EXHIBIT 2.1
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AGREEMENT AND PLAN OF REORGANIZATION
among
FINISAR CORPORATION,
a Delaware corporation
("Finisar"),
GEMSTONE ACQUISITION CORP.,
a Delaware corporation and wholly-owned
subsidiary of Finisar,
SENSORS UNLIMITED, INC.,
a New Jersey corporation
("Sensors"),
and
CERTAIN PRINCIPAL SHAREHOLDERS
of
Sensors
Dated August 16, 2000
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TABLE OF CONTENTS
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ARTICLE I THE MERGER....................................................................1
Section 1.1 Effective Time of the Merger..................................1
Section 1.2 Closing.......................................................2
Section 1.3 Effects of the Merger.........................................2
Section 1.4 Directors and Officers........................................2
ARTICLE II CONVERSION OF SECURITIES.....................................................3
Section 2.1 Certain Definitions...........................................3
Section 2.2 Conversion of Capital Stock...................................4
Section 2.3 Criteria For Determining Achievement of Milestones............5
Section 2.4 Exchange of Certificates......................................5
Section 2.5 Escrow........................................................7
Section 2.6 Contingent Shares.............................................8
Section 2.7 Dissenters' Rights............................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SENSORS...................................9
Section 3.1 Organization, Standing and Power..............................9
Section 3.2 Sensors Capital Structure.....................................9
Section 3.3 Authority; Required Filings and Consents.....................10
Section 3.4 Financial Statements.........................................11
Section 3.5 Absence of Undisclosed Liabilities...........................11
Section 3.6 Accounts Receivable..........................................11
Section 3.7 Inventories..................................................12
Section 3.8 Absence of Certain Changes or Events.........................12
Section 3.9 Taxes........................................................13
Section 3.10 Tangible Assets and Real Property............................15
Section 3.11 Intellectual Property........................................16
Section 3.12 Bank Accounts................................................18
Section 3.13 Contracts....................................................18
Section 3.14 Labor Difficulties...........................................19
Section 3.15 Trade Regulation.............................................19
Section 3.16 Environmental Matters........................................19
Section 3.17 Employee Benefit Plans.......................................20
Section 3.18 Compliance with Laws.........................................21
Section 3.19 Employees and Consultants....................................21
Section 3.20 Litigation...................................................21
Section 3.21 Restrictions on Business Activities..........................21
Section 3.22 Governmental Authorization...................................21
Section 3.23 Insurance....................................................21
Section 3.24 Interested Party Transactions................................22
Section 3.25 No Existing Discussions......................................22
Section 3.26 Real Property Holding Corporation............................22
Section 3.27 Corporate Documents..........................................22
Section 3.28 No Misrepresentation.........................................22
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TABLE OF CONTENTS
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF FINISAR AND SUB...........................23
Section 4.1 Organization.................................................23
Section 4.2 Finisar Capital Structure....................................23
Section 4.3 Authority; No Conflict; Required Filings and Consents........24
Section 4.4 SEC Filings; Financial Statements............................25
Section 4.5 Absence of Undisclosed Liabilities...........................25
Section 4.7 Litigation...................................................25
Section 4.8 No Misrepresentation.........................................25
ARTICLE V CONDUCT OF BUSINESS..........................................................26
Section 5.1 Covenants of Sensors.........................................26
Section 5.2 Covenants of Finisar.........................................28
Section 5.3 Cooperation..................................................28
ARTICLE VI ADDITIONAL AGREEMENTS.......................................................29
Section 6.1 No Solicitation..............................................29
Section 6.2 Consents.....................................................30
Section 6.3 Access to Information........................................30
Section 6.4 Legal Conditions to Merger...................................30
Section 6.5 Public Disclosure............................................30
Section 6.6 Tax-Free Reorganization......................................30
Section 6.7 Nasdaq Quotation.............................................31
Section 6.8 Securities Law Matters.......................................31
Section 6.9 HSR Act......................................................33
Section 6.10 Employment Matters...........................................33
Section 6.11 Stock Options................................................33
Section 6.12 Employee Stock Purchase Plan.................................34
Section 6.13 Finisar Plans................................................35
Section 6.14 Employee Retention Pool......................................35
Section 6.15 Sensors 401(k) Plan..........................................35
Section 6.16 Brokers or Finders...........................................35
Section 6.17 Additional Agreements; Reasonable Efforts....................36
Section 6.18 Expenses.....................................................36
Section 6.19 Board of Directors...........................................36
ARTICLE VII CONDITIONS TO MERGER.......................................................36
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger...36
Section 7.2 Additional Conditions to Obligations of Finisar and Sub......37
Section 7.3 Additional Conditions to Obligations of Sensors..............39
ARTICLE VIII TERMINATION AND AMENDMENT.................................................40
Section 8.1 Termination..................................................40
Section 8.2 Effect of Termination........................................40
Section 8.3 Termination Fee..............................................40
Section 8.4 Amendment....................................................41
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Section 8.5 Extension; Waiver............................................41
ARTICLE IX ESCROW AND INDEMNIFICATION..................................................41
Section 9.1 Survival of Representations and Warranties...................41
Section 9.2 Indemnification by Principal Shareholders....................41
Section 9.3 Procedures for Indemnification...............................42
Section 9.4 Defense of Third Party Claims................................43
Section 9.5 Manner of Indemnification....................................43
Section 9.6 Appointment of Shareholders' Representative..................44
ARTICLE X GENERAL PROVISIONS...........................................................44
Section 10.1 Notices......................................................44
Section 10.2 Interpretation...............................................46
Section 10.3 Counterparts.................................................47
Section 10.4 Severability.................................................47
Section 10.5 Entire Agreement.............................................47
Section 10.6 Governing Law................................................47
Section 10.7 Assignment...................................................47
Section 10.8 Third Party Beneficiaries....................................47
EXHIBITS
Exhibit A Sensors Research and Development Plan
Exhibit B Form of Escrow Agreement
Exhibit C Form of Affiliate Agreement
Exhibit D-1 Form of Employment Agreement - ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Exhibit D-2 Form of Employment Agreement - Other Specified Employees
Exhibit E Form of Noncompetition Agreement
Exhibit F Form of Opinion of ▇▇▇▇▇▇▇▇ Ingersoll Professional Corporation
Exhibit G Form of Opinion of ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP
SCHEDULES
Schedule 1.4 Initial Directors and Officers of the Surviving Corporation
Schedule 2.6 Key Sensors Employees
Schedule 6.8(f) Sensors Affiliates
Schedule 6.10(b) Sensors Employees to be Offered Employment
Schedule 6.11(e) Schedule of New Finisar Options
Schedule 6.18 Estimated Sensors Transaction Expenses
Schedule 7.2(e) Schedule of Third Party Consents
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of August 16, 2000, by and among Finisar Corporation, a Delaware
corporation ("Finisar"), Gemstone Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of Finisar ("Sub"), Sensors Unlimited, Inc., a New
Jersey corporation ("Sensors"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇, certain key employees and shareholders of Sensors (the
"Principal Shareholders").
RECITALS
WHEREAS, the Boards of Directors of Finisar, Sub and Sensors deem it
advisable and in the best interests of each corporation and its respective
shareholders that Finisar and Sensors combine in order to advance the
long-term business interests of Finisar and Sensors;
WHEREAS, the combination of Finisar and Sensors shall be effected by the
terms of this Agreement through a transaction (the "Merger") in which Sub
will merge with and into Sensors, Sensors will become a wholly-owned
subsidiary of Finisar and the shareholders of Sensors will become
shareholders of Finisar; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 EFFECTIVE TIME OF THE MERGER. Subject to the provisions of
this Agreement, (i) an Agreement of Merger (the "Agreement of Merger") in
such form as is required by the relevant provisions of the New Jersey
Business Corporation Act (the "BCA") shall be duly prepared, executed and
acknowledged by Sub and by Sensors as the Surviving Corporation (as defined
in Section 1.3(a)) and delivered to the New Jersey Secretary of State for
filing, along with certificates of officers (the "Officers' Certificates") of
the Constituent Corporations (as defined in Section 1.3(a)), and (ii) a
certificate of merger (the "Certificate of Merger") in such form as is
required by the relevant provisions of the Delaware General Corporation Law
shall be duly prepared, executed and acknowledged by the Surviving
Corporation and delivered to the Delaware Secretary of State for filing, in
each case as soon as practicable on or after the Closing Date (as defined in
Section 1.2). The Merger shall become effective upon the filing of the
Agreement of Merger and the Officers' Certificates with the New Jersey
Secretary of State and the filing of the Certificate of Merger with the
Delaware Secretary of State (the "Effective Time").
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Section 1.2 CLOSING. The closing of the Merger (the "Closing") will take
place at 1:00 p.m., Pacific Time, on a date to be specified by Finisar and
Sensors (the "Closing Date"), which shall be no later than the second
business day after satisfaction of the latest to occur of the conditions set
forth in Sections 7.1, 7.2(b) (other than the delivery of the officers'
certificate referred to therein) and 7.3(b) (other than the delivery of the
officers' certificate referred to therein), provided that the other closing
conditions set forth in Article VII have been met or waived as provided in
Article VII at or prior to the Closing, at the offices of ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ &
Freidenrich LLP, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ unless another date
or place is agreed to in writing by Finisar and Sensors.
Section 1.3 EFFECTS OF THE MERGER.
(a) At the Effective Time (i) the separate existence of Sub shall
cease, and Sub shall be merged with and into Sensors (the "Surviving
Corporation"), (ii) the Certificate of Incorporation of Sensors shall be
amended so that Article Third of such Certificate of Incorporation shall read
as follows: "The total number of shares of all classes which this corporation
shall have authority to issue shall be 1,000, all of which shall consist of
Common Stock" and, as so amended, such Certificate of Incorporation shall be
the Certificate of Incorporation of the Surviving Corporation, and (iii) the
Bylaws of Sub as in effect immediately prior to the Effective Time shall be
the Bylaws of the Surviving Corporation. (Sub and Sensors are sometimes
referred to herein as the "Constituent Corporations.")
(b) At and after the Effective Time, the Surviving Corporation
shall possess all the rights, privileges, powers and franchises of a public
as well as of a private nature, and be subject to all the restrictions,
disabilities and duties of each of the Constituent Corporations; and all and
singular rights, privileges, powers and franchises of each of the Constituent
Corporations, and all property, real, personal and mixed, and all debts due
to either of the Constituent Corporations on whatever account, as well as for
stock subscriptions and all other things in action or belonging to each of
the Constituent Corporations, shall be vested in the Surviving Corporation,
and all property, rights, privileges, powers and franchises, and all and
every other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were of the Constituent Corporations, and the
title to any real estate vested by deed or otherwise, in either of the
Constituent Corporations, shall not revert or be in any way impaired but all
rights of creditors and all liens upon any property of either of the
Constituent Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of the Constituent Corporations shall thereafter
attach to the Surviving Corporation, and may be enforced against it to the
same extent as if such debts and liabilities had been incurred by it.
Section 1.4 DIRECTORS AND OFFICERS. The initial directors and officers
of the Surviving Corporation shall be the persons identified on SCHEDULE 1.4
hereto, each of whom will hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, in each case until
their respective successors are duly elected or appointed.
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ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
(a) "ASSUMED OPTIONS" means options to purchase Finisar Common
Stock issued upon conversion of Sensors Options pursuant to Section 6.11.
(b) "CASH MERGER CONSIDERATION" has the meaning set forth in
Section 2.2(c).
(c) "CONTINGENT SHARES" has the meaning set forth in Section 2.6.
(d) "DEFERRED PER-SHARE STOCK AMOUNT" means a number of shares of
Finisar Common Stock equal to the Performance Shares divided by the
Outstanding Sensors Shares.
(e) "ESCROW SHARES" has the meaning set forth in Section 2.5.
(f) "FIRM MERGER SHARES" means a number of whole shares of Finisar
Common Stock equal to one-half of the Net Merger Consideration.
(g) "INITIAL PER-SHARE STOCK AMOUNT" means a number of shares of
Finisar Common Stock equal to the Firm Merger Shares divided by the
Outstanding Sensors Shares.
(h) "MILESTONES" means the six development milestones set forth in
the Sensors Research and Development Plan.
(i) "NET MERGER CONSIDERATION" means the Total Stock Consideration
less the aggregate number of shares of Finisar Common Stock initially subject
to Assumed Options.
(j) "OUTSTANDING SENSORS SHARES" means the aggregate number of
shares of Sensors Common Stock outstanding immediately prior to the Effective
Time.
(k) "PERFORMANCE SHARES" means a number of shares of Finisar Common
Stock equal to one-half of the Net Merger Consideration.
(l) "FINISAR COMMON STOCK" means the Common Stock, $.001 par value,
of Finisar.
(m) "FINISAR SHARE PRICE" means a cash amount equal to twenty-five
dollars ($25.00), as adjusted proportionately to reflect any stock split,
stock combination or stock dividend effected subsequent to the date of this
Agreement.
(n) "SENSORS COMMON STOCK" means the Common Stock, $0.01 par value,
of Sensors.
(o) "SENSORS OPTIONS" has the meaning set forth in Section 2.2(d).
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(p) "SENSORS RESEARCH AND DEVELOPMENT PLAN" means the Research and
Development Plan attached hereto as EXHIBIT A.
(q) "SENSORS TRANSACTION EXPENSES" and "ESTIMATED SENSORS
TRANSACTION EXPENSES" have the meanings set forth in Section 6.18.
(r) "TOTAL STOCK CONSIDERATION" means 20,000,000 shares of Finisar
Common Stock less the number of shares of Finisar Common Stock determined by
dividing the aggregate Estimated Sensors Transaction Expenses, as determined
pursuant to Section 6.18, by the Finisar Share Price (in each case as such
number of shares is adjusted to reflect any stock split, stock combination or
stock dividend effected subsequent to the date of this Agreement).
Section 2.2 CONVERSION OF CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of capital stock of Sensors or capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of the
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock of the Surviving Corporation.
(b) CONVERSION OF SENSORS COMMON STOCK. Subject to Sections 2.2(c)
and 2.4, each issued and outstanding share of Sensors Common Stock, other
than Dissenting Shares (as defined in Section 2.7), shall be converted into
the right to receive: (i) the Initial Per-Share Stock Amount, issuable and
payable at the Effective Time, or thereafter upon surrender of the
certificate representing such share of Sensors Common Stock pursuant to
Section 2.4; (ii) the Deferred Per-Share Stock Amount, issuable at the
Effective Time and deliverable on the first, second and third anniversaries
of the Closing, as provided in Section 2.5(b); and (iii) Contingent Shares,
issuable as provided in Section 2.6. All such shares of Sensors Common Stock,
when so converted, shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights with
respect thereto, except the right to receive shares of Finisar Common Stock
as set forth above, cash, to the extent elected pursuant to Section 2.2(c),
and any cash in lieu of fractional shares of Finisar Common Stock to be
issued or paid in consideration therefor upon the surrender of such
certificate in accordance with this Article II.
(c) ELECTION TO RECEIVE CASH MERGER CONSIDERATION. Notwithstanding
the provisions of Section 2.2(b), a holder of outstanding shares of Sensors
Common Stock may, by written notice delivered to Finisar not more than five
(5) days prior to the Closing, elect to receive cash in the amount of the
Finisar Share Price per share in substitution for whole Firm Merger Shares
which such holder is entitled to receive pursuant to Section 2.2(b) ("Cash
Merger Consideration"); provided, however, that (i) no holder shall be
entitled to elect to receive Cash Merger Consideration in lieu of more than
20% of the total number of Firm Merger Shares to which such holder would
otherwise be entitled, and (ii) if the aggregate Cash Merger Consideration
which the shareholders elect to receive, together with any additional
payments or distributions by the Company which could be deemed to be cash
payments in respect to the Merger exceeds 20% of the value of the Firm Merger
Shares, the amount of Cash Merger Consideration which the electing
shareholders may receive will be reduced pro-rata so that the
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sum of all Cash Merger Consideration plus such other cash payments equals
19.9% of the value of the Firm Merger Shares.
(d) SENSORS STOCK OPTIONS. At the Effective Time, all then
outstanding options to purchase Sensors Common Stock (the "Sensors Options")
issued under Sensors' 1993 Stock Option Plan and Second Amended and Restated
1997 Stock Option Plan (collectively, the "Sensors Option Plans") not
exercised as of the Effective Time will be assumed by Finisar and converted
into Assumed Options in accordance with Section 6.11.
Section 2.3 CRITERIA FOR DETERMINING ACHIEVEMENT OF MILESTONES. The
achievement of each of the Milestones shall be determined on the basis of the
criteria set forth in the Sensors Research and Development Plan.
Section 2.4 EXCHANGE OF CERTIFICATES. The procedures for exchanging
outstanding shares of Sensors Common Stock for Finisar Common Stock and cash
pursuant to the Merger are as follows:
(a) EXCHANGE AGENT. At the Effective Time, Finisar shall deposit
with an exchange agent designated by Finisar (the "Exchange Agent"), for the
benefit of the holders of shares of Sensors Common Stock, for exchange in
accordance with this Section 2.4, through the Exchange Agent, (i)
certificates representing the Firm Merger Shares and any Cash Merger
Consideration issuable and payable to the holders of Sensors Common Stock
pursuant to Section 2.2 and (ii) certificates representing the Performance
Shares, issuable and deliverable to the Escrow Agent pursuant to Section 2.5
(such cash and shares of Finisar Common Stock deposited with the Exchange
Agent, together with any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund"), in exchange for
outstanding shares of Sensors Common Stock.
(b) EXCHANGE PROCEDURES. At the Closing or within ten (10) days
thereafter, Finisar shall provide to each holder of record of a certificate
or certificates which immediately prior to the Effective Time represented
outstanding shares of Sensors Common Stock (each a "Certificate," and
collectively, the "Certificates") whose shares were converted pursuant to
Section 2.2 into the right to receive shares of Finisar Common Stock and Cash
Merger Consideration (i) a letter of transmittal, which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Finisar and Sensors
may reasonably specify, and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing
shares of Finisar Common Stock and Cash Merger Consideration. Upon surrender
of a Certificate for cancellation to the Exchange Agent or to such other
agent or agents as may be appointed by Finisar, together with a duly executed
letter of transmittal, the holder of such Certificate shall be entitled to
receive in exchange therefor (x) a certificate representing the number of
whole Firm Merger Shares which such holder has the right to receive pursuant
to the provisions of Section 2.2(b) and (y) cash representing any Cash Merger
Consideration which such holder has the right to receive pursuant to the
provisions of Section 2.2(c). Certificates representing the number of whole
Performance Shares which such holder has the right to receive shall be placed
in escrow pursuant to Section 2.5. The Certificate so surrendered shall
immediately be canceled. In the event of a transfer of ownership of Sensors
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Common Stock which is not registered in the transfer records of Sensors, a
certificate representing the Firm Merger Shares and any Cash Merger
Consideration to which the holder is entitled may be issued to a transferee
if the Certificate representing such Sensors Common Stock is presented to the
Exchange Agent accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have
been paid. Until surrendered as contemplated by this Section 2.4, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the certificate representing
shares of Finisar Common Stock, Cash Merger Consideration and cash in lieu of
any fractional shares of Finisar Common Stock as contemplated by this Section
2.4.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends
or other distributions declared or made after the Effective Time with respect
to Finisar Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the
shares of Finisar Common Stock represented thereby and no Cash Merger
Consideration or cash payment in lieu of fractional shares payable to any
such holder pursuant to subsection (e) below shall be paid until the holder
of record of such Certificate shall surrender such Certificate. Subject to
the effect of applicable laws, following surrender of any such Certificate,
there shall be paid to the record holder of the certificates representing
whole shares of Finisar Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, any Cash Merger Consideration to
which such holder is entitled and the amount of any cash payable in lieu of a
fractional share of Finisar Common Stock to which such holder is entitled
pursuant to subsection (e) below and the amount of dividends or other
distributions with a record date after the Effective Time previously paid
with respect to such whole shares of Finisar Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with
a record date after the Effective Time but prior to surrender and a payment
date subsequent to surrender payable with respect to such whole shares of
Finisar Common Stock.
(d) NO FURTHER OWNERSHIP RIGHTS IN SENSORS COMMON STOCK. All shares
of Finisar Common Stock and cash issued and paid upon the surrender for
exchange of shares of Sensors Common Stock in accordance with the terms
hereof (including any cash paid pursuant to subsection (c) or (e) of this
Section 2.4) shall be deemed to have been issued and paid in full
satisfaction of all rights pertaining to such shares of Sensors Common Stock,
and there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of Sensors Common Stock
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Section
2.4.
(e) NO FRACTIONAL SHARES. No certificate or scrip representing
fractional shares of Finisar Common Stock shall be issued upon the surrender
for exchange of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a shareholder of
Finisar. Notwithstanding any other provision of this Agreement, each holder
of shares of Sensors Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Finisar
Common Stock (after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of a share of Finisar Common Stock multiplied
by the Finisar Share Price.
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(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the shareholders of Sensors after one year
after the Effective Time shall be delivered to Finisar, upon demand, and any
shareholders of Sensors who have not previously complied with this Section
2.4 shall thereafter look only to Finisar for payment of their claim for
Finisar Common Stock, any Cash Merger Consideration, any cash in lieu of
fractional shares of Finisar Common Stock, and any dividends or distributions
with respect to Finisar Common Stock.
(g) NO LIABILITY. Neither Finisar nor Sensors shall be liable to
any holder of shares of Sensors Common Stock or Finisar Common Stock, as the
case may be, for such shares (or dividends or distributions with respect
thereto) delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(h) LOST CERTIFICATES. In the event any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed, Finisar
shall issue in exchange for such lost, stolen or destroyed Certificate the
shares of Finisar Common Stock and any Cash Merger Consideration issuable in
exchange therefor pursuant to the provisions of this Article II, together
with cash, if any, in lieu of fractional shares in accordance with Section
2.4(e) hereof. The Board of Directors of Finisar may in its discretion and as
a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed Certificate to provide to Finisar an indemnity
agreement against any claim that may be made against Finisar with respect to
the Certificate alleged to have been lost, stolen or destroyed.
Section 2.5 ESCROW.
(a) At the Closing, the Exchange Agent will deposit into escrow
(the "Escrow") certificates representing the Performance Shares (the "Escrow
Shares"). The Escrow Shares shall be held by First Trust of California or
such other financial institution as Finisar and Sensors shall mutually
determine (the "Escrow Agent") in accordance with and subject to the
provisions of an Escrow Agreement substantially in the form of EXHIBIT B
hereto (the "Escrow Agreement").
(b) Within ten (10) days following the first anniversary of the
Closing Date (or at such later date as determined pursuant to the Sensors
Research and Development Plan), one-third of the Performance Shares shall be
released from the Escrow and delivered to the persons who held shares of
Sensors Common Stock immediately prior to the Effective Time, on a pro rata
basis, if at least two of the Milestones have been achieved prior to such
date. Within ten (10) days following the second anniversary of the Closing
Date, (or at such later date as determined pursuant to the Sensors Research
and Development Plan), two-thirds of the Performance Shares (less the number
of Performance Shares, if any, previously released) shall be released from
the Escrow and delivered to the former shareholders of Sensors, on a pro rata
basis, if at least four of the Milestones have been achieved prior to such
date. Within ten (10) days following the third anniversary of the Closing
Date, the balance of the Performance Shares shall be released from the Escrow
and delivered to the former shareholders of Sensors, on a pro rata basis, if
all six of the Milestones have been achieved prior to such date.
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(c) Notwithstanding the foregoing, the portion of the Escrow Shares
specified in Section 9.2(b) shall be subject to claims of indemnification
under Article IX of this Agreement and the procedures specified in the Escrow
Agreement. Subject to the provisions of Section 9.2(d), the sole recourse for
indemnification claims under Article IX shall be limited to such portion of
the Escrow Shares.
Section 2.6 CONTINGENT SHARES. On each of the first three anniversaries
of the Closing Date, Finisar will issue and deliver to the persons who held
shares of Sensors Common Stock immediately prior to the Effective Time, on a
pro rata basis, shares of Finisar Common Stock (valued on the basis of the
average closing trading price per share of such stock on the Nasdaq National
Market (the "NNM") for the ten (10) trading days preceding the applicable
payment date) (the "Contingent Shares) as follows:
(a) On the first anniversary of the Closing Date, if at least 75%
of the key management and technical employees listed on SCHEDULE 2.6 hereto
(the "Key Sensors Employees"), or equivalent replacement employees reasonably
acceptable to Finisar, are then employed by Finisar or a Subsidiary of
Finisar, Finisar will issue and deliver Contingent Shares having an aggregate
dollar value equal to $2.375 multiplied by the aggregate number of
Performance Shares, and rounded to the nearest whole share.
(b) On the second anniversary of the Closing Date, if at least 65%
of the Key Sensors Employees, or equivalent replacement employees reasonably
acceptable to Finisar, are then employed by Finisar or a Subsidiary of
Finisar, Finisar will issue and deliver Contingent Shares having an aggregate
dollar value equal to $1.58333 multiplied by the aggregate number of
Performance Shares, and rounded to the nearest whole share.
(c) On the third anniversary of the Closing Date, if at least 50%
of the Key Sensors Employees, or equivalent replacement employees reasonably
acceptable to Finisar, are then employed by Finisar or a Subsidiary of
Finisar, and if prior to that date all six Milestones have been achieved,
Finisar will issue and deliver Contingent Shares having an aggregate dollar
value equal to $0.79167 multiplied by the aggregate number of Performance
Shares, and rounded to the nearest whole share.
(d) The contingent right of the persons who held shares of Sensors
Common Stock immediately prior to the Effective Time to receive Contingent
Shares as set forth in this Section 2.6 will be neither negotiable nor
assignable, except by operation of law.
Section 2.7 DISSENTERS' RIGHTS. In the event the Merger becomes
effective without the approval of the holders of 100% of the outstanding
shares of Sensors Common Stock, any shares of Sensors Common Stock held by
shareholders who properly exercise and perfect the dissenters' rights set
forth in Section 14A:11 of the BCA ("Dissenting Shares") shall not be
converted pursuant to Section 2.2, but shall instead be converted into the
right to receive such consideration as may be determined to be due with
respect to such Dissenting Shares pursuant to the provisions of the BCA.
Finisar shall have the right to control all negotiations and proceedings with
respect to the determination of the fair value of the Sensors Common Stock.
Sensors agrees that, without the prior written consent of Finisar or as
required under the BCA, it will not voluntarily make any payment with respect
to, or determine or offer to determine, the
8
fair value of the Sensors Common Stock. Each holder of Dissenting Shares (a
"Dissenting Shareholder") who, pursuant to the provisions of the BCA, becomes
entitled to payment of the fair value of Sensors Common Stock shall receive
payment therefor (but only after the fair value therefor shall have been
agreed upon or finally determined pursuant to the provisions of the BCA). In
the event that any holder of Sensors Common Stock fails to make an effective
demand for payment or otherwise loses his, her or its status as a Dissenting
Shareholder, Finisar shall, as of the later of the Effective Time or the
occurrence of such event, issue and deliver, upon surrender by such
Dissenting Shareholder of his, her or its Certificate(s), the shares of
Finisar Common Stock and cash, including any cash payment in lieu of
fractional shares, in each case without interest thereon, to which such
Dissenting Shareholder would have been entitled under Section 2.4.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SENSORS
Except as disclosed in the disclosure schedule provided to Finisar
on or before the date of this Agreement (the "Sensors Disclosure Schedule"),
Sensors and each of the Principal Shareholders, jointly and severally,
represent and warrant to Finisar as follows:
Section 3.1 ORGANIZATION, STANDING AND POWER. Sensors is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New Jersey, has all requisite corporate power to own, lease and
operate its properties and to carry on its business as currently being
conducted and as currently proposed to be conducted, and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
nature of its operations requires such qualification, except where the
failure to so qualify has not and will not have a Material Adverse Effect (as
defined in Section 10.2(a)) on Sensors. Sensors has delivered true and
correct copies of the Certificate of Incorporation and Bylaws of Sensors,
each as amended to date, to Finisar. Sensors is not in violation of any of
the provisions of its Certificate of Incorporation, Bylaws or other charter
documents. Sensors does not directly or indirectly own any equity or similar
interest in, or any interest convertible or exchangeable or exercisable for
any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity.
Section 3.2 SENSORS CAPITAL STRUCTURE.
(a) The authorized capital stock of Sensors consists of 5,000,000
shares of Sensors Common Stock and 2,000,000 shares of Preferred Stock, $0.01
par value ("Sensors Preferred Stock"). As of the date hereof, 776,833 shares
of Sensors Common Stock are issued and outstanding and held of record by
those persons set forth in the Sensors Disclosure Schedule. All such
outstanding shares of Sensors Common Stock have been duly authorized and
validly issued, are fully paid and nonassessable, have been issued in
compliance, in all material respects, with all applicable federal and state
securities laws, and are not subject to any preemptive rights or rights of
first refusal created by statute, the charter documents of Sensors or any
agreement to which Sensors is a party or by which it is bound. As of the date
hereof, 230,000 shares of Sensors Common Stock are reserved for issuance
under the 1993 Stock Option Plan, and 190,000 shares of Sensors Common Stock
are reserved for issuance under the Second Amended
9
and Restated 1997 Stock Option Plan, of which an aggregate of 400,466 shares
are subject to outstanding options held by those persons set forth in the
Sensors Disclosure Schedule. As of the date hereof, no shares of Sensors
Preferred Stock and no stock appreciation rights or restricted stock purchase
rights granted under either of the Sensors Option Plans, or otherwise, are
issued or outstanding.
(b) Except as set forth in this Section 3.2 or the Sensors Disclosure
Schedule, there are (i) no equity securities of any class of Sensors, or any
securities exchangeable into or exercisable for such equity securities,
issued, reserved for issuance, or outstanding and (ii) no outstanding
subscriptions, options, warrants, puts, calls, rights, or other commitments
or agreements of any character to which Sensors is a party or by which it is
bound obligating Sensors to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any equity
securities of Sensors or obligating Sensors to grant, extend, accelerate the
vesting of, change the exercise price of, or otherwise amend or enter into
any such option, warrant, call, right, commitment or agreement. There are no
contracts, commitments or agreements relating to voting, purchase or sale of
Sensors' capital stock (i) between or among Sensors and any of its
shareholders or (ii) to Sensors' knowledge, between or among any of Sensors'
shareholders.
Section 3.3 AUTHORITY; REQUIRED FILINGS AND CONSENTS.
(a) Sensors has all requisite corporate power and authority to
execute and deliver this Agreement and all other documents required to be
executed and delivered by Sensors hereunder, including the Agreement of
Merger (collectively, the "Transaction Documents"), and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the other Transaction Documents to which Sensors is or
will be a party and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on
the part of Sensors, subject only to the approval of the Merger by Sensors'
shareholders as required by the BCA. This Agreement and the other Transaction
Documents to which Sensors is a party have been or will be duly executed and
delivered by Sensors and constitute or will constitute the valid and binding
obligations of Sensors, enforceable against Sensors in accordance with their
respective terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to creditors' rights generally, and (ii) general principles of
equity.
(b) The execution and delivery by Sensors of this Agreement and the
other Transaction Documents to which it is or will be a party do not, and the
consummation of the transactions contemplated hereby and thereby will not,
(i) conflict with, or result in any violation or breach of any provision of,
the Certificate of Incorporation or Bylaws of Sensors, (ii) result in any
violation or breach of or constitute (with or without notice or lapse of
time, or both) a default under, or give rise to a right of termination,
cancellation or acceleration of any material obligation or loss of any
material benefit under, any note, mortgage, indenture, lease, contract or
other agreement or obligation to which Sensors is a party or by which Sensors
or any of its properties or assets may be bound, or (iii) conflict with or
violate any material permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Sensors or
any of its properties or assets.
10
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to Sensors in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) the filing of a pre-merger
notification and report form by the Company under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) the
filing of the Agreement of Merger and Officer's Certificates with the New
Jersey Secretary of State in accordance with the BCA, (iii) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal and state securities laws, (iv) such
filings as may be required under the New Jersey Industrial Site Recovery Act
("ISRA"), and (v) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material
Adverse Effect on Sensors and would not prevent or materially alter or delay
any of the transactions contemplated by this Agreement.
Section 3.4 FINANCIAL STATEMENTS. Sensors has delivered to Finisar (i)
its audited financial statements for each of the years ended December 31,
1998 and 1999, and (ii) its unaudited financial statements, including
statements of operations and cash flows for the seven-month period ended July
31, 2000 and a balance sheet as of July 31, 2000 (the "Balance Sheet Date")
(collectively, the "Sensors Financial Statements"). The Sensors Financial
Statements were prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved, except that the unaudited Sensors Financial Statements do not
contain footnotes. The Sensors Financial Statements present fairly in all
material respects the financial position of Sensors as of the respective
dates and the results of its operations and cash flows for the periods
indicated, subject, in the case of unaudited financial statements, to normal
year-end audit adjustments. Sensors maintains, and until the Effective Time
will continue to maintain, a standard system of accounting established and
administered in accordance with GAAP.
Section 3.5 ABSENCE OF UNDISCLOSED LIABILITIES. Sensors does not have
any liabilities, either accrued or contingent (whether or not required to be
reflected in financial statements in accordance with GAAP), and whether due
or to become due, other than (i) liabilities reflected or provided for on the
balance sheet as of the Balance Sheet Date (the "Sensors Balance Sheet")
contained in the Sensors Financial Statements, (ii) liabilities contemplated
by this Agreement or described in the Sensors Disclosure Schedule, and (iii)
normal or recurring liabilities incurred since the Balance Sheet Date in the
ordinary course of business consistent with past practices.
Section 3.6 ACCOUNTS RECEIVABLE. The accounts receivable shown on the
Sensors Balance Sheet arose in the ordinary course of business and have been
collected or are collectible in the book amounts thereof, less an amount not
in excess of the allowance for doubtful accounts and returns provided for in
the Sensors Balance Sheet. The accounts receivable of Sensors arising after
the Balance Sheet Date and prior to the Closing Date arose, or will arise, in
the ordinary course of business and have been collected or will be
collectible in the book amounts thereof, less allowances for doubtful
accounts and returns determined in accordance with GAAP and the past
practices of Sensors. None of such accounts receivable is subject to any
claim of offset or recoupment or counterclaim, and Sensors has no knowledge
of any specific facts that would be likely to give rise to any such claim. No
amount of such accounts receivable is
11
contingent upon the performance by Sensors of any obligation and no agreement
for deduction or discount has been made with respect to any such accounts
receivable.
Section 3.7 INVENTORIES. The inventories shown on the Sensors Balance
Sheet or thereafter acquired by Sensors consist of items of a quantity and
quality usable or salable in the ordinary course of business. Since the
Balance Sheet Date, Sensors has continued to replenish inventories in a
normal and customary manner consistent with past practices. Sensors has not
received notice that it will experience in the foreseeable future any
difficulty in obtaining, in the desired quantity and quality and at a
reasonable price and upon reasonable terms and conditions, the supplies or
component products required for the manufacture, assembly or production of
its products. The value at which inventories are carried reflect the
inventory valuation policy of Sensors, which is consistent with its past
practice and in accordance with GAAP. Due provision has been made on the
books of Sensors, consistent with past practices, to provide for all
slow-moving, obsolete, or unusable inventories at their estimated useful or
scrap values, and such inventory reserves are adequate to provide for such
slow-moving, obsolete or unusable inventory and inventory shrinkage.
Section 3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance
Sheet Date, Sensors has conducted its business in the ordinary course and in
a manner consistent with past practices and, since such date, Sensors has not:
(a) suffered any event or occurrence that has had a Material
Adverse Effect on Sensors;
(b) suffered any damage, destruction or loss, whether covered by
insurance or not, having a material adverse effect on its properties or
business;
(c) granted any material increase in the compensation payable or to
become payable by Sensors to its officers or employees;
(d) declared, set aside or paid any dividend or made any other
distribution on or in respect of the shares of its capital stock or declared
any direct or indirect redemption, retirement, purchase or other acquisition
of such shares;
(e) issued any shares of its capital stock or any warrants, rights,
or options for, or entered into any commitment relating to such capital
stock, other than shares of Sensors Common Stock issued upon exercise of
options outstanding under the Sensors Option Plans as of the date of this
Agreement;
(f) made any change in the accounting methods or practices it
follows, whether for general financial or tax purposes, or any change in
depreciation or amortization policies or rates;
(g) sold, leased, abandoned or otherwise disposed of any real
property, machinery, equipment or other operating property other than in the
ordinary course of business;
(h) sold, assigned, transferred, licensed or otherwise disposed of
any patent, trademark, trade name, brand name, copyright (or pending
application for any patent, trademark
12
or copyright), invention, work of authorship, process, know-how, formula or
trade secret or interest thereunder or other material intangible asset;
(i) entered into any material commitment or transaction (including,
without limitation, any borrowing or capital expenditure) other than in the
ordinary course of business;
(j) incurred any material liability, except in the ordinary course
of business and consistent with past practice;
(k) permitted or allowed any of its property or assets to be
subjected to any mortgage, deed of trust, pledge, lien, security interest or
other encumbrance of any kind, except for liens for current taxes not yet due
and purchase money security interests incurred in the ordinary course of
business;
(l) made any capital expenditure or commitment for additions to
property, plant or equipment individually in excess of $100,000, or, in the
aggregate, in excess of $250,000;
(m) paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets to, or entered into any agreement or
arrangement with, any of its officers, directors or shareholders or any
affiliate of any of the foregoing, other than employee compensation and
benefits and reimbursement of employment related business expenses incurred
in the ordinary course of business;
(n) agreed to take any action described in this Section 3.8 or
which would constitute a breach of any of the representations or warranties
of Sensors contained in this Agreement; or
(o) taken any other action that would have required the consent of
Finisar pursuant to Section 5.1 of this Agreement (and which has not been
obtained) had such action occurred after the date of this Agreement.
Section 3.9 TAXES.
(a) For purposes of this Agreement, a "Tax" or, collectively,
"Taxes," means any and all federal, state and local taxes of any country,
assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed
with respect to such amounts and any obligations under any agreements or
arrangements with any other person with respect to such amounts and including
any liability for taxes of a predecessor entity.
(b) Sensors has prepared and timely filed all returns, estimates,
information statements and reports required to be filed with any taxing
authority ("Returns") relating to any and all Taxes concerning or
attributable to Sensors or its operations, such Returns are true and correct
in all material respects and have been completed in all material respects in
accordance with applicable law, and Sensors has disclosed on its Returns all
positions taken therein that
13
could give rise to a substantial understatement penalty within the meaning of
Section 6662 of the Code (or any predecessor provision or comparable
provision of state, local or foreign law).
(c) Sensors, as of the Closing Date, (i) will have paid all Taxes
it is required to pay prior to the Closing Date and (ii) will have withheld
with respect to its employees all Taxes required to be withheld.
(d) Sensors has not been delinquent in the payment of any Tax.
There is no Tax deficiency outstanding or assessed or proposed against
Sensors that is not reflected as a liability on the Sensors Balance Sheet or
set forth on the Sensors Disclosure Schedule, nor has Sensors executed any
agreements or waivers extending any statute of limitations on or extending
the period for the assessment or collection of any Tax.
(e) The amount of Sensors' liability for unpaid Taxes (whether
actual or contingent) for all periods through the date hereof and the Closing
Date does not and will not, in the aggregate, exceed the amount of the
current liability accruals for Taxes (excluding reserves for deferred Taxes)
reflected on the Sensors Balance Sheet (other than Taxes which have accrued
after the date of such Sensors Balance Sheet).
(f) Sensors is not a party to any tax-sharing agreement or similar
arrangement with any other party, and Sensors has not assumed or agreed to
pay any Tax obligations of, or with respect to any transaction relating to,
any other person or agreed to indemnify any other person with respect to any
Tax.
(g) Sensors' Returns have never been audited by a government or
taxing authority, nor is any such audit in process or pending, and Sensors
has not been notified of any request for such an audit or other examination.
(h) Sensors has never been a member of an affiliated group of
corporations filing a consolidated federal income tax return.
(i) Sensors has made available to Finisar copies of all Returns
filed for all periods since its inception.
(j) Sensors has never filed any consent agreement under Section
341(f) of the Code or agreed to have Section 341(f)(4) apply to any
disposition of assets owned by Sensors.
(k) Sensors is not a party to any contract, agreement, plan or
arrangement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of Sensors that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to Sections 280G, 404 or 162(m) of the Code by Sensors or
Sub as an expense under applicable law.
(l) Sensors has not constituted either a "distributing corporation"
or a "controlled corporation" in a distribution of stock qualifying for
tax-free treatment under Section 355 of the Code (i) in the two years prior
to the date of this Agreement or (ii) in a distribution which could otherwise
constitute part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) in conjunction with the Merger.
14
(m) Sensors has not agreed to make, nor is it required to make, any
adjustment under Section 481 of the Code by reason of any change in
accounting method.
(n) None of Sensors' assets is treated as "tax-exempt use
property," within the meaning of Section 168(h) of the Code.
(o) Sensors is not, nor has it been, a "reporting corporation"
subject to the information reporting and record maintenance requirements of
Section 6038A of the Code and the regulations thereunder.
(p) Sensors has never been a party to any joint venture,
partnership or other agreement that could be treated as a partnership for Tax
purposes.
(q) There are (and immediately following the Effective Time there
will be) no liens, pledges, charges, claims, restrictions on transfer,
mortgages, security interests or other encumbrances of any sort
(collectively, "Liens") on the assets of Sensors relating to or attributable
to Taxes, other than Liens for Taxes not yet due and payable.
(r) Sensors (and any predecessor of Sensors) has been a validly
existing S corporation within the meaning of Sections 1361 and 1362 of the
Code and comparable provisions of all relevant state laws at all times during
its existence, and Sensors will be an S corporation up to and including the
day before the Closing Date.
Section 3.10 TANGIBLE ASSETS AND REAL PROPERTY.
(a) Sensors owns or leases all tangible assets and properties which
are material to the conduct of its business as currently conducted or which
are reflected on the Sensors Balance Sheet or acquired since the Balance
Sheet Date (the "Material Tangible Assets"). The Material Tangible Assets are
in good operating condition and repair. Sensors has good and marketable title
to all Material Tangible Assets that it owns (except properties, interests in
properties and assets sold or otherwise disposed of since the Sensors Balance
Sheet Date in the ordinary course of business), free and clear of all Liens,
except for Liens for current taxes not yet due and payable. Assuming the due
execution and delivery thereof by the other parties thereto, all leases of
Material Tangible Assets to which Sensors is a party are in full force and
effect and valid, binding and enforceable in accordance with their respective
terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to
creditors' rights generally, and (ii) general principles of equity. The
Sensors Disclosure Schedule sets forth a true and correct list of all such
leases, and true and correct copies of all such leases have been provided to
Finisar.
(b) Sensors owns no real property. The Sensors Disclosure Schedule
sets forth a true and complete list of all real property leased by Sensors.
Assuming the due execution and delivery thereof by the other parties thereto,
all such real property leases are in full force and effect and valid, binding
and enforceable in accordance with their respective terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to creditors' rights generally, and
(ii) general principles of equity. True and correct copies all such of real
property leases have been provided to Finisar.
15
Section 3.11 INTELLECTUAL PROPERTY.
(a) Sensors owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents, trademarks, trade names, service
marks, copyrights and mask works, and any applications for and registrations
of such patents, trademarks, trade names, service marks, copyrights and mask
works and all processes, formulas, methods, schematics, technology, know-how,
computer software programs or applications and tangible or intangible
proprietary information or material that are necessary to conduct the
business of Sensors as currently being conducted, or as currently proposed to
be conducted (all of which are referred to as the "Sensors Intellectual
Property Rights"), free and clear of all Liens. The foregoing representation
as it relates to Licensed Intellectual Property (as defined below) is limited
to Sensors' interest pursuant to licenses from third parties, each of which
is in full force and effect, is valid, binding and enforceable and grants
Sensors such rights to such intellectual property as are necessary to the
business of Sensors as currently conducted or currently proposed to be
conducted.
(b) The Sensors Disclosure Schedule contains an accurate and
complete list of (i) all patents, patent applications, trademarks, trade
names, service marks and registered copyrights and applications therefor
included in the Sensors Intellectual Property Rights, including the
jurisdictions in which each such Sensors Intellectual Property Right has been
issued or registered or in which any such application for such issuance or
registration has been filed, (ii) all licenses, sublicenses, distribution
agreements, options, rights (including marketing rights), and other
agreements to which Sensors is a party and pursuant to which any person is
authorized to use any Sensors Intellectual Property Rights or has the right
to manufacture, reproduce, market or exploit any product of Sensors (a
"Sensors Product") or any adaptation, translation or derivative work based on
any Sensors Product or any portion thereof, (iii) all licenses, sublicenses
and other agreements to which Sensors is a party and pursuant to which
Sensors is authorized to use any third party technology, trade secret,
know-how, process, patent, trademark or copyright, including software
("Licensed Intellectual Property"), which is used in the manufacture of,
incorporated in or forms a part of any Sensors Product (other than licenses
for standard off-the-shelf software used in the conduct of Sensors'
business), (iv) all joint development agreements to which Sensors is a party,
and (v) all agreements with Governmental Entities or other third parties
pursuant to which Sensors has obtained funding for research and development
activities.
(c) The execution and delivery of this Agreement, compliance with
its terms and the consummation of the transactions contemplated hereby do not
and will not conflict with, or result in any violation or breach of, or
default (with or without notice or lapse of time or both) or give rise to any
right, license or Lien relating to any Sensors Intellectual Property Rights,
or right of termination, cancellation or acceleration of any Sensors
Intellectual Property Rights, or the loss or encumbrance of any Sensors
Intellectual Property Rights or material benefit related thereto, or result
in or require the creation, imposition or extension of any Lien upon any
Sensors Intellectual Property Rights or otherwise impair the right of Sensors
or its customers to use the Sensors Intellectual Property Rights in the same
manner as such Sensors Intellectual Property Rights are currently being used
by Sensors or the customers of Sensors.
(d) All patents and registered trademarks, service marks and
copyrights issued to Sensors which relate to any Sensors Product are valid
and subsisting. The manufacturing,
16
marketing, licensing or sale of any Sensors Product does not infringe any
patent, trademark, trade name, service ▇▇▇▇, copyright, mask work right,
trade secret or other proprietary right of any third party. Sensors (i) has
not received notice that it has been sued in any suit, action or proceeding
which involves a claim of infringement of any patent, trademark, trade name,
service ▇▇▇▇, copyright, mask work right, trade secret or other proprietary
right of any third party and (ii) has no knowledge of any claim challenging
or questioning the validity or effectiveness of any license or agreement
relating to any Sensors Intellectual Property Rights or Licensed Intellectual
Property. There is no outstanding order, writ, injunction, decree, judgment
or stipulation by or with any court, administrative agency or arbitration
panel regarding patent, copyright, trade secret, trademark, trade name, mask
work right or other claims relating to the Sensors Intellectual Property
Rights to which Sensors is a party or by which it is bound.
(e) All designs, drawings, specifications, source code, object
code, documentation, flow charts and diagrams incorporated, embodied or
reflected in any Sensors Product at any stage of its development were
written, developed and created solely and exclusively by (i) employees of
Sensors without the assistance of any third party or (ii) third parties who
assigned ownership of their rights with respect thereto to Sensors by means
of valid and enforceable agreements, which are listed and described in the
Sensors Disclosure Schedule and copies of which have been provided to
Finisar. Sensors has at all times used commercially reasonable efforts to
protect its trade secrets. None of the trade secrets of Sensors have been
published or disclosed by Sensors or, to the knowledge of Sensors, by any
other person, to any person except pursuant to licenses or contracts
requiring such other persons to keep such trade secrets confidential.
(f) Sensors is not, and, to the knowledge of Sensors, no other
party to any licensing, sublicensing, distributorship or other similar
arrangements with Sensors relating to the Sensors Intellectual Property
Rights is, in breach of or default under any material obligations under such
arrangements.
(g) To the knowledge of Sensors, no person is infringing on or
otherwise violating any right of Sensors with respect to any Sensors
Intellectual Property Rights.
(h) Sensors has not assigned, sold or otherwise transferred
ownership of, or granted an exclusive license or right to use, any patent,
patent application, trademark, mask work right or service ▇▇▇▇.
(i) Neither Sensors nor any of its officers or employees has any
patents issued or patent applications pending for any device, process,
method, design or invention of any kind now used or needed by Sensors in the
furtherance of its business operations as currently being conducted or as
currently proposed to be conducted by Sensors, which patents or applications
have not been assigned to Sensors with such assignment duly recorded in the
United States Patent Office or with the applicable foreign Governmental
Entity.
(j) Each person currently or formerly employed by Sensors
(including consultants and independent contractors, if any) that has or had
access to confidential information of Sensors has executed and delivered to
Sensors a confidentiality and non-disclosure agreement in one of the forms
previously provided to Finisar. Neither the
17
execution or delivery of any such agreement by any such person, nor the
carrying on by any such person, as an employee, consultant or independent
contractor, of Sensors' business as currently conducted and as currently
proposed to be conducted, has or will conflict with or result in a breach of
the terms, conditions or provisions of, or constitute a default under, any
contract, covenant or instrument under which any of such persons is obligated.
Section 3.12 BANK ACCOUNTS. The Sensors Disclosure Schedule sets forth
the names and locations of all banks and other financial institutions at
which Sensors maintains accounts of any nature, the type of accounts
maintained at each such institution and the names of all persons authorized
to draw thereon or make withdrawals therefrom.
Section 3.13 CONTRACTS.
(a) Sensors is not a party or subject to any agreement, obligation
or commitment, written or oral:
(i) that calls for any fixed or contingent payment or
expenditure or any related series of fixed or contingent payments or
expenditures by or to Sensors totaling more than $50,000 in any twelve-month
period;
(ii) with agents, advisors, salesmen, sales representatives,
independent contractors or consultants that are not cancelable by it on no
more than thirty (30) days' notice and without liability, penalty or premium;
(iii) that restricts Sensors from carrying on anywhere in the
world its business or any portion thereof as currently conducted;
(iv) to provide funds to or to make any investment in any
other person or entity (in the form of a loan, capital contribution or
otherwise);
(v) with respect to obligations as guarantor, surety,
co-signer, endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any other person or entity;
(vi) for any line of credit, standby financing, revolving
credit or other similar financing arrangement;
(vii) with any distributor, original equipment manufacturer,
value added remarketer or other person for the distribution of any of the
Sensors Products;
(viii) with any Governmental Entity or involving the provision
of products or services to a Governmental Entity; or
(ix) that is otherwise material to the business of Sensors as
currently being conducted, or as currently proposed to be conducted.
(b) To Sensors' knowledge, no party to any such contract, agreement
or instrument intends to cancel, withdraw, modify or amend such contract,
agreement or instrument.
18
(c) Sensors is not in default under or in breach or violation of
any material contract, commitment or restriction to which Sensors is a party
or by which Sensors or any of its properties or assets is bound or affected.
To Sensors' knowledge, no other party is in default under or in breach or
violation of any material contract, commitment, or restriction to which
Sensors is a party or by which Sensors or any of its properties or assets is
bound or affected.
Section 3.14 LABOR DIFFICULTIES. Sensors is not engaged in any unfair
labor practice or in violation of any applicable laws respecting employment,
employment practices or terms and conditions of employment. There is no
unfair labor practice complaint against Sensors pending or, to Sensors'
knowledge, threatened before any Governmental Entity. There is no strike,
labor dispute, slowdown, or stoppage pending or, to Sensors' knowledge,
threatened against Sensors. Sensors is not now and has never been subject to
any union organizing activities. Sensors has not experienced any work
stoppage or other labor difficulty. To Sensors' knowledge, the consummation
of the transactions contemplated by this Agreement will not have a material
adverse effect on its relations with Sensors employees.
Section 3.15 TRADE REGULATION. Sensors has not terminated its
relationship with or refused to ship Sensors Products to any dealer,
distributor, third party marketing entity or customer which had theretofore
paid or been obligated to pay Sensors in excess of $10,000 over any
consecutive twelve (12) month period. All of the prices charged by Sensors in
connection with the marketing or sale of any of its products or services have
been in compliance, in all material respects, with all applicable laws and
regulations. No claims have been asserted or, to Sensors' knowledge,
threatened against Sensors with respect to the wrongful termination of any
dealer, distributor or any other marketing entity, discriminatory pricing,
price fixing, unfair competition, false advertising, or any other material
violation of any laws or regulations relating to anti-competitive practices
or unfair trade practices of any kind.
Section 3.16 ENVIRONMENTAL MATTERS.
(a) As of the date hereof, no material amount of any substance that
has been designated by applicable law or regulation to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment, excluding
office, janitorial and similar substances (a "Hazardous Material"), is
present, as a result of the actions or omissions of Sensors or, to Sensors'
knowledge, as a result of any actions or omissions of any third party or
otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water, that Sensors has at any time
owned, operated, occupied or leased. To the knowledge of Sensors, no
underground storage tanks are or were present under any property that Sensors
has at any time owned, operated, occupied or leased. Sensors has never
notified any Governmental Entity or third party, nor has Sensors been
required under any law, rule, regulation, order or agreement to notify any
Governmental Entity or third party, of any spill or release of any Hazardous
Material.
(b) At all times, Sensors has transported, stored, used,
manufactured, disposed of, released or exposed its employees or others to
Hazardous Materials (collectively, "Hazardous Materials Activities") in
material compliance with all laws, rules, regulations, orders or treaties
promulgated by any Governmental Entity.
19
(c) Sensors currently holds all environmental approvals, permits,
licenses, clearances and consents (the "Environmental Permits") necessary for
the conduct of its business as such businesses is currently being conducted
and is in material compliance with all such Environmental Permits. Except as
set forth in the Sensors Disclosure Schedule, no environmental report,
closure activity, investigation or assessment, and no notification to or
approval, consent or authorization from, any Governmental Entity with
jurisdiction regarding environmental matters or Hazardous Materials
(including, without limitation, ISRA) is required to be obtained, either
before or after the Effective Time, in connection with any of the
transactions contemplated by this Agreement.
(d) No action, proceeding, writ, injunction or claim is pending or,
to the knowledge of Sensors, threatened concerning any Environmental Permit
or any Hazardous Materials Activity of Sensors. Sensors is not aware of any
fact or circumstance which could reasonably be expected to involve Sensors in
any environmental litigation or impose upon Sensors any liability concerning
Hazardous Materials Activities.
Section 3.17 EMPLOYEE BENEFIT PLANS.
(a) Sensors has set forth in the Sensors Disclosure Schedule a
description of (i) all employee benefit plans, (ii) all bonus, stock option,
stock purchase, incentive, deferred compensation, supplemental retirement,
severance and other similar employee benefit plans, and (iii) all unexpired
severance agreements, written or otherwise, which are or have been
maintained, contributed to, or required to be contributed to by Sensors or
any affiliate of Sensors, within the meaning of Sections 414(b), (c), (m) or
(o) of the Code, for the benefit of, or relating to, any current or former
employee of Sensors or any such affiliate (individually, a "Sensors Employee
Plan," and collectively, the "Sensors Employee Plans").
(b) With respect to each Sensors Employee Plan, Sensors has made
available to Finisar a true and correct copy of (i) such Sensors Employee
Plan and (ii) each trust agreement, group annuity contract and other plan
document relating to such Sensors Employee Plan.
(c) Each Sensors Employee Plan has been established and maintained
in accordance with its terms and all applicable laws, including the Employee
Retirement Income Security Act of 1974, as amended, and the Code. With
respect to the Sensors Employee Plans, individually and in the aggregate, no
event has occurred, and, to Sensors' knowledge, there exists no condition or
set of circumstances in connection with which Sensors could be subject to any
liability which is not properly accrued on the Sensors Balance Sheet.
(d) With respect to the Sensors Employee Plans, individually and in
the aggregate, there are no funded benefit obligations for which
contributions have not been made or properly accrued and there are no
unfunded benefit obligations which have not been accounted for by reserves,
or otherwise properly footnoted in accordance with GAAP, on the financial
statements or books of Sensors.
(e) Sensors is not a party to any oral or written (i) union or
collective bargaining agreement, (ii) agreement with any officer or other key
employee of Sensors, the
20
benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving Sensors of the nature
contemplated by this Agreement, (iii) agreement with any officer of Sensors
providing any term of employment or compensation guarantee or for the payment
of compensation in excess of $100,000 per annum, or (iv) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or
the value of any of the benefits of which will be calculated on the basis of
any of the transactions contemplated by this Agreement.
Section 3.18 COMPLIANCE WITH LAWS. Sensors has complied with, is not in
violation of, and has not received any notices of violation with respect to,
any statute, law or regulation applicable to the ownership or operation of
its business.
Section 3.19 EMPLOYEES AND CONSULTANTS. The Sensors Disclosure Schedule
contains a list of the names of all employees and consultants of Sensors as
of the date of this Agreement and their salaries or wages, other
compensation, dates of employment and positions.
Section 3.20 LITIGATION. There is no action, suit, proceeding, claim,
arbitration or investigation pending before any agency, court or tribunal or,
to Sensors' knowledge, threatened against Sensors or any of its properties or
officers or directors (in their capacities as such). There is no judgment,
decree or order against Sensors or, to its knowledge, any of its directors or
officers (in their capacities as such) that could prevent, enjoin or
materially alter or delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a Material Adverse
Effect on Sensors.
Section 3.21 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
judgment, injunction, order or decree binding upon Sensors which has or could
reasonably be expected to have the effect of prohibiting or materially
impairing any current or future business practice of Sensors, any acquisition
of property by Sensors or the conduct of business by Sensors as currently
being conducted or as currently proposed to be conducted.
Section 3.22 GOVERNMENTAL AUTHORIZATION. Sensors has obtained each
governmental consent, license, permit, grant or other authorization of a
Governmental Entity that is required for the operation of the business of
Sensors (collectively, the "Sensors Authorizations"), and all of such Sensors
Authorizations are in full force and effect.
Section 3.23 INSURANCE. Sensors has insurance policies of the type and
in amounts customarily carried by persons conducting businesses or owning
assets similar to those of Sensors. The Sensors Disclosure Schedule contains
a list of all such policies. There is no material claim pending under any of
such policies as to which coverage has been questioned, denied or disputed by
the underwriters of such policies. All premiums due and payable under all
such policies have been paid, and Sensors is otherwise in compliance with the
terms of such policies. Sensors has no knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies.
21
Section 3.24 INTERESTED PARTY TRANSACTIONS.
(a) No director, officer or shareholder of Sensors has any interest
in (i) any material equipment or other material property or asset, real or
personal, tangible or intangible, including, without limitation, any of the
Sensors Intellectual Property Rights, used in connection with or pertaining
to the business of Sensors, (ii) any creditor, supplier, customer,
manufacturer, agent, representative, or distributor of any of the Sensors
Products, (iii) any entity that competes with Sensors, or with which Sensors
is affiliated or has a business relationship, or (iv) any material agreement,
obligation or commitment, written or oral, to which Sensors is a party;
provided, however, that no such person shall be deemed to have such an
interest solely by virtue of ownership of less than one percent (1%) of the
outstanding stock or debt securities of any company whose stock or debt
securities are traded on a recognized stock exchange or quoted on the NNM.
(b) Except as contemplated by the Transaction Documents or
otherwise set forth in the Sensors Disclosure Schedule, Sensors is not a
party to any (i) agreement with any officer or other employee of Sensors the
benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving Sensors in the nature
of any of the transactions contemplated by this Agreement, or (ii) agreement
or plan, including, without limitation, any stock option plan, stock
appreciation right plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of benefits of which will be accelerated,
by the occurrence of any of the transactions contemplated by this Agreement
or the value of any of the benefits of which will be calculated on the basis
of any of the transactions contemplated by this Agreement.
Section 3.25 NO EXISTING DISCUSSIONS. As of the date hereof, Sensors is
not engaged, directly or indirectly, in any discussions or negotiations with
any party other than Finisar with respect to a Sensors Acquisition Proposal
(as defined in Section 6.1).
Section 3.26 REAL PROPERTY HOLDING CORPORATION. Sensors is not a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
Section 3.27 CORPORATE DOCUMENTS. Sensors has furnished to Finisar, or
its representatives, for its examination (i) its minute book containing all
records required to be set forth of all proceedings, consents, actions, and
meetings of the shareholders, the Board of Directors and any committees
thereof and (ii) all permits, orders, and consents issued by any Governmental
Entity with respect to Sensors. The corporate minute books and other
corporate records of Sensors are complete and accurate in all material
respects, and the signatures appearing on all documents contained therein are
the true signatures of the persons purporting to have signed the same. All
actions reflected in such books and records were duly and validly taken in
material compliance with the laws of the applicable jurisdiction. Sensors has
delivered or made available to Finisar or its representatives true and
complete copies of all documents which are referred to in this Article III or
in the Sensors Disclosure Schedule.
Section 3.28 NO MISREPRESENTATION. No representation or warranty by
Sensors in this Agreement, or any statement, certificate or schedule
furnished or to be furnished by or on behalf of Sensors pursuant to this
Agreement, when taken together, contains or shall contain any untrue
22
statement of a material fact or omits or shall omit to state a material fact
required to be stated therein or necessary in order to make such statements,
in light of the circumstances under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FINISAR AND SUB
Except as set forth in the disclosure schedule delivered by Finisar to
Sensors on or before the date of this Agreement (the "Finisar Disclosure
Schedule"), Finisar and Sub represent and warrant to Sensors as follows:
Section 4.1 ORGANIZATION. Each of Finisar and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power to own,
lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to transact
business and is in good standing as a foreign corporation in each
jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect on Finisar.
Section 4.2 FINISAR CAPITAL STRUCTURE.
(a) The authorized capital stock of Finisar consists of 200,000,000
shares of Finisar Common Stock and 5,000,000 shares of Preferred Stock,
$0.001 par value ("Finisar Preferred Stock"). As of July 31, 2000,
159,874,284 shares of Finisar Common Stock were issued and outstanding, all
of which had been duly authorized and validly issued and were fully paid and
nonassessable. As of July 31, 2000, 11,056,500 shares of Finisar Common stock
were reserved for issuance pursuant to stock options granted and outstanding
under Finisar's stock option plans and rights outstanding under Finisar's
employee stock purchase plan. No material change in such capitalization has
occurred between July 31, 2000 and the date of this Agreement. As of the date
hereof, no shares of Finisar Preferred Stock are issued or outstanding. All
of the outstanding shares of capital stock of Sub have been duly authorized
and validly issued and are fully paid and nonassessable, and all such shares
are owned by Finisar, free and clear of all Liens, agreements, limitations on
voting rights, charges or other encumbrances of any nature.
(b) Except as set forth in this Section 4.2 or as reserved for
future grants of options under Finisar's stock option plans or Finisar's
employee stock purchase plan, there are (i) no equity securities of any class
of Finisar, or any security exchangeable into or exercisable for such equity
securities, issued, reserved for issuance or outstanding and (ii) no
outstanding subscriptions, options, warrants, puts, calls, rights or other
commitments or agreements of any character to which Finisar is a party or by
which it is bound obligating Finisar to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
equity securities of Finisar.
(c) The shares of Finisar Common Stock to be issued pursuant to the
Merger, when issued in accordance with the terms of this Agreement, will be
duly authorized, validly issued, fully paid and nonassessable.
23
Section 4.3 AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Finisar and Sub have all requisite corporate power and
authority to execute and deliver this Agreement and the other Transaction
Documents to which they are or will be parties and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the other Transaction Documents to which Finisar or Sub is
or will be a party and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate
action on the part of Finisar and Sub, respectively. This Agreement and the
other Transaction Documents to which Finisar and/or Sub are parties have been
or will be duly executed and delivered by Finisar and/or Sub and constitute
or will constitute the valid and binding obligations of Finisar and/or Sub,
enforceable against Finisar and/or Sub, as the case may be, in accordance
with their respective terms, except as such enforceability may be limited by
(i) bankruptcy laws and other similar laws affecting creditors' rights
generally and (ii) general principles of equity.
(b) The execution and delivery by Finisar and Sub of this Agreement
and the other Transaction Documents to which they are or will be parties do
not, and the consummation of the transactions contemplated hereby and thereby
will not, (i) conflict with, or result in any violation or breach of any
provision of the Certificate of Incorporation or Bylaws of Finisar or Sub,
(ii) result in any violation or breach of, or constitute (with or without
notice or lapse of time, or both) a default under, or give rise to a right of
termination, cancellation or acceleration of any material obligation or loss
of any material benefit under, any note, mortgage, indenture, lease, contract
or other agreement, instrument or obligation to which Finisar or Sub is a
party or by which either of them or any of their properties or assets may be
bound, or (iii) conflict with or violate any permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Finisar or Sub or any of its or their properties or assets,
except in the case of (ii) and (iii) for any such conflicts, violations,
defaults, terminations, cancellations or accelerations which would not be
reasonably likely to have a Material Adverse Effect on Finisar.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required
by or with respect to Finisar or any of its Subsidiaries in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) the filing of a pre-merger
notification and report form under the HSR Act, (ii) the filing of the
application for, and receipt of, the Permit (as defined in Section 6.8),
(iii) the filing of the Agreement of Merger and Officer's Certificates with
the New Jersey Secretary of State in accordance with the BCA and the filing
of the Certificate of Merger with the Delaware Secretary of State, (iv) if
required, the filing of a report on Form 8-K with the Securities and Exchange
Commission (the "SEC"), (v) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws, and (vi) such other consents,
authorizations, filings, approvals and registrations which, if not obtained
or made, would not prevent or materially alter or delay any of the
transactions contemplated by this Agreement or be reasonably likely to have a
Material Adverse Effect on Finisar.
24
Section 4.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Finisar has timely filed and made available to Sensors all
forms, reports and documents required to be filed by Finisar with the SEC
since November 4, 1999, other than registration statements on Form S-8
(collectively, the "Finisar SEC Reports"). Each of the Finisar SEC Reports
(i) at the time it was filed, complied in all material respects with the
applicable requirements of the Securities Act and the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as the case may be, and (ii) did
not at the time it was filed (or if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing) contain any
untrue statement of a material fact or omit to state a material fact required
to be stated in such Finisar SEC Report or necessary in order to make the
statements in such Finisar SEC Report, in the light of the circumstances
under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in
each case, any related notes) contained in the Finisar SEC Reports, including
any Finisar SEC Reports filed after the date of this Agreement until the
Closing, complied or will comply as to form in all material respects with the
applicable published rules and regulations of the SEC with respect thereto,
was or will be prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to
such financial statements or, in the case of unaudited statements, as
permitted by Form 10-Q promulgated by the SEC) and presented fairly or will
present fairly, in all material respects, the consolidated financial position
of Finisar and its Subsidiaries as of the respective dates, and the
consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are
not expected to be material in amount. The audited consolidated balance sheet
of Finisar as of April 30, 2000 is referred to herein as the "Finisar Balance
Sheet."
Section 4.5 ABSENCE OF UNDISCLOSED LIABILITIES. Finisar and its
Subsidiaries do not have any liabilities, either accrued or contingent
(whether or not required to be reflected in financial statements in
accordance with GAAP), and whether due or to become due, which individually
or in the aggregate would be reasonably likely to have a Material Adverse
Effect on Finisar, other than (i) liabilities reflected or provided for on
the Finisar Balance Sheet, (ii) liabilities specifically contemplated by this
Agreement, or described in the Finisar Disclosure Schedule or Finisar SEC
Reports, and (iii) normal or recurring liabilities incurred since April 30,
2000 in the ordinary course of business consistent with past practices.
Section 4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since April 30, 2000,
Finisar has not suffered any event or occurrence that has had a Material
Adverse Effect on Finisar.
Section 4.7 LITIGATION. Except as described in the Finisar SEC Reports,
there is no action, suit or proceeding, claim, arbitration or investigation
against Finisar pending or as to which Finisar has received any written
notice of assertion, which is reasonably likely to have a Material Adverse
Effect on Finisar or a material adverse effect on the ability of Finisar to
consummate the transactions contemplated by this Agreement.
Section 4.8 NO MISREPRESENTATION. No representation or warranty by
Finisar or Sub in this Agreement, or any statement, certificate or schedule
furnished or to be furnished by or on
25
behalf of Finisar or Sub pursuant to this Agreement, when taken together,
contains or shall contain any untrue statement of a material fact or omits or
shall omit to state a material fact required to be stated therein or
necessary in order to make such statements, in light of the circumstances
under which they were made, not misleading.
ARTICLE V
CONDUCT OF BUSINESS
Section 5.1 COVENANTS OF SENSORS. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Sensors agrees (except to the extent that
Finisar shall otherwise consent in writing), to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
previously conducted, to pay its debts and Taxes when due, to pay or perform
its other obligations when due (subject to good faith disputes with respect
to such obligations), and, to the extent consistent with such business, to
use all commercially reasonable efforts consistent with past practices and
policies to (i) preserve intact its present business organization, (ii) keep
available the services of its present officers and key employees and (iii)
preserve its relationships with customers, suppliers, distributors,
licensors, licensees and others having business dealings with it. Sensors
shall promptly notify Finisar of any event or occurrence not in the ordinary
course of business of Sensors where such event or occurrence would result in
a breach of any covenant of Sensors set forth in this Agreement or cause any
representation or warranty of Sensors set forth in this Agreement to be
untrue as of the date of, or giving effect to, such event or occurrence.
Except as expressly contemplated by this Agreement, or set forth on the
Sensors Disclosure Schedule, Sensors shall not, without the prior written
consent of Finisar:
(a) Grant or accelerate, amend or change the period of vesting or
exercisability of options, stock appreciation rights, stock purchase rights
or restricted stock granted under any employee stock plan of Sensors or
authorize cash payments in exchange for, or in settlement of, any options or
other rights granted under any of such plans except as required by the terms
of such plans or any related agreements in effect as of the date of this
Agreement;
(b) Transfer or license to any person or entity or otherwise
extend, amend or modify any rights to the Sensors Intellectual Property
Rights other than in the ordinary course of business consistent with past
practices;
(c) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock
(other than dividends of previously taxed S corporation earnings, in the
manner and to the extent described in the Sensors Disclosure Schedule), 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 purchase 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 by such party;
26
(d) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or securities
convertible into shares of its capital stock, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or other convertible
securities, other than the issuance of shares of Sensors Common Stock upon
the exercise or conversion of Sensors Options outstanding as of the date of
this Agreement;
(e) Acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial equity interest in or substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership or other business organization or division, or otherwise acquire
or agree to acquire any assets other than acquisitions involving aggregate
consideration of not more than $50,000;
(f) Sell, lease, license or otherwise dispose of any of its
properties or assets which are material, individually or in the aggregate, to
the business of Sensors, except for transactions entered into in the ordinary
course of business;
(g) Take any action to (i) increase or agree to increase the
compensation payable or to become payable to its officers or employees, (ii)
grant any additional severance or termination pay to, or enter into any
employment or severance agreements with, any officers, (iii) grant any
severance or termination pay to, or enter into any employment or severance
agreement, with any non-officer employee, except in accordance with past
practices, (iv) enter into any collective bargaining agreement, or (v)
establish, adopt, enter into or amend in any material respect any bonus,
profit sharing, thrift, compensation, stock option, restricted stock, stock
appreciation right, pension, retirement, deferred compensation, employment,
termination, severance or other plan, trust, fund, policy or arrangement for
the benefit of any directors, officers or employees;
(h) Revalue any of its assets, including writing down the value of
inventory or writing off notes or accounts receivable, other than in the
ordinary course of business;
(i) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities or guarantee any debt securities of others, other
than indebtedness incurred under outstanding lines of credit consistent with
past practice;
(j) Amend or propose to amend its Certificate of Incorporation or
Bylaws, except as contemplated by this Agreement;
(k) Incur or commit to incur any individual capital expenditure in
excess of $100,000 or aggregate capital expenditures in excess of $250,000,
in addition to the existing commitments set forth in the Sensors Disclosure
Schedule;
(l) Enter into or amend any agreements or amendments to existing
agreements pursuant to which any third party is granted exclusive marketing
or distribution rights with respect to any Sensors Product;
27
(m) Amend or terminate any contract, agreement or license to which
it is a party, except in the ordinary course of business;
(n) Waive or release any material right or claim, except in the
ordinary course of business;
(o) Revoke Sensors' election to be taxed as an S corporation within
the meaning of Section 1361 and 1362 of the Code or take or allow any action
(other than the closing of the Merger pursuant to this Agreement) that would
result in the termination of Sensors' status as a validly electing S
corporation within the meaning of Sections 1361 and 1362 of the Code;
(p) Make, change or revoke any other material election with respect
to Taxes or enter into or amend any material agreement or settlement with any
taxing authority;
(q) Initiate any litigation or arbitration proceeding; or
(r) Agree, in writing or otherwise, to take any of the actions
described in paragraphs (a) through (q) above, or any action which is
reasonably likely to make any of Sensors' representations or warranties
contained in this Agreement untrue or incorrect in any material respect on
the date made (to the extent so limited) or as of the Effective Time.
Section 5.2 COVENANTS OF FINISAR. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Finisar agrees (except to the extent that
Sensors shall otherwise consent in writing), to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
previously conducted, to pay its debts and Taxes when due, subject to good
faith disputes over such debts or Taxes, to pay or perform its other
obligations when due, and, to the extent consistent with such business, use
all commercially reasonable efforts consistent with past practices and
policies to (i) preserve intact its present business organization, (ii) keep
available the services of its present officers and key employees and (iii)
preserve its relationships with customers, suppliers, distributors,
licensors, licensees and others having business dealings with it. Finisar
shall promptly notify Sensors of any event or occurrence not in the ordinary
course of business of Finisar where such event or occurrence would result in
a breach of any covenant of Finisar set forth in this Agreement or cause any
representation or warranty of Finisar set forth in this Agreement to be
untrue as of the date of, or giving effect to, such event or occurrence.
Section 5.3 COOPERATION. Subject to compliance with applicable law, from
the date hereof until the Effective Time, each of Finisar and Sensors shall
confer on a regular and frequent basis with one or more representatives of
the other party to report operational matters of materiality and the general
status of ongoing operations and shall promptly provide the other party or
its counsel with copies of all filings made by such party with any
Governmental Entity in connection with this Agreement, the Merger and the
transactions contemplated hereby.
28
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 NO SOLICITATION.
(a) During the period from the date of this Agreement until the
earlier of the termination of this Agreement or the Effective Time, Sensors
shall not, directly or indirectly, through any officer, director, employee,
representative or agent, (i) take any action to solicit, initiate, encourage
or support any inquiries or proposals that constitute, or could reasonably be
expected to lead to, a proposal or offer for a merger, consolidation,
business combination, sale of assets, sale of shares of capital stock
(including without limitation by way of a tender offer) or similar
transactions involving Sensors, other than the transactions contemplated or
expressly permitted by this Agreement (any of the foregoing inquiries or
proposals being referred to in this Agreement as a "Sensors Acquisition
Proposal"), (ii) engage in negotiations or discussions concerning, or provide
any non-public information to any person or entity relating to, any Sensors
Acquisition Proposal, or (iii) agree to, approve or recommend any Sensors
Acquisition Proposal.
(b) Sensors shall notify Finisar no later than twenty-four (24)
hours after receipt by Sensors (or its advisors) of any Sensors Acquisition
Proposal or any request for nonpublic information in connection with a
Sensors Acquisition Proposal or for access to the properties, books or
records of Sensors by any person or entity that informs Sensors that it is
considering making, or has made, a Sensors Acquisition Proposal. Such notice
shall be made orally and in writing and shall indicate in reasonable detail
the identity of the offeror and the terms and conditions of such proposal,
inquiry or contact.
(c) During the period from the date of this Agreement until the
earlier of the termination of this Agreement or the Effective Time, Finisar
shall not, directly or indirectly, through any officer, director, employee,
representative or agent, (i) make any inquiries or proposals that constitute,
or could reasonably be expected to lead to, a proposal or offer for a merger,
consolidation, business combination, purchase of substantial assets, purchase
of shares of capital stock (including, without limitation, by way of a tender
offer) or similar transactions involving any other entity engaged primarily
in a business substantially similar to that of Sensors (any of the foregoing
inquiries or proposals being referred to in this Agreement as a "Finisar
Acquisition Proposal"), (ii) engage in negotiations or discussions
concerning, or provide any non-public information to any person or entity
relating to, any Finisar Acquisition Proposal, or (iii) agree to, approve or
recommend any Finisar Acquisition Proposal.
(d) During the period from the date of this Agreement until the
earlier of the termination of this Agreement or the Effective Time, each
Principal Shareholder agrees that he will not, directly or indirectly,
through any agent or otherwise, take any action to solicit, initiate, seek,
encourage or support any inquiry, proposal or offer from, furnish any
information to, or participate in any negotiations with, any corporation,
partnership, person or other entity or group (other than Finisar) regarding
any Sensors Acquisition Proposal. If a Sensors Acquisition Proposal is
received by, or such information is requested from, such Principal
Shareholder, such
29
Principal Shareholder shall promptly notify Finisar of such fact and specify
the information requested and the name of the person making such proposal
and/or requesting such information.
Section 6.2 CONSENTS. Each of Finisar and Sensors shall use all
reasonable efforts to obtain all necessary consents, waivers and approvals
under any of Finisar's or Sensors' material agreements, contracts, licenses
or leases as may be necessary or advisable to consummate the Merger and the
other transactions contemplated by this Agreement.
Section 6.3 ACCESS TO INFORMATION. Upon reasonable notice, Sensors shall
afford to the officers, employees, accountants, counsel and other
representatives of Finisar, reasonable access, during normal business hours
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments and records and, during such period, Sensors shall
furnish promptly to Finisar or its representatives all other information
concerning its business, properties and personnel as such other party may
reasonably request. Unless otherwise required by law, the parties will treat
any such information which is nonpublic in confidence in accordance with the
Nondisclosure Agreement effective as of April 5, 2000 (the "Confidentiality
Agreement") between Finisar and Sensors, which Confidentiality Agreement
shall continue in full force and effect in accordance with its terms. No
information or knowledge obtained in any investigation pursuant to this
Section 6.3 shall affect or be deemed to modify any representation or
warranty contained in this Agreement or the conditions to the obligations of
the parties to consummate the Merger.
Section 6.4 LEGAL CONDITIONS TO MERGER. Each of Finisar and Sensors will
take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on itself with respect to the Merger (which
actions shall include, without limitation, furnishing all information in
connection with approvals of or filings with any Governmental Entity) and
will promptly cooperate with and furnish information to each other in
connection with any such requirements imposed upon either of them or any of
their Subsidiaries in connection with the Merger. Each of Finisar and Sensors
will take all reasonable actions necessary to obtain (and will cooperate with
each other in obtaining) any consent, authorization, order or approval of, or
any exemption by, any Governmental Entity or other third party, required to
be obtained or made by Sensors, Finisar or any of their Subsidiaries in
connection with the Merger or the taking of any action contemplated thereby
or by this Agreement and to enable the Closing to occur as promptly as
practicable.
Section 6.5 PUBLIC DISCLOSURE. Finisar and Sensors shall consult with
each other before issuing any press release or otherwise making any public
statement with respect to the Merger or this Agreement and shall not issue
any such press release or make any such public statement prior to such
consultation, except as may be required by law or by the rules or regulations
of the SEC or the NNM.
Section 6.6 TAX-FREE REORGANIZATION. Finisar and Sensors each intend
that the Merger shall qualify for treatment as a reorganization within the
meaning of Section 368(a) of the Code. Finisar and Sensors each agree to
refrain from taking any action inconsistent with such intended treatment.
Finisar and Sensors agree to make, and Sensors agrees to use its best efforts
to cause its shareholders to make, reasonable representations as requested by
counsel to Finisar and Sensors with respect to the rendering of the opinions
required pursuant to Section 7.1(e).
30
Section 6.7 NASDAQ QUOTATION. Finisar agrees to continue the quotation
of Finisar Common Stock on the NNM during the term of this Agreement. Finisar
shall use its best efforts to cause the shares of Finisar Common Stock to be
issued in the Merger to be approved for quotation on the NNM, subject to
official notice of issuance, prior to the Closing Date.
Section 6.8 SECURITIES LAW MATTERS.
(a) As soon as practicable following the execution of this
Agreement, Finisar will file a request for a hearing (the "Hearing") before
the Commissioner of Corporations of the State of California to consider the
terms, conditions and fairness of the transactions contemplated by this
Agreement pursuant to Section 25142 of the California Corporations Code,
together with an application for a permit relating to the transactions
contemplated by this Agreement and the Agreement of Merger (the "Permit").
Sensors and the Principal Shareholders shall promptly furnish to Finisar all
data and information relating to Sensors and the Principal Shareholders as
may be necessary in connection with such request and application and such
other notices and documents as may be required in connection with the
Hearing. Finisar, Sensors and the Principal Shareholders shall use their
respective best efforts to cause the Hearing to take place and the Permit to
be issued at the earliest practicable date.
(b) Finisar shall prepare and file with appropriate state
securities or "Blue Sky" authorities all applications for qualification or
approval (or notices required to perfect exemptions from such compliance) as
may be required in connection with the Merger. Sensors and the Principal
Shareholders shall use their respective best efforts to assist Finisar as may
be necessary to comply with all appropriate state securities or Blue Sky laws
which may be applicable in connection with the Merger.
(c) In connection with the Hearing, Sensors shall prepare, with the
cooperation of Finisar, a Consent Solicitation Statement describing this
Agreement and the transactions contemplated hereby and thereby for the
purpose of soliciting the approval of Sensors Shareholders. Finisar shall
provide such information about itself as Sensors shall reasonably request.
The information supplied by Sensors for inclusion in the Consent Solicitation
Statement shall not, on the date the solicitation statement is first mailed
to Sensors Shareholders or at the Effective Time, contain any statement
which, at such time, is false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not misleading, or omit to state any material fact necessary to correct
any statement in any earlier communication which has become false or
misleading. Notwithstanding the foregoing, Sensors makes no representation,
warranty or covenant with respect to any information supplied by Finisar or
Sub which is contained in any of the foregoing documents. The information
supplied by Finisar for inclusion in the solicitation statement shall not, on
the date the solicitation statement is first mailed to Sensors' shareholders,
nor at the Effective Time, contain any statement which, at such time, is
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein, in light of
the circumstances under which it is made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication which has become false or misleading. Notwithstanding the
foregoing, Finisar and Sub make no representation, warranty or
31
covenant with respect to any information supplied by Sensors which is
contained in any of the foregoing documents.
(d) The Consent Solicitation Statement shall constitute a
disclosure document for the offer and issuance of shares of Finisar Common
Stock to be received by the holders of Sensors Common Stock in the Merger.
Finisar and Sensors shall each use reasonable commercial efforts to cause the
Consent Solicitation Statement to comply with applicable federal and state
securities laws requirements. Each of Finisar and Sensors 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
solicitation statement or in any amendments or supplements thereto, and to
cause its counsel and auditors to cooperate with the other's counsel and
auditors in the preparation of the solicitation statement. Sensors will
promptly advise Finisar, and Finisar will promptly advise Sensors, in writing
if at any time prior to the Effective Time either Sensors or Finisar shall
obtain knowledge of any facts that might make it necessary or appropriate to
amend or supplement the solicitation statement in order to make the
statements contained or incorporated by reference therein not misleading or
to comply with applicable law. The solicitation statement shall contain the
unanimous recommendation of the Board of Directors of Sensors that the
Sensors shareholders approve the Merger and this Agreement and the unanimous
conclusion of the Board of Directors that the terms and conditions of the
Merger are fair and reasonable to the shareholders of Sensors. Anything to
the contrary contained herein notwithstanding, Sensors shall not include in
the solicitation statement any information with respect to Finisar or its
affiliates or associates, the form and content of which information shall not
have been approved by Finisar prior to such inclusion.
(e) Upon receipt of the Permit, Sensors shall, as promptly as
possible but not later than three (3) days following the effectiveness of the
Permit, submit this Agreement and the transactions contemplated hereby to the
Sensors shareholders for approval and adoption as provided by New Jersey law
and its Certificate of Incorporation and Bylaws. Sensors shall use its best
efforts to solicit and obtain the consent of the Sensors shareholders
sufficient to approve the Merger and this Agreement and to enable the Closing
to occur as promptly as practicable and, in any event, on or before November
30, 2000. Sensors shall ensure that the meeting of the Sensors shareholders
called for the purpose of approving the Merger and this Agreement, or the
solicitation of written consents of the Sensors shareholders without a
meeting, is conducted, and that all proxies solicited by Sensors in
connection with any such meeting are solicited, in compliance with applicable
law and the Sensors charter documents. Sensors' obligation to call, give
notice of, convene and hold the shareholders' meeting, or to solicit the
written consent of its shareholders without a meeting, in accordance with
this Section 6.8(e) shall not be limited to or otherwise affected by the
commencement, disclosure, announcement or submission to Sensors of any
Sensors Acquisition Proposal.
(f) SCHEDULE 6.8(f) sets forth those persons who, in Sensors'
reasonable judgment are or may be "affiliates" of Sensors within the meaning
of Rule 145 (each such person a "Sensors Affiliate"). Sensors shall provide
Finisar such information and documents as Finisar shall reasonably request
for purposes of reviewing such list. Sensors shall deliver or cause to be
delivered to Finisar, promptly following the execution of this Agreement (and
in any case prior to the Closing) from each of the Sensors Affiliates, an
executed Affiliate Agreement in the form
32
attached hereto as EXHIBIT C. Finisar shall be entitled to place appropriate
legends on the certificates evidencing any Finisar Common Stock to be
received by such Sensors Affiliates pursuant to the terms of this Agreement,
and to issue appropriate stop transfer instructions to the transfer agent for
Finisar Common Stock, consistent with the terms of such Affiliate Agreements.
Section 6.9 HSR ACT. Finisar and Sensors shall promptly prepare and file
Notification and Report Forms under the HSR Act with the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of
Justice (the "Antitrust Division"), and respond as promptly as practicable to
all inquiries received from the FTC or the Antitrust Division for additional
information or documentation.
Section 6.10 EMPLOYMENT MATTERS.
(a) Effective on the Closing Date, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ will become an
employee of the Surviving Corporation pursuant to the terms of an Employment
Agreement in the form of EXHIBIT D-1 hereto, and each of the other Principal
Shareholders, and ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇
▇. ▇▇▇▇ will become employees of the Surviving Corporation pursuant to the
terms of Employment Agreements substantially in the form of EXHIBIT D-2
hereto (collectively, the "Employment Agreements").
(b) Prior to the Closing Date, Finisar will make offers of "at
will" employment (on behalf of the Surviving Corporation) to all employees of
Sensors recommended by the Chief Executive Officer of Sensors and set forth
on SCHEDULE 6.10(b) hereto, such offers to be conditioned upon the
consummation of the Merger. All Sensors employees whose employment will not
be continued by the Surviving Corporation will be terminated by Sensors prior
to the Closing Date.
Section 6.11 STOCK OPTIONS.
(a) Holders of outstanding, vested Sensors Options (including
options that vest due to the Merger) may elect to either (i) exercise such
options prior to the Closing and receive the Firm Merger Shares (or Cash
Merger Consideration in lieu of a portion thereof) and the Performance Shares
in the same manner and at the same time as other Sensors Shareholders or (ii)
not exercise such options prior to the Closing and instead have Finisar
assume their outstanding and unexercised Sensors Options and convert them
into options to purchase Finisar Common Stock, as set forth in Section
6.11(b) below.
(b) At the Effective Time, each outstanding Sensors Option which
has not been exercised prior to the Closing, whether vested or unvested,
shall be assumed by Finisar and converted into an option (an "Assumed
Option") to acquire, on the same terms and conditions as were applicable
under the Sensors Option (except as otherwise provided below), such number of
shares of Finisar Common Stock equal to the number of Firm Merger Shares and
Performance Shares which the holder of such Sensors Option would have been
entitled to receive pursuant to the Merger (assuming the issuance of all
Performance Shares) had such holder exercised such option in full immediately
prior to the Effective Time (rounded down to the nearest whole share), at a
price per share (rounded up to the nearest whole cent) equal to (i) the
aggregate exercise
33
price of the Sensors Common Stock purchasable pursuant to such Sensors Option
immediately prior to the Effective Time divided by (ii) the number of full
shares of Finisar Common Stock purchasable pursuant to the Assumed Option.
The vesting schedule of each Assumed Option shall be structured such that
each Assumed Option shall initially be vested to the extent of the greater of
(i) 25% of the total number of shares subject to the Assumed Option or (ii)
the vested percentage of the original Sensors Option at the Closing, but in
no event greater than 50% of the total number of shares subject to the
Assumed Option, and the remainder shall vest in three approximately equal
annual installments on each of the first three anniversaries of the Closing
Date, subject in each case to the holder's continued service with Finisar or
a Subsidiary thereof. The vesting of the Assumed Options will not be subject
to acceleration upon future events, except for (x) events that cause the
acceleration of options then outstanding under Finisar's stock option plans
or (y) the holder's death or permanent disability, the involuntary
termination of the holder's employment without cause or, in the case of the
Principal Shareholders, the voluntary termination of such Principal
Shareholder's employment for "Good Reason," as defined in such Principal
Shareholder's Employment Agreement.
(c) As soon as practicable after the execution of this Agreement,
Sensors shall deliver to the holders of the Sensors Options an appropriate
notice setting forth such holders' rights pursuant thereto and the right of
the holders to make the election set forth in Section 6.11(a) above. Each
Assumed Option shall be evidenced by a written assumption agreement
reflecting the terms set forth in Section 6.11(b) and delivered to the former
holders of Sensors Options promptly following the Effective Time. Finisar
shall, to the extent required by and subject to the provisions of the Sensors
Option Plan, take such actions as may be appropriate under the Code and the
regulations thereunder to cause the Assumed Options representing assumed
Sensors Options which qualified as incentive stock options immediately prior
the Effective Time continue to qualify as incentive stock options after the
Effective Time, to the extent permitted under the Code and the regulations
thereunder.
(d) Finisar shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Finisar Common Stock for
delivery upon exercise of the Assumed Options. As soon as practicable after
the Effective Time, Finisar shall file a registration statement on Form S-8
(or any successor or other appropriate forms), with respect to the shares of
Finisar Common Stock subject to the Assumed Options and shall use its best
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses in connection therewith) for so long as any Assumed Options
remain outstanding. With respect to those individuals who, subsequent to the
Merger, will be subject to the reporting requirements under Section 16(a) of
the Exchange Act, where applicable, Finisar shall administer the Assumed
Options in a manner that complies with Rule 16b-3 promulgated under the
Exchange Act.
(e) In addition to the Sensors Options assumed by Finisar in the
Merger, Finisar shall grant to all Sensors employees who remain employed at
the Closing new options, under Finisar's employee stock option plan, to
purchase shares of Finisar Common Stock in the amounts set forth on SCHEDULE
6.11(e) hereto.
Section 6.12 EMPLOYEE STOCK PURCHASE PLAN. Employees of Sensors as of
the Effective Time shall be permitted to participate in the Finisar Employee
Stock Purchase Plan commencing
34
on the first enrollment date following the Effective Time, subject to
compliance with the eligibility provisions of such plan.
Section 6.13 FINISAR PLANS. All Sensors employees who remain employees
of Finisar, Sensors or any other Subsidiary of Finisar following the
Effective Time shall be entitled to participate in all employee benefit plans
and programs (the "Finisar Plans") that are available to other Finisar
employees holding comparable positions. To the extent permitted by the
Finisar Plans, each participant shall be given full credit for such
participant's period of continuous service with Sensors prior to the
Effective Time. To the extent permitted by law, Finisar shall amend the
Finisar Plans, as necessary, to provide for such participation. In the case
of medical and health insurance coverage, Finisar shall cause the Surviving
Corporation to continue to insure Sensors employees under Sensors' existing
insurance plans or provide them with the opportunity to participate in
Finisar Plans providing generally comparable medical and health insurance
coverage.
Section 6.14 EMPLOYEE RETENTION POOL. Finisar shall establish a pool of
cash in the aggregate amount of $2,000,000 (the "Retention Pool") for
retention of Sensors employees. The Retention Pool shall be allocated among
the employees listed on SCHEDULE 6.11(e) hereto (excluding ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇)
in proportion to their current base salary as set forth on a list to be
delivered by Sensors to Finisar prior to the Closing. One-fourth of the
amount allocated to each eligible employee will vest at the Effective Time
provided such eligible employee accepts continued employment with the
Surviving Corporation and will be payable on the next regular payroll date
thereafter. Eligible employees will vest in the remaining amount allocated to
them in equal installments on the first, second and third anniversaries of
the Closing Date, subject to their continued employment by Finisar or a
Subsidiary of Finisar.
Section 6.15 SENSORS 401(k) PLAN. Sensors agrees to terminate its 401(k)
plan immediately prior to the Effective Time, unless Finisar, in its sole and
absolute discretion, agrees to sponsor and maintain such plan by providing
Sensors with written notice of such election at least three (3) days before
the Closing Date. Unless Finisar provides such notice, Sensors shall deliver
to Finisar evidence that Sensors' 401(k) plan has been terminated pursuant to
resolutions of Sensors' Board of Directors (the form and substance of which
resolutions shall be subject to review and approval of Finisar), effective as
of the day immediately preceding the Closing Date.
Section 6.16 BROKERS OR FINDERS. Each of Finisar and Sensors represents,
as to itself, its Subsidiaries and its Affiliates, that no agent, broker,
investment banker, financial advisor or other firm or person is or will be
entitled to any broker's or finder's fee or any other commission or similar
fee in connection with any of the transactions contemplated by this
Agreement, except Broadview International, financial advisor to Finisar, to
which Finisar has agreed to pay fees and expenses in connection with
financial advisory services, and Quantum Leap Institute LLC ("QLI"),
financial advisor to Sensors, and QLI's consultant, RHK, Inc., to which
Sensors has agreed to pay fees and expenses in connection with financial
advisory services, and each of Finisar and Sensors agrees to indemnify and
hold the other harmless from and against any and all claims, liabilities or
obligations with respect to any other fees, commissions or expenses asserted
by any person on the basis of any act or statement alleged to have been made
by such party or its Affiliate.
35
Section 6.17 ADDITIONAL AGREEMENTS; REASONABLE EFFORTS. Subject to the
terms and conditions of this Agreement, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including cooperating fully with the other
party, including by provision of information. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full
title to all properties, assets, rights, approvals, immunities and franchises
of either of the Constituent Corporations, the proper officers and directors
of each party to this Agreement shall take all such necessary action.
Section 6.18 EXPENSES. The parties shall each pay their own legal,
accounting, financial advisory and consulting fees and other out-of-pocket
expenses related to the negotiation, preparation and carrying out of this
Agreement and the transactions herein contemplated. In the event the Merger
is consummated all legal, accounting, financial advisory and consulting fees
and expenses incurred by Sensors (whether paid or accrued) relating to the
negotiation, preparation and carrying out of this Agreement and the
transactions contemplated hereby, and obtaining all authorizations, consents,
orders or approvals of, or declarations or filings with, all Governmental
Entities in connection with such transactions (the "Sensors Transaction
Expenses") shall be borne by the former security holders of Sensors, as
hereinafter provided. Filing fees and other fees payable to Governmental
Entities shall not be deemed to be Sensors Transaction Expenses. SCHEDULE
6.18 hereto sets forth Sensors' current estimate of the total Sensors
Transaction Expenses which Sensors expects to incur (the "Estimated Sensors
Transaction Expenses"). Sensors shall provide an updated schedule of
Estimated Sensors Transaction Expenses not later than two (2) business days
prior to the Closing (the "Closing Sensors Transaction Expense Schedule").
The amount of Sensors Transaction Expenses set forth on the Closing Sensors
Transaction Expense Schedule shall be used to calculate the Total Stock
Consideration as defined in Section 2.1(r). In the event the Sensors
Transaction Expenses actually incurred by Sensors exceed the amount shown on
the Closing Sensors Transaction Expense Schedule, Finisar shall be entitled
to assert a claim against the Escrow Shares pursuant to Article XI hereof in
order to recover all such additional expenses.
Section 6.19 BOARD OF DIRECTORS. Finisar shall elect ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
to its Board of Directors effective as of the Effective Time.
ARTICLE VII
CONDITIONS TO MERGER
Section 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the satisfaction on or prior to the Closing Date
of the following conditions:
(a) This Agreement and the Merger shall have been approved and
adopted by the affirmative vote of the holders of the requisite number of
outstanding shares of Sensors Common Stock.
36
(b) The waiting period (and any extension thereof) applicable to
the Merger under the HSR Act shall have been terminated or shall have expired.
(c) All other authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by,
any Governmental Entity the failure of which to obtain or comply with would
be reasonably likely to have a Material Adverse Effect on Finisar or Sensors
or a material adverse effect on the consummation of the transactions
contemplated hereby shall have been filed, occurred or been obtained.
(d) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other legal or regulatory restraint or prohibition preventing the
consummation of the Merger or limiting or restricting Finisar's conduct or
operation of the business of Finisar or Sensors after the Merger shall have
been issued, nor shall any proceeding brought by any Governmental Entity
seeking any of the foregoing be pending; nor shall there be any action taken,
or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the Merger which makes the consummation of the Merger
illegal.
(e) Finisar shall have received a written opinion from its counsel,
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP, and Sensors shall have received a written
opinion from its counsel, ▇▇▇▇▇▇▇▇ Ingersoll Professional Corporation, in
form and substance reasonably satisfactory to both parties, to the effect
that the Merger will be treated for federal income tax purposes as a tax-free
reorganization within the meaning of Section 368(a) of the Code; provided,
however, that if counsel to either party does not render such opinion, this
condition shall be deemed satisfied with respect to such party if counsel to
the other party renders such opinion to such party. In rendering such
opinions, counsel may rely upon reasonable representations and certificates
of Finisar, Sub, Sensors and their respective directors, officers and
shareholders.
(f) The California Department of Corporations shall have issued the
Permit qualifying the securities to be issued hereunder pursuant to Section
25121 of the California Corporations Code, and such issuance shall be exempt
from the registration requirements of the Securities Act pursuant to Section
3(a)(10) thereof.
Section 7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF FINISAR AND SUB. The
obligations of Finisar and Sub to effect the Merger are subject to the
satisfaction of each of the following conditions, any of which may be waived
in writing exclusively by Finisar:
(a) The representations and warranties of Sensors and the Principal
Shareholders set forth in this Agreement shall be true and correct as of the
date of this Agreement and as of the Closing Date as though made on and as of
the Closing Date, except (i) for changes contemplated by this Agreement, (ii)
that representations and warranties which specifically relate to a particular
date or period shall be true and correct as of such date or for such period
and (iii) where the failure of any such representation or warranty to be true
and correct on and as of the Closing Date, individually and in the aggregate,
would not be reasonably likely to have a Material Adverse Effect on Sensors,
or a material adverse effect upon the consummation of the transactions
contemplated hereby; and Finisar shall have received a certificate to such
effect signed on behalf of Sensors by the chief executive officer of Sensors
37
and each of the Principal Shareholders. For purposes of this subsection
7.2(a), the following events or occurrences shall not be deemed to be events
or occurrences having a Material Adverse Effect on Sensors: (i) distributions
by Sensors to Sensors shareholders in the manner described in the Sensors
Disclosure Statement to satisfy their Sensors-related income tax liabilities
for the period Sensors was an S corporation; (ii) increases in the trading
price of Finisar Common Stock, as reported on the NNM, occurring at any time
or from time to time between the date hereof and the Closing Date; (iii)
events or occurrences affecting the general economy, the electronics or
communications industries, generally, or the segments of the electronics and
communications industries in which Sensors participates; or (iv) events or
occurrences related directly to the Merger or the other transactions
contemplated by this Agreement.
(b) Sensors shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior
to the Closing Date, and Finisar shall have received a certificate to such
effect signed on behalf of Sensors by the chief executive officer of Sensors.
(c) Finisar shall have received from Sensors written evidence that
the execution, delivery and performance of Sensors' obligations under this
Agreement have been duly and validly approved and authorized by the Board of
Directors and the shareholders of Sensors.
(d) Finisar shall have received all permits and other
authorizations required under applicable state blue sky laws for the issuance
of shares of Finisar Common Stock pursuant to the Merger.
(e) Finisar shall have been furnished with evidence satisfactory to
it of the consent or approval of those persons whose consent or approval
shall be required in connection with the Merger under the material contracts
of Sensors, as set forth on SCHEDULE 7.2(e) hereto.
(f) Each of the Principal Shareholders and the other persons listed
in Section 6.10(a) shall have executed and delivered their respective
Employment Agreement.
(g) Each of the Principal Shareholders and the other persons listed
in Section 6.10(a) shall have executed and delivered Noncompetition
Agreements in the form of EXHIBIT E hereto (the "Noncompetition Agreement").
(h) Finisar shall have received satisfactory assurance, as
determined by Finisar in good faith, that at least 90% of the Key Sensors
Employees (other than the Principal Shareholders) will remain employed by the
Surviving Corporation or Finisar after the Merger.
(i) The Merger shall have been approved by the affirmative vote of
the holders of not less than 95% of the outstanding shares of Sensors Common
Stock.
(j) Finisar shall have received a legal opinion from ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ Professional Corporation, counsel to Sensors, substantially in the
form of EXHIBIT F hereto.
(k) The Escrow Agreement shall have been executed and delivered by
the Shareholders' Representative (as defined in Section 9.6) and the Escrow
Agent.
38
(l) Finisar shall have received from each of the affiliates of
Sensors an executed Affiliate Agreement.
Section 7.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF SENSORS. The
obligation of Sensors to effect the Merger is subject to the satisfaction of
each of the following conditions, any of which may be waived, in writing,
exclusively by Sensors:
(a) The representations and warranties of Finisar and Sub set forth
in this Agreement shall be true and correct as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date,
except (i) for changes contemplated by this Agreement, (ii) that
representations and warranties which specifically relate to a particular date
or period shall be true and correct as of such date or for such period, and
(iii) where the failure of any such representation or warranty to be true and
correct on and as of the Closing Date, individually or in the aggregate,
would not be reasonably likely to have a Material Adverse Effect on Finisar,
or a material adverse effect upon the consummation of the transactions
contemplated hereby; and Sensors shall have received a certificate to such
effect signed on behalf of Finisar by the chief financial officer of Finisar.
For the purposes of the foregoing condition, the following events or
occurrences shall not be deemed to be events or occurrences having a Material
Adverse Effect on Finisar: (i) reductions in the trading price of Finisar
Common Stock, as reported on the NNM, occurring at any time or from time to
time between the date hereof and the Closing Date; (ii) events or occurrences
affecting the general economy, the electronics or communications industries,
generally, or the segments of the electronics and communications industries
in which Finisar participates; or (iii) events or occurrences related
directly to the Merger or the other transactions contemplated by this
Agreement.
(b) Finisar and Sub shall have performed in all material respects
all obligations required to be performed by them under this Agreement at or
prior to the Closing Date, and Sensors shall have received a certificate to
such effect signed on behalf of Finisar by the chief financial officer of
Finisar.
(c) Sensors shall have received from Finisar and Sub written
evidence that the execution, delivery and performance of Finisar's and Sub's
obligations under this Agreement have been duly and validly approved and
authorized by the Boards of Directors of Finisar and Sub.
(d) Finisar shall have executed and delivered the Employment
Agreements and Noncompetition Agreements.
(e) Sensors shall have received a legal opinion from ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
& Freidenrich LLP, counsel to Finisar, substantially in the form of EXHIBIT G
hereto.
(f) The Escrow Agreement shall have been executed and delivered by
Finisar and the Escrow Agent.
(g) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall have been duly elected as a member of
Finisar's Board of Directors, effective as of the Effective Time.
39
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time (with respect to Sections 8.1(b) through 8.1(e),
by written notice by the terminating party to the other party):
(a) by the mutual written consent of Finisar and Sensors;
(b) by either Finisar or Sensors if the Merger shall not have been
consummated by November 30, 2000; provided, however, that the right to
terminate this Agreement under this Section 8.1(b) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has
been the cause of or resulted in the failure of the Merger to occur on or
before such date; and provided further, that if as of such date the waiting
period (and any extension thereof) applicable to the Merger under the HSR Act
shall not have been terminated or shall not have expired, Finisar or Sensors
may, by written notice to the other, elect to extend such date for up to an
additional sixty (60) days;
(c) by either Finisar or Sensors if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree or ruling or taken any other action, in each case having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, except, if the party relying on such order, decree or ruling or other
action has not complied with its obligations under Section 6.4 or 6.6 of this
Agreement;
(d) by Finisar if the Board of Directors of Sensors shall have
withdrawn or modified its recommendation of this Agreement or the Merger for
approval by the Sensors shareholders in a manner adverse to Finisar or shall
have publicly announced or disclosed to any third party its intention to do
any of the foregoing; or
(e) by Finisar or Sensors, if there has been a material breach of
any representation, warranty, covenant or agreement on the part of the other
party set forth in this Agreement, which breach (i) causes the conditions set
forth in Section 7.2(a) or (b) (in the case of termination by Finisar) or
7.3(a) or (b) (in the case of termination by Sensors) not to be satisfied and
(ii) shall not have been cured within ten (10) business days following
receipt by the breaching party of written notice of such breach from the
other party.
Section 8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 8.1, there shall be no liability or
obligation on the part of Finisar, Sensors, Sub or their respective officers,
directors, shareholders or Affiliates, except to the extent that such
termination results from the willful breach by a party of any of its
representations, warranties or covenants set forth in this Agreement;
provided that the provisions of Sections 6.16, 6.18 and 8.3 of this
Agreement, the confidentiality provisions set forth herein and in the
Confidentiality Agreement and the non-solicitation provisions set forth in
the Confidentiality Agreement shall remain in full force and effect and
survive any termination of this Agreement.
Section 8.3 TERMINATION FEE. In the event that (i) Finisar should
determine that any approval by its stockholders is required in connection
with the consummation of the Merger,
40
(ii) such approval is not obtained, (iii) this Agreement is terminated as a
result of Finisar's failure to obtain such approval and (iv) immediately
prior to such termination, Sensors was not in breach of any of its material
obligations hereunder (which breach shall not have been cured within ten (10)
business days following receipt by Sensors of notice of such breach), then
Finisar shall pay to Sensors a termination fee of $17,000,000, payable within
thirty (30) days following the termination of this Agreement.
Section 8.4 AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by the shareholders of Sensors, but, after any
such approval, no amendment shall be made which by law requires further
approval by such shareholders without such further approval. This Agreement
may not be amended except by an instrument in writing signed on behalf of
each of the parties hereto.
Section 8.5 EXTENSION; WAIVER. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (i) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on
behalf of such party.
ARTICLE IX
ESCROW AND INDEMNIFICATION
Section 9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. If the Merger
occurs, all of the representations and warranties contained in this Agreement
shall survive the Closing Date (except that representations and warranties
that specifically relate to a particular date or period shall be true and
correct as of such date and for such period) and shall continue in full force
and effect for the period ending on the date that is eighteen (18) months
following the Closing Date (the "Termination Date").
Section 9.2 INDEMNIFICATION BY PRINCIPAL SHAREHOLDERS.
(a) Subject to the terms and conditions contained herein, each of
the Principal Shareholders shall indemnify, defend and hold harmless Finisar,
its officers, directors, employees and attorneys, all Subsidiaries and
Affiliates of Finisar, and the respective officers, directors, employees and
attorneys of such entities (all such persons and entities being collectively
referred to as the "Finisar Group") from, against, for and in respect of any
and all losses, damages, costs and expenses (including reasonable legal fees
and expenses) which any member of the Finisar Group may sustain or incur
which are caused by or arise out of (i) any inaccuracy in or breach of any of
the representations, warranties or covenants made by Sensors or the Principal
Shareholders in this Agreement, including the Sensors Disclosure Schedule,
(ii) any Sensors Transaction Expenses in excess of the amount set forth on
the Closing Sensors Transaction Expense Schedule and reflected in the
calculation of the Total Stock Consideration,
41
or (iii) any breach by the Principal Shareholders of this Article IX or the
Escrow Agreement (collectively, "Finisar Losses").
(b) No Principal Shareholder shall be required to indemnify any
member of the Finisar Group for any Finisar Losses until the aggregate amount
of all Finisar Losses under all claims shall exceed $250,000 (the "Deductible
Amount"); provided, however, that Finisar Losses under Section 9.2(a)(ii)
shall be recoverable in full without regard to the Deductible Amount. Except
as specifically provided in Section 9.2(d), the maximum aggregate liability
of any individual Principal Shareholder pursuant to Section 9.2(a) shall in
no event exceed the value of the one-third of the Escrow Shares that
otherwise would have been deliverable to such Principal Shareholder on the
third anniversary of the Closing Date pursuant to Section 2.6 hereof
(assuming four of the Milestones have been achieved by the second anniversary
of the Closing Date and all six Milestones have been achieved by the third
anniversary of the Closing Date), and the indemnification payment to be made
on behalf of each such Principal Shareholder shall be withheld only from such
portion of the Escrow Shares.
(c) The obligation of the Principal Shareholders to indemnify
members of the Finisar Group for a Finisar Loss under this Article IX is
subject to the condition that the Shareholders' Representative (as defined in
Section 9.6) shall have received written notice of an Indemnification Claim
(as defined in Section 9.3) for such Finisar Loss on or before the
Termination Date.
(d) The provisions of Section 9.2(b) above and 9.5 below shall not
limit, in any manner, (i) any remedy at law or in equity to which any member
of the Finisar Group shall be entitled against Sensors or any shareholder of
Sensors as a result of willful fraud or intentional misrepresentation by
Sensors, any shareholder of Sensors or any of their respective
representatives, or (ii) any rights that Finisar may have under federal or
state securities laws.
(e) The amount of Finisar Losses shall be computed after giving
effect to the receipt of any insurance proceeds and tax benefits with respect
thereto.
Section 9.3 PROCEDURES FOR INDEMNIFICATION.
(a) As used in this Article IX, the term "Indemnitee" means the
member or members of the Finisar Group seeking indemnification hereunder.
(b) A claim for indemnification hereunder (an "Indemnification
Claim") shall be made by Indemnitee by delivery of a written notice to the
Representative and the Escrow Agent requesting indemnification and specifying
in reasonable detail the basis on which indemnification is sought (and shall
include relevant documentation related to the Indemnification Claim), the
amount of the asserted Finisar Losses and, in the case of a Third Party Claim
(as defined in Section 9.4), containing (by attachment or otherwise) such
other information as Indemnitee shall have concerning such Third Party Claim.
(c) If the Indemnification Claim involves a Third Party Claim, the
procedures set forth in Section 9.4 hereof shall be observed by Indemnitee
and the Representative.
42
Section 9.4 DEFENSE OF THIRD PARTY CLAIMS. Should any claim be made or
suit or proceeding be instituted against an Indemnitee which, if prosecuted
successfully, would be a matter for which such Indemnitee is entitled to
indemnification under this Article IX (a "Third Party Claim"), the
obligations and liabilities of the parties hereunder with respect to such
Third Party Claim shall be subject to the following terms and conditions:
(a) Indemnitee shall give the Representative and the Escrow Agent
written notice of any such Third Party Claim promptly after receipt by
Indemnitee of notice thereof, and the Representative may, subject to the
prior written consent of Finisar, undertake control of the defense thereof by
counsel of his own choosing reasonably acceptable to Indemnitee. Indemnitee
may participate in the defense through its own counsel at its own expense.
If, however, the Representative fails or refuses to undertake the defense of
such Third Party Claim within fifteen (15) days after written notice of such
claim has been delivered to the Representative by Indemnitee, Indemnitee
shall have the right to undertake the defense, compromise and, subject to
Section 9.5, settlement of such Third Party Claim with counsel of its own
choosing. In the circumstances described in the preceding sentence,
Indemnitee shall, promptly upon its assumption of the defense of such Third
Party Claim, make an Indemnification Claim as specified in Section 9.3(b),
which shall be deemed an Indemnification Claim that is not a Third Party
Claim for the purposes of the procedures set forth herein. Failure of
Indemnitee to furnish written notice to the Representative or the Escrow
Agent of a Third Party Claim shall not release the Principal Shareholders
from their obligations hereunder, except to the extent they are prejudiced by
such failure.
(b) Indemnitee and the Representative shall cooperate with each
other in all reasonable respects in connection with the defense of any Third
Party Claim, including making available records relating to such claim and
furnishing employees of Indemnitee as may be reasonably necessary for the
preparation of the defense of any such Third Party Claim or for testimony as
witness in any proceeding relating to such claim.
(c) Unless the Representative has failed to fulfill its obligations
under this Article IX, no settlement by Indemnitee of a Third Party Claim
shall be made without the prior written consent by or on behalf of the
Representative, which consent shall not be unreasonably withheld or delayed.
If the Representative has assumed the defense of a Third Party Claim as
contemplated by this Section 9.4, no settlement of such Third Party Claim may
be made by the Representative (or the individual Principal Shareholder as the
case may be) without the prior written consent by or on behalf of Indemnitee,
which consent shall not be unreasonably withheld or delayed.
Section 9.5 MANNER OF INDEMNIFICATION.
(a) The portion of the Escrow Shares specified in Section 9.2(b),
deposited into Escrow pursuant to the Escrow Agreement in accordance with the
provisions of Section 2.5, shall provide a fund against which members of the
Finisar Group may assert claims of indemnification under this Article IX.
Except as specifically provided in Section 9.2(d), the sole recourse of any
member of the Finisar Group for such indemnification claims is to the portion
of the Escrow Shares specified in Section 9.2(b).
43
(b) Each claim for indemnification asserted against the Principal
Shareholders pursuant to this Article IX shall be made only in accordance
with the procedures set forth in the Escrow Agreement, subject to the
provisions of Section 9.2(d) hereof.
Section 9.6 APPOINTMENT OF SHAREHOLDERS' REPRESENTATIVE. For purposes of
this Agreement, the Principal Shareholders hereby consent to the appointment
of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ as the representative and attorney-in-fact for and on
behalf of the Principal Shareholders (the "Shareholders' Representative"),
and to the taking by the Shareholders' Representative of any and all actions
and the making of any decisions required or permitted to be taken by him
under this Agreement or the Escrow Agreement, including, without limitation,
the exercise of the power to (i) execute the Escrow Agreement on behalf of
the Principal Shareholders, (ii) authorize delivery to Finisar of Escrow
Shares in satisfaction of Indemnification Claims, (iii) agree to, negotiate,
enter into settlements and compromises of and comply with orders of courts
and awards of arbitrators with respect to such Indemnification Claims, (iv)
resolve any Indemnification Claims and (v) take all actions necessary in the
judgment of the Shareholders' Representative for the accomplishment of the
foregoing and all of the other terms, conditions and limitations of this
Agreement and the Escrow Agreement. Accordingly, the Shareholders'
Representative has unlimited authority and power to act on behalf of each
Principal Shareholder with respect to this Agreement and the Escrow Agreement
and the disposition, settlement or other handling of all Indemnification
Claims, rights or obligations arising from and taken pursuant to this
Agreement. The Principal Shareholders will be bound by all actions taken by
the Shareholders' Representative in connection with this Agreement, and
Finisar shall be entitled to rely on any action or decision of the
Shareholders' Representative. The Shareholders' Representative will incur no
liability with respect to any action taken or suffered by him in reliance
upon any notice, direction, instruction, consent, statement or other document
believed by him to be genuine and to have been signed by the proper person
(and shall have no responsibility to determine the authenticity thereof), nor
for any other action or inaction, except his own willful misconduct or bad
faith. In all questions arising under this Agreement or the Escrow Agreement,
the Representative may rely on the advice of counsel, and the Shareholders'
Representative will not be liable to anyone for anything done, omitted or
suffered in good faith by the Shareholders' Representative based on such
advice. Except as expressly provided herein, the Shareholders' Representative
will not be required to take any action involving any expense unless the
payment of such expense is made or provided for in a manner satisfactory to
him. At any time during the term of the Escrow Agreement, holders of a
majority of the Escrow Shares subject to Indemnification Claims under this
Article IX may, by written consent, appoint a new representative as the
Shareholders' Representative by sending notice and a copy of the written
consent appointing such new representative signed by holders of a majority of
the Escrow Shares to Finisar and the Escrow Agent. Such appointment will be
effective upon the later of the date indicated in the consent or the date
such consent is received by Finisar and the Escrow Agent.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
commercial delivery service, or within seventy-two (72) hours after being
mailed by registered or certified mail (return receipt
44
requested) or sent via facsimile (with confirmation of receipt) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Finisar, to:
Finisar Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Sensors, to
Sensors Unlimited, Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇, ▇▇▇▇. ▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ Ingersoll Professional Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to the Principal Shareholders, to
c/o Sensors Unlimited, Inc.
at the above address
45
Section 10.2 INTERPRETATION.
(a) For purposes of this Agreement
(i) When reference is made to an Article or Section, such
reference shall be to an Article or Section of this Agreement unless
otherwise indicated;
(ii) The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation;"
(iii) The phrase "made available" in this Agreement shall mean
that the information referred to has been made available if requested by the
party to whom such information is to be made available;
(iv) The phrases "the date of this Agreement," "the date
hereof," and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to August 16, 2000;
(v) Any reference to a "Material Adverse Effect" with respect
to any entity or group of entities means a material adverse effect on the
business, assets (including intangible assets), financial condition,
prospects, or results of operations of such entity and its Subsidiaries,
taken as a whole;
(vi) Any reference to a party's "knowledge" means such party's
actual knowledge after reasonable inquiry of its directors, officers, and
other management level employees reasonably believed to have knowledge of
such matters; and any reference to the "knowledge of Sensors" shall include
the knowledge of each of the Principal Shareholders;
(vii) Any reference to the "prospects" of Sensors or its
business, or to Sensors' business "as currently proposed to be conducted,"
means such prospects or business without taking into account the effects of
the Merger or any changes to Sensors' business that are initiated by Finisar
thereafter;
(viii) The word "Subsidiary" means, with respect to any party,
any corporation or other organization, whether incorporated or
unincorporated, of which (i) such party or any other Subsidiary of such party
is a general partner (excluding partnerships, the general partnership
interests of which held by such party or any Subsidiary of such party do not
have a majority of the voting interest in such partnership) or (ii) at least
a majority of the securities or other interests having ordinary voting power
to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly
or indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries; and
(ix) The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
46
(b) This Agreement has been negotiated by the respective parties
hereto and their attorneys and the language hereof shall not be construed for
or against any party.
Section 10.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original as against any party
whose signature appears on such counterpart and all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to
the other parties, it being understood that all parties need not sign the
same counterpart.
Section 10.4 SEVERABILITY. In the event that any provision of this
Agreement, or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with
a valid and enforceable provision that will achieve, to the extent possible,
the economic, business and other purposes of such void or unenforceable
provision.
Section 10.5 ENTIRE AGREEMENT. This Agreement (including the schedules
and exhibits hereto and the other documents delivered pursuant hereto)
constitutes the entire agreement among the parties concerning the subject
matter hereof and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter
hereof, other than the Confidentiality Agreement.
Section 10.6 GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of California without
regard to any applicable conflicts of law principles.
Section 10.7 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
Section 10.8 THIRD PARTY BENEFICIARIES. Nothing contained in this
Agreement is intended to confer upon any person other than the parties hereto
and their respective successors and permitted assigns, any rights, remedies
or obligations under, or by reason of this Agreement, except that (i) the
persons who are shareholders of Sensors immediately prior to the Effective
Time (and their successors and assigns) are express intended third party
beneficiaries of Articles I, II and IV, Sections 6.6 and 6.7 and Article IX,
(ii) the persons who hold Sensors Options immediately prior to the Effective
Time (and their lawful successors and assigns) are express intended third
party beneficiaries of Section 6.11, and (iii) each of the foregoing persons
is an express intended third party beneficiary of Article X, to the extent
relevant to any of the foregoing, and as such are entitled to rely on the
provisions hereof as if a party hereto.
[SIGNATURE PAGE FOLLOWS]
47
IN WITNESS WHEREOF, Finisar, Sub and Sensors have caused this
Agreement to be signed by their respective officers thereunto duly
authorized, and the Principal Shareholders have signed this Agreement, as of
the date first written above.
SENSORS UNLIMITED, INC. FINISAR CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------- ---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief President and Chief
Executive Officer Executive Officer
PRINCIPAL SHAREHOLDERS GEMSTONE ACQUISITION CORP.
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President and Chief Executive Officer
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