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EXHIBIT 2.1
AGREEMENT
AND PLAN OF MERGER
BY AND AMONG
QLOGIC CORPORATION,
AMINO ACQUISITION CORP.
AND
ANCOR COMMUNICATIONS, INCORPORATED
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MAY 7, 2000
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated May 7,
2000, is made and entered into by and among QLogic Corporation, a Delaware
corporation ("Parent"), Amino Acquisition Corp., a Minnesota corporation and
wholly owned subsidiary of Parent ("Merger Sub"), and Ancor Communications,
Incorporated, a Minnesota corporation (the "Company"). Merger Sub and the
Company are sometimes collectively referred to as the "Constituent
Corporations."
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have determined that it is advisable and in the best interests of
the respective corporations and their shareholders that Merger Sub be merged
with and into the Company in accordance with the Minnesota Business Corporation
Act (the "MBCA") and the terms of this Agreement, pursuant to which the Company
will be the surviving corporation and will be a wholly owned subsidiary of
Parent (the "Merger"); and
WHEREAS, for financial reporting purposes the parties intend that the
Merger shall be accounted for as a "pooling of interests." The Company believes,
after consultation with its independent accountants, KPMG LLP, that the Company
will qualify as a party to a pooling-of-interests transaction under Opinion 16
of the Accounting Principles Board and applicable rules and regulations of the
Securities and Exchange Commission (collectively, "Opinion 16"), and shall
provide to Parent an opinion letter from its independent accountants, KPMG LLP,
addressed to the Company, stating that, based on its familiarity with the
Company, the Company will qualify as a party to a pooling-of-interests
transaction under Opinion 16. Parent believes, after consultation with its
independent accountants, KPMG LLP, that Parent will qualify as a party to a
pooling-of-interests transaction under Opinion 16, and shall provide to the
Company an opinion letter from its independent accountants, KPMG LLP, addressed
to Parent, stating that, as of the date of such letter, based on its familiarity
with Parent, Parent will qualify as a party to a pooling-of-interests
transaction under Opinion 16; and
WHEREAS, for United States federal income tax purposes, the parties
intend that the Merger shall qualify as a "reorganization" under Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), and that this
Agreement constitute a "plan of reorganization" within the meaning of the Code;
and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants, and agreements in connection with, and
establish various conditions precedent to, the Merger; and
WHEREAS, as a condition to, and immediately after the execution of,
this Agreement, Parent and the Company are concurrently entering into a Stock
Option Agreement (the "Company Option Agreement"), in substantially the form
attached hereto as Exhibit A, pursuant to which the Company will grant Parent an
option exercisable upon the occurrence of certain events;
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WHEREAS, as a condition to, and upon the execution of, this Agreement,
certain officers of the Company are entering into employment agreements with the
Company, and the Chief Executive Officer of the Company is entering into a
consulting agreement with Parent; and
WHEREAS, as an inducement to Parent to enter into this Agreement,
certain shareholders of the Company are concurrently herewith entering into a
Voting Agreement (the "Voting Agreement") in substantially the form attached
hereto as Exhibit B, whereby each such shareholder agrees to vote in favor of
the Merger and all other transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth in this Agreement and in the Articles of
Merger (as defined in Section 1.3 hereof), the parties hereto, intending to be
legally bound, agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. At the Effective Time (as defined in Section 1.3
hereof), subject to the terms and conditions of this Agreement and the Articles
of Merger (as defined in Section 1.3 hereof), Merger Sub shall be merged with
and into the Company, the separate existence of Merger Sub shall cease, and the
Company shall continue as the surviving corporation. The Company, in its
capacity as the corporation surviving the Merger, is hereinafter sometimes
referred to as the "Surviving Corporation."
1.2. Effect of Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement, the Articles of Merger and the
applicable provisions of the MBCA. Without limiting the generality of the
foregoing, the Surviving Corporation shall succeed to and possess all the
properties, rights, privileges, immunities, powers, franchises and purposes, and
be subject to all the duties, liabilities, debts, obligations, restrictions and
disabilities, of the Constituent Corporations, all without further act or deed.
1.3. Effective Time. Subject to the terms and conditions of this
Agreement, the parties hereto will cause the Articles of Merger, the form of
which is attached hereto as Exhibit C (the "Articles of Merger") to be executed,
delivered and filed with the Secretary of State of the State of Minnesota in
accordance with the applicable provisions of the MBCA at the time of the Closing
(as defined in Section 1.7 hereof). The Merger shall become effective upon
filing of the Articles of Merger with the Secretary of State of the State of
Minnesota, or at such later time as may be agreed to by the parties and set
forth in the Articles of Merger. The time of effectiveness is herein referred to
as the "Effective Time." The day on which the Effective Time shall occur is
herein referred to as the "Effective Date."
1.4. Articles of Incorporation; Bylaws. From and after the Effective
Time and until further amended in accordance with applicable law, the Articles
of Incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation, as
amended as set forth in an exhibit to the Articles of Merger. From and after the
Effective Time and until further amended in accordance with law, the Bylaws of
Merger Sub as in effect immediately prior to the Effective Time shall be the
Bylaws of the Surviving Corporation.
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1.5. Directors and Officers. From and after the Effective Time, the
directors of the Surviving Corporation shall be the persons who were the
directors of Merger Sub immediately prior to the Effective Time, and the
officers of the Surviving Corporation shall be the persons who were the officers
of Merger Sub immediately prior to the Effective Time. Said directors and
officers of the Surviving Corporation shall hold office for the term specified
in, and subject to the provisions contained in, the Articles of Incorporation
and Bylaws of the Surviving Corporation and applicable law. If, at or after the
Effective Time, a vacancy shall exist on the Board of Directors or in any of the
offices of the Surviving Corporation, such vacancy shall be filled in the manner
provided in the Articles of Incorporation and Bylaws of the Surviving
Corporation.
1.6. Taking of Necessary Action; Further Action. Parent, Merger Sub and
the Company, respectively, shall each use its or their commercially reasonable
best efforts to take all such action as may be necessary or appropriate to
effectuate the Merger under the MBCA at the time specified in Section 1.3
hereof. If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all
properties, rights, privileges, immunities, powers and franchises of either of
the Constituent Corporations, the officers of the Surviving Corporation are
fully authorized in the name of each Constituent Corporation or otherwise to
take, and shall take, all such lawful and necessary action.
1.7. The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Xxxxxxxxx Xxxxx
Xxxxxxx & Xxxxx, P.C., 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx Xxxxx,
Xxxxxxxxxx, within three business days after the date on which the last of the
conditions set forth in Article VI shall have been satisfied or waived, or at
such other place and on such other date as is mutually agreeable to Parent and
the Company (the "Closing Date"). The Closing will be effective as of the
Effective Time.
ARTICLE II
CONVERSION OF SECURITIES
2.1. Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Merger Sub, the Company,
the holder of any shares of Company Common Stock (as defined below) or the
holder of any options, warrants or other rights to acquire or receive shares of
Company Common Stock, the following shall occur:
(a) Conversion of Company Common Stock. At the Effective Time,
each share of common stock, par value $.01 per share, of the Company (the
"Company Common Stock") issued and outstanding immediately prior to the
Effective Time (other than any shares of Company Common Stock to be canceled
pursuant to Section 2.1(b) and any Dissenting Shares (as defined in Section
2.1(g) below)) will be canceled and extinguished and be converted automatically
into the right to receive 0.5275 shares (the "Exchange Ratio") of common stock,
par value $.001 per share, of the Parent (the "Parent Common Stock"). All
references in this Agreement to Parent Common Stock to be issued pursuant to the
Merger shall be deemed to include the corresponding rights to purchase shares of
Parent Common Stock pursuant to the Parent SRP Plan (defined in Section 4.2
hereof), except where the context otherwise requires.
(b) Cancellation of Company Common Stock Owned by Parent or
Company. At the Effective Time, all shares of Company Common Stock that are
owned by the Company as treasury stock and each share of Company Common Stock
owned by Parent or any direct or indirect
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wholly owned subsidiary of Parent or of the Company immediately prior to the
Effective Time shall be canceled and extinguished without any conversion
thereof.
(c) Company Stock Option Plans. At the Effective Time, the
Company's 1990 Stock Plan, 1994 Long-Term Incentive and Stock Option Plan and
the Company's Non-Employee Director Stock Option Plan (collectively, the
"Company Stock Option Plans") and all options to purchase Company Common Stock
then outstanding under the Company Stock Option Plans shall be assumed by Parent
in accordance with Section 2.2 hereof.
(d) Capital Stock of Merger Sub. At the Effective Time, each share
of common stock, $.01 par value, of Merger Sub ("Merger Sub Common Stock")
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, $.01 par value, of the Surviving
Corporation, and the Surviving Corporation shall be a wholly owned subsidiary of
Parent. Each stock certificate of Merger Sub evidencing ownership of any such
shares shall continue to evidence ownership of such shares of capital stock of
the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted in the event of (i) any stock split, reverse split, stock dividend
(including any dividend or distribution of securities convertible into Parent
Common Stock or Company Common Stock), reorganization, recapitalization,
combination, exchange of shares, adjustment or other like change with respect to
Parent Common Stock or Company Common Stock occurring after the date hereof and
prior to the Effective Time or (ii) any increase in the number of shares of
Company Common Stock on a fully diluted, as-converted basis (i.e., assuming
issuance of all shares of Common Stock issuable upon the exercise or conversion
of all securities outstanding immediately prior to the Effective Time which are
convertible into or exercisable for shares of Company Common Stock, whether or
not vested), other than increases resulting from transactions permitted in
Section 5.1 hereof, so as to provide holders of Company Common Stock and Parent
the same economic effect as contemplated by this Agreement prior to such stock
split, reverse split, stock dividend, reorganization, recapitalization,
combination, exchange of shares, adjustment or like change or increase.
(f) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued, but in lieu thereof each holder of shares of Company
Common Stock who would otherwise be entitled to a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent Common Stock to
be received by such holder) shall receive from Parent an amount of cash without
interest (rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the closing sale price for a share of Parent Common
Stock on the Nasdaq National Market on the trading day immediately prior to the
Effective Time.
(g) Dissenting Shares. (i) Notwithstanding anything in this
Agreement to the contrary, if Section 302A.471 of the MCBA shall be applicable
to the Merger, shares of Company Common Stock that are issued and outstanding
prior to the Effective Date and which are held by shareholders who (A) have not
voted such shares in favor of the Merger, (B) shall have delivered, prior to any
vote on the Merger, a written demand for the fair value of such shares in the
manner provided in Section 302A.473 of the MBCA and (C) as of the Effective
Time, shall not have effectively withdrawn or lost such right to dissenters'
rights ("Dissenting Shares"), shall not be converted into or represent a right
to receive the shares of Parent Common Stock pursuant to Section 2.1 hereof, but
the holders thereof shall be entitled only to such rights as are granted by
Section 302A.473 of the MBCA. Each holder of Dissenting Shares who becomes
entitled to
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payment for such shares pursuant to Sections 302A.471 and 302A.473 of the MBCA
shall receive payment therefor from the Surviving Corporation in accordance with
the MBCA; provided, however, that if any such holder of Dissenting Shares shall
have effectively withdrawn such holder's demand for appraisal of such shares or
lost such holder's right to appraisal and payment of such shares under Section
302A.473 of the MBCA, such holder or holders (as the case may be) shall forfeit
the right of appraisal of such shares and each such share shall thereupon be
deemed to have been canceled, extinguished and converted, as of the Effective
Time, into and represent the right to receive payment from the Surviving
Corporation of the applicable shares of Parent Common Stock, as provided in
Section 2.1 hereof.
(ii) The Company shall give Parent (A) prompt notice of any
written demand for fair value, any withdrawal of a demand for fair value and any
other instrument served pursuant to Section 302A.473 of the MBCA received by the
Company, and (B) the opportunity to direct all negotiations and proceedings with
respect to demands for fair value under Section 302A.473 of the MBCA. The
Company shall not, except with the prior written consent of Parent, voluntarily
make any payment with respect to any demand for fair value or offer to settle or
settle any such demand.
2.2. Stock Options.
(a) At the Effective Time, each outstanding option to purchase
shares of Company Common Stock under the Company Stock Option Plans (each, a
"Company Option"), whether vested or unvested immediately prior to the Effective
Time, shall be assumed by Parent and converted into an option (each, a "Parent
Option") to acquire, on substantially the same terms and conditions, including
but not limited to any performance criteria with respect to the Company's
business operations set forth in the applicable stock option agreements as were
applicable under such Company Option, the number of whole shares of Parent
Common Stock equal to the number of shares of Company Common Stock that were
issuable upon exercise of such Company Option immediately prior to the Effective
Time multiplied by the Exchange Ratio, as adjusted pursuant to Section 2.1(e)
above (rounded down to the nearest whole number of shares of Parent Common
Stock), and the per share exercise price of the shares of Parent Common Stock
issuable upon exercise of such Parent Option shall be equal to the exercise
price per share of Company Common Stock at which such Company Option was
exercisable immediately prior to the Effective Time divided by the Exchange
Ratio, as adjusted pursuant to Section 2.1(e) above (rounded up to the nearest
whole cent). Other than pursuant to the terms of existing commitments (all of
which commitments are identified in Section 2.2 of the Company Disclosure Letter
(as defined in the preamble to Article III hereof)), the Company shall not, and
shall cause any Company Stock Option Plan administrator not to, take any action
prior to the Effective Time that will extend the exercise period of any Company
Option or cause the vesting period of any Company Option to accelerate under any
circumstances, regardless of whether such circumstances are to occur before or
after the Effective Time, or otherwise amend the terms of outstanding Company
Options.
(b) All outstanding rights of the Company which it may hold
immediately prior to the Effective Time to repurchase unvested shares of Company
Common Stock (the "Repurchase Options") shall continue in effect following the
Merger and shall continue to be exercisable by the Parent upon the same terms
and conditions in effect immediately prior to the Effective Time, except that
the shares purchasable pursuant to the Repurchase Options and the purchase price
per shall be adjusted to reflect the conversion to Parent Common Stock and the
Exchange Ratio.
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(c) Parent shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Parent Common Stock for delivery
upon exercise of the Parent Options and to file all documents required to be
filed to cause the shares of Parent Common Stock issuable upon exercise of the
Parent Options to be listed on the Nasdaq National Market. As soon as
practicable after the Effective Time, but no later than five business days after
the Effective Time, Parent shall file a registration statement with the U.S.
Securities and Exchange Commission (the "SEC") on Form S-8 (or any successor
form) or another appropriate form with respect to the Parent Common Stock
subject to such Parent Options, and shall use all commercially reasonable best
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such Parent Options remain
outstanding. As soon as practicable after the Effective Time, Parent shall
inform in writing the holders of Company Options of their rights pursuant to the
Company Stock Option Plans and the agreements evidencing the grants of such
Company Options shall continue in effect on the same terms and conditions
(subject to the adjustments required by Section 2.2(a) hereof), after giving
effect to the Merger and the assumption by Parent of the Company Options as set
forth herein.
(d) In the case of any Company Option to which Section 421 of the
Code applies by reason of Section 422 of the Code ("Incentive Stock Options"),
the option exercise price, the number of shares of Parent Common Stock
purchasable pursuant to such option and the terms and conditions of exercise of
such option shall be determined in order to comply with Section 424(a) of the
Code.
(e) Parent will make good faith efforts to ensure, to the extent
permitted by the Code and to the extent required by and subject to the terms of
any such Incentive Stock Options, that Company Options which qualified as
Incentive Stock Options prior to the Closing Date continue to qualify as
Incentive Stock Options of Parent after the Closing.
2.3. Warrants. At the Effective Time, each warrant to purchase shares
of Company Common Stock outstanding immediately prior to the Effective Date
(each, a "Company Warrant") shall be assumed by Parent and converted into a
warrant (each a "Parent Warrant") to acquire, on substantially the same terms
and conditions, the number of whole shares of Parent Common Stock equal to the
number of shares of Company Common Stock that were issuable upon exercise of
such Company Warrant immediately prior to the Effective Time multiplied by the
Exchange Ratio, as adjusted pursuant to Section 2.1(e) above (rounded down to
the nearest whole number of shares of Parent Common Stock), and the per share
exercise price of the shares of the Parent Common Stock issuable upon exercise
of such Parent Warrant shall be equal to the exercise price per share of Company
Common Stock at which such Company Warrant was exercisable immediately prior to
the Effective Time divided by the Exchange Ratio, as adjusted pursuant to
Section 2.1(e) above (rounded up to the nearest whole cent). Other than pursuant
to the terms of existing commitments (all of which commitments are identified in
Section 2.3 of the Company Disclosure Letter), the Company shall not take any
action prior to the Effective Time that will extend the exercise period of any
Company Warrant or otherwise amend the terms of outstanding Company Warrants.
2.4. Employee Stock Purchase Plan. The parties acknowledge that the
Company's 1995 Employee Stock Purchase Plan, as amended (the "ESPP"), shall
continue to operate in accordance with its terms following the execution of this
Agreement, except as provided below. Unless previously terminated, effective as
of the date of approval of the Merger by the shareholders of the Company, each
outstanding purchase right to be exercised in accordance with the ESPP, the
Company shall cause the ESPP to terminate, and no purchase rights shall be
subsequently granted or
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exercised under the ESPP. The Company shall take all actions necessary to ensure
that the ESPP will not be amended or modified in any respect after the date
hereof, except to effect the terms of this Section 2.4. Notwithstanding the
foregoing, the Company shall cause such amendments to be made to the ESPP such
that, following such amendments, the operation of the ESPP will not cause
"pooling-of-interests" accounting treatment to be unavailable for the
transactions contemplated by the Agreement.
2.5. Exchange of Certificates.
(a) Prior to the Effective Time, Parent shall designate a
commercial bank, trust company or other financial institution, which may include
Parent's stock transfer agent, to act as exchange agent ("Exchange Agent") in
the Merger.
(b) Promptly after the Effective Time, Parent shall make available
to the Exchange Agent for exchange in accordance with this Article II, (i) the
aggregate number of shares of Parent Common Stock issuable pursuant to Section
2.1 in exchange for outstanding shares of Company Common Stock, and (ii) cash in
an amount sufficient to permit payment of cash in lieu of fractional shares
pursuant to Section 2.1(f) (the "Exchange Fund").
(c) Promptly, and in any event no later than ten business days
after the Effective Time, the Parent shall cause to be mailed to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock (the "Certificates")
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent, and shall be in such
form and have such other provisions as Parent may reasonably specify and which
shall be reasonably acceptable to the Company) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock (and cash in lieu of fractional
shares). Upon surrender of a Certificate for cancellation to the Exchange Agent,
together with such letter of transmittal, duly completed and validly executed,
and such other documents as may be reasonably required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive in
exchange a certificate representing the number of whole shares of Parent Common
Stock, plus cash in lieu of fractional shares in accordance with Section 2.1(f),
to which such holder is entitled pursuant to Section 2.1, and the Certificate so
surrendered shall forthwith be canceled. Until surrendered as contemplated by
this Section 2.5, each Certificate that, prior to the Effective Time,
represented shares of Company Common Stock will be deemed from and after the
Effective Time, for all corporate purposes, other than the payment of dividends,
to evidence the right to receive the number of full shares of Parent Common
Stock into which such shares of Company Common Stock shall have been so
converted and the right to receive an amount of cash in lieu of the issuance of
any fractional shares in accordance with Section 2.1(f).
(d) No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby until the
holder of record of such Certificate shall surrender such Certificate. Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, at the time
of such surrender, the amount of dividends or other
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distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Parent Common Stock.
(e) None of Parent, the Surviving Corporation or the Exchange
Agent shall be liable to any holder of shares of Company Common Stock for any
amount properly delivered to a public official in compliance with any abandoned
property, escheat or similar law.
(f) At the Effective Time, the stock transfer books of the Company
shall be closed and there shall be no further registration of transfers of
shares of Company Common Stock thereafter on the records of the Company. From
and after the Effective Time, the holders of certificates representing shares of
Company Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such shares of Company Common Stock
except as otherwise provided in this Agreement or by law.
(g) Subject to any applicable escheat or similar laws, any portion
of the Exchange Fund that remains unclaimed by the former shareholders of the
Company for one year after the Effective Time shall be delivered by the Exchange
Agent to Parent, upon demand of Parent, and any former shareholders of the
Company shall thereafter look only to Parent for satisfaction of their claim for
certificates representing shares of Parent Common Stock in exchange for their
shares of Company Common Stock pursuant to the terms of Section 2.1 hereof.
(h) If any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact, in form and substance reasonably
acceptable to the Exchange Agent, by the person claiming such Certificate to be
lost, stolen or destroyed, and complying with such other conditions as the
Exchange Agent may reasonably impose (including the execution of an
indemnification undertaking or the posting of an indemnity bond or other surety
in favor of the Exchange Agent and Parent with respect to the Certificate
alleged to be lost, stolen or destroyed), the Exchange Agent will deliver to
such person, such shares of Parent Common Stock and cash in lieu of fractional
shares, if any, as may be required pursuant to Section 2.1.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Merger Sub and Parent that the
statements contained in this Article III are true and correct, except as set
forth in the letter delivered by the Company to Merger Sub on the date hereof
(the "Company Disclosure Letter") (which Company Disclosure Letter sets forth
the exceptions to the representations and warranties contained in this Article
III under captions referencing the Sections to which such exceptions apply):
3.1. Organization and Qualification. Each of the Company and its
Subsidiaries (as defined below) is a company duly incorporated, validly existing
and, if applicable, in good standing under the laws of the jurisdiction of its
incorporation and each such entity has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Each of the Company and its Subsidiaries is duly
qualified or licensed to carry on its business as it is now being conducted, and
is qualified to conduct business, in each jurisdiction where the character of
its properties owned or leased or the nature of its activities makes such
qualification necessary, except for failures to be so qualified that would not,
individually or in the aggregate, have a Company Material Adverse Effect (as
defined below). Neither the Company nor any of its Subsidiaries is in violation
of any of the provisions of its Articles of Incorporation or other applicable
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charter document (any such document of any business entity hereinafter referred
to as its "Charter Document") or its Bylaws, or other applicable organizational
document (any such documents of any business entity hereinafter referred to as
its "Governing Document"). The Company has delivered to Merger Sub accurate and
complete copies of the respective Charter Documents and Governing Documents, as
currently in effect, of each of the Company and its Subsidiaries. As used in
this Agreement, the term "Company Material Adverse Effect" means any change,
effect, event or condition that (i) has a material adverse effect on the assets,
business or financial condition of the Company and its Subsidiaries, taken as a
whole (other than any such change, effect, event or condition that arises as a
result of the transactions contemplated hereby), or (ii) would prevent or
materially impair the Company's ability to consummate the transactions
contemplated hereby. As used in this Agreement, the term "Subsidiary" when used
with respect to any party means any corporation or other organization, whether
incorporated or unincorporated, of which such party directly or indirectly owns
or controls at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the board of directors
or others performing similar functions.
3.2. Capital Stock of Subsidiaries. Neither the Company nor any of its
Subsidiaries owns, controls or holds with the power to vote, directly or
indirectly, of record, beneficially or otherwise, any share of capital stock or
any equity or ownership interest in any company, corporation, partnership,
association, joint venture, business, trust or other entity, except for the
Subsidiaries described in the Company SEC Reports (as defined in Section 3.6(a)
hereof) or listed in Section 3.2 of the Company Disclosure Letter, and except
for ownership of securities in any publicly traded company held for investment
by the Company or any of its Subsidiaries and comprising less than five percent
of the outstanding stock of such company. Except as set forth in Section 3.2 of
the Company Disclosure Letter, the Company is directly or indirectly the record
and beneficial owner of all of the outstanding shares of capital stock of each
of its Subsidiaries and no equity securities of any of such Subsidiaries are or
may be required to be issued by reason of any options, warrants, scrip, rights
to subscribe for, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for, shares of any
capital stock of any such Subsidiary, and there are no contracts, commitments,
understandings or arrangements by which the Company or any such Subsidiary is
bound to issue, transfer or sell any shares of such capital stock or securities
convertible into or exchangeable for such shares. Other than as set forth in
Section 3.2 of the Company Disclosure Letter, all of such shares so owned by the
Company are validly issued, fully paid and nonassessable and are owned by it
free and clear of any claim, lien, pledge, security interest or other
encumbrance of any kind (collectively "Liens") with respect thereto other than
restrictions on transfer pursuant to applicable securities laws.
3.3. Capitalization. The authorized capital stock of the Company
consists of 40,000,000 shares of Company Common Stock, $.01 par value per share,
and 5,000,000 shares of preferred stock, $.01 par value per share (of which
400,000 shares are designated Series D Junior Participating Preferred Stock)
(the "Company Preferred Stock"). As of the close of business on May 5, 2000 (the
"Company Measurement Date"), (a) 29,289,786 shares of Company Common Stock were
issued and outstanding, (b) no shares of Company Preferred Stock were issued and
outstanding, (c) the Company had no shares of Company Common Stock held in its
treasury, (d) 4,621,887 shares of Company Common Stock were reserved for
issuance under the Company Stock Option Plans and the ESPP, (e) Company Options
to purchase 3,387,419 shares of Company Common Stock in the aggregate had been
granted and remained outstanding under the Company Stock Option Plans, (f)
Company Warrants to purchase 1,505,169 shares of Company Common Stock were
outstanding, (g) rights (the "Preferred Rights") to purchase 292,898 shares of
Series D Junior Participating
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Preferred Stock pursuant to the Company Rights Agreement (as defined in Section
3.25) were issued and outstanding, and (h) except for the Company Options,
Company Warrants, Preferred Rights and rights to the issuance of shares of
Company Common Stock under the ESPP, there were no outstanding Rights (defined
below). Except as permitted by Section 5.1(b), since the Company Measurement
Date, no additional shares in the Company have been issued and no Rights have
been granted. Except as described in the preceding sentence or as set forth in
Section 3.3 of the Company Disclosure Letter, the Company has no outstanding
bonds, debentures, notes or other securities or obligations the holders of which
have the right to vote or which are convertible into or exercisable for
securities having the right to vote on any matter on which any shareholder of
the Company has a right to vote. All issued and outstanding shares of Company
Common Stock are duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. There are not as of the date hereof any existing
options, warrants, stock appreciation rights, stock issuance rights, calls,
subscriptions, convertible securities or other rights which obligate the Company
or any of its Subsidiaries to issue, exchange, transfer or sell any shares of
the capital stock of the Company or any of its Subsidiaries, other than rights
to purchase shares of Series D Junior Participating Preferred Stock pursuant to
the Company Rights Agreement, Company Common Stock issuable under the Company
Stock Option Plans, Company Warrants, Preferred Rights and the ESPP, or awards
granted pursuant thereto (collectively, "Rights"). As of the date hereof, there
are no outstanding contractual obligations of the Company or any of its
Subsidiaries to repurchase, reprice, redeem or otherwise acquire any shares of
the capital stock of the Company or any of its Subsidiaries. As of the date
hereof, there are no outstanding contractual obligations of the Company to vote
or to dispose of any shares of the capital stock of any of its Subsidiaries.
3.4. Authority Relative to this Agreement. The Company has the
requisite corporate power and authority to execute and deliver, and perform its
obligations under, this Agreement and the Company Option Agreement and, subject
to obtaining the necessary approval of its shareholders, to consummate the
Merger and the other transactions contemplated hereby and thereby under
applicable law. The execution and delivery of this Agreement and the Company
Option Agreement and the consummation of the Merger and other transactions
contemplated hereby and thereby have been duly and validly authorized by the
Board of Directors of the Company and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or the Company Option
Agreement or to consummate the Merger or other transactions contemplated hereby
and thereby (other than approval by the Company's shareholders required by
applicable law). This Agreement and the Company Option Agreement have been duly
and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof by Parent and Merger Sub, each
constitutes a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors
rights generally or by general equitable principles.
3.5. No Conflict; Required Filings and Consents.
(a) Assuming that all filings, permits, authorizations, consents
and approvals or waivers thereof have been duly made or obtained as contemplated
by Section 3.5(b) hereof, neither the execution and delivery of this Agreement
or the Company Option Agreement by the Company nor the consummation of the
Merger or other transactions contemplated hereby or thereby nor compliance by
the Company with any of the provisions hereof will (i) violate, conflict with,
or result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination or suspension of, or accelerate
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the performance required by, or result in a right of termination or acceleration
under, or result in the creation of any Lien upon any of the properties or
assets of the Company or any of its Subsidiaries under, any of the terms,
conditions or provisions of (x) their respective Charter Documents or Governing
Documents, (y) any note, bond, charge, lien, pledge, mortgage, indenture or deed
of trust to which the Company or any such Subsidiary is a party or to which they
or any of their respective properties or assets may be subject, or (z) any
license, lease, agreement or other instrument or obligation to which the Company
or any such Subsidiary is a party or to which they or any of their respective
properties or assets may be subject, or (ii) violate any judgment, ruling,
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of its Subsidiaries or any of their respective properties or
assets, except, in the case of clauses (i) (y) and (z) and (ii) above, for such
violations, conflicts, breaches, defaults, terminations, suspensions,
accelerations, rights of termination or acceleration or creations of liens,
security interests, charges or encumbrances which would not, individually or in
the aggregate, have a Company Material Adverse Effect.
(b) No filing or registration with or notification to and no
permit, authorization, consent or approval of any court, commission,
governmental body, regulatory authority, agency or tribunal wherever located (a
"Governmental Entity") is required to be obtained, made or given by the Company
in connection with the execution and delivery of this Agreement or the Company
Option Agreement or the consummation by the Company of the Merger or other
transactions contemplated hereby or thereby except (i) (A) the filing of the
Articles of Merger as provided in Section 1.3 hereof, (B) in connection with the
applicable requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (C) the filing of the Joint Proxy
Statement/Prospectus (as defined in Section 3.26 hereof) and such reports under
Sections 13(a), 13(d), 15(d) or 16(a) with the SEC in accordance with the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act") and the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (the "Securities
Act"), as may be required in connection with this Agreement, the Company Option
Agreement and the transactions contemplated hereby or thereby, or (D) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state securities laws and the laws
of any country other than the United States, or (ii) where the failure to obtain
any such consents, approvals, authorizations or permits, or to make such filings
or notifications, would not, individually or in the aggregate, have a Company
Material Adverse Effect.
3.6. SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports, schedules,
statements and other documents required to be filed by it since January 1, 1997
to the date hereof (collectively, as supplemented and amended since the time of
filing, the "Company SEC Reports") with the SEC. The Company SEC Reports (i)
were prepared in all material respects with all applicable requirements of the
Securities Act and the Exchange Act, as the case may be and (ii) did not at the
time they were filed contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The representation in clause (ii) of the preceding
sentence does not apply to any misstatement or omission in any Company SEC
Report filed prior to the date of this Agreement which was superseded by a
subsequent Company SEC Report filed prior to the date of this Agreement. No
Subsidiary of the Company is required to file any report, form or other document
with the SEC.
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(b) The audited consolidated financial statements and unaudited
consolidated interim financial statements of the Company and its Subsidiaries
included or incorporated by reference in such Company SEC Reports (collectively,
the "Financial Statements") have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be otherwise indicated in the notes thereto)
and present fairly, in all material respects, the financial position and results
of operations and cash flows of the Company and its Subsidiaries on a
consolidated basis at the respective dates and for the respective periods
indicated (except, in the case of all such financial statements that are interim
financial statements, for footnotes and normal year-end adjustments).
(c) Neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature, whether absolute, accrued, unmatured,
contingent or otherwise whether due or to become due, known or unknown, or any
unsatisfied judgments or any leases of personalty or realty or unusual or
extraordinary commitments that are required to be shown on the face of a balance
sheet or disclosed in notes to financial statements under United States
generally accepted accounting principles, except (i) liabilities recorded on the
Company's balance sheet at December 31, 1999 (the "Balance Sheet") included in
the financial statements referred in Section 3.6(a) hereof and the notes
thereto, or (ii) liabilities or obligations incurred since December 31, 1999
(whether or not incurred in the ordinary course of business and consistent with
past practice) that would not, individually or in the aggregate, have a Company
Material Adverse Effect.
3.7. Absence of Changes or Events. Except as set forth in Section 3.7
of the Company Disclosure Letter or in the Company SEC Reports, since December
31, 1999 through the date of this Agreement, the Company and its Subsidiaries
have not incurred any liability or obligation that has resulted or would
reasonably be expected to result in a Company Material Adverse Effect, and there
has not been any change in the business, financial condition or results of
operations of the Company or any of its Subsidiaries which has had, or would
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, and the Company and its Subsidiaries have conducted
their respective businesses in the ordinary course consistent with their past
practices.
3.8. Litigation. Except as disclosed in the Company SEC Reports or as
set forth in Section 3.8 of the Company Disclosure Letter, there is no (a)
claim, action, suit or proceeding pending or, to the Knowledge (as defined in
Section 8.6 hereof) of the Company or any of its Subsidiaries, threatened
against or relating to the Company or any of its Subsidiaries, or (b)
outstanding judgment, order, writ, injunction or decree (collectively,
"Orders"), or application, request or motion therefor, in a proceeding to which
the Company, any Subsidiary of the Company or any of their respective assets was
or is a party except actions, suits, proceedings or Orders that, individually or
in the aggregate, has not had or would not reasonably be expected to have a
Company Material Adverse Effect, and neither the Company nor any Subsidiary is
in default in any material respect with respect to any such Order.
3.9. Title to Properties. The Company does not own any real property.
The Company has heretofore made available to Parent correct and complete copies
of all leases, subleases and other agreements (collectively, the "Real Property
Leases") under which the Company or any of its Subsidiaries uses or occupies or
has the right to use or occupy, now or in the future, any real property or
facility (the "Leased Real Property"), including without limitation all
modifications, amendments and supplements thereto. Except in each case where the
failure would not, individually or in the aggregate, have a Company Material
Adverse Effect or except as otherwise set forth in Section 3.9 of the Company
Disclosure Letter, (i) the Company or one of its Subsidiaries has a valid
leasehold
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interest in each parcel of Leased Real Property free and clear of all Liens
except liens of record and other permitted liens and each Real Property Lease is
in full force and effect, (ii) all rent and other sums and charges due and
payable by the Company or its Subsidiaries as tenants thereunder are current in
all material respects, (iii) no termination event or condition or uncured
default of a material nature on the part of the Company or any such Subsidiary
or, to the Knowledge of the Company or any such Subsidiary, the landlord, exists
under any Real Property Lease, (iv) the Company or one of its Subsidiaries is in
actual possession of each Leased Real Property and is entitled to quiet
enjoyment thereof in accordance with the terms of the applicable Real Property
Lease and applicable law, and (v) the Company and its Subsidiaries own outright
all of the personal property (except for leased property or assets for which it
has a valid and enforceable right to use) which is reflected on the Balance
Sheet, except for property since sold or otherwise disposed of in the ordinary
course of business and consistent with past practice and except for liens of
record and other permitted liens. Except where the failure would not,
individually or in the aggregate, have a Company Material Adverse Effect, the
plant, property and equipment of the Company and its Subsidiaries that are used
in the operations of their businesses are in good operating condition and
repair, subject to ordinary wear and tear, and, subject to normal maintenance,
are available for use.
3.10. Certain Contracts. Neither the Company nor any of its
Subsidiaries has breached, or received in writing any claim or notice that it
has breached, any of the terms or conditions of (i) any agreement, contract or
commitment required to be filed as an exhibit to the Company SEC Reports
(including any agreements, contracts or commitments entered into since December
31, 1999 that will be required to be filed by the Company with the SEC in any
report), (ii) any agreements, contracts or commitments with manufacturers,
suppliers, sales representatives, distributors, or OEM strategic partners of the
Company pursuant to which the Company recognized revenues or payments in excess
of $200,000 for the twelve-month period ended December 31, 1999, or (iii) any
agreements, contracts or commitments containing covenants that limit the ability
of the Company or any of its Subsidiaries to compete in any line of business or
with any Person (as defined in Section 8.6 hereof), or that include any
exclusivity provision or involve any restriction on the geographic area in which
the Company or any of its Subsidiaries may carry on its business (collectively,
"Company Material Contracts"), in such a manner as, individually or in the
aggregate, has had or would reasonably be expected to have a Company Material
Adverse Effect. Section 3.10 of the Company Disclosure Letter lists each Company
Material Contract described in clauses (ii) and (iii) of the preceding sentence.
Each Company Material Contract that has not expired by its terms is in full
force and effect and is the legal, valid and binding obligation of the Company
and/or its Subsidiaries, enforceable against them in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors rights and remedies generally and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), except where the
failure of such Company Material Contract to be in full force and effect or to
be legal, valid, binding or enforceable against the Company and/or its
Subsidiaries has not had and would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect. Except as set
forth in Section 3.10 of the Company Disclosure Letter, no consent, approval,
waiver or authorization of, or notice to any Person is needed in order that each
such Company Material Contract shall continue in full force and effect in
accordance with its terms without penalty, acceleration or rights of early
termination by reason of the consummation of the Merger and the other
transactions contemplated by this Agreement.
3.11. Compliance with Law. Except where the failure would not have a
Company Material Adverse Effect, all activities of the Company and its
Subsidiaries have been, and are currently being,
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conducted in compliance in all material respects with all applicable United
States federal, state, provincial and local and other foreign laws, ordinances,
regulations, interpretations, judgments, decrees, injunctions, permits,
licenses, certificates, governmental requirements, and Orders of any court or
other Governmental Entity or any nongovernmental self-regulatory agency, and no
notice has been received by the Company or any Subsidiary of any claims filed
against the Company or any Subsidiary alleging a violation of any such laws,
regulations or other requirements which would be required to be disclosed in any
Company SEC Report or any New SEC Report (as defined in Section 5.18 hereof).
The Company Stock Option Plans and the ESPP have been duly authorized, approved
and operated in compliance in all material respects with all applicable
securities, corporate and other laws of each jurisdiction in which participants
of such plans are located. The Company and its Subsidiaries have all permits,
licenses and franchises from Governmental Entities required to conduct their
businesses as now being conducted, except for such permits, licenses and
franchises the absence of which has not had and would not, individually or in
the aggregate, have a Company Material Adverse Effect.
3.12. Intellectual Property Rights; Year 2000.
(a) The Company and its Subsidiaries own, or are validly licensed
or otherwise possess legally enforceable rights to use, all patents, trademarks,
trade names, service marks, domain names and copyrights, any applications for
and registrations of such patents, trademarks, trade names, service marks,
domain names and copyrights, and all database rights, net lists, processes,
formulae, methods, schematics, technology, know-how, computer software programs
or applications and tangible or intangible proprietary information or material
that are necessary to conduct the business of the Company and its Subsidiaries
as currently conducted, or presently planned to be conducted, except for such
rights the absence of which would not be reasonably expected to have a Company
Material Adverse Effect (the "Company Intellectual Property Rights"). The
Company and its Subsidiaries have taken all action reasonably necessary to
protect the Company Intellectual Property Rights which is customary in the
industry, including without limitation, use of reasonable secrecy measures to
protect the trade secrets included in the Company Intellectual Property Rights.
(b) The execution and delivery of this Agreement and consummation
of the transactions contemplated hereby will not result in the breach of, or
create on behalf of any third party the right to terminate or modify, any
material license, sublicense or other agreement relating to the Company
Intellectual Property Rights, or any material licenses, sublicenses or other
agreements as to which the Company or any of its Subsidiaries is a party and
pursuant to which the Company or any of its Subsidiaries is authorized to use
any third party patents, trademarks, copyrights or trade secrets ("Company Third
Party Intellectual Property Rights"), including software that is used in the
manufacture of, incorporated in, or forms a part of any product sold by or
expected to be sold by the Company or any of its Subsidiaries, the breach of
which would, individually or in the aggregate, be reasonably likely to have a
Company Material Adverse Effect. The Company Disclosure Letter, under the
caption referencing this Section 3.12, lists all royalties, license fees,
sublicense fees or similar obligations requiring payment in excess of $100,000
per year by the Company or any Subsidiary for any Company Third Party
Intellectual Property Rights that are used in the manufacture of, incorporated
in, or forms a part of any product sold by or expected to be sold by the Company
or any of its Subsidiaries.
(c) All patents, registered trademarks, service marks, domain
names and copyrights which are held by the Company or any of its Subsidiaries,
the loss or invalidity of which would reasonably be expected to cause a Company
Material Adverse Effect, are valid and subsisting.
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The Company (i) has not been sued in any suit, action or proceeding, or received
in writing any claim or notice, which involves a claim of infringement or
misappropriation of any patents, trademarks, service marks, domain names,
copyrights or violation of any trade secret or other proprietary right of any
third party; and (ii) has no Knowledge that the manufacturing, marketing,
licensing or sale of its products or services infringe upon, misappropriate or
otherwise come into conflict with any patent, trademark, service xxxx,
copyright, trade secret or other proprietary right of any third party, which
infringement, misappropriation or conflict in the cases of clause (i) and (ii)
would, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect. To the Knowledge of the Company, no other
Person has interfered with, infringed upon, or otherwise come into conflict with
any Company Intellectual Property Rights or other proprietary information of the
Company or any of its Subsidiaries which has or would, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
(d) Except where the failure to do so would not have a Company
Material Adverse Effect, each employee, agent, consultant or contractor who has
materially contributed to or participated in the creation or development of any
copyrightable, patentable or trade secret material on behalf of the Company, any
of its Subsidiaries or any predecessor in interest thereto either: (i) is a
party to an agreement under which the Company or such Subsidiary is deemed to be
the original owner/author of all property rights therein; or (ii) has executed
an assignment or an agreement to assign in favor of the Company, such Subsidiary
or such predecessor in interest, as applicable, all right, title and interest in
such material.
(e) The Company and its Subsidiaries have experienced no material
disruption or interruption of their business or operations as a result of or
related to any of their information systems, data processing and other hardware,
software and other systems, facilities, programs and procedures used or sold by
the Company or any of its Subsidiaries (collectively, "Information Systems")
failing to be Y2K Compliant. "Y2K Compliant" means, with respect to any
Information System, that such Information System (i) handles date information
involving any and all dates before, during and/or after January 1, 2000,
including accepting input, providing output and performing date calculations in
whole or in part; (ii) operates accurately without interruption on and in
respect of any and all dates before, during and/or after January 1, 2000 and
without any change in performance; (iii) responds to and processes two-digit
year input without creating any ambiguity as to the century; and (iv) stores and
provides date input information without creating any ambiguity as to the
century, in each case without utilizing bridges, gateways and the like while
still preserving the level of functionality, usability, reliability, efficiency,
performance and accessibility of such data and associated programs as existed
prior to any modification to such Information System and its constituent
elements to make the same Y2K Compliant.
3.13. Taxes.
(a) "Tax" or "Taxes" shall mean all United States federal, state,
provincial, local or foreign taxes and any other applicable duties, levies,
fees, charges and assessments that are in the nature of a tax, including income,
gross receipts, property, sales, use, license, excise, franchise, ad valorem,
value-added, transfer, social security payments, and health taxes and any
deductibles relating to wages, salaries and benefits and payments to
subcontractors for any jurisdiction in which the Company or any of its
Subsidiaries does business (to the extent required under applicable Tax law),
together with all interest, penalties and additions imposed with respect to such
amounts.
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(b) Except as set forth in (or resulting from matters set forth
in) Section 3.13 of the Company Disclosure Letter or as could not, individually
or in the aggregate, reasonably be expected to have a Company Material Adverse
Effect:
(i) the Company and its Subsidiaries have prepared and timely
filed with the appropriate governmental agencies all franchise, income,
sales and all other material Tax returns and reports required to be
filed on or before the Effective Time (collectively "Returns"), taking
into account any extension of time to file granted to or obtained on
behalf of the Company and/or its Subsidiaries;
(ii) all Taxes of the Company and its Subsidiaries shown on
such Returns or otherwise known by the Company to be due or payable
have been timely paid in full to the proper authorities, other than
such Taxes as are being contested in good faith by appropriate
proceedings or which are adequately reserved for in accordance with
generally accepted accounting principles;
(iii) all deficiencies resulting from Tax examinations of
income, sales and franchise and all other material Returns filed by the
Company and its Subsidiaries in any jurisdiction in which such Returns
are required to be so filed have either been paid or are being
contested in good faith by appropriate proceedings;
(iv) no deficiency has been asserted or assessed against the
Company or any of its Subsidiaries which has not been satisfied or
otherwise resolved, and no examination of the Company or any of its
Subsidiaries is pending or, to the Knowledge of the Company, threatened
for any material amount of Tax by any taxing authority;
(v) no extension of the period for assessment or collection of
any material Tax is currently in effect and no extension of time within
which to file any material Return has been requested, which Return has
not since been filed;
(vi) all Returns filed by the Company and its Subsidiaries are
correct and complete in all material respects or adequate reserves have
been established with respect to any additional Taxes that may be due
(or may become due) as a result of such Returns not being correct or
complete;
(vii) to the Knowledge of the Company, no Tax liens have been
filed with respect to any Taxes;
(viii) neither the Company nor any of its Subsidiaries have
made since January 1, 1997, and none will make, any voluntary
adjustment by reason of a change in their accounting methods for any
pre-Merger period;
(ix) the Company and its Subsidiaries have made timely
payments of the Taxes required to be deducted and withheld from the
wages paid to their employees;
(x) the Company and its Subsidiaries are not parties to any
Tax sharing or Tax matters agreement; and
(xi) to the Knowledge of the Company, neither the Company nor
any of its Subsidiaries is liable to be assessed for or made
accountable for any Tax for which any
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other person or persons may be liable to be assessed or made
accountable whether by virtue of the entering into or the consummation
of the Merger or by virtue of any act or acts done by or which may be
done by or any circumstance or circumstances involving or which may
involve any other person or persons.
(c) The Company and its Subsidiaries are not parties to any
agreement, contract, or arrangement that would, as a result of the transactions
contemplated hereby, result, separately or in the aggregate, in (i) the payment
of any "excess parachute payments" within the meaning of Section 280G of the
Code by reason of the Merger or (ii) the payment of any form of compensation or
reimbursement for any Tax incurred by any Person arising under Section 280G of
the Code.
3.14. Employees. Neither the Company nor any of its Subsidiaries is a
party to any collective bargaining agreement, arrangement or labor contract with
a labor union or labor organization, whether formal or otherwise. The Company
Disclosure Letter, under the caption referencing this Section 3.14, lists all
employment, severance and change of control agreements (or any other agreements
that may result in the acceleration of outstanding options) of the Company or
its Subsidiaries. Each of the Company and its Subsidiaries is in compliance with
all applicable laws (including, without limitation, all applicable extension
orders) respecting employment and employment practices, terms and conditions of
employment, equal opportunity, anti-discrimination laws, and wages and hours,
except where such noncompliance has not had and would not, individually or in
the aggregate, reasonably be expected to have, a Company Material Adverse
Effect. There is no labor strike, slowdown or stoppage pending (or, to the
Knowledge of the Company or any of its Subsidiaries, any unfair labor practice
complaints, labor disturbances or other controversies respecting employment
which are pending or threatened which, if they actually occurred, would
reasonably be expected to have a Company Material Adverse Effect) against the
Company or any of its Subsidiaries.
3.15. Employee Benefit Plans.
(a) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and "Plan" means every plan, fund, contract, program and
arrangement (whether written or not) which is maintained or contributed to by
the Company and its Subsidiaries for the benefit of present or former employees
or with respect to which the Company and its Subsidiaries otherwise has current
or potential liability. "Plan" includes any arrangement intended to provide: (i)
medical, surgical, health care, hospitalization, dental, vision, workers'
compensation, life insurance, death, disability, legal services, severance,
sickness, accident, or cafeteria plan benefits (whether or not defined in
Section 3(1) of ERISA), (ii) pension, profit sharing, stock bonus, retirement,
supplemental retirement or deferred compensation benefits (whether or not tax
qualified and whether or not defined in Section 3(2) of ERISA), (iii) bonus,
incentive compensation, stock option, stock appreciation right, phantom stock or
stock purchase benefits, change in control benefits or (iv) salary continuation,
unemployment, supplemental unemployment, termination pay, vacation or holiday
benefits (whether or not defined in Section 3(3) of ERISA). The Company
Disclosure Letter, under the caption referencing this Section 3.15(a), sets
forth all material Plans by name and brief description.
(b) To the extent required (either as a matter of law or to obtain
the intended tax treatment and tax benefits), all Plans comply and have complied
with the requirements of ERISA, the Code and other applicable law, except where
such noncompliance would not, individually or in the aggregate, have a Company
Material Adverse Effect. With respect to the Plans, (i) all required
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contributions which are due have been made and an accrual required by generally
accepted accounting principles has been made on the books and records of the
Company or its Subsidiaries for all future contribution obligations; (ii) there
are no actions, suits or claims pending, other than routine uncontested claims
for benefits; and (iii) there have been no nonexempt prohibited transactions (as
defined in Section 406 of ERISA or Section 4975 of the Code), except for such
transactions, if any, which have not had and would not, individually or in the
aggregate, reasonably be expected to have, a Company Material Adverse Effect.
Except as otherwise disclosed in the Company Disclosure Letter under the caption
referencing this Section 3.15(b), all benefits under the Plans (other than Code
Section 125 cafeteria plans) are payable either through a fully-funded trust or
an insurance contract and no welfare benefit Plan (as defined in Section 3(1) of
ERISA) is self-funded.
(c) Parent has received true and complete copies of (i) all Plan
documents, including related trust agreements or funding arrangements; (ii) the
most recent determination letter, if any, received by the Company or its
Subsidiaries from the Internal Revenue Service (the "IRS") regarding the Plans
and any amendment to any Plan made subsequent to any Plan amendments covered by
any such determination letter; (iii) current summary plan descriptions; and (iv)
annual returns/reports on Form 5500 and summary annual reports for the most
recent plan year. To the Knowledge of the Company, nothing has occurred that
could materially adversely affect the qualification of the Plans and their
related trusts under Section 401(a) of the Code.
(d) Except as set forth in Section 3.15 of the Company Disclosure
Letter, the Company does not maintain or contribute to (and has never
contributed to) any multi-employer plan, as defined in Section 3(37) of ERISA.
Neither the Company nor any of its Subsidiaries has any actual or potential
material liabilities under Title IV of ERISA, including under Section 4201 of
ERISA for any complete or partial withdrawal from a multi-employer plan.
(e) Neither the Company nor any of its Subsidiaries has any actual
or potential material liability for death or medical benefits after separation
from employment, other than (i) death benefits under the employee benefit plans
or programs (whether or not subject to ERISA) set forth in Section 3.15 of the
Company Disclosure Letter and (ii) health care continuation benefits described
in Section 4980B of the Code.
(f) Neither the Company nor any of its Subsidiaries, nor any of
their respective directors, officers, employees or other "fiduciaries", as such
term is defined in Section 3(21) of ERISA, has committed any breach of fiduciary
responsibility imposed by ERISA or any other applicable law with respect to the
Plans which would subject the Company, Parent or any of their respective
directors, officers or employees to any liability under ERISA or any applicable
law, except for such breaches, if any, which have not had and would not,
individual or in the aggregate, reasonably be expected to have, a Company
Material Adverse Effect.
(g) There are no other trades or businesses (other than
Subsidiaries of the Company), whether or not incorporated, which, together with
the Company, would be deemed to be a "single employer" within the meaning of
Code Sections 414(b), (c) or (m).
(h) Except with respect to Taxes on benefits paid or provided, no
Tax has been waived or excused, has been paid or is owed by any person
(including, but not limited to, any Plan, any Plan fiduciary or the Company)
with respect to the operations of, or any transactions with respect to, any Plan
which would, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect. No action has been taken by the Company, nor
has there been
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any failure by the Company to take any action, nor is any action or failure to
take action contemplated by the Company (including all actions contemplated
under this Agreement), that would subject any person or entity to any liability
or Tax imposed by the IRS or DOL in connection with any Plan, except for such
liability or Tax that has not had and would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect. No
reserve for any Taxes has been established with respect to any Plan by the
Company nor has any advice been given to the Company with respect to the need to
establish such a reserve, except for such reserves which would not, individually
or in the aggregate, reasonably be expected to have a Company Material Adverse
Effect.
(i) There are no (i) legal, administrative or other proceedings or
governmental investigations or audits, or (ii) complaints to or by any
Governmental Entity, which are pending, anticipated or, to the Knowledge of the
Company, threatened, against any Plan or its assets, or against any Plan
fiduciary or administrator, or against the Company or its officers or employees
with respect to any Plan which would, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
(j) There are no leased employees, as defined in Section 414(n) of
the Code, providing services to the Company or its Subsidiaries, that must be
taken into account with respect to the requirements under Section 414(n)(3) of
the Code.
(k) Each Plan may be terminated directly or indirectly by Parent
and the Company, in their sole discretion, at any time before or after the
Effective Date in accordance with its terms, without causing the Parent or the
Company to incur any liability to any person, entity or government agency for
any conduct, practice or omission of the Company which occurred prior to the
Effective Date, except for (i) liabilities to, and the rights of, the employees
thereunder accrued prior to the Effective Date, or if later, the time of
termination, (ii) continuation rights required by the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, or other applicable law, and
(iii) liabilities which would not have a Company Material Adverse Effect.
3.16. Environmental Matters.
(a) The Company and its Subsidiaries (i) have been in compliance
and are presently complying in all material respects with all applicable health,
safety and Environmental Laws (defined below), and (ii) have obtained all
material permits, licenses and authorizations which are required under all
applicable health, safety and Environmental Laws and are in compliance in all
material respects with such permits, licenses and authorizations, except in each
case for such failure to comply or to obtain permits, licenses or authorizations
that would not, individually or in the aggregate, reasonably be expected to have
a Company Material Adverse Effect. To the Knowledge of the Company, (i) none of
the Leased Real Property (including without limitation soils and surface and
ground waters) are contaminated with any Hazardous Materials in quantities which
require investigation or remediation under Environmental Laws, (ii) neither the
Company nor any of its Subsidiaries is liable for any off-site contamination,
and (iii) there is no environmental matter which could reasonably be expected to
expose the Company or any of its Subsidiaries to a claim to clean-up any
Hazardous Materials or otherwise to remedy any pollution or damage at any of the
properties utilized in the Company's business under any Environmental Laws, that
would, with respect to any of (i), (ii) or (iii) above, be required to be
disclosed in the Company SEC Reports.
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(b) For purposes of this Agreement, the term (i) "Environmental
Laws" means all applicable United States federal, state, provincial, local and
other foreign laws, rules, regulations, codes, ordinances, orders, decrees,
directives, permits, licenses and judgments relating to pollution, contamination
or protection of the environment (including, without limitation, all applicable
United States federal, state, provincial, local and other foreign laws, rules,
regulations, codes, ordinances, orders, decrees, directives, permits, licenses
and judgments relating to Hazardous Materials in effect as of the date of this
Agreement), and (ii) "Hazardous Materials" means any dangerous, toxic or
hazardous pollutant, contaminant, chemical, waste, material or substance as
defined in or governed by any United States federal, state, provincial, local or
other foreign law, statute, code, ordinance, regulation, rule or other
requirement relating to such substance or otherwise relating to the environment
or human health or safety, including without limitation any waste, material,
substance, pollutant or contaminant that might cause any injury to human health
or safety or to the environment or might subject the Company or any of its
Subsidiaries to any imposition of costs or liability under any Environmental
Law.
3.17. Insurance. The Company is adequately covered by insurance
policies currently in force with respect to its business and properties. Except
as disclosed in Section 3.17 of the Company Disclosure Letter, there are no
claims outstanding under any insurance policy which could, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse Effect
and, to the Knowledge of the Company or any of its Subsidiaries, neither the
Company nor any of its Subsidiaries has failed to give any notice or to present
any such claim with respect to its business under any such policy in due and
timely fashion, except where such failure would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
3.18. Foreign Corrupt Practices Act. Neither the Company nor any of its
Subsidiaries (nor any person representing the Company or any of its
Subsidiaries) has at any time during the last five years (a) made any payment in
violation of the Foreign Corrupt Practices Act or similar laws of other
countries where the Company engages in business, or (b) made any payment to any
foreign, federal or state governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments required
or permitted by the laws of the United States or any jurisdiction thereof.
3.19. Export Control Laws. The Company has conducted its export
transactions in accordance in all material respects with applicable provisions
of United States export control laws and regulations, including but not limited
to the Export Administration Act and implementing Export Administration
Regulations.
3.20. Finders or Brokers. Except for such Persons as set forth in
Section 3.20 of the Company Disclosure Letter, whose fees will be paid by the
Company, none of the Company, the Subsidiaries of the Company, the Board of
Directors of the Company (the "Company Board") or any member of the Company
Board has employed any agent, investment banker, broker, finder or intermediary
in connection with the transactions contemplated hereby who might be entitled to
a fee or any commission in connection with the Merger or the other transactions
contemplated hereby.
3.21. Board Recommendation. The Company Board has, at a meeting of such
Company Board duly held on May 7, 2000, approved and adopted this Agreement, the
Merger, the Company Option Agreement and the other transactions contemplated
hereby and thereby, declared the advisability of the Merger and recommended that
the shareholders of the Company approve the
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Merger and the other transactions contemplated hereby, and has not as of the
date hereof rescinded or modified in any respect any of such actions.
3.22. Vote Required. The affirmative vote of the holders of a majority
of the shares of Company Common Stock outstanding on the record date set for the
Company Shareholders Meeting (as defined in Section 3.26 hereof) is the only
vote of the holders of any of the Company's capital stock necessary to approve
this Agreement and the transactions contemplated hereby.
3.23. Opinion of Financial Advisor. The Company has received the oral
opinion of Xxxxxxx, Xxxxx & Co. on the date of the meeting of the Company Board
referenced in Section 3.21 above, to the effect that, as of such date, the
Exchange Ratio is fair, from a financial point of view, to the holders of
Company Common Stock.
3.24. Tax Matters. Neither the Company nor, to its Knowledge, any of
its affiliates has taken or agreed to take any action, or knows of any
circumstances, that (without regard to any action taken or agreed to be taken by
Parent or any of its affiliates) would prevent the business combination to be
effected by the Merger from constituting a transaction qualifying as a
reorganization within the meaning of Section 368 of the Code.
3.25. State Takeover Statutes; Rights Agreement. The Company Board has
taken all actions so that the restrictions contained in Section 302A.673 of the
MBCA applicable to a "business combination" (as defined in Section 302A.673 of
the MBCA) will not apply to the execution, delivery of performance of this
Agreement or the Company Option Agreement or the consummation of the Merger or
the other transactions contemplated by this Agreement or by the Company Option
Agreement. The Company has taken all actions and completed all amendments, if
any, necessary or appropriate so that (a) the Rights Agreement, dated as of
November 10, 1998, as amended, between the Company and Norwest Bank Minnesota,
N.A. (the "Company Rights Agreement"), is inapplicable to the transactions
contemplated by this Agreement or the Company Option Agreement, and (b) the
execution of this Agreement or the Company Option Agreement and the consummation
of the transactions contemplated hereby or thereby, do not and will not (i)
result in Parent being an "Acquiring Person" (as such term is defined in the
Company Rights Agreement"), (ii) result in the ability of any person to exercise
any Rights under the Company Rights Agreement, (iii) enable or require the
"Rights" (as such term is defined in the Company Rights Agreement) to separate
from the shares of Company Common Stock to which they are attached or to be
triggered or become exercisable, or (iv) otherwise result in the occurrence of a
"Distribution Date" or "Shares Acquisition Date" (as such terms are defined in
the Company Rights Agreement).
3.26. Registration Statement; Joint Proxy Statement/Prospectus. The
information supplied by the Company for inclusion in the registration statement
on Form S-4 (or such other or successor form as shall be appropriate) pursuant
to which the shares of Parent Common Stock to be issued in the Merger will be
registered with the SEC (the "Registration Statement") shall not at the time the
Registration Statement (including any amendments or supplements thereto) is
declared effective by the SEC contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The information supplied by the Company for
inclusion in the joint proxy statement/prospectus to be sent to the shareholders
of Company in connection with the meeting of Company's shareholders to consider
the Merger (the "Company Shareholders Meeting") and to the stockholders of
Parent in connection with the meeting of Parent's stockholders to consider the
Merger (the "Parent Stockholders Meeting") (such joint proxy
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statement/prospectus as amended or supplemented is referred to herein as the
"Joint Proxy Statement/Prospectus") shall not, on the date the Joint Proxy
Statement/Prospectus is first mailed to Company's shareholders and the Parent
stockholders, at the time of the Company Shareholders Meeting and the Parent
Stockholders Meeting and at the Effective Time, contain any statement which, at
such time, is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they are made, not false or
misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Shareholders Meeting or the Parent Stockholders Meeting
which has become false or misleading. If at any time prior to the Effective Time
any event or information should be discovered by the Company which should be set
forth in an amendment to the Registration Statement or a supplement to the Joint
Proxy Statement/Prospectus, the Company shall promptly inform Parent.
Notwithstanding the foregoing, the Company makes no representation, warranty or
covenant with respect to any information supplied by Parent or Merger Sub which
is contained in any of the foregoing documents.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGER SUB AND PARENT
Merger Sub and Parent jointly and severally represent and warrant to
the Company that the statements contained in this Article IV are true and
correct:
4.1. Organization and Qualification. Parent is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with the corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. Merger Sub
is a corporation validly existing and in good standing under the laws of the
State of Minnesota. Each of Merger Sub and Parent is duly qualified or licensed
to carry on its business as it is now being conducted, and is qualified to
conduct business, in each jurisdiction where the character of its properties
owned or leased or the nature of its activities makes such qualification
necessary, except for failures to be so qualified that would not, individually
or in the aggregate, have, or would not reasonably be expected to have, a Parent
Material Adverse Effect (as defined below). Neither Parent nor Merger Sub is in
violation of any of the provisions of its Charter Document or its Governing
Document. As used in this Agreement, the term "Parent Material Adverse Effect"
means any change, effect, event or condition that (i) has a material adverse
effect on the assets, business or financial condition of Parent and its
Subsidiaries, taken as a whole, or (ii) would prevent or materially delay Merger
Sub's or Parent's ability to consummate the transactions contemplated hereby.
4.2. Capitalization. The authorized capital stock of Parent consists of
150,000,000 shares of Parent Common Stock, $.001 par value per share, and
1,000,000 shares of preferred stock, $.001 par value per share (of which 200,000
shares are designated Series A Junior Participating Preferred Stock (the "Parent
Preferred Stock"). As of the close of business on May 5, 2000 (the "Parent
Measurement Date"), (a) 74,292,949 shares of Parent Common Stock were issued and
outstanding, (b) no shares of Parent Preferred Stock were issued and
outstanding, (c) 12,855,999 shares of Parent Common Stock were reserved for
issuance under the stock-based benefit plans of the Parent (the "Parent Stock
Plans"), (d) options to purchase 5,881,970 shares of Parent Common Stock in the
aggregate had been granted and remained outstanding under the Parent Stock
Plans, and (e) except for the options, rights to acquire shares of Parent Common
Stock under Parent's 1998 Employee Stock Purchase Plan (the "Parent ESPP") and
rights to acquire shares of Parent Common Stock
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pursuant to the Rights Agreement, dated as of June 4, 1996, as amended, between
Parent and Xxxxxx Trust Company of California (the "Parent SRP Plan"), there
were no outstanding Parental Rights (as defined below). Since the Parent
Measurement Date, no additional shares of Parent Common Stock have been issued
and are outstanding, except pursuant to the exercise of options and the Parent
ESPP, and no Parental Rights have been granted (other than additional Parent SRP
Rights issued upon the issuance of shares of Parent Common Stock). All issued
and outstanding shares of Parent Common Stock are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights created by the
General Corporation Law of the State of Delaware ("DGCL") or Parent's Charter
Document or Governing Document, or any other agreement with the Company. There
are not at the date of this Agreement any existing options, warrants, calls,
subscriptions, convertible securities or other rights which obligate Parent or
any of its Subsidiaries to issue, exchange, transfer or sell any shares of
capital stock of Parent or any of its Subsidiaries, other than shares of Parent
Common Stock issuable under the Parent Stock Plans and the Parent ESPP, or
awards granted pursuant thereto, and other than Parent SRP Rights issued upon
the issuance of additional shares of Parent Common Stock (collectively,
"Parental Rights").
4.3. Authority Relative to this Agreement. Each of Parent and Merger
Sub has the requisite corporate power and authority to execute and deliver, and
to perform its obligations under, this Agreement and the Company Option
Agreement and, subject to obtaining the necessary approval of its stockholders,
to consummate the Merger and the other provisions contemplated hereby and
thereby under applicable law. The execution and delivery by Parent and Merger
Sub of this Agreement and the Company Option Agreement, and the consummation of
the Merger and the transactions contemplated hereby and thereby, have been duly
and validly authorized by the Board of Directors of Parent and Merger Sub and no
other corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or the Company Option Agreement or to consummate the
Merger or other transactions contemplated hereby and thereby (other than
approval by the Parent's stockholders required by applicable law). This
Agreement and the Company Option Agreement have been duly and validly executed
and delivered by Parent and Merger Sub and, assuming the due authorization,
execution and delivery of this Agreement and the Company Option Agreement by the
Company, is a valid and binding obligation of Parent and Merger Sub, enforceable
against them in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors
rights generally or by general equitable principles. The shares of Parent Common
Stock to be issued by Parent pursuant to the Merger, as well as the Parent
Options and the shares of Parent Common Stock to be issued upon exercise
thereof: (i) have been duly authorized, and, when issued in accordance with the
terms of the Merger and this Agreement (or the applicable option agreements),
will be validly issued, fully paid and nonassessable and will not be subject to
preemptive rights, (ii) will, when issued in accordance with the terms of the
Merger and this Agreement (or the applicable option agreements), be registered
under the Securities Act, and registered or exempt from registration under
applicable United States "Blue Sky" laws, (iii) will, when issued in accordance
with the terms of the Merger and this Agreement (or the applicable option
agreements), be listed on the Nasdaq National Market and (iv) will be issued
free and clear of any Liens.
4.4. No Conflicts; Required Filings and Consents.
(a) Neither the execution, delivery or performance of this
Agreement by Merger Sub or Parent, nor the consummation of the transactions
contemplated hereby, nor compliance by Merger Sub or Parent with any provision
hereof will (i) violate, conflict with or result in a breach of
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any provision of the Charter Documents or Governing Documents of Merger Sub or
Parent, (ii) cause a default or give rise to any right of termination,
cancellation or acceleration or loss of a material benefit under, or result in
the creation of any lien, charge or other encumbrance upon any of the properties
or assets of Merger Sub or Parent under any of the terms, conditions or
provisions of any note, license, bond, deed of trust, mortgage or indenture, or
any other material instrument, obligation or agreement to which Merger Sub or
Parent is a party or by which its properties or assets may be bound or (iii)
violate any law, judgment, ruling, order, writ, injunction, decree, statute,
rule or regulation applicable to Merger Sub or Parent or binding upon any of its
properties, except for, in the case of clauses (ii) and (iii), such defaults or
violations which would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect.
(b) No filing or registration with or notification to and no
permit, authorization, consent or approval of any Governmental Entity is
required to be obtained, made or given by Merger Sub or Parent in connection
with the execution and delivery of this Agreement or the consummation by Merger
Sub of the Merger or other transactions contemplated hereby except (i) (A) in
connection with the applicable requirements of the HSR Act, (B) the filing of a
Registration Statement (defined in Section 3.26 hereof) with the SEC, in
accordance with the Securities Act, as further described in Section 3.26 hereof
or (C) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state securities
laws and the laws of any country other than the United States, or (ii) where the
failure to obtain any such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect.
4.5. SEC Filings; Financial Statements.
(a) Parent has filed all forms, reports, schedules, statements and
other documents required to be filed by it since January 1, 1997 to the date
hereof (collectively, as supplemented and amended since the time of filing, the
"Parent SEC Reports") with the SEC. The Parent SEC Reports (i) were prepared in
all material respects with all applicable requirements of the Securities Act and
the Exchange Act, as the case may be, and (ii) did not at the time they were
filed contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The representation in clause (ii) of the preceding sentence does
not apply to any misstatement or omission in any Parent SEC Report filed prior
to the date of this Agreement which was superseded by a subsequent Parent SEC
Report filed prior to the date of this Agreement.
(b) The audited consolidated financial statements and unaudited
consolidated interim financial statements of Parent and its Subsidiaries
included or incorporated by reference in such Parent SEC Reports have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may otherwise be indicated in the notes thereto) and present fairly, in all
material respects, the financial position and results of operations and cash
flows of Parent and its Subsidiaries on a consolidated basis at the respective
dates and for the respective periods indicated (except, in the case of all such
financial statements that are interim financial statements, for normal year-end
adjustments).
(c) Neither Parent nor any of its Subsidiaries has any liabilities
or obligations of any nature, whether absolute, accrued, unmatured, contingent
or otherwise, whether due or to become due, known or unknown, or any unsatisfied
judgments or any leases of personalty or realty
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or unusual or extraordinary commitments that are required to be disclosed under
United States generally accepted accounting principles, except (i) as set forth
in the Parent SEC Reports, (ii) the liabilities recorded on Parent's
consolidated balance sheet at December 26, 1999 included in the financial
statements referred in Section 4.5(a) hereof and the notes thereto, (iii)
liabilities or obligations incurred since December 26, 1999 (whether or not
incurred in the ordinary course of business and consistent with past practice)
that would not, individually or in the aggregate, reasonably be expected to have
a Parent Material Adverse Effect, or (iv) liabilities that would not be required
by United States generally accepted accounting principles to be disclosed in
financial statements or in the notes thereto and that would not, individually or
in the aggregate, reasonably be expected to have a Parent Material Adverse
Effect.
4.6. Absence of Changes or Events. Except as set forth in the Parent
SEC Reports, since December 26, 1999 through the date of this Agreement, Parent
and its Subsidiaries have not incurred any liability or obligation that has
resulted or would reasonably likely be expected to result in a Parent Material
Adverse Effect, and there has not been any change in the business, financial
condition or results of operations of Parent or any of its Subsidiaries which
has had, or is reasonably expected to have, individually or in the aggregate, a
Parent Material Adverse Effect, and Parent and its Subsidiaries have conducted
their respective businesses in the ordinary course consistent with their past
practices.
4.7. Litigation. Except as disclosed in the Parent SEC Reports, there
is no (i) claim, action, suit or proceeding pending or, to the Knowledge of
Parent, threatened against or relating to Parent or any of its Subsidiaries, or
(ii) outstanding Orders, or application, request or motion therefor, in a
proceeding to which Parent, any Subsidiary of Parent or any of their respective
assets was or is a party except actions, suits, proceedings or Orders that,
individually or in the aggregate, has not had or would not reasonably be
expected to have a Parent Material Adverse Effect, and neither Parent nor any
Subsidiary is in default in any material respect with respect to any such Order.
4.8. Compliance with Law. All activities of Merger Sub and Parent have
been, and are currently being, conducted in compliance in all material respects
with all applicable United States federal, state and local and other foreign
laws, ordinances, regulations, interpretations, judgments, decrees, injunctions,
permits, licenses, certificates, governmental requirements, Orders and other
similar items of any court or other Governmental Entity or any nongovernmental
self-regulatory agency, and no notice has been received by Parent of any claims
filed against either Merger Sub or Parent alleging a violation of any such laws,
regulations or other requirements which would be required to be disclosed in the
Parent SEC Reports. Merger Sub and Parent have all permits, licenses and
franchises from Governmental Entities required to conduct their businesses as
now being conducted, except for such permits, licenses and franchises the
absence of which would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect.
4.9. Finders or Brokers. Except for XX Xxxxx Securities, whose fees
will be paid by Parent, none of Parent, Merger Sub, the other Subsidiaries of
Parent, the Boards of Directors of Parent and Merger Sub or any member of such
Boards of Directors has employed any agent, investment banker, broker, finder or
intermediary in connection with the transactions contemplated hereby who might
be entitled to a fee or any commission in connection with the Merger or the
other transactions contemplated hereby.
4.10. Tax Matters. Neither Parent nor, to its Knowledge, any of its
affiliates has taken or agreed to take any action, or knows of any
circumstances, that (without regard to any action taken or
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agreed to be taken by the Company or any of its affiliates) would prevent the
business combination to be effected by the Merger from constituting a
transaction qualifying as a reorganization within the meaning of Section 368 of
the Code.
4.11. Registration Statement; Joint Proxy Statement/Prospectus. The
information supplied by Parent and Merger Sub for inclusion in the Joint Proxy
Statement/Prospectus shall not, at the time the Registration Statement
(including any amendments or supplements thereto) is declared effective by the
SEC, contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The information
supplied by Parent for inclusion in the Joint Proxy Statement/Prospectus shall
not, on the date the Joint Proxy Statement/Prospectus is first mailed to the
Company's shareholders and the Parent stockholders, at the time of the Company
Shareholders Meeting and the Parent Stockholders Meeting and at the Effective
Time, contain any statement which, at such time, is false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
it is made, not false or misleading; or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Company Shareholders Meeting or the Parent
Stockholders Meeting which has become false or misleading. If at any time prior
to the Effective Time any event or information should be discovered by Parent or
Merger Sub which should be set forth in an amendment to the Registration
Statement or a supplement to the Joint Proxy Statement/Prospectus, Parent or
Merger Sub will promptly inform the Company. Notwithstanding the foregoing,
Parent and Merger Sub make no representation, warranty or covenant with respect
to any information supplied by the Company which is contained in any of the
foregoing documents.
ARTICLE V
COVENANTS AND AGREEMENTS
5.1. Conduct of Business of the Company Pending the Merger. Except as
contemplated by this Agreement or as expressly agreed to in writing by Parent,
during the period from the date of this Agreement to the earlier of (i) the
termination of this Agreement or (ii) the Effective Time, each of the Company
and its Subsidiaries will conduct their respective operations according to its
ordinary course of business consistent with past practice, and will use
commercially reasonable best efforts consistent with past practice and policies
to preserve intact its business organization, to keep available the services of
its officers and employees and to maintain satisfactory relationships with
suppliers, distributors, customers and others having business relationships with
it and will take no action which would adversely affect the ability of the
parties to consummate the transactions contemplated by this Agreement, or the
timing thereof. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, prior to the Effective Time, the
Company will not nor will it permit any of its Subsidiaries to, without the
prior written consent of Parent:
(a) amend any of its Charter Documents or Governing Documents;
(b) authorize for issuance, issue, sell, deliver, grant any
options, warrants, stock appreciation rights, or stock issuance rights for, or
otherwise agree or commit to issue, sell, deliver, pledge, dispose of or
otherwise encumber any shares of any class of its capital stock or any
securities convertible into shares of any class of its capital stock, except (i)
pursuant to and in accordance with the terms of Company Options outstanding on
the Company Measurement Date or granted pursuant
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to clause (iv) below, (ii) pursuant to the ESPP (to the extent shares of Company
Common Stock have been paid for with payroll deductions), (iii) pursuant to and
in accordance with the terms of Company Warrants outstanding on the Company
Measurement Date, or (iv) the grant of Company Options consistent with past
practices to new employees, which Company Options will represent the right to
acquire no more than 20,000 shares of Company Common Stock per new employee;
provided however, that the current form of agreement under the Company Stock
Option Plans shall be amended to no longer include any provisions providing for
acceleration of vesting upon a change of control, and any other form used by the
Company shall be in a form reasonably acceptable to Parent;
(c) subdivide, cancel, consolidate or reclassify any shares of its
capital stock, issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
shares or property or any combination thereof) in respect of its capital stock
or purchase, redeem or otherwise acquire any shares of its own capital stock or
of any of its Subsidiaries, except as otherwise expressly provided in this
Agreement;
(d) (i) incur or assume any long-term or short-term debt or issue
any debt securities except for borrowings under existing lines of credit in the
ordinary course of business consistent with past practice; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the material obligations of any other person
(other than Subsidiaries of the Company); or (iii) make any material loans,
advances or capital contributions to, or investments in, any other person (other
than to Subsidiaries of the Company);
(e) except as otherwise expressly contemplated by this Agreement,
(i) increase in any manner the compensation of (A) any employee who is not an
officer of the Company or any Subsidiary (a "NonExecutive Employee"), except in
the ordinary course of business consistent with past practice or (B) any of its
directors or officers, except in the ordinary course of business, consistent
with past practice, after consultation with Parent, (ii) pay or agree to pay any
pension, retirement allowance or other employee benefit not required, or enter
into, amend or agree to enter into or amend any agreement or arrangement with
any such director or officer or employee, whether past or present, relating to
any such pension, retirement allowance or other employee benefit, except as
required to comply with law or under currently existing agreements, plans or
arrangements or with respect to NonExecutive Employees, in the ordinary course
of business consistent with past practice; (iii) grant any rights to receive any
severance or termination pay to, or enter into or amend any employment or
severance agreement with, any employee or any of its directors or officers,
except as required by applicable law or with respect to severance or termination
pay to NonExecutive Employees in the ordinary course of business, consistent
with past practices; or (iv) except as may be required to comply with applicable
law, become obligated (other than pursuant to any new or renewed collective
bargaining agreement) under any new pension plan, welfare plan, multiemployer
plan, employee benefit plan, benefit arrangement, or similar plan or
arrangement, which was not in existence on the date hereof, including any bonus,
incentive, deferred compensation, share purchase, share option, share
appreciation right, group insurance, severance pay, retirement or other benefit
plan, agreement or arrangement, or employment or consulting agreement with or
for the benefit of any person, or amend any of such plans or any of such
agreements in existence on the date hereof; provided, however, that this clause
(iv) shall not prohibit the Company from renewing any such plan, agreement or
arrangement already in existence on terms no more favorable to the parties to
such plan, agreement or arrangement;
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(f) except as otherwise expressly contemplated by this Agreement,
enter into, amend in any material respect or terminate any Company Material
Contracts other than in the ordinary course of business consistent with past
practice;
(g) sell, lease, license, mortgage or dispose of any of its
properties or assets, other than (i) transactions in the ordinary course of
business consistent with past practice, (ii) sales of assets, for the fair
market value thereof, which sales do not individually or in the aggregate exceed
$500,000 or (iii) as may be required or contemplated by this Agreement;
(h) except as otherwise contemplated by the Merger, acquire or
agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of or equity in, or by any other manner, any
business or any corporation, limited liability company, partnership, association
or other business organization or division thereof or otherwise acquire or agree
to acquire any assets, other than the acquisition of assets that is in the
ordinary course of business consistent with past practice and which are
contemplated within the budget previously provided in writing by the Company to
the Parent without the prior written consent of Parent, which consent will not
be unreasonably withheld;
(i) alter (through merger, liquidation, reorganization,
restructuring or in any fashion) the corporate structure or ownership of the
Company or any Subsidiary;
(j) authorize or commit to make any material capital expenditures
not within the budget previously provided in writing by the Company to Parent
without the prior written consent of Parent, which consent shall not be
unreasonably withheld;
(k) make any change in the accounting methods or accounting
practices followed by the Company, except as required by generally accepted
accounting principles or applicable law;
(l) make any election under any applicable Tax laws which would,
individually or in the aggregate, have a Company Material Adverse Effect;
(m) take any action that (without regard to any action taken or
agreed to be taken by Parent or any of its Affiliates) would prevent Parent from
accounting for the business combination to be effected by the Merger as a
pooling-of-interests;
(n) settle any action, suit, claim, investigation or proceeding
(legal, administrative or arbitrative) requiring a payment by the Company or its
Subsidiaries in excess of $200,000 without the consent of Parent, which consent
shall not be unreasonably withheld or delayed;
(o) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of claims, liabilities or obligations reflected or reserved against in,
or contemplated by, the most recent financial statements (or the notes thereto)
of the Company included in the Company SEC Reports or incurred in the ordinary
course of business consistent with past practice; or
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(p) agree or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing; provided, however, that nothing
contained herein shall limit the ability of Parent to exercise its rights under
the Company Option Agreement.
5.2. Preparation of Registration Statement; Joint Proxy
Statement/Prospectus; Blue Sky Laws. As promptly as practicable and no later
than 20 business days after the date hereof, Parent and the Company shall
prepare, and Parent shall file with the SEC, the Registration Statement, in
which the Joint Proxy Statement/Prospectus will be included as part thereof.
Parent and the Company shall use all commercially reasonable best efforts to
have such Registration Statement declared effective under the Securities Act as
promptly as practicable after filing. The Joint Proxy Statement/Prospectus will,
when prepared pursuant to this Section 5.2 and mailed to the Company's
shareholders, comply in all material respects with the applicable requirements
of the Exchange Act and the Securities Act. The Joint Proxy Statement/Prospectus
shall be reviewed and approved by Parent and Parent's counsel prior to the
mailing of such Joint Proxy Statement/Prospectus to the Company's shareholders.
Parent shall also take any action required to be taken under any applicable
provincial or state securities laws (including "Blue Sky" laws) in connection
with the issuance of the Parent Common Stock in the Merger; provided, however,
that neither Parent nor the Company shall be required to register or qualify as
a foreign corporation or to take any action that would subject it to service of
process in any jurisdiction where any such entity is not now so subject, except
as to matters and transactions arising solely from the offer and sale of Parent
Common Stock or the Parent Options.
5.3. Company Shareholder and Parent Stockholder Meetings.
(a) The Company shall, promptly after the date hereof, take all
action necessary in accordance with the MBCA and its Articles of Incorporation
and Bylaws to convene the Company Shareholders Meeting within 45 days of the
Registration Statement being declared effective by the SEC, whether or not the
Company Board determines at any time after the date hereof that the Merger is no
longer advisable. The adoption of the Merger by the shareholders of the Company
shall be recommended by the Company Board unless, in the good faith judgment of
the Company Board, after consultation with outside counsel, taking such action
would be inconsistent with its fiduciary obligations under applicable law. The
Company Shareholders Meeting will be convened, held and conducted, and any
proxies will be solicited, in compliance with the MCBA and applicable securities
laws. The Company shall consult with Parent regarding the date of the Company
Shareholders Meeting. Subject to Section 5.2 and Section 5.6 hereof, the Company
shall use commercially reasonable best efforts to solicit from shareholders of
the Company proxies in favor of the Merger and shall take all other commercially
reasonable actions necessary or advisable to secure the vote or consent of
shareholders required to effect the Merger.
(b) Parent shall, promptly after the date hereof, take all action
necessary in accordance with the DGCL and its Certificate of Incorporation and
Bylaws to convene the Parent Stockholders Meeting within 45 days of the
Registration Statement being declared effective by the SEC, whether or not the
Parent Board determines at any time after the date hereof that the Merger is no
longer advisable. The approval by the stockholders of the Parent of the
transactions contemplated by this Agreement shall be recommended by the Parent
Board unless, in the good faith judgment of the Parent Board, after consultation
with outside counsel, taking such action would be inconsistent with its
fiduciary obligations under applicable law. The Parent Stockholders Meeting will
be convened, held and conducted, and any proxies will be solicited, in
compliance with the DGCL and applicable securities laws. Parent shall consult
with the Company regarding the date of the Parent
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Stockholders Meeting. Subject to Section 5.2 and Section 5.6 hereof, Parent
shall use commercially reasonable best efforts to solicit from stockholders of
Parent proxies in favor of the Merger and shall take all other commercially
reasonable actions necessary or advisable to secure the vote or consent of
stockholders required to effect the Merger.
5.4. Additional Agreements, Cooperation.
(a) Subject to the terms and conditions herein provided, each of
the parties hereto agrees to use its commercially reasonable best efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement, and to
cooperate, subject to compliance with applicable law, with each other in
connection with the foregoing, including using its commercially reasonable best
efforts (i) to obtain all necessary waivers, consents and approvals from other
parties to loan agreements, material leases and other material contracts, (ii)
to obtain all necessary consents, approvals and authorizations as are required
to be obtained under any United States federal or state, foreign law or
regulations, (iii) to defend all lawsuits or other legal proceedings challenging
this Agreement or the Company Option Agreement or the consummation of the
transactions contemplated hereby or thereby, (iv) to lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby, (v) to effect
all necessary registrations and filings and submissions of information requested
by Governmental Entities, and (vi) to fulfill all conditions to this Agreement.
(b) Each of the parties hereto agrees, subject to compliance with
applicable law, to furnish to each other party hereto such necessary information
and reasonable assistance as such other party may request in connection with its
preparation of necessary filings or submissions to any regulatory or
governmental agency or authority, including, without limitation, any filing
necessary under the provisions of the HSR Act, the Exchange Act, the Securities
Act or any other United States federal or state, or foreign statute or
regulation. Each party hereto shall promptly inform each other party of any
material communication from the U.S. Federal Trade Commission or any other
government or governmental authority regarding any of the transactions
contemplated hereby.
5.5. Publicity. Except as otherwise required by law or the rules of any
applicable securities exchange or the Nasdaq National Market, so long as this
Agreement is in effect, Parent and the Company will not, and will not permit any
of their respective affiliates or representatives to, issue or cause the
publication of any press release or make any other public announcement with
respect to the transactions contemplated by this Agreement without the consent
of the other party, which consent shall not be unreasonably withheld or delayed.
Parent and the Company will cooperate with each other in the development and
distribution of all press releases and other public announcements with respect
to this Agreement and the transactions contemplated hereby, and will furnish the
other with drafts of any such releases and announcements as far in advance as
possible.
5.6. No Solicitation.
(a) Immediately upon execution of this Agreement, the Company
shall (and shall cause its officers, directors, employees, investment bankers,
attorneys and other agents or representatives to) cease all discussions,
negotiations, responses to inquiries (except as set forth in the proviso to this
sentence) and other communications relating to any potential business
combination with all third parties who, prior to the date hereof, may have
expressed or otherwise indicated any interest in pursuing an Acquisition
Proposal (as hereinafter defined) with the Company;
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provided that, this Section 5.6(a) shall not prohibit activities permitted by
Section 5.6(b) in response to an inquiry initiated after the date hereof.
(b) Prior to termination of this Agreement pursuant to Article VII
hereof, the Company and its Subsidiaries shall not, nor shall the Company
authorize or permit any officers, directors or employees of, or any investment
bankers, attorneys or other agents or representatives retained by or acting on
behalf of, the Company or any of its Subsidiaries to, (i) initiate, solicit or
encourage, directly or indirectly, any inquiries or the making of any proposal
that constitutes an Acquisition Proposal, (ii) engage or participate in
negotiations or discussions with, or furnish any information or data to, or take
any other action to, facilitate any inquiries or making any proposal by, any
third party relating to an Acquisition Proposal, (iii) enter into any agreement
with respect to any Acquisition Proposal or approve an Acquisition Proposal, or
(iv) make or authorize any statement, recommendation or solicitation in support
of any possible Acquisition Proposal. Notwithstanding anything to the contrary
contained in this Section 5.6 or in any other provision of this Agreement, prior
to the Company Shareholders Meeting, the Company Board may participate in
discussions or negotiations with or furnish information to any third party
making an unsolicited Acquisition Proposal (a "Potential Acquiror") or approve
or recommend an unsolicited Acquisition Proposal if (A) a majority of the
disinterested directors of the Company Board determines in good faith, after
consultation with its independent financial advisor, that a Potential Acquiror
has submitted to the Company a written Acquisition Proposal which sets forth a
price or range of values to be paid by the Potential Acquiror and which, if
consummated, would be more favorable to the Company's shareholders, from a
financial point of view, than the Merger (a "Superior Proposal"), (B) the
Company Board has determined in good faith, based on consultation with
independent financial advisor, that such Potential Acquiror is financially
capable of consummating such Superior Proposal, and (C) a majority of the
disinterested directors of the Company Board determines in good faith, after
receiving advice from reputable outside legal counsel experienced in such
matters (and the parties hereto agree that the law firm of Xxxxxx & Xxxxxxx LLP
is so experienced), that the failure to participate in such discussions or
negotiations or to furnish such information or to approve or recommend such
unsolicited Acquisition Proposal is inconsistent with the Company Board's
fiduciary duties under applicable law. In the event that the Company shall
receive any Acquisition Proposal, it shall promptly (and in no event later than
48 hours after receipt thereof) furnish to Parent the identity of the recipient
of the Acquisition Proposal and of the Potential Acquiror, the terms of such
Acquisition Proposal, copies of such Acquisition Proposal and all information
requested by the Potential Acquiror, and shall further promptly inform Parent in
writing as to the fact such information is to be provided after compliance with
the terms of the preceding sentence. Notwithstanding the foregoing, the Company
shall not provide any non-public information to any such Potential Acquiror
unless (1) it has prior to the date thereof provided such information to Parent
and Merger Sub, and (2) the Company provides such non-public information
pursuant to a nondisclosure agreement with terms that are at least as
restrictive as those pursuant to the Confidential Information and Non-Disclosure
Agreement (the "Reciprocal Confidentiality Agreement"), dated March 6, 2000,
between Parent and the Company. Nothing contained herein shall prevent the
Company from complying with Rules 14d-9 and 14e-2 promulgated under the Exchange
Act with regard to an Acquisition Proposal or making any disclosure to the
Company's shareholders if, in the good faith judgment of the Company Board,
after receiving advice from reputable outside legal counsel experienced in such
matters (and the parties hereto agree that the law firm of Xxxxxx & Whitney LLP
is so experienced), such disclosure is required by applicable law. Without
limiting the foregoing, the Company understands and agrees that any violation of
the restrictions set forth in this Section 5.6(b) by the Company or any of its
Subsidiaries, or by any director or officer of the Company or any of its
Subsidiaries or any financial advisor, attorney or
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other advisor or representative of the Company or any of its Subsidiaries,
whether or not such person is purporting to act on behalf of the Company or any
of its Subsidiaries or otherwise, shall be deemed to be a breach of this Section
5.6(b) sufficient to enable Parent to terminate this Agreement pursuant to
Section 7.1(d)(i) hereof.
(c) In addition to the foregoing, the Company shall not enter into
any agreement concerning an Acquisition Proposal for a period of not less than
three business days after the Parent's receipt of a copy of the Acquisition
Proposal.
(d) For the purposes of this Agreement, "Acquisition Proposal"
shall mean any proposal, whether in writing or otherwise, made by any person
other than Parent and its Subsidiaries to acquire "beneficial ownership" (as
defined under Rule 13(d) of the Exchange Act) of 20% or more of the assets of,
or 20% or more of the outstanding capital stock of any of the Company or its
Subsidiaries pursuant to a merger, consolidation, exchange of shares or other
business combination, sale of shares of capital stock, sales of assets, tender
offer or exchange offer or similar transaction involving the Company or its
Subsidiaries.
5.7. Access to Information. From the date of this Agreement until the
Effective Time, and upon reasonable notice, the Company will give Parent and its
authorized representatives (including counsel, other consultants, accountants
and auditors) reasonable access during normal business hours to all facilities,
personnel and operations and to all books and records of it and its
Subsidiaries, will permit Parent to make such inspections as it may reasonably
require, will cause its officers and those of its Subsidiaries to furnish Parent
with such financial and operating data and other information with respect to its
business and properties as Parent may from time to time reasonably request and
confer with Parent to keep it reasonably informed with respect to operational
and other business matters relating to the Company and its Subsidiaries and the
status of satisfaction of conditions to the Closing, other than information that
may not be disclosed under applicable law or in violation of an agreement or if
such disclosure would result in a waiver of the attorney-client privilege;
provided, however, that in any such event the parties shall cooperate in good
faith to obtain waivers of such prohibitions or implement alternative methods of
disclosure of material information. All information obtained by Parent pursuant
to this Section 5.7 shall be kept confidential in accordance with the Reciprocal
Confidentiality Agreement.
5.8. Notification of Certain Matters. The Company or Parent, as the
case may be, shall promptly notify the other of (a) its obtaining of Knowledge
as to the matters set forth in clauses (i), (ii) and (iii) below, or (b) the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be likely to cause (i) any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at any time
from the date hereof to the Effective Time, (ii) any material failure of the
Company or Parent, as the case may be, or of any officer, director, employee or
agent thereof, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement or (iii) the
institution of any claim, suit, action or proceeding arising out of or related
to the Merger or the transactions contemplated hereby; provided, however, that
no such notification shall affect the representations or warranties of the
parties or the conditions to the obligations of the parties hereunder.
5.9. Resignation of Officers and Directors. At or prior to the
Effective Time, the Company shall deliver to Parent the resignations of such
officers and directors of the Company and shall use its commercially reasonable
best efforts to deliver to Parent the resignations of such officers and
directors of its Subsidiaries (in each case, in their capacities as officers and
directors, but not as
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employees if any of such persons are employees of the Company or any Subsidiary)
as Parent shall specify, which resignations shall be effective at the Effective
Time.
5.10. Indemnification.
(a) As of the Effective Time and for a period of six years
following the Effective Time, Parent will indemnify and hold harmless from and
against all claims, damages, losses, obligations or liabilities ("Losses") any
persons who were directors or officers of the Company or any Subsidiary prior to
the Effective Time (the "Indemnified Persons") to the fullest extent such person
could have been indemnified for such Losses under applicable law, under the
Governing Documents of the Company or any Subsidiary or under the
indemnification agreements listed on Schedule 5.10 in effect immediately prior
to the date hereof, with respect to any act or failure to act by any such
Indemnified Person at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement).
(b) Any determination required to be made with respect to whether
an Indemnified Person's conduct complies with the standards set forth under the
MBCA or other applicable law shall be made by independent counsel selected by
Parent and reasonably acceptable to the Indemnified Persons. Parent shall pay
such counsel's fees and expenses so long as the Indemnified Persons do not
challenge any such determination by such independent counsel).
(c) In the event that Parent or any of its successors or assigns
(i) consolidates with, merges or otherwise enters a business combination into or
with any other person, and Parent or such successor or assign is not the
continuing or surviving corporation or entity of such consolidation, merger or
business combination, or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each case, proper provision
shall be made so that such person or the continuing or surviving corporation
assumes the obligations set forth in this Section 5.10 and none of the actions
described in clauses (i) and (ii) above shall be consummated until such
provision is made.
(d) Parent shall maintain in effect for not less than six years
from the Effective Time the current policies of directors' and officers'
liability insurance maintained by the Company (provided that Parent may
substitute therefor policies of at least comparable coverage containing terms
and conditions which are no less advantageous to the Indemnified Parties in all
material respects so long as no lapse in coverage occurs as a result of such
substitution) with respect to all matters (including, without limitation,
extended reporting endorsements (tail coverage) on fiduciary liability with
respect to all senior officers and directors of the Company), including the
transactions contemplated hereby, occurring prior to, and including the
Effective Time; provided that, in the event that any claim for any losses is
asserted or made within such six-year period, such insurance shall be continued
in respect of any such Claim until final disposition of any and all such Claims;
and provided, further, that Parent shall not be obligated to make annual premium
payments for such insurance to the extent such premiums exceed 150% of the
premiums paid as of the date hereof by the Company or any Subsidiary for such
insurance. In such case, Parent shall purchase as much coverage as possible for
150% of the premiums paid as of the date hereof for such insurance, which
coverage shall be at least as favorable in all material respects as that
provided by Parent to its directors.
(e) In the event any claim, action, suit, proceeding or
investigation (a "Claim") for which indemnification is provided under this
Section 5.10 is brought against an Indemnified
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Person (whether arising before or after the Effective Time) after the Effective
Time Parent shall, consistent with the terms of any directors' and officers'
liability insurance policy defend such Indemnified Person from such claim with
counsel reasonably acceptable to such Indemnified Person; provided, however,
that in the event Parent fails to provide a defense to such Claim or it would be
inappropriate due to conflicts of interests that counsel for Parent also
represent such Indemnified Person, (i) such Indemnified Person may retain
separate counsel reasonably acceptable to Parent, (ii) the indemnifying party
shall pay all reasonable fees and expenses of such counsel for such Indemnified
Person as statements therefor are received, and (iii) the indemnifying party
will use all commercially reasonable best efforts to assist in the defense of
any such matter, provided that the indemnifying party shall not be liable for
any settlement of any Claim without its written consent, which consent shall not
be unreasonably withheld, and provided further, however, that not more than one
such separate counsel may be retained for all Indemnified Persons at the expense
of the indemnifying party (unless, and to the extent that, the joint
representation of all Indemnified Persons poses an actual conflict of interest).
Any Indemnified Person desiring to claim indemnification under this Section
5.10, upon learning of any Claim, shall notify the indemnifying party (but the
failure to so notify shall not relieve the indemnifying party from any liability
which it may have under this Section 5.10 except to the extent such failure
materially prejudices such indemnifying party).
(f) This Section 5.10 is intended to benefit the Indemnified
Persons, shall be enforceable by each Indemnified Person and his or her heirs
and representatives.
5.11. Shareholder Litigation. The Company shall give Parent the
reasonable opportunity to participate in the defense of any shareholder
litigation against or in the name of the Company and/or its respective directors
relating to the transactions contemplated by this Agreement.
5.12. Employee Benefit Plans.
(a) 401(k) Plan. Company shall take the following steps with
respect to the Ancor Communications, Incorporated Salary Savings Plan (401(k)
Plan): at least three days prior to the Effective Time, the Company shall
terminate the 401(k) Plan pursuant to written resolutions, the form and
substance of which shall be satisfactory to Parent. Individuals employed by the
Company at the Effective Time ("Company Employees") shall be allowed to
participate in Parent's 401(k) plan effective as of the first payroll following
the Effective Time; and all service with the Company shall be considered service
with Parent for purposes of determining eligibility, vesting, and benefit
accrual (i.e., any matching contributions) under Parent's 401(k) plan. As soon
as administratively feasible after assets are distributed from the 401(k) Plan,
Company Employees shall be offered an opportunity to roll their 401(k) Plan
account balances into Parent's 401(k) Plan.
(b) Welfare Plans. Company Employees shall be eligible to
participate in Parent's disability plans, group life insurance plan, medical
plan, dental plan, and Section 125 cafeteria plan as soon as administratively
feasible after the Effective Time but in no event later than January 1, 2001.
Prior to such time, Company Employees shall remain eligible for Company's
welfare plans, as applicable, and such plans will not be amended or changed in
any material respect by Parent or Company. Parent shall include service and
prior earnings with the Company for purposes of determining eligibility,
participation, and benefit accrual under its short term disability plan, group
life insurance plan medical plan, dental plan, and Section 125 cafeteria plan.
Parent shall include such service for purposes of determining benefit
eligibility or participation in Parent's disability plans; however, such
participation shall be subject to any applicable preexisting condition
exclusions.
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(c) Vacation and PTO. Company Employees shall be eligible to
participate in Parent's vacation or PTO policy, as applicable, as soon as
administratively feasible after the Effective Time but in no event later than
January 1, 2001. Prior to such date Company Employees shall remain eligible for
Company's vacation pay or sick pay policies, as applicable, and such plans or
policies will not be amended or changed in any material respect by Parent or
Company. Parent shall include service with the Company for purposes of
determining eligibility, participation, and calculation of vacation pay, sick
pay, or paid time off (PTO) under Parent's vacation or PTO policy, as
applicable. Subject to the terms of the Company plans or policies, each Company
Employee will be entitled to carry over all vacation days and sick leave accrued
but unused as of the Effective Time.
(d) Executive Incentive Program. The Company's Executive Incentive
Program shall be kept in place until December 31, 2000, after which time Company
Employees may be eligible to participate in any incentive program established by
Parent from time to time.
5.13. Determination of Optionholders and Warrantholders. At least ten
business days before the Effective Time, the Company shall provide Parent with a
true and complete list, as of such date, of (a) the holders of Company Options
and Company Warrants, (b) the number of shares of Company Common Stock subject
to Company Options and Company Warrants held by each such optionholder and
warrantholder and (c) the address of each such optionholder and warrantholder as
set forth in the books and records of the Company or any Subsidiary, following
upon which there shall be no additional grants of Company Options without
Parent's prior consent. From the date such list is provided to Parent until the
Effective Time, the Company shall provide a daily option activity report to
Parent containing such information as Parent shall reasonably request.
5.14. Preparation of Tax Returns. The Company shall file (or cause to
be filed) at its own expense, on or prior to the due date thereof, all Returns
required to be filed on or before the Closing Date. The Company shall provide
Parent with a copy of appropriate workpapers, schedules, drafts and final copies
of each foreign and domestic, federal, provincial and state income Tax return or
election of the Company (including returns of all Employee Benefit Plans) at
least ten days before filing such return or election and shall consult with
Parent with respect thereto prior to such filing.
5.15. Pooling Affiliates.
(a) Promptly following the date of this Agreement, the Company
shall deliver to Parent a list of names and addresses of those persons who are
affiliates within the meaning of Rule 145 of the rules and regulations
promulgated under the Securities Act or otherwise applicable SEC accounting
releases with respect to the Company (the "Company Pooling Affiliates"). The
Company shall provide Parent such information and documents as Parent shall
reasonably request for purposes of reviewing such list. The Company shall
deliver to Parent, on or prior to the Closing, an affiliate letter in the form
attached hereto as Exhibit D, executed by each of the Company Pooling Affiliates
identified in the foregoing list. Parent shall be entitled to place legends as
specified in such affiliate letters on the certificates evidencing any of the
Parent Common Stock to be received by such Company Pooling Affiliates pursuant
to the terms of this Agreement, and to issue appropriate stop transfer
instructions to the transfer agent for the Parent Common Stock, consistent with
the terms of such letters.
(b) Parent shall procure, on or prior to the Effective Time, an
affiliate letter in the form attached hereto as Exhibit E, executed by
appropriate affiliates of Parent.
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(c) For so long as resales of shares of Parent Common Stock issued
pursuant to the Merger are subject to the resale restrictions set forth in Rule
145 under the Securities Act, Parent will use good faith efforts to comply with
Rule 144(c)(1) under the Securities Act.
5.16. Pooling Actions. Between the date of this Agreement and the
Effective Time, the parties will each take all actions necessary for Parent to
account for the business combination to be effected by the Merger as a pooling
of interests.
5.17. Tax-Free Reorganization. Parent and the Company shall each use
all commercially reasonable best efforts to cause the Merger to qualify as a
reorganization within the meaning of Section 368(a) of the Code. Neither Parent
nor the Company shall take or fail to take, or cause any third party to take or
fail to take, any action that would cause the Merger to fail to qualify as a
"reorganization" within the meaning of Section 368(a) of the Code.
5.18. SEC Filings; Compliance. The Company and Parent shall each cause
the forms, reports, schedules, statements and other documents required to be
filed with the SEC by the Company and Parent, respectively, between the date of
this Agreement and the Effective Time (with respect to either the Company or
Parent, the "New SEC Reports") to be prepared in all material respects with all
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and such New SEC Reports will not at the time they are filed contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
5.19. Listing of Additional Shares. Prior to the Effective Time, Parent
shall file with the Nasdaq National Market a Notification Form for Listing of
Additional Shares with respect to the shares of Parent Common Stock to be issued
in the Merger.
5.20. Rights Agreement. Prior to the Effective Time, the Company Board
shall not take any action in contravention of the actions required by Section
3.25 of this Agreement.
ARTICLE VI
CONDITIONS TO CLOSING
6.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Effective Date of the following
conditions:
(a) Company Shareholder and Parent Stockholder Approval. This
Agreement and the Merger shall have been approved and adopted by the requisite
vote of (i) the shareholders of the Company under the MBCA and the Company's
Charter Document and Governing Documents and (ii) the stockholders of Parent
under the DGCL and the Parent's Charter Document and Governing Document.
(b) Governmental Action; No Injunction or Restraints. No action or
proceeding shall be instituted by any Governmental Entity seeking to prevent
consummation of the Merger, asserting the illegality of the Merger or this
Agreement or seeking damages (in an amount or to the extent that, if they were
incurred or paid by the Company, would constitute a Company Material Adverse
Effect) directly arising out of the transactions contemplated hereby which
continues to be
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outstanding. No judgment, order, decree, statute, law, ordinance, rule or
regulation entered, enacted, promulgated, enforced or issued by any court or
other Governmental Entity of competent jurisdiction or other legal restraint or
prohibition shall be in effect (i) imposing or seeking to impose sanctions,
damages or liabilities (in an amount or to the extent that, if they were
incurred or paid by the Company, would constitute a Company Material Adverse
Effect) directly arising out of the Merger on the Company or any of its officers
or directors; or (ii) preventing the consummation of the Merger.
(c) Governmental Consents. All necessary authorizations, consents,
orders or approvals of, or declarations or filings with, or expiration or waiver
of waiting periods imposed by, any Governmental Entity of any applicable
jurisdiction required for the consummation of the transactions contemplated by
this Agreement shall have been filed, expired or obtained, as to which the
failure to obtain, make or occur would have the effect of making the Merger or
this Agreement or any of the transactions contemplated hereby illegal or which,
individually or in the aggregate, would have a Parent Material Adverse Effect
(assuming the Merger had taken place), including, but not limited to: the
expiration or termination of the applicable waiting period, or any extensions
thereof, pursuant to the HSR Act.
6.2. Conditions to Obligations of Parent. The obligation of Parent to
effect the Merger is further subject to satisfaction or waiver of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth herein shall be true and correct both when
made and at and as of the Effective Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of
such date), except where the failure of such representations and warranties to
be so true and correct (without giving effect to any limitation as to
materiality or material adverse effect set forth therein) does not have, and
would not, individually or in the aggregate, reasonably be expected to have, a
Company Material Adverse Effect.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Effective Date.
(c) No Injunctions or Restraints. No final judgment, order,
decree, statute, law, ordinance, rule or regulation entered, enacted,
promulgated, enforced or issued by any court or other Governmental Entity of
competent jurisdiction or other legal restraint or prohibition shall be in
effect (i) imposing material limitations on the ability of Parent to acquire or
hold or to exercise full rights of ownership of any securities of the Company;
(ii) imposing material limitations on the ability of Parent or its Affiliates to
combine and operate the business and assets of the Company; (iii) imposing other
material sanctions, damages, or liabilities directly arising out of the Merger
on Parent or any of its officers or directors; or (iv) requiring divestiture by
Parent of any significant portion of the business, assets or property of the
Company or of Parent.
(d) Delivery of Closing Documents. At or prior to the Effective
Time, the Company shall have delivered to Parent all of the following:
(i) a certificate of the President and the Chief Financial
Officer of the Company, dated as of the Effective Date, stating that
the conditions precedent set forth in Sections 6.2(a), (b) and (c)
hereof have been satisfied; and
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(ii) a copy of (A) the Articles of Incorporation of the
Company, dated as of a recent date, certified by the Secretary of State
of the State of Minnesota, (B) the Bylaws of the Company and (C) the
resolutions of the Company Board and shareholders authorizing the
Merger and the other transactions contemplated by this Agreement,
certified by the Secretary of the Company.
(e) Pooling Letters. The Company shall have received a letter from
KPMG LLP addressed to the Company and dated as of the Effective Date, stating
that based on KPMG LLP's familiarity with the Company that the Company will
qualify as a party to a pooling of interests transaction under Opinion 16, and
Parent shall have received a letter of KPMG LLP, addressed to the Parent and
dated as of the Effective Date, stating that, in reliance on the letter
described in this paragraph (f) and based on its familiarity with Parent, the
Merger will qualify as a pooling-of-interests transaction under Opinion 16,
unless the failure to so qualify is solely as a result of any action taken by
Parent or Merger Sub on or after the date hereof and prior to the Effective
Date.
(f) Company Affiliate Letters. Parent shall have received all of
the letters described in Section 5.15(a) hereof executed by each of the Company
Pooling Affiliates.
(g) Dissenting Shares. The aggregate amount of Dissenting Shares
(as defined in Section 2.1(g) hereof) shall not exceed five percent of the total
number of shares of Company Common Stock, on a fully diluted, as-converted basis
(i.e., assuming issuance of all shares of Common Stock issuable upon the
exercise or conversion of all securities outstanding immediately prior to the
Effective Time which are convertible into or exercisable for shares of Company
Common Stock, whether or not vested), issued and outstanding immediately prior
to the Effective Time.
6.3. Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger is further subject to satisfaction or waiver of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub set forth herein shall be true and correct
both when made and at and as of the Effective Date, as if made at and as of such
time (except to the extent expressly made as of an earlier date, in which case
as of such date), except where the failure of such representations and
warranties to be so true and correct (without giving effect to any limitation as
to materiality or material adverse effect set forth therein) does not have, and
would not, individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect.
(b) Performance of Obligations of Parent. Parent shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Date.
(c) Delivery of Closing Documents. At or prior to the Effective
Time, the Parent shall have delivered to the Company a certificate of the
President and the Chief Financial Officer of Parent, dated as of the Effective
Date, stating that the conditions precedent set forth in Sections 6.3(a) and (b)
hereof have been satisfied.
(d) Tax Opinion. The Company shall have received an opinion from
Xxxxxx & Xxxxxxx LLP, counsel to the Company, dated as of the Effective Time,
substantially to the effect that, on the basis of the facts, representations and
assumptions set forth in such opinion which are consistent with the state of
facts existing at the Effective Time, the Merger will be treated for Federal
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income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code and that accordingly:
(i) No gain or loss will be recognized by the Company as a
result of the Merger;
(ii) No gain or loss will be recognized by the shareholders of
the Company who exchange Company Common Stock for Parent Common Stock
pursuant to the Merger (except with respect to cash received in lieu of
a fractional shares);
(iii) The tax basis of the Parent Common Stock received by the
stockholders who exchange all of their Company Common Stock in the
Merger will be the same as the tax basis of the Company Stock
surrendered in exchange therefor; and
(iv) The holding period of the Parent Common Stock received by
a shareholder of the Company pursuant to the Merger will include the
period during which the Company Common Stock surrendered therefor was
held, provided the Company Common Stock is a capital asset in the hands
of the shareholder of the Company at the time of the Merger.
In rendering such opinion, such counsel may require and rely upon
representations and covenants including those contained in certificates of
officers of Parent, the Company and others. The foregoing notwithstanding, if
Xxxxxx & Whitney LLP does not render such opinion, this condition shall
nonetheless be deemed satisfied if Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx renders such
opinion to the Company (it being agreed that Parent and the Company shall each
provide reasonable cooperation, including making reasonable representations, to
Xxxxxx & Whitney LLP or Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx, as the case may be, to
enable them to render such opinion).
ARTICLE VII
TERMINATION
7.1. Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the Merger by the
Company's shareholders or the Parent's stockholders:
(a) by mutual written consent of the Company and Parent (on behalf
of Parent and Merger Sub);
(b) by either the Company or Parent (on behalf of Parent and
Merger Sub):
(i) if the Merger shall not have been completed by November
30, 2000; provided, however, that the right to terminate this Agreement
pursuant to this Section 7.1(b)(i) shall not be available to any party
whose failure to perform any of its obligations under this Agreement
results in the failure of the Merger to be consummated by such time;
(ii) if shareholder approval shall not have been obtained at
the Company Shareholders Meeting duly convened therefor or at any
adjournment or postponement thereof; provided, however, that the right
to terminate this Agreement pursuant to this
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Section 7.1(b)(ii) shall not be available to any party whose failure to
perform any of its obligations under this Agreement results in the
failure to obtain shareholder approval.
(iii) if stockholder approval shall not have been obtained at
the Parent Stockholders Meeting duly convened therefor or at any
adjournment or postponement thereof; provided, however, that the right
to terminate this Agreement pursuant to this Section 7.1(b)(iii) shall
not be available to any party whose failure to perform any of its
obligations under this Agreement results in the failure to obtain
stockholder approval.
(iv) if any restraint having any of the effects set forth in
Section 6.1(b) or Section 6.2(c) hereof shall be in effect and shall
have become final and nonappealable; provided, however, that the right
to terminate this Agreement pursuant to this Section 7.1(b)(iv) shall
not be available to any party whose failure to perform any of its
obligations under this Agreement results in such restraint to continue
in effect; or
(v) if the Company enters into a merger, acquisition or other
agreement (including an agreement in principle) or understanding to
effect a Superior Proposal or the Company Board or a committee thereof
resolves to do so; provided, however, that the Company may not
terminate this Agreement pursuant to this Section 7.1(b)(v) unless (a)
the Company has delivered to Parent and Merger Sub a written notice of
the Company's intent to enter into such an agreement to effect such
Acquisition Proposal, which notice shall include, without limitation,
the material terms and conditions of the Acquisition Proposal and the
identity of the Person making the Acquisition Proposal, (b) three
business days have elapsed following delivery to Parent and Merger Sub
of such written notice by the Company and (c) during such
three-business-day period, the Company has cooperated with Parent and
Merger Sub to allow Parent and Merger Sub within such
three-business-day period to propose amendments to the terms of this
Agreement to be at least as favorable as the Superior Proposal;
provided, further, that the Company may not terminate this Agreement
pursuant to this Section 7.1(b)(v) unless, at the end of such
three-business-day-period, the Company Board continues reasonably to
believe that the Acquisition Proposal constitutes a Superior Proposal;
(c) by the Company
(i) if Parent or Merger Sub shall have breached any of its
representations and warranties contained in Article IV hereof which
breach has had or is reasonably likely to have a Parent Material
Adverse Effect or Parent or Merger Sub shall have breached or failed to
perform in any material respect any of its covenants or other
agreements contained in this Agreement, in each case, which breach or
failure to perform has not been cured by Parent or Merger Sub within
thirty days following receipt of notice thereof from the Company;
(ii) if (a) the Parent Board or any committee thereof shall
have withdrawn or modified in a manner adverse to the Company its
approval or recommendation of this Agreement, or (b) the Parent Board
or any committee thereof shall have resolved to take any of the
foregoing actions; or
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(d) by Parent (on behalf of Parent and Merger Sub):
(i) if the Company shall have breached any of its
representations and warranties contained in Article III hereof which
breach has had or is reasonably likely to have a Company Material
Adverse Effect or the Company shall have breached or failed to perform
in any material respect any of its covenants or other agreements
contained in this Agreement, in each case (other than a breach of
Section 5.6(b) hereof, as to which no materiality requirement and no
cure period shall apply), which breach or failure to perform has not
been cured by the Company within thirty days following receipt of
notice thereof from Parent; or
(ii) if (a) the Company Board or any committee thereof shall
have withdrawn or modified in a manner adverse to Parent its approval
or recommendation of the Merger or this Agreement, or approved or
recommended an Acquisition Proposal, or (b) the Company Board or any
committee thereof shall have resolved to take any of the foregoing
actions.
7.2. Effect of Termination. The termination of this Agreement pursuant
to the terms of Section 7.1 hereof shall become effective upon delivery to the
other party of written notice thereof. In the event of the termination of this
Agreement pursuant to the foregoing provisions of this Article VII, there shall
be no obligation or liability on the part of any party hereto (except as
provided in Section 7.3 hereof) or its shareholders or directors or officers in
respect thereof, except for agreements which survive the termination of this
Agreement, except for liability that Parent or Merger Sub or the Company might
have to the other party or parties arising from a breach of this Agreement due
to termination of this Agreement in accordance with Sections 7.1(c)(i) or
7.1(d)(i) or due to the fraudulent or willful misconduct of such party, and
except that the termination of the Company Option Agreement shall be governed by
its terms.
7.3. Fees and Expenses.
(a) Except as provided in this Section 7.3, whether or not the
Merger is consummated, the Company, on the one hand, and Parent and Merger Sub,
on the other, shall bear their respective expenses incurred in connection with
the Merger, including, without limitation, the preparation, execution and
performance of this Agreement and the transactions contemplated hereby, and all
fees and expenses of investment bankers, finders, brokers, agents,
representatives, counsel and accountants, except that the registration and
filing fees incurred in connection with the filing under the HSR Act and the
Registration Statement and Joint Proxy Statement/Prospectus shall be shared
equally by the Company and Parent.
(b) Notwithstanding any provision in this Agreement to the
contrary, if this Agreement is terminated as a result of a breach of this
Agreement in accordance with Sections 7.1(c)(i) or 7.1(d)(i), then the
nonbreaching party shall be entitled to receive from the breaching party damages
resulting from such breach, including without limitation, all out-of-pocket fees
and expenses incurred or paid by or on behalf of the nonbreaching party or any
Affiliate of the nonbreaching party in connection with this Agreement, the
Merger and transactions contemplated herein, including all fees and expenses of
counsel, investment banking firm, accountants and consultants; provided,
however, that no payments for damages shall be payable to any party pursuant to
this Section 7.3(b) if a Termination Fee is paid to such party pursuant to
Section 7.3(c) or 7.3(d) below.
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(c) Notwithstanding any other provision in this Agreement to the
contrary, if (x) this Agreement is terminated by the Company or Parent at a time
when Parent or the Company is entitled to terminate this Agreement pursuant to
Section 7.1(b)(ii) (except if, immediately prior to the Company Shareholder
Meeting, an event or condition exists that would result in a Parent Material
Adverse Effect or 7.1(d)(i) and, concurrently with or within twelve months after
such a termination, the Company shall enter into an agreement, or binding
arrangement or understanding with respect to an Acquisition Proposal (which
shall include, for this purpose, the commencement by a third party of a tender
offer or exchange offer or similar transaction directly with the Company's
shareholders) with a third party (collectively, a "Third Party Deal") or (y)
this Agreement is terminated pursuant to Section 7.1(b)(v), or 7.1(d)(ii)
(except, in the case of 7.1(d)(ii) only, if the Company Board's withdrawal or
modification of its approval or recommendation of this Agreement or the Merger
occurs after the occurrence of a Parent Material Adverse Effect), then, in each
case, the Company shall (in lieu of any obligation under this Agreement and as
liquidated damages and not as a penalty or forfeiture) pay to Parent U.S.
55,000,000 (the "Parent Termination Fee") in cash. Such payment shall be made
promptly, but in no event later than the second business day following: (i) in
the case of clause (x) relating to a termination pursuant to Section 7.1(d)(i)
as a result of a breach of Section 5.6, the later to occur of such termination
and the entry of such Third Party Deal; (ii) in the case of clause (x) other
than as set forth in the immediately preceding clause (i), the later to occur of
such termination and the consummation of such Third Party Deal; and (iii) in the
case of clause (y) such termination.
(d) Notwithstanding any other provision in this Agreement to the
contrary, if (x) this Agreement is terminated by the Company or Parent at a time
when Parent or the Company is entitled to terminate this Agreement pursuant to
Section 7.1(b)(iii) (except if immediately prior to the Parent Stockholder
Meeting, an event or condition exists that would result in a Company Material
Adverse Effect), or (y) this Agreement is terminated by the Company pursuant to
Section 7.1(c)(ii) (except if the Parent Board's withdrawal or modification of
its approval or recommendation of this Agreement occurs after a Company Material
Adverse Effect), then, in each case Parent shall (in lieu of any obligation
under this Agreement and as liquidated damages and not as a penalty or
forfeiture) pay to the Company $55,000,000 (the "Company Termination Fee") in
cash, such payment to be made promptly, but in no event later than the second
business day following such termination.
(e) The parties acknowledge that the agreements contained in
Sections 7.3(b), (c) and (d) hereof are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent and
Merger Sub on the one hand, and the Company on the other, would not enter into
this Agreement. Accordingly, if the Company fails promptly to pay the amounts
due pursuant to Sections 7.3(b) and/or (c) hereof, or if Parent fails promptly
to pay the amounts due pursuant to Section 7.3(b) and/or (d) hereof, (i) the
party failing to so pay shall pay interest on such amounts at the prime rate
announced by Silicon Valley Bank, Irvine, California, in effect on the date the
Termination Fee (or fees and expenses) were required to be paid, and (ii) if, in
order to obtain such payment, a party commences a suit or takes other action
which results in a judgment or other binding determination against the nonpaying
party for the fees and expenses in Sections 7.3(b), 7.3(c) or 7.3(d) hereof, the
nonpaying party shall also pay to the party entitled to receive payment its
costs and expenses (including reasonable attorneys' fees) in connection with
such suit, together with interest payable under the preceding clause (i).
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ARTICLE VIII
MISCELLANEOUS
8.1. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
8.2. Waiver. At any time prior to the Effective Date, any party hereto
may (a) extend the time for the performance of any of the obligations or other
acts of any other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements of any other party or with any conditions to its own obligations
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
duly authorized by and signed on behalf of such party.
8.3. Attorneys' Fees. Should suit be brought to enforce or interpret
any part of this Agreement, the prevailing party will be entitled to recover, as
an element of the costs of suit and not as damages, reasonable attorneys' fees
to be fixed by the court (including, without limitation, costs, expenses and
fees on any appeal).
8.4. Notices.
(a) Any notice or communication to any party hereto shall be duly
given if in writing and delivered in person or mailed by first class mail and
airmail, if overseas (registered or return receipt requested), facsimile (with
receipt electronically acknowledged) or overnight air courier guaranteeing next
day delivery, to such other party's address.
If to Parent:
QLogic Corporation
00000 Xxxxxx Xxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: X.X. Xxxxx
with a copy to:
Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxx X. Xxxxx, Esq.
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If to the Company:
Ancor Communications, Incorporated
0000 Xxxx Xxxxx, Xxxxx 00
Xxxx Xxxxxxx, Xxxxxxxxx 00000-0000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxx Xxxxxxxxxxx
with copies to:
Xxxxxx & Whitney LLP
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
(b) All notices and communications will be deemed to have been
duly given: at the time delivered by hand, if personally delivered; three
business days after being deposited in the mail, if mailed; when sent, if sent
by facsimile; and one business day after timely delivery to the courier, if sent
by overnight air courier guaranteeing next day delivery.
8.5. Counterparts. This Agreement may be executed via facsimile in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8.6. Interpretation; Construction. The language used in this Agreement
and the other agreements contemplated hereby shall be deemed to be the language
chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against any party. The headings of articles and
sections herein are for convenience of reference, do not constitute a part of
this Agreement, and shall not be deemed to limit or affect any of the provisions
hereof. As used in this Agreement, "Person" means any individual, corporation,
limited liability company, limited or general partnership, joint venture,
association, joint stock company, trust, unincorporated organization or other
entity; "Knowledge" means the actual knowledge of a director or any executive
officer of the applicable party or any of its Subsidiaries, as such knowledge
has been obtained or would have been obtained after reasonable inquiry by such
person in the normal conduct of the business; and all amounts shall be deemed to
be stated in U.S. dollars, unless specifically referenced otherwise.
8.7. Amendment. This Agreement may be amended by the parties at any
time before or after any required approval of matters presented in connection
with the Merger by the shareholders of the Company or the stockholders of
Parent; provided, however, that after any such approval, there shall not be made
any amendment that by law requires further approval by the shareholders of the
Company or the stockholders of Parent without obtaining such further approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.
8.8. No Third Party Beneficiaries. Except for the provisions of Section
5.10 hereof (which is intended to be for the benefit of the persons referred to
therein, and may be enforced by
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such persons) nothing in this Agreement shall confer any rights upon any person
or entity which is not a party or permitted assignee of a party to this
Agreement.
8.9. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware. Each party hereby
irrevocably waives the right to any jury trial in connection with any action or
proceeding brought or maintained in connection with this Agreement.
8.10. Entire Agreement. This Agreement (together with the Exhibits and
the Company Disclosure Letter, and the other documents delivered pursuant hereto
or contemplated hereby) constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof, in each case other than the Company Option
Agreement and the Reciprocal Confidentiality Agreement.
8.11. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers all as of the day and year first
above written.
QLOGIC CORPORATION
By: /s/ X.X. Xxxxx
---------------------------------------------
X.X. Xxxxx, President and
Chief Executive Officer
AMINO ACQUISITION CORP.
By: /s/ X.X. Xxxxx
---------------------------------------------
X.X. Xxxxx, President
ANCOR COMMUNICATIONS, INCORPORATED
By: /s/ Xxx Xxxxxxxxxxx
---------------------------------------------
Xxx Xxxxxxxxxxx, Chief Executive Officer
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Table of Contents
Page
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ARTICLE I THE MERGER........................................................2
1.1. The Merger.......................................................2
1.2. Effect of Merger.................................................2
1.3. Effective Time...................................................2
1.4. Articles of Incorporation; Bylaws................................2
1.5. Directors and Officers...........................................3
1.6. Taking of Necessary Action; Further Action.......................3
1.7. The Closing......................................................3
ARTICLE II CONVERSION OF SECURITIES..........................................3
2.1. Conversion of Securities.........................................3
2.2. Stock Options....................................................5
2.3. Warrants.........................................................6
2.4. Employee Stock Purchase Plan.....................................6
2.5. Exchange of Certificates.........................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................8
3.1. Organization and Qualification...................................8
3.2. Capital Stock of Subsidiaries....................................9
3.3. Capitalization...................................................9
3.4. Authority Relative to this Agreement............................10
3.5. No Conflict; Required Filings and Consents......................10
3.6. SEC Filings; Financial Statements...............................11
3.7. Absence of Changes or Events....................................12
3.8. Litigation......................................................12
3.9. Title to Properties.............................................12
3.10. Certain Contracts...............................................13
3.11. Compliance with Law.............................................13
3.12. Intellectual Property Rights; Year 2000.........................14
3.13. Taxes...........................................................15
3.14. Employees.......................................................17
3.15. Employee Benefit Plans..........................................17
3.16. Environmental Matters...........................................19
3.17. Insurance.......................................................20
3.18. Foreign Corrupt Practices Act...................................20
3.19. Export Control Laws.............................................20
3.20. Finders or Brokers..............................................20
3.21. Board Recommendation............................................20
3.22. Vote Required...................................................21
3.23. Opinion of Financial Advisor....................................21
3.24. Tax Matters.....................................................21
3.25. State Takeover Statutes; Rights Agreement.......................21
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Table of Contents
(continued)
Page
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3.26. Registration Statement; Joint Proxy Statement/Prospectus........21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MERGER SUB AND PARENT...........22
4.1. Organization and Qualification..................................22
4.2. Capitalization..................................................22
4.3. Authority Relative to this Agreement............................23
4.4. No Conflicts; Required Filings and Consents.....................23
4.5. SEC Filings; Financial Statements...............................24
4.6. Absence of Changes or Events....................................25
4.7. Litigation......................................................25
4.8. Compliance with Law.............................................25
4.9. Finders or Brokers..............................................25
4.10. Tax Matters.....................................................25
4.11. Registration Statement; Joint Proxy Statement/Prospectus........26
ARTICLE V COVENANTS AND AGREEMENTS..........................................26
5.1. Conduct of Business of the Company Pending the Merger...........26
5.2. Preparation of Registration Statement; Joint Proxy
Statement/Prospectus; Blue Sky Laws............................29
5.3. Company Shareholder and Parent Stockholder Meetings.............29
5.4. Additional Agreements, Cooperation..............................30
5.5. Publicity.......................................................30
5.6. No Solicitation.................................................30
5.7. Access to Information...........................................32
5.8. Notification of Certain Matters.................................32
5.9. Resignation of Officers and Directors...........................32
5.10. Indemnification.................................................33
5.11. Shareholder Litigation..........................................34
5.12. Employee Benefit Plans..........................................34
5.13. Determination of Optionholders and Warrantholders...............35
5.14. Preparation of Tax Returns......................................35
5.15. Pooling Affiliates..............................................35
5.16. Pooling Actions.................................................36
5.17. Tax-Free Reorganization.........................................36
5.18. SEC Filings; Compliance.........................................36
5.19. Listing of Additional Shares....................................36
5.20. Rights Agreement................................................36
ARTICLE VI CONDITIONS TO CLOSING............................................36
6.1. Conditions to Each Party's Obligation to Effect the Merger......36
6.2. Conditions to Obligations of Parent.............................37
6.3. Conditions to Obligations of the Company........................38
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Table of Contents
(continued)
Page
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ARTICLE VII TERMINATION......................................................39
7.1. Termination.....................................................39
7.2. Effect of Termination...........................................41
7.3. Fees and Expenses...............................................41
ARTICLE VIII MISCELLANEOUS....................................................43
8.1. Nonsurvival of Representations and Warranties...................43
8.2. Waiver..........................................................43
8.3. Attorneys' Fees.................................................43
8.4. Notices.........................................................43
8.5. Counterparts....................................................44
8.6. Interpretation; Construction....................................44
8.7. Amendment.......................................................44
8.8. No Third Party Beneficiaries....................................44
8.9. Governing Law...................................................45
8.10. Entire Agreement................................................45
8.11. Validity........................................................45
EXHIBITS
EXHIBITS
--------
A Stock Option Agreement
B Voting Agreement
C Certificate of Merger
D Form of Company Affiliate Letter
E Form of Parent Affiliate Letter
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