EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
by and between
ARIEL CORPORATION
and
MAYAN NETWORKS CORPORATION
Dated as of March 28, 2001
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS......................................................................................................... 2
SECTION 1.01 Certain Defined Terms............................................................................ 2
ARTICLE II THE MERGER......................................................................................................... 9
SECTION 2.01 The Merger....................................................................................... 9
SECTION 2.02 Closing.......................................................................................... 9
SECTION 2.03 Effective Time................................................................................... 9
SECTION 2.04 Effect of the Merger............................................................................. 9
SECTION 2.05 Certificate of Incorporation; Bylaws; Directors and Officers of Surviving Corporation and
Directors and Officers of Parent................................................................. 10
SECTION 2.06 Charter Amendments............................................................................... 10
ARTICLE III CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES................................................................ 10
SECTION 3.01 Conversion of Shares............................................................................. 10
SECTION 3.02 Exchange of Shares Other than Treasury Shares.................................................... 11
SECTION 3.03 Stock Transfer Books............................................................................. 13
SECTION 3.04 No Fractional Share Certificates................................................................. 13
SECTION 3.05 Options to Purchase Company Common Stock......................................................... 13
SECTION 3.06 Certain Adjustments.............................................................................. 14
SECTION 3.07 Lost, Stolen or Destroyed Certificates........................................................... 15
SECTION 3.08 Taking of Necessary Action; Further Action....................................................... 15
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF COMPANY.......................................................................... 15
SECTION 4.01 Organization and Qualification; Subsidiaries..................................................... 15
SECTION 4.02 Articles of Incorporation and Bylaws............................................................. 16
SECTION 4.03 Capitalization................................................................................... 16
SECTION 4.04 Authority Relative to this Agreement............................................................. 16
SECTION 4.05 No Conflict; Required Filings and Consents....................................................... 17
SECTION 4.06 Permits; Compliance with Laws.................................................................... 17
SECTION 4.07 Financial Statements............................................................................. 18
SECTION 4.08 Certain Tax Matters.............................................................................. 18
SECTION 4.09 Litigation....................................................................................... 18
SECTION 4.10 Affiliates....................................................................................... 19
SECTION 4.11 Brokers.......................................................................................... 19
SECTION 4.12 Information Supplied............................................................................. 19
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT............................................................................ 19
SECTION 5.01 Organization and Qualification; Subsidiaries..................................................... 19
i.
SECTION 5.02 Certificate of Incorporation and Bylaws.......................................................... 20
SECTION 5.03 Capitalization................................................................................... 20
SECTION 5.04 Authority Relative to this Agreement............................................................. 22
SECTION 5.05 No Conflict; Required Filings and Consents....................................................... 22
SECTION 5.06 Permits; Compliance with Laws.................................................................... 23
SECTION 5.07 SEC Filings; Financial Statements................................................................ 23
SECTION 5.08 Certain Tax Matters.............................................................................. 24
SECTION 5.09 Litigation....................................................................................... 24
SECTION 5.10 Absence of Certain Changes or Events............................................................. 25
SECTION 5.11 Employee Benefit Plans........................................................................... 25
SECTION 5.12 Employment and Labor Matters..................................................................... 28
SECTION 5.13 Contracts........................................................................................ 29
SECTION 5.14 Business Relationships........................................................................... 30
SECTION 5.15 Environmental Matters............................................................................ 30
SECTION 5.16 Intellectual Property............................................................................ 30
SECTION 5.17 Taxes............................................................................................ 31
SECTION 5.18 Insurance........................................................................................ 32
SECTION 5.19 Properties....................................................................................... 33
SECTION 5.20 Employees........................................................................................ 33
SECTION 5.21 Parent Rights Plan............................................................................... 33
SECTION 5.22 Certain Business Practices....................................................................... 33
SECTION 5.23 Books and Records................................................................................ 33
SECTION 5.24 Opinion of Financial Advisor..................................................................... 34
SECTION 5.25 Affiliates....................................................................................... 34
SECTION 5.26 Brokers.......................................................................................... 34
SECTION 5.27 Information Supplied............................................................................. 34
ARTICLE VI COVENANTS.......................................................................................................... 35
SECTION 6.01 Conduct of Parent Pending the Closing............................................................ 35
SECTION 6.02 Conduct of Company Pending the Closing........................................................... 37
SECTION 6.03 Notices of Certain Events........................................................................ 37
SECTION 6.04 Access to Information; Confidentiality........................................................... 37
SECTION 6.05 Reorganization................................................................................... 38
SECTION 6.06 Further Action; Consents; Filings................................................................ 38
SECTION 6.07 Additional Reports............................................................................... 39
ARTICLE VII ADDITIONAL AGREEMENTS............................................................................................. 40
SECTION 7.01 Joint Proxy Statement/Prospectus................................................................. 40
SECTION 7.02 Shareholders' Meetings........................................................................... 41
SECTION 7.03 Directors' and Officers' Indemnification and Insurance........................................... 42
SECTION 7.04 Public Announcements............................................................................. 43
ii.
SECTION 7.05 Voting Agreements................................................................................ 43
SECTION 7.06 Employment Agreements............................................................................ 43
SECTION 7.07 Market Standoff Agreements....................................................................... 43
SECTION 7.08 Market Standoff Agreements....................................................................... 43
SECTION 7.09 NNM Listing...................................................................................... 44
SECTION 7.10 Blue Sky......................................................................................... 44
SECTION 7.11 Reservation of Shares............................................................................ 44
SECTION 7.12 2001 Stock Incentive Plan........................................................................ 44
SECTION 7.13 Waiver from Certain Holders of Outstanding Parent Stock Options.................................. 44
SECTION 7.14 Registration Statements on Form S-8.............................................................. 44
SECTION 7.15 Employee Matters................................................................................. 45
SECTION 7.16 Parent Rights Plan............................................................................... 45
SECTION 7.17 Filing of Reports Necessary for Use of Rule 145.................................................. 45
SECTION 7.18 Resignations of Officers and Directors........................................................... 46
SECTION 7.19 No Solicitation.................................................................................. 46
SECTION 7.20 Notice of Merger................................................................................. 47
SECTION 7.21 Registration Statement for Convertible Subordinated Promissory Notes, Exchange Notes and
Underlying Conversion Shares..................................................................... 47
SECTION 7.22 Compensation Committee Ratification.............................................................. 48
SECTION 7.23 Bridge Loan...................................................................................... 48
ARTICLE VIII CONDITIONS TO THE MERGER......................................................................................... 49
SECTION 8.01 Conditions to the Obligations of Each Party to Consummate the Merger............................. 49
SECTION 8.02 Conditions to the Obligations of Company......................................................... 50
SECTION 8.03 Conditions to the Obligations of Parent.......................................................... 53
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.................................................................................. 54
SECTION 9.01 Termination...................................................................................... 54
SECTION 9.02 Effect of Termination............................................................................ 55
SECTION 9.03 Amendment........................................................................................ 56
SECTION 9.04 Waiver........................................................................................... 56
SECTION 9.05 Termination Fee; Expenses........................................................................ 56
ARTICLE X GENERAL PROVISIONS.................................................................................................. 57
SECTION 10.01 Non-Survival of Representations and Warranties................................................... 57
SECTION 10.02 Notices.......................................................................................... 57
SECTION 10.03 Severability..................................................................................... 58
SECTION 10.04 Assignment; Binding Effect; Benefit.............................................................. 58
iii.
SECTION 10.05 Incorporation of Annexes......................................................................... 58
SECTION 10.06 Governing Law.................................................................................... 58
SECTION 10.07 Jurisdiction; Waiver of Jury Trial............................................................... 58
SECTION 10.08 Headings; Interpretation......................................................................... 59
SECTION 10.09 Counterparts..................................................................................... 59
SECTION 10.10 Entire Agreement................................................................................. 59
ANNEXES
ANNEX A Parent Voting Agreement
ANNEX B Company Voting Agreement
ANNEX C Employment Agreement
ANNEX D Market Standoff Agreement
ANNEX E Opinion of Parent's Counsel
ANNEX F 2001 Stock Incentive Plan
ANNEX G Bridge Loan
iv.
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 28, 2001 (this
"Agreement"), among ARIEL CORPORATION, a Delaware corporation ("Parent") and
MAYAN NETWORKS CORPORATION, a California corporation ("Company"):
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the disinterested members of the boards of directors of each
of Parent and Company have unanimously determined that it is advisable and fair
to, and in the best interests of their respective companies and shareholders or
stockholders, as the case may be, to enter into a business combination by means
of the merger (the "Merger") of the Company with and into Parent with Parent as
the surviving corporation in which the shareholders of the Company will receive
shares of Parent Common Stock (as defined in Section 3.01) and have approved
this Agreement, and have recommended approval or adoption, as the case may be,
of this Agreement to their shareholders or stockholders, as the case may be;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Company to enter into this Agreement, certain stockholders of
Parent have entered into a voting agreement ("Parent Voting Agreement") in the
form attached hereto as Annex A, pursuant to which, among other things, each
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such stockholder agrees to vote in favor of adoption of this Agreement;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent to enter into this Agreement, certain shareholders of
Company have entered into a voting agreement ("Company Voting Agreement") in the
form attached hereto as Annex B, pursuant to which, among other things, each
-------
such shareholder agrees to vote in favor of adoption of this Agreement;
WHEREAS, concurrently with the consummation of the Merger and in order
to induce Parent and Company to enter into this Agreement, certain key employees
of Parent shall have entered into employment agreements (each an "Employment
Agreement") to be effective as of the Effective Time (as defined below) in the
form attached hereto as Annex C;
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WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent to enter into this Agreement, the Company and Parent have
entered into the Bridge Loan ("Bridge Loan") in the form attached hereto as
Annex G, along with the Security Agreement and the Intellectual Property
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Security Agreement attached thereto, pursuant to which, among other things,
Company has agreed to provide bridge financing to Parent for the period between
the date hereof and the earlier of the termination of the Agreement and the
Closing Date and in return Parent has agreed to provide a security interest in
the Parent assets and Intellectual Property to Company (as defined below);
WHEREAS, concurrently with and as a condition to the consummation of
the Merger, Company and Parent will, in connection with the Company's 5 1/4%
Convertible
Subordinated Notes due 2005 (the "Convertible Subordinated Promissory Notes"),
enter into a supplemental indenture which shall accommodate the consummation of
the Merger in a manner consistent with the requirements of that certain
Indenture, dated as of October 25, 2000, by and between Company and United
States Trust Company of New York (the "Indenture");
WHEREAS, concurrently with the consummation of the Merger, the Company
intends to offer to the Noteholders (as defined below) new convertible
subordinated promissory notes (the "Exchange Notes") in exchange for the
existing Convertible Subordinated Promissory Notes;
WHEREAS, concurrently with and as a condition to the consummation of
the Merger, Company and Parent shall have entered into such documents as shall
be necessary to provide for the offering of the Exchange Notes on such terms as
shall be satisfactory to the parties and shall otherwise have taken or cause to
be taken all such action as shall be required in connection therewith; and
WHEREAS, for United States Federal income tax purposes, it is intended
that the Merger shall qualify as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (together with
the rules and regulations promulgated thereunder, the "Code"), and that this
Agreement shall be, and hereby is, adopted as a "plan of reorganization" for
purposes of Section 368 of the Code.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein,
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Defined Terms. Unless the context otherwise
requires, the following terms, when used in this Agreement, shall have the
respective meanings specified below (such meanings to be equally applicable to
the singular and plural forms of the terms defined):
"Acquisition Proposal" shall mean any offer or proposal with respect
to the following involving Parent or any Parent Subsidiary, as the case may be
(other than the Merger):
(i) any merger, consolidation, share exchange, business
combination or other similar transaction;
(ii) any sale, lease, exchange, transfer or other disposition of
15% or more of the assets of Parent or any Parent Subsidiary, taken as a
whole, in a single transaction or series of transactions, or the sale,
lease, exchange, transfer or other disposition of any asset of Parent or
any Parent Subsidiary, the absence of which would materially diminish the
value of the Merger to the Company or the benefits expected by
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the Company to be realized from the Merger;
(iii) any tender offer or exchange offer for 15% or more of the
outstanding voting securities of Parent or any Parent Subsidiary or the
filing of a registration statement under the Securities Act in connection
therewith;
(iv) any Person having acquired beneficial ownership or the
right to acquire beneficial ownership of, or any "group" (as such term is
defined under Section 13(d) of the Exchange Act) having been formed which
beneficially owns or has the right to acquire beneficial ownership of, 15%
or more of the outstanding voting securities of Parent or any Parent
Subsidiary;
(v) any solicitation in opposition to the approval of this
Agreement by the shareholders of such party; or
(vi) any public announcement of a proposal, plan or intention
to do any of the foregoing or any agreement to engage in any of the
foregoing.
"Affiliate" shall mean, with respect to any Person, any other Person
that controls, is controlled by or is under common control with such Person.
"Aggregate Common Number" shall mean the aggregate number of shares of
Company Common Stock which are (or would be) outstanding immediately prior to
the Effective Time (including all shares of Company Common Stock issued or
issuable upon conversion of all shares of Company Preferred Stock and upon
exercise, conversion or exchange in full or all unvested and vested Company
Stock Options, Company Warrants and other Company Rights (as defined below)
which remain outstanding and are not exercised, converted, exchanged or expired
as of the Effective Time, excluding the Convertible Subordinated Promissory
Notes); provided, that solely for purposes of calculating the Aggregate Common
Number, it shall be assumed (i) that all such Company Stock Options, Company
Warrants and other Company Rights are exercised in full by means of a cash
exercise and not be means of a net exercise, whether or not such Company Stock
Options, Company Warrants and other Company Rights are in fact so exercised, and
(ii) the number of Company Stock Options outstanding as of the Effective Time
shall equal (A) the number of Company Stock Options outstanding as of the date
of this Agreement, (B) plus the number of Company Stock Options granted after
the date of this Agreement, (C) minus the number of Company Stock Options
cancelled after the date of this Agreement in connection with bona fide
terminations of Company employees, and (D) minus the number of Company Stock
Options exercised for shares of Common Stock (to the extent that the resulting
shares are issued and outstanding as of the Effective Time).
"Aggregate Share Number" shall mean 168,305,346 shares of Parent
Common Stock (which number represents an amount equal to nine times the fully
diluted capitalization of Parent), plus the number of shares of Parent Common
Stock obtained by dividing (a) the amount by which Parent's Expenses (excluding
(i) any Expenses incurred in connection with the preparation, negotiation or
filing of the Joint Proxy Statement/Prospectus or any other filing
3
required in order to register securities that Company securityholders will
receive on or after Closing and (ii) any fees, if any, issuable to Pennsylvania
Merchant Group pursuant to that certain letter agreement dated as of May 18,
2000) exceed $750,000 by (b) the Final Average Closing Price.
"Blue Sky Laws" shall mean United States state securities or "blue
sky" laws.
"Bridge Loan" shall mean the loan agreement entered into between
Parent and Company as of the date hereof.
"Business Day" shall mean any day on which the principal offices of
the SEC in Washington, D.C. are open and any day on which banks are not required
or authorized by law or executive order to close in The City of New York.
"California Law" shall mean the General Corporation Law of the State
of California.
"Company Disclosure Schedule" shall mean the disclosure schedule
delivered by Company to Parent prior to the execution of this Agreement and
forming a part hereof.
"Company Financial Advisor" shall mean ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc.
"Company Material Adverse Effect" shall mean any change in or effect
on the business of Company that, individually or in the aggregate (taking into
account all other such changes or effects), is, or is reasonably likely to be,
materially adverse to the business, assets, liabilities, financial condition or
results of operations of Company. Notwithstanding the foregoing, none of the
following shall be deemed, in and of itself, to constitute a Company Material
Adverse Effect: any event, violation, inaccuracy, circumstance or other matter
that results from conditions affecting the economy in general or conditions
affecting the industry in which the Company operates.
"Company Preferred Stock" shall mean the Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock and the Series D
Preferred Stock.
"Company Stock Plan" shall mean the Company's 1998 Stock Option/Stock
Issuance Plan.
"Company Superior Proposal" shall mean, an unsolicited, bona fide
written proposal that the board of directors of Company, prior to receipt of the
approval by the shareholders of Company of this Agreement, has negotiated
regarding any of the following transactions: (x) a merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving Company pursuant to which the shareholders of Company
immediately preceding such transaction hold less than fifty percent of the
equity interest in the surviving or resulting entity of such transaction; (y) a
sale or other disposition by Company of assets (excluding dispositions in the
ordinary course of business) representing all or substantially all of Company's
assets, or (z) the acquisition by any person or group (including by way of a
tender offer or an exchange offer or issuance by Company), directly or
indirectly, of
4
beneficial ownership or a right to acquire beneficial ownership of shares
representing fifty percent or more of the voting power of the then outstanding
shares of capital stock of Company, in each case on terms that, in the good
faith judgment of the board of directors of Company (after consultation with an
investment bank of nationally recognized reputation) are more favorable to
Company shareholders than the Merger; provided, however, that a proposal shall
only be a Company Superior Proposal if any financing required to consummate the
transaction contemplated by such proposal is committed or is otherwise
reasonably likely in the good faith judgment of Company's board of directors to
be obtained by such third party on a timely basis.
"Confidentiality Agreement" shall mean the confidentiality agreement,
dated as of February 15, 2001, between Parent and Company.
"DGCL" shall mean the General Corporation Law of the State of
Delaware, as amended from time to time.
"$" shall mean United States Dollars.
"Encumbrances" shall mean all claims, security interests, liens,
pledges, charges, escrows, options, proxies, rights of first refusal,
restrictions on transfer, preemptive rights, mortgages, hypothecations, prior
assignments, title retention agreements, indentures, security agreements or any
other encumbrance of any kind.
"Environmental Law" shall mean any Law and any enforceable judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to pollution or protection of the
environment or natural resources, including, without limitation, those relating
to the use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Material.
"Environmental Permit" shall mean any permit, approval, identification
number, license or other authorization required under or issued pursuant to any
applicable Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
"Exchange Ratio" shall mean the quotient obtained by dividing (a) the
Aggregate Share Number by (b) the Aggregate Common Number.
"Expenses" shall mean, with respect to any party hereto, all
reasonable out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and consultants to
a party hereto and its affiliates, and all other fees and expenses of third
parties ("Third Party Expenses")) incurred by such party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of its obligations pursuant to this Agreement and the
consummation of the Merger,
5
the preparation, printing and mailing of the Joint Proxy Statement/Prospectus
(as defined in Section 7.1), the solicitation of stockholder approvals, the
filing of HSR Act notice, if any, and all other matters related to the
transactions contemplated hereby and the closing of the Merger.
"Final Average Closing Price" shall mean the average closing price of
Parent Common Stock on the NNM for the ten consecutive trading days ending on
and including the third Business Day prior to the date of the Closing.
"GAAP" shall mean United States generally accepted accounting
principles, as in effect from time to time.
"Governmental Entity" shall mean any United States Federal, state or
local or foreign governmental, regulatory or administrative authority, agency or
commission or any court, tribunal or arbitral body.
"Governmental Order" shall mean any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Entity.
"Hazardous Material" shall mean (i) any petroleum, petroleum products,
by-products or breakdown products, radioactive materials, friable
asbestos-containing materials or polychlorinated biphenyls or (ii) any chemical,
material or substance defined or regulated as toxic or hazardous or as a
pollutant or contaminant or waste under any applicable Environmental Law.
"HSR Act" shall mean ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, together with the rules and regulations promulgated
thereunder.
"Intellectual Property" shall mean all United States, foreign and
international patents; trademarks, service marks and trade names (including
without limitation all goodwill pertaining thereto), designs, trade dress and
Internet domain names; copyrights; sui generis database rights; ideas,
inventions, technology, know-how, trade secrets, systems, processes, works of
authorship, databases, mask works, content, graphics, statistical models,
algorithms, modules, computer programs, computer software, source and object
code of such software, technical documentation, business methods, work product,
intellectual and industrial property licenses, and all other tangible or
intangible information or materials.
"IRS" shall mean the United States Internal Revenue Service.
"Knowledge of Company" shall mean that any officer or director of
Company is actually aware of a fact or other matter, or should have been aware
of a fact or other matter based upon due inquiry and investigation.
"Knowledge of Parent" shall mean that any officer or director of
Parent is actually aware of a fact or other matter, or should have been aware of
a fact or other matter based upon due inquiry and investigation.
"Law" shall mean any Federal, state, foreign or local statute, law,
ordinance,
6
regulation, rule, code, order, judgment, decree, other requirement or rule of
law of the United States, or any other jurisdiction, and any other similar act
or law.
"NNM" shall mean The Nasdaq National Market.
"Noteholder" shall mean each holder of a Convertible Subordinated
Promissory Note.
"Parent Disclosure Schedule" shall mean the disclosure schedule
delivered by Parent to Company prior to the execution of this Agreement and
forming a part hereof.
"Parent Financial Advisor" shall mean ▇▇▇▇▇▇▇ & Company, Inc.
"Parent Intellectual Property" shall mean all Intellectual Property
that is currently used in Parent's business or the business of any Parent
Subsidiary.
"Parent Material Adverse Effect" shall mean any change in or effect on
the business of Parent or the Parent Subsidiaries that, individually or in the
aggregate (taking into account all other such changes or effects), is, or is
reasonably likely to be, materially adverse to the business, assets,
liabilities, prospects, financial condition or results of operations of Parent
and the Parent Subsidiaries, taken as a whole. Notwithstanding the foregoing,
none of the following shall be deemed, in and of itself, to constitute a Parent
Material Adverse Effect: any event, violation, inaccuracy, circumstance or other
matter that results from conditions affecting the economy in general or
conditions affecting the industry in which the Parent or the Parent Subsidiaries
operate.
"Parent Stock Plans" shall mean the 1992 Stock Option and Restricted
Stock Plan, the 1994 Stock Option Plan, 1995 Stock Option Plan and the 1996
Directors Stock Option Plan.
"Parent Superior Proposal" shall mean, an unsolicited, bona fide
written proposal that the board of directors of Parent, prior to receipt of the
approval by the stockholders of Parent of this Agreement and the Merger, has
negotiated regarding any of the following transactions: (x) a merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving Parent pursuant to which the stockholders of
Parent immediately preceding such transaction hold less than fifty percent of
the equity interest in the surviving or resulting entity of such transaction;
(y) a sale or other disposition by Parent of assets (excluding dispositions in
the ordinary course of business) representing all or substantially all of
Parent's assets, or (z) the acquisition by any person or group (including by way
of a tender offer or an exchange offer or issuance by Parent), directly or
indirectly, of beneficial ownership or a right to acquire beneficial ownership
of shares representing fifty percent or more of the voting power of the then
outstanding shares of capital stock of Parent, in each case on terms that, in
the good faith judgment of the board of directors of Parent (after consultation
with an investment bank of nationally recognized reputation) are more favorable
to Parent stockholders than the Merger; provided, however, that a proposal shall
only be a Parent Superior Proposal if any financing required to consummate the
transaction contemplated by such proposal is committed or is otherwise
reasonably likely in the good faith judgment of Parent's board of directors to
be
7
obtained by such third party on a timely basis.
"Permitted Encumbrances" shall mean (i) liens for Taxes, assessments
and other governmental charges not yet due and payable, (ii) immaterial unfiled
mechanics', workmen's, repairmen's, warehousemen's, carriers' or other like
liens arising or incurred in the ordinary course of business which are not yet
due and payable and (iii) equipment leases with third parties entered into in
the ordinary course of business.
"Person" shall mean an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including, without
limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act),
trust, association, entity or government or political subdivision, agency or
instrumentality of a government.
"Reverse Stock Split" shall mean a reverse split of the common stock
of Parent, to be effective immediately prior to the Effective Time, in which
each share of the common stock of Parent, including shares of common stock of
Parent issuable upon exercise of Parent Stock Options and Parent Warrants, will
be exchangeable for shares of the common stock of Parent, at a ratio to be
mutually agreed upon by Company and Parent.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"Series A Preferred Stock" shall mean the Series A Preferred Stock,
$.0001 par value, of Company.
"Series B Preferred Stock" shall mean the Series B Preferred Stock,
$.0001 par value, of Company.
"Series C Preferred Stock" shall mean the Series C Preferred Stock,
$.0001 par value, of Company.
"Series D Preferred Stock" shall mean the Series D Preferred Stock,
$.0001 par value, of Company.
"Subsidiary" shall mean, with respect to any Person, any corporation,
limited liability company, partnership, joint venture or other legal entity of
which such Person (either alone or through or together with any other subsidiary
of such Person) owns, directly or indirectly, a majority of the stock or other
equity interests, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
"Tax" shall mean (i) any and all taxes, fees, levies, duties, tariffs,
imposts and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto)
imposed by any Governmental Entity or other taxing authority ("Taxing
Authority"), including, without limitation, taxes or other charges on or
8
with respect to income, franchises, windfall or other profits, gross or net
receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation or net worth; taxes
or other charges in the nature of excise, withholding, ad valorem, stamp,
transfer, value-added or gains taxes; license, registration and documentation
fees; and customers' duties, tariffs and similar charges; (ii) any liability for
the payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, combined, consolidated or unitary group for any taxable
period; and (iii) any liability for the payment of amounts of the type described
in (i) or (ii) as a result of being a transferee of, or a successor in interest
to, any Person or as a result of an express or implied obligation to indemnify
any Person.
"Tax Return" shall mean any return, statement or form (including,
without limitation, any estimated tax report or return, withholding tax report
or return or information report or return) required to be filed with respect to
any Taxes.
"Trustee" shall have the meaning set forth in the Indenture.
ARTICLE II
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with California Law
and the DGCL, at the Effective Time, the Company shall be merged with and into
Parent. As a result of the Merger, the separate corporate existence of the
Company shall cease and Parent shall continue as the surviving corporation of
the Merger (the "Surviving Corporation").
SECTION 2.02 Closing. Unless this Agreement shall have been
terminated and the Merger herein contemplated shall have been abandoned pursuant
to Section 9.01 and subject to the satisfaction or waiver of the conditions set
forth in Article VIII, the consummation of the Merger shall take place as
promptly as practicable (and in any event within five Business Days) after
satisfaction or waiver of the conditions set forth in Article VIII, at a closing
(the "Closing") to be held at the offices of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP,
2200 Geng Road, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, unless another date,
time or place is agreed to by Parent and Company.
SECTION 2.03 Effective Time. At the Closing, the parties shall cause
the Merger to be consummated by filing (a) a certificate of Merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware in
accordance with the DGCL and (b) an agreement of merger in such form as is
required by the applicable provisions of California Law (the "Agreement of
Merger") with the Secretary of State of the State of California executed in
accordance with the relevant provisions of California Law (the later of the date
and time of the filing of the Agreement of Merger and Certificate of Merger, or
such later date and time as may be set forth therein, being the "Effective
Time").
SECTION 2.04 Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of California
Law and the DGCL.
9
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the property, rights,
privileges, powers and franchises of each of the Company and Parent shall vest
in Parent as the Surviving Corporation, and all debts, liabilities and duties of
each of Company and Parent shall become the debts, liabilities and duties of
Parent as the Surviving Corporation.
SECTION 2.05 Certificate of Incorporation; Bylaws; Directors and
Officers of Surviving Corporation and Directors and Officers of Parent. Unless
otherwise agreed by Parent and Company before the Effective Time, at the
Effective Time:
(a) subject to the requirements of Section 7.03(a), the certificate of
incorporation and the bylaws of Parent as in effect immediately prior to the
Effective Time shall be the certificate of incorporation and the bylaws of the
Surviving Corporation, until thereafter amended as provided by Law and such
certificate of incorporation or bylaws; provided, however, that Article I of the
certificate of incorporation of the Surviving Corporation shall be amended to
read as follows: "The name of the corporation is MAYAN NETWORKS CORPORATION";
(b) the officers of the Surviving Corporation shall be those persons
listed on Schedule I hereto, in each case until their successors are elected or
----------
appointed and qualified or until their resignation or removal, and Parent shall
deliver at the Closing the voluntary resignations of each officer of Parent from
their positions as officers who is not designated to be an officer of Parent in
accordance with this subsection 2.05(b) which resignation shall be effective at
the Effective Time; and
(c) the directors of the Surviving Corporation shall be those persons
listed on Schedule II hereto, in each case until their successors are elected or
-----------
appointed and qualified or until their resignation or removal, and Parent shall
deliver at the Closing the voluntary resignations of each director of Parent
from their positions as directors who is not designated to be a director of
Parent in accordance with this subsection 2.05(c) which resignation shall be
effective at the Effective Time.
SECTION 2.06 Charter Amendments. Contemporaneously with or
immediately prior to the Closing, the name of Parent will be changed to "Mayan
Networks Corporation", and the certificate of incorporation of Parent, (i)
accomplishing the creation of the Parent Common Stock for issuance in connection
with the conversion of the Company Common Stock, Company Stock Options, Company
Warrants and the conversion of the Convertible Subordinated Promissory Notes and
(ii) effecting the Reverse Stock Split of the Parent Common Stock, will become
effective.
ARTICLE III
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 3.01 Conversion of Shares. At the Effective Time, by virtue
of the Merger, and without any action on the part of Parent, Company or the
holders of any of the following securities:
10
(a) Each share of Common Stock, $.0001 par value, of Company ("Company
Common Stock"), issued and outstanding immediately before the Effective Time
(including shares of Company Common Stock issued upon conversion of Company
Preferred Stock as provided in Section 3.01(c), but excluding those held in the
treasury of Company and all rights in respect thereof, shall, forthwith cease to
exist and be converted into the right to receive such number of shares of Common
Stock, $.001 par value per share, of Parent ("Parent Common Stock"), equal to
the Exchange Ratio, and cash in lieu of fractional shares pursuant to Section
3.04.
(b) Each share of Company Common Stock held in the treasury of Company
immediately prior to the Effective Time shall be canceled and retired and no
shares of stock or other securities of Parent, the Surviving Corporation or any
other corporation shall be issuable, and no payment of other consideration shall
be made, with respect thereto.
(c) Subject to the requisite approval of the holders of Company Preferred
Stock, each share of (i) Series A Preferred Stock, (ii) Series B Preferred
Stock, (iii) Series C Preferred Stock and (iv) Series D Preferred Stock issued
and outstanding immediately before the Effective Time, shall, prior to the
Effective Time be converted in accordance with its terms into Company Common
Stock and become exchangeable for the number of shares of Parent Common Stock
and cash in lieu of fractional shares pursuant to Section 3.04 as set forth in
Section 3.01(a).
SECTION 3.02 Exchange of Shares Other than Treasury Shares.
(a) Exchange Agent. As of the Effective Time, Parent shall enter into an
agreement with a bank or trust company reasonably acceptable to Company to act
as exchange agent for the Merger (the "Exchange Agent").
(b) Parent to Provide Common Stock and Cash. Promptly after the Effective
Time, Surviving Corporation shall make available to the Exchange Agent for the
benefit of the holders of Company Common Stock and Company Preferred Stock: (i)
certificates for Parent Common Stock ("Parent Certificates") representing the
number of whole Parent Common Stock issuable pursuant to Section 3.01(a) in
exchange for shares of Company Common Stock (including Company Common Stock
issued in connection with the conversion of Company Preferred Stock pursuant to
Section 3.01(c)) outstanding immediately prior to the Effective Time; and (ii)
sufficient funds to permit payment in lieu of fractional shares pursuant to
Section 3.04.
(c) Exchange Procedures. The Exchange Agent shall mail to each holder of
record of certificates representing shares of Company Common Stock and Company
Preferred Stock ("Company Certificates"), whose shares were converted into the
right to receive Parent Common Stock (and cash in lieu of fractional shares
pursuant to Section 3.04) promptly after the Effective Time: (i) a form letter
of transmittal in form and substance satisfactory to Company, such approval not
to be unreasonably withheld (which shall specify that delivery shall be
effected, and risk of loss and title to the Company Certificates shall pass,
only upon receipt of the Company Certificates by the Exchange Agent, and shall
be in such form and have such other provisions as Parent may reasonably
specify); and (ii) instructions for use in effecting the
11
surrender of the Company Certificates in exchange for Parent Certificates (and
cash in lieu of any fractional share). Upon surrender of Company Certificates
for cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by Parent, together with such letter of transmittal, duly completed
and validly executed, and such other documents as may be reasonably required by
the Exchange Agent, the holder of such Company Certificates shall be entitled to
receive in exchange therefor a Parent Certificate representing the number of
whole Parent Common Stock that such holder has the right to receive pursuant to
this Article III and payment of cash in lieu of any fractional share which such
holder has the right to receive pursuant to Section 3.04, and the Company
Certificates so surrendered shall be canceled. Until so surrendered, each
outstanding Company Certificate that, prior to the Effective Time, represented
shares of Company Common Stock or Company Preferred Stock will be deemed from
and after the Effective Time, for all purposes, to evidence the right to receive
the number of full shares of Parent Common Stock into which such shares of
Company Common Stock or Company Preferred Stock, as the case may be, shall have
been so converted and the right to receive an amount in cash in lieu of the
issuance of any fractional share in accordance with Section 3.04.
Notwithstanding any other provision of this Agreement, no interest will be paid
or will accrue on any cash payable to holders of Company Certificates pursuant
to the provisions of this Article III.
(d) Distributions With Respect to Unexchanged Shares. No dividends or other
distributions with respect to the Parent Common Stock with a record date after
the Effective Time will be paid to the holder of any unsurrendered Company
Certificate with respect to the Parent Common Stock represented thereby until
the holder of record of such Company Certificate shall surrender such Company
Certificate. Subject to the effect of applicable escheat or similar laws,
following surrender of any such Company Certificate, there shall be paid to the
record holder of the Parent Certificates issued in exchange therefor, without
interest, at the time of such surrender, the amount of any such dividends or
other distributions with a record date after the Effective Time theretofore
payable (but for the provisions of this Section 3.02(d)) with respect to such
shares of Parent Common Stock.
(e) Transfer of Ownership. If any Parent Certificate is to be issued in a
name, or cash in lieu of a fractional share paid to a Person, other than that in
which the Company Certificate surrendered in exchange therefor is registered, it
will be a condition of the issuance and/or payment thereof that the Company
Certificate so surrendered will be properly endorsed and otherwise in proper
form for transfer and that the Person requesting such exchange will have paid to
Parent or any agent designated by it any transfer or other taxes required by
reason of the issuance of a Parent Certificate or payment of cash in lieu of
fractional shares in any name other than that of the registered holder of the
Company Certificate surrendered, or established to the satisfaction of Parent or
any agent designated by it that such tax has been paid or is not payable.
(f) Termination of Exchange Agent Funding. Any portion of funds (including
any interest earned thereon) or Parent Certificates held by the Exchange Agent
which have not been delivered to holders of Company Certificates pursuant to
this Article III within six months after the Effective Time shall promptly be
paid or delivered, as appropriate, to Parent, and thereafter holders of Company
Certificates who have not theretofore complied with the exchange procedures set
forth in and contemplated by this Section 3.02 shall thereafter look only to
Parent
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(subject to abandoned property, escheat and similar laws) only as general
creditors thereof for their claim for shares of Parent Common Stock, any cash in
lieu of fractional Parent Common Stock and any dividends or distributions (with
a record date after the Effective Time) with respect to the shares of Parent
Common Stock to which they are entitled.
(g) No Liability. Notwithstanding anything to the contrary in this Section
3.02, none of the Exchange Agent, the Surviving Corporation or any party hereto
shall be liable to any Person in respect of any Parent Common Stock or cash
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
SECTION 3.03 Stock Transfer Books. As of the Effective Time, the stock
transfer books of Company shall each be closed, and there shall be no further
registration of transfers of shares of Company Common Stock or Company Preferred
Stock thereafter on any such stock transfer books. In the event of a transfer of
ownership of shares of Company Common Stock or Company Preferred Stock that is
not registered in the stock transfer records of Company at the Effective Time, a
certificate or certificates representing the number of full shares of Parent
Common Stock into which such shares of Company Common Stock or Company Preferred
Stock, as the case may be, shall have been converted shall be issued to the
transferee together with a cash payment in lieu of fractional shares, if any, in
accordance with Section 3.04, and a cash payment in the amount of dividends, if
any, in accordance with Section 3.02(d), if the Company Certificates
representing such shares of Company Common Stock or Company Preferred Stock
(which shall have been converted into Company Common Stock), as the case may be,
is or are surrendered as provided in Section 3.02(c), accompanied by all
documents required to evidence and effect such transfer and by evidence of
payment of any applicable stock transfer tax.
SECTION 3.04 No Fractional Share Certificates. No scrip or Parent
Certificate representing a fractional share of Parent Common Stock shall be
issued upon the surrender for exchange of Company Certificates, and an
outstanding fractional share interest shall not entitle the owner thereof to
vote, to receive dividends or to any rights of a stockholder of Parent or of
Surviving Corporation with respect to such fractional share interest. As
promptly as practicable following the Effective Time, Parent shall deposit with
the Exchange Agent an amount in cash sufficient for the Exchange Agent to pay
each holder of Company Common Stock an amount in cash, rounded to the nearest
whole cent, equal to the product obtained by multiplying (i) the fractional
share interest to which such holder would otherwise be entitled (after taking
into account all shares of Company Common Stock held at the Effective Time by
such holder) by (ii) the Final Average Closing Price. As soon as practicable
after the determination of the amount of cash, if any, to be paid to holders of
Company Common Stock with respect to any fractional share interests, the
Exchange Agent shall make available such amounts, net of any required
withholding taxes, to such holders of Company Common Stock, subject to and in
accordance with the terms of Section 3.02 hereof.
SECTION 3.05 Options to Purchase Company Common Stock.
(a) At the Effective Time, each option granted by the Company to purchase
shares of Company Common Stock outstanding under the Company Stock Plan,
including
13
options transferred to such plan from the Company's 1997 Stock Option
Plan or otherwise listed on Schedule 3.05 of the Company Disclosure Schedule,
whether vested or unvested ("Company Stock Options"), which is outstanding and
unexercised immediately prior to the Effective Time and each warrant to purchase
shares of Company Common Stock ("Company Warrants") which is outstanding and
unexercised immediately prior to the Effective Time, shall be assumed by Parent
and converted into an option or warrant, as the case may be, to purchase shares
of Parent Common Stock in such number and at such exercise price as provided in
(b) below but shall otherwise have the same terms and conditions as in effect
immediately prior to the Effective Time (except to the extent that such terms,
conditions and restrictions may be altered in accordance with their terms as a
result of the Merger and except that all references in each such Company Stock
Option or Company Warrant to Company shall be deemed to refer to Parent).
(b) The Company Stock Options or Company Warrants assumed by Parent:
(i) shall be exercisable for that number of whole shares of Parent
Common Stock equal to the product of (x) the number of shares of Company Common
Stock that were issuable upon exercise of the Company Stock Option or Company
Warrant immediately prior to the Effective Time and (y) the Exchange Ratio,
rounded down, if necessary, to the next whole share; and
(ii) shall have an exercise price per share of Parent Common Stock
issuable upon exercise of the assumed option or warrant equal to (x) the
exercise price per share of Company Common Stock at which the Company Stock
Option or Company Warrant was exercisable immediately prior to the Effective
Time divided by (y) the Exchange Ratio, rounded up, if necessary, to the next
whole cent.
Within 30 days after the Closing, Parent will issue to each Person, who
immediately prior to the Effective Time held a Company Stock Option or Company
Warrant, a document evidencing the foregoing changes. It is the intention of the
parties that the options so assumed by Parent qualify, to the maximum extent
permissible, following the Effective Time as incentive stock options as defined
in Section 422 of the Code to the extent such options qualified as incentive
stock options prior to the Effective Time.
(c) At the Effective Time, the Company Stock Plan shall be assumed by
Parent.
(d) All outstanding rights of the Company which it holds immediately prior
to the Effective Time to repurchase unvested shares of Company Common Stock (the
"Repurchase Options") shall be assigned to Parent in the Merger and shall
thereafter be exercisable by Parent upon the same terms and conditions in effect
immediately prior to the Effective Time, except that the Parent Common Stock
purchasable pursuant to the Repurchase Options and the purchase price per share
shall be adjusted to reflect the Exchange Ratio.
SECTION 3.06 Certain Adjustments. If between the date of this Agreement
and the Effective Time, the outstanding Parent Common Stock, Company Common
Stock or Company Preferred Stock shall be changed into a different number of
shares by reason of any reclassification, recapitalization, split-up,
combination or exchange of shares, or any
14
dividend payable in stock or other securities shall be declared thereon with a
record date within such period, then each Exchange Ratio shall be adjusted
accordingly to provide to Parent and Company the same economic effect as
contemplated by this Agreement prior to such reclassification, recapitalization,
split-up, combination, exchange or dividend.
SECTION 3.07 Lost, Stolen or Destroyed Certificates. In the event any
Company Certificates shall have been lost, stolen or destroyed, the Exchange
Agent shall issue in exchange for such lost, stolen or destroyed Company
Certificates, upon the making of an affidavit of that fact by the holder
thereof, such shares of Parent Common Stock (and cash in lieu of fractional
shares) as may be required pursuant to Section 3.01, provided, however, that
Parent may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Company
Certificates to indemnify Parent against any claim that may be made against
Parent, the Surviving Corporation or the Exchange Agent with respect to the
Company Certificates alleged to have been lost, stolen or destroyed.
SECTION 3.08 Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of Surviving Corporation, the officers and directors of
Company are fully authorized in the name of their corporation or otherwise to
take, and will use good faith efforts to take, all such lawful and necessary
action, so long as such action is not inconsistent with this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company hereby represents and warrants to Parent, subject to the
exceptions specifically disclosed in writing in the Company Disclosure Schedule,
all such exceptions to be referenced to a specific representation set forth in
this Article IV, that:
SECTION 4.01 Organization and Qualification; Subsidiaries.
(a) The Company has been duly organized and is validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted. The Company is duly
qualified or licensed to do business, and is in good standing (to the extent
applicable), in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that could not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect.
(b) There are no directly and indirectly owned Subsidiaries of the Company.
Except as set forth in Schedule 4.01 of the Company Disclosure Schedule, the
Company does not own an equity interest in any partnership or joint venture
arrangement or other business entity
15
that is material to the business, assets, liabilities, financial condition or
results of operations of Company.
SECTION 4.02 Articles of Incorporation and Bylaws. The copies of
Company's articles of incorporation and bylaws previously made available to
Parent by Company are true, complete and correct copies thereof. Such articles
of incorporation and bylaws are in full force and effect. The Company is not in
violation of any of the provisions of its articles of incorporation or bylaws.
SECTION 4.03 Capitalization. The authorized capital stock of Company
consists of 60,000,000 shares of Company Common Stock and 36,000,361 shares of
Company Preferred Stock, of which 1,907,500 have been designated Series A
Preferred Stock, all of which is issued and outstanding, 7,843,137 have been
designated Series B Preferred Stock, all of which is issued and outstanding,
11,826,647 have been designated Series C Preferred Stock, 11,826,346 shares of
which are issued and outstanding, and 14,423,077 have been designated Series D
Preferred Stock, all of which is issued and outstanding. As of the date hereof,
(i) 10,671,044 shares of Company Common Stock are issued and outstanding, all of
which are validly issued, fully paid and nonassessable, (ii) no shares of
Company Common Stock are held in the treasury of Company, (iii) 3,100,396 shares
of Company Common Stock are reserved for future issuance upon exercise of
outstanding Company Stock Options and 632,522 shares of Company Common Stock are
reserved for future grant pursuant to the Company Stock Plan, (iv) 88,236 shares
of Company Common Stock are reserved for future issuance upon exercise of
outstanding Company Warrants, (v) up to 1,967,471 shares of Company Common Stock
are reserved for future issuance upon conversion of the Convertible Subordinated
Promissory Notes and (vi) 36,000,060 shares of Company Common Stock are reserved
for future issuance upon conversion of outstanding Company Preferred Stock. Each
issued and outstanding share of Company Preferred Stock is validly issued, fully
paid and non-assessable. Except for shares of Company Common Stock issuable
pursuant to the Company Stock Plan and as otherwise set forth in herein or in
Schedule 4.03 of the Company Disclosure Schedule, and the Repurchase Options,
there are no options, warrants or other rights, agreements, arrangements or
commitments of any character to which the Company is a party or by which Company
is bound relating to the issued or unissued capital stock of Company or
obligating Company to issue or sell any shares of capital stock of, or other
equity interests in, the Company (the "Company Rights"). All shares of Company
Common Stock subject to issuance as aforesaid, upon issuance prior to the
Effective Time 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. Except for the Repurchase Options, there are no outstanding
contractual obligations of Company to repurchase, redeem or otherwise acquire
any shares of Company Common Stock or Company Preferred Stock. There are no
outstanding contractual obligations of Company to provide funds to, or make any
material investment (in the form of a loan, capital contribution or otherwise)
in any Person.
SECTION 4.04 Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder, and, subject to receipt of the Company
shareholders' approval and the required statutory approvals, to consummate the
transactions contemplated hereby. The
16
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby (other than, with respect to the
Merger, the approval of this Agreement by the holders of a majority of the
outstanding shares of Company Common Stock and the holders of a majority of the
outstanding shares of Company Preferred Stock entitled to vote with respect
thereto at the Company Shareholders' Meeting (as defined in Section 7.01), the
filing of the Certificate of Merger, and the filing and recordation of the
Agreement of Merger as required by California Law). This Agreement has been duly
executed and delivered by Company and, assuming the due authorization, execution
and delivery by the Parent, constitutes the legal, valid and binding obligation
of Company, enforceable against Company in accordance with its terms, except to
the extent that enforceability hereof may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by principles of equity regarding the
availability of remedies.
SECTION 4.05 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company does not,
and the performance by Company of its obligations hereunder, and the
consummation of the Merger will not, (i) conflict with or violate any provision
of the articles of incorporation or bylaws of Company, (ii) assuming that all
consents, approvals, authorizations and permits described in Section 4.05(b)
have been obtained and all filings and notifications described in Section
4.05(b) have been made, conflict with or violate any Law applicable to Company
or by which any property or asset of Company is bound or affected or (iii)
result in any breach of or constitute a default (or an event which with the
giving of notice or lapse of time or both could reasonably be expected to become
a default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of Company pursuant to, any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation, except in case of clauses (ii) and
(iii) for such conflicts, violations, breaches, defaults or rights as could not
reasonably be expected individually or in the aggregate to have a Company
Material Adverse Effect.
(b) The execution and delivery of this Agreement by Company does not, and
the performance by Company of its obligations hereunder and the consummation of
the Merger will not, require any consent, approval, authorization or permit of,
or filing by Company with or notification by Company to, any Governmental
Entity, except pursuant to applicable requirements of the Securities Act, Blue
Sky Laws, the pre-merger notification requirements of the HSR Act, if any, the
filing of the Certificate of Merger under the DGCL and the filing and
recordation of the Agreement of Merger as required by California Law.
SECTION 4.06 Permits; Compliance with Laws. Company is in possession of
all franchises, grants, authorizations, licenses, establishment registrations,
product listings, permits, approvals and orders of any Governmental Entity
necessary for Company to own, lease and operate its properties and assets or
otherwise to carry on its business as it is now being
17
conducted, other than those, the failure of which to possess, could not
reasonably be expected to have, individually, or in the aggregate, a Company
Material Adverse Effect (collectively, the "Company Permits"), and, as of the
date of this Agreement, none of the Company Permits has been suspended or
cancelled nor is any such suspension or cancellation pending or, to the
Knowledge of Company, threatened in writing. The Company is not in conflict
with, or in default or violation of, (i) any Law applicable to Company or by
which any property or asset of Company is bound or affected or (ii) any Company
Permits, which would prevent the Company from consummating the transactions
contemplated hereby.
SECTION 4.07 Financial Statements.
(a) Company has delivered to Parent copies of (i) the audited condensed
balance sheets of the Company at June 30, 2000, together with related audited
condensed statement of operations, stockholders' equity and cash flows for the
year ended June 30, 2000 and the notes thereto and (ii) the unaudited condensed
balance sheets of the Company at December 31, 2000, together with the related
condensed statements of operations and cash flows for the six-month period ended
December 31, 2000 and the notes thereto (collectively, the "Company Financial
Statements"). The Company Financial Statements were prepared in accordance with
GAAP (subject to normal year end adjustments, which adjustments are not
material) applied on a consistent basis throughout the periods indicated (except
as may be indicated in the notes thereto) and each presented fairly the
financial position of Company as at the respective dates thereof, and its
results of operations and cash flows for the period indicated therein, except as
otherwise noted therein (subject to normal and recurring immaterial year-end
adjustments).
(b) Except as and to the extent set forth or reserved against on the
condensed balance sheet of Company as of December 31, 2000, the Company has no
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) that would be required to be reflected on a balance sheet or in
notes thereto prepared in accordance with GAAP, except for (i) liabilities or
obligations which individually or in the aggregate could not reasonably be
expected to have a Company Material Adverse Effect or (ii) liabilities or
obligations incurred in the ordinary course of business consistent with past
practice since December 31, 2000.
SECTION 4.08 Certain Tax Matters. Neither the Company nor, to the
Knowledge of Company, any of its Affiliates has taken or agreed to take any
action (other than actions contemplated by this Agreement) that could reasonably
be expected to prevent the Merger from constituting a "reorganization" within
the meaning of Section 368(a) of the Code. The Company is not aware of any
agreement or plan to which the Company or any of its Affiliates is a party or
other circumstances relating to Company or any of its Affiliates that could
reasonably be expected to prevent the Merger from being so treated as a or from
so qualifying as a reorganization under Section 368(a) of the Code.
SECTION 4.09 Litigation. There is no suit, claim, action, proceeding or
investigation pending or, to the Knowledge of Company, threatened against
Company that could reasonably be expected to prevent the Company from
consummating the transactions contemplated hereby. The Company is not aware of
any facts or circumstances that could
18
reasonably be expected to result in the denial of insurance coverage under
policies issued to Company in respect of such suits, claims, actions,
proceedings and investigations, except in any case as could not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect. The Company is not subject to any outstanding order, writ, injunction or
decree which could reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect or materially interfere with
Company's ability to consummate the transactions contemplated hereby.
SECTION 4.10 Affiliates. Schedule 4.10 of the Company Disclosure Schedule
sets forth the names and addresses of each Person who is, in the Company's
reasonable judgment, an affiliate (as such term is used in Rule 145 under the
Securities Act) of the Company.
SECTION 4.11 Brokers. No broker, finder or investment banker (other than
Company Financial Advisor) is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger based upon arrangements made by or
on behalf of Company.
SECTION 4.12 Information Supplied. None of the information supplied or to
be supplied by Company for inclusion in (a) the Registration Statement on Form
S-4 to be filed with the SEC by Parent in connection with the issuance of shares
of Parent Common Stock in the Merger (including the joint proxy statement and
prospectus, together with any amendments thereto (the "Joint Proxy
Statement/Prospectus"), constituting a part thereof) (the "S-4 Registration
Statement") will, at the time the S-4 Registration Statement becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they are
made, not misleading, and (b) the Joint Proxy Statement/Prospectus and any
amendment or supplement thereto will, at the date such information is supplied
and at the time of the meetings of the Company shareholders and Parent
stockholders to be held to approve or adopt, as the case may be, this Agreement,
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact required to be stated therein or necessary
in order to make the statement therein, in light of the circumstances under
which they were made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT
The Parent hereby represents and warrants to Company, subject to the
exceptions specifically disclosed in the Parent Disclosure Schedule which shall
have been provided to the Company at least two days prior to the date of
execution of this Agreement, all such exceptions to be referenced to a specific
representation set forth in this Article V, that:
SECTION 5.01 Organization and Qualification; Subsidiaries.
19
(a) The Parent and each directly and indirectly owned Subsidiary of Parent
(the "Parent Subsidiaries"), has been duly organized and is validly existing and
in good standing (to the extent applicable) under the laws of the jurisdiction
of its incorporation or organization, as the case may be, and has the requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted. The Parent and each Parent
Subsidiary is duly qualified or licensed to do business, and is in good standing
(to the extent applicable), in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its business makes
such qualification or licensing necessary, except for such failures to be so
qualified or licensed and in good standing that could not reasonably be expected
to have, individually or in the aggregate, a Parent Material Adverse Effect.
(b) Schedule 5.01 of the Parent Disclosure Schedule sets forth, as of the
date of this Agreement, a true and complete list of each Parent Subsidiary and
each entity in which Parent owns a 15% or greater equity interest, together with
the jurisdiction of incorporation or organization of each Parent Subsidiary and
the percentage of each Parent Subsidiary's outstanding capital stock or other
equity interests owned by Parent or another Parent Subsidiary. Except as set
forth in Schedule 5.01 of the Parent Disclosure Schedule, neither the Parent nor
any Parent Subsidiary owns an equity interest in any partnership or joint
venture arrangement or other business entity that is material to the business,
assets, liabilities, financial condition or results of operations of the Parent
and the Parent Subsidiaries, taken as a whole.
SECTION 5.02 Certificate of Incorporation and Bylaws. The copies of
Parent's certificate of incorporation and bylaws previously made available to
the Company by Parent are true, complete and correct copies thereof. Such
certificate of incorporation and bylaws are in full force and effect. The Parent
is not in violation of any of the provisions of its certificate of incorporation
or bylaws. The certificate of incorporation and bylaws of Parent contains a
provision authorizing Parent to provide indemnification of its officers and
directors to the fullest extent permitted under Delaware Law.
SECTION 5.03 Capitalization.
(a) The authorized capital stock of Parent consists of 40,000,000 shares of
Parent Common Stock and 2,000,000 shares of preferred stock. As of the date
hereof (i) 13,083,720 shares of Parent Common Stock are issued and outstanding,
all of which are validly issued, fully paid and nonassessable, (ii) no shares of
Parent Common Stock are held in the treasury of Parent, (iii) no shares of
Parent Common Stock are held by the Parent Subsidiaries, and (iv) 3,014,526
shares of Parent Common Stock are reserved for future issuance upon exercise of
outstanding options to purchase shares of Parent Common Stock under the Parent
Stock Plans and pursuant to option grants which were not made under the Parent
Stock Plans ("Parent Stock Options"), and 2,602,348 shares of Parent Common
Stock are reserved for future issuance upon exercise of outstanding warrants to
purchase shares of Parent Common Stock ("Parent Warrants"). Except for the
Parent Warrants and Parent Common Stock issuable pursuant to the Parent Stock
Plans, there are no options, warrants or other rights, agreements, arrangements
or commitments of any character to which Parent is a party or by which Parent is
bound relating to the issued or unissued capital stock of Parent or any Parent
Subsidiary or obligating Parent or any Parent Subsidiary to issue or sell any
shares of capital stock of, or other
20
equity interests in, Parent or any Parent Subsidiary. All Parent Common Stock
subject to issuance as aforesaid, upon issuance prior to the Effective Time 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.
The Parent Common Stock and Parent Warrants issued pursuant to the Common Stock
Purchase Agreement dated as of February 24, 2000 by and among Parent and certain
purchasers listed therein, were duly approved for issuance by the vote of the
Parent stockholders in accordance with the rules of the NNM and applicable law.
Parent has not received any notices from Nasdaq or the NASD stating that Parent
Common Stock is subject to potential delisting from the NNM. There are no
outstanding contractual obligations of Parent or any Parent Subsidiary to
repurchase, redeem or otherwise acquire any Parent Common Stock or any capital
stock of any Parent Subsidiary. Schedule 5.03(a) includes a true and correct
copy of the capitalization table of Parent, which capitalization table
accurately reflects the fully diluted capitalization of Parent as of the date
hereof. Each outstanding share of capital stock of each Parent Subsidiary is
duly authorized, validly issued, fully paid and nonassessable and each such
share owned by Parent or another Parent Subsidiary is free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on Parent's or such other Parent Subsidiary's voting
rights, charges and other encumbrances of any nature whatsoever. There are no
outstanding contractual obligations of Parent or any Parent Subsidiary to
provide funds to, or make any material investment (in the form of a loan,
capital contribution or otherwise) in, any Parent Subsidiary or any other
Person. Except as disclosed in Schedule 5.03(b) of the Parent Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not, either by themselves or in conjunction with other possible events
(including termination of employment or service), result in the acceleration of
the exercisability of any outstanding Parent Stock Options, or the acceleration
of the vesting schedules applicable to the shares subject to those options or to
any unvested shares issued and outstanding under the Parent Stock Plans and the
applicable restricted stock agreements or any other modification to such options
or unvested shares. True and complete copies of all agreements and instruments
relating to Parent Stock Options or issued under the Parent Stock Plans have
been provided to the Company, and such agreements and instruments have not been
amended, modified or supplemented, and, except as specifically set forth herein,
there are no agreements to amend, modify or supplement such agreements or
instruments in any case from the form provided to the Company. Schedule 5.03(c)
of the Parent Disclosure Schedule sets forth (i) exercises of Parent Stock
Options which were granted under the Parent's 1992 and 1994 Stock Plans or
outside of any Parent Stock Plan and Parent Stock Options granted under Parent's
1995 and 1996 Plans prior to registration of shares of Parent Common Stock under
such Parent Option Plans on a Form S-8 Registration Statement and (ii) the
applicable exemption from the registration requirements of the Securities Act.
(b) All of the shares of Parent Common Stock to be issued (i) in connection
with the Merger, when issued in accordance with this Agreement, and (ii) upon
the conversion of any Company Right, including any Company Stock Option or
Company Warrant, to purchase shares of Parent Common Stock, when issued upon
exercise thereof following the Effective Time, will be validly issued, fully
paid and nonassessable and will not be subject to preemptive rights or similar
contractual rights granted by Parent. Additionally, all of the shares of Parent
Common Stock to be issued (i) in connection with the Merger, when issued in
accordance with this Agreement, and (ii) upon the conversion of any Company
Right, including any Company
21
Stock Option or Company Warrant, to purchase shares of Parent Common Stock, when
issued upon exercise thereof following the Effective Time, will be issued in
compliance with all applicable state securities laws. Furthermore, all of the
shares of Parent Common Stock to be issued (i) in connection with the Merger,
when issued in accordance with this Agreement, and (ii) upon the conversion of
any Company Right, including any Company Stock Option or Company Warrant, to
purchase shares of Parent Common Stock, when issued upon exercise thereof
following the Effective Time, will be qualified for listing on the NNM.
SECTION 5.04 Authority Relative to this Agreement. Parent has all
necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder, and, subject to receipt of Parent
stockholders' approval and the required statutory approvals, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and the consummation by Parent of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action, and no
other corporate proceedings on the part of Parent are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby (other than
the approval of the Share Issuance (as defined in Section 7.01) by the requisite
vote of stockholders of Parent at the Parent Stockholders' Meeting (as defined
in Section 7.01), the filing of the Certificate of Merger under the DGCL and the
filing and recordation of the Agreement of Merger as required by California
Law). This Agreement has been duly executed and delivered by Parent, and,
assuming the due authorization, execution and delivery by Company, constitutes a
legal, valid and binding obligation of Parent enforceable against Parent in
accordance with its terms, except to the extent that enforceability hereof may
be limited by applicable bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and by principles
of equity regarding the availability of remedies.
SECTION 5.05 No Conflict; Required Filings and Consents.
(a) Except as disclosed in Section 5.05 of the Parent Disclosure Schedule,
the execution and delivery of this Agreement by Parent does not, and the
performance by Parent of its obligations hereunder and the consummation of the
Merger will not, (i) conflict with or violate any provision of the certificate
of incorporation or bylaws of Parent or any equivalent organizational documents
of any Parent Subsidiary, (ii) assuming that all consents, approvals,
authorizations and permits described in Section 5.05(b) have been obtained and
all filings and notifications described in Section 5.05(b) have been made,
conflict with or violate any Law applicable to Parent or any Parent Subsidiary
or by which any property or asset of Parent or any Parent Subsidiary is bound or
affected or (iii) result in any breach of or constitute a default (or an event
which with the giving of notice or lapse of time or both could reasonably be
expected to become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of Parent or any Parent Subsidiary
pursuant to, any material note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation, except in
case of clauses (ii) and (iii) for such conflicts, violations, breaches,
defaults or rights as could not reasonably be expected individually or in the
aggregate to have a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement by Parent does not, and
the
22
performance by Parent of its obligations hereunder, and the consummation of the
Merger will not, require any consent, approval, authorization or permit of, or
filing by Parent with or notification by Parent to, any Governmental Entity,
except pursuant to applicable requirements of the Exchange Act, the Securities
Act, Blue Sky Laws, the rules and regulations of the NNM, the pre-merger
notification requirements of the HSR Act, if any, the filing of the Certificate
of Merger under the DGCL and the filing and recordation of the Agreement of
Merger as required by California Law.
SECTION 5.06 Permits; Compliance with Laws. Parent and each of the Parent
Subsidiaries are in possession of all franchises, grants, authorizations,
licenses, establishment registrations, product listings, permits, approvals and
orders of any Governmental Entity necessary for Parent or any Parent Subsidiary
to own, lease and operate its properties and assets or otherwise to carry on its
business as it is now being conducted, other than those, the failure of which to
possess, could not reasonably be expected to have, individually, or in the
aggregate, a Parent Material Adverse Effect (collectively, the "Parent
Permits"), and, as of the date of this Agreement, none of the Parent Permits has
been suspended or cancelled nor is any such suspension or cancellation pending
or, to the Knowledge of Parent, threatened in writing. Neither Parent nor any
Parent Subsidiary is in conflict with, or in default or violation of, (i) any
Law applicable to Parent or any Parent Subsidiary or by which any property or
asset of Parent or any Parent Subsidiary is bound or affected or (ii) any Parent
Permits, except for such conflicts, defaults or violations that could not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect. Schedule 5.06 of the Parent Disclosure Schedule sets
forth, as of the date of this Agreement, all actions, proceedings,
investigations or surveys pending or, to the Knowledge of Parent, threatened in
writing against Parent or any Parent Subsidiary that could reasonably be
expected to result in the suspension or cancellation of any Parent Permit. Since
January 1, 2001, neither Parent nor any Parent Subsidiary has received from any
Governmental Entity any written notification with respect to possible conflicts,
defaults or violations of Laws.
SECTION 5.07 SEC Filings; Financial Statements.
(a) Parent has filed all forms, reports, statements and documents required
to be filed by it with the SEC and the NNM since January 31, 1995 (collectively,
together with any such forms, reports, statements and documents (including
exhibits thereto) Parent may file or furnish subsequent to the date hereof until
the Closing, the "Parent Reports"). Each Parent Report (i) was prepared in
accordance with the requirements of the Securities Act, the Exchange Act or the
NNM, as the case may be, and (ii) did not at the time it was filed contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading.
Parent will file its Annual Report on Form 10-K with the SEC in a timely manner
in accordance with the requirements of the Exchange Act. No Parent Subsidiary is
subject to the periodic reporting requirements of the Exchange Act or required
to file any form, report or other document with the SEC, the NNM, any other
stock exchange or any other comparable Governmental Entity.
(b) Each of the consolidated financial statements (including, in each case,
any
23
notes thereto) contained in the Parent Reports was prepared in accordance with
GAAP (except, in the case of unaudited financial statements, for the absence of
footnotes and subject to normal year end adjustments, which adjustments are not
material) applied on a consistent basis throughout the periods indicated (except
as may be indicated in the notes thereto) and each presents fairly the
consolidated financial position of Parent and the Parent Subsidiaries as at the
respective dates thereof, and their consolidated results of operations,
stockholders' equity and cash flows for the respective periods indicated
therein, except as otherwise noted therein (subject, in the case of unaudited
statements, to normal and recurring immaterial year-end adjustments).
(c) Except as and to the extent set forth or reserved against on the
consolidated balance sheet of Parent and the Parent Subsidiaries as of December
31, 2000 as reported in the Parent Reports, neither Parent nor any Parent
Subsidiary has any liabilities or obligations of any nature (whether accrued,
absolute, contingent, matured, unmatured or otherwise) that would be required to
be reflected on a balance sheet or in notes thereto prepared in accordance with
GAAP, and neither Parent nor any Parent Subsidiary knows of any basis for such
liabilities, except for (i) liabilities or obligations which individually or in
the aggregate could not be reasonably expected to have a Parent Material Adverse
Effect, or (ii) liabilities or obligations incurred in the ordinary course of
business consistent with past practice since December 31, 2000.
(d) Section 5.07 of the Parent Disclosure Schedule includes copies of the
unaudited consolidated balance sheets of the Parent and the Parent Subsidiaries
at December 31, 2000, together with related unaudited consolidated statement of
operations, stockholders' equity and cash flows for the year ended December 31,
2000 and the notes thereto (the "Parent Financial Statements"). The Parent
Financial Statements were prepared in accordance with GAAP applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto), are accurate in all material respects and each presents
fairly the consolidated financial position of Parent and the Parent Subsidiaries
as at the respective dates thereof, and their consolidated results of
operations, stockholders' equity and cash flows for the respective periods
indicated therein, except as otherwise noted therein (subject to immaterial
year-end adjustments). The Audited Parent Financial Statements (as defined in
Section 6.07(a) below) will not contain any material changes from the Parent
Financial Statements.
SECTION 5.08 Certain Tax Matters. Neither Parent nor, to the Knowledge of
Parent, any of its Affiliates has taken or agreed to take any action (other than
actions contemplated by this Agreement) that could reasonably be expected to
prevent the Merger from constituting a "reorganization" within the meaning of
Section 368(a) of the Code. Parent is not aware of any agreement or plan to
which Parent or any of its Affiliates is a party or other circumstances relating
to Parent or any of its Affiliates that could reasonably be expected to prevent
the Merger from so qualifying as a reorganization under Section 368(a) of the
Code.
SECTION 5.09 Litigation. Except as disclosed in Schedule 5.09 of the
Parent Disclosure Schedule, there is no suit, claim, action, proceeding or
investigation pending or, to the Knowledge of Parent, threatened against Parent
or any Parent Subsidiary that could reasonably be expected to have, individually
or in the aggregate, a Parent Material Adverse
24
Effect or materially interfere with Parent's ability to consummate the
transactions contemplated herein, and, to the Knowledge of Parent, there are no
existing facts or circumstances that could reasonably be expected to result in
such a suit, claim, action, proceeding or investigation. Parent is not aware of
any facts or circumstances which could reasonably be expected to result in the
denial of insurance coverage under policies issued to Parent and Parent
Subsidiaries in respect of such suits, claims, actions, proceedings and
investigations, except in any case as could not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect. Neither
Parent nor any Parent Subsidiary is subject to any outstanding order, writ,
injunction or decree which could reasonably be expected to have, individually or
in the aggregate, a Parent Material Adverse Effect or materially interfere with
Parent's ability to consummate the transactions contemplated herein.
SECTION 5.10 Absence of Certain Changes or Events. Except as otherwise
set forth on Schedule 5.10 of the Parent Disclosure Schedule, since December 31,
2000, Parent and the Parent Subsidiaries have conducted their businesses only in
the ordinary course consistent with past practice and, since such date, there
has not been (i) any Parent Material Adverse Effect, (ii) any event that could
reasonably be expected to prevent or materially delay the performance of
Parent's obligations pursuant to this Agreement and the consummation of the
Merger, (iii) any material change by Parent in its accounting methods,
principles or practices, (iv) any declaration, setting aside or payment of any
dividend or distribution in respect of the Parent Common Stock or any
redemption, purchase or other acquisition of any of Parent's securities, (v)
except in the ordinary course of business consistent with past practice, any
increase in the compensation or benefits or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any executive officers of
Parent or any Parent Subsidiary, (vi) any issuance or sale of any stock, notes,
bonds or other securities other than pursuant to the exercise of outstanding
securities, or entering into any agreement with respect thereto, (vii) any
amendment to the Parent's certificate of incorporation or bylaws, (viii) other
than in the ordinary course of business, any (x) purchase, sale, assignment or
transfer of any material assets, (y) mortgage, pledge or the institution of any
lien, encumbrance or charge on any material assets or properties, tangible or
intangible, except for liens for taxes not yet delinquent and such other liens,
encumbrances or charges which do not, individually or in the aggregate, have a
Parent Material Adverse Effect, or (z) waiver of any rights of material value or
cancellation or any material debts or claims, (ix) any incurrence of any
material liability (absolute or contingent), except for current liabilities and
obligations incurred in the ordinary course of business consistent with past
practice, (x) any incurrence of any damage, destruction or similar loss, whether
or not covered by insurance, materially affecting the business or properties of
Parent or any Parent Subsidiary, or (xi) any entering into any transaction of a
material nature, or any agreement to enter into any such transaction (except the
Merger), other than in the ordinary course of business, consistent with past
practices.
SECTION 5.11 Employee Benefit Plans.
(a) With respect to each employee benefit fund, plan, program, arrangement
and
25
contract (including, without limitation, any "employee benefit plan," as defined
in Section 3(3) of ERISA) maintained, sponsored or contributed to or required to
be contributed to by Parent or any Parent Subsidiary or other trade or business
(whether or not incorporated) treated as a single employer with Parent (a
"Parent ERISA Affiliate") pursuant to Code Section 414(b), (c), (m) or (o) is a
party, or with respect to which Parent or any Parent ERISA Affiliate could incur
liability under Section 4069, 4212(c) or 4204 of ERISA or Section 412 of the
Code (the "Parent Benefit Plans"), Parent has made available to Company a true,
complete and correct copy of (i) such Parent Benefit Plan and the most recent
summary plan description related to such Parent Benefit Plan, if a summary plan
description is required therefor, (ii) each trust agreement or other funding
arrangement relating to such Parent Benefit Plan, (iii) the most recent annual
report (Form 5500) filed with the IRS) with respect to such Parent Benefit Plan,
(iv) the most recent actuarial report or financial statement relating to such
Parent Benefit Plan and (v) the most recent determination letter issued by the
IRS with respect to such Parent Benefit Plan, if it is qualified under Section
401(a) of the Code. Neither Parent nor any Parent Affiliate has any express or
implied commitment, whether legally enforceable or not, to modify, change or
terminate any Parent Benefit Plan, other than with respect to a modification,
change or termination required by ERISA or the Code.
(b) Each Parent Benefit Plan has been administered in accordance with its
terms and all applicable laws, including, without limitation, ERISA and the
Code, and all contributions required to be made under the terms of any of the
Parent Benefit Plans as of the date of this Agreement have been timely made or
have been reflected on the most recent consolidated balance sheet filed or
incorporated by reference in the Parent Reports filed prior to the date of this
Agreement. With respect to the Parent Benefit Plans, no event has occurred and,
to the Knowledge of Parent, there exists no condition or set of circumstances in
connection with which Parent or any Parent ERISA Affiliate could be subject to
any liability (other than for routine benefit liabilities) under the terms of
such Parent Benefit Plans, ERISA, the Code or any other applicable Law.
(c) Except as disclosed in Schedule 5.11 of the Parent Disclosure Schedule,
(i) each Parent Benefit Plan which is intended to be qualified under Section
401(a) of the Code or Section 401(k) of the Code has received or is currently
awaiting receipt of a favorable determination letter from the IRS as to its
qualified status under the Code, and each trust established in connection with
any Parent which is intended to be exempt from federal income taxation under
Section 501(a) of the Code has received a determination letter from the IRS that
it is so exempt, and no fact or event has occurred since the date of such
determination letter from the IRS to adversely affect the qualified status of
any such Parent Benefit Plan or the exempt status of any such trust; (ii) there
has been no prohibited transaction (within the meaning of Section 406 of ERISA
or Section 4975 of the Code) with respect to any Parent Benefit Plan; (iii) each
Parent Benefit Plan can be amended, terminated or otherwise discontinued after
the Effective Time in accordance with its terms, without liability, other than
(A) liability for ordinary administrative expenses typically incurred in a
termination event or (B) if the Parent Benefit Plan is a pension benefit plan
subject to Part 2 of Title I of ERISA, liability for the accrued benefits as of
the date of such termination (if and to the extent required by ERISA) to the
extent that either (x) there are sufficient assets set aside in a trust or
insurance contract to satisfy such liability or (y) such liability is reflected
on the most recent consolidated balance sheet included in the Parent
26
Reports filed prior to the date of this Agreement. No suit, administrative
proceeding, action or other litigation has been brought, or to the Knowledge of
Parent is threatened, against or with respect to any such Parent Benefit Plan,
including any audit or inquiry by the IRS or United States Department of Labor
(other than routine benefits claims).
(d) No Parent Benefit Plan is a multi-employer pension plan (as defined in
Section 3(37) of ERISA) or other pension plan subject to Title IV of ERISA and
neither the Parent nor any Parent ERISA Affiliate has sponsored or contributed
to or been required to contribute to a multi-employer pension plan or other
pension plan subject to Title IV of ERISA. No liability under Title IV of ERISA
has been incurred by Parent or any Parent ERISA Affiliate that has not been
satisfied in full, and no condition exists that presents a material risk to
Parent or any Parent ERISA Affiliate of incurring or being subject (whether
primarily, jointly or secondarily) to a material liability thereunder. None of
the assets of Parent or any Parent ERISA Affiliate is, or may reasonably be
expected to become, the subject of any lien arising under ERISA or Section
412(n) of the Code.
(e) With respect to each Parent Benefit Plan that is subject to Title IV or
Part 3 of Title I of ERISA or Section 412 of the Code, (i) no reportable event
(within the meaning of Section 4043 of ERISA, other than an event that is not
required to be reported before or within thirty days of such event) has occurred
or is expected to occur, (ii) there was not an accumulated funding deficiency
(within the meaning of Section 302 of ERISA or Section 412 of the Code), whether
or not waived, as of the most recently ended plan year of such Parent Benefit
Plan; and (iii) there is no "unfunded benefit liability" (within the meaning of
Section 4001(a)(18) of ERISA).
(f) Parent has set forth on Schedule 5.11(f) of the Parent Disclosure
Schedule and has delivered to Company true, complete and correct copies of (i)
all employment agreements with officers and all consulting and other advisory
agreements of Parent and each Parent Subsidiary providing for annual
compensation in excess of $100,000, (ii) all severance plans, agreements,
programs and policies of Parent and each Parent Subsidiary with or relating to
their respective employees, directors, advisory committee members or
consultants, and (iii) all plans, programs, agreements and other arrangements of
Parent and each Parent Subsidiary with or relating to their respective
employees, directors or consultants which contain "change of control"
provisions. No payment or benefit which will be made by Parent or any Parent
Subsidiary under any Parent Benefit Plan or other arrangement will constitute an
excess parachute payment under Code Section 280G(b)(1), and, except as disclosed
in Schedule 5.11(f) of the Parent Disclosure Schedule, the consummation of the
transactions contemplated by this Agreement will not individually or in
conjunction with any other possible event (including termination of employment)
(i) entitle any current or former employee or other service provider of Parent
or any Parent Subsidiary to severance benefits or any other payment,
compensation or benefit (including forgiveness of indebtedness), except as
expressly provided by this Agreement, or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation or benefit due any such employee
or service provider.
Except as required by Law, no Parent Benefit Plan provides any of the
following retiree or post-employment benefits to any Person: medical, disability
or life insurance benefits.
27
To the Knowledge of Parent, Parent and the Parent ERISA Affiliates are in
material compliance with (i) the requirements of the applicable health care
continuation and notice provisions of COBRA and the regulations (including
proposed regulations) thereunder and (ii) the applicable requirements of the
Health Insurance Portability and Accountability Act of 1996 and the regulations
(including the proposed regulations) thereunder.
SECTION 5.12 Employment and Labor Matters.
(a) Neither Parent nor any Parent Subsidiary is a party to any collective
bargaining or other labor union contract applicable to Persons employed by
Parent or any Parent Subsidiary, no collective bargaining agreement is being
negotiated by Parent or any Parent Subsidiary and Parent and Parent Subsidiaries
have no duty to bargain with any labor organization with respect to any such
persons. There is no pending demand for recognition or any other request or
demand from a labor organization for representative status with respect to any
persons employed by Parent and Parent Subsidiaries. As of the date of this
Agreement, there is no labor dispute, strike or work stoppage against Parent or
any Parent Subsidiary pending or, to the Knowledge of Parent, threatened which
may interfere with the respective business activities of Parent or any Parent
Subsidiary. As of the date of this Agreement, neither Parent nor any Parent
Subsidiary, or, to the Knowledge of Parent, any of their respective
representatives or employees, has committed any unfair labor practice in
connection with the operation of the respective businesses of Parent or any
Parent Subsidiary, and there is no charge or complaint against Parent or any
Parent Subsidiary by the National Labor Relations Board or any comparable
Governmental Entity pending or threatened.
(b) Parent and Parent Subsidiaries have complied, in all material respects
with the National Labor Relations Act, Title VII of the Civil Rights Act of
1964, the Age Discrimination in Employment Act, the Fair Labor Standards Act,
the Securities Act of 1933, as amended (the "Securities Act"), and all other
Laws pertaining to Parent and Parent Subsidiaries relations with its employees.
Parent and Parent Subsidiaries have no liability for any arrearages of wages.
Except as disclosed in Schedule 5.12(b) of the Parent Disclosure Schedule,
Parent and Parent Subsidiaries have no pending unfair labor practice charges,
contract grievances under any collective bargaining agreement, other
administrative charges, claims, grievances or lawsuits before any court,
governmental agency, regulatory body, or arbiter arising under any Law governing
any Plan, and, to the Knowledge of Parent and Parent Subsidiaries , there exist
no facts that could reasonably be expected to give rise to such a claim.
(c) Parent and Parent Subsidiaries have made available to Company a list of
the names, positions and rates of compensation of all officers, directors,
employees and consultants of Parent and Parent Subsidiaries, as of the date
hereof, showing each such person's name, positions, and annual remuneration,
bonuses and fringe benefits for the current fiscal year and the most recently
completed fiscal year. With respect to any persons employed by Parent and Parent
Subsidiaries , Parent and Parent Subsidiaries are in material compliance with
all Laws respecting employment conditions and practices, have withheld all
amounts required by any applicable Laws to be withheld from wages or any taxes
or penalties for failure to comply with any of the foregoing.
28
(d) With respect to any persons employed by Parent and Parent Subsidiaries,
(i) Parent and Parent Subsidiaries have not violated any legal requirement
prohibiting discrimination on the basis of race, color, national origin, sex,
religion, age, marital status, or handicap in its employment conditions or
practices; and (ii) except as disclosed in Schedule 5.12(d) of the Parent
Disclosure Schedule, there are no pending or, to the Knowledge of Parent and
Parent Subsidiaries, threatened discrimination complaints relating to race,
color, national origin, sex, religion, age, marital status, or handicap against
Parent and Parent Subsidiaries before any Government Entity nor, to the
Knowledge of Parent and Parent Subsidiaries, does any basis therefor exist.
(e) Parent and Parent Subsidiaries have complied, in all material respects,
with all Laws governing the employment of personnel by U.S. companies and the
employment of non-U.S. nationals in the United States, including, but not
limited to, the Immigration and Nationality Act 8 U.S.C. Sections 1101 et seq.
and its implementing regulations.
SECTION 5.13 Contracts. Except for the contracts and agreements described
in Schedule 5.13 of the Parent Disclosure Schedule (collectively, the "Parent
Material Contracts"), neither Parent nor the Parent Subsidiaries is a party to
or bound by any material contract, including without limitation, the following
contracts (which for purposes of this Agreement shall be deemed Parent Material
Contracts):
(a) any material distributor, sales, advertising, agency or manufacturer's
representative contract;
(b) any continuing contract for the purchase of materials, supplies,
equipment or services involving in the case of any such contact more than
$300,000 per annum;
(c) any contract that expires or may be renewed at the option of any Person
other than the Parent so as to expire more than one year after the date of this
Agreement;
(d) any trust indenture, mortgage, promissory note, loan agreement or other
contract for the borrowing of money, any currency exchange, commodities or other
hedging arrangement or any leasing transaction of the type required to be
capitalized in accordance with GAAP;
(e) any contract for capital expenditures in excess of $300,000 in the
aggregate;
(f) any contract limiting the freedom of the Parent or any Parent
Subsidiary to engage in any line of business or to compete with any other
Person, or any material confidentiality, secrecy or non-disclosure contract or
confidentiality, secrecy or non-disclosure contract entered into other than in
the ordinary course of business consistent with past practice;
(g) any contract pursuant to which the Parent or any Parent Subsidiary is a
lessor or lessee of any machinery, equipment, motor vehicles, office furniture,
fixtures or other personal property involving in the case of any such contract
more than $300,000 per annum;
(h) any contract with any Person with whom the Parent or any Parent
Subsidiary
29
does not deal at arm's length within the meaning of the Code; or
(i) any agreement of guarantee, support, indemnification, assumption or
endorsement of, or any similar commitment with respect to, the obligations,
liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness
of any other Person.
Parent and each Parent Subsidiary has performed all of the material
obligations required to be performed by it and is entitled to all material
benefits under, and to the Knowledge of Parent, is not alleged to be in default
in respect of any Parent Material Contract. Each of the Parent Material
Contracts is in full force and effect, unamended, and there exists no default or
event of default or event, occurrence, condition or act, with respect to Parent
or any Parent Subsidiary or to the Knowledge of Parent with respect to the other
contracting party, which, with the giving of notice or the lapse of time would
become a default or event of default under any Parent Material Contract. True,
correct and complete copies of all Parent Material Contracts have been delivered
or made available to Company.
SECTION 5.14 Business Relationships. Neither Parent nor any Parent
Subsidiary believes, or is aware of any circumstances that could reasonably lead
them to believe that the Merger may have an adverse impact on any arrangements
or relationships with customers, suppliers, distributors or corporate partners.
SECTION 5.15 Environmental Matters. Except as could not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect, (i) Parent and the Parent Subsidiaries are in compliance with all
applicable Environmental Laws and all Parent Permits required by Environmental
Laws; (ii) all past noncompliance of Parent or any Parent Subsidiary with
Environmental Laws or Environmental Permits has been resolved without any
pending, ongoing or future obligation, cost or liability; and (iii) neither
Parent nor any Parent Subsidiary has released a Hazardous Material at, or
transported a Hazardous Material to or from, any real property currently or
formerly owned, leased or occupied by Parent or any Parent Subsidiary, in
violation of any Environmental Law.
SECTION 5.16 Intellectual Property.
(a) Section 5.16(a) of the Parent Disclosure Schedule contains an accurate
and complete list of all patents and patent applications, trademarks, service
marks, Internet domain names and applications therefor, and copyrights and
copyright applications, which are part of the Parent Intellectual Property and
which have been issued or registered by, or filed with, any United States,
foreign or international governmental or other body having authority to issue,
register or review the same, including all patent applications that the Parent
intends to file prior to the Effective Time.
(b) Except as provided in Section 5.16(b) of the Parent Disclosure
Schedule, the Parent Intellectual Property is: (i) owned solely and exclusively
by Parent or a Parent Subsidiary, free and clear of any and all mortgages,
pledges, liens, security interests, conditional sale agreements or encumbrances,
of any kind; or (ii) rightfully used or otherwise enjoyed by Parent or its
Subsidiaries pursuant to one or more license agreements, each of which such
license
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agreements are, to the Knowledge of Parent and each Parent Subsidiary, valid and
enforceable.
(c) Except as disclosed in Schedule 5.16(c) of the Parent Disclosure
Schedule, no action is currently pending which asserts that Parent or any Parent
Subsidiary is infringing any Intellectual Property of any Person, and neither
Parent nor any Parent Subsidiary has received notice from any Person within the
past twenty four months asserting that Parent or any Parent Subsidiary is
infringing any Intellectual Property of any such Person. No action is currently
pending which asserts that any Person is infringing any Parent Intellectual
Property, and neither Parent nor any Parent Subsidiary has asserted any claim of
such infringement against any Person within the past twenty four months.
(d) Parent and its Subsidiaries have secured valid written
assignments from all consultants and employees who contributed to the creation
or development of Parent Intellectual Property of the rights to such
contributions that Parent and its Subsidiaries do not already own by operation
of law.
(e) Parent and its Subsidiaries have taken all necessary and
appropriate steps to protect and preserve the confidentiality of all Parent
Intellectual Property ("Confidential Information"). All use, disclosure or
appropriation of Confidential Information owned by Parent or any of its
Subsidiaries by or to a third party has been pursuant to the terms of a written
agreement between Parent or the applicable Subsidiary and such third party. All
use, disclosure or appropriation of Confidential Information not owned by Parent
or its Subsidiaries has been pursuant to the terms of a written agreement
between Parent and its Subsidiaries and the owner of such Confidential
Information, or is otherwise lawful.
SECTION 5.17 Taxes.
(a) Parent and each of the Parent Subsidiaries, and any consolidated,
combined, unitary or aggregate group for Tax purposes of which Parent or any
Parent Subsidiary is or has been a member, have properly completed and timely
filed all Tax Returns required to be filed by them and have paid all Taxes shown
thereon to be due. Parent has provided adequate accruals in accordance with GAAP
in its December 31, 2000 balance sheet contained in the Parent Financial
Statements (the "Parent December 2000 Balance Sheet") for any Taxes that as of
December 31, 2000 have not been paid, whether or not shown as being due on any
Tax Returns. Parent and the Parent Subsidiaries have no material liability for
unpaid Taxes accruing after December 31, 2000 except for Taxes incurred in the
ordinary course of business subsequent to December 31, 2000.
(b) There is (i) no material claim for Taxes that is secured by a
lien against the property of Parent or any Parent Subsidiary or is being
asserted against Parent or any Parent Subsidiary other than liens for Taxes not
yet due and payable, (ii) no audit of any Tax Return of Parent or any Parent
Subsidiary being conducted by a Tax Authority; (iii) no extension of the statute
of limitations on the assessment of any Taxes granted by Parent or any Parent
Subsidiary and currently in effect, and (iv) no agreement, contract or
arrangement to which Parent or any Parent Subsidiary is a party that may result
in the payment of any amount that would not be deductible by reason of Section
280G or 404 of the Code.
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(c) There has been no change in ownership of Parent or any Parent
Subsidiary that has caused the utilization of any losses of such entities to be
limited pursuant to Section 382 of the Code, and any loss carryovers reflected
on the Parent December 2000 Balance Sheet are properly computed and reflected.
(d) Parent and the Parent Subsidiaries have not been and will not be
required to include any material adjustment in taxable income for Tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions, events or
accounting methods employed prior to the Merger.
(e) Neither Parent nor any Parent Subsidiary has filed or will file
any consent to have the provisions of Section 341(f)(2) of the Code (or
comparable provisions of any state Tax laws) apply to Parent or any Parent
Subsidiary.
(f) Neither Parent nor any Parent Subsidiary is a party to any Tax
sharing or Tax allocation agreement nor does Parent or any Parent Subsidiary
have any liability or potential liability to another party under any such
agreement.
(g) Parent and each Parent Subsidiary is in full compliance with all
terms and conditions of any Tax exemptions or other Tax-sparing agreement or
order of a foreign government and the consummation of the Merger shall not have
any adverse effect on the continued validity and effectiveness of any such Tax
exemptions or other Tax-sparing agreement or order.
(h) Neither Parent nor any Parent Subsidiary has filed any
disclosures under Section 6662 or comparable provisions of state, local or
foreign law to prevent the imposition of penalties with respect to any Tax
reporting position taken on any Tax Return.
(i) Except as disclosed in Schedule 5.17(i) of the Parent Disclosure
Schedule, neither Parent nor any Parent Subsidiary has ever been a member of a
consolidated, combined or unitary group of which Parent was not the ultimate
parent corporation.
(j) Parent and each Parent Subsidiary has in its possession returns
and/or receipts with respect to Taxes paid to foreign Tax authorities. Neither
Parent nor any Parent Subsidiary has ever been a "personal holding company"
within the meaning of Section 542 of the Code or a "United States real property
holding corporation" within the meaning of Section 897 of the Code.
SECTION 5.18 Insurance. Parent and each Parent Subsidiary is
presently insured, and during each of the past three calendar years has been
insured, against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured. The policies of
fire, theft, liability and other insurance maintained with respect to the assets
or businesses of Parent and Parent Subsidiaries provide, in the good faith
judgment of the Parent's management, reasonably adequate coverage against loss.
Parent has made available to the Company a complete and correct list as of the
date hereof of all insurance policies maintained by the Parent or the Parent
Subsidiaries, and has made available to the Company complete and correct copies
of all such policies, together with all riders and
32
amendments thereto. All such policies are in full force and effect and all
premiums due thereon have been paid to the date hereof. Parent and the Parent
Subsidiaries have complied in all material respects with the terms of such
policies.
SECTION 5.19 Properties. The Parent and the Parent Subsidiaries have
good and valid title, free and clear of all Encumbrances, except for Permitted
Encumbrances, to all their material properties and assets, whether tangible or
intangible, real, personal or mixed, reflected in the Parent's consolidated
financial statements for the period ended December 31, 2000 as being owned by
Parent and the Parent Subsidiaries as of the date thereof, other than (i) any
properties or assets that have been sold or otherwise disposed of in the
ordinary course of business since the date of such financial statements, (ii)
liens disclosed in the notes to such financial statements and (iii) liens
arising in the ordinary course of business after the date of such financial
statements. All buildings, and all fixtures, equipment and other property and
assets that are material to its business on a consolidated basis, held under
leases or sub-leases by Parent or any Parent Subsidiary are held under valid
instruments enforceable in accordance with their respective terms, subject to
applicable laws of bankruptcy, insolvency or similar laws relating to creditors'
rights generally and by principles of equity regarding the availability of
remedies. Substantially all of Parent's and the Parent Subsidiaries' equipment
in regular use has been reasonably maintained and is in serviceable condition,
reasonable wear and tear excepted.
SECTION 5.20 Employees. A list of all officers, key employees and
key consultants of Parent and the Parent Subsidiaries and the current
compensation and benefits of such persons as of the date of this Agreement is
set forth in Schedule 5.20 of the Parent Disclosure Schedule. Except as
contemplated by this Agreement, to the Knowledge of Parent, none of Parent's key
sales or engineering staff (each of whom is identified in Schedule 5.20)
currently intends to leave Parent's or any Parent Subsidiary's employ.
SECTION 5.21 Parent Rights Plan. Neither the execution and delivery
of this Agreement or any of the agreements contemplated hereby by the parties
hereto and thereto nor the consummation of the transactions contemplated hereby
and thereby will cause Company or any of its affiliates or associates to be
within the definition of an "Acquiring Person" (as defined in the Rights Plan
dated as of October 9, 1998 (the "Parent Rights Plan")) for purposes of the
Parent Rights Plan, or Parent shall have taken, prior to the Effective time, any
and all action necessary or appropriate to insure that a Distribution Date does
not occur as a result of execution or performance of this Agreement, any of the
agreements contemplated hereby, or as a result of consummation of any of the
transactions contemplated hereby or thereby.
SECTION 5.22 Certain Business Practices. Neither Parent nor any
Parent Subsidiary nor any directors, officers, agents or employees of Parent or
any Parent Subsidiary (in their capacities as such) has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity or (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended.
SECTION 5.23 Books and Records. True and complete copies of all
33
documents listed in the Parent Disclosure Schedule have been provided to the
Company. The books of account, stock record books and other financial and
corporate records of Parent, all of which have been provided to the Company, are
materially complete and correct and have been maintained in accordance with good
business practices, including the maintenance of an adequate system of internal
accounting controls, and such book and records are accurately reflected in the
Parent Reports and the financial statement contained in the Parent Reports. The
minute books of Parent contain accurate and complete records of all meetings
held of, and corporate action by, the stockholders and the board of directors
and (and committees thereof) of Parent, and no meeting of any such stockholders
or board of directors (or committees thereof) has been held for which minutes
have not been prepared and are not contained in such minute books.
SECTION 5.24 Opinion of Financial Advisor. ▇▇▇▇▇▇▇ & Company, Inc.
("Parent Financial Advisor") has delivered to the board of directors of Parent
its opinion to the effect that the Exchange Ratio is fair to Parent from a
financial point of view.
SECTION 5.25 Affiliates. Schedule 5.25 of the Parent Disclosure
Schedule sets forth the names and addresses of each Person who is, in Parent's
reasonable judgment, an affiliate (as such term is used in Rule 145 under the
Securities Act) of Parent.
SECTION 5.26 Brokers.
(a) Except as disclosed in Schedule 5.26 of the Parent Disclosure
Schedule, no broker, finder or investment banker (other than Parent Financial
Advisor ) is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger based upon arrangements made by or on behalf of
Parent.
(b) Attached hereto as Schedule 5.26(b) of the Parent Disclosure
Schedule are true, complete and correct copies of all agreements between Parent
and the Parent Financial Advisor. Other than as attached hereto as Schedule
5.26(b) of the Parent Disclosure Schedule, there are no other agreements between
Parent and the Parent Financial Advisor.
SECTION 5.27 Information Supplied. None of the information supplied,
supplied herein or to be supplied by Parent for inclusion in (a) the S-4
Registration Statement to be filed with the SEC by Parent in connection with the
issuance of shares of Parent Common Stock in the Merger (including the Joint
Proxy Statement/Prospectus, constituting a part thereof) will, at the time the
S-4 Registration Statement becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading, and (b)
the Joint Proxy Statement/Prospectus and any amendment or supplement thereto
will, at the date such information is supplied and at the time of the meetings
of the Company shareholders and Parent stockholders to be held to approve or
adopt, as the case may be, this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
required to be stated therein or necessary in order to make the statement
therein, in light of the circumstances under which they were made, not
misleading.
34
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of Parent Pending the Closing. Parent agrees
that, between the date of this Agreement and the Effective Time, unless Company
shall otherwise agree in writing, (x) the respective businesses of Parent and
the Parent Subsidiaries shall be conducted only in, and Parent and the Parent
Subsidiaries shall not take any action except in, the ordinary course of
business consistent with past practice and (y) Parent shall use its reasonable
best efforts to keep available the services of such of the current officers,
significant employees and consultants of Parent and the Parent Subsidiaries and
to preserve the current relationships of Parent and the Parent Subsidiaries with
such of the corporate partners, customers, suppliers and other Persons with
which Parent or any Parent Subsidiary has significant business relations in
order to preserve substantially intact its business organization. Without
limitation, neither Parent nor any Parent Subsidiary shall, between the date of
this Agreement and the Effective Time, directly or indirectly, do, or agree to
do, any of the following (except to the extent contemplated in this Agreement)
without the prior written consent of Company:
(a) amend or otherwise change its certificate of incorporation,
bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee or encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license or encumbrance of, (i) any
shares of capital stock of Parent or any Parent Subsidiary of any class, or
securities convertible into or exchangeable or exercisable for any shares
of such capital stock, or any options, warrants or other rights of any kind
to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of Parent
or any Parent Subsidiary, other than the issuance of Parent Common Stock
pursuant to the exercise of stock options, warrants or convertible
securities therefor outstanding as of the date hereof or (ii) any material
property or assets of Parent or any Parent Subsidiary except dispositions
of inventory in the ordinary course of business consistent with past
practice;
(c) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization or Person or any
division thereof, other than the purchase of assets in the ordinary course
of business consistent with past practice; (ii) incur any indebtedness for
borrowed money (other than indebtedness with respect to working capital in
amounts consistent with past practice and the Bridge Loan) or issue any
debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any Person (other
than a Parent Subsidiary) for borrowed money or make any loans or advances
material to the business, assets, liabilities, financial condition or
results of operations of Parent and the Parent Subsidiaries, taken as a
whole; (iii) terminate, cancel or request any material change in, or agree
to any material change in, any Parent Material Contract; (iv) make or
authorize any capital expenditure; or (v) enter into or amend any contract,
agreement, commitment
or arrangement that, if fully performed, would not be permitted under this
Section 6.01(c);
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, except that any Parent Subsidiary may pay
dividends or make other distributions to Parent or any other Parent
Subsidiary;
(e) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock except
repurchases of unvested shares at cost in connection with the termination
of the employment relationship with any employee pursuant to stock option
or purchase agreements in effect on the date hereof;
(f) accelerate, amend or change the period (or permit any
acceleration, amendment or change) of exercisability of Parent Stock
Options or authorize cash payments in exchange for any Parent Stock
Options;
(g) amend the terms of, any of its securities or any securities
of any Parent Subsidiary;
(h) increase the compensation payable or to become payable to
its directors, officers, consultants or employees, grant any rights to
severance or termination pay to, or enter into any employment or severance
agreement which provides benefits upon a change in control of Parent that
would be triggered by the Merger with, any director, officer, consultant or
other employee or Service Provider of Parent or any Parent Subsidiary;
establish, adopt, enter into or amend any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any director, officer, consultant or employee of Parent or
any Parent Subsidiary, except to the extent required by applicable Law, or
enter into or amend any contract, agreement, commitment or arrangement
between Parent or any Parent Subsidiary and any of Parent's directors,
officers, consultants or employees or Service Providers;
(i) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction of claims,
liabilities or obligations (A) in the ordinary course of business and
consistent with past practice or (B) claims, liabilities or obligations
reflected on the Parent December 2000 Balance Sheet or (C) as otherwise set
forth on Schedule 6.01 of the Parent Disclosure Schedule;
(j) except as required by any Governmental Entity, make any
material change with respect to Parent's accounting policies, principles,
methods or procedures, including, without limitation, revenue recognition
policies, other than as required by GAAP;
36
(k) make any material Tax election or settle or compromise any
material Tax liability; or
(l) authorize or enter into any formal or informal agreement or
otherwise make any commitment to do any of the foregoing or to take any
action which would make any of the representations or warranties of Parent
contained in this Agreement untrue or incorrect or prevent Parent from
performing or cause Parent not to perform its covenants hereunder or result
in any of the conditions to the Merger set forth herein not being
satisfied.
SECTION 6.02 Conduct of Company Pending the Closing. Company agrees
that, unless Parent shall otherwise agree in writing, Company shall not, between
the date of this Agreement and the Effective Time, directly or indirectly
(except to the extent contemplated by this Agreement) without the prior written
consent of Parent, (i) sell, pledge, dispose of, transfer or encumber, or
authorize the sale, pledge, disposition, transfer or encumbrance of any material
property or assets of Company except in the ordinary course of business or (ii)
authorize or enter into any formal or informal agreement or otherwise make any
commitment to do any of the foregoing or to take any action which would make any
of the representations or warranties of Company contained in this Agreement
untrue or incorrect or prevent Company from performing or cause Company not to
perform its covenants hereunder or result in any of the conditions to the Merger
set forth herein not being satisfied.
SECTION 6.03 Notices of Certain Events. Each of Parent and Company
shall give prompt notice to the other of (i) any notice or other communication
from any Person alleging that the consent of such Person is or may be required
in connection with the Merger; (ii) any notice or other communication from any
Governmental Entity in connection with the Merger; or (iii) any actions, suits,
claims, investigations or proceedings commenced or, to the Knowledge of Company
or the Knowledge of Parent, as the case may be, threatened against, relating to
or involving or otherwise affecting Parent or the Parent Subsidiaries or
Company, respectively, which, if pending on the date hereof, would have been
required to have been disclosed in this Agreement, or that relate to the
consummation of the Merger. Parent shall give the Company prompt notice of (i)
the occurrence of a default or event that, with the giving of notice or lapse of
time or both, will become a default under any Parent Material Contract and (ii)
any change that could reasonably be expected to have a Parent Material Adverse
Effect or to delay or impede the ability of Parent to perform its obligations
pursuant to this Agreement.
SECTION 6.04 Access to Information; Confidentiality.
(a) Except as required pursuant to any confidentiality agreement or
similar agreement or arrangement to which Parent or Company or any of the Parent
Subsidiaries is a party or pursuant to applicable Law or the regulations or
requirements of any stock exchange or other regulatory organization with whose
rules a party hereto is required to comply, from the date of this Agreement to
the Effective Time, Parent and Company shall (and Parent shall cause the Parent
Subsidiaries to) (i) provide to the other (and its officers, directors,
employees, accountants, consultants, legal counsel, agents and other
representatives (collectively, "Representatives")) access at reasonable times
upon prior notice to its and its Subsidiaries'
37
officers, employees, agents, properties, offices and other facilities and to the
books and records thereof, and (ii) furnish promptly such information concerning
its and its subsidiaries' business, properties, contracts, assets, liabilities
and personnel as the other party or its Representatives may reasonably request.
No investigation conducted pursuant to this Section 6.04 shall affect or be
deemed to modify any representation or warranty made in this Agreement.
(b) The parties hereto shall comply with, and shall cause their
respective Representatives to comply with, all of their respective obligations
under the Confidentiality Agreement with respect to the information disclosed
pursuant to this Agreement.
SECTION 6.05 Reorganization.
(a) From and after the date of this Agreement, each party hereto
shall use all reasonable efforts to cause the Merger to qualify, and shall not
knowingly take any actions or cause any actions to be taken which could
reasonably be expected to prevent the Merger from qualifying as a
"reorganization" under Section 368(a) of the Code.
(b) Each of Company and Parent shall execute and deliver to Company
counsel and Parent counsel a certificate, in form reasonably acceptable to
Company and Parent, as the case may be, signed by an officer of Company or
Parent, as the case may be, setting forth factual representations and covenants
that will serve as a basis for the tax opinions required under Section 8.02(e)
and Section 8.03(e) hereof.
SECTION 6.06 Further Action; Consents; Filings.
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use all reasonable efforts to (i) take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to consummate
and make effective the Merger, (ii) obtain from Governmental Entities any
consents, licenses, permits, waivers, approvals, authorizations or orders
required to be obtained or made by Parent, Parent's Subsidiaries or Company in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the Merger and (iii) make all necessary filings, and
thereafter make any other required or appropriate submissions, with respect to
this Agreement and the Merger required under (A) the rules and regulations of
the NNM, (B) the Securities Act, the Exchange Act and any other applicable
Federal or state securities Laws, (C) the HSR Act, if applicable, and (D) any
other applicable Law. The parties hereto shall cooperate and consult with each
other in connection with the making of all such filings, including by providing
copies of all such documents to the nonfiling parties and their advisors prior
to filing, and neither of the parties shall file any such document if the other
party shall have reasonably objected to the filing of such document. No party
shall consent to any voluntary extension of any statutory deadline or waiting
period or to any voluntary delay of the consummation of the Merger at the behest
of any Governmental Entity without the consent and agreement of the other party
hereto, which consent shall not be unreasonably withheld or delayed.
(b) Each of Company and Parent will give (or Parent will cause its
Subsidiary to
38
give) any notices to third Persons, and use, and Parent will cause its
Subsidiaries to use, reasonable efforts to obtain any consents from third
Persons necessary, proper or advisable to consummate the transactions
contemplated by this Agreement.
SECTION 6.07 Additional Reports.
(a) As soon as reasonably practicable, but in no event later than 30
business days prior to the Effective Time, Parent shall provide to Company
copies of the audited consolidated balance sheets of the Parent and the Parent
Subsidiaries at December 31, 2000, together with related audited consolidated
statement of operations, stockholders' equity and cash flows for the year ended
December 31, 2000 and the notes thereto (the "Audited Parent Financial
Statements"). The Audited Parent Financial Statements shall be prepared in
accordance with GAAP applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto) and each present
fairly the consolidated financial position of Parent and the Parent Subsidiaries
as at the respective dates thereof, and their consolidated results of
operations, stockholders' equity and cash flows for the respective periods
indicated therein, except as otherwise noted therein (subject to immaterial
year-end adjustments). Parent shall have filed its Annual Report on Form 10-K
with the SEC in a timely manner in accordance with the requirements of the
Exchange Act.
(b) Parent shall furnish to Company copies of any reports of the type
referred to in Section 5.07, which it files with the SEC on or after the date
hereof, and Parent covenants and warrants that as of the respective dates
thereof, such reports will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Any consolidated interim financial statements included in
such reports (including any related notes and schedules) will fairly present the
financial position of Parent and its consolidated subsidiaries as of the dates
thereof and the results of operations and changes in financial position or other
information including therein for the periods or as of the date then ended
(subject, where appropriate, to normal year-end adjustments), in each case in
accordance with past practice and GAAP (except for the absence of footnotes)
consistently applied during the periods involved (except as otherwise disclosed
in the notes thereto).
(c) Company shall furnish to Parent copies of any reports which it
provides to Noteholders on or after the date hereof, and Company covenants and
warrants that as of the respective dates thereof, such reports will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Any
condensed interim financial statements included in such reports (including any
related notes and schedules) will fairly present the financial position of
Company as of the dates thereof and the results of operations and changes in
financial position or other information including therein for the periods or as
of the date then ended (subject, where appropriate, to normal year-end
adjustments), in each case in accordance with past practice and GAAP (except for
the absence of footnotes) consistently applied during the periods involved
(except as otherwise disclosed in the notes thereto).
39
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01 Joint Proxy Statement/Prospectus.
(a) As promptly as reasonably practicable after the execution of this
Agreement, Company and Parent shall prepare and Parent shall file with the SEC
an S-4 Registration Statement (including the Proxy Statement/Prospectus),
registering the offer and sale of shares of the Parent Common Stock, which
complies with the rules and regulations promulgated by the SEC, and the Company
and Parent shall use all reasonable efforts to cause the S-4 Registration
Statement to become effective as soon thereafter as practicable. Parent, with
the assistance of the Company when necessary, shall also use its reasonable best
efforts to obtain prior to the effective date of the S-4 Registration Statement
all necessary state securities law or "blue sky" permits and approvals required
in connection with the Merger and to consummate the other transactions
contemplated by this Agreement. Parent or Company, as the case may be, shall,
upon request by the other, furnish the other with all information concerning
itself, its Subsidiaries, directors, executive officers and shareholders or
stockholders, as the case may be, and such other matters as may be reasonably
necessary or advisable in connection with the Joint Proxy Statement/Prospectus,
the S-4 Registration Statement or any other statement, filing, notice or
application made by or on behalf of the Company or Parent or any of their
respective Subsidiaries to any third party and/or any Governmental Entity in
connection with the Merger and the transactions contemplated by this Agreement,
including, without limitation, providing pro forma financial information
regarding Parent and the Company, if necessary.
(b) The Joint Proxy Statement/Prospectus prepared by Company and
Parent in connection the Merger with respect to the special meetings of
Company's shareholders to be held to consider approval of this Agreement and the
Merger (the "Company Shareholders' Meeting") and of Parent's stockholders to be
held to consider the approval of the issuance of shares of Parent Common Stock
("Share Issuance") to Company's shareholders pursuant to the Merger (the "Parent
Stockholders' Meeting") shall include (i) with respect to Company and its
shareholders, (x) the approval of the Merger and the unanimous recommendation of
the disinterested members of the board of directors of Company to Company's
shareholders that they vote in favor of approval of this Agreement and (y) an
election form under which the holders of Company Preferred Stock may elect to
convert the Company Preferred Stock held by them immediately prior to the
Closing in accordance with the Company's articles of incorporation; provided,
however, that nothing in this Agreement shall prevent the board of directors of
the Company from withholding, withdrawing, amending or modifying its
recommendation in favor of approval and adoption of this Agreement and approval
of the Merger if: (A) a Company Superior Proposal is made to the Company and is
not withdrawn and (B) the board of directors of the Company concludes in good
faith, consistent with the advice of outside counsel admitted to practice in
California, that, in light of such Company Superior Proposal, the failure to
withhold, withdraw, amend or modify such recommendation would likely be
inconsistent with the fiduciary duties of the board of directors of Company to
Company shareholders under applicable law, and (ii) with respect to Parent and
its stockholders, (x) the approval of the Share Issuance, and the unanimous
recommendation of the disinterested
40
members of the board of directors of Parent to Parent's stockholders that they
vote in favor of approval of this Agreement, the Merger and the Share Issuance,
(y) the opinion of Parent Financial Advisor referred to in Section 5.24, (z) a
proposal to amend Parent's certificate of incorporation to (1) change its name
to Mayan Networks Corporation as of the Effective Time, (2) increase the Parent
Common Stock in order to reserve a sufficient number of authorized but unissued
Parent Common Stock for issuance in the Merger and upon exercise or conversion
of the Company Rights and (3) effect the Reverse Stock Split of the Parent
Common Stock and (xx) a proposal to adopt the 2001 Plan (collectively, the
"Parent Meeting Proposals"); provided, however, that nothing in this Agreement
shall prevent the board of directors of Parent from withholding, withdrawing,
amending or modifying its recommendation in favor of approval and adoption of
this Agreement and approval of the Merger if: (A) a Parent Superior Proposal is
made to the Parent and is not withdrawn, (B) neither the Parent nor any of its
representatives shall have violated any of the restrictions set forth in Section
7.19 and (C) the board of directors of the Parent concludes in good faith,
consistent with advice of outside counsel admitted to practice law in Delaware,
that, in light of such Parent Superior Proposal, the failure to withhold,
withdraw, amend or modify such recommendation would likely be inconsistent with
the fiduciary duties of the board of directors of Parent to Parent stockholders
under applicable law.
(c) The Company shall use its reasonable best efforts to ensure that
none of the information supplied by Company for inclusion or incorporation by
reference in the Joint Proxy Statement/Prospectus shall, at the date it or any
amendments or supplements thereto are mailed to shareholders of Company and the
stockholders of the Parent, at the time of the Company Shareholders' Meeting, at
the time of the Parent Stockholders' Meeting and at the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event or circumstance
relating to Company, or its officers or directors, should be discovered by
Company that should be set forth in an amendment or a supplement to the Joint
Proxy Statement/Prospectus, Company shall promptly inform Parent.
(d) The Parent shall use its reasonable best efforts to ensure that
none of the information supplied by Parent for inclusion or incorporation by
reference in the Joint Proxy Statement/Prospectus shall, at the date it or any
amendments or supplements thereto are mailed to shareholders of Company and the
stockholders of the Parent, at the time of the Company Shareholders' Meeting, at
the time of the Parent Stockholders' Meeting and at the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If, at any time prior to the Effective Time, any event or
circumstance relating to Parent or any Parent Subsidiary, or their respective
officers or directors, should be discovered by Parent that should be set forth
in an amendment or a supplement to the Joint Proxy Statement/Prospectus, Parent
shall promptly inform Company. All documents that Parent is responsible for
filing with the SEC in connection with the Merger will comply as to form in all
material respects with the applicable requirements of the rules and regulations
of the Securities Act and the Exchange Act.
SECTION 7.02 Shareholders' Meetings. Unless a Company Superior
41
Proposal is made to the Company and is not withdrawn and the board of directors
of the Company concludes in good faith, consistent with the advice of outside
counsel admitted to practice in California, that, in light of such Company
Superior Proposal, the failure to withhold, withdraw, amend or modify such
recommendation would likely be inconsistent with the fiduciary duties of the
board of directors of Company to Company shareholders under applicable law, the
Company shall call and hold the Company Shareholders' Meeting, and unless (A) a
Parent Superior Proposal is made to the Parent and is not withdrawn, (B) neither
the Parent nor any of its representatives shall have violated any of the
restrictions set forth in Section 7.19 and (C) the board of directors of the
Parent concludes in good faith, consistent with advice of outside counsel
admitted to practice law in Delaware, that, in light of such Parent Superior
Proposal, the failure to withhold, withdraw, amend or modify such recommendation
would likely be inconsistent with the fiduciary duties of the board of directors
of Parent to Parent stockholders under applicable law, the Parent shall call and
hold the Parent Stockholders' Meeting, as promptly as practicable after the date
hereof for the purpose of voting upon the approval of the matters described in
Section 7.01(b), pursuant to the Joint Proxy Statement/Prospectus, and the
Company and the Parent shall use all reasonable efforts to hold the Company
Shareholders' Meeting and the Parent Stockholders' Meeting on the same date and
as soon as practicable after the date hereof. Except as otherwise contemplated
by this Agreement, and subject to applicable law, the Company shall use all
reasonable efforts to solicit from its shareholders proxies in favor of the
approval of this Agreement pursuant to the Joint Proxy Statement/Prospectus and
shall take all other action necessary or advisable to secure the vote or consent
of shareholders required by California Law to obtain such approval. Except as
otherwise contemplated by this Agreement, and subject to applicable law, the
Parent shall use all reasonable efforts to solicit from its stockholders proxies
in favor of the Parent Meeting Proposals pursuant to the Joint Proxy
Statement/Prospectus and shall take all other action necessary or advisable to
secure the vote or consent of stockholders required by the applicable stock
exchange requirements to obtain such approval. Each of the parties hereto shall
use take all other action necessary or, in the opinion of the other parties
hereto, advisable to promptly and expeditiously secure any vote or consent of
shareholders required by applicable Law and such party's articles of
incorporation or certificate of incorporation, as the case may be, and bylaws to
effect the Merger.
SECTION 7.03 Directors' and Officers' Indemnification and Insurance.
(a) The provisions with respect to immunities and indemnification
that are set forth in the certificate of incorporation and bylaws of the
Surviving Corporation shall not be amended, repealed or otherwise modified for a
period of six years from the Effective Time in any manner that would affect
adversely the rights thereunder of individuals who at or at any time prior to
the Effective Time were directors, officers, employees or agents of Company.
(b) From and after the Effective Time, Parent and the Surviving
Corporation shall indemnify and hold harmless each present and former director
and officer of Company (the "Indemnified Parties"), against any costs or
expenses (including reasonable attorneys' fees and disbursements), judgments,
fines, losses, claims, damages or liabilities (collectively, "Costs") incurred
in connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters relating to their service as such an officer or director existing or
occurring at or prior to the Effective Time,
42
whether asserted or claimed prior to, at or after the Effective Time, to the
fullest extent that Company would have been permitted under California Law and
its articles of incorporation, bylaws and existing contractual arrangements
(each as in effect on the date hereof) to indemnify such Indemnified Parties.
(c) Surviving Corporation shall maintain directors' and officers'
liability insurance policies in amounts and with coverages equivalent to those
of Parent as in effect on the date hereof. In addition, for a period of six (6)
years after the Effective Time, Surviving Corporation shall maintain in effect
the directors' and officers' liability insurance policies previously maintained
by Company.
SECTION 7.04 Public Announcements. The initial press release
concerning the Merger to be released in connection with the execution and
delivery of this Agreement shall be a joint press release and, thereafter,
Parent and Company shall consult with each other before issuing any press
release or otherwise making any public statements with respect to this Agreement
or the Merger and shall not issue any such press release or make any such public
statement without the prior approval of the other, except to the extent required
by applicable Law or the requirements of the rules and regulations of the NNM,
in which case the issuing party shall consult with the other party before
issuing any such release or making any such public statement.
SECTION 7.05 Voting Agreements.
(a) The Parent shall use its reasonable best efforts, on behalf of
Company and pursuant to the request of Company, to cause each Parent stockholder
named in Schedule 7.05(a) to execute and deliver to Company a Voting Agreement
substantially in the form of Annex A attached hereto concurrent with the
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execution of this Agreement.
(b) Company shall use its reasonable best efforts, on behalf of
Parent and pursuant to the request of Parent, to cause each Company stockholder
named in Schedule 7.05(b) to execute and deliver to Parent a Voting Agreement
substantially in the form of Annex B attached hereto concurrent with the
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execution of this Agreement.
SECTION 7.06 Employment Agreements. Parent shall use its best
efforts to cause each of the individuals named in Schedule III to deliver to
Company an executed Employment Agreement substantially in the form attached
hereto as Annex C.
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SECTION 7.07 Market Standoff Agreements. Company shall use its
reasonable best efforts, on behalf of the Parent and pursuant to the request of
Parent, to cause each Company shareholder named in Schedule 7.07 to execute and
deliver to the Parent a Market Standoff Agreement substantially in the form
attached hereto as Annex D.
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SECTION 7.08 Market Standoff Agreements. Parent shall use its
reasonable best efforts, on behalf of the Company and pursuant to the request of
Company, to cause each Parent stockholder named in Schedule 7.08 to execute and
deliver to the Company a Market Standoff Agreement substantially in the form
attached hereto as Annex D.
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SECTION 7.09 NNM Listing.
(a) Prior to the Effective Time, Parent shall file with the NNM a
Notification Form for Listing of Additional Shares with respect to the Parent
Common Stock issuable in connection with the Merger and shall use all reasonable
efforts to have such Parent Common Stock to be issued in the Merger and upon
exercise of Company Stock Options, Company Warrants and the Convertible
Subordinated Promissory Notes approved for quotation on the NNM.
(b) Prior to the Effective Time, Parent and Company shall prepare and
file an application for initial inclusion of the Surviving Corporation on the
NNM.
SECTION 7.10 Blue Sky. Parent, with the assistance of Company when
necessary, shall use all reasonable efforts to obtain prior to the Effective
Time all necessary permits and approvals required under Blue Sky Laws to permit
the distribution of the Parent Common Stock to be issued in accordance with the
provisions of this Agreement.
SECTION 7.11 Reservation of Shares. Parent shall reserve for
issuance the number of Parent Common Stock that will be issuable upon exercise
of the Company Rights assumed pursuant to Section 3.05 hereof.
SECTION 7.12 2001 Stock Incentive Plan. Prior to the Effective Time,
the Board of Directors of Parent shall adopt a 2001 Stock Incentive Plan, in the
form attached as Annex F hereto (the "2001 Plan"). The 2001 Plan shall serve as
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the successor to the Parent Stock Plans and the Company Stock Plan. The board of
directors of Parent shall take such actions as may be necessary and appropriate
so that at the Effective Time, all the Parent Stock Options outstanding under
the Parent Stock Plans shall be transferred to the 2001 Plan and shall be
treated as outstanding options under the 2001 Plan; provided, however, that each
outstanding option so transferred shall continue to be governed solely by the
terms of the documents evidencing such options and no provision of the 2001 Plan
shall be deemed to affect or otherwise modify the rights or obligations of the
holders of such transferred options. Parent shall cause the 2001 Plan to be
submitted to the stockholders of the Parent for their approval at the Parent
Stockholders' Meeting with the recommendation of the board of directors.
SECTION 7.13 Waiver from Certain Holders of Outstanding Parent Stock
Options. Prior to the Effective Time, Parent shall use its best efforts to
obtain, from each optionee listed on Schedule 7.13 (including all optionees with
options issued under Parent's 1995 Stock Option Plan), each of whom is holding a
Parent Stock Option that has or may have a right to accelerated vesting due to
the Merger, a waiver of any such right to acceleration.
SECTION 7.14 Registration Statements on Form S-8. Within twenty (20)
Business Days after the Effective Time, the Surviving Corporation shall file
with the SEC one or more registration statements on Form S-8 for the shares of
Parent Common Stock issuable pursuant to outstanding options under the Company
Stock Plan assumed by Parent, provided that such options qualify for
registration on such Form S-8 and will maintain the effectiveness of such
registration statements for so long as any of such options or other rights
remain outstanding.
44
SECTION 7.15 Employee Matters. Simultaneously with the Merger, the
Surviving Corporation shall assume all employment agreements and termination
benefit agreements and arrangements which are in effect at Company on the date
hereof. The Company and Parent agree to cooperate and take such reasonable
actions as may be required to effect an orderly transition of benefits coverage
under Company's 401(k) plan, including but not limited to, termination of such
plan. As of the Effective Time, the Surviving Corporation shall honor and
satisfy all obligations and liabilities with respect to the Company Benefit
Plans. Notwithstanding the foregoing, the Surviving Corporation shall not be
required to continue any particular Company Benefit Plan after the Effective
Time, and any Company Benefit Plan may be amended or terminated in accordance
with its terms and applicable law. To the extent that any Company Benefit Plan
is terminated or amended after the Effective Time so as to reduce the benefits
that are then being provided with respect to participants thereunder, Surviving
Corporation shall arrange for each individual who is then a participant in such
terminated or amended plan to participate in a comparable benefit plan
maintained by Surviving Corporation in accordance with the eligibility criteria
thereof. All welfare benefit plans of the Parent or the Surviving Corporation in
which the Company's employees participate after the Effective Time shall provide
coverage for preexisting health conditions to the same extent those conditions
were covered under the applicable plans or programs of the Company as of the
Effective Time, and all limitations as to pre-existing conditions, exclusions
and waiting periods shall accordingly be waived with respect to participation
and coverage under those plans, other than limitations or waiting periods
already in effect with respect to one or more Company employees which had not
been satisfied as of the Effective Time under any welfare plan maintained for
such Company employees immediately prior to the Effective Time. In addition,
under each such welfare benefit plan of the Parent or the Surviving Corporation,
the outstanding claims and expenses incurred by the Company's employees under
each corresponding welfare benefit plan of the Company for the portion of the
plan year preceding the Effective Time shall be recognized, and the Company's
employees shall be given credit for amounts paid by them under each
corresponding benefit plan of the Company, for the portion of the plan year
preceding the Effective Time, for purposes of applying deductibles, co-payments
and out-of-pocket maximums as though such amounts had been paid in accordance
with the terms and conditions of the successor welfare benefit plan of the
Parent or the Surviving Corporation.
SECTION 7.16 Parent Rights Plan. Parent shall take all necessary
action to ensure that none of the transactions contemplated by this Agreement or
any of the agreements contemplated hereby will cause (i) Company or any of its
affiliates or associates to become an Acquiring Person (as defined in the Parent
Rights Plan) for purposes of the Parent Rights Plan, or (ii) otherwise affect in
any way the rights under the Parent Rights Plan, including by causing such
rights to separate from the underlying shares or by giving such holders the
right to acquire securities of any party hereto.
SECTION 7.17 Filing of Reports Necessary for Use of Rule 145. After
the Effective Time, Surviving Corporation shall use reasonable efforts to file
all reports and data with the SEC necessary to permit the shareholders of
Company and stockholders of Parent who may be deemed "underwriters" (within the
meaning of Rule 145 under the Securities Act) of Company Common Stock and
Company Preferred Stock to sell Parent Common Stock received by them in
connection with the Merger pursuant to Rules 144 and 145(d) under the Securities
45
Act if they would otherwise be so entitled. After the Effective Time, Surviving
Corporation will use reasonable efforts to file with the SEC reports,
statements, and other materials required by the federal securities laws on a
timely basis.
SECTION 7.18 Resignations of Officers and Directors.
(a) Parent shall deliver at the Closing the voluntary resignations of
each officer of Parent from their positions as officers who is not designated to
be an officer of Parent in accordance with subsection 2.05(b), which resignation
shall be effective at the Effective Time, and those persons listed on Schedule I
----------
hereto, shall have been elected as officers of Parents, to hold office until
their successor are elected or appointed and qualified or until their
resignation or removal; and
(b) Parent shall deliver at the Closing the voluntary resignations of
each director of Parent from their positions as directors who is not designated
to be a director of Parent in accordance with subsection 2.05(c), which
resignation shall be effective at the Effective Time, and those persons listed
on Schedule II hereto, shall have been elected as directors of Parent in each
-----------
case until their successors are elected or appointed and qualified or until
their resignation or removal.
SECTION 7.19 No Solicitation.
(a) From the date of this Agreement until the earlier of the
Effective Time or termination of this Agreement, pursuant to Section 9.01, the
Parent shall not directly or indirectly, and shall not authorize or permit any
Subsidiary of the Parent or any Representative of the Parent or Parent
Subsidiaries directly or indirectly to, (i) solicit, initiate, encourage or
induce the making, submission or announcement of any Acquisition Proposal or
take any action that would, individually or in the aggregate, reasonably be
expected to lead to an Acquisition Proposal, (ii) furnish any information
regarding Parent or any Parent subsidiaries to any Person in connection with or
in response to an Acquisition Proposal or an inquiry or indication of interest
that could lead to an Acquisition Proposal, (iii) engage in discussions with any
Person with respect to any Acquisition Proposal, (iv) approve, endorse or
recommend any Acquisition Proposal or (v) enter into any letter of intent or
similar document or any contract contemplating or otherwise relating to any
Acquisition Proposal; provided, however, that nothing herein shall prohibit the
Parent's Board of Directors from complying with Rules 14d-9 or 14e-2 under the
Exchange Act; and provided, further, that prior to the required Parent
stockholder approval, this Section 7.19 shall not prohibit the Parent from
furnishing nonpublic information regarding Parent or any Parent Subsidiaries to,
or entering into discussions with, any Person in response to an Acquisition
Proposal that is submitted to the Parent by such Person (and not withdrawn) if
(1) neither the Parent nor any Representative of Parent or any Parent
subsidiaries shall have violated in any material respect any of the restrictions
set forth in this Section 7.19 (other than Section 7.19(ii) or Section
7.19(iii)), (2) the Acquisition Proposal constitutes a Parent Superior Proposal,
(3) the Board of Directors of the Parent concludes in good faith consistent with
advice of outside counsel admitted to practice law in the State of Delaware,
that, in light of such Parent Superior Proposal, the failure to take such action
would likely be inconsistent with the fiduciary duties of the Board of the
Directors of the Parent to the Parent's stockholders under applicable law, (4)
at
46
least 24 hours prior to furnishing any such nonpublic information to, or
entering into discussions with, such Person, the Parent gives the Company
written notice of the identity of such Person and of the Parent's intention to
furnish nonpublic information to, or enter into discussions with, such Person,
and the Parent receives from such Person an executed confidentiality agreement
containing customary limitations on the use and disclosure of all nonpublic
written and oral information furnished to such Person by or on behalf of the
Parent, and (5) prior to furnishing any such nonpublic information to such
Person, the Parent furnishes such nonpublic information to the Company (to the
extent such nonpublic information has not been previously furnished by the
Parent to the Company). Without limiting the generality of the foregoing (x) the
parent acknowledges and agrees that any violation of any of the restrictions set
forth in the preceding sentence by any Representative of Parent or any Parent
subsidiaries, whether or not such Representative is purporting to act on behalf
of Parent or any Parent subsidiaries, shall be deemed to constitute a breach of
this Section 7.19 by the Company, and (y) the Company acknowledges and agrees
that the taking of any action permitted by and in accordance with this Section
7.19 shall not constitute a breach of this Agreement.
(b) The Parent shall promptly (and in no event later than 24 hours
after receipt of any Acquisition Proposal, any inquiry or indication of interest
that could reasonably be expected to lead to an Acquisition Proposal or any
request for nonpublic information) advise the Company orally and in writing of
any Acquisition Proposal, any inquiry or indication of interest that could
reasonably be expected to lead to an Acquisition Proposal or any request for
nonpublic information relating to Parent or any Parent subsidiaries (including
the identity of the Person making or submitting such Acquisition Proposal,
inquiry, indication of interest or request, and the terms thereof) that is made
or submitted by any Person prior to the Closing. The Parent shall keep the
Company fully informed with respect to the status of any such Acquisition
Proposal, inquiry, indication of interest or request and any modification or
proposed modification thereto.
(c) The Parent shall immediately cease and cause to be terminated any
existing discussions with any Person that relate to any Acquisition Proposal.
(d) The Parent agrees not to release or permit the release of any
Person from, or to waive or permit the waiver of any provision of, any
confidentiality, "standstill" or similar agreement to which Parent or any Parent
subsidiaries is a party, and will use its reasonable best efforts to enforce or
cause to be enforced each such argument at the request of the Company. The
Parent also will promptly request each Person that has executed, within 12
months prior to the date of this Agreement, a confidentiality agreement in
connection with its consideration of a possible acquisition transaction or
equity investment to return all confidential information heretofore furnished to
such Person by or on behalf of Parent or any Parent Subsidiaries.
SECTION 7.20 Notice of Merger. Not later than fifteen days prior to
the Effective Time, the Company shall give such notices relating to the Merger
as are required under Section 15.10 of the Indenture.
SECTION 7.21 Registration Statement for Convertible Subordinated
Promissory Notes, Exchange Notes and Underlying Conversion Shares. Parent shall
prepare and file one or more registration statements with the SEC, which
registration statements shall be
47
declared effective at the Effective Time, covering the resale of the Convertible
Subordinated Promissory Notes, the Exchange Notes and such shares of Parent
Common Stock as are issuable to the Noteholders upon conversion of the
Convertible Subordinated Promissory Notes and the Exchange Notes after the
Merger (the "Underlying Conversion Shares") and which, in the case of the
registration statement covering the Subordinated Promissory Notes and the
Underlying Conversion Shares into which such Subordinated Promissory Notes are
convertible, shall satisfy the requirements of the Registration Rights
Agreement, dated as of October 25, 2000, between the Company and ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, Inc. (the "Registration Rights Agreement") as if (i) the Parent were
the Company (as such term in defined in the Registration Rights Agreement); (ii)
such registration statement were the registration statement provided for under
the terms of the Registration Rights Agreement; and (iii) such registration
statement were required to be effective under the Registration Rights Agreement
at the Effective Time.
SECTION 7.22 Compensation Committee Ratification. Parent's board of
directors shall have (i) ratified the establishment of ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ as
the sole member of the Compensation Committee of the Parent board of directors,
with the authority to grant Parent Stock Options under the Parent Stock Plans
and (ii) ratified the previous grants of Parent Stock Options made by ▇▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ pursuant to his authority as the Compensation Committee of the Parent
board of directors.
SECTION 7.23 Bridge Loan.
(a) Provided this Agreement has not been terminated, the Company
agrees to advance to Parent, on an as-needed-basis, bridge loans of up to an
aggregate of $2 Million for the purpose of financing operating expenses incurred
in the ordinary course of business, pursuant to the terms set forth in the form
of Bridge Loan attached hereto as Annex G, and subject to execution and delivery
of such Bridge Loan by Parent. Each advance of all or any portion of the Bridge
Loan shall be subject to the conditions that (i) the representations and
warranties of Parent set forth in this Agreement shall be true and correct in
all material respects as of the time of such advance, (ii) Parent shall not have
breached in any material respect any covenant contained in this Agreement, and
(iii) Parent shall have given the Company at least three (3) days' written
notice requesting such advance and affirming that the conditions described in
clauses (i) and (ii) have been satisfied.
(b) The Bridge Loan shall be due and payable on the earlier of the
Effective Time or the Company's demand following termination of this Agreement,
as set forth in the form of Bridge Loan. Additionally, upon the occurrence of
certain "Events of Default" as defined therein, including, but not limited to
(i) the failure by Parent to timely file its Annual Report on Form 10-K in
accordance with the Exchange Act or (ii) the existence of any material changes
to the Parent Financial Statements, the Bridge Loan shall become immediately due
and payable.
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ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01 Conditions to the Obligations of Each Party to
Consummate the Merger. The obligations of the parties hereto to consummate the
Merger are subject to the satisfaction or, if permitted by applicable Law,
waiver of the following conditions:
(a) this Agreement shall have been duly approved by the
requisite vote of shareholders of Company in accordance with California Law
and by the requisite vote of stockholders of Parent in accordance with the
rules of the NNM and applicable Law;
(b) no law, order, statute, rule, regulation, domestic or
foreign, executive order, stay, decree, judgment or injunction shall have
been enacted, entered, promulgated or enforced by any court or Governmental
Entity which prohibits, prevents or makes illegal the consummation of the
Merger which has not been vacated, dismissed or withdrawn prior to the
Effective Time. Company and Parent shall use their reasonable best efforts
to have any of the foregoing vacated, dismissed or withdrawn by the
Effective Time;
(c) the S-4 Registration Statement shall have become effective
under the Securities Act. No stop order suspending the effectiveness of the
S-4 Registration Statement shall have been issued, and no proceeding for
that purpose shall have been initiated or be threatened, by the SEC;
(d) any waiting period (and any extension thereof) applicable to
the consummation of the Merger under the HSR Act, or any other applicable
competition, merger control or similar Law shall have expired or been
terminated;
(e) all consents, approvals and authorizations legally required
to be obtained to consummate the Merger shall have been obtained from all
Governmental Entities, except where the failure to obtain any such consent,
approval or authorization could not reasonably be expected to result in a
Parent Material Adverse Effect or a Company Material Adverse Effect;
(f) there shall not be threatened, instituted or pending any
action or proceeding before any court or governmental authority or agency,
domestic or foreign, (i) challenging or seeking to make illegal, or to
delay or otherwise directly or indirectly to restrain or prohibit, the
consummation of the transactions contemplated hereby, or seeking to obtain
material damages in connection with the transactions contemplated hereby,
(ii) seeking to prohibit direct or indirect ownership or operation by
Parent of all or a material portion of the business and assets of the
Company, or to Parent or to Company to dispose of or to hold separately all
or a material portion of the business or assets of Parent or Company, as a
result of the transactions contemplated hereby, (iii) seeking to invalidate
or render unenforceable any material provision of this Agreement, the
Agreement of Merger or any of the other agreements attached as Annexes
hereto, or
49
(iv) otherwise relating to and materially adversely affecting the
transactions contemplated hereby;
(g) each of the Parent, the Company and the Trustee shall have
executed and delivered a supplemental indenture, and all such other
requirements as are provided for in the Indenture in connection with the
Merger shall have been met;
(h) each of the Parent and the Company shall have entered into
such documents as shall be necessary to provide for the offering of the
Exchange Notes on such terms as shall be satisfactory to the parties and
shall otherwise have taken or caused to be taken all such actions as shall
be required in connection therewith; and
(i) the Parent Common Stock to be issued in the Merger shall
have been authorized for listing on the NNM, subject to notice of issuance.
SECTION 8.02 Conditions to the Obligations of Company. The
obligations of Company to consummate the Merger, or to permit the consummation
of the Merger are subject to the satisfaction or, if permitted by applicable
Law, waiver of the following further conditions:
(a) The representations and warranties of Parent contained in
this Agreement shall have been accurate in all material respects as of the
date of this Agreement, and shall be accurate in all material respects as
of the Effective Time as if made on and as of the Effective Time (other
than representations and warranties which address matters only as of a
certain date which shall be true and correct in all material respects as of
such certain date) (it being understood that, for purposes of determining
the accuracy of such representations and warranties, "Material Adverse
Effect " qualifications and other materiality qualifications contained in
such representations and warranties shall be disregarded);
(b) Parent shall have performed or complied in all material
respects with all covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time;
(c) The Company shall have been provided with a certificate
executed by (i) an authorized officer of Parent on behalf of Parent and
(ii) each of the Parent's Chairman of the Board of Directors, the Parent's
Chief Executive Officer and the Parent's Chief Accounting Officer,
certifying that the condition set forth in Section 8.02(a) shall have been
fulfilled, and a certificate executed by an authorized officer of Parent on
behalf of Parent certifying that the conditions set forth in Section
8.02(b) shall have been fulfilled;
(d) The Parent shall have furnished to Company (i) copies of the
text of the resolutions by which the corporate action on the part of Parent
necessary to approve this Agreement, the Agreement of Merger, the amended
certificate of incorporation, the election of the directors listed on
Schedule III, the adoption of the 2001 Plan and the transactions
contemplated hereby and thereby were taken, (ii) a certificate dated as of
the
50
Effective Time executed on behalf of Parent by its corporate secretary or
one of its assistant corporate secretaries certifying the signature and office
of each officer of Parent executing this Agreement, the Agreement of Merger, the
amended certificate of incorporation, or any other agreement, certificate or
other instrument executed pursuant hereto, and (iv) a copy of the amended
certificate of incorporation, certified by the Secretary of State of the State
of Delaware, and a certificate of good standing from the Secretary of State of
the State of Delaware, evidencing the good standing of Parent in such
jurisdiction;
(e) The Company shall have obtained an opinion from Company's legal
counsel in form and substance reasonably satisfactory to it substantially to the
effect that if the Merger is consummated in accordance with the provisions of
this Agreement, under current law, for federal income tax purposes, the Merger
will qualify as a reorganization within the meaning of Section 368(a) of the
Code, provided, that if Company is unable to obtain such an opinion from its
legal counsel, this condition shall be deemed to be satisfied if Parent's legal
counsel delivers an opinion to Company to the same effect;
(f) The Surviving Corporation shall have been qualified for listing on
the NNM in accordance with the Rule 4330(f) of the NNM;
(g) The Reverse Stock Split shall have been approved by the Parent
stockholders and shall be effective immediately prior to the Effective Time;
(h) Each share of Company Preferred Stock outstanding prior to the
Effective Time shall have been converted into shares of Company Common Stock;
(i) The Amended and Restated Investors' Rights Agreement dated as of
November 1, 1999, the Amended and Restated Right of First Refusal and Co-Sale
Agreement dated as of October 21,1999 and the Amended and Restated Voting
Agreement dated as of October 21, 1999 shall have been terminated;
(j) The Company shall have been furnished with evidence satisfactory
to it of the consent or approval of those persons whose consent or approval
shall be required in connection with the Merger under any material contract of
Parent or any of its Subsidiaries or otherwise, except where the failure to
obtain such consent or approval would not have a Material Adverse Effect on
Parent;
(k) Each officer of Parent who is not designated to be an officer of
Parent in accordance with subsection 2.05(b) shall have delivered a duly
executed resignation from his or her position with Parent effective immediately
after the Effective Time, and those persons listed on Schedule I hereto, shall
----------
have been elected as officers of Parent effective immediately after the
Effective Time, to hold office until their successors are
51
elected or appointed and qualified or until their resignation or removal;
(l) Each director of Parent who is not designated to be a director of
Parent in accordance with subsection 2.05(c) shall have delivered a duly
executed resignation from his or her position with Parent effective immediately
after the Effective Time, and those persons listed on Schedule II hereto, shall
-----------
have been elected as directors of Parent effective immediately after the
Effective Time, to hold office until their successors are elected or appointed
and qualified or until their resignation or removal;
(m) The board of directors of Parent and the Parent stockholders shall
have approved the certificate of amendment to the certificate of incorporation
of the Parent to (1) change its name to Mayan Networks Corporation as of the
Effective Time, (2) increase the Parent Common Stock in order to reserve a
sufficient number of authorized but unissued Parent Common Stock for issuance in
the Merger and upon exercise or conversion of the Company Rights, and the
certificate shall have been filed with, and approved by, the Secretary of State
of the State of Delaware and (3) effect the Reverse Stock Split of the Parent
Common Stock;
(n) The 2001 Plan shall have been approved by the board of directors
of Parent and the Parent stockholders to be effective at the Effective Time;
(o) Parent shall have obtained from each of the optionees listed on
Schedule 7.13 (including all optionees with options issued under Parent's 1995
Stock Option Plan), each of whom is holding a Parent Stock Option that has or
may have any right to acceleration of vesting due to the Merger, a waiver of
such right to acceleration;
(p) Parent shall have prepared and filed a registration statement with
the SEC, which registration statement shall have been declared effective at the
Effective Time, covering the resale of the Convertible Subordinated Promissory
Notes, the Exchange Notes and the Underlying Conversion Shares;
(q) Parent shall have maintained directors' and officers' liability
insurance policies in amounts and with coverages equivalent to those in effect
as of the date hereof;
(r) No Parent Material Adverse Effect shall have occurred or shall be
continuing since the date of this Agreement;
(s) The employees of Parent specifically identified on Schedule III
------------
shall have accepted employment with Company and shall have entered into
employment agreements in the form attached hereto Annex C;
-------
(t) Each Parent stockholder named in Schedule 7.08 shall have executed
and delivered to the Company a Market Standoff Agreement substantially in the
form attached hereto as Annex D; and
-------
(u) Company shall have received a legal opinion from Parent's legal
counsel, in the form attached hereto as Annex E.
-------
52
SECTION 8.03 Conditions to the Obligations of Parent. The obligations
of Parent to consummate the Merger are subject to the satisfaction or waiver of
the following further conditions:
(a) each of the representations and warranties of Company
contained in this Agreement shall have been accurate in all material
respects as of the date of this Agreement, and shall be accurate in all
material respects as of the Effective Time as if made on and as of the
Effective Time (it being understood that, for purposes of determining the
accuracy of such representations and warranties, "Material Adverse Effect "
qualifications and other materiality qualifications contained in such
representations and warranties shall be disregarded);
(b) The Company shall have performed or complied in all material
respects with all covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time;
(c) The Parent shall have been provided with a certificate
executed on behalf of Company by an authorized officer certifying that the
conditions set forth in Section 8.03(a) and (b) shall have been fulfilled;
(d) The Company shall have furnished to Parent (i) copies of the
text of the resolutions by which the corporate action on the part of the
Company necessary to approve this Agreement, the Agreement of Merger and
the transactions contemplated hereby and thereby were taken, (ii) a
certificate dated as of the Effective Time executed on behalf of Company by
its corporate secretary or one of its assistant corporate secretaries
certifying to the Parent that such copies are true, correct and complete
copies of such resolutions and that such resolutions were duly adopted and
have not been amended or rescinded, (iii) an incumbency certificate dated
as of the Effective Time executed on behalf of Company by its corporate
secretary or one of its assistant corporate secretaries certifying the
signature and office of each officer of Company executing this Agreement,
the Agreement of Merger, or any other agreement, certificate or other
instrument executed pursuant hereto, and (iv) certificates of good standing
from the Secretary of State of the State of California, evidencing the good
standing of the Company in such jurisdiction;
(e) The Parent shall have obtained an opinion from Parent's legal
counsel in form and substance reasonably satisfactory to it substantially
to the effect that if the Merger is consummated in accordance with the
provisions of this Agreement, under current law, for federal income tax
purposes, the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code, provided, that if Parent is unable to obtain
such an opinion from its legal counsel, this condition shall be deemed to
be satisfied if Company's legal counsel delivers an opinion to Parent to
the same effect;
(f) The Parent shall have been provided with a certification (a
"FIRPTA Certificate") issued by the Company pursuant to treasury Regulation
Section 1.897-2(h) that the stock of Company is not a "United States real
property interest" as defined in
53
Section 897 of the Code; and
(g) Each Company shareholder named in Schedule 7.07 shall have
executed and delivered to Parent a Market Standoff Agreement substantially
in the form attached hereto as Annex D.
-------
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time by written notice received by the non-terminating
party or parties from the terminating party or parties stating the basis for
such termination and referring to the applicable clause of this Section 9.01,
notwithstanding any requisite adoption and approval of this Agreement, as
follows:
(a) by mutual written consent duly authorized by the boards of
directors of each of Parent and Company;
(b) by either Parent or Company, if the Effective Time shall not
have occurred on or before August 31, 2001; provided, however, that the
right to terminate this Agreement under this Section 9.01(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement shall have caused, or resulted in, the failure of the Effective
Time to occur on or before such date;
(c) by either Parent or Company, if any Governmental Order, writ,
injunction or decree preventing the consummation of the Merger shall have
been entered by any court of competent jurisdiction and shall have become
final and nonappealable;
(d) by Parent, in response to a Parent Superior Proposal which
was not solicited by Parent; provided that Parent shall have complied in
all material respects with its obligations under Section 7.19 (no-
solicitation) and such Parent Superior Proposal did not otherwise result
from a breach of any of Parent's obligations under this Agreement; and
provided further, that no termination pursuant to this Section 9.01(d)
shall be effective until after the fifth business day following Company's
receipt of written notice advising Company that the board of directors of
Parent is prepared to accept a Parent Superior Proposal, specifying the
material terms and conditions of such Parent Superior Proposal and
identifying the person making such Parent Superior Proposal; and the
payment of any applicable termination fee pursuant to Section 9.05(b) and
concurrently with such termination the fee specified in Section 9.05(b)
shall have been paid to the Company;
(e) by Company, in response to a Company Superior Proposal;
provided that such Company Superior Proposal did not otherwise result from
a breach of any of Company's obligations under this Agreement; and provided
further, that no termination pursuant to this Section 9.01(e) shall be
effective until after the fifth business day
54
following Parent's receipt of written notice advising Parent that the Board
of Directors of Company is prepared to accept a Company Superior Proposal,
specifying the material terms and conditions of such Company Superior
Proposal and identifying the person making such Company Superior Proposal;
and the payment of any applicable termination fee pursuant to Section
9.05(c) and concurrently with such termination the fee specified in Section
9.05(c) shall have been paid to the Parent;
(f) by the Parent, if this Agreement and the Merger is brought to
a vote and shall fail to receive the requisite votes for approval at the
Company Shareholders' Meeting or any adjournment or postponement thereof;
(g) by the Company, if the Parent Meeting Proposals shall fail to
receive the requisite votes for approval at the Parent Stockholders'
Meeting or any adjournment or postponement thereof;
(h) by the Parent, twenty days after receipt by the Company of a
written notice from the Parent of a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have
become untrue, incomplete or incorrect, in either case such that the
conditions set forth in Section 8.03 would not be satisfied (a "Terminating
Company Breach"); provided, however, that if such Terminating Company
Breach is cured by the Company within such twenty day period, the Parent
may not terminate this Agreement under this Section 9.01(h);
(i) by the Company, twenty days after receipt by the Parent of a
written notice from the Company of a breach of any representation,
warranty, covenant or agreement on the part of the Parent set forth in this
Agreement, or if any representation or warranty of the Parent shall have
become untrue, incomplete or incorrect, in either case such that the
conditions set forth in Section 8.02 would not be satisfied (a "Terminating
Parent Breach"); provided, however, that if such Terminating Parent Breach
is cured by the Parent within such twenty day period, the Company may not
terminate this Agreement under this Section 9.01(i); or
(j) by the Company, if (i) Parent Common Stock shall become
delisted from NNM prior the Effective Time, (ii) the outstanding Common
Stock of the Surviving Corporation does not qualify for listing on the NNM
in accordance with Rule 4330(f) of the NNM or the application for the
listing of shares of Common Stock to be issued in the Merger or (iii) the
Surviving Corporation's initial listing application to the NNM shall have
been denied.
The right of any party hereto to terminate this Agreement pursuant to this
Section 9.01 will remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any Person
controlling any such party or any of their respective officers, directors,
representatives or agents, whether prior to or after the execution of this
Agreement.
SECTION 9.02 Effect of Termination. Except as provided in Section 9.05,
55
in the event of termination of this Agreement pursuant to Section 9.01, this
Agreement shall forthwith become void, there shall be no liability under this
Agreement on the part of any party hereto or any of its Affiliates or any of its
or their officers or directors, and all rights and obligations of each party
hereto shall cease; provided, however, that nothing herein shall relieve any
party hereto from liability for the willful or intentional material breach of
any of its representations and warranties or the willful or intentional material
breach of any of its covenants or agreements set forth in this Agreement; and
provided, further, that the provisions of Section 6.03, Section 7.04, Section
9.05 and this Section 9.01 shall remain in full force and effect and survive any
termination of this Agreement for a period of three years.
SECTION 9.03 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective boards of directors
at any time prior to the Effective Time; provided, however, that, after the
approval of this Agreement by the shareholders of Company, no amendment may be
made that changes the amount or type of consideration into which Company Common
Stock will be converted pursuant to this Agreement. This Agreement may not be
amended except by an instrument in writing signed by the parties hereto.
SECTION 9.04 Waiver. At any time prior to the Effective Time, any
party hereto may (a) extend the time for or waive compliance with the
performance of any obligation or other act of any other party hereto, (b) waive
any inaccuracy in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance by the other party
with any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby.
SECTION 9.05 Termination Fee; Expenses.
(a) Except as otherwise set forth in Section 1.01 or in this Section
9.05, all Expenses incurred in connection with this Agreement and the Merger
shall be paid by the party incurring such Expenses, whether or not the Merger is
consummated, except that Parent and Company each shall pay one-half of all
Expenses incurred solely for printing and mailing the Joint Proxy
Statement/Prospectus and any fees required to be paid under the HSR Act, if
applicable.
(b) In the event that this Agreement shall be terminated by Parent
pursuant to Section 9.01(d), then, in any such event, Parent shall reimburse the
Company for all Expenses reasonably incurred by the Company in connection with
this Agreement and the transactions contemplated hereby, which fee shall be due
and payable in full upon termination of this Agreement. All payments pursuant to
this Section 9.05(b) shall be made by wire transfer of same-day funds to an
account specified by the Company.
(c) In the event that this Agreement shall be terminated by Company
pursuant to Section 9.01(e), then, in any such event, the Company shall
reimburse Parent for all Expenses reasonably incurred by Parent in connection
with this Agreement and the transactions contemplated hereby, which fee shall be
due and payable in full upon termination of this
56
Agreement. All payments pursuant to this Section 9.05(c) shall be made by wire
transfer of same-day funds to an account specified by Parent.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01 Non-Survival of Representations and Warranties. The
representations and warranties in this Agreement shall terminate at the
Effective Time or upon the termination of this Agreement pursuant to Section
9.01, as the case may be. This Section 10.01 shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Effective Time.
SECTION 10.02 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in Person, by
telecopy or facsimile or by a nationally recognized courier service to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
10.02):
(a) if to Company:
▇▇▇▇ ▇'▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Chief Financial Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP
Two Embarcadero Place
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Parent:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Steptoe & ▇▇▇▇▇▇▇ LLP
57
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, ▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: 202 429 3902
SECTION 10.03 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Merger is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner to the fullest
extent permitted by applicable Law in order that the Merger may be consummated
as originally contemplated to the fullest extent possible.
SECTION 10.04 Assignment; Binding Effect; Benefit. 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 hereto. Subject to the
preceding sentence, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Notwithstanding anything contained in this Agreement to the contrary,
other than Section 7.04, nothing in this Agreement, expressed or implied, is
intended to confer on any Person other than the parties hereto or their
respective successors and permitted assigns any rights or remedies under or by
reason of this Agreement.
SECTION 10.05 Incorporation of Annexes. The Parent Disclosure
Schedule, the Company Disclosure Schedule and all Annexes attached hereto and
referred to herein are hereby incorporated herein and made a part of this
Agreement for all purposes as if fully set forth herein. Parent and Company
acknowledge that the Parent Disclosure Schedule and the Company Disclosure
Schedule (i) are qualified in their entirety by reference to specific provisions
of this Agreement and (ii) are not intended to constitute and shall not be
construed as indicating that such matter is required to be disclosed, nor shall
such disclosure be construed as an admission that such information is material
with respect to Parent or Company, as the case may be, except to the extent
required by this Agreement and by applicable law.
SECTION 10.06 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA
OTHER THAN CONFLICT OF LAWS PRINCIPLES THEREOF DIRECTING THE APPLICATION OF ANY
LAW OTHER THAN THAT OF THE STATE OF CALIFORNIA.
SECTION 10.07 Jurisdiction; Waiver of Jury Trial. Each party hereto
irrevocably consents to the exclusive jurisdiction of any court located within
the State of California, in connection with any matter based upon or arising out
of this Agreement or the matters contemplated herein, agrees that process may be
served upon them in any manner authorized by the laws of the State of California
for such persons and waives and covenants not
58
to assert or plead any objection which they might otherwise have to such
jurisdiction and such process. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION OR
AGREEMENT CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY HERETO IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
SECTION 10.08 Headings; Interpretation. The descriptive headings
contained in this Agreement are included for convenience of reference only and
shall not affect in any way the meaning or interpretation of this Agreement. The
parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties,
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any provisions of this Agreement.
SECTION 10.09 Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 10.10 Entire Agreement. This Agreement (including the Annexes,
the Parent Disclosure Schedule and the Company Disclosure Schedule) and the
Confidentiality Agreement constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto.
59
IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
ARIEL CORPORATION
By:___________________________
Name:
Title:
MAYAN NETWORKS CORPORATION
By:___________________________
Name:
Title:
60
Schedule I
----------
Officers of the Surviving Corporation
Name of Officer Title
--------------- -----
▇▇▇▇▇▇ ▇▇▇▇ Chief Executive Officer and Chairman
▇▇▇ ▇▇▇▇▇ President
▇▇▇▇ ▇▇▇▇▇▇▇▇ Chief Financial Officer and Secretary
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Senior Vice President - Marketing
61
Schedule II
-----------
Directors of the Surviving Corporation
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
62
Schedule III
------------
Key Employees
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Gene ▇▇▇▇▇▇▇
▇▇▇▇▇ During
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ Kristiansan
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
63