EXHIBIT 2.1
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
SUN MICROSYSTEMS, INC.
AZURE ACQUISITION CORPORATION
AND
COBALT NETWORKS, INC.
Dated as of September 18, 2000
PROJECT BLUE
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION is made and entered
into as of September 18, 2000, by and among Sun Microsystems, Inc., a Delaware
corporation ("Parent"), Azure Acquisition Corporation, a Delaware corporation
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and a wholly-owned subsidiary of Parent ("Merger Sub"), and Cobalt Networks,
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Inc., a Delaware corporation (the "Company").
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RECITALS:
A. Upon the terms and subject to the conditions set forth this Agreement
(as defined in Section 1.2 hereof) and in accordance with the General
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Corporation Law of the State of Delaware ("Delaware Law"), Parent and the
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Company intend to enter into a business combination transaction.
B. The Board of Directors of the Company (i) has determined that the
Merger (as defined in Section 1.1 hereof) is consistent with and in furtherance
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of the long-term business strategy of the Company, and fair to and in the best
interests of, the Company and its stockholders, (ii) has unanimously approved
this Agreement, the Merger and the other transactions contemplated by this
Agreement, and (iii) has unanimously determined to recommend that the
stockholders of the Company adopt and approve this Agreement and approve the
Merger.
C. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, certain
affiliates of the Company are entering into Voting Agreements, in the form
attached hereto as Exhibit A (each, a "Voting Agreement" and, collectively, the
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"Voting Agreements"), with Parent.
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D. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, certain
affiliates of the Company are entering into Affiliate Agreements, in the form
attached hereto as Exhibit B (each, a "Affiliate Agreement" and, collectively,
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the "Affiliate Agreements"), with Parent.
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E. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, certain
stockholders of the Company are entering into Non-Competition Agreements, in the
form attached hereto as Exhibit C (each, a "Non-Competition Agreement" and,
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collectively, the "Non-Competition Agreements"), with Parent.
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F. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, the Company
is entering into a Stock Option Agreement in favor of Parent, in the form
attached hereto as Exhibit D (the "Stock
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Option Agreement"). The Board of Directors of the Company has unanimously
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approved the Stock Option Agreement.
G. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, certain
officers, directors and other employees of the Company have agreed to waive
certain severance and other rights that may be triggered as a direct or indirect
result of the transactions contemplated hereby (each, an "Severance and
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Acceleration Waiver") and, collectively, the "Severance and Acceleration
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Waivers").
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H. The parties hereto intend, by executing this Agreement, to adopt a plan
of reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code").
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I. The parties hereto intend for the Merger to be accounted for as a
purchase.
AGREEMENT
NOW, THEREFORE, in consideration of foregoing premises, the mutual
covenants, promises and representations set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and accepted, the parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2 hereof)
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and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Merger Sub shall be merged with and into
the Company (the "Merger"), the separate corporate existence of Merger Sub shall
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cease and the Company shall continue as the surviving corporation. The Company,
as the surviving corporation after the Merger, is hereinafter sometimes referred
to as the "Surviving Corporation."
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1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
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the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of Delaware Law (the "Certificate of
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Merger") (the time of such filing (or such later time as may be agreed in
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writing by the Company and Parent and specified in the Certificate of Merger)
being referred to herein as the "Effective Time") as soon as practicable on or
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after the Closing Date (as defined below). Unless the context otherwise
requires, the term "Agreement" as used herein refers collectively to this
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Agreement and Plan of Merger and Reorganization and the Certificate of Merger.
The closing of the Merger and the other transactions contemplated hereby (the
"Closing") shall take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
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Professional Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at a
date to be specified by the parties hereto, which time and date shall
be no later than the second (2/nd/) business
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day after the satisfaction or waiver of the conditions set forth in Article VI
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hereof, or at such other location, time and date as the parties hereto shall
mutually agree in writing (the date upon which the Closing actually occurs being
referred to herein as the "Closing Date").
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1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
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shall be as provided in this Agreement and the applicable provisions of Delaware
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
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(a) Certificate of Incorporation. At the Effective Time, the
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Certificate of Incorporation of the Company shall be amended and restated in its
entirety to be the same in substance as the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time (except that
the name of the Company shall remain Cobalt Networks, Inc.), and such
Certificate of Incorporation of the Company, as so amended and restated, shall
be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended in accordance with Delaware Law and such Certificate of
Incorporation.
(b) Bylaws. The Bylaws of Merger Sub, as in effect immediately prior
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to the Effective Time, shall be, at the Effective Time, the Bylaws of the
Surviving Corporation until thereafter amended in accordance with Delaware Law,
the Certificate of Incorporation of the Surviving Corporation and such Bylaws.
1.5 Directors and Officers
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(a) Directors. The initial directors of the Surviving Corporation
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shall be the directors of Merger Sub immediately prior to the Effective Time,
until their respective successors are duly elected or appointed and qualified.
(b) Officers. The initial officers of the Surviving Corporation
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shall be the officers of Merger Sub immediately prior to the Effective Time,
until their respective successors are duly appointed.
1.6 Effect on Capital Stock. Subject to the terms and conditions set forth in
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this Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, the Company or the holders of any of the
following securities, the following shall occur:
(a) Conversion of Company Common Stock. Each share of Common Stock,
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par value $0.001 per share, of the Company ("Company Common Stock") issued and
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outstanding immediately prior to the Effective Time, other than any shares of
Company Common Stock to be canceled pursuant to Section 1.6(b) hereof, shall be
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canceled and extinguished and automatically converted (subject to Section 1.6(e)
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and Section 1.6(f) hereof)
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into the right to receive 0.50 (the "Exchange Ratio") shares of Common Stock,
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par value $0.00067 per share, of Parent (including, with respect to each such
share of Common Stock of Parent, the associated Rights (as defined in that
certain Second Amended and Restated Shares Rights Agreement, dated as of
February 11, 1998, as amended April 14, 1999 and April 26, 2000) (the "Parent
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Rights Agreement") between the Company and BankBoston, N.A., as Rights Agent
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(the "Parent Common Stock") upon surrender of the certificate representing such
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share of Company Common Stock in the manner set forth in Section 1.7 hereof (or
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in the case of a lost, stolen or destroyed certificate, upon delivery of an
affidavit (and bond, if required) in the manner set forth in Section 1.9
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hereof). If any shares of Company Common Stock outstanding immediately prior to
the Effective Time are unvested or are subject to a repurchase option, risk of
forfeiture or other condition under any applicable restricted stock purchase
agreement or other agreement with the Company, then the shares of Parent Common
Stock issued in exchange for such shares of Company Common Stock shall also be
unvested and subject to the same repurchase option, risk of forfeiture or other
condition, and the certificates representing such shares of Parent Common Stock
may accordingly be marked with appropriate legends. The Company shall take all
action that may be necessary to ensure that, from and after the Effective Time,
Parent is entitled to exercise any such repurchase option or other right set
forth in any such restricted stock purchase agreement or other agreement.
(b) Cancellation of Parent-Owned Stock. Each share of Company Common
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Stock held by Parent, the Company or any direct or indirect wholly-owned
subsidiary of Parent or the Company, immediately prior to the Effective Time
shall be canceled and extinguished without any conversion thereof or
consideration paid therefor.
(c) Stock Options; Employee Stock Purchase Plans.
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(i) At the Effective Time, all options to purchase Company
Common Stock then outstanding under (A) the Company's Amended and Restated 1997
Employee Stock Plan (the "Employee Stock Plan"), (B) the Company's 1999 Director
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Option Plan (the "Director Option Plan"), (C) the Chili!Soft, Inc., Inc. 1997
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Stock Option Plan (the "1997 Chili!Soft, Inc. Plan"), (D) the Chili!Soft, Inc.
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1998 Stock Option Plan (the "1998 Chili!Soft, Inc. Plan"), (E) the Chili!Soft,
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Inc. 1999 Stock Option Plan (the "1999 Chili!Soft, Inc. Plan" and, together with
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the Employee Stock Plan, the Director Option Plan, the 1997 Chili!Soft, Inc.
Plan and the 1998 Chili!Soft, Inc. Plan, the "Company Stock Plans"), shall be
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assumed by Parent in accordance with the terms of Section 5.9(a) hereof.
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(ii) At the Effective Time, all purchase rights outstanding
under the Company's 1999 Employee Stock Purchase Plan (the "Employee Stock
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Purchase Plan") shall be treated as set forth in Section 5.9(b) hereof.
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(d) Capital Stock of Merger Sub. Each share of Common Stock, par
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value $0.001 per share, of Merger Sub (the "Merger Sub Common Stock") issued and
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outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of Common Stock, par value
$0.001 per share, of the Surviving Corporation. Each certificate evidencing
ownership of shares of Merger Sub Common Stock immediately
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prior to the Effective Time shall, as of the Effective Time, evidence ownership
of an equivalent number of shares of capital stock of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
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adjusted to reflect appropriately the effect of any forward or reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into Parent Common Stock or Company Common Stock), extraordinary
cash dividends, reorganization, recapitalization, reclassification, combination,
exchange of shares or other like change with respect to Parent Common Stock
(including, without limitation, the two-for-one forward stock split, to be paid
in the form of a stock dividend, approved by the Board of Directors of Parent on
August 16, 2000 (the "Parent Stock Split"), which will be effected (if at all)
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only upon the approval of a proposed increase in the authorized number of shares
of Parent Common Stock by the stockholders of Parent at the currently scheduled
Annual Meeting of Stockholders of Parent to be held on November 8, 2000) (the
"Parent Share Increase") or Company Common Stock occurring on or after the date
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hereof and prior to the Effective Time.
(f) Fractional Shares. No fraction of a share of Parent Common Stock
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shall be issued by virtue of the Merger, but in lieu thereof, each holder of
shares of Company Common Stock who would otherwise be entitled to a fraction of
a share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock that otherwise would be received by such holder) shall, upon
surrender of such holder's Certificates(s) (as defined in Section 1.7(c)
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hereof), receive from Parent an amount of cash (rounded to the nearest whole
cent), without interest, equal to the product obtained by multiplying (x) such
fraction, by (y) the average closing price on the Nasdaq National Market System
("Nasdaq"), as reported in The Wall Street Journal, Western Edition (or, in the
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event of a good faith dispute as to the accuracy of the price reported therein,
another authoritative source reasonably agreed on by the parties hereto), of one
(1) share of Parent Common Stock for the five (5) consecutive trading days
ending on the trading day immediately prior to the day on which the Effective
Time shall occur.
1.7 Surrender of Certificates.
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(a) Exchange Agent. EquiServe Limited Partnership, or another bank
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or trust company selected by Parent (which shall be reasonably acceptable to the
Company), shall act as the exchange agent (the "Exchange Agent") in the Merger.
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(b) Parent to Provide Common Stock. Promptly following the Effective
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Time, Parent shall make available to the Exchange Agent for exchange in
accordance with this Article I, the shares of Parent Common Stock issuable
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pursuant to Section 1.6 hereof in exchange for outstanding shares of Company
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Common Stock, and cash in an amount estimated to be sufficient for payment in
lieu of fractional shares pursuant to Section 1.6(f) hereof, and any dividends
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or distributions to which holders of shares of Company Common Stock may be
entitled pursuant to Section 1.7(d) hereof.
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(c) Exchange Procedures. Promptly following the Effective Time,
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Parent shall cause the Exchange Agent to mail to each holder of record (as of
the Effective Time) of a certificate or certificates (each, a "Certificate" and,
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collectively, the "Certificates"), which
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immediately prior to the Effective Time represented outstanding shares of
Company Common Stock whose shares were converted into the right to receive
shares of Parent Common Stock pursuant to Section 1.6 hereof, cash in lieu of
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any fractional shares pursuant to Section 1.6(f) hereof, and any dividends or
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other distributions pursuant to Section 1.7(d) hereof, (i) a letter of
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transmittal in customary form (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall contain such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock, cash in lieu of any fractional
shares pursuant to Section 1.6(f) hereof, and any dividends or other
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distributions pursuant to Section 1.7(d) hereof. Upon surrender of Certificates
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for cancellation to the Exchange Agent or to such other agent or agents as may
be reasonably appointed by Parent, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
the holders of such Certificates shall be entitled to receive in exchange
therefor certificates representing the number of whole shares of Parent Common
Stock into which their shares of Company Common Stock were converted at the
Effective Time pursuant to Section 1.6 hereof, payment in lieu of fractional
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shares which such holders have the right to receive pursuant to Section 1.6(f)
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hereof, and any dividends or other distributions payable pursuant to Section
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1.7(d), and the Certificates so surrendered shall forthwith be canceled. Until
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so surrendered, outstanding Certificates shall be deemed from and after the
Effective Time, for all corporate purposes, subject to Section 1.7(d) hereof as
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to dividends and other distributions, to evidence only the ownership of the
number of full shares of Parent Common Stock into which such shares of Company
Common Stock shall have been so converted pursuant to Section 1.6 hereof, and
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the right to receive an amount in cash in lieu of the issuance of any fractional
shares pursuant to Section 1.6(f) hereof and any dividends or other
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distributions payable pursuant to Section 1.7(d) hereof.
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(d) Distributions With Respect to Unexchanged Shares. No dividends
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or other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holders of any unsurrendered Certificates with respect to the
shares of Parent Common Stock represented thereby until the holders of record of
such Certificates shall surrender such Certificates. Subject to applicable law,
following surrender of any such Certificates, the Exchange Agent shall deliver
to the record holders thereof, without interest, certificates representing whole
shares of Parent Common Stock issued in exchange therefor along with payment in
lieu of fractional shares pursuant to Section 1.6(f) hereof and the amount of
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any such dividends or other distributions with a record date after the Effective
Time payable with respect to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If certificates representing shares of
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Parent Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of certificates
representing shares of Parent Common Stock in any name other than that of the
registered holder of the Certificates
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surrendered, or established to the satisfaction of Parent or any agent
designated by it that such tax has been paid or is not payable.
(f) Required Withholding. Each of the Exchange Agent, Parent and the
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Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Company Common Stock such amounts as may be required
to be deducted or withheld therefrom under the Code, or under any provision of
state, local or foreign tax law or under any other applicable legal requirement.
To the extent such amounts are so deducted or withheld, such amounts shall be
treated for all purposes under this Agreement as having been paid to the person
to whom such amounts would otherwise have been paid.
(g) No Liability. Notwithstanding anything to the contrary in this
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Section 1.7, neither the Exchange Agent, Parent, the Surviving Corporation nor
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any other party hereto shall be liable to a holder of shares of Parent Common
Stock or Company Common Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in Company Common Stock. All shares of
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Parent Common Stock issued in accordance with the terms hereof (including any
cash paid in respect thereof pursuant to Section 1.6(f) or Section 1.7(d)
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hereof) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock, and there shall be no further
registration of transfers on the records of the Surviving Corporation of shares
of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, at any time following the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article I.
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1.9 Lost, Stolen or Destroyed Certificates. In the event that any
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Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, certificates
representing the shares of Parent Common Stock into which the shares of Company
Common Stock represented by such Certificates were converted pursuant to Section
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1.6 hereof, cash for fractional shares, if any, as may be required pursuant to
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Section 1.6(f) hereof and any dividends or distributions payable pursuant to
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Section 1.7(d) hereof; provided, however, that Parent and the Exchange Agent
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may, in their discretion and as a condition precedent to the issuance of such
certificates representing shares of Parent Common Stock, cash and other
distributions, require the owner of such lost, stolen or destroyed Certificates
to deliver a bond in such sum as it may reasonably direct as indemnity against
any claim that may be made against Parent, the Surviving Corporation or the
Exchange Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
1.10 Tax and Accounting Consequences.
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(a) Tax. It is intended by the parties hereto that the Merger shall
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constitute a reorganization within the meaning of Section 368 of the Code. The
parties hereto adopt this
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Agreement as a "plan of reorganization" within the meaning of Sections 1.368-
2(g) and 1.368-3(a) of the United States Income Tax Regulations.
(b) Accounting. It is intended by the parties hereto that the Merger
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shall be accounted for as a purchase.
1.11 Taking of Necessary Action; Further Action. If, at any time following
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the Effective Time, any further action is necessary or desirable to carry out
the purposes and intent of this Agreement and to vest the Surviving Corporation
with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of the Company and Merger Sub, the officers
and directors of the Company and Merger Sub shall take all such lawful and
necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub, as of
the date hereof and as of the Closing Date as though made at the Closing Date,
subject to such exceptions as are specifically disclosed in writing (with
reference to a specific section of this Agreement to which each such exception
applies) in a disclosure letter supplied by the Company to Parent, dated as of
the date hereof and certified by a duly authorized officer of Company (the
"Company Disclosure Letter"), which disclosure shall provide an exception to or
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otherwise qualify or respond to the representations or warranties of the Company
specifically referred to in such disclosure and any other representation or
warranty of the Company to the extent that it is reasonably apparent from such
disclosure that such disclosure is applicable to such other representation or
warranty, as follows:
2.1 Organization and Qualification; Subsidiaries.
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(a) Each of the Company and its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. Each of the Company and its
subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates, approvals and orders
("Approvals") necessary to own, lease and operate the properties it purports to
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own, operate or lease and to carry on its business as it is now being conducted,
except where the failure to have such Approvals would not, individually or in
the aggregate, be material to the Company. Each of the Company and its
subsidiaries is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary, except for such failures to be
so duly qualified or licensed and in good standing that would not, either
individually or in the aggregate, be material to the Company.
(b) Company has no subsidiaries except for the corporations
identified in Section 2.1(b) of the Company Disclosure Letter. Neither the
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Company nor any of its
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subsidiaries has agreed, is obligated to make, or is bound by, any written, oral
or other agreement, contract, sub-contract, lease, binding understanding,
instrument, note, option, warranty, purchase order, license, sub-license,
insurance policy, benefit plan, commitment, or undertaking of any nature, as of
the date hereof or as may hereafter be in effect under which it may become
obligated to make, any future investment in or capital contribution to any other
entity. Neither the Company nor any of its subsidiaries directly or indirectly
owns any equity or similar interest in or any interest convertible, exchangeable
or exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business, association or entity.
2.2 Certificate of Incorporation and Bylaws. The Company has previously
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furnished to Parent a complete and correct copy of its Certificate of
Incorporation and Bylaws as amended to date. Such Certificate of Incorporation,
Bylaws and equivalent organizational documents of each of its subsidiaries are
in full force and effect. Neither the Company nor any of its subsidiaries is in
violation of any of the provisions of its Certificate of Incorporation or Bylaws
or equivalent organizational documents.
2.3 Capitalization.
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(a) The authorized capital stock of the Company consists of one
hundred and twenty million (120,000,000) shares of Company Common Stock and ten
million (10,000,000) shares of Preferred Stock ("Company Preferred Stock"), each
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having a par value of $0.001 per share. As of the close of business on September
14, 2000, (i) 30,333,599 shares of Company Common Stock were issued and
outstanding, all of which are validly issued, fully paid and nonassessable, (ii)
no shares of Company Common Stock were held in treasury by the Company or by any
subsidiaries of the Company, (iii) 2,208,440 shares of Company Common Stock were
available for future issuance pursuant to the Employee Stock Purchase Plan, (iv)
4,957,461 shares of Company Common Stock were reserved for issuance upon the
exercise of outstanding options to purchase Company Common Stock under the
Employee Stock Purchase Plan, (v) 328,328 shares of Company Common Stock were
reserved for issuance upon the exercise of outstanding options to purchase
Company Common Stock under the Director Option Plan, (vi) 9,177 shares of
Company Common Stock were reserved for issuance upon the exercise of outstanding
options to purchase Company Common Stock under the 1997 Chili!Soft Stock Plan,
(vii) 18,085 shares of Company Common Stock were reserved for issuance upon the
exercise of outstanding options to purchase Company Common Stock under the 1998
Chili!Soft Stock Plan, and (viii) 381,259 shares of Company Common Stock were
reserved for issuance upon the exercise of outstanding options to purchase
Company Common Stock under the 1999 Chili!Soft Stock Plan. Between the close of
business on September 14, 2000 and the date hereof, no shares of Company Common
Stock have been issued other than upon exercise of vested Company Stock Options
(as defined in Section 5.9 hereof) listed on Section 2.3(b) of the Company
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Disclosure Letter. As of the date hereof, no shares of Company Preferred Stock
are issued or outstanding. Except as set forth in Section 2.3(a) of the Company
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Disclosure Letter, there are no commitments or agreements of any character to
which the Company is bound obligating the Company to accelerate the vesting of
any Company Stock Option as a result of the Merger or any
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other transactions contemplated by this Agreement, or as a result of the
termination of employment of any holder of any such option.
(b) Section 2.3(b) of the Company Disclosure Letter sets forth the
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following information with respect to each Company Stock Option outstanding as
to the date of the Agreement: (i) the name of the optionee; (ii) the particular
plan pursuant to which such Company Stock Option was granted; (iii) the number
of shares of Company Common Stock subject to such Company Stock Option; (iv) the
exercise price of such Company Stock Option; (v) the date on which such Company
Stock Option was granted; (vi) the extent to which each such option is vested
and unvested as of a recent practicable date; (vii) the date on which such
Company Stock Option expires and (viii) whether the exercisability of such
option will be accelerated in any way by the transactions contemplated by this
Agreement, and indicates the extent of any such acceleration. Section 2.3(b) of
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the Company Disclosure Letter also shall set forth the vesting schedule
generally applicable to Company Stock Options, and shall specifically identify
each Company Stock Option with a vesting schedule that is different than such
generally applicable vesting schedule (including a description of each such
different vesting schedule). The Company has made available to Parent accurate
and complete copies of all stock option plans pursuant to which the Company has
granted such Company Stock Options that are currently outstanding and the form
of all stock option agreements evidencing such Company Stock Options. All shares
of Company Common Stock subject to the issuance aforesaid, upon issuance on the
terms and conditions specified in the instrument pursuant to which they are
issuable, would be duly authorized, validly issued, fully paid and non
assessable. All outstanding shares of Company Common Stock, all outstanding
Company Stock Options, and all outstanding shares of capital stock of each
subsidiary of the Company have been issued and granted in compliance with (i)
all applicable securities laws and other applicable federal, state, local,
municipal, foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issues, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Entity (as defined
below) and (ii) all requirements set forth in applicable contracts, agreements,
and instruments.
(c) Except for (i) securities Company owns, directly or indirectly
through one or more subsidiaries, free and clear of all liens, pledges,
hypothecations, charges, mortgages, security interests, encumbrances, claims,
infringements, interferences, options, right of first refusals, preemptive
rights, community property interests or restriction of any nature (including any
restriction on the voting of any security, any restriction on the transfer of
any security or other asset, any restriction on the possession, exercise or
transfer of any other attribute of ownership of any asset, but excluding any
restrictions on transfer imposed by federal or state securities laws), and (ii)
shares of capital stock or other similar ownership interests of subsidiaries of
the Company that are owned by certain nominee equity holders as required by the
applicable law of the jurisdiction of organization of such subsidiaries (which
shares or other interests do not materially affect the Company's control of such
subsidiaries), as of the date of this Agreement, there are no equity securities,
partnership interests or similar ownership interests of any class of equity
security of any subsidiary of the Company, or any security exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except as set forth in
-10-
Section 2.3(c) of the Company Disclosure Letter or as set forth in Section
-------------- -------
2.3(b) hereof, and except for the Stock Option Agreement, there are no
------
subscriptions, options, warrants, equity securities, partnership interests or
similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which Company or any of its
subsidiaries is a party or by which it is bound obligating Company or any of its
subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition of, any shares of capital stock, partnership interests
or similar ownership interests of the Company or any of its subsidiaries or
obligating the Company or any of its subsidiaries to grant, extend, accelerate
the vesting of or enter into any such subscription, option, warrant, equity
security, call, right, commitment or agreement. As of the date of this
Agreement, except as contemplated by this Agreement, there are no registration
rights and there is, except for the Voting Agreements, no voting trust, proxy,
rights plan, antitakeover plan or other agreement or understanding to which the
Company or any of its subsidiaries is a party or by which they are bound with
respect to any equity security of any class of the Company or with respect to
any equity security, partnership interest or similar ownership interest of any
class of any of its subsidiaries. Stockholders of the Company will not be
entitled to dissenters' rights under applicable state law in connection with the
Merger.
2.4 Authority Relative to this Agreement. The Company has all necessary
------------------------------------
corporate power and authority to execute and deliver this Agreement and the
Stock Option Agreement and to perform its obligations hereunder and thereunder
and, subject to obtaining the approval of the stockholders of the Company of the
Merger, to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Stock Option Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action on the part of the Company and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement, the Stock
Option Agreement or to consummate the transactions so contemplated (other than,
with respect to the Merger, the approval and adoption of this Agreement and the
approval of the Merger by holders of a majority of the outstanding shares of
Company Common Stock in accordance with Delaware Law and the Company's
Certificate of Incorporation and Bylaws). This Agreement and the Stock Option
Agreement have been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent and Merger Sub,
constitute legal and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except as enforceability may
be subject to and limited by laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and rules of law governing specific
performance, injunctive relief or other equitable remedies.
2.5 No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement and the Stock Option
Agreement by Company do not, and the performance of this Agreement and the Stock
Option Agreement by Company will not, (i) conflict with or violate the
Certificate of Incorporation or Bylaws or equivalent organizational documents of
the Company or any of its subsidiaries, (ii) subject to obtaining the approval
of the Company's stockholders in favor of approval and
-11-
adoption of this Agreement and approval of the Merger, and obtaining the
consents, approvals, authorizations and permits and making registrations,
filings and notifications set forth in Section 2.5(b) hereof (or Section 2.5(b)
-------------- ------------------
of the Company Disclosure Letter), conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the Company or any of its
subsidiaries or by which its or any of their respective properties is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
impair the Company's or any of its subsidiaries' rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company or any of its subsidiaries pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or its or any of
their respective properties are bound or affected.
(b) The execution and delivery of this Agreement and the Stock Option
Agreement by the Company do not, and the performance of this Agreement by the
Company will not, require any consent, approval, authorization or permit of, or
registration, filing with or notification to, any court, administrative agency,
commission, governmental or regulatory authority, domestic or foreign (each, a
"Governmental Entity" and, collectively, "Governmental Entities"), except for
------------------- ---------------------
(i) applicable requirements, if any, of the Securities Act of 1933, as amended
(the "Securities Act"), the Securities Exchange Act of 1934, as amended (the
--------------
"Exchange Act"), and state securities laws ("Blue Sky Laws"), the pre-merger
------------ -------------
notification requirements (the "HSR Approval") of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
------------
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and foreign
-------
Governmental Entities and the rules and regulations promulgated thereunder, (ii)
the rules and regulations of The Nasdaq Stock Market, Inc., (iii) the filing and
recordation of the Merger Certificate as required by the Delaware Law, and (iv)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, would not be material to the Company
or Parent or have a Material Adverse Effect (as defined in Section 8.3(c)
--------------
hereof) on the parties hereto, prevent or materially delay consummation of the
Merger or otherwise prevent the parties hereto from performing their obligations
under this Agreement.
2.6 Compliance; Permits.
-------------------
(a) Neither the Company nor any of its subsidiaries is in conflict
with, or in default or violation of, (i) any law, rule, regulation, order,
judgment or decree applicable to the Company or any of its subsidiaries or by
which its or any of their respective properties is bound or affected, or (ii)
any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or its or any of their respective properties is bound or
affected, except for any conflicts, defaults or violations that (individually or
in the aggregate) would not cause the Company to lose any material benefit or
incur any material liability. No investigation or review by any governmental or
regulatory body or authority is, to the knowledge of the Company, pending or
threatened against the Company or
-12-
its subsidiaries, nor has any governmental or regulatory body or authority
indicated an intention to conduct the same, other than, in each such case, those
the outcome of which could not, individually or in the aggregate, reasonably be
expected to have the effect of prohibiting or materially impairing any business
practice of the Company or any of its subsidiaries, any acquisition of material
property by the Company or any of its subsidiaries or the conduct of business by
the Company or any of its subsidiaries.
(b) The Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from Governmental Entities which are
material to operation of the business of the Company and its subsidiaries taken
as a whole (collectively, the "Company Permits"). The Company and its
---------------
subsidiaries are in compliance in all material respects with the terms of the
Company Permits.
2.7 SEC Filings; Financial Statements.
---------------------------------
(a) The Company has made available to Parent a correct and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by the Company with the Securities and Exchange Commission
("SEC") since November 5, 1999 (the "Company SEC Reports"), which are all the
--- -------------------
forms, reports and documents required to be filed by Company with the SEC since
such date. The Company SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
(ii) did not at the time they were filed and if amended or superseded by a
filing prior to the date of this Agreement then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the Company's subsidiaries is required to file any reports
or other documents with the
SEC.
(b) Each set of consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports was
prepared in accordance with generally accepted accounting principles ("GAAP")
----
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited statements, do not
contain footnotes as permitted by Form 10-Q of the Exchange Act) and each fairly
presents the consolidated financial position of the Company and its subsidiaries
as at the respective dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal adjustments which
were not or are not expected to be material in
amount.
(c) The Company has previously furnished to Parent a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by the Company with the SEC
pursuant to the Securities Act or the Exchange Act.
2.8 No Undisclosed Liabilities. Neither the Company nor any of its
--------------------------
subsidiaries has any liabilities (absolute, accrued, contingent or otherwise) of
a nature required to be disclosed on a balance sheet or in the related notes to
the consolidated financial statements prepared in accordance with GAAP which
are, individually or in the aggregate, material to the business,
-13-
results of operations or financial condition of the Company and its subsidiaries
taken as a whole, except (i) liabilities provided for in the Company's balance
sheet as of June 30, 2000 or (ii) liabilities incurred since June 30, 2000 in
the ordinary course of business, none of which is material to the business,
results of operations or financial condition of the Company and its
subsidiaries, taken as a whole.
2.9 Absence of Certain Changes or Events. Since June 30, 2000, there
------------------------------------
has not been any Material Adverse Effect on the Company. Since December 31,
1999, there has not been: (i) any declaration, setting aside or payment of any
dividend on, or other distribution (whether in cash, stock or property) in
respect of, any of the Company's or any of its subsidiaries' capital stock, or
any purchase, redemption or other acquisition by the Company of any of the
Company's capital stock or any other securities of the Company or its
subsidiaries or any options, warrants, calls or rights to acquire any such
shares or other securities except for repurchases from employees following their
termination pursuant to the terms of their pre-existing stock option or purchase
agreements, (ii) any split, combination or reclassification of any of the
Company's or any of its subsidiaries' capital stock, (iii) any granting by the
Company or any of its subsidiaries of any increase in compensation or fringe
benefits, except for normal increases of cash compensation in the ordinary
course of business consistent with past practice, or any payment by the Company
or any of its subsidiaries of any bonus, except for bonuses made in the ordinary
course of business consistent with past practice, or any granting by the Company
or any of its subsidiaries of any increase in severance or termination pay or
any entry by the Company or any of its subsidiaries into any currently effective
employment, severance, termination or indemnification agreement or any agreement
the benefits of which are contingent or the terms of which are materially
altered upon the occurrence of a transaction involving the Company of the nature
contemplated hereby, (iv) entry by the Company or any of its subsidiaries into
any licensing or other agreement with regard to the acquisition or disposition
of any Intellectual Property (as defined in Section 2.19 hereof) other than
------------
licenses in the ordinary course of business consistent with past practice or any
amendment or consent with respect to any licensing agreement filed or required
to be filed by the Company with the SEC, and other than licenses disclosed on
Section 2.19(j) of the Company Disclosure Letter, (v) any material change by the
Company in its accounting methods, principles or practices, except as required
by concurrent changes in GAAP, (vi) any revaluation by the Company of any of its
assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable, or (vii) any sale of
assets of the Company other than in the ordinary course of business.
2.10 Absence of Litigation. There are no claims, actions, suits or
---------------------
proceedings pending or, to the knowledge of the Company, threatened (or, to the
knowledge of the Company, any governmental or regulatory investigation pending
or threatened) against the Company or any of its subsidiaries or any properties
or rights of the Company or any of its subsidiaries, before any Governmental
Entity.
2.11 Employee Benefit Plans.
----------------------
-14-
(a) All employee compensation, incentive, fringe or benefit plans,
programs, policies, commitments or other arrangements (whether or not set forth
in a written document and including, without limitation, all "employee benefit
plans" (within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) (the "Plans") covering (i) any
----- -----
active, former employee, director or consultant of the Company, (ii) any
subsidiary of Company, or (iii) any trade or business (whether or not
incorporated) which is a member of a controlled group or which is under common
control with the Company within the meaning of Section 414 of the Code (an
"Affiliate"), or with respect to which the Company has or may in the future have
---------
liability, are listed in Section 2.11(a) of the Company Disclosure Letter. The
---------------
Company has provided to Parent: (i) correct and complete copies of all documents
embodying each Plan including (without limitation) all amendments thereto, all
related trust documents, and all material written agreements and contracts
relating to each such Plan; (ii) the three (3) most recent annual reports (Form
Series 5500 and all schedules and financial statements attached thereto), if
any, required under ERISA or the Code in connection with each Plan; (iii) the
most recent summary plan description together with the summary(ies) of material
modifications thereto, if any, required under ERISA with respect to each Plan;
(iv) all IRS determination, opinion, notification and advisory letters; (v) all
material correspondence to or from any governmental agency relating to any Plan;
(vi) all COBRA forms and related notices; (vii) all discrimination tests for
each Plan for the most recent three (3) plan years; (viii) the most recent
annual actuarial valuations, if any, prepared for each Plan; (xi) if the Plan is
funded, the most recent annual and periodic accounting of Plan assets; (x) all
material written agreements and contracts relating to each Plan, including, but
not limited to, administrative service agreements, group annuity contracts and
group insurance contracts; (xi) all material communications to employees or
former employees regarding in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits, acceleration
of payments or vesting schedules or other events which would result in any
material liability under any Plan or proposed Plan; (xii) all policies
pertaining to fiduciary liability insurance covering the fiduciaries for each
Plan; and (xiii) all registration statements, annual reports (Form 11-K and all
attachments thereto) and prospectuses prepared
in connection with any Plan.
(b) Each Plan has been maintained and administered in all material
respects in compliance with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations (foreign or domestic),
including but not limited to ERISA, and the Code, which are applicable to such
Plans. No suit, action or other litigation (excluding claims for benefits
incurred in the ordinary course of Plan activities) has been brought, or to the
knowledge of the Company is threatened, against or with respect to any such
Plan. There are no audits, inquiries or proceedings pending or, to the knowledge
of the Company, threatened by the Internal Revenue Service or Department of
Labor with respect to any Plans. All contributions, reserves or premium payments
required to be made or accrued as of the date hereof to the Plans have been
timely made or accrued. Section 2.11(b) of the Company Disclosure Letter
---------------
includes a listing of the accrued vacation liability of Company as of August 25,
2000. Any Plan intended to be qualified under Section 401(a) of the Code and
each trust intended to qualify under Section 501(a) of the Code (i) has either
obtained a favorable determination, notification, advisory and/or opinion
letter, as applicable, as to its qualified status from the Internal Revenue
Service or still has a remaining period of time under applicable Treasury
Regulations or Internal
-15-
Revenue Service pronouncements in which to apply for such letter and to make any
amendments necessary to obtain a favorable determination, and (ii) incorporates
or has been amended to incorporate all provisions required to comply with the
Tax Reform Act of 1986 and subsequent legislation or still has a remaining
period of time under applicable Treasury Regulations or Internal Revenue Service
pronouncements in which to amend the Plan. The Company does not have any plan or
commitment to establish any new Plan, to modify any Plan (except to the extent
required by law or to conform any such Plan to the requirements of any
applicable law, in each case as previously disclosed to Parent in writing, or as
required by this Agreement), or to enter into any new Plan. Each Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to Parent, the Company or any of
its Affiliates (other than ordinary administration expenses).
(c) Neither the Company, nor any of its subsidiaries, nor any of their
Affiliates has at any time ever maintained, established, sponsored, participated
in, or contributed to any plan subject to Title IV of ERISA or Section 412 of
the Code and at no time has the Company or any of its subsidiaries contributed
to or been requested to contribute to any "multiemployer plan," as such term is
defined in ERISA or to any plan described in Section 413(c) of the Code. To the
knowledge of the Company, neither the Company, any of its subsidiaries, nor any
officer or director of the Company or any of its subsidiaries is subject to any
liability or penalty under Section 4975 through 4980B of the Code or Title I of
ERISA. There are no audits, inquiries or proceedings pending or, to the
knowledge of the Company, threatened by the IRS or DOL with respect to any
Company Employee Plan. No "prohibited transaction," within the meaning of
Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise
exempt under Section 408 of ERISA, has occurred with respect to any Company
Employee Plan.
(d) Neither the Company, any of its subsidiaries, nor any of their
Affiliates has, prior to the Effective Time and in any material respect,
violated any of the health continuation requirements of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA"), the requirements of
-----
Family Medical Leave Act of 1993, as amended, the requirements of the Women's
Health and Cancer Rights Act, as amended, the requirements of the Newborns' and
Mothers' Health Protection Act of 1996, as amended, or any similar provisions of
state law applicable to employees of the Company or any of its subsidiaries.
None of the Plans promises or provides retiree medical or other retiree welfare
benefits to any person except as required by applicable law and neither the
Company nor any of its subsidiaries has represented, promised or contracted
(whether in oral or written form) to provide such retiree benefits to any
employee, former employee, director, consultant or other person, except to the
extent required by statute.
(e) Neither the Company nor any of its subsidiaries is bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union. No employee of the Company or
any of its subsidiaries is represented by any labor union or covered by any
collective bargaining agreement and, to the knowledge of the Company, no
campaign to establish such representation is in progress. There is no pending
or, to the knowledge of the Company, threatened labor dispute involving the
Company or any of its
-16-
subsidiaries and any group of its employees nor has the Company or any of its
subsidiaries experienced any labor interruptions over the past three (3) years,
and the Company and its subsidiaries consider their relationships with their
employees to be good. The Company and its subsidiaries are in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations regarding employment, employment practices, terms and
conditions of employment and wages and hours.
(f) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, bonus
or otherwise) becoming due to any stockholder, director or employee of the
Company or any of its subsidiaries under any Plan or otherwise, (ii) materially
increase any benefits otherwise payable under any Plan, or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
(g) No payment or benefit which will or may be made by the Company or
its Affiliates with respect to any Employee will be characterized as a
"parachute payment" within the meaning of Section 280G of the Code .
(h) Each International Employee Plan (as defined below) has been
established, maintained and administered in compliance with its terms and
conditions and with the requirements prescribed by any and all statutory or
regulatory laws that are applicable to such International Employee Plan.
Furthermore, no International Employee Plan has unfunded liabilities, that as of
the Effective Time, will not be offset by insurance or fully accrued. Except as
required by law, no condition exists that would prevent the Company or Parent
from terminating or amending any International Employee Plan at any time for any
reason. For purposes of this Section "International Employee Plan" shall mean
each Plan that has been adopted or maintained by the Company or any of its
subsidiaries, whether informally or formally, for the benefit of current or
former employees of the Company or any of its subsidiaries outside the United
States.
(i) Except as set forth in Section 2.11(i) of the Company Disclosure
---------------
Letter, no Company Employee Plan provides, reflects or represents any liability
to provide retiree benefits health to any person for any reason, except as may
be required by COBRA or other applicable statute, and the Company has never
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) or any other person
that such Employee(s) or other person would be provided with retiree health
benefits, except to the extent required by statute.
2.12 Labor Matters. (i) There are no material claims pending or, to the
--------------
knowledge of each of the Company and its respective subsidiaries, threatened,
between the Company or any of its subsidiaries and any of their respective
employees; (ii) as of the date of this Agreement, neither the Company nor any of
its subsidiaries is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by Company or its
subsidiaries nor does the Company or its subsidiaries know of any activities or
proceedings of any labor union to organize any such employees; and (iii) as of
the date of this Agreement, neither the Company nor
any of its subsidiaries has any knowledge of any strikes, slowdowns, work
stoppages or lockouts, or threats thereof, by or with respect to any employees
of the Company or any of its subsidiaries.
2.13 Registration Statement; Proxy Statement/Prospectus. None of the
--------------------------------------------------
information supplied or to be supplied by the Company for inclusion or
incorporation by reference in (i) the Registration Statement (as defined in
Section 5.1(a) hereof) will, at the time the Registration Statement becomes
--------------
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading, and (ii) the Proxy
Statement/Prospectus (as defined in Section 5.1(a) hereof) to be filed with the
--------------
SEC by Company pursuant to Section 5.1(a) hereof will, on the dates mailed to
--------------
the stockholders of the Company, at the time of the Company Stockholders'
Meeting (as defined in Section 5.2(a) hereof) and as of the Effective Time,
--------------
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement/Prospectus will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated by the SEC thereunder. Notwithstanding the foregoing,
the Company makes no representation or warranty with respect to any information
supplied by Parent or Merger Sub which is contained in any of the foregoing
documents.
2.14 Restrictions on Business Activities. There is no agreement,
-----------------------------------
commitment, judgment, injunction, order or decree binding upon the Company or
any of its subsidiaries or to which the Company or any of its subsidiaries is a
party which has or could reasonably be expected to have the effect of
prohibiting or impairing any business practice of the Company or any of its
subsidiaries, any acquisition of property by the Company or any of its
subsidiaries or the conduct of business by the Company or any of its
subsidiaries as currently conducted.
2.15 Title to Property. Neither the Company nor any of its subsidiaries
-----------------
owns any material real property. The Company and each of its subsidiaries have
good and defensible title to all of their material properties and assets, free
and clear of all liens, charges and encumbrances except liens for taxes not yet
due and payable and such liens or other imperfections of title, if any, as do
not materially detract from the value of or interfere with the present use of
the property affected thereby; and all leases pursuant to which Company or any
of its subsidiaries lease from others material amounts of real or personal
property are in good standing, valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
material default or event of default (or any event which with notice or lapse of
time, or both, would constitute a material default and in respect of which
Company or subsidiary has not taken adequate steps to prevent such default from
occurring). All the plants, structures and equipment of Company and its
subsidiaries, except such as may be under construction, are in good operating
condition and repair, in all material respects.
2.16 Taxes.
-----
-18-
(a) Definition of Taxes. For all purposes of and under this Agreement,
-------------------
"Tax" or "Taxes" refers to any and all federal, state, local and foreign taxes,
--- -----
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor or transferor entity.
(b) Tax Returns and Audits.
----------------------
(i) The Company and each of its subsidiaries have timely filed
all federal, reports ("Returns") relating to Taxes required to be filed by the
-------
Company state, local and foreign returns, estimates, information statements and
and each of its subsidiaries with any Tax authority, except such Returns which
are not, individually or in the aggregate, material to the Company. The Company
and each of its subsidiaries have paid all Taxes shown to be due on such
Returns.
(ii) The Company and each of its subsidiaries as of the
Effective Time will have withheld with respect to its employees all federal and
state income taxes, Taxes pursuant to the Federal Insurance Contribution Act
("FICA"), Taxes pursuant to the Federal Unemployment Tax Act ("FUTA") and other
Taxes required to be withheld, except such Taxes which are not, individually or
in the aggregate, material to the Company.
(iii) Neither the Company nor any of its subsidiaries has been
delinquent in the payment of any material Tax nor is there any material Tax
deficiency outstanding, proposed or assessed against the Company or any of its
subsidiaries, nor has the Company or any of its subsidiaries executed any
unexpired waiver of any statute of limitations on or extending the period for
the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of the Company
or any of its subsidiaries by any Tax authority is presently in progress, nor
has the Company or any of its subsidiaries been notified of any request for such
an audit or other examination.
(v) No adjustment relating to any Returns filed by the Company or
any of its subsidiaries has been proposed in writing formally or informally by
any Tax authority to the Company or any of its subsidiaries or any
representative thereof.
(vi) Neither the Company nor any of its subsidiaries has any
liability for any unpaid Taxes which has not been accrued for or reserved on the
Company's balance sheet as of June 30, 2000 in accordance with GAAP, whether
asserted or unasserted, contingent or otherwise, which is material to the
Company, other than any liability for unpaid Taxes that may have accrued since
the date of the Company Balance Sheet in connection with the operation of the
business of the Company and its subsidiaries in the ordinary course.
-19-
(vii) There is no contract, agreement, plan or arrangement to
which the Company or any of its subsidiaries is a party as of the date of this
Agreement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of the Company or any of its
subsidiaries or any other person that, individually or collectively, could
reasonably be expected to give rise to the payment of any amount that would not
be deductible pursuant to Sections 280G, 404 or 162(m) of the Code. There is no
contract, agreement, plan or arrangement to which the Company is a party or by
which it is bound to compensate any individual for excise taxes paid pursuant to
Section 4999 of the Code.
(viii) Neither the Company nor any of its subsidiaries has filed
any consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by the Company or any of its
subsidiaries. (ix) Neither the Company nor any of its subsidiaries is party to
or has any obligation under any tax-sharing, tax indemnity or tax allocation
agreement or arrangement. Neither the Company nor any of its subsidiaries has
ever been a member of a group filing a consolidated, unitary, combined or
similar Return (other than Returns which include only the Company and any of its
subsidiaries) under any federal, state, local or foreign law. Neither the
Company nor any of its subsidiaries is party to any joint venture, partnership
or other arrangement that could be treated as a partnership for federal and
applicable state, local or foreign Tax purposes.
(x) None of the Company's or its subsidiaries' assets are tax
exempt use property within the meaning of Section 168(h) of the Code.
(xi) Neither the Company nor any subsidiary of the Company has
participated as either a "distributing corporation" or a "controlled
corporation" in a distribution of stock qualifying for tax-free treatment under
Section 355 of the Code.
2.17 Environmental Matters.
---------------------
(a) Definitions. For all purposes of and under this Agreement, the
-----------
following terms shall have the following respective meanings:
(i) "Hazardous Material" means any material or substance that is
------------------
prohibited or regulated by any Environmental Law or that has been designated by
any Governmental Entity to be radioactive, toxic, hazardous or otherwise a
danger to health, reproduction or the environment.
(ii) "Business Facility" means any property including the land,
-----------------
the improvements thereon, the groundwater thereunder and the surface water
thereon, that is or at any time has been owned, operated, occupied, controlled
or leased by the Company or any of its subsidiaries in connection with the
operation of its business.
-20-
(iii) "Disposal Site" means a landfill, disposal site, disposal
-------------
agent, waste hauler or recycler of Hazardous Materials, or any real site other
than a Business Facility receiving Hazardous Materials used or generated by a
Business Facility.
(iv) "Environmental Laws" means all applicable laws, rules,
------------------
regulations, orders, treaties, statutes, and codes promulgated by any
Governmental Entity which prohibit, regulate or control any Hazardous Material
or any Hazardous Material Activity, including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
the Resource Recovery and Conservation Act of 1976, the Federal Water Pollution
Control Act, the Clean Air Act, the Hazardous Materials Transportation Act, the
Clean Water Act, comparable laws, rules, regulations, ordinances, orders,
treaties, statutes, and codes of other Governmental Entities the regulations
promulgated pursuant to any of the foregoing, and all amendments and
modifications of any of the foregoing, all as amended to date.
(v) "Hazardous Materials Activity" means the transportation,
----------------------------
transfer, recycling, storage, use, treatment, manufacture, removal, remediation,
release, exposure of others to, sale, or distribution of any Hazardous Material
or any product or waste containing a Hazardous Material, or
product manufactured with Ozone depleting substances.
(vi) "Environmental Permit" means any approval, permit,
--------------------
registration, certification, license, clearance or consent required to be
obtained from any private person or any Governmental Entity with respect to a
Hazardous Materials Activity which is or was conducted by the Company.
(b) Condition of Property. Parent and Company expressly acknowledge that
---------------------
the Company's corporate offices are located in the Middlefield-▇▇▇▇▇-▇▇▇▇▇▇
("MEW") federal Superfund Site in Mountain View, California, which has been
listed by the United States Environmental Protection Agency ("EPA") on the
federal National Priority List under the federal Comprehensive Environmental
Response, Compensation and Liability Act, 42 USC (S) 9601 et seq. Parent and
Company further expressly acknowledge that Hazardous Materials, including
chemicals designated by the State of California and EPA as carcinogens and
reproductive toxicants, have been released and are present in soil and
groundwater throughout the MEW Superfund Site. Neither the Company nor its
subsidiaries have incurred any liability to date with respect to the MEW
Superfund Site, and neither the Company nor its subsidiaries reasonably expect
to incur any material liability with respect to the MEW Superfund Site in the
future. Excluding the MEW Superfund Site and except in a manner that could not
reasonably be expected to subject the Company or its subsidiaries to material
liability, to the knowledge of the Company, no Hazardous Materials are present
on any Business Facility, or were present on any other Business Facility at the
time it ceased to be owned, operated, occupied, controlled or leased by the
Company on any of its subsidiaries. To the knowledge of the Company, there are
no underground storage tanks, asbestos which is friable or likely to become
friable or PCBs present on any Business Facility currently owned, operated,
occupied, controlled or leased by the Company or any subsidiaries or as a
consequence of the acts of the Company or its subsidiaries or agents.
-21-
(c) Hazardous Materials Activities. The Company and its subsidiaries
------------------------------
have conducted all Hazardous Material Activities relating to their business in
compliance in all material respects with all applicable Environmental Laws. The
Hazardous Material Activities of the Company and it subsidiaries prior to the
Closing have not resulted in the exposure of any person to a Hazardous Material
in a manner which has caused or could reasonably be expected to the Company or
its subsidiaries to incur liability.
(d) Permits. To the knowledge of the Company, the Company holds all
-------
Environmental Permits necessary for the conduct of the business of the Company
and its subsidiaries, and all such Environmental Permits are valid and in full
force and effect. The Company and its subsidiaries have complied in all material
respects with all covenants and conditions of any such Environmental Permit. To
the knowledge of the Company, no circumstances exist which could cause any such
Environmental Permit to be revoked, modified, or rendered non-renewable upon
payment of the permit fee.
(e) Environmental Litigation. No action, proceeding, revocation
------------------------
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
best of the Company's knowledge, threatened, concerning or relating to any
Environmental Permit or any Hazardous Materials Activity of the Company or any
of its subsidiaries relating to their business, or any Business Facility.
(f) Offsite Hazardous Material Disposal. No action, proceeding,
-----------------------------------
liability or claim has been filed against the Company or, to the actual
knowledge of the Company, is threatened against any Disposal Site or against the
Company or any of its subsidiaries with respect to any transfer or release of
Hazardous Materials relating to the Business to a Disposal Site .
(g) Reports and Records. The Company has delivered to Parent or made
-------------------
available for inspection by Parent and its agents, representatives and employees
all records in the Company's possession concerning the Hazardous Materials
Activities of the Company and its subsidiaries relating to their business and
all environmental audits and environmental assessments of any Business Facility
conducted at the request of, or otherwise in the possession of the Company. The
Company has complied with all environmental disclosure obligations imposed by
applicable law with respect to this transaction.
2.18 Brokers. Except for the fees payable to ▇▇▇▇▇▇▇ Sachs & Co. pursuant
-------
to an engagement letter dated September 1, 2000, a copy of which has been
provided to Parent, the Company has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders fees or agent's commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
2.19 Intellectual Property.
---------------------
(a) For the purposes of this Agreement, the following terms have the
following definitions:
-22-
(i) "Intellectual Property" shall mean any or all of the
---------------------
following and all rights in, arising out of, or associated therewith: (i) all
United States, international and foreign patents and applications therefor and
all reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyrights registrations
and applications therefor, and all other rights corresponding thereto throughout
the world; (iv) all mask works, mask work registrations and applications
therefor, and any equivalent or similar rights in semiconductor masks, layouts,
architectures or topology; (v) domain names, uniform resource locators ("URLs")
----
and other names and locators associated with the Internet (collectively, "Domain
------
Names"), (vi) all computer software, including all source code, object code,
-----
firmware, development tools, files, records and data, and all media on which any
of the foregoing is recorded; (vii) all industrial designs and any registrations
and applications therefor throughout the world; (viii) all trade names, logos,
common law trademarks and service marks, trademark and service ▇▇▇▇
registrations and applications therefor throughout the world; (ix) all databases
and data collections and all rights therein throughout the world; (x) all moral
and economic rights of authors and inventors, however denominated, throughout
the world, and (xi) any similar or equivalent rights to any of the foregoing
anywhere in the world.
(ii) "Company Intellectual Property" shall mean any Intellectual
-----------------------------
Property that is owned by, or exclusively licensed to, the Company or any of its
subsidiaries.
(iii) "Registered Intellectual Property" means all United States,
--------------------------------
international and foreign: (i) patents and patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks; (iii) registered copyrights and applications for
copyright registration; and (iv) any other Intellectual Property that is the
subject of an application, certificate, filing, registration or other document
issued, filed with, or recorded by any state, government or other public legal
authority.
(iv) "Company Registered Intellectual Property" means all of the
----------------------------------------
Registered Intellectual Property owned by, or filed in the name of, the Company
or any of its subsidiaries.
(b) Section 2.19(b) of the Company Disclosure Letter contains a
---------------
complete and accurate list of (i) all Company Registered Intellectual Property
and specifies, where applicable, the jurisdictions in which each such item of
Company Registered Intellectual Property has been issued or registered, and (ii)
all proceedings or actions before any court or tribunal (including the United
States Patent and Trademark Office (the "PTO") or equivalent authority anywhere
---
else in the world) related to any of the Company Registered Intellectual
Property.
(c) Section 2.19(c) of the Company Disclosure Letter contains a
---------------
complete and accurate list (by name and version number) of all products,
software or service offerings of the Company or any of its subsidiaries
(collectively, "Company Products") that have been sold,
----------------
-23-
distributed or otherwise disposed of in the ten (10)-year period preceding the
date hereof or which the Company or any of its subsidiaries currently intends to
sell, distribute or otherwise dispose of in the future, including any products
or service offerings under development.
(d) No Company Intellectual Property or Company Product is subject to
any proceeding or outstanding decree, order, judgment, contract, license,
agreement, or stipulation restricting in any manner the use, transfer, or
licensing thereof by Company or any of its subsidiaries, or which may affect the
validity, use or enforceability of such Company Intellectual Property or Company
Product.
(e) Each item of Company Registered Intellectual Property is valid and
subsisting, all necessary registration, maintenance and renewal fees currently
due in connection with such Company Registered Intellectual Property have been
made and all necessary documents, recordations and certificates in connection
with such Company Registered Intellectual Property have been filed with the
relevant patent, copyright, trademark or other authorities in the United States
or foreign jurisdictions, as the case may be, for the purposes of prosecuting,
maintaining or perfecting such Company Registered Intellectual Property.
(f) Section 2.19(f) of the Company Disclosure Letter contains a
---------------
complete and accurate list of all actions that are required to be taken by the
Company within ninety (90) days of the date hereof with respect to any of the
Company Registered Intellectual Property.
(g) The Company owns and has good and exclusive title to each item of
Company Intellectual Property owned by it, free and clear of any lien or
encumbrance (excluding non-exclusive licenses and related restrictions granted
in the ordinary course). Without limiting the generality of the foregoing, (i)
the Company is the exclusive owner of all trademarks and trade names used in
connection with the operation or conduct of the business of the Company and its
subsidiaries, including the sale, distribution or provision of any Company
Products by the Company or any of its subsidiaries, (ii) the Company owns
exclusively, and has good title to, all copyrighted works that are included or
incorporated into Company Products or which the Company or any of its
subsidiaries otherwise purports to own, and (iii) to the extent that any patents
would be infringed by any Company Products, the Company is the exclusive owner
of such patents.
(h) To the extent that any technology, software or Intellectual
Property has been developed or created independently or jointly by a third party
for the Company or any of its subsidiaries, or is incorporated into any of the
Company Products, the Company and its subsidiaries have a written agreement with
such third party with respect thereto and the Company and its subsidiaries
thereby either (i) have obtained ownership of, and is the exclusive owner of, or
(ii) have obtained perpetual, non-terminable licenses (sufficient for the
conduct of its business as currently conducted and as proposed to be conducted)
to all such third party's Intellectual Property in such work, material or
invention by operation of law or by valid assignment, to the fullest extent it
is legally possible to do so.
(i) Neither the Company nor any of its subsidiaries has transferred
ownership of, or granted any exclusive license with respect to, any Intellectual
Property that is Company
-24-
Intellectual Property, to any third party, or knowingly permitted the Company's
rights in such Company Intellectual Property to lapse or enter the public
domain.
(j) Other than "shrink wrap" and similar widely available commercial
end-user licenses, Section 2.19(j) of the Company Disclosure Letter contains a
---------------
complete and accurate list of all contracts, licenses and agreements to which
the Company or any of its subsidiaries is a party (i) with respect to Company
Intellectual Property licensed or transferred to any third party, or (ii)
pursuant to which a third party has licensed or transferred any Intellectual
Property to the Company or any of its subsidiaries.
(k) All contracts, licenses and agreements relating to either (i)
Company Intellectual Property, or (ii) Intellectual Property of a third party
licensed to the Company or any of its subsidiaries, are in full force and
effect. The consummation of the transactions contemplated by this Agreement will
neither violate nor result in the breach, modification, cancellation,
termination, suspension of, or acceleration of any payments with respect to,
such contracts, licenses and agreements. Each of the Company and its
subsidiaries is in material compliance with, and has not materially breached any
term of any such contracts, licenses and agreements and, to the knowledge of the
Company, all other parties to such contracts, licenses and agreements are in
compliance with, and have not materially breached any term of, such contracts,
licenses and agreements. Following the Closing Date, the Surviving Corporation
will be permitted to exercise all of the Company's and its subsidiaries' rights
under such contracts, licenses and agreements to the same extent the Company and
its subsidiaries would have been able to had the transactions contemplated by
this Agreement not occurred and without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments which the Company
or any of its subsidiaries would otherwise be required to pay. Neither this
Agreement nor the transactions contemplated by this Agreement, including the
assignment to Parent or Merger Sub by operation of law or otherwise of any
contracts or agreements to which the Company is or any of its subsidiaries are a
party, will result in (i) either Parent's or the Merger Sub's granting to any
third party any right to or with respect to any material Intellectual Property
right owned by, or licensed to, either of them, (ii) either the Parent's or the
Merger Sub's being bound by, or subject to, any non-compete or other material
restriction on the operation or scope or their respective businesses, or (iii)
either the Parent's or the Merger Sub's being obligated to pay any royalties or
other material amounts to any third party in excess of those payable by Parent
or Merger Sub, respectively, prior to the Closing.
(l) The operation of the business of the Company and its subsidiaries
as such business currently is conducted and reasonably contemplated to be
conducted, including (i) the Company's and its subsidiaries' design,
development, manufacture, distribution, reproduction, marketing or sale of the
products, software or services of the Company and its subsidiaries (including
Company Products), and (ii) the Company's use of any product, device or process,
has not, does not and will not infringe or misappropriate the Intellectual
Property of any third party or, to its knowledge, constitute unfair competition
or trade practices under the laws of any jurisdiction.
-25-
(m) The Company Intellectual Property constitutes all the material
Intellectual Property used in and/or necessary to the conduct of the business of
the Company and its subsidiaries as it currently is conducted, and as it is
currently planned to be conducted by the Company and its subsidiaries,
including, without limitation, the design, development, manufacture, use, import
and sale of products, technology and performance of services (including the
Company Products).
(n) Neither the Company nor any of its subsidiaries has received
notice from any third party that the operation of the business of the Company or
any of its subsidiaries or any act, product or service of the Company or any of
its subsidiaries, infringes or misappropriates the Intellectual Property of any
third party or constitutes unfair competition or trade practices under the laws
of any jurisdiction.
(o) To the knowledge of the Company, no person has or is infringing
or misappropriating any Company Intellectual Property.
(p) The Company and each of its subsidiaries has taken reasonable
steps to protect Company's and its subsidiaries' rights in Company's
confidential information and trade secrets that it wishes to protect or any
trade secrets or confidential information of third parties provided to Company
or any of its subsidiaries, and, without limiting the foregoing, each of Company
and its subsidiaries has and enforces a policy requiring each employee and
contractor to execute a proprietary information/confidentiality agreement
substantially in the form provided to Parent and all current and former
employees and contractors of Company and any of its subsidiaries have executed
such an agreement, except where the failure to do so is not reasonably expected
to be material to Company.
(q) To the knowledge of the Company, all of the Company's and its
subsidiaries' products (including Company Products) (i) will record, store,
process, calculate and present calendar dates falling on and after (and if
applicable, spans of time including) January 1, 2000, and will calculate any
information dependent on or relating to such dates in the same manner, and with
the same functionality, data integrity and performance, as the products record,
store, process, calculate and present calendar dates on or before December 31,
1999, or calculate any information dependent on or relating to such dates
(collectively, "Year 2000 Compliant"), (ii) will lose no functionality with
-------------------
respect to the introduction of records containing dates falling on or after
January 1, 2000, and (iii) will be interoperable with other products used and
distributed by Parent that may reasonably deliver records to the Company's or
any of its subsidiaries' products or receive records from the Company's or any
of its subsidiaries' products, or interact with the Company's or any of its
subsidiaries' products. All of the Company's or its subsidiaries' Information
Technology (as defined below) is Year 2000 Compliant, and will not cause an
interruption in the ongoing operations of the Company's or any of its
subsidiaries' business on or after January 1, 2000. For purposes of the
foregoing, the term "Information Technology" shall mean and include all
----------------------
software, hardware, firmware, telecommunications systems, network systems,
embedded systems and other systems, components and/or services (other than
general utility services including gas, electric, telephone and postal) that are
owned or
-26-
used by the Company or any of its subsidiaries in the conduct of their business,
or purchased by the Company or any of its subsidiaries from third-party
suppliers.
2.20 Agreements, Contracts and Commitments.
-------------------------------------
(a) Neither the Company nor any of its subsidiaries is a party to or
is bound by:
(i) any employment or consulting agreement, contract or
commitment with any officer or director or higher level employee or member of
the Company's Board of Directors, other than those that are terminable by the
Company or any of its subsidiaries on no more than thirty (30) days notice
without liability or financial obligation to the Company;
(ii) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(iii) any agreement of indemnification or any guaranty other
than any agreement of indemnification entered into in connection with the sale
or license of hardware or software products in the ordinary course of business;
(iv) any agreement, contract or commitment containing any
covenant limiting in any respect the right of the Company or any of its
subsidiaries to engage in any line of business or to compete with any person or
granting any exclusive distribution rights;
(v) any agreement, contract or commitment currently in force
relating to the disposition or acquisition by the Company or any of its
subsidiaries after the date of this Agreement of a material amount of assets not
in the ordinary course of business or pursuant to which the Company or any of
its subsidiaries has any material ownership interest in any corporation,
partnership, joint venture or other business enterprise other than the Company's
subsidiaries;
(vi) any dealer, distributor, joint marketing or development
agreement currently in force under which the Company or any of its subsidiaries
have continuing material obligations to jointly market any product, technology
or service and which may not be canceled without penalty upon notice of ninety
(90) days or less, or any material agreement pursuant to which Company or any of
its subsidiaries have continuing material obligations to jointly develop any
intellectual property that will not be owned, in whole or in part, by Company or
any of its subsidiaries and which may not be canceled without penalty upon
notice of ninety (90) days or less;
(vii) any agreement, contract or commitment currently in force
to provide source code to any third party for any product or technology that is
material to Company and its subsidiaries taken as a whole;
-27-
(viii) any agreement, contract or commitment currently in force
to license any third party to manufacture or reproduce any Company Product,
service or technology or any agreement, contract or commitment currently in
force to sell or distribute any Company Products, services or technology, except
agreements with distributors or sales representative in the normal course of
business cancelable without penalty upon notice of ninety (90) days or less and
substantially in the form previously provided to Parent;
(ix) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit, other than accounts receivables
and payables in the ordinary course of business;
(x) any material settlement agreement entered into within five
(5) years prior to the date of this Agreement; or
(xi) any other agreement, contract or commitment that has a
value of $300,000 or more in any individual case.
(b) Neither the Company nor any of its subsidiaries, nor to the
Company's knowledge any other party to a Company Contract (as defined below), is
in breach, violation or default under, and neither the Company nor any of its
subsidiaries has received written notice that it has breached, violated or
defaulted under, any of the material terms or conditions of any of the
agreements, contracts or commitments to which the Company or any of its
subsidiaries is a party or by which it is bound that are required to be set
forth in the Company Disclosure Letter (any such agreement, contract or
commitment, a "Company Contract") in such a manner as would permit any
----------------
other party to cancel or terminate any such Company Contract, or would permit
any other party to seek material damages or other remedies (for any or all of
such breaches, violations or defaults, in the aggregate).
2.21 Insurance. The Company maintains insurance policies and fidelity
---------
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company and its subsidiaries
(collectively, the "Insurance Policies") which the Company reasonably believes
------------------
are of the type and in amounts customarily carried by persons conducting
businesses similar to those of the Company and its subsidiaries. There is no
material claim by the Company or any of its subsidiaries pending under any of
the material Insurance Policies as to which coverage has been questioned, denied
or disputed by the underwriters of such policies or bonds. The Company is not
aware of, and has not received notice under any Insurance Policies of, (i) an
insurer's intention or threat to cancel or terminate any of the Insurance
Policies, (ii) an insurer's intention or threat to increase the premiums due
under any of the Insurance Policies.
2.22 Opinion of Financial Advisor. The Company has received the opinion of
----------------------------
its financial advisor, ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., to the effect that, as of the date
hereof, the Exchange Ratio pursuant to this Agreement is fair from a financial
point of view to the stockholders of the Company, and will provide a copy of
such opinion to Parent within three (3) business days of the date of this
Agreement.
-28-
2.23 Board Approval. The Board of Directors of Company has, as of the date
--------------
of this Agreement, unanimously (i) approved this Agreement and the transactions
contemplated hereby, subject to stockholder approval, (ii) approved the Stock
Option Agreement and the transactions contemplated thereby, (iii) determined
that the Merger is in the best interests of the stockholders of Company and is
on terms that are fair to such stockholders, and (iv) recommended that the
stockholders of Company approve and adopt this Agreement and approve the Merger.
2.24 Vote Required. The affirmative vote of the holders of a majority of
-------------
the outstanding shares of Company Common Stock is the only vote of the holders
of any class or series of the Company's capital stock necessary to approve and
adopt this Agreement and approve the Merger.
2.25 State Takeover Statutes. The Board of Directors of the Company has
-----------------------
approved the Merger, this Agreement, the Stock Option Agreement and the Voting
Agreements, and such approval is sufficient to render inapplicable to the
Merger, this Agreement, the Stock Option Agreement and the Voting Agreements and
the transactions contemplated by this Agreement, the Stock Option Agreement and
the Voting Agreements, the provisions of Section 203 of the Delaware Law to the
extent, if any, such Section is applicable to the Merger, this Agreement, the
Stock Option Agreement and the Voting Agreements and the transactions
contemplated by this Agreement, the Stock Option Agreement and the Voting
Agreements. No other state takeover statute or similar statute or regulation
applies to or purports to apply to the Merger, this Agreement, the Stock Option
Agreement and the Voting Agreements or the transactions contemplated by this
Agreement, the Stock Option Agreement and the Voting Agreements.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to the
Company, as of the date hereof and as of the Closing Date as though made at the
Closing Date, as follows:
3.1 Organization and Qualification; Subsidiaries. Each of Parent and its
--------------------------------------------
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted, except, in
the case of Parent's subsidiaries, for such failures to be so duly organized,
validly existing and in good standing that would not, either individually or in
the aggregate, have a Material Adverse Effect on Parent. Each of Parent and its
subsidiaries is in possession of all Approvals necessary to own, lease and
operate the properties it purports to own, operate or lease and to carry on its
business as it is now being conducted, except where the failure to have such
Approvals would not, individually or in the aggregate, have a Material Adverse
Effect on Parent. Each of Parent and its subsidiaries is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good
-29-
standing that would not, either individually or in the aggregate, have a
Material Adverse Effect on Parent.
3.2 Certificate of Incorporation and Bylaws. Parent has previously
---------------------------------------
furnished to Company a complete and correct copy of its Certificate of
Incorporation and Bylaws as amended to date. Such Certificate of Incorporation,
Bylaws and equivalent organizational documents of each of its subsidiaries are
in full force and effect. Neither Parent nor any of its subsidiaries is in
violation of any of the provisions of its Certificate of Incorporation or Bylaws
or equivalent organizational documents.
3.3 Capitalization. Before giving effect to the Parent Stock Split and
--------------
the Parent Share Increase, the authorized capital stock of Parent consists of
(i) three billion and six hundred million (3,600,000,000) shares of Parent
Common Stock and of (ii) ten million (10,000,000) shares of Preferred Stock, par
value $0.00067 per share ("Parent Preferred Stock"). At the close of business on
----------------------
September 12, 2000 (i) 1,609,171,019 shares of Parent Common Stock were issued
and outstanding, all of which are validly issued, fully paid and nonassessable,
(ii) 137,210,572 shares of Parent Common Stock were held in treasury by Parent
or by subsidiaries of Parent, (iii) 63,305,420 shares of Parent Common Stock
were reserved for future issuance pursuant to Parent's employee stock purchase
plan, (iv) 218,104,814 shares of Parent Common Stock were reserved for issuance
upon the exercise of outstanding options ("Parent Options") to purchase Parent
--------------
Common Stock. As of the date hereof, no shares of Parent Preferred Stock were
issued or outstanding, other than shares of Parent Preferred Stock reserved for
future issuance pursuant to the Rights (as defined in the Parent Rights
Agreement). The authorized capital stock of Merger Sub consists of 1,000 shares
of common stock, par value $0.001 per share, all of which, as of the date
hereof, are issued and outstanding. All of the outstanding shares of Parent's
and Merger Sub's respective capital stock have been duly authorized and validly
issued and are fully paid and nonassessable. All shares of Parent Common Stock
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, shall, and the
shares of Parent Common Stock to be issued pursuant to the Merger will be, duly
authorized, validly issued, fully paid and nonassessable. All of the outstanding
shares of capital stock (other than directors' qualifying shares) of each of
Parent's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and all such shares (other than directors' qualifying shares) are
owned by Parent or another subsidiary free and clear of all security interests,
liens, claims, pledges, agreements, limitations in Parent's voting rights,
charges or other encumbrances of any nature whatsoever, except as would not,
either individually or in the aggregate, have a Material Adverse Effect on
Parent.
3.4 Authority Relative to this Agreement. Each of Parent and Merger Sub
------------------------------------
has all necessary corporate power and authority to execute and deliver this
Agreement and the Stock Option Agreement, and to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Stock Option
Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub
of the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of Parent and Merger
Sub and no other
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corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement and the Stock Option Agreement, or to consummate the
transactions so contemplated. The Board of Directors of Parent has, as of the
date this Agreement, approved this Agreement and the Stock Option Agreement and
the transactions contemplated hereby and thereby, and no further corporate
action is required on the part of Parent to authorize this Agreement or the
Stock Option Agreement or the transactions contemplated hereby or thereby. This
Agreement and the Stock Option Agreement have been duly and validly executed and
delivered by Parent and Merger Sub and, assuming the due authorization,
execution and delivery by Company, constitute legal and binding obligations of
Parent and Merger Sub, enforceable against Parent and Merger Sub in accordance
with their respective terms, except as enforceability may be subject to and
limited by laws of general application relating to bankruptcy, insolvency and
the relief of debtors, and rules of law governing specific performance
injunctive relief or other equitable remedies.
3.5 No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement by Parent and Merger
Sub and the Stock Option Agreement by Parent do not, and the performance of this
Agreement by Parent and Merger Sub and the Stock Option Agreement by Parent
shall not, (i) conflict with or violate the Certificate of Incorporation, Bylaws
or equivalent organizational documents of Parent or any of its subsidiaries,
(ii) subject to obtaining the consents, approvals, authorizations and permits
and making the registrations, filings and notifications, set forth in Section
-------
3.5(b) hereof, conflict with or violate any law, rule, regulation, order,
------
judgment or decree applicable to Parent or any of its subsidiaries or by which
it or their respective properties are bound or affected, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or impair Parent's or any such
subsidiary's rights or alter the rights or obligations of any third party under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Parent or any of its subsidiaries pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent or any of
its subsidiaries is a party or by which Parent or any of its subsidiaries or its
or any of their respective properties are bound or affected, except to the
extent such conflict, violation, breach, default, impairment or other effect
could not in the case of clauses (ii) or (iii) individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent.
(b) The execution and delivery of this Agreement by Parent and Merger
Sub and the Stock Option Agreement by Parent do not, and the performance of this
Agreement by Parent and Merger Sub shall not, require any consent, approval,
authorization or permit of, or registration, filing with or notification to, any
Governmental Entity, except for (i) applicable requirements, if any, of the
Securities Act, the Exchange Act, Blue Sky Laws, the pre-merger notification
requirements of the HSR Act and of foreign governmental entities and the rules
and regulations promulgated thereunder, (ii) the rules and regulations of The
Nasdaq Stock Market, Inc., (iii) the filing and recordation of the Certificate
of Merger as required by the Delaware Law and (iv) where the failure to obtain
such consents, approvals, authorizations or permits, or to
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make such filings or notifications, (A) would not prevent consummation of the
Merger or otherwise prevent Parent or Sub from performing their respective
obligations under this Agreement or (B) could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Parent.
3.6 SEC Filings.
-----------
(a) Parent has made available to the Company a correct and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by Parent with the SEC on or after July 1, 1999 and prior to the
date of this Agreement (the "Parent SEC Reports"), which are all the forms,
------------------
reports and documents required to be filed by Parent with the SEC since such
date. The Parent SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of Parent's subsidiaries is required to file any reports or
other documents with the SEC.
(b) Each set of consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited statements, do not contain footnotes as permitted by Form 10-Q
of the Exchange Act) and each fairly presents in all material respects the
consolidated financial position of Parent and its subsidiaries at the respective
dates thereof and the consolidated results of its operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal adjustments which were not or are not expected to
be material in amount.
3.7 Absence of Changes. Since June 30, 2000, there has not been any
------------------
Material Adverse Effect on Parent.
3.8 Registration Statement; Proxy Statement/Prospectus. None of the
--------------------------------------------------
information supplied or to be supplied by Parent for inclusion or incorporation
by reference in (i) the Registration Statement will, at the time the
Registration Statement becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading; and (ii)
the Proxy Statement/Prospectus will, at the dates mailed to the stockholders of
Company, at the time of the Company Stockholders' Meeting and as of the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. The Registration Statement will comply as to form in all
material respects with the provisions of the Securities Act and the rules and
regulations promulgated by the SEC thereunder. Notwithstanding the foregoing,
Parent makes no representation or warranty with
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respect to any information supplied by the Company which is contained in any of
the foregoing documents.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by the Company.
----------------------------------
(a) During the period commencing with the execution and delivery of
this Agreement and continuing until the earlier to occur of the termination of
this Agreement pursuant to its terms or the Effective Time, the Company and each
of its subsidiaries shall, except to the extent that Parent shall otherwise
consent in writing, carry on its business, in the usual, regular and ordinary
course, in substantially the same manner as heretofore conducted and in
compliance with all applicable laws and regulations, pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, pay or perform
other material obligations when due, and use its commercially reasonable efforts
consistent with past practices and policies to (i) preserve intact its present
business organization, (ii) keep available the services of its present officers
and employees and (iii) preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings. In addition, Company will promptly notify Parent of any material event
involving its business or operations.
(b) Except as permitted or required by the terms of this Agreement,
or as set forth in Section 4.1 of the Company Disclosure Letter, during the
-----------
period commencing with the execution and delivery of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, the Company shall not do any of the following,
and shall not permit any of its subsidiaries to do any of the following, except
to the extent that Parent shall otherwise consent in writing:
(i) waive any stock repurchase rights, accelerate, amend or
change the period of exercisability of options or restricted stock, or reprice
options granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of such
plans;
(ii) grant any severance or termination pay to any officer or
employee except pursuant to written agreements outstanding, or policies
existing, on the date hereof and as previously disclosed in writing or made
available to Parent, or adopt any new severance plan, or amend or modify or
alter in any respect any severance plan, agreement or arrangement existing on
the date hereof, or grant any equity-based compensation (except as permitted by
Section 4.1(b)(iv) hereof), whether payable in cash or stock;
------------------
(iii) transfer or license to any person or entity, or otherwise
extend, amend or modify any rights to the Company Intellectual Property, or
enter into any agreements or make other commitments or arrangements to grant,
transfer or license to any person future patent rights other than non-exclusive
licenses granted to end-users in the ordinary course of business and consistent
with past practice;
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(iv) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, stock, equity securities or property) in
respect of, any capital stock of the Company or any of its subsidiaries, or
split, combine or reclassify any such capital stock, or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for any such capital stock;
(v) purchase, redeem or otherwise acquire, directly or
indirectly, any shares of capital stock of the Company or any of its
subsidiaries, except repurchases of unvested shares at cost in connection with
the termination of the employment relationship with any employee pursuant to
stock option or purchase agreements in effect on the date hereof;
(vi) issue, deliver, sell, authorize, pledge or otherwise
encumber (or propose any of the foregoing with respect to) any shares of capital
stock of the Company or of any subsidiaries of the Company or any securities
convertible into, or exercisable or exchangeable for, shares of such capital
stock, or any subscriptions, rights, warrants or options to acquire any shares
of such capital stock, or enter into other agreements or commitments of any kind
or character obligating the Company or any of its subsidiaries to issue any
shares of such capital stock or securities convertible, or exercisable or
exchangeable for, shares of such capital stock, other than (A) the issuance,
delivery and/or sale of (x) shares of Company Common Stock pursuant to the
exercise of stock options therefor outstanding on the date of this Agreement,
and (y) shares of Company Common Stock issuable to participants in the Employee
Stock Purchase Plan consistent with the terms thereof, and (B) the granting of
stock options, in the ordinary course of business and consistent with past
practices, to newly hired employees who are not executive officers of the
Company in an aggregate amount not to exceed the amount set forth in Section 4.1
-----------
of the Company Disclosure Letter;
(vii) cause, permit or propose any amendments to its Certificate
of Incorporation, Bylaws or other charter documents (or similar governing
instruments of any of its subsidiaries);
(viii) acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest in or a portion of the assets of, or
by any other manner, any business or any corporation, limited liability company,
general or limited partnership, business trust, unincorporated association or
other business organization, entity or division thereof, or otherwise acquire or
agree to acquire all or substantially all of the assets of any of the foregoing,
or purchase any equity interest in any of the foregoing or enter into any joint
ventures, strategic partnerships or similar alliances;
(ix) sell, lease, license, encumber or otherwise dispose of any
properties or assets, except sales of inventory in the ordinary course of
business consistent with past practice, and except for the sale, lease or
disposition (other than through licensing) of property or assets which are not
material, individually or in the aggregate, to the business of Company and its
subsidiaries;
(x) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
options, warrants, calls or
-34-
other rights to acquire any debt securities of the Company, enter into any "keep
well" or other agreement to maintain any financial statement condition or enter
into any arrangement having the economic effect of any of the foregoing, other
than in connection with the financing of ordinary course trade payables
consistent with past practice;
(xi) adopt or amend any employee benefit plan, policy or
arrangement, or employee stock purchase or stock option plan, or enter into any
employment contract or collective bargaining agreement (other than offer letters
and letter agreements entered into, in the ordinary course of business and
consistent with past practice, with newly hired employees who are terminable "at
will" and who are not officers of the Company), pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
or fringe benefits (including rights to severance or indemnification) of its
directors, officers, employees or consultants;
(xii) (A) pay, discharge, settle or satisfy any claims,
liabilities or obligations (whether absolute or contingent, asserted or
unasserted, accrued or unaccrued, or otherwise) or litigation (whether or not
commenced prior to the date of this Agreement), other than the payment,
discharge, settlement or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms as in existence
as of the date hereof, or (B) waive the benefits of, agree to modify in any
manner, terminate, release any person from or knowingly fail to enforce any
confidentiality or similar agreement to which the Company or any of its
subsidiaries is a party or of which the Company or any of its subsidiaries is a
beneficiary;
(xiii) make any payments outside of the ordinary course of
business in excess of $300,000 in the case of any individual or series of
related payments, or $1,000,000 in the aggregate, excluding payments permitted
by this Section 4.1.
-----------
(xiv) modify, amend or terminate any material contract or
agreement to which the Company or any of its subsidiaries is a party, or waive,
delay the exercise of, release or assign any material rights or claims
thereunder;
(xv) enter into, renew or modify any contracts, agreements or
obligations relating to the distribution, sale, license or marketing by third
parties of the products of the Company or any of its subsidiaries, or products
licensed by the Company or any of its subsidiaries, other than non-exclusive
contracts, agreements or obligations which may be cancelled by the Company
without penalty and with prior notice of sixty (60) days or less;
(xvi) except as required by GAAP, revalue any assets of the
Company or any of its subsidiaries, or make any change in accounting methods,
principles or practices;
(xvii) incur or enter into any agreement, contract or other
commitment or arrangement requiring the Company or any of its subsidiaries to
make payments in excess of $300,000 in any individual case, or $1,000,000 in the
aggregate;
-35-
(xviii) engage in any action that could reasonably be expected to
cause the Merger to fail to qualify as a "reorganization" under Section 368(a)
of the Code, whether or not otherwise permitted by the provisions of this
Article IV;
----------
(xix) engage in any action with the intent to, directly or
indirectly, adversely impact or materially delay the consummation of the Merger
or any of the other transactions contemplated by this Agreement; or
(xx) hire any employee with an annual compensation level in
excess of $100,000, except for employees who are not executive officers and are
hired on an "at-will" basis in the ordinary course of business consistent with
past practices;
(xxi) make any Tax election that is reasonably likely to
adversely affect in any material respect the Tax liabilities or Tax attributes
of the Company or any of its subsidiaries, or settle or compromise any material
income Tax liability, or consent to any extension or waiver of any limitations
period with respect to Taxes;
(xxii) other than fees payable to pursuant to the engagement
letter referred to in Section 2.18 hereof, make any individual or series of
------------
related payments outside of the ordinary course of business (including payments
to legal, accounting or other professional service advisors) in excess of
$1,000,000 in the aggregate;
(xxiii) agree in writing or otherwise to take any of the actions
described in Section 4.1(b)(i) through Section 4.1(b)(xxii), inclusive.
----------------- --------------------
4.2 Conduct of Business by Parent. During the period from the date of
-----------------------------
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, except as permitted by
the terms of this Agreement and the Stock Option Agreement, without the prior
written consent of the Company, Parent shall not engage in any action that would
reasonably be expected to cause the Merger to fail to qualify as a
"reorganization" under Section 368(a) of the Code.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement; Other Filings;
------------------------------------------------------------------
Board Recommendations.
---------------------
(a) As promptly as practicable after the execution of this Agreement,
the Company and Parent shall prepare and file with the SEC a proxy
statement/prospectus to be delivered to the stockholders of the Company in
connection with the Merger (the "Proxy Statement/Prospectus"), and Parent
--------------------------
shall prepare and file with the SEC a registration statement on Form S-4, in
which the Proxy Statement/Prospectus will be included as a prospectus, in
connection with the issuance of the Parent Common Stock in or as a result of the
Merger (the "Registration Statement"). Each of the Company and Parent shall
----------------------
promptly provide to the other all such information concerning its business and
financial statements and affairs as reasonably
-36-
may be required or appropriate for inclusion in the Proxy Statement/Prospectus
or the Registration Statement, or in any amendments or supplements thereto, and
to cause its counsel and auditors to cooperate with the other party's counsel
and auditors in the preparation of the Proxy Statement/Prospectus and the
Registration Statement. Each of the Company and Parent shall respond to any
comments of the SEC, and shall use its respective commercially reasonable
efforts to have the Registration Statement declared or ordered effective under
the Securities Act as promptly as practicable after such filing, the Company
shall cause the Proxy Statement/Prospectus to be mailed to its stockholders at
the earliest practicable time after the Registration Statement is declared or
ordered effective by the SEC. As promptly as practicable after the date of this
Agreement, each of the Company and Parent shall prepare and file any other
filings required to be filed by it under the Exchange Act, the Securities Act or
any other Federal, foreign, state "blue sky" or related laws relating to the
Merger and the transactions contemplated by this Agreement (the "Other
-----
Filings"). Each of the Company and Parent shall notify the other promptly upon
-------
the receipt of any comments from the SEC or its staff or any other government
officials and of any request by the SEC or its staff or any other government
officials for amendments or supplements to the Registration Statement, the Proxy
Statement/Prospectus or any Other Filing, or for additional information and
shall supply the other with copies of all correspondence between such party or
any of its representatives, on the one hand, and the SEC or its staff or any
other government officials, on the other hand, with respect to the Registration
Statement, the Proxy Statement/Prospectus, the Merger or any Other Filing. Each
of the Company and Parent shall cause all documents that it is responsible for
filing with the SEC or other regulatory authorities under this Section 5.1(a) to
--------------
comply in all material respects with all applicable requirements of law and the
rules and regulations promulgated thereunder. Whenever any event occurs which is
required to be set forth in an amendment or supplement to the Proxy
Statement/Prospectus, the Registration Statement or any Other Filing, the
Company or Parent, as the case may be, shall promptly inform the other of such
occurrence and cooperate in filing with the SEC or its staff or any other
government officials, and/or mailing to the stockholders of the Company, such
amendment or supplement.
(b) The Proxy Statement/Prospectus shall include (i) the unanimous
recommendation of the Board of Directors of the Company in favor of adoption and
approval of this Agreement and approval of the Merger, subject to the right of
the Board of Directors of the Company to withhold, withdraw, amend, modify or
change its recommendation and recommend a Superior Offer in accordance with
Section 5.2(c) hereof, and (ii) the opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. referred to
--------------
in Section 2.22 hereof.
------------
5.2 Meeting of Company Stockholders.
-------------------------------
(a) Promptly after the date hereof, the Company shall take all action
necessary in accordance with Delaware Law and its Certificate of Incorporation
and Bylaws to convene a meeting of the stockholders of the Company (the "Company
-------
Stockholders' Meeting") to be held as promptly as practicable, and in any event
----------------------
(to the extent permissible under Delaware Law and the Certificate of
Incorporation and Bylaws of the Company) within forty five (45) calendar days,
following the declaration of effectiveness of the Registration Statement, for
the purpose of voting upon this Agreement and the Merger. Subject to the terms
of Section 5.2(c) hereof, the
--------------
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Company shall use commercially reasonable efforts to solicit from its
stockholders proxies in favor of the adoption and approval of this Agreement and
the approval of the Merger, and shall take all other commercially reasonable
action necessary or advisable to secure the vote or consent of its stockholders
required by the rules of The Nasdaq Stock Market, Inc. or Delaware Law to obtain
such approvals. The Company may adjourn or postpone the Company Stockholders'
Meeting (i) if and to the extent necessary to ensure that any necessary
supplement or amendment to the Proxy Statement/Prospectus is provided to the
Company's stockholders in advance of a vote on this Agreement and the Merger, or
(ii) if, as of the time for which the Company Stockholders' Meeting is
originally scheduled (as set forth in the Proxy Statement/Prospectus), there are
insufficient shares of Company Common Stock represented (either in person or by
proxy) to constitute a quorum necessary to conduct the business of the Company
Stockholders' Meeting. The Company shall ensure that the Company Stockholders'
Meeting is called, noticed, convened, held and conducted, and that all proxies
solicited by the Company in connection with the Company Stockholders' Meeting
are solicited, in compliance with Delaware Law, and the Certificate of
Incorporation and Bylaws of the Company, the rules of The Nasdaq Stock Market,
Inc. and all other applicable legal requirements. Notwithstanding anything to
the contrary contained in this Agreement, the Company's obligation to call, give
notice of, convene and hold the Company Stockholders' Meeting in accordance with
this Section 5.2(a) shall not be limited to or otherwise affected by the
--------------
commencement, disclosure, announcement or submission to the Company of any
Acquisition Proposal (as defined below), or by any withholding, withdrawal,
amendment, modification or change of the recommendation of the Board of
Directors of the Company with respect to this Agreement and/or the Merger.
(b) Unless the Board of Directors of the Company shall have withheld,
withdrawn, amended, modified or changed its recommendation of this Agreement and
the Merger in compliance with Section 5.2(c) hereof: (i) the Board of Directors
of the Company shall unanimously recommend that the Company's stockholders vote
in favor of and adopt and approve this Agreement and approve the Merger at the
Company Stockholders' Meeting; (ii) the Proxy Statement/Prospectus shall include
a statement to the effect that the Board of Directors of the Company has
unanimously recommended that the Company's stockholders vote in favor of and
adopt and approve this Agreement and approve the Merger at the Company
Stockholders' Meeting; and (iii) neither the Board of Directors of the Company
nor any committee thereof shall withhold, withdraw, amend, modify, change or
propose or resolve to withhold, withdraw, amend, modify or change, in each case
in a manner adverse to Parent, the unanimous recommendation of the Board of
Directors of the Company that the Company's stockholders vote in favor of and
adopt and approve this Agreement and approve the Merger. For all purposes of and
under this Agreement, the foregoing recommendation of the Board of Directors of
the Company shall be deemed to have been modified in a manner adverse to Parent
if such recommendation by the Board of Directors of the Company or any committee
thereof shall no longer be unanimous.
(c) Nothing in this Agreement shall prevent the Board of Directors of
the Company from withholding, withdrawing, amending, modifying or changing its
unanimous recommendation in favor of the adoption and approval of this Agreement
and approval of the Merger if (i) a Superior Offer (as defined below) is made to
the Company and is not withdrawn, (ii) neither the Company nor any of its
representatives shall have violated the terms of
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Section 5.5 hereof and the Company is not then in material breach of this
-----------
Agreement, and (iii) the Board of Directors of the Company reasonably concludes
in good faith, after consultation with its outside counsel, that, in light of
such Superior Offer, the withholding, withdrawal, amendment, modification or
changing of such recommendation is required in order for the Board of Directors
of the Company to comply with its fiduciary obligations to the Company's
stockholders under Delaware Law with respect to such Superior Offer; provided,
however, that prior to publicly withholding, withdrawing, amending, modifying or
changing its recommendation in favor of the adoption and approval of this
Agreement and approval of the Merger, the Company shall have given Parent at
least three (3) business days prior written notice (or such lesser prior notice
as provided to the members of Company's Board of Directors) thereof and the
opportunity to meet with the Company and its counsel. Nothing contained in this
Section 5.2 shall limit the Company's obligation to hold and convene the Company
-----------
Stockholders' Meeting (regardless of whether the unanimous recommendation of the
Board of Directors of the Company shall have been withheld, withdrawn, amended,
modified or changed pursuant hereto). As used in this Agreement, the term
"Superior Offer" shall mean any bona fide, unsolicited written Acquisition
--------------
Proposal (as defined in Section 5.5(b) hereof) for all of the outstanding shares
--------------
of Company Common Stock on terms that the Board of Directors of the Company
determines in good faith, after considering the advice of a financial advisor of
nationally recognized reputation and taking into account all the terms and
conditions of the Acquisition Proposal, are more favorable to the Company's
stockholders than the terms of the Merger; provided, however, that any such
offer shall not be deemed to be a "Superior Offer" pursuant hereto if any
financing required to consummate the transaction contemplated by such offer is
both not committed and not likely, in the judgment of the Board of Directors of
the Company, to be obtained by such third party on a timely basis.
5.3 Confidentiality. The parties hereto acknowledge that the Company and
---------------
Parent have previously executed a Confidential Disclosure Agreement, dated as of
September 8, 2000 (the "Confidentiality Agreement"), which Confidentiality
-------------------------
Agreement will continue in full force and effect in accordance with its terms.
5.4 Access to Information. During the period commencing with the
---------------------
execution and delivery of this Agreement until the earlier to occur of the
termination of this Agreement pursuant to its terms and the Effective Time, the
Company shall afford Parent and its accountants, counsel and other
representatives reasonable access during normal business hours to the
properties, books, records and personnel of the Company to obtain all
information concerning the business of the Company, including, without
limitation, the status of the Company's product development efforts, properties,
results of operations and personnel, as Parent may reasonably request. No
information or knowledge obtained by Parent during the course of any
investigation conducted pursuant to this Section 5.4 shall affect, or be deemed
-----------
to modify in any respect any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Merger contained
herein.
5.5 No Solicitation.
---------------
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(a) During the period commencing with the execution and delivery of
this Agreement until the earlier to occur of the termination of this Agreement
pursuant to its terms and the Effective Time, the Company and its subsidiaries
shall not, nor will they authorize or permit any of their respective officers or
directors, or any investment banker, attorney or other advisor or representative
retained by any of them to, nor will they authorize any of their respective
affiliates or employees to, or indirectly, (i) solicit, initiate, knowingly
encourage or induce the making, submission or announcement of any Acquisition
Proposal (as defined in Section 5.5(b) hereof), (ii) participate in any
--------------
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to knowingly facilitate any inquiries
or the making of any proposal that constitutes or may reasonably be expected to
lead to, any Acquisition Proposal, (iii) engage in discussions or negotiations
with any person with respect to any Acquisition Proposal (it being understood
and agreed that informing any person as to the existence of these provisions, or
requesting additional information regarding the terms and conditions of any
Acquisition Proposal from the person making such Acquisition Proposal, without
in each case providing additional information, shall not constitute a discussion
or negotiation in violation of this Section 5.5(a)), (iv) subject to the terms
--------------
of Section 5.2(c) hereof, approve, endorse or recommend any Acquisition
--------------
Proposal, or (v) enter into any letter of intent or similar document or any
contract, agreement or commitment contemplating or otherwise relating to any
Acquisition Transaction; provided, however, that prior to the adoption and
approval of this Agreement and the approval of the Merger by the requisite vote
of the stockholders of the Company, nothing in this Agreement (including the
first sentence of this Section 5.5(a)) shall prohibit the Company from
furnishing information regarding the Company or any of its subsidiaries to, or
entering into a confidentiality agreement with, or entering into or conducting
discussions or negotiations with, any person or group in response to a Superior
Offer submitted by such person or group (and not withdrawn) if (1) neither the
Company nor any representative of the Company and its subsidiaries shall have
violated any of the restrictions set forth above in this Section 5.5, (2) the
-----------
Board of Directors of the Company concludes in good faith, after consultation
with its outside legal counsel, that such action is required in order for the
Board of Directors of the Company to comply with its fiduciary obligations to
the Company's stockholders under Delaware Law (3) business days prior to
furnishing any such information to, or entering into discussions or negotiations
with, such person or group, the Company gives Parent written notice of the
identity of such person or group and of the Company's intention to furnish
information to, or enter into discussions or negotiations with, such person or
group, and (y) the Company receives from such person or group an executed
confidentiality agreement at least as restrictive as the Confidentiality
Agreement, and (4) contemporaneously with furnishing any such information to
such person or group, the Company furnishes such information to Parent (to the
extent such information has not been previously furnished by the Company to
Parent). In addition, nothing in this Agreement shall prohibit the Company from
complying with Rule 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal. The Company and its subsidiaries shall immediately cease
any and all existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any Acquisition Proposal. Without limiting
the generality of the foregoing, the parties hereto understand and agree that
any violation of the restrictions set forth in this Section 5.5(a) by any
--------------
officer or director of the Company or any of its subsidiaries or any investment
banker, attorney or other advisor or representative of the Company or any of its
subsidiaries shall be deemed to be a breach of this Section 5.5(a) by the
--------------
-40-
Company. In addition to the foregoing, the Company shall (i) provide Parent with
at least forty eight (48) hours prior notice (or such lesser prior notice as
provided to the members of the Board of Directors of the Company, but in no
event less than twelve (12) hours unless the Company shall have previously
notified Parent of a prior meeting of the Board of Directors of the Company to
consider such Superior Offer) of any meeting of the Board of Directors of the
Company at which the Board of Directors of the Company is reasonably expected to
consider a Superior Offer, and (ii) provide Parent with at least three (3)
business days prior written notice (or such lesser prior notice as provided to
the members of the Board of Directors of the Company) of a meeting of the Board
of Directors of the Company at which the Board of Directors of the Company is
reasonably expected to recommend a Superior Offer to the stockholders of the
Company and together with such notice a copy of the proposed form of agreement,
letter of intent or other definitive document containing the terms and
conditions of such Superior Offer.
(b) For all purposes of and under this Agreement, the term
"Acquisition Proposal" shall mean any offer or proposal (other than an offer or
--------------------
proposal by Parent) providing for any Acquisition Transaction. For all purposes
of and under this Agreement, the term "Acquisition Transaction" shall mean any
-----------------------
transaction or series of related transactions, other than the transactions
contemplated by this Agreement, involving: (i) any acquisition or purchase from
the Company by any person or "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder) of more than
a fifteen percent (15%) interest in the total outstanding voting securities of
the Company or any of its subsidiaries, or any tender offer or exchange offer
that if consummated would result in any person or "group" (as defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder)
beneficially owning fifteen percent (15%) or more of the total outstanding
voting securities of the Company or any of its subsidiaries, or any merger,
consolidation, business combination or similar transaction involving the Company
pursuant to which the stockholders of the Company immediately preceding such
transaction would hold less than eighty-five percent (85%) of the equity
interests in the surviving or resulting entity of such transaction; (ii) any
sale, lease (other than in the ordinary course of business), exchange, transfer,
license (other than in the ordinary course of business), acquisition or
disposition of more than fifteen percent (15%) of the assets of the Company; or
(iii) any liquidation or dissolution of the Company.
(c) In addition to the obligations of the Company set forth in
Section 5.5(a) hereof, the Company shall advise Parent, as promptly as
--------------
practicable, and in any event within twenty four (24) hours, orally and in
writing, of (i) any request for information which the Company reasonably
believes is likely to lead to an Acquisition Proposal or, (ii) any Acquisition
Proposal, or (iii) any inquiry with respect to or which the Company reasonably
believes could lead to any Acquisition Proposal, the (iv) material terms and
conditions of any such request, Acquisition Proposal or inquiry, and (v) the
identity of the person or group making any such request, Acquisition Proposal or
inquiry. The Company shall keep Parent informed in all material respects of the
status and details (including material amendments or proposed amendments) of any
such request, Acquisition Proposal or inquiry.
-41-
5.6 Public Disclosure. Parent and the Company shall consult with each
-----------------
other, and to the extent practicable, agree, before issuing any press release or
otherwise making any public statement with respect to this Agreement, the Merger
or an Acquisition Proposal, and shall not issue any such press release or make
any such public statement prior to such consultation, except as may be required
by applicable law or any listing agreement with a national securities exchange
or The Nasdaq Stock Market, Inc. The parties hereto have agreed to the text of
the joint press release announcing the signing of this Agreement.
5.7 Reasonable Efforts; Notification.
--------------------------------
(a) Upon the terms and subject to the conditions and limitations set
forth in this Agreement (including, without limitation, the Company's rights
under Section 5.2 and Section 5.5 hereof), each of the parties hereto shall use
----------- -----------
its commercially reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties hereto in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by this Agreement, including,
without limitation, using reasonable efforts to accomplish the following: (i)
the taking of all reasonable actions necessary to cause the conditions precedent
set forth in Article VI hereof to be satisfied, (ii) the obtaining of all
----------
necessary actions or nonactions, waivers, consents, approvals, orders and
authorizations from Governmental Entities, and the making of all necessary
registrations, declarations and filings (including registrations, declarations
and filings with Governmental Entities, if any), and the taking of all
reasonable steps as may be necessary to avoid any suit, claim, action,
investigation or proceeding by any Governmental Entity, (iii) the obtaining of
all necessary consents, approvals or waivers from third parties which may be
required or desirable as a result of, or in connection with, the transactions
contemplated by this Agreement, (iv) the defending of any suits, claims,
actions, investigations or proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby, including, without limitation, seeking to have any stay or temporary
restraining order entered by any court or other Governmental Entity vacated or
reversed, and (v) the execution or delivery of any additional certificates,
instruments and other documents necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement. In
connection with and without limiting the foregoing, but subject to the
conditions and limitations set forth in this Agreement (including, without
limitation, the Company's rights under Section 5.2 and Section 5.5 hereof) the
----------- -----------
Company and its Board of Directors shall, if any state takeover statute or
similar statute or regulation is or becomes applicable to the Merger, this
Agreement or any of the transactions contemplated by this Agreement, use
commercially reasonable efforts to ensure that the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger, this Agreement
and the transactions contemplated hereby. Notwithstanding anything to the
contrary in this Agreement, nothing in this Agreement shall be deemed to require
Parent or the Company or any subsidiary or affiliate thereof to agree to any
divestiture by itself or any of its affiliates of shares of capital stock or of
any business, assets or property, or the imposition of any material
-42-
limitation on the ability of any of them to conduct their businesses or to own
or exercise control of such assets, properties and stock.
(b) The Company shall give prompt notice to Parent upon becoming
aware that any representation or warranty made by the Company in this Agreement
has become untrue or inaccurate, or that the Company has failed to comply with
or satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement, in each case, such that
the conditions set forth in Section 6.3(a) or Section 6.3(b) hereof would not be
-------------- --------------
satisfied, provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the Company, or the
conditions to the obligations of the parties under this Agreement.
(c) Parent shall give prompt notice to the Company upon becoming
aware that any representation or warranty made by Parent or Merger Sub in this
Agreement has become untrue or inaccurate, or that Parent or Merger Sub has
failed to comply with or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement, in
each case, such that the conditions set forth in Section 6.2(a) or Section
-------------- -------
6.2(b) hereof would not be satisfied, provided, however, that no such
------
notification shall affect the representations, warranties, covenants or
agreements of Parent or Merger Sub, or the conditions to the obligations of the
parties under this Agreement.
5.8 Third Party Consents. As soon as practicable following the date
--------------------
hereof, Parent and the Company shall each use its respective commercially
reasonable efforts to obtain any consents, waivers and approvals under any of
its or its subsidiaries' respective agreements, contracts, licenses or leases
required to be obtained in connection with the consummation of the transactions
contemplated hereby and by the Stock Option Agreement.
5.9 Company Stock Options; Employee Stock Purchase Plan.
---------------------------------------------------
(a) Company Stock Options. At the Effective Time, each outstanding
---------------------
option to purchase shares of Company Common Stock (each, a "Company Stock
-------------
Option") under any Company Stock Plan, whether or not vested, shall be assumed
------
by Parent by virtue of the Merger and without any action on the part of Parent,
the Company or any holders of Company Stock Options, and, to the extent required
under any Company Stock Plan, Parent shall issue assumption agreements to all
holders of Company Stock Options within thirty (30) calendar days following the
Effective Time. Each Company Stock Option so assumed by Parent under this
Agreement shall continue to have, and be subject to, the same terms and
conditions of such options immediately prior to the Effective Time (including,
without limitation, any repurchase rights or vesting provisions, but after
giving effect to the amendments entered into pursuant to Section 6.3(b) hereof),
-------------
except that (i) each Company Stock Option shall be exercisable (or will become
exercisable in accordance with its terms) for that number of whole shares of
Parent Common Stock equal to the product obtained by multiplying (x) the number
of shares of Company Common Stock that were issuable upon the exercise in full
of such Company Stock Option immediately prior to the Effective Time, by (y) the
Exchange Ratio, rounded down to the nearest whole number of shares of Parent
Common Stock, and (ii) the per share exercise price for
the shares of Parent Common Stock issuable upon the exercise of each such
assumed Company Stock Option shall be equal to the quotient obtained by dividing
(x) the exercise price per share of Company Common Stock at which such Company
Stock Option was exercisable immediately prior to the Effective Time, by (y) the
Exchange Ratio, rounded up to the nearest whole cent.
(b) Employee Stock Purchase Plan. Prior to the Effective Time,
----------------------------
outstanding purchase rights under the Employee Stock Purchase Plan shall be
exercised in accordance with Section 19 of the Employee Stock Purchase Plan, and
each share of Company Common Stock purchased pursuant to such exercise shall by
virtue of the Merger, and without any action on the part of the holder thereof,
be converted into the right to receive a number of shares of Parent Common Stock
equal to the Exchange Ratio, without issuance of certificates representing
issued and outstanding shares of Company Common Stock to participants under the
Employee Stock Purchase Plan. The Company shall terminate the Employee Stock
Purchase Plan, effective at or prior the Closing.
5.10 Form S-8. As soon as is reasonably practicable following the
--------
Effective Time, to the extent available for use by Parent, Parent shall file a
registration statement on Form S-8 (or any successor form thereto) to register
under the Securities Act the issuance of the shares of Parent Common Stock
issuable upon the exercise of all Company Stock Options assumed by parent
pursuant to Section 5.9 hereof, to the extent that the issuance of such shares
-----------
may be registered on Form S-8 (or any successor form thereto).
5.11 Indemnification; Directors' and Officers' Insurance.
---------------------------------------------------
(a) From and after the Effective Time, Parent shall, and shall cause
the Surviving Corporation to, fulfill and honor in all respects the obligations
of the Company and its subsidiaries under any indemnification agreements between
(i) the Company or any of its subsidiaries and (ii) any of their respective
directors and officers, as in effect on the date hereof (the "Indemnified
-----------
Parties"), and any indemnification provisions in the Company's Certificate of
-------
Incorporation or Bylaws, as in effect on the date hereof, or in any equivalent
organizational documents of any subsidiary of the Company, as the case may be.
The Certificate of Incorporation and Bylaws of the Surviving Corporation shall
contain provisions with respect to exculpation and indemnification that are at
least as favorable to the Indemnified Parties as those contained in the
Certificate of Incorporation and Bylaws of the Company, as in effect on the date
hereof, and the exculpation and indemnification provisions of the equivalent
organizational documents of each subsidiary of the Company as in effect on the
date hereof shall remain in full force and effect, and no such provisions shall
be amended, repealed or otherwise modified for a period of six (6) years
following the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who, immediately prior to the Effective Time,
were directors, officers, employees or agents of the Company or any subsidiary
of the Company, unless such modification is required by applicable law.
(b) For a period of four (4) years following the Effective Time,
Parent shall maintain in effect a policy of directors' and officers' insurance
covering those persons who are currently covered, or will be covered on or prior
to the Effective Time, by the Company's
directors' and officers' insurance policy in effect as of the date hereof (a
copy of which has been heretofore delivered to Parent) for actions or omissions
occurring on or prior to the Effective Time, which insurance policy shall
contain terms and conditions (including, without limitation, coverage amounts
and scope) that are at least as favorable in the aggregate as the terms and
conditions of the Company's directors' and officers' insurance policy in effect
as of the date hereof; provided, however, that notwithstanding the foregoing,
Parent shall not be required to pay an annual premium on such insurance policy
that is greater than one hundred and fifty percent (150%) of the annual premium
payable under the Company's directors' and officers' insurance policy in effect
as of the date hereof as set forth in Section 5.11 of the Company Disclosure
------------
Letter (the "Current Premium"), and if the annual premium for such coverage
---------------
would at any time exceed one hundred and fifty percent (150%) of the Current
Premium, the Surviving Corporation shall maintain insurance policies which
provide the maximum and best coverage then available at an annual premium equal
to one hundred and fifty percent (150%) of the Current Premium; and provided
further, however, that notwithstanding the foregoing, Parent may satisfy its
obligations under this Section 5.11(b) by purchasing a "tail" policy under the
---------------
Company's existing directors' and officers' insurance policy which (i) has an
effective term of four (4) years from the Effective Time, (ii) covers those
persons who are currently covered, or will be covered on or prior to the
Effective Time, by the Company's directors' and officers' insurance policy in
effect as of the date hereof for actions and omissions occurring on or prior to
the Effective Time, and (iii) contains terms and conditions (including, without
limitation, coverage amounts) that are at least as favorable in the aggregate as
the terms and conditions of the Company's directors' and officers' insurance
policy in effect as of the date hereof.
(c) Parent and the Surviving Corporation jointly and severally agree
to pay all expenses, including reasonable attorneys' fees, that may be incurred
by any Indemnified Party in enforcing the indemnity and other obligations
provided for in this Section 5.11 to the extent that such Indemnified Party is
------------
determined to be entitled to indemnification under this Section 5.11.
------------
(d) The provisions of this Section 5.11 shall operate for the
------------
benefit of, and shall be enforceable by, each of the Indemnified Parties, and
their heirs, representatives, successors and assigns.
5.12 Nasdaq Listing. Parent shall use its commercially reasonable best
--------------
efforts to cause the shares of Parent Common Stock issuable, and those required
to be reserved for issuance, in connection with the Merger, to be authorized for
listing on Nasdaq, at or prior to the Closing Date, upon official notice of
issuance.
5.13 Company Affiliates. Section 5.13 of the Company Disclosure Letter
------------------ ------------
contains a complete and accurate list of those persons who may be deemed to be,
in the Company's reasonable judgment, affiliates of the Company within the
meaning of Rule 145 promulgated under the Securities Act (each a "Company
-------
Affiliate"). The Company shall provide Parent with such information and
---------
documents as Parent reasonably requests for purposes of reviewing and verifying
such list. The Company shall use its commercially reasonable efforts to deliver
or cause to be delivered to Parent, as promptly as practicable on or following
the date
-45-
hereof, from each Company Affiliate who has not delivered an Affiliate Agreement
on or prior to the date hereof, an executed Affiliate Agreement. The Affiliate
Agreements will be in full force and effect as of the Effective Time. Parent
will be entitled to place appropriate legends on the certificates evidencing any
Parent Common Stock to be received by a Company Affiliate pursuant to the terms
of this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for Parent Common Stock, consistent with the terms of each
Affiliate Agreement.
5.14 Regulatory Filings; Reasonable Efforts. As soon as may be reasonably
--------------------------------------
practicable, the Company and Parent each shall file with the United States
Federal Trade Commission (the "FTC") and the Antitrust Division of the United
---
States Department of Justice ("DOJ") Notification and Report Forms relating to
---
the transactions contemplated hereby as required by the HSR Act, as well as
comparable pre-merger notification forms required by the merger notification or
control laws and regulations of any applicable jurisdiction, as agreed to by the
parties hereto. The Company and Parent each shall promptly (i) supply the other
with any information which may be required in order to effectuate such filings,
and (ii) supply any additional information which reasonably may be required by
the FTC, the DOJ or the competition or merger control authorities of any other
jurisdiction and which the parties hereto may reasonably deem appropriate;
provided, however, that Parent shall not be required to agree to any divestiture
by Parent or the Company or any of Parent's subsidiaries or affiliates of shares
of capital stock or of any business, assets or property of Parent, the Company
or any Parent's subsidiaries or affiliates, or the imposition of any material
limitations on the ability of any of the foregoing to conduct their respective
businesses or to own or exercise control of such assets, properties and capital
stock.
5.15 Company 401(k) Plan. The Company shall terminate, or cause to be
-------------------
terminated, its 401(k) plan and any other 401(k) plan (including, without
limitation, the Chili!Soft 401(k) plan) sponsored by the Company or any
Affiliate, effective no later than the day immediately preceding the Closing
Date.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction or fulfillment, at or prior to the Closing
Date, of the following conditions:
(a) Company Stockholder Approval. This Agreement shall have been
----------------------------
duly approved and adopted, and the Merger shall have been duly approved, by the
requisite vote under Delaware Law, by the stockholders of the Company.
(b) Registration Statement Effective; Proxy Statement/Prospectus.
------------------------------------------------------------
The SEC shall have declared or ordered the Registration Statement to be
effective, no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued, and no proceeding for that
purpose, and no similar proceeding in respect of the Proxy Statement/Prospectus,
shall have been initiated or threatened in writing (and not abandoned or
withdrawn) by the SEC.
-46-
(c) No Order; HSR Act. No Governmental Entity shall have enacted,
-----------------
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger. All
waiting periods, if any, under the HSR Act relating to the transactions
contemplated hereby will have expired or terminated early and all material
foreign antitrust approvals required to be obtained prior to the Merger in
connection with the transactions contemplated hereby shall have been obtained.
(d) Tax Opinions. Parent and the Company shall each have received
------------
written opinions from their respective tax counsel (▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, Professional Corporation, and ▇▇▇▇▇▇▇ Phleger & ▇▇▇▇▇▇▇▇ LLP,
respectively), in form and substance reasonably satisfactory to them, to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and such opinions shall not have been withdrawn;
provided, however, that if the counsel to either Parent or the Company shall not
render such opinion, this condition shall nonetheless be deemed to be satisfied
with respect to such party if counsel to the other party hereto shall render
such opinion to such party. The parties hereto agree to make such reasonable
representations as requested by such counsel for the purpose of rendering such
opinions.
(e) Nasdaq Listing. The shares of Parent Common Stock issuable to the
--------------
stockholders of the Company in connection with the Merger pursuant to this
Agreement, and such other shares required to be reserved for issuance in
connection with the Merger, shall have been authorized for listing on the
Nasdaq, upon official notice of issuance, or shall be exempt from such
requirement under then applicable laws, regulations and rules of The Nasdaq
Stock Market, Inc.
6.2 Additional Conditions to Obligations of the Company. The obligation
---------------------------------------------------
of the Company to consummate and effect the Merger shall be subject to the
satisfaction or fulfillment, at or prior to the Closing Date, of each of the
following conditions, any of which may be waived, in writing, exclusively by the
Company:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Parent and Merger Sub contained in this Agreement (i) shall have
been true and correct in all respects as of the date of this Agreement and (ii)
shall be true and correct in all respects on and as of the Closing Date with the
same force and effect as if made on the Closing Date, except, with respect to
clauses (i) and (ii), (A) in each case, or in the aggregate, as does not
constitute a Material Adverse Effect on Parent, (B) for changes contemplated by
this Agreement, and (C) for those representations and warranties which address
matters only as of a particular date (which representations shall have been true
and correct (subject to the Material Adverse Effect qualifications as set forth
in the preceding clause (A)) as of such particular date) (it being understood
that, for purposes of determining the accuracy of such representations and
warranties, all "Material Adverse Effect" qualifications and other
qualifications based on the word "material" or similar phrases contained in such
representations and warranties shall be
-47-
disregarded). The Company shall have received a certificate with respect to the
foregoing signed on behalf of Parent by duly authorized officer thereof.
(b) Agreements and Covenants. Parent and Merger Sub shall in all
------------------------
material respects have performed or complied with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date, and the Company shall have received a certificate to such
effect signed on behalf of Parent by a duly authorized officer thereof.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
-----------------------------------------------------------------
The obligations of Parent and Merger Sub to consummate and effect the Merger
shall be subject to the satisfaction or fulfillment, at or prior to the Closing
Date, of each of the following conditions, any of which may be waived, in
writing, exclusively by Parent:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in this Agreement (i) shall have been true
and correct in all respects as of the date of this Agreement and (ii) shall be
true and correct in all respects on and as of the Closing Date with the same
force and effect as if made on and as of the Closing Date, except, with respect
to clauses (i) and (ii), (A) in each case, or in the aggregate, as does not
constitute a Material Adverse Effect on the Company; provided, however, that
such Material Adverse Effect qualifier shall be inapplicable with respect to
representations and warranties contained in Sections 2.3(a) (other than an
---------------
inaccuracy in the aggregate amount of no greater than 50,000 shares of Company
Common Stock and shares of Company Common Stock issuable upon exercise of
Company Stock Options), 2.3(c), 2.4, 2.18, 2.22, 2.23, 2.24 and 2.25, each of
------ --- ---- ---- ---- ---- ----
which individually shall have been true and correct in all respects as of the
date of this Agreement and shall be true and correct in all material respects on
and as of the Closing Date, and provided, further, that such Material Adverse
Effect qualifier shall be inapplicable with respect to representations and
warranties contained in Section 2.19, which individually shall have been true
------------
and correct in all material respects as of the date of this Agreement and shall
be true and correct in all material respects on and as of the Closing Date, (B)
for changes contemplated by this Agreement, and (C) for those representations
and warranties which address matters only as of a particular date (which
representations shall have been true and correct (subject to the Material
Adverse Effect qualifications and limitations set forth in the preceding clause
(A)) as of such particular date) (it being understood that, for purposes of
determining the accuracy of such representations and warranties, (x) all
"Material Adverse Effect" and materiality qualifications and other
qualifications based on the word "material" or similar phrases contained in such
representations and warranties shall be disregarded, and (y) any update of or
modification to the Company Disclosure Letter made or purported to have been
made after the date of this Agreement shall be disregarded). Parent shall have
received a certificate with respect to the foregoing signed on behalf of Company
by a duly authorized officer thereof.
(b) Agreements and Covenants. The Company shall in all material
------------------------
respects have performed or complied with all agreements and covenants required
by this Agreement to be performed or complied with by it at or prior to the
Closing Date, and Parent shall have received a certificate to such effect signed
on behalf of Company by a duly authorized officer thereof.
-48-
(c) Non-Competition Agreements. Each of the employees who have
--------------------------
executed a Non-Competition Agreement shall continue to be employed by the
Company as of the Closing, shall not have notified (whether formally or
informally) Parent or the Company of such employee's intention of leaving the
employ of Parent or the Company following the Effective Time, and shall not have
rescinded the Non-Competition Agreement to which such employ is a party.
(d) Consents. The Company shall have obtained the consents, waivers
--------
and approvals required to be obtained in connection with the consummation of the
transactions contemplated hereby, which consents, waivers and approvals are set
forth in Section 6.3(d) of the Company Disclosure Letter.
--------------
(e) Severance and Acceleration Waivers. Each of the Severance and
----------------------------------
Acceleration Waivers shall be in full force and effect.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time, whether before or after the requisite approval of the
stockholders of the Company has been obtained in respect of this Agreement and
the Merger:
(a) by mutual written consent of Parent and the Company, duly
authorized by the respective Boards of Directors of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated by March 16, 2001 for any reason; provided, however, that the right
to terminate this Agreement under this Section 7.1(b) shall not be available to
--------------
any party whose action or failure to act has been a principal cause of or
resulted in the failure of the Merger to occur on or before such date, and such
action or failure to act constitutes a breach of this Agreement;
(c) by either Parent or the Company if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, permanently enjoining or otherwise
permanently prohibiting the Merger, which order, decree, ruling or other action
is final and nonappealable and remains in effect at the time of termination;
(d) by either Parent or the Company if the requisite approval of the
stockholders of the Company contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the requisite vote at a meeting of
the stockholders of the Company, duly convened therefor or at any adjournment or
postponement thereof; provided, however, that the right to terminate this
Agreement under this Section 7.1(d) shall not be available to a party in the
--------------
event that the failure to obtain the requisite approval of the stockholders of
the Company shall have been caused by the action or failure to act of such party
proposing to exercise its right of termination under this Section 7.1(d), and
--------------
such action or failure to act constitutes a breach of this Agreement;
-49-
(e) by Parent if a Triggering Event (as defined below) shall have
occurred;
(f) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or if
any representation or warranty of Parent shall have become untrue, in either
case such that the conditions set forth in Section 6.2(a) or Section 6.2(b)
-------------- --------------
hereof would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue; provided, however,
that if such inaccuracy in Parent's representations and warranties or breach by
Parent is curable by Parent through the exercise of its commercially reasonable
efforts, then the Company may not terminate this Agreement under this Section
-------
7.1(f) for thirty (30) calendar days following the delivery of written notice
------
from the Company to Parent of such breach, provided Parent continues to exercise
commercially reasonable efforts to cure such breach (it being understood and
agreed that the Company may not terminate this Agreement pursuant to this
Section 7.1(f) if the Company shall have materially breached this Agreement or
--------------
if such breach by Parent is cured during such thirty (30) calendar day period);
(g) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of Company shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) or Section 6.3(b)
-------------- --------------
hereof would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue; provided, however,
that if such inaccuracy in the Company's representations and warranties or
breach by the Company is curable by the Company through the exercise of its
commercially reasonable efforts, then Parent may not terminate this Agreement
under this Section 7.1(g) for thirty (30) calendar days following the delivery
--------------
of written notice from Parent to the Company of such breach, provided the
Company continues to exercise commercially reasonable efforts to cure such
breach (it being understood and agreed that Parent may not terminate this
Agreement pursuant to this Section 7.1(g) if Parent shall have materially
--------------
breached this Agreement or if such breach by the Company is cured during such
thirty (30) calendar day period);
(h) by Parent, if there has been a Material Adverse Effect with
respect to the Company and its subsidiaries that is not curable by the Company
through the exercise of its commercially reasonable efforts; or
(i) by Company, if there has been a Material Adverse Effect with
respect to Parent that is not curable by Parent through the exercise of its
commercially reasonable efforts.
For the purposes of this Agreement, a "Triggering Event" shall be deemed to have
----------------
occurred if: (i) the Board of Directors of the Company or any committee thereof
shall for any reason have withdrawn or shall have amended or modified, in either
case, in a manner adverse to Parent its unanimous recommendation in favor of the
adoption and approval of the Agreement or the approval of the Merger; (ii) the
Company shall have failed to include in the Proxy Statement/Prospectus the
unanimous recommendation of the Board of Directors of the Company in favor of
the adoption and approval of the Agreement and the approval of the Merger; (iii)
the Board of Directors of the Company shall have failed to reaffirm its
unanimous recommendation
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in favor of the adoption and approval of the Agreement and the approval of the
Merger within ten (10) business days after Parent requests in writing that such
recommendation be reaffirmed at any time following the announcement of an
Acquisition Proposal; (iv) the Board of Directors of the Company or any
committee thereof shall have approved or recommended any Acquisition Proposal;
(v) the Company shall have entered into any letter of intent or similar document
or any agreement, contract or commitment accepting any Acquisition Proposal;
(vi) the Company shall have breached any of the terms of Section 5.5 hereof; or
-----------
(vii) a tender or exchange offer relating to not less than fifteen percent (15%)
of the then-outstanding shares of capital stock of the Company shall have been
commenced by a person unaffiliated with Parent and the Company shall not have
sent to its securityholders pursuant to Rule 14e-2 promulgated under the
Securities Act, within ten (10) business days after such tender or exchange
offer is first commenced, a statement indicating that the Company recommends
rejection of such tender or exchange offer.
7.2 Notice of Termination; Effect of Termination. Any termination of this
--------------------------------------------
Agreement pursuant to Section 7.1 hereof shall be effective immediately upon the
-----------
delivery of written notice of the terminating party to the other party or
parties hereto. In the event of the termination of this Agreement pursuant to
Section 7.1 hereof, this Agreement shall be of no further force or effect,
-----------
except (i) as set forth in this Section 7.2, and as set forth in Section 7.3 and
----------- -----------
Article VIII (miscellaneous) hereof, each of which shall survive the termination
of this Agreement, and (ii) nothing herein shall relieve any party hereto from
any liability for any willful or intentional breach of this Agreement. No
termination of this Agreement shall affect the obligations of the parties hereto
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
7.3 Fees and Expenses.
-----------------
(a) General. Except as otherwise provided in this Section 7.3, all
------- -----------
fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fees
and expenses, whether or not the Merger is consummated; provided, however, that
Parent and the Company shall share equally all fees and expenses, other than
attorneys' and accountants fees and expenses, incurred in relation to the
printing and filing (with the SEC) of the Proxy Statement/Prospectus (including
any preliminary materials related thereto) and the Registration Statement
(including financial statements and exhibits) and any amendments or supplements
thereto, and any fees required to be paid under the HSR Act.
(b) Company Payments.
----------------
(i) Notwithstanding anything to the contrary set forth in this
Agreement, in the event that this Agreement is terminated by Parent pursuant to
Section 7.1(e) hereof, the Company shall pay to Parent in immediately available
--------------
funds, within one (1) business day after demand by Parent, an amount in cash
equal to $59,000,000 (the "Termination Fee").
---------------
(ii) Notwithstanding anything to contrary set forth in this
Agreement, in the event that (A) this Agreement is terminated by Parent or the
Company, as applicable, pursuant to Section 7.1(b) or Section 7.1(d) hereof, (B)
-------------- --------------
following the date hereof and prior to the
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termination of this Agreement, a third party shall have announced an Acquisition
Proposal, and (C) within twelve (12) months following the termination of this
Agreement, a Company Acquisition (as defined in Section 7.3(b)(iv) hereof) is
------------------
consummated or the Company enters into an agreement or letter of intent
providing for a Company Acquisition, or a third party commences a tender or
exchange offer for a Company Acquisition, then the Company shall pay to Parent,
in immediately available funds, an amount in cash equal to the Termination Fee
upon (x) the consummation of such Company Acquisition, or (y) the entry by the
Company into such agreement or letter of intent.
(iii) The Company acknowledges that the agreements set forth in
this Section 7.3(b) are an integral part of the transactions contemplated by
-------------
this Agreement, and that, without these agreements, Parent would not enter into
this Agreement. Accordingly, if the Company shall fail to pay in a timely manner
the amounts due pursuant to this Section 7.3(b), and, in order to obtain such
--------------
payment, Parent makes a claim that results in a final judgment against the
Company for the amounts set forth in this Section 7.3(b), the Company shall pay
--------------
to Parent its reasonable costs and expenses (including reasonable attorneys'
fees and expenses) in connection with such suit, together with interest on the
amounts set forth in this Section 7.3(b) at the prime rate of The Chase
--------------
Manhattan Bank in effect on the date such payment was required to be made.
Payment of the fees described in this Section 7.3(b) shall not be in lieu of
--------------
damages incurred in the event of any willful or intentional breach of this
Agreement.
(iv) For all purposes of and under this Agreement, the term
"Company Acquisition" shall mean any of the following transactions (other than
-------------------
the transactions contemplated by this Agreement); (i) a merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company pursuant to which the stockholders of the
Company immediately preceding such transaction hold less than fifty percent
(50%) of the aggregate equity interests in the surviving or resulting entity of
such transaction, (ii) a sale or other disposition by the Company of assets
representing in excess of fifty percent (50%) of the aggregate fair market value
of the Company's business immediately prior to such sale, or (iii) the
acquisition by any person or group (including by way of a tender offer or an
exchange offer or issuance by the Company), directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of shares
representing in excess of fifty percent (50%) of the voting power of the then
outstanding shares of capital stock of the Company.
7.4 Amendment. Subject to applicable law, this Agreement may be amended
---------
by the parties hereto at any time, but only by execution of an instrument in
writing, signed on behalf of each of the parties hereto by a duly authorized
officer thereof.
7.5 Extension; Waiver. At any time prior to the Effective Time, any party
-----------------
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto, and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such
-52-
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Any delay in exercising any right under
this Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The representations
----------------------------------------------
and warranties of the Company, Parent and Merger Sub contained in this Agreement
shall terminate at the Effective Time, and only the covenants that by their
terms survive or call for action to be taken after the Effective Time shall
survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Parent, Merger Sub or the Company (following the Effective
Time), to:
Sun Microsystems, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
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and to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
One Market, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone: No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company (prior to the Effective Time), to:
Cobalt Networks, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
Two Embarcadero Place
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
8.3 Interpretation; Knowledge.
-------------------------
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of this Agreement. Unless otherwise indicated the words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When reference is
made herein to "the business of" an entity, such reference shall be deemed to
include the business of all direct and indirect subsidiaries of such entity
taken together with such entity as a whole. Reference to the subsidiaries of an
entity (the "Parent Entity") shall be deemed to include all direct and indirect
-------------
subsidiaries of such Parent Entity, but shall not include any entity of which
less than twenty
percent (20%) of the outstanding voting securities or other equity interests are
owned by the Parent Entity.
(b) For purposes of this Agreement the term "knowledge" means with
---------
respect to a party hereto, with respect to any matter in question, that any of
the executive officers of such party has actual knowledge of such matter.
(c) For purposes of this Agreement, the term "Material Adverse
-----------------
Effect" when used in connection with an entity means any change, event,
------
violation, inaccuracy, circumstance or effect that is materially adverse to the
business, assets (including intangible assets), capitalization, financial
condition or results of operations of such entity and its subsidiaries taken as
a whole. For purposes of this Agreement, the term "person" shall mean any
------
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity; provided, however, that in no event shall any of the
following, alone or in combination, be deemed to constitute, nor shall any of
the following be taken into account in determining whether there has been or
will be a Material Adverse Effect on any entity: (i) any change in such entity's
stock price or trading volume in and of itself; or (ii) any change, event,
violation, inaccuracy, circumstance or effect that such entity successfully
bears the burden of proving results from changes affecting any of the industries
in which such entity operates generally or the United States economy generally
(which changes in each case do not disproportionately affect such entity); or
(iii) any change, event, violation, inaccuracy, circumstance or effect resulting
from the disruption or loss of existing or prospective customer, distributor or
supplier relationships that such entity successfully bears the burden of proving
results from the public announcement or pendency of the transactions
contemplated hereby.
8.4 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
-------------------------------------------
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Disclosure Letter
(i) constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, it being understood that the Confidentiality Agreement shall continue in
full force and effect until the Closing and shall survive any termination of
this Agreement; and (ii) are not intended to confer upon any other person any
rights or remedies hereunder, except as specifically provided in Section 5.11
------------
hereof.
8.6 Severability. In the event that any provision of this Agreement or
------------
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the
-55-
application of such provision to other persons or circumstances will be
interpreted so as reasonably to effect the intent of the parties hereto. The
parties further agree to replace such void or unenforceable provision of this
Agreement with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of such void or
unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise provided
------------------------------------
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.8 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
8.9 Rules of Construction. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of its
----------
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
8.11 WAIVER OF JURY TRIAL. EACH OF PARENT, THE COMPANY AND MERGER SUB
--------------------
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, THE COMPANY OR MERGER SUB
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
[Remainder of Page Intentionally Left Blank]
-56-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective thereunto duly authorized offices, as of the date
first written above.
SUN MICROSYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
_______________________________________
Name: _____________________________________
Title: ____________________________________
AZURE ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
_______________________________________
Name: _____________________________________
Title: ____________________________________
COBALT NETWORKS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_______________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_____________________________________
Title: President and CEO
____________________________________
**** AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ****
EXHIBIT A
---------
FORM OF VOTING AGREEMENT
EXHIBIT B
---------
FORM OF AFFILIATE AGREEMENT
EXHIBIT C
---------
FORM OF NON-COMPETITION AGREEMENT
EXHIBIT D
---------
FORM OF STOCK OPTION AGREEMENT