the transactions contemplated hereby and in the Stock Option Agreement.
Section 3.19 Pooling of Interests; Reorganization. To the
Knowledge of the Company, neither it nor any of its Subsidiaries has (i) taken
any action or failed to take any action which action or failure would
48
jeopardize the treatment of the Merger as a pooling of interests for accounting
purposes or (ii) taken any action or failed to take any action which action or
failure would jeopardize the qualification of the Merger as a reorganization
within the meaning of Section 368(a) of the Code.
Section 3.20 Brokers. No broker, investment banker or
other person, other than Xxxxxx Xxxxxxx & Co. Incorporated, the fees and
expenses of which will be paid by the Company (as reflected in an agreement
between Xxxxxx Xxxxxxx & Co. Incorporated and the Company, a copy of which has
been furnished to Parent), is entitled to any broker's, finder's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement and by the Stock Option Agreement based upon arrangements made
by or on behalf of the Company.
Section 3.21 Rights Agreement. The Company has amended the
Rights Agreement to (i) render the Rights Agreement inapplicable to the Merger,
the Stock Option Agreement, the Stockholder Agreements and the transactions
contemplated hereby and thereby, (ii) provide that Parent shall not be deemed
an Acquiring Person (as defined in the Rights Agreement), the Distribution Date
(as defined in the Rights Agreement) shall not be deemed to occur and the
Rights will not separate from the shares of Company Common Stock as a result of
entering into this Agreement, the Stock Option Agreement, the Stockholder
Agreements or consummating the transactions contemplated hereby or thereby and
(iii) provide that the Rights shall cease to be exercisable immediately prior
to the Effective Time.
49
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger. (a)
Except as expressly permitted by clauses (i) through (xvii) of this Section
4.1(a), during the period from the date of this Agreement through the Effective
Time, the Company shall, and shall cause each of its Subsidiaries to, in all
material respects carry on its business in the ordinary course of its business
as currently conducted and, to the extent consistent therewith, use reasonable
best efforts to preserve intact its current business organizations, keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings
with it to the end that its goodwill and ongoing business shall be unimpaired
at the Effective Time. Without limiting the generality of the foregoing, and
except as otherwise expressly contemplated by this Agreement or as set forth in
Section 4.1 of the Company Letter (with specific reference to the applicable
subsection below), the Company shall not, and shall not permit any of its
Subsidiaries to, without the prior written consent of Parent:
(i) (A) declare, set aside or pay any dividends on, or make
any other actual, constructive or deemed distributions in respect of,
any of its capital stock, or otherwise make any payments to its
stockholders in their capacity as such, (B) split, combine or
reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, (C) purchase, redeem or otherwise
acquire any shares of capital stock of the Company or any other
securities thereof or any rights, warrants or options to acquire any
such shares or other securities or (D) amend the Rights Agreement;
(ii) issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock, any other voting securities
or equity equivalent or any securities convertible into, or
50
any rights, warrants or options to acquire any such shares, voting
securities, equity equivalent or convertible securities, other than
(A) the issuance of shares of Company Common Stock upon the exercise
of Company Stock Options outstanding on the date of this Agreement in
accordance with their current terms, (B) the issuance of shares of
Company Common Stock pursuant to the Stock Option Agreement and (C)
the issuance of Company Stock Options to purchase up to 800,000 shares
of Company Common Stock in the ordinary course of business consistent
with past practice to newly hired employees who are not officers of
the Company or any of its Subsidiaries (provided that no individual
receives Company Stock Options to purchase in excess of 12,500 shares
of Company Common Stock);
(iii) amend its charter or by-laws or other comparable
charter or organizational documents;
(iv) 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 assets acquired in the ordinary course
of business and not material to the Company and its Subsidiaries taken
as a whole;
(v) sell, lease, license (as licensor of Intellectual
Property Rights of the Company), mortgage, encumber or otherwise
dispose any of its properties or assets, other than sales, leases or
licenses of products or services in the ordinary course of business
and not material to the Company and its Subsidiaries taken as a whole;
(vi) incur any indebtedness for borrowed money, guarantee any
such indebtedness or make any loans, advances or capital contributions
to, or other investments in, any other person, other than
indebtedness, loans, advances, capital
51
contributions and investments between the Company and any of its
wholly owned Subsidiaries or between any of such wholly owned
Subsidiaries or cash management activities carried on in the ordinary
course of business consistent with past practice;
(vii) alter (through merger, liquidation, reorganization,
restructuring or in any other fashion) the corporate structure or
ownership of the Company (other than as provided in Sections
4.1(a)(ii)(A), (B) and (C)) or any Subsidiary;
(viii) enter into, adopt or amend any severance plan,
agreement or arrangement, Company Plan or employment or consulting
agreement, except as required by applicable law and except for
entering into any consulting agreements in the ordinary course of
business consistent with past practice;
(ix) increase the compensation payable or to become payable
to its directors, officers or employees (except for increases in the
ordinary course of business consistent with past practice in salaries
or wages of employees of the Company or any of its Subsidiaries who
are not officers of the Company or any of its Subsidiaries) or grant
any severance or termination pay to, or enter into or amend any
employment or severance agreement with, any current or former director
or officer of the Company or any of its Subsidiaries, or establish,
adopt, enter into, or, except as may be required to comply with
applicable law, amend or take action to enhance or accelerate any
rights or benefits under, any labor, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of
any current or former director, officer or employee;
(x) knowingly violate or knowingly fail to perform any
obligation or duty imposed upon it or
52
any Subsidiary by any applicable material federal, state or local law,
rule, regulation, guideline or ordinance;
(xi) make any change to accounting policies or procedures
(other than actions required to be taken by generally accepted
accounting principles);
(xii) prepare or file any Tax Return inconsistent with past
practice or, on any such Tax Return, take any position, make any
election, or adopt any method that is inconsistent with positions
taken, elections made or methods used in preparing or filing similar
Tax Returns in prior periods;
(xiii) make any tax election or settle or compromise any
material federal, state, local or foreign income tax liability;
(xiv) enter into, amend or terminate any noncompetition
agreement or any agreement or contract pursuant to which any third
party is granted marketing, distribution, material manufacturing or
any exclusive rights with respect to any Company product, process or
technology; amend the Noncompetition Agreements or make or agree to
make any new capital expenditure or expenditures which, individually,
is in excess of $10,000,000 or, in the aggregate, are in excess of
$60,000,000 at any time prior to October 31, 1998 (or in excess of
$80,000,000 at any time);
(xv) waive or release any material right or claim, or pay,
discharge or satisfy any material 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 liabilities reflected or reserved against in the most
recent Company SEC Documents filed prior to the date hereof, or
incurred in the ordinary course of business consistent with past
practice;
53
(xvi) initiate any litigation or arbitration proceeding or
settle or compromise any material litigation or arbitration
proceeding; or
(xvii) authorize, recommend, propose 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.
(b) During the period from the date of this Agreement to
the Effective Time of the Merger, Parent shall not, and shall not permit any of
its Subsidiaries to, without the prior written consent of the Company:
(i) declare, set aside, or pay any cash dividends on, or make
any other cash distributions in respect of, any capital stock of
Parent;
(ii) amend the Parent Charter or the Parent Bylaws;
(iii) alter (through liquidation, reorganization or
restructuring) the corporate structure of Parent; or
(iv) authorize, recommend, propose 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.
Notwithstanding the foregoing, nothing contained in this
Agreement shall prohibit Parent from adopting a stockholder rights plan and
issuing securities pursuant thereto or amending the Parent Charter to increase
the number of shares authorized thereby or amending the Parent Bylaws to change
the number of directors of Parent.
Section 4.2 No Solicitation. (a) From the date hereof
until the earlier of the Effective Time or the date on which this Agreement is
terminated in accordance with the terms hereof, the Company shall not, nor
shall it permit any of its Subsidiaries to, nor shall it authorize or permit
any officer, director or employee of or any financial advisor, attorney or
other advisor or representative of, the Company or any of its Subsidiaries to,
(i) solicit, initiate or
54
knowingly encourage the submission of, any Takeover Proposal (as hereafter
defined), (ii) enter into any agreement with respect to any Takeover Proposal
or (iii) participate in any discussions or negotiations regarding, or furnish
to any person any information with respect to, or take any other action to
knowingly facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Takeover Proposal;
provided, however, that prior to the Company Stockholder Meeting, nothing
contained in this Agreement (including, without limitation Section 4.1(a))
shall prevent the Company or its Board of Directors from (i) complying with
Rules 14d-9 and 14e-2 under the Exchange Act or publicly disclosing the
existence of a Takeover Proposal to the extent required by applicable law or
(ii) furnishing non-public information to, or entering into discussions or
negotiations with, any person or entity in connection with an unsolicited bona
fide written Takeover Proposal by such person or entity, if and only to the
extent that, with respect to clause (ii) above, (w) such Takeover Proposal
would, if consummated, result in a transaction that would, in the reasonable
good faith judgment of the Board of Directors of the Company, after
consultation with its financial advisors, result in a transaction more
favorable to the Company's stockholders from a financial point of view than the
Merger (any such more favorable Takeover Proposal being referred to in this
Agreement as a "Superior Proposal") and, in the reasonable good faith judgment
of the Board of Directors of the Company, after consultation with its financial
advisors, the person or entity making such Superior Proposal has the financial
means to conclude such transaction, (x) the failure to take such action would
in the reasonable good faith judgment of the Board of Directors of the Company,
on the basis of the advice of the outside corporate counsel of the Company,
violate the fiduciary duties of the Board of Directors of the Company to the
Company's stockholders under applicable law, (y) prior to furnishing such
non-public information to, or entering into discussions or negotiations with,
such person or entity, such Board of Directors receives from such person or
entity an executed confidentiality agreement with provisions not less favorable
to the Company than those contained in the Confidentiality Agreement (as
defined below) and (z) the Company shall have fully complied with this Section
4.2. For purposes of this Agreement, "Takeover Proposal" means any proposal or
offer, or any expression of interest, by any third party relating
55
to the Company's willingness or ability to receive or discuss a proposal or
offer for a merger, consolidation or other business combination involving the
Company or any of its Subsidiaries or any proposal or offer to acquire in any
manner, directly or indirectly, a substantial equity interest in, a substantial
portion of the voting securities of, or a substantial portion of the assets of
the Company or any of its Subsidiaries, other than the transactions
contemplated by this Agreement and the Stock Option Agreement.
(b) The Company shall advise Parent orally (within one
business day) and in writing (as promptly as practicable) of (i) any Takeover
Proposal or any inquiry with respect to or which could lead to any Takeover
Proposal, (ii) the material terms of such Takeover Proposal and (iii) the
identity of the person making any such Takeover Proposal or inquiry. The
Company will keep Parent fully informed of the status and details of any such
Takeover Proposal or inquiry.
Section 4.3 Third Party Standstill Agreements. During
the period from the date of this Agreement through the Effective Time, the
Company shall not terminate, amend, modify or waive any provision of any
confidentiality agreement relating to a Takeover Proposal or standstill
agreement to which the Company or any of its Subsidiaries is a party (other
than any involving Parent). During such period, the Company agrees to enforce,
to the fullest extent permitted under applicable law, the provisions of any
such agreements, including, but not limited to, obtaining injunctions to
prevent any breaches of such agreements and to enforce specifically the terms
and provisions thereof in any court of the United States or any state thereof
having jurisdiction.
Section 4.4 Pooling of Interests; Reorganization. During
the period from the date of this Agreement through the Effective Time, unless
the other party shall otherwise agree in writing, none of Parent, the Company
or any of their respective Subsidiaries shall (a) knowingly take or fail to
take any action which action or failure would jeopardize the treatment of the
Merger as a pooling of interests for accounting purposes or (b) knowingly take
or fail to take any action which action or failure would jeopardize the
qualification of the Merger as
56
a reorganization within the meaning of Section 368(a) of the Code. Between the
date of this Agreement and the Effective Time, Parent and the Company each
shall take, or cause to be taken, all actions reasonably necessary in order for
the Merger to be treated as a pooling of interests for accounting purposes.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meetings. The Company and Parent
will each, as soon as practicable following the date of this Agreement, duly
call, give notice of, convene and hold a meeting of stockholders (respectively,
the "Company Stockholder Meeting" and the "Parent Stockholder Meeting" and,
collectively, the "Stockholder Meetings") for the purpose of considering the
approval of this Agreement (in the case of the Company) and the Share Issuance
(in the case of Parent). The Company and Parent shall coordinate and cooperate
with respect to the timing of such meetings and shall use their reasonable best
efforts to hold such meetings on the same day. Parent will, through its Board
of Directors, recommend to its stockholders approval of the Share Issuance,
shall use all reasonable efforts to solicit such approval by its stockholders
and shall not withdraw or modify, or propose to withdraw or modify in a manner
adverse to the Company, such recommendation, except if in the reasonable good
faith judgment of Parent's Board of Directors, on the basis of the advice of
outside corporate counsel of Parent, the making of, or the failure to withdraw
or modify, such recommendation would violate the fiduciary duties of such Board
of Directors to Parent's stockholders under applicable law. Parent agrees to
submit the Share Issuance to its stockholders for approval whether or not the
Board of Directors of Parent determines at any time subsequent to the date
hereof and in accordance with the preceding sentence that the Share Issuance is
no longer advisable and recommends that the stockholders of Parent reject it.
The Company will, through its Board of Directors, recommend to its stockholders
approval of this Agreement, shall use all reasonable efforts to solicit such
approval by its stockholders and shall not withdraw or modify, or propose to
withdraw or modify in a manner adverse to Parent, such recommendation, except
if (i) the Company
57
has complied with Section 4.2 and (ii) (A) in the reasonable good faith
judgment of the Company's Board of Directors, on the basis of the advice of
outside corporate counsel of the Company, the making of, or the failure to
withdraw or modify, such recommendation would violate the fiduciary duties of
such Board of Directors to the Company's stockholders under applicable law or
(B) (x) the Board of Directors of the Company, after due deliberation and in
the good faith exercise of its fiduciary duties under applicable law (as
advised by outside corporate counsel of the Company), determines (1) to
withdraw or modify such recommendation solely because Parent notifies the
Company that it intends to enter into or has entered into a definitive written
agreement to effect a Parent Acquisition Event (as defined herein) and (2)
that, solely as a result of such Parent Acquisition Event, the Merger is no
longer in the best interests of the Company and its stockholders and (y) the
Board of Directors of the Company notifies Parent that it has resolved to
withdraw or modify its recommendation in favor of the approval of this
Agreement within five business days of the receipt of Parent's notice. In the
event Parent subsequently notifies the Company that it has elected not to enter
into such definitive written agreement to effect the Parent Acquisition Event,
the Board of Directors of the Company shall rescind any resolution to withdraw
or modify its recommendation in favor of approval of this Agreement. The
Company agrees to submit the Merger Agreement to its stockholders for approval
whether or not the Board of Directors of the Company determines at any time
subsequent to the date hereof and in accordance with the terms of this Section
5.1 that the Merger Agreement is no longer advisable and recommends that the
stockholders of the Company reject it.
Section 5.2 Preparation of the Registration Statement and
the Joint Proxy Statement. The Company and Parent shall promptly prepare and
file with the SEC the Joint Proxy Statement and Parent shall prepare and file
with the SEC the Registration Statement, in which the Joint Proxy Statement
will be included as a prospectus. Each of Parent and the Company shall use its
reasonable best efforts to have the Registration Statement declared effective
under the Securities Act as promptly as practicable after such filing. As
promptly as practicable after the Registration Statement shall have become
effective, each of Parent and the Company shall mail the Joint Proxy Statement
to its respective
58
stockholders. Parent shall also take any action reasonably required to be
taken under any applicable state securities laws in connection with the
issuance of Parent Common Stock in the Merger, and the Company shall furnish
all information concerning the Company and the holders of Company Common Stock
as may be reasonably requested in connection with any such action.
Section 5.3 Intentionally Omitted.
Section 5.4 Access to Information. Subject to currently
existing contractual and legal restrictions applicable to Parent or to the
Company or any of their respective Subsidiaries, as the case may be, each of
Parent and the Company shall, and shall cause each of its Subsidiaries to,
afford to the accountants, counsel, financial advisors and other
representatives of the other reasonable access to, and permit them to make such
inspections as they may reasonably require of, during normal business hours
during the period from the date of this Agreement through the Effective Time,
all of its properties, books, contracts, commitments and records (including,
without limitation, the work papers of independent accountants, if available
and subject to the consent of such independent accountants) and, during such
period, each of Parent and the Company shall, and shall cause each of its
Subsidiaries to, furnish promptly to the other (i) a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of federal or state securities laws and
(ii) all other information concerning its business, properties and personnel as
the other may reasonably request. No investigation pursuant to this Section
5.4 shall affect any representation or warranty in this Agreement of any party
hereto or any condition to the obligations of the parties hereto. All
information obtained pursuant to this Section 5.4 shall be kept confidential in
accordance with the Confidentiality Agreement, dated May 14, 1998 between
Parent and the Company (the "Confidentiality Agreement").
Section 5.5 Compliance with the Securities Act. (a)
Section 5.5(a) of the Company Letter contains a list identifying all persons
who, at the time of the Company Stockholder Meeting, may be deemed to be
"affiliates" of the Company as that term is used in paragraphs (c) and (d) of
Rule 145 under the Securities Act (the "Rule 145
59
Affiliates"). The Company shall use its reasonable best efforts to cause each
person who is identified as a Rule 145 Affiliate in such list to deliver to
Parent within 30 days of the date hereof a written agreement in substantially
the form of Exhibit 5.5(a) hereto (the "Company Affiliate Letter"), executed by
each of such persons identified in the foregoing list. Prior to the Effective
Time, the Company shall amend and supplement Section 5.5(a) of the Company
Letter and use its reasonable best efforts to cause each additional person who
is identified as a Rule 145 Affiliate of the Company to execute the Company
Affiliate Letter. Parent shall be entitled to place appropriate legends on the
certificates evidencing any Parent Common Stock to be received by affiliates of
the Company pursuant to this Agreement and to issue appropriate stop transfer
instructions to the transfer agent for the Parent Common Stock, consistent with
the terms of the Company Affiliate Letter.
(b) Section 5.5(b) of the Parent Letter contains a list
identifying those persons who may be, at the time of the Parent Stockholder
Meeting, affiliates of Parent under applicable SEC accounting releases with
respect to pooling of interests accounting treatment. Parent shall use its
reasonable best efforts to enter into a written agreement in substantially the
form of Exhibit 5.5(b) hereto (the "Parent Affiliate Letter") within 30 days of
the date hereof with each of such persons identified in the foregoing list.
Prior to the Effective Time, Parent shall amend and supplement Section 5.5(b)
of the Parent Letter and use its reasonable best efforts to cause each
additional person who is identified as an affiliate of Parent to execute the
Parent Affiliate Letter.
Section 5.6 Current Nasdaq Quotation. Each of Parent and
the Company shall use its reasonable best efforts to continue the quotation of
the Parent Common Stock and the Company Common Stock, respectively, on NASDAQ
during the term of this Agreement to the extent necessary so that appraisal
rights will not be available to stockholders of the Company under Section 262
of the DGCL.
Section 5.7 Fees and Expenses. (a) Except as provided
in this Section 5.7 and Section 5.11, whether or not the Merger is consummated,
all costs and expenses incurred in connection with this Agreement and the
60
transactions contemplated hereby including, without limitation, the fees and
disbursements of counsel, financial advisors and accountants, shall be paid by
the party incurring such costs and expenses, provided that all printing
expenses and all filing fees (including, without limitation, filing fees under
the Securities Act, the Exchange Act and the HSR Act) shall be divided equally
between Parent and the Company.
(b) (i) Notwithstanding any provision in this Agreement
to the contrary, if this Agreement is terminated (A) by the Company or Parent
pursuant to Section 7.1(e) and a Takeover Proposal existed between the date
hereof and the date of the Company Stockholder Meeting, (B) by the Company or
Parent pursuant to Section 7.1(g) or (C) by Parent pursuant to Section
7.1(h)(except, in the case of Section 7.1(h)(i), as provided in Section
5.7(d)), 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 reasonable out-of-pocket fees and expenses
incurred or paid by or on behalf of Parent or any Affiliate (as hereinafter
defined) of Parent in connection with this Agreement, the Stock Option
Agreement and the transactions contemplated herein or therein, including all
fees and expenses of counsel, investment banking firms, accountants and
consultants; provided, however, that the Company shall not be obligated to make
payments pursuant to this Section 5.7(b)(i) in excess of $10,000,000 in the
aggregate. As used herein, "Affiliate" shall have the meaning set forth in
Rule 405 under the Securities Act.
(ii) Notwithstanding any provision in this Agreement to
the contrary, if this Agreement is terminated (A) by the Company or Parent
pursuant to Section 7.1(f) and a Parent Takeover Proposal (as defined below)
existed between the date hereof and the date of the Parent Stockholder Meeting
or (B) by the Company pursuant to Section 7.1(i) (except in circumstances in
which the event described in Section 7.1(i) causing such termination occurred
solely as a result of a Material Adverse Effect on the Company (provided that,
for purposes of this Section 5.7(b)(ii)(B), a Material Adverse Effect on the
results of operations of the Company and
61
its Subsidiaries shall only be deemed to be such to the extent it relates to
the long-term prospects of the results of operations of the Company and its
Subsidiaries taken as a whole) after the Board of Directors of Parent
determined, in its reasonable good faith judgment, on the basis of the advice
of outside corporate counsel of Parent, that the making of its recommendation
to the stockholders of Parent in favor of the Share Issuance, or the failure to
withdraw or modify such recommendation, would violate its fiduciary duties
under applicable law in light of such Material Adverse Effect on the Company),
then, in each case, 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 reasonable 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 Stock Option Agreement and the transactions
contemplated herein or therein, including all fees and expenses of counsel,
investment banking firms, accountants and consultants; provided, however, that
Parent shall not be obligated to make payments pursuant to this Section
5.7(b)(ii) in excess of $10,000,000 in the aggregate. As used herein, "Parent
Takeover Proposal" means any proposal or offer, or any expression of interest,
by any third party relating to Parent's willingness or ability to receive or
discuss a proposal or offer for a merger, consolidation or other business
combination, in each case pursuant to which Parent is acquired by a third
party.
(c) Notwithstanding any provision in this Agreement to
the contrary, if (i) this Agreement is terminated by the Company or Parent
pursuant to Section 7.1(e) and a Takeover Proposal existed between the date
hereof and the date of the Company Stockholder Meeting and, concurrently with
or within twelve months after any such termination a Third Party Acquisition
Event (as defined below) occurs or the Company shall enter into any letter of
intent, agreement in principle, acquisition agreement or other similar agreement
with respect to a Third Party Acquisition Event, (ii) this Agreement is
terminated by Parent or the Company pursuant to Section 7.1(g) or (iii) this
Agreement is terminated by Parent pursuant to Section 7.1(h) (except, in the
case of Section 7.1(h)(i), as provided in Section 5.7(d)), then, in each case,
the Company shall (in addition to any obligation under Section 5.7(b) and
without prejudice to any other rights that Parent may have against the Company
for a breach of this Agreement) pay to Parent a fee (the "Termination Fee") of
$200,000,000 in
62
cash, such payment to be made promptly, but in no event later than, in the case
of clause (i), the later to occur of such termination and such Third Party
Acquisition Event or, in the case of clauses (ii) or (iii), such termination.
As used in this Agreement, a "Third Party Acquisition Event"
involving the Company means (i) a transaction or series of transactions
pursuant to which any person or group (as such term is defined under the
Exchange Act), other than Parent or Sub, or any affiliate thereof ("Third
Party"), acquires (or would acquire upon completion of such transaction or
series of transactions) more than twenty percent (20%) of the equity securities
or voting power of the Company or any of its Subsidiaries, pursuant to a tender
offer or exchange offer or otherwise, (ii) a merger, consolidation, share
exchange or other business combination involving the Company or any of its
Subsidiaries pursuant to which any person other than Parent or Sub acquires
ownership (or would acquire ownership upon consummation of such merger,
consolidation, share exchange or other business combination) of more than
twenty percent (20%) of the outstanding equity securities or voting power of
the Company or any of its Subsidiaries or of the entity surviving such merger
or business combination or resulting from such consolidation, (iii) any other
transaction or series of transactions pursuant to which any Third Party
acquires (or would acquire upon completion of such transaction or series of
transactions) control of assets of the Company or any of its Subsidiaries
(including, for this purpose, outstanding equity securities of Subsidiaries of
such party) having a fair market value equal to more than twenty percent (20%)
of the fair market value of all the consolidated assets of the Company
immediately prior to such transaction or series of transactions, or (iv) any
transaction or series of transactions pursuant to which any Third Party
acquires (or would acquire upon completion of such transaction or series of
transactions) control of the Board of Directors of the Company or by which
nominees of any Third Party are (or would be) elected or appointed to a
majority of the seats on the Board of Directors of the Company.
(d) No payment shall be required to be made by the
Company pursuant to Section 5.7(b)(i)(C) or 5.7(c)(iii) (in each case, with
respect to a termination of this Agreement pursuant to Section 7.1(h)(i)) if
the following
63
conditions are satisfied: (i) no Takeover Proposal existed between the date
hereof and the date of the Company Stockholder Meeting; (ii) the event
described in Section 7.1(h)(i) causing the termination of this Agreement
occurred solely as a result of (A) the occurrence of a Material Adverse Effect
on Parent (provided that, for purposes of this Section 5.7(d)(ii)(A), a
Material Adverse Effect on the results of operations of Parent and its
Subsidiaries shall only be deemed to be such to the extent it relates to the
long-term prospects of the results of operations of Parent and its Subsidiaries
taken as a whole) or (B) Parent entering into a definitive written agreement
pursuant to which (x) Parent acquires, or one of Parent's Subsidiaries merges
with, another entity and (y) in consideration therefor Parent agrees to issue
Parent Common Stock or other voting securities representing, in the aggregate,
20% or more of the then outstanding shares of Parent Common Stock and other
Parent voting securities (a "Parent Acquisition Event"); (iii) prior to the
occurrence of the event described in Section 7.1(h)(i) causing the termination
of this Agreement (if resulting from such Material Adverse Effect on Parent as
stated above), the Board of Directors of the Company determined in its
reasonable good faith judgment, on the basis of the advice of outside corporate
counsel of the Company, that the making of its recommendation to the
stockholders of the Company in favor of approval of this Agreement, or the
failure to withdraw or modify such recommendation, would violate its fiduciary
duties under applicable law solely in light of the Material Adverse Effect on
Parent; and (iv) prior to the occurrence of the event described in Section
7.1(h)(i) causing such termination (if resulting from Parent entering into a
definitive written agreement to effect a Parent Acquisition Event as stated
above), (A) the Board of Directors of the Company, after due deliberation and
in the good faith exercise of its fiduciary duties under applicable law (as
advised by outside corporate counsel of the Company), determined (1) to
withdraw or modify such recommendation solely because Parent notified the
Company that it intended to enter into or had entered into a definitive written
agreement to effect a Parent Acquisition Event and (2) that, solely as a result
of such Parent Acquisition Event, the Merger was no longer in the best
interests of the Company and its stockholders and (B) the Board of Directors of
the Company notified Parent that it had resolved to withdraw or modify its
recommendation in
64
favor of the approval of this Agreement within five business days of the
receipt of Parent's notice.
Section 5.8 Company Stock Plans. (a) Not later than the
Effective Time, each Company Stock Option which is outstanding immediately
prior to the Effective Time pursuant to the Company Stock Option Plans shall
become and represent an option to purchase the number of shares of Parent
Common Stock (a "Substitute Option") (decreased to the nearest full share)
determined by multiplying (i) the number of shares of Company Common Stock
subject to such Company Stock Option immediately prior to the Effective Time by
(ii) the Exchange Ratio, at an exercise price per share of Parent Common Stock
(rounded up to the nearest tenth of a cent) equal to the exercise price per
share of Company Common Stock immediately prior to the Effective Time divided
by the Exchange Ratio. Parent shall pay cash to holders of Company Stock
Options in lieu of issuing fractional shares of Parent Common Stock upon the
exercise of Substitute Options for shares of Parent Common Stock, unless in the
judgment of Parent such payment would adversely affect the ability to account
for the Merger under the pooling of interests method. After the Effective
Time, except as provided above in this Section 5.8, each Substitute Option
shall be exercisable upon the same terms and conditions as were applicable
under the related Company Stock Option immediately prior to or at the Effective
Time. The Company shall take all necessary action to implement the provisions
of this Section 5.8. As soon as reasonably practicable, and in no event later
than twenty days after the Effective Time, Parent shall file a registration
statement on Form S-8 (or any successor or other appropriate form) with respect
to Parent Common Stock subject to such Substitute Options, or shall cause such
Substitute Options to be deemed to be issued pursuant to a Parent Stock Plan
for which shares of Parent Common Stock have been previously registered
pursuant to an appropriate registration form.
(b) The Company shall cause the Company Stock Purchase
Plan and all rights thereunder to terminate, with the effect of such
termination being that no offering period and no purchase period shall commence
under such plan.
Section 5.9 Reasonable Best Efforts; Pooling of
Interests. (a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use reasonable best efforts to take,
or cause to
65
be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including, but not limited to: (i) the obtaining of all necessary
actions or non-actions, waivers, consents and approvals from all Governmental
Entities and the making of all necessary registrations and filings (including
filings with Governmental Entities) and the taking of all reasonable steps as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity (including those in connection with the
HSR Act and State Takeover Approvals), (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement, the Stock Option Agreement or the consummation of
the transactions contemplated hereby and thereby, including seeking to have any
stay or temporary restraining order entered by any court or other Governmental
Entity vacated or reversed, (iv) each of Parent and the Company agreeing to
take, together with their respective accountants, all actions reasonably
necessary in order to obtain a favorable determination (if required) from the
SEC that the Merger may be accounted for as a pooling of interests in
accordance with generally accepted accounting principles and (v) the execution
and delivery of any additional instruments necessary to consummate the
transactions contemplated by this Agreement. No party to this Agreement shall
consent to any voluntary delay of the consummation of the Merger at the behest
of any Governmental Entity without the consent of the other parties to this
Agreement, which consent shall not be unreasonably withheld.
(b) Each party shall use all reasonable best efforts to
not take any action, or enter into any transaction, which would cause any of
its representations or warranties contained in this Agreement to be untrue or
result in a breach of any covenant made by it in this Agreement.
(c) Notwithstanding anything to the contrary contained in
this Agreement, in connection with any filing or submission required or action
to be taken by either Parent or the Company to effect the Merger and to
consummate
66
the other transactions contemplated hereby, the Company shall not, without
Parent's prior written consent, and Parent shall not, without the Company's
prior written consent, commit to any divestiture transaction, and neither
Parent or any of its Affiliates nor the Company or any of its Affiliates shall
be required to divest or hold separate or otherwise take or commit to take any
action that limits its freedom of action with respect to, or its ability to
retain, the Company or any of the businesses, product lines or assets of
Parent, the Company or any of their respective Subsidiaries or that otherwise
would have a Material Adverse Effect on Parent or the Company.
(d) Nothing contained in this Agreement, including
without limitation this Section 5.9, shall limit or restrict Parent's ability
to enter into any Parent Takeover Proposal, any Parent Acquisition Event or any
other business combination or Parent's activities in connection with any of the
foregoing; provided, however, that this Section 5.9(d) shall not affect the
right of the Board of Directors of the Company to withdraw or modify its
recommendation to the stockholders of the Company in favor of approval of this
Agreement in accordance with the terms of Section 5.1.
Section 5.10 Public Announcements. Parent and the Company
will not issue any press release with respect to the transactions contemplated
by this Agreement or otherwise issue any written public statements with respect
to such transactions without prior consultation with the other party, except as
may be required by applicable law or by obligations pursuant to any listing
agreement with any national securities exchange or the rules of NASDAQ.
Section 5.11 Real Estate Transfer and Gains Tax. Parent
and the Company agree that either the Company or the Surviving Corporation will
pay any state or local tax which is attributable to the transfer of the
beneficial ownership of the Company's or its Subsidiaries' real property, if
any (collectively, the "Gains Taxes"), and any penalties or interest with
respect to the Gains Taxes, payable in connection with the consummation of the
Merger. The Company and Parent agree to cooperate with the other in the filing
of any returns with respect to the Gains Taxes, including supplying in a timely
manner a complete list of all real property interests held by the Company and
its Subsidiaries and any information with respect to such property that is
67
reasonably necessary to complete such returns. The portion of the
consideration allocable to the real property of the Company and its
Subsidiaries shall be determined by Parent in its reasonable discretion.
Section 5.12 State Takeover Laws. If any "fair price,"
"business combination" or "control share acquisition" statute or other similar
statute or regulation shall become applicable to the transactions contemplated
hereby or in the Stock Option Agreement, Parent and the Company and their
respective Boards of Directors shall use their reasonable best efforts to grant
such approvals and take such actions as are necessary so that the transactions
contemplated hereby and thereby may be consummated as promptly as practicable
on the terms contemplated hereby and thereby and otherwise act to minimize the
effects of any such statute or regulation on the transactions contemplated
hereby and thereby.
Section 5.13 Indemnification; Directors and Officers
Insurance. For six years from and after the Effective Time, Parent agrees to
cause the Surviving Corporation to indemnify and hold harmless all past and
present officers and directors of the Company and of its Subsidiaries to the
same extent such persons are indemnified as of the date of this Agreement by
the Company for acts or omissions occurring at or prior to the Effective Time
pursuant to the Company Charter, the Company Bylaws and the indemnification
agreements in the form filed as an exhibit to the Company SEC Documents which
were entered into prior to the date hereof between the Company and persons
identified in Section 5.13 of the Company Letter. Parent shall provide, or
shall cause the Surviving Corporation to provide, for an aggregate period of
not less than six years from the Effective Time, the Company's current
directors and officers an insurance and indemnification policy that provides
coverage for events occurring prior to the Effective Time (the "D&O Insurance")
that is substantially similar (with respect to limits and deductibles) to the
Company's existing policy or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; provided, however, that the Surviving
Corporation shall not be required to pay an annual premium for the D&O Insurance
in excess of $1,425,000, but shall, in such event, maintain all coverage that
can be purchased for such amount. The Company represents and warrants to Parent
that a true
68
and complete copy of the Company's existing insurance and indemnification
policy has been provided to Parent.
Section 5.14 Notification of Certain Matters. Parent
shall use its reasonable best efforts to give prompt notice to the Company, and
the Company shall use its reasonable best efforts to give prompt notice to
Parent, of: (i) the occurrence, or non-occurrence, of any event the
occurrence, or non-occurrence, of which it is aware and which would be
reasonably likely to cause (x) any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect or (y) any
covenant, condition or agreement contained in this Agreement not to be complied
with or satisfied in all material respects, (ii) any failure of Parent or the
Company, as the case may be, to comply in a timely manner with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder or (iii) any change or event which would be reasonably likely to have
a Material Adverse Effect on Parent or the Company, as the case may be;
provided, however, that the delivery of any notice pursuant to this Section
5.14 shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
Section 5.15 Employee Benefit Plans and Agreements. (a)
Parent agrees that it will cause the Surviving Corporation from and after the
Effective Time to honor all Company Plans and all employment agreements entered
into by the Company prior to the date hereof; provided, however, that nothing
in this Agreement shall be interpreted as limiting the power of Parent or the
Surviving Corporation to amend or terminate any Company Plan or any other
individual employee benefit plan, program, agreement or policy or as requiring
Parent or the Surviving Corporation to offer to continue (other than as
required by its terms) any written employment contract.
(b) Subject to this Section 5.15(b), Parent agrees that
all employees of the Company and its Subsidiaries who are covered under any of
the Company Plans immediately prior to the Effective Time shall continue to be
covered under such Company Plans after the Effective Time other than the
Company Stock Purchase Plan and the Company Stock Option Plans.
Notwithstanding the foregoing, Parent may terminate all of the Company Plans
provided that: (1)
69
each Company employee and each employee of the Company's Subsidiaries is
provided coverage under the Parent Plans on the same terms and conditions as
similarly situated Parent employees; (2) Parent causes each Parent Plan
covering employees of the Company or its Subsidiaries to recognize prior
service of such employees with the Company and its Subsidiaries as service with
Parent and its Subsidiaries (i) for purposes of any waiting period and
eligibility requirements under any Parent Plan that is not a "pension plan" (as
defined in Section 3(2) of ERISA), and (ii) for purposes of eligibility
(including eligibility for early retirement benefits) and vesting (but not
benefit accrual) under any Parent Plan that is a "pension plan" (as defined in
Section 3(2) of ERISA); (3) Parent causes coverage to be immediately available
for employees of the Company and its Subsidiaries under the comparable Parent
Plan, if any, at the time coverage ceases under any Company Plan sought to be
terminated; and (4) to the extent Parent elects to terminate any Company Plan,
it will terminate the other Company Plans in accordance herewith as soon as
practicable after the termination of such Company Plan. Notwithstanding the
foregoing, nothing herein shall require Parent to offer benefits under the
Parent Plans comparable to those offered under the Company Plans.
(c) After the Effective Time, Parent shall cause employees of
the Company to be eligible to participate in stock purchase plans maintained by
Parent from time to time and to receive grants of options to purchase Parent
Common Stock under the stock option plans maintained by Parent from time to
time, in each case in accordance with the terms of such plans.
Section 5.16 Rights Agreement. Without the prior written
consent of Parent, the Company shall not redeem the Rights issued under the
Rights Agreement or terminate the Rights Agreement prior to the Effective Time
unless required to do so by a court of competent jurisdiction.
Section 5.17 Directorships. Promptly following the
Effective Time, Parent's Board of Directors shall elect Xxxxxxx X. Xxxxxxx, Xxx
X. Xxxxxxx, Xxxxxxx Xxxxxxx and Xxxxx X. Xxxxxx to be directors of Parent so
that immediately thereafter, the Board of Directors of Parent shall consist of
twelve directors.
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ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to
Effect the Merger. The respective obligations of each party to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following conditions:
(a) Stockholder Approval. This Agreement shall have been
duly approved by the requisite vote of stockholders of the Company in
accordance with applicable law and the Company Charter and the Company Bylaws,
and the Share Issuance shall have been approved by the requisite vote of the
stockholders of Parent in accordance with applicable rules of NASDAQ,
applicable law and the Parent Charter and the Parent Bylaws.
(b) Quotation of Stock. The Parent Common Stock issuable
in the Merger shall have been authorized for quotation on NASDAQ, subject to
official notice of issuance.
(c) HSR and Other Approvals. (i) The waiting period (and
any extension thereof) applicable to the consummation of the Merger under the
HSR Act shall have expired or been terminated.
(ii) All authorizations, consents, orders, declarations or
approvals of, or filings with, or terminations or expirations of waiting
periods imposed by, any Governmental Entity, which the failure to obtain, make
or occur would have the effect of making the Merger or any of the transactions
contemplated hereby illegal or would have, individually or in the aggregate, a
Material Adverse Effect on Parent (assuming the Merger had taken place), shall
have been obtained, shall have been made or shall have occurred.
(d) Registration Statement. The Registration Statement
shall have become effective in accordance with the provisions of the Securities
Act. No stop order suspending the effectiveness of the Registration Statement
shall have been issued by the SEC and no proceedings for that purpose shall
have been initiated or, to the Knowledge of Parent or
71
the Company, threatened by the SEC. All necessary state securities or Blue Sky
authorizations (including State Takeover Approvals) shall have been received.
(e) No Order. No court or other Governmental Entity
having jurisdiction over the Company or Parent, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of making the Merger or any of the transactions contemplated hereby
illegal.
Section 6.2 Conditions to Obligation of the Company to
Effect the Merger. The obligation of the Company to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
additional conditions:
(a) Performance of Obligations; Representations and
Warranties. Each of Parent and Sub shall have performed in all material
respects each of its agreements contained in this Agreement required to be
performed on or prior to the Effective Time, each of the representations and
warranties of Parent and Sub contained in this Agreement that is qualified by
materiality shall be true and correct on and as of the Effective Time as if
made on and as of such date (other than representations and warranties which
address matters only as of a certain date which shall be true and correct as of
such certain date) and each of the representations and warranties that is not
so qualified shall be true and correct in all material respects on and as of
the Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain date
which shall be true and correct in all material respects as of such certain
date), in each case except as contemplated or permitted by this Agreement, and
the Company shall have received a certificate signed on behalf of Parent by its
Chief Executive Officer and its Chief Financial Officer to such effect.
(b) Tax Opinion. The Company shall have received an
opinion of Xxxxx & Xxxxxxx L.L.P., in form and substance reasonably
satisfactory to the Company, dated the Effective Time, substantially to the
effect that on the basis of
72
facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing as of the Effective Time, for
federal income tax purposes:
(i) the Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and the Company, Sub and Parent
will each be a party to that reorganization within the meaning of
Section 368(b) of the Code;
(ii) no gain or loss will be recognized by Parent, Sub or the
Company as a result of the Merger;
(iii) no gain or loss will be recognized by the stockholders
of the Company upon the conversion of their shares of Company Common
Stock into shares of Parent Common Stock pursuant to the Merger,
except with respect to cash, if any, received in lieu of fractional
shares of Parent Common Stock;
(iv) the aggregate tax basis of the shares of Parent Common
Stock received in exchange for shares of Company Common Stock pursuant
to the Merger (including a fractional share of Parent Common Stock for
which cash is received) will be the same as the aggregate tax basis of
such shares of Company Common Stock;
(v) the holding period for shares of Parent Common Stock
received in exchange for shares of Company Common Stock pursuant to
the Merger will include the holder's holding period for such shares of
Company Common Stock, provided such shares of Company Common Stock
were held as capital assets by the holder at the Effective Time; and
(vi) a stockholder of the Company who receives cash in lieu
of a fractional share of Parent Common Stock will recognize gain or
loss equal to the difference, if any, between such stockholder's basis
in the fractional share
73
(determined under clause (iv) above) and the amount of cash received.
In rendering such opinion, Xxxxx & Xxxxxxx L.L.P. may rely upon the
representations contained herein and may receive and rely upon representations
from Parent, the Company, and others, including representations from Parent
substantially similar to the representations in the Parent Tax Certificate
attached to the Parent Letter and representations from the Company
substantially similar to the representations in the Company Tax Certificate
attached to the Company Letter.
(c) Material Adverse Effect. Since the date of this
Agreement, there shall not have been any events, changes or developments that,
individually or in the aggregate, would have a Material Adverse Effect on
Parent; provided, that, for purposes of this Section 6.2(c), a Material Adverse
Effect on the results of operations of Parent shall only be deemed to be such
to the extent it relates to the long-term prospects of the results of
operations of Parent and its Subsidiaries taken as a whole. The Company shall
have received a certificate signed on behalf of Parent by its Chief Executive
Officer and its Chief Financial Officer to such effect.
(d) Consents. Parent shall have obtained the consent or
approval of each person that is not a Governmental Entity whose consent or
approval shall be required in connection with the transactions contemplated
hereby under any loan or credit agreement, note, mortgage, indenture, lease or
other agreement by which Parent or any of its Subsidiaries is bound, except as
to which the failure to obtain such consents and approvals would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
(e) Litigation. There shall not be instituted or pending
any suit, action or proceeding by any Governmental Entity relating to this
Agreement, the Stock Option Agreement or any of the transactions contemplated
herein or therein which would have a Material Adverse Effect on the Company or
Parent.
Section 6.3 Conditions to Obligations of Parent and Sub
to Effect the Merger. The obligations of Parent and Sub to effect the Merger
shall be subject to the fulfillment
74
at or prior to the Effective Time of the following additional conditions:
(a) Performance of Obligations; Representations and
Warranties. The Company shall have performed in all material respects each of
its agreements contained in this Agreement required to be performed on or prior
to the Effective Time, each of the representations and warranties of the
Company contained in this Agreement that is qualified by materiality shall be
true and correct on and as of the Effective Time as if made on and as of such
date (other than representations and warranties which address matters only as
of a certain date which shall be true and correct as of such certain date) and
each of the representations and warranties that is not so qualified shall be
true and correct in all material respects on and as of the Effective Time as if
made on and as of such date (other than representations and warranties which
address matters only as of a certain date which shall be true and correct in
all material respects as of such certain date), in each case except as
contemplated or permitted by this Agreement, and Parent shall have received a
certificate signed on behalf of the Company by its Chief Executive Officer and
its Chief Financial Officer to such effect.
(b) Tax Opinion. Parent shall have received an opinion
of Sidley & Austin, in form and substance reasonably satisfactory to Parent,
dated the Effective Time, substantially to the effect that on the basis of
facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing as of the Effective Time, for
federal income tax purposes:
(i) the Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and the Company, Sub and Parent
will each be a party to that reorganization within the meaning of
Section 368(b) of the Code;
(ii) no gain or loss will be recognized by Parent, Sub or the
Company as a result of the Merger;
(iii) no gain or loss will be recognized by the stockholders
of the Company upon the conversion of their shares of Company Common
Stock
75
into shares of Parent Common Stock pursuant to the Merger, except with
respect to cash, if any, received in lieu of fractional shares of
Parent Common Stock;
(iv) the aggregate tax basis of the shares of Parent Common
Stock received in exchange for shares of Company Common Stock pursuant
to the Merger (including a fractional share of Parent Common Stock for
which cash is received) will be the same as the aggregate tax basis of
such shares of Company Common Stock;
(v) the holding period for shares of Parent Common Stock
received in exchange for shares of Company Common Stock pursuant to
the Merger will include the holder s holding period for such shares of
Company Common Stock, provided such shares of Company Common Stock
were held as capital assets by the holder at the Effective Time; and
(vi) a stockholder of the Company who receives cash in lieu
of a fractional share of Parent Common Stock will recognize gain or
loss equal to the difference, if any, between such stockholder s basis
in the fractional share (determined under clause (iv) above) and the
amount of cash received.
In rendering such opinion, Sidley & Austin may rely upon representations
contained herein and may receive and rely upon representations from Parent, the
Company, and others, including representations from Parent substantially
similar to the representations in the Parent Tax Certificate attached to the
Parent Letter and representations from the Company substantially similar to the
representations in the Company Tax Certificate attached to the Company Letter.
(c) Material Adverse Effect. Since the date of this
Agreement, there shall not have been any events, changes or developments that,
individually or in the aggregate, would have (i) a Material Adverse Effect on
the Company; provided, that, for purposes of this Section 6.3(c), a Material
Adverse Effect on the results of operations of the Company and its Subsidiaries
shall only be
76
deemed to be such to the extent it relates to the long-term prospects of the
results of operations of the Company and its Subsidiaries taken as a whole.
Parent shall have received a certificate signed on behalf of the Company by its
Chief Executive Officer and its Chief Financial Officer to such effect.
(d) Accounting. Parent shall have received an opinion of
Ernst & Young LLP (or any successor thereto), in form and substance reasonably
satisfactory to Parent, that the Merger will qualify for pooling of interests
accounting treatment under Accounting Principles Board Opinion No. 16 if closed
and consummated in accordance with this Agreement (which opinion shall be
based, as to the financial statements of the Company, on a customary "pooling"
letter of Price Waterhouse LLP); and
(e) Consents. The Company shall have obtained the
consent or approval of each person that is not a Governmental Entity whose
consent or approval shall be required in connection with the transactions
contemplated hereby under any loan or credit agreement, note, mortgage,
indenture, lease or other agreement or instrument by which the Company or any
of its Subsidiaries is bound, except as to which the failure to obtain such
consents and approvals would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
(f) Litigation. There shall not be instituted or pending
any suit, action or proceeding by any Governmental Entity relating to this
Agreement, the Stock Option Agreement or any of the transactions contemplated
herein or therein which would have a Material Adverse Effect on the Company or
Parent.
(g) Rights Agreement. The Rights shall not have become
nonredeemable, exercisable, distributed or triggered pursuant to the terms of
the Rights Agreement.
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ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be
terminated at any time prior to the Effective Time, whether before or after any
approval of the matters presented in connection with the Merger by the
stockholders of the Company or Parent:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the other party
shall have failed to comply in any material respect with any of its covenants
or agreements contained in this Agreement required to be complied with prior to
the date of such termination, which failure to comply has not been cured within
thirty business days following receipt by such other party of written notice
from the non-breaching party of such failure to comply;
(c) by either Parent or the Company if there has been (i)
a breach by the other party (in the case of Parent, including any material
breach by Sub) of any representation or warranty that is not qualified as to
materiality which has the effect of making such representation or warranty not
true and correct in all material respects or (ii) a breach by the other party
(in the case of Parent, including any material breach by Sub) of any
representation or warranty that is qualified as to materiality, in each case
which breach has not been cured within thirty business days following receipt
by the breaching party from the non-breaching party of written notice of the
breach;
(d) by Parent or the Company if: (i) the Merger has not
been effected on or prior to the close of business on December 31, 1998;
provided, however, that the right to terminate this Agreement pursuant to this
Section 7.1(d)(i) shall not be available to any party whose failure to fulfill
any of its obligations contained in this Agreement has been the cause of, or
resulted in, the failure of the Merger to have occurred on or prior to the
aforesaid date; or (ii) any court or other Governmental Entity having
jurisdiction over
78
a party hereto shall have issued an order, decree or ruling or taken any other
action permanently enjoining, restraining or otherwise prohibiting the
consummation of the Merger and such order, decree, ruling or other action shall
have become final and nonappealable;
(e) by Parent or the Company if the stockholders of the
Company do not approve this Agreement at the Company Stockholder Meeting or at
any adjournment or postponement thereof; provided, however, that the Company
may not terminate this Agreement pursuant to this Section 7.1(e) if the Company
has not complied with its obligations under Sections 4.2, 5.1 and 5.2 or has
otherwise breached in any material respect its obligations under this Agreement
in any manner that could reasonably have caused the failure of the stockholder
approval to be obtained at the Company Stockholder Meeting;
(f) by Parent or the Company if the stockholders of
Parent do not approve the Share Issuance at the Parent Stockholder Meeting or
at any adjournment or postponement thereof; provided, however, that Parent may
not terminate this Agreement pursuant to this Section 7.1(f) if Parent has not
complied with its obligations under Sections 5.1 and 5.2 or has otherwise
breached in any material respect its obligations under this Agreement in any
manner that could reasonably have caused the failure of the vote in favor of
the Share Issuance to be obtained at the Parent Stockholder Meeting;
(g) by Parent or the Company if (i) the Board of
Directors of the Company reasonably determines that a Takeover Proposal
constitutes a Superior Proposal and (ii) the Board of Directors of the Company
determines in its reasonable good faith judgment, on the basis of the advice of
the outside corporate counsel of the Company, that the failure to accept such
Superior Proposal would violate its fiduciary duties to its stockholders under
applicable law; provided, however, that the Company may not terminate this
Agreement pursuant to this Section 7.1(g) unless (i) the Company has delivered
to Parent a written notice of the Company s intent to enter into such an
agreement to effect the Superior Proposal, (ii) five business days have elapsed
following delivery to Parent of such written notice by the Company and (iii)
during such five business day period the Company has fully cooperated with
Parent, including, without
79
limitation, informing Parent of the terms and conditions of the Takeover
Proposal and the identity of the person making the Takeover Proposal, with the
intent of enabling Parent to agree to a modification of the terms and
conditions of this Agreement so that the transactions contemplated hereby, as
so modified, may be effected; provided, further, that the Company may not
terminate this Agreement pursuant to this Section 7.1(g) unless at the end of
such five business day period (i) the Board of Directors of the Company
continues reasonably to believe that the Takeover Proposal constitutes a
Superior Proposal, (ii) the Board of Directors of the Company continues to
reach a determination in its reasonable good faith judgment, on the basis of
the advice of the outside corporate counsel of the Company, that the failure to
accept such Superior Proposal would violate its fiduciary duties to its
stockholders under applicable law and (iii) prior to such termination the
Company pays to Parent the amounts specified under Sections 5.7(a), (b) and
(c); and provided, further, that this Agreement shall not terminate pursuant to
this Section 7.1(g) unless simultaneously with such termination the Company
enters into a definitive acquisition, merger or similar agreement to effect the
Superior Proposal.
(h) by Parent if (i) the Board of Directors of the
Company shall not have recommended, or shall have resolved not to recommend, or
shall have qualified, modified or withdrawn its recommendation of the Merger or
declaration that the Merger is advisable and fair to and in the best interest
of the Company and its stockholders, or shall have resolved to do so, (ii) any
person (other than Parent or its Affiliates) acquires or becomes the beneficial
owner of 20% or more of the outstanding shares of Company Common Stock, (iii)
the Board of Directors of the Company shall have recommended to the
stockholders of the Company any Takeover Proposal or shall have resolved to do
so or (iv) a tender offer or exchange offer for 20% or more of the outstanding
shares of capital stock of the Company is commenced, and the Board of Directors
of the Company fails to recommend against acceptance of such tender offer or
exchange offer by its stockholders (including by taking no position with
respect to the acceptance of such tender offer or exchange offer by its
stockholders); or
(i) by the Company if the Board of Directors of Parent shall
not have recommended, or shall have resolved
80
not to recommend, or shall have qualified or modified or withdrawn its
recommendation of the Share Issuance or declaration that the Share Issuance is
advisable and fair to and in the best interest of Parent and its stockholders,
or shall have resolved to do so.
The right of any party hereto to terminate this Agreement
pursuant to this Section 7.1 shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any party
hereto, any person controlling any such party or any of their respective
officers or directors, whether prior to or after the execution of this
Agreement.
Section 7.2 Effect of Termination. In the event of
termination of this Agreement by either Parent or the Company, as provided in
Section 7.1, this Agreement shall forthwith become void and there shall be no
liability hereunder on the part of the Company, Parent, Sub or their respective
officers or directors (except for the last sentence of Section 5.4 and the
entirety of Section 5.7, which shall survive the termination); provided,
however, that nothing contained in this Section 7.2 shall relieve any party
hereto from any liability for any willful breach of a representation or
warranty contained in this Agreement or the breach of any covenant contained in
this Agreement.
Section 7.3 Amendment. This Agreement may be amended by
the parties hereto, by or pursuant to action taken by their respective Boards
of Directors, at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of Parent and the Company, but,
after any such approval, no amendment shall be made which by law requires
further approval by such stockholders without such further approval. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 7.4 Waiver. At any time prior to the Effective
Time, the parties hereto may (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein which may legally be waived. Any
agreement
81
on the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and
Warranties. The representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall terminate at the
Effective Time.
Section 8.2 Notices. All notices and other
communications hereunder shall be in writing and shall be deemed given when
delivered personally, one day after being delivered to an overnight courier or
when telecopied (with a confirmatory copy sent by overnight courier) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent or Sub, to
Tellabs, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
with a copy to:
Sidley & Austin
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
Xxxx X. Xxxxx, Esq.
Facsimile No.: (000) 000-0000
(b) if to the Company, to
CIENA Corporation
0000 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
82
with a copy to:
Xxxxx & Xxxxxxx L.L.P.
000 X. Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Silver, Esq.
Facsimile No.: (000) 000-0000
Section 8.3 Interpretation. When a reference is made in
this Agreement to a Section, such reference shall be to a Section of this
Agreement unless otherwise indicated. The table of contents, list of defined
terms and headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 8.4 Counterparts. This Agreement may be executed
in counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
Section 8.5 Entire Agreement; No Third-Party
Beneficiaries. This Agreement, except for the Stock Option Agreement and as
provided in the last sentence of Section 5.4, constitutes the entire agreement
and supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof. This Agreement,
except for the provisions of Section 5.13, is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
Section 8.6 Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Delaware, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
Section 8.7 Assignment. Subject to Section 1.1, neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties.
83
Section 8.8 Severability. If any term or other provision
of this Agreement is invalid, illegal or incapable of being enforced by any
rule of law, or public policy, all other terms, conditions and provisions of
this Agreement shall nevertheless remain in full force and effect so long as
the economic and legal substance of the transactions contemplated hereby are
not affected in any manner materially adverse to any party. 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 a mutually acceptable manner in order that the transactions
contemplated by this Agreement may be consummated as originally contemplated to
the fullest extent possible.
Section 8.9 Enforcement of this Agreement. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific wording or were otherwise breached. It is accordingly agreed that the
parties hereto shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, such
remedy being in addition to any other remedy to which any party is entitled at
law or in equity.
84
IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized all as of the date first written above.
TELLABS, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------
Xxxxxxx X. Xxxxx
President and Chief Executive
Officer
WHITE OAK MERGER CORP.
By: /s/ Xxxxxxx X. Xxxxx
---------------------------
Xxxxxxx X. Xxxxx
President
CIENA CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------
Xxxxxxx X. Xxxxxxx
President and Chief Executive
Officer
85
EXHIBIT 5.5(a)
FORM OF AFFILIATE LETTER FOR AFFILIATES OF THE COMPANY
Tellabs, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may
be deemed to be an "affiliate" of CIENA Corporation, a Delaware corporation
(the "Company"), as the term "affiliate" is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), and/or (ii) used in
and for purposes of Accounting Series Releases 130 and 135, as amended, of the
Commission. Pursuant to the terms of the Agreement and Plan of Merger dated as
of June 2, 1998 (the "Merger Agreement") among Tellabs, Inc., a Delaware
corporation ("Parent"), White Oak Merger Corp., a Delaware corporation ("Sub"),
and the Company, Sub will be merged with and into the Company (the "Merger").
Capitalized terms used in this letter without definition shall have the
meanings assigned to them in the Merger Agreement.
As a result of the Merger, I will receive shares of Common
Stock, no par value, of Parent (the "Parent Shares") in exchange for shares of
common stock, par value $.01 per share, of the Company (the "Company Shares")
owned by me or purchasable upon exercise of stock options.
1. I represent, warrant and covenant to Parent that in the event I
receive any Parent Shares as a result of the Merger:
A. I shall not make any sale, transfer or other disposition
of the Parent Shares in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement
and discussed the requirements of such
86
documents and other applicable limitations upon my ability to sell, transfer or
otherwise dispose of the Parent Shares, to the extent I felt necessary, with my
counsel or counsel for the Company.
C. I have been advised that the issuance of the Parent Shares
to me pursuant to the Merger has been or will be registered with the Commission
under the Act on a Registration Statement on Form S-4. However, I have also
been advised that, because at the time the Merger is submitted for a vote of
the stockholders of the Company, (a) I may be deemed to be an affiliate of the
Company and (b) the sale, transfer or other disposition by me of the Parent
Shares will not have been registered under the Act, I may not sell, transfer or
otherwise dispose of the Parent Shares issued to me in the Merger unless (i)
such sale, transfer or other disposition is made in conformity with the volume
and other limitations of Rule 145 promulgated by the Commission under the Act,
(ii) such sale, transfer or other disposition has been registered under the Act
or (iii) in the opinion of counsel reasonably acceptable to Parent, such sale,
transfer or other disposition is otherwise exempt from registration under the
Act.
D. I understand that Parent is under no obligation to
register the sale, transfer or other disposition of the Parent Shares by me or
on my behalf under the Act or to take any other action necessary in order to
make compliance with an exemption from such registration available.
E. I also understand that there will be placed on the
certificates for the Parent Shares issued to me, or any substitutions therefor,
a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE
REGISTERED HOLDER HEREOF AND TELLABS, INC., A COPY OF WHICH AGREEMENT
IS ON FILE AT THE PRINCIPAL OFFICES OF TELLABS, INC."
F. I also understand that unless a sale or transfer is made
in conformity with the provisions of Rule
87
145, or pursuant to a registration statement, Parent reserves the right to put
the following legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN
ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION
WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES
ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933."
G. I further represent to, and covenant with, Parent that I
will not, during the 30 days prior to the Effective Time (as defined in the
Merger Agreement), sell, transfer or otherwise dispose of or reduce my risk (as
contemplated by SEC Accounting Series Release No. 135) with respect to the
Company Shares or shares of the capital stock of Parent that I may hold and,
furthermore, that I will not sell, transfer or otherwise dispose of or reduce
my risk (as contemplated by SEC Accounting Series Release No. 135) with respect
to the Parent Shares received by me in the Merger or any other shares of the
capital stock of Parent until after such time as results covering at least 30
days of combined operations of the Company and Parent have been published by
Parent, in the form of a quarterly earnings report, an effective registration
statement filed with the Commission, a report to the Commission on Form 10-K,
10-Q, or 8-K, or any other public filing or announcement which includes the
combined results of operations. Notwithstanding the foregoing provisions of
this paragraph 1(G), but subject to the other provisions of this letter, I
understand that during the aforementioned period, subject to providing written
notice to and obtaining the consent of Parent, which consent shall not be
unreasonably withheld, I will not be prohibited from de minimis dispositions
and charitable contributions or bona fide gifts of the Parent Shares which, in
each case, will not disqualify the accounting for the Merger as a pooling of
interests.
88
H. Execution of this letter should not be considered an
admission on my part that I am an "affiliate" of the Company as described in
the first paragraph of this letter, nor as a waiver of any rights I may have to
object to any claim that I am such an affiliate on or after the date of this
letter.
2. By Parent s acceptance of this letter, Parent hereby agrees with
me that certificates with the legends set forth in paragraphs 1(E) and (F)
above will be substituted by delivery of certificates without such legend if
(i) one year shall have elapsed from the date the undersigned acquired the
Parent Shares received in the Merger and the provisions of Rule 145(d)(2) are
then available to the undersigned, (ii) two years shall have elapsed from the
date the undersigned acquired the Parent Shares received in the Merger and the
provisions of Rule 145(d)(3) are then applicable to the undersigned, or (iii)
the Parent has received an opinion of counsel, which opinion and counsel shall
be reasonably satisfactory to Parent to the effect that the restrictions
imposed by Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
------------------------------
Name:
Agreed and accepted this day
--------
of [ ], 1998, by
------------------
TELLABS, INC.
By
---------------------------------
Name:
Title:
89
EXHIBIT 5.5(b)
FORM OF AFFILIATE LETTER FOR AFFILIATES OF PARENT
Tellabs, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may
be deemed to be an "affiliate" of Tellabs, Inc., a Delaware corporation
("Parent"), as the term "affiliate" is defined for purposes of Accounting
Series Releases 130 and 135, as amended, of the Securities and Exchange
Commission ("Commission"). Pursuant to the terms of the Agreement and Plan of
Merger dated as of June 2, 1998 (the "Merger Agreement") among Parent, White
Oak Merger Corp., a Delaware corporation ("Sub"), and CIENA Corporation, a
Delaware corporation (the "Company"), Sub will be merged with and into the
Company (the "Merger").
I represent to, and covenant with, Parent that I will not,
during the period beginning 30 days prior to the Effective Time (as defined in
the Merger Agreement) until after such time as results covering at least 30
days of combined operations of the Company and Parent have been published by
Parent, in the form of a quarterly earnings report, an effective registration
statement filed with the Commission, a report to the Commission on Form 10-K,
10-Q, or 8-K, or any other public filing or announcement which includes the
combined results of operations, sell, transfer or otherwise dispose of or
reduce my risk with respect to any shares of the capital stock of Parent
("Parent Stock") or the Company that I may hold. Notwithstanding the
foregoing, I understand that during the aforementioned period, subject to
providing written notice to and obtaining the consent of Parent, which consent
shall not be unreasonably withheld, I will not be prohibited from de minimis
dispositions and charitable contributions or bona fide gifts of the Parent
Stock which, in each case, will not disqualify the accounting for the Merger as
a pooling of interests.
Execution of this letter should not be considered an admission
on my part that I am an "affiliate" of Parent as described in the first
paragraph of this letter, nor as a
90
waiver of any rights I may have to object to any claim that I am such an
affiliate on or after the date of this letter.
Very truly yours,
------------------------------
Name:
Accepted this day of
---------
[ ], 1998, by
---------------
TELLABS, INC.
By
---------------------------
Name:
