1
EXHIBIT 2.4
FIRST AMENDED AND RESTATED
MERGER AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
NEW FOCUS, INC.,
NECTAR ACQUISITION CORPORATION,
GLOBE Y. TECHNOLOGY, INC.
▇▇▇▇▇▇ ▇▇▇
AND
THE OTHER PARTIES SIGNATORY HERETO
DATED AS OF FEBRUARY 7, 2001
2
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 THE MERGER...........................................................2
1.1 The Merger..........................................................2
1.2 Effective Time......................................................2
1.3 Effect of the Merger on Constituent Corporations....................3
1.4 Certificate of Incorporation and Bylaws of Surviving Corporation....3
1.5 Directors and Officers of Surviving Corporation.....................3
1.6 Maximum Number of Shares of New Focus Common Stock to be Issued;
Effect on Outstanding Securities of the Company.....................3
1.7 Adjustments to Exchange Ratio.......................................4
1.8 Fractional Shares...................................................4
1.9 Exchange Procedures.................................................4
1.10 No Further Ownership Rights in Company Common Stock.................5
1.11 Exemption From Registration; California Permit......................5
1.12 Taking of Necessary Action; Further Action..........................5
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
COMPANY SHAREHOLDER..........................................................6
2.1 Organization and Qualification......................................6
2.2 Authority Relative to this Agreement................................6
2.3 Capital Stock.......................................................7
2.4 No Subsidiaries.....................................................8
2.5 Directors and Officers..............................................8
2.6 No Conflicts........................................................8
2.7 Books and Records; Organizational Documents.........................8
2.8 Company Financial Statements........................................9
2.9 Absence of Changes..................................................9
2.10 No Undisclosed Liabilities.........................................13
2.11 Taxes..............................................................13
2.12 Legal Proceedings..................................................14
2.13 Compliance with Laws and Orders....................................15
2.14 Plans; ERISA.......................................................15
2.15 Real Property......................................................17
2.16 Tangible Personal Property.........................................20
2.17 Intellectual Property..............................................20
2.18 Contracts..........................................................24
2.19 Insurance..........................................................25
2.20 Employee Matters...................................................25
2.21 Interested Party Transactions......................................26
2.22 Environmental Matters..............................................26
-i-
3
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
2.23 Substantial Customers and Suppliers................................27
2.24 Other Negotiations; Brokers; Third Party Expenses..................28
2.25 Banks and Brokerage Accounts.......................................28
2.26 Foreign Corrupt Practices Act......................................28
2.27 Tax-Free Reorganization............................................28
2.28 Approvals..........................................................28
2.29 Permit Application.................................................29
2.30 Restrictions on Business Activities................................29
2.31 No Solicitation....................................................29
2.32 Disclosure.........................................................29
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF NEW FOCUS AND
MERGER SUB..................................................................30
3.1 Organization and Qualification.....................................30
3.2 Authority Relative to this Agreement...............................30
3.3 Issuance of New Focus Common Stock.................................30
3.4 SEC Documents; New Focus Financial Statements......................30
3.5 Approvals..........................................................31
3.6 Continuation of the Business.......................................31
ARTICLE 4 CONDUCT PRIOR TO THE EFFECTIVE TIME.................................31
4.1 Conduct of Business of the Company.................................31
4.2 No Solicitation....................................................34
ARTICLE 5 ADDITIONAL AGREEMENTS...............................................35
5.1 Permit Application.................................................35
5.2 Shareholder Approval...............................................36
5.3 Access to Information..............................................36
5.4 Confidentiality....................................................36
5.5 Expenses...........................................................37
5.6 Public Disclosure..................................................37
5.7 Approvals..........................................................37
5.8 FIRPTA Compliance..................................................37
5.9 Notification of Certain Matters....................................37
5.10 Additional Documents and Further Assurances; Cooperation...........38
5.11 NNM Listing of Additional Shares Application.......................38
5.12 Company's Auditors.................................................38
5.13 Takeover Statutes..................................................38
5.14 Treatment as Reorganization........................................38
5.15 Tax Matters........................................................39
-ii-
4
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
5.16 Information Technology Access......................................39
5.17 Change of Merger Form..............................................40
5.18 Intellectual Property..............................................40
5.19 Delivery of Stock Ledger and Minute Book of the Company............41
5.20 Registration of Patent Assignments.................................41
5.21 Execution of Support Agreement and Non-Competition Agreement.......41
5.22 Execution of Employment and Non-Solicitation Agreements............41
5.23 Preparation of Financial Statements................................41
ARTICLE 6 CONDITIONS TO THE MERGER............................................41
6.1 Conditions to Obligations of Each Party to Effect the Merger.......41
6.2 Additional Conditions to Obligations of the Company................42
6.3 Additional Conditions to the Obligations of New Focus and
Merger Sub.........................................................42
ARTICLE 7 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS;
ESCROW PROVISIONS...........................................................44
7.1 Survival of Representations, Warranties, Covenants and Agreements..44
7.2 Representations, Warranties, Covenants and Agreements..............45
7.3 Escrow Provisions..................................................45
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER...................................53
8.1 Termination........................................................53
8.2 Effect of Termination..............................................54
8.3 Amendment..........................................................54
8.4 Extension; Waiver..................................................55
ARTICLE 9 MISCELLANEOUS PROVISIONS............................................55
9.1 Notices............................................................55
9.2 Entire Agreement...................................................56
9.3 Post-Closing Cooperation...........................................56
9.4 Waiver.............................................................56
9.5 Third Party Beneficiaries..........................................57
9.6 No Assignment; Binding Effect......................................57
9.7 Headings...........................................................57
9.8 Invalid Provisions.................................................57
9.9 Governing Law......................................................57
9.10 WAIVER OF TRIAL BY JURY............................................57
9.11 Construction.......................................................57
9.12 Counterparts.......................................................58
9.13 Specific Performance...............................................58
-iii-
5
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
ARTICLE 10 DEFINITIONS........................................................58
10.1 Definitions........................................................58
10.2 Construction.......................................................70
EXHIBITS
Exhibit A Support Agreement
Exhibit B Employment and Non-Competition Agreement
Exhibit C Employment and Non-Solicitation Agreements
Exhibit D Form of Certificate of Merger
Exhibit E Form of Shareholder Certificate
Exhibit F Intentionally Omitted
Exhibit G Intentionally Omitted
Exhibit H-1 Form of Company Officer's Certificate
Exhibit H-2 Form of Company Secretary's Certificate
Exhibit I Matters to be Opined Upon by GLOBE Y. TECHNOLOGY Legal Counsel
-iv-
6
MERGER AGREEMENT AND PLAN OF REORGANIZATION
This FIRST AMENDED AND RESTATED MERGER AGREEMENT AND PLAN OF
REORGANIZATION (the "First Amended Merger Agreement") is made and entered into
as of February 7, 2001, by and among New Focus, Inc., a Delaware corporation
("New Focus"), Nectar Acquisition Corporation, a Delaware corporation and
wholly-owned subsidiary of New Focus ("Merger Sub"), GLOBE Y. TECHNOLOGY, Inc.,
a California corporation (the "Company"), ▇▇▇▇▇▇ ▇▇▇ (the "Company Shareholder")
, with respect to Article 7 and Article 9 only, Nai-Yu Pai ("Shareholder
Agent"), and Cupertino National Bank & Trust, d.b.a. Greater Bay Trust Company
("Escrow Agent"). This Merger Agreement amends and restates in its entirety that
certain MERGER AGREEMENT AND PLAN OF REORGANIZATION, entered into as of October
25, 2000, by and among New Focus, Merger Sub, the Company, the Shareholder Agent
and the Escrow Agent. Capitalized terms used and not otherwise defined herein
have the meanings set forth in Article 10.
RECITALS
A. New Focus, Merger Sub, Company and Shareholder Agent entered into that
certain MERGER AGREEMENT AND PLAN OF REORGANIZATION, October 25, 2000 ("Merger
Agreement"), and such parties now desire to amend and restate the Merger
Agreement in the form of this First Amended and Restated Merger Agreement to,
among other things, make Escrow Agent party to the First Amended and Restated
Merger Agreement with respect to Articles 7 and 9.
B. The board of directors of New Focus believes it is in the best
interests of New Focus and its stockholders that New Focus acquire the Company
through the merger of Merger Sub with and into the Company, pursuant to which
the Company shall become a wholly-owned subsidiary of New Focus (the "Merger")
and, in furtherance thereof, have approved the Merger, this Agreement and the
transactions contemplated hereby.
C. The board of directors of the Company believes it is in the best
interests of the Company and the Company Shareholder that New Focus acquire the
Company through the Merger and, in furtherance thereof, have approved the
Merger, this Agreement and the transactions contemplated hereby.
C. Pursuant to the Merger, subject to the terms and conditions of this
Agreement, all of the shares of common stock of the Company which are issued and
outstanding immediately prior to the Effective Time of the Merger shall be
converted into the right to receive shares of New Focus common stock, par value
$0.001 per share ("New Focus Common Stock").
D. As a condition and an inducement to New Focus to enter into this
Agreement, the Company Shareholder has concurrently herewith entered into a
Support Agreement with New Focus in substantially the form attached hereto as
Exhibit A ("Support Agreement") pursuant to which, among other things, the
Company Shareholder has agreed to vote the shares of Company Common Stock owned
by him in favor of the Merger.
7
E. As a condition and a further inducement to New Focus to enter into this
Agreement, the Company Shareholder has agreed to enter into an Employment and
Non-Competition Agreement substantially in the form attached hereto as Exhibit B
(the "Employment and Non-Competition Agreement").
F. As a condition and a further inducement to New Focus to enter into this
Agreement, certain consultants and employees of the Company have agreed to enter
into Employment and Non-Solicitation Agreements substantially in the form
attached hereto as Exhibit C (the "Employment and Non-Solicitation
Agreements"), each of which shall become effective at the Effective Time.
G. New Focus and the Company intend that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, and in furtherance thereof intend that this Agreement shall be a "plan of
reorganization" within the meaning of Sections 354(a) and 361(a) of the Internal
Revenue Code.
H. A portion of the shares of New Focus Common Stock otherwise issuable or
reserved for issuance by New Focus in connection with the Merger shall be placed
in escrow by New Focus, the release of which amount shall be contingent upon
certain events and conditions, all as set forth in Article 7 herein.
I. The Company and New Focus desire to make certain representations,
warranties, covenants and agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the covenants, promises,
representations and warranties set forth herein, and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged by
the parties), intending to be legally bound hereby, the parties agree as
follows:
ARTICLE 1
THE MERGER
1.1 The Merger. At the Effective Time and upon the terms and subject to
the conditions of this Agreement and the applicable provisions of California Law
and Delaware Law, Merger Sub shall be merged with and into the Company, the
separate corporate existence of Merger Sub shall cease, and the Company shall
continue as the surviving corporation. The Company is sometimes referred to
herein as the "Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
to Section 8.1, the closing of the Merger (the "Closing") will take place as
promptly as practicable after January 1, 2001, provided that all of the
conditions set forth in Article 6 have been satisfied or waived, at the offices
of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
unless another place or time is agreed to by New Focus and the Company. The date
upon which the Closing actually occurs is herein referred to as the "Closing
Date." On the Closing Date, the parties hereto shall cause the Merger to be
consummated by filing a Certificate of Merger (or like instrument), in
substantially the form attached hereto as Exhibit D (the "Certificate of
Merger"), with
-2-
8
the Secretary of State of the State of California and the Secretary of State of
the State of Delaware, in accordance with the relevant provisions of applicable
California Law and Delaware Law (the time of acceptance by the Secretary of
State of the State of Delaware of such filing or such later time as may be
agreed to by the parties and set forth in the Certificate of Merger being
referred to herein as the "Effective Time").
1.3 Effect of the Merger on Constituent Corporations. At the Effective
Time, the effect of the Merger shall be as provided in the applicable provisions
of California Law and Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Merger Sub and the Company shall vest in
the Surviving Corporation, and all debts, liabilities, obligations,
restrictions, disabilities and duties of Merger Sub and the Company shall become
the debts, liabilities, obligations, restrictions, disabilities and duties of
the Surviving Corporation.
1.4 Certificate of Incorporation and Bylaws of Surviving Corporation.
(a) At the Effective Time, the certificate of incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
certificate of incorporation of the Surviving Corporation until thereafter
amended as provided by law and such certificate of incorporation and bylaws of
the Surviving Corporation.
(b) The bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended as provided by such bylaws, the certificate of incorporation
and applicable law.
1.5 Directors and Officers of Surviving Corporation. The directors of
Merger Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, each to hold office in accordance with the certificate of
incorporation and bylaws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, each to hold office in accordance with the bylaws of the
Surviving Corporation.
1.6 Maximum Number of Shares of New Focus Common Stock to be Issued;
Effect on Outstanding Securities of the Company. The maximum number of shares of
New Focus Common Stock to be issued in exchange for all shares of Company Common
Stock which are issued and outstanding immediately prior to the Effective Time,
as determined in accordance with the terms of this Agreement, shall not exceed
the Total Merger Consideration. On the terms and subject to the conditions of
this Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of New Focus, the Company or the Company Shareholder, the
following shall occur:
(a) Conversion of Company Common Stock. Each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time will be
cancelled and extinguished and converted automatically (subject to Section 1.8)
into the right to receive, that number of shares of New Focus Common Stock equal
to the Exchange Ratio, it being understood
-3-
9
that certain shares of New Focus Common Stock issuable pursuant to this Section
1.6(a) shall be held in escrow in accordance with Article 7 hereof.
(b) Conversion of Common Stock of Merger Sub. Each share of common
stock, $.001 par value, of Merger Sub issued and outstanding immediately prior
to the Effective Time shall remain issued and outstanding and shall constitute a
share of common stock of the Surviving Corporation.
1.7 Adjustments to Exchange Ratio. The Exchange Ratio shall be equitably
adjusted to reflect fully the effect of any stock split, reverse split, stock
combination, stock dividend (including any dividend or distribution of
securities convertible into New Focus Common Stock or Company Common Stock),
reorganization, reclassification, recapitalization or other like change with
respect to New Focus Common Stock or Company Common Stock the effective date of
which occurs after the date hereof and prior to the Effective Time.
1.8 Fractional Shares. No fraction of a share of New Focus Common Stock
will be issued in the Merger, but in lieu thereof, if the Company Shareholder
would otherwise be entitled to a fraction of a share of New Focus Common Stock
(after aggregating all fractional shares of New Focus Common Stock to be
received by such holder), he shall, instead, be entitled to receive from New
Focus an amount of cash (rounded down to the nearest whole cent) equal to the
product of (a) such fraction, multiplied by (b) the Closing Price.
1.9 Exchange Procedures.
(a) New Focus Common Stock. As promptly as practicable after the
Closing Date, New Focus shall deposit with the Exchange Agent for exchange in
accordance with this Article 1, the aggregate number of shares of New Focus
Common Stock issuable in exchange for outstanding shares of Company Common Stock
and cash in an amount sufficient to permit the payment of cash in lieu of
fractional shares pursuant to Section 1.8; provided, however, that, on behalf of
the Company Shareholder, New Focus shall deposit into an escrow account a number
of shares of New Focus Common Stock equal to the Escrow Amount.
(b) Exchange Procedures. After the Effective Time and upon surrender
of the Company Shareholder's certificate representing Company Common Stock,
which was converted into the right to receive shares of New Focus Common Stock
pursuant to Section 1.6 (the "Certificate"), for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by New Focus,
together with a letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, the Company Shareholder shall be
entitled to receive in exchange therefor a certificate representing the number
of whole shares of New Focus Common Stock (less the number of shares of New
Focus Common Stock to be deposited in the Escrow Funds on the Company
Shareholder's behalf pursuant to Article 7) and cash in lieu of fractional
shares to which such holder is entitled pursuant to Sections 1.6 and 1.8, and
the Certificate so surrendered shall be canceled. As soon as practicable after
the Effective Time, and subject to and in accordance with the provisions of
Article 7, New Focus shall cause to be distributed to the Escrow Agent a
certificate or certificates (in such denominations as may be requested by the
Escrow Agent)
-4-
10
representing that number of shares of New Focus Common Stock equal to the Escrow
Amount, which certificate shall be registered in the name of the Escrow Agent.
Such shares shall be beneficially owned by the Company Shareholder on whose
behalf such shares were deposited in the Escrow Funds and shall be available to
compensate New Focus as provided in Article 7. Until surrendered, each
outstanding 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
ownership of the number of full shares of New Focus Common Stock into which such
shares of Company Common Stock shall have been so converted (subject only to, if
applicable, the expiration or early termination of any waiting period under the
HSR Act which is applicable to the holder of such shares) and cash in lieu of
fractional shares.
1.10 No Further Ownership Rights in Company Common Stock. All shares of
New Focus Common Stock issued upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms hereof (including any cash in
lieu of fractional shares) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common Stock,
and there shall be no further registration of transfers on the records of the
Company of shares of Company Common Stock which were outstanding immediately
prior to the Effective Time.
1.11 Exemption From Registration; California Permit. New Focus and the
Company intend that the shares of New Focus Common Stock to be issued pursuant
to Section 1.6 in connection with the Merger will be issued in a transaction
exempt from registration under the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder (the "Securities Act"),
by reason of Section 3(a)(10) thereof or, pursuant to Section 5.1(c), by reason
of Section 4(2) of the Securities Act. Subject to the provisions of Section
5.1(c), New Focus and the Company intend that the shares of New Focus Common
Stock to be issued pursuant to Section 1.6 in connection with the Merger will be
qualified under the California Code, pursuant to Section 25121 thereof, after a
fairness hearing has been held pursuant to the authority granted by Section
25142 of such law (the "Fairness Hearing"). Each of New Focus and the Company
shall use commercially reasonable efforts (i) to file promptly following the
execution and delivery of this Agreement, an application for issuance of a
permit pursuant to Section 25121 of the California Code to issue such securities
(the "California Permit") and (ii) to obtain the California Permit as promptly
as practicable thereafter.
1.12 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any such further action is necessary or desirable to carry out
the purposes of this Agreement or to vest the Surviving Corporation with full
right, title and possession to all Assets and Properties, rights, privileges,
powers and franchises of the Company, or to effect the assignment to the
Surviving Corporation of any and all (a) Company Intellectual Property related
to the Company's business including such Intellectual Property created by the
Company Shareholder prior to the Company's incorporation, which was not created
for or on behalf of former employers, and (b) all Company Intellectual Property
created by employees and consultants which was created for or on behalf of the
Company, or to complete and prosecute all domestic and foreign patent filings
related
-5-
11
to such Company Intellectual Property, the officers and directors of the
Surviving Corporation are fully authorized to take, and will take, all such
lawful and necessary action.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE COMPANY SHAREHOLDER
Each of the Company and the Company Shareholder hereby represent and
warrant to New Focus and Merger Sub that on the date hereof and as of the
Effective Time, as though made at the Effective Time, subject to such exceptions
as are specifically disclosed with respect to specific numbered and lettered
sections and subsections of this Article 2 in the disclosure schedule and
schedule of exceptions (the "Company Disclosure Schedule") delivered herewith
and dated as of the date hereof, and numbered with corresponding numbered and
lettered sections and subsections; provided, however, that disclosures made with
respect to a specific numbered and lettered section and subsection of this
Article 2 shall be deemed disclosed with respect to another specific numbered
and lettered section and subsection of this Article 2 without a specific
cross-reference, if it is readily apparent from the context of the disclosure
that such disclosure should apply to such other specific numbered and lettered
section and subsection.
2.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, and has full corporate power and authority to conduct its
business as now conducted and as currently proposed to be conducted and to own,
use, license and lease its Assets and Properties. The Company is duly qualified,
licensed or admitted to do business and is in good standing as a foreign
corporation or branch of an overseas company in each jurisdiction in which the
ownership, use, licensing or leasing of its Assets and Properties, or the
conduct or nature of its business, makes such qualification, licensing or
admission necessary, except for such failures to be so duly qualified, licensed
or admitted and in good standing that could not reasonably be expected to have a
Material Adverse Effect on the Company; provided, however, changes resulting
from the ordinary course of business or as contemplated by this Agreement shall
be deemed not to have a Material Adverse Effect. Section 2.1 of the Company
Disclosure Schedule sets forth each jurisdiction where the Company is so
qualified, licensed or admitted to do business and separately lists each other
jurisdiction in which the Company owns, uses, licenses or leases its Assets and
Properties, or conducts business or has employees or engages independent
contractors.
2.2 Authority Relative to this Agreement. Subject only to the requisite
approval and adoption of this Agreement by the Company Shareholder, the Company
has full corporate power and authority to execute and deliver this Agreement and
the other agreements which are attached (or forms of which are attached) as
exhibits hereto (the "Ancillary Agreements") to which the Company is a party, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The Company's board of directors
has unanimously approved this Agreement and declared its advisability. Subject
to the requisite approval and adoption of this Agreement by the Company
Shareholder, the execution and delivery by the Company of this Agreement and the
Ancillary Agreements to which the Company is a party and the consummation
-6-
12
by the Company of the transactions contemplated hereby and thereby, and the
performance by the Company of its obligations hereunder and thereunder, have
been duly and validly authorized by all necessary corporate action of the
Company, and no other corporate action on the part of the Company is required to
authorize the execution, delivery and performance of this Agreement and the
Ancillary Agreements to which the Company is a party and the consummation by the
Company of the transactions contemplated hereby and thereby. This Agreement and
the Ancillary Agreements to which the Company is a party have been or will be,
as applicable, duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery hereof (and, in the case
of the Ancillary Agreements to which New Focus is a party, thereof) by New
Focus, each constitutes or will constitute, as applicable, a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its respective terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar Laws relating to the enforcement of creditors' rights generally
and by general principles of equity.
2.3 Capital Stock.
(a) The authorized capital stock of the Company consists only of
1,000,000 shares of Common Stock, no par value per share (the "Company Common
Stock"), all of which shares of Common Stock are issued and outstanding as of
the date hereof. All of the issued and outstanding shares of Company Common
Stock are validly issued, fully paid and nonassessable, and have been issued in
compliance with all applicable federal, state and foreign securities Laws. There
are no declared or accrued but unpaid dividends with respect to any shares of
Company Common Stock. No shares of Company Common Stock are held in treasury or
are authorized and none are reserved for issuance.
(b) Section 2.3(b) of the Company Disclosure Schedule lists the name
and state or country of residence of each holder of Company Common Stock
provided to the Company by such holder.
(c) There are no outstanding options, warrants, stock purchase
rights, restricted stock purchase agreement or agreements, arrangements or
understandings to which the Company is a party (written or oral) to issue any
Equity Equivalents with respect to the Company.
(d) There are no preemptive rights or agreements, arrangements or
understandings to issue preemptive rights with respect to the issuance or sale
of Company Common Stock created by statute, the articles of incorporation or
bylaws of the Company, or any agreement or other arrangement to which the
Company is a party (written or oral) or to which it is bound and there are no
agreements, arrangements or understandings to which the Company is a party
(written or oral) pursuant to which the Company has the right to elect to
satisfy any Liability by issuing Company Common Stock or Equity Equivalents.
(e) Except for the Support Agreement, the Company is not a party or
subject to any agreement or understanding, and there is no agreement,
arrangement or understanding between or among any Persons which affects,
restricts or relates to voting, giving of written consents, dividend
-7-
13
rights or transferability of shares with respect to the Company Common Stock,
including any voting trust agreement or proxy. No debt securities of the Company
are issued and outstanding.
2.4 No Subsidiaries.
The Company has no (and prior to the Closing will have no) Subsidiaries
and does not directly or indirectly (and prior to the Closing will not)
otherwise hold any equity, membership, partnership, joint venture or other
ownership interest in any Person.
2.5 Directors and Officers. The names of each director and officer of the
Company and any Subsidiary on the date hereof, and his or her position with the
Company or the Subsidiary, are listed in Section 2.5 of the Company Disclosure
Schedule.
2.6 No Conflicts. The execution and delivery by the Company of this
Agreement and the Ancillary Agreements to which the Company is a party does not,
and the performance by the Company of its obligations under this Agreement and
the Ancillary Agreements to which the Company is a party and the consummation of
the transactions contemplated hereby and thereby do not and will not:
(a) Conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the articles of incorporation or bylaws of
the Company;
(b) subject to obtaining the consents, approvals and actions, making
the filings and giving the notices disclosed in Section 2.6(c) of the Company
Disclosure Schedule, if any, conflict with or result in a violation or breach of
any Law or Order applicable to the Company or any of its Assets and Properties;
or
(c) except as disclosed in Section 2.6(c) of the Company Disclosure
Schedule, (i) conflict with or result in a violation or breach of, (ii)
constitute a default (or an event that, with or without notice or lapse of time
or both, would constitute a default) under, (iii) require the Company to obtain
any consent, approval or action of, make any filing with or give any notice to
any Person as a result or under the terms of (except for (A) the filing of the
Certificate of Merger; and (B) such consents approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state or federal securities laws), (iv) result in or give to any Person any
right of termination, cancellation, acceleration or modification in or with
respect to, (v) result in or give to any Person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments or
performance under, (vi) result in the creation or imposition of (or the
obligation to create or impose) any Lien upon the Company or any of its Assets
and Properties under or (vii) result in the loss of any material benefit under
any of the terms, conditions or provisions of any material Contract or License
to which the Company is a party or by which any of the Company's Assets and
Properties is bound.
2.7 Books and Records; Organizational Documents. The minute books and
stock record books and other similar records of the Company have been provided
or made available to New Focus or its counsel prior to the execution of this
Agreement, are complete and correct in all respects
-8-
14
and have been maintained in accordance with sound business practices. Such
minute books contain a true and complete record of all actions taken at all
meetings and by all written consents in lieu of meetings of the directors,
shareholders and committees of the board of directors of the Company from the
date of the Company's incorporation through the date hereof. The Company has
prior to the execution of this Agreement delivered to New Focus true and
complete copies of its articles of incorporation and bylaws, both as amended
through the date hereof. The Company is not in violation of any provisions of
its articles of incorporation or bylaws or the legal provisions regarding the
setting up of a branch.
2.8 Company Financial Statements. Section 2.8(a) of the Company Disclosure
Schedule sets forth the Company Financials. The Company Financials delivered to
New Focus are correct and complete in all material respects and have been
prepared in accordance with GAAP applied on a basis consistent throughout the
periods indicated and consistent with each other (except as may be indicated in
the notes thereto as delivered to New Focus prior to the date hereof, subject to
normal year-end adjustments, which adjustments will not be material in amount or
significance). The Company Financials present fairly and accurately the
financial condition and operating results of the Company as of the dates and
during the periods indicated therein, subject to normal year-end adjustments,
which adjustments will not be material in amount or significance. Except as set
forth in Section 2.8(b) of the Company Disclosure Schedule, since the inception
of the Company, there has been no material change in any accounting policies,
principles, methods or practices, including any change with respect to reserves
(whether for bad debts, contingent liabilities or otherwise), of the Company.
2.9 Absence of Changes. Since the Financial Statement Date, except as set
forth in Section 2.9 of the Company Disclosure Schedule, there has not been any
material adverse change in the Business or Condition of the Company or any
occurrence or event which, individually or in the aggregate could be reasonably
expected to have any Material Adverse Effect upon the Business or Condition of
the Company; provided, however, changes (a) resulting from effects, changes,
events, circumstances and conditions generally affecting the industry in which
the Company operates or from changes in general business or economic conditions
in the region, nation or world, (b) changes occurring in the ordinary course of
business or (c) changes resulting from action taken as contemplated by this
Agreement, shall be deemed not to be a material adverse change in the Business
or Condition of the Company. In addition, without limiting the generality of the
foregoing, except as expressly contemplated by this Agreement and except as
disclosed in Section 2.9 of the Company Disclosure Schedule, since the Financial
Statement Date:
(a) the Company has not entered into any material Contract,
commitment or transaction or incurred any Liabilities outside of the ordinary
course of business consistent with past practice;
(b) the Company has not entered into any Contract in connection with
any transaction involving a Business Combination;
-9-
15
(c) the Company has not altered or entered into any Contract or
other commitment to alter, its interest in any corporation, association, joint
venture, partnership or business entity in which the Company directly or
indirectly holds any interest on the date hereof;
(d) the Company has not entered into any strategic alliance, joint
development or joint marketing Contract;
(e) there has not been any material amendment or other material
modification (or agreement to do so) or violation of the terms of, any of the
Contracts set forth or described in the Company Disclosure Schedule, except as
described therein;
(f) the Company has not entered into any transaction with any
officer, director, shareholder, Affiliate or Associate of the Company, other
than pursuant to any Contract in effect on the Financial Statement Date and
disclosed to New Focus pursuant to (and so identified in) Section 2.9(f),
Section 2.18(a) or Section 2.21 of the Company Disclosure Schedule or other than
pursuant to any contract of employment and listed pursuant to Section 2.18(a) of
the Company Disclosure Schedule;
(g) the Company has not entered into or amended any Contract
pursuant to which any other Person is granted manufacturing, marketing,
distribution, licensing or similar rights of any type or scope with respect to
any products of the Company or Company Intellectual Property, other than as
contemplated by the Contracts and Licenses disclosed in the Company Disclosure
Schedule;
(h) no Action or Proceeding has been commenced or threatened by or
against the Company;
(i) the Company has not declared or set aside or paid any dividends
on or made any other distributions (whether in cash, stock or property) in
respect of any Company Common Stock or Equity Equivalents, or effected or
approved any split, combination or reclassification of any Company Common Stock
or Equity Equivalents or issued or authorized the issuance of any other
securities in respect of, in lieu of or in substitution for shares of Company
Common Stock or Equity Equivalents, or repurchased, redeemed or otherwise
acquired, directly or indirectly, any shares of Company Common Stock or Equity
Equivalents;
(j) the Company has not issued, granted, delivered, sold or
authorized or proposed to issue, grant, deliver or sell, or purchased or
proposed to purchase, any shares of Company Common Stock or Equity Equivalents,
the Company has not modified or amended the rights of any holder of any
outstanding shares of Company Common Stock or Equity Equivalents; and there have
not been any agreements, arrangements, plans or understandings with respect to
any such modification or amendment.
(k) there has not been any amendment to the Company's articles of
incorporation or bylaws;
-10-
16
(l) there has not been any transfer (by way of a License or
otherwise) to any Person of rights to any Company Intellectual Property;
(m) the Company has not made or agreed to make any disposition or
sale of, waiver of rights to, license or lease of, or incurrence of any Lien on,
any Assets and Properties of the Company, other than dispositions of inventory,
or nonexclusive licenses of products to Persons to whom the Company had granted
licenses of its products at the Financial Statement Date, in the ordinary course
of business of the Company consistent with past practice;
(n) the Company has not made or agreed to make any purchase of any
Assets and Properties of any Person other than (i) acquisitions of inventory, or
licenses of products, in the ordinary course of business of the Company
consistent with past practice and (ii) other acquisitions in an amount not
exceeding five thousand dollars ($5,000);
(o) the Company has not made or agreed to make any capital
expenditures or commitments for additions to property, plant or equipment of the
Company constituting capital assets individually or in the aggregate in an
amount exceeding five thousand dollars ($5,000);
(p) the Company has not made or agreed to make any write-off or
write-down any determination to write off or write-down, or revalue, any of the
Assets and Properties of the Company, or change any reserves or liabilities
associated therewith, individually or in the aggregate in an amount exceeding
five thousand dollars ($5,000);
(q) the Company has not made or agreed to make payment, discharge or
satisfaction, in an amount in excess of five thousand dollars ($5,000), in any
one case, or five thousand dollars ($5,000) in the aggregate, of any claim,
Liability or obligation (whether absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business of Liabilities reflected or reserved against in
the Company Financials;
(r) the Company has not failed to pay or otherwise satisfy any
Liabilities presently due and payable of the Company, except such Liabilities
which are being contested in good faith by appropriate means or procedures and
which, individually or in the aggregate, are immaterial in amount;
(s) the Company has not incurred any Indebtedness or guaranteed any
Indebtedness in an aggregate amount exceeding five thousand dollars ($5,000) or
issued or sold any debt securities of the Company or guaranteed any debt
securities of others;
(t) the Company has not granted any severance or termination pay to
any director, officer, employee or consultant, except payments made pursuant to
written Contracts outstanding on the date hereof, copies of which have been
delivered to New Focus and the terms of which are disclosed in Section 2.9(t) of
the Company Disclosure Schedule;
(u) except pursuant to a Contract disclosed to New Focus pursuant to
Section 2.9(f) or Section 2.18 of the Company Disclosure Schedule, the Company
has not granted or approved any
-11-
17
increase of greater than five percent (5%) in salary, rate of commissions, rate
of consulting fees or any other compensation of any current or former officer,
director, shareholder, employee, independent contractor or consultant of the
Company;
(v) the Company has not paid or approved the payment of any
consideration of any nature whatsoever (other than salary, commissions or
consulting fees and customary benefits paid to any current or former officer,
director, shareholder, employee or consultant of the Company) to any current or
former officer, director, shareholder, employee, independent contractor or
consultant of the Company;
(w) the Company has not established or modified any (i) targets,
goals, pools or similar provisions under any Plan, employment Contract or other
employee compensation arrangement or independent contractor Contract or other
compensation arrangement or (ii) salary ranges, increased guidelines or similar
provisions in respect of any Plan, employment Contract or other employee
compensation arrangement or independent contractor Contract or other
compensation arrangement;
(x) the Company has not adopted, entered into, amended, modified or
terminated (partially or completely) any Plan;
(y) the Company has not paid or agreed or made any commitment to pay
any discretionary or stay bonus;
(z) the Company has not taken or approved any action, which could
reasonably be expected to jeopardize the status of the Merger as a tax-free
reorganization;
(aa) the Company has not made or changed any material election in
respect of Taxes, adopted or changed any accounting method in respect of Taxes,
entered into any tax allocation agreement, tax sharing agreement, tax indemnity
agreement or closing agreement, settlement or compromise of any material claim
or assessment in respect of Taxes, or consented to any extension or waiver of
the statute of limitations period applicable to any claim or assessment in
respect of Taxes with any Taxing Authority or otherwise;
(bb) the Company has not made any material change in accounting
policies, principles, methods, practices or procedures (including for bad debts,
contingent liabilities or otherwise, respecting capitalization or expense of
research and development expenditures, depreciation or amortization rates or
timing of recognition of income and expense);
(cc) other than in the ordinary course of business, the Company has
not made any representation or proposal to, or engaged in substantive
discussions with, any of the holders (or their representatives) of any
Indebtedness, or to or with any party which has issued a letter of credit which
benefits the Company;
(dd) the Company has not commenced or terminated, or made any change
in, any line of business;
-12-
18
(ee) the Company has not failed to renew any insurance policy; no
insurance policy of the Company has been cancelled or materially amended; and
the Company has given all notices and presented all claims (if any) under all
such policies in a timely fashion;
(ff) there has been no material amendment or non-renewal of any of
the Company's Approvals, and the Company has used commercially reasonable
efforts to maintain such Approvals and has observed in all material respects all
Laws and Orders applicable to the conduct of the Company's business or the
Company's Assets and Properties;
(gg) there has been no physical damage, destruction or other
casualty loss (whether or not covered by insurance) affecting any of the real or
personal property or equipment of the Company individually or in the aggregate
in an amount exceeding five thousand dollars ($5,000).
(hh) the Company has not repurchased, cancelled or modified the
terms of any Company Common Stock, Equity Equivalents or other financial
instrument that derives value from its convertibility into Company Common Stock
or Equity Equivalents, other than transactions entered into in the ordinary
course of business and pursuant to contractual provisions in effect at the time
of execution and delivery of this Agreement;
(ii) the Company has not entered into or approved any contract,
arrangement or understanding or acquiesced in respect of any arrangement or
understanding, to do, engage in or cause or having the effect of any of the
foregoing, including with respect to any Business Combination not otherwise
restricted by the foregoing paragraphs.
2.10 No Undisclosed Liabilities. Except as reflected or reserved against
in the Company Financials (including the notes thereto) or as disclosed in
Section 2.10 of the Company Disclosure Schedule, there are no Liabilities
required to be reflected therein under GAAP of, relating to or affecting, the
Company or any of its Assets and Properties, other than Liabilities incurred in
the ordinary course of business consistent with past practice since the
Financial Statement Date which, in the aggregate, are not material to the
Business or Condition of the Company, and are not for tort or for breach of
contract.
2.11 Taxes.
(a) The Company and any consolidated, combined, unitary or aggregate
group for Tax (as defined below) purposes of which the Company has been a
member, has properly completed and timely filed all Tax Returns required to be
filed by it and have paid all Taxes shown thereon to be due. The Company has
provided adequate accruals in accordance with generally accepted accounting
principles in its Financial Statements for any Taxes that have not been paid,
whether or not shown as being due on any Tax Returns. There is (i) no material
claim for Taxes that is a lien against the property of the Company that is
currently being asserted against the Company other than liens for Taxes not yet
due and payable, (ii) no audit of any Tax Return of the Company or any of its
subsidiaries being conducted by a Tax Authority, (iii) no extension of the
statute of limitations on the assessment of any Taxes granted by the Company and
currently in effect, and (iv) no agreement, contract or arrangement to which the
Company is a party that may result in the payment of any
-13-
19
amount that would not be deductible by reason of Section 280G (other than
agreements or arrangements for which shareholder approval meeting the
requirements of Section 280G(b)(5)(B) will be obtained prior to the Closing) or
Section 404 of the Code. There has been no change in ownership of the Company
that has caused the utilization of any losses of such entities to be limited
pursuant to Section 382 of the Code. The Company has not been and will not be
required to include any material adjustment in Taxable income for any Tax period
(or portion thereof) pursuant to Section 481 or 263A of the Code or any
comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the Merger. The
Company has not filed and will not file any consent to have the provisions of
paragraph 341(f)(2) of the Code (or comparable provisions of any state Tax laws)
apply to the Company. The Company is not a party to any Tax sharing or Tax
allocation agreement nor does the Company owe any amount under any such
agreement. The Company has not filed any disclosures under Section 6662 or
comparable provisions of state, local or foreign law to prevent the imposition
of penalties with respect to any Tax reporting position taken on any Tax Return.
The Company has never been a member of a consolidated, combined or unitary group
of which The Company was not the ultimate parent corporation. For purposes of
this Agreement, the following terms have the following meanings: "Tax" (and,
with correlative meaning, "Taxes" and "Taxable") means (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
Governmental Entity (a "Tax Authority") responsible for the imposition of any
such tax (domestic or foreign), (ii) any liability for the payment of any
amounts of the type described in (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any Taxable period, and
(iii) any liability for the payment of any amounts of the type described in (i)
or (ii) as a result of being a transferee of or successor to any person or as a
result of any express or implied obligation to indemnify any other person. As
used herein, "Tax Return" shall mean any return, statement, report or form
(including, without limitation, estimated tax returns and reports, withholding
tax returns and reports and information reports and returns) required to be
filed with respect to Taxes. The Company has in its possession receipts for any
Taxes paid to foreign Tax authorities. The Company has never been a "personal
holding company" within the meaning of Section 542 of the Code or a "United
States real property holding corporation" within the meaning of Section 897 of
the Code.
(b) All self-employed directors or officers of the Company, have duly
complied with all the obligations in respect of social security, including the
payment of contributions.
2.12 Legal Proceedings.
(a) Except as set forth in Section 2.12 of the Company Disclosure
Schedule:
(i) there are no Actions or Proceedings pending or threatened
against, relating to or affecting the Company or any of its Assets and
Properties;
-14-
20
(ii) there are no facts or circumstances known to the Company
that could reasonably be expected to give rise to any Action or Proceeding
against, relating to or affecting the Company or any of its Assets and
Properties;
(iii) the Company has not received notice, and does not
otherwise have knowledge of any Orders outstanding against the Company; and
(iv) No Governmental or Regulatory Authority has at any time
challenged or questioned the legal right of the Company to conduct its
operations as presently or previously conducted or as presently contemplated to
be conducted.
(b) Section 2.12(b) of the Company Disclosure Schedule sets forth all
Actions or Proceedings relating to or affecting, or threatened against, the
Company or any of its Assets and Properties during the three-year period prior
to the date hereof.
2.13 Compliance with Laws and Orders. Neither the Company, nor any of its
directors, officers, Affiliates, agents or employees, acting on behalf of the
Company, has violated in any material respect since the incorporation of the
Company, or is currently in default or violation in any material respect under,
any Law or Order applicable to the Company or any of its Assets and Properties,
and the Company is not aware of any claim of violation of any such Laws and
Orders by the Company since the incorporation of the Company.
2.14 Plans; ERISA.
(a) Existence of Plans. Except as disclosed in Section 2.14(a) of the
Company Disclosure Schedule, (i) neither the Company, any Subsidiary nor any of
their respective ERISA Affiliates maintains or sponsors (or ever maintained or
sponsored), or paid to or on behalf of any employee payment for the provision or
reimbursement of any employee benefit, including, without limitation, health and
dental benefits, or makes or is required to make contributions to, any Plans,
(ii) none of the Plans is or was a "multi-employer plan", as defined in Section
3(37) of ERISA, (iii) none of the Plans is or was a "defined benefit pension
plan" within the meaning of Section 3(35) of ERISA, (iv) none of the Plans
provides or provided post-retirement medical or health benefits, (v) none of the
Plans is or was a "welfare benefit fund," as defined in Section 419(e) of the
Internal Revenue Code, or an organization described in Sections 501(c)(9) or
501(c)(20) of the Internal Revenue Code, (vi) neither the Company, any
Subsidiary nor any of its ERISA Affiliates is or was a party to any collective
bargaining agreement, and (vii) neither the Company, any Subsidiary nor any of
its ERISA Affiliates has announced or otherwise made any commitment to create or
amend any Plan. Notwithstanding any statement or indication in this Agreement to
the contrary, there are no Plans (A) as to which New Focus will be required to
make any contributions or with respect to which New Focus shall have any
obligation or liability whatsoever, whether on behalf of any of the current
employees of the Company or any Subsidiary or on behalf of any other person,
after the Closing, or (B) which New Focus, the Surviving Corporation or any
Subsidiary will not be able to terminate immediately after the Closing in
accordance with their terms and ERISA. With respect to each of such Plans, at
the Closing there will be no unrecorded liabilities with respect to the
establishment, implementation, operation, administration or termination of any
such Plan, or the
-15-
21
termination of the participation in any such Plan by the Company, any Subsidiary
or any of their respective ERISA Affiliates. The Company has delivered, as
applicable, to New Focus true and complete copies of: (I) each of the Plans and
any related funding agreements thereto (including insurance contracts) including
all amendments, all of which are legally valid and binding and in full force and
effect and there are no defaults thereunder, (II) the currently effective
summary plan description pertaining to each of the Plans, (III) all annual
reports for each of the Plans (including all related schedules), (IV) the most
recently filed PBGC Form 1 (if applicable), (V) the most recent Internal Revenue
Service determination letter, opinion, notification or advisory letter (as the
case may be) for each Plan which is intended to constitute a qualified plan
under Section 401 of the Internal Revenue Code and each amendment to each of the
foregoing documents, and (VI) for each unfunded Plan, financial statements
consisting of (a) the consolidated statement of assets and liabilities of such
Plan as of its most recent valuation date, and (b) the statement of changes in
fund balance and in financial position or the statement of changes in net assets
available for benefits under such Plan for the most recently-ended plan year,
which such financial statements shall fairly present the financial condition and
the results of operations of such Plan in accordance with GAAP, consistently
applied, as of such dates.
(b) Deficiencies; Qualification. None of the Plans nor any trust
created thereunder has incurred any "accumulated funding deficiency" as such
term is defined in Section 412 of the Internal Revenue Code, whether or not
waived, since the effective date of said Section 412, and no condition has
occurred or exists which by the passage of time could be expected to result in
an accumulated funding deficiency as of the last day of the current plan year of
any such Plan. Furthermore, neither the Company, any Subsidiary nor any of their
respective ERISA Affiliates has any unfunded liability under ERISA in respect of
any of the Plans. Each of the Plans which is intended to be a qualified plan
under Section 401(a) of the Internal Revenue Code has received a favorable
determination letter, opinion, notification or advisory letter from the Internal
Revenue Service, and has been operated in accordance with its terms and with the
provisions of the Internal Revenue Code. All of the Plans have been administered
and maintained in substantial compliance with ERISA, the Internal Revenue Code
and all other applicable Laws. All contributions required to be made to each of
the Plans under the terms of that Plan, ERISA, the Internal Revenue Code or any
other applicable Laws have been timely made. Each Plan intended to meet the
requirements for tax-favored treatment under Subchapter B of Chapter 1 of the
Internal Revenue Code is in compliance with such requirements. There are no
Liens against the property of the Company, any Subsidiary or any of their
respective ERISA Affiliates under Section 412(n) of the Internal Revenue Code or
Sections 302(f) or 4068 of ERISA. The Financial Statements properly reflect all
amounts required to be accrued as liabilities to date under each of the Plans.
(c) Acceleration. Neither the execution and delivery of this
Agreement nor the consummation of any of the transactions contemplated hereby
(whether alone or upon the occurrence of any additional or further acts or
events) will (i) result in any obligation or liability (with respect to accrued
benefits or otherwise) on the part of the Company, New Focus, the Surviving
Corporation, or any of their respective Subsidiaries to the PBGC, to any Plan,
or to any present or former employee, director, officer, shareholder, contractor
or consultant (or any of their dependents) of New Focus, the Surviving
Corporation, or any of their respective Subsidiaries or any
-16-
22
of their dependents, (ii) be a trigger event under any Plan that will result in
any payment (whether of severance pay or otherwise) becoming due to any such
present or former employee, officer, director, shareholder, contractor, or
consultant, or any of their dependents, or (iii) accelerate the time of payment
or vesting, or increase the amount, of any compensation theretofore or
thereafter due or granted to any employee, officer, director, shareholder,
contractor, or consultant of the Company or any Subsidiary or any of their
dependents. With respect to any insurance policy which provides, or has
provided, funding for benefits under any Plan, (A) there is and will be no
liability of the Company, New Focus, the Surviving Corporation or any of their
respective Subsidiaries in the nature of a retroactive or retrospective rate
adjustment, loss sharing arrangement, or actual or contingent liability as of
the Closing Date, nor would there be any such liability if such insurance policy
were terminated as of the Closing Date, and (B) no insurance company issuing any
such policy is in receivership, conservatorship, bankruptcy, liquidation, or
similar proceeding, and no such proceedings with respect to any insurer are
imminent.
(d) Litigation. Other than routine claims for benefits under the
Plans, there are no pending, or threatened, Actions or Proceedings involving the
Plans, or the fiduciaries, administrators, or trustees of any of the Plans or
the Company, any Subsidiary or any of their respective ERISA Affiliates as the
employer or sponsor under any Plan, with any of the IRS, the Department of
Labor, the PBGC, any participant in or beneficiary of any Plan or any other
person whomsoever. The Company knows of no reasonable basis for any such claim,
lawsuit, dispute or Action or Proceeding.
(e) Except as disclosed in Section 2.14(h) of the Company Disclosure
Schedule, there is not in operation, and no proposal has been announced to enter
into or establish, any agreement, arrangement, custom or practice (whether
legally enforceable or not) (each such agreement, arrangement, custom or
practice is referred to herein as a "Scheme") for the payment of, or payment of
a contribution towards, any extra-legal pensions, allowances, lump sums or other
similar benefits on retirement, death, disability, termination of employment
(voluntary or not) or during periods of sickness or disablement, for the benefit
of any director, former director, officer, employee or former employee of the
Company or for the benefit of the dependents on any such person. All obligations
payable by the Company under any Scheme are duly provisioned in the Financial
Statements and are duly funded in accordance with normal practices applicable to
such Schemes and all amounts have been paid in due course and to date there are
no payments outstanding.
(f) Full particulars of the Schemes have been disclosed, such
particulars being true and not misleading in any way.
(g) All contributions to the Schemes which are due have been paid by
the due date of payment. There are no expenses outstanding in relation to the
Schemes. In respect of any employee who is covered for lump sum death benefit,
those benefits are fully insured with an insurance company of good repute on
normal terms and all premiums payable have been paid.
(h) There are no claims or actions in progress or pending, nor any
reason for such claims or actions, in respect of the Schemes, nor are there any
unresolved disputes under the Schemes' internal dispute resolution procedures.
-17-
23
2.15 Real Property.
Section 2.15(a) of the Company Disclosure Schedule contains a true and
correct list of (i) each parcel of real property leased, utilized and/or
operated by the Company (as lessor or lessee or otherwise) (the "Leased Real
Property") and (ii) all Liens relating to or affecting any parcel of real
property referred to in clause (i) to which the Company is a party. The Company
owns no real property other than Company owned leasehold improvements, if any,
on the Leased Real Property.
(a) Subject to the terms of its respective leases, the Company has a
valid and subsisting leasehold estate in and the right to quiet enjoyment of
each of the Leased Real Properties for the full term of the leases (including
renewal periods) relating thereto. Each lease referred to in clause (i) of
Section 2.15(a) above is a legal, valid and binding agreement, enforceable in
accordance with its terms, of the Company and of each other Person that is a
party thereto, and except as set forth in Section 2.15(b) of the Company
Disclosure Schedule, there is no, and the Company has not received notice of
any, default (or any condition or event which, after notice or lapse of time or
both, would constitute a default) thereunder. The Company does not owe brokerage
commissions or finders fees with respect to any such Leased Real Property,
except to the extent that the Company may renew the term of any such lease, in
which case, any such commissions and fees would be in amounts that are
reasonable and customary for the spaces so leased, given their intended use and
terms.
(b) Except as disclosed in Section 2.15(c) of the Company Disclosure
Schedule, all improvements on the Leased Real Property (A) comply with and are
operated in accordance with applicable laws (including Environmental Laws) and
all applicable Liens, Approvals, material Contracts, covenants and restrictions
and (B) are in all material respects in good operating condition and in a state
of good maintenance and repair, ordinary wear and tear excepted, and such
improvements are in all material respects adequate and suitable for the purposes
for which they are presently being used and there are no condemnation or
appropriation proceedings pending or threatened against any of such real
property or the improvements thereon.
(c) True and correct copies of the documents under which the Leased
Real Property is leased, subleased (to or by the Company or otherwise),
utilized, and/or operated (the "Lease Documents") have been delivered to New
Focus. The Lease Documents are unmodified and in full force and effect, and
there are no other Contracts between the Company and any third party(ies), or by
and among any third party(ies), claiming an interest in the interest of the
Company in the Leased Real Property or otherwise relating to the use and
occupancy of the Leased Real Property.
(d) The Company is in physical possession and actual occupation of
the whole of the Leased Real Property on an exclusive basis and no right of
occupation or enjoyment has been acquired or is in the course of being acquired
by any third party or has been granted or agreed to be granted to any third
party.
(e) The Leased Real Property is free of any tenancy, license or other
arrangement entitling a person other than the Company to occupy the whole or any
part.
-18-
24
(f) The Leased Real Property is not subject to any restrictive
covenants, stipulations, easements, profits a prendre, wayleaves, licenses,
grants, restrictions, overriding interests or other rights vested in third
parties, and the Company has not entered into any agreement or commitment to
give or create any of the foregoing.
(g) The Leased Real Property is free from any local land charge, land
charge, caution, inhibition or notice, and no matter exists which is capable of
registration against any of the Leased Real Property.
(h) There are no outstanding actions, disputes, claims or demands
between the Company and any third party affecting any part of the Leased Real
Property or any neighboring property or any boundary walls and fences, or with
respect to any easement, right or means of access to any part of the Leased Real
Property.
(i) No part of the Leased Real Property is being nor is intended or
required by the Company to be used other than for the permitted user thereof for
the purposes of the Town and Country Planning ▇▇▇ ▇▇▇▇ the Planning (Listed
Buildings and Conservation Areas) ▇▇▇ ▇▇▇▇ and the Planning (Consequential
Provisions) ▇▇▇ ▇▇▇▇ and legislation of a like nature (the "Planning Acts"). The
permissions consents approvals and licenses authorizing such user are
unconditional permanent and not personal to the Company.
(j) Building regulation consents have been obtained with respect to
all development, alterations and improvements to the Leased Real Property
undertaken by the Company.
(k) Compliance is being made to the extent required by the Company
and has at all times been made in all respects with all planning permissions,
orders, and regulations issued under the Planning Act and all building
regulation consents and bye-laws for the time being in force with respect to any
part of the Leased Real Property.
(l) The Company has not received notice of any resolution, proposal,
scheme or order, whether or not formally adopted, for the compulsory acquisition
of the whole or any part of the Leased Real Property or of any access or egress
therefrom, or for the alteration, construction or improvement of any road,
subway, underpass, footbridge, elevated road, dual carriage or flyover upon or
adjoining or passing within 200 meters of any part of the Leased Real Property
or any such access or egress.
(m) The Company has paid the rent and observed and performed the
covenants on the part of the tenant and the conditions contained in each of the
leases under which any part of the Leased Real Property is held and the last
demand (or receipt for rent if issued) was unqualified. Each such lease is valid
and in full force.
(n) All licenses, consents and approvals required from the landlords
and any superior landlords under any leases of any part of the Leased Real
Property have been obtained, and the covenants on the part of the tenant
contained in such licenses, consents and approvals have been duly performed and
observed.
-19-
25
(o) There is (save in relation to the Leased Real Property) no actual
or contingent liability on the part of the Company arising directly or
indirectly out of any agreement, lease, underlease, tenancy, conveyance,
transfer, license or any other deed or document whatsoever relating to real
property or to any estate or interest therein entered into by the Company
including (but without limitation) any actual or contingent liability arising
directly or indirectly out of:
(i) any estate or interest held by the Company as original
lessee or underlessee; or
(ii) any guarantee given by the Company in relation to a
lease or underlease; or
(iii) any other covenant made by the Company in favor of any
lessor or head lessor.
2.16 Tangible Personal Property. The Company is in possession of and has
good and marketable title to, or has valid leasehold interests in or valid
rights under Contract to use, all tangible personal property used in the conduct
of its business, including all tangible personal property reflected on the
Company Financials and tangible personal property acquired since the Financial
Statement Date, other than property disposed of since such date in the ordinary
course of business consistent with past practice. Except as disclosed in Section
2.16 of the Company Disclosure Schedule, all such tangible personal property
(including plant, property and equipment) is free and clear of all Liens and is
adequate and suitable in all material respects for the conduct by the Company of
its business as presently conducted, and is in good working order and condition
in all material respects, ordinary wear and tear excepted, and its use complies
in all material respects with all applicable Laws.
2.17 Intellectual Property.
(a) Section 2.17(a) of the Company Disclosure Schedule lists all
Company Registered Intellectual Property (including all trademarks and service
marks that the Company has used with the intent of creating or benefiting from
any common law rights relating to such marks) and lists any proceedings or
actions pending as of the date hereof before any court or tribunal related to
any of the Company Registered Intellectual Property.
(b) The Company has all requisite right, title and interest in or
valid and enforceable rights under Contracts or Licenses to use all Company
Intellectual Property necessary to the conduct of its business as presently
conducted. Each item of Company Intellectual Property, including all Company
Registered Intellectual Property listed in Section 2.17(a) of the Company
Disclosure Schedule, is owned exclusively by the Company and is free and clear
of any Liens (excluding Intellectual Property licensed to the Company under any
Licenses). The Company (i) owns exclusively all trademarks, service marks and
trade names used by the Company in connection with the operation or conduct of
the business of the Company, including the sale of any products or technology or
the provision of any services by the Company; provided, however, that the
Company may use trademarks, service marks and trade names of third parties which
are licensed to the
-20-
26
Company or are in the public domain, and (ii) owns exclusively, and has good
title to, each copyrighted work that is a Company product and each other work of
authorship that the Company otherwise purports to own.
(c) The Quitclaim Agreement by and between ▇▇▇▇▇▇ ▇▇▇, Sole
Proprietorship and the Company, dated October 12, 2000, validly transferred all
Intellectual Property of the Sole Proprietorship to the Company, was duly
authorized by the Company and is enforceable by, or on behalf of, the Company.
(d) To the extent that any Company Intellectual Property has been
developed or created by any Person other than the Company, the Company has
either (i) obtained ownership of, and is the exclusive owner of, all such
Intellectual Property by operation of law or by valid assignment of any such
rights or (ii) has obtained a License under or to such Intellectual Property.
(e) Except pursuant to agreements described in Section 2.17(e) of the
Company Disclosure Schedule, the Company has not transferred ownership of or
granted any License of or other right to use or authorized the retention of any
rights to use any Intellectual Property that is or was Company Intellectual
Property, to any other Person.
(f) Except as set forth in the Company Disclosure Schedule, the
Company Intellectual Property constitutes all the Intellectual Property used in
and/or necessary to the conduct of the Company's business as it currently is
conducted or as reasonably contemplated to be conducted, including the design,
development, use, import, license, and sale of the products and technology of
the Company (including products and technology currently under development) and
the rights necessary to have manufactured by third parties on the Company's
behalf, or such Intellectual Property is readily available in the marketplace on
commercially reasonable terms.
(g) Section 2.17(g) of the Company Disclosure Schedule lists all
material Contracts and Licenses (including all inbound Licenses) to which the
Company is a party with respect to any Intellectual Property. Except as set
forth in Section 2.17(g) of the Company Disclosure Schedule, no Person other
than the Company has ownership rights to improvements made by the Company in
Intellectual Property which has been licensed to the Company.
(h) Section 2.17(h) of the Company Disclosure Schedule lists all
material Contracts, Licenses and agreements between the Company and any other
Person wherein or whereby the Company has agreed to, or assumed, any obligation
or duty to warrant, indemnify, reimburse, hold harmless, guaranty or otherwise
assume or incur any obligation or Liability or provide a right of rescission
with respect to the infringement or misappropriation by the Company or such
other Person of the Intellectual Property of any Person other than the Company.
(i) Except as set forth in Section 2.17(i) of the Company Disclosure
Schedule, the operation of the business of the Company as currently conducted or
as presently proposed to be conducted, including the design, development, use,
import, license, and sale of the products and technology of the Company
(including products and technology currently under development) and the rights
necessary to have manufactured by third parties on the Company's behalf, is
readily
-21-
27
available in the marketplace on commercially reasonable terms and does not (i)
infringe or misappropriate the Intellectual Property of any Person, (ii)
materially violate any term or provision of any License or Contract concerning
such Intellectual Property, (iii) violate the rights of any Person (including
rights to privacy or publicity), or (iv) constitute unfair competition or an
unfair trade practice under any Law, and the Company has not received notice
from any Person claiming that such operation or any act, product, technology or
service (including products, technology or services currently under development)
of the Company infringes or misappropriates the Intellectual Property of any
Person or constitutes unfair competition or trade practices under any Law,
including notice of third party patent or other Intellectual Property rights
from a potential licensor of such rights. Notwithstanding the foregoing, the
Company makes no representation or warranty hereunder with respect to the
infringement or misappropriation of Intellectual Property rights to the extent
caused by (1) the combination of the Product Designs with products, designs,
software or processes that are not provided by the Company at the Closing; and
(2) any modification of the Product Designs following the Closing.
(j) Each item of Company Registered Intellectual Property is valid
and subsisting, and all necessary registration, maintenance, renewal fees,
annuity fees and taxes in connection with such Registered Intellectual Property
have been paid and all necessary documents and certificates in connection with
such Company Registered Intellectual Property have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property. Section 2.17(j) of the Company Disclosure
Schedule lists all actions that must be taken by the Company within one hundred
twenty (120) days from the date hereof, including the payment of any
registration, maintenance, renewal fees, annuity fees and taxes or the filing of
any documents, applications or certificates for the purposes of maintaining,
perfecting or preserving or renewing any Company Registered Intellectual
Property. In each case in which the Company has acquired ownership of any
Intellectual Property rights from any Person, the Company has obtained a valid
and enforceable assignment sufficient to irrevocably transfer all rights in such
Intellectual Property (including the right to seek past and future damages with
respect to such Intellectual Property) to the Company and, to the maximum extent
provided for by and required to protect the Company's ownership rights in and to
such Intellectual Property in accordance with applicable Laws, the Company has
recorded each such assignment of Registered Intellectual Property with the
relevant Governmental or Regulatory Authority.
(k) Except as set forth in Section 2.17(k) of the Company Disclosure
Schedule, there are no Contracts or Licenses between the Company and any other
Person with respect to Company Intellectual Property under which there is any
dispute (or, to the Company's knowledge, facts that may reasonably lead to a
material dispute) known to the Company regarding the scope of such Contract or
License, or performance under such Contract or License, including with respect
to any payments to be made or received by the Company thereunder.
(l) To the knowledge of the Company, no Person is infringing or
misappropriating any Company Intellectual Property (excluding, to the extent
such Company Intellectual Property is
-22-
28
licensed to the Company, Intellectual Property for which a functional substitute
is readily available to the Company or New Focus upon commercially reasonable
terms).
(m) The Company has taken all commercially reasonable steps to
protect the Company's rights in confidential information and trade secrets of
the Company or provided by any other Person to the Company subject to a duty of
confidentiality. Without limiting the generality of the foregoing, (i) the
Company has, and enforces a policy requiring each employee, consultant and
independent contractor to execute proprietary information, confidentiality and
invention and copyright assignment agreements substantially in the form set
forth in Section 2.17(m) of the Company Disclosure Schedule, and all current and
former employees, consultants and independent contractors of the Company have
executed such an agreement and copies of all such agreements have been provided
to New Focus or made available to New Focus for review, and (ii) none of the
agreements to which the Company is a party substantially in the form of the
"Confidentiality Agreement" attached as Exhibit 2.17 to the Company Disclosure
Schedule supersedes, amends or otherwise modifies any other agreement that (a)
is materially more comprehensive with respect to the terms dealing with the
Company's disclosure of any confidential information and/or trade secrets to any
third-party and/or (b) is materially more restrictive on a third-party's use or
disclosure of such information and/or trade secrets.
(n) None of the Company Owned Intellectual Property or technology of
the Company (or any Company Intellectual Property licensed to the Company by a
third party, excluding Intellectual Property for which a functional substitute
is readily available to the Company or New Focus upon commercially reasonable
terms) or the Product Designs are subject to any Order, Action or Proceeding or
"march in" rights that restricts, or that is reasonably expected to restrict in
any manner, the use, transfer or licensing of any Company Intellectual Property
by the Company or that may affect the validity, use or enforceability of such
Company Intellectual Property.
(o) No (i) product, technology, service or publication of the
Company, (ii) material published or distributed by the Company or (iii) conduct
or statement of Company constitutes obscene material, a defamatory statement or
material, false advertising or otherwise violates any Law in any material
respect.
(p) The Company has taken commercially reasonable actions to assure
that there shall be no material adverse change to its business or electronic
systems or material interruptions in the ongoing business of the Company by
reason of the advent of the year 2000, including that the products described in
the Product Design will, without interruption or manual intervention, record,
store, process, calculate and present calendar dates falling on and after (and
if applicable, spans of time including) January 1, 2000 in substantially the
same manner, and with the same functionality, data integrity and performance, as
such products record, store, process, calculate and present calendar dates on or
before December 31, 1999, or calculate any information dependent on or relating
to such dates. Without limiting the generality of the foregoing, and except as
set forth in Section 2.17(p) of the Company Disclosure Schedule, the Company has
no knowledge of any material issues that have arisen in connection with the
ability of its material IT systems to handle the change of date year from 1999
to 2000.
-23-
29
(q) Neither this Agreement nor any transactions contemplated by this
Agreement will result in New Focus's granting any rights or licenses with
respect to the Intellectual Property of New Focus to any Person pursuant to any
Contract to which the Company is a party or by which any of its Assets and
Properties are bound, other than rights or licenses to Company Intellectual
Property that are described in the material Contracts and Licenses.
(r) Section 2.17(r) of the Company Disclosure Schedule sets forth a
list of (x) all software which the Company has licensed from any third party
which is used by the Company in its products or otherwise in its business (other
than software for which a functional substitute is readily available to the
Company or New Focus upon commercially reasonable terms) and (y) a list of all
"freeware" and "shareware" incorporated into any product now or heretofore
shipped by the Company. The Company has all rights necessary to the use of such
software, "freeware" and "shareware."
(s) The Company has previously provided to New Focus specifications
for standards of performance and functionality for proposed products with
respect to each Product Design. No products based on the Product Designs will
fail to meet or exceed such standards of performance and functionality in any
material respect, the failure of which would be directly or indirectly caused by
a defect in Product Design.
(t) The Company has taken all commercially reasonable steps to
protect and preserve ownership of Company Owned Intellectual Property. The
Company has secured valid written assignments from all consultants and employees
who contributed to the creation or development of the Company Owned Intellectual
Property. In the event that the consultant is concurrently employed by the
Company and a third party, the Company has taken additional steps to ensure that
any Company Intellectual Property developed by such a consultant does not belong
to the third party or conflict with the third party's employment agreement, such
steps include ensuring that all research and development work performed by such
a consultant are performed only on the Company's facilities and only using the
Company's resources, except as set forth in Section 2.17(t) of the Company
Disclosure Schedule.
2.18 Contracts.
(a) Section 2.18(a)(1) of the Company Disclosure Schedule contains a
true and complete list of each of the material Contracts or other arrangements
(true and complete copies or, if none, reasonably complete and accurate written
descriptions of which, together with all amendments and supplements thereto and
all waivers of any terms thereof, have been made available to New Focus prior to
the execution of this Agreement), to which the Company is a party or by which
any of its Assets and Properties is bound. Section 2.18(a)(2) of the Company
Disclosure Schedule contains a true and complete list of each material Contract
of the Company not terminable by the Company upon thirty (30) days (or less)
notice by the Company without penalty or obligation to make payments based on
such termination.
(b) Each Contract required to be disclosed in Section 2.18(a) of the
Company Disclosure Schedule is in full force and effect and constitutes a legal,
valid and binding agreement,
-24-
30
enforceable in accordance with its terms by the Company and each other party
thereto; and except as disclosed in Section 2.18(b) of the Company Disclosure
Schedule, no other party to such Contract is, nor has received notice that it
is, in violation or breach of or default under any such Contract (or with notice
or lapse of time or both, would be in violation or breach of or default under
any such Contract).
(c) Except as disclosed in Section 2.18(c) of the Company Disclosure
Schedule, the Company is not a party to or bound by (i) any material Contract
that automatically terminates or allows termination by the other party thereto
upon consummation of the transactions contemplated by this Agreement or (ii) by
any Contract that contains any covenant or other provision which limits the
Company's ability to compete with any Person in any line of business or in any
area or territory.
2.19 Insurance.
(a) Section 2.19(a) of the Company Disclosure Schedule contains a
true and complete list (including the names and addresses of the insurers, the
expiration dates thereof, the annual premiums and payment terms thereof, the
period of time covered thereby and a brief description of the interests insured
thereby) of all liability, property, workers' compensation, directors' and
officers' liability and other insurance policies currently in effect that insure
any of the business, operations or employees of the Company or affect or relate
to the ownership, use or operation of any of the Assets and Properties of the
Company and that (a) have been issued to the Company or (b) have been issued to
any Person (other than the Company) for the benefit of the Company. The
insurance coverage provided by the policies set forth in Section 2.19(a) of the
Company Disclosure Schedule will not terminate or lapse by reason of any of the
transactions contemplated by this Agreement or any of the Ancillary Agreements.
Each policy listed in Section 2.19(a) of the Company Disclosure Schedule is
valid and binding and in full force and effect, all premiums due thereunder have
been paid when due and neither the Company or the Person to whom such policy has
been issued has received any notice of cancellation or termination in respect of
any such policy or is in default thereunder. The insurance policies listed in
Section 2.19(a) of the Company Disclosure Schedule, (i) in light of the
business, operations and Assets and Properties of the Company are in amounts and
have coverages that are reasonable and customary for Persons engaged in similar
businesses and operations and having similar Assets and Properties and (ii) are
in amounts and have coverages as required by any material Contract to which the
Company is a party or by which any of its Assets and Properties is bound.
(b) Section 2.19(b) of the Company Disclosure Schedule contains a
list of all claims made under any insurance policies covering the Company since
its inception. The Company has not received notice that any insurer under any
policy listed (or required to be listed) in Section 2.19(b) of the Company
Disclosure Schedule is denying, disputing or questioning liability with respect
to a claim thereunder or defending under a reservation of rights clause.
2.20 Employee Matters. The Company is in compliance in all material
respects with all currently applicable laws and regulations respecting
employment, discrimination in employment, terms and conditions of employment,
wages, hours and occupational safety and health and employment practices, and is
not engaged in any unfair labor practice. The Company has withheld
-25-
31
all amounts required by law or by agreement to be withheld from the wages,
salaries, and other payments to employees; and is not liable for any arrears of
wages or any taxes or any penalty for failure to comply with any of the
foregoing. The Company is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
employees (other than routine payments to be made in the normal course of
business and consistent with past practice). There are no pending claims against
the Company under any workers compensation plan or policy or for long term
disability. There are no controversies pending or threatened, between the
Company and any of its employees, which controversies have or could reasonably
be expected to result in a Material Adverse Effect on the Company. The Company
is not a party to any collective bargaining agreement or other labor union
contract nor does the Company know of any activities or proceedings of any labor
union to organize any such employees. No employees or consultants of the Company
are in violation of any term of any employment contract, patent disclosure
agreement, noncompetition agreement, or any restrictive covenant to a former
employer relating to the right of any such employee to be employed by, or any
such consultant to provide services to, the Company because of the nature of the
business conduced or presently proposed to be conducted by the Company or to the
use of trade secrets or proprietary information of others. No employees of the
Company have given notice to the Company, nor, to the knowledge of the Company,
does any such employee intend to terminate his or her employment with the
Company. No consultant has terminated providing services to the Company, nor, to
the knowledge of the Company, does any such Consultant intend to terminate
providing services to the Company.
2.21 Interested Party Transactions. The Company is not indebted to any
director, officer, employee or agent of the Company (except for amounts due as
normal salaries and bonuses and in reimbursement of ordinary expenses), and no
such person is indebted to the Company.
2.22 Environmental Matters.
(a) The Company possesses any and all Environmental Permits necessary
to or required for the operation of its business. The Company will obtain, prior
to the Closing, any Environmental Permits that must be obtained as of or
immediately after the Closing in order for the Surviving Corporation and/or the
Company to conduct the business of the Company as it was conducted prior to the
Closing.
(b) The Company is in compliance in all material respects with (i)
all terms, conditions and provisions of its Environmental Permits; and (ii) all
Environmental Laws.
(c) Neither the Company nor any predecessor of the Company nor any
entity previously owned by the Company has received any notice of alleged,
actual or potential responsibility for, or any inquiry regarding, (i) any
Release or threatened or suspected Release of any Hazardous Material, or (ii)
any violation of Environmental Law.
(d) Neither the Company nor any predecessor of the Company nor any
entity previously owned by the Company has any obligation or liability with
respect to any Hazardous Material, including any Release or threatened or
suspected Release of any Hazardous Material, and
-26-
32
there have been no events, facts or circumstances which could form the basis of
any such obligation or liability.
(e) No Releases of Hazardous Material(s) have occurred at, from, in,
to, on, or under any Site and no Hazardous Material is present in, on, about or
migrating to or from any Site.
(f) Neither the Company, nor any predecessor of the Company, nor any
entity previously owned by the Company, has transported or arranged for the
treatment, storage, handling, disposal or transportation of any Hazardous
Material at or to any location.
(g) No Site is a current or proposed Environmental Clean-up Site.
(h) There are no Liens under or pursuant to any Environmental Law on
any Site.
(i) There is no (i) underground storage tank, active or abandoned,
(ii) polychlorinated biphenyl containing equipment, (iii) asbestos-containing
material, (iv) radon, (v) lead-based paint or (vi) urea formaldehyde at any
Site. Any underground storage tank meets all 1998 upgrade requirements.
(j) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted with respect to any Site which have
not been delivered to New Focus prior to execution of this Agreement.
(k) The Company is not a party, whether as a direct signatory or as
successor, assign, third party beneficiary, guarantor or otherwise, to, and is
not otherwise bound by, any lease or other contract under which the Company is
obligated or may be obligated by any representation, warranty, covenant,
restriction, indemnification or other undertaking respecting Hazardous Materials
or under which any other person is or has been released respecting Hazardous
Materials.
(l) The Company and any predecessors of the Company and any entity
previously owned by the Company have provided all notifications and warnings,
made all reports, and kept and maintained all records required pursuant to
Environmental Laws.
(m) The Company is not aware of any circumstances which may give rise
or have in the past given rise to any liability (whether under statute or at
common law) in nuisance in respect of the Company's business.
2.23 Substantial Customers and Suppliers. Section 2.23 of the Company
Disclosure Schedule lists all of the Company's suppliers of goods and services
during the most recent fiscal year. Except as disclosed in Section 2.23 of the
Company Disclosure Schedule, no such supplier has unilaterally ceased or
materially reduced its sales or provision of services to the Company since the
inception of the Company, or has threatened to cease or materially reduce such
sales or provision of services after the date hereof. Except as disclosed in
Section 2.23 of the Company Disclosure Schedule, to the actual knowledge of the
Company, no such supplier is threatened with bankruptcy or insolvency.
-27-
33
2.24 Other Negotiations; Brokers; Third Party Expenses. Neither the
Company nor any of its officers, directors, employees, agents, or its
shareholder or any of its Affiliates (nor any investment banker, financial
advisor, attorney, accountant or other Person retained by or acting for or on
behalf of the Company or any such Affiliate) (a) has entered into any Contract
that conflicts with any of the transactions contemplated by this Agreement or
(b) has entered into any Contract, or had any discussions with any Person
regarding any transaction involving the Company which could result in New Focus,
the Company or any general partner, limited partner, manager, officer, director,
employee, agent or Affiliate of any of them being subject to any claim for
liability to said Person as a result of entering into this Agreement or
consummating the transactions contemplated hereby. No broker, investment banker,
financial advisor or other Person is entitled to any broker's, finder's,
financial advisor's or similar fee or commission in connection with this
Agreement and the transactions contemplated hereby based on arrangements made by
or on behalf of the Company. Section 2.24 of the Company Disclosure Schedule
sets forth the principal terms and conditions of any Contract with respect to,
and a reasonable estimate of, all Third Party Expenses expected to be incurred
by the Company in connection with the negotiation and effectuation of the terms
and conditions of this Agreement and the transactions contemplated hereby
("Estimated Third Party Expenses").
2.25 Banks and Brokerage Accounts. Section 2.25 of the Company Disclosure
Schedule sets forth (a) a true and complete list of the names and locations of
all banks, trust companies, securities brokers and other financial institutions
at which the Company has an account or safe deposit box or maintains a banking,
custodial, trading or other similar relationship, (b) a true and complete list
and description of each such account, box and relationship, indicating in each
case the account number and the names of the respective officers, employees,
agents or other similar representatives of the Company having signatory power
with respect thereto and (c) a list of each Investment Asset, the name of the
record and beneficial owner thereof, the location of the certificates, if any,
therefor, the maturity date, if any, and any stock or bond powers or other
authority for transfer granted with respect thereto.
2.26 Foreign Corrupt Practices Act. Neither the Company nor any agent,
employee or other Person associated with or acting on behalf of the Company has,
directly or indirectly, used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity,
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds, violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback
or other similar unlawful payment.
2.27 Tax-Free Reorganization. Neither the Company nor any of its
directors, officers or shareholders has taken any action which could jeopardize
the status of the Merger as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code.
2.28 Approvals
(a) Section 2.27(a) of the Company Disclosure Schedule contains a
list of all contracts that require a novation or consent to assignment, as the
case may be, prior to the Effective
-28-
34
Time so that New Focus shall be made a party in place of the Company or as
assignee (the "Contracts Requiring Novation or Consent to Assignment"). Such
list is complete and accurate. (b) The affirmative vote or consent of the
Company Shareholder is the only vote necessary to approve this Agreement and the
Merger and the transactions contemplated hereby.
2.29 Permit Application. The information supplied by the Company for
inclusion in the application for issuance of a California Permit pursuant to
which the shares of New Focus Common Stock to be issued in the Merger will be
qualified under the California Code (the "Permit Application") shall not, at the
time the Fairness Hearing is held pursuant to Section 25142 of the California
Code and the time the qualification of such securities is effective under
Section 25122 of the California Code, 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. Notwithstanding the foregoing, the
Company makes no representation, warranty or covenant with respect to any
information supplied by New Focus which is contained in the Permit Application.
2.30 Restrictions on Business Activities. There is no agreement
(non-competition or otherwise), commitment, judgment, injunction, order to
decree to which the Company is a party or otherwise binding upon the Company
which has or may reasonably be expected to have the effect of prohibiting or
impairing any business practice of the Company, any acquisition of property
(tangible or intangible) by the Company, the conduct of business by the Company
or otherwise limiting the freedom of the Company to engage in any line of
business or to compete with any person. Without limiting the generality of the
foregoing, the Company has not entered into any agreement under which the
Company is restricted from selling, licensing or otherwise distributing any of
their respective technology or products or from providing services to customers
or potential customers or any class of customers, in any geographic area, during
any period of time, or in any segment of the market.
2.31 No Solicitation. Since September 15, 2000, the Company has not taken
nor has the Company permitted any of the Company's officers, directors,
employees, shareholders, attorneys, investment advisors, agents,
representatives, Affiliates or Associates (collectively, "Representatives") to
(directly or indirectly), take any of the actions prohibited from being taken on
or after the date of this Agreement by Section 4.2 hereof with any Person other
than New Focus and its designees.
2.32 Disclosure. No representation or warranty made by the Company
contained in this Agreement, and no statement contained in the Company
Disclosure Schedule or in any agreement, certificate or instrument furnished to
New Focus pursuant to any provision of this Agreement (including the Company
Financials and the notes thereto) contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
herein or therein, in the light of the circumstances under which they were made,
not misleading. The Company has provided New Focus all material information
concerning the Company in the possession, custody or control of the Company.
-29-
35
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF NEW FOCUS AND MERGER SUB
Each of New Focus and Merger Sub hereby represents and warrants to the
Company, subject to such exceptions as are specifically disclosed with respect
to specific numbered and lettered sections and subsections of this Article 3 in
the disclosure schedule and schedule of exceptions (the "New Focus Disclosure
Schedule") delivered herewith and dated as of the date hereof, and numbered with
corresponding numbered and lettered sections and subsections, as follows:
3.1 Organization and Qualification. New Focus is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the Laws of the State of Delaware. Each of New Focus and
Merger Sub has full corporate power and authority to conduct its business as now
conducted and as currently proposed to be conducted and to own, use and lease
its Assets and Properties. Each of New Focus and Merger Sub is duly qualified,
licensed or admitted to do business and is in good standing in each jurisdiction
in which the ownership, use, licensing or leasing of its Assets and Properties,
or the conduct or nature of its business, makes such qualification, licensing or
admission necessary, except for such failures to be so duly qualified, licensed
or admitted and in good standing that could not reasonably be expected to have a
Material Adverse Effect on the Business or Condition of New Focus.
3.2 Authority Relative to this Agreement. Each of New Focus and Merger Sub
has full corporate power and authority to execute and deliver this Agreement and
the Ancillary Agreements to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery by New Focus and Merger Sub of this
Agreement and the Ancillary Agreements to which each of New Focus and Merger Sub
is a party and the consummation by New Focus and Merger Sub of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action of New Focus and Merger Sub. This Agreement and the
Ancillary Agreements to which each of New Focus and Merger Subs is a party have
been or will be, as applicable, duly and validly executed and delivered by New
Focus and, assuming the due authorization, execution and delivery hereof by the
Company and/or the other parties thereto, constitutes or will constitute, as
applicable, legal, valid and binding obligations of New Focus and Merger Sub,
enforceable against them in accordance with its respective terms, except as the
enforceability thereof may be limited by principles of public policy and subject
to the laws of general application relating to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar Laws relating
to the enforcement of creditors' rights generally and by general principles of
equity. 3.3 Issuance of New Focus Common Stock. The shares of New Focus Common
Stock to be issued pursuant to the Merger, when issued, will be duly authorized,
validly issued, fully paid, non-assessable and issued in compliance with
applicable federal and state securities laws subject to the truth and accuracy
of the representations made by the Company in Section 2.3.
3.4 SEC Documents; New Focus Financial Statements. New Focus has furnished
or made available to the Company true and complete copies of all SEC Documents
filed by it with the SEC
-30-
36
since May 17, 2000, all in the form so filed. As of their respective filing
dates, such SEC Documents filed by New Focus and all SEC Documents filed after
the date hereof but before the Closing complied or, if filed after the date
hereof, will comply in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the SEC
thereunder, as the case may be, and none of the SEC Documents contained or will
contain any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading,
except to the extent such SEC Documents have been corrected, updated or
superseded by a document subsequently filed with the SEC. The financial
statements of New Focus, including the notes thereto, included in the SEC
Documents (the "New Focus Financial Statements") comply as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP consistently applied
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q under the Exchange Act) and present fairly
the consolidated financial position of New Focus at the dates thereof and the
consolidated results of its operations and cash flows for the periods then ended
(subject to normal year-end adjustments), it being understood that such
financial statements may be required to be restated from time to time as may be
required under applicable pooling of interests accounting rules in connection
with past, present or future acquisitions. There has been no change in New
Focus's accounting policies except as described in the notes to the New Focus
Financial Statements. Except as reflected or reserved against in the New Focus
Financial Statements, New Focus has no material Liabilities, except for
Liabilities and obligations (i) incurred in the ordinary course of business or
(ii) that would not be required to be reflected or reserved against in the
balance sheet of New Focus prepared in accordance with GAAP.
3.5 Approvals. Other than the filing of the Certificate of Merger,
together with the required officers' certificates, and such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under state or federal securities laws, there are no Approvals of
Governmental or Regulatory Authorities relating to the business conducted by New
Focus required to be given to or obtained by New Focus from any Governmental or
Regulatory Authorities in connection with the consummation of the transactions
contemplated by this Agreement that, if not obtained, would result in a material
adverse change in the Business or Condition of New Focus and its Subsidiaries,
taken as a whole.
3.6 Continuation of the Business. New Focus agrees not to dissolve the
Surviving Corporation and to cause the Surviving Corporation to continue its
historic Business or to use a significant portion of its historic Business
assets in a business for a period not ending earlier than one year from the
Closing Date.
ARTICLE 4
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement and the Effective Time, the Company agrees (unless New Focus shall
give its prior consent in writing) to carry on its business in
-31-
37
the ordinary course consistent with past practice, to pay its Liabilities and
Taxes consistent with the Company's past practices (and in any event when due),
to pay or perform other obligations when due consistent with the Company's past
practices (other than Liabilities, Taxes and other obligations, if any,
contested in good faith through appropriate proceedings and for which a adequate
reserves have been established), and, to the extent consistent with such
business, to use all commercially reasonable efforts and institute all policies
required to preserve intact its present business organization, keep available
the services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, licensors, licensees,
independent contractors and other Persons having business dealings with it, all
with the express purpose and intent of preserving unimpaired its goodwill and
ongoing businesses at the Effective Time. The Company shall not, without the
prior written consent of New Focus, take or agree in writing or otherwise to
take, any action that would result in the occurrence of any of the changes
described in Section 2.9 or any other action that would make any of its
representations or warranties contained in this Agreement untrue or incorrect in
any material respect or prevent the Company from performing or cause the Company
not to perform its agreements and covenants hereunder or cause any condition to
New Focus's closing obligations in Section 6.1 or Section 6.3 not to be
satisfied. Without limiting the generality of the foregoing, during the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, the Company shall not do,
cause or permit any of the following, without the prior written consent of New
Focus:
(a) Charter Documents: cause or permit any amendments to its articles
of incorporation or bylaws;
(b) Dividends; Changes in Capital Stock: declare or pay any dividend
on or make any other distribution (whether in cash, stock or property) in
respect of any of its capital stock, or split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or
repurchase or otherwise acquire, directly or indirectly, any shares of its
capital stock except from former employees, directors and consultants in
accordance with agreements providing for the repurchase of shares in connection
with any termination of service to it;
(c) Contracts: enter into any Contract or commitment, or violate,
amend or otherwise modify or waive any of the terms of any of its Contracts;
(d) Issuance of Securities: except as set forth in Section 2.3(d) of
the Company Disclosure Schedule, issue, deliver or sell or authorize or propose
the issuance, delivery or sale of, any shares of Company Common Stock or Equity
Securities or other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities;
(e) Intellectual Property: dispose of, license or transfer to any
person or entity any rights to any Intellectual Property;
(f) Exclusive Rights: enter into or amend any agreement pursuant to
which any other party is granted exclusive marketing, distribution or other
exclusive rights of any type or scope with respect to any of Company's products
or technology;
-32-
38
(g) Dispositions: sell, lease, license or otherwise dispose of or
encumber any of Company's properties or assets, except for sales of products
(and related nonexclusive licenses) in the ordinary course consistent with past
practice;
(h) Indebtedness: incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others;
(i) Leases: enter into any operating or capitalized lease;
(j) Payment of Obligations: pay, discharge or satisfy any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise) arising other than in the ordinary course of business, other than
the payment, discharge or satisfaction of liabilities reflected or reserved
against in the Company Financials and reasonable expenses incurred in connection
with the transactions contemplated by this Agreement;
(k) Capital Expenditures: make any capital expenditures, capital
additions or capital improvements;
(l) Insurance: reduce the amount of any insurance coverage provided
by existing insurance policies;
(m) Termination or Waiver: terminate or waive any right of
substantial value;
(n) Employee Benefit Plans; New Hires; Pay Increases: adopt or amend
any employee benefit or stock purchase or option plan, or hire any new director,
officer or consultant, or non-officer employee, grant and/or pay any special
bonus or special remuneration to any employee, consultant or director or
increase the salaries, wage rates or compensation of any employee or consultant;
(o) Severance Arrangements: grant any severance or termination pay
(i) to any director, officer or consultant or (ii) to any other employee or
consultant except payments made pursuant to standard written agreements
outstanding on the date hereof;
(p) Lawsuits: (A) commence a lawsuit other than (i) for the routine
collection of bills, (ii) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a valuable
aspect of its business, provided that it consults with New Focus prior to the
filing of such a suit, or (iii) for a breach of this Agreement or (B) settle any
lawsuit;
(q) Acquisitions: acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof;
(r) Taxes: make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, file any Tax Return
or any amendment to a Tax Return,
-33-
39
enter into any closing agreement, settle any claim or assessment in respect of
material Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of material Taxes;
(s) Revaluation: revalue any of its assets, including writing down
the value of inventory or writing off notes or accounts receivable; or
(t) Other: take or agree in writing or otherwise to take, any of the
actions described in Section 4.1(a) through Section 4.1(s) above, or any other
action that would reasonably be expected to prevent the Company from performing,
or cause the Company not to perform, its covenants and agreements hereunder.
4.2 No Solicitation. Until the earlier of the Effective Time and the date
of termination of this Agreement pursuant to the provisions of Section 8.1, the
Company will not take (and since September 15, 2000, inclusive, has not taken),
nor will the Company permit (and since September 15, 2000, inclusive, has not
permitted) any of the Company's Representatives to (directly or indirectly),
take any of the following actions with any Person other than New Focus and its
designees: (a) solicit, encourage, initiate, entertain, review or encourage any
proposals or offers from, or participate in or conduct discussions with or
engage in negotiations with, any Person relating to any offer or proposal, oral,
written or otherwise, formal or informal (a "Competing Proposed Transaction"),
with respect to any possible Business Combination with the Company or any of its
Subsidiaries (whether such Subsidiaries are in existence on the date hereof or
are hereafter organized), (b) provide information with respect to the Company or
any of its Subsidiaries (whether such Subsidiaries are in existence on the date
hereof or are hereafter organized) to any Person, other than New Focus, relating
to (or which the Company believes would be used for the purpose of formulating
an offer or proposal with respect to), or otherwise assist, cooperate with,
facilitate or encourage any effort or attempt by any such Person with regard to,
any possible Business Combination with the Company or any Subsidiary of the
Company (whether such Subsidiary is in existence on the date hereof or are
hereafter organized), (c) agree to, enter into a Contract with any Person, other
than New Focus, providing for, or approve a Business Combination with the
Company or any Subsidiary (whether such Subsidiary is in existence on the date
hereof or are hereafter organized), (d) make or authorize any statement,
recommendation, solicitation or endorsement in support of any possible Business
Combination with the Company or any Subsidiary (whether such Subsidiary is in
existence on the date hereof or are hereafter organized) other than by New
Focus, or (e) authorize or permit any of the Company's Representatives to take
any such action. The Company shall immediately cease and cause to be terminated
any such contacts or negotiations with any Person relating to any such
transaction or Business Combination. In addition to the foregoing, if the
Company receives prior to the Effective Time or the termination of this
Agreement any offer or proposal (formal or informal, oral, written or otherwise)
relating to, or any inquiry or contact from any Person with respect to, a
Competing Proposed Transaction, the Company shall immediately notify New Focus
thereof and provide New Focus with the details thereof, including the identity
of the Person or Persons making such offer or proposal, and will keep New Focus
fully informed on a current basis of the status and details of any such offer or
proposal and of any modifications to the terms thereof; provided, however, that
this provision shall not in any way be deemed to limit the
-34-
40
obligations of the Company and its Representatives set forth in the previous
sentence; provided further, that the Company will not be required to provide to
New Focus information that would result in a violation of a written
confidentiality agreement, executed by the Company prior to September 15, 2000.
Each of the Company and New Focus acknowledge that this Section 4.2 was a
significant inducement for New Focus to enter into this Agreement and the
absence of such provision would have resulted in either (i) a material reduction
in the consideration to be paid to the Company Shareholder in the Merger or (ii)
a failure to induce New Focus to enter into this Agreement.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Permit Application.
(a) As soon as reasonably practicable after the execution of this
Agreement but no later than thirty (30) days thereafter, New Focus shall
prepare, with the cooperation of the Company, and file the Permit Application.
New Focus and the Company shall each use commercially reasonable efforts to
cause the Permit Application to comply with the requirements of applicable
federal and state laws. Each of New Focus and the Company agrees to provide
promptly to the other such information concerning its business and financial
statements and affairs as, in the reasonable judgment of the providing party or
its counsel, may be required or appropriate for inclusion in the Permit
Application, or in any amendments or supplements thereto, and to cause its
counsel and auditors to cooperate with the other's counsel and auditors in the
preparation and completion of the Permit Application. The Company will promptly
advise New Focus, and New Focus will promptly advise the Company, in writing if
at any time prior to the Effective Time either the Company or New Focus, as
applicable, shall obtain knowledge of any facts that might make it necessary or
appropriate to amend or supplement the Permit Application in order to make the
statements contained or incorporated by reference therein not misleading or to
comply with applicable law. Anything to the contrary contained herein
notwithstanding, New Focus shall not include in the Permit Application any
information with respect to the Company or its affiliates or associates, the
form and content of which information shall not have been approved by the
Company prior to such inclusion.
(b) In the event that it is determined by New Focus, following
consultation with the Company, that the California Permit cannot be obtained, or
cannot reasonably be expected to be obtained, in time to permit the Closing to
occur on or before the Outside Date, then New Focus and the Company shall use
commercially reasonable efforts to effect the issuance of the shares of New
Focus Common Stock to be issued pursuant to Section 1.6 in a private placement
pursuant to Section 4(2) of the Securities Act on terms and conditions that are
reasonably satisfactory to New Focus. The parties hereto acknowledge and agree
that in such event: (i) as a condition to effecting such issuance as a private
placement pursuant to Section 4(2) of the Securities Act, New Focus shall be
entitled to obtain from the Company Shareholder a Shareholder Certificate in the
form attached hereto as Exhibit E (or such other form as shall be reasonably
satisfactory to New Focus) (the "Shareholder Certificate") and that New Focus
will be relying upon the representations made by the Company Shareholder in the
applicable Shareholder Certificate in connection with the issuance of
-35-
41
New Focus Common Stock to such shareholder; (ii) the shares of New Focus Common
Stock so issued pursuant to Section 1.6 will not be registered under the
Securities Act and will constitute "restricted securities" within the meaning of
the Securities Act; and (iii) the certificate(s) representing the shares of New
Focus Common Stock shall bear appropriate legends to identify such privately
placed shares as being restricted under the Securities Act, to comply with
applicable state securities laws and, if applicable, to notice the restrictions
on transfer of such shares.
5.2 Shareholder Approval. As soon as reasonably practicable following the
execution and delivery of this Agreement, the Company shall give written notice
of this Agreement and the proposed Merger to the Company Shareholder and to take
all other action necessary in accordance with California Law and its articles of
incorporation and bylaws to secure the written consent of the Company
Shareholder ("Company Shareholder Action"). The Company shall consult with New
Focus regarding the date of the Company Shareholder Action. The Company shall
obtain from the Company Shareholder a proxy or written consent in favor of the
Merger and this Agreement and shall take all other action necessary or advisable
to secure the vote or written consent of the Company Shareholder required to
effect the Merger.
5.3 Access to Information. Between the date of this Agreement and the
earlier of the Effective Time or the termination of this Agreement, upon
reasonable notice, the Company shall (a) give New Focus and its officers,
employees, accountants, counsel, financing sources and other agents and
representatives full access to all buildings, offices, and other facilities and
to all Books and Records of the Company, whether located on the premises of the
Company or at another location; (b) permit New Focus to make such inspections as
it, in its sole discretion, may require, including, without limitation,
investigation and testing of the condition of any improvements at any property
owned or leased by the Company and the condition of the subsurface soil and
groundwater on such properties; (c) cause its officers to furnish New Focus such
financial, operating, technical and product data and other information with
respect to the business and Assets and Properties of the Company as New Focus
from time to time may request, including financial statements and schedules; (d)
allow New Focus the opportunity to interview such employees and other personnel
and Affiliates of the Company with the Company's prior written consent, which
consent shall not be unreasonably withheld or delayed; and (e) assist and
cooperate with New Focus in the development of integration plans for
implementation by New Focus and the Surviving Corporation following the
Effective Time; provided, however, that no investigation pursuant to this
Section 5.3 shall affect or be deemed to modify any representation or warranty
made by the Company herein.
5.4 Confidentiality. Each of the parties hereto shall (and shall cause each
of its representatives to) not disclose any information provided by the other
party with respect to the negotiation and execution of this Agreement or the
consummation of the transactions contemplated hereby, including for the purposes
of due diligence ("Confidential Information"), and shall (and shall cause each
of its representatives to) use the Confidential Information only with respect to
the consummation of the transactions contemplated hereby or as otherwise
provided by this Agreement; provided, however, that the following shall be
deemed not to be Confidential Information: (a) information that the receiving
party can demonstrate was already in its possession prior to the disclosure
thereof by the other party, (b) information that is generally known to the
public and did
-36-
42
not become so known through the violation of this Section 5.4 by the receiving
party or its representatives, (c) information that becomes available to the
receiving party on a non-confidential basis from a source other than the other
party or its representatives, provided that such source is not know by the
receiving party to be bound by a contractual, legal or fiduciary obligation of
confidentiality to the other party with respect to that information, and (d)
information that is required to be disclosed by law or by the rules and
regulations of the NASD. The Company acknowledges that New Focus Common Stock is
publicly traded and that any Confidential Information with respect to New Focus
could be considered to be material non-public information within the meaning of
U.S. federal and state securities laws. Accordingly, the Company acknowledges
and agrees not to (and shall inform each of its officers, directors and
employees not to) engage in any transactions in New Focus's Common Stock in
violation of applicable ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ laws.
5.5 Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger including all legal, accounting,
financial advisory, consulting and all other fees and expenses of third parties
("Third Party Expenses") incurred by a party in connection with the negotiation
and effectuation of the terms and conditions of this Agreement and the
transactions contemplated hereby, shall be the obligation of the respective
party incurring such fees and expenses. New Focus shall have the right to
approve Third Party Expenses to be incurred by the Company between the date
hereof and the Closing, including necessary fees and expenses of legal counsel,
accountants, financial advisors, auditors and tax advisors, which such approvals
will not be unreasonably withheld, and the Company shall not pay any such Third
Party Expenses that have not been so approved. Section 2.24 of the Company
Disclosure Schedule includes the Third Party Expenses reasonably estimated to be
incurred by the Company and New Focus hereby approves such Third Party Expenses.
5.6 Public Disclosure. Unless otherwise required by Law (including federal
and state securities laws) or, as to New Focus, by the rules and regulations of
the NASD, prior to the Effective Time, no public disclosure (whether or not in
response to any inquiry) of the existence of any subject matter of, or the terms
and conditions of, this Agreement shall be made by any party hereto unless
approved by New Focus and the Company prior to release; provided, however, that
such approval shall not be unreasonably withheld or delayed.
5.7 Approvals. The Company shall use commercially reasonable efforts to
obtain all Approvals from Governmental or Regulatory Authorities or under any of
the Contracts or other agreements as may be required in connection with the
Merger (all of which Approvals are set forth in the Company Disclosure Schedule)
so as to preserve all rights of and benefits to the Company thereunder and New
Focus shall provide the Company with such assistance and information as is
reasonably required to obtain such Approvals.
5.8 FIRPTA Compliance. On or prior to the Closing Date, the Company shall
deliver to New Focus a properly executed statement in a form reasonably
acceptable to New Focus for purposes of satisfying New Focus's obligations under
Treasury Regulation Section 1.1445-2(c)(3).
5.9 Notification of Certain Matters. The Company shall give prompt notice
to New Focus, and New Focus shall give prompt notice to the Company, of (a) the
occurrence or non-occurrence of
-37-
43
any event, the occurrence or non-occurrence of which is likely to cause any
representation or warranty of the Company or New Focus, respectively, contained
in this Agreement to be untrue or inaccurate at or prior to the Closing Date and
(b) any failure of the Company or New Focus, as the case may be, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 5.9 shall not limit or otherwise affect any remedies available to
the party receiving such notice.
5.10 Additional Documents and Further Assurances; Cooperation. Each party
hereto, at the request of the other party hereto, shall execute and deliver such
other instruments and do and perform such other acts and things (including all
action reasonably necessary to seek and obtain any and all consents, waivers and
approvals of any Governmental or Regulatory Authority or Person required in
connection with the Merger; provided, however, that New Focus shall not be
obligated to consent to any divestitures or operational limitations or
activities in connection therewith and no party shall be obligated to make a
payment of money as a condition to obtaining any such consent, waiver or
approval) as may be necessary or desirable for effecting completely the
consummation of this Agreement and the transactions contemplated hereby. Each
party agrees to use commercially reasonable efforts to cause the conditions set
forth in Article 6 to be satisfied, where the satisfaction of such conditions
depends on action or forbearance from action by such party.
5.11 NNM Listing of Additional Shares Application. New Focus shall, to the
extent required by the rules of the NNM, notify the NNM of the shares of Common
Stock of New Focus issuable and the shares of New Focus Common Stock required to
be reserved for issuance in connection with the Merger.
5.12 Company's Auditors. The Company will use commercially reasonable
efforts to cause its management and its independent auditors to facilitate on a
timely basis (a) the preparation of financial statements (including pro forma
financial statements if required) as required by New Focus to comply with
applicable SEC regulations, (b) the review of any Company audit or review work
papers, including the examination of selected Financial statements and data, (c)
the delivery of such representations from the Company's independent accountants
as may be reasonably requested by New Focus or its accountants, and (d) the
securing of a binding fee commitment (on terms similar to those in place on the
date of this Agreement) with respect to consents and comfort letters requested
by New Focus after the Closing.
5.13 Takeover Statutes. If any Takeover Statute is or may become applicable
to the transactions contemplated hereby, the board of directors of the Company
will grant such approvals and take such actions as are necessary so that the
transactions contemplated by this Agreement and the Ancillary Agreements may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate the effects of any Takeover Statute on any of the
transactions contemplated hereby.
5.14 Treatment as Reorganization. The Parties intend the Merger to qualify
as a reorganization under Section 368(a) of the Code. Each Party hereto has
consulted with his or its own tax adviser in connection with the Merger and
related transactions and no Party makes any
-38-
44
representation or warranty with regard to the qualification of the Merger
as a reorganization. Each of the Company, the Company Shareholder and New Focus
shall not take any action that could reasonably be expected to prevent the
Merger from qualifying, as a reorganization under Section 368(a) of the Code.
Each of the Company, the Company Shareholder and New Focus shall report the
Merger as a reorganization within the meaning of Section 368 of the Code, unless
otherwise required pursuant to a "determination" within the meaning of Section
1313(a) of the Code. The Company Shareholder shall bear all risks and expenses
associated with any failure of the Merger to so qualify for any reason, other
than any such failure that is caused by a breach of this Agreement by New Focus.
5.15 Tax Matters. The Company Shareholder shall be responsible for timely
filing all federal and state income tax returns of the Company for taxable
periods ending on or prior to the Effective Time of the Merger and has paid or
will pay all income taxes attributable to the income of the Company's business
or operation or ownership of such business or the assets used therein arising on
or prior to the date of incorporation of the Company. Such returns will be
prepared and filed in accordance with applicable law and in a manner consistent
with past practices. New Focus and the Company, on the one hand, and the Company
Shareholder, on the other hand, will make available to the other, as reasonably
requested, all information, records or documents relating to the liability for
Taxes of the Company for all periods ending on or prior to the Effective Time
and will preserve such information, records or documents until the expiration of
any applicable statute of limitations or extensions thereof.
5.16 Information Technology Access. In furtherance of the Company's
agreement in Section 5.3 and to facilitate prompt integration following the
Closing of the Company's information technology ("IT") inventory (e.g., voice
and data network services and software and hardware, licenses,
financial/accounting software, IT budgets, etc.) with New Focus's, the Company
will provide New Focus and its Representatives with access to the Company's IT
inventory, as well as the Company's personnel responsible for such IT inventory.
Because of the substantial lead time that may be required to order and install
new software and hardware to integrate the Company's IT systems with New
Focus's, and the importance of a smooth integration of such IT systems promptly
after the Closing, the Company agrees that New Focus may order, either in New
Focus's name or, if required by the vendor, the Company's name, any new IT
services, hardware and software that New Focus believes will be needed at the
Company's facilities in order to integrate New Focus's and the Company's
respective operations following the Closing. The Company will cooperate with New
Focus in the installation of such IT systems, hardware and software prior to and
in anticipation of the Closing, including providing New Focus with reasonable
access to and use of the Company's appropriate personnel. If required by the
vendor, at New Focus's request, the Company will place IT systems, hardware and
software orders in the Company's name. For clarity, it is the parties' intent
not to connect any of the ordered services or systems prior to the Closing. New
Focus and the Company agree to cooperate with each other to minimize any
potential disruption to the Company's business from the IT integration efforts;
provided, however, that New Focus will not have any liability to the Company for
any such disruption or as may otherwise result from the IT integration efforts,
except as may be directly caused by New Focus's gross negligence or willful
misconduct; and provided further that in no event will New Focus have any
liability to the Company for any
-39-
45
indirect, incidental, consequential, special or speculative damages, including
damages for loss of profits or use, business interruption or loss of goodwill,
irrespective of whether such damages arise under contract, tort, statute or
otherwise and whether or not the Company has given New Focus advance notice of
the possibility of such damages. If the Closing does not occur, other than
because of the Company's breach of the Merger Agreement, New Focus will
reimburse the Company for its reasonable and documented out-of-pocket costs
incurred by it in connection with the ordering and installation of IT services,
hardware and software. If New Focus is so required to reimburse the Company, New
Focus will own any such hardware and software and will pay for its removal from
Company premises. New Focus and the Company will cooperate in the removal of any
such hardware or software so as to minimize any disruption to the Company's
business. In addition, if the Closing does not occur, the Company will cooperate
with New Focus in canceling any orders for IT services, hardware or software and
will otherwise act to minimize the costs which might be incurred in connection
with the IT integration efforts.
5.17 Change of Merger Form. The Company agrees that in the event New Focus
requests that the transactions contemplated hereby be effected through a
different form of merger than the form presently contemplated herein, and
provided that the alternative form of merger is in any event intended to qualify
as a tax-free reorganization and otherwise achieves the ends described herein
without material deviation, the Company shall cooperate with New Focus in
effecting the alternative form of merger and will take all reasonably necessary
action towards such end, including the execution of any amendments to this
Agreement (provided that such amendments relate only to the alternative form of
merger and any related matters and do not include any other substantive changes
not otherwise agreed between the parties).
5.18 Intellectual Property. The Company shall give New Focus prompt notice
that any Person shall have (a) commenced, or shall have notified the Company
that it intends to commence, an Action or Proceeding or (b) provided the Company
with notice, in either case which allege(s) that any of the Intellectual
Property, including the Company Intellectual Property, presently embodied, or
proposed to be embodied, in the Company's products or utilized in any
development tools (including standard cells) or design environments designed or
modified by the Company infringes or otherwise violates the intellectual
property rights of such Person, is available for licensing from a potential
licensor providing the notice or otherwise alleges that the Company does not
otherwise own or have the right to exploit such Intellectual Property, including
the Company Intellectual Property. The Company shall cooperate with New Focus in
making arrangements, prior to the Closing Date, reasonably satisfactory to New
Focus to effect the assignment to the Company of (a) Company Intellectual
Property created by the Founders related to the Company's business including
such Intellectual Property created by the Company's founders prior to the
Company's incorporation, which was not created for or on behalf of former
employers, and (b) all Company Intellectual Property created by employees and
consultants which was created for or on behalf of the Company, and to obtain the
cooperation of such Persons to complete all appropriate patent filings related
thereto. The Company shall take commercially reasonable actions to maintain,
perfect, preserve or renew the Company Registered Intellectual Property,
including the payment of any registration, maintenance, renewal fees, annuity
fees and taxes or the filing of any documents, applications or certificates
related thereto, and to promptly respond and prepare to respond to all requests,
related to
-40-
46
the Company Registered Intellectual Property, received from Governmental or
Regulatory Authorities. At the Closing, the Company will notify New Focus of all
actions which must be taken within the one hundred twenty (120) days following
the Closing Date and which are necessary to maintain, perfect, preserve or renew
the Company Registered Intellectual Property, including the payment of any
registration, maintenance, renewal fees, annuity fees and taxes or the filing of
any documents, applications or certificates related thereto.
5.19 Delivery of Stock Ledger and Minute Book of the Company. The Company
shall deliver its ledger and minute book to New Focus at the Closing.
5.20 Registration of Patent Assignments. The Company shall promptly after
the date hereof record any assignments to the Company of Company Registered
Intellectual Property at the request of New Focus.
5.21 Execution of Support Agreement and Non-Competition Agreement. Prior to
November 1, 2000, the Company shall provide to New Focus an original execution
copy of the Support Agreement and original execution copy of the Employment and
Non-Competition Agreement for the Company Shareholder.
5.22 Execution of Employment and Non-Solicitation Agreements. Prior to
November 25, 2000, the Company shall provide to New Focus original execution
copies of the Employment and Non-Competition Agreements for the individuals
identified on Schedule 5.21.
5.23 Preparation of Financial Statements. The Company shall cause audited
financial statements and/or financial statements prepared in accordance with
GAAP if so requested by New Focus and shall cooperate in the preparation of, and
provide any information pertaining to the financial condition of the Company
required to be included in, any SEC Documents.
ARTICLE 6
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Governmental and Regulatory Approvals. Approvals from any
Governmental or Regulatory Authority (if any) necessary for consummation of the
transactions contemplated hereby shall have been timely obtained; and any
waiting period applicable to the consummation of the Merger under the HSR Act
(other than with respect to the receipt of New Focus Common Stock by the Company
Shareholder) shall have expired or been terminated.
(b) No Injunctions or Regulatory Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other Order issued by
any court of competent jurisdiction or Governmental or Regulatory Authority or
other legal or regulatory restraint or prohibition preventing the consummation
of the Merger shall be in effect; nor shall there be any
-41-
47
action taken, or any Law or Order enacted, entered, enforced or deemed
applicable to the Merger or the other transactions contemplated by the terms of
this Agreement that would prohibit the consummation of the Merger or which would
permit consummation of the Merger only if certain divestitures were made or if
New Focus were to agree to limitations on its business activities or operations.
(c) Shareholder Approval. The Merger shall have been approved by the
Company Shareholder in accordance with California Law and Delaware Law.
(d) Fairness Hearing and California Permit; Private Placement
Alternative. Either (i) the fairness hearing shall have been held by the
Commissioner of Corporations of the State of California and the California
Permit shall have been issued by the State of California, or (ii) if the
issuance of the shares of New Focus Common Stock pursuant to Section 1.6 is
effected in a private placement pursuant to Section 4(2) of the Securities Act,
the parties shall be reasonably satisfied that the shares of New Focus Common
Stock to be issued in connection with the Merger pursuant to Section 1.6(a) are
issuable without registration pursuant to Section 4(2) of the Securities Act and
SEC rules and regulations promulgated thereunder.
6.2 Additional Conditions to Obligations of the Company. The obligations of
the Company to consummate the Merger and the other transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations and Warranties. The representations and warranties
of New Focus and Merger Sub contained in this Agreement that are qualified by
"materiality" or "material adverse change" or contain other materiality
exceptions or qualifications shall be accurate in all respects, and the
representations and warranties of New Focus and Merger Sub contained in this
Agreement that are not so qualified shall be accurate in all material respects,
in each case as of the date of this Agreement and as of the Closing Date as if
made on and as of the Closing Date (other than representations and warranties
which by their express terms are made solely as of a specified earlier date,
which shall be accurate to such extent as of such specified earlier date).
(b) Performance. New Focus and Merger Sub shall have performed and
complied with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by the New Focus
and Merger Sub at or before the Closing.
6.3 Additional Conditions to the Obligations of New Focus and Merger Sub.
The obligations of New Focus and Merger Sub to consummate the Merger and the
other transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions, any
of which may be waived, in writing, exclusively by New Focus:
(a) Representations and Warranties. The representations and warranties
of the Company contained in this Agreement that are qualified by "materiality"
or "material adverse change" or contain other materiality exceptions or
qualifications shall be accurate in all respects, and the representations and
warranties of the Company contained in this Agreement that are not so
-42-
48
qualified shall be accurate in all material respects, in each case as of the
date of this Agreement, and as of the Closing Date as if made on and as of the
Closing Date (other than representations and warranties which by their express
terms are made solely as of a specified earlier date, which shall be accurate to
such extent as of such specified earlier date).
(b) Performance. The Company shall have performed and complied with in
all material respects each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by the Company on or before the
Closing Date, and shall have performed and complied with in all respects the
agreement and obligations set forth in this Agreement.
(c) Officers' Certificates. The Company shall have delivered to New
Focus a certificate, dated the Closing Date and executed by the President and
Chief Executive Officer of the Company, substantially in the form set forth in
Exhibit H-1 hereto, and a certificate, dated the Closing Date and executed by
the Secretary of the Company, substantially in the form set forth in Exhibit H-2
hereto.
(d) Third Party Consents. New Focus shall have been furnished with
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers listed (or required to be listed) in Section 2.6 of the
Company Disclosure Schedule, and that all such consents, approvals and waivers
are in full force and effect.
(e) Legal Proceedings. No Governmental or Regulatory Authority shall
have notified either party to this Agreement that such Governmental or
Regulatory Authority intends to commence proceedings to restrain or prohibit the
transactions contemplated hereby or force rescission, unless such Governmental
or Regulatory Authority shall have withdrawn such notice and abandoned any such
proceedings prior to the time which otherwise would have been the Closing Date.
(f) Legal Opinion. New Focus shall have received a legal opinion from
▇▇▇▇▇ ▇. ▇▇▇▇, Esq., legal counsel to the Company, as to the matters set forth
in Exhibit I.
(g) Employment and Non-Competition Agreement. The Company Shareholder
shall have signed the Employment and Non-Competition Agreement and such
agreement shall be in full force and effect.
(h) Employment and Non-Solicitation Agreements. Each of the persons
listed on Schedule 5.21 shall have executed and delivered to New Focus an
Employment and Non-Solicitation Agreement and all of such Agreements shall be in
full force and effect.
(i) Support Agreement. The Company Shareholder shall have executed and
delivered to New Focus a Support Agreement, and no breach of any Support
Agreement shall have occurred or be continuing.
(j) Employees and Consultants. The employees of, and consultants to,
the Company set forth on Schedule 6.3(j) shall, except for the death or
disability of such employees or consultants,
-43-
49
continue to be employed by, or provide service to, as the case may be, the
Company at the Closing and shall not have given any notice or other indication
that they are not willing or do not intend to be employed by, or continue to
provide services to, as the case may be, New Focus or a Subsidiary of New Focus
(as New Focus shall designate), following the Merger or that they are not
willing or do not intend to execute and deliver to New Focus's standard form of
Confidentiality and Invention Assignment Agreement and associated schedules and
statements without amendment or modification thereto in any substantive respect.
(k) No Material Adverse Change. There shall have occurred no material
adverse change in the Business or Condition of the Company since the date
hereof; provided, however, that any material adverse change resulting from (a)
effects, changes, events, circumstances and conditions generally affecting the
industry in which the Company operates or from changes in general business or
economic conditions in the region, nation or world, (b) changes occurring in the
ordinary course of business or (c) changes resulting from action taken as
contemplated by this Agreement, shall not constitute a material adverse change
for the purpose of this Section 6.3(j).
(l) No Litigation. No litigation or proceeding shall be pending or
threatened, which would be reasonably expected to result in a material adverse
change in the Business or Condition of the Company.
(m) Assignment of Intellectual Property. Arrangements reasonably
satisfactory to New Focus shall have been made to effect the assignment to the
Company of that Intellectual Property described in Section 5.20.
(n) Shareholder Approval of Certain Payments. Any agreements or
arrangements that may result in the payment of any amount that would not be
deductible by reason of Section 280G of the Internal Revenue Code shall have
been approved by such number of shareholders of the Company as is required by
the terms of Section 280G(b)(5)(B) and shall be obtained in a manner that
satisfies all applicable requirements of such Section 280G(b)(5)(B) and the
proposed Treasury regulations thereunder, including Q-7 of Section 1.280G-1 of
such proposed regulations.
(o) Registration of Patent Assignments. The Company shall have
recorded any assignments to the Company of Company Registered Intellectual
Property at the request of New Focus.
(p) Delivery of the Software Code. The Company shall have delivered to
New Focus a copy of the Software Code in a form acceptable to New Focus.
ARTICLE 7
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS; ESCROW PROVISIONS
7.1 Survival of Representations, Warranties, Covenants and Agreements.
Notwithstanding any right of New Focus or the Company (whether or not exercised)
to investigate the affairs of New
-44-
50
Focus or the Company (whether pursuant to Section 5.3 or otherwise) or a waiver
by New Focus or the Company of any condition to Closing set forth in Article 6,
each party shall have the right to rely fully upon the representations,
warranties, covenants and agreements of the other party contained in this
Agreement or in any instrument delivered pursuant to this Agreement. Except for
Article 7 (which shall survive until termination of the escrow created thereby
and the satisfaction of any other obligations described therein), all of the
representations, warranties, covenants and agreements of the Company and New
Focus contained in this Agreement or in any instrument delivered pursuant to
this Agreement shall survive the Merger and continue until the Expiration Date.
7.2 Representations, Warranties, Covenants and Agreements. Solely for the
purposes of Articles 2 and 3, the representations, warranties, covenants,
agreements and all other provisions contained therein shall be deemed to have
been made and entered into as of October 25, 2000, and all references in
Articles 2 and 3 to "the date hereof" and "the date of this Agreement" shall
mean October 25, 2000.
7.3 Escrow Provisions.
(a) Establishment of the General Escrow Fund. At or promptly following
the Effective Time, the General Escrow Amount, without any act of the Company
Shareholder, will be deposited with the Escrow Agent, such deposit to constitute
an escrow fund (the "General Escrow Fund") to be governed by the terms set forth
herein. The Company Shareholder shall be entitled to all voting rights with
respect to the New Focus Common Stock held in escrow on its behalf. The Company
and the Company Shareholder jointly and severally indemnify and hold New Focus,
the Surviving Corporation and their officers, directors, affiliates, lenders,
successors and assigns (the "Indemnitees") harmless against all claims, losses,
liabilities, damages, deficiencies, costs and expenses, including, without
limitation, reasonable attorneys' and experts' fees and expenses of
investigation and defense (hereinafter individually a "Loss" and collectively
"Losses") incurred by New Focus, the Surviving Corporation or any other
Indemnitee directly or indirectly as a result of or in connection with (i) any
inaccuracy or breach of a representation or warranty of the Company contained in
this Agreement or in the Ancillary Agreements or in any instrument delivery
pursuant to this Agreement or (ii) any failure by the Company to perform or
comply with any covenant contained in this Agreement or in the Ancillary
Agreements or in any instrument delivery pursuant to this Agreement. The General
Escrow Fund shall be available to compensate New Focus and its affiliates from
any such Loss. The Company Shareholder shall not have any right of contribution
from the Company with respect to any Loss claimed by New Focus. All
indemnification under this Section 7.2(a) shall be made exclusively by means of
claims against the General Escrow Fund, and, except as set forth in the
following sentence, no Indemnitee shall look to the Company Shareholder for
indemnification or contribution except for the General Escrow Fund and as set
forth in Section 7.2(b). Notwithstanding the foregoing, nothing in this
Agreement shall limit any remedy to which New Focus shall be entitled against
the Company Shareholder for his fraud or intentional misrepresentation. In
addition to indemnification for any Losses, as set forth above, if prior to the
Expiration Date of the General Escrow Period, the chief financial officer of New
Focus shall deliver to the Escrow Agent a certificate duly signed by the chief
financial officer of New Focus certifying that the Company Shareholder ceased to
be an employee of New Focus or of a New Focus
-45-
51
Subsidiary prior to the Expiration Date for any reason other than "Involuntary
Termination" or termination without "Cause" (as those terms are defined in the
Employment and Non-Competition Agreement) (such certificate being referred to
herein as a "Certificate of Non-Employment"), then the Escrow Agent shall
immediately cause the General Escrow Amount, without any further action of New
Focus, the Company Shareholder or any other party, to be distributed in whole to
New Focus, and New Focus shall indemnify the Escrow Agent for such transfer.
(b) Establishment of the Special Escrow Fund. At or promptly following
the Effective Time, the Special Escrow Amount, without any act of the Company
Shareholder, will be deposited with the Escrow Agent, such deposits to
constitute an escrow fund (the "Special Escrow Fund") to be governed by the
terms set forth herein. The Company Shareholder shall be entitled to all voting
rights with respect to the New Focus Common Stock held in escrow on its behalf.
The Company and the Company Shareholder agree that the Special Escrow Fund will
be distributed in whole to New Focus and the Surviving Corporation upon delivery
to the Escrow Agent of a Certificate of Non-Employment prior to the Expiration
Date, in accordance with Section 7.2(a).
(c) General Escrow Period. Distribution upon Termination of General
Escrow Period. Subject to the following requirements, the General Escrow Fund
shall be in existence immediately following the Effective Time and shall
terminate upon the earlier to occur of (i) the termination of the Company
Shareholder's status as an employee of New Focus or its subsidiary or (ii) 11:59
p.m., Pacific time, on the date that is one year from the Closing Date (the
"General Escrow Period"); provided, however, that, with respect to
indemnification for any Loss, the General Escrow Period shall not terminate with
respect to any amount which, in the reasonable judgement of New Focus, subject
to the objection of the Shareholder Representative and the subsequent
arbitration of the matter in the manner provided in paragraph (i) below, is
necessary to satisfy any claims that are either threatened in writing or are
pending but unsatisfied and that are specified in any Officer's Certificate
delivered to the Escrow Agent prior to termination of such General Escrow Period
with respect to facts and circumstances existing prior to the termination of
such General Escrow Period. As soon as all such claims have been resolved the
Escrow Agent shall notify New Focus of its intent to deliver to the Company
Shareholders the remaining portion of the General Escrow Fund not required to
satisfy such claims (the "General Settlement Amount"). As soon as all such
claims, if any, have been resolved, and provided that New Focus has not
delivered a Certificate of Non-Employment to the Escrow Agent, in accordance
with Section 7.2(a), the Escrow Agent shall deliver to the Company Shareholder
the remaining portion of the Escrow Funds not required to satisfy such claims.
If the Company Shareholder would otherwise be entitled to a fraction of a share
of New Focus Common Stock, he shall, instead, be entitled to receive from New
Focus an amount of cash (rounded down to the nearest whole cent) equal to the
product of (a) such fraction, multiplied by (b) the Closing Price. New Focus
shall use its commercially reasonable efforts to have such shares and cash
delivered in a timely manner after such resolution.
(d) Special Escrow Period; Distribution upon Termination of Special
Escrow Period. Subject to the following requirements, the Special Escrow Fund
shall be in existence during the Special Escrow Period. Upon the Expiration Date
of the Special Escrow Period, and provided that New Focus has not delivered a
Certificate of Non-Employment to the Escrow Agent, in accordance
-46-
52
with Section 7.2(a), the Escrow Agent shall deliver to the Company Shareholder
the Special Escrow Amount. If the Company Shareholder would otherwise be
entitled to a fraction of a share of New Focus Common Stock, he shall, instead,
be entitled to receive from New Focus an amount of cash (rounded down to the
nearest whole cent) equal to the product of (a) such fraction, multiplied by (b)
the Closing Price. Upon the Expiration Date of the Special Escrow Period, and
provided that New Focus has not delivered a Certificate of Non-Employment to the
Escrow Agent , the Escrow Agent and New Focus shall use their commercially
reasonable efforts to have, with respect to the Escrow Agent, such shares and,
with respect tot New Focus, such cash, if any, delivered in a timely manner
after such resolution.
(e) Recourse to the Escrow Funds. The Escrow Funds shall be available
to compensate the Indemnitees for any and all (i) Losses (whether or not
involving a Third Party Claim), incurred or sustained by New Focus or any other
Indemnitee as a result of any inaccuracy in or breach (or any claim by any third
party alleging, constituting or involving an inaccuracy or breach) of any
representation, warranty, covenant or agreement of the Company contained herein
or in the Ancillary Agreements or in any instrument delivered pursuant to this
Agreement or (ii) to compensate New Focus in the event of the Company
Shareholder's employment termination prior to the Expiration Date. New Focus and
the Company each acknowledge that such Losses, if any, or the Company
Shareholder not continuing to be employed by New Focus at least until the
Expiration Date of would relate to unresolved contingencies existing at the
Effective Time, which if resolved at the Effective Time would have led to a
reduction in the aggregate Merger consideration to be paid to the Company
Shareholder. The Company Shareholder shall not have any liability under this
Agreement of any sort whatsoever in excess of the Escrow Funds for breach by the
Company of any of its representations or warranties contained in this Agreement,
the Ancillary Agreements or in any other instrument or document required to be
delivered pursuant to this Agreement in connection herewith, except in the event
of fraud or willful misconduct (i.e., a fraudulent or willful breach of a
representation or warranty, but excluding a negligent or reckless breach). In
the event of such a fraudulent breach, New Focus shall have all remedies
available at law or in equity (including for tort) with respect to such breach.
(f) Protection of Escrow Funds.
(i) The Escrow Agent shall hold and safeguard the Escrow Funds
during the Escrow Period, shall treat such fund as a trust fund in accordance
with the terms of this Agreement and not as the property of New Focus and shall
hold and dispose of the Escrow Funds only in accordance with the terms hereof.
(ii) Any shares of New Focus Common Stock or other Equity
Equivalents securities issued or distributed by New Focus ("New Shares") in
respect of New Focus Common Stock in the Escrow Funds which have not been
released from the Escrow Funds shall be added to the Escrow Funds. New Shares
issued in respect of shares of New Focus Common Stock which have been released
from the Escrow Funds shall not be added to the Escrow Funds but shall be
distributed to the record holders thereof. Cash dividends on New Focus Common
Stock shall not be
-47-
53
added to the Escrow Funds but shall be distributed to the record holders of the
New Focus Common Stock on the record date set for any such dividend.
(iii) The Company Shareholder shall have voting rights with
respect to the shares of New Focus Common Stock contributed to the Escrow Funds
by the Company Shareholder (and on any voting securities added to the Escrow
Funds in respect of such shares of New Focus Common Stock).
(g) Indemnification Claims Upon the General Escrow Fund.
(i) Upon receipt by the Escrow Agent at any time on or before the
last day of the General Escrow Period of a certificate signed by an Authorized
Officer of New Focus (an "Officer's Certificate"): (A) stating that New Focus or
another New Focus Indemnitee has paid or properly accrued or reasonably
anticipates that it will have to pay or accrue Losses, directly or indirectly,
as a result of any inaccuracy or breach (or any claim by any third party
alleging, constituting or involving an inaccuracy or breach) of any
representation, warranty, covenant or agreement of the Company contained in this
Agreement or in any of the Ancillary Agreements or in any instrument or
agreement delivered pursuant to this Agreement, and (B) specifying in reasonable
detail the individual items of Losses included in the amount so stated, the date
each such item was paid or properly accrued, or the basis for such anticipated
liability, and the nature of the misrepresentation, breach of warranty,
agreement or covenant to which such item is related, the Escrow Agent shall,
subject to the provisions of Section 7.2(h), deliver to New Focus out of the
General Escrow Fund, as promptly as practicable, shares of New Focus Common
Stock held in the General Escrow Fund in an amount equal to such Losses. Where
the basis for a claim upon the General Escrow Fund by New Focus is that New
Focus reasonably anticipates that it will pay or accrue a Loss, no payment will
be made from the General Escrow Fund for such Loss unless and until such Loss is
actually paid or accrued.
(ii) For the purposes of determining the number of shares of New
Focus Common Stock to be delivered to New Focus out of the General Escrow Fund
pursuant to Section 7.2(a) or (g) or to be retained in the General Escrow Fund
after the General Escrow Period pursuant to Section 7.2(c), the shares of New
Focus Common Stock shall be valued at the Closing Price.
(h) Objections to Claims. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such certificate shall be
delivered to the Shareholder Agent and for a period of thirty (30) days after
such delivery, the Escrow Agent shall make no delivery to New Focus of any
General Escrow Amount pursuant to Section 7.2(g). After the expiration of such
thirty (30) day period, the Escrow Agent shall make delivery of shares of New
Focus Common Stock from the Escrow Funds in accordance with Section 7.2(g),
provided that no such payment or delivery may be made to the extent the
Shareholder Agent shall object in a written statement to the claim made in the
Officer's Certificate, and such statement shall have been delivered to the
Escrow Agent prior to the expiration of such thirty (30) day period.
(i) Resolution of Conflicts; Arbitration.
-48-
54
(i) In case the Shareholder Agent shall object in writing to all
or any portion of any claim or claims made in any Officer's Certificate, the
Shareholder Agent and New Focus shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims. If the
Shareholder Agent and New Focus should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties and shall be furnished to
the Escrow Agent. The Escrow Agent shall be entitled to rely on any such
memorandum and distribute shares of New Focus Common Stock from the General
Escrow Fund in accordance with the terms thereof.
(ii) If no such agreement can be reached after good faith
negotiation, either New Focus or the Shareholder Agent may demand arbitration of
the dispute unless the amount of the damage or Loss is at issue in a pending
Action or Proceeding involving a Third Party Claim, in which event arbitration
shall not be commenced until such amount is ascertained or both parties agree to
arbitration; and in either event the matter shall be settled by arbitration
conducted by three arbitrators, one selected by New Focus and one selected by
the Shareholder Agent, and the two arbitrators selected by New Focus and the
Shareholder Agent shall select a third arbitrator. The arbitrators shall set a
limited time period and establish procedures designed to reduce the cost and
time for discovery of information relating to any dispute while allowing the
parties an opportunity, adequate as determined in the sole judgment of the
arbitrators, to discover relevant information from the opposing parties about
the subject matter of the dispute. The arbitrators shall rule upon motions to
compel, limit or allow discovery as they shall deem appropriate given the nature
and extent of the disputed claim. The arbitrators shall also have the authority
to impose sanctions, including attorneys' fees and other costs incurred by the
parties, to the same extent as a court of law or equity, should the arbitrators
determine that discovery was sought without substantial justification or that
discovery was refused or objected to by a party without substantial
justification. The decision of a majority of the three arbitrators as to the
validity and amount of any claim in such Officer's Certificate shall be binding
and conclusive upon the parties to this Agreement, and, the Escrow Agent shall
be entitled to act in accordance with such decision and make or withhold
payments out of the General Escrow Fund in accordance therewith. Such decision
shall be written and shall be supported by written findings of fact and
conclusions regarding the dispute which shall set forth the award, judgment,
decree or order awarded by the arbitrators.
(iii) Judgment upon any award rendered by the arbitrators may be
entered in any court having competent jurisdiction. Any such arbitration shall
be held in the city and county of Santa Clara, California under the commercial
rules of arbitration then in effect of the American Arbitration Association. For
purposes of this Section 7.2(i), in any arbitration hereunder in which any claim
or the amount thereof stated in the Officer's Certificate is at issue, New Focus
shall be deemed to be the Non-Prevailing Party in the event that the arbitrators
award New Focus less than the sum of one-half of the disputed amount of any
Losses plus any amounts not in dispute; otherwise, the shareholders of the
Company as represented by the Shareholder Agent shall be deemed to be the
Non-Prevailing Party. The Non-Prevailing Party to an arbitration shall pay its
own expenses, the fees of each arbitrator, the administrative costs of the
arbitration and the expenses, including reasonable attorneys' fees and costs,
incurred by the other party to the arbitration.
-49-
55
(j) Shareholder Agent; Power of Attorney.
(i) In the event that the Merger is approved by the Company
Shareholder, effective upon such vote, and without further act of the Company
Shareholder, Nai-Yu Pai shall be appointed as agent and attorney-in-fact (the
"Shareholder Agent") for the Company Shareholder, for and on its behalf, to give
and receive notices and communications, to authorize delivery to New Focus of
shares of New Focus Common Share from the Escrow Funds in satisfaction of claims
by New Focus, to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with orders of
courts and awards of arbitrators with respect to such claims, and to take all
actions necessary or appropriate in the judgment of the Shareholder Agent for
the accomplishment of the foregoing. Such agency may be changed by the Company
Shareholder from time to time upon not less than thirty (30) days prior written
notice to New Focus. No bond shall be required of the Shareholder Agent, and the
Shareholder Agent shall not receive compensation for his services. Notices or
communications to or from the Shareholder Agent shall constitute notice to or
from the Company Shareholder.
(ii) The Shareholder Agent shall not incur any liability with
respect to any action taken or suffered by him or omitted hereunder as
Shareholder Agent while acting in good faith and in the exercise of reasonable
judgment. The Shareholder Agent may, in all questions arising hereunder, rely on
the advice of counsel and for anything done, omitted or suffered in good faith
by the Shareholder Agent based on such advice, the Shareholder Agent shall not
be liable to anyone. The Shareholder Agent undertakes to perform such duties and
only such duties as are specifically set forth in this Agreement and no implied
covenants or obligations shall be read into this Agreement against the
Shareholder Agent.
(iii) The Shareholder Agent shall have reasonable access to
information about the Company and the reasonable assistance of the Company's
officers and employees for purposes of performing its duties and exercising its
rights hereunder, provided that the Shareholder Agent shall treat confidentially
and not disclose any nonpublic information from or about the Company to anyone
(except on a need to know basis to individuals who agree in writing to treat
such information confidentially).
(k) Actions of the Shareholder Agent. A decision, act, consent or
instruction of the Shareholder Agent shall constitute a decision of the Company
Shareholder for whom a portion of the Escrow Amount otherwise issuable to it are
deposited in the Escrow Funds and shall be final, binding and conclusive upon
the Company Shareholder, and the Escrow Agent and New Focus may rely upon any
such decision, act, consent or instruction of the Shareholder Agent as being the
decision, act, consent or instruction of the Company Shareholder. The Escrow
Agent and New Focus are hereby relieved from any liability to any person for any
acts done by them in accordance with such decision, act, consent or instruction
of the Shareholder Agent.
(l) Third-Party Claims. In the event New Focus becomes aware of a
third-party claim (a "Third Party Claim") which New Focus reasonably expects may
result in a demand against the General Escrow Fund, New Focus shall notify the
Shareholder Agent of such claim, and the Shareholder Agent, as representative
for the Company Shareholder, shall be entitled, at the Company
-50-
56
Shareholder's expense, to participate in any defense of such claim. New Focus
shall have the right in its sole discretion to settle any Third Party Claim;
provided, however, that if New Focus settles any Third Party Claim without the
Shareholder Agent's consent (which consent shall not be unreasonably withheld or
delayed), New Focus may not make a claim against the General Escrow Fund with
respect to the amount of Losses incurred by New Focus in such settlement. In the
event that the Shareholder Agent has consented to any such settlement, the
Shareholder Agent shall have no power or authority to object under any provision
of this Article 7 to the amount of any claim by New Focus against the General
Escrow Fund with respect to the amount of Losses incurred by New Focus in such
settlement.
(m) Indemnification for Shareholder Agent. The Company Shareholder
shall, indemnify, defend and hold the Shareholder Agent harmless from and
against any Loss, damage, tax, liability and expense that may be incurred by the
Shareholder Agent arising out of or in connection with the acceptance or
administration of the Shareholder Agent's duties, except as caused by the
Shareholder Agent's gross negligence or willful misconduct, including the legal
costs and expenses of defending such Shareholder Agent against any claim or
liability in connection with the performance of the Shareholder Agent's duties.
The Shareholder Agent shall be entitled, but not limited, to such
indemnification from the Escrow prior to any distribution thereof to the Company
Shareholder, but after any distributions therefrom to New Focus.
(n) Escrow Agent's Duties.
(i) Limitation on Duties of Escrow Agent. The Escrow Agent shall
be obligated only for the performance of such duties as are specifically set
forth herein, and as set forth in any additional written escrow instructions
which the Escrow Agent may receive after the date of this Agreement which are
signed by an officer of New Focus and the Shareholder Agent, and may rely and
shall be protected in relying or refraining from acting on any instrument
reasonably believed to be genuine and to have been signed or presented by the
proper party or parties. The Escrow Agent shall not be liable for any act done
or omitted hereunder as Escrow Agent while acting in good faith and in the
exercise of reasonable judgment, and any act done or omitted pursuant to the
advice of counsel shall be conclusive evidence of such good faith.
(ii) Compliance with Orders. The Escrow Agent is hereby expressly
authorized to comply with and obey Orders of any court of law or Governmental or
Regulatory Authority, notwithstanding any notices, warnings or other
communications from any party or any other person to the contrary. In case the
Escrow Agent obeys or complies with any such Order, the Escrow Agent shall not
be liable to any of the parties hereto or to any other person by reason of such
compliance, notwithstanding any such Order being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction or proper authority.
(iii) Limitations on Liability of Escrow Agent. The Escrow Agent
shall not be liable in any respect on account of (A) the identity, authority or
rights of the parties executing or delivering or purporting to execute or
deliver this Agreement or any documents or papers deposited or called for
hereunder; or (B) the expiration of any rights under any statute of limitations
with respect to this Agreement or any documents deposited with the Escrow Agent.
-51-
57
(iv) Good Faith of Escrow Agent. In performing any duties under
the Agreement, the Escrow Agent shall not be liable to any party for damages,
Losses, or expenses, except for gross negligence or willful misconduct on the
part of the Escrow Agent. The Escrow Agent shall not incur any such liability
for (A) any act or failure to act made or omitted in good faith, or (B) any
action taken or omitted in reliance upon any instrument, including any written
statement or affidavit provided for in this Agreement that the Escrow Agent
shall in good faith believe to be genuine, nor will the Escrow Agent be liable
or responsible for forgeries, fraud, impersonations or determining the scope of
any representative authority. In addition, the Escrow Agent may consult with
legal counsel in connection with the Escrow Agent's duties under this Agreement
and shall be fully protected in any act taken, suffered, or permitted by him,
her or it in good faith in accordance with the advice of counsel. The Escrow
Agent is not responsible for determining and verifying the authority of any
person acting or purporting to act on behalf of any party to this Agreement.
(v) Non-responsibility of Escrow Agent. If any controversy arises
between the parties to this Agreement, or with any other party, concerning the
subject matter of this Agreement, its terms or conditions, the Escrow Agent will
not be required to determine the controversy or to take any action regarding it.
The Escrow Agent may hold all documents and shares of New Focus Common Stock and
may wait for settlement of any such controversy by final appropriate legal
proceedings or other means as, in the Escrow Agent's discretion, the Escrow
Agent may be required, despite what may be set forth elsewhere in this
Agreement. In such event, the Escrow Agent will not be liable for any damages.
Furthermore, the Escrow Agent may at its option, file an action of interpleader
requiring the parties to answer and litigate any claims and rights among
themselves. The Escrow Agent is authorized to deposit with the clerk of the
court all documents and shares of New Focus Common Stock held in escrow, except
all costs, expenses, charges and reasonable attorney fees incurred by the Escrow
Agent due to the interpleader action and which the parties jointly and severally
agree to pay. Upon initiating such action, the Escrow Agent shall be fully
released and discharged of and from all obligations and liability imposed by the
terms of this Agreement.
(vi) Indemnification of Escrow Agent. New Focus and its
successors and assigns agrees to indemnify and hold the Escrow Agent harmless
against any and all Losses incurred by the Escrow Agent in connection with the
performance of the Escrow Agent's duties under this Agreement, including but not
limited to any litigation arising from this Agreement or involving its subject
matter.
(vii) Resignation of Escrow Agent. The Escrow Agent may resign at
any time upon giving at least thirty (30) days written notice to the parties;
provided, however, that no such resignation shall become effective until the
appointment of a successor Escrow Agent which shall be accomplished as follows:
the parties shall use their reasonable best efforts to mutually agree on a
successor Escrow Agent within thirty (30) days after receiving such notice. If
the parties fail to agree upon a successor Escrow Agent within such time, the
Escrow Agent shall have the right to appoint a successor Escrow Agent authorized
to do business in the State of California. The successor Escrow Agent shall
execute and deliver an instrument accepting such appointment and it
-52-
58
shall, without further acts, be vested with all the estates, properties, rights,
powers, and duties of the predecessor Escrow Agent as if originally named as
Escrow Agent. The Escrow Agent shall be discharged from any further duties and
liability under this Agreement.
(o) Fees. All fees of the Escrow Agent for performance of its duties
hereunder shall be paid by New Focus. In the event that the conditions of this
Agreement are not promptly fulfilled, or if the Escrow Agent renders any service
not provided for in this Agreement, or if the parties request a substantial
modification of its terms, or if any controversy arises, or if the Escrow Agent
is made a party to, or intervenes in, any Action or Proceeding pertaining to
this escrow or its subject matter, the Escrow Agent shall be reasonably
compensated for such extraordinary services and reimbursed for all costs,
attorney's fees, and expenses occasioned by such default, delay, controversy or
Action or Proceeding. New Focus agrees to pay these sums upon demand.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2, this Agreement may be
terminated and the Merger abandoned at any time prior to the Effective Time:
(a) by mutual agreement of the Company and New Focus;
(b) by New Focus or the Company if: (i) the Effective Time has not
occurred before 5:00 p.m. (Pacific Time) on March 1, 2001 (the "Outside Date"),
(provided, however, that (A) if the failure to obtain any Approval of
Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated hereby has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date, then the Outside
Date shall be automatically extended to April 1, 2001, and (B) the right to
terminate this Agreement under this Section 8.1(b)(i) shall not be available to
any party whose willful failure to fulfill any obligation hereunder has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date); (ii) there shall be a final nonappealable order of a federal
or state court in effect preventing consummation of the Merger; or (iii) there
shall be any statute, rule, regulation or order enacted, promulgated or issued
or deemed applicable to the Merger by any Governmental or Regulatory Authority
that would make consummation of the Merger illegal;
(c) by New Focus if there shall be any action taken, or any Law or
Order enacted, promulgated or issued or deemed applicable to the Merger, by any
Governmental or Regulatory Authority, which would: (i) prohibit New Focus's
ownership or operation of all or any portion of the business of the Company or
(ii) compel New Focus to dispose of or hold separate all or any portion of the
Assets and Properties of the Company as a result of the Merger;
(d) by New Focus if it is not in material breach of its
representations, warranties, covenants and agreements under this Agreement and
there has been a breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of the Company and (i) the Company is
not using its reasonable efforts to cure such breach, or has not cured such
breach within thirty (30) days, after notice of such breach to the Company
(provided, however, that, no cure period
-53-
59
shall be required for a breach which by its nature cannot be cured) and (ii) as
a result of such breach any of the conditions set forth in Section 6.1 or
Section 6.3, as the case may be, would not be satisfied prior to the Closing
Date;
(e) by the Company if it is not in material breach of its
representations, warranties, covenants and agreements under this Agreement and
there has been a breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of New Focus and (i) New Focus is not
using its reasonable efforts to cure such breach, or has not cured such breach
within thirty (30) days, after notice of such breach to New Focus (provided,
however, that no cure period shall be required for a breach which by its nature
cannot be cured), and (ii) as a result of such breach any of the conditions set
forth in Section 6.1 or Section 6.2, as the case may be, would not be satisfied
as of the Closing Date;
(f) by New Focus, if this Agreement shall not have been approved and
adopted by the requisite votes or consents, as applicable, of the Company's
shareholders in accordance with Delaware Law at any meeting (or any adjournment
thereof) convened for the purpose of taking a vote with respect to the Merger
or, in any solicitation of the Company Shareholder written consent with respect
to the Merger, within twenty (20) days after the record date established for
determining the shareholders of the Company entitled to consent;
(g) by New Focus, if the status of any of the individuals listed on
Schedule 6.3(i) as employees of the Company is altered without the prior written
consent of New Focus, except for reason of death or disability;
(h) by New Focus, if, at any time, less than ninety percent (90%) of
the Company's engineering and research and development employees of the Company
employed as of the date of this Agreement (exclusive of those listed on Schedule
6.3(i)) shall cease to be employed by the Company at the Closing; or
(i) by New Focus, if, at any time, the Company does not manufacture
and ship at least 15 coupler machines each month.
8.2 Effect of Termination. In the event of a valid termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of New Focus or the
Company, or their respective officers, directors or shareholders or Affiliates
or Associates; provided, however, that each party shall remain liable for any
willful breaches of this Agreement prior to its termination; and provided
further that, the provisions of Sections 5.4, 5.5 and 8.2, Article 9 (exclusive
of Section 9.3) and the applicable definitions set forth in Article 10 shall
remain in full force and effect and survive any termination of this Agreement.
8.3 Amendment. Except as is otherwise required by applicable law after the
shareholders of the Company approve the Merger and this Agreement, this
Agreement may be amended by the parties hereto at any time by execution of an
instrument in writing signed on behalf of each of the parties hereto; provided,
however, that the consent of the Shareholder Agent and the Escrow Agent
-54-
60
shall not be required in connection with any amendment to this Agreement that
does not affect the rights and obligations of the Shareholder Agent or the
Escrow Agent, as applicable.
8.4 Extension; Waiver. At any time prior to the Effective Time, New Focus
and the Company may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations of the other party hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (c) waive compliance
with any of the agreements, covenants or conditions for the benefit of such
party contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 Notices. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission against
facsimile confirmation or mailed by internationally recognized overnight courier
prepaid, to the parties at the following addresses or facsimile numbers:
If to New Focus to:
New Focus, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇▇▇▇▇▇▇ No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Chief Financial Officer
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.:(▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to the Company to:
GLOBE Y. TECHNOLOGY, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.:
Attn: President and Chief Executive Officer
-55-
61
If to the Shareholder Agent:
Nai-Yu Pai
▇▇▇▇ ▇▇▇▇▇ ▇▇▇, #▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Escrow Agent:
Cupertino National Bank, d.b.a Greater Bay Trust Company
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, V.P. and Senior Trust Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices, requests and other communications will (a) if delivered
personally to the address as provided in this Section 9.1, be deemed given upon
delivery, (b) if delivered by facsimile transmission to the facsimile number as
provided for in this Section 9.1, be deemed given upon facsimile confirmation,
and (c) if delivered by overnight courier to the address as provided in this
Section 9.1, be deemed given on the earlier of the first Business Day following
the date sent by such overnight courier or upon receipt (in each case regardless
of whether such notice, request or other communication is received by any other
Person to whom a copy of such notice is to be delivered pursuant to this Section
9.1). Any party from time to time may change its address, facsimile number or
other information for the purpose of notices to that party by giving notice
specifying such change to the other party hereto.
9.2 Entire Agreement. This Agreement and the Exhibits and Schedules hereto,
including the Company Disclosure Schedule and the New Focus Disclosure Schedule,
constitute the entire Agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
including, without limitation, the Exclusivity and Confidentiality Letter
Agreement between the parties dated September 15, 2000, as amended October 3,
2000.
9.3 Post-Closing Cooperation. At any time or from time to time after the
Closing, the parties shall execute and deliver to the other party such other
documents and instruments, provide such materials and information and take such
other actions as the other party may reasonably request to consummate the
transactions contemplated by this Agreement and otherwise to cause the other
party to fulfill its obligations under this Agreement and the transactions
contemplated hereby.
9.4 Waiver. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
-56-
62
9.5 Third Party Beneficiaries. The terms and provisions of this Agreement
are intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and it is not the intention of the parties to
confer third-party beneficiary rights, and this Agreement does not confer any
such rights, upon any other Person other than any Person entitled to indemnity
under Article 7.
9.6 No Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any party without the prior written consent of the other party and
any attempt to do so will be void. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
9.7 Headings. The headings and table of contents used in this Agreement
have been inserted for convenience of reference only and do not define or limit
the provisions hereof.
9.8 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
9.9 Governing Law. This Agreement, any other merger agreements, the
Ancillary Agreements and any other closing documents shall be governed by and
construed in accordance with the domestic laws of the State of California,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California; provided, however, that the Merger shall be governed by Delaware
Law.
9.10 WAIVER OF TRIAL BY JURY. IN ANY ACTION OR PROCEEDING ARISING HEREFROM,
THE PARTIES HERETO CONSENT TO TRIAL WITHOUT A JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER OR THEIR SUCCESSORS
IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT,
REGARDLESS OF THE FORM OF ACTION OR PROCEEDING.
9.11 Construction. The parties hereto agree that this Agreement is the
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly
-57-
63
or in favor of or against any party hereto but rather shall be given a fair and
reasonable construction without regard to the rule of contra proferentem.
9.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. The Escrow Agent may
execute this Agreement following the date hereof and prior to the Closing, and
such later execution, if so executed after the date hereof, shall not affect the
binding nature of this Agreement as of the date hereof between the other
signatories hereto.
9.13 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
Except where this Agreement specifically provides for arbitration, it is agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
ARTICLE 10
DEFINITIONS
10.1 Definitions. As used in this Agreement, the following defined terms
shall have the meanings indicated below:
"Actions or Proceedings" means any action, suit, complaint, petition,
investigation, proceeding, arbitration, litigation or Governmental or Regulatory
Authority investigation, audit or other proceeding, whether civil or criminal,
in law or in equity, or before any arbitrator or Governmental Regulatory
Authority.
"Affiliate" means, as applied to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common control with,
that Person, (b) any other Person that owns or controls ten percent (10%) or
more of any class of equity securities (including any equity securities issuable
upon the exercise of any option or convertible security) of that Person or any
of its Affiliates, or (c) as to a corporation, each director and officer
thereof, and as to a partnership, each general partner thereof, and as to a
limited liability company, each managing member or similarly authorized person
thereof (including officers), and as to any other entity, each Person exercising
similar authority to those of a director or officer of a corporation. For the
purposes of this definition, "control" (including with correlative meanings, the
terms "controlling", "controlled by", and "under common control with") as
applied to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through ownership of voting securities or by contract or
otherwise.
"Agreement" means this Merger Agreement and Plan of Reorganization,
including (unless the context otherwise requires) the Exhibits and the
Disclosure Schedules and the certificates and instruments delivered in
connection herewith, or incorporated by reference, as the same may be amended or
supplemented from time to time in accordance with the terms hereof.
-58-
64
"Agreement of Merger" has the meaning ascribed to it in Section 1.2.
"Ancillary Agreements" has the meaning ascribed to it in Section 2.2.
"Approval" means any approval, authorization, consent, permit,
qualification or registration, or any waiver of any of the foregoing, required
to be obtained from or made with, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental or
Regulatory Authority or any other Person.
"Assets and Properties" of any Person means all assets and properties
of every kind, nature, character and description (whether real, personal or
mixed, whether tangible or intangible, whether absolute, accrued, contingent,
fixed or otherwise and wherever situated), including the goodwill related
thereto, operated, owned, licensed or leased by such Person, including cash,
cash equivalents, Investment Assets, accounts and notes receivable, chattel
paper, documents, instruments, general intangibles, real estate, equipment,
inventory, goods and Intellectual Property.
"Associate" means, with respect to any Person, any corporation or
other business organization of which such Person is an officer or partner or is
the beneficial owner, directly or indirectly, of ten percent (10%) or more of
any class of equity securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person serves as a trustee
or in a similar capacity and any relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person.
"Authorized Officer" means one of the following officers: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, President and Chief Executive Officer; ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Chief
Financial Officer, Dr. ▇▇▇▇▇▇▇ ▇▇▇, Chief Technical Officer and Vice President,
Engineering, Telecom; or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Chief Operating Officer.
"Books and Records" means all files, documents, instruments, papers,
books and records relating to the Business or Condition of the Company,
including financial statements, internal reports, Tax Returns and related work
papers and letters from accountants, budgets, pricing guidelines, ledgers,
journals, deeds, title policies, minute books, stock certificates and books,
stock transfer ledgers, Contracts, Licenses, customer lists, computer files and
programs (including data processing files and records), retrieval programs,
operating data and plans and environmental studies and plans.
"Business Combination" means, with respect to any Person, (a) any
merger, consolidation, share exchange reorganization or other business
combination transaction to which such Person is a party, (b) any sale, dividend,
split or other disposition of any capital stock or other equity interests of
such Person (except for issuances of common stock upon conversion of preferred
stock outstanding on the date hereof or the exercise of options or warrants
outstanding on the date hereof or issued in accordance with the covenants of
this Agreement), (c) any tender offer (including a self tender), exchange offer,
recapitalization, restructuring, liquidation, dissolution or similar or
extraordinary transaction, (d) any sale, dividend or other disposition of all or
a material or significant portion of the Assets and Properties of such Person
(including by way of exclusive license or joint
-59-
65
venture formation) or (e) the entering into of any agreement or understanding,
the granting of any rights or options, or the acquiescence of such Person, with
respect to any of the foregoing.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of California are authorized or obligated to
close.
"Business or Condition of New Focus" means the business, condition
(financial or otherwise), results of operations or Assets and Properties of the
New Focus and its Subsidiaries, considered in the aggregate.
"Business or Condition of the Company" means the business, condition
(financial or otherwise), results of operations, or Assets and Properties of the
Company and each of its Subsidiaries, considered in the aggregate.
"California Code" means the California Corporations Code and all
amendments and additions thereto.
"California Law" means the substantive laws of the State of
California.
"California Permit" has the meaning ascribed to it in Section 1.11.
"Certificate" has the meaning ascribed to it in Section 1.9(b).
"Certificate of Merger" has the meaning ascribed to it in Section 1.2.
"Certificate of Non-Employment" has the meaning ascribed to it in
Section 7.2(a).
"Closing" means the closing of the transactions contemplated by
Section 1.2.
"Closing Date" has the meaning ascribed to it in Section 1.2.
"Closing Price" means the average per share closing sales price of New
Focus Common Stock as traded on the NNM and reported by The Wall Street Journal
for the ten (10) consecutive market trading days commencing on the eleventh
(11th) market trading day prior to the Closing Date and ending on (inclusive)
the second (2nd) market trading day prior to the Closing Date; provided,
however, that with respect to claims pursuant to Section 7.2(g), the Closing
Price shall mean the closing sales price of New Focus Common Stock as traded on
the NNM and reported by The Wall Street Journal on the date that is five days
prior to the Closing Date.
"Company" has the meaning ascribed to it in the forepart of this
Agreement.
"Company Affiliates" has the meaning ascribed to it in Section 5.10.
"Company Common Stock" has the meaning ascribed to it in Section
2.3(a).
-60-
66
"Company Disclosure Schedule" means the schedules delivered to New
Focus by or on behalf of the Company, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein in connection with the representations and warranties made by the
Company in Article 2 or otherwise.
"Company Financials" means the consolidated balance sheet of the
Company, prepared in accordance GAAP and applied on a consistent basis, as of
the nine-month period ended September 30, 2000, and the related audited
statement of income, changes in shareholders' equity and cash flows for the
nine-month period ended September 30, 2000, prepared in accordance GAAP and
applied on a consistent basis, and, in each case, including the notes thereto
together with the notes thereto and the unqualified report of the Company's
independent accountants with respect thereto.
"Company Intellectual Property" shall mean any Intellectual Property
that (a) is owned by the Company; (b) is licensed to the Company; (c) was
developed or created by or for the Company; or (d) is used in or necessary for
the conduct of the business of the Company as presently or heretofore conducted
or as intended to be used in or necessary for the conduct of the business of the
Company, including (i) Company Intellectual Property created by the Founders
related to the Company's business including such Intellectual Property created
by the Company's founders prior to the Company's incorporation, which was not
created for or on behalf of former employers, and (ii) all Company Intellectual
Property created by employees and consultants which was created for or on behalf
of the Company.
"Company Owned Intellectual Property" shall mean the Company
Intellectual Property owned by the Company.
"Company Registered Intellectual Property" means all Registered
Intellectual Property owned by, filed in the name of, assigned to or applied for
by, the Company.
"Company Shareholder" shall mean ▇▇▇▇▇▇ ▇▇▇, the sole shareholder of
outstanding shares of Company Common Stock.
"Company Shareholder Action" has the meaning ascribed to it in Section
5.2.
"Competing Proposed Transaction" has the meaning ascribed to it in
Section 4.2.
"Contract" means any contract, agreement or other business arrangement
(whether oral or written) including:
(i) any distributor, sales, advertising, agency or
manufacturer's representative contract;
(ii) any continuing contract for the purchase of materials,
supplies, equipment or services involving in the case of any such contact more
than fifteen thousand dollars ($15,000) over the life of the contract;
-61-
67
(iii) any contract that expires or may be renewed at the option
of any person other than the Company so as to expire more than one (1) year
after the date of this Agreement;
(iv) any trust indenture, mortgage, promissory note, loan
agreement or other contract for the borrowing of money, any currency exchange,
commodities or other hedging arrangement or any leasing transaction of the type
required to be capitalized in accordance with generally accepted accounting
principles;
(v) any contract for capital expenditures in excess of twenty
thousand dollars ($20,000) in the aggregate;
(vi) any contract limiting the freedom of the Company to engage
in any line of business or to compete with any other Person or any
confidentiality, secrecy or non-disclosure contract;
(vii) any contract pursuant to which the Company is a lessor of
any machinery, equipment, motor vehicles, office furniture, fixtures or other
personal property;
(viii) any contract with any person with whom the Company does
not deal at arm's-length;
(ix) any contract that is not terminable by the Company upon
thirty (30) days (or less) notice by the Company without penalty or obligation
to make payments based on such termination and which (i) requires payments by
the Company in excess of twenty thousand dollars ($20,000) (either alone or
pursuant to a Series of related contracts), or (ii) requires the Company to
provide services to any Person after the Closing; or
(x) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with respect to, the
obligations, liabilities (whether accrued, absolute, contingent or otherwise) or
indebtedness of any other Person.
"Delaware Law" means the Delaware General Corporation Law and all
amendments and additions thereto.
"Escrow Agent" means an institution acceptable to New Focus and the
Shareholder Agent, which institution shall become party to this agreement prior
to the Effective Time by executing the signature page hereto without any further
action by the parties hereto.
"Disclosure Schedules" means the Company Disclosure Schedule and the
New Focus Disclosure Schedule.
"Effective Time" has the meaning ascribed to it in Section 1.2.
-62-
68
"Employment and Non-Competition Agreement" has the meaning set forth
in Recital E to this Agreement.
"Employment and Non-Solicitation Agreement" has the meaning ascribed
to it in Recital F to this Agreement.
"Environment" means air, surface water, ground water, or land,
including land surface or subsurface, and any receptors such as persons,
wildlife, fish, biota or other natural resources.
"Environmental Clean-up Site" means any location which is listed or
proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on any
similar state or regional list of sites relating to investigation or cleanup, or
which is the subject of any pending or threatened action, suit, proceeding, or
investigation related to or arising from any location at which there has been a
Release or threatened or suspected Release of a Hazardous Material.
"Environmental Law" means any federal, state, local or foreign
environmental, health and safety or other Law relating to of Hazardous
Materials, including (in the U.S.) the Comprehensive, Environmental Response
Compensation and Liability Act, the Clean Air Act, the Federal Water Pollution
Control Act, the Solid Waste Disposal Act, the Federal Insecticide, Fungicide
and Rodenticide Act, and the California Safe Drinking Water and Toxic
Enforcement Act.
"Environmental Permit" means any permit, license, approval, consent or
authorization required under or in connection with any Environmental Law and
includes any and all orders, consent orders or binding agreements issued by or
entered into with a Governmental or Regulatory Authority.
"Equity Equivalents" means securities (including Options to purchase
any shares of Company Common Stock) which, by their terms, are or may be
exercisable, convertible or exchangeable for or into common stock, preferred
stock or other securities at the election of the holder thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" has the meaning ascribed to it in the definition of
"Plan" in this Section 10.
"Escrow Amount" means the General Escrow Amount and the Special Escrow
Amount, collectively.
"Escrow Funds" means the General Escrow Fund and the Special Escrow
Fund, collectively.
-63-
69
"Escrow Period" means the applicable General Escrow Period or Special
Escrow Period.
"Estimated Third Party Expenses" has the meaning ascribed to it in
Section 2.24.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder.
"Exchange Agent" means U.S. Stock Transfer Corporation.
"Exchange Ratio" means the quotient obtained by dividing (a) the Total
Merger Consideration by (b) the number of outstanding shares of Company Common
Stock.
"Expiration Date" means the last date of the General Escrow Period or
the Special Escrow Period, as applicable.
"Fairness Hearing" has the meaning ascribed to it in Section 1.11.
"Financial Statement Date" means September 30, 2000.
"Founder" means ▇▇▇▇▇▇ ▇▇▇.
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time.
"General Escrow Amount" means the number of shares of New Focus Common
Stock obtained by multiplying (a) the aggregate number of shares of New Focus
Common Stock issuable by the New Focus at the Effective Time to the Company
Shareholder in accordance with the Section 1.6(a) by (b) 0.15. The shares
deposited with the Escrow Agent shall not be subject to any repurchase rights.
"General Escrow Fund" has the meaning ascribed to it in Section
7.2(a).
"General Escrow Period" has the meaning ascribed to it in Section
7.2(c).
"General Settlement Amount" has the meaning ascribed to it in Section
7.2(c)
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, bureau, board, commission, department, official
or other instrumentality of the United States, any foreign country or any
domestic or foreign state, county, city or other political subdivision, and
shall include any stock exchange, quotation service and the National Association
of Securities Dealers.
"Hazardous Material" means (a) any chemical, material, substance or
waste including, containing or constituting petroleum or petroleum products,
solvents (including chlorinated solvents), nuclear or radioactive materials,
asbestos in any form that is or could become
-64-
70
friable, radon, lead-based paint, urea formaldehyde foam insulation or
polychlorinated biphenyls, (b) any chemicals, materials, substances or wastes
which are now defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants"
or words of similar import under any Environmental Law; or (c) any other
chemical, material, substance or waste which is regulated by any Governmental or
Regulatory Authority or which could constitute a nuisance.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended.
"Income Tax" means (a) any income, alternative or add-on minimum tax,
gross income, gross receipts, franchise, profits, including estimated taxes
relating to any of the foregoing, or other similar tax or other like assessment
or charge of similar kind whatsoever, excluding any Other Tax, together with any
interest and any penalty, addition to tax or additional amount imposed by any
Taxing Authority responsible for the imposition of any such Tax (domestic or
foreign); or (b) any liability of a Person for the payment of any taxes,
interest, penalty, addition to tax or like additional amount resulting from the
application of Treas. Reg. ss.1.1502-6 or comparable provisions of any Taxing
Authority in respect of a Tax Return of a relevant group or any Contract.
"Indebtedness" of any Person means all obligations of such Person (a)
for borrowed money, (b) evidenced by notes, bonds, debentures or similar
instruments, (c) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(d) under capital leases and (e) in the nature of guarantees of the obligations
described in clauses (a) through (d) above of any other Person.
"Indemnitees" shall have the meaning ascribed to it in Section 7.2(a).
"Intellectual Property" means all trademarks and trademark rights,
trade names and trade name rights, service marks and service ▇▇▇▇ rights,
service names and service name rights, patents and patent rights, utility models
and utility model rights, copyrights, mask work rights, brand names, trade
dress, product designs, product packaging, business and product names, logos,
slogans, rights of publicity, trade secrets, inventions (whether patentable or
not), invention disclosures, improvements, processes, formulae, industrial
models, processes, designs, specifications, technology, methodologies, computer
software (including all source code and object code), firmware, development
tools, flow charts, annotations, all Web addresses, sites and domain names, all
data bases and data collections and all rights therein, any other confidential
and proprietary right or information, whether or not subject to statutory
registration, and all related technical information, manufacturing, engineering
and technical drawings, know-how and all pending applications for and
registrations of patents, utility models, trademarks, service marks and
copyrights, and the right to ▇▇▇ for past infringement, if any, in connection
with any of the foregoing, and all documents, disks, records, files and other
media on which any of the foregoing is stored.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
-65-
71
"Investment Assets" means all debentures, notes and other evidences of
Indebtedness, stocks, securities (including rights to purchase and securities
convertible into or exchangeable for other securities), interests in joint
ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Company.
"IRS" means the United States Internal Revenue Service or any
successor entity.
"IT" has the meaning ascribed to it in Section 5.16.
"Law" or "Laws" means any law, statute, order, decree, consent decree,
judgment, rule, regulation, ordinance or other pronouncement having the effect
of law whether in the United States, any foreign country, or any domestic or
foreign state, county, city or other political subdivision or of any
Governmental or Regulatory Authority.
"Lease Documents" has the meaning ascribed to it in Section 2.15(d).
"Leased Real Property(ies)" has the meaning ascribed to it in Section
2.15(a).
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person, whether absolute, accrued, contingent (or based upon
any contingency), known or unknown, fixed or otherwise, or whether due or to
become due.
"License" means any Contract that grants a Person the right to use or
otherwise enjoy the benefits of any Intellectual Property (including any
covenants not to ▇▇▇ with respect to any Intellectual Property).
"Liens" means any mortgage, pledge, assessment, security interest,
lease, lien, easement, license, covenant, condition, restriction, adverse claim,
levy, charge, option, equity, adverse claim or restriction or other encumbrance
of any kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing, except for any restrictions on transfer
generally arising under any applicable federal or state securities law.
"Loss(es)" means any and all damages, fines, fees, Taxes, penalties,
deficiencies, losses (including lost profits or diminution in value) and
expenses, including interest, reasonable expenses of investigation, court costs,
reasonable fees and expenses of attorneys, accountants and other experts or
other expenses of litigation or other proceedings or of any claim, default or
assessment (such fees and expenses to include all fees and expenses, including
fees and expenses of attorneys, incurred in connection with (a) the
investigation or defense of any Third Party Claims or (b) asserting or disputing
any rights under this Agreement against any party hereto or otherwise), net of
any insurance proceeds actually received (without any adverse effect on the
premiums paid for such insurance) or proceeds received by virtue of third party
indemnification.
"Material Adverse Effect" means any change, event or effect that is
materially adverse to the business, assets (including intangible assets),
condition (financial or otherwise), results of operations or capitalization of
the Company or New Focus, as applicable; provided,
-66-
72
however, that any change in the per share sales price of New Focus Common Stock
as traded on the NMM shall in no event constitute a Material Adverse Effect.
"Merger" has the meaning ascribed to it in Recital A to this
Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
"New Focus" has the meaning ascribed to it in the forepart of this
Agreement.
"New Focus Common Stock" has the meaning ascribed to it in Recital C
to this Agreement.
"New Focus Disclosure Schedule" has the meaning ascribed to it in the
forepart of Article 3.
"New Focus Financial Statements" has the meaning ascribed to it in
Section 3.4.
"New Focus Indemnitees" has the meaning ascribed to it in Section
7.2(b).
"New Shares" has the meaning ascribed to it in Section 7.2(d)(ii).
"NNM" means the distinct tier of The Nasdaq Stock Market referred to
as the Nasdaq National Market.
"Officer's Certificate" has the meaning ascribed to it in Section
7.2(e)(i).
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract (other
than the Company Preferred Stock) that gives the right to (a) purchase or
otherwise receive or be issued any shares of capital stock or other equity
interests of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock or other equity
interests of such Person or (b) receive any benefits or rights similar to any
rights enjoyed by or accruing to the holder of shares of capital stock or other
equity interests of such Person, including any rights to participate in the
equity, income or election of directors or officers of such Person.
"Order" means any writ, judgment, decree, injunction or similar order
of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Other Tax" means any sales, use, ad valorem, business license,
withholding, payroll, employment, excise, stamp, transfer, recording,
occupation, premium, property, value added, custom duty, severance, windfall
profit or license tax, social security contribution, governmental fee or other
similar assessment or charge, together with any interest and any penalty,
addition to tax or additional amount imposed by any Taxing Authority responsible
for the imposition of any such tax (domestic or foreign).
"Outside Date" shall have the meaning ascribed to it in Section
8.1(b).
-67-
73
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA.
"Permit" means any license, permit, franchise or authorization.
"Permit Application" has the meaning ascribed to it in Section 2.29
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company or partnership, proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.
"Plan" mean (a) each of the "employee benefit plans" (as such term is
defined in Section 3(3) of ERISA, of which any of the Company, any Subsidiary,
or any member of the same controlled group of businesses as the Company or any
Subsidiary within the meaning of Section 4001(a)(14) of ERISA (an "ERISA
Affiliate") is or ever was a sponsor or participating employer or as to which
the Company or any Subsidiary or any of their ERISA Affiliates makes
contributions or is required to make contributions, and (b) any similar
employment, severance or other arrangement or policy of any of the Company any
Subsidiary or any of their ERISA Affiliates (whether written or oral) providing
for health, life, vision or dental insurance coverage (including self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits or retirement benefits, fringe
benefits, or for profit sharing, deferred compensation, bonuses, stock options,
stock appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits.
"Product Designs" shall mean the designs developed by the Company for
those proposed products of the Company, in the form in which such designs exist
as of the Closing, and excluding any corrections, modifications, enhancements
and derivatives made thereto following the Closing.
"PTO" means the United States Patent and Trademark Office.
"Registered Intellectual Property" shall mean all United States,
international and foreign: (a) patents and patent applications (including
provisional applications); (b) registered trademarks and servicemarks,
applications to register trademarks and servicemarks, intent-to-use
applications, other registrations or applications to trademarks or servicemarks,
or trademarks or servicemarks in which common law rights are owned or otherwise
controlled; (c) registered copyrights and applications for copyright
registration; (d) any mask work registrations and applications to register mask
works; and (e) any other Intellectual Property that is the subject of an
application, certificate, filing, registration or other document issued by,
filed with, or recorded by, any state, government or other public legal
authority.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of a
Hazardous Material into the Environment.
"Representatives" has the meaning ascribed to it in Section 2.30.
-68-
74
"Scheme" has the meaning ascribed to it in Section 2.14(e).
"SEC" means the Securities and Exchange Commission or any successor
entity.
"SEC Documents" means, with respect to any Person, each report,
schedule, form, statement or other document filed or required to be filed with
the SEC by such Person pursuant to Section 13(a) of the Exchange Act.
"Securities Act" has the meaning ascribed to it in Section 1.11.
"Site" means any of the real properties currently or previously owned,
leased, occupied, used or operated by the Company, any predecessors of the
Company, or any entities previously owned by the Company, including all soil,
subsoil, surface waters and groundwater.
"Shareholder Agent" has the meaning ascribed to it in Section
7.2(j)(i).
"Shareholder Certificate" has the meaning ascribed to it in Section
5.1(b).
"Software Code" means the code to Company's proprietary software used
in the Company's Business.
"Special Escrow Amount" means the number of shares of New Focus Common
Stock obtained by multiplying (a) the aggregate number of shares of New Focus
Common Stock issuable by the New Focus at the Effective Time to the Company
Shareholder in accordance with the Section 1.6(a) by (b) 0.05. The shares
deposited with the Escrow Agent shall not be subject to any repurchase rights.
"Special Escrow Fund" shall have the meaning ascribed to it in Section
7.2(b).
"Special Escrow Period" means the period beginning on the Effective
Date and ending upon the earlier to occur of (i) the termination of the Company
Shareholder's status as an employee of New Focus or its Subsidiary or (ii) 11:59
p.m., Pacific Time on the date that is two years from the Closing Date.
"Subsidiary" means any Person in which the Company or New Focus, as
the context requires, directly or indirectly through Subsidiaries or otherwise,
beneficially owns at least fifty percent (50%) of either the equity interest in,
or the voting control of, such Person, whether or not existing on the date
hereof.
"Support Agreement" has the meaning ascribed to it in Recital D to
this Agreement.
"Surviving Corporation" has the meaning ascribed to it in Section 1.1.
"Takeover Statute" means a "fair price," "moratorium," "control share
acquisition" or other similar antitakeover statute or regulation enacted under
state or federal laws in the United States, including Section 203 of the
Delaware Law.
-69-
75
"Tax" or "Taxes" means Income Taxes and/or Other Taxes, as the context
requires.
"Tax Laws" means the Internal Revenue Code, federal, state, county,
local or foreign laws relating to Taxes and any regulations or official
administrative pronouncements released thereunder.
"Tax Returns" means any return, report, information return, schedule,
certificate, statement or other document (including any related or supporting
information) filed or required to be filed with, or, where none is required to
be filed with a Taxing Authority, the statement or other document issued by, a
Taxing Authority in connection with any Tax.
"Taxing Authority" means any governmental agency, board, bureau, body,
department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Third Party Claim" has the meaning ascribed to it in Section 7.2(i).
"Third Party Expenses" has the meaning ascribed to it in Section 5.5.
"Total Merger Consideration" shall mean the number of shares of New
Focus Common Stock determined by dividing (i) $50,000,000 by (ii) the Closing
Price.
10.2 Construction.
(a) Unless the context of this Agreement otherwise requires, (i) words
of any gender include each other gender and the neuter, (ii) words using the
singular or plural number also include the plural or singular number,
respectively, (iii) the terms "hereof," "herein," "hereby" and derivative or
similar words refer to this entire Agreement as a whole and not to any
particular Article, Section or other subdivision, (iv) the terms "Article" or
"Section" or other subdivision refer to the specified Article, Section or other
subdivision of the body of this Agreement, (v) the phrases "ordinary course of
business" and "ordinary course of business consistent with past practice" refer
to the business and practice of the Company, (vi) the words "include,"
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation," and (vii) when a reference is made in this Agreement to Exhibits,
such reference shall be to an Exhibit to this Agreement unless otherwise
indicated. All accounting terms used herein and not expressly defined herein
shall have the meanings given to them under GAAP. When used herein, the terms
"party" or "parties" refer to New Focus, on the one hand, and the Company, on
the other, and the terms "third party" or "third parties" refers to Persons
other than New Focus or the Company.
(b) When used herein, the phrase "to the knowledge of" any Person, "to
the best knowledge of" any Person, "known to" any Person or any similar phrase,
means (i) with respect to any Person who is an individual, the actual knowledge
of such Person, (ii) with respect to any other Person, the actual knowledge of
the directors and officers of such Person and other individuals that have a
similar position or have similar powers and duties as the officers and directors
of such Person, and (iii) in the case of each of (i) and (ii), the knowledge of
facts that such individuals should have
-70-
76
after due inquiry. For this purpose, "due inquiry" with respect to any matter
means inquiry of and consultations with (A) the directors and officers of such
Person and other individuals that have a similar position or have similar powers
and duties as such officers and directors, and (B) with respect to the Company,
the Company Shareholder and the advisors to the Company (who are individuals),
including outside auditors and legal counsel who have been actively involved in
representing the Company.
[SIGNATURE PAGE FOLLOWS]
-71-
77
IN WITNESS WHEREOF, New Focus and the Company, and with respect to Section
1.9, Article 7 and Article 9 only, the Shareholder Agent and the Escrow Agent,
have caused this Agreement to be signed by their duly authorized
representatives, all as of the date first written above.
GLOBE Y. TECHNOLOGY, INC. NEW FOCUS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇ By:
--------------------------- ---------------------------
Title: President Title:
------------------------- ------------------------
ESCROW AGENT NECTAR ACQUISITION CORPORATION
CUPERTINO NATIONAL BANK,
D.B.A. GREATER BAY TRUST COMPANY By:
---------------------------
By: Title:
--------------------------- -----------------------
Title:
-------------------------
SHAREHOLDER AGENT COMPANY SHAREHOLDER
By: /s/ NAI-YU-PAI /s/ ▇▇▇▇▇▇ ▇▇▇
--------------------------- ------------------------------
Nai-Yu Pai ▇▇▇▇▇▇ ▇▇▇
78
IN WITNESS WHEREOF, New Focus and the Company, and with respect to Section
1.9, Article 7 and Article 9 only, the Shareholder Agent and the Escrow Agent,
have caused this Agreement to be signed by their duly authorized
representatives, all as of the date first written above.
GLOBE Y. TECHNOLOGY, INC. NEW FOCUS, INC.
By: By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------- ---------------------------
Title: Title: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------ President
------------------------
ESCROW AGENT NECTAR ACQUISITION CORPORATION
CUPERTINO NATIONAL BANK,
D.B.A. GREATER BAY TRUST COMPANY By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
By: Title: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------- President
Title: ------------------------
------------------------
SHAREHOLDER AGENT COMPANY SHAREHOLDER
By:
--------------------------- ------------------------------
Nai-Yu Pai ▇▇▇▇▇▇ ▇▇▇
79
IN WITNESS WHEREOF, New Focus and the Company, and with respect to Section
1.9, Article 7 and Article 9 only, the Shareholder Agent and the Escrow Agent,
have caused this Agreement to be signed by their duly authorized
representatives, all as of the date first written above.
GLOBE Y. TECHNOLOGY, INC. NEW FOCUS, INC.
By: By:
--------------------------- ---------------------------
Title: Title:
------------------------- ------------------------
ESCROW AGENT NECTAR ACQUISITION CORPORATION
CUPERTINO NATIONAL BANK,
D.B.A. GREATER BAY TRUST COMPANY By:
---------------------------
By: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Title:
--------------------------- -----------------------
Title: VICE PRESIDENT AND
SENIOR TRUST OFFICER
-------------------------
SHAREHOLDER AGENT COMPANY SHAREHOLDER
By:
--------------------------- ------------------------------
Nai-Yu Pai ▇▇▇▇▇▇ ▇▇▇
80
SCHEDULE 6.3(i) EMPLOYEES AND CONSULTANTS
Stone Xie
▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇
Jinjun ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ Sun
81
SCHEDULE 6.3(j) EMPLOYEES AND CONSULTANTS
Stone Xie
▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇
Jinjun ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ Sun