1
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
dated as of December 20, 1996
by and among
FORE SYSTEMS, INC.,
ALPHA ACQUISITION CORPORATION,
CADIA NETWORKS, INC.,
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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TABLE OF CONTENTS
PAGE
ARTICLE 1 -- THE MERGER......................................................................................... 1
1.1 The Merger................................................................................ 1
1.2 Closing................................................................................... 2
1.3 Effective Time............................................................................ 2
1.4 Articles of Incorporation of the Surviving Corporation.................................... 2
1.5 By-laws of the Surviving Corporation...................................................... 2
1.6 Directors and Officers of the Surviving Corporation....................................... 2
1.7 Merger Consideration...................................................................... 2
1.8 Effect on Capital Stock................................................................... 3
1.9 Exchange of Certificates.................................................................. 4
1.10 Grant of Stock Options.................................................................... 6
ARTICLE 2 -- REPRESENTATIONS AND WARRANTIES OF FORE AND MERGER SUB.............................................. 7
2.1 Organization and Standing: Certificate of Incorporation and By-laws....................... 7
2.2 Capitalization............................................................................ 7
2.3 Authorization............................................................................. 8
2.4 Compliance with Other Instruments......................................................... 9
2.5 Governmental Consent, etc................................................................. 9
2.6 SEC Documents; FORE Financial Statements.................................................. 9
2.7 No Material Adverse Change................................................................ 10
2.8 Disclosure................................................................................ 10
2.9 Litigation................................................................................ 10
2.10 Continuity of Business Enterprise......................................................... 11
ARTICLE 3 -- REPRESENTATIONS AND WARRANTIES OF THE MANAGEMENT SHAREHOLDERS AND THE COMPANY...................... 11
3.1 Stock Ownership; Residence................................................................ 11
3.2 Organization and Qualification; No Subsidiaries........................................... 14
3.3 Certificate of Incorporation and By-Laws.................................................. 14
3.4 Capitalization............................................................................ 15
3.5 Corporate Power and Authorization......................................................... 16
3.6 Compliance with Other Instruments......................................................... 16
3.7 Governmental Consent, etc................................................................. 16
3.8 Financial Statements...................................................................... 17
3.9 No Undisclosed Liabilities................................................................ 17
3.10 Absence of Certain Changes or Events...................................................... 17
3.11 Litigation................................................................................ 19
3.12 Absence of Changes in Benefit Plans....................................................... 19
3.13 ERISA..................................................................................... 20
3.14 Taxes..................................................................................... 20
(i)
3
3.15 No Excess Parachute Payments; Section 162(m) of the Code.................................. 21
3.16 Completeness of Disclosure................................................................ 21
3.17 Compliance with Applicable Laws........................................................... 21
3.18 Brokers; Payments......................................................................... 22
3.19 Contracts; Debt Instruments............................................................... 23
3.20 Title to Properties....................................................................... 24
3.21 Employee Matters.......................................................................... 24
3.22 Insurance................................................................................. 24
3.23 Intellectual Property Matters............................................................. 25
3.24 Payments.................................................................................. 26
3.25 Suppliers and Customers................................................................... 26
3.26 Continuity of Business Enterprise......................................................... 27
ARTICLE 4 -- COVENANTS OF THE COMPANY, THE MANAGEMENT SHAREHOLDERS AND FORE..................................... 27
4.1 Access to Information..................................................................... 27
4.2 Restriction on Transfer of FORE Common Stock.............................................. 27
4.3 Public Announcements...................................................................... 27
4.4 Exchange of Shares........................................................................ 28
ARTICLE 5 -- CONDITIONS......................................................................................... 28
5.1 Conditions to Each Party's Obligations.................................................... 28
5.2 Conditions to Obligations of the Company and the Management Shareholders.................. 29
5.3 Conditions to Obligations of FORE......................................................... 29
ARTICLE 6 -- AMENDMENT AND WAIVER............................................................................... 31
6.1 Amendment................................................................................. 31
6.2 Waiver.................................................................................... 31
ARTICLE 7 -- INDEMNIFICATION.................................................................................... 31
7.1 Indemnification Obligation................................................................ 31
7.2 Escrow.................................................................................... 32
7.3 Minimum Claims............................................................................ 32
7.4 Defense Costs............................................................................. 33
ARTICLE 8 -- GENERAL PROVISIONS................................................................................. 33
8.1 Survival of Representation, Warranties and Agreements..................................... 33
8.2 Notices................................................................................... 33
8.3 Interpretation............................................................................ 34
8.4 Entire Agreement; No Third Party Beneficiaries............................................ 34
8.5 Assignment................................................................................ 34
8.6 Governing Law............................................................................. 34
8.7 Counterparts.............................................................................. 34
8.8 Specific Performance...................................................................... 34
8.9 Definitions............................................................................... 35
(ii)
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EXHIBIT A - FORM OF CERTIFICATE OF MERGER
EXHIBIT B - FORM OF INCENTIVE STOCK OPTION AGREEMENT
EXHIBIT C-1 - FORM OF INVESTOR LETTER AGREEMENT
EXHIBIT C-2 - FORM OF AFFILIATE LETTER AGREEMENT
EXHIBIT D - FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT E - FORM OF LEGAL OPINION OF ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
EXHIBIT F - FORM OF EMPLOYMENT AGREEMENT
EXHIBIT G - FORM OF LEGAL OPINION OF ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
EXHIBIT H - FORM OF INDEMNITY ESCROW AGREEMENT
(iii)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of December 20,
1996, is by and among FORE SYSTEMS, INC., a Delaware corporation ("FORE"),
ALPHA ACQUISITION CORPORATION, a Delaware corporation and a wholly owned
subsidiary of FORE ("Merger Sub"), CADIA NETWORKS, INC., a Delaware corporation
(the "Company"), ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(together, the "Management Shareholders").
W I T N E S S E T H:
WHEREAS, the Board of Directors of FORE, the Board of Directors and the
sole stockholder of Merger Sub and the Board of Directors of the Company have
approved the acquisition of the Company by FORE by means of a merger of Merger
Sub with and into the Company upon the terms and subject to the conditions set
forth herein; and
WHEREAS, for federal income tax purposes, it is intended that the
acquisition of the Company by FORE pursuant hereto shall qualify as a
reorganization under the provisions of Section 368 of the Internal Revenue Code
of 1986, as amended; and
WHEREAS, for financial accounting purposes it is intended that the
acquisition of the Company by FORE pursuant hereto shall be accounted for as a
"pooling of interests;"
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, and intending to be
legally bound hereby, FORE, Merger Sub, the Company and the Management
Shareholders agree as follows:
ARTICLE 1 -- THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement and
the Certificate of Merger in substantially the form attached hereto as Exhibit
A (the "Certificate of Merger"), at the Effective Time (as defined in Section
1.3) Merger Sub shall be merged with and into the Company and the separate
corporate existence of Merger Sub shall thereupon cease (the "Merger") (Merger
Sub and the Company are sometimes referred to as the "Constituent
Corporations"). The Company shall be the surviving corporation of the Merger
(sometimes hereinafter referred to as the "Surviving Corporation") and shall
continue to be governed by the laws of the State of Delaware, and the separate
corporate existence of the Company with all its rights, privileges, immunities,
powers and franchises shall continue
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unaffected by the Merger, except as set forth in this Article 1. At the
Effective Time, the Merger shall have the effects specified in the Delaware
General Corporation Law (the "DGCL").
1.2 Closing. The closing of the Merger (the "Closing") shall take place
(i) at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, 32nd Floor, Oxford Centre,
Pittsburgh, Pennsylvania at 10:00 a.m., prevailing time, on December 20, 1996,
or (ii) at such other place and time and/or on such other date as the Company
and FORE may agree. The date upon which the Closing occurs is herein referred
to as the "Closing Date."
1.3 Effective Time. As soon as practicable following the Closing, the
Company as the Surviving Corporation shall file the Certificate of Merger with
the Secretary of State of the State of Delaware. The Merger shall become
effective at such time as such document is so filed which time is hereinafter
referred to as the "Effective Time."
1.4 Certificate of Incorporation of the Surviving Corporation. The
Certificate of Incorporation of the Merger Sub in effect at the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation.
1.5 By-laws of the Surviving Corporation. The By-laws of the Merger Sub in
effect at the Effective Time shall be the By-laws of the Surviving Corporation.
1.6 Directors and Officers of the Surviving Corporation. The directors and
officers of Merger Sub at the Effective Time shall, from and after the
Effective Time, be the directors and officers of the Surviving Corporation
until their successors shall have been duly elected or appointed and qualified
or until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and By-laws.
1.7 Merger Consideration. The sum of (i) the aggregate number of shares of
FORE Common Stock, par value $.01 per share ("FORE Common Stock") issuable
pursuant to Section 1.8(a) and Section 1.8(b), and (ii) the number of shares of
FORE Common Stock issuable upon exercise of the Substitute Stock Options to be
granted pursuant to Section 1.10, shall be the "Merger Consideration." The
Merger Consideration shall be calculated by dividing $150 million by the
average of the last reported sale price per share of FORE Common Stock in the
NASDAQ National Market, as reported by The Wall Street Journal for each of the
twenty (20) trading days ending on the day immediately preceding the Closing
Date (the "Average Price").
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1.8 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of any holder of any capital stock of
the Company:
(a) Each share of the Common Stock of the Company, $.00004 par value
per share ("Company Common Shares"), issued and outstanding immediately prior
to the Effective Time shall be canceled and shall represent the right to
receive that number of FORE Common Shares obtained by multiplying one (1) times
the "Common Exchange Ratio," as defined in Section 1.8(c). Each Company Common
Share that is held by the Company in its treasury immediately prior to the
Effective Time shall be cancelled and retired without payment of any
consideration therefor.
(b) Each share of the Series A Convertible Preferred Stock of the
Company, par value $.01 per share (the "Company Preferred Shares" and, together
with the Company Common Shares, the "Company Shares") issued and outstanding
immediately prior to the Effective Time shall be canceled and shall represent
the right to receive that number of FORE Common Shares obtained by multiplying
one (1) times the "Preferred Exchange Ratio," as defined in Section 1.8(d).
(c) The "Common Exchange Ratio" shall be calculated by dividing the
"Common Merger Consideration," determined as set forth below, by the number of
Company Common Shares.
(i) The "Common Merger Consideration" shall be calculated by
dividing the "Common Portion" by the Average Price.
(ii) The "Common Portion" shall equal $150 million minus the
"Preferred Portion."
(d) The "Preferred Exchange Ratio" shall be calculated by dividing the
"Preferred Merger Consideration," determined as set forth below, by the number
of Company Preferred Shares.
(i) The "Preferred Merger Consideration" shall be calculated by
dividing the "Preferred Portion" by the Average Price.
(ii) The "Preferred Portion" shall equal (i) $4.35 million plus
(ii) $145.65 million multiplied by the percentage of the outstanding shares
represented by the Company Preferred Shares on an as-converted basis.
(e) All Company Shares shall cease to be outstanding and shall be
canceled and retired and shall cease to exist, and each holder of a certificate
(a "Certificate") representing any such Company Share shall thereafter cease to
have any rights with respect to such shares, except the right to receive,
without
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interest, the Merger Consideration applicable thereto, and cash for fractional
interests in accordance with Section 1.9(d) upon the surrender of such
Certificate.
(f) At the Effective Time, each share of common stock, par value $.01
per share, of Merger Sub ("Merger Sub Stock") issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into one
share of Common Stock, $.01 par value per share (the "New Company Stock"), of
the Company as the Surviving Corporation. From and after the Effective Time,
each outstanding certificate theretofore representing shares of the Merger Sub
Stock shall be deemed for all purposes to evidence ownership of and to
represent the number of shares of New Company Stock into which such shares of
Merger Sub Stock shall have been converted. Promptly after the Effective Time,
the Surviving Corporation shall issue to FORE a stock certificate representing
shares of New Company Stock, in exchange for the certificate which formerly
represented shares of Merger Sub Stock, which shall be canceled and no payment
shall be made or consideration paid with respect thereto.
1.9 Exchange of Certificates.
(a) Exchange Procedures. At the Effective Time, upon surrender to FORE
of Certificates representing all of such holder's outstanding capital stock of
the Company, each holder of such a Certificate shall, subject to Section 7.2 of
this Agreement and any stock repurchase agreements between the Company and such
Holder (entered into by the Company pursuant to the Cadia Networks, Inc. 1996
Restricted Stock Purchase Plan (the "1996 Restricted Stock Purchase Plan"), the
Cadia Networks, Inc. 1996 Stock Option Plan (the "1996 Stock Option Plan") or
otherwise (the "Stock Repurchase Agreements")), be entitled to receive, in
exchange therefor, a certificate representing that number of whole shares of
FORE Common Stock which such holder has the right to receive in respect of the
Certificate surrendered pursuant to the provisions of this Article 1, and each
Certificate so surrendered shall forthwith be canceled. As soon as practicable
after the Effective Time, and subject to and in accordance with the provisions
of Section 7.2 hereof, FORE shall cause to be delivered to the Indemnity Escrow
Agent (as defined in Section 7.2 hereof) a certificate or certificates
representing the Escrow Shares (as defined in Section 7.2 hereof). Such shares
shall be held in escrow and shall be available to compensate FORE for certain
damages as provided in the Indemnity Escrow Agreement referred to in Section
7.2. To the extent not used for such purposes, the Escrow Shares shall be
released, all as provided in the Indemnity Escrow Agreement referred to in
Section 7.2 hereof. As soon as practicable after the Effective Time, FORE shall
cause to be distributed to the Secretary of FORE
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a certificate or certificates representing the number of whole shares of FORE
Common Stock that are subject to repurchase by FORE in accordance with the
terms of the Stock Repurchase Agreements. Such shares shall be held in escrow
by the Secretary of FORE and shall be released in accordance with terms of the
Stock Repurchase Agreements.
If any certificate for shares of FORE Common Stock is to be issued in
a name other than that in which the Certificate surrendered in exchange
therefor is registered, it shall be a condition of such exchange that the
Certificate(s) so surrendered shall be properly endorsed for transfer (or
accompanied by an appropriate instrument of transfer) and shall otherwise be in
proper form for transfer, and that the person requesting such exchange shall
pay any transfer or other taxes required by reason of the issuance of
certificates for such shares of FORE Common Stock in a name other than that of
the registered holder of the Certificate surrendered, or shall establish to the
satisfaction of FORE that any such taxes have been paid or are not applicable.
In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and containing such
indemnification provisions as FORE may deem appropriate including, without
limitation, the posting of a bond in such amount as FORE may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, FORE will issue in exchange for such lost, stolen or destroyed
Certificate, a certificate representing that number of whole shares of FORE
Common Stock which the holder of such Certificate would have the right to
receive in respect of such Certificate had such Certificate not been lost,
stolen or destroyed and had such Certificate been surrendered pursuant to the
provisions of this Article 1.
(b) Distributions with Respect to Unexchanged Company Shares.
Notwithstanding any other provisions of this Agreement, no dividends or other
distributions on shares of FORE Common Stock shall be paid with respect to any
Company Shares or other securities represented by a Certificate until such
Certificate is surrendered for exchange as provided herein. Subject to the
effect of applicable laws, following surrender of any such Certificate, there
shall be paid to the holder of certificates representing shares of FORE Common
Stock issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore payable with respect to such shares of
FORE Common Stock and not paid, less the amount of any withholding taxes which
may be required thereon, and (ii) at the appropriate payment date, the amount
of dividends or other distributions with a record date after the Effective Time
but
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prior to surrender thereof and a payment date subsequent to surrender thereof
payable with respect to such shares of FORE Common Stock, less the amount of
any withholding taxes which may be required thereon. No holder of unsurrendered
Certificates shall be entitled, until the surrender of such Certificate, to
vote the shares of FORE Common Stock into which such holder's Company Shares
shall have been converted.
(c) Transfers. At and after the Effective Time, there shall be no
transfers on the stock transfer books of the Company of the Company Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented for transfer to the Surviving
Corporation, they shall be canceled and exchanged for certificates representing
shares of FORE Common Stock in accordance with the procedures set forth in this
Article 1.
(d) Fractional Shares. Notwithstanding any other provision of this
Article 1, no fractional shares of FORE Common Stock will be issued and any
holder of Company Shares entitled hereunder to receive a fractional share of
FORE Common Stock but for this Section 1.9(d) will be entitled hereunder to
receive no such fractional share but a cash payment in lieu thereof in an
amount equal to such fraction multiplied by the Average Price.
1.10 Grant of Stock Options. At Closing, each outstanding option to
purchase Company Common Shares granted under the 1996 Stock Option Plan
("Company Stock Options") shall be canceled, and FORE shall grant to each
holder thereof (collectively, the "Optionees") of Company Stock Options, a new
option (collectively, "Substitute Stock Options") to purchase, in accordance
with, and subject to, the vesting schedule applicable to each such Company
Stock Option, that number of shares of FORE Common Stock that is equal to the
number of shares of Company Common Stock subject to such Optionee's Company
Stock Option, multiplied by the Common Exchange Ratio; provided, however, that
no Substitute Stock Options shall be granted with respect to any Company Stock
Options that will expire in accordance with their terms at or prior to the
Effective Time. To the extent that they replace "incentive stock options" which
have been granted under the 1996 Stock Option Plan, the Substitute Stock
Options will be intended to qualify as "incentive stock options" under the
Internal Revenue Code of 1986, as amended (the "Code") (although FORE makes no
representation or warranty whatsoever that such stock options will so qualify).
The Substitute Stock Options granted to each Optionee shall have an exercise
price per share equal to the exercise price per share of the Company Stock
Options held by the Optionee on the Closing Date and exchanged for the
Substitute Stock Options divided by the Common Exchange Ratio, all in
accordance with the terms of an Incentive Stock
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Option Agreement governing the Substitute Stock Options (the form of which is
attached hereto as Exhibit B) and the FORE 1996 Stock Option Plan.
ARTICLE 2 -- REPRESENTATIONS AND WARRANTIES OF FORE
AND MERGER SUB
Except as disclosed in a document referring specifically to the
representations and warranties in this Agreement which reasonably identifies an
exception to a representation and warranty in this Agreement and which is
delivered by FORE to the Company prior to execution of this Agreement (the
"FORE Disclosure Schedule"), FORE and Merger Sub represent and warrant to the
Company as set forth below. Any disclosure included in the FORE Disclosure
Schedule with respect to a particular representation and warranty shall be
deemed to be a disclosure with respect to all FORE representations and
warranties to which it applies.
2.1 Organization and Standing: Certificate of Incorporation and By-laws.
Each of FORE and Merger Sub is a corporation duly organized and existing under,
and by virtue of, the laws of the State of Delaware and is in good standing
under such laws. Each of FORE and Merger Sub has requisite corporate power to
own and operate its properties and assets, and to carry on its business as
presently conducted and as proposed to be conducted. Each of FORE and Merger
Sub is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the business conducted by it or the
location of the properties owned or leased by it make such qualification
necessary, except for jurisdictions in which the failure to so qualify would
not have a Material Adverse Effect on FORE and Merger Sub as a whole. As used
in this Agreement, the term "Material Adverse Effect" shall mean any effect on,
or change in, the business, financial condition, results of operations,
properties, assets, liabilities or prospects of the party affected thereby that
is, or that would reasonably be expected to be, materially adverse. FORE has
furnished the Company with copies of its Amended and Restated Certificate of
Incorporation, as amended, and Amended and Restated By-laws. Merger Sub has
furnished the Company with copies of its Certificate of Incorporation and
By-Laws. Said copies are true, correct and complete and contain all amendments
through the date hereof.
2.2 Capitalization. The authorized capital stock of FORE consists (a) of
300,000,000 shares of FORE Common Stock, and (b) 5,000,000 shares of Preferred
Stock, par value $.01 per share ("FORE Preferred Stock"). As of September 30,
1996, 90,588,259 shares of FORE Common Stock were outstanding, 14,414,607
shares were subject to outstanding options granted under FORE's stock
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option plans ("FORE Options"), 5,536,988 shares of FORE Common Stock were
reserved for issuance under FORE's stock option plans and 1,719,958 shares were
reserved for issuance under the FORE 1994 Employee Stock Purchase Plan ("FORE
Stock Purchase Plan"). As of September 30, 1996, FORE held 120,000 shares of
FORE Common Stock in its treasury, and no shares of FORE Preferred Stock were
outstanding. All the outstanding shares of FORE Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. The shares of FORE Common Stock issuable in connection with the Merger
have been duly authorized and reserved for issuance and, when issued in
accordance with the terms of this Agreement, will be validly issued, fully
paid, nonassessable and free of preemptive rights. The authorized capital stock
of Merger Sub consists of 1,000 shares of common stock, par value $.01 per
share, 100 of which are issued and outstanding. All Merger Sub Stock is validly
issued, fully paid and nonassessable, free of preemptive rights and owned by
FORE. Except for the shares referred to above that are issuable pursuant to
FORE Options, there are not any options, warrants, calls, conversion rights,
commitments or agreements of any character to which FORE or Merger Sub is a
party or by which either of them may be bound obligating FORE to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of the
capital stock of FORE or obligating FORE to grant, extend or enter into any
such option warrant, call, conversion right, commitment or agreement. The
shares of FORE Common Stock to be issued pursuant to this Agreement, when
issued in accordance with this Agreement, will, assuming the accuracy of the
representations of the Management Shareholders contained in Section 3.1 hereof,
and the accuracy of the representations of the holders of Company Shares other
than the Management Shareholders (the "Investors") contained in the Letter
Agreements to be executed by each of the Investors, and the form of which is
attached hereto as Exhibit C-1, be issued in compliance with all applicable
federal and state securities laws.
2.3 Authorization. Each of FORE and Merger Sub has the requisite corporate
power and authority to enter into this Agreement and to perform its obligations
hereunder. All corporate action on the part of each of FORE and Merger Sub, and
their respective directors and stockholders, necessary for the authorization,
execution, delivery and performance of this Agreement by FORE and Merger Sub,
and the performance of the respective obligations of FORE and Merger Sub
hereunder, has been taken or will be taken prior to the Closing Date. This
Agreement has been duly executed and delivered by FORE and Merger Sub and
constitutes a valid and binding obligation of each of FORE and Merger Sub,
enforceable against FORE and Merger Sub in accordance with its terms, except
that such enforceability may be limited by
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bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to creditors' rights generally, and that such enforceability is subject to
general principles of equity.
2.4 Compliance with Other Instruments. FORE is not in violation of its
Amended and Restated Certificate of Incorporation, as amended, or its Amended
and Restated By-laws. Merger Sub is not in violation of its Certificate of
Incorporation or By-laws. Subject to satisfaction of the conditions set forth
in Article 5, the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not conflict with or result in any
violation of any material statute, law, rule, regulation, judgment, order,
decree or ordinance applicable to FORE or Merger Sub or their respective
properties or assets, or conflict with or result in any breach or default (with
or without notice or lapse of time, or both) under or give rise to a right of
termination, cancellation or acceleration of any material obligation or to loss
of a material benefit, under (i) any provision of its Amended and Restated
Certificate of Incorporation, as amended, or its Amended and Restated By-laws,
in the case of FORE, or its Certificate of Incorporation or its By-laws, in the
case of Merger Sub, or (ii) any material agreement, contract, note, mortgage,
indenture, lease, instrument, permit, concession, franchise or license to which
FORE or Merger Sub is a party or by which FORE or Merger Sub or their
respective properties or assets may be bound or affected.
2.5 Governmental Consent, etc. No consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state or local government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), is required by or with respect to FORE or Merger Sub in
connection with the execution and delivery of this Agreement or the
consummation by FORE and Merger Sub of the transactions contemplated hereby
except for (a) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which FORE and Merger Sub are qualified to do
business, and (b) such consents, approvals, orders, authorizations,
registrations, or qualifications as may be required under federal and state
securities or blue sky laws in connection with the offer and sale of FORE
Common Stock pursuant to the Merger.
2.6 SEC Documents; FORE Financial Statements. FORE has furnished the
Company with a true and complete copy of each statement, quarterly and other
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") filed by FORE with the U.S. Securities and
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Exchange Commission (the "Commission") since March 31, 1996 (the "FORE SEC
Documents"), which are all the documents (other than preliminary material) that
FORE was required to file with the SEC under the Exchange Act since such date.
As of their respective filing dates, the FORE SEC Documents complied in all
material respects with the requirements of the Exchange Act and none of the
FORE SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading, except to the extent corrected by a subsequently filed FORE SEC
Document provided to the Company prior to the Effective Time. The financial
statements of FORE included in the FORE SEC Documents (the "FORE Financial
Statements") comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally accepted
accounting principles consistently applied (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) and fairly present the consolidated financial position of FORE
and its consolidated subsidiaries at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal, recurring audit adjustments).
There has been no change in FORE's accounting policies except as described in
the notes to the FORE Financial Statements.
2.7 No Material Adverse Change. Since September 30, 1996, FORE has
conducted its business in the ordinary course and there has not occurred: (a)
any material adverse change in the business, financial condition, results of
operations and assets of FORE; (b) any amendments or changes to its Amended and
Restated Certificate of Incorporation, as amended; (c) any damage, destruction
or loss, whether covered by insurance or not, materially and adversely
affecting the properties or businesses of FORE, taken as a whole; or (d) any
sale of a material amount of property of FORE, except in the ordinary course of
business.
2.8 Disclosure. No statement by FORE or Merger Sub contained in this
Agreement and the exhibits attached hereto (when read together) contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made.
2.9 Litigation. There is no action, suit, proceeding, claim, arbitration
or investigation pending against FORE or Merger Sub which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay any of the
transactions contemplated by this Agreement.
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2.10 Continuity of Business Enterprise. It is the present intention of
FORE to continue at least one significant historic business line of the
Company, or to use at least a significant portion of the Company's historic
business assets in a business, in each case within the meaning of Section
1.368-1(d) of the Regulations under the Internal Revenue Code of 1986, as
amended (the "Regulations").
ARTICLE 3 -- REPRESENTATIONS AND WARRANTIES OF THE MANAGEMENT
SHAREHOLDERS AND THE COMPANY
Except as disclosed in a document referring specifically to the
representations and warranties in this Agreement which reasonably identifies an
exception to a representation and warranty in this Agreement and which is
delivered by the Management Shareholders and the Company to FORE prior to the
execution of this Agreement (the "Company Disclosure Schedule"), the Management
Shareholders, jointly and severally, and the Company represent and warrant to
FORE and Merger Sub as set forth below. Any disclosure included in the Company
Disclosure Schedule with respect to a particular representation and warranty
shall be deemed to be a disclosure with respect to all of the representations
and warranties of the Management Shareholders and/or the Company to which it
applies. The terms "knowledge," "best knowledge" or similar terms, when applied
to the Company, mean the actual knowledge of each Management Shareholder or
director of the Company and the knowledge that could reasonably be expected to
be obtained by each such person in the course of conducting due investigation
concerning the subject matter.
3.1 Stock Ownership; Residence
(a) Each Management Shareholder acknowledges, represents and warrants
to FORE as follows:
(i) The Management Shareholder understands that the shares of FORE
Common Stock to be issued to the Management Shareholder in the Merger will not
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities law by reason of specific exemptions
under the provisions thereof which depend in part upon the other
representations and warranties made by the Management Shareholder in this
Agreement. The Management Shareholder understands that FORE is relying upon the
Management Shareholder's representations and warranties contained in this
Section 3.1 for the purpose of determining whether this transaction meets the
requirements for such exemptions. The Management Shareholder's jurisdiction of
residence is set forth in the Company Disclosure Schedule.
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(ii) The Management Shareholder has such knowledge, skill and
experience in business, financial and investment matters so that the Management
Shareholder is capable of evaluating the merits and risks of an investment in
FORE Common Stock pursuant to the transactions contemplated by this Agreement
or to the extent that the Management Shareholder has deemed it appropriate to
do so, the Management Shareholder has relied upon appropriate professional
advice regarding the tax, legal and financial merits and consequences of an
investment in FORE Common Stock pursuant to the transactions contemplated by
this Agreement.
(iii) The Management Shareholder has made, either alone or together
with the Management Shareholder's advisors, such independent investigation of
FORE, its management and related matters as the Management Shareholder deems to
be, or such advisors have advised to be, necessary or advisable in connection
with an investment in FORE Common Stock through the transactions contemplated
by this Agreement; and the Management Shareholder and advisors have received
all information and data that the Management Shareholder and such advisors
believe to be necessary in order to reach an informed decision as to the
advisability of an investment in FORE Common Stock pursuant to the transactions
contemplated by this Agreement.
(iv) The Management Shareholder has reviewed the Management
Shareholder's financial condition and commitments, alone and together with the
Management Shareholder's advisors, and, based on such review, the Management
Shareholder is satisfied that (A) the Management Shareholder has adequate means
of providing for the Management Shareholder's financial needs and possible
contingencies and has assets or sources of income which, taken together, are
more than sufficient so that he could bear the risk of loss of the Management
Shareholder's entire investment in FORE Common Stock, (B) the Management
Shareholder has no present or contemplated future need to dispose of all or any
portion of FORE Common Stock to satisfy any existing or contemplated
undertaking, need or indebtedness, and (C) the Management Shareholder is
capable of bearing the economic risk of an investment in FORE Common Stock for
the indefinite future. The Management Shareholder shall furnish any additional
information requested by FORE to assure the compliance of this transaction with
applicable federal and state securities laws.
(v) The Management Shareholder understands that the shares of FORE
Common Stock to be received by the Management Shareholder in the transactions
contemplated hereby will be "restricted securities" under applicable federal
securities laws and that the Securities Act and the rules of the Commission
promulgated thereunder provide in substance that the Management Shareholder may
dispose of such shares only pursuant to an
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effective registration statement under the Securities Act or an exemption from
registration if available. The Management Shareholder further understands that,
except as provided in the Registration Rights Agreement, the form of which is
attached hereto as Exhibit D (the "Registration Rights Agreement"), FORE has no
obligation or intention to register the sale of any of the shares of FORE
Common Stock to be received by the Management Shareholder in the transactions
contemplated hereby, or take any other action so as to permit sales pursuant
to, the Securities Act. Accordingly, except as provided in the Registration
Rights Agreement, the Management Shareholder understands that the Management
Shareholder may dispose of such shares only in transactions which are of a type
exempt from registration under the Securities Act, including (without
limitation) a "private placement," in which event the transferee will acquire
such shares as "restricted securities" and subject to the same limitations as
in the hands of the Management Shareholder. The Management Shareholder further
understands that applicable state securities laws may impose additional
constraints upon the sale of securities. As a consequence, the Management
Shareholder understands that the Management Shareholder may have to bear the
economic risks of an investment in FORE Common Stock to be received by the
Management Shareholder pursuant to the transactions contemplated hereby for an
indefinite period of time.
(vi) The Management Shareholder is acquiring shares of FORE Common
Stock pursuant to the transactions contemplated hereby for investment only and
not with a view to or intention of or in connection with any resale or
distribution of such shares or any interest therein.
(vii) The certificate(s) evidencing the shares of FORE Common Stock
to be issued pursuant to the transactions contemplated hereby shall bear the
following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or any
state securities laws and may not be sold or transferred in the
absence of such registration or an exemption therefrom under the
Securities Act of 1933, as amended, and applicable state securities
laws."
(viii) The certificate(s) evidencing the shares of FORE Common
Stock to be issued pursuant to the transactions contemplated hereby and subject
to repurchase rights under the Stock Repurchase Agreements shall bear the
following legend:
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"The shares represented by this certificate are subject to certain
restrictions upon transfer and rights of repurchase as set forth in
a certain stock repurchase agreement, a copy of which is on file
with the Secretary of FORE Systems, Inc."
(ix) The Management Shareholder is, and will be immediately prior
to the Effective Time, the lawful owner, of record and beneficially, of the
entire right, title and interest in and to the number of Company Common Shares
and Company Preferred Shares set forth in the Company Disclosure Schedule, free
and clear of all liens, pledges, claims, charges, encumbrances and security
interests of any kind or nature whatsoever ("Liens"), except such restrictions
as may arise under applicable federal and state securities laws and
regulations.
(x) The Management Shareholder has no present plan or intention or
arrangement to sell, transfer or otherwise dispose of the shares of FORE Common
Stock to be received pursuant to this Agreement.
(xi) The Management Shareholder has not, since November 20, 1996,
sold, transferred or otherwise disposed of any shares of the capital stock of
either the Company or FORE held by the Management Shareholder.
3.2 Organization and Qualification; No Subsidiaries. The Company is a
corporation duly organized and existing under, and by virtue of, the laws of
the State of Delaware and is in good standing under such laws. The Company has
requisite corporate power to own and operate its properties and assets, and to
carry on its business as presently conducted and as currently proposed to be
conducted by the Company. The Company is duly qualified to do business and is
in good standing in each jurisdiction in which the character of the business
conducted by it or the location of the properties owned or leased by it make
such qualification necessary, except for jurisdictions in which the failure to
so qualify would not have a Material Adverse Effect on the Company. The Company
does not own, directly or indirectly, any capital stock or other ownership
interest in any other corporation, partnership, joint venture or other business
association or entity.
3.3 Certificate of Incorporation and By-Laws. The Certificate of
Incorporation and By-Laws of the Company in the forms attached to the Company
Disclosure Schedule are the Certificate of Incorporation and the By-Laws of the
Company as in effect on the date of this Agreement.
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3.4 Capitalization. The authorized capital stock of the Company consists
only of 10,000,000 shares of Common Stock and 10,000,000 shares of Preferred
Stock of which 4,350,000 shares are designated as Series A Convertible
Preferred Stock. As of the date hereof, 2,507,800 Company Common Shares are
issued and outstanding, 4,350,000 Company Preferred Shares are issued and
outstanding and 76,000 Company Common Shares are held in the Company's
treasury. The Company has reserved 571,200 Company Common Shares for issuance
to employees, consultants or directors under the 1996 Stock Option Plan. Of
such shares reserved for issuance under the 1996 Stock Option Plan, 132,500 are
subject to outstanding options. The Company has reserved 968,800 Company
Common Shares for issuance to directors, officers, consultants and key
personnel under the 1996 Restricted Stock Purchase Plan. Of such shares
reserved for issuance under the 1996 Restricted Stock Purchase Plan, all
968,800 shares have been issued and are outstanding.
All outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and nonassessable and are not subject to
preemptive rights and were offered and issued in compliance with all applicable
securities laws. There are no bonds, debentures, notes or other indebtedness of
the Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders of
the Company may vote. As of the date of this Agreement, there are no
outstanding securities, options (other than the Company Stock Options, a
complete list of which, including grant dates, exercise prices and vesting
schedules, is attached to the Company Disclosure Schedule), warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company or any Management Shareholder or, to the best knowledge of
the Company and the Management Shareholders, any other holder of the Company's
equity, is a party or by which it or any of them is bound obligating the
Company or any Management Shareholder or any other holder of the Company's
equity to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other securities of the Company or
obligating the Company or any Management Shareholder or any other holder of the
Company's equity to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or
undertaking. As of the date of this Agreement, there are no outstanding
contractual obligations of the Company to repurchase, redeem or otherwise
acquire any shares of capital stock of the Company. Except as set forth in the
Company Disclosure Schedule, none of the Company Stock Options is or will be
subject to any acceleration of vesting or other change as a result of the
Merger or any of the transactions contemplated hereby.
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3.5 Corporate Power and Authorization. The Company has the requisite
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder. Each Management Shareholder has the requisite power and
capacity to enter into this Agreement and to perform the Management
Shareholder's obligations hereunder. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by the Board of
Directors and, prior to Closing, will have been duly authorized by all the
stockholders of the Company and no other corporate proceedings on the part of
the Company or its stockholders are necessary to authorize this Agreement and
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and each Management Shareholder and constitutes a
valid and binding obligation of the Company and each Management Shareholder,
enforceable against the Company and each Management Shareholder in accordance
with its terms, except that such enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to
creditors' rights generally, and that such enforceability is subject to general
principles of equity.
3.6 Compliance with Other Instruments. The Company is not in violation of
any term of its Certificate of Incorporation or By-laws, or, except as set
forth in the Company Disclosure Schedule, in any material respect of any
mortgage, indenture, contract, agreement, instrument, judgment or decree, or
any order, statute, rule or regulation applicable to the Company the violation
of which could reasonably be expected to have a Material Adverse Effect on the
Company. Subject to satisfaction of the conditions set forth in Article 5, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not conflict with or result in any
violation of any material statute, law, rule, regulation, judgment, order,
decree or ordinance applicable to the Company or its properties or assets, or
conflict with or result in any breach or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any material obligation or to loss of a
material benefit, under (a) any provision of its Certificate of Incorporation
or By-laws or (b) any agreement, contract, note, mortgage, indenture, lease,
instrument, permit, concession, franchise or license to which the Company is a
party or by which the Company or the properties or assets of the Company may be
bound or affected.
3.7 Governmental Consent, etc. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to the Company in connection with the
execution and delivery of this Agreement or the consummation by the Company of
the transactions
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contemplated hereby, except for (a) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and appropriate documents
with the relevant authorities of other states in which the Company is qualified
to do business, (b) such consents, approvals, orders, authorizations,
registrations or qualifications as may be required under federal or state
securities or blue sky laws in connection with the distribution of FORE Common
Stock pursuant to the Merger and (c) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required,
which if not obtained or made would not have a Material Adverse Effect on the
Company.
3.8 Financial Statements. The Company has delivered to FORE true, complete
and correct copies of unaudited financial statements produced in accordance
with generally accepted accounting principles except for any required
footnotes, consistently applied throughout the periods involved, for the period
from its inception through November 30, 1996 (together, the "Financial
Statements"). All financial and managerial accounting information supplied by
the Company to FORE and its independent accountants is true, accurate and
complete, and reflects actual transactions, operations and commitments.
3.9 No Undisclosed Liabilities. The Company has no liabilities,
obligations or commitments of any nature (whether absolute, accrued, contingent
or otherwise), matured or unmatured (herein, "Liabilities"), except (a)
Liabilities which are adequately reflected or reserved against in the Financial
Statements, (b) Liabilities which have been disclosed in the Company Disclosure
Schedule, and (c) Liabilities which have been incurred in the ordinary course
of business and consistent with past practice since November 30, 1996 and which
are not, individually or in the aggregate, material in amount.
3.10 Absence of Certain Changes or Events. Except as set forth in the
Company Disclosure Schedule, since September 30, 1996, the Company has
conducted its business only in the ordinary course, and there has not been:
(a) any event, act, occurrence or failure to act where an action was
required which has had a Material Adverse Effect on the Company or any event,
fact or condition of which the Company or the Management Shareholders are aware
that would reasonably be expected to have a Material Adverse Effect on the
Company and that has not been disclosed in the Company Disclosure Schedule;
(b) any amendment of or change to the Certificate of Incorporation or
By-laws of the Company;
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(c) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of the
Company's capital stock;
(d) any split, combination or reclassification of any of its capital
stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for, shares of its
capital stock;
(e) (i) any increase in or modification of the compensation or
benefits payable or to become payable by the Company to any of its directors or
employees; (ii) any grant by the Company to any employee of any increase in
severance or termination pay, (iii) any entry by the Company into any
employment, severance or termination agreement with any employee, or (iv) any
grant, whether or not to an employee of the Company, of any option, warrant or
right to purchase or otherwise acquire any shares of capital stock of the
Company not reflected in the list described in Section 3.4 hereof;
(f) any increase in or modification of any bonus, pension, insurance
or other employee benefit plan, payment or arrangement made to, for or with any
of its employees;
(g) any sale of the property or assets of the Company individually in
excess of $10,000 or in the aggregate in excess of $25,000;
(h) any alteration in any term of any outstanding security of the
Company;
(i) any (i) incurrence, assumption or guarantee by the Company of any
debt for borrowed money; (ii) issuance or sale of any securities convertible
into or exchangeable for debt securities of the Company; or (iii) issuance or
sale of options or other rights to acquire from the Company, directly or
indirectly, debt securities of the Company or any securities convertible into
or exchangeable for any such debt securities;
(j) any creation or assumption by the Company of any mortgage, pledge,
security interest or lien or other encumbrance on any asset (other than liens
arising under existing lease financing arrangements, liens arising in the
ordinary course of the Company's business which in the aggregate are not
material and liens for taxes not yet due and payable);
(k) any making of any loan, advance or capital contribution to, or
investment in, any person other than travel loans or advances in the ordinary
course of business consistent with past practice;
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(l) any entry into, amendment of, relinquishment, termination or
nonrenewal by the Company of any contract, lease transaction, commitment or
other right or obligation other than in the ordinary course of business
consistent with past practice;
(m) any transfer, grant or loss by the Company (or to the best of the
Company's knowledge, diminishment in material value by any means) of a right
under the Company Intellectual Property Rights (as defined in Section 3.23
hereof) other than those transferred or granted in the ordinary course of
business consistent with past practice under existing agreements;
(n) any labor dispute, other than individual grievances, or any
activity or proceeding by a labor union or representative thereof to organize
any employees of the Company;
(o) any violation of or conflict with any applicable laws, statutes,
orders, rules and regulations promulgated or judgment entered by any
Governmental Entity which, individually or in the aggregate, has had (or,
insofar as the Company or the Management Shareholders are aware, reasonably is
expected to have) a Material Adverse Effect on the Company;
(p) any agreement or arrangement made by the Company to take any
action which, if taken prior to the date hereof, would have made any
representation or warranty set forth in this Article 3 untrue or incorrect as
of the date when made;
(q) any damage, destruction or loss, whether or not covered by
insurance, that has had or could have a Material Adverse Effect on the Company;
or
(r) any change in accounting practices by the Company.
3.11 Litigation. As of the date of this Agreement, there is no suit,
action or proceeding pending or, to the knowledge of the Company or the
Management Shareholders, threatened against the Company or the Management
Shareholders.
3.12 Absence of Changes in Benefit Plans. Except as set forth in the
Disclosure Schedule, since September 30, 1996, there has not been any adoption
or amendment by the Company of any collective bargaining agreement or any
bonus, pension, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization, medical or
other plan, arrangement or understanding providing benefits to any current or
former employee, officer or director of the Company; true, complete and correct
copies of all of such plans, arrangements and understandings have heretofore
been furnished or made available
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to FORE. There exist no employment, consulting, severance, termination or
indemnification agreements, arrangements or understandings between the Company
and any current or former employee, officer or director of the Company.
3.13 ERISA. Except as set forth in the Disclosure Schedule, the Company
does not currently maintain or contribute to, nor has it ever maintained or
contributed to, any "employee benefit plan," as such term is defined in Section
3 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
with respect to which the Company is required to file Internal Revenue Service
Form 5500, and the Company does not currently contribute to, nor has it ever
contributed to, any "multiemployer plan," as that term is defined in Section 3
of ERISA.
3.14 Taxes.
(a) The Company has filed all material tax returns and reports
required to be filed by it ("Returns"). All Returns are complete and correct in
all material respects. The Company has paid all taxes required to be paid by
it, and the Financial Statements reflect all taxes payable by the Company for
all taxable periods and portions thereof through the date of such Financial
Statements.
(b) No deficiencies for any taxes have been proposed, asserted or
assessed against the Company that are not properly reflected in accordance with
generally accepted accounting principles in the Financial Statements and no
requests for waivers of the time to assess any such taxes are pending. The
Company has not agreed with any tax authority to extend the time to assess any
such taxes. The Company has not entered into any closing agreement with respect
to any taxable year.
(c) The Company Disclosure Schedule sets forth any taxable years of
the Company as to which the respective statutes of limitations with respect to
taxes have not yet expired, for which examinations (i) have been completed,
(ii) are presently being conducted and (iii) have not been initiated, and those
years for which required Returns have not yet been filed. All deficiencies
asserted or assessments made as a result of any examinations have been fully
paid, or are fully reflected as a liability in the Financial Statements of the
Company or disclosed in the Company Disclosure Schedule, or are being contested
and an adequate reserve therefor has been established and is fully reflected in
the Financial Statements or disclosed in the Company Disclosure Schedule.
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(d) Except as set forth in the Company Disclosure Schedule, the
Company does not now have, and has never had, a permanent establishment in any
non-U.S. country, as defined in any applicable tax treaty or convention
between the United States and such non-U.S. country, or any presence in a
non-U.S. country with which the United States does not have a tax treaty or
convention that could subject the Company to the tax laws of such non-U.S.
country.
(e) As used in this Agreement, "taxes" shall include all federal,
state, local and foreign income, property, sales, excise and other taxes,
tariffs or duties of any nature whatsoever.
3.15 No Excess Parachute Payments; Section 162(m) of the Code.
(a) Any amount that could be received (whether in cash or property or
the vesting of property) as a result of any of the transactions contemplated by
this Agreement by any employee, officer or director of the Company or any of
its affiliates who is a "disqualified individual" (as defined in Section
280G(c) of the Code) under any employment, severance or termination agreement,
other compensation arrangement or Benefit Plan currently in effect would not be
characterized as an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Code).
(b) The disallowance of a deduction under Section 162(m) of the Code
for employee remuneration will not apply to any amount paid or payable by the
Company under any contract, plan, program, arrangement or understanding.
3.16 Completeness of Disclosure. No representation or warranty by the
Company or any Management Shareholder in this Agreement or any certificate,
schedule, statement, document or instrument furnished or to be furnished to
FORE pursuant hereto, or in connection with the negotiation, execution or
performance of this Agreement, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact required to be
stated herein or therein or necessary to make any statement herein or therein
not misleading.
3.17 Compliance with Applicable Laws.
(a) The Company has in effect all material federal, state, local and
foreign governmental approvals, authorizations, certificates, filings,
franchises, licenses, notices, permits and rights ("Permits") necessary for it
to own, lease or operate its properties and assets and to carry on its business
as now conducted, and there has occurred no material default under any
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such Permit. The Company is in material compliance with all applicable
statutes, laws, ordinances, rules, orders and regulations of any Governmental
Entity.
(b) The Company is, and has been, in material compliance with all
applicable "Environmental Laws". The term "Environmental Laws" means any
federal, state or local statute, code, ordinance, rule, regulation, policy,
guideline, permit, consent, approval, license, judgment, order, writ, decree,
directive, injunction or other authorization, including the requirement to
register underground storage tanks, relating to: (i) "Releases" (as defined
below) of "Hazardous Material" (as defined below) into the environment,
including into ambient air, soil, sediments, land surface or subsurface,
buildings or facilities, surface water, groundwater, publicly-owned treatment
works, septic systems or land; or (ii) the generation, treatment, storage,
disposal, use, handling, manufacturing, transportation or shipment of Hazardous
Material.
(c) During the period of ownership or operation by the Company of any
of its current or previously owned or leased properties, there have been no
Releases of Hazardous Material in, on, under or affecting such properties or any
surrounding site, and the Company has not disposed of any Hazardous Material in
a manner that could reasonably be anticipated to lead to a Release. The term
"Release" has the meaning set forth in 42 U.S.C. Section 9601(22). The term
"Hazardous Material" means (i) hazardous materials, pollutants, contaminants,
constituents, medical or infectious wastes, hazardous wastes and hazardous
substances as those terms are defined in the following statutes and their
implementing regulations: the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq., the Comprehensive Environmental Response, Compensation and
Liability Act, as amended by the Superfund Amendments and Reauthorization Act,
42 U.S.C. Section 9601 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et
seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq. and the
Clean Air Act, 42 U.S.C. Section 7401 et seq., (ii) petroleum, including crude
oil and any fractions thereof, (iii) natural gas, synthetic gas and any mixtures
thereof, (iv) asbestos and/or asbestos-containing material, (v) radon and (vi)
PCBs, or materials or fluids containing PCBs.
3.18 Brokers; Payments. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. No valid claim (other than any claim of FORE which may arise
pursuant to Section 7.1 hereof) exists against the Company or the Surviving
Corporation or, based on any action by the
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Company, against FORE for payment of any "topping," "break-up" or "bust-up" fee
or any similar compensation or payment arrangement as a result of the
transactions contemplated hereby.
3.19 Contracts; Debt Instruments.
(a) Except as set forth on the Company Disclosure Schedule, there is
no contract or agreement that is material to the business, condition (financial
or otherwise), properties, assets, results of operations or prospects of the
Company; true, complete and correct copies of all such material contracts and
agreements have heretofore been furnished or made available to FORE. All such
material contracts and agreements are in full force and effect and enforceable
in accordance with their respective terms, and, to the best knowledge of the
Company and the Management Shareholders, the parties thereto other than the
Company have complied, and are complying, with all of their material
obligations and are not in material violation or default under (nor does there
exist any condition which upon the passage of time or the giving of notice
would cause such a material violation of or default under) any of such material
contracts or agreements. The Company is not in violation of or in default under
(nor does there exist any condition which upon the passage of time or the
giving of notice would cause such a violation of or default under) any loan or
credit agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise, license or any other contract, agreement, arrangement or
understanding to which it is a party or by which it or any of its properties or
assets is bound.
(b) Set forth on the Company Disclosure Schedule is (i) a list of all
loan or credit agreements, notes, bonds, mortgages, indentures and other
agreements and instruments pursuant to which any indebtedness of the Company is
outstanding or may be incurred and (ii) the respective principal amounts
currently outstanding thereunder. For purposes of this Agreement,
"indebtedness" shall mean, with respect to any person, without duplication, (A)
all obligations of such person for borrowed money, or with respect to deposits
or advances of any kind to such person, (B) all obligations of such person
evidenced by bonds, debentures, notes or similar instruments, (C) all
obligations of such person upon which interest charges are customarily paid,
(D) all obligations of such person under conditional sale or other title
retention agreements relating to property purchased by such person, (E) all
obligations of such person issued or assumed as the deferred purchase price of
property or services (excluding obligations of such person to creditors for raw
materials, inventory, services and supplies incurred in the ordinary course of
such person's business), (F) all capitalized lease obligations of such person,
(G) all obligations of others secured by any lien on property or assets
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owned or acquired by such person, whether or not the obligations secured
thereby have been assumed, (H) all obligations of such person under interest
rate or currency hedging transactions (valued at the termination value
thereof), (I) all letters of credit issued for the account of such person and
(J) all guarantees and arrangements having the economic effect of a guarantee
of such person of any indebtedness of any other person.
3.20 Title to Properties.
(a) The Company has good and marketable title to, or valid leasehold
interests in, all its properties and assets, free and clear of all Liens other
than (i) mechanics and other statutory Liens and the lien of current taxes not
yet due and payable, and (ii) possible minor Liens which do not in any case
materially detract from the value of the property subject thereto or materially
impair the operations of the Company, and which have not arisen otherwise than
in the ordinary course of business.
(b) The Company has complied in all material respects with the terms
of all leases to which it is a party and under which it is in occupancy, all
such leases are in full force and effect and, to the best knowledge of the
Company and the Management Shareholders, the parties thereto other than the
Company have complied, and are complying, with all of their material
obligations and are not in material default under (nor does there exist any
condition which, upon the passage of time or the giving of notice, would cause
such a material violation of or default under) any of such leases. The Company
enjoys peaceful and undisturbed possession under all such leases.
3.21 Employee Matters. There are no collective bargaining or other labor
union agreements to which the Company is a party or by which it is bound. The
Company has not encountered any labor union organizing activity, or had any
actual or threatened employee strikes, work stoppages, slowdowns or lockouts.
To the best knowledge of the Company and the Management Shareholders, no
employee of the Company has any intention to terminate his or her employment
with the Company either before or after the Effective Time.
3.22 Insurance. As of the date hereof, the Company is covered under
insurance policies and programs which provide coverage to the Company by
insurers of recognized financial responsibility and solvency against such
losses and risks and in such amounts as are customary in the type and size of
business in which it is engaged; true, complete and correct copies of all such
policies and programs have heretofore been furnished to FORE. All material
policies of insurance and fidelity or surety bonds insuring the Company or its
business, assets, employees,
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29
officers and directors are in full force and effect. Except as otherwise
disclosed pursuant to Section 3.11, as of the date hereof, there are no material
claims by the Company under any such policy or instrument as to which any
insurance company is denying liability or defending under a reservation of
rights clause. All necessary notifications of claims have been made to insurance
carriers.
3.23 Intellectual Property Matters. The Company owns or has the right to
use, free and clear of all Liens, charges, claims and restrictions, all
know-how, processes, patents, trade secrets, trademarks, service marks, trade
names, copyrights, licenses, information, proprietary rights and other rights
materially necessary to its business as now conducted or currently proposed to
be conducted by the Company (the "Company Intellectual Property Rights"). To
the best of the Company's and each Management Shareholder's knowledge, the
Company is not infringing upon or otherwise acting adversely to any actual or
claimed know-how, process, patent, trade secret, trademark, service ▇▇▇▇, trade
name, copyright, information, proprietary right or other right of any person.
Except as set forth in the Company Disclosure Schedule, the Company has never
applied for, received or owned any rights under any patents. There are no
outstanding options, licenses or agreements of any kind relating to any Company
Intellectual Property Rights held by any third party (other than license
agreements on the Company's standard form entered into in the ordinary course
of business), nor is the Company bound by or a party to any options, licenses
or agreements of any kind with respect to the patents, trade secrets, know-how,
processes, trademarks, service marks, trade names, copyrights, licenses,
information, proprietary rights or other rights of any other person or entity.
The Company has not received any communications alleging that the Company has
violated or, by conducting its business as now conducted or currently proposed
to be conducted by the Company, would violate any patent, trade secret,
trademark, service ▇▇▇▇, trade name, copyright, license, information,
proprietary right or other right of any other person or entity, and, there is
no basis for any such allegation. There is no actual or threatened infringement
or adverse use of the Company's rights to or in any know-how, processes, trade
secrets, trademarks, service marks, trade names, copyrights, licenses,
information, proprietary rights or other material rights of the Company. To the
best of the Company's and each Management Shareholder's knowledge, no employee
of the Company is obligated under any fiduciary duty or any contract (including
licenses, covenants or commitments of any nature) or other agreement, or
subject to any judgment, decree or order of any court or administrative agency,
that would interfere with the use of such employee's best efforts to promote
the interests of the Company or that would conflict with the Company's business
as now conducted or currently proposed to be conducted by the
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Company. Neither the execution nor delivery of this Agreement, nor the carrying
on of the Company's business by the employees of the Company, nor the conduct
of the Company's business as now conducted or currently proposed to be
conducted by the Company, will conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under or a
violation of, any fiduciary duty or any contract, covenant or instrument under
which any of such employees is now obligated. It is not, nor will it be
necessary, to utilize any inventions of any of the Company's employees (or
people it currently intends to hire) made prior to their employment by the
Company other than inventions which have previously been assigned to the
Company.
3.24 Payments. The Company has not paid or delivered any fee, commission
or other sum of money or item or property to any finder, agent, government
official or other party, in the United States or any other country, which is
related to the business or operations of the Company, which the Company knows
or has reason to believe to have been illegal under any federal, state or local
laws of the United States or any other country having jurisdiction; and the
Company has not participated in any illegal boycotts or other similar practices
affecting any of its actual or potential customers. The Company is in
compliance with the Foreign Corrupt Practices Act.
3.25 Suppliers and Customers. There are no material agreements which
commit the Company to carry on business at fixed prices or prices determined by
an established formula. Except as set forth in the Company Disclosure Schedule,
no supplier or customer who accounted for more than five percent of the
Company's sales or purchases since inception and no other supplier or customer
material to the business of the Company has terminated its relationship with
the Company, has decreased or delayed materially, or, to the Company's
knowledge, threatened to decrease or delay materially its services or supplies
to the Company or decrease its usage of the Company's products or services. The
Company and the Management Shareholders are not aware of any facts or events
which may reasonably be expected to form the basis for such a decrease or
delay. Neither the Company nor any Management Shareholder believes that any
customer or supplier material to the business of the Company will terminate or
significantly change its relationship in a manner adverse to the Company
following the consummation of the transactions contemplated under this
Agreement. The Company has delivered to FORE a complete and accurate list with
respect to the business or activity of the Company, of:
(a) each supplier from whom purchases exceeded $50,000 for the time
period from the Company's inception through November 30, 1996;
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(b) each customer to whom sales exceeded $50,000 for the time period
from the Company's inception through November 30, 1996 and the aggregate sales
with respect to each such customer; and
(c) each supplier who constitutes a single source of supply to the
Company and from whom purchases exceeded $25,000 for the time period from the
Company's inception through November 30, 1996.
3.26 Continuity of Business Enterprise. The Company operates at least one
significant historic line of business within the meaning of Section 1.368-1(d)
of the Regulations.
ARTICLE 4 -- COVENANTS OF THE COMPANY, THE MANAGEMENT
SHAREHOLDERS AND FORE
4.1 Access to Information. The Company covenants and agrees that it shall,
and shall cause its officers, directors, employees and agents to, afford the
officers, employees, agents and representatives of FORE complete access at all
reasonable times, from the date hereof to the Closing Date, to its officers,
employees, agents, properties, books and records, and shall furnish FORE all
financial, operating and other data and information as FORE, through its
officers, employees, agents or representatives, may reasonably request. Subject
to applicable law, FORE shall cause all such information of a non-public nature
to be retained confidentially.
4.2 Restriction on Transfer of FORE Common Stock. In addition to and not
in limitation of any other restriction imposed by applicable law or this
Agreement, each Management Shareholder covenants and agrees that such
Management Shareholder shall not, prior to the Effective Time, sell, transfer
or otherwise dispose of any shares of the capital stock of either the Company
or FORE held by the Management Shareholder, and that the Management Shareholder
will not sell, transfer or otherwise dispose of any shares of FORE Common Stock
received by the Management Shareholder pursuant to the transactions
contemplated hereby or any other shares of the capital stock of FORE until
after such time as results covering at least 30 days of post-Closing combined
operations of the Company and FORE have been published by FORE within the
meaning of Section 201.01 of the Securities and Exchange Commission's
Codification of Financial Reporting Policies (the "Pooling Restriction
Period").
4.3 Public Announcements. Upon execution of this Agreement or at Closing,
FORE may, at its sole discretion, make an appropriate public announcement of
the transactions contemplated hereby. FORE will provide a copy of a draft of
any such press
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release to the Company in advance of making such release public. No Management
Shareholder shall make any press release or other public statement or
disclosure concerning this Agreement or the transactions contemplated hereby
without the prior written approval of FORE.
4.4 Exchange of Shares. FORE agrees that, unless FORE determines, with
advice of outside counsel, that applicable tax law requires otherwise, FORE
will not treat the exchange of shares pursuant to this Agreement as a transfer
under Section 83(a) of the Code.
ARTICLE 5 -- CONDITIONS
5.1 Conditions to Each Party's Obligations. The respective obligations of
FORE, the Company and the Management Shareholders to consummate the Merger and
the other transactions contemplated by this Agreement are subject to the
fulfillment of each of the following conditions, unless waived in writing by
all of such parties:
(a) Governmental and Regulatory Consents. All filings required to be
made prior to the Closing Date by FORE or the Company with, and all consents,
approvals and authorizations required to be obtained prior to the Closing Date
by FORE or the Company from, any Governmental Entity in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by FORE and the Company shall have been made
or obtained (as the case may be).
(b) Litigation. No United States or state court or other Governmental
Entity of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, judgment, decree, injunction
or other order (collectively, an "Order"), whether temporary, preliminary or
permanent, which is in effect and prohibits consummation of the transactions
contemplated by this Agreement, or imposes any restriction on FORE, the
Management Shareholders or the Company in connection with the consummation of
the Merger or with respect to the respective business operations of FORE or the
Company either prior to or subsequent to Closing which would be reasonably
likely to have a Material Adverse Effect on FORE or the Company, as the case
may be.
(c) Employment Agreements. Each of ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and the Company shall have executed and delivered an Employment Agreement in
the form attached hereto as Exhibit F.
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5.2 Conditions to Obligations of the Company and the Management
Shareholders. The obligations of the Company and the Management Shareholders to
consummate the Merger and the other transactions contemplated by this Agreement
are also subject to the fulfillment prior to the Closing of each of the
following conditions unless waived in writing by the Company or the Management
Shareholders:
(a) Representations and Warranties of FORE and Merger Sub. The
representations and warranties of FORE and of Merger Sub set forth in this
Agreement shall be true and correct in all material respects (except for such
representations and warranties which are qualified by their terms by a
reference to materiality, which representations and warranties as so qualified
shall be true in all respects) as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date, except as otherwise
contemplated by this Agreement, and the Company shall have received a
certificate signed on behalf of FORE and of Merger Sub by the Chief Executive
Officer or President of each of FORE and Merger Sub to such effect.
(b) Performance of Obligations of FORE. FORE and Merger Sub shall have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date, and the Company
shall have received a certificate signed on behalf of FORE and Merger Sub by
the Chief Executive Officer or President of each of FORE and Merger Sub to such
effect.
(c) Consents. FORE shall have obtained all consents required to
consummate the transactions contemplated by this Agreement and all other
consents in connection with the transactions contemplated hereby.
(d) Legal Opinion. The Company shall have received an opinion of
▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP, counsel to FORE, directed to the Company and the
Management Shareholders dated the Closing Date, in the form attached hereto as
Exhibit E.
5.3 Conditions to Obligations of FORE. The obligations of FORE to
consummate the Merger and the other transactions contemplated by this Agreement
are also subject to the fulfillment prior to the Closing of the following
conditions unless waived in writing by FORE:
(a) Representations and Warranties of the Management Shareholders and
the Company. The representations and warranties of the Management Shareholders
and the Company set forth in this Agreement shall be true and correct in all
material respects (except for such representations and warranties which are
qualified by their terms by a reference to materiality, which
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representations and warranties as so qualified shall be true in all respects)
as of the date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date, except as otherwise contemplated by this Agreement,
and FORE shall have received a certificate signed on behalf of the Company by
the President of the Company and by each Management Shareholder to such effect.
(b) Performance of Obligations of the Company and the Management
Shareholders. The Company and the Management Shareholders shall have performed
in all material respects all obligations required to be performed by them under
this Agreement at or prior to the Closing Date, and FORE shall have received a
certificate signed on behalf of the Company by the President of the Company and
by each Management Shareholder to such effect.
(c) Tax Opinion. FORE shall have received the opinion of ▇▇▇▇▇▇, ▇▇▇▇▇
& ▇▇▇▇▇▇▇ LLP, counsel to FORE, dated the Closing Date, to the effect that the
acquisition of the Company by FORE pursuant hereto will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code, and that FORE and the Company will each be a party to that
reorganization within the meaning of Section 368(b) of the Code.
(d) Legal Opinion. FORE shall have received an opinion of ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to the Company, dated the Closing Date, in the form
attached hereto as Exhibit G.
(e) Pooling of Interests. FORE shall have received from Price
Waterhouse LLP a letter, on or before the Closing Date, in form and substance
satisfactory to FORE, to the effect that the Merger will qualify for "pooling
of interests" accounting treatment.
(f) Escrow Agreement. The Management Shareholders and the Investors
shall have executed and delivered to FORE the Indemnity Escrow Agreement
referred to in Section 7.2 together with a consent of spouse from the spouse of
each Management Shareholder and Investor who is married and resides in a
community property state and three stock powers medallion signature guaranteed
and endorsed in blank.
(g) Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved by all of the stockholders of the
Company in accordance with Section 251 of the DGCL, and such approval and
adoption shall not have been revoked, withdrawn or modified.
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(h) Letter Agreements. Each of the Investors shall have executed and
delivered to FORE a Letter Agreement in the form attached hereto as Exhibit C-1
and each affiliate of the Company shall have executed and delivered to FORE a
Letter Agreement in the form attached hereto as Exhibit C-2.
(i) Consents. The Management Shareholders and the Company shall have
obtained all consents required to consummate the transactions contemplated by
this Agreement and all other consents in connection with the transactions
contemplated hereby.
(j) Termination of Existing Agreements. The Investor Rights Agreement,
dated as of June 3, 1996, by and among Accel Communications Corp. and the
Management Stockholders (as defined therein) and Investors (as defined therein)
and the Right of First Refusal and Co-Sale Agreement, dated as of June 3, 1996,
by and among the Management Stockholders (as defined therein) and Purchasers
(as defined therein) shall each have been terminated.
ARTICLE 6 -- AMENDMENT AND WAIVER
6.1 Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties.
6.2 Waiver. Any party may waive any of its rights hereunder if such waiver
is set forth in an instrument in writing signed on behalf of such party. The
failure of any party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of those rights.
ARTICLE 7 -- INDEMNIFICATION
7.1 Indemnification Obligation. From and after the Closing, the Management
Shareholders and the Investors will, jointly and severally, to the extent and
in the manner set forth in Sections 7.2 and 7.3 below and the Indemnity Escrow
Agreement referenced therein, reimburse, defend, indemnify and hold harmless
FORE and its successors and assigns (each an "Indemnitee") against and in
respect of:
(a) any and all damages, losses, deficiencies, liabilities, costs and
expenses (including, without limitation, legal fees and expenses) (collectively
"Losses") incurred or suffered by any Indemnitee that result from, relate to or
arise out of any misrepresentation, breach of warranty, undisclosed liabilities
or nonfulfillment of any agreement or covenant under this Agreement on the part
of the Company or one or more of the Management Shareholders or Investors, or
from any misrepresentation in or omission from any certificate, schedule,
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statement, document or instrument furnished to FORE pursuant hereto or in
connection with the negotiation, execution or performance of this Agreement, or
any action, suit, claim, proceeding, investigation, demand, assessment, audit,
fine, or judgment incident to any of the foregoing or to the enforcement of
this Section 7.1.
(b) in addition to and not in limitation of the foregoing, any and all
Losses that result from, relate to or arise out of any action based upon a
claim that (i) the Company has at any time infringed or violated any patent,
copyright, trade secret, trademark, trade name, service ▇▇▇▇, license or other
proprietary right of a third party, or (ii) the carrying on of the Company's
business by the present or former employees of the Company as currently
conducted conflicts with or breaches the terms, conditions and provisions of,
or constitutes a default under, or a violation of any fiduciary duty under, any
contract, covenant or instrument under which any of the Company's present or
former employees or independent contractors (but not including a contract
binding the Company and not any such employee or independent contractor) is now
or ever was obligated.
7.2 Escrow. At the Effective Time, ten percent (10%) of the number of
shares of FORE Common Stock issuable to each Management Shareholder and each
Investor pursuant to Article 1, rounded up to the nearest whole share (the
"Escrow Shares") shall be delivered, together with a consent of spouse from
each spouse of a Management Shareholder and each Investor who is married, and
three stock powers medallion signature guaranteed and endorsed in blank from
each Management Shareholder and each Investor, to Mellon Bank, N.A. as
indemnity escrow agent (the "Indemnity Escrow Agent") to be held for a period
ending on the first anniversary of the Closing Date. FORE may make a claim for
any Losses indemnified hereunder until the nine-month anniversary of the
Closing Date; further, FORE may make a claim for any Losses indemnified
hereunder pursuant to Section 7.1(b) until the one-year anniversary of the
Closing Date. The Escrow Shares shall be held and disbursed by the Indemnity
Escrow Agent in accordance with an Indemnity Escrow Agreement in the form
attached hereto as Exhibit H. The Indemnitees' sole and exclusive remedy for
any Losses under this Agreement and the transactions contemplated hereby shall
be to recover shares of FORE Common Stock from the Escrow Fund in accordance
with the terms of the Indemnity Escrow Agreement.
7.3 Minimum Claims. No claim shall be considered to be an indemnifiable
claim pursuant to this Section 7 unless the amount of such claim exceeds
$10,000. No claim shall be made by FORE under Section 7.1 of this Agreement
unless and until the amount of all indemnifiable claims made by FORE exceeds
$250,000. However, once the amount of all such claims greater than $10,000
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exceeds $250,000, recovery may be made for all Losses with respect to
indemnifiable claims greater than $10,000 hereunder without regard to the
$250,000 threshold.
7.4 Defense Costs. The Management Shareholders and the Investors may
utilize up to a maximum of $75,000 in the Escrow Fund to pay the costs of
defending an indemnifiable claim.
ARTICLE 8 -- GENERAL PROVISIONS
8.1 Survival of Representation, Warranties and Agreements. All
representations, warranties and agreements contained herein shall survive the
consummation of the Merger and shall (except to the extent that survival is
necessary to effectuate the intent of such provisions) terminate as specified
in Article 7. Any party's right to indemnification or other remedies based upon
the representations and warranties, covenants, agreements and undertakings of
the other party will not be affected by any investigation, knowledge or waiver
of any condition by such party. Any investigation by such party shall be for
its own protection only and shall not affect or impair any right or remedy
hereunder.
8.2 Notices. All notices and other communications hereunder shall be
deemed given and received (i) upon delivery if delivered personally or by
telecopy, (ii) on the next business day if sent by overnight courier, or (iii)
four (4) business days after mailing if mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to FORE:
FORE Systems, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
With a copy to:
FORE Systems, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esquire
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(b) if to the Company or the Management Shareholders:
Cadia Networks, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., Esquire
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
8.3 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.4 Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) constitutes the
entire agreement and supersedes all other prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof. There are no third party beneficiaries of this Agreement
and nothing in this Agreement, express or implied, is intended to or shall
confer upon any person other than the parties hereto and their respective
successors and permitted assigns, any rights, remedies, obligations or
liabilities.
8.5 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by operation of law or otherwise,
provided that FORE may assign its rights and obligations hereunder to a direct
or indirect subsidiary of FORE, but no such assignment shall relieve FORE of
its obligations hereunder. Subject to the foregoing sentence, this Agreement
will be binding upon, and inure to the benefit of, the parties and their
respective successors and assigns.
8.6 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware, without giving effect to the conflicts of law principles thereof.
8.7 Counterparts. This Agreement may be executed in one or more
counterparts which together shall constitute a single agreement.
8.8 Specific Performance. The Company and the Management Shareholders
agree that irreparable damage would occur in the event any of the provisions of
this Agreement were not performed
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by them in accordance with the terms hereof and that FORE shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at
law or equity.
8.9 Definitions. For purposes of this Agreement, each of the defined terms
is defined in the Section of this Agreement indicated:
Term Section
---- -------
1996 Restricted Stock Purchase Plan 1.9(a)
1996 Stock Option Plan 1.9(a)
Agreement Preamble
Average Price 1.7
Certificate 1.8(e)
Certificate of Merger 1.1
Closing 1.2
Closing Date 1.2
Code 1.10
Commission 2.6
Common Exchange Ratio 1.8(c)
Common Merger Consideration 1.8(c)
Common Portion 1.8(c)
Company Preamble
Company Common Shares 1.8(a)
Company Disclosure Schedule Preamble to Article 3
Company Intellectual Property Rights 3.23
Company Preferred Shares 1.8(b)
Company Shares 1.8(b)
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Term Section
---- -------
Company Stock Options 1.10
Constituent Corporations 1.1
DGCL 1.1
Effective Time 1.3
Environmental Laws 3.17(b)
ERISA 3.13
Escrow Shares 7.2
Exchange Act 2.6
Financial Statements 3.8
FORE Common Stock 1.7
FORE Disclosure Schedule Preamble to Article 2
FORE Financial Statements 2.6
FORE Options 2.2
FORE Preferred Stock 2.2
FORE SEC Documents 2.6
FORE Stock Purchase Plan 2.2
Governmental Entity 2.5
Hazardous Materials 3.17(c)
Indemnitee 7.1
Indemnity Escrow Agent 7.2
Investors 2.2
Liabilities 3.9
Liens 3.1(a)
Losses 7.1(a)
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Term Section
---- -------
Management Shareholders Preamble
Material Adverse Effect 2.1
Merger 1.1
Merger Consideration 1.7
Merger Sub Preamble
Merger Sub Stock 1.8(f)
New Company Stock 1.8(f)
Optionees 1.10
Order 5.1(b)
Permits 3.17(a)
Pooling Restriction Period 4.2
Preferred Exchange Ratio 1.8(d)
Preferred Merger Consideration 1.8(d)
Preferred Portion 1.8(c)
Registration Rights Agreement 3.1(a)
Regulations 2.10
Releases 3.17(c)
Returns 3.14
Securities Act 3.1(a)
Stock Repurchase Agreements 1.9(a)
Substitute Stock Options 1.10
Surviving Corporation 1.1
Taxes 3.14(e)
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IN WITNESS WHEREOF, FORE SYSTEMS, INC., ALPHA ACQUISITION CORPORATION,
CADIA NETWORKS, INC. and THE MANAGEMENT SHAREHOLDERS have caused this Agreement
to be executed as of the date first set forth above.
FORE SYSTEMS, INC. ALPHA ACQUISITION CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------ ---------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman and Chief Title: Chief Executive Officer
Executive Officer
CADIA NETWORKS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
MANAGEMENT SHAREHOLDERS:
/s/ ▇▇▇▇ ▇▇▇▇
----------------------------
▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
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----------------------------
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/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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