<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 4, 1997
DSC COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-10018 54-1025763
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1000 Coit Road
Plano, Texas 75075
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (972) 519-3000
<PAGE> 2
ITEM 2. Acquisition or Disposition of Assets.
On December 4, 1997 (the "Closing Date"), DSC Communications Corporation
("DSC") acquired Celcore, Inc. ("CELCORE"), a GSM and AMPS mobile wireless
systems manufacturer, for approximately $145 million in cash and the assumption
of CELCORE's outstanding stock options pursuant to an Amended and Restated
Agreement and Plan of Merger, dated December 3, 1997 (the "Merger Agreement"),
by and among DSC, CI Acquisition Company, a wholly-owned subsidiary of DSC
("Merger Subsidiary"), and CELCORE. Pursuant to the Merger Agreement, Merger
Subsidiary merged with and into CELCORE, CELCORE became a wholly-owned
subsidiary of DSC and each share of CELCORE capital stock was converted into
the right to receive $8.00 in cash. The terms and conditions of the Merger
Agreement were determined in arm's-length negotiations among the parties
thereto. The acquisition was funded using DSC's existing cash. DSC intends to
continue the operation of the business of CELCORE as conducted prior to the
Closing Date.
ITEM 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
It is impracticable to file the financial statements required by this item
7(a) at this time because such statements are not available. DSC will file such
statements as soon as practicable, but not later than February 17, 1998.
(b) Pro Forma Financial Statements.
It is impracticable to file the financial statements required by this item
7(b) at this time because such statements are not available. DSC will file such
statements as soon as practicable, but not later than February 17, 1998.
(c) Exhibits.
Exhibit No. Description.
----------- ------------
2.1 Amended and Restated Agreement and Plan of Merger
among DSC Communications Corporation, CI
Acquisition Company and Celcore, Inc.
2
<PAGE> 3
99.1 Press Release, dated December 4, 1997, issued by DSC
Communications Corporation
3
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
DSC COMMUNICATIONS CORPORATION
Date: December 19, 1997 By: /s/ George B. Brunt
---------------------------
George B. Brunt,
Vice President, Secretary
and General Counsel
4
<PAGE> 5
EXHIBIT INDEX
Exhibit No. Description.
- ----------- ------------
2.1 Amended and Restated Agreement and Plan of Merger among DSC
Communications Corporation, CI Acquisition Company and Celcore,
Inc.
99.1 Press Release, dated December 4, 1997, issued by DSC
Communications Corporation
5
<PAGE> 1
EXHIBIT 2.1
================================================================================
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
Among
DSC COMMUNICATIONS CORPORATION,
CI ACQUISITION COMPANY
and
CELCORE, INC.
Dated December 3, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I
THE MERGER
SECTION 1.01. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Effective Time; Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.03. Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.04. Certificate of Incorporation; Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.05. Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.02. Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.03. Stock Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.04. Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.05. Escrow Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.06. Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE TARGET
SECTION 3.01. Corporate Organization and Qualification; Subsidiaries . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.02. Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.03. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.04. Authority Relative to This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.05. No Conflict; Required Filings and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.06. Permits; Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.07. Financial Statements; Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.08. Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.09. Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.10. Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.11. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.12. Intellectual Property Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.13. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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SECTION 3.14. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.15. Target Products; Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.16. Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.17. Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.18. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.19. Tangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.20. Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.21. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.22. Certain Business Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.23. Real Property and Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.24. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.25. Indemnification Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.26. Board Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.27. Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.28. Payments Resulting from Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.29. State Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PARENT SUB
SECTION 4.01. Corporate Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.02. Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.03. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.04. Authority Relative to This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.05. No Conflict; Required Filings and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.06. Ownership of Parent Sub; No Prior Activities . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.07. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.08. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.09. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.10. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.11. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Target Pending the Merger . . . . . . . . . . . . . . . . . . . . . 33
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.02. Target's Consent Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.03. Appropriate Action; Consents; Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 6.04. Access to Information; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.05. No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.06. Obligations of Parent Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.07. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.08. Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.09. Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.10. Registration on Form S-8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.11. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.12. Unaudited Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.13. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.14. Update Disclosure; Breaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.15. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.16. Consent Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.17. DSC Special Celcore Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VII
CONDITIONS PRECEDENT TO THE MERGER
SECTION 7.01. Conditions to the Obligations of Each Party . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 7.02. Conditions to the Obligations of Parent and Parent Sub . . . . . . . . . . . . . . . . . . . . 41
SECTION 7.03. Conditions to the Obligations of Target . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VIII
TERMINATION
SECTION 8.01. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 8.02. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 8.03. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.04. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
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ARTICLE IX
ESCROW AND INDEMNIFICATION
SECTION 9.01. Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.02. Parent Escrow Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.03. Representative Escrow Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 10.02. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 10.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 10.04. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 10.05. Entire Agreement and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 10.06. Target Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 10.07. Assignments, Successors, and No Third-Party Rights . . . . . . . . . . . . . . . . . . . . . 56
SECTION 10.08. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 10.09. Section Headings, Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 10.10. Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 10.11. Incorporation of Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 10.12. Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 10.13. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 10.14. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 10.15. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 10.16. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
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EXHIBITS:
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Exhibit A Certificate of Incorporation
Exhibit B Consent Agreement
Exhibit C Opinion of Powell, Goldstein, Frazer & Murphy LLP
Exhibit D Opinion of Baker & McKenzie
Exhibit E DSC Special Celcore Incentive Plan
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This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of
December 3, 1997 (this "Agreement"), by and among DSC Communications
Corporation, a Delaware corporation ("Parent"), CI Acquisition Company, a
Delaware corporation and a direct, wholly owned subsidiary of Parent ("Parent
Sub"), and Celcore, Inc., a Delaware corporation (the "Target").
WHEREAS, Parent, Parent Sub and Target have entered into that certain
Agreement and Plan of Merger dated October 29, 1997 (the "Original Merger
Agreement");
WHEREAS, Parent, Parent Sub and Target desires to amend, restate and
modify the Original Merger Agreement in its entirety as set forth in this
Agreement;
WHEREAS, Parent Sub, upon the terms and subject to the conditions of
this Agreement and in accordance with the Delaware General Corporation Law
("Delaware Law"), will merge with and into Target (the "Merger") and as a
result of the Merger, the separate corporate existence of Parent Sub shall
cease and Target shall continue as the surviving corporation of the Merger (the
"Surviving Corporation");
WHEREAS, the Board of Directors of Target (i) has determined that the
Merger is in the best interests of Target and its stockholders (the "Target
Stockholders") and unanimously approved and adopted this Agreement and the
transactions contemplated hereby (the "Transactions") and (ii) has unanimously
recommended approval and adoption of this Agreement and approval of the Merger
by, and directed that this Agreement and the Merger be submitted to a vote of,
the Target Stockholders; and
WHEREAS, the Boards of Directors of Parent and Parent Sub have
determined that the Merger is in the best interests of Parent and Parent Sub
and their stockholders and have unanimously approved and adopted this Agreement
and the Transactions.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Parent Sub and Target hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the conditions
set forth in this Agreement and in accordance with Delaware Law, at the
Effective Time (as defined below), Parent Sub shall be merged with and into
Target. As a result of the Merger, the outstanding shares of capital stock of
Parent Sub and Target shall be converted or canceled in the manner provided in
Article II of this Agreement, the separate corporate existence of Parent
<PAGE> 7
Sub shall cease, and Target will be the surviving corporation in the Merger and
shall become a subsidiary of Parent. The name of the Surviving Corporation
shall be DSC/Celcore, Inc.
SECTION 1.02. Effective Time; Closing. As promptly as practicable on
or before December 4, 1997, and in no event later than the first business day
following the satisfaction or, if permissible, waiver of the conditions set
forth in Article VII (or such other date as may be agreed in writing by each of
the parties hereto), the parties hereto shall cause the Merger to be
consummated by filing a certificate of merger (the "Certificate of Merger")
with the Secretary of State of the State of Delaware (the "Secretary") in such
form as is required by, and executed in accordance with the relevant provisions
of, Delaware Law. The term "Effective Time" means the date and time of the
filing of the Certificate of Merger with the Secretary (or such later time as
may be agreed in writing by each of the parties hereto and specified in the
Certificate of Merger). Immediately prior to the filing of the Certificate of
Merger, a closing (the "Closing") will be held at the Dallas, Texas offices of
Baker & McKenzie (the "Closing Date") (or such other place as the parties may
agree).
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of Delaware
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the rights, privileges, powers and franchises (of a
public as well as of a private nature) of Target and Parent Sub and all
property (real, personal and mixed) of Target and Parent Sub and all debts due
to either Target or Parent Sub on any account, including subscriptions to
shares, and every other interest of or belonging to or due to each of Target
and Parent Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of each of Target and Parent Sub shall become the debts,
liabilities, obligations and duties of the Surviving Corporation and may be
enforced against the Surviving Corporation to the same extent as if such debts,
liabilities, obligations and duties had been incurred or contracted by the
Surviving Corporation. The title to any real estate or any interest therein
vested, by deed or otherwise, in Target or Parent Sub shall not revert or in
any way become impaired by reason of the Merger, and all rights of creditors
and all liens upon any property of Target or Parent Sub shall be preserved
unimpaired following the Merger.
SECTION 1.04. Certificate of Incorporation; Bylaws. (a) At the
Effective Time, the certificate of incorporation of Target, as in effect
immediately prior to the Effective Time, shall be amended as of the Effective
Time by operation of this Agreement and by virtue of the Merger without any
further action by the stockholders or directors of the Surviving Corporation to
read in its entirety as set forth in Exhibit A attached hereto.
(b) At the Effective Time, the bylaws of Parent Sub, as
in effect immediately prior to the Effective Time, shall be the bylaws of the
Surviving Corporation until thereafter amended as provided by Delaware Law, the
certificate of incorporation of the Surviving Corporation and such bylaws.
2
<PAGE> 8
SECTION 1.05. Directors and Officers. The directors of Parent Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the certificate
of incorporation and bylaws of the Surviving Corporation until a successor is
elected or appointed and has qualified or until the earliest of such director's
death, resignation, removal or disqualification, and the officers of Parent Sub
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified, or as otherwise provided in the bylaws of
the Surviving Corporation.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Parent Sub, Target
or the holders of any of the following securities:
(a) Each share of common stock, $0.10 par value per share
("Target Common Stock"), of Target issued and outstanding immediately prior to
the Effective Time (other than Dissenting Shares (as defined below)) shall be
converted into the right to receive $8.00 (the "Merger Consideration") payable
to the holder thereof in cash, without any interest thereon, upon surrender of
the certificate representing such share in accordance with Section 2.02.
(b) Each share of Series A Convertible Preferred Stock,
par value $0.10 per share ("Series A Preferred Stock"), Series B Convertible
Preferred Stock, par value $0.10 per share ("Series B Preferred Stock"), Series
C Convertible Preferred Stock, par value $0.10 per share ("Series C Preferred
Stock"), and Series D Convertible Preferred Stock, par value $0.10 per share
("Series D Preferred Stock"), of Target (collectively, the "Target Preferred
Stock") issued and outstanding immediately prior to the Effective Time (other
than Dissenting Shares) shall be converted into the right to receive the Merger
Consideration payable to the holder thereof in cash, without any interest
thereon, upon surrender of the certificate representing such share in
accordance with Section 2.02.
(c) From and after the Effective Time, all shares of
Target Common Stock and Target Preferred Stock (together referred to as the
"Target Stock") (other than Dissenting Shares) shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each certificate previously representing any such shares (other than Dissenting
Shares) shall thereafter represent the right to receive, subject to Section
2.02(h), the Merger Consideration to be paid in consideration therefor upon
surrender of such certificate in accordance with Section 2.02, without
interest. Subject to Section 2.02(h), certificates previously representing
shares of Target Stock (other than Dissenting Shares) shall be exchanged for
the Merger Consideration to be paid in consideration therefor upon the
surrender of such certificates in accordance with the provisions of Section
2.02, without interest.
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(d) Any shares of Target Stock held in the treasury of
Target and any shares of Target Stock owned by Parent or any direct or indirect
wholly owned subsidiary of Parent or of Target immediately prior to the
Effective Time shall be canceled and extinguished without any conversion
thereof and no payment shall be made with respect thereto.
(e) Each share of common stock, par value $0.01 per
share, of Parent Sub ("Parent Sub Common Stock") issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one newly and validly issued, fully paid and non-assessable share of common
stock of the Surviving Corporation.
SECTION 2.02. Exchange of Certificates. (a) Exchange Agent. As of or
before the Effective Time, Parent shall deposit, or shall cause to be
deposited, with a bank or trust company organized under the laws of, and having
an office in, any state of the United States and designated by Parent (the
"Exchange Agent"), for the benefit of the holders of shares of Target Stock
and, for exchange through the Exchange Agent in accordance with this Article
II, cash in the aggregate amount required to make the cash payments specified
in Section 2.01, in respect of (i) the Target Common Stock issued and
outstanding at the Effective Time (other than Dissenting Shares and shares
canceled in accordance with Section 2.01(d)) and (ii) the Target Preferred
Stock issued and outstanding at the Effective Time (other than Dissenting
Shares and shares canceled in accordance with Section 2.01(d)), such sum being
hereinafter referred to as the "Exchange Fund". Subject to Section 2.02(h), the
Exchange Agent shall, pursuant to irrevocable instructions from Parent, deliver
cash contemplated to be paid pursuant to Section 2.01 out of the Exchange Fund.
(b) Exchange Procedures. Promptly after the Effective
Time and subject to Section 2.02(h), Parent shall instruct the Exchange Agent
to mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Target Stock (the "Certificates") (i) a letter of transmittal (which shall be
in customary form and specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for the consideration payable
therefor pursuant to Section 2.01. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such duly executed letter of
transmittal and such other documents as may be required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration which such holder has the right to
receive in respect of the shares of Target Stock formerly represented by such
Certificates, less that portion of the Merger Consideration held in escrow
pursuant to Section 2.02(h) hereof. The surrendered Certificates shall then be
marked canceled. In addition, the holder of such Certificate subsequently may
receive cash in accordance with the escrow provisions of Article IX. In the
event of a transfer of ownership
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of shares of Target Stock which is not registered in the transfer records of
Target, cash representing the consideration payable pursuant to Section 2.01
may be paid to a transferee if the Certificates representing such shares of
Target Stock are presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.02, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the consideration specified in this Article II. No interest will be
paid or will accrue on any cash payable to holders of Certificates pursuant to
the provisions of this Article II.
(c) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by Parent, on a
daily basis, provided that any such investment is guaranteed as to payment of
principal and interest by the federal government of the United States. Any
interest and other income resulting from such investments shall be paid to
Target Stockholders.
(d) No Further Rights in Target Stock. All consideration
paid upon conversion of the shares of Target Stock in accordance with the terms
hereof shall be deemed to have been paid in full satisfaction of all rights
pertaining to such shares of Target Stock.
(e) [Intentionally Omitted]
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of Target Stock for
one year after the Effective Time shall be delivered to Parent, upon demand,
and, subject to Section 2.02(g), any holders of Target Stock who have not
theretofore complied with this Article II shall thereafter look only to Parent
for the consideration therefor specified in this Article II.
(g) No Liability. Neither Parent nor the Surviving
Corporation shall be liable to any Target Stockholders for any cash delivered
to a public official following termination of the Exchange Fund pursuant to any
applicable abandoned property, escheat or similar Law.
(h) Escrow. Notwithstanding the foregoing, at the
Effective Time, five percent (5%) of the aggregate Merger Consideration payable
to Target Stockholders pursuant to Section 2.01 hereof as a result of the
Merger shall be segregated and deducted therefrom and established as an escrow
amount (the "Parent Escrow Amount"). In addition, at the Effective Time, three
hundred and thirty-three one-thousandths percent (.333%) of the aggregate
Merger Consideration payable to the Target Stockholders pursuant to Section
2.01 hereof as a result of the Merger shall be segregated and deducted
therefrom and established as an escrow amount (the "Representative Escrow
Amount"). The Parent Escrow Amount (together with five percent (5%) of any
shares of Parent Common Stock issued upon exercise of any Target Option between
the Effective Time and the Expiration Date) and the Representative Escrow
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Amount (together with three hundred and thirty-three one-thousandths percent
(.333%) of any shares of Parent Common Stock issued upon exercise of any Target
Option between the Effective Time and the Expiration Date) shall be held in
accordance with and subject to the provisions of Article IX of this Agreement.
The Parent Escrow Amount (together with five percent (5%) of any shares of
Parent Common Stock issued upon exercise of any Target Option between the
Effective Time and the Expiration Date) shall be held as collateral for the
indemnification obligations of the Persons who were holders of Target Stock and
Target Options immediately prior to the Effective Time under Article IX of this
Agreement. The Representative Escrow Amount (together with three hundred and
thirty-three one-thousandths percent (.333%) of any shares of Parent Common
Stock issued upon exercise of any Target Option between the Effective Time and
the Expiration Date) shall be held for the purpose of paying certain costs and
expenses of the Representative (as defined below) in performing his/her
obligations under Article IX.
(i) Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond in
such reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the consideration payable (subject to Section 2.02(h)) in respect
thereof pursuant to this Agreement.
SECTION 2.03. Stock Transfer Books. At the Effective Time, the stock
transfer books of Target shall be closed and there shall be no further
registration of transfers of shares of Target Stock thereafter on the records
of Target. On or after the Effective Time, any Certificates presented to the
Exchange Agent or Parent for any reason shall be canceled and exchanged into
the consideration therefor specified in this Article II in accordance with the
terms of this Agreement.
SECTION 2.04. Stock Options. (a) All options (the "Target Options")
under the Target's 1995 Stock Option Plan and 1996 Stock Incentive Plan
(together, the "Target Stock Option Plan"), outstanding at the Effective Time,
whether or not exercisable, whether or not vested, and whether or not
performance-based, shall remain outstanding following the Effective Time,
except that, in accordance with the amendments to the Target Options for
Messrs. Berger, Foley, Gonzalez and Rosen, each of which is dated January 30,
1997 under the Target Stock Option Plan, the Target Options for Messrs.
Berger, Foley, Gonzales and Rosen shall be fully exercisable immediately prior
to the Effective Time. At the Effective Time, the Target Options shall, by
virtue of the Merger and without any further action on the part of the holders
thereof or the Target, be assumed by Parent. From and after the Effective Time,
all references to the Target in the Target Stock Option Plan and the applicable
stock option agreements issued thereunder shall be deemed to refer to Parent,
which shall have assumed the Target Stock Option Plan as of the Effective Time
by virtue of this Agreement
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and without any further action. Each Target Option assumed by Parent (each a
"Substitute Option") shall be exercisable upon the same terms and conditions as
under the applicable Target Stock Option Plan and the applicable option
agreement issued thereunder, except that (i) each such Target Option shall be
exercisable for, and represent the right to acquire, that whole number of
shares of Parent Common Stock (rounded up or down to the nearest whole share)
equal to the number of shares of Target Common Stock subject to such Target
Option multiplied by the Exchange Ratio (as defined below); (ii) the option
price per share of Parent Common Stock shall be an amount equal to the option
price per share of Target Common Stock subject to such Target Option in effect
immediately prior to the Effective Time divided by the Exchange Ratio (the
option price per share, as so determined, being rounded upward to the nearest
full cent); and (iii) with respect to any Target Option which is
performance-based, the performance targets shall be adjusted following the
Effective Time in the good faith judgment of the Board of Directors of Parent
to fairly reflect the impact, if any, of the Transactions; and (iv) in the case
of any Substitute Option that remains unexercised as of the termination of the
Escrow Period (as defined below), the number of shares of Parent Common Stock
issuable upon the exercise of such Substitute Options shall be reduced in
proportion to any reduction in the number of shares of Parent Common Stock
received by holders of the Substitute Options assumed by Parent which are
exercised prior to the Expiration Date as a result of any distribution made to
Parent pursuant to Article IX of this Agreement. No payment shall be made for
fractional interests of Parent Common Stock represented by the Substitute
Options.
(b) As soon as practicable after the Effective Time,
Parent shall deliver to each holder of an outstanding Target Option an
appropriate notice setting forth such holder's rights pursuant thereto and such
Target Option shall continue in effect on the same terms and conditions
(including any antidilution provisions, and subject to the adjustments required
by this Section 2.04 after giving effect to the Merger). Parent shall comply
with the terms of all such Target Options and ensure, to the extent required
by, and subject to the provisions of, the Target Stock Option Plan that Target
Options which qualified as incentive stock options under Section 422 of the
Code (as defined below) prior to the Effective Time continue to qualify as
incentive stock options after the Effective Time. Parent shall take all
corporate action necessary to reserve for issuance a sufficient number of
shares of Parent Common Stock for delivery upon exercise of Substitute Options
pursuant to the terms set forth in this Section 2.04. Following the Effective
Time, the shares of Parent Common Stock subject to Target Options will be
covered by an effective registration statement on Form S-8 (or any successor
form) or another appropriate form with the Securities and Exchange Commission
("SEC") and Parent shall use its Best Efforts to maintain the effectiveness of
such registration statement or registration statements for so long as
Substitute Options remain outstanding.
(c) If between the date of this Agreement and the
Effective Time, the outstanding shares of Parent Common Stock, Target Common
Stock or Target Preferred Stock shall have been changed into a different number
of shares or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange
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of shares, the Exchange Ratio shall be correspondingly adjusted to reflect such
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares.
SECTION 2.05. Escrow Approval. By adopting and approving this
Agreement, the Target Stockholders, except in respect of Dissenting Shares,
approve the Parent Escrow Agreement (as defined below) and the Representative
Escrow Agreement (as defined below), the appointment of the Escrow Agent to act
under the authority granted it under the Parent Escrow Agreement, the
Representative Escrow Agreement and this Agreement and the appointment of the
Representative (as defined below) to act on behalf of the Target Stockholders
and the holders of the Target Options under the terms of the Parent Escrow
Agreement and the Representative Escrow Agreement and this Agreement. If the
Representative ceases to be the Representative for any reason, he will be
replaced in accordance with the terms of the Parent Escrow Agreement.
SECTION 2.06. Appraisal Rights. Any issued and outstanding share of
Target Stock which has not been voted for the Merger and with respect to which
appraisal will have been properly demanded in accordance with Section 262 of
the Delaware Law ("Dissenting Shares") will not be converted into the right to
receive the consideration described in Section 2.01, and the holders thereof
will have only such rights as are provided in Section 262 of the Delaware Law,
unless and until the Target Stockholder withdraws such holder's demand for such
appraisal in accordance with the Delaware Law or otherwise loses such holder's
right to such appraisal. If a Target Stockholder withdraws such holder's demand
for appraisal or will otherwise lose the right to such appraisal, then, as of
the Effective Time or the occurrence of such event, whichever last occurs, such
holder's shares of Target Stock will cease to be Dissenting Shares and will be
converted into the consideration described in Section 2.01. Prior to the
Effective Time, Target will give Parent prompt notice of any written demands
for appraisal or withdrawals of demands for appraisal received by Target and,
except with the prior written consent of Parent, will not settle or offer to
settle any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE TARGET
Except as set forth in the disclosure schedule delivered by
Target and signed by Target, Parent and Parent Sub for identification prior to
the execution and delivery of this Agreement (the "Target Disclosure
Schedule"), which shall identify exceptions by specific section references, the
Target hereby represents and warrants to Parent and Parent Sub that:
SECTION 3.01. Corporate Organization and Qualification; Subsidiaries.
Each of Target and Celcore International, Inc. (Delaware), a Delaware
corporation, and Celcore International, Inc. (Mauritius), a Republic of
Mauritius corporation (the "Target Subsidiaries"), is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority to own,
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lease and operate its properties and to carry on its business as it is now
being conducted. Each of Target and the Target Subsidiaries is duly qualified
or licensed as a foreign corporation to do business, and is in good standing,
in each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed
and in good standing that would not, individually or in the aggregate, have a
Material Adverse Effect. As used in this Agreement, the term "Material Adverse
Effect" means with respect to any Person, any change or effect that is, or is
reasonably likely to be, materially adverse to the financial condition,
business or results of operations of such Person and its subsidiaries, taken as
a whole. Other than the Target Subsidiaries, Target does not have any
subsidiaries. Neither Target nor either Target Subsidiary owns directly or
indirectly any voting equity or similar voting interest in, or any interest
convertible into or exchangeable or exercisable for, any voting equity or
similar voting interest in, any corporation, partnership, joint venture or
other business association or entity. Target is not, and has not been within
the two years immediately preceding the date hereof, a subsidiary or division
of another corporation, nor has Target within such time owned, directly or
indirectly, any shares of Parent Common Stock.
SECTION 3.02. Certificate of Incorporation and Bylaws. The Target has
heretofore furnished or made available to Parent a complete and correct copy of
its and the Target Subsidiaries' certificates of incorporation and bylaws, each
as amended to date. Neither the Target nor either of the Target Subsidiaries is
in violation of any provision of its certificate of incorporation or bylaws.
SECTION 3.03. Capitalization. The authorized capital stock of the
Target consists of 50,000,000 shares of Target Common Stock and 14,000,000
shares of Target Preferred Stock, consisting of 4,500,000 shares of Series A
Preferred Stock, 3,000,000 shares of Series B Preferred Stock, 4,000,000 shares
of Series C Preferred Stock and 2,500,000 shares of Series D Preferred Stock.
As of the date of this Agreement, (a) 5,591,250 shares of Target Common Stock
and (b) 4,500,000, 3,000,000, 3,038,045.66 and 2,004,227 shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series
D Preferred Stock, respectively (a total of 12,542,273 shares of Target
Preferred Stock), were issued and outstanding, all of which are validly issued,
fully paid and nonassessable and not subject to preemptive rights, and (c)
2,460,250 shares of Target Common Stock are issuable pursuant to outstanding
Target Options. Each share of Target Preferred Stock is convertible into one
share of Target Common Stock. All of the issued and outstanding shares of
capital stock of the Target Subsidiaries are held by Target and are validly
issued, fully paid and nonassessable and not subject to preemptive rights. No
shares of capital stock of the Target have been acquired by the Target that are
subject to outstanding pledges by the Target to secure the future payment of
some or all of the purchase price for such shares. Other than the Target
Options, as of the date of this Agreement, there are no options, warrants or
other rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of the Target obligating the Target to
issue or sell any shares of capital stock of, or other equity interests in, the
Target or the Target Subsidiaries. Between August 31, 1997 and the date of
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this Agreement, no shares of Target Common Stock have been issued by the
Target, except pursuant to the exercise of the stock options, stock incentive
rights and warrants described above that were outstanding on August 31, 1997,
in each case in accordance with their respective terms. All shares of Target
Common Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. Other
than as set forth in Target's certificate of incorporation (including the
Target Preferred Stock certificates of designation, each a "Certificate of
Designation"), there are no outstanding contractual obligations of the Target
to repurchase, redeem or otherwise acquire any shares of Target Stock. Target
has not made any distributions to any Target Stockholders or participated in or
effected any issuance, exchange or retirement of shares of Target Common Stock,
or otherwise changed the equity interests of Target Stockholders, in
contemplation of effecting the Merger within the two years immediately
preceding the date hereof. Target has not reacquired during the two years
immediately preceding the date of this Agreement any shares of Target Common
Stock.
SECTION 3.04. Authority Relative to This Agreement. The Target has all
necessary corporate power and authority to execute and deliver this Agreement
and, with respect to the Merger, upon the approval and adoption of the Merger
by the Target Stockholders in accordance with this Agreement and Delaware Law,
to perform its obligations hereunder and to consummate the Transactions. The
execution and delivery of this Agreement by the Target and the consummation by
the Target of the Transactions (including the Amendments (as defined in Section
3.05)) have been duly and validly authorized by all necessary corporate action
and no other corporate proceedings on the part of the Target are necessary to
authorize this Agreement or to consummate the Transactions (other than, with
respect to the Merger, the approval and adoption of this Agreement and the
Amendments by the Target Stockholders as described in Section 3.17 and
recordation of an appropriate Certificate of Merger with the Secretary as
required by Delaware Law). This Agreement has been duly and validly executed
and delivered by the Target and, assuming the due authorization, execution and
delivery of this Agreement by Parent and Parent Sub, constitutes a legal, valid
and binding obligation of the Target, enforceable against the Target in
accordance with its terms.
SECTION 3.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by the Target do not, and the
performance of this Agreement by the Target will not, subject to, (x) with
respect to the Merger, obtaining the requisite approval and adoption of the
Merger and the Amendments by the Target Stockholders in accordance with its
certificate of incorporation (including its Certificates of Designations), this
Agreement and Delaware Law, (y) the filing of certificates of amendment
relating to the amendments to the Target's certificate of incorporation
(including its Certificates of Designations) with the Secretary of State of
Delaware, which amendments shall remove the thirty (30) day period for notice
required under Article Fourth, Section E(iv)(e) of the certificate of
incorporation of Target and Section D(iv)(e) of each of the Certificates of
Designations (the "Amendments") and (z) obtaining any necessary Consents from
third parties and permits from Governmental
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Authorities and making the filings described in Section 3.05(b) and Section
3.05(b) of the Target Disclosure Schedule, (i) subject to the adoption of the
Amendments, conflict with or violate the certificate of incorporation or bylaws
of the Target or the Target Subsidiaries, (ii) conflict with or violate any Law
applicable to the Target or the Target Subsidiaries or by which any property or
asset of the Target or the Target Subsidiaries is bound or affected, or (iii)
except as specified in Section 3.20 of the Target Disclosure Schedule, result
in any Breach of or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of the
Target or the Target Subsidiaries or require the Consent of any third party
pursuant to, any note, bond, mortgage, indenture, Contract, license, permit,
franchise or other instrument or obligation to which the Target or the Target
Subsidiaries is a party other than with respect to breaches or defaults which
would not constitute a Material Adverse Effect.
(b) The execution and delivery of this Agreement by the
Target do not, and the performance of this Agreement and the Transactions
contemplated hereby by the Target will not, require any Consent or permit of,
or filing with or notification to, any United States (federal, state or local)
or foreign government, or governmental, regulatory or administrative authority,
agency or commission or court of competent jurisdiction ("Governmental
Authority"), except (i) for applicable requirements, if any, of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Securities Act of
1933, as amended (the "Securities Act"), state securities or "blue sky" laws
("Blue Sky Laws"), the pre-merger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act"), and filing and
recordation of an appropriate Certificate of Merger with the Secretary as
required by Delaware Law or (ii) as specified in Section 3.05(b) of the Target
Disclosure Schedule.
SECTION 3.06. Permits; Compliance. Each of the Target and the Target
Subsidiaries is in possession of all Governmental Authorizations necessary for
each of the Target and the Target Subsidiaries to own, lease and operate its
properties or to carry on its business as it is now being conducted (the
"Target Permits") and, as of the date hereof, no suspension or cancellation of
any of the Target Permits is pending or, to the Knowledge of the Target,
Threatened, except in each case for such Governmental Authorizations, the
absence of which would not have a Material Adverse Effect. Neither the Target
nor the Target Subsidiaries is in conflict with, or in default or violation of,
(i) any Law applicable to it or by which any property or asset of it is bound
or affected, or (ii) any Target Permit, other than a conflict with, or default
or violation of, such Laws or Target Permits that would not have a Material
Adverse Effect on Target.
SECTION 3.07. Financial Statements; Books and Records. (a) Target has
delivered to Parent: (i) (A) audited balance sheets of the Target and
statements of stockholders' (deficit) equity as at December 31, 1994, 1995 and
1996; (B) audited statements of operations and statements of cash flows for the
years ended December 31, 1994, 1995, 1996; and (C) notes
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to such financial statements (the "Notes") together with a report thereon of
KPMG Peat Marwick LLP, independent accountants; and (ii) (A) unaudited balance
sheets of the Target and statements of stockholders' (deficit) equity as at
August 31, 1996 and 1997; and (B) unaudited statements of operations and
statements of cash flows for the eight months ended August 31, 1996 and 1997
and (c) Notes (such financial statements referred to in clauses (i) and (ii)
together referred to as the "Financial Statements"). Such Financial Statements
and Notes fairly present the financial condition and the results of operations,
changes in stockholders' equity, and cash flow of the Target as at the
respective dates of and for the periods referred to in such Financial
Statements, all in accordance with GAAP, except that the unaudited financial
statements referred to in clause (ii) may be subject to normal year-end
adjustments. The Financial Statements reflect the consistent application of
such accounting principles throughout the periods involved. No financial
statements of any Person other than the Target are required by GAAP to be
included in the Financial Statements of the Target.
(b) The books of account, minute books, stock record
books, and other records of the Target and each Target Subsidiary, all of which
have been made available to Parent, are complete and correct in all material
respects and have been maintained in accordance with sound business practices,
including the maintenance of an adequate system of internal controls. The
minute books of the Target and each Target Subsidiary contain accurate and
complete records of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of
Directors of the Target and each Target Subsidiary, as appropriate, and no
meeting of any such stockholders, Board of Directors, or committee has been
held for which minutes have not been prepared and are not contained in such
minute books. At the Closing, all of those books and records will be in the
possession of the Target.
SECTION 3.08. Absence of Certain Changes or Events. Since August 31,
1997, each of the Target and the Target Subsidiaries has conducted business
only in the Ordinary Course of Business and, since August 31,1997, there has
not been (a) any event or events (whether or not covered by insurance),
individually or in the aggregate, having a Material Adverse Effect, (b) any
material change by the Target in its accounting methods, principles or
practices, (c) any entry by the Target or the Target Subsidiaries into any
Contract or transaction material to the Target or the Target Subsidiaries,
except in the Ordinary Course of Business, (d) any declaration, setting aside
or payment of any dividend or distribution in respect of any capital stock of
either the Target or the Target Subsidiaries, (e) any redemption, purchase or
other acquisition (including issuance or granting of any rights to acquire) of
any of their securities or (f) other than pursuant to the Target Plans and the
Target Other Benefit Obligations (as defined in Section 3.10 hereof), any
increase in or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option, stock purchase
or other employee benefit plan, except in the Ordinary Course of Business.
SECTION 3.09. Absence of Litigation. Except as set forth in Section
3.09 of the Target Disclosure Schedule, there is no claim or Proceeding pending
or, to Target's
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Knowledge, Threatened against the Target or the Target Subsidiaries, before any
arbitrator or Governmental Authority, (a) to be asserted or instituted against
Target or the Target Subsidiaries, (b) which directly relates to the Target,
the Target Subsidiaries or any of their properties, assets or business or to
which the Target or Target Subsidiaries is a party, including without
limitation, the Intellectual Property Assets, (c) that affects any Target
Stockholders' Target Stock, (d) which seeks to and is reasonably likely to
significantly delay or prevent the consummation of the Merger, or (e) which
arises out of a warranty covering any of the Target Products or Target or the
Target Subsidiaries' other current or past goods or services other than
warranty claims in the Ordinary Course of Business. Neither the Target or the
Target Subsidiaries nor any property or asset of the Target or the Target
Subsidiaries is in violation of any Order against Target or the Target
Subsidiaries having, individually or in the aggregate, a Material Adverse
Effect.
SECTION 3.10. Employee Benefits. (a) As used in this Section 3.10, the
following terms have the meanings set forth below.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, and regulations and rules issued pursuant to that Act, or any
successor Law.
"ERISA Affiliate" means any Person (including the Target Subsidiaries)
that, together with the Target, would be treated as a single employer
under Code Section 414.
"Multiemployer Plan" has the meaning given in ERISA Section 3(37)(A).
"Other Benefit Obligations" means all obligations, arrangements, or
customary practices, whether or not legally enforceable, to provide
benefits, other than salary, as compensation for services rendered, to
present or former directors, employees, or agents, other than
obligations, arrangements, and practices that are Plans. Other
Benefit Obligations include consulting agreements under which the
compensation paid does not depend upon the amount of service rendered,
sabbatical policies, severance payment policies, dependent care
assistance plans, cafeteria plans and fringe benefits within the
meaning of Code Section 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Pension Plan" has the meaning given in ERISA Section 3(2)(A).
"Plan" has the meaning given in ERISA Section 3(3).
"Plan Sponsor" has the meaning given in ERISA Section 3(16)(B).
"Qualified Plan" means any Plan that meets or purports to meet the
requirements of Code Section 401(a).
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"Target Other Benefit Obligation" means an Other Benefit Obligation
owed, adopted, or followed by the Target or an ERISA Affiliate.
"Target Plan" means all Plans of which the Target or an ERISA
Affiliate is or was a Plan Sponsor, or to which the Target or an ERISA
Affiliate otherwise contributes or has contributed, or in which the
Target or an ERISA Affiliate otherwise participates or has
participated. All references to Plans are to Target Plans unless the
context requires otherwise.
"Target VEBA" means a VEBA whose members include employees of the
Target or any ERISA Affiliate.
"Title IV Plans" means all Pension Plans that are subject to Title IV
of ERISA, 29 U.S.C. Section 1301 et seq., other than Multiemployer
Plans.
"VEBA" means a voluntary employees' beneficiary association under Code
Section 501(c)(9).
"Welfare Plan" has the meaning given in ERISA Section 3(1).
(b) (i) Section 3.10(b)(i) of the Target Disclosure Schedule
contains a complete and accurate list of all Target Plans and Target Other
Benefit Obligations, and identifies as such all Target Plans that are Qualified
Plans.
(ii) Section 3.10(b)(ii) of the Target Disclosure
Schedule contains a complete and accurate list of (A) all
ERISA Affiliates and (B) all Plans of which any such ERISA
Affiliate is or was a Plan Sponsor, in which any such ERISA
Affiliate participates or has participated, or to which any
such ERISA Affiliate contributes or has contributed within the
three years preceding the date of this Agreement.
(c) Target has delivered to Parent:
(i) all documents that set forth the terms of
each Target Plan or Target Other Benefit Obligation and of any
related trust, including (A) all plan descriptions and summary
plan descriptions of Target Plans for which the Target is
required to prepare and distribute plan descriptions and
summary plan descriptions, and (B) all summaries and
descriptions furnished to participants and beneficiaries
regarding Target Plans and Target Other Benefit Obligations
for which a plan description or summary plan description is
not required;
(ii) all personnel, payroll, and employment
manuals and policies;
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(iii) a written description of any Target Plan or
Target Other Benefit Obligation that is not otherwise in
writing;
(iv) all insurance policies purchased by or to
provide benefits under any Target Plan;
(v) all Contracts with third party
administrators, actuaries, investment managers, consultants,
and other independent contractors that relate to any Target
Plan or Target Other Benefit Obligation;
(vi) all reports submitted within the three years
preceding the date of this Agreement by third party
administrators, actuaries, investment managers, consultants,
or other independent contractors with respect to any Target
Plan or Target Other Benefit Obligation;
(vii) the Form 5500 filed in each of the most
recent three plan years with respect to each Target Plan,
including all schedules thereto and the opinions of
independent accountants;
(viii) all notices that were given by the Internal
Revenue Service or the Department of Labor to the Target, any
ERISA Affiliate, or any Target Plan within the three years
preceding the date of this Agreement; and
(ix) with respect to Qualified Plans, the most
recent determination letter for each such Target Plan and the
most recent financial statement.
(d) In addition:
(i) The Target and each ERISA Affiliate has
performed all of their material obligations to provide
benefits under all Target Plans and Target Other Benefit
Obligations. The Target and each ERISA Affiliate has made
appropriate entries in its financial records and statements
for all obligations and liabilities under such Plans and
Obligations that have accrued but are not due.
(ii) No statement, either written or oral, has
been made by the Target or any ERISA Affiliate to any Person
with regard to any Plan or Other Benefit Obligation that was
not in accordance with the Plan or Other Benefit Obligation
and that could have a Material Adverse Effect to the Target,
any ERISA Affiliate or Parent.
(iii) The Target and each ERISA Affiliate, with
respect to all Target Plans and Target Other Benefit
Obligations, is, and each Target Plan and
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Target Other Benefit Obligation is, in full compliance with
ERISA, the Code, and other applicable Laws including the
provisions of such Laws expressly mentioned in this Section
3.10, except where any failures to comply alone or in the
aggregate would not have a Material Adverse Effect to the
Target Plan or Target Other Benefit Obligation (or any
participant or beneficiaries thereunder), the Target, any
ERISA Affiliate or Parent. Any bonding required with respect
to any Target Plan in accordance with applicable provisions of
ERISA has been obtained and is in full force and effect.
(A) No transaction prohibited by ERISA
Section 406 and no "prohibited transaction" under
Code Section 4975(c) has occurred with respect to any
Target Plan.
(B) Neither the Target nor any ERISA
Affiliate has any known liability to the Internal
Revenue Service with respect to any Plan, including
any liability imposed by Chapter 43 of the Code.
(C) Neither the Target nor any ERISA
Affiliate has any known liability under ERISA Section
502.
(D) All filings required by ERISA and
the Code as to each Target Plan have been timely
filed, and all material notices and disclosures to
participants required by either ERISA or the Code
have been timely provided.
(E) All contributions and payments made
or accrued with respect to all Target Plans and
Target Other Benefit Obligations are deductible under
Code Section 162 or Section 404.
(iv) With respect to all Target Plans and Target
Other Benefit Obligations, all applicable contributions and
premium payments for all periods ending prior to the Closing
Date shall be or have been made or accrued prior to the
Closing Date in accordance with past practice. No Target Plan
has any unfunded liability. The financial records of each
funded Target Plan have been kept in accordance with GAAP.
(v) Since December 31, 1996, there has been no
establishment or amendment of any Target Plan or Target Other
Benefit Obligation.
(vi) To the Knowledge of the Target, no event has
occurred or circumstance exists that could result in a
material increase in premium costs of Target Plans and Target
Other Benefit Obligations that are insured, or a material
increase in benefit costs of such Plans and Obligations that
are self-insured.
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(vii) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or Proceeding
involving, any Target Plan or Target Other Benefit Obligation
is pending or, to Target's or any ERISA Affiliate's Knowledge,
is Threatened.
(viii) Each Qualified Plan of the Target or any
ERISA Affiliate is qualified in form and operation under Code
Section 401(a); each trust for each such Plan is exempt from
federal income tax under Code Section 501(a). To Target's
Knowledge, no event has occurred or circumstance exists that
will or could give rise to disqualification or loss of
tax-exempt status of any such Plan or trust. Each Qualified
Plan of the Target or any ERISA Affiliate has received a
favorable determination letter from the Internal Revenue
Service evidencing compliance with the relevant provisions of
the Tax Reform Act of 1986.
(ix) No Target Plan is subject to Title IV of
ERISA, and neither Target nor any ERISA Affiliate has any
liability with respect to any Title IV Plan.
(x) Neither the Target nor any ERISA Affiliate
has ever established, maintained, or contributed to or
otherwise participated in, or had an obligation to maintain,
contribute to, or otherwise participate in, any Multiemployer
Plan.
(xi) Neither the Target nor any ERISA Affiliate
has any liability (including current or potential withdrawal
liability) with respect to any Multiemployer Plan.
(xii) Neither the Target nor any ERISA Affiliate
has ever established, maintained or contributed to any VEBA,
and neither the Target nor any ERISA Affiliate has any
liability with respect to any VEBA.
(xiii) Except to the extent required under ERISA
Section 601 et seq. and Code Section 4980B, neither the Target
nor any ERISA Affiliate provides health or welfare benefits
for any retired or former employee or is obligated to provide
health or welfare benefits to any active employee following
such employee's retirement or other termination of service.
(xiv) The Target and each ERISA Affiliate has
complied in all material respects with the provisions of ERISA
Section 601 et seq. and Code Section 4980B and has also
complied in all material respects with the applicable
provisions of ERISA Section 701 et seq. and Subtitle K of the
Code.
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(xv) No payment that is owed or may become due to
any Person will be non-deductible to the Target or subject to
tax under Code Section 280G or Section 4999; nor will the
Target be required to "gross up" or otherwise compensate any
such Person because of the imposition of any excise tax on a
payment to such Person.
(xvi) The consummation of the Transactions will not
result in the payment, vesting, or acceleration of any
benefit.
SECTION 3.11. Labor Matters. (a) Section 3.11 of the Target Disclosure
Schedule contains a complete and accurate list of the following information for
each employee or director of the Target or the Target Subsidiaries, including
each employee on leave of absence or layoff status: name; job title; current
compensation paid or payable and any change in compensation since December 31,
1996; vacation accrued; and service credited for purposes of vesting and
eligibility to participate under the Target Plans and Target Other Benefit
Obligations (as defined in Section 3.10 hereof).
(b) To Target's Knowledge, no officer or key employee of
the Target or the Target Subsidiaries is a party to, or is otherwise bound by,
any agreement or arrangement, including any confidentiality, noncompetition, or
proprietary rights agreement, between such officer or employee and any other
Person ("Proprietary Rights Agreement") that would materially and adversely
affect (i) the performance of his duties as an officer or employee of the
Target or the Target Subsidiaries, or (ii) the ability of Target or the Target
Subsidiaries to conduct their business, including any Proprietary Rights
Agreement with Target or the Target Subsidiaries by any such employee or
director. To the Target's Knowledge, no officer or other key employee of the
Target or the Target Subsidiaries intends to terminate his employment with the
Target or the Target Subsidiaries.
(c) Neither the Target nor the Target Subsidiaries has
been or is a party to any collective bargaining or other labor Contract. There
has not been, there is not presently pending or existing, and, to Target's
Knowledge, there is not Threatened, (a) any strike, slowdown, picketing, work
stoppage, or employee grievance process, (b) any Proceeding against either the
Target or the Target Subsidiaries relating to the alleged violation of any Law
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations
Board, the Equal Employment Opportunity Commission, or any comparable
Governmental Authority, organizational activity, or other labor or employment
dispute against or affecting any of the Target or the Target Subsidiaries or
(c) any application for certification of a collective bargaining agent. There
is no lockout of any employees by the Target or the Target Subsidiaries, and no
such action is contemplated by the Target or the Target Subsidiaries. Each of
the Target and the Target Subsidiaries has complied in all respects with all
Laws relating to employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, occupational safety and health,
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and plant closing, except for any noncompliance alone or in the aggregate which
would not have a Material Adverse Effect on Target, the Target Subsidiaries or
Parent.
SECTION 3.12. Intellectual Property Assets. (a) The term
"Intellectual Property Assets" includes:
(i) all business names, designs, trade names,
trademarks or service marks, and any applications and
registrations relating thereto, used or intended to be used by
the Target or the Target Subsidiaries in relation to its goods
or services, including, without limitation, all rights
associated with those names recited in Schedule 3.12(a)(i) of
the Target Disclosure Schedule (collectively, "Marks");
(ii) all patents and patent applications on any
subject matter, which have been developed, designed, made,
conceived or reduced to practice jointly or individually by
any employee of, or any Person retained by, the Target or the
Target Subsidiaries, or which have been otherwise acquired by
the Target or the Target Subsidiaries within the scope of such
employment or retention, including, without limitation, those
patents and patent applications recited in Schedule
3.12(a)(ii) of the Target Disclosure Schedule (collectively,
"Patents");
(iii) all copyrights in both published and
unpublished works, which have been authored or placed in a
tangible medium either jointly or individually by any employee
of, or any Person retained by, the Target or the Target
Subsidiaries within the scope of such employment or retention,
or which have been otherwise acquired by the Target or the
Target Subsidiaries (collectively, "Copyrights");
(iv) all rights in mask works, which have been
developed, designed, made, conceived or reduced to practice
either jointly or individually by any employee of, or any
Person retained by, the Target or the Target Subsidiaries
within the scope of such employment or retention, or which
have been otherwise acquired by the Target or the Target
Subsidiaries (collectively, "Rights in Mask Works");
(v) all trade secrets, not commonly known or
available to the public which derive economic value, actual or
potential, from not being generally known to, or ascertainable
by proper means by, other Persons who can obtain economic
value from its disclosure or use, including confidential or
proprietary information, know-how, processes, methods,
research, technical information, data, improvements, ideas,
inventions, discoveries, techniques, developments, plans,
schematics, drawings, flowcharts, prints, specifications,
software
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programs, source and executable codes, development and
marketing plans, strategies, forecasts, customer information,
customer lists and the like, whether or not commercial,
experimental or patentable, which have been developed,
designed, made, conceived or reduced to practice jointly or
individually by any employee of, or Person retained by, the
Target or the Target Subsidiaries within the scope of such
employment or retention, or which have been otherwise acquired
by the Target or the Target Subsidiaries (collectively, "Trade
Secrets");
(vi) all goodwill associated with the Marks,
Patents, Copyrights, Rights in Mask Works and Trade Secrets,
all remedies and protections afforded under the laws of all
applicable jurisdictions against violations or infringements
thereof, as well as all rights of the Target or the Target
Subsidiaries under any Contract relating to the Marks,
Patents, Copyrights, Rights in Mask Works and Trade Secrets;
and
(vii) all attorney work files owned by the Target
or the Target Subsidiaries relating to the foregoing.
(b) Agreements. Section 3.12(b) of the Target Disclosure
Schedule contains a complete and accurate list and summary description,
including any royalties paid or received by the Target or the Target
Subsidiaries, of all Contracts relating to the Intellectual Property Assets to
which the Target or the Target Subsidiaries is a party or by which the Target
or the Target Subsidiaries is bound, except for any license implied by the sale
of a product and perpetual, paid-up licenses for commonly available software
programs with a value of less than $5,000.00 under which the Target or the
Target Subsidiaries is the licensee. There are no outstanding or Threatened
disputes or disagreements with respect to any such Contract.
(c) Intellectual Property Assets Necessary for the
Target's Business
(i) The Intellectual Property Assets are all
those necessary for the operation of the Target's businesses
as they are currently conducted. The Target or one of the
Target's Subsidiaries is the owner of all right, title, and
interest in and to each of the Intellectual Property Assets,
free and clear of all liens, security interests, charges,
encumbrances, equities, and other than those Liens referred to
in Section 3.19 of the Target Disclosure Schedule hereof and
has the right to make, have made, develop, use, sell or
otherwise employ any technology or product of the Target
without payment to a third party and without a claim of
infringement or other challenge except as otherwise set forth
in Section 3.19 of the Target Disclosure Schedule.
(ii) All former and current employees of the
Target or the Target Subsidiaries, and any Person otherwise
retained by the Target or the Target
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Subsidiaries, on a consulting or other non-employee basis,
have executed written Contracts with the Target or the Target
Subsidiaries that assign all rights to any inventions,
improvements, discoveries, or information relating to the
Intellectual Property Assets to the Target or one of the
Target's Subsidiaries. To Target's Knowledge, no employee of
the Target or the Target Subsidiaries has entered into any
Contract that restricts or limits in any way the scope or type
of work in which the employee may be engaged or that requires
the employee to transfer, assign or disclose information
concerning his work to anyone other than the Target or one of
the Target Subsidiaries.
(d) Marks
(i) Section 3.12(a)(i) of the Target Disclosure
Schedule contains a complete and accurate list and summary
description of all Marks. The Target is the owner of all
right, title, and interest in and to each of the Marks, free
and clear of all liens, security interests, charges,
encumbrances, equities and other adverse claims.
(ii) All Marks that have been registered with the
United States Patent and Trademark Office are currently in
compliance with all Laws (including the timely
post-registration filing of affidavits of use and
incontestability and renewal applications), are valid and
enforceable, and are not subject to any maintenance fees or
actions falling due within ninety days after the Effective
Time.
(iii) No Mark has been or is now involved in any
opposition, invalidation, or cancellation, and no such action
is Threatened with the respect to any of the Marks.
(iv) There is no trademark or trademark
application of any third party that may or does interfere with
any of the Marks.
(v) No Mark is infringed or has been challenged
or Threatened in any way. None of the Marks used by the Target
or Target's Subsidiaries infringes or is alleged to infringe
any trade name, trademark or service mark of any third party.
(vi) All products and materials containing a Mark
bear the proper federal registration notice where required by
Law.
(e) Patents
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(i) Section 3.12(a)(ii) of the Target Disclosure
Schedule contains a complete and accurate list and summary
description of all Patents. The Target is the owner of all
right, title and interest in and to each of the Patents, free
and clear of all liens, security interests, charges,
encumbrances, entities, and other adverse claims.
(ii) All of the issued Patents are currently in
compliance with all Laws (including payment of filing,
examination and maintenance fees), are valid and enforceable,
and are not subject to any maintenance fees or actions falling
due within ninety days after the Effective Time.
(iii) No Patent has been or is now involved in any
interference, reissue, reexamination or opposition proceeding.
There is no patent or patent application of any third party
that may or does interfere with any of the Patents.
(iv) No Patent is infringed, or has been
challenged or Threatened in any way. None of the products
manufactured or sold, nor any method or process used, by the
Target or Target's Subsidiaries infringes or is alleged to
infringe any patent or other proprietary right of any third
party.
(v) All products made, used, or sold under the
Patents have been marked with the proper patent notice.
(f) Copyrights
(i) Section 3.12(a)(iii) of the Target Disclosure
Schedule contains a complete and accurate list and summary
description of all Copyrights that have been registered. The
Target is the owner of all right, title, and interest in and
to each of the Copyrights, free and clear of all liens,
security interests, charges, encumbrances, equities, and other
adverse claims.
(ii) All the Copyrights that have been registered
are currently in compliance with all Laws, are valid and
enforceable, and are not subject to any maintenance fees or
taxes or actions falling due within ninety days after the
Effective Time.
(iii) No Copyright is infringed or has been
challenged or Threatened in any way. None of the subject
matter of any of the Copyrights infringes or is alleged to
infringe any copyright of any third party, or is a derivative
work based on the work of a third party.
(iv) All works encompassed by the Copyrights have
been marked with the proper copyright notice, if any, required
by Law.
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(g) Trade Secrets
(i) With respect to each Trade Secret, the
written documentation relating to such Trade Secret is
accurate in all material respects.
(ii) The Target has taken all reasonable
precautions to protect the secrecy, confidentiality and value
of its Trade Secrets.
(iii) The Target has good title and an absolute
(but not necessarily exclusive) right to use the Trade
Secrets. The Trade Secrets have not been made public, and have
not been used, divulged or appropriated either for the benefit
of any Person (other than the Target) or to the detriment of
the Target. No Trade Secret is subject to any adverse claim or
has been challenged or Threatened in any way, or has been
improperly obtained from a third party.
SECTION 3.13. Taxes. (a) The Target (including the Target
Subsidiaries) has (i) filed all federal, state, local and foreign tax returns
required to be filed by it prior to the date of this Agreement (taking into
account extensions), (ii) paid or accrued all taxes shown to be due on such
returns and paid all applicable ad valorem and value added taxes as are due and
(iii) paid or accrued all taxes for which a notice of assessment or collection
has been received (other than amounts being contested in good faith by
appropriate Proceedings), except in the case of clause (i), (ii) or (iii) for
any such filings, payments or accruals which would not, individually or in the
aggregate, have a Material Adverse Effect. Neither the Internal Revenue Service
nor any other taxing authority has asserted any claim for taxes, or to the best
Knowledge of the Target, is Threatening to assert any claims for taxes; which
claims, individually or in the aggregate, could have a Material Adverse Effect.
The Target has open years for federal tax returns only as set forth in the
Section 3.13(a) of the Target Disclosure Schedule. The Target has withheld or
collected and paid over to the appropriate Governmental Authorities (or is
properly holding for such payment) all taxes required by Law to be withheld or
collected, except for amounts which would not, individually or in the
aggregate, have a Material Adverse Effect. The Target has not made an election
under Section 341(f) of the Code. There are no liens for taxes upon the assets
of the Target.
(b) [Intentionally Omitted]
SECTION 3.14. Environmental Matters. (a) For purposes of this
Agreement, the following terms shall have the following meanings: (i)
"Hazardous Substances" means (A) those substances defined in or regulated under
the following federal statutes and their state counterparts, as each may be
amended from time to time, and all regulations thereunder: the Hazardous
Materials Transportation Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Clean
Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal
Insecticide, Fungicide, and Rodenticide Act, the Toxic Substances Control Act
and the Clean Air Act; (B) petroleum
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<PAGE> 29
and petroleum products, byproducts and breakdown products including crude oil
and any fractions thereof; (C) natural gas, synthetic gas, and any mixtures
thereof; (D) polychlorinated biphenyls; and (E) any other chemicals, materials
or substances defined or regulated as toxic or hazardous or as a pollutant or
contaminant or as a waste under any applicable Environmental Law; and (ii)
"Environmental Laws" means any Law, now or hereafter in effect and as amended,
and any judicial or administrative interpretation thereof, including any
judicial or administrative Order or Consent, relating to pollution or
protection of the environment, health, safety or natural resources, including
without limitation, those relating to (A) releases or threatened releases of
Hazardous Substances or materials containing Hazardous Substances or (B) the
manufacture, handling, transport, use, treatment, storage or disposal of
Hazardous Substances or materials containing Hazardous Substances.
(b) Except as would not individually or in the aggregate
result in or be likely to result in any damages in excess of $500,000: (i) to
Target's Knowledge, the Target is and has been in material compliance with all
applicable Environmental Laws; (ii) the Target has obtained all material
permits, approvals, identification numbers, licenses or other authorizations
required under any applicable Environmental Laws ("Environmental Permits") and
is and has been in material compliance with their requirements; (iii) there are
no underground or aboveground storage tanks or any surface impoundments, septic
tanks, pits, sumps or lagoons in which Hazardous Substances are being or have
been treated, stored or disposed of on any owned or leased real property or on
any real property formerly owned, leased or occupied by the Target; (iv) there
is, to Target's Knowledge, no asbestos or asbestos-containing material on any
owned or leased real property in violation of applicable Environmental Laws;
(v) to Target's Knowledge, the Target has not released, discharged or disposed
of Hazardous Substances on any owned or leased real property or on any real
property formerly owned, leased or occupied by the Target and none of such
property is contaminated with any Hazardous Substances; (vi) the Target is not
undertaking, and has not completed, any investigation or assessment or remedial
or response action relating to any such release, discharge or disposal of or
contamination with Hazardous Substances at any site, location or operation,
either voluntarily or pursuant to the Order of any Governmental Authority or
the requirements of any Environmental Law; and (vii) there are no past, pending
or, to Target's Knowledge, Threatened actions, suits, demands, demand letters,
claims, liens, notices of non-compliance or violation, notices of liability or
potential liability, investigations, Proceedings, consent orders or consent
agreements relating in any way to Environmental Laws, any Environmental Permits
or any Hazardous Substances ("Environmental Claims") against the Target or any
of its property, and to Target's Knowledge, there are no circumstances that can
reasonably be expected to form the basis of any such Environmental Claim,
including without limitation with respect to any off-site disposal location
presently or formerly used by the Target or any of its predecessors.
(c) The Target has provided Parent or Parent Sub with
copies of any environmental reports, studies or analyses in its possession or
under its control relating to owned or leased real property or the operations
of the Target.
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SECTION 3.15. Target Products; Regulation. There have been no written
notices, citations or decisions by any Governmental Authority received by
Target or the Target Subsidiaries that any product produced, manufactured,
marketed or distributed at any time by the Target or the Target Subsidiaries
(the "Target Products") is defective or fails to meet any applicable standards
promulgated by any such Governmental Authority.
SECTION 3.16. Opinion of Financial Advisor. The Target has received
the written opinion of Donaldson, Lufkin & Jenrette Securities Corporation
("Target Banker") on the date of this Agreement, to the effect that the
consideration to be paid by Parent in the Merger is fair from a financial point
of view to the Target Stockholders as of the date thereof, and the Target will
promptly, after the date of this Agreement, deliver a copy of such opinion to
Parent. A copy of the Target Banker engagement letter, dated June 16, 1997, has
previously been delivered to Parent.
SECTION 3.17. Vote Required. The affirmative vote of a majority of the
then outstanding shares of Target Common Stock and the Series A Preferred Stock
voting together as a single class along with (i) an affirmative vote of the
holders of 60% of the shares of Series B Preferred Stock, (ii) an affirmative
vote of the holders of 60% of the shares of Series C Preferred Stock, and (iii)
an affirmative vote of the holders of 60% of the shares of Series D Preferred
Stock are the only votes of the holders of any class or series of capital stock
of the Target necessary to approve the Merger. The affirmative vote of a
majority of the then outstanding shares of Target Common Stock and the Series A
Preferred Stock voting together as a single class and an affirmative vote of
the majority of the holders of the shares of Series B Preferred Stock, Series C
Preferred Stock, and Series D Preferred Stock, each voting as a separate class,
are the only votes of the holders of any class or series of capital stock of
the Target necessary to approve the Amendments.
SECTION 3.18. Brokers. No broker, finder or investment banker (other
than Target Banker) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of the Target. The Target has heretofore furnished to Parent a
correct copy of all agreements between the Target and Target Banker pursuant to
which such firm would be entitled to any payment relating to the Transactions.
SECTION 3.19. Tangible Property. The Target and the Target
Subsidiaries have good title to, or a valid leasehold interest in, the
properties and assets used by them or shown on the unaudited balance sheet
dated August 31, 1997 or acquired after the date thereof, with the exception of
such property and assets sold in the Ordinary Course of Business, and such
properties and assets are free and clear of any mortgage, pledge, lien,
encumbrance, charge, or other security interest ("Liens"), except Liens in
favor of lenders as reflected in the Financial Statements and statutory,
purchase money, workers compensation, landlord and similar Liens incurred in
the Ordinary Course of Business.
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SECTION 3.20. Material Contracts. (a) Section 3.20(a) of the Target
Disclosure Schedule contains a complete and accurate list as of October 2,
1997, and the Target has delivered to the Parent true and complete copies of
the following outstanding Contracts, except where noted, to which Target or
either Target Subsidiary are currently a party or for which Target or either
Target Subsidiary are currently liable:
(i) each Contract that involves performance of
services or delivery of goods or materials by the Target or
either Target Subsidiary of an amount or value in excess of
$100,000;
(ii) each Contract that involves performance of
services or delivery of goods or materials to the Target or
either Target Subsidiary of an amount or value in excess of
$100,000;
(iii) each Contract that was not entered into in
the Ordinary Course of Business and that involves expenditures
or receipts of the Target or either Target Subsidiary in
excess of $100,000;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other
Contract affecting the ownership of, leasing of, title to, use
of, or any leasehold or other interest in, any real or
personal property (except personal property leases and
installment and conditional sales agreements having a value
per item or aggregate payments of less than $100,000 and with
terms of less than one year);
(v) each licensing agreement other than "shrink
wrap" or similar licenses of commercially available software
or other material Contract with respect to the Intellectual
Property Assets or any other Patents, Marks, Copyrights, or
other intellectual property, including agreements with current
or former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual
Property Assets;
(vi) each collective bargaining agreement and
other Contract to or with any labor union or other employee
representative of a group of employees;
(vii) each joint venture, partnership, and other
Contract (however named) not otherwise described in this
Section involving a sharing of profits, losses, costs, or
liabilities by the Target or either Target Subsidiary with any
other Person;
(viii) each Contract containing covenants that in
any way purport to restrict the on-going business activity of
the Target or either Target Subsidiary
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or limit the freedom of the Target or either Target Subsidiary
to engage in any line of business or to compete with any
Person;
(ix) each Contract providing for payments to or by
any Person not affiliated with Target or either Target
Subsidiary based on sales, purchases, or profits, other than
direct payments for goods or services;
(x) each power of attorney given by Target or
either Target Subsidiary that is currently effective and
outstanding;
(xi) each Contract entered into other than in the
Ordinary Course of Business that contains or provides for an
express undertaking by the Target or either Target Subsidiary
to be responsible for consequential Damages;
(xii) each Contract for capital expenditures in
excess of $100,000;
(xiii) each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance
extended by the Target or either Target Subsidiary other than
in the Ordinary Course of Business;
(xiv) each Contract for sales, marketing and
support services provided by independent agents or other
Persons for the Target Products or other goods and services of
the Target or either Target Subsidiary of an amount or value
in excess or expected to be in excess of $100,000;
(xv) each Contract under which another Person is
appointed a distributor of the Target Products or other goods
and services of the Target or either Target Subsidiary or
under which the Target or either Target Subsidiary is
appointed a distributor of another Person's goods or services,
of an amount or value in excess of $100,000;
(xvi) each Contract relating to manufacturing of
proprietary components of the Target Products or other goods
of the Target or either Target Subsidiary of an amount or
value in excess of $100,000; and
(xvii) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
Section 3.20(a) of the Target Disclosure Schedule identifies
any such written Contracts and, in respect of oral Contracts,
sets forth reasonably complete details concerning any such
oral Contracts.
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(b) Each Contract identified or required to be identified
in Section 3.20(a) of the Target Disclosure Schedule is, in all material
respects, in full force and effect and is valid and enforceable in accordance
with its terms, and to Target's Knowledge, no party is in default thereunder
and no event has occurred which, but for the passage of time or the giving of
notice or both, would constitute a default thereunder, except, in each case,
where the invalidity, default or breach would not, individually or in the
aggregate, have a Material Adverse Effect, and the Target has given to or
received from any other Person any notice or other communication (whether oral
or written) regarding any actual, alleged, possible, or potential violation or
breach of, or default under, any Contract, except in each case, where any
breach would not individually or in the aggregate have a Material Adverse
Effect.
(c) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts paid or
payable to the Target under current or completed Contracts with any Person and
no such Person has made written demand for such renegotiation.
(d) The Contracts relating to the sale, design,
manufacture, or provision of products or services by the Target or either
Target Subsidiary have been entered into in the Ordinary Course of Business
and, to Target's Knowledge, have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Law.
SECTION 3.21. [Intentionally Omitted]
SECTION 3.22. Certain Business Practices. As of the date of this
Agreement, to the Knowledge of Target or any Target Subsidiary neither the
Target nor either Target Subsidiary nor any director, officer, agent or
employee of the Target or either Target Subsidiary and no party to any Contract
with Target or the Target Subsidiaries, has (i) used any funds for
contributions, gifts, entertainment or other expenses relating to political
activities that violate any Law, (ii) made any payment to foreign or domestic
government officials or employees or to foreign or domestic political parties
or campaigns that violate any Law or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or (iii) made any other payment that
violates any Law.
SECTION 3.23. Real Property and Leases. (a) Neither the Target nor the
Target Subsidiaries owns or has owned any real property.
(b) Section 3.23(b) of the Target Disclosure Schedule
lists and describes all real property leased or subleased to either the Target
or the Target Subsidiaries. With respect to each lease and sublease: (i) the
lease or sublease is legal, valid, binding, enforceable, and in full force and
effect in all material respects; (ii) to the Knowledge of Target, no party to
the lease or sublease is in material breach or default, and no event has
occurred which, with notice or lapse of time, would constitute a material
breach or default or
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permit termination, modification, or acceleration thereunder; (iii) to the
Knowledge of Target, no party to the lease or sublease has repudiated any
material provision thereof; (iv) there are no material disputes, oral
agreements, or forbearance programs in effect as to the lease or sublease; (v)
neither of the Target or the Target Subsidiaries has assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold; and (vi) to Target's Knowledge, all facilities
leased or subleased thereunder have received all Governmental Authorizations
(including material licenses and permits) required in connection with the
operation thereof, and have been operated and maintained in all material
respects in accordance with all applicable Laws.
SECTION 3.24. Insurance. All material assets and risks of the Target
are covered by valid and currently effective insurance policies in such types
and amounts as are consistent, to Target's Knowledge, with customary practices
and standards of companies engaged in businesses and operations similar to
those of the Target.
SECTION 3.25. Indemnification Claims. Section 3.25 of the Target
Disclosure Schedule sets forth a list of all Persons who are parties to
director, officer and/or employee indemnification agreements with Target or the
Target Subsidiaries (the "Indemnification Agreements"). Except as set forth in
Section 3.25 of the Target Disclosure Schedule, there are no outstanding claims
under any of the Indemnification Agreements or under any indemnification rights
granted pursuant to the certificate of incorporation or bylaws of Target or the
Target Subsidiaries (as currently in effect); and to Target's Knowledge, there
are no facts or circumstances that either now, or with the passage of time,
could reasonably be expected to provide a basis for a claim under any such
Indemnification Agreement or under any indemnification rights granted pursuant
to the certificate of incorporation or bylaws of Target or the Target
Subsidiaries.
SECTION 3.26. Board Recommendation. At a meeting duly called and held
in compliance with Delaware Law, the Board of Directors of the Target has
unanimously adopted a resolution (i) approving the Merger, based on a
determination that the Merger is fair to the holders of Target Stock and is in
the best interests of the Target Stockholders, (ii) approved and recommended
the Amendments for adoption by the stockholders of Target and (iii) approving
and adopting this Agreement and the Transactions contemplated hereby and
thereby and unanimously recommending approval and adoption of this Agreement
and the Transactions contemplated hereby and thereby by the stockholders of the
Target.
SECTION 3.27. Change in Control. Except as set forth in Section 3.27
of the Target Disclosure Schedule, copies of which have been delivered to
Parent, neither the Target nor the Target Subsidiaries is a party to any
Contract which contains a "change in control," "potential change in control" or
similar provision and the consummation of the Transactions will not (either
alone or upon the occurrence of any additional acts or events) result in any
payment (whether of severance pay or otherwise) becoming due from the Target or
the Target Subsidiaries to any Person.
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SECTION 3.28. Payments Resulting from Mergers. Except as set forth in
Section 3.28 of the Target Disclosure Schedule, copies of which have been
delivered to Parent, neither the consummation nor announcement of any of the
Transactions will result in any (i) material payment (whether of severance pay
or otherwise) becoming due from Target or the Target Subsidiaries to any
director, officer, employee or former employee thereof under (i) any
management, employment, deferred compensation, severance (including any
payment, right or benefit resulting from a change in control), bonus or other
contract for personal services with any officer, director or employee or any
plan, agreement or understanding similar to any of the foregoing, or any "rabbi
trust" or similar arrangement, or (ii) material benefit under any Plan being
established or becoming accelerated, vested or payable.
SECTION 3.29. State Takeover Statutes. The Board of Directors of
Target has approved the terms of this Agreement and the Merger and the other
Transactions, and such approval is sufficient to render inapplicable to the
Merger and the other Transactions the provisions of Section 203 of the Delaware
Law. To Target's Knowledge, no other state takeover statute or similar statute
or regulation applies or purports to apply to the Merger or the other
Transactions and no provision of the certificate of incorporation, bylaws or
other governing instruments of Target (including the Certificates of
Designations) or either of the Target Subsidiaries would, directly or
indirectly, restrict or impair the ability of Parent to vote, or otherwise to
exercise the rights of a stockholder with respect to, shares of Target and the
Target Subsidiaries that may be acquired or controlled by Parent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
AND PARENT SUB
Except as set forth in the disclosure schedule delivered by Parent and
Parent Sub to the Target and signed by the Target, Parent and Parent Sub for
identification prior to the execution and delivery of this Agreement (the
"Parent Disclosure Schedule"), which shall identify exceptions by specific
section references, Parent and Parent Sub hereby, jointly and severally,
represent and warrant to the Target that:
SECTION 4.01. Corporate Organization and Qualification. Each of Parent
and Parent Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted. Each of
Parent and Parent Sub is duly qualified or licensed as a foreign corporation to
do business, and is in good standing in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing as would not, individually or in
the aggregate, have a Material Adverse Effect. Parent is not, and has not been
within the two years immediately preceding the date of this Agreement, a
subsidiary or
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division of another corporation, nor has Parent within such time owned,
directly or indirectly, any shares of Target Common Stock.
SECTION 4.02. Certificate of Incorporation and Bylaws. Parent has
heretofore furnished or made available to the Target a complete and correct
copy of the certificates of incorporation and bylaws of each of Parent and
Parent Sub, each as amended to date. Neither Parent nor Parent Sub is in
violation of any provision of its certificate of incorporation or bylaws.
SECTION 4.03. Capitalization. As of the date of this Agreement, the
authorized capital stock of Parent consists of 500,000,000 shares of Parent
Common Stock, $0.01 par value, and 5,000,000 shares of preferred stock, $1.00
par value ("Parent Preferred Stock"). As of June 30, 1997, (a) 117,388,254
shares of Parent Common Stock were issued and outstanding, all of which were
validly issued, fully paid and nonassessable, (b) 4,988,958 shares of Parent
Common Stock were held in the treasury of Parent, (c) 9,414,142 shares of
Parent Common Stock were reserved for future issuance pursuant to outstanding
stock options or stock incentive rights granted pursuant to Parent's stock
option and restricted stock plans, and (d) no shares of Parent Preferred Stock
were outstanding. The authorized capital stock of Parent Sub consists of 1,000
shares of Parent Sub Common Stock, of which, as of the date of this Agreement,
one (1) share is issued and outstanding and held by Parent.
SECTION 4.04. Authority Relative to This Agreement. Each of Parent and
Parent Sub has all necessary corporate power and authority to execute and
deliver this Agreement and, with respect to the Merger, to perform its
obligations hereunder and to consummate the Transactions. The execution and
delivery of this Agreement by Parent and Parent Sub and the consummation by
Parent and Parent Sub of the Transactions have been duly and validly authorized
by all necessary corporate action and no other corporate proceedings on the
part of Parent or Parent Sub are necessary to authorize this Agreement or to
consummate the Transactions (other than, with respect to the Merger, the filing
and recordation of the appropriate Certificate of Merger with the Secretary as
required by Delaware Law). This Agreement has been duly and validly executed
and delivered by Parent and Parent Sub and, assuming the due authorization,
execution and delivery of this Agreement by the Target, constitutes a legal,
valid and binding obligation of each of Parent and Parent Sub enforceable
against each of Parent and Parent Sub in accordance with its terms.
SECTION 4.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Parent and Parent Sub do not, and
the performance of this Agreement by Parent and Parent Sub will not, subject
to, obtaining the Consents and permits and making the filings described in
Section 4.05(b) and Section 4.05(b) of the Parent Disclosure Schedule, (i)
conflict with or violate the certificate of incorporation of either Parent or
Parent Sub, (ii) conflict with or violate any Law applicable to Parent or
Parent Sub or by which any property or asset of any of them is bound or
affected, or (iii) result in any Breach of or constitute a default (or an event
which with notice or lapse of time or both would become
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a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of Parent or Parent Sub or require the
Consent of any third party pursuant to, any note, bond, mortgage, indenture,
Contract, license, permit, franchise or other instrument to which Parent or
Parent Sub is a party or by which Parent or Parent Sub or any property or asset
of any of them is bound or affected, except for any such conflicts, violations,
breaches, defaults or other occurrences which would not, individually or in the
aggregate, have a Material Adverse Effect on Parent or prevent Parent or Parent
Sub from performing their respective obligations under this Agreement and
consummating the Transactions.
(b) The execution and delivery of this Agreement by
Parent and Parent Sub do not, and the performance of this Agreement by Parent
and Parent Sub will not, require any Consent or filing with or notification to,
any Governmental Authority, except (i) for applicable requirements, if any, of
the Exchange Act, the Securities Act, Blue Sky Laws, the HSR Act and filing and
recordation of an appropriate Certificate of Merger with the Secretary as
required by Delaware Law, (ii) as specified in Section 4.05(b) of the Parent
Disclosure Schedule, and (iii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not have a Material Adverse Effect on Parent and would not prevent or
delay consummation of the Transactions, or otherwise prevent Parent or Parent
Sub from performing their respective obligations under this Agreement.
SECTION 4.06. Ownership of Parent Sub; No Prior Activities. (a) Parent
Sub was formed solely for the purpose of engaging in the Transactions
contemplated by this Agreement.
(b) As of the date hereof and the Effective Time, except
for obligations or liabilities incurred in connection with its incorporation or
organization and the Transactions and except for this Agreement and any other
agreements or arrangements contemplated by this Agreement, Parent Sub has not
and will not have incurred, directly or indirectly, through any subsidiary or
affiliate, any obligations or liabilities or engaged in any business activities
of any type or kind whatsoever or entered into any agreements or arrangements
with any Person.
SECTION 4.07. [Intentionally Omitted]
SECTION 4.08. [Intentionally Omitted]
SECTION 4.09. [Intentionally Omitted]
SECTION 4.10. [Intentionally Omitted]
SECTION 4.11. [Intentionally Omitted]
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ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Target Pending the Merger.
The Target covenants and agrees that, except as otherwise contemplated by this
Agreement, unless Parent shall otherwise agree in writing, between the date of
this Agreement and the Effective Time, (a) the business of the Target shall be
conducted only in, and the Target shall not, and shall cause the Target
Subsidiaries not to, take any action except in, the Ordinary Course of
Business, (b) the Target shall use all reasonable efforts to preserve
substantially intact its business organization, to keep available the services
of the current officers, employees and consultants of the Target and to
preserve the current relationships of the Target with customers, suppliers and
other persons with which the Target has significant business relationships, (c)
Target shall keep in full force and effect liability and other insurance and
bonds comparable in amount and scope of coverage to that currently maintained
and described in Section 3.24 of the Target Disclosure Schedule, (d) Target
shall not and shall not permit the Target Subsidiaries to engage in any
practice, take any action, or enter into any transaction of the sort described
in Section 3.08 above or paragraph (e) below and Target shall not:
(i) amend or otherwise change its certificate of
incorporation or bylaws;
(ii) issue, sell, pledge, dispose of, grant,
encumber, or authorize the issuance, sale, pledge,
disposition, grant or encumbrance of, (A) any shares of
capital stock of the Target of any class, or any options,
warrants, convertible securities or other rights of any kind
to acquire any shares of such capital stock, or any other
ownership interest (including without limitation, any phantom
interest), of the Target (except for (i) the issuance of
shares of capital stock issuable pursuant to currently
outstanding Target Options and rights pursuant to Plans or
Other Benefit Obligations currently in effect on the date
hereof and described in Section 3.10 of the Target Disclosure
Schedule or (ii) the granting of Target Options pursuant to
offer letters for employment outstanding on the date hereof
for an aggregate of 65,500 shares of Target Stock), or (B) any
of the Target's assets, except for sales in the Ordinary
Course of Business;
(iii) 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;
(iv) reclassify, combine, split, divide or redeem,
purchase or otherwise acquire, directly or indirectly, any of
its capital stock;
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(v) (A) acquire (including without limitation, by
merger, consolidation, or acquisition of stock or assets) any
interest in any corporation, limited liability company,
partnership, joint venture, other business organization or any
division thereof or any assets, other than the acquisition of
assets in the Ordinary Course of Business, (B) 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 other than (I)
indebtedness owed to Parent or (II) advances to employees or
the Target Subsidiaries made in the Ordinary Course of
Business, (C) enter into any Contract material to the
business, results of operations or financial condition of the
Target other than in the Ordinary Course of Business, (D)
authorize any capital expenditure, other than capital
expenditures set forth in Section 5.01(e)(v)(D) of the Target
Disclosure Schedule or (E) enter into or amend any Contract
with respect to any matter set forth in this subsection (v);
(vi) (A) increase the compensation payable or to
become payable to any director, officer or other employee, or
grant any bonus (except bonuses under existing Target Plans in
ordinary course of business consistent with past practices),
to, or grant any severance or termination pay to, or enter
into any employment or severance Contract with any director,
officer or other employee or enter into any collective
bargaining Contract, except in accordance with existing terms
of the current Target Plan consistent with past practices or
(B) establish, adopt, enter into or amend any Plan or Other
Benefit Obligation (as defined in Section 3.10) or trust or
fund for the benefit of any director, officer or class of
employees except as may be required by applicable Law;
(vii) settle or compromise any pending or
Threatened litigation which is material or which relates to
the Transactions contemplated hereby without the prior written
consent of Parent, which consent shall not be unreasonably
withheld;
(viii) grant or convey to any Person any rights,
including, but not limited to, by way of sale, license or
sub-license, in any of the Intellectual Property Assets;
(ix) enter into any Contract with any Person for
the sale, licensing, development, marketing, distribution,
manufacture or commercial exploitation of any of the Target
Products or the Intellectual Property Assets, except in
connection with the sale of Target Products made in the
Ordinary Course of Business;
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(x) abandon, or fail to pay any maintenance fees,
or fail to renew any Intellectual Property Asset registration,
or application for any of the foregoing, or license agreement,
owned by the Target;.
(xi) (A) change any of its methods of accounting
in effect at December 31, 1996 or (B) make or rescind any
express or deemed election relating to taxes, settle or
compromise any claim relating to taxes, or change any of its
methods of reporting income or deductions for federal income
tax purposes from those employed in the preparation of the
federal income tax returns for the taxable year ending
December 31, 1996, except, in the case of (A) or (B), as may
be required by Law, the Internal Revenue Service or GAAP;
(xii) take any action or fail to take any action
which to Target's Knowledge, would reasonably be expected to
have a Target Material Adverse Effect prior to or after the
Effective Time or would reasonably be expected to adversely
effect the ability of the Target prior to the Effective Time,
or Parent or any of its subsidiaries after the Effective Time,
to obtain consents of third parties or approvals of
Governmental Authorities required to consummate the
Transactions;
(xiii) exercise the right to cancel any of the
Target Options for Messrs. Berger, Foley, Gonzalez or Rosen or
any other employees of Target in exchange for cash as
described in Section 13(d) of the 1995 Stock Option Plan and
their stock option agreements with Target or take any action
to accelerate the time or times at which a Target Option may
be exercised in whole or in part; or
(xiv) agree in writing or otherwise to do any of
the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. [Intentionally Omitted]
SECTION 6.02. Target's Consent Solicitation. Target shall take all
action necessary in accordance with Delaware Law and its certificate of
incorporation (including its Certificates of Designation) and bylaws to prepare
and circulate to its stockholders as promptly as practicable forms of written
consent and related materials for the purpose of soliciting such Target
Stockholders' approval of this Agreement, the Amendments and the Merger. Target
shall use all commercially reasonable efforts to solicit from the Target
Stockholders proxies in favor of the approval of this Agreement, the Amendments
and the Merger and waivers by Target Stockholders holding Target Preferred
Stock of liquidation rights, and shall take all
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other actions reasonably necessary or advisable to secure the vote or consent
of Target Stockholders required by Delaware Law and the Target's certificate of
incorporation (including the Certificates of Designations) to obtain such
approvals (including unanimously recommending such approval). Target shall
request the holders of Target Preferred Stock also to waive any liquidation
rights provided for in Target's certificate of incorporation (including the
Certificates of Designations).
SECTION 6.03. Appropriate Action; Consents; Filings. (a) Target,
Parent and Parent Sub shall use their Best Efforts to (i) take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or required to be taken by
any Governmental Authority or otherwise to consummate and make effective the
Transactions as promptly as practicable, (ii) obtain from any Governmental
Authorities any Consents or other Governmental Authorizations required to be
obtained or made by Parent or Target or any of their subsidiaries in connection
with the authorization, execution and delivery of this Agreement and the
consummation of the Transactions, including without limitation, the Merger, and
(iii) as promptly as practicable, make all necessary filings, and thereafter
make any other required submissions, with respect to this Agreement and the
Merger required under (A) Delaware Law, (B) the HSR Act and any related
governmental request thereunder, and (C) any other applicable Law; provided
that Parent and Target shall cooperate with each other in connection with the
making of all such filings, including providing copies of all such documents to
the non-filing party and its advisors prior to filing and, if requested,
accepting all reasonable additions, deletions or changes suggested in
connection therewith. Target and Parent shall use reasonable Best Efforts to
furnish to each other all information required for any application or other
filing to be made pursuant to the rules and regulations of any applicable Law
in connection with the Transactions contemplated by this Agreement.
(b) (i) Each of Parent and Target shall give (or shall
cause their respective subsidiaries to give) any notices to third parties, and
use, and cause their respective subsidiaries to use, their commercially
reasonable efforts to obtain any third party Consents (including those set
forth in Section 3.05), (A) necessary to consummate the Transactions, (B)
disclosed or required to be disclosed in Target Disclosure Schedule or the
Parent Disclosure Schedule or (C) required to prevent a Material Adverse Effect
from occurring prior to or after the Effective Time.
(ii) In the event that Parent or Target shall fail
to obtain any third party Consent described in subsection
(b)(i) above, it shall use its Best Efforts, and shall take
any such actions reasonably requested by the other party, to
minimize any adverse effect upon Target and Parent, their
respective subsidiaries, and their respective businesses
resulting, or which could reasonably be expected to result
after the Effective Time, from the failure to obtain such
Consent.
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(c) From the date of this Agreement until the Effective
Time, each party shall promptly notify the other party of any pending, or to
the Knowledge of the first party, Threatened Proceeding by or before any
Governmental Authority or any other Person (i) challenging or seeking material
Damages in connection with the Merger or the conversion of Target Stock into
the Merger Consideration pursuant to the Merger or (ii) seeking to restrain or
prohibit the consummation of the Merger or otherwise limit the right of Parent
or Parent Sub to own or operate all or any portion of the businesses or assets
of Target, which in either case is reasonably likely to have a Material Adverse
Effect on Target prior to the Effective Time, or a Material Adverse Effect on
Parent or Parent Sub (including the Surviving Corporation) after the Effective
Time.
SECTION 6.04. Access to Information; Confidentiality. Subject to the
Non-Disclosure Agreement dated October 21, 1996 between Parent and Target (the
"Non-Disclosure Agreement"), between the date of this Agreement and the Closing
Date, Target will (a) afford Parent and its representatives and prospective
lenders and their representatives full and free access to Target's personnel,
properties, Contracts, books and records, and other documents and data, (b)
furnish Parent and its advisors with copies of all such Contracts, books and
records, and other existing documents and data as Parent may reasonably
request, and (c) furnish Parent and its advisors with such additional
financial, operating and other data and information as Parent may reasonably
request.
SECTION 6.05. No Solicitation. (a) Target shall not, directly or
indirectly, negotiate with any Person other than Parent or Parent Sub with
respect to the acquisition of Target or the shares of Target Stock and it will
not, and will not permit any of its officers, directors, employees, agents or
representatives (including without limitation, investment bankers, attorneys
and accountants) ("Agents") to (i) initiate contact with, (ii) make, solicit or
encourage any inquiries or proposals, (iii) enter into, or participate in, any
discussions or negotiations with, (iv) disclose, directly or indirectly, any
information not customarily disclosed concerning the business and properties of
Target or the Target Subsidiaries to or (v) afford any access to any of
Target's or the Target Subsidiaries' properties, books and records to any
Person in connection with any possible proposal relating to (x) the disposition
of their respective businesses or substantially all or a significant portion of
their assets, (y) the acquisition of equity or debt securities of Target or the
Target Subsidiaries, or (z) the merger, share exchange or business combination,
or similar acquisition transaction of or involving Target or the Target
Subsidiaries (each of (x), (y) and (z), a "Takeover Proposal") with any Person
other than Parent or Parent Sub; provided, however, that if at any time prior
to the receipt of the votes of the Target Stockholders necessary to approve the
Merger pursuant to Section 6.02, the Board of Directors of Target determines in
good faith, based on the written advice of outside counsel, that it is
necessary to do so in order to comply with its fiduciary duties to the Target
Stockholders under Delaware Law, Target (and its Agents) may, in response to an
unsolicited Takeover Proposal (a "Superior Proposal") that involves
consideration to the Target Stockholders with a value that Target's Board of
Directors reasonably believes, after receiving written advice from Target
Banker, is superior to the
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consideration provided for in the Merger and after taking into consideration
the liability in respect of the Transaction Fee, and subject to compliance with
Section 6.05(b), furnish information with respect to Target pursuant to a
confidentiality agreement with terms substantially the same as the terms of the
Confidentiality Agreement to any Person making such proposal and participate in
negotiations regarding such proposal. Target shall immediately cease and cause
to be terminated any existing solicitation, initiation, encouragement,
activity, discussion or negotiation with any parties conducted heretofore by
Target with respect to any Takeover Proposal existing on the date hereof.
Without limiting the foregoing, it is understood that any violation of the
restrictions set forth in the preceding sentence by Target, the Target
Subsidiaries or any Agent of Target or the Target Subsidiaries, whether or not
such Person is purporting to act on behalf of Target or the Target Subsidiaries
or otherwise, shall be deemed to be a breach of this Section 6.05(a) by Target.
(b) In addition to the obligations of Target set forth in
paragraph (a) of this Section 6.05, Target promptly shall advise Parent orally
and in writing of any request for information or of any Takeover Proposal or
any inquiry with respect to or which could reasonably be expected to lead to
any Takeover Proposal, the identity of the Person making any such request,
Takeover Proposal or inquiry and all the terms and conditions thereof. Target
will keep Parent fully informed of the status and details (including amendments
or proposed amendments) of any such request, Takeover Proposal or inquiry.
(c) Neither the Board of Directors of Target nor any
committee thereof shall (x) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent, the approval (including, without
limitation, either the Board of Directors' or any committee's resolution
thereof providing for such approval) or recommendation by such Board of
Directors or such committee of this Agreement or the Merger or (y) approve or
recommend, or propose to approve or recommend, any Takeover Proposal, except in
connection with a Superior Proposal and then only at or after the termination
of this Agreement pursuant to Section 8.01(f).
SECTION 6.06. Obligations of Parent Sub. Parent shall take all action
necessary to cause Parent Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and subject to conditions set forth
in this Agreement.
SECTION 6.07. Public Announcements. (a) Each of Parent and Target
shall consult with the other before issuing any press release or otherwise
making any public statements with respect to this Agreement or any Transaction
and shall not issue any such press release or make any such public statement
without the prior written consent of the other party, except as may be required
by Law, and (b) prior to the Effective Time, Target will not issue any other
press release or otherwise make any public statements regarding its business
without the prior written consent of Parent, which consent shall not be
unreasonably withheld.
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SECTION 6.08. Employee Matters. Parent shall be permitted, on and
after the date hereof, to offer to and endeavor to enter into employment
agreements at the Effective Time with the officers and employees of Target on
terms reasonably satisfactory to Parent.
SECTION 6.09. Further Action. At any time and from time to time, each
party to this Agreement agrees, subject to the terms and conditions of this
Agreement, to take such reasonable actions and to execute and deliver such
documents as may be necessary to effectuate the purposes of this Agreement at
the earliest practicable time.
SECTION 6.10. Registration on Form S-8. Parent shall prepare and file
with the SEC, and shall use its Best Efforts to cause to become effective, a
registration statement on Form S-8 with respect to the shares of Parent Common
Stock issuable upon exercise of the Substitute Options.
SECTION 6.11. [Intentionally Omitted]
SECTION 6.12. Unaudited Financial Information. Until the Effective
Time, Target will cause to be prepared (and furnish to Parent) as promptly as
possible on a monthly basis unaudited balance sheets, commencing with September
30, 1997, and the related unaudited statements of operations, statements of
stockholders' equity and statements of cash flows for the respective one-month
periods (such balance sheets, and related statements being collectively
referred to in this Agreement as the "Unaudited Monthly Statements"). The
Unaudited Monthly Statements will be prepared from the books and records of
Target and will fairly present, in all material respects, the financial
position of Target and the results of its operations and its cash flows as of
and for the respective time periods in accordance with internal Target
accounting methods and standards currently used.
SECTION 6.13. [Intentionally Omitted]
SECTION 6.14. Update Disclosure; Breaches. From and after the date of
this Agreement until the Effective Time, each party hereto shall promptly
notify the other party hereto by written update to its Disclosure Schedule of
(i) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which would, or would reasonably be likely to, cause any
condition to the obligations of any party to effect the Merger and the other
Transactions contemplated by this Agreement not to be satisfied, or (ii) the
failure of Target or Parent, as the case may be, to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with
or satisfied by it pursuant to this Agreement which would, or would reasonably
be likely to, result in any condition to the obligations of any party to effect
the Merger and the other Transactions contemplated by this Agreement not to be
satisfied. No disclosure by any party pursuant to this Section 6.14 will be
deemed to amend or supplement either the Target Disclosure Schedule or the
Parent Disclosure Schedule or prevent or cure any inaccuracy or Breach of
representation or warranty, or Breach of any covenant or obligation hereunder.
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SECTION 6.15. [Intentionally Omitted]
SECTION 6.16. Consent Agreements. Target shall cause each director and
officer of Target to execute and deliver to Parent and, with respect to the
Target Stockholders listed on Section 6.16 of the Target Disclosure Schedule,
use its Best Efforts to deliver or cause to be delivered, by the date of this
Agreement, consent agreements and irrevocable proxies in the forms annexed
hereto as Exhibit B (the "Consent Agreements"), agreeing, among other things,
to vote or execute written consents in favor of the Merger.
SECTION 6.17. DSC Special Celcore Incentive Plan. As of the Effective
Time, Parent shall adopt the DSC Special Celcore Incentive Plan in the form
annexed hereto as Exhibit E.
ARTICLE VII
CONDITIONS PRECEDENT TO THE MERGER
SECTION 7.01. Conditions to the Obligations of Each Party. The
obligations of the Target, Parent and Parent Sub to consummate the Merger are
subject to the satisfaction of the following conditions:
(a) [Intentionally Omitted]
(b) Stockholder Approval. This Agreement, the Amendments
and the Transactions contemplated hereby shall have been approved and adopted
by the affirmative vote or by written consent of the Target Stockholders in
accordance with Delaware Law and the Target's certificate of incorporation
(including the Certificates of Designations) and bylaws and the rules of the
NASD and the Target Stockholders holding Target Preferred Stock shall have
waived the liquidation rights provided for in the Target's certificate of
incorporation (including the Certificates of Designations).
(c) No Challenge. There shall not be pending any
Proceeding by any Governmental Authority (i) challenging or seeking material
Damages in connection with the Merger or the conversion of Target Stock into
the Merger Consideration or (ii) seeking to restrain or prohibit the
consummation of the Merger or the Transactions or otherwise limiting the right
of Parent or its subsidiaries to own or operate all or any portion of the
business or assets of the Target at and after the Effective Time.
(d) No Order. No Governmental Authority shall have
enacted, issued, promulgated, enforced or entered any Order which is in effect
and which has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger or the other Transactions contemplated herein.
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(e) [Intentionally Omitted]
(f) HSR. Any applicable waiting period under the HSR Act
relating to the Merger shall have expired or been terminated.
(g) Other Approvals. All Consents and waivers required to
be obtained, which are set forth in Section 7.01(g) of the Target Disclosure
Schedule, and all filings or notices required to be made, by Parent, Parent Sub
and/or the Target prior to consummation of the Transactions (other than filing
an appropriate Certificate of Merger with the Secretary in accordance with
Delaware Law) shall have been obtained from and made with all required
Governmental Authorities.
(h) [Intentionally Omitted]
SECTION 7.02. Conditions to the Obligations of Parent and Parent Sub.
Each of Parent's and Parent Sub's obligations to consummate the Merger and to
take the other actions required to be taken by each of Parent and Parent Sub at
the Closing is subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (any of which may be waived by Parent and Parent
Sub, in whole or in part):
(a) Accuracy of Representations. Each of the
representations and warranties of Target contained in this Agreement, without
giving effect to any update to the Target Disclosure Schedule under Section
6.14, shall be true and correct in all material respects as of the date of this
Agreement and shall be true and correct in all material respects (except that
where any statement in a representation or warranty expressly includes a
standard of materiality, such statement shall be true and correct) as of the
Effective Time as though made as of the Effective Time, except that those
representations and warranties which address matters only as of a particular
date shall remain true and correct in all material respects (except that where
any statement in a representation or warranty expressly includes a standard of
materiality, such statement shall be true and correct) as of such date. Parent
shall have received a certificate of the Chief Executive Officer and Chief
Financial Officer of the Target to that effect.
(b) Target's Performance. All of the covenants and
obligations that Target is required to perform or to comply with pursuant to
this Agreement at or prior to the Effective Time (considered collectively), and
each of those covenants and obligations (considered individually), must have
been duly performed and complied in all material respects with and each
document required to be delivered must have been delivered.
(c) Consents. Target shall have obtained the Consent of
each other Person whose Consent shall be required in connection with the Merger
under all loan or credit arrangements, notes, mortgages, indentures, leases or
other Contracts to which Target is a
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party other than Consents which the failure to obtain would not have a Material
Adverse Effect on Target or Parent.
(d) [Intentionally Omitted]
(e) Opinion of Counsel. Parent shall have received from
Powell, Goldstein, Frazer and Murphy LLP one or more opinions dated the Closing
Date, in form and substance reasonably satisfactory to Parent, covering the
matters set forth in the form of opinion attached hereto as Exhibit C.
(f) [Intentionally Omitted]
(g) Target Material Adverse Effect. After the date
hereof, there shall not have been a Target Material Adverse Effect, it being
understood that the matters described in the Target Disclosure Schedule as of
the date hereof (but not thereafter updated pursuant to Section 6.14 hereof)
shall not be deemed a Target Material Adverse Effect for purposes of this
Section. Parent shall have received a certificate of the Chief Executive
Officer and Chief Financial Officer of the Target to that effect.
(h) Dissenting Shareholders and Fractional Shares; Waiver
of Liquidation Rights. The Target Stockholders approve the Merger, the
Amendments and the Transactions contemplated hereby and shares of Target Stock
representing, in the aggregate, not more than ten percent (10%) of the
outstanding shares of Target Stock are subject to claims for dissenter's rights
as provided for under Delaware Law. The Target Stockholders holding Target
Preferred Stock shall have waived any rights to receive cash or other property
upon a liquidation of the Target as provided in any of the Certificates of
Designations.
SECTION 7.03. Conditions to the Obligations of Target. Target's
obligation to consummate the Merger and to take the other actions required to
be taken by the Target at the Closing is subject to the satisfaction, at or
prior to the Closing, of each of the following conditions (any of which may be
waived by the Target, in whole or in part):
(a) Accuracy of Representations. Each of the
representations and warranties of Parent and Parent Sub contained in this
Agreement, without giving effect to any update to the Parent Disclosure
Schedule under Section 6.14, shall be true and correct in all material respects
(except that where any statement in a representation or warranty expressly
includes a statement of materiality, such statement shall be true and correct)
as of the date hereof and as of the Effective Time, as though made on and as of
the Effective Time, except that those representations and warranties which
address matters only as of a particular date shall remain true and correct in
all material respects (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement shall be
true and correct) as of such date. Target shall have received a certificate of
an executive officer of each of Parent and Parent Sub, respectively, to that
effect.
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(b) Parent's and Parent Sub's Performance. All of the
covenants and obligations that each of Parent and Parent Sub is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
(c) Opinion of Counsel. Target shall have received from
Baker & McKenzie one or more opinions dated the Closing Date, in form and
substance reasonably satisfactory to Target, covering the matters set forth in
the form of opinion attached hereto as Exhibit D.
(d) [Intentionally Omitted]
ARTICLE VIII
TERMINATION
SECTION 8.01. Termination. This Agreement may be terminated and the
Merger and the other Transactions may be abandoned at any time prior to the
Effective Time, notwithstanding any requisite approval and adoption of this
Agreement and the Transactions, as follows:
(a) by mutual written consent duly authorized by the
Boards of Directors of each of Parent, Parent Sub and Target;
(b) by either Parent or Target, if either (i) the
Effective Time shall not have occurred on or before January 31, 1998 (or such
later date as shall have been agreed to in writing by Parent and Target);
provided, however, that the right to terminate this Agreement under this
Section 8.01(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 Effective Time to occur on or before such date; or (ii) there
shall be any Order which is final and nonappealable preventing the consummation
of the Merger, except if the party relying on such Order has not complied with
its obligations under Section 6.03(a);
(c) by either Parent or Target, if (i) the Target
Stockholders shall have failed to approve and adopt this Agreement, the Merger
and other Transactions at a meeting duly convened therefor, or (ii) the
condition precedent under Section 7.02(i) has not been fulfilled;
(d) by Parent, upon a Breach of any representation,
warranty, covenant or agreement on the part of Target set forth in this
Agreement, or if any representation or warranty of Target is not true and
correct in all material respects (except that where any statement in a
representation or warranty expressly includes a standard of materiality, such
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statement shall be true and correct), in either case such that the conditions
set forth in Sections 7.02(a) and (b) would not be satisfied, other than a
Breach that would not have a Material Adverse Effect on Target (a "Terminating
Target Breach"); provided, however, that, if such Terminating Target Breach is
curable by the Target through the exercise of its Best Efforts and for so long
as the Target continues to exercise such Best Efforts, Parent may not terminate
this Agreement under Section 8.01(d); or
(e) by Target, upon Breach of any representation,
warranty, covenant or agreement on the part of Parent set forth in this
Agreement, or if any representation or warranty of Parent is not true and
correct in all material respects (except that where any statement in a
representation or warranty expressly includes a standard of materiality, such
statement shall be true and correct), in either case such that the conditions
set forth in Sections 7.03(a) and (b) would not be satisfied, other than a
Breach that would not have a Material Adverse Effect on Parent ("Terminating
Parent Breach"); provided, however, that, if such Terminating Parent Breach is
curable by Parent through the exercise of its Best Efforts and for so long as
Parent continues to exercise such Best Efforts, the Target may not terminate
this Agreement under this Section 8.01(e); or
(f) by Parent, if the Board of Directors of Target shall
(i) withdraw its recommendation to the Target Stockholders to approve the
Merger, or (ii) have recommended to the Target Stockholders any Business
Combination Transaction (as defined below) or resolved to do so.
SECTION 8.02. Fees and Expenses. (a) Target shall pay Parent a fee (a
"Transaction Fee") of $5,000,000, less any Specified Expenses (as defined
below) previously paid, if this Agreement is terminated pursuant to (i) Section
8.01(c) and any Business Combination Transaction is thereafter consummated
within twelve (12) months of such termination or (ii) Section 8.01(f). As used
herein, the term "Business Combination Transaction" shall mean any of the
following involving Target: (A) any merger, consolidation, share exchange,
business combination or other similar transaction (other than the
Transactions); (B) any sale, lease, exchange, transfer or other disposition
(other than a pledge or mortgage) of 25% or more of the assets of Target and
the Target Subsidiaries, taken as a whole, in a single transaction or series of
transactions; or (C) the acquisition by a Person or any "group" (as such term
is defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of beneficial ownership of 33 1/3% or more of the
shares of Target Stock, considered as a whole, whether by tender offer,
exchange offer or otherwise.
(b) Parent shall be entitled to receive its Specified
Expenses (but not the Transaction Fee) up to $1,000,000 in immediately
available funds in the event that this Agreement is terminated pursuant to
Section 8.01(d) and one-half (1/2) of its Specified Expenses up to $500,000 in
immediately available funds in the event the Agreement is terminated pursuant
to Section 8.01(c). Target shall be entitled to receive its Specified
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Expenses up to $500,000 in immediately available funds in the event that this
Agreement is terminated pursuant to Section 8.01(e).
(c) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to Section 8.01, all obligations of the
parties hereto shall terminate except the obligations of the parties pursuant
to this Section 8.02 and Sections 6.07, 10.01, 10.02, 10.03, 10.05, 10.08,
10.12, 10.13, 10.14 and 10.15 and pursuant to the Confidentiality Agreement. No
termination of this Agreement pursuant to Section 8.01(d) or 8.01(e) shall
prejudice the ability of a non-breaching party from seeking Damages to which
such party would otherwise be entitled from any other party for any breach of
this Agreement including without limitation, attorneys' fees and the right to
pursue any remedy at law or in equity. Notwithstanding the foregoing, if Parent
is required to file suit to seek the Transaction Fee or either Parent or the
Target is required to file suit to seek its Specified Expenses, and such party
ultimately succeeds on the merits, the party shall be entitled to all cost and
expenses, including attorneys' fees, which it has incurred in enforcing its
rights under this Section 8.02.
(d) As used herein, "Specified Expenses" means all
reasonable out-of-pocket expenses and fees actually incurred by a Person or on
its behalf in connection with the Transactions prior to the termination of this
Agreement (including without limitation, all reasonable fees and expenses of
counsel, financial advisors, banks or other entities providing financing to
such Person (including financing, commitment and other fees payable thereto),
accountants, environmental and other experts and consultants to such Person and
its affiliates, all SEC or HSR Act related filing fees, and all printing and
advertising expenses) and in connection with the negotiation, preparation,
execution, performance and termination of this Agreement, the structuring of
the Transactions, any agreements relating thereto and any filings to be made in
connection therewith. Specified Expenses shall not include compensation of
employees of Parent or Target.
SECTION 8.03. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that, after the
approval and adoption of this Agreement and the Transactions by the Target
Stockholders, no amendment may be made which would violate Delaware Law. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
SECTION 8.04. Waiver. At any time prior to the Effective Time, any
party hereto may (a) extend the time for the performance of any obligation or
other act of any other party hereto, (b) waive any inaccuracy in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any agreement or condition
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party or parties to be bound thereby.
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ARTICLE IX
ESCROW AND INDEMNIFICATION
SECTION 9.01. Survival of Representations and Warranties. All of
Target's representations, warranties, covenants and agreements contained in
this Agreement or in any instrument delivered pursuant to this Agreement
(including without limitation, the Target Disclosure Schedule) relating to the
Intellectual Property Assets of Target, including without limitation pursuant
to Sections 3.09, 3.12 and 3.20 shall survive the Merger and continue until
5:00 p.m., Dallas, Texas time, one year following the Closing Date, (the
"Expiration Date"). Except as provided in the immediately preceding sentence,
none of the Target's representations, warranties, covenants, and agreements
shall survive the Closing Date. None of Parent's representations, warranties,
covenants and agreements contained in this Agreement or in any instrument
delivered pursuant to this Agreement (including without limitation, the Parent
Disclosure Schedule) shall survive the Merger.
SECTION 9.02. Parent Escrow Arrangements.
(a) Parent Escrow Fund. At the Effective Time the Target
Stockholders (except Target Stockholders, in respect of Dissenting Shares) will
be deemed to have received and deposited with the Escrow Agent (as defined
below) that amount of the Merger Consideration that is equal to their
proportionate share of the Parent Escrow Amount (which shall not include that
portion of the Parent Escrow Amount which is allocated for contribution by
holders of Target Options assumed by Parent). As soon as practicable after the
Effective Time, the Parent Escrow Amount, without any act of any Target
Stockholder, will be deposited with an institution designated by Parent and
reasonably acceptable to the Representative (as defined in Section 9.02(g)
below)) as escrow agent (the "Escrow Agent"). The Parent Escrow Amount as
increased or reduced by any earnings or losses thereon, together with other
shares deposited in respect of Target Options assumed by Parent and exercised
between the Effective Time and the Expiration Date, plus a proportionate share
of any additional shares as may be issued in respect of such shares upon any
stock split, stock dividend or recapitalization effected by Parent after the
Effective Time and prior to the Expiration Date, shall constitute an escrow
fund (the "Parent Escrow Fund") and shall be governed by the terms set forth
herein and in an escrow agreement to be agreed upon by the parties and to be
entered into by and among, Parent, the Representative and the Escrow Agent (the
"Parent Escrow Agreement"). The portion of the Parent Escrow Amount contributed
on behalf of each Target Stockholder shall be in proportion to the aggregate
amount of the Merger Consideration which such holder would otherwise be
entitled to receive under Section 2.01, plus the number of Target Options
subject to adjustment under this Section 9.02 and Section 2.04(a)(iv). Upon the
exercise of any Target Option between the Effective Time and the Expiration
Date, five percent (5%) of the shares of Parent Common Stock issued upon such
exercise shall be added and deposited to the Parent Escrow Fund upon such
exercise, and at the expiration of the Escrow Period (as defined in Section
9.02(b)), any Target Options not so exercised as of the expiration of the
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Escrow Period shall be adjusted in accordance with Section 2.04(a)(iv). The
Parent Escrow Fund shall be the sole and exclusive remedy available to
compensate Parent and its affiliates for any claims, losses, liabilities,
damages, deficiencies, costs and expenses, including reasonable attorneys' fees
and expenses, and expenses of investigation and defense (hereinafter
individually a "Loss" and collectively "Losses"), incurred by Parent, its
officers, directors, or affiliates (including the Surviving Corporation)
directly as a result of any inaccuracy or Breach of a representation, warranty,
covenant or agreement of Target contained in this Agreement (without regard to
any update or modification of the Target Disclosure Schedule following the date
of this Agreement), or any instrument delivered pursuant to this Agreement
relating to the Intellectual Property Assets of Target, including without
limitation pursuant to Sections 3.09, 3.12 and 3.20. Parent shall act in good
faith and in a commercially reasonable manner to mitigate all Losses it may
suffer. Parent may not receive any cash or shares from the Parent Escrow Fund
(and no adjustment shall be made pursuant to Section 2.04(a)(iv)) unless and
until Officer's Certificates (as defined in Section 9.02(d) below) identifying
Losses have been delivered to the Escrow Agent as provided in Section 9.02(e);
in such case, Parent may recover from the Parent Escrow Fund Losses to Parent
(and adjustment may be made pursuant to Section 2.04(a)(iv)).
(b) Escrow Period; Distribution upon Termination of
Escrow Period. Subject to the following requirements, the Parent Escrow Fund
shall be in existence immediately following the Effective Time and shall
terminate at 5:00 p.m., Texas time, on the Expiration Date (the "Escrow
Period"). On the Expiration Date any remaining cash and shares comprising the
Parent Escrow Fund less any Loss shall be released from the Parent Escrow Fund
and distributed to the Target Stockholders and those individuals who have on or
prior to the Expiration Date exercised the Target Options assumed by Parent
(the "Escrow Release"). Notwithstanding the above, no Escrow Release shall
occur and the Escrow Period shall not terminate with respect to such amount (or
some portion thereof) that is necessary in the reasonable judgment of Parent,
subject to the objection of the Representative and the subsequent arbitration
of the matter in the manner provided in Section 9.02(f) hereof, to satisfy any
unsatisfied claims concerning facts and circumstances existing prior to the
contemplated date of the Escrow Release or the termination of the Escrow
Period, as the case may be, each as specified in an Officer's Certificate
delivered to the Escrow Agent prior to the contemplated date of an Escrow
Release or termination of the Escrow Period, as appropriate. As soon as all
such claims have been resolved, the Escrow Agent shall deliver to the Target
Stockholders the amount which is subject to an Escrow Release or at the end of
the Escrow Period, as appropriate the remaining portion of the Parent Escrow
Fund not required to satisfy such claims. Deliveries pursuant to this Section
9.02(b) of cash from the Parent Escrow Fund to the Target Stockholders and
shares of Parent Common Stock from the Parent Escrow Fund to those individuals
who have exercised Target Options between the Effective Time and the Expiration
Date shall be made in proportion to their respective original contributions to
the Parent Escrow Fund.
(c) Protection of Parent Escrow Fund.
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(i) Any shares of Parent Common Stock or other
equity securities issued or distributed by Parent (including
shares issued upon a stock split) ("New Shares") in respect of
Parent Common Stock in the Parent Escrow Fund which have not
been released from the Parent Escrow Fund shall be added to
the Parent Escrow Fund and become a part thereof. New Shares
issued in respect of shares of Parent Common Stock which have
been released from the Parent Escrow Fund shall not be added
to the Parent Escrow Fund but shall be distributed to the
record holders thereof. Cash dividends on Parent Common Stock
shall not be added to the Parent Escrow Fund and not
distributed to the record holders thereof.
(ii) Each Target Stockholder and each individual
who, prior to the Expiration Date, has exercised the Target
Options assumed by Parent shall have voting rights with
respect to the shares of Parent Common Stock contributed to
the Parent Escrow Fund by such party (and on any voting
securities added to the Parent Escrow Fund in respect of such
shares of Parent Common Stock).
(d) Claims Upon Parent Escrow Fund.
(i) Upon receipt by the Escrow Agent at any time
on or before the last day of the Escrow Period, as
appropriate, of a certificate signed by any officer of Parent
(an "Officer's Certificate"): (A) stating that Parent has paid
or properly accrued or reasonably anticipates that it will
have to pay or accrue Losses, and (B) specifying in reasonable
detail the individual items of Loss included in the amount so
stated, the date each such item was paid or properly accrued,
or the basis for such anticipated liability, and the nature of
the misrepresentation, Breach of warranty or covenant to which
such item is related, the Escrow Agent shall, subject to the
provisions of Section 9.02(e) hereof, deliver to Parent out of
the Parent Escrow Fund, as promptly as practicable, cash and
shares of Parent Common Stock held in the Parent Escrow Fund
in an amount equal to such Losses.
(ii) For the purposes of determining the number of
shares of Parent Common Stock to be delivered to Parent out of
the Parent Escrow Fund pursuant to Section 9.02(d)(i) hereof,
the shares of Parent Common Stock and the adjustment to the
number of Target Options issuable under Section 2.04(a)(iv)
shall be valued at the average of the reported last sale price
of a share of Parent Common Stock as reported by Nasdaq for
the 10 consecutive trading days ending immediately preceding
the second trading day before the date such determination is
made. Parent and the Representative shall certify
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such value in a certificate signed by both Parent and the
Representative, and shall deliver such certificate to the
Escrow Agent.
(iii) Notwithstanding the foregoing, Parent shall
not be entitled to make a claim for payment of Losses under
this Section 9.02(d) until Parent has suffered Losses of
$100,000 in the aggregate and thereafter Parent shall be
entitled to indemnification for all Losses without regard to
such $100,000 threshold.
(e) Objections to Claims. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such certificate
shall be delivered by Parent to the Representative and for a period of thirty
(30) days after such delivery, the Escrow Agent shall make no delivery to
Parent of any cash or shares from the Parent Escrow Fund pursuant to Section
9.02(d) hereof unless the Escrow Agent shall have received written
authorization from the Representative to make such delivery. After the
expiration of such thirty (30) day period, the Escrow Agent shall make delivery
of cash and shares of Parent Common Stock from the Parent Escrow Fund in
accordance with Section 9.02(d) hereof, provided that no such payment or
delivery may be made if the Representative shall object in a written statement
(the "Representative Agent Notice") to the claim made in the Officer's
Certificate, and such statement shall have been delivered to the Escrow Agent,
with a copy to Parent, prior to the expiration of such thirty (30) day period.
(f) Resolution of Conflicts; Arbitration.
(i) In case the Representative shall so object in
writing to any claim or claims made in any Officer's
Certificate, the Representative and Parent shall attempt in
good faith to agree upon the rights of the respective parties
with respect to each of such claims. If the Representative and
Parent should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties and
shall be furnished to the Escrow Agent. The Escrow Agent shall
be entitled to rely on any such memorandum and distribute cash
and shares of Parent Common Stock from the Parent Escrow Fund
in accordance with the terms thereof.
(ii) If no such agreement is reached within thirty
(30) days following receipt by the Escrow Agent of the
Representative Agent Notice, either Parent or the
Representative may demand arbitration of the matter unless the
amount of the Loss is at issue in pending litigation with a
third party, in which event arbitration shall not be commenced
until such amount is ascertained or both parties agree to
arbitration; and in either such event the matter shall be
settled by arbitration conducted by three arbitrators. Parent
and the Representative shall each select one arbitrator, and
the two arbitrators so selected shall select a third
arbitrator, each of which arbitrators shall be
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independent and have at least ten years relevant experience.
The arbitrators shall set a limited time period and establish
procedures designed to reduce the cost and time for discovery
while allowing the parties an opportunity, adequate in the
sole judgment of the arbitrators, to discover relevant
information from the opposing parties about the subject matter
of the dispute. The arbitrators shall rule upon motions to
compel or limit discovery and shall have the authority to
impose sanctions, including attorneys' fees and costs, to the
same extent as a court of competent law or equity, should the
arbitrators determine that discovery was sought without
substantial justification or that discovery was refused or
objected to without substantial justification. The decision of
a majority of the three arbitrators as to the validity and
amount of any claim in such Officer's Certificate shall be
binding and conclusive upon the parties to this Agreement, and
notwithstanding anything in Section 9.02(e) hereof, the Escrow
Agent shall be entitled to act in accordance with such
decision and make or withhold payments out of the Parent
Escrow Fund in accordance therewith. Such decision shall be
written and shall be supported by written findings of fact and
conclusions which shall set forth the award, judgment, decree
or order awarded by the arbitrators.
(iii) Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction.
Any such arbitration shall be held in New York, New York under
the American Arbitration Association rules then in effect. The
non-prevailing party to an arbitration shall pay its own
expenses, the fees of each arbitrator, the administrative
costs of the arbitration, and the expenses, including without
limitation, reasonable attorneys' fees and costs, incurred by
the other party to the arbitration.
(g) Representative of the Stockholders; Power of
Attorney.
(i) At the Effective Time, and without further
act of any party, Robert P. Goodman shall be appointed as
agent and attorney-in-fact (the "Representative") for each
Target Stockholder (except such Target Stockholders, if any,
as shall have perfected their appraisal rights under Delaware
Law) and each holder of Target Options, for and on behalf of
Target Stockholders and the holders of the Target Options, to
give and receive notices and communications, to authorize
delivery to Parent of cash and shares of Parent Common Stock
from the Parent Escrow Fund in satisfaction of claims by
Parent, to object to such deliveries, to agree to, negotiate,
enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all
actions necessary or appropriate in the judgment of
Representative for the accomplishment of the foregoing. Such
agency may be changed by the Target Stockholders from time to
time upon not less than thirty (30) days prior
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written notice to Parent; provided that the Representative may
not be removed unless holders of at least a majority in
interest of the Parent Escrow Fund agree to such removal and
to the identity of the substituted agent. Any vacancy in the
position of Representative may be filled by approval of the
holders of a majority in interest of the Parent Escrow Fund.
No bond shall be required of the Representative, and the
Representative shall not receive compensation for his or her
services. Notices or communications to or from the
Representative relating to the Parent Escrow Fund shall
constitute notice to or from each of the Target Stockholders.
(ii) The Representative shall not be liable for
any act done or omitted hereunder as Representative while
acting in good faith. The Target Stockholders on whose behalf
the Parent Escrow Amount was contributed to the Parent Escrow
Fund shall severally indemnify the Representative and hold the
Representative harmless against any loss, liability or expense
incurred without negligence or bad faith on the part of the
Representative and arising out of or in connection with the
acceptance or administration of the Representative's duties
hereunder, including the reasonable fees and expenses of any
legal counsel retained by the Representative.
(h) Actions of the Representative. A decision, act,
consent or instruction of the Representative relating to the Parent Escrow Fund
shall constitute a decision of all Target Stockholders (except such Target
Stockholders if any, as shall have perfected appraisal rights under Delaware
Law) and all holders of Target Options assumed by Parent, and shall be final,
binding and conclusive upon each of such Target Stockholders, and the Escrow
Agent and Parent may rely upon any such decision, act, consent or instruction
of the Representative as being the decision, act, consent or instruction of
each such Target Stockholder and each such holder of Target Options. In the
absence of bad faith, the Escrow Agent and Parent are hereby relieved from any
liability to any person for any acts done by them in accordance with such
decision, act, consent or instruction of the Representative.
(i) Third-Party Claims. In the event Parent becomes aware
of a third-party claim which Parent believes may result in a demand against the
Parent Escrow Fund, Parent shall notify the Representative of such claim, and
the Representative, as representative for the Target Stockholders and the
holders of the Target Options, shall be entitled, at their expense, to
participate in any defense of such claim. Parent shall have the right in its
sole discretion to settle any such claim; provided, however, that except with
the consent of the Representative, no settlement of any such claim with
third-party claimants shall alone be determinative of the amount of any claim
against the Parent Escrow Fund. In the event that the Representative has
consented to any such settlement and acknowledged that the claim is a valid
claim against the Parent Escrow Fund, the Representative shall have no power or
authority to object under any provision of this Article IX to the amount of any
claim by Parent against the Parent Escrow Fund with respect to such settlement.
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SECTION 9.03. Representative Escrow Arrangements.
(a) Representative Escrow Fund. At the Effective Time the
Target Stockholders (except Target Stockholders, in respect of Dissenting
Shares) will be deemed to have received and deposited with the Escrow Agent
that amount of the Merger Consideration that is equal to their proportionate
share of the Representative Escrow Amount. As soon as practicable after the
Effective Time, the Representative Escrow Amount, without any act of any Target
Stockholder, will be deposited with the Escrow Agent. The Representative Escrow
Amount as increased or reduced by any earnings or losses thereon, together with
other shares deposited in respect of Target Options assumed by Parent and
exercised between the Effective Time and the Expiration Date, plus a
proportionate share of any additional shares as may be issued in respect of
such shares upon any stock split, stock dividend or recapitalization effected
by Parent after the Effective Time and prior to the Expiration Date, shall
constitute an escrow fund (the "Representative Escrow Fund") and shall be
governed by the terms set forth herein and in an escrow agreement to be agreed
upon by the parties and to be entered into by and between the Representative
and the Escrow Agent (the "Representative Escrow Agreement"). The portion of
the Representative Escrow Amount contributed on behalf of each Target
Stockholder shall be in proportion to the aggregate amount of the Merger
Consideration which such holder would otherwise be entitled to receive under
Section 2.01, plus the number of Target Options subject to adjustment under
this Section 9.03 and Section 2.04(a)(iv). Upon the exercise of any Target
Option between the Effective Time and the Expiration Date, three hundred and
thirty-three one-thousandths percent (.333%) of the shares of Parent Common
Stock issued upon such exercise shall be added and deposited to the
Representative Escrow Fund upon such exercise, and at the expiration of the
Escrow Period, any Target Options not so exercised as of the expiration of the
Escrow Period shall be adjusted in accordance with Section 2.04(a)(iv). The
Representative Escrow Fund shall be used to pay for the costs and expenses,
including reasonable attorneys' fees and expenses, and expenses of
investigation and defense (hereinafter individually a "Representative Expense"
and collectively "Representative Expenses"), incurred by Representative in
performing his or her obligations under this Article IX.
(b) Representative Escrow Period; Distribution Upon
Termination of Representative Escrow Period. Subject to the following
requirements, the Representative Escrow Fund shall be in existence immediately
following the Effective Time and shall terminate at 5:00 p.m., Texas time, on
the Expiration Date (the "Representative Escrow Period"). On the Expiration
Date any remaining cash and shares comprising the Representative Escrow Fund
less any additional Representative Expenses shall be released from the
Representative Escrow Fund and distributed to the Target Stockholders (the
"Representative Escrow Release"). Notwithstanding the above, no Representative
Escrow Release shall occur and the Representative Escrow Period shall not
terminate with respect to such amount (or some portion thereof) that is
necessary in the reasonable judgment of Representative to satisfy any
unsatisfied claims concerning facts and circumstances existing
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<PAGE> 58
prior to the contemplated termination of the Representative Escrow Period. As
soon as all such claims have been resolved, the Escrow Agent shall deliver to
the Target Stockholders the amount which is subject to a Representative Escrow
Release and the remaining portion of the Representative Escrow Fund not
required to satisfy such claims. Deliveries pursuant to this Section 9.03(b)
of cash from the Representative Escrow Fund to the Target Stockholders and
shares of Parent Common Stock from the Parent Escrow Fund to those individuals
who have exercised Target Options between the Effective Time and the Expiration
Date shall be made in proportion to their respective original contributions to
the Representative Escrow Fund.
(c) Protection of Representative Escrow Fund.
(i) Any shares of Parent Common Stock or other
equity securities issued or distributed by Parent (including
shares issued upon a stock split) ("New Shares") in respect of
Parent Common Stock in the Representative Escrow Fund which
have not been released from the Representative Escrow Fund
shall be added to the Representative Escrow Fund and become a
part thereof. New Shares issued in respect of shares of Parent
Common Stock which have been released from the Representative
Escrow Fund shall not be added to the Representative Escrow
Fund but shall be distributed to the record holders thereof.
Cash dividends on Parent Common Stock shall not be added to
the Representative Escrow Fund and not distributed to the
record holders thereof.
(ii) Each Target Stockholder shall have voting
rights with respect to the shares of Parent Common Stock
contributed to the Representative Escrow Fund by such party
(and on any voting securities added to the Representative
Escrow Fund in respect of such shares of Parent Common Stock).
(d) Claims Upon Representative Escrow Fund.
(i) Upon receipt by the Escrow Agent at any time
on or before the last day of the Representative Escrow Period,
as appropriate, of a certificate signed by the Representative
stating that Representative has paid or properly accrued or
reasonably anticipates that it will have to pay or accrue
Representative Expenses, the Escrow Agent shall deliver to
Representative out of the Representative Escrow Fund, as
promptly as practicable, cash and shares of Parent Common
Stock held in the Representative Escrow Fund in an amount
equal to such Representative Expenses.
(ii) For the purposes of determining the number of
shares of Parent Common Stock to be delivered to
Representative out of the Representative Escrow Fund pursuant
to Section 9.03(d)(i) hereof, the shares of Parent
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<PAGE> 59
Common Stock shall be valued at the last reported sale price
of a share of Parent Common Stock as reported by Nasdaq on the
date such determination is made.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Expenses. Except as set forth in Sections 6.01 and
8.02, each party to this Agreement will bear its respective costs and expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants. Parent will pay the HSR Act filing
fee. In the event of termination of this Agreement, the obligation of each
party to pay its own expenses will be subject to any rights of such party
arising from a Breach of this Agreement by another party.
SECTION 10.02. Confidentiality. In addition to the obligations set
forth in the Non-Disclosure Agreement between the date of this Agreement and
the Closing Date, Parent and the Target will maintain in confidence, and will
cause their respective directors, officers, employees, agents, and advisors to
maintain in confidence, any written, oral, or other information obtained in
confidence from another party or the Target in connection with this Agreement
or the Transactions, unless (a) such information is already known to such party
or to others not bound by a duty of confidentiality or such information becomes
publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Transactions, or (c)
the furnishing or use of such information is required by Proceedings. If the
Transactions are not consummated, each party will return or destroy as much of
such written information as the other party may reasonably request.
SECTION 10.03. Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by facsimile (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to the appropriate
addresses and facsimile numbers set forth below (or to such other addresses and
facsimile numbers as a party may designate by notice to the other parties):
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<PAGE> 60
Target:
Celcore, Inc.
3800 Forest Hill-Irene Road
Memphis, Tennessee 38125
Attention: Robert P. Goodman
Facsimile No.: (901) 624-4118
with a copy to:
Powell, Goldstein, Frazer and Murphy, LLP
Sixteenth Floor
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1740
Attention: G. William Speer
Facsimile No. (404) 571-6999
Parent and Parent Sub:
DSC Communications Corporation
1000 Coit Road
Plano, Texas 75075
Attention: General Counsel
Facsimile No.: (972) 519-2321
with a copy to:
Baker & McKenzie
4500 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Daniel W. Rabun
Facsimile No.: (214) 978-3099
Representative:
Robert P. Goodman
1013 Cove Road
Mamaroneck, New York 10543
Facsimile No.: (914) 777-2639
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<PAGE> 61
SECTION 10.04. Further Assurances. The parties agree (a) to furnish
upon request to each other such further information, (b) to execute and deliver
to each other such other documents, and (c) to do such other acts and things,
all as the other party may reasonably request for the purpose of carrying out
the intent of this Agreement and the documents referred to in this Agreement.
SECTION 10.05. Entire Agreement and Modification. This Agreement
supersedes all prior agreements between the parties with respect to its subject
matter and constitutes (along with the documents referred to in this Agreement)
a complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter, but the Confidentiality Agreement
shall be deemed to be a part of this Agreement and is hereby incorporated by
reference.
SECTION 10.06. Target Disclosure Schedule.
(a) The disclosures in the Target Disclosure Schedule
relate only to the representations and warranties in the Section of the
Agreement to which they expressly relate and not to any other representation or
warranty in this Agreement.
(b) In the event of any inconsistency between the
statements in the body of this Agreement and those in the Target Disclosure
Schedule (other than an exception expressly set forth as such in the Target
Disclosure Schedule with respect to a specifically identified representation or
warranty), the statements in the body of this Agreement will control.
SECTION 10.07. Assignments, Successors, and No Third-Party Rights.
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties (whether by operation of Law or otherwise)
except that Parent may assign any of its rights under this Agreement to any
subsidiary of Parent. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the
parties to this Agreement any legal or equitable right, remedy, or claim under
or with respect to this Agreement or any provision of this Agreement. This
Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement and their successors and
assigns.
SECTION 10.08. Severability. If any provision of this Agreement is
held invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not held invalid or
unenforceable.
SECTION 10.09. Section Headings, Construction. The headings of
Sections in this Agreement are provided for convenience only and will not
affect its construction or
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interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
SECTION 10.10. Time of Essence. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of the essence.
SECTION 10.11. Incorporation of Schedules. The Target Disclosure
Schedule and the Parent Disclosure Schedule referred to herein and signed for
identification by the parties hereto are hereby incorporated herein and made a
part hereof for all purposes as if fully set forth herein.
SECTION 10.12. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 10.13. Waiver of Jury Trial. Each of Parent, the Target and
Parent Sub hereby irrevocably waives all right to trial by jury in any
Proceeding (whether based on contract, tort or otherwise) arising out of or
relating to this Agreement or the actions of Parent, the Target or Parent Sub
in the negotiation, administration, performance and enforcement thereof.
SECTION 10.14. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware without regard
to the rules of conflicts of law thereof. All actions and proceedings arising
out of or relating to this Agreement shall be heard and determined in any court
sitting in the City of Wilmington, Delaware and each of the parties consents to
the jurisdiction of such courts in any such Proceeding and waives any objection
to venue laid therein.
SECTION 10.15. Certain Definitions. For purposes of this Agreement:
"Affiliate" of a specified person shall mean a person who, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such specified person.
"Average Trading Price" shall mean the average of the reported last
sale prices of a share of Parent Common Stock on the Nasdaq as reported by
Nasdaq for the 10 consecutive trading days ending immediately preceding the
second trading day before the date of the Effective Time.
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"Best Efforts" shall mean the efforts that a prudent Person desirous
of achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as possible but without the necessity of
making payments to third parties to procure consents, approvals or similar
requirements.
"Breach" shall mean a "Breach" of a representation, warranty,
covenant, obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement if there is or has been any inaccuracy in
or breach of, or any failure to perform or comply with, such representation,
warranty, covenant, obligation, or other provision.
"business day" shall mean any day on which the principal offices of
the SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in New York, New York.
"Code" shall mean the United States Internal Revenue code of 1986, as
amended.
"Consent" shall mean any approval, consent, ratification, waiver, or
other authorization of third parties (excluding any Governmental
Authorization).
"Contract" shall mean any agreement, contract, lease, obligation,
commitment, arrangement, promise, or undertaking (whether written or oral and
whether express or implied) that is legally binding.
"control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise.
"Exchange Ratio" shall mean a fraction, the numerator of which is
eight (8) and the denominator of which is the Average Trading Price.
"GAAP" shall mean generally accepted United States accounting
principles.
"Governmental Authorization" shall mean any franchises, grants,
approval, license, permit, easements, variances, exceptions, certificates,
approvals, orders, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental
Authority or pursuant to any Law.
"Knowledge:" an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
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(a) such individual is actually aware of such fact or
other matter; or
(b) a prudent individual would be expected to discover or
otherwise become aware of such fact or other matter in the course of conducting
reasonable inquiries.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving, or who
has at any time served, as a director, officer, key employee, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, Knowledge of such fact or other matter.
"Law" shall mean any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, rule, regulation, judgment, decree,
statute, or treaty.
"Nasdaq" shall mean the NASDAQ National Market.
"Order" shall mean any award, decision, decree, determination,
injunction, judgment, order, consent decree, ruling, subpoena, writ or verdict
entered, issued, made, or rendered by any court, administrative agency, or
other Governmental Authority or by any arbitrator.
"Ordinary Course of Business:" an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of
such Person and is taken in the ordinary course of the normal day-to-day
operations of such Person;
(b) such action is not required under law to be
authorized by the board of directors of such Person; and
(c) such action is similar in nature and magnitude to
actions customarily taken, without any authorization by the board of directors
(or by any Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons that are
in the same line of business as such Person.
"Parent Common Stock" shall mean the common stock, par value $0.01 per
share of Parent, including any preferred stock purchase rights issuable
pursuant to the Rights Agreement, dated April 25, 1996 between Parent and
KeyCorp Shareholder Services, Inc. as rights agent, or any other purchase right
issued in substitution thereof.
"Person" shall mean any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Authority.
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"Proceeding" shall mean any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Authority or arbitrator.
"Subsidiary" or "subsidiaries" of any Person means any corporation,
limited liability company, partnership, joint venture or other legal entity of
which such Person (either alone or through or together with any other
subsidiary), owns or has rights to acquire, directly or indirectly, more than
50% of the stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such corporation or other legal entity.
"Threatened:" a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in
writing), or if any other event has occurred or any other circumstances exist,
that would lead a prudent Person to conclude that such a claim, Proceeding,
dispute, action, or other matter is likely to be asserted, commenced, taken, or
otherwise pursued in the future.
SECTION 10.16. Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
DSC COMMUNICATIONS CELCORE, INC.:
CORPORATION:
By: /s/ James L. Donald By: /s/ Robert P. Goodman
------------------------------ --------------------------------
James L. Donald, Chairman of Robert P. Goodman, Chairman of
the Board, President and Chief the Board and Chief Executive
Executive Officer Officer
CI ACQUISITION COMPANY:
By: /s/ James L. Donald
------------------------------
James L. Donald, Chairman of
the Board, President and
Chief Executive Officer
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DEFINED TERMS
<TABLE>
<S> <C>
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Average Trading Price . . . . . . . . . . . . . . . . . . . . . 57
Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . 57
Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . . . . 11
Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Business Combination Transaction . . . . . . . . . . . . . . . 44
business day . . . . . . . . . . . . . . . . . . . . . . . . . 58
Certificate of Designation . . . . . . . . . . . . . . . . . . 10
Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . 2
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
control . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Copyrights . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Delaware Law . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . 8
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . 2
Environmental Claims . . . . . . . . . . . . . . . . . . . . . 24
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . 24
Environmental Permits . . . . . . . . . . . . . . . . . . . . . 24
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . . . 13
Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . 46
Escrow Period . . . . . . . . . . . . . . . . . . . . . . . . . 47
Escrow Release . . . . . . . . . . . . . . . . . . . . . . . . 47
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . 11
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . 4
Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . 58
Expiration Date . . . . . . . . . . . . . . . . . . . . . . . . 46
Financial Statements . . . . . . . . . . . . . . . . . . . . . 12
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Governmental Authority . . . . . . . . . . . . . . . . . . . . 11
Governmental Authorization . . . . . . . . . . . . . . . . . . 58
Hazardous Substances . . . . . . . . . . . . . . . . . . . . . 23
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Indemnification Agreements . . . . . . . . . . . . . . . . . . 29
Intellectual Property Assets . . . . . . . . . . . . . . . . . 19
Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Marks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . 9
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . 3
Multiemployer Plan . . . . . . . . . . . . . . . . . . . . . . 13
Nasdaq . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
New Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Non-Disclosure Agreement . . . . . . . . . . . . . . . . . . . 37
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Officer's Certificate . . . . . . . . . . . . . . . . . . . . . 48
Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Ordinary Course of Business . . . . . . . . . . . . . . . . . . 59
Other Benefit Obligations . . . . . . . . . . . . . . . . . . . 13
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Parent Common Stock . . . . . . . . . . . . . . . . . . . . . . 59
Parent Disclosure Schedule . . . . . . . . . . . . . . . . . . 30
Parent Escrow Agreement . . . . . . . . . . . . . . . . . . . . 46
Parent Escrow Amount . . . . . . . . . . . . . . . . . . . . . . 5
Parent Escrow Fund . . . . . . . . . . . . . . . . . . . . . . 46
Parent Preferred Stock . . . . . . . . . . . . . . . . . . . . 31
Parent Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Parent Sub Common Stock . . . . . . . . . . . . . . . . . . . . . 4
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . 13
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Plan Sponsor . . . . . . . . . . . . . . . . . . . . . . . . . 13
Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Proprietary Rights Agreement . . . . . . . . . . . . . . . . . 18
Qualified Plan . . . . . . . . . . . . . . . . . . . . . . . . 13
Representative . . . . . . . . . . . . . . . . . . . . . . . . 50
Representative Agent Notice . . . . . . . . . . . . . . . . . . 49
Representative Escrow Agreement . . . . . . . . . . . . . . . . 52
</TABLE>
62
<PAGE> 68
<TABLE>
<S> <C>
Representative Escrow Amount . . . . . . . . . . . . . . . . . . . 5
Representative Escrow Fund . . . . . . . . . . . . . . . . . . . 52
Representative Escrow Period . . . . . . . . . . . . . . . . . . 52
Representative Escrow Release . . . . . . . . . . . . . . . . . . 52
Representative Expense . . . . . . . . . . . . . . . . . . . . . 52
Representative Expenses . . . . . . . . . . . . . . . . . . . . . 52
Rights in Mask Works . . . . . . . . . . . . . . . . . . . . . . 19
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . 11
Series A Preferred Stock . . . . . . . . . . . . . . . . . . . . . 3
Series B Preferred Stock . . . . . . . . . . . . . . . . . . . . . 3
Series C Preferred Stock . . . . . . . . . . . . . . . . . . . . . 3
Series D Preferred Stock . . . . . . . . . . . . . . . . . . . . . 3
Specified Expenses . . . . . . . . . . . . . . . . . . . . . . . 45
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Substitute Option . . . . . . . . . . . . . . . . . . . . . . . . . 7
Superior Proposal . . . . . . . . . . . . . . . . . . . . . . . . 37
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . 1
Takeover Proposal . . . . . . . . . . . . . . . . . . . . . . . . 37
Target . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Target Banker . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Target Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 3
Target Disclosure Schedule . . . . . . . . . . . . . . . . . . . . 8
Target Options . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Target Other Benefit Obligation . . . . . . . . . . . . . . . . . 14
Target Permits . . . . . . . . . . . . . . . . . . . . . . . . . 11
Target Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Target Preferred Stock . . . . . . . . . . . . . . . . . . . . . . 3
Target Products . . . . . . . . . . . . . . . . . . . . . . . . . 25
Target Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Target Stock Option Plan . . . . . . . . . . . . . . . . . . . . . 6
Target Stockholders . . . . . . . . . . . . . . . . . . . . . . . . 1
Target Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 8
Target VEBA . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Terminating Parent Breach . . . . . . . . . . . . . . . . . . . . 44
Terminating Target Breach . . . . . . . . . . . . . . . . . . . . 44
Threatened . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Title IV Plans . . . . . . . . . . . . . . . . . . . . . . . . . 14
Trade Secrets . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Transaction Fee . . . . . . . . . . . . . . . . . . . . . . . . . 44
Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Unaudited Monthly Statements . . . . . . . . . . . . . . . . . . 39
VEBA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Welfare Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
62
<PAGE> 69
EXHIBIT A
CERTIFICATE OF INCORPORATION
OF
CI ACQUISITION COMPANY
ARTICLE I
The name of the corporation is CI Acquisition Company (the
"Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, New
Castle County, Delaware 19801. The name of its registered agent at such address
is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
The total number of shares of stock which the Corporation shall have
the authority to issue is one thousand (1,000) shares of Common Stock, par
value one cent ($.01) per share.
ARTICLE V
The powers of the incorporator are to terminate upon the filing of
this certificate of incorporation, and the name and mailing address of the
persons who are to serve as the board of directors until the first annual
meeting of the stockholders or until their successors are elected and qualified
are as follows:
<TABLE>
<CAPTION>
Names of Directors Mailing Address
------------------ ---------------
<S> <C>
James L. Donald DSC Communications Corporation
1000 Coit Road
Plano, Texas 75075
</TABLE>
A-1
<PAGE> 70
<TABLE>
<S> <C>
Gerald F. Montry DSC Communications Corporation
1000 Coit Road
Plano, Texas 75075
George Brunt DSC Communications Corporation
1000 Coit Road
Plano, Texas 75075
</TABLE>
ARTICLE VI
Elections of directors need not be by written ballot unless the bylaws
of the Corporation shall so provide.
ARTICLE VII
The Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal bylaws of the Corporation, but the stockholders may make
additional bylaws and may alter or repeal any bylaw whether adopted by them or
otherwise.
ARTICLE VIII
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under
the provisions of Section 291 of the General Corporation Law of the State of
Delaware or on the application of trustees in dissolution or of any receiver or
receivers appointed for the Corporation under the provisions of Section 279 of
the General Corporation Law of the State of Delaware, order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all of the
creditors or class of creditors, and/or on all of the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
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<PAGE> 71
ARTICLE IX
A director of the Corporation or any director of a predecessor
corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of
Delaware, as the same exists or hereafter may be amended, or (iv) for any
transaction from which the director derived an improper personal benefit. If
the General Corporation Law of the State of Delaware is amended after the date
of filing of this certificate of incorporation to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended General Corporation Law of the State of Delaware. Each
director and officer of this corporation and any predecessor corporation shall
be indemnified to the full extend permitted under Section 145 of the General
Corporation Law of the State of Delaware. Any repeal or modification of this
Article IX by the stockholders of the Corporation shall be prospective only,
and shall not adversely affect any limitation on the personal liability of a
director of the Corporation existing at the time of such repeal or
modification.
ARTICLE X
The name and mailing address of the incorporator is as follows:
Name Mailing Address
---- ---------------
Daniel W. Rabun Baker & McKenzie
4500 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
The undersigned incorporator under penalties of perjury hereby
acknowledges that the foregoing certificate of incorporation is his act and
deed and that the facts stated therein are true.
-------------------------------
Daniel W. Rabun
A-3
<PAGE> 72
EXHIBIT B
CONSENT AGREEMENT
This Consent Agreement ("Agreement") is made and entered into as of
________ ___, 1997 by and between DSC Communications Corporation, a Delaware
corporation ("Parent"), and the undersigned director, executive officer, or
affiliate of Celcore, Inc., a Delaware corporation ("Target").
RECITALS
A. Parent, Target and CI Acquisition Company, a Delaware
corporation and a wholly-owned subsidiary of Parent ("Parent Sub"), contemplate
entering into an Amended and Restated Agreement and Plan of Merger (the "Merger
Agreement"), providing for the merger of Parent Sub with and into Target (the
"Merger"), pursuant to which Target will become a wholly-owned subsidiary of
Parent.
B. Capitalized terms used herein and not defined have the meaning
for them set forth in the Merger Agreement.
C. The stockholder named on the signature page hereof (the
"Stockholder") is the beneficial holder of record of the number and class of
shares of the outstanding Target Stock, as is indicated on the final page of
this Agreement (the "Shares"). In connection with the Merger, Parent will
acquire the Stockholder's entire equity interest in Target and the Stockholder
will receive in exchange the Merger Consideration in accordance with the terms
of the Merger Agreement. In consideration of and in order to induce the
execution of the Merger Agreement by Parent, the Stockholder agrees not to sell
or otherwise dispose of any shares of Target Stock held by the Stockholder and
to vote the Shares so as to facilitate consummation of the Merger as more fully
described below.
NOW, THEREFORE, in consideration of the mutual promises and the mutual
covenants and agreements contained herein, the parties agree as follows:
1. Agreement to Retain Shares. The Stockholder agrees not to
transfer, pledge, sell, exchange or offer to transfer or sell or otherwise
dispose of or encumber any of the Shares or to make any offer or agreement
relative thereto at any time prior to the Expiration Date. The "Expiration
Date" shall mean the earlier of (a) the date and time on which the Merger shall
become effective in accordance with the terms and provisions of the Merger
Agreement, or (b) the date on which the Merger Agreement shall be terminated
pursuant to the Merger Agreement.
2. Agreement to Vote Shares; Waiver of Liquidation Rights and
Appraisal Rights. At any meeting of the Target Stockholders called with respect
to any of the following, and at
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<PAGE> 73
any adjournment thereof, and on every action by written consent of the Target
Stockholders with respect to any of the following, the Stockholder shall vote
the Shares in favor of approval of (i) the Merger Agreement and the Merger and
any matter that could reasonably be expected to facilitate the Merger, (ii) the
payments under the employment agreements for Messrs. Berger, Foley, and
Gonzalez which are being entered into with such individuals in connection with
the Merger, (iii) the waiver of any rights to receive cash or other property
upon a liquidation of Target as provided in the certificate of incorporation of
Target or in any of the Certificates of Designations in respect of any Target
Preferred Stock and (iv) the amendments to the Target's certificate of
incorporation (including its Certificates of Designations), as contemplated by
Annex B to this Agreement. The Stockholder, as the holder of voting stock of
Target shall be present in person or by proxy, at all meetings of Target
Stockholders so that all Shares are counted for the purposes of determining the
presence of a quorum at such meetings. This Agreement is intended to bind the
Stockholder only with respect to the specific matters set forth herein, and
shall not prohibit the Stockholder from action in accordance with his fiduciary
duties as an officer or director of Target. In respect of the Merger, the
Stockholder hereby waives (x) any rights to receive cash or other property upon
a liquidation of Target as provided in the certificate of incorporation of
Target or any of the Certificates of Designations in respect of any Target
Preferred Stock owned by such Stockholder and (y) any right to receive the
notice under Article Fourth, Section E(iv)(e) of the Target's Certificate of
Incorporation and Section D(iv)(e) of each of the Target's Certificates of
Designations. In addition, the Stockholder agrees not to take any action or
actions to perfect any appraisal rights the Stockholder may have as a result of
the Merger under Section 262 of the Delaware Law and hereby waives all rights
to appraisal under Section 262 of the Delaware Law.
3. Irrevocable Proxy. By execution of this Agreement, the
Stockholder hereby irrevocably appoints and constitutes Robert P. Goodman (the
"Proxyholder"), the agent and proxy of the Stockholder, with full power of
substitution and resubstitution, to the full extent of the Stockholder's rights
with respect to the shares of capital stock of Target beneficially owned by the
Stockholder, which shares are listed below (the "Shares"), and any and all
other shares or securities issued or issuable in respect thereof on or after
the date hereof and prior to the date this proxy terminates, to vote the
Shares, or to execute written consents in lieu of a stockholders meeting, in
favor of approval of the (i) Merger and the Merger Agreement, and any matter
that could reasonably be expected to facilitate the Merger, (ii) the payments
under the employment agreements for Messrs. Berger, Foley, and Gonzalez which
are being entered into with such individuals in connection with the Merger,
(iii) the waiver of the right of the Stockholder to receive cash or other
property upon a liquidation of Target as provided in the certificate of
incorporation of Target or in any of the Certificates of Designations in
respect of any Target Preferred Stock and (iv) the amendments to the Target's
certificate of incorporation (including its Certificates of Designations), as
set forth on Annex B to this Agreement. The Proxyholder may not exercise the
proxy contained in this Section 3 on any other matter. The Stockholder may vote
the Shares on all such other matters. The proxy granted by the Stockholder to
the Proxyholder hereby is granted as of the date of this Agreement in order to
secure the obligations of the Stockholders set forth in Section 2 hereof,
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<PAGE> 74
and is irrevocable and coupled with an interest in such obligations and in the
interests in Target to be purchased and sold pursuant the Merger Agreement. The
proxy contained in this Section 3 will terminate upon the termination of this
Agreement in accordance with its terms. Upon the execution hereof, other than
any irrevocable proxy previously given by the Stockholder to the Proxyholder in
connection with that certain Voting Agreement dated on or about October 29,
1997 by and between Stockholder and Parent, all prior proxies given by the
Stockholder with respect to the Shares and any and all other shares or
securities issued or issuable in respect thereof on or after the date hereof,
are hereby revoked and no subsequent proxies will be given until such time as
this proxy shall be terminated in accordance with its terms. The Stockholder
authorizes the Proxyholder to file this proxy and any substitution with the
Secretary of Target and with any Inspector of Elections at any meeting of the
Target Stockholders. The proxy contained in this Section 3 is irrevocable and
shall survive the insolvency, incapacity, death or liquidation of the
Stockholder. Stockholder acknowledges and agrees that a copy, facsimile
telecommunication or other reproduction of this Agreement may be substituted or
used in lieu of the original writing or transmission for any and all purposes
for which the an original of this Agreement could be used.
4. Additional Purchases. For purposes of this Agreement
(including without limitation, the recitals hereto), the term "Shares" shall
include any shares of Target capital stock (including Target Stock) that the
Stockholder purchases or as to which the Stockholder otherwise acquires voting
power after the execution of this Agreement and prior to the Expiration Date.
5. Representations, Warranties and Covenants of the Stockholder.
The Stockholder hereby represents, warrants and covenants to Parent the
following:
(a) Ownership of Shares. Except as specifically described
on Annex A to this Agreement (if any), the Stockholder (i) is the holder and
beneficial owner of the Shares, which at the date hereof and at all times until
the Expiration Date will be free and clear of any liens, claims, options,
charges or other encumbrances, (ii) does not beneficially own any shares of
Target Stock other than the Shares and (iii) has full power and authority to
make, enter into, deliver and carry out the terms of this Agreement and the
Proxy.
(b) No Voting Trusts and Agreements. The Stockholder will
not, and will not permit any entity under the Stockholder's control to, deposit
any shares of Target capital stock (including Target Stock) held by the
Stockholder or such entity in a voting trust or subject any shares of Target
capital stock (including Target Stock) held by the Stockholder or such entity
to any arrangement or agreement with respect to the voting of such shares of
capital stock, other than agreements entered into with Parent or its
affiliates.
(c) No Proxy Solicitations. The Stockholder will not, and
will not permit any entity under the Stockholder's control to, (i) solicit
proxies or become a participant in a "solicitation" (as such term is defined in
Rule 14a-11 under the Securities Exchange Act of
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<PAGE> 75
1934, as amended (the "Exchange Act")), with respect to any proposal made in
opposition to or competition with consummation of the Merger and the Merger
Agreement, any merger, consolidation, share exchange, sale of securities or
assets, reorganization, recapitalization or other business combination
involving Target and any other party (other than Parent and its affiliates),
any liquidation (including pursuant to the liquidation rights provided for in
the Certificates of Designations), or winding up of Target and any other matter
that would, or could reasonably be expected to, prohibit or discourage the
Merger (each of the foregoing is referred to as an "Opposing Proposal"), or
otherwise encourage or assist any party in taking or planning any action that
would compete with, restrain or otherwise serve to interfere with or inhibit
the timely consummation of the Merger in accordance with the terms of the
Merger Agreement, (ii) initiate a Stockholders' vote or action by consent of
Target Stockholders with respect to an Opposing Proposal or (iii) become a
member of a "group" (as such term is used in Section 13(d) of the Exchange Act)
with respect to any voting securities of Target with respect to an Opposing
Proposal.
6. Representations, Warranties and Covenants of Parent. Parent
represents, warrants and covenants to the Stockholder as follows:
(a) Due Authorization. This Agreement has been authorized
by all necessary corporate action on the part of Parent and has been duly
executed by a duly authorized officer of Parent.
(b) Validity; No Conflict. This Agreement constitutes the
legal, valid and binding obligation of Parent. Neither the execution of this
Agreement by Parent nor the consummation of the transactions contemplated
hereby will result in a breach or violation of the terms of any agreement by
which Parent is bound or of any decree, judgment, order, law or regulation now
in effect of any court or other governmental body applicable to Parent.
7. Additional Documents. The Stockholder and Parent hereby
covenant and agree to execute and deliver any additional documents necessary or
desirable, in the reasonable opinion of Parent's legal counsel or the
Stockholder, as the case may be, to carry out the intent of this Agreement.
8. Consent and Waiver. The Stockholder hereby gives any consent
or waivers that are reasonably required for the consummation of the Merger
under the terms of any agreement to which the Stockholder is a party or
pursuant to any rights the Stockholder may have.
9. Miscellaneous.
(a) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
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<PAGE> 76
(b) Binding Effect and Assignment. This Agreement and all
of the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but,
except as otherwise specifically provided herein, neither this Agreement nor
any of the rights, interests or obligations of the parties hereto may be
assigned by any of the parties without the prior written consent of the other.
(c) Amendments and Modifications. This Agreement may not
be modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.
(d) Specific Performance; Injunctive Relief. The parties
hereto acknowledge that Parent will be irreparably harmed and that there will
be no adequate remedy at law for a violation of any of the covenants or
agreements of the Stockholder set forth herein. Therefore, it is agreed that,
in addition to any other remedies that may be available to Parent upon such
violation, Parent shall have the right to enforce such covenants and agreements
by specific performance, injunctive relief or by any other means available to
it at law or in equity.
(e) Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and sufficient if delivered
in person, by commercial overnight courier service, by confirmed facsimile, or
sent by mail (registered or certified mail, postage prepaid, return receipt
requested) to the respective parties as follows:
(i) if to Parent, to:
DSC Communications Corporation
1000 Coit Road
Plano, Texas 75075
Attention: General Counsel
Facsimile No.: (972) 519-2321
with a copy to:
4500 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Daniel W. Rabun
Facsimile No.: (214) 965-5902
B-5
<PAGE> 77
Stockholder:
--------------------------
--------------------------
--------------------------
Attention:
----------------
Facsimile No.:
------------
with a copy to:
--------------------------
--------------------------
--------------------------
Attention:
----------------
Facsimile No.:
------------
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
(f) Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of Delaware
without giving effect to principles of conflicts of law.
(g) Entire Agreement. This Agreement, together with that
certain Voting Agreement dated on or about October 29, 1997 by and between the
Stockholder and Parent, contain the entire understanding of the parties in
respect of the subject matter hereof, and supersedes all prior negotiations and
understanding between the parties with respect to such subject matter.
(h) Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
(i) Effect of Headings. The section headings herein are
for convenience only and shall not affect the construction or interpretation of
this Agreement.
(j) Termination. Notwithstanding anything else in this
Agreement, this Agreement and the Proxy, and all obligations of the Stockholder
under either of them, shall automatically terminate as of the Expiration Date.
(k) Covenant Not-to-Compete. [ROBERT GOODMAN ONLY]
(i) Stockholder acknowledges that Parent is acquiring the
goodwill of Target. Therefore, Stockholder agrees that for a period
commencing upon the Closing Date and ending upon the fifth anniversary
thereof, unless otherwise extended pursuant to the terms hereof,
Stockholder will not, directly or indirectly, either as an employer,
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<PAGE> 78
consultant, agent, principal, partner, stockholder, or in any other
capacity, engage or participate in any business that is involved in
the development, marketing, manufacturing or sale of GSM or AMPS
mobile switching centers (a "Prohibited Business"), within any state
or country in which Target or Parent or its Subsidiaries is conducting
or reasonably expects to conduct or expand its business (the "Covenant
Not-to-Compete"). Stockholder represents to Parent that the
enforcement of the restriction contained in this Section 9(k) would
not be unduly burdensome to Stockholder and that in order to induce
Parent to enter into this Agreement, Stockholder further represents
and acknowledges that Stockholder is willing and able to compete in
other geographical areas not prohibited by this Section 9(k).
Notwithstanding the foregoing, Stockholder shall not be prohibited
from owning up to five percent (5%) of the outstanding capital stock
of any class of capital stock registered under Section 12 (b) or (g)
of the Exchange Act.
(ii) Stockholder agrees that a breach or violation of the
Covenant Not-to-Compete by Stockholder shall entitle Parent, as a
matter of right, to an injunction issued by any court or arbitration
panel of competent jurisdiction, restraining any further or continued
breach or violation of this covenant. Such right to an injunction
shall be cumulative and in addition to, and not in lieu of, any other
remedies to which Parent may show itself justly entitled. Further,
during any period in which Stockholder is in breach of the Covenant
Not-to-Compete, the time period of the Covenant Not-to-Compete shall
be extended for an amount of time that Stockholder is in breach
hereof.
(iii) In addition to the restrictions set forth in
sub-paragraph (i) of this Section 9(k), Stockholder shall not for a
period commencing upon the Closing Date and ending upon the first
anniversary thereof, either directly or indirectly, (A) make known to
any person, firm or corporation involved in a Prohibited Business the
names and addresses of any of the customers of Target or contacts of
Target or any other information pertaining to such persons, (B) call
on, solicit, or take away, or attempt to call on, solicit or take away
any of the customers of Target on whom Stockholder called or with whom
Stockholder became acquainted during Stockholder's association with
Target, for any other person, firm or corporation involved in a
Prohibited Business or (C) recruit or hire or attempt to recruit or
hire, directly or by assisting others, any employee, consultant or
independent contractor of Target.
(iv) The representations and covenants contained in this
Section 9 on the part of Stockholder will be construed as ancillary to
and independent of any other provision of this Agreement, and the
existence of any proceeding of Stockholder against Target or any
officer, director, or shareholder of Parent whether predicated on this
Agreement or otherwise, shall not constitute a defense to the
enforcement by Parent of the covenants of the Stockholder contained in
this Section 9.
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(v) If Stockholder violates any covenant contained in
this Section 9 and Parent brings legal action for injunctive or other
relief, Parent shall not, as a result of the time involved in
obtaining the relief, be deprived of the benefit of the full period of
any such covenant. Accordingly, the covenants of Stockholder contained
in this Section 9 shall be deemed to have durations as specified
above, which periods shall commence upon the Closing Date and shall be
extended for the amount of time between the Closing Date and the date
of entry by a court of competent jurisdiction of a final judgment
enforcing the covenants of Stockholder in this Section 9.
(vi) The parties to this Agreement agree that the
limitations contained in this Section 9 with respect to geographic
area, duration and scope of activity are reasonable. However, if any
court shall determine that the geographic area, duration or scope of
activity of any restriction contained in this Section 9 is
unenforceable, it is the intention of the parties that such
restrictive covenant set forth herein shall not thereby be terminated
but shall be deemed amended to the extent required to render it valid
and enforceable.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
DSC COMMUNICATIONS CORPORATION
By:
------------------------------
Its:
-----------------------------
Stockholder
---------------------------------
Printed Name:
--------------------
Dated: , 1997
--------------------
Shares beneficially owned:
shares of Target Common Stock
-------
shares of Target Series A
------- Preferred Stock
shares of Target Series B
------- Preferred Stock
shares of Target Series C
------- Preferred Stock
shares of Target Series D
------- Preferred Stock
B-8
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EXHIBIT C
TARGET COUNSEL OPINION LETTER
[TARGET COUNSEL LETTERHEAD]
December __, 1997
DSC Communications Corporation
1000 Coit Road
Plano, Texas 75075
Gentlemen:
We have acted as counsel to Celcore, Inc., a Delaware corporation (the
"Target"), in connection with the execution and delivery of the Amended and
Restated Agreement and Plan of Merger (the "Agreement"), dated as of December
__, 1997, among DSC Communications Corporation, a Delaware corporation
("Parent"), CI Acquisition Company, a Delaware corporation and a direct,
wholly-owned subsidiary of Parent ("Parent Sub"), and Target providing for the
merger of Parent Sub with and into Target (the "Merger"). This opinion letter
is being furnished to you pursuant to Section 7.02 of the Agreement. Unless
otherwise defined herein or the context hereof otherwise requires, each term
used herein with its initial letter capitalized has the meaning given to such
term in the Agreement.
We have examined and are familiar with originals or copies, certified or
otherwise authenticated to our satisfaction, of such documents and records of
Target and each Target Subsidiary, and such statutes, regulations and
instruments as we have deemed necessary or advisable for the purposes of this
opinion letter, including, without limitation, (i) the Agreement, (ii) the
Certificate of Merger dated as of December __, 1997 between Target and Parent
Sub and (iii) the certificate of incorporation and bylaws of Target.
As to certain facts material to our opinions herein, we have assumed the
accuracy of the representations of Target in the Agreement and of one or more
officers of Target. In addition, we have assumed that all signatures on all
documents presented to us are genuine, that all documents submitted to us as
originals are accurate and complete, that all documents submitted to us as
copies are true and complete copies of the originals thereof, that all
information submitted to us was accurate and complete, and that all persons
executing and delivering originals or copies of documents examined by us were
competent to execute and deliver such documents. We have also assumed the due
authorization, execution and delivery
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by the Parent and Parent Sub of the Agreement and the Certificate of Merger and
that the Agreement and the Certificate of Merger constitute legal, valid and
binding obligations of the Parent and Parent Sub enforceable against each of
them in accordance with their terms.
Based upon the foregoing and subject to the qualifications and limitations set
forth below, we are of the opinion that:
1. Target is duly incorporated, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted. Target is
duly qualified or licensed as a foreign corporation to do business, and is in
good standing in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except where the failure to be qualified or licensed
would not have a Material Adverse Effect.
2. Target has all necessary corporate power and authority to
execute and deliver the Agreement and to perform its obligations thereunder and
to consummate the Merger and the Transactions. The execution and delivery of
the Agreement by Target and the consummation by Target of the Transactions have
been duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of Target are necessary to authorize the
Agreement or to consummate the Merger and the Transactions (other than the
recordation of an appropriate Certificate of Merger with the Secretary as
required by Delaware Law).
3. The Agreement has been duly and validly executed and delivered
by Target and constitutes a legal, valid and binding obligation of Target,
enforceable against Target in accordance with its terms, except as may be (i)
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, or other Laws affecting enforcement of creditors' rights generally,
and (ii) subject to general principles of equity, regardless of whether
enforcement is considered in a Proceeding at law or in equity.
4. The execution and delivery of the Agreement by Target do not,
and the performance of the Agreement by Target and the consummation of the
Merger and the Transactions will not, (i) conflict with or violate the
certificate of incorporation or bylaws of Target, (ii) conflict with or violate
Delaware Law or the laws of the United States of America, or (iii) to the best
of our knowledge, result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on
any property or asset of Target or the Target Subsidiaries or require the
Consent of any third party pursuant to, any note, bond, mortgage, indenture,
Contract, license, permit, franchise or other instrument or obligation to which
Target or the Target Subsidiaries is a party or by which Target or the Target
Subsidiaries or any property or asset of Target or the Target Subsidiaries is
bound or affected.
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5. The execution and delivery of the Agreement by Target do not,
and the performance of the Agreement and the Merger and the Transactions
contemplated thereby by Target will not, require any Consent or permit of, or
filing with or notification to, any federal or Delaware Governmental Authority,
except the filing and recordation of an appropriate Certificate of Merger with
the Secretary as required by Delaware Law.
6. Upon the issuance of a Certificate of Merger by the Secretary,
the Merger will become effective in accordance with the Agreement and the
Delaware Law, and each issued and outstanding share of Target Stock (other than
Dissenting Shares) will be converted into the consideration provided in Section
2.01 of the Agreement.
7. To the best of our knowledge, except as set forth in the
Target Disclosure Schedule, no Proceedings are pending or Threatened against
Target or the Target Subsidiaries seeking to prevent or delay the Merger or the
Transactions contemplated by the Agreement or challenging any of the terms or
provisions of the Agreement or seeking material damages in connection
therewith.
8. Immediately prior to the Merger, the authorized capital stock
of Target and each of the Target Subsidiaries is as set forth in Section 3.03
of the Agreement. Each share of Target Preferred Stock is convertible into one
share of Target Common Stock. All of the issued and outstanding shares of
capital stock of the Target Subsidiaries are held by Target and are validly
issued, fully paid and nonassessable and, to the best of our knowledge, not
subject to preemptive rights, except as identified in this Opinion. To the best
of our knowledge, no shares of capital stock of the Target have been acquired
by the Target that are subject to outstanding pledges by the Target to secure
the future payment of some or all of the purchase price for such shares. To the
best of our knowledge, other than the Target Options, as of the date of this
Agreement, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Target obligating the Target to issue or sell any shares
of capital stock of, or other equity interests in, the Target or the Target
Subsidiaries. To the best of our knowledge, other than as set forth in Target's
certificate of incorporation (including the Target Certificate of
Designations), there are no outstanding contractual obligations of the Target
to repurchase, redeem or otherwise acquire any shares of Target Stock.
9. The Board of Directors of Target has approved the terms of the
Agreement and the Merger and the other Transactions, and such approval is
sufficient to render inapplicable to the Merger and the other Transactions the
provisions of Section 203 of the Delaware Law.
The preceding opinions and "negative assurance" statements are subject to the
following qualifications and limitations:
A. In connection with statements herein qualified by "to our
knowledge" or as to matters that have "come to our attention," our examination
has been limited to discussions
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with the officers and other representatives of Target and each Target
Subsidiary by, and those statements refer only to what is in the actual
knowledge of, attorneys of this Firm who have been involved in the
representation of Target and the Target Subsidiaries in connection with the
Merger and the Transactions described in the Agreement, and we have made no
independent investigations as to the accuracy or completeness of any of the
representations, warranties, data or other information, written or oral, made
or furnished by Parent or Parent Sub to us or to you.
B. The opinions and statements expressed herein are limited to
the matters specifically addressed, and no opinion or statement is implied or
may be inferred beyond the matters so specifically addressed.
C. With respect to the opinion expressed in Paragraph 7, we have
not conducted any search of any indexes, dockets or other records of any court
or other Governmental Authority.
D. The opinions and statements expressed herein are rendered as
of the time immediately preceding the Effective Time, and we hereby disclaim
any obligation to advise you of, or to supplement any of our opinions or
statements because of, any changes in fact or Law which might affect any of
those opinions or statements.
E. We are licensed to practice law only in the State of Georgia
and are therefore unable to render an opinion regarding the laws of any
jurisdiction other than the State of Georgia. Accordingly, for purposes of this
opinion we have assumed that the laws of the State of Georgia and Delaware or
any other jurisdiction that is the subject of this opinion are the same.
Notwithstanding the foregoing, we are able to render an opinion with respect to
any matter covered by this opinion that is governed or controlled by Delaware
Law and accordingly our opinion is not subject to the foregoing limitation to
the extent it relates to Delaware Law.
F. This opinion letter is solely for your benefit in connection
with the Merger and the Transactions described in the Agreement and may not be
relied upon, quoted or otherwise used by any other person or entity or for any
other purpose without our express written consent.
Very truly yours,
POWELL, GOLDSTEIN, FRAZER
& MURPHY LLP
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EXHIBIT D
PARENT COUNSEL OPINION LETTER
[PARENT COUNSEL LETTERHEAD]
December __, 1997
Celcore, Inc.
3800 Forest Hill-Irene Road
Memphis, Tennessee 38125
Gentlemen:
We have acted as counsel to DSC Communications Corporation, a Delaware
corporation ("Parent"), and CI Acquisition Company, a Delaware corporation and
a direct, wholly-owned subsidiary of Parent ("Parent Sub"), in connection with
the execution and delivery of the Amended and Restated Agreement and Plan of
Merger (the "Agreement"), dated as of December __, 1997, among Parent, Parent
Sub and Celcore, Inc., a Delaware corporation (the "Target"), providing for the
merger of Parent Sub with and into Target (the "Merger"). This opinion letter
is being furnished to you pursuant to Section 7.03 of the Agreement. Unless
otherwise defined herein or the context hereof otherwise requires, each term
used herein with its initial letter capitalized has the meaning given to such
term in the Agreement.
We have examined and are familiar with originals or copies, certified or
otherwise authenticated to our satisfaction, of such documents and records of
Parent and Parent Sub, and such statutes, regulations and instruments as we
have deemed necessary or advisable for the purposes of this opinion letter,
including without limitation, (i) the Agreement, (ii) the Certificate of Merger
dated as of December ___, 1997 between Target and Parent Sub and (iii) the
certificates of incorporation and bylaws of Parent and Parent Sub.
As to certain facts material to our opinions herein, we have assumed the
accuracy of the representations of Parent and Parent Sub in the Agreement and
of one or more officers of Parent or Parent Sub. In addition, we have assumed
that all signatures on all documents presented to us are genuine, that all
documents submitted to us as originals are accurate and
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<PAGE> 85
complete, that all documents submitted to us as copies are true and complete
copies of the originals thereof, that all information submitted to us was
accurate and complete, and that all persons executing and delivering originals
or copies of documents examined by us were competent to execute and deliver
such documents. We have also assumed the due authorization, execution and
delivery by Target of the Agreement and the Certificate of Merger and that the
Agreement and the Certificate of Merger constitute legal, valid and binding
obligations of Target enforceable against Target in accordance with their
terms.
Based upon the foregoing and subject to the qualifications and limitations set
forth below, we are of the opinion that:
1. Each of Parent and Parent Sub is duly incorporated, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted. Each of Parent and Parent Sub is duly qualified or licensed as a
foreign corporation to do business, and is in good standing in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except where the failure to be qualified or licensed would not have
a Material Adverse Effect.
2. Each of Parent and Parent Sub has all necessary corporate
power and authority to execute and deliver the Agreement and to perform its
obligations thereunder and to consummate the Merger and the Transactions. The
execution and delivery of the Agreement by Parent and Parent Sub and the
consummation by Parent and Parent Sub of the Transactions have been duly and
validly authorized by all necessary corporate action and no other corporate
proceedings on the part of Parent or Parent Sub are necessary to authorize the
Agreement or to consummate the Merger and the Transactions (other than the
recordation of an appropriate Certificate of Merger with the Secretary as
required by Delaware Law).
3. The Agreement has been duly and validly executed and delivered
by Parent and Parent Sub and constitutes a legal, valid and binding obligation
of each of Parent and Parent Sub, enforceable against each of Parent and Parent
Sub in accordance with its terms, except as may be (i) limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium, or other Laws
affecting enforcement of creditors' rights generally, and (ii) subject to
general principles of equity, regardless of whether enforcement is considered
in a Proceeding at law or in equity.
4. The execution and delivery of the Agreement by Parent and
Parent Sub do not, and the performance of the Agreement by Parent and Parent
Sub and the consummation of the Merger and the Transactions will not, (i)
conflict with or violate the certificate of incorporation or bylaws of either
Parent or Parent Sub, (ii) conflict with or violate Delaware Law or the laws of
the United States of America, or (iii) to the best of our knowledge, result in
any breach of or constitute a default (or an event which with notice or lapse
of time or both would become
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a default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of Parent or Parent Sub or require the
Consent of any third party pursuant to, any note, bond, mortgage, indenture,
Contract, license, permit, franchise or other instrument or obligation to which
Parent or Parent Sub is a party or by which Parent or Parent Sub or any
property or asset of Parent or Parent Sub is bound or affected.
5. The execution and delivery of the Agreement by Parent and
Parent Sub do not, and the performance of the Agreement and the Merger and the
Transactions contemplated thereby by Parent and Parent Sub will not, require
any Consent or permit of, or filing with or notification to, any federal or
Delaware Governmental Authority, except the filing and recordation of an
appropriate Certificate of Merger with the Secretary as required by Delaware
Law.
6. Upon the issuance of a Certificate of Merger by the Secretary,
the Merger will become effective in accordance with the Agreement and the
Delaware Law, and each issued and outstanding share of Target Stock (other than
Dissenting Shares) will be converted into the consideration provided in Section
2.01 of the Agreement.
7. To the best of our knowledge, except as set forth in the
Parent Disclosure Schedule, no Proceedings are pending or Threatened against
Parent or Parent Sub seeking to prevent or delay the Merger or the Transactions
contemplated by the Agreement or challenging any of the terms or provisions of
the Agreement or seeking material damages in connection therewith.
The preceding opinions and "negative assurance" statements are subject to the
following qualifications and limitations:
A. In connection with statements herein qualified by "to our
knowledge" or as to matters that have "come to our attention," our examination
has been limited to discussions with the officers and other representatives of
Parent and Parent Sub by, and those statements refer only to what is in the
actual knowledge of, attorneys in the Dallas, Chicago and Washington D.C.
offices of this Firm who have been involved in the representation of Parent and
Parent Sub in connection with the Merger and the Transactions described in the
Agreement, and we have made no independent investigations as to the accuracy or
completeness of any of the representations, warranties, data or other
information, written or oral, made or furnished by Target or the Target
Subsidiaries to us or to you.
B. The opinions and statements expressed herein are limited to
the matters specifically addressed, and no opinion or statement is implied or
may be inferred beyond the matters so specifically addressed.
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C. With respect to the opinion expressed in Paragraph 7, we have
not conducted any search of any indexes, dockets or other records of any court
or other Governmental Authority.
D. The opinions and statements expressed herein are rendered as
of the time immediately preceding the Effective Time, and we hereby disclaim
any obligation to advise you of, or to supplement any of our opinions or
statements because of, any changes in fact or Law which might affect any of
those opinions or statements.
E. We are licensed to practice law only in the State of Texas and
are therefore unable to render an opinion regarding the laws of any
jurisdiction other than the State of Texas. Accordingly, for purposes of this
opinion we have assumed that the laws of the State of Texas and Delaware or any
other jurisdiction that is the subject of this opinion are the same.
Notwithstanding the foregoing, we are able to render an opinion with respect to
any matter covered by this opinion that is governed or controlled by Delaware
Law and accordingly our opinion is not subject to the foregoing limitation to
the extent it relates to Delaware Law.
F. This opinion letter is solely for your benefit in connection
with the Merger and the Transactions described in the Agreement and may not be
relied upon, quoted or otherwise used by any other person or entity or for any
other purpose without our express written consent.
Very truly yours,
BAKER & MCKENZIE
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EXHIBIT E
DSC COMMUNICATIONS CORPORATION
DSC SPECIAL CELCORE INCENTIVE PLAN
Scope and Purpose of Plan
This DSC Special Celcore Incentive Plan (the "Plan") provides for the
granting of:
(a) Options (hereinafter defined) to certain employees of DSC
Communications Corporation, a Delaware corporation (the
"Corporation"), or its Affiliates (as hereinafter defined) who
are Eligible Individuals (as hereinafter defined), and
(b) The right to cash payments (the "Cash Payments") to certain
employees of the Corporation or its Affiliates who are
Eligible Individuals.
This Plan is being implemented pursuant to the terms of the Amended and
Restated Agreement and Plan of Merger (the "Merger Agreement"), dated as of
December ___, 1997 by and among the Corporation, CI Acquisition Company, a
Delaware corporation and a direct, wholly owned subsidiary of the Corporation,
and CELCORE, INC., a Delaware corporation ("Celcore").
SECTION 1. DEFINITIONS.
"ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"AFFILIATES" shall mean all persons and business entities,
whether corporations, partnerships, joint ventures or otherwise, which now or
hereafter control, or are owned or controlled, directly or indirectly, by the
Corporation, or are under common control with the Corporation.
"AGGREGATE OPTION AMOUNT" shall mean (i) with respect to the
Fiscal Year ending December 31, 1998, an amount equal to $800,000 divided by
the Closing Sales Price, (ii) with respect to the Fiscal Year ending December
31, 1999, an amount equal to $1,450,000 divided by the Closing Sales Price, and
(iii) with respect to each Fiscal Year ending December 31, 2000 and December
31, 2001, an amount equal to the difference of (A) $2,250,000 minus (B) the
then aggregate of the Annual Option Vesting Amount for each of the Fiscal Years
prior to the Fiscal Year in question.
"AGGREGATE OPTION SHARES" shall have the meaning set forth in
Section 2.1 hereof.
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"AGGREGATE PAYMENT AMOUNT" shall mean (i) with respect to the
Fiscal Year ending December 31, 1998, an amount equal to $800,000, and (ii)
with respect to the Fiscal Year ending December 31, 1999, an amount equal to
$1,450,000.
"AGREEMENT" shall mean the written agreement between the
Corporation and an Eligible Individual in the form attached as Exhibit A hereto
evidencing the Option and Cash Payment granted by the Corporation.
"ANNUAL OPTION VESTING AMOUNT" shall have the meaning set
forth in Section 6.2(a) hereof.
"ANNUAL PAYMENT AWARD" shall have the meaning set forth in
Section 2.2 hereof.
"APPLICABLE PERCENTAGE" shall mean with respect to a Fiscal
Year, the sum of (i) sixty percent (60%), plus (ii) the product of (A) two (2),
times (B) the difference of the Attained Percentage with respect to such Fiscal
Year, minus eighty percent (80%); provided, however, in the event the
Applicable Percentage for that Fiscal Year is less than zero, the Applicable
Percentage for such Fiscal Year shall be deemed to be zero.
"ATTAINED PERCENTAGE" shall mean with respect to a Fiscal
Year, the percentage when expressed as a fraction has as its numerator the
Celcore Revenues with respect to that Fiscal Year and has as its denominator
the Target Revenue with respect to that Fiscal Year; provided that in no event
shall the Attained Percentage exceed one hundred twenty-five percent (125%).
"BOARD OF DIRECTORS" shall mean the board of directors of the
Corporation.
"CASH PAYMENT" shall have the meaning set forth in the
recitals hereof.
"CAUSE" means conduct that amounts to (i) fraud or dishonesty
against the Corporation or its Affiliates, (ii) Eligible Individual's willful
misconduct, repeated refusal to follow the reasonable directions of the board
of directors of the Corporation or its Affiliates, or knowing violation of law
in the course of performance of the duties of Eligible Individual's service
with the Corporation or its Affiliates, (iii) repeated absences from work
without a reasonable excuse, (iv) repeated intoxication with alcohol or drugs
while on the Corporation or Affiliates' premises during regular business hours,
(v) a conviction or plea of guilty or nolo contendere to a felony or a crime
involving dishonesty, (vi) a breach or violation of the terms of any agreement
to which an Eligible Individual and the Corporation or its Affiliates are
party, including, without limitation, any agreement providing for the
protection of the confidential information or the proprietary rights of the
Corporation or its Affiliates or any agreement involving non-competition
obligations of the Eligible Individual, or (vii) the violation of the sexual
harassment policy of the Corporation or any of its Affiliates or the
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determination that such Eligible Individual has engaged in any misconduct of a
sexual nature that unreasonably interferes with an individual's work
performance or creates an intimidating, hostile or offensive working
environment at the Corporation or any of its Affiliates; provided, however,
notwithstanding the foregoing, in respect of Messrs. Berger, Gonzalez and
Foley, the term "Cause" shall have the meaning provided in their respective
Employment Agreements dated October 29, 1997.
"CELCORE REVENUES" shall mean the revenues, if any, of the
Corporation and its Affiliates recognized by the Corporation under its revenue
recognition policy and attributable to the line of products currently being
developed or marketed by Celcore as of the Effective Time. For purposes of this
Plan, "Celcore Revenues" and "revenues" (i) shall be reduced by all discounts
or rebates, and Federal, state, county, city and local taxes and any charges
for shipping, duty or insurance, relating to the products and related services
referred to above and (ii) shall include revenues derived from services
associated with such products, including engineering, installation, repair,
service and training.
"CLOSING SALES PRICE" shall mean the reported last sale prices
of a share of Stock on the NASDAQ National Market as reported on the date of
the Effective Time.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"COMMITTEE" shall mean the committee appointed pursuant to
Section 3 hereof by the Board of Directors to administer this Plan.
"EFFECTIVE TIME" shall have the meaning provided in the Merger
Agreement.
"ELIGIBLE INDIVIDUALS" shall mean the employees of the
Corporation or its Affiliates participating in the Plan.
"FISCAL YEAR" shall mean the twelve months beginning on
January 1 of any year and ending on December 31 of the same year, except that
the first Fiscal Year shall begin on January 1, 1998 and shall end on December
31, 1998.
"OPTION" shall mean any stock option which is granted by the
Committee to an Eligible Individual under the Plan.
"PERCENTAGE PARTICIPATION" of an Eligible Individual with
respect to the Annual Payment Award and/or the Annual Option Vesting Amount, as
the case may be, for any Fiscal Year shall be the percentage opposite such
Eligible Individual's name as set forth on Schedule I hereto.
"PERMANENT AND TOTAL DISABILITY" has the same meaning as
provided in the long-term disability plan or policy maintained or, if
applicable, most recently maintained, by
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the Corporation or, if applicable, any Affiliate of the Corporation for the
Eligible Individual. If no long-term disability plan or policy was ever
maintained on behalf of the Eligible Individual Permanent and Total Disability
shall mean that condition described in Code Section 22(e)(3), as amended from
time to time. In the event of a dispute, the determination of Permanent and
Total Disability shall be made by the Board of Directors and shall be supported
by advice of a physician competent in the area to which such Permanent and
Total Disability relates. The scope of this definition shall automatically be
reduced or expanded to the extent that section 22(e)(3) of the Code is amended
to reduce or expand the scope of the definition of Permanent and Total
Disability thereunder.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"STOCK" shall mean the Corporation's authorized $0.01 par
value common stock together with any other securities with respect to which
Options granted hereunder may become exercisable (including any preferred stock
purchase rights issuable pursuant to the Rights Agreement, dated April 25, 1996
between the Corporation and Harris Trust and Savings Bank (formerly KeyCorp
Shareholder Services, Inc.) as rights agent, or any other purchase right issued
in substitution thereof).
"TARGET REVENUE" shall mean an amount equal to (i) $60,000,000
with respect to the Fiscal Year ending December 31, 1998, (ii) $110,000,000
with respect to the Fiscal Year ending December 31, 1999, (iii) $215,000,000
with respect to Fiscal Year ending December 31, 2000 and (iv) $300,000,000 with
respect to Fiscal Year ending December 31, 2001.
"TERMINATION OF SERVICE" means the termination of the service
relationship, whether employment or otherwise, between an Eligible Individual
and the Corporation and its Affiliates, regardless of the fact that severance
or similar payments are made to the Eligible Individual for any reason,
including, but not by way of limitation, a termination by resignation,
discharge, death, Permanent and Total Disability or retirement. The Committee
shall, in its absolute discretion, determine the effect of all matters and
questions relating to Termination of Service, including, but not by way of
limitation, the question of whether a leave of absence constitutes a
Termination of Service, or whether a Termination of Services is for Cause.
SECTION 2. MAXIMUM NUMBER OF SHARES SUBJECT TO AND AMOUNT OF CASH
PAYMENTS AVAILABLE UNDER THE PLAN.
2.1 DESCRIPTION OF STOCK AND MAXIMUM SHARES ALLOCATED. The Stock
which Options granted hereunder give an Eligible Individual the right to
purchase may be unissued or reacquired shares of Stock, as the Board of
Directors may, in its sole and absolute discretion, from time to time
determine. Subject to the adjustments provided for in Section 6.9 hereof, the
aggregate number of shares of Stock available for issuance pursuant to the
exercise of all Options granted hereunder shall be $3,375,000 divided by the
Closing Sales Price (the "Aggregate Option Shares"). The Options granted to
each Eligible Individual
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pursuant to this Plan shall vest in accordance with the provisions of paragraph
(a) of Section 6.2 hereof.
2.2 MAXIMUM AMOUNT OF CASH PAYMENTS. The aggregate amount of funds
available for Cash Payments to all Eligible Individuals pursuant to the Plan
shall be $3,375,000. The aggregate amount of Cash Payments (the "Annual Payment
Award") to be made to Eligible Individuals with respect to a Fiscal Year shall
be an amount equal to the product of (i) the Aggregate Payment Amount with
respect to such Fiscal Year, times (ii) the Applicable Percentage with respect
to such Fiscal Year. Notwithstanding anything contained herein to the contrary,
no Cash Payment shall be made in a Fiscal Year under this Plan if the Attained
Percentage for that Fiscal Year is less than eighty percent (80%). With respect
to a Fiscal Year, any portion of the Aggregate Payment Amount attributable to
such Fiscal Year which shall not have been delivered as Cash Payments pursuant
to this Plan with respect to such Fiscal Year shall cease to be available for
Cash Payments under this Plan.
SECTION 3. ADMINISTRATION OF THIS PLAN.
3.1 COMMITTEE. The Plan shall be administered by the Committee.
The Committee shall consist of such number of directors of the Corporation as
shall be determined by the Board of Directors, and may be constituted by all
members of the Board of Directors.
3.2 DURATION, REMOVAL, ETC. The members of the Committee shall
serve at the pleasure of the Board of Directors, which shall have the power, at
any time and from time to time, to remove members from the Committee or to add
members thereto. Vacancies on the Committee, however caused, shall be filled by
action of the Board of Directors.
3.3 MEETINGS AND ACTIONS OF COMMITTEE. The Committee shall elect
one of its members as its Chairman and shall hold its meetings at such times
and places as it may determine. All decisions and determinations of the
Committee shall be made by the majority vote or decision of all of its members
present at a meeting; provided, however, that any decision or determination
reduced to writing and signed by all of the members of the Committee shall be
as fully effective as if it had been made at a meeting duly called and held.
The Committee may make any rules and regulations for the conduct of its
business that are not inconsistent with the provisions hereof and with the
by-laws of the Corporation as it may deem advisable.
3.4 COMMITTEE'S POWERS. Subject to the express provisions hereof,
the Committee shall have the authority, in its sole and absolute discretion
exercised in good faith, (a) to adopt, amend, and rescind administrative and
interpretive rules and regulations relating to this Plan; (b) to determine the
Celcore Revenues for purposes of determining the vesting of the Options and the
award of Cash Payments; (c) to determine the circumstances of any termination
of employment of an Eligible Individual for purposes of applying the provisions
of Section 6.8 hereof and the effect of approved leaves of absence; (d) to
construe the respective Agreements
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and this Plan; (e) to make all other determinations and perform all other acts
necessary or advisable for administering this Plan, including the delegation of
such ministerial acts and responsibilities as the Committee deems appropriate;
and (f) to correct any defect or supply any omission or reconcile any
inconsistency in this Plan or in any Agreement in the manner and to the extent
it shall deem expedient to carry it into effect, provided that no such
correction, addition, reconciliation or other amendment to this Plan shall
adversely affect the rights of any Eligible Individual.
SECTION 4. ELIGIBILITY AND PARTICIPATION.
Options and Cash Payments shall be granted hereunder as of the
Effective Time to all persons who are Eligible Individuals and only to persons
who are Eligible Individuals, subject to the provisions of Section 6.8 hereof.
In addition, no person shall be considered an Eligible Individual and entitled
to any of the rights under the Plan unless such person has executed and
delivered to the Corporation the Employee Patent, Copyright, and Proprietary
Information Agreement, attached hereto as Exhibit B.
SECTION 5. GRANT OF OPTIONS AND CERTAIN TERMS OF THE AGREEMENTS.
Each Option and Cash Payment granted hereunder shall be evidenced by
an Agreement, dated as of the Effective Time, executed by the Corporation and
the Eligible Individual to whom the Option and Cash Payment is granted. The
Effective Time shall be deemed to be the date on which the Option covered by an
Agreement is granted, even though the Agreement may not be executed until a
later time.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS AND CASH PAYMENTS.
All Options and Cash Payments granted hereunder shall comply with, be
deemed to include, and be subject to the following terms and conditions:
6.1 NUMBER OF SHARES. Each Agreement shall provide for the grant
of Options to an Eligible Individual to purchase a number of shares of Stock,
subject to the adjustments provided for in Section 6.9 hereof, equal to the
product of (a) the Aggregate Option Shares and (b) the Percentage Participation
allocated to such Eligible Individual.
6.2 VESTING OF OPTIONS.
(a) Subject to the provisions of Section 6.8 hereof, the Options
granted to an Eligible Individual shall be eligible for vesting at the end of
each of the Fiscal Years of the Corporation ending December 31, 1998 to
December 31, 2001 as provided in this Section 6.2(a). The number of Options
that shall vest (the "Annual Option Vesting Amount") at the end of the Fiscal
Years of the Corporation ending December 31, 1998 through December 31, 2001
shall equal the product of (i) the Aggregate Option Amount with respect to such
Fiscal
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Year times (ii) the Applicable Percentage with respect to such Fiscal Year.
Notwithstanding anything contained herein to the contrary, the Annual Option
Vesting Amount shall be zero in any Fiscal Year in which the Attained
Percentage for that Fiscal Year is less than eighty percent (80%). The number
of Options granted to an Eligible Individual that shall vest with respect to
each Fiscal Year of the Corporation ending December 31, 1998 through December
31, 2001 shall be an amount equal to the Percentage Participation of such
Eligible Individual with respect to that Fiscal Year times the Annual Option
Vesting Amount, if any, for that Fiscal Year. If the number of Options that
would vest according to the immediately preceding sentence exceeds the number
of Options granted to an Eligible Individual which have not yet vested, then
only those Options that have not yet vested shall vest according to this
Section 6.2(a). All Options that have not vested with respect to the Fiscal
Years ending December 31, 1998 through December 31, 2001 in accordance with
this Section 6.2(a) shall vest on December 31, 2002.
(b) An Eligible Individual may not purchase the shares of Stock
subject to an Option until such time as that portion of the Option has vested
pursuant to this Section 6.2. Notwithstanding any other provision of this Plan,
including the provisions of Section 6.8 hereof, no Option shall be exercisable
after the fifth anniversary of the vesting date of such Option.
6.3 EXERCISE PRICE OF OPTIONS. The exercise price per share of
Stock subject to an Option shall be the Closing Sales Price.
6.4 CASH PAYMENTS. Each Agreement shall provide for the grant of
the right to Cash Payments to an Eligible Individual with respect to each
Fiscal Year of the Corporation ending December 31, 1998 and December 31, 1999
in an amount equal to the Percentage Participation of such Eligible Individual
with respect to that Fiscal Year times the Annual Payment Award, if any, for
that Fiscal Year. Each Cash Payment under this Section 6.4 shall be deemed
payable as of December 31 in respect of each Fiscal Year and the delivery of
any Cash Payment with respect to a Fiscal Year shall be made by the Corporation
not later than 75 days after the end of such Fiscal Year. The Corporation may,
in its discretion, withhold from the amount of any Cash Payment delivered to an
Eligible Individual the portion thereof that it deems necessary to satisfy its
obligation to withhold Federal, state or local income or other taxes incurred
by reason of such Cash Payment.
6.5 DETERMINATION OF CELCORE REVENUES. For purposes of determining
the Annual Option Vesting Amount with respect to a Fiscal Year and the Annual
Payment Award with respect to a Fiscal Year, within 60 days after the end of
each Fiscal Year of the Corporation (i) from December 31, 1998 to December 31,
2001 with respect to the Annual Option Vesting Amount and (ii) December 31,
1998 and December 31, 1999 with respect to the Annual Payment Award, the
Corporation shall furnish the Committee with such financial information as it
shall require in order to determine the Celcore Revenues with respect to that
Fiscal Year, and the Committee shall make such determination in good faith as
soon as possible after the
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receipt of such information, which determination shall be final and binding on
all Eligible Individuals. Within 75 days after the end of each Fiscal Year of
the Corporation ending December 31, 1998 to December 31, 2001, the Committee
shall notify each Eligible Individual with respect to whom an Option is
eligible for vesting for that Fiscal Year of the determination of the Celcore
Revenues for that Fiscal Year and the number of shares of Stock subject to such
Eligible Individual's Option which has vested with respect to that Fiscal Year,
together with delivery of the Cash Payment, if any, with respect to that Fiscal
Year.
6.6 MEDIUM AND TIME OF PAYMENT, METHOD OF EXERCISE, AND
WITHHOLDING TAXES. The exercise price of an Option shall be payable upon the
exercise of the Option in cash or by check payable to the order of the
Corporation. Exercise of an Option shall not be effective until the Corporation
has received written notice of exercise. Such notice must specify the number of
whole shares of Stock to be purchased and be accompanied by payment in full of
the aggregate exercise price of the number of shares purchased. The Corporation
shall not in any case be required to sell, issue, or deliver a fractional share
with respect to any Option.
The Committee may, in its discretion, require an Eligible Individual
to pay to the Corporation at the time of exercise of an Option or portion
thereof the amount that the Corporation deems necessary to satisfy its
obligation to withhold Federal, state or local income or other taxes incurred
by reason of the exercise.
6.7 TERM, TIME OF EXERCISE, AND TRANSFERABILITY OF OPTIONS. In
addition to such other terms and conditions as may be included in a particular
Agreement granting an Option, during the term of an Option such Option shall be
exercisable during an Eligible Individual's lifetime only by him or by his
guardian or legal representative. An Option shall not be transferable other
than by will or the laws of descent and distribution. No Option shall be deemed
to satisfy the provisions of Section 422A of the Code. As soon as reasonably
practicable after the Corporation receives written notice that the Eligible
Individual has elected to exercise all or a portion of an Option which has
vested pursuant to the Plan, such notice to be accompanied by payment in full
of the aggregate Option price of the number of shares purchased, the
Corporation shall issue and deliver a certificate representing the shares
acquired in consequence of the exercise and any other amounts payable in
consequence of such exercise.
Nothing herein or in any Option granted hereunder shall require the
Corporation to issue any shares upon exercise of any Option if such issuance
would, in the opinion of counsel for the Corporation, constitute a violation of
the Securities Act or any similar or superseding statute or statutes, any
applicable blue sky or state securities laws or any other applicable statute or
regulation, as then in effect. The Corporation shall file or cause to be filed
with the Securities and Exchange Commission at least twenty days prior to the
date of the notification to Eligible Individuals of that portion of the Options
which has vested with respect to the Fiscal Year ended December 31, 1998, a
Registration Statement on Form S-8 registering under
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the Securities Act the Stock issuable upon exercise of the Options, and shall
keep such Registration Statement effective for so long as Options remain
outstanding and exercisable under this Plan or, if shorter, so long as such
Form S-8, or any successor form, remains available to the Corporation for
registration of such Stock. At the time of any exercise of an Option, in the
event such Registration Statement on Form S-8 or successor form is not
effective, the Corporation may, as a condition precedent to the exercise of
such Option, require from the Eligible Individual exercising such Option (or in
the event of his death, his legal representatives, heirs, legatees, or
distributees) such written representations, if any, concerning his intentions
with regard to the retention or disposition of the shares being acquired by
exercise of such Option and such written covenants and agreements, if any, as
to the manner of disposal of such shares as, in the opinion of counsel to the
Corporation, may be necessary to ensure that any disposition by such Eligible
Individual (or in the event of his death, his legal representatives, heirs,
legatees, or distributees), will not involve a violation of the Securities Act
or any similar or superseding statute or statutes, or any other applicable
state or federal statute or regulation, as then in effect.
6.8 TERMINATION OF EMPLOYMENT, DEATH OR DISABILITY.
(a) If an Eligible Individual ceases to be employed by at least
one of the employers in the group of employers consisting of the Corporation
and its Affiliates because the Eligible Individual voluntarily terminates
employment with such group of employers, (i) the portion, if any, of an Option
that has not yet vested under the terms of the Plan, on the date of the
Eligible Individual's Termination of Service shall terminate as of such date,
(ii) the Eligible Individual shall have the right for thirty (30) days after
such Termination of Service to exercise the portion, if any, of the Option
which has vested pursuant to the Plan as of the date of the Eligible
Individual's Termination of Service, and thereafter such Option shall terminate
and cease to be exercisable, (iii) the portion of any Option which has vested
with respect to a Fiscal Year ending prior to the date of the Eligible
Individual's Termination of Service but with respect to which the Committee has
not yet determined the amount which has vested at the date of such termination
may be exercised by the Eligible Individual within thirty (30) days after (A)
the date of receipt by the Eligible Individual of the portion of any Cash
Payment which has vested with respect to such Fiscal Year, or (B) if no Cash
Payment is made with respect to such Fiscal Year, the date of receipt by the
Eligible Individual of a notice from the Committee pursuant to Section 6.5
hereof of the number of shares of Stock subject to such Eligible Individual's
Option which has vested with respect to that Fiscal Year, and thereafter such
portion shall terminate and cease to be exercisable, and (iv) the portion of
any Cash Payment granted to the Eligible Individual which is payable with
respect to a Fiscal Year ending prior to the date of the Eligible Individual's
Termination of Service shall be paid to such Eligible Individual at the time
provided for in this Plan, and no other Cash Payment shall be required to be
paid by the Corporation in connection with this Plan. Notwithstanding the
foregoing, if an Eligible Individual ceases to be employed during the Fiscal
Year because the Eligible Individual voluntarily terminates employment as
provided in this Section 6.8(a), no
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Cash Payment for such Fiscal Year shall be payable to the Eligible Individual
and no Options shall vest in respect of such Fiscal Year.
(b) If an Eligible Individual ceases to be employed by at least
one of the employers in the group of employers consisting of the Corporation
and its Affiliates because any of such entities terminates the Eligible
Individual's employment for Cause, (i) the portion, if any, of an Option that
remains unexercised, including that portion, if any, that has vested under the
terms of the Plan, on the date of the Eligible Individual's Termination of
Service, shall terminate and cease to be exercisable as of such date, and (ii)
the right of such Eligible Individual to any Cash Payment which has not been
paid prior to the date of the Eligible Individual's Termination of Service
shall be terminated.
(c) If an Eligible Individual ceases to be employed by at least
one of the employers in the group of employers consisting of the Corporation
and its Affiliates because one or more of such entities terminates the
employment of the Eligible Individual but not for Cause, (i) subject to Section
6.8(f) below, the portion, if any, of an Option that has not yet vested under
the terms of the Plan, on the date of the Eligible Individual's Termination of
Service shall terminate as of such date, (ii) subject to Section 6.8(f) below,
such Eligible Individual shall be entitled to exercise the Option to the extent
that such Eligible Individual was entitled to exercise it on such date, but
only until the earlier of the date (A) the Option held by such Eligible
Individual expires, or (B) six (6) months after the date of the Termination of
Services of such Eligible Individual, and (iii) subject to Section 6.8(f)
below, such Eligible Individual shall receive a Cash Payment pursuant to
Section 2.2 hereof.
(d) Notwithstanding the provisions of Sections 6.8(a), (b) and (c)
above, if an Eligible Individual ceases to be employed by at least one of the
employers in the group of employers consisting of the Corporation and its
Affiliates by reason of Permanent and Total Disability, (i) subject to Section
6.8(f) below, the portion, if any, of an Option that has not yet vested under
the terms of the Plan on the date of the Eligible Individual's Termination of
Service due to such Permanent and Total Disability shall terminate as of such
date, (ii) subject to Section 6.8(f) below, notwithstanding such Termination of
Service, such Eligible Individual may exercise an Option in whole or in part to
the extent such Option was exercisable on the date of Termination of Service of
such Eligible Individual due to such Permanent and Total Disability, but only
until the earlier of the date (A) the Option held by the Eligible Individual
expires, or (B) twelve (12) months from the date of Termination of Service of
such Eligible Individual due to such Permanent and Total Disability, and (ii)
subject to Section 6.8(f) below, such Eligible Individual shall be eligible to
receive a Cash Payment pursuant to Section 2.2 hereof.
(e) Upon the death of an Eligible Individual, (i) any Option held
by an Eligible Individual shall terminate and be of no further effect;
provided, however, notwithstanding the provisions of Sections 6.8(a), (b) and
(c) above and subject to Section 6.8(f) below, if an Eligible Individual dies
while in the employ of the Corporation or an Affiliate, such legal
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representatives, heirs, legatees, or distributees shall have the right to
exercise such Options in accordance with this Plan and such Eligible
Individual's Agreement to the extent such Options had vested at the time of
such Eligible Individual's death, but only until the earlier of the date (A)
the Option held by the Eligible Individual expires, or (B) twelve (12) months
from the date of the Eligible Individual's death, and (ii) subject to Section
6.8(f) below, the Eligible Individual's legal representatives, heirs, legatees,
or distributees shall be eligible to receive a Cash Payment pursuant to Section
2.2 hereof.
(f) Unless otherwise determined by the Committee or required by
applicable law, in the event during the Fiscal Year an Eligible Individual
ceases to be employed by at least one of the employers in the group of
employers consisting of the Corporation and its Affiliates because one or more
of such entities terminates the employment of such Eligible Individual but not
for Cause, or by reason of death or Permanent and Total Disability of such
Eligible Individual that occurs:
(i) if such Eligible Individual is otherwise entitled to
receive a Cash Payment under Section 2.2 hereof for such Fiscal Year
but for the fact the Eligible Individual is no longer employed, the
Eligible Individual (or the Eligible Individual's legal representative
or beneficiary) shall receive a Cash Payment equal to the product of
(i) the Cash Payment he/she would have received for such entire Fiscal
Year, multiplied by (ii) a fraction, the numerator of which is the
number of days during such Fiscal Year in which the Eligible
Individual was an employee of the Corporation or its Affiliates, and
the denominator of which is the number of days in such Fiscal Year;
and
(ii) if an Option would otherwise vest under Section 6.2
hereof, the Annual Option Vesting Amount allocable to such Eligible
Individual based on his Percentage Participation shall be adjusted
such that the number of Options granted to such Eligible Individual
that shall vest with respect to such Fiscal Year shall be equal to the
product of (i) the Annual Option Vesting Amount that would have been
allocable to such Eligible Individual for such entire Fiscal Year,
multiplied by (ii) a fraction, the numerator of which is the number of
days during such Fiscal Year in which the Eligible Individual was an
employee of the Corporation or its Affiliates, and the denominator of
which is the number of days in such Fiscal Year.
6.9 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER, ETC.
Notwithstanding any other provision hereof, in the event of any change in the
number of outstanding shares of Stock effected without receipt of consideration
therefor by the Corporation, by reason of a stock dividend, or split,
combination, exchange of shares of other recapitalization, merger, or
otherwise, in which the Corporation is the surviving corporation, the aggregate
number and class of the reserved shares, the number and class of shares subject
to each outstanding Option and the exercise price of each outstanding Option
shall be automatically adjusted to accurately and equitably reflect the effect
thereon of such change,
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provided that any fractional share resulting from such adjustment may be
eliminated, and provided further that the exercise price of an Option shall not
be less than $.01 per share. In the event of a dispute concerning such
adjustment, the decision of the Committee made in good faith shall be
conclusive. Neither this Plan nor any Agreement shall affect the right of the
Corporation or any Affiliate thereof to reclassify, recapitalize or otherwise
change its capital or debt structure or to merge, consolidate, convey any or
all of its assets, dissolve, liquidate, wind up, or otherwise reorganize.
In the event of (a) a dissolution or liquidation of the Corporation,
(b) a merger or consolidation (other than a merger effecting a reincorporation
of the Corporation in another state or other jurisdiction or any other merger
or a consolidation in which the stockholders of the surviving corporation and
their proportionate interests therein immediately after the merger or
consolidation are substantially identical to the stockholders of the
Corporation and their proportionate interests therein immediately prior to the
merger or consolidation) in which the Corporation is not the surviving
corporation (or survives only as a subsidiary of another corporation in a
transaction in which the stockholders of the parent of the Corporation and
their proportionate interests therein immediately after the transaction are not
substantially identical to the stockholders of the Corporation and their
proportionate interests therein immediately prior to the transaction; provided
that the Board of Directors may at any time prior to such merger or
consolidation provide by resolution that the foregoing provisions of this
parenthetical shall not apply if a majority of the board of directors of such
parent immediately after the transaction consists of individuals who
constituted a majority of the Board of Directors immediately prior to the
transaction), or (c) a transaction in which any person becomes the owner of 50%
or more of the total combined voting power of all classes of stock of the
Corporation (provided that the Board of Directors may at any time prior to such
transaction provide by resolution that this Subparagraph (c) shall not apply if
such acquiring person is a corporation and a majority of the board of directors
of such corporation immediately after the transaction consists of individuals
who constituted a majority of the Board of Directors immediately prior to the
acquisition of such 50% or more total combined voting power), every Option then
outstanding shall terminate, but the holders of each such then outstanding
Option shall, in any event, have the right, immediately prior to such
dissolution, liquidation, merger, consolidation, or transaction, to exercise
such Options, to the extent not theretofore exercised, without regard to the
vesting provisions of Section 6.2 hereof if (and only if) such Options have not
at that time expired or been terminated pursuant to Section 6.8 hereof. Such
acceleration of exercisability shall not apply to a given Option if any
surviving or acquiring corporation agrees to assume such Option in connection
with the merger, consolidation, or transaction, in which event such Options
will continue to be subject to the vesting provisions of Section 6.2 hereof.
6.10 RIGHTS AS A STOCKHOLDER. An Eligible Individual shall have no
right as a stockholder with respect to any shares covered by his Option until a
certificate representing such shares is issued to him. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash or other
property) or distributions or other rights for which the
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record date is prior to the date such certificate is issued, except as provided
in Section 6.9 hereof.
6.11 FURNISH INFORMATION. Each Eligible Individual shall furnish to
the Corporation all information requested by the Corporation to enable it to
comply with any reporting or other requirement imposed upon the Corporation by
or under any applicable statute or regulation.
6.12 OBLIGATION TO EXERCISE. The granting of an Option hereunder
shall impose no obligation upon the Eligible Individual to exercise the same or
any part thereof.
SECTION 7. GENERAL.
7.1 APPLICATION OF FUNDS; ISSUANCE OF SHARES. The proceeds
received by the Corporation from the sale of shares pursuant to Options shall
be used for general corporate purposes. When issued upon exercise of Options in
accordance with the terms of this Plan, all shares of Stock will be duly
authorized, validly issued, fully paid and nonassessable.
7.2 RIGHT OF THE CORPORATION AND AFFILIATES TO TERMINATE
EMPLOYMENT. Nothing contained in this Plan, or in any Agreement, shall confer
upon any Eligible Individual the right to continue in the employ of the
Corporation or any Affiliate, or interfere in any way with the rights of the
Corporation or any Affiliate to terminate or modify in any way the terms,
including but not limited to the compensation and responsibilities, of the
Eligible Individual's employment at any time. Nothing contained herein shall be
deemed to require any action on the part of the Committee or the Board of
Directors of the Corporation or any Affiliate in connection with the
termination of employment of an Eligible Individual.
7.3 NO LIABILITY FOR GOOD FAITH DETERMINATIONS. Neither the
members of the Board of Directors nor any member of the Committee shall be
liable for any act, omission, or determination taken or made in good faith with
respect to this Plan or any Option or right to Cash Payment granted under it,
and members of the Board of Directors and the Committee shall be entitled to
indemnification and reimbursement by the Corporation in respect of any claim,
loss, damage, or expense (including attorneys' fees, the costs of settling any
suit, provided such settlement is approved by independent legal counsel
selected by the Corporation, and amounts paid in satisfaction of a judgment,
except a judgment based on a finding of bad faith) arising therefrom to the
full extent permitted by law and under any directors and officers liability or
similar insurance coverage that may from time to time be in effect.
7.4 OTHER BENEFITS. Participation in the Plan shall not preclude
the Eligible Individual from eligibility in any other stock option plan of the
Corporation or any Affiliate or any old age benefit, insurance, pension, profit
sharing retirement, bonus, or other extra
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compensation plans which the Corporation or any Affiliate has adopted, or may,
at any time, adopt for the benefit of its employees.
7.5 EXECUTION OF RECEIPTS AND RELEASES. Any payment of cash or any
issuance or transfer of shares of Stock to the Eligible Individual, or to his
legal representatives, heir, legatee, or distributee, in accordance with the
provisions hereof, shall, to the extent thereof, be in full satisfaction of all
claims of such persons with respect to such payment, issuance or transfer
hereunder. The Committee may require any Eligible Individual, legal
representative, heir, legatee, or distributee, as a condition precedent to such
payment, to execute a release and receipt therefor in such form as it shall
determine.
7.6 NO GUARANTEE OF INTERESTS. Neither the Committee nor the
Corporation guarantees the Stock of the Corporation from loss or depreciation.
7.7 SEVERABILITY. If any provision of this Plan is held to be
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining provisions hereof, but such provision shall be fully
severable and this Plan shall be construed and enforced as if the illegal or
invalid provision had never been included herein.
7.8 NOTICES. Whenever any notice is required or permitted
hereunder, such notice must be in writing and personally delivered or sent by
mail. Any notice required or permitted to be delivered hereunder shall be
deemed to be delivered on the date on which it is personally delivered, or,
whether actually received or not on the third business day after it is
deposited in the United States mail, certified or registered, postage prepaid,
addressed to the person who is to receive it at the address which such person
has theretofore specified by written notice delivered in accordance herewith.
The Corporation or an Eligible Individual may change, at any time and from time
to time, by written notice to the other, the address which it or he/she had
previously specified for receiving notices. Until changed in accordance
herewith, the Corporation and each Eligible Individual shall specify as his
address for receiving notices, the address set forth in the Agreement
pertaining to the Option or Cash Payment to which such notice relates.
7.9 WAIVER OF NOTICE. Any person entitled to notice hereunder may
waive such notice.
7.10 HEADLINES. The title and headings of Sections are included for
convenience of reference only and are not to be considered in construction of
the provisions hereof.
7.11 GOVERNING LAW. All questions arising with respect to the
provisions of the Plan and each Agreement shall be determined by application of
the laws of the State of Texas except to the extent Texas law is preempted by
federal law. The obligation of the Corporation to sell and deliver Stock
hereunder is subject to applicable laws and to the approval of any
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governmental authority required in connection with the authorization, issuance,
sale, or delivery of such Stock.
7.12 WORD USAGE. Words used in the masculine shall apply to ,the
feminine where applicable, and wherever the context of this Plan dictates, the
plural shall be read as the singular and the singular as the plural.
7.13 FISCAL YEAR. Nothing contained in this Plan or any Agreement
shall be deemed to restrict or prohibit the Corporation from changing its
Fiscal Year, provided that in the event the Corporation changes its Fiscal Year
appropriate adjustments shall be made with respect to the vesting schedule for
the Options and the Cash Payments to avoid any impairment of benefits hereunder
caused by such change in Fiscal Year.
7.14 OTHER AGREEMENTS. Notwithstanding any provision in the Plan to
the contrary, the right of an Eligible Individual to receive, or obtain the
benefits after the receipt of, Cash Payments and Options pursuant to the Plan is
subject to the rights and remedies of the Corporation pursuant to the Employee
Patent, Copyright, and Proprietary Information Agreement with such Eligible
Individual.
E-15
<PAGE> 103
IN WITNESS WHEREOF, DSC Communications Corporation, acting by and
through its officers hereunto duly authorized has executed this instrument,
this ____ day of December, 1997.
DSC COMMUNICATIONS CORPORATION
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
E-16
<PAGE> 1
EXHIBIT 99.1
DSC COMPLETES ACQUISITION OF CELCORE FOR PRIMARILY CASH
Dallas, December 4, 1997 ... DSC Communications Corporation announced today the
completion of the acquisition of Celcore, Inc. for approximately $145 million
in cash and the assumption of Celcore's outstanding stock options. The
acquisition of the Memphis-based GSM and AMPS mobile wireless systems
manufacturer follows the signing of a definitive agreement announced in late
October of this year.
Originally DSC had offered its common stock for all outstanding shares of
Celcore. Both parties subsequently agreed to the cash acquisition. The total
purchase price is estimated to be approximately $167 million, which includes
the cash consideration, the value of assumed stock options and estimated
transaction costs.
Approximately $135 million of the total purchase price will be written off as
in-process research and development in the fourth quarter of 1997. The
remaining excess of purchase price over net assets acquired will be accounted
for as costs in excess of net assets of businesses acquired and amortized over
its estimated useful life.
Celcore designs and develops cost-effective wireless telecommunication systems
for cellular and PCS applications in low teledensity markets. Its technology
development center will remain in Memphis and will be known as the company's
cellular infrastructure division.
DSC Communications is a global provider of advanced telecommunications
products, including digital switching, transmission, access and network
management systems. DSC's integrated network solutions support voice, data and
broadband services, such as intelligent networking, wireless and switched
digital voice applications. DSC had 1996 annual revenues of approximately
$1.4 billion and is active in more than 60 countries worldwide.
FOR MORE INFORMATION, CONTACT:
DSC Communications
Terry Adams - 972-519-4358
Julie Williams - 972-519-3089
http://www.dsccc.com
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