AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND BETWEEN
C-CUBE MICROSYSTEMS INC.
AND
HARMONIC INC.
DATED AS OF DECEMBER 9, 1999
TABLE OF CONTENTS
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ARTICLE I. THE MERGER........................................................ A-1
SECTION 1.1 The Merger.................................................. A-1
SECTION 1.2 Effect on Common Stock...................................... A-2
SECTION 1.3 Exchange of Certificates.................................... A-3
SECTION 1.4 Stock Options............................................... A-4
SECTION 1.5 Disposition of the Semiconductor Business................... A-5
SECTION 1.6 Lost Certificates........................................... A-6
SECTION 1.7 Merger Closing.............................................. A-6
SECTION 1.8 Possible Alternative Structure.............................. A-6
ARTICLE II. THE SURVIVING CORPORATION........................................ A-7
SECTION 2.1 Certificate of Incorporation................................ A-7
SECTION 2.2 By-Laws..................................................... A-7
SECTION 2.3 Officers and Directors...................................... A-7
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... A-7
SECTION 3.1 Corporate Existence and Power............................... A-7
SECTION 3.2 Corporate Authorization..................................... A-8
SECTION 3.3 Consents and Approvals; No Violations....................... A-8
SECTION 3.4 Capitalization.............................................. A-9
SECTION 3.5 Subsidiaries................................................ A-9
SECTION 3.6 SEC Documents............................................... A-9
SECTION 3.7 Financial Statements........................................ A-10
SECTION 3.8 Absence of Undisclosed Liabilities.......................... A-10
SECTION 3.9 Joint Proxy Statement; Form S-4............................. A-10
SECTION 3.10 Absence of Material Adverse Changes, Etc.................... A-11
SECTION 3.11 Taxes....................................................... A-11
SECTION 3.12 Employee Benefit Plans...................................... A-12
SECTION 3.13 Litigation; Compliance with Laws............................ A-14
SECTION 3.14 Labor Matters............................................... A-14
SECTION 3.15 Certain Contracts and Arrangements.......................... A-15
SECTION 3.16 Environmental Matters....................................... A-15
SECTION 3.17 Intellectual Property....................................... A-16
SECTION 3.18 Opinion of Financial Advisor................................ A-17
SECTION 3.19 Board Recommendation........................................ A-17
SECTION 3.20 Tax Treatment............................................... A-17
SECTION 3.21 Finders' Fees............................................... A-17
SECTION 3.22 Section 203 of the Delaware General Corporation Law......... A-17
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT......................... A-17
SECTION 4.1 Corporate Existence and Power............................... A-18
SECTION 4.2 Authorization............................................... A-18
SECTION 4.3 Consents and Approvals; No Violations....................... A-18
SECTION 4.4 Capitalization.............................................. A-19
SECTION 4.5 Subsidiaries................................................ A-19
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SECTION 4.6 SEC Documents............................................... A-19
SECTION 4.7 Financial Statements........................................ A-20
SECTION 4.8 Absence of Undisclosed Liabilities.......................... A-20
SECTION 4.9 Proxy Statement; Form S-4................................... A-20
SECTION 4.10 Absence of Material Adverse Changes, Etc.................... A-20
SECTION 4.11 Taxes....................................................... A-21
SECTION 4.12 Employee Benefit Plans...................................... A-21
SECTION 4.13 Litigation; Compliance with Laws............................ A-23
SECTION 4.14 Labor Matters............................................... A-23
SECTION 4.15 Certain Contracts and Arrangements.......................... A-23
SECTION 4.16 Environmental Matters....................................... A-24
SECTION 4.17 Intellectual Property....................................... A-24
SECTION 4.18 Opinion of Financial Advisor................................ A-25
SECTION 4.19 Board Recommendation........................................ A-25
SECTION 4.20 Tax Treatment............................................... A-25
SECTION 4.21 Finders' Fees............................................... A-25
SECTION 4.22 Section 203 of the Delaware General Corporation Law......... A-25
ARTICLE V. COVENANTS OF THE PARTIES.......................................... A-25
SECTION 5.1 Conduct of the Business of the Company...................... A-25
SECTION 5.2 Conduct of the Business of Parent........................... A-26
SECTION 5.3 Stockholders' Meetings; Proxy Material...................... A-26
SECTION 5.4 Access to Information; Confidentiality Agreement............ A-27
SECTION 5.5 No Solicitation............................................. A-27
SECTION 5.6 Director and Officer Liability.............................. A-28
SECTION 5.7 Commercially Reasonable Efforts............................. A-28
SECTION 5.8 Certain Filings............................................. A-28
SECTION 5.9 Comfort Letters............................................. A-29
SECTION 5.10 Public Announcements........................................ A-29
SECTION 5.11 Further Assurances.......................................... A-30
SECTION 5.12 Employee Matters............................................ A-30
SECTION 5.13 Tax-Free Reorganization Treatment........................... A-30
SECTION 5.14 Blue Sky Permits............................................ A-30
SECTION 5.15 Listing..................................................... A-30
SECTION 5.16 State Takeover Laws......................................... A-30
SECTION 5.17 Certain Notifications....................................... A-30
SECTION 5.18 Affiliate Letters........................................... A-30
SECTION 5.19 Disposition of Semiconductor Business....................... A-31
SECTION 5.20 Supply, License and Development Agreement................... A-31
SECTION 5.21 Transitional Services Agreement............................. A-31
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ARTICLE VI. CONDITIONS TO THE MERGER......................................... A-31
SECTION 6.1 Conditions to Each Party's Obligations...................... A-31
SECTION 6.2 Conditions to the Company's Obligation to Consummate the
Merger...................................................... A-32
SECTION 6.3 Conditions to Parent's Obligations to Consummate the
Merger...................................................... A-32
ARTICLE VII. TERMINATION..................................................... A-33
SECTION 7.1 Termination................................................. A-33
SECTION 7.2 Effect of Termination....................................... A-34
SECTION 7.3 Fees........................................................ A-34
ARTICLE VIII. MISCELLANEOUS.................................................. A-35
SECTION 8.1 Notices..................................................... A-35
SECTION 8.2 Survival of Representations and Warranties.................. A-35
SECTION 8.3 Interpretation.............................................. A-35
SECTION 8.4 Amendments, Modification and Waiver......................... A-36
SECTION 8.5 Successors and Assigns...................................... A-36
SECTION 8.6 Specific Performance........................................ A-36
SECTION 8.7 Governing Law............................................... A-36
SECTION 8.8 Severability................................................ A-36
SECTION 8.9 Third Party Beneficiaries................................... A-36
SECTION 8.10 Entire Agreement............................................ A-36
SECTION 8.11 Counterparts; Effectiveness................................. A-36
EXHIBITS
A Form of Certificate of Merger
B Form of Affiliate Agreement
C Form of Supply, License and Development Agreement
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AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated
as of December 9, 1999 (this "AGREEMENT"), by and between C-Cube Microsystems
Inc., a Delaware corporation (the "COMPANY"), and Harmonic Inc., a Delaware
corporation ("PARENT").
WITNESSETH
WHEREAS, the respective Boards of Directors of Parent and the Company have
each (i) determined that the Merger (as defined in Section 1.1(a) hereof) is
advisable and fair to, and in the best interests of, their respective
stockholders and (ii) approved this Agreement and the Merger upon the terms and
subject to the conditions set forth herein, and in accordance with the Delaware
General Corporation Law (the "DGCL"), whereby each issued and outstanding share
of common stock, par value $.001 per share (the "COMMON STOCK"), of the Company
(other than shares of Common Stock owned, directly or indirectly, by the Company
or by Parent immediately prior to the Effective Time (as defined in Section
1.1(b) hereof) and Dissenting Shares (as defined in Section 1.2(c) hereof),
will, upon the terms and subject to the conditions and limitations set forth
herein, be converted into shares of Common Stock, par value $.001 per share, of
Parent (the "PARENT SHARES") and, if the Semi Sale (as defined in Section 1.5(a)
hereof) has been consummated, the Semi Sale Consideration (as defined in Section
1.5(b)) in accordance with the provisions of Article I of this Agreement;
WHEREAS, for federal income tax purposes, the Merger is intended to qualify
as a reorganization under the provisions of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "CODE"); and
WHEREAS, the parties wish to amend and restate that certain Agreement and
Plan of Merger and Reorganization, dated as of October 27, 1999 by and between
the Company and Parent.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants, agreements and conditions set forth herein, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger.
(a) Upon the terms and subject to the conditions of this Agreement, and in
accordance with the DGCL, at the Effective Time, the Company shall be merged
(the "MERGER") with and into Parent, whereupon the separate existence of the
Company shall cease, and Parent shall continue as the surviving corporation
(sometimes referred to herein as the "SURVIVING CORPORATION") and shall continue
to be governed by the laws of the State of Delaware and shall continue under the
name "Harmonic Inc."
(b) Concurrently with the Closing (as defined in Section 1.7 hereof), the
Company and Parent shall cause a certificate of merger substantially in the form
attached hereto as Exhibit A (the "CERTIFICATE OF MERGER") with respect to the
Merger to be executed and filed with the Secretary of State of the State of
Delaware (the "SECRETARY OF STATE") as provided in the DGCL. The Merger shall
become effective on the date and time at which the Certificate of Merger has
been duly filed with the Secretary of State of the State of Delaware in
accordance with Section 251 of the DGCL or at such other date and time as is
agreed between the parties and specified in the Certificate of Merger, and such
date and time is hereinafter referred to as the "EFFECTIVE TIME."
(c) The Merger shall have the effects set forth in the DGCL. Without
limiting the generality of the foregoing and subject thereto, from and after the
Effective Time, the Surviving Corporation shall possess all properties, rights,
privileges, immunities, powers and franchises and be subject to all of the
obligations, restrictions, disabilities, liabilities, debts and duties of the
Company and Parent.
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SECTION 1.2 Effect on Common Stock. At the Effective Time:
(a) Cancellation of Shares of Common Stock. Each share of Common Stock held
by the Company as treasury stock and each share of Common Stock owned by Parent
immediately prior to the Effective Time shall automatically be cancelled and
retired and cease to exist, and no consideration or payment shall be delivered
therefor or in respect thereto. All shares of Common Stock to be converted into
Merger Consideration pursuant to this Section 1.2 shall, by virtue of the Merger
and without any action on the part of the holders thereof, cease to be
outstanding, be cancelled and retired and cease to exist, and each holder of a
certificate (representing prior to the Effective Time any such shares of Common
Stock) shall thereafter cease to have any rights with respect to such shares of
Common Stock, except the right to receive (i) the Parent Shares into which such
shares of Common Stock have been converted, (ii) any dividend and other
distributions in accordance with Section 1.3(c) hereof, (iii) any cash, without
interest, to be paid in lieu of any fraction of a Parent Share in accordance
with Section 1.3(d) hereof and (iv) if the Semi Sale has been consummated, the
Semi Sale Consideration.
(b) Conversion of Shares of Common Stock. Subject to Section 1.3(d) hereof,
each share of Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares of Common Stock referred to in the first
sentence of Section 1.2(a) hereof and Dissenting Shares shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into (i) that number of Parent Shares equal to .5427 (provided, however, that
such number was calculated assuming that the Convertible Notes (as defined in
Section 1.5(b) hereof) all are converted prior to the Effective Time), and (ii)
if the Semi Sale (as defined in Section 1.5(a) below) has been consummated at or
prior to the Effective Time, the Semi Sale Consideration (collectively, the
"MERGER CONSIDERATION"); provided, however, in the event that clause (ii)
applies, to the extent that any portion of the Semi Sale Purchase Price is not
paid to the Company or any of its Subsidiaries upon the consummation of the Semi
Sale, then Parent shall only be obligated to pay to the stockholders of the
Company the portion of the Semi Sale Consideration attributable to such portion
of the Semi Sale Purchase Price ("DEFERRED SEMI SALE PURCHASE PRICE") if, as and
when paid by the purchaser of the Semi Business (the "SEMI PURCHASER") to
Parent, Company or any of its Subsidiaries (less any reserves established in
connection with the principles set forth in Schedule 1.5(a) hereto).
(c) Dissenting Shares. (i) Notwithstanding any provision of this Agreement
to the contrary, in the event of a Semi Sale, any shares of Company Common Stock
held by a holder who has demanded and perfected dissenters' rights for such
shares in accordance with the DGCL and who, as of the Effective Time, has not
effectively withdrawn or lost such dissenters' rights ("DISSENTING SHARES")
shall not be converted into or represent a right to receive Merger Consideration
pursuant to Section 1.2(b), but the holder thereof shall only be entitled to
such rights as are granted by the DGCL.
(ii) Notwithstanding the provisions of subsection (i) above, if any holder
of shares of Company Common Stock who demands purchase of such shares under the
DGCL shall effectively withdraw or lose (through failure to perfect or
otherwise) such holder's dissenters' rights, then, as of the later of (A) the
Effective Time or (B) the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive Merger
Consideration as provided in Section 1.2(b), without interest thereon, upon
surrender of the certificate representing such shares.
(iii) The Company shall give Parent (A) prompt notice of its receipt of any
written demands for purchase of any shares of Company Common Stock, withdrawals
of such demands, and any other instruments relating to the Merger served
pursuant to the DGCL and received by the Company and (B) the opportunity to
participate in all negotiations and proceedings with respect to demands for
purchase of any shares of Company Common Stock under the DGCL. The Company shall
not, except with the prior written consent of Parent or as may be required under
applicable law, voluntarily make any payment with respect to any demands for the
purchase of Company Common Stock or offer to settle or settle any such demands.
(d) Convertible Notes. At the Effective Time, the holders of the
Convertible Notes then outstanding will become entitled thereafter to convert
such Convertible Notes into the kind and amount of Merger
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Consideration which they would have been entitled to receive in the Merger had
such Convertible Notes been converted into Common Stock immediately prior to the
Merger. At or prior to the Effective Time, Parent and the Company shall execute
any supplemental indenture required in connection with the Merger by the
indenture governing the Convertible Notes.
SECTION 1.3 Exchange of Certificates.
(a) Prior to the mailing of the Proxy Statement (as defined in Section
5.3(c) hereof) such bank, trust company, Person or Persons as shall be
designated by Parent and reasonably acceptable to the Company shall act as the
depositary and exchange agent for the delivery of the Merger Consideration in
exchange for shares of Common Stock (the "EXCHANGE AGENT") in connection with
the Merger. At or promptly following the Effective Time, Parent shall deposit,
or cause to be deposited, with the Exchange Agent the Merger Consideration for
the benefit of the holders of shares of Common Stock which are converted into
Merger Consideration pursuant to Section 1.2(b) hereof (together with cash as
required to (i) pay any dividends or distributions with respect thereto in
accordance with Section 1.3(c) hereof and (ii) make payments in lieu of
fractional Parent Shares, pursuant to Section 1.3(d) hereof, being hereinafter
referred to as the "EXCHANGE FUND")); provided, however, that Parent shall only
be obligated to so deposit Deferred Semi Sale Purchase Price if, as and when
paid by the Semi Purchaser. For purposes of this Agreement, "PERSON" means any
natural person, firm, individual, corporation, limited liability company,
partnership, association, joint venture, company, business trust, trust or any
other entity or organization, whether incorporated or unincorporated, including
a government or political subdivision or any agency or instrumentality thereof.
(b) As of or promptly following the Effective Time, the Surviving
Corporation shall cause the Exchange Agent to mail (and to make available for
collection by hand) to each holder of record of a certificate or certificates,
which immediately prior to the Effective Time represented outstanding shares of
Common Stock (other than Dissenting Shares) (the "CERTIFICATES"), (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and which shall be in the form and have such
other provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration into which the number of shares of Common Stock
previously represented by such Certificate shall have been converted pursuant to
this Agreement (which instructions shall provide that at the election of the
surrendering holder, Certificates may be surrendered, and the Merger
Consideration in exchange therefor collected, by hand delivery). Upon surrender
of a Certificate for cancellation to the Exchange Agent, together with a letter
of transmittal duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration for each share of Common Stock
formerly represented by such Certificate, to be mailed (or made available for
collection by hand if so elected by the surrendering holder) within three
business days of receipt thereof (but in no case prior to the Effective Time),
and the Certificate so surrendered shall be forthwith cancelled. The Exchange
Agent shall accept such Certificates upon compliance with such reasonable terms
and conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. No interest shall be paid
or accrued for the benefit of holders of the Certificates on the cash payable
pursuant to subsections (c) and (d) below upon the surrender of the
Certificates.
(c) No dividends or other distributions with respect to Parent Shares with
a record date on or after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the Parent Shares represented thereby
by reason of the conversion of shares of Common Stock pursuant to Sections
1.2(b) hereof and no cash payment in lieu of fractional Parent Shares shall be
paid to any such holder pursuant to Section 1.3(d) hereof until such Certificate
is surrendered in accordance with this Article I. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid, without interest, to the Person in whose name the Parent Shares
representing such securities are registered (i) at the time of such surrender
the amount of any cash payable in lieu of fractional Parent Shares to which such
holder is entitled pursuant to Section 1.3(d) hereof and the proportionate
amount of
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dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to Parent Shares, and (ii) at the appropriate
payment date or as promptly as practicable thereafter, the proportionate amount
of dividends or other distributions with a record date after the Effective Time
but prior to such surrender and a payment date subsequent to such surrender
payable with respect to such Parent Shares.
(d) No fraction of a share of Parent Common Stock will be issued by virtue
of the Merger, but in lieu thereof each holder of shares of Parent 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
Certificate(s) receive from Parent an amount of cash (rounded to the nearest
whole cent), without interest, equal to the product of (i) such fraction,
multiplied by (ii) the average closing price of Parent Common Stock for the five
(5) trading days immediately preceding the last full trading day prior to the
Effective Time, as reported on the Nasdaq National Market System.
(e) Any portion of the Exchange Fund which remains undistributed to the
holders of the Certificates for one year after the Effective Time shall be
delivered to Parent, upon demand, and any holders of shares of Common Stock
prior to the Merger who have not theretofore complied with this Article I shall
thereafter look for payment of their claim, as general creditors thereof, only
to Parent for their claim for Parent Shares, any cash without interest, to be
paid, in lieu of any fractional Parent Shares and any dividends or other
distributions with respect to Parent Shares to which such holders may be
entitled.
(f) None of Parent, the Company or the Exchange Agent shall be liable to
any Person in respect of any Parent Shares held in the Exchange Fund (and any
cash, dividends and other distributions payable in respect thereof) delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificates shall not have been surrendered prior to one
year after the Effective Time (or immediately prior to such earlier date on
which (i) any Parent Shares, (ii) any cash in lieu of fractional Parent Shares
or (iii) any dividends or distributions with respect to Parent Shares in respect
of such Certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 3.3(b) hereof)), any such Parent
Shares, cash, dividends or distributions in respect of such Certificate shall,
to the extent permitted by applicable law, become the property of Parent, free
and clear of all claims or interest of any Person previously entitled thereto.
SECTION 1.4 Stock Options.
Each option granted to a Continuing Employee (as defined in Section 5.12(a)
hereof) to acquire a share of Common Stock, which is outstanding and unvested
immediately prior to the Effective Time ("OPTION"), shall become and represent
an option to purchase the Merger Consideration (a "SUBSTITUTE OPTION") at an
exercise price equal to the exercise price per share of Common Stock subject to
the Option immediately prior to the Effective Time; provided, however, that in
the case of an Option that is intended to qualify as an incentive stock option
under Section 422 of the Code, the conversion formula shall be adjusted (in lieu
of providing for any payment of cash) if necessary to conform with Section
424(a) of the Code. The parties acknowledge and agree that the number of Options
and the exercise price thereof will be adjusted in accordance with the terms
thereof upon consummation of a Semi Spin (as defined in Section 1.5(a)) so as to
preserve the option value as determined immediately prior to consummation of the
Semi Spin; provided, however, that in the case of an Option that is intended to
qualify as an incentive stock option under Section 422 of the Code, such
adjustments shall be made in a manner so that the Option shall continue to be
treated as an incentive stock option under Section 422 of the Code to the
greatest extent allowed by law. After the Effective Time, each Substitute Option
shall be exercisable upon the same terms and conditions as were applicable to
the related Option prior to the Effective Time subject to accelerated vesting if
and to the extent required by the applicable plans as of the date hereof. In the
event of any adjustment to the conversion ratio or exercise price of any Option,
such adjustments shall be made pursuant to the mutual agreement of Parent and
Company prior to the Effective Time. Parent shall take such corporate action as
may be necessary or appropriate to, at or prior to the Effective Time, file a
registration statement on Form S-8 (or any successor or other appropriate
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form) with respect to the Parent Shares subject to any Substitute Options to the
extent such registration is required under applicable law in order for such
Parent Shares to be sold without restriction in the United States, and Parent
shall maintain the effectiveness of such registration statement for so long as
such Substitute Options remain outstanding. Notwithstanding anything to the
contrary contained in this Agreement, the parties agree that (i) all options to
acquire shares of Common Stock that are held by Continuing Employees and that
are vested and outstanding immediately prior to the Effective Time shall be, to
the extent not exercised, cancelled as of the Effective Time, and (ii) all
options to acquire shares of Common Stock that are held by Persons who are not
Continuing Employees shall be exercised, converted into Semi (as defined in
Section 1.5(a)) or Semi Purchaser (as defined in Section 1.5(a)) options or
otherwise cancelled on or prior to the Effective Time.
SECTION 1.5 Disposition of the Semiconductor Business.
(a) It is a condition to each party's obligation to consummate the Merger
that, prior to the Effective Time, the Semiconductor Business (as defined below)
either be (i) transferred to the stockholders of the Company by transferring the
Semiconductor Business to a newly formed affiliate of the Company ("SEMI") and
distributing the ownership of Semi to the stockholders of the Company (such
transfer and distribution, the "SEMI SPIN") in a transaction that is treated as
immediately taxable in full to the Company for federal income tax purposes or
(ii) sold by the Company in its entirety (a "SEMI SALE" and, together with the
Semi Spin, a "SEMI DISPOSITION") to a purchaser (the "SEMI PURCHASER"). The
decision as to whether and under what terms to implement a Semi Spin or a Semi
Sale will be the Company's; provided, however, that Parent's consent shall be
required in connection with any material deviation from the terms and conditions
of a Semi Sale or a Semi Spin, as applicable, and the terms generally
applicable, set forth on Schedule 1.5(a). In the event the parties hereto
disagree as to whether or not the terms and conditions of a Semi Disposition
materially deviate from the terms and conditions set forth on Schedule 1.5(a) or
in the event the parties hereto disagree on the amount of cash to be reserved
for the Semi Sale Taxes (as defined in Section 1.5(b)), either party shall be
entitled to submit such dispute or disagreement for final and binding
determination to a mutually acceptable third-party arbitrator, such
determination to be made within ten (10) days of the submission to such
arbitrator by either party. If the parties are unable to mutually agree upon an
arbitrator within one week of a party's notification to the other party of its
desire to arbitrate such a dispute, then each party shall have one week to
select an arbitrator and such two arbitrators shall have one week to select a
third arbitrator who shall have final authority to resolve such dispute within
ten (10) days of such arbitrator's selection based upon the terms and conditions
set forth on Schedule 1.5(a). The parties shall share equally in the fees and
expenses of such arbitrators, and such fees and expenses shall be paid by the
parties prior to the Effective Time.
(b) The "Semiconductor Business" shall consist of the assets and
liabilities set forth on Schedule 1.5(b). The "SEMI SALE CONSIDERATION" shall
equal the quotient of (i) the Semi Sale Purchase Price less the sum of (A) all
expenses attributable to the sale of the Semiconductor Business and (B) the Semi
Sale Taxes and (ii) the sum of (a) the number of shares of Common Stock
outstanding immediately prior to consummation of the Semi Sale, (b) the number
of shares of Common Stock underlying options to purchase Common Stock that are
vested immediately prior to consummation of the Semi Sale ("VESTED OPTIONS"),
(c) the number of shares of Common Stock underlying Options not constituting
Vested Options that are issued to Continuing Employees, and (d) the number of
shares of Common Stock underlying the Company's 5 7/8% Convertible Subordinate
Notes ("CONVERTIBLE NOTES") outstanding immediately prior to the consummation of
the Semi Sale. The "SEMI SALE PURCHASE PRICE" shall equal the aggregate purchase
price for the Semiconductor Business payable to the Company or any of its
Subsidiaries in the Semi Sale, including any contingent consideration and any
consideration subject to escrow, holdback or indemnification provisions of the
Semi Sale, but excluding amounts payable with respect to, or reserved for
payment with respect to, options issued to employees of the Semiconductor
Business that are not vested as of the Effective Time. The "SEMI SALE TAXES"
shall equal the income and other Taxes (as defined in Section 3.11(b)) incurred
and to be incurred by Parent, the Company or any affiliates thereof in
connection with the Semi Sale and the distribution of the Semi Sale
Consideration pursuant to the Merger. For purposes of determining the amount of
the Semi Sale Taxes that are based on
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net income, there shall be deducted from the "amount realized" from the Semi
Sale (or corresponding amount as determined for state, local or foreign income
Tax purposes), without duplication, (i) the tax basis of the cash and other
assets recognized as assets of the Semiconductor Business pursuant to Schedules
1.5(a) and 1.5(b) (but only to the extent such cash and other assets are
transferred to the Semi Purchaser), (ii) capitalized expenses of the Company
that both reduce the income tax liability of the Company and are attributable to
the sale within the meaning of clause (i)(A) of the second sentence of this
Section 1.5(b), (iii) the amount of any deductions accrued on or prior to the
Closing Date attributable to the exercise of Company options after the date
hereof and on or prior to the Closing Date (provided that deductions that reduce
Semi Sale Taxes pursuant to this paragraph shall not also reduce other Company
taxable income, and assuming for the purposes of this subsection that a
"disqualifying disposition" occurs with respect to 80% of all Company options
that are "incentive stock options" under Section 422 of the Code that are
exercised on or prior to the Closing Date) and (iv) any other currently
deductible items of the Company attributable to the sale within the meaning of
clause (i)(A) of the second sentence of this Section 1.5(b). For purposes of
this paragraph, expenses related to the disposition of Semi incurred or accrued
by the end of the Closing Date shall not be treated as allocated to Semi's tax
period beginning on the day after Closing Date under Treas. Reg. Section
1.1502-76(b)(1)(ii)(B). The Company and Parent shall mutually determine the
amount of the Semi Sale Taxes prior to the Closing Date. If the Company and
Parent fail to reach an agreement within one (1) week prior to the scheduled
Closing Date, either party shall be entitled to submit the matter to a mutually
acceptable third-party arbitrator. If the parties are unable to mutually agree
upon an arbitrator within one (1) week of a party's notification to the other
party of its desire to arbitrate such a dispute, then each party shall have one
(1) week to select an arbitrator and such two arbitrators shall have ten (10)
days to select a third arbitrator who shall have final authority to resolve such
dispute within ten (10) days of such arbitrator's selection, but before the
Closing Date. The parties shall share equally in the fees and expenses of such
arbitrators, and such fees and expenses shall be paid by the parties prior to
the Effective Time.
SECTION 1.6 Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond, in such
reasonable amount as the Surviving Corporation may direct (but consistent with
past practice of the Company), as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Parent Shares to
which the holder thereof is entitled pursuant to this Article I.
SECTION 1.7 Merger Closing. Subject to the satisfaction or waiver of the
conditions set forth in Article VI hereof, the closing of the Merger (the
"CLOSING") will take place at 10:00 a.m., California time, on a date to be
specified by the parties hereto, and no later than the second business day after
the satisfaction or waiver of the conditions set forth in Article VI hereof that
are to be satisfied other than on the day of Closing, at the offices of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, unless another time, date or place is agreed to in writing by
the parties hereto (such date, the "CLOSING DATE").
SECTION 1.8 Possible Alternative Structure. In the event that Parent or
the Company reasonably determines prior to the Effective Time that (i) there is
a material possibility that the transactions contemplated by this Agreement will
not constitute a "reorganization" within the meaning of Section 368(a) of the
Code, (ii) there is a material possibility that the Merger will result in a
material corporate level Tax, or (iii) there are material Tax benefits available
if the transactions contemplated by this Agreement are restructured, such party
may request that the structure of the acquisition of the Company contemplated by
this Agreement be altered in a manner so as to permit (i) the transactions
contemplated by this Agreement to qualify as a reorganization under Section 368
of the Code or a transfer under Section 351 of the Code, (ii) the avoidance of
such material corporate-level Tax, or (iii) the achievement of such Tax benefits
as applicable. In any case, corresponding changes to this Agreement shall be
made consistent with such structure but without any material adverse change in
the economic consequences to Parent, the Company or their respective
stockholders.
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ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1 Certificate of Incorporation. At the Effective Time, the
Certificate of Incorporation of Parent, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by law.
SECTION 2.2 By-Laws. The by-laws of Parent in effect at the Effective Time
shall be the by-laws of the Surviving Corporation until thereafter amended in
accordance with applicable law, the certificate of incorporation of such entity
and the by-laws of such entity.
SECTION 2.3 Officers and Directors.
(a) From and after the Effective Time, the officers of Parent at the
Effective Time shall be the officers of the Surviving Corporation, with the
following additions and exceptions: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇, until their respective
successors are duly elected or appointed and qualified in accordance with
applicable law.
(b) The Board of Directors of the Surviving Corporation effective as of,
and immediately following, the Effective Time shall consist of six (6) members
provided, further that the Board of Directors of Parent shall take all such
action as may be necessary to cause to be appointed to the Board of Directors of
the Surviving Corporation as of the Effective Time five (5) designees of Parent
and one (1) designee of the Company, each of whom shall be nominated from the
current directors of the Parent and the Company, designated in writing by the
parties prior to the mailing of the Proxy Statement (defined in Section 5.3(c)
hereof).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent, subject to such exceptions
as are specifically disclosed in writing in the disclosure letter supplied by
the Company to Parent, which disclosure shall provide an exception to or
otherwise qualify the representations or warranties of Company specifically
referred to in such disclosure and such other representations and warranties to
the extent such disclosure shall reasonably appear to be applicable to such
other representations or warranties (the "COMPANY DISCLOSURE SCHEDULE") as
follows:
SECTION 3.1 Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals (collectively, "LICENSES") required to
carry on its business as now conducted or presently proposed to be conducted
except for failures to have any such License which would not, in the aggregate,
have a Company Material Adverse Effect (as defined below). The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned, leased or operated
by it or the nature of its activities makes such qualification necessary, except
in such jurisdictions where failures to be so qualified would not reasonably be
expected to, in the aggregate, have a Company Material Adverse Effect. As used
herein, the term "COMPANY MATERIAL ADVERSE EFFECT" means a material adverse
effect on the financial condition, business, assets or results of operations of
the Company and its Subsidiaries, taken as a whole (assuming consummation of the
Semi Disposition), provided, however, that in no event shall any effect that
results from (a) the public announcement or pendency of the transactions
contemplated hereby or any actions taken in compliance with this Agreement, (b)
changes affecting the telecommunications equipment industry generally, (c)
changes affecting the United States economy generally, or (d) stockholders class
action litigation arising from allegations of a breach of fiduciary duty
relating to this Agreement, constitute a Company Material Adverse Effect. The
Company has heretofore made available to Parent true and complete copies of the
Certificate of Incorporation and the by-laws of the Company as currently in
effect.
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SECTION 3.2 Corporate Authorization.
(a) The Company has the requisite corporate power and authority to execute
and deliver this Agreement and, subject to approval of the Company's
stockholders, as set forth in Section 3.2(b) hereof and as contemplated by
Section 5.3 hereof, to perform its obligations hereunder. The execution and
delivery of this Agreement and the performance of its obligations hereunder have
been duly and validly authorized, and this Agreement has been approved, by the
Board of Directors of the Company and no other corporate proceedings, on the
part of the Company, other than the approval of the Company's stockholders, are
necessary to authorize the execution, delivery and performance of this
Agreement. This Agreement has been duly executed and delivered by the Company
and constitutes, assuming due authorization, execution and delivery of this
Agreement by Parent, a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
(b) Under applicable law, the Certificate of Incorporation and the rules of
the NASDAQ, the affirmative vote of the holders of a majority of the shares of
Common Stock outstanding on the record date, established by the Board of
Directors of the Company in accordance with the by-laws of the Company,
applicable law and this Agreement, is the vote required to approve the Merger,
adopt this Agreement and, if applicable, approve the Semi Sale.
SECTION 3.3 Consents and Approvals; No Violations.
(a) Neither the execution and delivery of this Agreement nor the
performance by the Company of its obligations hereunder will (i) conflict with
or result in any breach of any provision of the Certificate of Incorporation or
the by-laws of the Company; (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration or
obligation to repurchase, repay, redeem or acquire or any similar right or
obligation) under any of the terms, conditions or provisions of any note,
mortgage, letter of credit, other evidence of indebtedness, guarantee, license,
lease or agreement or similar instrument or obligation to which the Company or
any of its Subsidiaries is a party or by which any of them or any of their
assets may be bound or (iii) assuming that the filings, registrations,
notifications, authorizations, consents and approvals referred to in subsection
(b) below have been obtained or made, as the case may be, violate any order,
injunction, decree, statute, rule or regulation of any Governmental Entity to
which the Company or any of its Subsidiaries is subject, excluding from the
foregoing clauses (ii) and (iii) such requirements, defaults, breaches, rights
or violations that would not, in the aggregate, reasonably be expected to have a
Company Material Adverse Effect and would not have a material adverse effect on
the ability of the Company to perform its obligations hereunder.
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any government or any agency, court, tribunal,
commission, board, bureau, department, political subdivision or other
instrumentality of any government (including any regulatory or administrative
agency), whether federal, state, multinational (including, but not limited to,
the European Community), provincial, municipal, domestic or foreign (each, a
"GOVERNMENTAL ENTITY") is required in connection with the execution and delivery
of this Agreement by the Company or the performance by the Company of its
obligations hereunder, except (i) the filing of the Certificate of Merger in
accordance with the DGCL; (ii) compliance with any applicable requirements of
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, and the
rules and regulations thereunder (the "HSR ACT"), or any foreign laws regulating
competition, antitrust, investment or exchange controls; (iii) compliance with
any applicable requirements of the Securities Act of 1933, as amended, and the
rules and regulations thereunder (the "SECURITIES ACT") and the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder (the
"EXCHANGE ACT"); (iv) compliance with any applicable requirements of state blue
sky or takeover laws and (v) such other consents, approvals, orders,
authorizations, notifications, registrations, declarations and filings the
failure of which to be obtained or made would not, in the aggregate, reasonably
be expected to have a Company Material Adverse Effect and would not have a
material adverse effect on the ability of the Company to perform its obligations
hereunder.
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SECTION 3.4 Capitalization. The authorized capital stock of the Company
consists of 150,000,000 shares of Common Stock, par value $0.001 and 5,000,000
shares of preferred stock, par value $ 0.001 per share (the "PREFERRED STOCK").
As of September 30, 1999, there were (i) 40,476,647 shares of Common Stock
issued and outstanding and (ii) no shares of Preferred Stock issued and
outstanding. All shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable and were not
issued in violation of any preemptive rights. As of September 30, 1999, there
were outstanding options to purchase 14,475,268 shares of Common Stock. Except
as set forth in this Section 3.4, for the Convertible Notes and for changes
since September 30, 1999, resulting from the exercise of options outstanding on
such date, there are outstanding (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the Company or any Subsidiary
of the Company convertible into or exchangeable for shares of capital stock or
voting securities of the Company, (iii) no options, preemptive or other rights
to acquire from the Company or any of its Subsidiaries, and no obligation of the
Company to issue any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of the Company and
(iv) no equity equivalent interest in the ownership or earnings of the Company
or its Subsidiaries or other similar rights (the items in clauses (i), (ii),
(iii) and (iv) being referred to collectively as the "COMPANY SECURITIES").
There are no outstanding obligations of the Company or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any Company Securities. No Subsidiary
of the Company owns any capital stock or other voting securities of the Company.
SECTION 3.5 Subsidiaries.
(a) Each Subsidiary of the Company (each, a "COMPANY SUBSIDIARY") (i) is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, (ii) has all corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted and (iii) is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for failures of this
representation and warranty to be true which would not, in the aggregate, have a
Company Material Adverse Effect. For purposes of this Agreement, "SUBSIDIARY"
means with respect to any Person, any corporation or other legal entity of which
such Person owns, directly or indirectly, more than 50% of the outstanding stock
or other equity interests, the holders of which are entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity. All Company Subsidiaries and their respective
jurisdictions of incorporation are identified in Schedule 3.5 of the Company
Disclosure Schedule.
(b) All of the outstanding shares of capital stock of each Subsidiary of
the Company are duly authorized, validly issued, fully paid and nonassessable,
and such shares are owned by the Company or by a Subsidiary of the Company free
and clear of any Liens (as defined hereafter) or limitations on voting rights.
There are no subscriptions, options, warrants, calls, preemptive rights, rights,
convertible securities or other agreements or commitments of any character
relating to the issuance, transfer, sale, delivery, voting or redemption
(including any rights of conversion or exchange under any outstanding security
or other instrument) of any of the capital stock or other equity interests of
any of such Subsidiaries. There are no agreements requiring the Company or any
of its Subsidiaries to make contributions to the capital of, or lend or advance
funds to, any Subsidiaries of the Company. For purposes of this Agreement,
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset.
SECTION 3.6 SEC Documents. The Company has filed all required reports,
proxy statements, registration statements, forms and other documents with the
SEC since January 1, 1998 (the "COMPANY SEC DOCUMENTS"). As of their respective
dates, and giving effect to any amendments thereto, (a) the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the applicable rules
and regulations of the SEC promulgated thereunder and (b) none of the Company
SEC Documents contained any untrue statement of a material
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fact or omitted 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 were made, not misleading.
SECTION 3.7 Financial Statements.
(a) The financial statements of the Company (including, in each case, any
notes and schedules thereto) included in the Company SEC Documents (a) were
prepared from the books and records of the Company and its Subsidiaries, (b)
comply as to form in all material respects with all applicable accounting
requirements and the rules and regulations of the SEC with respect thereto, (c)
are in conformity with United States generally accepted accounting principles
("GAAP"), applied on a consistent basis (except in the case of unaudited
statements, as permitted by the rules and regulations of the SEC) during the
periods involved and (d) fairly present, in all material respects, the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments which were not and are not
expected to be, individually or in the aggregate, material in amount).
(b) The unaudited financial statements of the Company (assuming
consummation of the Semi Disposition) for the nine-month period ended September
30, 1999 and attached to Schedule 3.7(b) of the Company Disclosure Schedule
(including any notes and schedules thereto) (a) were prepared from the books and
records of the Company and its Subsidiaries, (b) comply as to form in all
material respects with all applicable accounting requirements and the rules and
regulations of the SEC with respect thereto, (c) are in conformity with GAAP,
applied on a consistent basis (except as permitted by the rules and regulations
of the SEC) during the period involved and (d) fairly present, in all material
respects, the consolidated financial position of the Company and its
consolidated Subsidiaries (assuming consummation of the Semi Disposition) as of
the date thereof and the consolidated results of their operations and cash flows
for the period then ended (subject to normal year-end audit adjustments which
were not and are not expected to be, individually or in the aggregate, material
in amount).
SECTION 3.8 Absence of Undisclosed Liabilities. Except as set forth in the
Company SEC Documents filed through the date of this Agreement, and except for
liabilities and obligations incurred in the ordinary course of business since
the date of the most recent consolidated balance sheet included in the Company
SEC Documents, neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) except for those that would not, in the aggregate, reasonably be
expected to have a Company Material Adverse Effect.
SECTION 3.9 Joint Proxy Statement; Form S-4.
(a) None of the information contained in the Proxy Statement (and any
amendments thereof or supplements thereto) will at the time of the mailing of
the Proxy Statement to the stockholders of the Company or the stockholders of
Parent and at the time of the Special Meeting (as defined in Section 5.3(a)) or
the Parent Special Meeting (as defined in Section 5.3(b)), 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 were made, not misleading, except that no
representation is made by the Company with respect to statements made or omitted
in the Proxy Statement relating to Parent based on information supplied by
Parent for inclusion in the Proxy Statement. The Proxy Statement will comply as
to form in all material respects with the provisions of the Exchange Act and the
rules and regulations promulgated thereunder, except that no representation is
made by the Company with respect to the statements made or omitted in the Proxy
Statement relating to Parent based on information supplied by Parent for
inclusion in the Proxy Statement.
(b) None of the information supplied or to be supplied by the Company for
inclusion or incorporation by reference in the registration statement on Form
S-4 (and/or such other form as may be applicable and used) to be filed with the
SEC in connection with the issuance of Parent Shares by reason of the
transactions contemplated by this Agreement (such registration statement, as it
may be amended or supplemented, is herein referred to as the "FORM S-4") will,
with respect to information relating to the
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Company, at the time the Form S-4 is filed with the SEC, and at any time it is
amended or supplemented or at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
SECTION 3.10 Absence of Material Adverse Changes, Etc. Since June 30,
1999, there has not been a Company Material Adverse Effect. Without limiting the
foregoing, except as disclosed in the Company SEC Documents filed by the Company
through the date hereof or as contemplated by this Agreement, since June 30,
1999, (i) the Company and its Subsidiaries have conducted their business in the
ordinary course of business and (ii) there has not been:
(a) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or
any repurchase, redemption or other acquisition by the Company or any
Subsidiary (other than any wholly-owned Subsidiary) of the Company of any
outstanding shares of capital stock or other equity securities of, or other
ownership interests in, the Company or of any Company Securities;
(b) any amendment of any provision of the Certificate of Incorporation
or by-laws of, or of any material term of any outstanding security issued
by, the Company or any Subsidiary (other than any wholly-owned Subsidiary)
of the Company;
(c) any incurrence, assumption or guarantee by the Company or any
Subsidiary of the Company of any indebtedness for borrowed money other than
borrowings under existing short term credit facilities not in excess of
$100,000 in the aggregate;
(d) any change in any method of accounting or accounting practice by
the Company or any Subsidiary of the Company, except for any such change
required by reason of a change in GAAP;
(e) any (i) grant of any severance or termination pay to any director,
officer or employee of the Company or any Subsidiary of the Company, (ii)
employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or
employee of the Company or any Subsidiary of the Company entered into,
(iii) increase in benefits payable under any existing severance or
termination pay policies or employment agreements or (iv) increase in
compensation, bonus or other benefits payable to directors, officers or
employees of the Company or any Subsidiary of the Company, in each case
other than in the ordinary course of business;
(f) issuance of Company Securities other than pursuant to options
outstanding as of June 30, 1999 and the issuance of options after such date
in the ordinary course of business and upon the conversion of the
Convertible Notes (and the issuance of Company Securities pursuant
thereto);
(g) acquisition or disposition of assets material to the Company and
its Subsidiaries (assuming consummation of the Semi Disposition), except
for sales of inventory in the ordinary course of business consistent with
past practice, or any acquisition or disposition of capital stock of any
third party (other than acquisitions or dispositions of non-controlling
equity interests of third parties in the ordinary course of business where
the aggregate cost of all such acquisitions and dispositions does not
exceed $10,000,000), or any merger or consolidation with any third party,
by the Company or any Subsidiary;
(h) entry by the Company into any joint venture, partnership or
similar agreement with any person other than a wholly-owned Subsidiary; or
(i) any authorization of, or commitment or agreement to take any of,
the foregoing actions except as otherwise permitted by this Agreement.
SECTION 3.11 Taxes.
(a)(1) All Tax Returns (as defined below) required to be filed by or on
behalf of the Company, each of its Subsidiaries, and each affiliated, combined,
consolidated or unitary group of which the Company or
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any of its Subsidiaries is or has been a member ("COMPANY GROUP MEMBERS") have
been timely filed, and all returns filed are complete and accurate and correctly
reflect the tax liabilities required to be reported therein, (2) the Company,
its Subsidiaries, and Company Group Members have timely paid all Taxes (as
defined below) that have become due or payable and have adequately reserved for
in accordance with GAAP all Taxes (whether or not shown on any Tax Return) that
have accrued but are not yet due or payable; (3) there is no presently pending
audit examination, refund, claim or litigation, proposed adjustment or matter in
controversy with respect to any Taxes due and owing by the Company, any
Subsidiary of the Company or any Company Group Member and none of the above has
knowledge that any such action or proceeding is being contemplated, (4) neither
the Company, any Subsidiary of the Company nor any Company Group Member has
filed any waiver of the statute of limitations applicable to the assessment or
collection of any Tax which remains open; (5) all assessments for Taxes due and
owing by the Company, any Subsidiary of the Company or any Company Group Member
with respect to completed and settled examinations or concluded litigation have
been paid; (6) neither the Company, any Subsidiary of the Company nor any
Company Group Member is a party to any express or implied tax indemnity
agreement, tax sharing agreement or other agreement under which it could become
liable to another person as a result of the imposition of a Tax upon any person,
or the assessment or collection of such a Tax; (7) the Company, each of its
Subsidiaries, and each Company Group Member has complied in all material
respects with all rules and regulations relating to the withholding of Taxes;
(8) neither the Company, any Subsidiary, nor any Company Group Member is a party
to any agreement, contract, arrangement or plan that has resulted or would
result, individually or in the aggregate, in connection with this Agreement or
any change of control of the Company, any Subsidiary, or any Company Group
Member in the payment of any "excess parachute payments" within the meaning of
Section 280G of the Code; (9) neither the Company, any Subsidiary, nor any
Company Group Member has made any payments since December 31, 1998, and is not a
party to an agreement that could require it to make any payments (including any
deemed payment of compensation upon exercise of an option), that would not be
fully deductible by reason of Section 162(m) of the Code; and (10) the
liabilities of the Company will not exceed the adjusted basis of the assets of
the Company, in each case as determined for federal income tax purposes
immediately prior to the Effective Time.
(b) For purposes of this Agreement, (i) "TAXES" means (A) all taxes, levies
or other like assessments, charges or fees (including estimated taxes, charges
and fees), including, without limitation, income, corporation, advance
corporation, gross receipts, transfer, excise, property, sales, use,
value-added, license, payroll, withholding, social security and franchise or
other governmental taxes or charges, imposed by the United States or any state,
county, local or foreign government or subdivision or agency thereof, and such
term shall include any interest, penalties or additions to tax attributable to
such taxes, and (B) any liability for payment of amounts described in clause (A)
whether as a result of transferee liability, of being a member of an affiliated,
consolidated, combined or unitary group for any period, or otherwise through
operation of law, and (ii) "TAX RETURN" means any report, return, statement or
other written information required to be supplied to a taxing authority in
connection with Taxes.
SECTION 3.12 Employee Benefit Plans.
(a) Except for any plan, fund, program, agreement or arrangement that is
subject to the laws of any jurisdiction outside the United States, Schedule
3.12(a) of the Company Disclosure Schedule contains a true and complete list of
each material deferred compensation, incentive compensation, and equity
compensation plan; material "welfare" plan, fund or program (within the meaning
of section 3(1) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")); material "pension" plan, fund or program (within the meaning
of section 3(2) of ERISA); each material employment, termination or severance
agreement; and each other material employee benefit plan, fund, program,
agreement or arrangement, in each case, that is in writing and sponsored,
maintained or contributed to or required to be contributed to by the Company or
by any trade or business, whether or not incorporated (each, an "ERISA
AFFILIATE"), that together with the Company would be deemed a "single employer"
within the meaning of section 4001(b) of ERISA, or to which the Company or an
ERISA Affiliate is party, whether written or oral, for the benefit of any
employee, consultant, director or former employee, consultant or
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director of the Company or any Subsidiary of the Company. The plans, funds,
programs, agreements and arrangements listed on Schedule 3.12(a) of the Company
Disclosure Schedule are referred to herein collectively as the "PLANS".
(b) With respect to each Plan, the Company has heretofore delivered or made
available to Parent true and complete copies of the Plan and any amendments
thereto (or if the Plan is not a written Plan, a description thereof), any
related trust or other funding vehicle, the most recent reports or summaries
required under ERISA or the Code and the most recent determination letter
received from the Internal Revenue Service with respect to each Plan intended to
qualify under section 401 of the Code.
(c) No liability under Title IV or section 302 of ERISA has been incurred
by the Company or any ERISA Affiliate that has not been satisfied in full, other
than liability for premiums due the Pension Benefit Guaranty Corporation (which
premiums have been paid when due).
(d) Each Plan has been operated and administered in all material respects
in accordance with its terms and applicable law, including, but not limited to,
ERISA and the Code.
(e) Each Plan intended to be "qualified" within the meaning of section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service, or in the case of such a Plan for which a favorable
determination letter has not yet been received, the applicable remedial
amendment period under Section 401(b) of the Code has not expired.
(f) No Plan provides medical, surgical, hospitalization, death or similar
benefits (whether or not insured) for employees or former employees of the
Company or any Subsidiary for periods extending beyond their retirement or other
termination of service, other than (i) coverage mandated by applicable law, (ii)
death benefits under any "pension plan," or (iii) benefits the full cost of
which is borne by the current or former employee (or his or her beneficiary),
dependant or other covered person.
(g) There are no pending, or to the knowledge of the Company, threatened or
anticipated, claims that would reasonably be expected to have a Company Material
Adverse Effect by or on behalf of any Plan, by any employee or beneficiary
covered under any such Plan, or otherwise involving any such Plan (other than
routine claims for benefits).
(h) The consummation of the transactions contemplated by this Agreement
will not, either alone or in combination with another event, (i) entitle any
current or former employee or officer of the Company or any ERISA Affiliate to
severance pay, unemployment compensation or any other payment, except as
expressly provided in this Agreement, or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee or
officer, other than payments, accelerations or increases (x) under any employee
benefit plan that is subject to the laws of a jurisdiction outside of the United
States or (y) mandated by applicable law.
(i) To the knowledge of the Company, all employee benefit plans that are
subject to the laws of any jurisdiction outside the United States are in
material compliance with such applicable laws, including relevant Tax laws, and
the requirements of any trust deed under which they were established, except for
such exceptions to the foregoing which, in the aggregate, would not reasonably
be expected to have a Company Material Adverse Effect. Schedule 3.12(i) lists
all material employee pension benefit plans that are subject to the laws of any
jurisdiction outside the United States except for such plans that are
governmental or statutory plans.
(j) Each Plan can be amended prospectively or terminated at any time
without approval from any person, without advance notice, and without any
liability other than for benefits accrued prior to such amendment or
termination.
(k) No agreement, commitment, or obligation exists to increase any benefits
under any Plan or to adopt any new Plan.
(l) No Plan has any unfunded accrued benefits that are not fully reflected
in the Financial Statements.
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(m) No ERISA pension plan has incurred any "accumulated funding deficiency"
or "waived funding deficiency" within the meaning of Section 302 of ERISA or
Section 412 of the Internal Revenue Code of 1986, as amended (the "CODE") and
the Company has never sought to obtain any variance from the minimum funding
standards pursuant to Section 412(d) of the Code. The funding method used in
connection with each ERISA Pension Plan meets the requirements of ERISA and the
Code and the actuarial assumptions used in connection with each such plan are
reasonable, given the experience of such ERISA Pension Plan and reasonable
expectations.
The fair market value of the plan assets of each ERISA Pension Plan are at
least equal to (i) the present value of its benefit liabilities (as defined in
ERISA Section 4001(a)(16), including any unpredictable contingent event benefits
within the meaning of Code Section 412(l)(7), and determined on the basis of
assumptions prescribed by the PBGC for purposes of ERISA Section 4044), and (ii)
the Projected Benefit Obligations thereunder, as defined in Statement of
Financial Accounting Standards No. 87, including any allowance for indexation
and ad hoc increases. No ERISA Pension Plan has been completely or partially
terminated or been the subject of a Reportable Event under ERISA Section 4043.
No proceeding by the PBGC to terminate any ERISA Pension Plan has been
instituted, and the Company has not incurred any liability to the PBGC (other
than the PBGC premiums, all of which have been timely paid) or otherwise under
Title IV of ERISA with respect to any ERISA Pension Plan.
(n) The Company neither maintains nor participates in any Voluntary
Employees' Beneficiary Association ("VEBA"), under Code Sections 419 and 419A,
which is intended to be exempt from taxation under section 501(c)(9) of the
Code.
(o) The Company does not maintain, participate in, contribute to, or have
any obligation to contribute or any liability with respect to any multiple
employer or multiemployer plan, or has had any obligation with respect to such a
plan during the six (6) years immediately preceding the date of this Agreement.
SECTION 3.13 Litigation; Compliance with Laws.
(a) Except as set forth in the Company SEC Documents filed through the date
of this Agreement or otherwise fully covered by insurance, there is no action,
suit or proceeding pending against, or to the knowledge of the Company,
threatened against, the Company or any Subsidiary of the Company or any of their
respective properties before any court or arbitrator or any Governmental Entity
which would reasonably be expected to have a Company Material Adverse Effect.
(b) The Company and its Subsidiaries are in compliance with all applicable
laws, ordinances, rules and regulations of any federal, state, local or foreign
governmental authority applicable to their respective businesses and operations,
except for such violations, if any, which, in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect. All
governmental approvals, permits and licenses (collectively, "PERMITS") required
to conduct the business of the Company and its Subsidiaries have been obtained,
are in full force and effect and are being complied with except for such
violations and failures to have Permits in full force and effect, if any, which,
individually or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect.
SECTION 3.14 Labor Matters. As of the date of this Agreement (i) there is
no labor strike, dispute, slowdown, stoppage or lockout actually pending or, to
the knowledge of the Company, threatened against the Company; (ii) to the
knowledge of the Company, no union organizing campaign with respect to the
Company's employees or any of its Subsidiaries is underway; (iii) there is no
unfair labor practice charge or complaint against the Company or any of its
Subsidiaries pending or, to the knowledge of the Company, threatened before the
National Labor Relations Board or any similar state or foreign agency; (iv)
there is no written grievance pending relating to any collective bargaining
agreement or other grievance procedure; (v) to the knowledge of the Company, no
charges with respect to or relating to the Company or any of its Subsidiaries
are pending before the Equal Employment Opportunity Commission or any other
agency responsible for the prevention of unlawful employment practices; and (vi)
there are no collective bargaining agreements with any union covering employees
of the Company or any of its Subsidiaries,
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except for such exceptions to the foregoing clauses (i) through (vi) which,
individually or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect.
SECTION 3.15 Certain Contracts and Arrangements. Each material contract or
agreement to which the Company or any of its Subsidiaries is a party or by which
any of them is bound is in full force and effect, and neither the Company nor
any of its Subsidiaries, nor, to the knowledge of the Company, any other party
thereto, is in breach of, or default under, any such contract or agreement, and
no event has occurred that with notice or passage of time or both would
constitute such a breach or default thereunder by the Company or any of its
Subsidiaries, or, to the knowledge of the Company, any other party thereto,
except for such failures to be in full force and effect and such breaches and
defaults which, in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect.
SECTION 3.16 Environmental Matters.
(a) The following definitions apply to Section 3.16 and Section 4.16. (i)
"CLEANUP" means all actions required to: (A) cleanup, remove, treat or remediate
Hazardous Materials (as defined hereafter) in the indoor or outdoor environment;
(B) prevent the Release (as defined hereafter) of Hazardous Materials so that
they do not migrate, endanger or threaten to endanger public health or welfare
or the indoor or outdoor environment; (C) perform pre-remedial studies and
investigations and post-remedial monitoring and care; or (D) respond to any
government requests for information or documents in any way relating to cleanup,
removal, treatment or remediation or potential cleanup, removal, treatment or
remediation of Hazardous Materials in the indoor or outdoor environment.
(ii) "Environmental Claim" means any claim, action, cause of action,
investigation or written notice by any Person alleging potential liability
(including, without limitation, potential liability for investigatory costs,
Cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on or resulting
from (A) the presence or Release of any Hazardous Materials at any location,
whether or not owned or operated by the Company or any of its Subsidiaries or
(B) circumstances forming the basis of any violation of any Environmental Law
(as defined hereafter).
(iii) "Environmental Laws" means all federal, state, local and foreign laws
and regulations relating to pollution or protection of the environment,
including, without limitation, laws relating to Releases or threatened Releases
of Hazardous Materials or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, transport or handling of Hazardous
Materials.
(iv) "Hazardous Materials" means all substances defined as Hazardous
Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous
Substances Pollution Contingency Plan, 40 C.F.R. Section 300.5, or defined as
such by, or regulated as such under, any Environmental Law.
(v) "Release" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, dispersal, leaching or migration into the
environment (including, without limitation, ambient air, surface water,
groundwater and surface or subsurface strata) or into or out of any property,
including the movement of Hazardous Materials through or in the air, soil,
surface water, groundwater or property.
(b) (i) To the knowledge of the Company, the Company and its Subsidiaries
are in compliance with all applicable Environmental Laws (which compliance
includes, but is not limited to, the possession by the Company and its
Subsidiaries of all permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof), except where failures to be in compliance would not, in the aggregate,
reasonably be expected to have a Company Material Adverse Effect. Since January
1, 1998 and prior to the date of this Agreement, neither the Company nor any of
its Subsidiaries has received any communication (written or oral), whether from
a Governmental Entity, citizens' group, employee or otherwise, alleging that the
Company or any of its Subsidiaries is not in such compliance, except where
failures to be in compliance would not, in the aggregate, reasonably be expected
to have a Company Material Adverse Effect.
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(ii) There is no Environmental Claim pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries or, to the
knowledge of the Company, against any Person whose liability for any
Environmental Claim the Company or any of its Subsidiaries has or may have
retained or assumed either contractually or by operation of law that would
reasonably be expected to have a Company Material Adverse Effect.
(iii) There are no present or, to the knowledge of the Company, past
actions, activities, circumstances, conditions, events or incidents, including,
without limitation, the Release or presence of any Hazardous Material that could
form the basis of any Environmental Claim against the Company or any of its
Subsidiaries or, to the knowledge of the Company, against any Person whose
liability for any Environmental Claim the Company or any of its Subsidiaries has
or may have retained or assumed either contractually or by operation of law that
would, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
(iv) Neither the Company nor any of its Subsidiaries is subject to any
indemnity or other agreement relating to liability under any Environmental Laws
or relating to Hazardous Materials.
(v) The Company agrees to cooperate with Parent to effect the retention of
any permits or other governmental authorizations under Environmental Laws that
will be required to permit the Company to conduct the business as conducted by
the Company and its Subsidiaries immediately prior to the Closing Date.
SECTION 3.17 Intellectual Property.
(a) To the knowledge of the Company, the Company and its Subsidiaries own
or have the right to use all material Intellectual Property (as defined
hereafter) reasonably necessary for the Company and its Subsidiaries to conduct
their business as it is currently conducted (assuming consummation of the Semi
Disposition). All Company Registered Intellectual Property has been identified
on Schedule 3.17(a) "COMPANY REGISTERED INTELLECTUAL PROPERTY" includes a list
of United States, international and foreign (i) patents and patent applications,
(ii) registered trademarks and trademark applications, and (iii) registered
copyright applications, in each case owned by the Company and its Subsidiaries
(assuming consummation of the Semi Disposition).
(b) To the knowledge of the Company: (i) all of the registrations,
including patents, relating to material Intellectual Property owned by the
Company and its Subsidiaries (assuming consummation of the Semi Disposition) are
subsisting and unexpired, free of all liens or encumbrances, have not been
abandoned; (ii) the Company does not infringe the intellectual property rights
of any third party in any respect that would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect; (iii) no
judgment, decree, injunction, rule or order has been rendered by Governmental
Entity which would limit, cancel or question the validity of, or the Company's
or its Subsidiaries' rights (assuming consummation of the Semi Disposition) in
and to, any Intellectual Property owned by the Company (assuming consummation of
the Semi Disposition) in any respect that would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect; and (iv)
the Company has not received notice of any pending or threatened suit, action or
adversarial proceeding that seeks to limit, cancel or question the validity of,
or the Company's or its Subsidiaries' rights (assuming consummation of the Semi
Disposition) in and to, any Intellectual Property, which would reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
(c) For purposes of this Agreement "INTELLECTUAL PROPERTY" shall mean all
rights, privileges and priorities provided under U.S., state and foreign law
relating to intellectual property, including without limitation all (w)(1)
proprietary inventions, discoveries, processes, formulae, designs, methods,
techniques, procedures, concepts, developments, technology, new and useful
improvements thereof and proprietary know-how relating thereto, whether or not
patented or eligible for patent protection; (2) copyrights and copyrightable
works, including, but not limited to, computer applications, programs, software,
databases and related items; (3) trademarks, service marks, trade names, and
trade dress, the goodwill of any business symbolized thereby, and all common-law
rights relating thereto; (4) trade secrets and other
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confidential information; (x) patents and invention disclosures; (y) all
registrations, applications and recordings for any of the foregoing and (z)
licenses or other similar agreements granting to the Company or any of its
Subsidiaries the rights to use any of the foregoing.
(d) To the knowledge of the Company, the Company and its Subsidiaries have
not used and are not making use of any confidential or proprietary information
or trade secrets of any other Person in breach of any agreement to which the
Company or any of its Subsidiaries is subject or in violation of any civil or
criminal law.
(e) The Company has taken commercially reasonable security measures to
protect the secrecy, confidentiality and value of its trade secrets.
(f) To the knowledge of the Company, all employees of the Company and its
Subsidiaries have executed written agreements with the Company or its
Subsidiaries that assign to the Company or its Subsidiaries all rights to
inventions improvements, discoveries or information relating to the business of
the Company and its Subsidiaries. To the Company's knowledge, no employee of the
Company or its Subsidiaries has entered into any agreement that restricts or
limits in any way the scope or type of work in which the employee may be engaged
or requires the employee to transfer, assign or disclose any Intellectual
Property or information concerning the employee's work to anyone other than the
Company or its Subsidiaries.
SECTION 3.18 Opinion of Financial Advisor. The Company has received the
opinion of Credit Suisse First Boston Corporation ("CSFB") dated the date of the
original agreement to the effect that, as of the date of such opinion, and based
upon and subject to the matters stated therein, the Exchange Ratio is fair from
a financial point of view to the holders of Common Stock. A true and complete
copy of such opinion will be delivered to Parent as soon as practicable.
SECTION 3.19 Board Recommendation. The Board of Directors of the Company,
at a meeting duly called and held, has approved this Agreement and (i)
determined that this Agreement and the transactions contemplated hereby,
including the Merger, taken together are advisable and in the best interests of
the stockholders of the Company; and (ii) resolved to recommend that the
stockholders of the Company adopt this Agreement and approve the Merger.
SECTION 3.20 Tax Treatment. Neither the Company nor any of its affiliates
has taken any action or knows of any fact, agreement, plan or other circumstance
that could pose a material risk to the status of the Merger as a reorganization
under the provisions of Section 368(a) of the Code.
SECTION 3.21 Finders' Fees. Except for CSFB (a true and correct copy of
whose engagement agreement has been provided to Parent), whose fees will be paid
by the Company, there is no investment banker, broker, finder or other
intermediary which has been retained by, or is authorized to act on behalf of,
the Company or any Subsidiary of the Company that would be entitled to any fee
or commission from the Company, any Subsidiary of the Company, Parent or any of
Parent's affiliates upon consummation of the transactions contemplated by this
Agreement.
SECTION 3.22 Section 203 of the Delaware General Corporation Law. The
Board of Directors of the Company has taken all actions so that (a) the
restrictions contained in Section 203 of the DGCL applicable to a "business
combination" (as defined in such Section 203) will not apply to the execution,
delivery or performance of this Agreement or to the consummation of the Merger
or the other transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company subject to such exceptions as
are specifically disclosed in writing in the disclosure letter and referencing a
specific representation supplied by Parent to Company, which disclosure shall
provide an exception to or otherwise qualify the representations or warranties
of
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Parent specifically referred to in such disclosure and such other
representations and warranties to the extent such disclosure shall reasonably
appear to be applicable to such other representations or warranties (the "PARENT
DISCLOSURE SCHEDULE"), as follows:
SECTION 4.1 Corporate Existence and Power. Parent is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all corporate or other power, as the case may
be, and all Licenses required to carry on its business as now conducted or
presently proposed to be conducted except for failures to have any such License
which would not, in the aggregate, have a Parent Material Adverse Effect (as
defined below). Parent is duly qualified to do business and is in good standing
in each jurisdiction where the character of the property owned, leased or
operated by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where failures to be so qualified
would not reasonably be expected to, in the aggregate, have a Parent Material
Adverse Effect. As used herein, the term "PARENT MATERIAL ADVERSE EFFECT" means
a material adverse effect on the financial condition, business, assets or
results of operations of Parent and its Subsidiaries, taken as a whole,
provided, however, that in no event shall any effect that results from (a) the
public announcement or pendency of the transactions contemplated hereby, (b)
changes affecting the telecommunications equipment industry generally, (c)
changes affecting the United States economy generally or (d) stockholder class
action litigation arising from allegations of a breach of fiduciary duty
relating to this Agreement, constitute a Parent Material Adverse Effect. Parent
has heretofore delivered or made available to the Company true and complete
copies of the governing documents or other organizational documents of like
import, as currently in effect, of Parent.
SECTION 4.2 Authorization. Parent has the requisite power and authority to
execute and deliver this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement and the performance of its obligations
hereunder have been duly and validly authorized by the Board of Directors of
Parent, and no other proceedings on the part of Parent are necessary to
authorize the execution, delivery and performance of this Agreement. This
Agreement has been duly executed and delivered by Parent and constitutes,
assuming due authorization, execution and delivery of this Agreement by the
Company, a valid and binding obligation of Parent, enforceable against it in
accordance with its terms.
SECTION 4.3 Consents and Approvals; No Violations.
(a) Neither the execution and delivery of this Agreement nor the
performance by Parent of its obligations hereunder will (i) conflict with or
result in any breach of any provision of the Certificate of Incorporation or
by-laws (or other governing or organizational documents) of Parent, or (ii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration or obligation to repurchase, repay, redeem or
acquire or any similar right or obligation) under any of the terms, conditions
or provisions of any note, mortgage, letter of credit, other evidence of
indebtedness, guarantee, license, lease or agreement or similar instrument or
obligation to which Parent is a party or by which any of them or any of the
respective assets used or held for use by any of them may be bound or (iii)
assuming that the filings, registrations, notifications, authorizations,
consents and approvals referred to in subsection (b) below have been obtained or
made, as the case may be, violate any order, injunction, decree, statute, rule
or regulation of any Governmental Entity to which Parent is subject, excluding
from the foregoing clauses (ii) and (iii) such requirements, defaults, breaches,
rights or violations that would not, in the aggregate, reasonably be expected to
have a Parent Material Adverse Effect and would not reasonably be expected to
have a material adverse effect on the ability of Parent to consummate the
transactions contemplated hereby.
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any Governmental Entity is required in connection with
the execution and delivery of this Agreement by Parent or the performance by it
of its obligations hereunder, except (i) the filing of the Certificate of Merger
in accordance with the DGCL; (ii) compliance with any applicable requirements of
the HSR Act or any foreign laws regulating competition, antitrust, investment or
exchange controls; (iii) compliance with any applicable requirements of the
Securities Act and the Exchange Act; (iv) compliance with any
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applicable requirements of state blue sky or takeover laws and (v) such other
consents, approvals, orders, authorizations, notifications, registrations,
declarations and filings the failure of which to be obtained or made would not
reasonably be expected to have a Parent Material Adverse Effect and would not
have a material adverse effect on the ability of Parent to perform its
obligations hereunder.
SECTION 4.4 Capitalization. The authorized capital stock of Parent
consists of 50,000,000 shares of Parent Common Stock and 5,000,000 shares of
preferred stock, par value $.001 per share (the "PARENT PREFERRED STOCK"). As of
September 27, 1999 there were (i) 15,145,478 shares of Parent Common Stock
issued and outstanding and (ii) no shares of Parent Preferred Stock issued and
outstanding. All shares of capital stock of Parent have been duly authorized and
validly issued and are fully paid and nonassessable and were not issued in
violation of any preemptive rights. As of September 27, 1999 there were
outstanding Parent Options to purchase 1,910,974 shares of Parent Common Stock.
Except as set forth in this Section 4.4 and except for changes since September
27, 1999 resulting from the exercise of Parent Options outstanding on such date,
there are outstanding (i) no shares of capital stock or other voting securities
of Parent, (ii) no securities of Parent or any Subsidiary of Parent convertible
into or exchangeable for shares of capital stock or voting securities of Parent,
(iii) no options, preemptive or other rights to acquire from Parent or any of
its Subsidiaries, and no obligation of Parent to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of Parent, and (iv) no equity equivalent interest in
the ownership or earnings of Parent or its Subsidiaries or other similar rights
(the items in clauses (i), (ii), (iii) and (iv) being referred to collectively
as the "PARENT SECURITIES"). There are no outstanding obligations of Parent or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any Parent
Securities. No Subsidiary of Parent owns any capital stock or other voting
securities of Parent or the Company.
SECTION 4.5 Subsidiaries.
(a) Each Subsidiary of Parent (each, a "PARENT SUBSIDIARY") (i) is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, (ii) has all corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted and (iii) is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for failures of this
representation and warranty to be true which would not, in the aggregate, have a
Parent Material Adverse Effect. All Parent Subsidiaries and their respective
jurisdictions of incorporation are identified in Schedule 4.5 of Parent
Disclosure Schedule.
(b) All of the outstanding shares of capital stock of each Subsidiary of
Parent are duly authorized, validly issued, fully paid and nonassessable, and
such shares are owned by Parent or by a Subsidiary of Parent free and clear of
any Liens or limitations on voting rights. There are no subscriptions, options,
warrants, calls, preemptive rights, rights, convertible securities or other
agreements or commitments of any character relating to the issuance, transfer,
sale, delivery, voting or redemption (including any rights of conversion or
exchange under any outstanding security or other instrument) of any of the
capital stock or other equity interests of any of such Subsidiaries. There are
no agreements requiring Parent or any of its Subsidiaries to make contributions
to the capital of, or lend or advance funds to, any Subsidiaries of Parent.
SECTION 4.6 SEC Documents. Parent has filed all required reports, proxy
statements, registration statements, forms and other documents with the SEC
since January 1, 1998 (the "PARENT SEC DOCUMENTS"). As of their respective
dates, and giving effect to any amendments thereto, (a) the Parent SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the applicable rules and regulations
of the SEC promulgated thereunder and (b) none of the Parent SEC Documents
contained any untrue statement of a material fact or omitted 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 were made,
not misleading.
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SECTION 4.7 Financial Statements. The financial statements of Parent
(including, in each case, any notes and schedules thereto) included in the
Parent SEC Documents (a) were prepared from the books and records of Parent and
its Subsidiaries, (b) comply as to form in all material respects with all
applicable accounting requirements and the rules and regulations of the SEC with
respect thereto, (c) are in conformity with GAAP, applied on a consistent basis
(except in the case of unaudited statements, as permitted by the rules and
regulations of the SEC) and (d) fairly present, in all material respects, the
consolidated financial position of Parent and its consolidated Subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments which were not and are not expected to be,
individually or in the aggregate, material in amount).
SECTION 4.8 Absence of Undisclosed Liabilities. Except as set forth in the
Parent SEC Documents filed through the date of this Agreement, and except for
liabilities and obligations incurred in the ordinary course of business since
the date of the most recent consolidated balance sheet included in the Parent
SEC Documents, neither Parent nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
except for those that would not, in the aggregate, reasonably be expected to
have a Parent Material Adverse Effect.
SECTION 4.9 Proxy Statement; Form S-4.
(a) None of the information contained in the Proxy Statement (and any
amendments thereof or supplements thereto) will at the time of the mailing of
the Proxy Statement to the stockholders of the Company or the stockholders of
Parent and at the time of the Special Meeting or the Parent Special Meeting,
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 were made, not
misleading, except that no representation is made by Parent with respect to
statements made or omitted in the Proxy Statement relating to the Company based
on information supplied by the Company for inclusion in the Proxy Statement. The
Proxy Statement will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations promulgated
thereunder, except that no representation is made by Parent with respect to the
statements made or omitted in the Proxy Statement relating to the Company based
on information supplied by the Company for inclusion in the Proxy Statement.
(b) None of the information supplied or to be supplied by Parent for
inclusion or incorporation by reference in the Form S-4 will, with respect to
information relating to Parent, at the time the Form S-4 is filed with the SEC,
and at any time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
SECTION 4.10 Absence of Material Adverse Changes, Etc. Since June 30,
1999, there has not been a Parent Material Adverse Effect. Without limiting the
foregoing, except as disclosed in Parent SEC Documents filed by Parent through
the date hereof or as contemplated by this Agreement, since June 30, 1999, (i)
Parent and its Subsidiaries have conducted their business in the ordinary course
of business and (ii) there has not been:
(a) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Parent, or any
repurchase, redemption or other acquisition by Parent or any Subsidiary
(other than any wholly-owned Subsidiary) of Parent of any outstanding
shares of capital stock or other equity securities of, or other ownership
interests in, Parent or of any Company Securities;
(b) any amendment of any provision of the Certificate of Incorporation
or by-laws of, or of any material term of any outstanding security issued
by, Parent or any Subsidiary (other than any wholly-owned Subsidiary) of
Parent;
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(c) any incurrence, assumption or guarantee by Parent or any
Subsidiary of Parent of any indebtedness for borrowed money other than
borrowings under existing short term credit facilities not in excess of
$100,000 in the aggregate;
(d) any change in any method of accounting or accounting practice by
Parent or any Subsidiary of Parent, except for any such change required by
reason of a change in GAAP;
(e) issuance of Parent Securities other than pursuant to options
outstanding as of June 30, 1999 and the issuance of options after such date
in the ordinary course of business (and the issuance of securities pursuant
thereto);
(f) acquisition or disposition of assets material to Parent and its
Subsidiaries, except for sales of inventory in the ordinary course of
business consistent with past practice, or any acquisition or disposition
of capital stock of any third party (other than acquisitions or
dispositions of non-controlling equity interests of third parties in the
ordinary course of business where the aggregate cost of all such
acquisitions and dispositions does not exceed $10,000,000), or any merger
or consolidation with any third party, by Parent or any Subsidiary;
(g) entry by Parent into any joint venture, partnership or similar
agreement with any person other than a wholly-owned Subsidiary; or
(h) any authorization of, or commitment or agreement to take any of,
the foregoing actions except as otherwise permitted by this Agreement.
SECTION 4.11 Taxes.
(1) All Tax Returns required to be filed by or on behalf of Parent, each of
its Subsidiaries, and each affiliated, combined, consolidated or unitary group
of which Parent or any of its Subsidiaries is or has been a member ("PARENT
GROUP MEMBERS") have been timely filed, and all returns filed are complete and
accurate and correctly reflect the tax liabilities required to be reported
therein, (2) Parent, its Subsidiaries and Parent Group Members have timely paid
all Taxes (as defined below) that have become due or payable and have adequately
reserved for in accordance with GAAP all Taxes (whether or not shown on any Tax
Return) that have accrued but are not yet due or payable; (3) there is no
presently pending audit examination, refund claim or litigation, proposed
adjustment or matter in controversy with respect to any Taxes due and owing by
Parent, any Subsidiary of Parent or any Parent Group Member and none of the
above has knowledge that of any such action or proceeding is being contemplated;
(4) neither Parent, any Subsidiary of Parent nor any Parent Group Member has
filed any waiver of the statute of limitations applicable to the assessment or
collection of any Tax which remains open; (5) all assessments for Taxes due and
owing by Parent, any Subsidiary of Parent or any Parent Group Member with
respect to completed and settled examinations or concluded litigation have been
paid; (6) neither Parent, any Subsidiary of Parent nor any Parent Group Member
is a party to any express or implied tax indemnity agreement, tax sharing
agreement or other agreement under which it could become liable to another
person as a result of the imposition of a Tax upon any person, or the assessment
or collection of such a Tax; and (7) Parent, each of its Subsidiaries, and each
Parent Group Member has complied in all material respects with all rules and
regulations relating to the withholding of Taxes.
SECTION 4.12 Employee Benefit Plans.
(a) Except for any plan, fund, program, agreement or arrangement that is
subject to the laws of any jurisdiction outside the United States, Schedule
4.12(a) of Parent Disclosure Schedule contains a true and complete list of each
material deferred compensation, incentive compensation, and equity compensation
plan; material "welfare" plan, fund or program (within the meaning of section
3(1) of ERISA); material "pension" plan, fund or program (within the meaning of
section 3(2) of ERISA); each material employment, termination or severance
agreement; and each other material employee benefit plan, fund, program,
agreement or arrangement, in each case, that is in writing and sponsored,
maintained or contributed to or required to be contributed to by Parent or by
any trade or business, whether or not incorporated, that together with Parent
would be deemed a "single employer" within the meaning of
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section 4001(b) of ERISA, or to which Parent or an ERISA Affiliate is party,
whether written or oral, for the benefit of any employee, consultant, director
or former employee, consultant or director of Parent or any Subsidiary of
Parent. The plans, funds, programs, agreements and arrangements listed on
Schedule 4.12(a) of the Parent Disclosure Schedule are referred to herein
collectively as the "PARENT PLANS".
(b) With respect to each Parent Plan, Parent has heretofore delivered or
made available to the Company true and complete copies of the Parent Plan and
any amendments thereto (or if the Parent Plan is not a written plan, a
description thereof), any related trust or other funding vehicle, the most
recent reports or summaries required under ERISA or the Code and the most recent
determination letter received from the Internal Revenue Service with respect to
each Parent Plan intended to qualify under section 401 of the Code.
(c) No liability under Title IV or section 302 of ERISA has been incurred
by Parent or any ERISA Affiliate that has not been satisfied in full, other than
liability for premiums due the Pension Benefit Guaranty Corporation (which
premiums have been paid when due).
(d) Each Parent Plan has been operated and administered in all material
respects in accordance with its terms and applicable law, including, but not
limited to, ERISA and the Code.
(e) Each Parent Plan intended to be "qualified" within the meaning of
section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service, or in the case of such a Parent Plan for which a
favorable determination letter has not yet been received, the applicable
remedial amendment period under Section 401(b) of the Code has not expired.
(f) No Parent Plan provides medical, surgical, hospitalization, death or
similar benefits (whether or not insured) for employees or former employees of
Parent or any Subsidiary for periods extending beyond their retirement or other
termination of service, other than (i) coverage mandated by applicable law, (ii)
death benefits under any "pension plan," or (iii) benefits the full cost of
which is borne by the current or former employee (or his or her beneficiary),
dependant or other covered person.
(g) There are no pending, or to the knowledge of Parent, threatened or
anticipated, claims that would reasonably be expected to have a Parent Material
Adverse Effect by or on behalf of any Parent Plan, by any employee or
beneficiary covered under any such Parent Plan, or otherwise involving any such
Parent Plan (other than routine claims for benefits).
(h) To the knowledge of Parent, all employee benefit plans that are subject
to the laws of any jurisdiction outside the United States are in material
compliance with such applicable laws, including relevant Tax laws, and the
requirements of any trust deed under which they were established, except for
such exceptions to the foregoing which, in the aggregate, would not reasonably
be expected to have a Parent Material Adverse Effect. Schedule 4.12(i) lists all
material employee pension benefit plans that are subject to the laws of any
jurisdiction outside the United States except for such plans that are
governmental or statutory plans.
(i) Each Plan can be amended prospectively or terminated at any time
without approval from any person, without advance notice, and without any
liability other than for benefits accrued prior to such amendment or
termination.
(j) No agreement, commitment, or obligation exists to increase any benefits
under any Plan or to adopt any new Plan.
(k) No Plan has any unfunded accrued benefits that are not fully reflected
in the Financial Statements.
(l) No ERISA pension plan has incurred any "accumulated funding deficiency"
or "waived funding deficiency" within the meaning of Section 302 of ERISA or
Section 412 of the Internal Revenue Code of 1986, as amended (the "Code") and
Parent has never sought to obtain any variance from the minimum funding
standards pursuant to Section 412(d) of the Code. The funding method used in
connection with
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each ERISA Pension Plan meets the requirements of ERISA and the Code and the
actuarial assumptions used in connection with each such plan are reasonable,
given the experience of such ERISA Pension Plan and reasonable expectations.
The fair market value of the plan assets of each ERISA Pension Plan are at
least equal to (i) the present value of its benefit liabilities (as defined in
ERISA Section 4001(a)(16), including any unpredictable contingent event benefits
within the meaning of Code Section 412(l)(7), and determined on the basis of
assumptions prescribed by the PBGC for purposes of ERISA Section 4044), and (ii)
the Projected Benefit Obligations thereunder, as defined in Statement of
Financial Accounting Standards No. 87, including any allowance for indexation
and ad hoc increases. No ERISA Pension Plan has been completely or partially
terminated or been the subject of a Reportable Event under ERISA Section 4043.
No proceeding by the PBGC to terminate any ERISA Pension Plan has been
instituted, and Parent has not incurred any liability to the PBGC (other than
the PBGC premiums, all of which have been timely paid) or otherwise under Title
IV of ERISA with respect to any ERISA Pension Plan.
(m) Parent neither maintains nor participates in any Voluntary Employees'
Beneficiary Association ("VEBA"), under Code Sections 419 and 419A, which is
intended to be exempt from taxation under section 501(c)(9) of the Code.
(n) Parent does not maintain, participate in, contribute to, or have any
obligation to contribute or any liability with respect to any multiple employer
or multiemployer plan, or has had any obligation with respect to such a plan
during the six years immediately preceding the date of this Agreement.
SECTION 4.13 Litigation; Compliance with Laws.
(a) Except as set forth in either the Parent SEC Documents filed through
the date of this Agreement or otherwise fully covered by insurance, there is no
action, suit or proceeding pending against, or to the knowledge of Parent
threatened against, Parent or any Subsidiary of Parent or any of their
respective properties before any court or arbitrator or any Governmental Entity
which would reasonably be expected to have a Parent Material Adverse Effect.
(b) Parent and its Subsidiaries are in compliance with all applicable laws,
ordinances, rules and regulations of any federal, state, local or foreign
governmental authority applicable to their respective businesses and operations,
except for such violations, if any, which, in the aggregate, would not
reasonably be expected to have a Parent Material Adverse Effect. All Permits
required to conduct the business of Parent and its Subsidiaries have been
obtained, are in full force and effect and are being complied with except for
such violations and failures to have Permits in full force and effect, if any,
which, individually or in the aggregate, would not reasonably be expected to
have a Parent Material Adverse Effect.
SECTION 4.14 Labor Matters. As of the date of this Agreement (i) there is
no labor strike, dispute, slowdown, stoppage or lockout actually pending or, to
the knowledge of Parent, threatened against Parent; (ii) to the knowledge of
Parent, no union organizing campaign with respect to Parent's employees is
underway; (iii) there is no unfair labor practice charge or complaint against
Parent pending or, to the knowledge of Parent, threatened before the National
Labor Relations Board or any similar state or foreign agency; (iv) there is no
written grievance pending relating to any collective bargaining agreement or
other grievance procedure; (v) to the knowledge of Parent, no charges with
respect to or relating to Parent are pending before the Equal Employment
Opportunity Commission or any other agency responsible for the prevention of
unlawful employment practices; and (vi) there are no collective bargaining
agreements with any union covering employees of Parent, except for such
exceptions to the foregoing clauses (i) through (vi) which, individually or in
the aggregate, would not reasonably be expected to have a Parent Material
Adverse Effect.
SECTION 4.15 Certain Contracts and Arrangements. Each material contract or
agreement to which Parent or any of its Subsidiaries is a party or by which any
of them is bound is in full force and effect, and neither Parent nor any of its
Subsidiaries, nor, to the knowledge of Parent, any other party thereto, is in
breach of, or default under, any such contract or agreement, and no event has
occurred that with notice or passage of time or both would constitute such a
breach or default thereunder by Parent or any of its
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Subsidiaries, or, to the knowledge of Parent, any other party thereto, except
for such failures to be in full force and effect and such breaches and defaults
which, in the aggregate, would not reasonably be expected to have a Parent
Material Adverse Effect.
SECTION 4.16 Environmental Matters.
(a)(i) To the knowledge of Parent, Parent and its Subsidiaries are in
compliance with all applicable Environmental Laws (which compliance includes,
but is not limited to, the possession by Parent and its Subsidiaries of all
permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof),
except where failures to be in compliance would not, in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect. Since January
1, 1998 and prior to the date of this Agreement, neither Parent nor any of its
Subsidiaries has received any communication (written or oral), whether from a
Governmental Entity, citizens' group, employee or otherwise, alleging that
Parent or any of its Subsidiaries is not in such compliance, except where
failures to be in compliance would not, in the aggregate, reasonably be expected
to have a Parent Material Adverse Effect.
(ii) There is no Environmental Claim pending or, to the knowledge of
Parent, threatened against Parent or any of its Subsidiaries or, to the
knowledge of Parent, against any Person whose liability for any Environmental
Claim Parent or any of its Subsidiaries has or may have retained or assumed
either contractually or by operation of law that would reasonably be expected to
have a Parent Material Adverse Effect.
(iii) There are no present or, to the knowledge of Parent, past actions,
activities, circumstances, conditions, events or incidents, including, without
limitation, the Release or presence of any Hazardous Material that could form
the basis of any Environmental Claim against Parent or any of its Subsidiaries
or, to the knowledge of Parent, against any Person whose liability for any
Environmental Claim Parent or any of its Subsidiaries has or may have retained
or assumed either contractually or by operation of law that would, individually
or in the aggregate, reasonably be expected to have a Parent Material Adverse
Effect.
(iv) Neither the Parent nor any of its Subsidiaries is subject to any
indemnity or other agreement relating to liability under any Environmental Laws
or relating to Hazardous Materials.
SECTION 4.17 Intellectual Property.
(a) To the knowledge of Parent, Parent and its Subsidiaries own or have the
right to use all material Intellectual Property reasonably necessary for Parent
and its Subsidiaries to conduct their business as it is currently conducted.
(b) To the knowledge of Parent: (i) all of the registrations, including
patent registrations, relating to material Intellectual Property owned by Parent
and its Subsidiaries are subsisting and unexpired, free of all liens or
encumbrances, have not been abandoned; (ii) Parent does not infringe the
intellectual property rights of any third party in any respect that would
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect; (iii) no judgment, decree, injunction, rule or order
has been rendered by Governmental Entity which would limit, cancel or question
the validity of, or Parent's or its Subsidiaries' rights in and to, any
Intellectual Property owned by Parent in any respect that would reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect; and (iv) Parent has not received notice of any pending or threatened
suit, action or adversarial proceeding that seeks to limit, cancel or question
the validity of, or Parent's or its Subsidiaries' rights in and to, any
Intellectual Property, which would reasonably be expected to have, individually
or in the aggregate, a Parent Material Adverse Effect.
(c) To the knowledge of the Parent, the Parent and its Subsidiaries have
not used and are not making use of any confidential or proprietary information
or trade secrets of any other Person in breach of any agreement to which the
Parent is subject or in violation of any civil or criminal law.
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(d) The Parent has taken commercially reasonable security measures to
protect the secrecy, confidentiality and value of its trade secrets.
(e) To the knowledge of the Parent, all employees of the Parent have
executed written agreements with the Parent that assign to the Parent all rights
to inventions improvements, discoveries or information relating to the business
of the Parent. To the Parent's knowledge, no employee of the Parent has entered
into any agreement that restricts or limits in any way the scope or type of work
in which the employee may be engaged or requires the employee to transfer,
assign or disclose any Intellectual Property or information concerning the
employee's work to anyone other than the Parent.
SECTION 4.18 Opinion of Financial Advisor. Parent has received the opinion
of Warburg Dillon Read to the effect that, as of the date of such opinion, the
Exchange Ratio is fair from a financial point of view to Parent. A true and
complete copy of such opinion will be delivered to the Company as soon as
practicable.
SECTION 4.19 Board Recommendation. The Board of Directors of Parent, at a
meeting duly called and held, has approved this Agreement and (i) determined
that this Agreement and the transactions contemplated hereby, including the
Merger, taken together are fair to and in the best interests of the shareholders
of Parent; and (ii) resolved to recommend that the shareholders of Parent
approve the Share Issuance.
SECTION 4.20 Tax Treatment. Neither Parent nor any of its affiliates has
taken any action or knows of any fact, agreement, plan or other circumstance
that could pose a material risk to the status of the Merger as a reorganization
under the provisions of Section 368(a) of the Code.
SECTION 4.21 Finders' Fees. Except for Warburg Dillon Read (a true and
correct copy of whose engagement agreement has been provided to the Company),
whose fees will be paid by Parent, there is no investment banker, broker, finder
or other intermediary that might be entitled to any fee or commission in
connection with or upon consummation of the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent.
SECTION 4.22 Section 203 of the Delaware General Corporation Law. The
Board of Directors of Parent has taken all actions so that (a) the restrictions
contained in Section 203 of the DGCL applicable to a "business combination" (as
defined in such Section 203) will not apply to the execution, delivery or
performance of this Agreement or the consummation of the Merger or the other
transactions contemplated by this Agreement.
ARTICLE V
COVENANTS OF THE PARTIES
SECTION 5.1 Conduct of the Business of the Company. From the date hereof
until the Effective Time, except as expressly contemplated or allowed by this
Agreement, including in connection with the Semi Disposition, the Company and
its Subsidiaries shall conduct their businesses in the ordinary course
consistent with past practice and shall use commercially reasonable efforts to
preserve intact their business organizations and relationships with third
parties and to keep available the services of their present officers and
employees. Without limiting the generality of the foregoing, from the date
hereof until the Effective Time, except as expressly contemplated or allowed by
this Agreement, including in connection with the Semi Disposition, the Company
will not (and will not permit any of its Subsidiaries to) take any action or
knowingly omit to take any action that would (i) make any of its representations
and warranties contained herein false to an extent that would cause the
condition set forth in Section 6.3(b) not to be satisfied, or (ii) make the
representations and warranties set forth in Section 3.10 false. In addition,
from the date hereof until the Effective time, except as expressly contemplated
or allowed by this Agreement, including in connection with the Semi Disposition,
the Company shall not, and shall not permit its Subsidiaries to accelerate,
amend or change the period of exercisability of options or restricted stock, or
reprice options outstanding on the date of this Agreement.
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SECTION 5.2 Conduct of the Business of Parent. From the date hereof until
the Closing Date, except as expressly contemplated or allowed by this Agreement,
Parent and its Subsidiaries shall conduct their businesses in the ordinary
course consistent with past practice and shall use their commercially reasonable
efforts to preserve intact their business organizations and relationships with
third parties and to keep available the services of their present officers and
employees. Without limiting the generality of the foregoing, from the date
hereof until the Closing Date, except as expressly contemplated or allowed by
this Agreement, Parent will not (and will not permit any of its Subsidiaries to)
take any action or knowingly omit to take any action that would (i) make any of
its representations and warranties contained herein false to an extent that
would cause the condition set forth in Section 6.2(b) not to be satisfied or
(ii) make the representations and warranties set forth in Section 4.10 false.
SECTION 5.3 Stockholders' Meetings; Proxy Material.
(a) Subject to the last sentence of this Section 5.3(a), the Company shall,
in accordance with applicable law and the Certificate of Incorporation and the
by-laws of the Company duly call, give notice of, convene and hold a special
meeting of its stockholders (the "SPECIAL MEETING") as promptly as practicable
after the date hereof for the purpose of considering and taking action upon this
Agreement, the Merger, and, to the extent required by applicable law, the Semi
Sale, if any (the "COMPANY APPROVAL MATTERS"). The Board of Directors of the
Company shall recommend approval and adoption of this Agreement and approval of
the Merger and the Semi Sale, if applicable, by the Company's stockholders;
provided that the Board of Directors of the Company may withdraw, modify or
change such recommendation if but only if (i) it believes in good faith that a
Superior Proposal (as defined in Section 5.5 hereof) has been made and (ii) it
has determined in good faith, based on the advice of outside counsel, that the
failure to withdraw, modify or change such recommendation would constitute a
breach of the fiduciary duties of the Board of Directors of the Company under
applicable law.
(b) Subject to the last sentence of this Section 5.3(b), Parent shall, in
accordance with applicable law and the Certificate of Incorporation and the
by-laws of Parent duly call, give notice of, convene and hold a special meeting
of its stockholders (the "PARENT SPECIAL MEETING") as promptly as practicable
after the date hereof for the purpose of considering and taking action upon this
Agreement, the Merger and the issuance of Parent Shares in connection with the
transactions contemplated hereby (the "PARENT APPROVAL MATTERS"). The Board of
Directors of Parent shall recommend approval and adoption of the Parent Approval
Matters by Parent's stockholders.
(c) Promptly following the date of this Agreement, the Company and Parent
shall prepare a joint proxy statement relating to the Company Approval Matters
and the Parent Approval Matters (the "PROXY STATEMENT"), and Parent shall
prepare and file with the SEC, following resolution of any comments the SEC may
have with respect to the Proxy Statement, the Form S-4, in which the Proxy
Statement will be included as a prospectus. Parent and the Company shall
cooperate with each other in connection with the preparation of the foregoing
documents. Parent and the Company shall each use commercially reasonable efforts
to have the Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing. The Company will use commercially reasonable
efforts to cause the Proxy Statement to be mailed to the Company's stockholders,
and Parent will use commercially reasonable efforts to cause the Proxy Statement
to be mailed to Parent's stockholders, in each case as promptly as practicable
after the Form S-4 is declared effective under the Securities Act.
(d) Each of the Company and Parent shall as promptly as practicable notify
the other of the receipt of any comments from the SEC relating to the Proxy
Statement. Each of Parent and the Company shall as promptly as practicable
notify the other of (i) the effectiveness of the Form S-4, (ii) the receipt of
any comments from the SEC relating to the Form S-4 and (iii) any request by the
SEC for any amendment to the Form S-4 or for additional information. All filings
by Parent and the Company with the SEC in connection with the transactions
contemplated hereby, including the Proxy Statement, the Form S-4 and any
amendment or supplement thereto, shall be subject to the prior review of the
other, and all mailings to the Company's and Parent's stockholders in connection
with the transactions contemplated by this Agreement shall be subject to the
prior review of the other party.
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SECTION 5.4 Access to Information; Confidentiality Agreement. Upon
reasonable advance notice, between the date hereof and the Closing Date, each of
the Company and Parent shall (i) give the other, its respective counsel,
financial advisors, auditors and other's authorized representatives
(collectively, "REPRESENTATIVES") reasonable access during normal business hours
to the offices, properties, books and records of such party and its
Subsidiaries, (ii) furnish to the other Representatives such financial and
operating data and other information relating to such party, its Subsidiaries
and their respective operations as such Persons may reasonably request and (iii)
instruct such party's employees, counsel and financial advisors to cooperate
with the other in its investigation of the business of such party and its
Subsidiaries; provided that any information and documents received by the other
party or its Representatives (whether furnished before or after the date of this
Agreement) shall be held in accordance with the Confidentiality Agreement dated
July 29, 1999 between Parent and the Company (the "CONFIDENTIALITY AGREEMENT"),
which shall remain in full force and effect pursuant to the terms thereof,
notwithstanding the execution and delivery of this Agreement or the termination
hereof until the Effective Time.
SECTION 5.5 No Solicitation. From the date hereof until the Effective Time
or, if earlier, the termination of this Agreement, the Company and its
Subsidiaries shall not (whether directly or indirectly through advisors, agents
or other intermediaries), and the Company shall cause their respective officers,
directors, advisors (including its financial advisors, attorneys and
accountants), representatives or other agents not to, directly or indirectly,
(a) solicit, initiate or encourage any Acquisition Proposal (as defined
hereafter) or (b) engage in discussions or negotiations with, or disclose any
non-public information relating to the Company or its Subsidiaries or afford
access to the properties, books or records of the Company or its Subsidiaries
to, any Person or group (other than Parent or any designees of Parent)
concerning any Acquisition Proposal provided, however, that if the Board of
Directors of the Company determines in good faith, based on such matters as it
deems relevant, acting only after consultation with WSGR (or other legal counsel
of nationally recognized standing) that the failure to do so would be a breach
of its fiduciary duties to the Company's stockholders under the DGCL, the
Company may, in response to an Acquisition Proposal that was not solicited and
that the Board of Directors of the Company determines, based upon the advice of
CSFB (or another financial advisor of nationally recognized standing), is from a
Person or group other than the Parent or its affiliates that is capable of
consummating a Superior Proposal (as defined hereafter) and only for so long as
the Board of Directors so determines that its actions are likely to lead to a
Superior Proposal, (i) furnish information to any such Person or group only
pursuant to a confidentiality agreement substantially in the same form as was
executed by Parent prior to the execution of this Agreement and only if copies
of such information are concurrently provided to Parent, and (ii) participate in
discussions and negotiations regarding such proposal or offer. The Company shall
promptly (and in any event within one business day after becoming aware thereof)
(i) notify Parent in the event the Company or any of its Subsidiaries or other
affiliates or any of their respective officers, directors, employees and agents
receives any Acquisition Proposal, including the material terms and conditions
thereof and the identity of the party submitting such proposal, and any request
for confidential information in connection with a potential Acquisition
Proposal, (ii) provide a copy of any written agreements, proposals or other
materials the Company receives from any such Person or group (or its
representatives), (iii) provide Parent with copies of all information furnished
to any such Person or group pursuant to clause (i) of the preceding sentence if
such information has not been previously furnished to Parent and (iv) notify
Parent of any material changes or developments with respect to any of the
matters described in clauses (i) or (ii). For purposes of this Agreement,
"ACQUISITION PROPOSAL" with respect to a Person means any offer or proposal for
a merger, consolidation, recapitalization, liquidation or other business
combination involving such Person or the acquisition or purchase of over 50% or
more of any class of equity securities of such Person, or any tender offer
(including self-tenders) or exchange offer that if consummated would result in
any Person beneficially owning 50% or more of any class of equity securities of
such Person, or a substantial portion of the assets of, such Person and its
Subsidiaries taken as a whole (it being understood by the parties that the
assets of the Company not constituting the Semiconductor Business are a
substantial portion of the assets of the Company and its Subsidiaries, taken as
a whole), other than the transactions contemplated by this Agreement (including
the Semi Disposition). As used herein, a "SUPERIOR PROPOSAL" shall mean a bona
fide Acquisition Proposal which in the reasonable good
A-27
faith judgment of the Company's Board of Directors, based on such matters as it
deems relevant, including in the case of clauses (i) and (ii) below the advice
of the Company's financial advisor, (i) provides greater benefits to the
Company's stockholders than those provided pursuant to this Agreement, (ii)
provides that any financing required to consummate the transaction contemplated
by the offer is either in the possession of the Person making such Acquisition
Proposal or is likely to be obtained by such Person on a timely basis, and (iii)
does not contain a "right of first refusal" or "right of first offer" with
respect to any counter-proposal that Parent might make; provided, further, that
the Board of Directors of the Company by a majority vote determines in its good
faith judgment that such Acquisition Proposal is reasonably capable of being
completed (taking into account all legal, financial, regulatory and other
aspects of the proposal and the person making the proposal). Nothing contained
in this Section 5.5 shall prohibit the Company or the Company's Board of
Directors from taking and disclosing to the Company's stockholders a position
with respect to a tender or exchange offer by a third party pursuant to Rules
14d-9 and 14e-2(a) promulgated under the Exchange Act or from making any
disclosure required by applicable law.
SECTION 5.6 Director and Officer Liability.
(a) Parent and the Company agree that all rights to indemnification and all
limitations on liability existing in favor of any individuals who on or prior to
the Effective Time were officers, directors, employees or agents of the Company
and any of its Subsidiaries (the "INDEMNITEES") as provided in the Certificate
of Incorporation or by-laws of the Company or an agreement between an Indemnitee
and the Company or a Subsidiary of the Company as in effect as of the date
hereof shall survive the Merger and continue in full force and effect in
accordance with its terms.
(b) Subject to the terms and conditions set forth on Schedule 1.5(a), for
six years after the Effective Time, the Surviving Corporation shall provide
officers' and directors' liability insurance in respect of acts or omissions
occurring prior to the Effective Time covering each such Person currently
covered by the Company's officers' and directors' liability insurance policy on
terms with respect to coverage and amount no less favorable than those of such
policy in effect on the date hereof; provided, however, that in no event shall
the Surviving Corporation be required to expend more than an amount per year
equal to 200% of current annual premiums paid by the Company for such insurance
(the "MAXIMUM AMOUNT") to maintain or procure insurance coverage pursuant
hereto; provided, further, that if the amount of the annual premiums necessary
to maintain or procure such insurance coverage exceeds the Maximum Amount, the
Surviving Corporation shall maintain or procure, for such six-year period, the
most advantageous policies of directors' and officers' insurance obtainable for
an annual premium equal to the Maximum Amount.
(c) The obligations of Parent and the Surviving Corporation under this
Section 5.6 shall not be terminated or modified in such a manner as to adversely
affect any Indemnitee to whom this Section 5.6 applies without the consent of
such affected Indemnitee (it being expressly agreed that the Indemnitees to whom
this Section 5.6 applies shall be third party beneficiaries of this Section
5.6).
SECTION 5.7 Commercially Reasonable Efforts. Upon the terms and subject to
the conditions of this Agreement and those set forth on Schedule 1.5(a), each
party hereto shall use commercially reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement.
SECTION 5.8 Certain Filings.
(a) The Company and Parent shall cooperate with one another (i) in
connection with the preparation of the Proxy Statement and the Form S-4, (ii) in
determining whether any action by or in respect of, or filing with, any
Governmental Entity is required, or any actions, consents, approvals or waivers
are required to be obtained from parties to any material contracts, in
connection with the consummation of the transactions contemplated by this
Agreement and (iii) in seeking any such actions, consents, approvals or waivers
or making any such filings, furnishing information required in connection
therewith or with the Proxy Statement and the Form S-4 and seeking timely to
obtain any such actions, consents, approvals or
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waivers. Without limiting the provisions of this Section 5.8, each party hereto
shall file with the Department of Justice and the Federal Trade Commission a
Pre-Merger Notification and Report Form pursuant to the HSR Act in respect of
the transactions contemplated hereby within ten (10) days of the date of this
Agreement, and each party will use commercially reasonable efforts to take or
cause to be taken all actions necessary, including to promptly and fully comply
with any requests for information from regulatory Governmental Entities, to
obtain any clearance, waiver, approval or authorization relating to the HSR Act
that is necessary to enable the parties to consummate the transactions
contemplated by this Agreement. Without limiting the provisions of this Section
5.8, each party hereto shall use commercially reasonable efforts to promptly
make the filings required to be made by it with all foreign Governmental
Entities in any jurisdiction in which the parties believe it is necessary or
advisable.
(b) The Company and Parent shall each use commercially reasonable efforts
to resolve such objections, if any, as may be asserted with respect to the
Merger or any other transaction contemplated by this Agreement under any
Antitrust Law (as defined below). If any administrative, judicial or legislative
action or proceeding is instituted (or threatened to be instituted) challenging
the Merger or any other transaction contemplated by this Agreement as violative
of any Antitrust Law, the Company and Parent shall each cooperate to contest and
resist any such action or proceeding, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and that restricts, prevents or
prohibits consummation of the Merger or any other transaction contemplated by
this Agreement, including, without limitation, by pursuing all reasonable
avenues of administrative and judicial appeal. Notwithstanding anything to the
contrary in this Agreement, none of Parent, any of its Subsidiaries or the
Surviving Corporation, shall be required (and the Company shall not, without the
prior written consent of Parent, agree, but shall, if so directed by Parent,
agree) to hold separate or divest any of their respective assets or operations
or enter into any consent decree or licensing or other arrangement with respect
to any of their assets or operations.
(c) Each of the Company and Parent shall promptly inform the other party of
any material communication received by such party from the Federal Trade
Commission, the Antitrust Division of the Department of Justice, or any other
governmental or regulatory authority regarding any of the transactions
contemplated hereby.
(d) "Antitrust Law" means the ▇▇▇▇▇▇▇ Act, as amended, the ▇▇▇▇▇▇▇ Act, as
amended, and all other federal, state and foreign statutes, rules, regulations,
orders, decrees, administrative and judicial doctrines, and other laws that are
designed or intended to prohibit, restrict or regulate competition or actions
having the purpose or effect of monopolization or restraint of trade.
SECTION 5.9 Comfort Letters.
(a) The Company shall use all reasonable efforts to cause Deloitte & Touche
LLP to deliver a letter dated not more than five (5) days prior to the date on
which the Form S-4 shall become effective and addressed to itself and Parent and
their respective Boards of Directors in form and substance reasonably
satisfactory to Parent and customary in scope and substance for agreed-upon
procedures letters delivered by independent public accountants in connection
with registration statements and proxy statements similar to the Form S-4 and
the Proxy Statement.
(b) Parent shall use all reasonable efforts to cause PricewaterhouseCoopers
LLP to deliver a letter dated not more than five (5) days prior to the date on
which the Form S-4 shall become effective and addressed to itself and the
Company and their respective Boards of Directors in form and substance
reasonably satisfactory to the Company and customary in scope and substance for
agreed-upon procedures letters delivered by independent accountants in
connection with registration statements and proxy statements similar to the Form
S-4 and the Proxy Statement.
SECTION 5.10 Public Announcements. Neither the Company, Parent nor any of
their respective affiliates shall issue or cause the publication of any press
release or other public announcement with respect to the Merger, this Agreement
or the other transactions contemplated hereby without the prior consultation
with the other party, except as may be required by law or by any listing
agreement with, or
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the policies of, a national securities exchange in which circumstance reasonable
efforts to consult will still be required to the extent practicable.
SECTION 5.11 Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Parent, any
deeds, bills of sale, assignments or assurances and to take and do, in the name
and on behalf of the Company or Parent, any other actions to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any and all right,
title and interest in, to and under any of the rights, properties or assets of
the Company acquired or to be acquired by the Surviving Corporation, as a result
of, or in connection with, the Merger.
SECTION 5.12 Employee Matters.
(a) For a period of one year immediately following the date of the Closing,
Parent agrees to cause the Surviving Corporation and its Subsidiaries to provide
to all active employees of the Company at the Effective Time who continue to be
employed by the Company as of the Effective Time and those other employees that
Parent decides prior to the Effective Time, at its sole discretion, to retain
(collectively "CONTINUING EMPLOYEES") coverage by benefit plans or arrangements
that are, in the aggregate, substantially similar (including, with respect to
eligibility requirements, exclusions and the employee portion of the cost of
such benefit plans or arrangements) to those provided to the employees of the
Company immediately prior to the date of the Closing.
(b) Parent shall, and shall cause the Surviving Corporation and Parent's
Subsidiaries to, honor in accordance with their terms all agreements, contracts,
arrangements, commitments and understandings described in Schedule 3.12(a) of
the Company Disclosure Schedule as to the Continuing Employees.
SECTION 5.13 Tax-Free Reorganization Treatment.
Each of Parent and the Company shall take all reasonable actions necessary
to cause the Merger to qualify as a reorganization under the provisions of
section 368(a) of the Code and to obtain the opinion of counsel referred to in
Sections 6.2(d) and 6.3(d) hereof, and neither party will take any action
inconsistent therewith.
SECTION 5.14 Blue Sky Permits. Parent shall use commercially reasonable
efforts to obtain, prior to the effective date of the Form S-4, all necessary
state securities laws or "blue sky" permits and approvals required to carry out
the transactions contemplated by this Agreement and the Merger, and will pay all
expenses incident thereto.
SECTION 5.15 Listing. Parent shall use commercially reasonable efforts to
cause the Parent Shares to be issued in the Merger or upon exercise of
Substitute Options or upon cancellation of Options to be listed on the NNM,
subject to notice of official issuance thereof, prior to the Closing Date.
SECTION 5.16 State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation is or may become applicable to the Merger, the Company and Parent
shall each take such actions as are necessary so that the transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated hereby and otherwise act to eliminate or minimize the
effects of any such statute or regulation on the Merger.
SECTION 5.17 Certain Notifications. Between the date hereof and the
Effective Time, each party shall promptly notify the other party hereto in
writing after becoming aware of the occurrence of any event which will, or is
reasonably likely to, result in the failure to satisfy any of the conditions
specified in Article VI.
SECTION 5.18 Affiliate Letters.
The Company shall, at least 45 days prior to the date of the Special
Meeting, deliver to Parent a list reasonably satisfactory to Parent setting
forth the names and addresses of all persons who at the time of the Special
Meeting are, in the Company's reasonable judgment, "affiliates" of the Company
for purposes of Rule 145 under the Securities Act. The Company shall furnish
such information and documents as
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Parent may reasonably request for the purpose of reviewing such list. The
Company shall use commercially reasonable efforts to cause each person who is
identified as an affiliate on such list to execute a written agreement at least
30 days prior to the date of the Special Meeting in the form of Exhibit B hereto
(collectively, the "AFFILIATE AGREEMENTS").
SECTION 5.19 Disposition of Semiconductor Business. The Company will use
its commercially reasonable efforts to consummate the Semi Disposition and will
inform Parent promptly, and in no event later than three business days after,
material developments relating thereto. Parent will cooperate with the Company
in its efforts to consummate the Semi Disposition including by (i) providing
assistance with respect to any proxy or information statement required in
connection with the Semi Disposition and including such proxy or information
statement in the Proxy Statement and Form S-4 and (ii) cooperating in the filing
of any tax election or Tax Returns required or deemed advisable by the Company,
so long as such elections or Tax Returns do not materially adversely affect
Parent.
SECTION 5.20 Supply, License and Development Agreement. Each of the
parties shall enter into an agreement at or prior to the Effective Time in the
form attached hereto as Exhibit C.
SECTION 5.21 Transitional Services Agreement. The Company and Parent will
use commercially reasonable efforts to enter into a Transitional Services
Agreement in connection with the proposed Semi Spin. Except for the items for
which substantially all of the use is by or for the benefit of the DiviCom
business, all infrastructure hardware and software (including, but not limited
to, telecommunications, networks, servers, desktop computers and enterprise
applications) shall be owned by Semiconductor. The Transition Services Agreement
shall specify the support provided by Semiconductor to the DiviCom business
during the transition period following the merger.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1 Conditions to Each Party's Obligations. The respective
obligations of the Company and Parent to consummate the Merger are subject to
the satisfaction or, to the extent permitted by applicable law, the waiver on or
prior to the Effective Time of each of the following conditions:
(a) (i) This Agreement shall have been adopted, the Merger approved
and the Semi Sale, if any, approved by the stockholders of the Company, and
(ii) the Share Issuance shall have been approved by the stockholders of
Parent, each in accordance with applicable law;
(b) Any applicable waiting periods under the HSR Act relating to the
Merger shall have expired or been terminated;
(c) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger
or the other transactions contemplated by this Agreement;
(d) The Form S-4 shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceedings seeking a
stop order, and any material "blue sky" and other state securities laws
applicable to the registration and qualification of the Common Stock
following the Closing shall have been complied with;
(e) The Parent Shares issuable in accordance with the Merger shall
have been authorized for listing on the NNM, subject to official notice of
issuance;
(f) The Semi Disposition shall have been consummated in accordance
with the terms and provisions of Section 1.5(a) of this Agreement; and
(g) All disputes and disagreements arising under Section 1.5(a) of
this Agreement and any arbitration of such disputes and disagreements shall
have been resolved or completed except to the
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extent such disputes or disagreements relate to Semi Spin Taxes and are
anticipated to be resolved after the Merger.
SECTION 6.2 Conditions to the Company's Obligation to Consummate the
Merger. The obligation of the Company to consummate the Merger shall be further
subject to the satisfaction or, to the extent permitted by applicable law, the
waiver on or prior to the Effective Time of each of the following conditions:
(a) Parent shall have performed in all material respects its
agreements and covenants contained in or contemplated by this Agreement
that are required to be performed by it at or prior to the Effective Time
pursuant to the terms hereof;
(b) The representations and warranties of Parent contained in Article
IV hereof shall be true and correct in all respects as of the Effective
Time (or, to the extent such representations and warranties speak as of an
earlier date, they shall be true in all respects as of such earlier date),
except (i) as otherwise contemplated by this Agreement and (ii) for such
failures to be true and correct which in the aggregate do not constitute
Parent Material Adverse Effect;
(c) The Company shall have received certificates signed by the Chief
Executive Officer of Parent, dated the Closing Date, to the effect that, to
such officer's knowledge, the conditions set forth in Sections 6.2(a) and
6.2(b) hereof have been satisfied or waived; and
(d) The Company shall have received an opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, its tax counsel, in form and
substance reasonably satisfactory to it, dated the Closing Date, to the
effect that the Merger will constitute a reorganization for United States
federal income tax purposes within the meaning of Section 368(a) of the
Code, provided, however, that if ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
Professional Corporation does not render such opinion, this condition shall
nonetheless be deemed to be satisfied with respect to Company if ▇▇▇▇▇▇,
▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP renders such opinion to Company. The Company agrees to
make such representations as may be requested by tax counsel in connection
with the opinions referred to above and in Section 6.3(d).
SECTION 6.3 Conditions to Parent's Obligations to Consummate the
Merger. The obligations of Parent to effect the Merger shall be further subject
to the satisfaction, or to the extent permitted by applicable law, the waiver on
or prior to the Effective Time of each of the following conditions:
(a) The Company shall have performed in all material respects each of
its agreements and covenants contained in or contemplated by this Agreement
that are required to be performed by it at or prior to the Effective Time
pursuant to the terms hereof;
(b) The representations and warranties of the Company contained in
Article III hereof shall be true and correct in all respects as of the
Effective Time (or, to the extent such representations and warranties speak
as of an earlier date, they shall be true in all respects as of such
earlier date), except (i) as otherwise contemplated by this Agreement, (ii)
for such failures to be true and correct which in the aggregate do not
constitute a Company Material Adverse Effect and (iii) for such failures to
be true and correct which relate solely to the Semiconductor Business.
(c) Parent shall have received a certificate signed by the chief
executive officer of the Company, dated the Closing Date, to the effect
that, to such officer's knowledge, the conditions set forth in Sections
6.3(a) and 6.3(b) hereof have been satisfied or waived;
(d) Parent shall have received an opinion of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇
LLP, its tax counsel, in form and substance reasonably satisfactory to it,
dated the Closing Date, to the effect that the Merger will constitute a
reorganization for United States federal income tax purposes within the
meaning of Section 368(a) of the Code provided, however, that if ▇▇▇▇▇▇,
▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP does not render such opinion, this condition shall
nonetheless be deemed to be satisfied with respect to Parent if ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, renders such opinion
to Parent. Parent
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agrees to make such representations as may be requested by tax counsel in
connection with the opinions referred to above and in Section 6.2(d); and
(e) The Company shall have redeemed or defeased all of the outstanding
Convertible Notes.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination. Notwithstanding anything herein to the contrary,
this Agreement may be terminated and the transactions contemplated by this
Agreement may be abandoned at any time prior to the Closing Date, whether before
or after the Company and Parent have obtained stockholder approval:
(a) by the mutual written consent of the Company and Parent;
(b) by either the Company or Parent, if the Merger has not been
consummated by May 31, 2000, or such other date, if any, as the Company and
Parent shall agree upon; provided, that the party seeking to terminate this
Agreement pursuant to this Section 7.1(b) shall not have breached in any
material respect its obligations under this Agreement;
(c) by either the Company or Parent, if there shall be any law or
regulation that makes consummation of the transactions contemplated by this
Agreement illegal or if any judgment, injunction, order or decree enjoining
Parent or the Company from consummating the transactions contemplated by
this Agreement is entered and such judgment, injunction, order or decree
shall have become final and nonappealable;
(d) by Parent, if (i) the Board of Directors of the Company shall have
withdrawn or modified or amended in any respect adverse to Parent its
approval or recommendation of the Company Approval Matters, (ii) the Board
of Directors of the Company shall have recommended to the stockholders of
the Company any Acquisition Proposal or shall have resolved or announced an
intention to do so, or (iii) a tender offer or exchange offer for 50% or
more of the outstanding shares of the Company Common Stock is announced or
commenced and, either (A) the Board of Directors of the Company recommends
acceptance of such tender offer or exchange offer by its stockholders or
(B) within ten business days of such commencement, the Board of Directors
of the Company shall have failed to recommend against acceptance of such
tender offer or exchange offer by its stockholders;
(e) by either the Company or Parent, if (i) the approval of the
stockholders of the Company of the Company Approval Matters or (ii) the
approval of the stockholders of Parent of the Parent Approval Matters shall
not have been obtained at a duly held meeting of stockholders of the
Company or Parent, respectively, or any adjournment thereof;
(f) by the Company, for the purpose of accepting a Superior Proposal,
so long as the adoption of this Agreement and the approval of the Merger by
the Company's stockholders at the Special Meeting shall not have been
obtained prior to such termination;
(g) by the Company if (i) there shall have been a breach of any
representations or warranties on the part of Parent set forth in this
Agreement or if any representations or warranties of Parent shall have
become untrue, such that the conditions set forth in Section 6.2(b) would
be incapable of being satisfied by May 31, 2000, provided that the Company
has not breached any of its obligations hereunder in any material respect;
or (ii) there shall have been a breach by Parent of any of its covenants or
agreements hereunder having, in the aggregate, a Parent Material Adverse
Effect or materially adversely affecting (or materially delaying) the
ability of Parent or the Company to consummate the Merger, and Parent has
not cured such breach within thirty (30) business days after notice by the
Company thereof, provided that the Company has not breached any of its
obligations hereunder in any material respect; or
(h) by Parent if (i) there shall have been a breach of any
representations or warranties on the part of the Company or any of its
Subsidiaries set forth in this Agreement or if any representations or
A-33
warranties of the Company or any of its Subsidiaries shall have become
untrue, such that the conditions set forth in Section 6.3(b) would be
incapable of being satisfied by May 31, 2000, provided that Parent has not
breached any of its obligations hereunder in any material respect; or (ii)
there shall have been a breach by the Company or any of its Subsidiaries of
one or more of its respective covenants or agreements hereunder having, in
the aggregate, a Company Material Adverse Effect or materially adversely
affecting (or materially delaying) the ability of Parent or the Company to
consummate the Merger, and the Company has not cured such breach within
thirty (30) business days after notice by Parent thereof, provided that
Parent has not breached any of its obligations hereunder in any material
respect.
The party desiring to terminate this Agreement shall give written notice of
such termination to the other party.
SECTION 7.2 Effect of Termination. Except for any willful breach of this
Agreement by any party hereto (which willful breach and liability therefor shall
not be affected by the termination of this Agreement or the payment of any fee
pursuant to Section 7.3 hereof), if this Agreement is terminated pursuant to
Section 7.1 hereof, then this Agreement shall become void and of no effect with
no liability on the part of any party hereto; provided, however that
notwithstanding such termination the agreements contained in Sections 7.2, 7.3
and 8.7 hereof and the provision of Section 5.4 hereof shall survive the
termination hereof.
SECTION 7.3 Fees.
(a) The Company agrees to pay Parent in immediately available funds by wire
transfer an amount equal to $50,000,000 (the "TERMINATION FEE") if:
(i) this Agreement is terminated by Parent pursuant to Section 7.1(d)
hereof, other than a termination pursuant to Section 7.1(d)(i) either (A)
after the occurrence of a Parent Material Adverse Effect or (B) in the
event the representations and warranties of Parent were not true in all
material respects at the time of the withdrawal, modification or amendment
referred to in such section;
(ii) (A) this Agreement is terminated by Parent or the Company
pursuant to Section 7.1(e)(i) hereof, (B) at the time of such failure to so
approve the Company Approval Matters there shall exist an Acquisition
Proposal with respect to the Company that has not been publicly withdrawn
and (C) within twelve months after such termination, the Company shall
enter into a definitive agreement with respect to any Acquisition Proposal
or the transaction contemplated by any Acquisition Proposal (an
"ACQUISITION TRANSACTION") relating to the Company shall be consummated; or
(iii) this Agreement is terminated by the Company pursuant to Section
7.1(f) hereof.
(b) Parent agrees to pay the Company in immediately available funds by wire
transfer an amount equal to $50,000,000 if (A) this Agreement is terminated by
Parent or the Company pursuant to Section 7.1(e)(ii) hereof, (B) at the time of
such failure to so approve the Parent Approval Matters there shall exist an
Acquisition Proposal with respect to Parent that has not been publicly withdrawn
and (C) within twelve months after such termination, Parent shall enter into a
definitive agreement with respect to any Acquisition Proposal or an Acquisition
Transaction relating to Parent shall be consummated.
(c) The party required to pay a fee pursuant to this Section 7.3 (if all
conditions thereto have been satisfied) shall pay such fee (i) prior to the
termination of this Agreement by each party, (ii) not later than one business
day after the termination of this Agreement by the other party or (iii) in the
case of a fee payable pursuant to Section 7.3(a)(ii) or 7.3(b), at or prior to
the consummation of the applicable Acquisition Transaction.
(d) Except as provided otherwise in this Section 9.3, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement to any
party hereunder shall be in writing and deemed given upon (a) personal delivery,
(b) transmitter's confirmation of a receipt of a facsimile transmission, (c)
confirmed delivery by a standard overnight carrier or when delivered by hand or
(d) when mailed in the United States by certified or registered mail, postage
prepaid, addressed at the following addresses (or at such other address for a
party as shall be specified by notice given hereunder):
If to the Company, to:
C-Cube Microsystems Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
If to Parent, to:
Harmonic Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
SECTION 8.2 Survival of Representations and Warranties. Except as
otherwise provided herein or in any document contemplated hereby, the
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time. All
other covenants and agreements contained herein which by their terms are to be
performed in whole or in part, or which prohibit actions, subsequent to the
Effective Time, shall survive the Merger in accordance with their terms.
SECTION 8.3 Interpretation. References herein to the "knowledge" (and all
variants and derivatives thereof) of a party shall mean the actual knowledge of
the executive officers of such party. Whenever the words "include," "includes"
or "including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation." As used in this Agreement, the term "affiliate"
shall have the meaning set forth in Rule 12b-2 promulgated under the Exchange
Act.
A-35
The article and section headings contained in this Agreement are solely for
the purpose of reference, are not part of the agreement of the parties hereto
and shall not in any way affect the meaning or interpretation of this Agreement.
Any matter disclosed pursuant to any Schedule of the Company Disclosure Schedule
or the Parent Disclosure Schedule shall not be deemed to be an admission or
representation as to the materiality of the item so disclosed.
SECTION 8.4 Amendments, Modification and Waiver. (a) Except as may
otherwise be provided herein, any provision of this Agreement may be amended,
modified or waived by the parties hereto, by action taken by or authorized by
their respective Board of Directors, prior to the Closing Date if, and only if,
such amendment or waiver is in writing and signed, in the case of an amendment,
by the Company and Parent or, in the case of a waiver, by the party against whom
the waiver is to be effective; provided that after the adoption of this
Agreement by the stockholders of the Company, no such amendment shall be made
except as allowed under applicable law.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 8.5 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that neither the Company nor Parent
may assign, delegate or otherwise transfer any of its rights or obligations
under this Agreement without the consent of the other party hereto.
SECTION 8.6 Specific Performance. The parties acknowledge and agree that
any breach of the terms of this Agreement would give rise to irreparable harm
for which money damages would not be an adequate remedy and accordingly the
parties agree that, in addition to any other remedies, each shall be entitled to
enforce the terms of this Agreement by a decree of specific performance without
the necessity of proving the inadequacy of money damages as a remedy.
SECTION 8.7 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
laws thereof) as to all matters, including, but not limited to, matters of
validity, construction, effect, performance and remedies.
SECTION 8.8 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated herein are not affected in any manner materially
adverse to any party hereto. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner.
SECTION 8.9 Third Party Beneficiaries. This Agreement is solely for the
benefit of the Company and its successors and permitted assigns, with respect to
the obligations of Parent under this Agreement, and for the benefit of Parent
and its successors and permitted assigns, with respect to the obligations of the
Company under this Agreement, and this Agreement shall not, except to the extent
necessary to enforce the provisions of Article I and Section 5.6 hereof be
deemed to confer upon or give to any other third party any remedy, claim,
liability, reimbursement, cause of action or other right.
SECTION 8.10 Entire Agreement. This Agreement, including any exhibits or
schedules hereto and the Confidentiality Agreement constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes all other prior agreements or understandings, both written and oral,
between the parties or any of them with respect to the subject matter hereof.
SECTION 8.11 Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be deemed an original, with the
same effect as if the signatures thereto
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and hereto were upon the same instrument. This Agreement shall become effective
when each party hereto shall have received counterparts hereof signed by all of
the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
HARMONIC INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Financial Officer
C-CUBE MICROSYSTEMS INC.
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
A-37
SCHEDULE 1.5(A)
TERMS OF SEMI SPIN AND SEMI SALE
SEMI SPIN
- On the Separation Date (as defined in Schedule 1.5(b)), the Company will
execute and deliver the following agreements to implement the principles
of this Schedule 1.5(a): an Assignment and Assumption Agreement, an
Employee Matters Agreement, a Tax Sharing Agreement (which shall be
subject to the approval of Parent, which shall not be unreasonably
withheld or delayed), a Master Confidentiality and Non-Disclosure
Agreement, an Indemnification and Insurance Matters Agreement,
resignations of any appropriate employees, and such other agreements as
the parties may agree are necessary or desirable.
- The Company will agree to offer any transition services necessary for a
reasonable period and for reasonable compensation.
- The Company will use its reasonable best efforts with the reasonable
cooperation of Parent to file a registration statement on the appropriate
form with the SEC and to complete all other customary procedures
affiliated with the public offering of securities with costs of such
registration to be fully paid by the Company prior to the Effective Time.
- The Company will use its reasonable best efforts with the reasonable
cooperation of Parent to prepare an information statement as required by
law, file it with the SEC and complete all other customary procedures
affiliated with such information statement and all other actions
necessary or desirable in order to effect the distribution of the
Semiconductor Business securities to the appropriate holders with costs
to be fully paid by the Company prior to the Effective Time.
- The Tax Sharing Agreement will include, in addition to customary
provisions regarding the allocation of responsibility for filing Tax
Returns, paying Taxes, conducting Tax contests, and cooperating in Tax
matters, provisions allocating the corporate Tax liability, if any,
incurred as a direct result of the Semi Spin (and it shall be assumed
solely for purposes of computing the amount of Semi Spin Taxes that 100%
of Semi is being distributed to the shareholders of the Company,
notwithstanding that a portion of the interests in Semi may be retained
by the Company and transferred to Parent in the Merger) (the "SEMI SPIN
TAXES") to Semi and provisions for establishing, prior to the Merger, a
cash reserve to be used for the payment of such Taxes in a manner
consistent with the principles set forth in this Schedule 1.5(a). For
purposes of determining the amount of the Semi Spin Taxes that are based
on net income, the value of Semi shall be equal to the total implied
market capitalization of Semi determined by reference to the trading
price of Semi on the date of distribution, unless the parties mutually
agree in writing on an alternative value, and there shall be deducted
from such value (without duplication): (i) the tax basis of the stock of
Semi (or, if Semi is distributed in a transaction treated as an asset
transfer for applicable income tax purposes, cash and other assets
recognized as assets of the Semiconductor Business pursuant to this
Schedule 1.5(a) and Schedule 1.5(b) (but only to the extent such cash
andother assets are transferred to Semi, reduced by liabilities properly
taken into account under applicable law in determining the "amount
realized" from such distribution), (ii) capitalized expenses of the
Company that both reduce the income tax liability of the Company and are
attributable to the Semi Spin, (iii) the amount of any deductions accrued
on or prior to the Closing Date attributable to the exercise of Company
options after the date hereof and on or prior to the Closing Date
(provided that deductions that reduce Semi Spin Taxes pursuant to this
paragraph shall not also reduce other Company taxable income, and
assuming for the purposes of this subsection that a "disqualifying
disposition" occurs with respect to 80% of all Company options that are
"incentive stock options" under Section 422 of the Code that are
exercised on or prior to the Closing Date) and (iv) any other deductible
items of the Company attributable to the Semi Spin. For purposes of this
paragraph, expenses related to the disposition of Semi incurred or
accrued by the end of the Closing Date shall not be treated as allocated
to Semi's tax period beginning on the day after
A-38
Closing Date under Treas. Reg. Section 1.1502-76(b)(1)(ii)(B). The Tax
Sharing Agreement shall provide for the Company to calculate the Semi
Spin Taxes and submit the calculation to Parent for review no later than
20 days after the Semi Spin. In the event that Parent disagrees with the
Company as to the amount of the Semi Spin Taxes, Parent shall notify the
Company no later than 20 days after the Company submits its calculations
of Semi Spin Taxes to Parent and the Company and Parent shall discuss the
computation of the Semi Spin Taxes in a good faith effort to reach an
agreement as to the amount of the Semi Spin Taxes. If the Company and
Parent fail to reach an agreement by the day which is 60 days after the
Semi Spin, either party shall be entitled to submit the matter to a
mutually acceptable third-party arbitrator. If the parties are unable to
mutually agree upon an arbitrator within one week of a party's
notification to the other party of its desire to arbitrate such a
dispute, then each party shall have one week to select an arbitrator and
such two arbitrators shall have one week to select a third arbitrator who
shall have final authority to resolve such dispute within twenty days of
such arbitrator's selection. The parties shall share equally in the fees
and expenses of such arbitrators.
- The Tax Sharing Agreement shall also provide for the payment of
additional amounts by Semi to Parent in the event that later events
demonstrate that the amount of the Semi Spin Taxes is greater than
originally calculated and it shall provide for the payment of additional
amounts by Parent to Semi in the event that later events demonstrate that
the amount of the Semi Spin Taxes is less than originally calculated,
with such payments to be determined in a manner consistent with the
principles set forth in Schedule 1.5(a). With respect to such additional
amounts, the Tax Sharing Agreement shall include dispute resolution
provisions comparable to those described in the preceding paragraph. The
Tax Sharing Agreement shall clarify that similar additional amounts shall
not be paid in respect of Pre-Semi Disposition Taxes (as defined below)
not attributable to the Semiconductor Business.
SEMI SALE
- The Company and the Semi Purchaser will exchange customary covenants
including to: execute and deliver any additional agreements as necessary;
execute and deliver all necessary instruments of transfer, conveyance,
assignment, etc.; enter into any necessary interim service level or other
agreements; exchange information as necessary for judicial, regulatoryor
administrative requirements; hold all information of the other party
confidential; use reasonable efforts to cause the Semiconductor Business
practice to continue business in the ordinary course; and use reasonable
best efforts to obtain all necessary governmental approvals.
- The Company and, to the extent customary and appropriate in light of the
form of the Semi Sale Purchase Price, the Semi Purchaser will provide
customary representations and warranties such as: organization and
qualification; no conflict, government consents; financial information;
no undisclosed liabilities; receivables; suppliers; Y2K readiness;
litigation; compliance with laws; absence of certain changes; permits and
licenses; environmental matters; material contracts; intellectual
property; real property; employee benefits matters and the like.
- Semi Purchaser will agree that either (i) the representations and
warranties provided by the Company in connection with the Semi Sale do
not survive after the consummation of such Semi Sale and no further
indemnification or escrow relating to the breach of such representations
or warranties survives or (ii) an amount to be determined by the Semi
Purchaser will be escrowed to cover any and all liabilities arising from
such representations and warranties.
- The Company shall not distribute or otherwise transfer any proceeds from
the Semi Sale to the Company's security holders except in the manner
contemplated by this Agreement.
GENERALLY APPLICABLE
- The agreement for the Semi Disposition will provide terms so that the
Surviving Corporation shall not assume or be responsible for and shall be
indemnified by a financially viable entity for any
A-39
Semiconductor Business Liability (as defined in Schedule 1.5(b)),
including, but not limited to, the Semi Sale Taxes and obligations to
make severance payments to employees of the Semiconductor Business.
- The Surviving Corporation will also not assume or be responsible for and
shall be indemnified by a financially viable entity for any liability
with respect to any severance payments and related liabilities arising
out of any termination of non Continuing Employees.
- The Semi Disposition will include terms intended to maintain to the
extent practicable the value of stock options currently held by the
Semiconductor Business employees including, without limitation, possible
acceleration or additional grants of options.
- On or around the Separation Date, the Company will provide the
Semiconductor Business with the Company's cash reserves excluding the sum
of (i) the sixty million dollars ($60,000,000) due Parent, (ii) any
amount necessary to pay all Taxes of the Company and its Subsidiaries
accrued through the date of the Semi Disposition but not including Semi
Sale Taxes or Semi Spin Taxes (the "Pre-Semi Disposition Taxes"), (iii)
cash in an amount sufficient to pay the fees and expenses associated with
the transactions contemplated by this Agreement, including, but not
limited to, the fees and expenses of the Company's investment bankers,
attorneys, accountants and other professional advisors, (iv) cash in an
amount sufficient to pay the Semi Sale Taxes or the Semi Spin Taxes as
the case may be, and (v) cash in an amount sufficient to make all
severance payments to any employee of the Company who is not a Continuing
Employee nor an employee of the Semiconductor Business (the "Retained
Cash"). It shall be a condition to the Semi Disposition that the Company
have cash reserves no less than the sum of the amount specified in
clauses (i) through (v).
- Notwithstanding anything in this Agreement or Schedule 1.5 to the
contrary, to the extent that the amount provided by the Company to the
Semiconductor Business has been reduced on account of certain liabilities
under clauses (ii) through (v) of the preceding paragraph, such
liabilities shall not be treated as Semiconductor Business Liabilities.
SCHEDULE 1.5(B)
ASSETS/LIABILITIES OF THE SEMICONDUCTOR BUSINESS
1. SEMI ASSETS. Except as otherwise provided in any express agreement of
the Company and Parent, the following assets (the "ASSETS") shall be recognized
as assets of the Semiconductor Business and shall be sold or transferred
pursuant to Section 1.5(a) of the Agreement:
(a) all assets reflected in the unaudited consolidated balance sheet
(including notes thereto) of the Semiconductor Business as of September 30,
1999 attached hereto as Annex 1.5(b)-1 (the "BALANCE SHEET"), subject to
any dispositions of such Assets subsequent to the date of such Balance
Sheet;
(b) all assets that have been written off, expensed or fully
depreciated that, had they not been written off, expensed or fully
depreciated, would have been reflected in the Balance Sheet in accordance
with the principles and accounting policies under which the Balance Sheet
was prepared;
(c) all assets acquired by the Company or its Subsidiaries after the
date of the Balance Sheet that would be reflected in the consolidated
balance sheet of the Semiconductor Business as of the effective date and
time of each transfer of property, assumption of liability, license,
undertaking, or other agreement in connection with the Semi Disposition
(the "SEPARATION DATE") if such consolidated balance sheet was prepared at
the time of the Semi Disposition using the same principles and accounting
policies under which the Balance Sheet was prepared;
(d) all assets that are used primarily by the Semiconductor Business
at the Separation Date but are not reflected in the Balance Sheet due to
mistake or unintentional omission;
A-40
(e) all claims or other rights of the Company or the Semiconductor
Business that primarily relates to the Semiconductor Business, whenever
arising, against any person or entity other than an officer, employee,
director or consultant of the Semiconductor Business, if and to the extent
that (i) such claim or right arises out of the events, acts or omissions
occurring as of the Separation Date (based on then existing law) and (ii)
the existence or scope of the obligation of such other person or entity as
of the Separation Date was not acknowledged, fixed or determined in any
material respect, due to a dispute or other uncertainty as of the
Separation Date or as a result of the failure of such claim or other right
to have been discovered or asserted as of the Separation Date. A claim or
right meeting the foregoing definition shall be considered an
"SEMICONDUCTOR BUSINESS CONTINGENT GAIN" regardless of whether there was
any action pending, threatened or contemplated as of the Separation Date
with respect thereto. In the case of any claim or right a portion of which
arises out of events, acts or omissions occurring prior to the Separation
Date and a portion of which arises out of events, acts or omissions
occurring on or after the Separation Date, only that portion that arises
out of events, acts or omissions occurring prior to the Separation Date
shall be considered a SemiconductorBusiness Contingent Gain. For purposes
of the foregoing, a claim or right shall be deemed to have accrued as of
the Separation Date if all the elements of the claim necessary for its
assertion shall have occurred on or prior to the Separation Date, such that
the claim or right, were it asserted in an action on or prior to the
Separation Date, would not be dismissed by a court on ripeness or similar
grounds. Notwithstanding the foregoing, none of (i) any insurance proceeds,
(ii) any Excluded Assets (as defined below), (iii) any reversal of any
litigation or other reserve, or (iv) any matters relating to Taxes which
are governed by the Tax Sharing Agreement shall be deemed to be a
Semiconductor Business Contingent Gain;
(f) all contracts in which the Company is a party or by which it or
any of its assets is bound whether or not in writing, except for any such
contract or agreement that is contemplated to be retained by the Company
because it relates primarily to the DiviCom business including:
(i) all prepaid expenses, trade accounts and other accounts and
notes receivables;
(ii) all rights under contracts or agreement, all claims or rights
against any person or entity arising from the ownership of any Asset,
all rights in connection with any bids or offers and all claims, choses
in action or similar rights, whether accrued or contingent;
(iii) all rights under insurance policies and all rights in the
nature of insurance, indemnification or contribution;
(iv) all licenses, permits, approvals and authorization which have
been issued by any governmental authority; and
(v) interest rate, currency, commodity or other swap, collar, cap
or other hedging or similar agreements or arrangements.
(g) all computers, desks, equipment (including equipment used for
research and development) and other Assets used primarily by employees of
the Company that will become employees of the Semiconductor Business in
connection with the Semi Disposition;
(h) to the extent permitted by law and subject to any agreement
regarding indemnification and/ or insurance matters, all rights of the
Semiconductor Business under any of the Company's insurance policies;
(i) all assets that are expressly agreed by Parent and the Company to
be Assets;
(j) all (a) accounts receivable and other rights to payment for goods
or services sold, leased or otherwise provided in the conduct of the
Semiconductor Business that, as of the Separation Date, are payable by a
third party to the Company or any of the Company's subsidiaries, whether
past due, due or to become due, including any interest, sales or use taxes,
finance charges, late or returned check charges and other obligations of
the accounts debtor withrespect thereto, and any proceeds of any of
A-41
the foregoing and (b) other miscellaneous Assets for which an adjustment is
made in the Balance Sheet;
(k) the Company's rights in the trade and service marks and domain
names incorporating or based on the name C-CUBE and any goodwill associated
therewith; and
(i) cash or cash equivalents, bank accounts, lock boxes and other
deposit arrangements (other than the Retained Cash).
EXCLUDED ASSETS. The following assets shall be excluded from the
pool of the Semiconductor Business' Assets (the "EXCLUDED ASSETS"):
(ii) the Company Registered Intellectual Property listed on the
Disclosure Schedule; and
(iii) any Assets that are expressly agreed by Parent and the
Company to be Excluded Assets.
2. THE SEMICONDUCTOR BUSINESS' LIABILITIES. For the purposes of this
Agreement, "SEMICONDUCTOR BUSINESS LIABILITIES" shall mean (without duplication)
the following Liabilities, except as otherwise provided for in any express
agreement of the parties:
(a) all Liabilities reflected in the Balance Sheet, subject to any
discharge of such Liabilities subsequent to the date of the Balance Sheet;
(b) all Liabilities of the Company or its Subsidiaries that arise
after the date of the Balance Sheet that would be reflected in the
consolidated balance sheet of the Semiconductor Business as of the
Separation Date if such consolidated balance sheet was prepared using the
same principles and accounting policies under which the Balance Sheet was
prepared;
(c) all Liabilities that are related primarily to the Semiconductor
Business at the Separation Date but are not reflected in the Balance Sheet
due to mistake or unintentional omission;
(d) any Liability of the Company or the Semiconductor Business that
primarily relates to the Semiconductor Business, whenever arising, to any
person or entity other than an officer, director, employee or consultant of
the Semiconductor Business, if and to the extent that (i) such Liability
arises out of the events, acts or omissions occurring on or before the
Separation Date and (ii) the existence or scope of the obligation of a
member of the officer, director, employee or consultant of the
Semiconductor Business as of the Separation Date with respect to such
Liability was not acknowledged, fixed or determined in any material
respect, due to a dispute or other uncertainty as of the Separation Date or
as a result of the failure of such Liability to have been discovered or
asserted as of the Separation Date (it being understood that the existence
of a litigation or other reserve with respect to any Liability shall not be
sufficient for such Liability to be considered acknowledged, fixed or
determined) (the "SEMICONDUCTOR BUSINESS CONTINGENT LIABILITY"). In the
case of any Liability a portion of which arises out of events, acts or
omissions occurring prior to the Separation Date and a portion of which
arises out of events, acts or omissions occurring on or after the
Separation Date, only that portion that arises out of events, acts or
omissions occurring prior to the Separation Date shall be considered a
Semiconductor Business Contingent Liability. For purposes of the foregoing,
a Liability shall be deemed to have arisen out of events, acts or omissions
occurring prior to the Separation Date if all the elements necessary for
the assertion of a claim with respect to such Liability shall have occurred
on or prior to the Separation Date, such that the claim, were it asserted
in an action on or prior to the Separation Date, would not be dismissed by
a court on ripeness or similar grounds. For purposes of clarification of
the foregoing, the parties agree that no Liability relating to, arising out
of or resulting from any obligation of any person or entity to satisfy any
obligation accrued under any employee stock option plan, stock purchase
plan or the like as of the Separation Date, shall be deemed to be a
Semiconductor Business Contingent Liability. For purposes of determining
whether a claim relating to the Year 2000 problem is a Semiconductor
Business Contingent Liability, claims relating to products shipped prior to
the Separation Date shall be deemed to have arisen prior to the Separation
Date.
A-42
(e) all Liabilities (other than Liabilities for Taxes), whether
arising before, on or after the Separation Date, primarily relating to,
arising out of or resulting from:
(i) the operation of the Semiconductor Business, as conducted at
any time prior to, on or after the Separation Date (including any
Liability relating to, arising out of or resulting from any act or
failure to act by any director, officer, employee, agent or
representative (whether or not such act or failure to act is or was
within such person or entity's authority));
(ii) the operation of any business conducted by the Semiconductor
Business at any time after the Separation Date (including any Liability
relating to, arising out of or resulting from any act or failure to act
by any director, officer, employee, agent or representative (whether or
not such act or failure to act is or was within such person or entity's
authority)); or
(iii) any Semiconductor Business Assets;
(f) all Liabilities relating to, arising out of or resulting from any
of the terminated, divested or discontinued businesses and operations
listed or described on Annex 1.5(b)-3; and
(g) all Liabilities that are expressly agreed by Parent and the
Company to be Semiconductor Business Liabilities, including fees and
expenses of the Company incurred in connection with the Merger, and all
agreements, obligations and Liabilities of the Semiconductor Business under
the agreements governing the Semi Disposition.
(h) all (i) accounts payable and other obligations of payment for
goods or services purchased, leased or otherwise received in the conduct of
the Semiconductor Business that as of the Separation Date are payable to a
third party by the Company or any of the Company's subsidiaries, whether
past due, due or to become due, including any interest, sales or use taxes,
finance charges, late or returned check charges and other obligations of
the Company or any of the Company's Subsidiaries with respect thereto, and
any obligations related to any of the foregoing and (ii) all employee
compensation Liabilities relating to employees of the Semiconductor
Business.
EXCLUDED LIABILITIES. The following Liabilities shall be excluded
from the pool of the Semiconductor Business' Liabilities, (the "EXCLUDED
LIABILITIES"):
(i) all Liabilities to the extent that (i) it is covered under the
terms of the Company's insurance policies in effect prior to the
Separation Date and (ii) the Semiconductor Business is not a named,
insured under, or otherwise entitled to the benefits of, such insurance
policies;
(ii) all Liabilities for Pre-Semi Disposition Taxes not
attributable to the Semiconductor Business; and
(iii) all Liabilities that are expressly agreed by Parent and the
Company to be Excluded Liabilities, and all agreements and obligations
of the Company under the agreements governing the Semi Disposition.
A-43
ANNEX 1.5(b)-1
PRESENTATION (A)
PRO FORMA CONDENSED BALANCE SHEET
SEPTEMBER 30, 1999
ASSETS
C-CUBE SEMICONDUCTOR
MICROSYSTEMS INC. PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
----------------- ----------- -------------
Current assets:
Cash, equivalents and short-term investments........ $277,373 $(148,000)(1),(2),(3) $129,373
Accounts receivable, net of allowances.............. 61,046 (52,504)(1) 8,542
Inventories......................................... 12,373 (9,948)(1) 2,425
Deferred income taxes............................... 11,723 (9,190)(1)(5) 2,533
Other current assets................................ 14,914 (6,174)(1) 8,740
-------- --------- --------
Total current assets........................ 377,429 (225,816) 151,613
Property and equipment -- net......................... 33,881 (14,063)(1) 19,818
Production capacity rights............................ 5,164 -- 5,164
Distribution rights -- net............................ 1,359 -- 1,359
Purchased technology -- net........................... 5,139 (2,595)(1) 2,544
Other assets.......................................... 1,995 (499)(1) 1,496
-------- --------- --------
Total....................................... $424,967 $(242,973) $181,994
======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................... $ 24,356 $ (11,592)(1) $ 12,764
Accrued liabilities................................. 31,195 9,385(1),(4) 40,580
Income taxes payable................................ 12,162 (6,649)(1) 5,513
Deferred revenue.................................... 5,537 (5,537)(1) --
Current portion of long-term obligations............ 368 (11)(1) 357
-------- --------- --------
Total current liabilities................... 73,618 (14,404) 59,214
Long-term obligations................................. 20,150 (48)(1) 20,102
Deferred income taxes................................. 3,230 (2,545)(1) 685
-------- --------- --------
Total liabilities........................... 96,998 (16,997) 89,001
-------- --------- --------
Minority interest in subsidiary....................... 409 -- 409
Stockholders' equity:
Preferred stock..................................... -- -- --
Common stock........................................ 270,932 254,000 524,932
Accumulated other comprehensive loss................ (1,992) 27(1) (1,965)
(480,003)(1),(2),(3)
Retained earnings (deficit)......................... 58,620 (4),(5) (421,383)
-------- --------- --------
Total stockholders' equity.................. 327,560 (225,976) 101,584
-------- --------- --------
Total....................................... $424,967 $(242,973) $181,994
======== ========= ========
- ---------------
Two balance sheets have been presented to give effect to a range of possible
results. Presentation (A) shows the estimated effect assuming a $975 million
valuation of the semiconductor business. Presentation (B) shows the effect
assuming a $1.1 billion valuation of the semiconductor business. The Company
estimates that each additional $100 million in valuation will reduce cash and
retained earnings by approximately $40 million. The Company has debt financing
available should the evaluation of the semiconductor business exceed $1.1
billion.
See notes to pro forma condensed balance sheet at F-55.
(A) Based on a $975 million valuation of the semiconductor business.
A-44
ANNEX 1.5(B)-1
PRESENTATION (B)
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
ASSETS
C-CUBE SEMICONDUCTOR
MICROSYSTEMS, INC. PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
------------------ ----------- -------------
Current assets:
Cash, cash equivalents and short-term
investments................................ $277,373 $(233,000)(1)(2)(3) $ 44,373
Accounts receivable, net of allowances........ 61,046 (52,504)(1) 8,542
Inventories................................... 12,373 (9,948)(1) 2,425
Deferred income taxes......................... 11,723 (9,190)(1)(5) 2,533
Other current assets.......................... 14,914 (6,174)(1) 8,740
-------- --------- ---------
Total current assets.................. 377,429 (310,816) 66,613
Property and equipment -- net................... 33,881 (14,063)(1) 19,818
Production capacity rights...................... 5,164 -- 5,164
Distribution rights -- net...................... 1,359 -- 1,359
Purchased technology -- net..................... 5,139 (2,595)(1) 2,544
Other assets.................................... 1,995 (499)(1) 1,496
-------- --------- ---------
Total................................. $424,967 $(327,973) $ 96,994
======== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................. $ 24,356 $ (11,592)(1) $ 12,764
Accrued liabilities........................... 31,195 9,385(1)(4) 40,580
Income taxes payable.......................... 12,162 (6,649)(1) 5,513
Deferred revenue.............................. 5,537 (5,537)(1) --
Current portion of long-term obligations...... 368 (11)(1) 357
-------- --------- ---------
Total current liabilities............. 73,618 (14,404) 59,214
Long-term obligations........................... 20,150 (48)(1) 20,102
Deferred income taxes........................... 3,230 (2,545)(1) 685
-------- --------- ---------
Total liabilities..................... 96,998 (16,997) 80,001
-------- --------- ---------
Minority interest in subsidiary................. 409 -- 409
Stockholders' equity:
Preferred stock............................... -- -- --
Common stock.................................. 270,932 254,000(2) 524,932
Accumulated other comprehensive loss.......... (1,992) 27(1) (1,965)
Retained earnings (deficit)................... 58,620 (565,003)(1)(2)(3)(4)(5) (506,383)
-------- --------- ---------
Total stockholders' equity............ 327,560 (310,976) 16,584
-------- --------- ---------
Total................................. $424,967 $(327,973) $ 96,994
======== ========= =========
- ---------------
(B) Based on a $1.1 billion valuation of the Semiconductor business.
A-45
