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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 20, 1999
AMONG
ZHONE TECHNOLOGIES, INC.,
ZHONE ACQUISITION CORP.
AND
PREMISYS COMMUNICATIONS, INC.
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TABLE OF CONTENTS
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Page
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ARTICLE I. THE TENDER OFFER.......................................................................................2
1.1 The Offer.......................................................................................2
1.2 SEC Filings.....................................................................................3
1.3 Company Action..................................................................................4
1.4 Composition of the Company Board................................................................5
ARTICLE II. THE MERGER............................................................................................6
2.1 The Merger......................................................................................6
2.2 Closing.........................................................................................6
2.3 Effective Time..................................................................................6
2.4 Effects of the Merger...........................................................................6
2.5 Certificate of Incorporation....................................................................6
2.6 Bylaws..........................................................................................7
2.7 Officers and Directors of Surviving Corporation.................................................7
2.8 Effect on Capital Stock.........................................................................7
2.9 Treatment of Stock Options......................................................................7
2.10 Surrender and Payment...........................................................................8
2.11 Adjustment of Merger Consideration..............................................................9
2.12 Further Assurances.............................................................................10
ARTICLE III. REPRESENTATIONS AND WARRANTIES......................................................................10
3.1 Representations and Warranties of the Company..................................................10
3.2 Representations and Warranties of Parent.......................................................25
ARTICLE IV. COVENANTS RELATING TO CONDUCT OF BUSINESS............................................................27
4.1 Conduct of Business Pending Closing............................................................27
4.2 Prohibited Actions Pending Closing.............................................................27
4.3 Other Actions..................................................................................30
4.4 Advice of Changes; Government Filings..........................................................30
ARTICLE V. ADDITIONAL AGREEMENTS.................................................................................30
5.1 Preparation of Proxy Statement; the Company Stockholders Meeting...............................30
5.2 Access to Information..........................................................................31
5.3 Approvals and Consents; Cooperation............................................................31
5.4 No Solicitation................................................................................32
5.5 Employee Benefits..............................................................................34
5.6 Fees and Expenses..............................................................................35
5.7 Indemnification; Insurance.....................................................................35
5.8 Company Stock Purchase Plan....................................................................35
5.9 Public Announcements...........................................................................35
5.10 Takeover Statutes..............................................................................36
5.11 Rights Agreement...............................................................................36
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5.12 Short-Term Investments.........................................................................36
ARTICLE VI. CONDITIONS PRECEDENT.................................................................................36
6.1 Conditions to Each Party's Obligations to Effect the Merger....................................36
ARTICLE VII. TERMINATION AND AMENDMENT...........................................................................37
7.1 Termination....................................................................................37
7.2 Effect of Termination..........................................................................38
7.3 Amendment......................................................................................39
7.4 Extension; Waiver..............................................................................39
ARTICLE VIII. GENERAL PROVISIONS.................................................................................40
8.1 Non-Survival of Representations, Warranties and Agreements.....................................40
8.2 Notices........................................................................................40
8.3 Interpretation.................................................................................40
8.4 Counterparts...................................................................................41
8.5 Entire Agreement; No Third Party Beneficiaries.................................................41
8.6 Governing Law..................................................................................41
8.7 Severability...................................................................................41
8.8 Assignment.....................................................................................41
8.9 Enforcement....................................................................................42
8.10 Definitions....................................................................................42
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GLOSSARY OF DEFINED TERMS
Definition Location
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Affiliated Group....................................................................................Section 8.10(a)
Agreement..................................................................................................Preamble
Alternative Transaction..............................................................................Section 5.4(a)
Articles of Merger......................................................................................Section 2.3
Board of Directors..................................................................................Section 8.10(b)
Business Day........................................................................................Section 8.10(c)
Cap Amount...........................................................................................Section 5.7(b)
Certificate of Merger...................................................................................Section 2.3
Certificates........................................................................................Section 2.10(b)
Closing.................................................................................................Section 2.2
Closing Date............................................................................................Section 2.2
Code.................................................................................................Section 3.1(k)
Company....................................................................................................Preamble
Company Acquisition Agreement........................................................................Section 5.4(c)
Company Benefit Plans.............................................................................Section 3.1(r)(i)
Company Board........................................................................................Section 1.3(a)
Company Common Stock.......................................................................................Recitals
Company Disclosure Schedule.............................................................................Section 3.1
Company Option.............................................................................................Recitals
Company Option Agreement...................................................................................Recitals
Company Patent Rights................................................................................Section 3.1(o)
Company Permits......................................................................................Section 3.1(i)
Company Preferred Stock...........................................................................Section 3.1(c)(i)
Company Returns...................................................................................Section 3.1(k)(i)
Company Rights Agreement .........................................................................Section 3.1(c)(i)
Company SEC Reports...............................................................................Section 3.1(e)(i)
Company Stock Option Plans..........................................................................Section 8.10(d)
Company Stock Purchase Plan.......................................................................Section 3.1(c)(i)
Company Stockholders Meeting.........................................................................Section 5.1(a)
Company Subs.........................................................................................Section 3.1(a)
Company Takeover Proposal............................................................................Section 5.4(a)
Confidentiality Agreement ..............................................................................Section 5.2
Continuing Directors.................................................................................Section 1.4(c)
CSFB.................................................................................................Section 3.2(d)
DGCL.......................................................................................................Recitals
Effective Time..........................................................................................Section 2.3
Environmental Laws...................................................................................Section 3.1(s)
ERISA.............................................................................................Section 3.1(r)(i)
Exchange Act....................................................................................Section 3.1(d)(iii)
Exchange Agent......................................................................................Section 2.10(a)
Fairness Opinion.....................................................................................Section 1.3(a)
Financial Advisor....................................................................................Section 1.3(a)
Fully Diluted Shares................................................................................Section 8.10(e)
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GAAP..............................................................................................Section 3.1(e)(i)
Governmental Entity.............................................................................Section 3.1(d)(iii)
HSR Act.........................................................................................Section 3.1(d)(iii)
Indemnified Party....................................................................................Section 5.7(a)
Intellectual Property Rights...................................................................Section 3.1(o)(viii)
Interim Balance Sheet.............................................................................Section 3.1(e)(i)
Interim Financial Statements......................................................................Section 3.1(e)(i)
Leased Real Property.................................................................................Section 3.1(h)
Legal Proceeding....................................................................................Section 8.10(f)
Legal Requirement...................................................................................Section 8.10(g)
Liens............................................................................................Section 3.1(c)(ii)
Material Adverse Effect.............................................................................Section 8.10(h)
Merger.....................................................................................................Recitals
Merger Consideration.................................................................................Section 2.8(c)
Merger Sub.................................................................................................Preamble
Minimum Shares.......................................................................................Section 1.1(a)
Nasdaq..........................................................................................Section 3.1(d)(iii)
Offer................................................................................................Section 1.1(a)
Offer Documents......................................................................................Section 1.2(a)
Organizational Documents............................................................................Section 8.10(i)
Outside Date.........................................................................................Section 7.1(b)
Parent.....................................................................................................Preamble
Pending Marks....................................................................................Section 3.1(o)(ii)
Person..............................................................................................Section 8.10(j)
Price Per Share......................................................................................Section 1.1(a)
Principal Stockholders.....................................................................................Recitals
Proxy Statement...................................................................................Section 3.1(f)(i)
Registered Marks.................................................................................Section 3.1(o)(ii)
Required Company Vote................................................................................Section 3.1(m)
Required Regulatory Approvals........................................................................Section 6.1(d)
Rights............................................................................................Section 3.1(c)(i)
Schedule 14D-1.......................................................................................Section 1.2(a)
Schedule 14D-9.......................................................................................Section 1.2(b)
SEC..................................................................................................Section 1.2(a)
Securities Act..................................................................................Section 3.1(d)(iii)
Short-Term Investments.................................................................................Section 5.12
Stockholders Agreement.....................................................................................Recitals
Subsidiary..........................................................................................Section 8.10(k)
Superior Proposal....................................................................................Section 5.4(a)
Surviving Corporation...................................................................................Section 2.1
Tax.................................................................................................Section 8.10(l)
Tax Return..........................................................................................Section 8.10(m)
TBCA.......................................................................................................Recitals
Third Party..........................................................................................Section 5.4(a)
Violation........................................................................................Section 3.1(d)(ii)
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This AGREEMENT AND PLAN OF MERGER, dated as of October 20, 1999 (this
"Agreement"), is by and among Zhone Technologies, Inc., a Delaware corporation
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("Parent"), Zhone Acquisition Corp., a Texas corporation and a wholly owned
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subsidiary of Parent ("Merger Sub"), and Premisys Communications, Inc., a
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Delaware corporation (the "Company").
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W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have each determined that the Merger (as defined below) is in the
best interests of their respective stockholders and have approved the Merger
upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, in order to effectuate the foregoing, the Company, upon the
terms and subject to the conditions of this Agreement and in accordance with the
Delaware General Corporation Law (the "DGCL") and the Texas Business Corporation
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Act (the "TBCA"), will merge with and into Merger Sub (the "Merger");
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WHEREAS, in order to facilitate the Merger, the Boards of Directors of
Parent, Merger Sub and the Company have each approved the Offer (as defined
below) to purchase for cash all of the issued and outstanding shares of Common
Stock, par value $.01 per share, of the Company together with the associated
rights to purchase shares of Series A Junior Participating Preferred Stock, par
value $.01 per share, of the Company (collectively, the "Company Common Stock"),
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at a price per share equal to the Price Per Share (as defined below) subject to
the terms and conditions set forth herein and in Annex A hereto;
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WHEREAS, concurrently with the execution of this Agreement and as a
condition to the willingness of Parent and Merger Sub to enter into this
Agreement, Parent, Merger Sub and the Company have entered into a Company Option
Agreement dated as of the date hereof (the "Company Option Agreement") pursuant
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to which the Company has granted Merger Sub an option (the "Company Option") to
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purchase newly issued shares of Company Common Stock under certain
circumstances;
WHEREAS, concurrently with the execution of this Agreement and as a
condition to the willingness of Parent and Merger Sub to enter into this
Agreement, Parent, Merger Sub and certain principal stockholders of the Company
(the "Principal Stockholders") have entered into a stockholders agreement dated
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as of the date hereof (the "Stockholders Agreement") pursuant to which, among
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other things, the Principal Stockholders have agreed to (a) tender their shares
of Company Common Stock into the Offer and (b) vote their shares of Company
Common Stock in favor of the Merger, in each case upon the terms and subject to
the conditions set forth in the Stockholders Agreement; and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
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NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I.
THE TENDER OFFER
1.1 The Offer
(a) Subject to the provisions of this Agreement, (i) not later than the
first Business Day after execution of this Agreement, Parent and the Company
shall issue a public announcement of the execution of this Agreement and (ii)
Merger Sub shall, as soon as practicable, but in no event later than five
Business Days after the date of such announcement, commence (within the meaning
of Rule 14d-2(a) of the Exchange Act) a tender offer (the "Offer") to purchase
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all of the outstanding shares of Company Common Stock at a price of $10.00 per
share, net to the seller in cash without interest (the "Price Per Share"),
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subject to reduction only for any applicable withholding taxes. The Offer shall
be made pursuant to an Offer to Purchase and related Letter of Transmittal
containing the terms and conditions set forth in this Agreement. The obligation
of Merger Sub to accept for payment, purchase and pay for shares of Company
Common Stock tendered pursuant to the Offer shall be subject only to (i) at
least that number of shares of Company Common Stock equivalent to 75% of the
Fully Diluted Shares (as defined below) of Company Common Stock on the date such
shares are purchased pursuant to the Offer (subject to reduction as described
below, the "Minimum Shares") being validly tendered and not withdrawn prior to
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the expiration of the Offer and (ii) the satisfaction of the other conditions
set forth in Annex A hereto, any of which conditions may be waived by Merger Sub
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in its sole discretion; provided, however, that Merger Sub shall not reduce the
Minimum Shares below a majority of the Fully Diluted Shares of Company Common
Stock without the prior written consent of the Company. The Company agrees that
no shares of Company Common Stock held by the Company or any of its Subsidiaries
will be tendered to Merger Sub pursuant to the Offer.
(b) Without the prior written consent of the Company, neither Parent nor
Merger Sub shall (i) decrease the Price Per Share payable in the Offer, (ii)
decrease the number of shares of Company Common Stock sought pursuant to the
Offer below a majority of the Fully Diluted Shares of Company Common Stock or
change the form of consideration payable in the Offer, (iii) change or amend the
conditions to the Offer (including the conditions set forth in Annex A hereto)
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or impose additional conditions to the Offer, (iv) except as provided below,
change the expiration date of the Offer, or (v) otherwise amend, add or waive
any term or condition of the Offer in any manner adverse to the holders of
shares of Company Common Stock; provided, however, that if on any scheduled
expiration date of the Offer, which shall initially be 20 Business Days after
the commencement date of the Offer, all conditions to the Offer have not been
satisfied or waived, Merger Sub may, from time to time, extend the expiration
date of the Offer for up to 10 additional Business Days (but in no event shall
such extensions exceed, in the aggregate, 30 Business Days without the Company's
prior written consent, and in no event shall Merger Sub be required to extend
the expiration date of the Offer beyond the Outside Date); provided further that
if on any scheduled expiration date of the Offer all conditions to the Offer
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(other than the Minimum Shares) have been satisfied or waived, and the number of
shares of Company Common Stock that have been validly tendered and not withdrawn
represent at least a majority of the Fully Diluted Shares of Company Common
Stock, and Merger Sub does not elect to reduce the Minimum Shares and consummate
the Offer, then Merger Sub shall, at the Company's request, on up to three
occasions, extend the expiration date of the Offer for up to 10 additional
Business Days (but in no event shall such extensions exceed, in the aggregate,
30 Business Days, and in no event shall Merger Sub be required to extend the
expiration date of the Offer beyond the Outside Date); and provided further that
Merger Sub may, (x) without the consent of the Company, extend the Offer for any
period required by any rule, regulation, interpretation or position of the SEC
applicable to the Offer and (y) extend the Offer if (1) the conditions to the
Offer shall have been satisfied or waived and (2) the number of shares of
Company Common Stock that have been validly tendered and not withdrawn represent
less than 90% of the issued and outstanding shares of Company Common Stock;
provided, however, that in no event shall the extensions permitted under the
foregoing clause (y) exceed, in the aggregate, 10 Business Days. Assuming the
prior satisfaction or waiver of all the conditions to the Offer set forth in
Annex A, and subject to the terms and conditions of this Agreement, Merger Sub
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shall, and Parent shall cause Merger Sub to, accept for payment, purchase and
pay for, in accordance with the terms of the Offer, all shares of Company Common
Stock validly tendered and not withdrawn pursuant to the Offer as soon as
reasonably practicable after the expiration of the Offer. Parent shall provide,
or cause to be provided, to Merger Sub, on a timely basis, the funds necessary
to purchase any shares of Company Common Stock that Merger Sub becomes obligated
to purchase pursuant to the Offer.
1.2 SEC Filings
(a) As soon as reasonably practicable on the commencement date of the
Offer, Parent and Merger Sub shall file with the Securities and Exchange
Commission (the "SEC") and disseminate to the Company's stockholders, with
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respect to the Offer, a Tender Offer Statement on Schedule 14D-1 (the "Schedule
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14D-1"). The Schedule 14D-1 shall comply as to form and content in all material
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respects with the applicable provisions of the federal securities laws and shall
contain or incorporate by reference the Offer to Purchase, the related Letter of
Transmittal and other ancillary documents and agreements pursuant to which the
Offer will be made (the Schedule 14D-1, the Offer to Purchase, the Letter of
Transmittal and such other documents being collectively referred to herein as
the "Offer Documents"). The Company and its counsel shall be given a reasonable
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opportunity to review and comment upon the Offer Documents and any amendment or
supplement thereto prior to the filing thereof with the SEC. Parent and Merger
Sub agree to provide to the Company and its counsel any comments which Parent,
Merger Sub or their counsel may receive from the Staff of the SEC with respect
to the Offer Documents promptly after receipt thereof. Parent, Merger Sub and
the Company agree to correct promptly any information provided by any of them
for use in the Offer Documents which shall have become false or misleading in
any material respect, and Parent and Merger Sub further agree to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC
and disseminated to the Company's stockholders, in each case as and to the
extent required by the applicable provisions of the federal securities laws.
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(b) On the date the Offer Documents are filed with the SEC, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-
9 (as amended from time to time, the "Schedule 14D-9") containing the
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recommendation of the Company Board described in Section 5.1(a), which shall
comply as to form and content in all material respects with the applicable
provisions of the federal securities laws. The Company shall cooperate with
Parent and Merger Sub in mailing or otherwise disseminating the Schedule 14D-9
with the appropriate Offer Documents to the stockholders of the Company. Parent
and its counsel shall be given a reasonable opportunity to review and comment
upon the Schedule 14D-9 and any amendment or supplement thereto prior to the
filing thereof with the SEC. The Company agrees to provide to Parent and Merger
Sub and their counsel any comments which the Company or its counsel may receive
from the Staff of the SEC with respect to the Schedule 14D-9 promptly after
receipt thereof. The Company, Parent and Merger Sub agree to correct promptly
any information provided by any of them for use in the Schedule 14D-9 which
shall have become false or misleading in any material respect, and the Company
further agrees to take all steps necessary to cause such Schedule 14D-9 as so
corrected to be filed with the SEC and disseminated to the Company's
stockholders, in each case as and to the extent required by the applicable
provisions of the federal securities laws. Parent, Merger Sub and the Company
each hereby agree to provide promptly such information necessary to the
preparation of the exhibits and schedules to the Schedule 14D-9 and the Offer
Documents which the respective party responsible therefor shall reasonably
request.
1.3 Company Action
(a) The Company hereby approves of and consents to the Offer and
represents that the Board of Directors of the Company (the "Company Board"), at
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a meeting duly called and held, duly adopted resolutions approving this
Agreement, the Company Option Agreement, the Stockholders Agreement, the Offer
and the Merger, determining, as of the date of such resolutions, that the terms
of the Offer and the Merger are fair to, and in the best interests of, the
Company's stockholders, recommending that the Company's stockholders accept the
Offer, tender their shares pursuant to the Offer and approve this Agreement (if
required), and approving the acquisition of shares of Company Common Stock by
Merger Sub pursuant to the Offer and the other transactions contemplated by this
Agreement. The Company hereby consents to the inclusion in the Offer Documents,
the Schedule 14D-9 and the Proxy Statement (if any) of such recommendation of
the Company Board. The Company hereby represents that the Company Board has
received the written opinion (the "Fairness Opinion") of Broadview Associates
----------------
LLC (the "Financial Advisor") that the consideration to be received by the
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holders of Company Common Stock pursuant to the Offer and the Merger is fair to
such holders from a financial point of view. The Company has been authorized by
the Financial Advisor to permit the inclusion of the Fairness Opinion in the
Offer Documents, the Schedule 14D-9 and the Proxy Statement (if any). The
Company has been advised by each of its directors and executive officers that
each such person currently intends to tender all shares of Company Common Stock
owned by such person pursuant to the Offer.
(b) Promptly upon execution of this Agreement and in connection with the
Offer, the Company shall furnish Merger Sub with such information (including a
list of the stockholders of the Company, mailing labels and a list of securities
positions, each as of a recent date), and shall
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thereafter render such assistance, as Parent or Merger Sub may reasonably
request in communicating the Offer to the Company's stockholders.
1.4 Composition of the Company Board
(a) Promptly upon the acceptance for payment of, and payment by Merger Sub
in accordance with the Offer and the Company Option for, not less than the
Minimum Shares, Merger Sub shall be entitled to designate such number of members
of the Company Board, rounded up to the next whole number, equal to that number
of directors which equals the product of the total number of directors on the
Company Board (giving effect to the directors elected pursuant to this sentence)
multiplied by the percentage that such number of shares of Company Common Stock
owned in the aggregate by Parent or Merger Sub, upon such acceptance for
payment, bears to the number of shares of Company Common Stock outstanding;
provided, however, that until the Effective Time there shall be at least one
Continuing Director. To effect the foregoing, the Company shall, on the
expiration date of the Offer, (i) either increase the size of the Company Board
or secure the resignations of such number of its incumbent directors as is
necessary to enable Parent's designees to be so elected to the Company Board,
and (ii) cause Parent's designees to be so elected, in each case as may be
necessary to comply with the foregoing provisions of this Section 1.4(a).
(b) The Company's obligation to cause designees of Parent to be elected or
appointed to the Company Board shall be subject to Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder. The Company shall promptly take all
actions required pursuant to Section 14(f) and Rule l4f-1 in order to fulfill
its obligations under this Section 1.4, and shall include in the Schedule 14D-9
such information with respect to the Company and its officers and directors as
is required under Section 14(f) and Rule 14f-1. Parent and Merger Sub shall
supply to the Company any information with respect to any of them and their
nominees, officers, directors and affiliates required by Section 14(f) and Rule
l4f-1 and applicable rules and regulations.
(c) After the time that Parent's designees constitute at least a majority
of the Company Board and until the Effective Time, any amendment or termination
of this Agreement shall require the approval of a majority of the then serving
directors, if any, who are directors as of the date hereof (the "Continuing
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Directors"), except to the extent that applicable law requires that such action
---------
be acted upon by the full Company Board, in which case such action shall require
the concurrence of a majority of the Company Board, which majority shall include
each of the Continuing Directors. If there is more than one Continuing Director
and prior to the Effective Time, the number of Continuing Directors is reduced
for any reason, the remaining Continuing Director or Directors shall be entitled
to designate persons to fill such vacancies who shall be deemed Continuing
Directors for purposes of this Agreement. In the event there is only one
Continuing Director and he or she resigns or is removed or if all Continuing
Directors resign or are removed, he, she or they, as applicable, shall be
entitled to designate his, her or their successors, as the case may be, each of
whom shall be deemed a Continuing Director for purposes of this Agreement.
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ARTICLE II.
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the DGCL and the TBCA, the Company shall be
merged with and into Merger Sub at the Effective Time. Following the Merger, the
separate corporate existence of the Company shall cease and Merger Sub shall
continue as the surviving corporation (the "Surviving Corporation") in
---------------------
accordance with the DGCL and the TBCA. Notwithstanding the foregoing, Parent may
elect at any time prior to the Merger to merge Merger Sub with and into the
Company instead of merging the Company with and into Merger Sub as provided
above. In such event, this Agreement shall be deemed automatically amended by
the parties as appropriate to give effect to the revised form of the Merger with
each party executing a written amendment to this Agreement as necessary to
reflect the foregoing and to provide that the Company shall be the Surviving
Corporation.
2.2 Closing. At the closing of the Merger (the "Closing"), which shall take
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place as soon as practicable after satisfaction or waiver (as permitted by this
Agreement and applicable law) of the conditions set forth in Article VI (the
"Closing Date"), unless another time or date is agreed to in writing by the
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parties hereto, Parent shall effect the Merger in accordance with Section 2.1.
The Closing shall be held at the offices of Latham & Watkins, 135 Commonwealth
Drive, Menlo Park, California 94025, unless another place is agreed to in
writing by the parties hereto.
2.3 Effective Time. Upon the Closing, the parties shall file (a) with the
Secretary of State of the State of Delaware a certificate of merger or other
appropriate documents (in any such case, the "Certificate of Merger") executed
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in accordance with the relevant provisions of the DGCL and shall make all other
filings, recordings or publications required under the DGCL in connection with
the Merger, and (b) with the Secretary of State of the State of Texas articles
of merger or other appropriate documents (in any such case, the "Articles of
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Merger") executed in accordance with the relevant provisions of the TBCA and
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shall make all other filings, recordings or publications required under the TBCA
in connection with the Merger. The Merger shall become effective at such time as
the Certificate of Merger and the Articles of Merger are duly filed with the
Delaware and Texas Secretaries of State, respectively, or at such other time as
the parties may agree and specify in the Certificate of Merger and the Articles
of Merger (the time the Merger becomes effective being the "Effective Time").
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2.4 Effects of the Merger. At and after the Effective Time, the Merger shall
have the effects set forth in Section 259 of the DGCL and Section 5.06 of the
TBCA.
2.5 Articles of Incorporation. The articles of incorporation of Merger Sub as
in effect immediately prior to the Effective Time in the form attached hereto as
Annex B shall be the articles of incorporation of the Surviving Corporation
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until thereafter changed or amended as provided therein or by applicable law,
provided that such articles of incorporation may be amended to reflect "Premisys
Communications, Inc." as the name of the Surviving Corporation.
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2.6 Bylaws. The bylaws of Merger Sub as in effect immediately prior to the
Effective Time shall be the bylaws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
2.7 Officers and Directors of Surviving Corporation. The officers and directors
of Merger Sub shall be the officers and directors of the Surviving Corporation,
until the earlier of their resignation or removal or otherwise ceasing to be an
officer or director or until their respective successors are duly elected and
qualified, as the case may be.
2.8 Effect on Capital Stock. As of the Effective Time, by virtue of the Merger
and without any action on the part of the holder of any shares of Company Common
Stock or any shares of capital stock of Merger Sub:
(a) Capital Stock of Merger Sub. Each issued and outstanding share of
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capital stock of Merger Sub shall be converted into and become one fully paid
and nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share of
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Company Common Stock that is owned by the Company or by a wholly owned
subsidiary of the Company and each share of Company Common Stock that is owned
by Parent, Merger Sub or any other wholly owned subsidiary of Parent shall
automatically be canceled and retired and shall cease to exist, and no Merger
Consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section 2.10(h), each
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issued and outstanding share of Company Common Stock (other than shares to be
canceled in accordance with Section 2.8(b)) shall be converted into the right to
receive in cash, without interest, the Price Per Share (the "Merger
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Consideration"). As of the Effective Time, all such shares of Company Common
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Stock shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate representing
any such shares of Company Common Stock shall cease to have any rights with
respect thereto, except the right to receive upon the surrender of such
certificates, the Merger Consideration.
2.9 Treatment of Stock Options. Simultaneously with the Merger, each
outstanding option to purchase a share of Company Common Stock under the Company
Stock Option Plans shall be canceled, and each holder of any such vested option
shall be paid by the Surviving Corporation promptly after the Effective Time for
each such vested option an amount determined by multiplying (a) the excess, if
any, of the Merger Consideration over the applicable exercise price of such
option by (b) the number of shares of Company Common Stock such holder could
have purchased had such holder exercised such option immediately prior to the
Effective Time. Any such payment shall be subject to all applicable federal,
state and local tax withholding requirements. No unvested options shall be
accelerated or otherwise become exercisable as a result of the Offer or the
Merger, except to the extent that the Company's 1995 Directors Stock Option Plan
or any of the employment or severance agreements listed in Item 5.5 of the
--------
Company Disclosure Schedule provide otherwise. Except as otherwise agreed to by
the parties, the Company Stock Option Plans and the Company Stock Purchase Plan
shall terminate as of the Effective Time and any and all rights under any
provisions in any other plan, program or
7
<PAGE>
arrangement providing for the issuance or grant of any interest in respect of
the capital stock of the Company or any Company Sub shall be canceled as of the
Effective Time. The Company and each relevant committee of the Company Board
shall take any and all actions necessary to effectuate the actions contemplated
by this Section 2.9 and Section 5.8, including without limitation amending the
Company Stock Option Plans or the Company Stock Purchase Plan and using their
best efforts to obtain any necessary consents or waivers from the holders of
outstanding options.
2.10 Surrender and Payment.
(a) Exchange Agent. Prior to the Effective Time, Parent shall appoint an
--------------
agent (the "Exchange Agent") for the purpose of exchanging certificates
--------------
representing shares of Company Common Stock for the Merger Consideration. Merger
Sub shall deposit with the Exchange Agent the Merger Consideration to be paid in
respect of the shares of Company Common Stock. For purposes of determining the
Merger Consideration to be made available, Merger Sub shall assume that no
holder of shares of Company Common Stock will perfect its right to appraisal of
such shares.
(b) Exchange Procedures. As soon as reasonably practicable after the
-------------------
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
------------
Effective Time represented outstanding shares of Company Common Stock, other
than shares to be canceled or retired in accordance with Section 2.8(b), (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 delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by Parent, together
with such Letter of Transmittal, duly executed, and such other documents as may
be reasonably required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor the Merger Consideration, and
the Certificate so surrendered shall forthwith be canceled. If any portion of
the Merger Consideration is to paid to a Person other than the registered holder
of the shares represented by the Certificate or Certificates surrendered in
exchange therefor, it shall be a condition to such payment that the Certificate
or Certificates so surrendered shall be properly endorsed or otherwise be in
proper form for transfer and that the Person requesting such payment shall pay
to the Exchange Agent any transfer or other taxes required as a result of such
payment to a Person other than the registered holder of such shares or establish
to the satisfaction of the Exchange Agent that such tax has been paid or is not
payable. Until surrendered as contemplated by this Section 2.10, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive, upon such surrender, the Merger Consideration.
(c) No Further Ownership Rights in Company Common Stock. All Merger
---------------------------------------------------
Consideration paid upon the surrender for exchange of Certificates in accordance
with the terms of this Article II shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of Company Common Stock
theretofore represented by such Certificates, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
8
<PAGE>
Corporation of the shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be canceled and exchanged as provided in this Article
II, except as otherwise provided by law.
(d) Unclaimed Funds. Any portion of the Merger Consideration made
---------------
available to the Exchange Agent pursuant to Section 2.10(a) that remains
unclaimed by holders of the Certificates for six months after the Effective Time
shall be delivered to the Surviving Corporation, upon demand, and any holders of
Certificates who have not theretofore complied with this Article II shall
thereafter look only to the Surviving Corporation for payment of their claim for
Merger Consideration.
(e) No Liability. None of Parent, Merger Sub, the Company or the Exchange
------------
Agent shall be liable to any Person in respect of any Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(f) Lost Certificates. In the event that 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 Parent, the posting by such Person of a bond in such reasonable
amount as Parent may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
with respect to such Certificate, to which they are entitled pursuant hereto.
(g) Merger Consideration. Any portion of the Merger Consideration made
--------------------
available to the Exchange Agent pursuant to Section 2.10(a) to pay for shares of
Company Common Stock for which appraisal rights have been perfected shall
be returned to the Surviving Corporation, upon demand.
(h) Dissenting Shares. Notwithstanding Section 2.8, shares of Company
-----------------
Common Stock, outstanding immediately prior to the Effective Time and held by a
holder who has not voted in favor of the Merger or consented thereto in writing
and who has demanded appraisal for such shares in accordance with the DGCL,
shall not be converted into the right to receive the Merger Consideration,
unless such holder fails to perfect or withdraws or otherwise loses its right to
appraisal. If after the Effective Time such holder fails to perfect or withdraws
or loses its right to appraisal, such shares shall be treated as if they had
been converted as of the Effective Time into the right to receive the Merger
Consideration. The Company shall give Parent (i) prompt notice of any demands
received by the Company for appraisal of shares of Company Common Stock, and
(ii) the opportunity to participate in and direct all negotiations and
proceedings with respect to such demands. The Company shall not, without the
prior written consent of Parent, make any payment with respect to, or settle or
offer to settle, any such demands.
2.11 Adjustment of Merger Consideration. In the event that, subsequent to the
date of this Agreement but prior to the Effective Time, any stock split,
combination, reclassification or stock dividend with respect to the outstanding
shares of Company Common Stock, any change or conversion of outstanding shares
of Company Common Stock into other securities or any other
9
<PAGE>
dividend or distribution with respect to the outstanding shares of Company
Common Stock should occur, appropriate and proportionate adjustments shall be
made to the Merger Consideration, and thereafter all references to the Merger
Consideration shall be deemed to be to the Merger Consideration as so adjusted.
2.12 Further Assurances. If at any time after the Effective Time the Surviving
Corporation shall consider or be advised that any deeds, bills of sale,
assignments or assurances or any other acts or things are necessary, desirable
or proper (a) to vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of either the
Company or Merger Sub or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either the Company or Merger Sub, all such deeds, bills of sale,
assignments and assurances and do, in the name and on behalf of the Company or
Merger Sub, all such other acts and things necessary, desirable or proper to
vest, perfect or confirm its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of the Company or
Merger Sub, as applicable, and otherwise to carry out the purposes of this
Agreement.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth in the
Company Disclosure Schedule delivered by the Company to Parent at or prior to
the execution of this Agreement (the "Company Disclosure Schedule") or the
---------------------------
Company SEC Reports (as defined below), the Company represents and warrants to
Parent and Merger Sub as follows:
(a) Organization, Standing and Power. Each of the Company and its
--------------------------------
Subsidiaries ("Company Subs") has been duly incorporated and is validly existing
------------
and in good standing under the laws of its jurisdiction of incorporation. Each
of the Company and the Company Subs is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to so qualify could not reasonably be expected, either
individually or in the aggregate, to have a Material Adverse Effect on the
Company. The copies of the Organizational Documents of the Company and the
Company Subs which were previously furnished or made available to Parent are
true, complete and correct copies of such documents as in effect on the date of
this Agreement and no amendments thereto are pending. The Company is not in
violation of any term of the Organizational Documents of the Company.
(b) Company Subs. The only Company Subs are those named in Exhibit 21.1 to
------------
the Company's Annual Report on Form 10-K for the fiscal year ended June 25,
1999, as filed with the SEC and heretofore furnished or made available to
Parent. The Company is, directly or indirectly, the record and beneficial owner
of all of the outstanding shares of capital stock of each of the Company Subs.
All references herein to the Company, unless the context indicates otherwise,
shall be deemed to mean the Company and the Company Subs.
10
<PAGE>
(c) Capital Structure.
-----------------
(i) As of October 15, 1999, the authorized capital stock of the
Company consisted of (A) 100,000,000 shares of Company Common Stock, of
which 24,215,117 shares were issued and outstanding, and (B) 2,000,000
shares of preferred stock, par value $.01 per share ("Company Preferred
-----------------
Stock"), of which 500,000 shares had been designated Series A Junior
-----
Participating Preferred Stock. As of the date of this Agreement, no shares
of Company Preferred Stock are issued or outstanding. All issued and
outstanding shares of capital stock of the Company are duly authorized,
validly issued, fully paid and nonassessable, and were issued in compliance
with applicable securities laws. No class of the Company's capital stock is
entitled to preemptive rights. As of October 15, 1999, there were no
outstanding options, warrants or other rights to acquire capital stock from
the Company other than (C) rights to purchase an aggregate of 500,000
shares of Series A Junior Participating Preferred Stock (the "Rights")
------
issued pursuant to the Rights Agreement dated as of September 18, 1998
between the Company and ChaseMellon Shareholder Services LLC (the "Company
-------
Rights Agreement"), (D) options representing in the aggregate the right to
----------------
purchase 4,948,500 shares of Company Common Stock under the Company Stock
Option Plans, and (E) options to purchase in the aggregate 83,997 shares of
Company Common Stock under the Company's 1995 Employee Stock Purchase Plan
(the "Company Stock Purchase Plan").
---------------------------
(ii) All of the issued and outstanding shares of capital stock of the
Company Subs are duly authorized, validly issued, fully paid and
nonassessable and are owned by the Company, free and clear of any liens,
claims, encumbrances, restrictions, preemptive rights or any other claims
of any third party ("Liens"). Except for the capital stock of the Company
-----
Subs, the Company does not own, directly or indirectly, any capital stock
or other ownership interest in any Person.
(iii) As of the date of this Agreement, no bonds, debentures, notes or
other indebtedness of the Company having the right to vote on any matters
on which stockholders may vote are issued or outstanding.
(iv) Except as otherwise set forth in this Section 3.1(c), as of the
date of this Agreement, there are no securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind
to which the Company or any of the Company Subs is a party or by which any
of them is bound obligating the Company or any of the Company Subs to
issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other voting securities of the
Company or any of the Company Subs or obligating the Company or any of the
Company Subs to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or
undertaking. As of the date of this Agreement, there are no outstanding
obligations of the Company or any of the Company Subs to repurchase, redeem
or otherwise acquire any shares of capital stock of the Company or any of
the Company Subs.
11
<PAGE>
(v) The Company has taken all actions necessary such that, for all
purposes under the Rights Agreement, neither Parent nor Merger Sub shall be
deemed an Acquiring Person (as defined in the Rights Agreement), the
Distribution Date (as defined in the Rights Agreement) shall not be deemed
to occur, and the Rights will not separate from the Company Common Stock,
as a result of Parent's or Merger Sub's entering into this Agreement, the
Company Option Agreement or the Stockholders Agreement or consummating the
Offer, the Merger and/or the other transactions contemplated hereby or
thereby. The Company has taken all necessary action with respect to all of
the outstanding Rights so that, as of immediately prior to the Effective
Time and immediately prior to the consummation of the Offer, (A) the
Company will not have any obligations under the Rights or the Rights
Agreement with respect to the Offer, the Merger and/or the other
transactions contemplated hereby or thereby and (B) the holders of Rights
will have no rights under the Rights or the Rights Agreement with respect
to the Offer, the Merger and/or the other transactions contemplated hereby
or thereby.
(d) Authority; No Conflicts.
-----------------------
(i) The Company has all requisite corporate power and corporate
authority to enter into this Agreement and, subject to the adoption of this
Agreement by the requisite vote of the holders of Company Common Stock, to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of the Company, subject in the case of the consummation
of the Merger to the adoption of this Agreement by the stockholders of the
Company. This Agreement has been duly executed and delivered by the Company
and constitutes a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditors generally
and by general equity principles (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
(ii) The execution and delivery of this Agreement does not or will
not, as the case may be, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of,
or constitute a default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, amendment, cancellation or
acceleration of any obligation or the loss of a material benefit under, or
the creation of a lien, pledge, security interest, charge or other
encumbrance on any assets (any such conflict, violation, default, right of
termination, amendment, cancellation or acceleration, loss or creation, a
"Violation") pursuant to: (A) any provision of the Organizational
---------
Documents of the Company or the Company Subs or (B) except as could not
reasonably be expected to have a Material Adverse Effect on the Company
and, subject to obtaining or making the consents, approvals, orders,
authorizations, registrations, declarations and filings referred to in
paragraph (iii) below, any material indenture or loan or credit agreement
or any other material contract, agreement, permit, authorization, order,
writ, judgment, injunction, decree, determination or arbitration award to
which the Company or any of the Company Subs is a party or by which the
12
<PAGE>
property of the Company or Company Subs is bound or affected, or result in
the creation or imposition of any mortgage, pledge, lien, security interest
or other charge or encumbrance on any of the Company's or Company Subs'
assets or shares of capital stock, except where such breach, default,
acceleration or exercise of right of termination would not have a Material
Adverse Effect.
(iii) No consent, approval, order or authorization of, or registration,
declaration or filing with, any supranational, national, state, municipal
or local government, any instrumentality, subdivision, court,
administrative agency or commission or other authority thereof, or any
quasi-governmental or private body exercising any regulatory, taxing, or
other governmental or quasi-governmental authority (a "Governmental
------------
Entity"), is required by or with respect to the Company or any of the
------
Company Subs in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, except for (x) those required under or in
relation to (A) the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), (B) state securities or "blue sky" laws, (C)
-------
the Securities Act of 1933, as amended (the "Securities Act"), (D) the
--------------
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (E) the
------------
DGCL and the TBCA with respect to the filing and recordation of appropriate
merger or other documents, (F) rules and regulations of the Nasdaq National
Market ("Nasdaq"), and (G) antitrust or other competition laws of other
------
jurisdictions, and (y) such consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to make or
obtain could not reasonably be expected to have a Material Adverse Effect
on the Company.
(e) Reports and Financial Statements.
--------------------------------
(i) The Company has timely filed all required reports, schedules,
forms, statements and other documents required to be filed by it with the
SEC prior to the date of this Agreement (collectively, including all
exhibits thereto, the "Company SEC Reports"). None of the Company Subs is
-------------------
required to file any form, report or other document with the SEC. None of
the Company SEC Reports, as of their respective dates (and, if amended or
superseded by a filing prior to the date of this Agreement or of the
Closing Date, then on the date of such filing), contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
Company has provided to Parent and Merger Sub a true, accurate and complete
copy of the balance sheet of the Company and the Company Subs as of
September 24, 1999 (the "Interim Balance Sheet") and the statement of
---------------------
operations and statement of cash flows of the Company and the Company Subs
for the three month period ended September 24, 1999 (together with the
Interim Balance Sheet, the "Interim Financial Statements"). Each of the
----------------------------
financial statements (including the related notes) included in the Company
SEC Reports and the Interim Financial Statements (including the related
notes) present fairly, in all material respects, the consolidated financial
position and consolidated results of operations and cash flows of the
Company and the Company Subs as of the respective dates or for the
respective periods set forth therein, all
13
<PAGE>
in conformity with U.S. generally accepted accounting principles ("GAAP")
----
consistently applied during the periods involved except as otherwise noted
therein, and subject, in the case of the unaudited interim financial
statements, to normal and recurring year-end adjustments that have not been
and are not expected to be material in amount. All of such Company SEC
Reports, as of their respective dates (and as of the date of any amendment
to the respective Company SEC Report), complied as to form in all material
respects with the applicable requirements of the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder.
(ii) Except as set forth in the Company SEC Reports filed prior to the
date of this Agreement, and except for liabilities and obligations incurred
in the ordinary course of business since June 25, 1999 and except for
liabilities and obligations reflected in the Interim Balance Sheet, neither
the Company nor any of the Company Subs has any liabilities or obligations
of any nature required by GAAP to be set forth on a consolidated balance
sheet of the Company and the Company Subs which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect
on the Company.
(iii) Schedule 3.1(e)(iii) sets forth the Company's fiscal year 2000
-------------------
operating budget. Such operating budget has been prepared in good faith on
the basis of assumptions which the Company believes are reasonable.
(f) Information Supplied.
--------------------
(i) None of (A) the proxy statement related to the meeting of the
Company's stockholders to be held in connection with the Merger and the
transactions contemplated by this Agreement (or the written consents in
lieu thereof) (the "Proxy Statement"), (B) the Schedule 14D-9 or (C) the
---------------
information supplied or to be supplied by the Company for inclusion or
incorporation by reference in the Offer Documents and any other documents
to be filed with the SEC in connection with the transactions contemplated
hereby, including any amendment or supplement to such documents, will, at
the respective times such documents are filed, and, with respect to the
Offer Documents and the Proxy Statement, if any, when first published, sent
or given to the stockholders of the Company, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not false or misleading or, in
the case of the Offer Documents and the Proxy Statement, if any, or any
amendment thereof or supplement thereto, at the time of the Company
Stockholders Meeting (as defined below), if any, and at the Effective Time,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they
are made, not false or misleading or necessary to correct any statement in
any earlier communication with respect to the Offer or the solicitation of
proxies for the Company Stockholders Meeting, if any, which shall have
become false or misleading.
14
<PAGE>
(ii) Notwithstanding the foregoing provisions of this Section 3.1(f),
no representation or warranty is made by the Company with respect to
statements made or incorporated by reference in the Proxy Statement or
Schedule 14D-9 based on information supplied by Parent or Merger Sub for
inclusion or incorporation by reference therein.
(g) Title to and Condition of Assets.
--------------------------------
(i) All tangible properties and assets owned or leased by the Company
are, except for changes in the ordinary course of business, reflected in
the Interim Balance Sheet, a true, accurate and complete copy of which has
been provided to Parent and Merger Sub. The Company owns good and
marketable fee, or valid leasehold, title to the real and personal property
owned or leased by it, free and clear of all Liens, except for Liens that
do not impair the current use or diminish the value of any material item of
property to any material extent.
(ii) Except as set forth on Schedule 3.1(g)(ii) and except as could
------------------
not reasonably be expected to have a Material Adverse Effect on the
Company, all of the equipment and tangible personal property owned or
leased by the Company is in good operating condition and repair, subject to
normal wear and tear, and none of such assets is in need of maintenance or
repairs except for ordinary, routine maintenance.
(h) Real Property. The Company does not own any real property. All of the
-------------
real property leased by the Company is identified in the Company SEC Reports
(herein referred to as the "Leased Real Property").
--------------------
(i) Leases. Each lease of Leased Real Property has been duly
------
authorized and executed by the Company and is in full force and effect and
binding and enforceable against the parties thereto. The Company is not in
default under any of said leases, nor has any event occurred which, with
notice or the passage of time, or both, would give rise to such a default.
To the knowledge of the Company, the other party to each of said leases is
not in default under any of said leases and there is no event which, with
notice or the passage of time, or both, would give rise to such a default.
(ii) Condition of Leased Real Property. To the Company's knowledge,
---------------------------------
(i) there are no material defects in the physical condition of any of the
Leased Real Property and (ii) all such Leased Real Property is in good
operating condition and repair and has been well maintained.
(iii) Compliance with the Law. The Company has not received any notice
-----------------------
from any Governmental Entity of any violation of any regulation, license,
permit or authorization issued with respect to the Leased Real Property
that has not been heretofore corrected. The Company has not received any
notice of any real estate tax deficiency or assessment and is not aware of
any proposed deficiency, claim or assessment with respect to any of the
Leased Real Property, or any pending or threatened condemnation thereof.
15
<PAGE>
(i) Compliance with Applicable Laws; Regulatory Matters. The Company and
---------------------------------------------------
the Company Subs hold all permits, licenses, certificates, franchises,
registrations, variances, exemptions, orders and approvals of all Governmental
Entities which are material to the operation of their businesses, taken as a
whole (the "Company Permits"). The Company and the Company Subs are in
---------------
compliance with the terms of the Company Permits, except where the failure so to
comply, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on the Company. Except as disclosed in the
Company SEC Reports, the businesses of the Company and the Company Subs are not
being and have not been conducted in violation of any law, ordinance,
regulation, judgment, decree, injunction, rule or order of any Governmental
Entity, except for violations which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on the Company. As of
the date of this Agreement, no investigation by any Governmental Entity with
respect to the Company or any of the Company Subs is pending or, to the
knowledge of the Company, threatened, other than investigations which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Company.
(j) Litigation. Except as disclosed in the Company SEC Reports, there is
----------
no litigation, arbitration, claim, suit, action, investigation or proceeding
pending or, to the knowledge of the Company, threatened, against or affecting
the Company or any of the Company Subs, nor to the knowledge of the Company is
there any basis therefor, which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on the Company, nor is
there any judgment, award, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against the Company or any of the Company Subs
which, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on the Company.
(k) Taxes.
-----
(i) Each Tax Return required to be filed by or on behalf of the
Company and each Company Sub either on a separate or combined or
consolidated basis with respect to any taxable period ending on or before
the Closing Date (the "Company Returns") (A) has been or will be filed on
---------------
or before the applicable due date with the appropriate Governmental Entity,
and (B) has been, or will be when filed, prepared in all material respects
in compliance with all applicable Legal Requirements. All Company Returns
are complete and accurate in all material respects. All Taxes owed by any
of the Company and the Company Subs (whether or not shown on any Company
Return) have been paid.
(ii) The Company has delivered or made available to Parent correct and
complete copies of all federal income Tax Returns, examination reports and
statements of deficiencies assessed against, or agreed to by any of the
Company and the Company Subs since December 31, 1997.
(iii) The unpaid Taxes of the Company and the Company Subs (A) did not,
as of September 24, 1999, exceed by any material amount the reserve for Tax
liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and tax income) set forth on the
face of the Interim Balance Sheet (rather than in any notes thereto) and
(B) will not exceed by any material amount that reserve as
16
<PAGE>
adjusted for operations and transactions through the Closing Date in
accordance with the past customs and practice of the Company and the
Company Subs in filing their income Tax Returns.
(iv) The Company has not distributed the stock of a "controlled
corporation" (within the meaning of that term as used in Section 355(a) of
the Code) in a transaction subject to Section 355 of the Code within the
past two years.
(v) No written claim, and to the best knowledge of the Company, no
claim, has ever been made by an authority in a jurisdiction where any of
the Company and the Company Subs does not file Tax Returns that it is or
may be subject to taxation by that jurisdiction.
(vi) None of the Company and the Company Subs has any unrecognized
gains relating to deferred intercompany transactions.
(vii) There are no excess loss accounts, as defined in Treasury
Regulations 1.1502-19, between or among any members of the affiliated group
of corporations of which Company is the common parent.
(viii) Schedule 3.1(k) lists all Company Returns that have been audited
---------------
since January 1, 1995 and indicates those Company Returns that currently
are the subject of an audit.
(ix) Since June 25, 1999, the Company has not incurred any liability
or obligation for any Tax other than in the ordinary course of its
business.
(x) None of the Company and the Company Subs has waived any statute
of limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency, and no written requests for
waivers of the time to assess any Taxes of the Company or the Company Subs
are pending.
(xi) None of the Company and the Company Subs currently is the
beneficiary of any extension of time within which to file any Tax Return.
(xii) Except as set forth on Schedule 3.1(k), no claim or Legal
---------------
Proceeding is pending or, to the best knowledge of the Company, has been
overtly threatened against or with respect to the Company or any of the
Company Subs in respect of any Tax. There are no unsatisfied liabilities
for Taxes (including liabilities for interest, additions to tax and
penalties thereon and related expenses) with respect to any notice of
deficiency or similar document received by the Company or any of the
Company Subs with respect to any Tax (other than liabilities for Taxes
asserted under any such notice of deficiency or similar document which are
being contested in good faith by the Company or any of the Company Subs and
with respect to which adequate reserves for payment have been established
on the Interim Balance Sheet). There are no Liens for Taxes upon any of the
assets of the Company or any of the Company Subs except Liens for current
Taxes not yet due and payable. Neither the Company nor any of the Company
Subs has entered into or
17
<PAGE>
become bound by any agreement or consent pursuant to Section 341(f) of the
Code (or any comparable provision of state or foreign Tax laws). Neither
the Company nor any of the Company Subs has been nor will it be required to
include any adjustment in taxable income for any tax period (or portion
thereof) pursuant to Section 481 or 263A of the Code (or any comparable
provision under state or foreign Tax laws) as a result of transactions or
events occurring, or accounting methods employed, prior to the Closing.
(xiii) There is no agreement, plan, arrangement or other contract
covering any employee or independent contractor or former employee or
independent contractor of the Company or any of the Company Subs that,
considered individually or considered collectively with any other such
contracts, will, or could reasonably be expected to, give rise directly or
indirectly to the payment of any amount that would not be deductible
pursuant to Section 280G or Section 162 of the Code (or any comparable
provision under state or foreign Tax laws). Neither the Company nor any of
the Company Subs is, nor has it ever been, a party to or bound by any tax
indemnity agreement, tax sharing agreement, tax allocation agreement or
similar contract.
(xiv) None of the Company and the Company Subs (A) has been a member of
an Affiliated Group filing a consolidated federal income Tax Return (other
than a group the common parent of which was the Company), or (B) has any
liability or obligation for the Taxes of any Person (other than any of the
Company and the Company Subs) under Treasury Regulations Section 1.1502-6
(or any similar provision of state, local or foreign law), as a transferee
or successor, by contract, or otherwise.
(xv) Neither the Company nor any of the Company Subs is subject to any
joint venture, partnership or other arrangement or contract that is treated
as a partnership for U.S. federal income tax purposes.
(l) Absence of Certain Changes or Events. Since the date of the Interim
------------------------------------
Balance Sheet, the Company and the Company Subs have conducted their respective
businesses only in the ordinary course consistent with past practice, and there
has not been:
(i) Any change in the business, properties, assets, results of
operations, financial condition, liabilities, or prospects of the Company,
which change by itself or in conjunction with all other such changes,
whether or not arising in the ordinary course of business, has had or could
reasonably be expected to have a Material Adverse Effect on the Company;
(ii) Any material contingent liability incurred by the Company as
guarantor or otherwise with respect to the obligations of others or any
cancellation of any material debt or claim owing to, or waiver of any
material right of, the Company;
(iii) Any material obligation or liability of any nature, whether
accrued, absolute or contingent (including without limitation liabilities
for Taxes due or to become due or contingent or potential liabilities
relating to products or services provided by the Company or the conduct of
the business of the Company regardless of whether claims in
18
<PAGE>
respect thereof have been asserted), incurred by the Company other than
obligations and liabilities incurred in the ordinary course of business
consistent with past practice (it being understood that claims relating to
the failure to perform or the improper performance of services shall not be
deemed to be incurred in the ordinary course of business);
(iv) Any purchase, sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of any of
the properties or assets of the Company other than in the ordinary course
of business consistent with past practice;
(v) Any damage, destruction or loss, whether or not covered by
insurance, materially adversely affecting the properties, assets or
business of the Company;
(vi) Any declaration, setting aside or payment of any dividend by the
Company, or the making of any other distribution in respect of the capital
stock of the Company, or any direct or indirect redemption, purchase or
other acquisition by the Company of its capital stock;
(vii) Any split, combination or reclassification of any of the
Company's capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock;
(viii) Any labor trouble or claim of unfair labor practices involving
the Company; any material change in the compensation payable or to become
payable by the Company to any of its directors, officers, employees, agents
or independent contractors; any material bonus payment or arrangement made
to or with any of such directors, officers, employees, agents or
independent contractors; or any entry by the Company into any material
employment, consulting, severance, termination or similar agreement with
any of such directors, officers, employees, agents or independent
contractors;
(ix) Any change with respect to the officers or management of the
Company;
(x) Any payment or discharge of a material Lien or liability of the
Company which was not shown in the Interim Financial Statements or incurred
in the ordinary course of business thereafter;
(xi) Any material obligation or liability incurred by the Company to
any of its directors, officers, stockholders or employees, or any material
loans or advances made by the Company to any of its directors, officers,
stockholders or employees, except normal compensation and expense
reimbursement payable to officers or employees;
(xii) Any change in accounting methods or practices, credit practices
or collection policies used by the Company (provided that this
representation (xii) shall relate back to, and shall be made with respect
to any such changes since, June 25, 1999);
19
<PAGE>
(xiii) Any change in any Tax election of the Company under federal,
state, local or foreign Tax law;
(xiv) Any other material transaction entered into by the Company other
than transactions in the ordinary course of business; or
(xv) Any agreement or understanding whether in writing or otherwise,
for the Company to take any of the actions specified in paragraphs (i)
through (xiv) above.
(m) Vote Required. The affirmative vote of the holders of a majority of the
-------------
outstanding shares of Company Common Stock (the "Required Company Vote") is the
---------------------
only vote of the holders of any class or series of the Company capital stock
necessary to approve this Agreement and the transactions contemplated hereby.
(n) State Takeover Statutes. The Company Board has approved the Offer, the
-----------------------
Merger, this Agreement, the Company Option Agreement and the Stockholders
Agreement and such approval is sufficient to render inapplicable to the Offer,
the Merger, this Agreement, the Company Option Agreement, the Stockholders
Agreement and the transactions contemplated by this Agreement, the Company
Option Agreement and the Stockholders Agreement the provisions of Section 203 of
the DGCL to the extent, if any, such Section is applicable to the Offer, the
Merger, this Agreement, the Company Option Agreement, the Stockholders Agreement
and the transactions contemplated by this Agreement, the Company Option
Agreement and the Stockholders Agreement. To the Company's knowledge, no other
state takeover statute or similar statute or regulation applies to or purports
to apply to the Offer, the Merger, this Agreement, the Company Option Agreement,
the Stockholders Agreement or the transactions contemplated by this Agreement,
the Company Option Agreement or the Stockholders Agreement.
(o) Intellectual Property.
---------------------
(i) The list of patents and patent applications (collectively, the
"Company Patent Rights") as listed on Schedule 3.1(o)(i) is a complete and
---------------------- ------------------
correct listing of all the patents and patent applications owned solely or
jointly by the Company, and, to the Company's knowledge, there are no
unpaid maintenance fees, patents that have lapsed, or abandonment of patent
applications, or any reason why any patent application should not be
allowed.
(ii) The Company is the sole and exclusive owner of all right, title,
and interest in the trademarks ("Registered Marks") and trademark
----------------
applications ("Pending Marks") listed on Schedule 3.1(o)(ii), and to the
------------- -------------------
Company's knowledge, the Company has not allowed any of the Registered
Marks or Pending Marks to be abandoned, canceled, or to expire.
(iii) Except as set forth on Schedule 3.1(o)(iii), to the knowledge of
--------------------
the Company, other than patent and trademark prosecution by the Company,
there are no legal or governmental proceedings pending relating to patents,
trade secrets, trademarks, service marks or other proprietary information
or materials of the Company, and to the
20
<PAGE>
Company's knowledge, no such proceedings are overtly threatened or
contemplated by any Governmental Entity or other Person.
(iv) The Company has made available to Parent true and correct copies
of all material license agreements relating to the Intellectual Property
Rights to which the Company is a party listed on Schedule 3.1(o)(iv).
-------------------
(v) Except as set forth on Schedule 3.1(o)(v), the Company owns, or
------------------
is licensed or otherwise has the right to use (in each case, clear of any
Liens of any kind), all material Intellectual Property Rights used in or
necessary for the conduct of its business as currently conducted, and no
claims are pending or, to the Company's knowledge, threatened that the
Company is infringing on or otherwise violating the rights of any Person
with regard to any Intellectual Property Rights owned by and/or licensed to
the Company, and to the Company's knowledge, no Person is infringing on or
otherwise violating any right of the Company with respect to any
Intellectual Property Rights owned by and/or licensed to the Company.
(vi) None of the former or current members of management or key
personnel of the Company, including all former and current employees,
agents, consultants and contractors who have contributed to or participated
in the conception and development of Intellectual Property Rights of the
Company, have any valid claim against the Company in connection with the
involvement of such Persons in the conception and development of any
Intellectual Property Rights of the Company, and to the Company's
knowledge, no such claim has been asserted or threatened.
(vii) The Company has taken reasonable and necessary steps to protect
its Intellectual Property Rights, and to the knowledge of the Company, no
material Intellectual Property Rights have been lost or are in jeopardy of
being lost through failure to act by the Company.
(viii) For purposes of this Agreement, "Intellectual Property Rights"
----------------------------
shall mean inventions, discoveries and ideas, whether patented, patentable
or not in any jurisdiction, patents, patent applications (including
reexaminations, reissues, extensions and the like), trademarks (registered
or unregistered), service marks, brand names, certification marks, trade
dress, assumed names, trade names and other indications of origin, the
goodwill associated with the foregoing and registrations in any
jurisdiction of, and applications in any jurisdiction to register, the
foregoing, including any extension, modification or renewal of any such
registration or application; trade secrets, know-how and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any Person; writings and other works, whether copyrighted,
copyrightable or not in any jurisdiction; registration or applications for
registration of copyrights in any jurisdiction, and any renewals or
extensions thereof; computer programs and software (including source code,
object code and data); licenses, immunities, covenants not to sue and the
like relating to the foregoing; any similar intellectual property or
proprietary rights and any claims or causes of action arising out of or
related to any infringement or misappropriation of any of the foregoing.
21
<PAGE>
(p) Contracts.
---------
(i) Contracts. Except as set forth on the exhibit index to the
---------
Company's Annual Report on Form 10-K for the fiscal year ended June 25,
1999 or on Schedule 3.1(p)(i), the Company is not a party to or subject to
------------------
any oral or written:
(A) Contracts not made in the ordinary course of business
which are material to the Company;
(B) Employment contracts, severance contracts or other similar
contracts, including without limitation contracts that will result in the
payment by, or the creation of any obligation or liability to pay on behalf of
the Company any severance, termination, "golden parachute" or other similar
payments to any present or former personnel following termination of employment
or otherwise as a result of the consummation of the transactions contemplated by
this Agreement;
(C) Contracts involving future expenditures or liabilities,
actual or potential, in excess of $150,000 or otherwise material to the Company;
(D) Promissory notes, loans, agreements, indentures, evidences
of indebtedness, letters of credit, guarantees, or other instruments relating to
an obligation to pay money in excess of $150,000, whether the Company shall be
the borrower, lender or guarantor thereunder; or
(E) Contracts containing provisions limiting the freedom of
the Company or any of its affiliates to sell or license products to, or
otherwise conduct business with, or compete against, any Person.
(ii) Absence of Defaults. The Company has fulfilled, or taken all
-------------------
action necessary to enable it to fulfill when due, all of its material
obligations under such contracts. To the Company's knowledge, all other
parties to such contracts are currently in compliance in all material
respects with the provisions thereof, no party is in default thereunder and
no notice of any claim of default has been given to the Company. To the
Company's knowledge, the services or products called for by any unfinished
contract can be supplied in accordance with the terms of such contract,
including time specifications, and the Company has no reason to believe
that any unfinished contract will upon performance by the Company result in
a loss to the Company.
(iii) Warranty. To the Company's knowledge, the Company has
--------
committed no act, and there has been no omission, which may result in, and
there has been no occurrence which may give rise to, liability in excess of
the Company's warranty reserves reflected in the Interim Balance Sheet for
breach of warranty (whether covered by insurance or not) on the part of the
Company, with respect to services rendered prior to or on the Closing Date.
There are no existing or threatened material product or service liability,
warranty or other similar claims, or any facts upon which a material claim
of such nature could be based, against the Company for products or services
which are
22
<PAGE>
defective or fail to meet any product or service warranties. No request has
been made to the Company to lower the previously agreed to price for
products that have been shipped by the Company or services that have been
provided by the Company which has not been resolved, and to the Company's
knowledge, there are no facts upon which any such claim could be based.
(q) Insurance. The physical properties, assets and business of the
---------
Company are insured to the extent disclosed on Schedule 3.1(q) and all such
---------------
insurance policies and arrangements are disclosed on said Schedule. Said
insurance policies and arrangements are in full force and effect, all premiums
with respect thereto are currently paid, and the Company is in compliance in all
material respects with the terms thereof. Said insurance is sufficient for
compliance by the Company with all requirements of law and all agreements and
leases to which the Company is a party. The Company reasonably believes that
said insurance is adequate and customary for the business engaged in by the
Company.
(r) Employee Benefit Plans; Labor Matters.
-------------------------------------
(i) With respect to each employee benefit plan, program,
arrangement and contract (including, without limitation, any "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and any bonus, deferred
-----
compensation, stock bonus, stock purchase, restricted stock, stock option,
employment, termination, change in control and severance plan, program,
arrangement and contract), to which the Company or any of the Company Subs
is a party, which is maintained or contributed to by the Company or any of
the Company Subs, or with respect to which the Company or any of the
Company Subs could incur material liability under Section 4069, 4201 or
4212(c) of ERISA (the "Company Benefit Plans"), the Company has made
---------------------
available to Parent a true and complete copy of such Company Benefit Plan.
(ii) Each of the Company Benefit Plans that is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the IRS, and the Company is not aware
of any circumstances likely to result in the revocation of any such
favorable determination letter that could reasonably be expected to have a
Material Adverse Effect on the Company.
(iii) With respect to the Company Benefit Plans, no event has
occurred and, to the knowledge of the Company, there exists no condition or
set of circumstances in connection with which the Company or any of the
Company Subs could be subject to any liability under the terms of such
Company Benefit Plans, ERISA, the Code or any other applicable law which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on the Company.
(iv) Neither the Company nor any of the Company Subs is a party to
any collective bargaining or other labor union contracts and no collective
bargaining agreement is being negotiated by the Company or any of the
Company Subs. There is no
23
<PAGE>
pending labor dispute, strike or work stoppage against the Company or any
of the Company Subs which may interfere with the respective business
activities of the Company or any of the Company Subs, except where such
dispute, strike or work stoppage could not reasonably be expected to have a
Material Adverse Effect on the Company. There is no pending charge or
complaint against the Company or any of the Company Subs by the National
Labor Relations Board or any comparable state agency, except where such
unfair labor practice, charge or complaint could not reasonably be expected
to have a Material Adverse Effect on the Company.
(s) Environmental Matters. Except in all cases as, in the aggregate, have
---------------------
not had and would not reasonably be expected to have a Material Adverse Effect
on the Company, the Company (a) has obtained all applicable permits, consents,
licenses and other authorizations which are required to be obtained under all
applicable federal, state, local or foreign laws or any regulation, code, plan,
order, decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder relating to pollution or protection of the environment,
including laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, or hazardous or toxic wastes into ambient
air, surface water, ground water, or land or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials or wastes ("Environmental Laws") by the Company; (b) is in compliance
------------------
with all terms and conditions of such required permits, consents, licenses and
other authorizations, and also is in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in applicable Environmental Laws; (c) has not
received notice of any past or present violations of Environmental Laws or any
event, condition, circumstance, activity, practice, incident, action or plan
which is reasonably likely to interfere in any material respect with or prevent
continued compliance with or which could give rise to any common law or
statutory liability, or otherwise form the basis of any material claim, action,
suit or proceeding against the Company based on or resulting from the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge or release into the
environment, of any pollutant, contaminant or hazardous or toxic material or
waste; and (d) has taken all actions necessary under applicable Environmental
Laws to register any products or materials required to be registered by the
Company thereunder.
(t) Year 2000 Compliance. Except as set forth in the Company SEC Reports
--------------------
and except in all cases as, in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect on the Company, the
Company has all systems and software solutions necessary or appropriate to
address and accommodate Year 2000 computer systems issues, and the Company's
products and software programs, systems and applications used in the operation
of its business have been tested and are fully capable of providing accurate
results using data having date ranges spanning the twentieth and twenty-first
centuries. Without limiting the generality of the foregoing, except as set forth
in the Company SEC Reports and except in all cases as, in the aggregate, have
not had and would not reasonably be expected to have a Material Adverse Effect
on the Company, all of the Company's products and software programs, systems and
applications are able to: (a) consistently handle date information before,
during and after January 1, 2000, including but not limited to accepting date
input, providing date output, and performing calculations on dates or portions
of dates; (b) function accurately and without
24
<PAGE>
interruption before, during and after January 1, 2000 (including leap year
computations), without any change in operations associated with the advent of
the new century; (c) respond to two-digit date input in a way that resolves any
ambiguity as to century in a disclosed defined and predetermined manner (as
designed and represented by the manufacturer(s)); and (d) store and provide
output of date information in ways that are unambiguous as to century (four
digit date formats).
(u) Brokers or Finders. No agent, broker, investment banker, financial
------------------
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company, except the Financial Advisor. A true and correct
copy of the engagement letter of the Financial Advisor is attached hereto as
Schedule 3.1(u).
---------------
(v) Opinion of Financial Advisor. The Company has received the Fairness
----------------------------
Opinion dated the date of this Agreement from the Financial Advisor to the
effect that, as of such date, the consideration to be received by the holders of
Company Common Stock pursuant to the Offer and the Merger is fair to such
holders from a financial point of view.
3.2 Representations and Warranties of Parent. Parent represents and warrants to
the Company as follows:
(a) Organization, Standing and Power. Each of Parent and Merger Sub has
--------------------------------
been duly incorporated and is validly existing and in good standing under the
laws of its jurisdiction of incorporation. Each of Parent and Merger Sub is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification necessary, except where the failure so to qualify could not
reasonably be expected, either individually or in the aggregate, to have a
Material Adverse Effect on Parent. The copies of the Organizational Documents of
Parent and Merger Sub which were previously furnished or made available to the
Company are true, complete and correct copies of such documents as in effect on
the date of this Agreement.
(b) Authority; No Conflicts.
-----------------------
(i) Each of Parent and Merger Sub has all requisite corporate
power and corporate authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part of Parent and Merger Sub. This Agreement has been duly executed and
delivered by Parent and Merger Sub and constitutes a valid and binding
agreement of Parent and Merger Sub, enforceable against each of them in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors generally, or by general equity
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
25
<PAGE>
(ii) The execution and delivery of this Agreement does not or will
not, as the case may be, and the consummation of the transactions
contemplated hereby will not, result in any Violation of: (A) any provision
of the Organizational Documents of Parent or Merger Sub or (B) except as
could not reasonably be expected to have a Material Adverse Effect on
Parent and subject to obtaining or making the consents, approvals, orders,
authorizations, registrations, declarations and filings referred to in
paragraph (iii) below, any material loan or credit agreement, note,
mortgage, bond, indenture, lease, benefit plan or other material agreement,
obligation, instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Parent, Merger Sub or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to Parent or Merger Sub in connection with the
execution and delivery of this Agreement by Parent or Merger Sub or the
consummation by Parent or Merger Sub of the transactions contemplated
hereby, except for (A) the consents, approvals, orders, authorizations,
registrations, declarations and filings required under or in relation to
clause (x) of Section 3.1(d)(iii) and (B) such consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of
which to make or obtain could not reasonably be expected to have a Material
Adverse Effect on Parent.
(c) Information Supplied.
--------------------
(i) None of (A) the Offer Documents, (B) the Schedule 14D-1 or (C)
the information supplied or to be supplied by Parent or Merger Sub for
inclusion or incorporation by reference in the Proxy Statement, if any, the
Schedule 14D-9 and any other documents to be filed with the SEC in
connection with the transactions contemplated hereby, including any
amendment or supplement to such documents, will, at the respective times
such documents are filed, and, with respect to the Proxy Statement, if any,
and the Offer Documents, when first published, sent or given to
stockholders of the Company, 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 made therein, in light of the
circumstances under which they are made, not false or misleading or, in the
case of the Proxy Statement, if any, or any amendment thereof or supplement
thereto, at the time of the Company Stockholders Meeting, if any, and at
the Effective Time, contain any untrue statement of a material fact, or
omit to state any material fact required to be stated therein or necessary
in order to make the statements made therein, in light of the circumstances
under which they are made, not false or misleading or necessary to correct
any statement in any earlier communication with respect to the Offer or the
solicitation of proxies for the Company Stockholders Meeting, if any, which
shall have become false or misleading.
(ii) Notwithstanding the foregoing provisions of this Section
3.2(c), no representation or warranty is made by Parent or Merger Sub with
respect to statements made or incorporated by reference in the Offer
Documents or Schedule 14D-1 based on information supplied by the Company
for inclusion or incorporation by reference therein.
26
<PAGE>
(d) Brokers or Finders. No agent, broker, investment banker, financial
------------------
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent or Merger Sub, except Credit Suisse First Boston
Corporation ("CSFB").
----
(e) No Business Activities. Neither Parent nor Merger Sub has conducted
----------------------
any material business activities (with respect to Intellectual Property Rights
or otherwise) other than in connection with their organization and
capitalization, the negotiation and execution of this Agreement and the
consummation of the transactions contemplated hereby.
(f) Available Funds. At the expiration of the Offer and at the Effective
---------------
Time, Parent and Merger Sub will have available all funds necessary to satisfy
their obligations under this Agreement and in connection with the transactions
contemplated hereby, including, without limitation, the obligation to purchase
all outstanding shares of Company Common Stock validly tendered into the Offer
as well as all shares of Company Common Stock outstanding at the Effective Time.
(g) Litigation. There is no litigation, arbitration, claim, suit, action,
----------
investigation or proceeding pending or, to the knowledge of Parent, threatened,
against or affecting Parent or Merger Sub, nor to the knowledge of Parent is
there any basis therefor, which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on Parent, nor is there
any judgment, award, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against Parent or Merger Sub which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on Parent.
ARTICLE IV.
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Conduct of Business Pending Closing. From the date hereof until the
Closing, the Company shall (and shall cause each of the Company Subs to):
(a) maintain its existence in good standing;
(b) maintain the general character of its business and properties and
conduct its business in the ordinary and usual manner consistent with past
practice, except as expressly permitted by this Agreement;
(c) maintain business and accounting records consistent with past
practice; and
(d) use its best efforts (i) to preserve its business intact, (ii) to
keep available to the Company the services of its present officers and
employees, and (iii) to preserve for the Company or such Subsidiary the goodwill
of its suppliers, customers and others having business relations with the
Company or such Subsidiary.
4.2 Prohibited Actions Pending Closing. Unless otherwise provided for herein or
approved by Parent in writing, or unless otherwise set forth in Item 4.2 of the
--------
Company Disclosure
27
<PAGE>
Schedule, from the date hereof until the Closing, the Company shall not (and
shall not permit any of the Company Subs to):
(a) amend or otherwise change any of its Organizational Documents;
(b) except as contemplated by Section 3.1(c)(v), amend the Rights
Agreement or take any action with respect to, or make any determination under,
the Rights Agreement, including a redemption of the Rights to facilitate an
Alternative Transaction (as defined below);
(c) except as contemplated by Section 4.2(o), issue or sell or authorize
for issuance or sale (other than any issuance of Company Common Stock upon the
exercise of any outstanding option to purchase Company Common Stock which option
was issued prior to the date hereof in accordance with the terms of the relevant
stock option agreement), or grant any options or make other agreements with
respect to, any shares of its capital stock or any other of its securities;
(d) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise with respect to any of its capital
stock;
(e) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(f) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any Person, or make any loans or
advances, except (i) short-term borrowings incurred in the ordinary course of
business consistent with past practice and (ii) intercompany indebtedness
between the Company and any of the Company Subs or between the Company Subs;
(g) (i) acquire (including, without limitation, by merger, consolidation,
or acquisition of stock or assets) any corporation, partnership, other business
organization or any division thereof or any material amount of assets; (ii)
except as contemplated by Section 4.2(o), enter into any contract or agreement
other than in the ordinary course of business consistent with past practice;
(iii) authorize any capital commitment which is in excess of $100,000 or capital
expenditures which are, in the aggregate, in excess of $250,000; or (iv) enter
into or amend any contract, agreement, commitment or arrangement with respect to
any matter set forth in Section 4.2(f) or this Section 4.2(g);
(h) sell, lease, license, mortgage, pledge or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or assets,
other than sales or licenses of products in the ordinary course of business
consistent with past practice;
(i) take any action, other than in the ordinary course of business
consistent with past practice, with respect to accounting policies or procedures
(including, without limitation, procedures with respect to the payment of
accounts payable and collection of accounts receivables);
28
<PAGE>
(j) make any Tax election or settle or compromise any federal, state,
local or foreign Tax liability;
(k) settle or compromise any pending or threatened suit, action or claim
which is material or which relates to any of the transactions contemplated by
this Agreement;
(l) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice, of liabilities reflected or reserved against in
the Interim Balance Sheet or subsequently incurred in the ordinary course of
business consistent with past practice;
(m) except in connection with the sale or license of the Company's
products in the ordinary course of business consistent with past practice, sell,
assign, transfer, license, sublicense, pledge or otherwise encumber any of the
Company's Intellectual Property Rights;
(n) except as required by law or as contemplated by Section 4.2(o), enter
into, adopt, amend or terminate any Company Benefit Plan or any other agreement,
arrangement, plan or policy involving the Company or any of the Company Subs,
and one or more of its directors, officers, employees or consultants, or
materially change any actuarial or other assumption used to calculate funding
obligations with respect to any pension plan, or change the manner in which
contributions to any pension plan are made or the basis on which such
contributions are determined; provided, however, that the Company shall be
permitted to submit to its stockholders for their consideration and approval the
amendments to the Company Stock Options Plans and the Company Stock Purchase
Plan described in the Company Disclosure Schedule if the Offer has not been
consummated within 50 Business Days after the commencement date of the Offer;
(o) except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not materially increase
benefits or compensation expenses of the Company or the Company Subs, or as
contemplated hereby or by the terms of any employment agreement in existence on
the date hereof, increase the cash compensation of any director, officer or
other key employee or pay any benefit or amount not required by a plan or
arrangement as in effect on the date of this Agreement to any such person;
except that the Company may hire up to 20 persons (none of whom shall be
officers of the Company) on an at will basis (with no employment, severance or
similar agreements) and grant to such persons options to purchase up to 200,000
shares of Company Common Stock in the aggregate; provided that no portion of any
such options shall vest or otherwise become exercisable (including, without
limitation, as a result of the Offer or the Merger) within one year of the date
of hire; provided further that the Company shall notify each such person prior
to hiring that the options being granted shall be canceled for no value upon the
consummation of the transactions contemplated by this Agreement; and provided
further that any such hiring at an annual salary in excess of $110,000 shall be
subject to the prior approval of Parent, which approval shall not be
unreasonably withheld; or
(p) announce an intention, commit or agree to do any of the foregoing.
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4.3 Other Actions. The Company shall not take any action that would reasonably
be expected to result in (a) any of the representations and warranties of the
Company set forth in this Agreement that are qualified as to materiality
becoming untrue, (ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect or (iii) any of the conditions
to the Offer or the Merger not being satisfied.
4.4 Advice of Changes; Government Filings. Each party shall (a) confer on a
regular and frequent basis with the other, (b) report (to the extent permitted
by law, regulation and any applicable confidentiality agreement) to the other on
operational matters and (c) promptly advise the other orally and in writing of
(i) any representation or warranty made by it contained in this Agreement that
is qualified as to materiality becoming untrue or inaccurate in any respect or
any such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it (A) to comply with or
satisfy in any respect any covenant, condition or agreement required to be
complied with or satisfied by it under this Agreement that is qualified as to
materiality or (B) to comply with or satisfy in any material respect any
covenant, condition or agreement required to be complied with or satisfied by it
under this Agreement that is not so qualified as to materiality or (iii) any
change, event or circumstance that has had or could reasonably be expected to
have a Material Adverse Effect on such party or materially adversely affect its
ability to consummate the Offer or the Merger in a timely manner; provided,
however, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement. The Company and Parent shall file all reports
required to be filed by each of them with the SEC (and all other Governmental
Entities) between the date of this Agreement and the Effective Time and shall
(to the extent permitted by law or regulation or any applicable confidentiality
agreement) deliver to the other party copies of all such reports promptly after
the same are filed. Each party agrees that, to the extent practicable, it shall
consult with the other party with respect to the obtaining of all permits,
consents, approvals and authorizations of all third parties and Governmental
Entities necessary or advisable to consummate the transactions contemplated by
this Agreement and each party shall keep the other party apprised of the status
of matters relating to completion of the transactions contemplated hereby.
ARTICLE V.
ADDITIONAL AGREEMENTS
5.1 Preparation of Proxy Statement; the Company Stockholders Meeting
(a) The Company shall, as soon as practicable following the acquisition
by Merger Sub of the Minimum Shares pursuant to the Offer, to the extent
necessary to consummate the Merger, duly call, give notice of, convene and hold
a meeting (or obtain the written consents) of its stockholders (the "Company
-------
Stockholders Meeting") for the purpose of obtaining the Required Company Vote,
--------------------
and the Company shall, through the Company Board, recommend to its stockholders
that they accept the Offer and tender all of their shares of Company Common
Stock to Merger Sub and approve the transactions contemplated by this Agreement;
provided, however, that the Company Board may withdraw or modify such
recommendation in accordance with Section 5.4. Parent shall vote or cause to be
voted all shares of Company Common Stock owned of record by Parent or Merger Sub
in favor of the transactions contemplated by this Agreement.
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(b) Notwithstanding the preceding paragraph or any other provision of
this Agreement, in the event Merger Sub owns 90% or more of the outstanding
shares of Company Common Stock following the expiration of the Offer and any
exercise of the Company Option, the Company shall not be required to call the
Company Stockholders Meeting or to file or mail the Proxy Statement, and the
parties hereto shall, at the request of Parent and subject to Article VI, take
all necessary and appropriate action to cause the Merger to become effective as
soon as practicable following such expiration without a meeting of stockholders
of the Company in accordance with Section 253 of the DGCL and Section 5.16 of
the TBCA.
(c) If required by applicable law, as soon as practicable following
Parent's request, the Company shall prepare and file with the SEC the Proxy
Statement. The Company shall use its best efforts to cause the Proxy Statement
to be mailed to the Company's stockholders as promptly as practicable.
5.2 Access to Information. The Company shall, and shall cause the Company Subs
to, afford to the officers, employees, accountants, counsel, financial advisors
and other representatives of Parent reasonable access during normal business
hours, during the period prior to the Effective Time, to all of its properties,
books, contracts, commitments and records and its officers, employees and
representatives and, during such period, the Company shall, and shall cause the
Company Subs to, furnish promptly to Parent (a) a copy of each report, schedule,
registration statement and other document filed, published, announced or
received by it during such period pursuant to the requirements of federal or
state securities laws, as applicable, and (b) consistent with its legal
obligations, all other information concerning its business, properties and
personnel as Parent may reasonably request. Such information shall be held in
confidence to the extent required by, and in accordance with, the provisions of
the agreement (the "Confidentiality Agreement") dated September 20, 1999 between
-------------------------
the Company and Parent, which Confidentiality Agreement shall remain in full
force and effect.
5.3 Approvals and Consents; Cooperation. Each of the Company and Parent shall
cooperate with each other and use (and shall cause their respective Subsidiaries
to use) its best efforts to take or cause to be taken all actions, and do or
cause to be done all things, necessary, proper or advisable on their part under
this Agreement and applicable laws to consummate and make effective the Merger
and the other transactions contemplated by this Agreement, the Company Option
Agreement and the Stockholders Agreement as soon as practicable, including (i)
preparing and filing as promptly as practicable all documentation to effect all
necessary applications, notices, petitions, filings, tax ruling requests and
other documents and to obtain as promptly as practicable all consents, waivers,
licenses, orders, registrations, approvals, permits, tax rulings and
authorizations necessary or advisable to be obtained from any third party and/or
any Governmental Entity in order to consummate the Merger or any of the other
transactions contemplated by this Agreement, the Company Option Agreement or the
Stockholders Agreement and (ii) taking all reasonable steps as may be necessary
to obtain all such consents, waivers, licenses, registrations, permits,
authorizations, tax rulings, orders and approvals. Without limiting the
generality of the foregoing, each of the Company and Parent agrees to make all
necessary filings in connection with the Required Regulatory Approvals as
promptly as practicable after the date of this Agreement, and to use its best
efforts to furnish or cause to be furnished, as promptly as practicable, all
information and documents requested with respect to
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such Required Regulatory Approvals and shall otherwise cooperate with the
applicable Governmental Entity in order to obtain any Required Regulatory
Approvals in as expeditious a manner as possible. Each of the Company and Parent
shall use its best efforts to resolve such objections, if any, as any
Governmental Entity may assert with respect to this Agreement, the Company
Option Agreement, the Stockholders Agreement or the transactions contemplated
hereby or thereby in connection with the Required Regulatory Approvals.
5.4 No Solicitation
(a) The Company and the Company Subs and their respective directors and
officers shall not, and the Company shall direct and use its best efforts to
cause the employees, representatives and agents of the Company and the Company
Subs not to, directly or indirectly, solicit or encourage the initiation of
(including by way of furnishing information) any inquiries or proposals
regarding any merger, sale of assets, sale of shares of capital stock (including
without limitation by way of a tender offer) or similar transaction involving
the Company or any Company Subs that if consummated would constitute an
Alternative Transaction (as defined below) (any of the foregoing inquiries or
proposals being referred to herein as a "Company Takeover Proposal"). Nothing
-------------------------
contained in this Agreement shall prevent the Company Board from (i) furnishing
information to a third party which has made a bona fide Company Takeover
Proposal that is a Superior Proposal (as defined below) not solicited in
violation of this Agreement, provided that such third party has executed an
agreement with confidentiality provisions substantially similar to those then in
effect between the Company and Parent or (ii) subject to compliance with the
other terms of this Section 5.4, considering and negotiating a bona fide Company
Takeover Proposal that is a Superior Proposal not solicited in violation of this
Agreement; provided that, as to each of clauses (i) and (ii), the Company Board
reasonably determines in good faith (after due consultation with independent
counsel) that it is or is reasonably likely to be required to do so in order to
discharge properly its fiduciary duties. For purposes of this Agreement, a
"Superior Proposal" means any proposal made by a third party to acquire,
-----------------
directly or indirectly, for consideration consisting of cash and/or securities,
all of the equity securities of the Company entitled to vote generally in the
election of directors or all or substantially all the assets of the Company, on
terms which the Company Board reasonably believes (after consultation with a
financial advisor of nationally recognized reputation) to be more favorable from
a financial point of view to its stockholders than the Offer and the Merger
taking into account at the time of determination all factors relating to such
proposed transaction deemed relevant by the Company Board, including, without
limitation, the financing thereof, the proposed timing thereof and all other
conditions thereto and any changes to the financial terms of this Agreement
proposed by Parent and Merger Sub. "Alternative Transaction" means any of (i) a
-----------------------
transaction pursuant to which any Person (or group of Persons) other than Parent
or its affiliates (a "Third Party") acquires or would acquire more than 10% of
-----------
the outstanding shares of any class of equity securities of the Company, whether
from the Company or pursuant to a tender offer or exchange offer or otherwise,
(ii) a merger or other business combination involving the Company pursuant to
which any Third Party acquires more than 10% of the outstanding equity
securities of the Company or the entity surviving such merger or business
combination, (iii) any transaction pursuant to which any Third Party acquires or
would acquire control of assets (including for this purpose the outstanding
equity securities of Company Subs and securities of the entity surviving any
merger or business combination including any of the Company Subs) of the Company
or any
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Company Subs having a fair market value (as determined by the Company Board in
good faith) equal to more than 10% of the fair market value of all the assets of
the Company and the Company Subs, taken as a whole, immediately prior to such
transaction, or (iv) any other consolidation, business combination,
recapitalization or similar transaction involving the Company or any of the
Company Subs, other than the transactions contemplated by this Agreement.
(b) The Company shall immediately notify Parent and Merger Sub after
receipt of any Company Takeover Proposal, or any modification of or amendment to
any Company Takeover Proposal, or any request for nonpublic information relating
to the Company or any of the Company Subs in connection with a Company Takeover
Proposal or for access to the properties, books or records of the Company or any
Subsidiary by any Person that informs the Company Board or such Subsidiary that
it is considering making, or has made, a Company Takeover Proposal. Such notice
to Parent and Merger Sub shall be made orally and in writing, and shall indicate
the identity of the Person making the Company Takeover Proposal or intending to
make the Company Takeover Proposal or requesting nonpublic information or access
to the books and records of the Company, the terms of any such Company Takeover
Proposal or modification or amendment to a Company Takeover Proposal, and
whether the Company is providing or intends to provide the Person making the
Company Takeover Proposal with access to information concerning the Company as
provided in Section 5.4(a). The Company shall also immediately notify Parent and
Merger Sub, orally and in writing, if it enters into negotiations concerning any
Company Takeover Proposal.
(c) Except as set forth in this Section 5.4, neither the Company Board nor
any committee thereof shall (i) withdraw or modify, or indicate publicly its
intention to withdraw or modify, in a manner adverse to Parent, the approval or
recommendation by such Board of Directors or such committee of the Offer or the
Merger, (ii) approve or recommend, or indicate publicly its intention to approve
or recommend, any Company Takeover Proposal or (iii) cause the Company to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement (each, a "Company Acquisition Agreement") related to any
-----------------------------
Company Takeover Proposal. Notwithstanding the foregoing, in the event that
prior to the Effective Time the Company Board determines in good faith, with the
advice of outside counsel, that the failure to do so could reasonably be
determined to be a breach of its fiduciary duties to the Company's stockholders
under applicable law, the Company Board may (subject to this and the following
sentences) approve or recommend a Superior Proposal and, in connection
therewith, withdraw or modify its approval or recommendation of the Offer or the
Merger and/or terminate this Agreement (and concurrently with or after such
termination, if it so chooses, cause the Company to enter into any Company
Acquisition Agreement with respect to any Superior Proposal); provided that (i)
the Company gives Parent at least five Business Days advance notice of its
intent to take any of the foregoing actions and (ii) during such five Business
Day period, the Company, if requested by Parent, negotiates in good faith with
Parent to make such adjustments to the terms and conditions of this Agreement as
would enable the Company to proceed with the Offer and the Merger on such
adjusted terms. After such five Business Day period, the Company Board may then
(and only then) withdraw or modify its approval or recommendation of the Offer
or the Merger and/or terminate this Agreement.
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(d) The Company shall advise the directors, officers and employees of the
Company and the Company Subs and any investment banker, attorney or other
advisor retained by the Company or any of the Company Subs in connection with
the transactions contemplated by this Agreement of the restrictions set forth in
this Section 5.4. It is understood that any violation of the restrictions set
forth in this Section 5.4 by any director or officer of the Company or any of
the Company Subs, or any such violation by any employee, representative or agent
of the Company or any of the Company Subs where the Company shall have failed to
use its best efforts to prevent such violation, shall be deemed to be a breach
of this Section 5.4 by the Company.
(e) Upon the execution of this Agreement, the Company, the Company Subs
and their respective directors, officers, employees, representatives and agents
shall immediately cease any and all existing activities, discussions or
negotiations with any Third Parties conducted previously with respect to any
Company Takeover Proposal or Alternative Transaction. For so long as this
Agreement shall not have been terminated in accordance with its terms, the
Company Board shall not redeem the Rights or waive or amend any provision of the
Rights Agreement, in any such case to permit or facilitate the consummation of
any Company Takeover Proposal or Alternative Transaction.
5.5 Employee Benefits
(a) As of the Effective Time, Parent shall cause the Surviving Corporation
to honor and satisfy all obligations and liabilities with respect to the Company
Benefit Plans, including all employment and severance agreements listed in Item
----
5.5 of the Company Disclosure Schedule. Notwithstanding the foregoing, the
---
Surviving Corporation shall not be required to continue any particular Company
Benefit Plan after the Effective Time, and any Company Benefit Plan may be
amended or terminated in accordance with its terms and applicable law. To the
extent that any Company Benefit Plan (other than the Company Stock Option Plans
or the Company Stock Purchase Plan) is terminated or amended after the Effective
Time so as to reduce in any material respect the benefits that are then being
provided with respect to participants thereunder, Parent shall arrange for each
individual who is then a participant in such terminated or amended plan to
participate in a comparable Parent benefit plan at a level commensurate with
other similarly situated employees of Parent in accordance with the eligibility
criteria thereof. Parent shall pro rate any portion of a premium or deductible
with respect to employee benefit plans of Parent in which employees of the
Company and the Company Subs (and their beneficiaries) participate after the
Effective Time for the portion of the calendar year prior to their participation
in such plans. Parent shall take all steps necessary to cause each employee
benefit plan of Parent which is an "employee welfare benefit plan" under Section
3(1) of ERISA to waive any restrictions or limitations with respect to "pre-
existing conditions" or prior medical history which would apply in preventing an
employee or beneficiary thereof who is otherwise eligible to participate in such
employee benefit plan of Parent from participating in such plan without
restriction or limitation.
(b) For purposes of determining eligibility to participate, vesting and
accrual or entitlement to benefits where length of service is relevant under any
employee benefit plan or arrangement of Parent, the Surviving Corporation or any
of their respective Subsidiaries, employees of the Company and the Company Subs
as of the Effective Time shall receive service
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credit for service with the Company and the Company Subs to the same extent such
service credit was granted under the Company Benefit Plans, subject to offsets
for previously accrued benefits and no duplication of benefits.
5.6 Fees and Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with this Agreement, the Company Option
Agreement, the Stockholders Agreement and the transactions contemplated hereby
and thereby shall be paid by the party incurring such fees and expenses, except
as provided in Section 7.2, and except that, promptly following the Closing,
Parent shall cause the Surviving Corporation to pay all reasonable legal,
accounting and investment banker fees incurred by the Company in connection with
this Agreement and the transactions contemplated hereby.
5.7 Indemnification; Insurance
(a) Parent shall, and shall cause the Surviving Corporation to, maintain
in effect for a period of six years after the Effective Time the current
provisions regarding indemnification of current or former officers and directors
(each an "Indemnified Party") contained in the Organizational Documents of the
-----------------
Company or any of the Company Subs and in any agreements between an Indemnified
Party and the Company or any of the Company Subs.
(b) Parent shall, and shall cause the Surviving Corporation to, maintain
in effect for a period of six years after the Effective Time the Company's
current directors' and officers' insurance policies with respect to acts or
failures to act prior to or as of the Effective Time (other than to the extent
the available limit of any such insurance policy may be reduced or exhausted by
reason of the payment of claims thereunder); provided, however, that in order to
maintain or procure such coverage, neither Parent nor the Surviving Corporation
shall be required to pay an annual premium in excess of 150% of the current
annual premium paid by the Company for its existing coverage (the "Cap Amount");
----------
and provided, further, that if equivalent coverage cannot be obtained, or can be
obtained only by paying an annual premium in excess of the Cap Amount, Parent
and the Surviving Corporation shall only be required to obtain as much coverage
as can be obtained by paying an annual premium equal to the Cap Amount.
5.8 Company Stock Purchase Plan. Prior to the Effective Time, the Company shall
take all actions necessary to (a) shorten the offering period under the Company
Stock Purchase Plan in which the Effective Time occurs so that such offering
period terminates on the day immediately prior to the Effective Time and (b)
terminate the Company Stock Purchase Plan effective as of the Effective Time.
5.9 Public Announcements. The Company and Parent shall agree on the form and
content of the initial press release regarding the transactions contemplated
hereby and thereafter shall consult with each other before issuing any press
release or other public statement with respect to any of the transactions
contemplated hereby and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by law or
obligations pursuant to any listing agreement with, or rules of, any national
securities exchange.
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5.10 Takeover Statutes. If Section 203 of the DGCL or any other takeover statute
shall become applicable to the transactions contemplated by this Agreement, the
Company Option Agreement or the Stockholders Agreement, the Company shall grant
such approvals and take such actions as are necessary so that the transactions
contemplated hereby and thereby may be consummated as promptly as practicable on
the terms contemplated hereby and thereby and otherwise act to eliminate or
minimize the effects of such takeover statute on the transactions contemplated
hereby and thereby.
5.11 Rights Agreement. The Company shall take all further action (in addition to
that referred to in Section 3.1(c)(v)), if any, necessary in order to render the
Rights inapplicable to the Offer, the Merger and the other transactions
contemplated by this Agreement, the Company Option Agreement and the
Stockholders Agreement.
5.12 Short-Term Investments. Not later than five days prior to the earliest
expiration date of the Offer, the Company shall open an account in the name of
the Company at CSFB and shall deposit at least $75 million into such account
consisting of cash and all of the short-term investments of the Company and the
Company Subs (including, without limitation, municipal bonds and other
securities) (collectively, "Short-Term Investments"). The assets held in the
----------------------
CSFB account shall remain the property of the Company, and the Company shall
have absolute control over such account and shall be entitled to all interest
earned on the Short-Term Investments held in the such account. The Company shall
take all actions necessary to convert all of the Short-Term Investments into
cash or liquid investments readily convertible into cash on demand not later
than the first Business Day following the expiration date of the Offer. To the
extent that any Short-Term Investments mature prior to the expiration date of
the Offer, the Company shall deposit the funds obtained thereby into the CSFB
account in the form of cash or liquid investments readily convertible into cash
on demand.
ARTICLE VI.
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligations to Effect the Merger. The
obligations of the Company, Parent and Merger Sub to effect the Merger are
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. The Company shall have obtained all approvals of
--------------------
holders of shares of capital stock of the Company necessary to approve this
Agreement and all of the transactions contemplated hereby (including the
Merger); provided that this condition shall be deemed satisfied upon the
consummation of the Offer.
(b) HSR Act. The waiting period (and any extension thereof) applicable to
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the Merger under the HSR Act shall have been terminated or shall have expired.
(c) No Injunctions or Restraints, Illegality. No temporary restraining
----------------------------------------
order, preliminary or permanent injunction or other order issued by a court or
other Governmental Entity of competent jurisdiction shall be in effect and have
the effect of making the Merger illegal or otherwise prohibiting consummation of
the Merger; provided, however, that the
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provisions of this Section 6.1(c) shall not be available to any party whose
failure to fulfill its obligations pursuant to Section 5.3 shall have been the
cause of, or shall have resulted in, such order or injunction.
(d) Required Regulatory Approvals. All authorizations, consents, orders
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and approvals of, and declarations and filings with, and all expirations of
waiting periods imposed by, any Governmental Entity which, if not obtained in
connection with the consummation of the transactions contemplated hereby, could
reasonably be expected to have a Material Adverse Effect on the Company
(collectively, "Required Regulatory Approvals"), shall have been obtained, have
-----------------------------
been declared or filed or have occurred, as the case may be, and all such
Required Regulatory Approvals shall be in full force and effect.
(e) Offer. Merger Sub shall have consummated the Offer; provided, however,
-----
that neither Parent nor Merger Sub shall be entitled to rely on this condition
if either of them shall have failed to purchase shares of Company Common Stock
pursuant to the Offer in breach of their obligations under this Agreement.
ARTICLE VII.
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, by action taken or authorized by the Board of Directors of the
terminating party or parties, whether before or after approval of the matters
presented in connection with the Merger by the stockholders of the Company:
(a) By mutual written consent of Parent and the Company;
(b) By either Parent or the Company if the Merger shall not have been
consummated by March 31, 2000 (the "Outside Date"); provided, however, that the
------------
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Merger to
occur on or before such date;
(c) By either Parent or the Company if any Governmental Entity shall have
issued an order, decree or ruling or taken any other action (which order,
decree, ruling or other action the parties shall have used their best efforts to
resist, resolve or lift, as applicable, subject to the provisions of Section
5.3) permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, the Company Option Agreement or the
Stockholders Agreement and such order, decree, ruling or other action shall have
become final and nonappealable;
(d) By either Parent or the Company if any approval by the stockholders of
the Company required for the consummation of the Merger or the other
transactions contemplated hereby shall not have been obtained at the Company
Stockholders Meeting or any adjournment thereof by reason of the failure to
obtain the required vote at a duly held meeting of stockholders or at any
adjournment thereof;
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(e) By Parent, prior to the acceptance for payment of the Minimum Shares
pursuant to the Offer, if (i) the Company Board or any committee thereof shall
have withdrawn or modified in a manner adverse to Parent or Merger Sub its
approval or recommendation of the Offer or the Merger, (ii) the Company Board or
any committee thereof shall have approved or recommended to the stockholders of
the Company any Company Takeover Proposal or Alternative Transaction, (iii) the
Company Board or any committee thereof shall have approved or recommended that
the stockholders of the Company tender their shares of Company Common Stock in
any tender or exchange offer that is an Alternative Transaction, (iv) the
Company Board or any committee thereof shall have resolved to take any of the
foregoing actions, or (v) the Company Board or any committee thereof shall have
redeemed the Rights, or waived or amended any provision of the Rights Agreement,
in any such case to permit or facilitate the consummation of any Company
Takeover Proposal or Alternative Transaction;
(f) By the Company, prior to the acceptance for payment of the Minimum
Shares pursuant to the Offer, in accordance with Section 5.4(c) hereof;
provided, however, that the right to terminate this Agreement pursuant to this
Section 7.1(f) shall not be available (x) if the Company has breached in any
material respect its obligations under Section 5.4 or (y) if the Company shall
fail to pay when due the fees contemplated by Section 7.2(b);
(g) By Parent, prior to the acceptance for payment of the Minimum Shares
pursuant to the Offer, upon a breach of any covenant or agreement on the part of
the Company set forth in this Agreement which could reasonably be expected to
have a Material Adverse Effect on the Company or a material adverse effect on
the consummation of the Offer or the Merger, or if any representation or
warranty of the Company shall have become inaccurate and such inaccuracy could
reasonably be expected to have a Material Adverse Effect on the Company or a
material adverse effect on the consummation of the Offer or the Merger;
(h) By the Company, upon a breach of any covenant or agreement on the part
of Parent or Merger Sub set forth in this Agreement which could reasonably be
expected to have a Material Adverse Effect on Parent or a material adverse
effect on the consummation of the Offer or the Merger, or if any representation
or warranty of Parent or Merger Sub shall have become inaccurate and such
inaccuracy could reasonably be expected to have a Material Adverse Effect on
Parent or a material adverse effect on the consummation of the Offer or the
Merger; or
(i) By Parent or the Company, if the Offer terminates or expires on
account of the failure of any condition specified in Annex A without Merger Sub
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having purchased any shares of Company Common Stock thereunder (provided that
the right to terminate this Agreement pursuant to this Section 7.1(i) shall not
be available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of any such
condition).
7.2 Effect of Termination
(a) In the event of termination of this Agreement by either Parent or the
Company as provided in Section 7.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent or the
Company or their respective officers or
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directors except (i) with respect to Section 5.6, this Section 7.2 and Article
VIII, (ii) with respect to any liabilities or damages incurred or suffered by a
party as a result of the willful breach by the other party of any of its
covenants or other agreements set forth in this Agreement and (iii) the
Confidentiality Agreement shall remain in full force and effect.
(b) In the event that (i) this Agreement is terminated pursuant to Section
7.1(e) or 7.1(f), or pursuant to Section 7.1(g) in the case of a material breach
of the Company's obligations under Section 5.4, or (ii)(A) any Third Party makes
a Company Takeover Proposal to the Company or its stockholders and thereafter
this Agreement is terminated by either party pursuant to Section 7.1(b) or
7.1(d) and (B)(x) within 12 months after the termination of this Agreement any
Alternative Transaction is consummated or the Company enters into any Company
Acquisition Agreement, in either case with the Third Party (or any affiliate of
the Third Party) that made the Company Takeover Proposal to the Company or its
stockholders, or (y) within 9 months after the termination of this Agreement any
Alternative Transaction is consummated or the Company enters into any Company
Acquisition Agreement, in either case with any other Third Party, then the
Company shall pay Parent a cash fee of $10,000,000, which amount shall be
payable by wire transfer of immediately available funds no later than (1) two
Business Days after such termination in the case of a termination described in
clause (i) above or (2) the date of consummation of such Alternative Transaction
in the case of a termination described in clause (ii) above. The Company
acknowledges that the agreements contained in this Section 7.2(b) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Parent and Merger Sub would not enter into this
Agreement; accordingly, if the Company fails to promptly pay the amount due
pursuant to this Section 7.2(b), and in order to obtain such payment Parent
commences a suit which results in a judgment against the Company, the Company
shall pay to Parent its costs and expenses (including attorneys' fees) arising
in connection with such suit.
7.3 Amendment. This Agreement may be amended by the parties hereto, by action
taken or authorized by their respective Boards of Directors, at any time before
or after approval of the matters presented in connection with the Merger by the
stockholders of the Company, but, after any such approval, no amendment shall be
made which by law requires further approval by such stockholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective Boards of Directors,
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party. No delay on the part of any
party hereto in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any waiver on the part of any party hereto of any
right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or
39
<PAGE>
privilege hereunder. Unless otherwise provided, the rights and remedies herein
provided are cumulative and are not exclusive of any rights or remedies which
the parties hereto may otherwise have at law or in equity. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
ARTICLE VIII.
GENERAL PROVISIONS
8.1 Non-Survival of Representations, Warranties and Agreements. None of the
representations, warranties, covenants and other agreements in this Agreement or
in any instrument delivered pursuant to this Agreement, including any rights
arising out of any breach of such representations, warranties, covenants and
other agreements, shall survive the Effective Time, except for those covenants
and agreements contained herein and therein that by their terms apply or are to
be performed in whole or in part after the Effective Time and this Article VIII.
8.2 Notices. All notices and other communications hereunder shall be in writing
and shall be deemed duly given (a) on the date of delivery if delivered
personally, (b) on the first Business Day following the date of dispatch if
delivered by a nationally recognized next-day courier service, (c) on the fifth
Business Day following the date of mailing if delivered by registered or
certified mail, return receipt requested, postage prepaid or (d) if sent by
facsimile transmission, with a copy mailed on the same day in the manner
provided in (a) or (b) above, when transmitted and receipt is confirmed by
telephone. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice:
(a) if to Parent or Merger Sub, to Zhone Technologies, Inc., 7677 Oakport
Street, Suite 1040, Oakland, CA 94621, Attention: Mory Ejabat, Telecopy: (510)
777-7010, with a copy to Latham & Watkins, 701 "B" Street, Suite 2100, San
Diego, CA 92101, Attention: Scott N. Wolfe, Esq., Telecopy: (619) 696-7419; and
(b) if to the Company, to Premisys Communications, Inc., 48664 Milmont
Drive, Fremont, CA 94538, Attention: Nicholas J. Williams, Telecopy: (510) 353-
2321, with a copy to Fenwick & West LLP, Two Palo Alto Square, Palo Alto, CA
94306, Attention: David W. Healy, Esq., Telecopy: (650) 494-1417.
8.3 Interpretation. When a reference is made in this Agreement to Sections,
Exhibits or Schedules, such reference shall be to a Section of or Exhibit or
Schedule to this Agreement unless otherwise indicated. The table of contents,
glossary of defined terms and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law
40
<PAGE>
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise.
8.4 Counterparts. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.
8.5 Entire Agreement; No Third Party Beneficiaries
(a) This Agreement (including the Schedules and Exhibits), the Company
Option Agreement, the Stockholders Agreement and the Confidentiality Agreement
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
(b) This Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement.
8.6 Governing Law. This Agreement shall be governed and construed in accordance
with the laws of the State of Delaware, without regard to the laws that might be
applicable under conflicts of laws principles.
8.7 Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any law or public policy, all other
terms 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 hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible. Any provision of this Agreement held invalid or
unenforceable only in part, degree or certain jurisdictions shall remain in full
force and effect to the extent not held invalid or unenforceable. To the extent
permitted by applicable law, each party waives any provision of law which
renders any provision of this Agreement invalid, illegal or unenforceable in any
respect.
8.8 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole
or in part (whether by operation of law or otherwise), without the prior written
consent of the other parties, except that Merger Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly-owned subsidiary of Parent. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
41
<PAGE>
8.9 Enforcement. The parties agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. Accordingly, the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in the Court of
Chancery in and for New Castle County in the State of Delaware (or, if such
court lacks subject matter jurisdiction, any appropriate state or federal court
in New Castle County in the State of Delaware), this being in addition to any
other remedy to which they are entitled at law or in equity. Each of the parties
hereto (a) shall submit itself to the personal jurisdiction of the Court of
Chancery in and for New Castle County in the State of Delaware (or, if such
court lacks subject matter jurisdiction, any appropriate state or federal court
in New Castle County in the State of Delaware) in the event any dispute arises
out of this Agreement or any of the transactions contemplated hereby, (b) shall
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, and (c) shall not bring any action
relating to this Agreement or any of the transactions contemplated hereby in any
court other than the Court of Chancery in and for New Castle County in the State
of Delaware (or, if such court lacks subject matter jurisdiction, any
appropriate state or federal court in New Castle County in the State of
Delaware).
8.10 Definitions. As used in this Agreement:
(a) "Affiliated Group" means any affiliated group within the meaning of
----------------
Code Section 1504(a) or any similar group defined under a similar provision of
state, local or foreign law.
(b) "Board of Directors" means the Board of Directors of any specified
------------------
Person and any properly serving and acting committees thereof.
(c) "Business Day" means any day on which banks are not required or
------------
authorized to close in the City of New York.
(d) "Company Stock Option Plans" means the Company's 1992 Stock Option
--------------------------
Plan, 1994 Stock Option Plan and 1995 Directors Stock Option Plan.
(e) "Fully Diluted Shares" means all outstanding shares of Company Common
--------------------
Stock on a fully diluted basis, after giving effect to the exercise or
conversion of all outstanding options, rights and other securities which are
then exercisable or convertible into shares of Company Common Stock, but only to
the extent that any such options, rights or other securities are exercisable or
convertible into shares of Company Common Stock at a per share price less than
the Price Per Share.
(f) "Legal Proceeding" shall mean any action, suit, litigation,
----------------
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding), hearing, inquiry, audit, examination or
investigation commenced, brought, conducted or heard by or before, or otherwise
involving, any court or other Governmental Entity or any arbitrator or
arbitration panel.
42
<PAGE>
(g) "Legal Requirement" means any federal, state, local, municipal,
-----------------
foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Entity.
(h) "Material Adverse Effect" means, with respect to any entity, any
-----------------------
adverse change, circumstance or effect that, individually or in the aggregate
with all other adverse changes, circumstances and effects, is or is reasonably
likely to be materially adverse to the condition (financial or other), business,
operations, assets, liabilities or results of operations of such entity and its
Subsidiaries taken as a whole, except that (i) a change in the market price of
the Company Common Stock shall not, in and of itself, be deemed a "Material
Adverse Effect" with respect to the Company and (ii) a "Material Adverse Effect"
with respect to the Company shall not include any adverse change, circumstance
or effect as to which the Company sustains the burden of reasonably
demonstrating that any such adverse change, circumstance or effect is primarily
attributable to the transactions contemplated by this Agreement or the pendency
or announcement of the Offer or the Merger (with all parties acknowledging that
postponement, modification or cancellation of product orders by customers of the
Company and employee attrition of the Company are possible results from the
transactions contemplated by this Agreement or the pendency or announcement of
the Offer or the Merger). Parent and Merger Sub may conclude that a Material
Adverse Effect on the Company has occurred only if Parent and Merger Sub make
such determination in good faith after consulting with their own, and the
Company's, respective Chief Financial Officer or Chief Executive Officer,
auditors and other financial advisors.
(i) "Organizational Documents" means, with respect to any entity, the
------------------------
certificate of incorporation, articles of incorporation, bylaws or other
governing documents of such entity.
(j) "Person" means an individual, corporation, partnership, limited
------
liability company, association, trust, unincorporated organization, entity or
group (as defined in the Exchange Act).
(k) "Subsidiary" when used with respect to any party means any corporation
----------
or other organization, whether incorporated or unincorporated, (i) of which such
party or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting and economic
interests in such partnership) or (ii) at least a majority of the securities or
other interests of which having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of its Subsidiaries, or
by such party and one or more of its Subsidiaries.
(1) (i) "Tax" (including, with correlative meaning, the terms "Taxes" and
--- -----
"Taxable") means all federal, state, local and foreign income, profits,
-------
franchise, capital gains, business, gross receipts, environmental, customs duty,
capital stock, severance, stamp, payroll, sales, employment, unemployment,
disability, use, property, withholding, excise, production, value added,
occupancy, surtax, estimated, national health insurance, ad valorem, transfer
and other taxes, duties, levies, tariffs, deficiencies, fees or assessments of
any nature whatsoever, together
43
<PAGE>
with all interest, penalties, fines and additions to tax imposed with respect to
such amounts and any interest in respect of such penalties and additions to tax,
and (ii) "Tax Return" means all federal, state, local and foreign returns and
reports (including elections, claims, declarations, disclosures, schedules,
estimates, computations, statements, notices, notifications, forms,
certificates, information returns or other documents or information) required to
be supplied to a Tax authority in any jurisdiction relating to the
determination, assessment, collection, payment, administration, implementation,
or enforcement of any Tax.
[signature page follows]
44
<PAGE>
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
ZHONE TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ Mory Ejabat
-----------------------------------
Name: Mory Ejabat
-----------------------------------
Title: Chairman & CEO
-----------------------------------
ZHONE ACQUISITION CORP.,
a Texas corporation
By: /s/ Mory Ejabat
-----------------------------------
Name: Mory Ejabat
-----------------------------------
Title: Chairman & CEO
-----------------------------------
PREMISYS COMMUNICATIONS, INC.,
a Delaware corporation
By: ___________________________________
Name: ___________________________________
Title: ___________________________________
45
<PAGE>
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
ZHONE TECHNOLOGIES, INC.,
a Delaware corporation
By: _______________________________
Name:_______________________________
Title:______________________________
ZHONE ACQUISITION CORP.,
a Texas corporation
By: _______________________________
Name:_______________________________
Title:______________________________
PREMISYS COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ Nicholas J. Williams
--------------------------------
Name: Nicholas J. Williams
--------------------------------
Title: President/CEO/COO
--------------------------------
<PAGE>
ANNEX A
Conditions To The Offer
-----------------------
The Offer shall be conditioned upon at least that number of shares of
Company Common Stock equivalent to 75% of the Fully Diluted Shares of Company
Common Stock on the date such shares are purchased pursuant to the Offer
(subject to reduction as described below, the "Minimum Shares") being validly
--------------
tendered and not withdrawn prior to the date which is 20 Business Days following
the commencement of the Offer in accordance with the terms hereof or such later
date as the Offer may be extended by an amendment to this Agreement; provided,
however, that Merger Sub may reduce the Minimum Shares to not less than a
majority of the Fully Diluted Shares of Company Common Stock without the prior
written consent of the Company. Moreover, notwithstanding any other provision
of the Offer, and subject to the terms and conditions of this Agreement, Merger
Sub shall not be obligated to accept for payment any shares of Company Common
Stock until expiration of all applicable waiting periods under the HSR Act, and
Merger Sub shall not be required to accept for payment, purchase or pay for, and
may delay the acceptance for payment of or payment for, any shares of Company
Common Stock tendered in the Offer, or terminate or amend the Offer, if, prior
to the time of acceptance for payment of any such shares of Company Common Stock
(whether or not any other shares of Company Common Stock have theretofore been
accepted for payment or paid for pursuant to the Offer), any of the following
shall occur and remain in effect:
(a) there shall be instituted or pending by any Governmental Entity any
suit, action or proceeding (i) challenging the acquisition by Parent or Merger
Sub of any shares of Company Common Stock pursuant to the Offer, seeking to
restrain or prohibit the making or consummation of the Offer or the Merger or
the performance of any of the other transactions contemplated by this Agreement,
the Company Option Agreement or the Stockholders Agreement or seeking to obtain
from the Company, Parent or Merger Sub any damages that are material in relation
to the Company or Parent, (ii) seeking to prohibit or materially limit the
ownership or operation by the Company or Parent of a material portion of the
business or assets of the Company or Parent, or to compel the Company or Parent
to dispose of or hold separate a material portion of the business or assets of
the Company or Parent, in each case as a result of the Offer or any of the other
transactions contemplated by this Agreement, the Company Option Agreement or the
Stockholders Agreement, (iii) seeking to impose material limitations on the
ability of Parent or Merger Sub to acquire or hold, or exercise full rights of
ownership of, any shares of Company Common Stock to be accepted for payment
pursuant to the Offer including, without limitation, the right to vote such
shares on all matters properly presented to the stockholders of the Company,
(iv) seeking to prohibit Parent or Merger Sub from effectively controlling in
any material respect any material portion of the business or operations of the
Company, (v) that could reasonably be expected to require the divestiture by
Parent or Merger Sub of any shares of Company Common Stock, or (vi) that could
reasonably be expected to result in a Material Adverse Effect on the Company or
Parent;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to the
Offer or the Merger, by any
<PAGE>
Governmental Entity or court, that would result in any of the consequences
referred to in clauses (i) through (vi) of paragraph (a) above;
(c) there shall have occurred (i) any general suspension of, or limitation
on prices for, trading in securities on Nasdaq, (ii) a declaration of a banking
moratorium or any general suspension of payments in respect of banks in the
United States or (iii) in the case of any of the foregoing existing at the time
of the execution of this Agreement, a material acceleration or worsening
thereof;
(d) there shall have occurred any event or change since the date of the
Interim Balance Sheet that could reasonably be expected to have a Material
Adverse Effect on the Company, other than any event or change specifically set
forth in the Company Disclosure Schedule;
(e) any of the representations and warranties of the Company set forth in
this Agreement shall not be true and correct at the date of this Agreement and
at the scheduled or extended expiration of the Offer, unless the effect of all
such failures to be true and correct could not reasonably be expected to have a
Material Adverse Effect on the Company or a material adverse effect on the
consummation of the Offer or the Merger;
(f) the Company shall have failed to perform any obligation or to comply
with any agreement or covenant of the Company to be performed or complied with
by it under this Agreement or the Company Option Agreement, unless the effect of
all such failures to perform or comply could not reasonably be expected to have
a Material Adverse Effect on the Company or a material adverse effect on the
consummation of the Offer or the Merger;
(g) any Required Regulatory Approval or other third party consent,
authorization or approval which, if not obtained in connection with the
consummation of the transactions contemplated hereby, could reasonably be
expected to have a Material Adverse Effect on the Company, shall not have been
obtained, declared or filed or have occurred, as the case may be, or any such
Required Regulatory Approval or other third party consent, authorization or
approval shall not be in full force and effect;
(h) the Company Board (i) shall have withdrawn, or modified or changed in
a manner adverse to Parent or Merger Sub (including by amendment of the Schedule
14D-9) its recommendation of the Offer, this Agreement or the Merger, (ii) shall
have recommended a Company Takeover Proposal or Alternative Transaction, (iii)
shall have adopted any resolution to effect any of the foregoing or (iv) upon
the request of Parent or Merger Sub, shall have failed to reaffirm its approval
or recommendation of the Offer, this Agreement or the Merger within two Business
Days;
(i) any Person or "group" (within the meaning of Section 13(d)(3) of the
Exchange Act), other than Parent, Merger Sub or their affiliates or any group of
which any of them is a member, shall have acquired or announced its intention to
acquire beneficial ownership (as determined pursuant to Rule 13d-3 promulgated
under the Exchange Act) of 10% or more of the Company Common Stock and, in the
good faith judgment of Parent or Merger Sub in its sole
<PAGE>
discretion, made it inadvisable to proceed with such acceptance of shares for
payment or the payment therefor; provided that this condition shall not apply
upon satisfaction and maintenance of the Minimum Shares;
(j) the Company shall have commenced a case under any chapter of Title XI
of the United States Code or any similar law or regulation; or a petition under
any chapter of Title XI of the United States Code or any similar law or
regulation shall have been filed against the Company which is not dismissed
within two days;
(k) the Stockholders Agreement shall not have been executed by each of the
parties thereto other than Parent and Merger Sub;
(l) a Distribution Date shall have occurred under the Rights Agreement; or
(m) this Agreement shall have been terminated by Parent or the Company
pursuant to its terms.
The foregoing conditions are for the sole benefit of Parent and Merger
Sub and may be asserted by Parent and Merger Sub regardless of the circumstances
giving rise to any such condition or may be waived by Parent and Merger Sub in
whole or in part at any time and from time to time; provided, however, that
Merger Sub shall not reduce the Minimum Shares below a majority of the Fully
Diluted Shares of Company Common Stock without the prior written consent of the
Company. The failure by Parent or Merger Sub at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
<PAGE>
ANNEX B
Articles of Incorporation of Merger Sub
---------------------------------------
ARTICLES OF INCORPORATION
OF
ZHONE ACQUISITION CORP.
I, the undersigned, a natural person of the age of eighteen years or more,
acting as the incorporator of a corporation (the "Company"), under the Texas
Business Corporation Act (the "Act"), do hereby adopt the following Articles of
Incorporation (the "Articles") for the Company:
ARTICLE ONE
The name of the Company is Zhone Acquisition Corp.
ARTICLE TWO
The period of duration of the Company is perpetual.
ARTICLE THREE
The purpose for which the Company is organized is to engage in the
transaction of any and all lawful business for which a corporation may be
incorporated under the Act.
ARTICLE FOUR
The aggregate number of shares of capital stock which the Company has
authority to issue is 1,000, par value $0.01 per share, designated Common Stock.
Each share of such Common Stock will have identical rights and privileges in
every respect.
ARTICLE FIVE
No holder of any shares of capital stock of the Company, whether now or
hereafter authorized may, as such holder, have any preemptive or preferential
right to receive, purchase, or subscribe to (a) any unissued or treasury shares
of any class of stock (whether now or hereafter authorized) of the Company, (b)
any obligations, evidences of indebtedness, or other securities of the Company
convertible into or exchangeable for, or carrying or accompanied by any rights
to receive, purchase, or subscribe to, any such unissued or treasury shares, (c)
any right of subscription to or to receive, or any warrant or option for the
purchase of, any of the foregoing securities, or (d) any other securities that
may be issued or sold by the Company.
<PAGE>
ARTICLE SIX
The Company will not commence business until it has received for the
issuance of its shares consideration equal to or exceeding the value of $1,000,
consisting of money, labor done or property actually received.
ARTICLE SEVEN
Cumulative voting for the election of directors is expressly denied and
prohibited.
ARTICLE EIGHT
Any action of the Company which, under the provisions of the Act or any
other applicable law, is required to be authorized or approved by the holders of
any specified fraction which is in excess of one-half or any specified
percentage which is in excess of fifty percent of the outstanding shares (or of
any class or series thereof) of the Company will, notwithstanding any law, be
deemed effectively and properly authorized or approved if authorized or approved
by the vote of the holders of more than fifty percent of the outstanding shares
entitled to vote on that matter (or, if the holders of any class or series of
the Company's shares are entitled by the Act or any other applicable law to vote
on that matter separately as a class, by the vote of the holders of more than
fifty percent of the outstanding shares of each such class or series). Without
limiting the generality of the foregoing, the provisions of this Article Eight
will be applicable to any required shareholder authorization or approval of: (a)
any amendment to these Articles; (b) any plan of merger, share exchange, or
reorganization involving the Company; (c) any transfer of all, or substantially
all, the property and assets of the Company; and (d) any voluntary dissolution
of the Company.
Nothing contained in this Article Eight is intended to require shareholder
authorization or approval of any action of the Company whatsoever unless such
approval is specifically required by the other provisions of these Articles, the
Company's Bylaws or by the Act or other applicable law.
ARTICLE NINE
The street address of the initial registered office of the Company is 408
West 17/th/ Street, Suite 101, Austin, Texas 78701 and the name of its initial
Registered Agent at such address is Lawyer's Aid Service, Inc.
ARTICLE TEN
The number of directors constituting the initial Board of Directors is
three and the names and addresses of the persons who are to serve as directors
until the first annual meeting of shareholders or until their earlier
resignation or removal and until their successor or successors shall have been
duly elected and qualified are as follows:
<PAGE>
<TABLE>
<CAPTION>
Name Address
<S> <C>
Mory Ejabat 7677 Oakport Street, Suite 1040
Oakland, California 94621
Jeanette Symons 7677 Oakport Street, Suite 1040
Oakland, California 94621
Robert Dahl 7677 Oakport Street, Suite 1040
Oakland, California 94621
</TABLE>
ARTICLE ELEVEN
The name and address of the Incorporator are as follows:
<TABLE>
<CAPTION>
Name Address
<S> <C>
Keith D. Kohlhepp 201 Main Street, Suite 2500
Forth Worth, TX 76102
</TABLE>
ARTICLE TWELVE
To the fullest extent permitted by applicable law, a director of the
Company will not be liable to the Company or its shareholders for an act or
omission in the director's capacity as a director. A director will not be
liable to the Company or its shareholders to such extent as permitted by any law
hereafter enacted, including, without limitation any subsequent amendment to the
Texas Miscellaneous Corporation Laws Act or the Act. This Article Twelve does
not eliminate or limit the liability of a director to the extent that applicable
law prohibits elimination or limitation of liability.
Any repeal or amendment of this Article Twelve by the Company's
shareholders will be prospective only and may not adversely affect any
limitation on the personal liability or alleged liability of a director arising
from an act or omission of such director occurring prior to the time of such
repeal or amendment.
ARTICLE THIRTEEN
Any action which may be taken, or which is required by law, the Articles,
or Bylaws to be taken, at any annual or special meeting of shareholders may be
taken without a meeting, without prior notice, and without a vote, of a consent
in writing, setting forth the action so taken, is signed by the holder or
holders of shares having not less than the minimum number of votes that would be
necessary to take such action at a meeting at which the holders of all shares
entitled to vote on the action were present and voted.
<PAGE>
THE UNDERSIGNED INCORPORATOR, for the purposes of forming the Company, does
make and file these Articles of Incorporation, hereby declaring and certifying
that the facts stated here are true and accordingly has set his hand on October
19, 1999.
_______________________________
Keith D. Kohlhepp
