Agreement and Plan of Merger
Among
Comdial Corporation
(a Delaware corporation),
Aurora Acquisition Corporation
(a Delaware corporation),
Aurora Systems, Inc.
(a Delaware corporation),
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
February 14, 1996
Agreement and Plan of Merger
Agreement and Plan of Merger (the "Agreement"), dated as of
February 14, 1996, by and among Comdial Corporation, a Delaware
corporation ("Buyer"); Aurora Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of Buyer ("Sub"); Aurora
Systems, Inc., a Delaware corporation ("Aurora"); ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇▇"); and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇").
Recitals
The Boards of Directors of Buyer, Sub and ▇▇▇▇▇▇ ▇▇▇▇ it
advisable and in the best interests of each corporation and its
respective stockholders that Buyer and Aurora combine in order to
advance the long-term business interests of Buyer and Aurora. The
combination of Buyer and Aurora shall be effected by the terms of
this Agreement through a transaction in which Sub will merge with
and into Aurora and Aurora will become a wholly owned subsidiary of
Buyer (the "Merger").
NOW, THEREFORE, in consideration of the foregoing and the
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, a certificate of merger (the
"Certificate of Merger") in such form as is required by the
relevant provisions of the Delaware General Corporation Law (the
"DGCL") shall be duly prepared, executed and acknowledged by the
Surviving Corporation (as defined in Section 1.3) and thereafter
delivered to the Secretary of State of the State of Delaware for
filing, as provided in the DGCL, 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 Certificate of Merger with
the Secretary of State of the State of Delaware or at such time
thereafter as is provided in the Certificate of Merger (the
"Effective Time").
Section 1.2 Closing. The closing of the Merger (the
"Closing") will take place at 10:00 a.m., Eastern Time, on a date
to be specified by Buyer and Aurora, 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) (the "Closing Date"), at
the offices of McGuire, Woods, Battle & ▇▇▇▇▇▇, L.L.P., ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ unless another date or
place is agreed to in writing by Buyer and Aurora.
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 Aurora (Sub and
Aurora are sometimes referred to below as the "Constituent
Corporations" and Aurora is sometimes referred to below as the
"Surviving Corporation"), (ii) the Restated and Amended Certificate
of Incorporation of Aurora shall be amended and restated in its
entirety to read as set forth on Exhibit A attached hereto and made
a part hereof and, as so amended and restated, 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.
(b) At and after the Effective Time, in accordance with the
provisions of Section 259 of the DGCL, the separate existence of
each of the Constituent Corporations shall cease and the Surviving
Corporation shall acquire and possess all the assets and properties
and shall assume and be subject to all the obligations and
liabilities of each of the Constituent Corporations; and all of the
rights, privileges, powers and franchises of each of the
Constituent Corporations shall be vested in the Surviving
Corporation by operation of law.
Section 1.4 Directors and Officers. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ shall be the
initial directors of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and Bylaws of
the Surviving Corporation and the officers of Aurora immediately
prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their respective
successors are duly elected or appointed.
Article II
Conversion of Securities
Section 2.1 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 the Common Stock, par value $0.01 per
share, of Aurora ("Aurora Common Stock"), the Series A Preferred
Stock, par value $0.01 per share, of Aurora ("Aurora Preferred
Stock"), or the 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,
$0.01 par value, of the Surviving Corporation.
(b) Conversion of Aurora Preferred Stock. Subject to
Section 2.2, each issued and outstanding share of Aurora Preferred
Stock shall be converted into the right to receive an amount in
cash equal to the sum of (i) $2.910 (the "Current Liquidation
Preference") and (ii) an amount equal to a 22% per annum,
compounded annually, rate of return on the Current Liquidation
Preference from the date hereof to the Closing.
(c) Cancellation of Aurora Stock Purchase Warrant. That
certain Warrant Certificate to Purchase Common Stock dated January
13, 1995 (the "Poly Ventures Warrant"), issued to and held of
record by Poly Ventures II, Limited Partnership, a Delaware limited
partnership ("Poly Ventures II") shall be cancelled and retired and
shall cease to exist and no stock of Buyer or other consideration
shall be delivered in exchange therefor.
(d) Conversion of Aurora Employee Stock Options. Subject
to Section 2.2, the holders of the issued and outstanding employee
stock options of Aurora ("Aurora Stock Options"), except for those
Aurora Stock Options as to which the exercise price is greater than
$2.25 per share (which are to be cancelled and retired and shall
cease to exist and no stock or other consideration shall be
delivered in exchange therefor), shall be entitled to receive, in
the aggregate, (A) $27,578 in cash and (B) 4,404 fully paid and
non-assessable shares of the Common Stock, par value $0.01 per
share, of Buyer ("Buyer Common Stock"), allocated among such
holders in accordance with the schedule set forth on Exhibit E
attached hereto. In the event that any holder of Aurora Stock
Options listed on Exhibit E shall have exercised an Aurora Stock
Option in whole or in part prior to the Effective Time, then (1)
the shares of Aurora Common Stock held by such holder as a result
of the exercise of the Aurora Stock Option shall be converted into
the right to receive that proportion of cash and Buyer Common Stock
allocable to the exercised option or portion thereof on Exhibit E
(as if such option had not been exercised and remained outstanding
for purposes of this Article II), (2) such holder shall be
entitled to receive an additional amount in cash equal to the
aggregate exercise price paid by such holder upon the exercise of
such option, and (3) the aggregate amount of cash and Buyer Common
Stock the holders of Aurora Stock Options are otherwise entitled to
receive shall be reduced by the aggregate amount paid and issued to
such holder. Notwithstanding the foregoing, the number of shares of
Buyer Common Stock issuable to the holders of Aurora Stock Options
(or to any holder who exercises an Aurora Stock Option in whole or
part prior to the Effective Time as provided herein) pursuant to
this Section 2.1(d) shall be appropriately adjusted in the event of
a stock split or reverse split, stock dividend, or similar
transaction affecting the number of shares of Buyer Common Stock
outstanding.
(e) Conversion of Aurora Common Stock Owned By ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇. Subject to Section 2.2, (i) all of the 400,000 shares
of Aurora Common Stock owned by ▇▇▇▇▇▇▇▇ shall be converted into
the right to receive, in the aggregate, (A) $375,000 in cash and
(B) 60,000 fully paid and non-assessable shares of Buyer Common
Stock and (ii) all of the 400,000 shares of Aurora Common Stock
owned by ▇▇▇▇▇ shall be converted into the right to receive, in the
aggregate, (A) $375,000 in cash and (B) 60,000 fully paid and non-
assessable shares of Buyer Common Stock. Notwithstanding the
foregoing, the number of shares of Buyer Common Stock issuable to
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ pursuant to clauses (i)(B) and (ii)(B) of this
Section 2.1(e) shall be appropriately adjusted in the event of a
stock split or reverse split, stock dividend, or similar
transaction affecting the number of shares of Buyer Common Stock
outstanding.
(f) Conversion of Aurora Common Stock Owned by ▇▇▇▇▇▇.
Subject to Section 2.2, all of the 155,914 shares of Aurora Common
Stock owned by ▇▇▇▇▇▇ Corporation shall be converted into the right
to receive, in the aggregate, (A) $146,169 in cash and (B) 23,387
fully paid and non-assessable shares of Buyer Common Stock.
Notwithstanding the foregoing, the number of shares of Buyer Common
Stock issuable to ▇▇▇▇▇▇ Corporation pursuant to clause (B) of this
Section 2.1(f) shall be appropriately adjusted in the event of a
stock split or reverse split, stock dividend, or similar
transaction affecting the number of shares of Buyer Common Stock
outstanding.
(g) Effect of Conversion. All such shares of Aurora
Common Stock and Aurora Preferred Stock, all Aurora Options, and
the Poly Ventures Warrant, when so converted, shall no longer be
outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate representing
any such securities shall cease to have any rights with respect
thereto, except the right to receive the cash and/or Buyer Common
Stock to be issued or paid in consideration therefor, as provided
in this Section 2.1, upon the surrender of the certificate in
accordance with Section 2.2, without interest.
Section 2.2 Exchange of Certificates. The procedures for
exchanging outstanding shares of Aurora Common Stock and Aurora
Preferred Stock, Aurora Stock Options, and the Poly Ventures
Warrant for cash and/or Buyer Common Stock pursuant to the Merger
as provided in Section 2.1, are as follows:
(a) Exchange Procedures. At the Effective Time, the
holders of certificates or other instruments theretofore evidencing
shares of Aurora Common Stock or Aurora Preferred Stock, Aurora
Stock Options, or the Poly Ventures Warrant outstanding immediately
prior to the Merger shall cease to have any rights with respect to
such securities, except the right to receive the cash and/or Buyer
Common Stock pursuant to the Merger provided in Section 2.1. Each
holder of a certificate or other instrument evidencing any such
security shall promptly surrender the same to the Surviving
Corporation or its transfer agent. Buyer shall deposit with the
Surviving Corporation, for the benefit of the holders of such
securities, certificates representing the shares of Buyer Common
Stock issuable to ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ and an amount in cash equal to
the cash issuable to all other security holders pursuant to the
Merger as provided in Section 2.1. At or after the Effective Time,
upon surrender of a certificate to the Surviving Corporation or its
transfer agent for cancellation, the holder shall be entitled to be
paid and receive from the Surviving Corporation in exchange
therefor the cash and/or Buyer Common Stock provided in Section
2.1, without interest. Until surrendered as contemplated by this
Section 2.2, each certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such
surrender the cash and/or Buyer Common Stock contemplated by
Section 2.1.
(b) No Further Transfers. After the Effective Time,
there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Aurora
Common Stock or Aurora Preferred Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective
Time, certificates representing any such securities are presented
to the Surviving Corporation, they shall be cancelled and exchanged
for cash and/or Buyer Common Stock as provided in this Article II.
Article III
Representations and Warranties of Aurora
Aurora represents and warrants to Buyer and Sub that the
statements contained in this Article III are true and correct,
except as set forth in the disclosure schedule delivered by Aurora
to Buyer on or before the date of this Agreement (the "Aurora
Disclosure Schedule"). The Aurora Disclosure Schedule shall be
arranged in items corresponding to the numbered and lettered
sections contained in this Article III, and the disclosure in any
item shall qualify only the corresponding section in this Article
III and any other section in which a cross reference to such item
is made.
Section 3.1 Organization. Aurora 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 do 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 the business,
assets (including intangible assets), financial condition or
results of operations ("Material Adverse Effect") of Aurora.
Aurora does not own, directly or indirectly, any equity or similar
interest in, or any interest convertible into or exchangeable or
exercisable for, any corporation, partnership, limited liability
company, joint venture, or other organization.
Section 3.2 Aurora Capital Structure.
(a) The authorized capital stock of Aurora consists of
2,000,000 shares of Aurora Common Stock and 212,176 shares of
Aurora Preferred Stock. As of the date of this Agreement,
(i) 955,914 shares of Aurora Common Stock are issued and
outstanding, all of which are validly issued, fully paid and
nonassessable, and owned of record and beneficially as set forth in
Item 3.2(a) of the Aurora Disclosure Schedule, (ii) no shares of
Aurora Common Stock were held in the treasury of Aurora or by
subsidiaries of Aurora, (iii) 80,000 of Aurora Common Stock were
reserved for future issuance upon the exercise of Aurora Stock
Options, as to which Aurora Stock Options have been granted with
respect to 54,750 shares, (iv) 125,000 shares of Aurora Common
Stock were reserved for future issuance upon the exercise of the
Poly Ventures Warrant, and (v) 212,176 shares of Aurora Common
Stock were reserved for future issuance upon the conversion of the
Aurora Preferred Stock. As of the date of this Agreement, 212,176
shares of Aurora Preferred Stock are issued and outstanding, all of
which are validly issued, fully paid and nonassessable, and owned
of record and beneficially as set forth in Item 3.2(a) of the
Aurora Disclosure Schedule. All shares of Aurora Common Stock
subject to issuance as specified above, upon issuance on the terms
and conditions specified in the instruments pursuant to which they
are issuable, shall be duly authorized, validly issued, fully paid
and nonassessable. There are no obligations, contingent or
otherwise, of Aurora to repurchase, redeem or otherwise acquire any
shares of Aurora Common Stock or make any investment (in the form
of a loan, capital contribution or otherwise) in any corporation,
partnership, limited liability company, joint venture, or other
organization.
(b) Except as set forth in this Section 3.2, there are
no equity securities of any class of Aurora, or any security
exchangeable into or exercisable for such equity securities,
issued, reserved for issuance or outstanding. Except as set forth
in this Section 3.2, there are no options, warrants, equity
securities, calls, rights, commitments or agreements of any
character to which Aurora is a party or by which it is bound
obligating Aurora to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of Aurora or
obligating Aurora to grant, extend, accelerate the vesting of or
enter into any such option, warrant, equity security, call, right,
commitment or agreement. To the best knowledge of Aurora, there
are no voting trusts, proxies or other agreements or understandings
with respect to the voting of the shares of capital stock of
Aurora, except for that certain stockholder agreement among Aurora,
Poly Ventures II, ▇▇▇▇▇▇ Corporation, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ dated
January 13, 1995. A true and complete schedule of the Aurora Stock
Options, identifying the holder, the number of underlying shares,
the dates of issuance and expiration, and the exercise price, is
set forth in Item 3.2(b) of the Aurora Disclosure Schedule.
Section 3.3 Authority; No Conflict; Required Filings and
Consents.
(a) Aurora has all requisite corporate power and
authority to enter into this Agreement and, subject only to the
approval of the Merger by Aurora's stockholders under the DGCL, to
consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of Aurora,
subject only to the approval of the Merger by Aurora's stockholders
under the DGCL. This Agreement has been duly executed and
delivered by Aurora and constitutes the valid and binding
obligation of Aurora, enforceable in accordance with its 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, regardless of whether asserted
in a proceeding in equity or at law.
(b) Subject to the approval of the Merger by Aurora's
stockholders under the DGCL, the execution and delivery of this
Agreement by Aurora does not, and the consummation of the
transactions contemplated by this Agreement will not, (i) conflict
with, or result in any violation or breach of any provision of the
Certificate of Incorporation or Bylaws of Aurora, (ii) result in
any violation or breach of, or constitute (with or without notice
or lapse of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss
of any benefit) under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, lease, contract or other
agreement, instrument or obligation to which Aurora is a party or
by which Aurora or any of its properties or assets may be bound, or
(iii) conflict with or violate any permit, concession, franchise,
or license or, to the best knowledge of Aurora, any judgment,
order, decree, statute, law, ordinance, rule or regulation
applicable to Aurora or any of its 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
Aurora or which would not adversely affect the ability of Aurora to
consummate the transactions contemplated by this Agreement.
(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 Aurora in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing of the Certificate of Merger with
the Delaware Secretary of State in accordance with DGCL, (ii) the
obtaining of such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under
applicable Federal and state securities laws, and (iii) the
obtaining of such other consents, approvals, orders,
authorizations, registrations, declarations and filings which, if
not obtained or made, would not be reasonably likely to have a
Material Adverse Effect on Aurora.
Section 3.4 Financial Statements. Aurora has previously
furnished Buyer with true and complete copies of reviewed financial
statements of Aurora for the years ending September 30, 1992, 1993,
1994, and 1995, including the notes thereto, together with the
report on such statements of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., C.P.A.,
Aurora's independent auditor, and has also furnished Buyer with
true and complete copies of the unaudited and unreviewed
consolidated interim financial statements of Aurora for the three-
month period ending December 31, 1995. Except as may be indicated
therein or in the notes thereto, such financial statements
(collectively, the "Aurora Financial Statements") present fairly
the financial position of Aurora as of such dates and the results
of its operations and changes in financial position for such
periods and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis
subject, in the case of the unaudited interim financial statements,
to normal year-end and audit adjustments and any other adjustments
described therein and to the absence of certain footnote
disclosures. As used in this Agreement, the term "Aurora Balance
Sheet" refers to the reviewed but unaudited balance sheet of Aurora
as of September 30, 1995 included in the Aurora Financial
Statements.
Section 3.5 No Undisclosed Liabilities. Aurora does not have
any liabilities, either accrued or contingent (whether or not
required to be reflected in financial statements in accordance with
generally accepted accounting principles), and whether due or to
become due, which individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect on Aurora other
than (i) liabilities reflected in the Aurora Balance Sheet, (ii)
liabilities specifically described in this Agreement or Item 3.5 of
the Aurora Disclosure Schedule, and (iii) normal or recurring
liabilities incurred since September 30, 1995 in the ordinary
course of business consistent with past practices.
Section 3.6 Absence of Certain Changes or Events. Since
September 30, 1995, Aurora has conducted its business only in the
ordinary course and in a manner consistent with past practice and,
since such date, there has not been (i) any material adverse change
in the financial condition, results of operations or business
(together, a "Material Adverse Change") of Aurora; (ii) any
damage, destruction or loss (whether or not covered by insurance)
with respect to Aurora having a Material Adverse Effect on Aurora;
(iii) any material change by Aurora in its accounting methods,
principles or practices to which Buyer has not previously consented
in writing; (iv) any revaluation by Aurora of any of its assets,
including, without limitation, writing down the value of
capitalized software or inventory or writing off notes or accounts
receivable, unless Buyer has previously consented in writing; or
(v) except as disclosed in Item 3.6 of the Aurora Disclosure
Schedule, any other action or event that would have required the
consent of Buyer pursuant to Section 5.1 of this Agreement had such
action or event occurred after the date of this Agreement and that
would be reasonably likely to have a Material Adverse Effect on
Aurora.
Section 3.7 Taxes.
(a) For the purposes of this Agreement, a "Tax" or,
collectively, "Taxes," means any and all federal, state, local and
foreign taxes, 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) Aurora has accurately prepared and timely filed all
federal, state, local and foreign returns, estimates, information
statements and reports required to be filed at or before the
Effective Time ("Returns") relating to any and all Taxes concerning
or attributable to Aurora or any of its subsidiaries or to their
operations, and such Returns are true and correct in all material
respects and have been completed in all material respects in
accordance with applicable law.
(c) As of the Effective Time Aurora (i) will have paid
all Taxes it is required to pay prior to the Effective Time and
(ii) will have withheld with respect to its employees all federal
and state income taxes, FICA, FUTA and other Taxes required to be
withheld, except where any failure to make such payment or
withholding would not be reasonably likely to have a Material
Adverse Effect on Aurora.
(d) There is no Tax deficiency outstanding, proposed or
assessed against Aurora that is not reflected as a liability on the
Aurora Balance Sheet nor has Aurora executed any waiver of any
statute of limitations on or extending the period for the
assessment or collection of any Tax.
(e) Aurora does not have any material liabilities for
unpaid federal, state, local and foreign Taxes that have not been
accrued for or reserved on Aurora Balance Sheet, whether asserted
or unasserted, contingent or otherwise.
Section 3.8 Properties. Item 3.8 of the Aurora Disclosure
Schedule contains a true and complete list of all real property
owned by Aurora and real property leased by Aurora pursuant to
leases providing for the occupancy, in each case, of not less than
1,000 square feet ("Material Lease(s)"), and the name of the
lessor, the date of the Material Lease and each amendment to the
Material Lease and the aggregate annual rental or other fee payable
under any such Material Lease. All such Material Leases are in
good standing, valid and effective in accordance with their
respective terms, and Aurora is not in default under any of such
leases, except where the lack of such good standing, validity and
effectiveness or the existence of such default would not be
reasonably likely to have a Material Adverse Effect on Aurora.
Except as disclosed in Item 3.8 of the Aurora Disclosure Schedule,
Aurora has, and at the Effective Time will have, good and
marketable title to all of its properties, real and personal, free
and clear of all mortgages, liens, pledges, security interests,
restrictions or encumbrances of any nature whatsoever.
Section 3.9 Intellectual Property.
(a) To the best of Aurora's knowledge, Aurora owns, or is
licensed or otherwise possesses legally enforceable rights to use,
all patents, trademarks, trade names, service marks, copyrights and
mask works, any applications for and registrations of such patents,
trademarks, trade names, service marks, copyrights and mask works,
and all processes, formulae, methods, schematics, technology,
know-how, computer software programs or applications and tangible
or intangible proprietary information or material that are
necessary to conduct the business of Aurora as currently conducted,
or planned to be conducted (the "Aurora Intellectual Property
Rights"). Item 3.9 of the Aurora Disclosure Schedule lists (i) all
patents and patent applications and all trademarks, registered
copyrights, trade names and service marks, which Aurora considers
to be material to its business and included in the Aurora
Intellectual Property Rights, including the jurisdictions in which
each such Aurora Intellectual Property Right has been issued or
registered or in which any such application for such issuance and
registration has been filed, (ii) all licenses, sublicenses,
distribution agreements and other agreements as to which Aurora is
a party and pursuant to which any person is authorized to use any
Aurora Intellectual Property Rights or has the right to
manufacture, reproduce, market or exploit any Aurora product or any
adaptation, translation or derivative work based on an Aurora
product or any portion thereof, (iii) all licenses, sublicenses and
other agreements as to which Aurora is a party and pursuant to
which Aurora is authorized to use any third party patents,
trademarks or copyrights, including software ("Aurora Third Party
Intellectual Property Rights") which are incorporated in, are, or
form a part of any Aurora product, and (iv) all joint development
agreements as to which Aurora is a party.
(b) Aurora is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its
obligations under this Agreement, in breach of any license,
sublicense or other agreement relating to the Aurora Intellectual
Property Rights or Aurora Third Party Intellectual Property Rights.
(c) To Aurora's knowledge, all patents, registered
trademarks, service marks and copyrights listed in Item 3.9 of the
Aurora Disclosure Schedule are valid and subsisting. Except as set
forth on Item 3.9 of the Aurora Disclosure Schedule, Aurora (i) has
not been sued in any suit, action or proceeding which involves a
claim of infringement of any patents, trademarks, service marks,
copyrights or violation of any trade secret or other proprietary
right of any third party; and (ii) has no knowledge that the
manufacturing, marketing, licensing or sale of its products
infringes any patent, trademark, service ▇▇▇▇, copyright, trade
secret or other proprietary right of any third party.
Section 3.10 Agreements, Contracts and Commitments. Item 3.10
of the Aurora Disclosure Schedule sets forth a complete and correct
list of each existing contract, agreement or commitment of Aurora,
other than Material Leases:
(i) upon which any substantial part of its business
is dependent or which, if breached, would be reasonably likely to
have a Material Adverse Effect on Aurora;
(ii) which provides for aggregate future payments
of more than $5,000, except for purchase orders or sale orders
arising in the ordinary and usual course of business, in which case
they are listed only if any party thereto is obligated to make
payments pursuant thereto aggregating more than $25,000;
(iii) which extends for more than 180 days from the
date hereof and is not cancellable by either party on 30 days'
notice or less;
(iv) which provides for the sale, after the date
hereof and other than in the ordinary course of business, of any of
its assets;
(v) which relates to the employment, compensation,
retirement or termination of the services of any officer or
employee or former officer or employee, including bonus, incentive,
pension, profit-sharing, hospitalization, insurance, deferred
compensation, retirement, stock option or stock purchase plans or
similar plans providing employee benefits for or with respect to
any officer or employee;
(vi) which contains covenants pursuant to which any
person or entity has agreed not to compete with the business of any
other person or entity or not to disclose to others information
concerning such other person or entity;
(vii) which relates to the sale or other disposition
of goods or services and which (A) involve terms or quantities
exceeding normal commitments or in the ordinary course of business
or (B) contain most favored pricing or other special pricing terms
or other provisions which would prohibit or limit the ability of
Buyer to effect price increases;
(viii) pursuant to which title to any assets of
Aurora may be encumbered; or
(ix) which relates to any partnership, joint venture
or other arrangement involving a sharing of profits from any
enterprise.
Each of the foregoing is referred to in this Agreement as a
"Material Contract." Except as set forth in Item 3.10 of the
Aurora Disclosure Schedule, each Material Contract is in full force
and effect and there has not occurred, with respect to any such
Material Contract, any default or event of default, which, with or
without due notice or with the lapse of time, or both, would
constitute a default or event of default on the part of Aurora, or,
to the best of Aurora's knowledge, any other party thereto, except
where such default or event of default would not have a Material
Adverse Effect on Aurora. Complete copies of each Material
Contract have been delivered to Buyer.
Section 3.11 Litigation. Except as set forth in Item 3.11 of
the Aurora Disclosure Schedule, there are no actions, suits,
claims, investigations or proceedings (legal, administrative or
arbitrative) pending or, to the best of Aurora's knowledge,
threatened, against Aurora or any of its Affiliates (as defined
herein), whether at law or in equity and whether civil or criminal
in nature, before any federal, state, municipal or other court,
arbitrator, governmental department, commission, agency or
instrumentality, domestic or foreign, nor are there any judgments,
decrees or orders of any such court, arbitrator, governmental
department, commission, agency or instrumentality outstanding
against Aurora or any of its Affiliates which have, or if adversely
determined, would be reasonably likely to have a Material Adverse
Effect on Aurora, or which seek specifically to prevent, restrict
or delay consummation of the transactions contemplated by this
Agreement or fulfillment of any of the conditions of this
Agreement. As used herein, the term "Affiliate" means (i) any
officer or director of Aurora, (ii) any person or entity
beneficially owning 10% or more of any class of equity securities
of Aurora, and (iii) any other person or entity that directly, or
indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, Aurora.
Section 3.12 Environmental Matters.
(a) As of the date hereof, to the best of Aurora's
knowledge, no underground storage tanks are present under any
property that Aurora has at any time owned, operated, occupied or
leased. As of the date hereof, except as set forth in Item 3.12 of
the Aurora Disclosure Schedule, no material amount of any substance
that has been designated by any Governmental Entity or by
applicable federal, state or local law to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment,
including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and
Recovery Act of 1976, as amended, and the regulations promulgated
pursuant to such laws (a "Hazardous Material"), are present as a
result of the actions of Aurora or any of its subsidiaries, or, to
the best of Aurora's knowledge, any actions of any third party or
otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water, that Aurora has at
any time owned, operated, occupied or leased, where the presence of
such Hazardous Material is reasonably likely to have a Material
Adverse Effect on Aurora.
(b) At no time has Aurora transported, stored, used,
manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on
or before the Closing Date, nor has Aurora or any of its
subsidiaries disposed of, transported, sold, or manufactured any
product containing a Hazardous Material (collectively, "Hazardous
Materials Activities") in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity to prohibit,
regulate or control Hazardous Materials or any Hazardous Material
Activity which has had or is reasonably likely to have a Material
Adverse Effect on Aurora.
(c) Aurora currently holds all environmental approvals,
permits, licenses, clearances and consents (the "Environmental
Permits") necessary for the conduct of its Hazardous Material
Activities and other businesses of Aurora as such activities and
businesses are currently being conducted, the absence of which
would be reasonably likely to have a Material Adverse Effect on
Aurora.
(d) No action, proceeding, revocation proceeding,
amendment procedure, writ, injunction or claim is pending or, to
the knowledge of Aurora, threatened concerning any Environmental
Permit or any Hazardous Materials Activity of Aurora or any of its
subsidiaries. Aurora is not aware of any fact or circumstance
which could involve Aurora in any environmental litigation or
impose upon Aurora any environmental liability which would be
reasonably likely to have a Material Adverse Effect on Aurora.
Section 3.13 Employee Benefit Plans.
(a) Aurora has set forth on Item 3.13 of the Aurora
Disclosure Schedule all employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) and all bonus, stock option, stock
purchase, incentive, deferred compensation, supplemental
retirement, severance and other similar employee benefit plans, and
all unexpired severance agreements, written or otherwise, for the
benefit of, or relating to, any current or former employee of
Aurora or any trade or business (whether or not incorporated) which
is a member or which is under common control with Aurora within the
meaning of Section 414 of the Code (an "ERISA Affiliate")
(together, the "Aurora Employee Plans").
(b) With respect to each Aurora Employee Plan, Aurora has
made available to Buyer a true and correct copy of (i) the most
recent annual report (Form 5500) filed with the Internal Revenue
Service ("IRS"), (ii) such Aurora Employee Plan, (iii) each trust
agreement and group annuity contract, if any, relating to such
Aurora Employee Plan, and (iv) the most recent actuarial report or
valuation relating to a Aurora Employee Plan subject to Title IV of
ERISA.
(c) With respect to the Aurora Employee Plans,
individually and in the aggregate, no event has occurred, and to
the knowledge of Aurora, there exists no condition or set of
circumstances in connection with which Aurora could be subject to
any liability that is reasonably likely to have a Material Adverse
Effect on Aurora under ERISA, the Code or any other applicable law.
(d) With respect to the Aurora 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 generally accepted accounting principles, on the
financial statements of Aurora, which obligations are reasonably
expected to have a Material Adverse Effect on Aurora.
(e) Except as set forth in Item 3.13 of the Aurora
Disclosure Schedule, Aurora 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 Aurora, the benefits of which
are contingent, or the terms of which are materially altered, upon
the occurrence of a transaction involving Aurora of the nature
contemplated by this Agreement, (iii) agreement with any officer of
Aurora providing any term of employment or compensation guarantee
extending for a period longer than one year from the date hereof or
for the payment of compensation in excess of $30,000 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 3.14 Compliance with Laws. Except as otherwise
expressly represented and warranted by Aurora herein, to the best
knowledge of Aurora it has complied with, is not in violation of,
and has not received any notices of violation with respect to, any
federal, state or local statute, law or regulation with respect to
the conduct of its business, or the ownership or operation of its
business, except for failures to comply or violations which would
not individually or in the aggregate have a Material Adverse Effect
on Aurora. Aurora has all federal, state and local governmental
licenses, permits, approvals and authorizations (collectively,
"Permits") that are material to the conduct of its business, and
such Permits are in full force and effect and will remain in full
force and effect after the Effective Time. Item 3.14 of the Aurora
Disclosure Schedule contains and true and complete list of all such
Permits.
Section 3.15 Interested Party Transactions. Except as listed
in Item 3.15 of the Aurora Disclosure Schedule, no officer,
director or other Affiliate of Aurora (i) competes with or is
involved in or has a direct or indirect interest in any business
entity which competes with the business conducted by Aurora, (ii)
has any agreement with Aurora other than an employment agreement
listed on Item 3.10(v) of the Aurora Disclosure Schedule, or (iii)
has any interest, direct or indirect, in any property, real or
personal, tangible or intangible, including, without limitation,
Aurora Intellectual Property, used in or pertaining to the business
of Aurora.
Section 3.16 Full Disclosure. None of the information
supplied or to be supplied by Aurora at the date such information
is supplied, and none of the representations and warranties of
Aurora which are made in this Agreement (a representation and
warranty being deemed to include the information contained in any
schedule hereto or furnished in connection herewith), contains an
untrue statement of a material fact or, taken as a whole, omits to
state a material fact necessary in order to make the statements
made therein, in light of the circumstances under which they were
made, not misleading.
Article IV
Representations and Warranties of Buyer and Sub
Buyer and Sub represent and warrant to Aurora that the
statements contained in this Article IV are true and correct,
except as set forth in the disclosure schedule delivered by Buyer
to Aurora on or before the date of this Agreement (the "Buyer
Disclosure Schedule"). The Buyer Disclosure Schedule shall be
arranged in items corresponding to the numbered and lettered
sections contained in this Article IV and the disclosure in any
item shall qualify only the corresponding section in this Article
IV and any other section in which a cross reference to such item is
made.
Section 4.1 Organization of the Company. Each of Buyer 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 do 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 Buyer and its consolidated subsidiaries, taken as
a whole.
Section 4.2 Buyer Capital Structure.
(a) The authorized capital stock of Buyer consists of
30,000,000 shares of Buyer Common Stock and 2,000,000 shares
Preferred Stock, par value $10.00 per share, issuable in one or
more series at such time or times, and for such consideration or
considerations as the board of directors of Buyer may determine
("Buyer Preferred Stock"). As of the date of this Agreement,
(i) 8,136,618 shares of Buyer Common Stock are issued and
outstanding, all of which are validly issued, fully paid and
nonassessable, and (ii) no shares of Buyer Preferred Stock are
issued and outstanding. There are no obligations, contingent or
otherwise, of Buyer to repurchase, redeem or otherwise acquire any
shares of Buyer Common Stock or make any investment (in the form of
a loan, capital contribution or otherwise) in any corporation,
partnership, limited liability company, joint venture, or other
organization.
(b) Except as set forth in this Section 4.2, there are no
equity securities of any class of Buyer, or any security
exchangeable into or exercisable for such equity securities,
issued, reserved for issuance or outstanding. Except as set forth
in this Section 4.2, and except with respect to stock options
issued pursuant to Buyer's stock incentive plans, decriptions of
which are set forth in the SEC Filings (as defined in Section 4.5
below), there are no options, warrants, equity securities, calls,
rights, commitments or agreements of any character to which Buyer
is a party or by which it is bound obligating Buyer to issue,
deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock of Buyer or obligating Buyer to
grant, extend, accelerate the vesting of or enter into any such
option, warrant, equity security, call, right, commitment or
agreement.
Section 4.3 Authority; No Conflict; Required Filings and
Consents.
(a) Each of Buyer and Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate
the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of each of Buyer and Sub.
This Agreement has been duly executed and delivered by each of
Buyer and Sub and constitutes the valid and binding obligation of
each of Buyer and Sub, enforceable in accordance with its 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, regardless of whether asserted
in a proceeding in equity or at law.
(b) Except as disclosed in Item 4.3 of the Buyer
Disclosure Schedule, the execution and delivery of this Agreement
by Buyer and Sub does not, and the consummation of the transactions
contemplated by this Agreement will not, (i) conflict with, or
result in any violation or breach of any provision of the Articles
of Incorporation or Bylaws of Buyer or Sub, (ii) result in any
violation or breach of, or constitute (with or without notice or
lapse of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss
of any material benefit) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, contract
or other agreement, instrument or obligation to which Buyer or any
of its consolidated subsidiaries is a party or by which any of them
or any of their properties or assets may be bound, or (iii)
conflict or violate any permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Buyer or Sub or any of 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 Buyer and its consolidated subsidiaries,
taken as a whole.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity
is required by or with respect to Buyer or Sub in connection with
the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby, except for (i) the filing of
the Certificate of Merger with the Delaware Secretary of State in
accordance with the DGCL, (ii) the obtaining of such consents,
approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable Federal and state
securities laws, and (iii) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or
made, would not be reasonably likely to have a Material Adverse
Effect on Buyer and its consolidated subsidiaries, taken as a
whole.
Section 4.4 Validity of Shares to be Issued. The shares of
Buyer Common Stock to be issued to the stockholders of Aurora as a
result of the Merger have or will have been duly authorized and,
upon delivery thereof pursuant to the provisions of this Agreement,
will be validly issued, fully paid and non-assessable and not
subject to any preemptive rights.
Section 4.5 Reports; Current Information. Buyer has
previously made available to Aurora (i) a true and complete copy of
each document filed by it with the Securities Exchange Commission
pursuant to Section 13(a), 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934 since January 1, 1993 (the "SEC Filings"), and
(ii) each communication sent by Buyer to its stockholders generally
since that date, and will continue to make such filings and
communications available to Aurora until the Closing. At the time
of filing, mailing, or delivery thereof, none of such documents or
information contained or will contain an untrue statement of a
material fact or omitted or will omit to state a material fact
necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading. Item
4.5 of the Buyer Disclosure Schedule sets forth a list of all
agreements and instruments filed as exhibits to the SEC Filings,
which are all of the agreements and instruments required to be
filed as exhibits thereto. Buyer will, upon request of Aurora,
furnish to Aurora copies of any of such agreements and instruments.
Section 4.6 Financial Statements. Except as may be indicated
therein or in the notes thereto, Buyer's financial statements
included in the SEC Filings present fairly the consolidated
financial position of Buyer and its consolidated subsidiaries,
taken as a whole, as of the respective dates of such financial
statements and the results of their consolidated operations and
consolidated changes in financial position for the respective
periods covered by such financial statements and have been prepared
in accordance with generally acepted accounting principles applied
on a consistent basis subject, in the case of the unaudited interim
financial statements, to normal year-end and audit adjustments and
any other adjustments described therein and to the absence of
certain footnote disclosures.
Section 4.7 Absence of Certain Changes or Events. Since
December 31, 1994, except as disclosed in the SEC Filings, Buyer
has conducted its business only in the ordinary course and in a
manner consistent with past practice and, since such date, except
as disclosed in the SEC Filings, there has not been (i) any
Material Adverse Change in Buyer and its consolidated
subsidiaries, taken as a whole; (ii) any damage, destruction or
loss (whether or not covered by insurance) with respect to Buyer
and its consolidated subsidiaries having a Material Adverse Effect
on Buyer and its consolidated subsidiaries, taken as a whole; (iii)
any material change by Buyer in its accounting methods, principles
or practices which has not previously been disclosed in writing to
Aurora; or (iv) any material revaluation by Buyer or its
consolidated subsidiaries of any of their assets, including,
without limitation, writing down the value of capitalized software
or inventory or writing off notes or accounts receivable, which has
not previously been disclosed in writing to Aurora.
Section 4.8 Taxes.
(a) Buyer has accurately prepared and timely filed all
Returns relating to any and all Taxes concerning or attributable to
Buyer or any of its consolidated subsidiaries or to their
operations, and such Returns are true and correct in all material
respects and have been completed in all material respects in
accordance with applicable law.
(b) As of the Effective Time Buyer (i) will have paid all
Taxes it is required to pay prior to the Effective Time, and (ii)
will have withheld with respect to its employees all federal and
state income taxes, FICA, FUTA and other Taxes required to be
withheld, except where any failure to make such payment or
withholding would not be reasonably likely to have a Material
Adverse Effect on Buyer and its consolidated subsidiaries, taken as
a whole.
(c) There is no Tax deficiency outstanding, proposed or
assessed against Buyer which would have a Material Adverse Effect
on Buyer that is not reflected as a liability on the appropriate
financial statements of Buyer included in the SEC Filings nor has
Buyer executed any waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax.
(d) Buyer does not have any material liabilities for
unpaid federal, state, local and foreign Taxes that have not been
accrued for or reserved on the appropriate financial statements of
Buyer included in the SEC Filings, whether asserted or unasserted,
contingent or otherwise.
Section 4.9 Litigation. Except as set forth in Item 4.9 of
the Buyer Disclosure Schedule and except for legal proceedings, if
any, which Buyer would not be required to disclose in any SEC
Disclosure Document pursuant to Item 103 of Regulation S-K, there
are no actions, suits, claims, investigations or proceedings
(legal, administrative or arbitrative) pending or, to the best of
Buyer's knowledge, threatened, against Buyer or any of its
consolidated subsidiaries, whether at law or in equity and whether
civil or criminal in nature, before any federal, state, municipal
or other court, arbitrator, governmental department, commission,
agency or instrumentality, domestic or foreign, nor are there any
judgments, decrees or orders of any such court, arbitrator,
governmental department, commission, agency or instrumentality
outstanding against Buyer or any of its consolidated subsidiaries
which have, or if adversely determined, would be reasonably likely
to have a Material Adverse Effect on Buyer and its consolidated
subsidiaries, taken as a whole, or which seek specifically to
prevent, restrict or delay consummation of the transactions
contemplated by this Agreement or fulfillment of any of the
conditions of this Agreement.
Section 4.10 Environmental Matters.
(a) As of the date hereof, except as set forth in Item
4.10 of the Buyer Disclosure Schedule, to the best of Buyer's
knowledge, no underground storage tanks are present under any
property that Buyer has at any time owned, operated, occupied or
leased. As of the date hereof, except as set forth in Item 4.10 of
the Buyer Disclosure Schedule, no material amount of any Hazardous
Material is present as a result of the actions of Buyer or any of
its consolidated subsidiaries, or, to the best of Buyer's
knowledge, any actions of any third party or otherwise, in, on or
under any property, including the land and the improvements, ground
water and surface water, that Buyer has at any time owned,
operated, occupied or leased, where the presence of such Hazardous
Material is reasonably likely to have a Material Adverse Effect on
Buyer and its consolidated subsidiaries, taken as a whole.
(b) At no time has Buyer transported, stored, used,
manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on
or before the Closing Date, nor has Buyer or any of its
consolidated subsidiaries engaged in Hazardous Materials Activities
in violation of any rule, regulation, treaty or statute promulgated
by any Governmental Entity to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity which has
had or is reasonably likely to have a Material Adverse Effect on
Buyer and its consolidated subsidiaries, taken as a whole.
(c) Buyer currently holds all Environmental Permits
necessary for the conduct of its Hazardous Material Activities and
other businesses of Buyer as such activities and businesses are
currently being conducted, the absence of which would be reasonably
likely to have a Material Adverse Effect on Buyer and its
consolidated subsidiaries, taken as a whole.
(d) No action, proceeding, revocation proceeding,
amendment procedure, writ, injunction or claim is pending or, to
the knowledge of Buyer, threatened concerning any Environmental
Permit or any Hazardous Materials Activity of Buyer or any of its
consolidated subsidiaries. Buyer is not aware of any fact or
circumstance which could involve Buyer in any environmental
litigation or impose upon Buyer any environmental liability which
would be reasonably likely to have a Material Adverse Effect on
Buyer and its consolidated subsidiaries, taken as a whole.
Section 4.11 Employee Benefit Plans.
(a) Buyer has set forth on Item 4.11 of the Buyer
Disclosure Schedule a list of all existing employee benefit plans
(as defined in Section 3(3) of ERISA) and all existing bonus, stock
option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar employee
benefit plans, and all unexpired severance agreements, written or
otherwise, for the benefit of, or relating to, the employees of
Buyer or any of its consolidated subsidiaries (together, the "Buyer
Employee Plans").
(b) With respect to each Buyer Employee Plan, Buyer will
make available to Aurora upon request a true and correct copy of
(i) the most recent annual report (Form 5500) filed with the IRS,
(ii) such Buyer Employee Plan, (iii) each trust agreement and group
annuity contract, if any, relating to such Buyer Employee Plan, and
(iv) the most recent actuarial report or valuation relating to a
Buyer Employee Plan subject to Title IV of ERISA.
(c) With respect to the Buyer Employee Plans,
individually and in the aggregate, no event has occurred, and to
the knowledge of Buyer, there exists no condition or set of
circumstances in connection with which Buyer could be subject to
any liability that is reasonably likely to have a Material Adverse
Effect on Buyer under ERISA, the Code or any other applicable law.
(d) With respect to the Buyer 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 generally accepted accounting principles, on the
financial statements of Buyer, which obligations are reasonably
expected to have a Material Adverse Effect on Buyer.
Section 4.12 Compliance with Laws. Except as otherwise
expressly represented and warranted by Buyer herein, to the best
knowledge of Buyer it has complied with, is not in violation of,
and has not received any notices of violation with respect to, any
federal, state or local statute, law or regulation with respect to
the conduct of its business, or the ownership or operation of its
business, except for failures to comply or violations which would
not individually or in the aggregate have a Material Adverse Effect
on Buyer and its consolidated subsidiaries, taken as a whole.
Buyer has all Permits that are material to the conduct of its
business, and such Permits are in full force and effect and will
remain in full force and effect after the Effective Time.
Section 4.13 Full Disclosure. None of the information
supplied or to be supplied by Buyer at the date such information is
supplied, and none of the representations and warranties of Buyer
and Sub which are made in this Agreement (a representation and
warranty being deemed to include the information contained in any
schedule hereto or furnished in connection herewith), contains an
untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not
misleading.
Article V
Conduct of Business
Section 5.1 Business In Ordinary Course; Restrictions. During
the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time,
Aurora agrees 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, to use all 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. Aurora shall promptly
notify Buyer of any event or occurrence not in the ordinary course
of business of Aurora where such event or occurrence would result
in a breach of any covenant of Aurora set forth in this Agreement
or cause any representation or warranty of Aurora 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, Aurora shall not, without the prior written consent of
Buyer:
(i) accelerate, amend or change the period of
exercisability of options or restricted stock granted under any
employee stock plan of Aurora or authorize cash payments in
exchange for any options 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;
(ii) transfer or license to any person or entity or
otherwise extend, amend or modify any rights to the Aurora
Intellectual Property Rights other than in the ordinary course of
business consistent with past practices;
(iii) 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, 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;
(iv) 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 Aurora Common Stock issuable upon the
exercise of the Aurora Stock Options currently issued and
outstanding or upon the exercise of the Aurora Warrant or upon the
conversion of Aurora Preferred Stock;
(v) 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 $20,000;
(vi) sell, lease, license or otherwise dispose of any of
its properties or assets, except for transactions entered into in
the ordinary course of business;
(vii) (A) increase or agree to increase the compensation
payable or to become payable to its officers or employees, (B)
grant any additional severance or termination pay to, or enter into
any employment or severance agreements with, officers, (C) grant
any severance or termination pay to, or enter into any employment
or severance agreement, with any employee, (D) enter into any
collective bargaining agreement, (E) establish, adopt, enter into
or amend in any material respect any bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other
plan, trust, fund, policy or arrangement for the benefit of any
directors, officers or employees;
(viii) revalue any of its assets, including writing down
the value of inventory or writing off notes or accounts receivable;
(ix) 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;
(x) amend or propose to amend its Certificate of
Incorporation or Bylaws, except as contemplated by this Agreement;
(xi) incur or commit to incur any individual capital
expenditure in excess of $20,000 or aggregate capital expenditures
in excess of $50,000;
(xii) acquire or agree to acquire, directly or
indirectly, any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any
corporation, partnership, limited liability company, joint venture,
or other organization; or
(xiii) take, or agree in writing or otherwise to take,
any of the actions described in Sections (i) through (xii) above,
or any action which is reasonably likely to make any of Aurora's
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 Cooperation. From the date hereof until the
Effective Time, Aurora shall confer with Buyer on a regular and
frequent basis to report operational matters of materiality and the
general status of ongoing operations and shall promptly provide
Buyer 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.
Article VI
Additional Agreements
Section 6.1 No Solicitation. Pending the consummation of the
transactions contemplated by this Agreement and until this
Agreement is terminated pursuant to Article VIII, Aurora, ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇ agree, jointly and severally, that neither Gasparro,
Walsh, nor Aurora or any of its officers, directors, Affiliates,
agents or representatives will, directly or indirectly, (i)
solicit, initiate, encourage the submission of, or accept any offer
or proposal or submit any offer or proposal to any person or
entity, other than Buyer and Buyer's Affiliates, that constitutes,
or could reasonably be expected to lead to, a proposal or offer for
a merger, consolidation, business combination, sale of substantial
assets, sale of shares of capital stock (including without
limitation by way of a tender offer) or similar transactions
involving Aurora, other than the transactions contemplated by this
Agreement (any of the foregoing inquiries or proposals being
referred to in this Agreement as an "Acquisition Proposal"), (ii)
engage in negotiations or discussions concerning, or provide any
non-public information to any person or entity relating to, any
Acquisition Proposal, or (iii) agree to, approve or recommend any
Acquisition Proposal. Aurora shall notify Buyer no later than 24
hours after receipt by Aurora (or its advisors) of any Acquisition
Proposal or any request for nonpublic information in connection
with an Acquisition Proposal or for access to the properties, books
or records of Aurora by any person or entity that informs Aurora
that it is considering making, or has made, an 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.
Section 6.2 Private Placement. Aurora and its officers,
directors and other Affiliates understand and acknowledge that the
offering of Buyer Common Stock to Gasparro, Walsh, ▇▇▇▇▇▇
Corporation and the holders of Aurora Stock Options pursuant to the
Merger will not be registered under the Securities Act of 1933, as
amended (the "1933 Act") or under any applicable state laws on the
ground that the offering and sale of such Buyer Common Stock is
exempt from registration pursuant to Section 4(2) of the 1933 Act
and Rule 505 of Regulation D thereunder and comparable exemptions
from registration or qualification under any applicable state laws.
Neither Aurora nor any of Aurora's officers, directors, or other
Affiliates will take any action which would adversely affect the
availability of the exemptions from registration under the 1933 Act
under Section 4(2) and Regulation D or under any applicable state
laws.
Section 6.3 Third Party Consents. Aurora shall use all
reasonable efforts to obtain all necessary consents, waivers and
approvals under any of Aurora's Material Contracts as may be
necessary or advisable to consummate the Merger and the other
transactions contemplated by this Agreement.
Section 6.4 Access to Information.
(a) Upon reasonable notice, Aurora shall afford to the
officers, employees, accountants, counsel and other representatives
of Buyer who have a need to know in connection with the transaction
contemplated by this Agreement, 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, Aurora shall furnish promptly to Buyer all other
information concerning its business, properties and personnel as
Buyer may reasonably request.
(b) Buyer agrees that all confidential information
furnished by Aurora to Buyer, will be held and treated by Buyer
and its Affiliates in strict confidence and will be used by Buyer
solely for the purposes and in connection with the transactions
contemplated by this Agreement. Any confidential information
furnished to Buyer in written or other tangible form will be
returned to Aurora promptly upon request, including all copies,
summaries, analyses and extracts thereof, in the event this
Agreement is terminated and the transactions contemplated hereby
abandoned prior to Closing. Nothing herein shall be deemed to
restrict Buyer's use or disclosure of any information which (i) is
or becomes generally available to the public other than as a result
of a breach of Buyer's obligations under this Agreement, (ii) is
rightfully received by Buyer from a third party without the breach
of any confidentiality obligation to Aurora, or (iii) was available
to Buyer on a nonconfidential basis prior to its disclosure to
Buyer by Aurora.
(c) No information or knowledge obtained in any
investigation pursuant to this Section 6.4 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 6.5 Aurora Stockholders' Meeting. Aurora shall call
a meeting of its stockholders to be held as promptly as practicable
for the purpose of voting upon this Agreement and the Merger (the
"Aurora Stockholders' Meeting"). Aurora will, through its Board of
Directors (subject to their fiduciary duties under Delaware law),
recommend to Aurora's stockholders approval of such matters and
will coordinate and cooperate with Buyer with respect to the timing
of such meeting and shall use its best efforts to hold the Aurora
Stockholders' Meeting as soon as practicable after the date hereof.
Aurora shall use all reasonable efforts to solicit from its
stockholders proxies in favor of such matters. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇
each agrees to attend the Aurora Stockholders' Meeting and to vote
all of the shares of Aurora Common Stock held by either of them in
favor of this Agreement and the Merger and ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ each
further appoints the other and any duly elected secretary or
assistant secretary of Aurora, or any of them, as proxies, each
with the power to appoint his or her substitute and to act alone,
and authorizes them, or any of them, to represent and to vote all
of the shares of Aurora Common Stock held by him or her in favor of
the Merger of this Agreement and the Merger at the Aurora
Stockholders' Meeting and at any adjournment thereof.
Section 6.6 Legal Conditions to Merger. Each of Buyer and
Aurora 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 required 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
in connection with the Merger. Each of Buyer and Aurora 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
public third party, required to be obtained or made by Aurora,
Buyer, or Sub in connection with the Merger or the taking of any
action contemplated thereby or by this Agreement.
Section 6.7 Public Disclosure. Buyer and Aurora 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 of the National Association of
Securities Dealers, Inc.
Section 6.8 Brokers or Finders. Each of Buyer and Aurora
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 and each of
Buyer and Aurora 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.
Section 6.9 Agreements Regarding Aurora Employees. Following
the Effective Time, the officers and other employees of Aurora will
be entitled to receive or participate in Buyer employee benefits
and benefit plans, including pension plans, health and welfare
plans, vacation and severance arrangements, and stock incentive
plans to the same extent as other officers and employees of Buyer
and its consolidated subsidiaries. In addition to the foregoing,
with respect to any person who is an employee of Aurora on the date
of this Agreement, Buyer will honor the terms of Aurora's existing
employee sabbatical plan (pursuant to which an Aurora employee may
take a six-week paid leave of absence after five years' of
employment), provided that an employee shall be permitted to take
only one such leave of absence pursuant to the sabbatical plan and
provided further that such leave of absence must be taken by the
employee within one year from the date on which the benefit
accrues.
Section 6.10 Certain Indebtedness of Aurora. At or promptly
following the Effective Time, Buyer will refinance or otherwise
satisfy Aurora's obligations with respect to (i) that certain
promissory note of Aurora dated September 6, 1995, payable to the
Home Loan & Investment Bank in the original principal amount of
$125,000, and (ii) those two certain promissory notes of Aurora
dated August 7, 1995, and October 17, 1995, respectively, each
payable to Poly Ventures II in the original principal amount of
$100,000.
Section 6.11 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, subject to the appropriate vote of
stockholders of Aurora described in Section 6.6, including
cooperating fully with the other party. 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 6.12 Indemnification By ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇.
(a) ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ will, from and after the
Effective Time, jointly indemnify, defend and hold Buyer and the
Surviving Corporation harmless from and against all losses, claims,
damages, costs, expenses (including reasonable attorneys' and other
advisors' fees), liabilities, concessions, or judgments or amounts
that are paid in settlement of or in connection with any claim,
action, suit, proceeding or investigation based in whole or in part
on or arising in whole or in part out of any breach by Aurora,
▇▇▇▇▇▇▇▇, or ▇▇▇▇▇ of any representation, warranty, or covenant
made in or pursuant to this Agreement.
(b) Notwithstanding the foregoing, no claim made by
Buyer or the Surviving Corporation against ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ for
indemnification pursuant to this Section 6.12 shall result in any
liability to ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ unless the aggregate of all such
claims made by Buyer and the Surviving Corporation pursuant to this
Section 6.12 exceeds $100,000, and then only to the extent of such
excess; and furthermore, the total liability of ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇
pursuant to this Section 6.12 shall not exceed an amount equal to
50% of the value of the Buyer Common Stock received by ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ in the Merger (such value to be based upon the last reported
sale price of Buyer Common Stock on the Nasdaq National Market on
the trading day immediately preceeding the Closing Date).
(c) The representations and warranties of Aurora
contained in this Agreement shall survive the Closing until the
first anniversary of the Closing (the "Survival Date") at which
time they shall lapse. Notwithstanding the provisions of the
preceding sentence, any representation or warranty in respect of
which indemnification may be sought by Buyer or the Surviving
Corporation pursuant to this Section 6.12 shall survive the
Survival Date if written notice, given in good faith, of the
specific breach thereof is given to ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ prior to the
Survival Date, whether or not liability has actually been
sustained.
(d) Buyer and the Surviving Corporation shall follow the
procedures set forth in this Section 6.12(d) in order to be
entitled to indemnification with respect to claims resulting from
the assertion of liability by persons or entities other than Buyer
or the Surviving Corporation, including claims by Governmental
Entities for penalties, fines and assessments. In the event that
any action, suit or proceeding (hereinafter, a "Legal Action") is
brought against Buyer or the Surviving Corporation or any claim or
demand is made by any person or entity, including any Governmental
Entity (a "Third Party Claim"), in respect of which Buyer or the
Surviving Corporation desires to make a claim against ▇▇▇▇▇▇▇▇ or
▇▇▇▇▇ pursuant to this Section 6.12, Buyer or the Surviving
Corporation, as the case may be, shall give prompt written notice
to ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ of the institution of such Legal Action or
the making of such Third Party Claim, such notice to identify the
amount, nature of, and other circumstances surrounding such claim.
Upon the written agreement of ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ that they are
obligated to indemnify hereunder, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ may (and if so
requested by Buyer or the Surviving Corporation shall) participate
in such Legal Action or Third Party Claim or assume the defense
thereof, with counsel satisfactory to Buyer and the Surviving
Corporation; provided, however, that Buyer and the Surviving
Corporation shall in any event have the right to participate at its
own expense in the defense of any such Legal Action or Third Party
Claim and provided further that in no event may ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇
settle or compromise a Legal Action or Third Party Claim without
the prior written consent of Buyer or the Surviving Corporation, as
the case may be, which consent shall not be unreasonably withheld.
Without limiting the generality of the foregoing, it shall not be
deemed unreasonable to withhold consent to a settlement or
compromise involving injunction or other equitable relief against
Buyer or the Surviving Corporation or any of its assets, employees
or business.
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
prior to the Closing Date of the following conditions:
(a) Aurora Stockholder Approval. This Agreement and the
Merger shall have been approved and adopted by the affirmative vote
of the holders of a majority of the outstanding shares of Aurora
Common Stock.
(b) Approvals. Other than the filing provided for by
Section 1.2, all 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
would be reasonably likely to have a Material Adverse Effect on
Buyer or Aurora shall have been filed, occurred or been obtained.
(c) Consents. All consents required to be obtained from
third parties (which consents are set forth in this Agreement or in
the Aurora Disclosure Schedule or the Buyer Disclosure Schedule)
the failure of which to obtain would be reasonably likely to have
a Material Adverse Effect on Buyer or Aurora shall have been
obtained.
(d) No Injunctions or Restraints; Illegality. 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 Buyer's
conduct or operation of the business of Buyer after the Merger
shall have been issued, nor shall any proceeding brought by a
domestic administrative agency or commission or other domestic
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.
Section 7.2 Additional Conditions to Obligations of Buyer and
Sub. The obligations of Buyer 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 Buyer and Sub:
(a) Representations and Warranties. The representations
and warranties of Aurora set forth in this Agreement shall be true
and correct in all material respects as of the date of this
Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as
though made on and as of the Closing Date, except for (i) changes
contemplated by this Agreement and (ii) where the failure to be
true and correct would not be reasonably likely to have a Material
Adverse Effect on Aurora or a material adverse effect upon the
consummation of the transactions contemplated hereby; and Buyer
shall have received a certificate signed on behalf of Aurora by the
chief executive officer and the chief financial officer of Aurora
to such effect.
(b) Performance of Obligations of Aurora. Aurora 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 Buyer shall have received a certificate signed on behalf
of Aurora by the chief executive officer and the chief financial
officer of Aurora to such effect.
(c) Opinion of Aurora's Counsel. Buyer shall have
received a written opinion from ▇▇▇▇▇▇ & Dodge, counsel to Aurora,
dated as of the Effective Time, substantially in the form attached
hereto as Exhibit B.
(d) Completion of Due Diligence. Buyer shall have
completed and shall have been satisfied in its sole discretion with
the results of its examination and review of the properties, books,
contracts, commitments and records of Aurora, including the
Material Contracts.
(e) Board Approval. The Board of Directors of Buyer
shall have approved this Agreement and the transactions
contemplated hereby and shall have authorized the officers of Buyer
to consummate the Merger in accordance with the terms hereof.
(f) Employment of Key Personnel. ▇▇▇▇▇▇▇▇ shall have
executed and delivered to Buyer an employment agreement
substantially in the form attached hereto as Exhibit C and ▇▇▇▇▇
shall have executed and delivered to Buyer an employment agreement
substantially in the form attached hereto as Exhibit D.
(g) No Dissenters. None of the holders of any of the
capital stock of Aurora shall have elected to become a dissenting
stockholder pursuant to the provisions of Section 262 of the DGCL.
Section 7.3 Additional Conditions to Obligations of Aurora.
The obligation of Aurora 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 Aurora:
(a) Representations and Warranties. The representations
and warranties of Buyer and Sub set forth in this Agreement shall
be true and correct in all material respects as of the date of this
Agreement and (except to the extent such representations speak as
of an earlier date) as of the Closing Date as though made on and as
of the Closing Date, except for (i) changes contemplated by this
Agreement and (ii) where the failure to be true and correct would
not be reasonably likely to have a Material Adverse Effect on Buyer
or a material adverse effect upon the consummation of the
transactions contemplated hereby; and Aurora shall have received a
certificate signed on behalf of Buyer by the chief executive
officer and the chief financial officer of Buyer to such effect.
(b) Performance of Obligations of Buyer and Sub. Buyer
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 Aurora shall have received a
certificate signed on behalf of Buyer by the chief executive
officer and the chief financial officer of Buyer to such effect.
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(g), by written notice by the terminating party
to the other party), whether before or after approval of the
matters presented in connection with the Merger by the stockholders
of Aurora:
(a) by mutual written consent of Buyer and Aurora; or
(b) by either Aurora or Buyer if the Merger shall not
have been consummated by June 30, 1996 (provided that the right to
terminate this Agreement under this Section 8.1(b) shall not be
available to a party if its 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); or
(c) by Buyer if the average of the closing price of Buyer
Common Stock as reported by the Nasdaq National Market for each day
on which it trades during the period of five (5) trading days
preceding the Closing Date (the "Pre-Closing Period Market Price")
is greater than $12.00; provided, however, that Buyer shall not
have the right to terminate this Agreement pursuant to this Section
8.1(c) if Aurora agrees to decrease the number of shares of Buyer
Common Stock issuable in the Merger by an amount such that the
aggregate number of shares of Buyer Common Stock issuable in the
Merger, multiplied by the Pre-Closing Period Market Price, is not
greater than $1,773,492.00; or
(d) by Aurora if the Pre-Closing Period Market Price is
less than $7.00; provided, however, that Aurora shall not have the
right to terminate this Agreement pursuant to this Section 8.1(d)
if Buyer agrees to increase the number of shares of Buyer Common
Stock issuable in the Merger by an amount such that the aggregate
number of shares of Buyer Common Stock issuable in the Merger,
multiplied by the Pre-Closing Period Market Price, is not less than
$1,034,537.00; or
(e) by either Buyer or Aurora 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 6.6 of this Agreement;
or
(f) by Buyer, if, at the Aurora Stockholders' Meeting
(including any adjournment or postponement), the requisite vote of
the stockholders of Aurora in favor of this Agreement and the
Merger shall not have been obtained or any of the stockholders of
Aurora shall have elected to become a dissenting stockholder
pursuant to Section 262 of the DGCL; or
(g) by Buyer or Aurora, if there has been a breach of
any representation, warranty, covenant or agreement on the part of
the other party set forth in this Agreement, which breach
(A) causes the conditions set forth in Section 7.2(a) or (b) (in
the case of termination by Buyer) or 7.3(a) or (b) (in the case of
termination by Aurora) not to be satisfied, and (B) shall not have
been cured within 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 Buyer, Aurora,
Sub or their respective officers, directors, stockholders or
Affiliates, except to the extent that such termination results from
the breach by a party of any of its representations,
warranties,covenants or agreements set forth in this Agreement;
provided that, the provisions of Sections 6.4(b) of this Agreement
shall remain in full force and effect and survive any termination
of this Agreement.
Section 8.3 Fees and Expenses. All fees and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated; provided,
however, that the fees and expenses, if any, incurred by ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇ in connection with the Merger shall be paid by Aurora.
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 stockholders
of Aurora, but, after any such approval, no amendment shall be made
which by law requires further approval by such stockholders without
such further approval. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties
hereto.
Section 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
Miscellaneous
Section 9.1 Survival of Representations, Warranties and
Agreements. Except as otherwise provided in Section 6.12, the
representations, warranties and agreements in this Agreement and in
any instrument delivered pursuant to this Agreement shall survive
the Closing and the Effective Time.
Section 9.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if
delivered personally, telecopied (which is confirmed) or mailed by
registered or certified mail (return receipt requested) 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 Buyer or Sub, to
Comdial Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Senior Vice President
` Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
McGuire, Woods, Battle & ▇▇▇▇▇▇, LLP
P. O. Box 1288
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Aurora, to:
Aurora Systems, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & Dodge
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Section 9.3 Interpretation. When a reference is made in this
Agreement to a section, such reference shall be to a Section of
this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation
of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." 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. 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 February 14, 1996.
Section 9.4 Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when two 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 9.5 Entire Agreement; No Third Party Beneficiaries.
This Agreement (including the documents and the instruments
referred to herein) (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter
hereof, and (b) is not intended to confer upon any person or entity
other than the parties hereto any rights or remedies hereunder.
Section 9.6 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of Delaware
without regard to any applicable conflicts of law.
Section 9.7 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.
In Witness Whereof, Buyer, Sub, and Aurora have caused this
Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
Aurora Systems, Inc.
By:_____________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chief Executive Officer
Comdial Corporation
By:___________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President
Aurora Acquisition Corporation
By:___________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President
_______________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
______________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Exhibit A
Restated Certificate of Incorporation
--------------------------------------
Restated Certificate of Incorporation
of
Aurora Systems, Inc.
The Certificate of Incorporation of Aurora Systems, Inc. as heretofore
amended or supplemented, shall at the Effective Time be restated and further
amended to read in its entirety as follows:
1. The name of the corporation is Aurora Systems, Inc. (the
"Corporation").
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, County of ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. The name of its registered agent at such address is
the Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. The aggregate number of shares of capital stock which the Corporation
shall have the authority to issue is one hundred (100) shares of Common Stock
with a par value of $0.01 per share.
5. The Corporation is to have perpetual existence.
6. In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized to make, alter and
repeal the Bylaws of the Corporation.
7. Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provisions contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the Bylaws of the Corporation. Elections of
directors need not be by written ballot unless the Bylaws of the Corporation
shall so provide.
8. Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under the provisions of section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement of the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation.
9. The Corporation reserves the right to amend, alter, change or repeal
any provisions contained in this certificate of incorporation, in the manner
now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
Exhibit B
Opinion of Aurora's Legal Counsel
---------------------------------
[ LETTERHEAD OF ▇▇▇▇▇▇ & DODGE ]
< closing date >
Comdial Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Agreement and Plan of Merger Dated February _, 1996,
Among Comdial Corporation, Aurora Acquisition Corporation,
Aurora Systems, Inc., ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Ladies and Gentlemen:
We have acted as counsel for Aurora Systems, Inc., a Delaware corporation
("Aurora") and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (the "Founders") in
connection with the transactions contemplated by an Agreement and Plan of
Merger dated ___________, 1996 (the "Agreement"), among Comdial Corporation, a
Delaware corporation ("Buyer"), Aurora Acquisition Corporation, a Delaware
corporation ("Sub"), Aurora, and the Founders, pursuant to which, among other
things, Sub has agreed to merge with and into Aurora. This opinion is rendered
pursuant to the provisions of Section 7.2(c) of the Agreement. All terms used
herein, and not otherwise defined herein, shall have the meanings they have in
the Agreement unless the context requires otherwise.
In so acting, we have examined such certificates of public
officials, certificates of officers of Aurora, and the originals (or copies
thereof, certified to our satisfaction) of such corporate documents and
records of Aurora, and such other documents, records and papers as we have
deemed relevant in order to give the opinions hereinafter set forth. In this
connection, we have assumed the genuineness of signatures, the authenticity of
all documents submitted to us as originals and the conformity to authentic
original documents of all documents submitted to us as certified, conformed,
facsimile or photostatic copies. In addition, we have relied, to the extent
that we deem such reliance proper, upon certificates of officers of Aurora
with respect to the accuracy of certain factual matters relevant to the
opinions contained herein.
Based upon the foregoing, it is our opinion that:
1. Aurora is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Aurora is duly
qualified to transact business and is in good standing as a foreign
corporation in the State of Massachusetts; the chief executive officer of
Aurora has submitted to us a certificate, a copy of which is attached hereto
as Appendix 1, stating that, in his opinion, the State of Massachusetts is the
only jurisdiction in which the real or personal property or assets owned,
leased, licensed, or used or business conducted by Aurora is material to the
operations of Aurora. To the best of our knowledge, Aurora has no
subsidiaries.
2. Aurora has all corporate power and authority to own all of its
properties and assets and to carry on its business as now being conducted.
3. Aurora has the corporate power and authority to execute and
deliver the Agreement and to consummate the transactions contemplated thereby.
The execution and delivery by Aurora of the Agreement and the consummation of
the transactions contemplated thereby have been duly authorized by the board
of directors and the stockholders of Aurora and no other corporate proceedings
on the part of Aurora or its stockholders are necessary with respect thereto.
The Agreement has been duly executed and delivered by Aurora and the Founders
and constitutes the valid and binding obligation of Aurora and the Founders,
enforceable against each of them in accordance with its terms. Our opinion is
subject to the qualifications that the enforceability of the Agreement against
Aurora or the Founders may be limited by (i) applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally, (ii) equitable
principles of general applicability (regardless of whether considered in a
proceeding in equity or at law) and (iii) the requirement that the parties act
with reasonableness and in good faith to the extent required by applicable
law.
4. Except for the filing of a Certificate of Merger with the
Delaware Secretary of State, Aurora has made all filings with, and obtained
all permits, authorizations, consents or approvals of public bodies required
of it as a condition to the lawful consummation of the transactions
contemplated by the Agreement, including the Merger.
5. (a) Immediately prior to the Effective Time, the authorized
capital stock of Aurora consists of 2,000,000 shares of Aurora Common Stock
and 212,176 shares of Aurora Preferred Stock, of which (i) 955,914 shares of
Aurora Common Stock are issued and outstanding, all of which are validly
issued, fully paid and nonassessable, and owned of record and beneficially as
set forth in Item 3.2(a) of the Aurora Disclosure Schedule, (ii) no shares of
Aurora Common Stock are held in the treasury of Aurora, (iii) 80,000 shares of
Aurora Common Stock are reserved for future issuance upon the exercise of
Aurora Stock Options, as to which Aurora Stock Options have been granted with
respect to 54,750 shares, (iv) 125,000 shares of Aurora Common Stock are
reserved for future issuance upon the exercise of the Poly Ventures Warrant,
and (v) 212,176 shares of Aurora Common Stock are reserved for future issuance
upon the conversion of the Aurora Preferred Stock, and (v) 212,176 shares of
Aurora Preferred Stock are issued and outstanding, all of which are validly
issued, fully paid and nonassessable, and owned of record and beneficially as
set forth in Item 3.2(a) of the Aurora Disclosure Schedule. All shares of
Aurora Common Stock subject to issuance as specified above, upon issuance on
the terms and conditions specified in the instruments pursuant to which they
are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. To the best of our knowledge, there are no obligations,
contingent or otherwise, of Aurora to repurchase, redeem or otherwise acquire
any shares of Aurora Common Stock or make any investment (in the form of a
loan, capital contribution or otherwise) in any corporation, partnership,
limited liability company, joint venture or other organization.
(b) To the best of our knowledge, except as set forth in Paragraph
5(a), (i) there are no equity securities of any class of Aurora, or any
security exchangeable into or exercisable for such equity securities, issued,
reserved for issuance or outstanding, and (ii) there are no options, warrants,
equity securities, calls, rights, commitments or agreements of any character
to which Aurora is a party or by which it is bound obligating Aurora to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares
of capital stock of Aurora or obligating Aurora to grant, extend, accelerate
the vesting of or enter into any such option, warrant, equity security, call,
right, commitment or agreement. To the best our knowledge, there are no
voting trusts, proxies or other agreements or understandings with respect to
the shares of capital stock of Aurora, except for that certain stockholder
agreement among Aurora, Poly Ventures II, ▇▇▇▇▇▇ Corporation, ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ dated January 13, 1995.
6. The execution and delivery by Aurora and the Founders of the
Agreement and the consummation of the transactions contemplated thereby,
including the Merger, and the consummation of the transactions contemplated
thereby, does not and will not violate or result in a breach of any provision
of the Certificate of Incorporation or Bylaws of Aurora or, to the best of our
knowledge, (i) result in a default (or give rise to any right of termination,
cancellation or acceleration) under the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, agreement, lease or other instrument
or obligation known to us to which Aurora or either of the Founders is a party
or by which Aurora or either of the Founders or the business conducted by it
or either of them may be bound, or (ii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Aurora or either of the
Founders or to the business conducted by it or either of them.
7. In the course of our engagement to represent or advise Aurora
professionally, we have not become aware of any pending legal proceeding
before, or investigation by, any court or administrative agency or authority
or any arbitration tribunal nor have we devoted substantive attention in the
form of legal representation or consultation to any overtly threatened
litigation against Aurora, either of the Founders, ▇▇▇ any of their respective
properties or assets, or with respect to the transactions contemplated by the
Agreement. In expressing the foregoing opinion, we have endeavored, to the
extent we have believed necessary, to determine from lawyers currently in our
firm who have performed legal services for Aurora or the Founders whether such
services involved substantive attention in the form of legal consultation
concerning pending or overtly threatened litigation. Beyond that (and except
for due inquiry of the chief executive and financial officers of Aurora), we
have not made any review of Aurora's transactions or other matters as a basis
for the opinion expressed herein. The opinions expressed herein are limited to
matters governed by the laws of the States of Massachusetts and Delaware.
This letter is furnished to Buyer and is solely for Buyer's benefit and for
the benefit of any financial institution lending funds to Buyer for the
purpose of consummating the transactions contemplated by the Agreement,
including the Merger. No other persons are entitled to rely on this letter
without our prior written consent.
Very truly yours,
▇▇▇▇▇▇ & DODGE
Exhibit C
▇▇▇▇▇▇▇▇ Employment Agreement
-----------------------------
Employment Agreement
This Employment Agreement is made and entered into as of _____________,
1996, by and between Comdial Corporation, a Delaware corporation ("Comdial")
and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, an individual residing at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Executive").
Recitals
Pursuant to an Agreement and Plan of Merger (the "Merger Agreement") dated
as of February __, 1996, by and among Comdial, Aurora Acquisition Corporation,
a Delaware corporation ("Sub"), and Aurora Systems, Inc., a Delaware
corporation ("Aurora"), Sub has agreed to merge with and into Aurora (the
"Merger"). It is a condition of the Merger Agreement that the Executive enter
into this Agreement providing for the employment of the Executive by Comdial
and after the Effective Time (as such term is defined in the Merger Agreement),
and providing for non-competition and other arrangements set forth herein.
Now, Therefore, In consideration of the premises and the mutual covenants
herein contained, the continued employment of the Executive, and other good and
valuable consideration, Comdial and Executive agree as follows:
1. Employment; Term. On the terms and conditions hereinafter set forth,
Comdial hereby employs Executive, and Executive hereby accepts exclusive
full-time employment with Comdial. Such employment shall commence at the
Effective Time and shall continue until terminated in accordance with the
provisions of Section 10 of this Agreement. The period during which Executive
is employed hereunder shall be referred to as the "Employment Term".
2. Duties. During the Term of Employment, Executive shall serve as Chief
Executive Officer of Aurora and shall have such powers, duties and
responsibilities as are consistent with such offices and prescribed from time
to time by Aurora's bylaws or the Board of Directors of Aurora (the "Board").
From time to time, Comdial may assign Executive additional duties and
responsibilities of an executive nature for the benefit of Comdial or its other
subsidiaries. Executive agrees faithfully to discharge such duties and
responsibilities and, generally, to perform such other functions consistent
with such offices for Comdial and its subsidiaries. The compensation herein
provided to be paid to Executive shall cover and include all services and
functions performed by Executive for Comdial, Aurora, and Comdial's other
subsidiaries. Executive's employment shall be in accordance with the policies
established by Comdial as to working facilities, vacation, sick leave and all
other benefits for, and restrictions upon, its senior executives and Executive
shall comply at all times with the procedures established by the Board or by
Comdial relating to the conduct of the senior executives of Comdial and its
subsidiaries, as in effect from time to time during the Employment Term.
3. Extent of Services; Place of Employment. Executive agrees that,
during the Employment Term, he will devote substantially all of his working
time (except for vacations and periods of illness), attention and best efforts
to the business and interests of Aurora, that he will perform all duties and
responsibilities assigned to him and that he will do his utmost to enhance and
develop the business, interests and welfare of Aurora and Comdial generally and
shall not, without the prior written consent of the Board, work for any other
employer or take any other position or undertake any activity (whether or not
compensated) not related to his employment that would in the aggregate require
any substantial portion of his working time or otherwise adversely affect his
ability to perform hereunder. Executive shall perform his duties at the
principal office of Aurora in Acton, Massachusetts, except to the extent that
Executive may be required to travel and render services in different locations
from time to time incident to the performance of such duties. Notwithstanding
the foregoing, Executive may (i) continue to serve on the board of directors of
the Multi Media Telecommunications Association ("MMTA") trade association, and
(ii) serve as a consultant to other business organizations provided the Board
shall have given its prior written consent to each such consulting engagement,
which consent shall not be unreasonably withheld.
4. Salary; Benefits. Executive's compensation, including base salary,
bonus, and other fringe benefits, is set forth on Schedule 1 attached hereto
and made a part hereof. In addition, Executive shall be eligible to
participate in all benefit plans, programs and arrangements available to senior
executives in accordance with the terms thereof and as the same may from time
to time be amended from time to time during the Employment Term.
Notwithstanding the foregoing, the Board may increase Executive's compensation
at any time during the Employment Term.
5. Termination.
(a) Four-Year Term. Subject to the provisions of Sections 5(b), 5(c)
and 5(d), the term of this Agreement shall extend from the Effective Time until
the fourth anniversary of the Effective Time.
(b) Death or Disability. This Agreement shall be terminated
automatically upon Executive's death and may be terminated at the discretion of
the Board or if Executive shall be rendered substantially unable to perform his
services hereunder for three consecutive months because of a medically
determined physical or mental disability. A condition of disability under this
Agreement shall be determined by the Board on the basis of competent medical
advice. A written opinion of a licensed physician certified in his field of
specialization and acceptable to the Board, or Executive's receipt of or
entitlement to disability benefits under any insurance policy, benefit plan, or
under federal social security laws shall be conclusive evidence of disability.
(c) Termination for Cause. The Board may, at any time, upon written
notice to Executive, terminate Executive's employment for Cause. For purposes
of this Section 5(c), the term "Cause" shall mean (i) Executive's willful and
continued failure substantially to perform the duties set forth in Section 2 of
this Agreement (other than as a result of total or partial incapacity due to
physical or mental disability) for a period of at least thirty (30) days after
written demand by Aurora or Comdial for performance is delivered to the
Executive which specifies the alleged failures; (ii) Executive's engaging in
(A) a misappropriation of funds, properties or assets of Comdial or any of its
subsidiaries, unless unintentional and de minimis in amount, (B) any malicious
damage or destruction of any property or assets of Comdial or any of its
subsidiaries, whether resulting from Executive's willful actions or omissions
or Executive's gross negligence, or (C) any falsification of any books,
records, documents or systems of Comdial or any of its subsidiaries; (iii) an
act or acts on the part of the Executive involving moral turpitude or
constituting a felony under the laws of the United States, any state or any
political subdivision thereof; or (iv) Executive's material breach of the
obligations of the Executive under Sections 7 and 8 of this Agreement, which
breach continues for at least thirty (30) days after notice from Aurora or
Comdial specifying such breach.
(d) Voluntary Resignation. Executive may, at any time, upon thirty
(30) days' written notice to Comdial, terminate the Employment Term for any
reason, with or without cause.
(e) Termination by Executive. Executive may terminate employment
under this Agreement if the Board (i) assigns to Executive any duties
significantly inconsistent with Executive's position, duties, responsibilities
or status at the general management level within the Company, or (ii)
materially reduces the Executive's compensation or benefits below the
compensation and benefits provided for in this Agreement, or (iii) otherwise
fails to honor its obligations to Executive under this Agreement, and such
actions continue for a period of at least thirty (30) days after written notice
from the Executive to the Board specifying the alleged failure. If the
Executive so terminates employment under this Agreement, Comdial shall continue
to pay to Executive the compensation set forth in this Agreement from the date
of such termination of employment until the earlier of (A) the fourth (4th)
anniversary of the date of this Agreement, or (B) Executive's death.
6. Effect of Termination. Except as otherwise provided in Section 5(e)
of this Agreement, upon the termination of the Employment Term, Comdial's
obligations under Sections 1 and 4 of this Agreement shall immediately expire,
but all other rights and obligations of the parties hereto, including, without
limitation, the obligation of Comdial to pay compensation accrued pursuant to
Section 4 through such termination date and the obligations of Executive under
Sections 7, 8, 9, 10 and 16 of this Agreement shall continue in full force and
effect.
7. Noncompetition.
(a) Executive acknowledges that his relationship with Comdial and
its affiliates will give him access to valuable confidential and proprietary
information and expertise not generally known in the industry in which Comdial
and its affiliates are engaged (including information conceived, originated,
discovered or developed by Executive) relating to the telecommunications,
telephone systems and computer telephony products and business of Comdial (the
"Business"), including, without limitation, the following: technical know-how;
lists of previous, present and prospective venture partners, investors, and
lenders; credit information; sources of supply; business plans, proposals and
summaries; private processes, techniques and formulae; research and development
activities and data; inventions; and other aspects of the affairs and business
operations of Comdial and its affiliates as they exist on the date hereof (or
as they may from time to time exist during the term of this Agreement). If
used to the benefit of a company engaging in a business similar to the
Business, such information would prejudice the interests of Comdial.
(b) In view of the foregoing, as a material inducement to Comdial to
enter into this Agreement, Executive hereby agrees that neither Executive nor
any entity controlled by or otherwise affiliated with Executive shall, during
the Employment Term and thereafter during thePost Employment Period (defined in
Section 7(c) of this Agreement), except for duties to be performed by Executive
as an employee of Comdial, in any manner, directly or indirectly, own, manage,
operate, control, be employed by, consult with, participate in or be connected
in any manner with the ownership, management, operation or control of any sole
proprietorship, partnership, corporation or other entity (A) which competes
with Comdial or its affiliates in the development, manufacture or sale of (1)
any product sold or service rendered by Comdial or any of its affiliates as of
the date the Employment Term is terminated, or (2) any product in active
development by Comdial prior to the date on which the Employment Term is
terminated (the active development of any product to be established by
verifiable dollars being spent in such product's development) in any country
where Comdial then conducts business, or (B) which calls upon, solicits,
diverts or takes away any of the then existing customers or patrons of Comdial
for the purpose of causing or attempting to cause any such person to purchase
products sold or services rendered by Comdial or any of its affiliates from any
person other than Comdial or its affiliates or otherwise diverts business from
Comdial. Nothing contained in the foregoing sentence shall be construed as
preventing Executive (i) from owning, solely for passive investment, less than
five percent (5%) of the stock of any entity registered on a recognized stock
exchange, or (ii) from engaging in any business activity if Executive's
employment is terminated by Comdial prior to the expiration of the Employment
Term without Cause. Executive agrees that the specified duration of the
covenants set forth in this Section 7 shall be extended by and for the term of
any period during which Executive is in violation of any such covenant.
(c) For purposes of this Section 7, the term "Post Employment Period"
shall mean a period of time extending from the end of the Employment Term for
the number of years set forth below, depending on the length of the Employment
Term:
Length of Employment Post Employment
Term Period
-------------------- ---------------
Less than 1 year 3 years
1 year but less than 4 years 2 years
4 years and longer 1 year
8. Confidentiality Agreement; Assignment of Inventions. Executive agrees
to execute and deliver to Comdial, at the Effective Time, Comdial's standard
Employee Confidentiality Agreement and Assignment, a copy of which is attached
to this Agreement as Schedule 2. The Executive shall be bound by the
provisions of the Employee Confidentiality Agreement and Assignment throughout
the Employment Term. In the event the Executive's employment is terminated for
any reason, Executive shall continue to be bound the provisions of the Employee
Confidentiality Agreement and Assignment, in accordance with its terms.
9. Copyrights. Executive specifically agrees that all copyrightable
materials generated or developed by Executive which relate to the business of
Comdial or any of its affiliates, including, but not limited to, computer
programs and documentation, shall be considered works made for hire under the
copyright laws of the United States and shall, upon creation, be owned
exclusively by Comdial. To the extent that any such materials, under
applicable law, may not be considered works made for hire, Executive hereby
assigns to Comdial the ownership of all copyrights to such materials, without
the necessity of any further consideration, and Comdial shall be entitled to
register and hold in its own name all copyrights in respect of such materials.
10. Piggyback Registration Rights.
(a) If Comdial at any time proposes to register any of its
securities under the Securities Act of 1933, as amended (the "1933 Act"), in
connection with the public offering of such securities, solely for cash,
whether or not for sale for its own account, on a form which would permit
registration of the shares (the "Shares") of common stock of Comdial held by
the Executive and acquired in connection with the Merger for sale to the public
under the 1933 Act, Comdial will each such time give written notice to
Executive of its intention to do so, describing such securities and specifying
the form and manner of the intended distribution thereof and the other
relevant facts involved in such proposed registration, and upon the written
request of Executive delivered to Comdial within seven (7) days after the
giving of any such notice (which request shall specify the number of Restricted
Shares intended to be disposed of by Executive and the intended method of
disposition thereof), Comdial will use reasonable efforts as a part of its
filing to effect the registration under the 1933 Act of all Shares which
Comdial has been so requested to register, to the extent requisite to permit
the disposition (in accordance with the intended methods thereof as specified)
of such shares so to be registered.
(b) Notwithstanding the foregoing, if (i) the registration so
proposed by Comdial involves an underwritten offering of the securities so
being registered, and (ii) the managing underwriter of such underwritten
offering shall advise Comdial in writing that, in its opinion, the distribution
of all or a specified portion of such Shares concurrently with the securities
being distributed by such underwriters would be reasonably likely to materially
and adversely affect the distribution of such securities by such underwriters,
then Comdial will promptly furnish Executive with a copy of such opinion and
may require, by written notice to Executive accompanying such opinion, that the
distribution of all or a specified portion of such Shares as indicated in such
opinion be deferred until the completion of the distribution of such securities
by such underwriters, but in no event for a period of more than one hundred
eighty (180) days after the effective date of such registration.
(c) Comdial shall not be obligated to effect any registration of
Shares pursuant to Section 12(a) (i) incidental to the registration of any of
its securities in connection with mergers, acquisitions, exchange offers,
dividend reinvestment plans or stock option or other employee benefit plans,
(ii) incidental to the registration of any debt securities or other securities
not constituting capital stock, or (iii) as to which Executive would be free
immediately to sell under Rule 144 or other similar rule exempting such Shares
from registration.
(d) Executive shall pay all expenses directly related to the
registration and the offer and sale of the Shares by him, including, without
limitation, the expenses of his counsel, and underwriting discounts and sales
commissions.
11. Application of Agreement. In the event that any court shall finally
hold that any provision stated in this Agreement constitutes an unreasonable
restriction upon Executive, the parties hereby expressly agree that the
provisions of this Agreement shall not be rendered void but shall apply as to
time and territory or to such other extent as such court may judiciously
determine or indicate constitutes a reasonable restriction under the
circumstances involved.
12. Injunctive Relief. It is understood and agreed that it may be
impossible to measure in money the damages that will accrue to Comdial in the
event that Executive breaches the provisions of Sections 7, 8 or 9 above, and
that Comdial's remedy at law in the event of such a breach would not be
adequate. Therefore, it is agreed that Comdial shall be entitled, in the event
of such a breach, to an injunction and other equitable remedies as a matter of
right. However, recourse to any remedy hereunder shall not constitute an
election by Comdial, but Comdial may resort to other remedies or a combination
of remedies as it may choose.
13. Executive's Representation. Executive represents and warrants to
Comdial that he has the full power and right to enter into and perform this
Agreement without the consent or approval of any other person, including any
present or previous employer; and that his execution, delivery and performance
of this Agreement will not violate or cause a breach of any existing employment
or other agreement or any other duty by which he is bound, or any outstanding
covenant or promise, including covenants not to compete, given by him to any
other person. Executive agrees to indemnify Comdial against any damages,
expenses or claims, including attorney's fees, by reason of any breach of these
representations or any other part of this Agreement.
14. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or transmitted by
telecopy or telegram or mailed by registered or certified mail (return receipt
requested) to the parties at the addresses set forth below (or at such other
address for a party as shall be specified by like notice):
If to Comdial:
Aurora Systems, Inc.
c/o Comdial Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
McGuire, Woods, Battle & ▇▇▇▇▇▇, LLP
P. O. Box 1288
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Executive:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
c/o Aurora Systems, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & Dodge
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
15. Interpretation. When a reference is made in this Agreement to a
section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation."
16. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two 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.
17. Employee Policies. The Executive shall be subject to Comdial's
standard employee policies applicable generally to employees holding similar
positions and having similar responsibilities. The Executive agrees to
execute, at the Effective Time, such standard forms and documents as any
employee of similar rank would sign and execute, acknowledging receipt of
copies of Comdial's standard employee policies.
18. Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein) (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) is not intended to confer upon any person or
entity other than the parties hereto any rights or remedies hereunder.
19. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Virginia without regard to any
applicable conflicts of law.
20. Binding Effect. This Agreement shall be binding upon and inure
solely to the benefit of the parties hereto and their respective successors and
assigns. This Agreement is personal with Executive and may not be assigned by
him. Comdial shall have the right to assign this Agreement to any affiliate of
Comdial or to a successor to all or substantially all of the business or assets
of Comdial or any division or part of Comdial with which Executive shall be
employed.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
COMDIAL CORPORATION
By: ____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President
______________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Schedule 1
Compensation And Bonus
Base Salary: $140,000.00 per annum
Incentive Bonus: Executive shall be entitled to receive a cash bonus
paid on or before March 31 of each year in an amount
equal to the Bonus Plan Amount, as defined below. The
term "Bonus Plan Amount" means, with respect to the
last completed fiscal year, an amount equal to 11.5%
of the first $1,000,000.00 of Aurora's earnings before
interest and taxes ("EBIT") and 5.7% of Aurora's EBIT
in excess of $1,000,000.00. For each fiscal year,
EBIT shall be determined by Comdial using generally
accepted accounting principles, consistently applied,
and (i) shall be based upon actual results achieved from
following Aurora's business plan for such year as
approved or modified by the Board, (ii) shall be
determined without reference to allocation of corporate
overhead or other costs from Comdial, (iii) shall
allocate Comdial requested research and development
efforts at two (2) times cost plus reasonable royalty
sharing, (iv) shall be adjusted if Executive is assigned
duties by Comdial which cause the Executive to devote
substantial amounts of time away from Aurora, and (v)
shall include transfer pricing to Comdial on the basis
of the best price available. For the fiscal year
ending December 31, 1996, the Bonus Plan Amount payable
to Executive shall be at least $50,000.
Schedule 2 to Employment Agreement
Employee Confidentiality Agreement and Assignment
-------------------------------------------------
Name:_______________________________________ Employee No.________________
Department:_________________ Place:________________ Date_________________
COMDIAL CORPORATION and its subsidiary corporations (hereinafter
collectively called "Company") are engaged or may be engaged in certain
fields of business, including but not limited to the fields of telephony,
data processing, communications and electronics. The Company pursues
research and development work, engages in design, manufacture and production
of products, and further maintains accounting, cost, product, sales and
other records, as well as lists of customers, and other proprietary
information.
In consideration of my employment and the remuneration paid me by the
Company and as a condition of my employment or of my continued employment,
I hereby acknowledge and agree to the following matters.
1. I will devote all my time and best efforts in the fields
of business, work or investigation of the Company and for its
sole benefit.
2. I agree to maintain in confidence, both during my employment
and thereafter, all proprietary information developed by me or
learned by virtue of my employment by the Company ("Proprietary
Information"), whether developed or learned before or after signing
this agreement. For this purpose, Proprietary Information includes,
but is not limited to, any secret process, method of operation,
trade secret, engineering and technical data, business plan,
customer list, price list, or other information not generally
known by the public. I will not disclose any Proprietary
Information to others or use it to my own advantage or that of
any third person.
3. I will fully, completely and promptly disclose in writing to
the Company any inventions, ideas, concepts, discoveries,
improvements or other creations, whether patentable or not,
conceived by me during and within the scope of my employment
and relating to the fields of business, work or
investigation of the Company.
4. Subject to the exclusions set forth in the next sentence,
I agree to assign and transfer to the Company (and I do hereby
assign and transfer to the Company by means of this agreement)
all right, title and interest to all inventions, discoveries or
improvements, patentable or unpatentable, conceived or made
by me, either alone or with others, during the period of my
employment and for one year thereafter. This assignment and
agreement applies to all such items except for (i) any item as
to which the Company agrees in writing that such item was not
suggested by and did not result from any work performed on
behalf of, or at the request of, the Company, and (ii) any
item which does not fall within or arise out of the fields of
business, work or investigation of the Company. I further
agree to make and maintain such written records of the foregoing
(if any) as the Company may require, which shall be and remain
the property of and available to the Company at all times.
5. I agree to execute any and all instruments and do all things
which the Company deems necessary to vest and maintain and protect
and enforce in the Company (and the Company's nominees) the entire
right, title and interest to all such inventions, discoveries and
improvements in any and all countries, at the request and expense of
the Company, but without additional remuneration to me.
6. Except as my duties for the Company may require, I will not
remove from the property of the Company any documents, files,
notebooks, records, correspondence, or models relating to the fields of
business, work or investigation of the Company, or make copies thereof,
all such items or copies whether made by me or by others being
recognized by me to be the property of the Company and not to
be used for my own or another's benefit, or delivered or communicated
to another, at any time, without the written consent of the Company.
7. The Company shall be entitled to an injunction in any court having
jurisdiction in the event of any threatened or actual violation of
any of the provisions of this agreement.
8. Whenever the phrase "fields of business, work or investigation of
the Company" is used herein it shall be deemed to include, without
limitation, any present or future fields of business, work or
investigation of the Company or any present or future subsidiary of
the Company, and any field in which the Company (or any such
subsidiary) has granted patent licenses or other rights to others.
9. This agreement is for the benefit of successors and assigns of
the Company (as well as for the benefit of the Company), and is
binding upon my heirs, assigns, administrators and representatives.
10. The enforcement of any of my obligations under this agreement
shall not depend upon the enforcement of any other obligation
hereunder. The expiration or termination of my employment
shall not relieve me of any of my obligations as set forth in
paragraphs 1 through 9 of this agreement. The Company
may enforce any and all of its rights under this agreement for
a period of three years after the expiration or termination of
my employment.
11. This agreement as of the date hereof replaces all prior
similar agreements and may be altered only in a writing
signed by the Company.
12. I further represent that except as listed below, I have no
agreements with or obligations to others relating to the fields
of business, work or investigation of the Company which are in
conflict with this agreement:
Obligations Excluded From This Agreement:
13. I further represent that the list below contains a complete
list of all inventions and patents which I have made heretofore
in the fields of business, work or investigation of the Company,
and which I desire to be excluded from this agreement.
Name of Excluded Invention Description of Excluded Invention
-------------------------- ---------------------------------
WITNESS the following signatures as of the date first written above.
WITNESS: ACCEPTED AND AGREED:
________________________________ __________________________________
Signature of Witness Signature (Sign name in full)
Exhibit ▇
▇▇▇▇▇ Employment Agreement
--------------------------
Employment Agreement
This Employment Agreement is made and entered into as of
_____________, 1996, by and between Comdial Corporation, a Delaware
corporation ("Comdial") and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual residing at ▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Executive").
Recitals
Pursuant to an Agreement and Plan of Merger (the "Merger Agreement")
dated as of February __, 1996, by and among Comdial, Aurora Acquisition
Corporation, a Delaware corporation ("Sub"), and Aurora Systems, Inc., a
Delaware corporation ("Aurora"), Sub has agreed to merge with and into
Aurora (the "Merger"). It is a condition of the Merger Agreement that the
Executive enter into this Agreement providing for the employment of the
Executive by Comdial and after the Effective Time (as such term is defined
in the Merger Agreement), and providing for non-competition and other
arrangements set forth herein.
Now, Therefore, In consideration of the premises and the mutual
covenants herein contained, the continued employment of the Executive, and
other good and valuable consideration, Comdial and Executive agree as
follows:
1. Employment; Term. On the terms and conditions hereinafter set
forth, Comdial hereby employs Executive, and Executive hereby accepts
exclusive full-time employment with Comdial. Such employment shall
commence at the Effective Time and shall continue until - terminated in
accordance with the provisions of Section 10 of this Agreement. The period
during which Executive is employed hereunder shall be referred to as the
"Employment Term".
2. Duties. During the Term of Employment, Executive shall serve as
President of Aurora and shall have such powers, duties and
responsibilities as are consistent with such offices and prescribed from
time to time by Aurora"s bylaws or the Board of Directors of Aurora (the
"Board"). From time to time, Comdial may assign Executive additional
duties and responsibilities of an executive nature for the benefit of
Comdial or its other subsidiaries. Executive agrees faithfully to
discharge such duties and responsibilities and, generally, to perform such
other functions consistent with such offices for Comdial and its
subsidiaries. The compensation herein provided to be paid to Executive
shall cover and include all services and functions performed by Executive
for Comdial, Aurora, and Comdial"s other subsidiaries. Executive"s
employment shall be in accordance with the policies established by Comdial
as to working facilities, vacation, sick leave and all other benefits for,
and restrictions upon, its senior executives and Executive shall comply at
all times with the procedures established by the Board or by Comdial
relating to the conduct of the senior executives of Comdial and its
subsidiaries, as in effect from time to time during the Employment Term.
3. Extent of Services; Place of Employment. Executive agrees that,
during the Employment Term, she will devote substantially all of her
working time (except for vacations and periods of illness), attention and
best efforts to the business and interests of Aurora, that she will perform
all duties and responsibilities assigned to her and that she will do her
utmost to enhance and develop the business, interests and welfare of Aurora
and Comdial generally and shall not, without the prior written consent of
the Board, work for any other employer or take any other position or
undertake any activity (whether or not compensated) not related to her
employment that would in the aggregate require any substantial portion of
her working time or otherwise adversely affect her ability to perform
hereunder. Executive shall perform her duties at the principal office of
Aurora in Acton, Massachusetts, except to the extent that Executive may be
required to travel and render services in different locations from time to
time incident to the performance of such duties. Notwithstanding the
foregoing, Executive may serve as a consultant to other business
organizations provided the Board shall have given its prior written consent
to each such consulting engagement, which consent shall not be unreasonably
withheld.
4. Salary; Benefits. Executive"s compensation, including base
salary, bonus, and other fringe benefits, is set forth on Schedule 1
attached hereto and made a part hereof. In addition, Executive shall be
eligible to participate in all benefit plans, programs and arrangements
available to senior executives in accordance with the terms thereof and as
the same may from time to time be amended from time to time during the
Employment Term. Notwithstanding the foregoing, the Board may increase
Executive"s compensation at any time during the Employment Term.
5. Termination.
(a) Four-Year Term. Subject to the provisions of Sections 5(b),
5(c) and 5(d), the term of this Agreement shall extend from the Effective
Time until the fourth anniversary of the Effective Time.
(b) Death or Disability. This Agreement shall be terminated
automatically upon Executive's death and may be terminated at the
discretion of the Board or if Executive shall be rendered substantially
unable to perform her services hereunder for three consecutive months
because of a medically determined physical or mental disability. A
condition of disability under this Agreement shall be determined by the
Board on the basis of competent medical advice. A written opinion of a
licensed physician certified in her field of specialization and acceptable
to the Board, or Executive"s receipt of or entitlement to disability
benefits under any insurance policy, benefit plan, or under federal social
security laws shall be conclusive evidence of disability.
(c) Termination for Cause. The Board may, at any time, upon
written notice to Executive, terminate Executive"s employment for Cause.
For purposes of this Section 5(c), the term "Cause" shall mean (i)
Executive"s willful and continued failure substantially to perform the
duties set forth in Section 2 of this Agreement (other than as a result of
total or partial incapacity due to physical or mental disability) for a
period of at least thirty (30) days after written demand by Aurora or
Comdial for performance is delivered to the Executive which specifies the
alleged failures; (ii) Executive"s engaging in (A) a misappropriation of
funds, properties or assets of Comdial or any of its subsidiaries, unless
unintentional and de minimis in amount, (B) any malicious damage or
destruction of any property or assets of Comdial or any of its
subsidiaries, whether resulting from Executive"s willful actions or
omissions or Executive"s gross negligence, or (C) any falsification of any
books, records, documents or systems of Comdial or any of its subsidiaries;
(iii) an act or acts on the part of the Executive involving moral turpitude
or constituting a felony under the laws of the United States, any state or
any political subdivision thereof; or (iv) Executive"s material breach of
the obligations of the Executive under Sections 7 and 8 of this Agreement,
which breach continues for at least thirty (30) days after notice from
Aurora or Comdial specifying such breach.
(d) Voluntary Resignation. Executive may, at any time, upon
thirty (30) days' written notice to Comdial, terminate the Employment Term
for any reason, with or without cause.
(e) Termination by Executive. Executive may terminate
employment under this Agreement if the Board (i) assigns to Executive any
duties significantly inconsistent with Executive"s position, duties,
responsibilities or status at the general management level within the
Company, or (ii) materially reduces the Executive"s compensation or
benefits below the compensation and benefits provided for in this
Agreement, or (iii) otherwise fails to honor its obligations to Executive
under this Agreement, and such actions continue for a period of at least
thirty (30) days after written notice from the Executive to the Board
specifying the alleged failure. If the Executive so terminates employment
under this Agreement, Comdial shall continue to pay to Executive the
compensation set forth in this Agreement from the date of such termination
of employment until the earlier of (A) the fourth (4th) anniversary of the
date of this Agreement, or (B) Executive"s death.
6. Effect of Termination. Except as otherwise provided in Section
5(e) of this Agreement, upon the termination of the Employment Term,
Comdial's obligations under Sections 1 and 4 of this Agreement shall
immediately expire, but all other rights and obligations of the parties
hereto, including, without limitation, the obligation of Comdial to pay
compensation accrued pursuant to Section 4 through the termination date and
the obligations of Executive under Sections 7, 8, 9, 10 and 16 of this
Agreement shall continue in full force
and effect.
7. Noncompetition.
(a) Executive acknowledges that her relationship with Comdial
and its affiliates will give her access to valuable confidential and
proprietary information and expertise not generally known in the industry
in which Comdial and its affiliates are engaged (including information
conceived, originated, discovered or developed by Executive) relating to
the tele- communications, telephone systems and computer telephony products
and business of Comdial (the "Business"), including, without limitation,
the following: technical know-how; lists of previous, present and
prospective venture partners, investors, and lenders; credit information;
sources of supply; business plans, proposals and summaries; private
processes, techniques and formulae; research and development activities and
data; inventions; and other aspects of the affairs and business operations
of Comdial and its affiliates as they exist on the date hereof (or as they
may from time to time exist during the term of this Agreement). If used
to the benefit of a company engaging in a business similar to the Business,
such information would prejudice the interests of Comdial.
(b) In view of the foregoing, as a material inducement to
Comdial to enter into this Agreement, Executive hereby agrees that neither
Executive nor any entity controlled by or otherwise affiliated with
Executive shall, during the Employment Term and thereafter during the Post
Employment Period (defined in Section 7(c) of this Agreement), except for
duties to be performed by Executive as an employee of Comdial, in any
manner, directly or indirectly, own, manage, operate, control, be employed
by, consult with, participate in or be connected in any manner with the
ownership, management, operation or control of any sole proprietorship,
partnership, corporation or other entity (A) which competes with Comdial or
its affiliates in the development, manufacture or sale of (1) any product
sold or service rendered by Comdial or any of its affiliates as of the date
the Employment Term is terminated, or (2) any product in active development
by Comdial prior to the date on which the Employment Term is terminated
(the active development of any product to be established by verifiable
dollars being spent in such product"s development) in any country where
Comdial then conducts business, or (B) which calls upon, solicits, diverts
or takes away any of the then existing customers or patrons of Comdial for
the purpose of causing or attempting to cause any such person to purchase
products sold or services rendered by Comdial or any of its affiliates from
any person other than Comdial or its affiliates or otherwise diverts
business from Comdial. Nothing contained in the foregoing sentence shall
be construed as preventing Executive (i) from owning, solely for passive
investment, less than five percent (5%) of the stock of any entity
registered on a recognized stock exchange, or (ii) from engaging in any
business activity if Executive"s employment is terminated by Comdial prior
to the expiration of the Employment Term without Cause. Executive agrees
that the specified duration of the covenants set forth in this Section 7
shall be extended by and for the term of any period during which Executive
is in violation of any such covenant.
(c) For purposes of this Section 7, the term "Post Employment
Period" shall mean a period of time extending from the end of the
Employment Term for the number of years set forth below, depending on the
length of the Employment Term:
Length of Employment Post Employment
Term Period
Less than 1 year 3 years
1 year but less than 4 years 2 years
4 years and longer 1 year
8. Confidentiality Agreement; Assignment of Inventions. Executive
agrees to execute and deliver to Comdial, at the Effective Time, Comdial"s
standard Employee Confidentiality Agreement and Assignment, a copy of which
is attached to this Agreement as Schedule 2. The Executive shall be bound
by the provisions of the Employee Confidentiality Agreement and Assignment
throughout the Employment Term. In the event the Executive"s employment is
terminated for any reason, Executive shall continue to be bound the
provisions of the Employee Confidentiality Agreement and Assignment, in
accordance with its terms.
9. Copyrights. Executive specifically agrees that all copyrightable
materials generated or developed by Executive which relate to the business
of Comdial or any of its affiliates, including, but not limited to,
computer programs and documentation, shall be considered works made for
hire under the copyright laws of the United States and shall, upon
creation, be owned exclusively by Comdial. To the extent that any such
materials, under applicable law, may not be considered works made for hire,
Executive hereby assigns to Comdial the ownership of all copyrights to such
materials, without the necessity of any further consideration, and Comdial
shall be entitled to register and hold in its own name all copyrights in
respect of such materials.
10. Piggyback Registration Rights.
(a) If Comdial at any time proposes to register any of its
securities under the Securities Act of 1933, as amended (the "1933 Act"),
in connection with the public offering of such securities, solely for cash,
whether or not for sale for its own account, on a form which would permit
registration of the shares (the "Shares") of common stock of Comdial held
by the Executive and acquired in connection with the Merger for sale to the
public under the 1933 Act, Comdial will each such time give written notice
to Executive of its intention to do so, describing such securities and
specifying the form and manner of the intended distribution thereof and
the other relevant facts involved in such proposed registration, and upon
the written request of Executive delivered to Comdial within seven (7) days
after the giving of any such notice (which request shall specify the number
of Restricted Shares intended to be disposed of by Executive and the
intended method of disposition thereof), Comdial will use reasonable
efforts as a part of its filing to effect the registration under the 1933
Act of all Shares which Comdial has been so requested to register, to the
extent requisite to permit the disposition (in accordance with the intended
methods thereof as specified) of such shares so to be registered.
(b) Notwithstanding the foregoing, if (i) the registration so
proposed by Comdial involves an underwritten offering of the securities so
being registered, and (ii) the managing underwriter of such underwritten
offering shall advise Comdial in writing that, in its opinion, the
distribution of all or a specified portion of such Shares concurrently with
the securities being distributed by such underwriters would be reasonably
likely to materially and adversely affect the distribution of such
securities by such underwriters, then Comdial will promptly furnish
Executive with a copy of such opinion and may require, by written notice to
Executive accompanying such opinion, that the distribution of all or a
specified portion of such Shares as indicated in such opinion be deferred
until the completion of the distribution of such securities by such
underwriters, but in no event for a period of more than one hundred eighty
(180) days after the effective date of such registration.
(c) Comdial shall not be obligated to effect any registration
of Shares pursuant to Section 12(a) (i) incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange
offers, dividend reinvestment plans or stock option or other employee
benefit plans, (ii) incidental to the registration of any debt securities
or other securities not constituting capital stock, or (iii) as to which
Executive would be free immediately to sell under Rule 144 or other similar
rule exempting such Shares from registration.
(d) Executive shall pay all expenses directly related to the
registration and the offer and sale of the Shares by her, including,
without limitation, the expenses of her counsel, and underwriting discounts
and sales commissions.
11. Application of Agreement. In the event that any court shall
finally hold that any provision stated in this Agreement constitutes an
unreasonable restriction upon Executive, the parties hereby expressly agree
that the provisions of this Agreement shall not be rendered void but shall
apply as to time and territory or to such other extent as such court may
judiciously determine or indicate constitutes a reasonable restriction
under the circumstances involved.
12. Injunctive Relief. It is understood and agreed that it may be
impossible to measure in money the damages that will accrue to Comdial in
the event that Executive breaches the provisions of Sections 7, 8 or 9
above, and that Comdial's remedy at law in the event of such a breach would
not be adequate. Therefore, it is agreed that Comdial shall be entitled,
in the event of such a breach, to an injunction and other equitable
remedies as a matter of right. However, recourse to any remedy hereunder
shall not constitute an election by Comdial, but Comdial may resort to
other remedies or a combination of remedies as it may choose.
13. Executive"s Representation. Executive represents and warrants
to Comdial that she has the full power and right to enter into and perform
this Agreement without the consent or approval of any other person,
including any present or previous employer; and that her execution,
delivery and performance of this Agreement will not violate or cause a
breach of any existing employment or other agreement or any other duty by
which she is bound, or any outstanding covenant or promise, including
covenants not to compete, given by her to any other person. Executive
agrees to indemnify Comdial against any damages, expenses or claims,
including attorney's fees, by reason of any breach of these representations
or any other part of this Agreement.
14. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or
transmitted by telecopy or telegram or mailed by registered or certified
mail (return receipt requested) to the parties at the addresses set forth
below (or at such other address for a party as shall be specified by like
notice):
If to Comdial:
Aurora Systems, Inc.
c/o Comdial Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
McGuire, Woods, Battle & ▇▇▇▇▇▇, LLP
P. O. Box 1288
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If to Executive:
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c/o Aurora Systems, Inc.
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with a copy to:
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15. Interpretation. When a reference is made in this Agreement to a
section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement they shall
be deemed to be followed by the words "without limitation."
16. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement
and shall become effective when two 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.
17. Employee Policies. The Executive shall be subject to Comdial"s
standard employee policies applicable generally to employees holding
similar positions and having similar responsibilities. The Executive
agrees to execute, at the Effective Time, such standard forms and documents
as any employee of similar rank would sign and execute, acknowledging
receipt of copies of Comdial"s standard employee policies.
18. Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein) (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to
the subject matter hereof, and (b) is not intended to confer upon any
person or entity other than the parties hereto any rights or remedies
hereunder.
19. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Virginia without regard to
any applicable conflicts of law.
20. Binding Effect. This Agreement shall be binding upon and inure
solely to the benefit of the parties hereto and their respective successors
and assigns. This Agreement is personal with Executive and may not be
assigned by her. Comdial shall have the right to assign this Agreement to
any affiliate of Comdial or to a successor to all or substantially all of
the business or assets of Comdial or any division or part of Comdial with
which Executive shall be employed.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
Comdial Corporation
By:
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Senior Vice President
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Schedule 1
Compensation And Bonus
----------------------
Base Salary: $110,000.00 per annum
Incentive Bonus: Executive shall be entitled to receive a cash
bonus paid on or before March 31 of each year in
an amount equal to the Bonus Plan Amount, as
defined below. The term "Bonus Plan Amount"
means, with respect to the last completed fiscal
year, an amount equal to 8.5% of the
first $1,000,000.00 of Aurora's earnings before
interest and taxes ("EBIT") and 4.3% of Aurora's
EBIT in excess of $1,000,000.00. For each fiscal
year, EBIT shall be determined by Comdial using
generally accepted accounting principles,
consistently applied, and (i) shall
be based upon actual results achieved from
following Aurora's business plan for such year as
approved or modified by the Board, (ii) shall be
determined without reference to allocation of
corporate overhead or other costs from Comdial,
(iii) shall allocate Comdial requested research
and development efforts at two (2) times cost plus
reasonable royalty sharing, (iv) shall be adjusted
if Executive is assigned duties by Comdial which
cause the Executive to devote substantial amounts
of time away from Aurora, and (v) shall include
transfer pricing to Comdial on the basis
of the best price available. For the fiscal year
ending December 31, 1996, the Bonus Plan Amount
payable to Executive shall be at least $50,000.
Schedule 2
Employee Confidentiality Agreement and Assignment
-------------------------------------------------
Name:_______________________________________ Employee No.________________
Department:_________________ Place:________________ Date_________________
COMDIAL CORPORATION and its subsidiary corporations (hereinafter
collectively called "Company") are engaged or may be engaged in certain
fields of business, including but not limited to the fields of telephony,
data processing, communications and electronics. The Company pursues
research and development work, engages in design, manufacture and
production of products, and further maintains accounting, cost, product,
sales and other records, as well as lists of customers, and other
proprietary information.
In consideration of my employment and the remuneration paid me by the
Company and as a condition of my employment or of my continued employment,
I hereby acknowledge and agree to the following matters.
1. I will devote all my time and best efforts in the fields
of business, work or investigation of the Company and for its
sole benefit.
2. I agree to maintain in confidence, both during my employment
and thereafter, all proprietary information developed by me or
learned by virtue of my employment by the Company ("Proprietary
Information"), whether developed or learned before or after signing
this agreement. For this purpose, Proprietary Information includes,
but is not limited to, any secret process, method of operation,
trade secret, engineering and technical data, business plan,
customer list, price list, or other information not generally
known by the public. I will not disclose any Proprietary
Information to others or use it to my own advantage or that of
any third person.
3. I will fully, completely and promptly disclose in writing to
the Company any inventions, ideas, concepts, discoveries,
improvements or other creations, whether patentable or not,
conceived by me during and within the scope of my employment
and relating to the fields of business, work or
investigation of the Company.
4. Subject to the exclusions set forth in the next sentence,
I agree to assign and transfer to the Company (and I do hereby
assign and transfer to the Company by means of this agreement)
all right, title and interest to all inventions, discoveries or
improvements, patentable or unpatentable, conceived or made
by me, either alone or with others, during the period of my
employment and for one year thereafter. This assignment and
agreement applies to all such items except for (i) any item as
to which the Company agrees in writing that such item was not
suggested by and did not result from any work performed on
behalf of, or at the request of, the Company, and (ii) any
item which does not fall within or arise out of the fields of
business, work or investigation of the Company. I further
agree to make and maintain such written records of the foregoing
(if any) as the Company may require, which shall be and remain
the property of and available to the Company at all times.
5. I agree to execute any and all instruments and do all things
which the Company deems necessary to vest and maintain and protect
and enforce in the Company (and the Company's nominees) the entire
right, title and interest to all such inventions, discoveries and
improvements in any and all countries, at the request and expense of
the Company, but without additional remuneration to me.
6. Except as my duties for the Company may require, I will not
remove from the property of the Company any documents, files,
notebooks, records, correspondence, or models relating to the fields
of business, work or investigation of the Company, or make copies
thereof, all such items or copies whether made by me or by others
being recognized by me to be the property of the Company and not to
be used for my own or another's benefit, or delivered or
communicated to another, at any time, without the written consent of
the Company.
7. The Company shall be entitled to an injunction in any court having
jurisdiction in the event of any threatened or actual violation of
any of the provisions of this agreement.
8. Whenever the phrase "fields of business, work or investigation of
the Company" is used herein it shall be deemed to include, without
limitation, any present or future fields of business, work or
investigation of the Company or any present or future subsidiary of
the Company, and any field in which the Company (or any such
subsidiary) has granted patent licenses or other rights to others.
9. This agreement is for the benefit of successors and assigns of
the Company (as well as for the benefit of the Company), and is
binding upon my heirs, assigns, administrators and representatives.
10. The enforcement of any of my obligations under this agreement
shall not depend upon the enforcement of any other obligation
hereunder. The expiration or termination of my employment
shall not relieve me of any of my obligations as set forth in
paragraphs 1 through 9 of this agreement. The Company
may enforce any and all of its rights under this agreement for
a period of three years after the expiration or termination of
my employment.
11. This agreement as of the date hereof replaces all prior
similar agreements and may be altered only in a writing
signed by the Company.
12. I further represent that except as listed below, I have no
agreements with or obligations to others relating to the fields
of business, work or investigation of the Company which are in
conflict with this agreement:
Obligations Excluded From This Agreement:
13. I further represent that the list below contains a complete
list of all inventions and patents which I have made heretofore
in the fields of business, work or investigation of the Company,
and which I desire to be excluded from this agreement.
Name of Excluded Invention Description of Excluded Invention
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WITNESS the following signatures as of the date first written above.
WITNESS: ACCEPTED AND AGREED:
___________________________ ____________________________________
Signature of Witness Signature (Sign name in full)
Exhibit E
Allocation of Cash and Stock Among Option Holders
-------------------------------------------------
Schedule of Option Holders:
Buyer
Common
Shares Exercise Stock Cash
Holder Title Issuable (SI) Price (EP) ($2.25-EP)*SI Issuable
Issuable
▇▇▇▇ ▇▇▇▇▇▇ Cust. Serv. Mgr. 8,000 $0.10 $17,200 1,146
$7,173
▇▇▇▇ ▇▇▇▇▇▇ Cust. Serv. Mgr. 2,000 $2.36 $0 0
$0
▇▇▇▇ ▇▇▇▇ Terminated 750 $0.10 $1,613 107
$676
▇▇▇▇ ▇▇▇▇▇▇ Sr. Engineer 2,500 $0.10 $5,375 358
$2,243
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Sr. Engineer 3,000 $0.10 $6,450 430
$2,688
Alex Niedowicki NAM 5,000 $0.10 $10,750 716
$4,485
▇▇▇▇▇▇▇ ▇▇▇▇ Terminated 2,500 $0.10 $5,375 358
$2,243
▇▇▇▇▇ ▇▇▇▇▇▇ Marketing Mgr. 8,000 $0.10 $17,200 1,146
$7,173
▇▇▇▇▇ ▇▇▇▇▇▇ Marketing Mgr. 2,000 $2.36 $0 0
$0
▇▇▇▇▇ ▇▇▇▇▇ Admin. Asst. 1,000 $0.10 $2,150 143
$899
▇▇▇▇▇▇ ▇▇▇▇▇ NAM 2,500 $2.36 $0 0
$0
▇▇▇▇▇▇ ▇▇▇▇▇▇ Engineer 2,500 $2.36 $0 0
$0
▇▇▇ ▇▇▇▇▇▇ Dir. of Engineering 10,000 $2.36 $0 0
$0
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Cust. Service 2,500 $2.36 $0 0
$0
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. Engineer 2,500 $2.36 $0 0
$0
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Total 54,750 $66,113 4,404
$27,578