SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
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Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 24, 1998
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Applied Magnetics Corporation
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(Exact name of registrant as specified in its charter)
Delaware 95-1950506
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(State of incorporation or organization) (I.R.S. Employer Identification No.)
75 Robin Hill Road, Goleta, CA 93117
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (805) 683-5353
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Exhibit Index on page 4
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Item 5 Other Events.
On November 24, 1998, the Registrant entered into an Agreement and
Plan of Merger with AMC Merger Subsidiary, Inc., a Delaware corporation and a
wholly-owned subsidiary of Registrant ("AMC") and DAS Devices, Inc., a Delaware
corporation ("DAS"), pursuant to which AMC would merge with and into DAS and
Registrant would issue 13,051,872 shares of its common stock, par value $.01 per
share, to the stockholders of DAS (the "Merger"). The Merger would result in DAS
becoming a wholly-owned subsidiary of Registrant. As of November 23, 1998,
Registrant had 24,103,294 shares of its common stock, par value $.01,
outstanding. The Merger is subject to the approval of the shareholders of
Registrant, AMC and DAS, expiration of the waiting period of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and certain
other conditions. It is expected the Merger will be completed in approximately
four months.
On November 24, 1998, the Registrant also entered into a Share
Purchase Agreement by and among Sierra Ventures VI, Watershed Partners, L.P.,
Watershed Cayman, L.L.C., Haussman Holdings, East River Ventures, L.L.C. and The
Chase Manhattan Bank, as Trustee for First Plaza Group Trust (collectively, the
"Investors"), pursuant to which the Registrant will sell $20,000,000 of its
common stock to the Investors, par value $.01 per share, through a private
placement to take place simultaneously with the consummation of the Merger (the
"Share Purchase"). The Share Purchase is subject to the approval of the
shareholders of Registrant, expiration of the waiting period of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, consummation
of the Merger and certain other conditions.
Item 7 Financial Statements and Exhibits.
(C) Exhibits
(2.1) Agreement and Plan of Merger, dated as of November 24, 1998,
among Applied Magnetics Corporation, AMC Merger Subsidiary,
Inc. and DAS Devices, Inc.
(2.2) Share Purchase Agreement, dated as of November 24, 1998, by
and among Applied Magnetics Corporation, Sierra Ventures VI,
Watershed Partners, L.P., Watershed Cayman, L.L.C., Haussman
Holdings, East River Ventures, L.L.C. and The Chase Manhattan
Bank, as Trustee for First Plaza Group Trust
(99) Joint Press Release issued November 25, 1998 by Applied
Magnetics Corporation and DAS Devices, Inc.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereto duly authorized.
APPLIED MAGNETICS CORPORATION
By: /s/ Craig D. Crisman
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Name: Craig D. Crisman
Title: Chief Executive Officer
Date: December 2, 1998
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EXHIBIT INDEX
Exhibit Description Page
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(2.1) Agreement and Plan of Merger, dated as of November 24, 1998,
among Applied Magnetics Corporation, AMC Merger Subsidiary,
Inc. and DAS Devices, Inc.
(2.2) Share Purchase Agreement, dated as of November 24, 1998, by
and among Applied Magnetics Corporation, Sierra Ventures VI,
Watershed Partners, L.P., Watershed Cayman, L.L.C.,
Haussman Holdings, East River Ventures, L.L.C. and The
Chase Manhattan Bank, as Trustee for First Plaza Group
Trust
(99) Joint Press Release issued November 25, 1998 by Applied
Magnetics Corporation and DAS Devices, Inc.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER, dated as of November 24, 1998 (this
"Agreement"), among APPLIED MAGNETICS CORPORATION, a Delaware corporation
("Parent"), AMC MERGER SUBSIDIARY, INC., a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), and DAS DEVICES, INC., a Delaware
corporation (the "Company").
WITNESSETH:
WHEREAS, the boards of directors of Parent and the Company have
determined that it is consistent with and in furtherance of their respective
long-term business strategies and fair to and in the best interests of their
respective companies and stockholders to combine their respective businesses
pursuant to the transaction set forth in this Agreement;
WHEREAS, the board of directors of each of Parent, Merger Sub and
the Company have approved and declared advisable the merger of Merger Sub with
and into the Company (the "Merger"), upon the terms and subject to the
conditions of this Agreement and in accordance with the General Corporation Law
of the State of Delaware (the "DGCL") and any applicable provisions of the
California General Corporation Law (the "CGCL");
WHEREAS, the board of directors of Parent has approved this
Agreement and the Merger and the issuance of 13,051,872 shares of the common
stock, par value $.01 per share, of Parent ("Parent Common Stock"), and the
amendments to the Certificate of Incorporation of Parent, all as contemplated by
this Agreement, and has recommended that the holders of Parent Common Stock vote
to approve the issuance of Parent Common Stock and the amendments to the
Certificate of Incorporation of Parent as contemplated by this Agreement;
WHEREAS, the board of directors of the Company has approved this
Agreement and the Merger, as contemplated by this Agreement, and has recommended
that the holders of capital stock of the Company ("Company Capital Stock"), vote
to adopt this Agreement and the terms of the Merger as contemplated by this
Agreement;
WHEREAS, the board of directors of Merger Sub has approved this
Agreement and the Merger, as contemplated by this Agreement, and has recommended
that its sole stockholder vote to adopt this Agreement and the terms of the
Merger, and Parent, as the sole stockholder of Merger Sub, has adopted this
Agreement and terms of the Merger, as contemplated by this Agreement;
WHEREAS, for United States federal income tax purposes, it is
intended that the Merger shall qualify as a reorganization under the provisions
of Section 368(a) of the United States Internal Revenue Code of 1986, as amended
(the "Code"), and the Treasury regulations thereunder (the "Regulations");
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NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto 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 the DGCL, at the Effective
Time (as defined below), Merger Sub shall be merged with and into the Company.
As a result of the Merger, the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the surviving corporation of the Merger
as a wholly owned subsidiary of Parent (the "Surviving Corporation").
SECTION 1.02 Closing. Unless this Agreement shall have been
terminated and the Merger herein contemplated shall have been abandoned pursuant
to Section 8.01 and subject to the satisfaction or waiver of the conditions set
forth in Article VII, the consummation of the Merger shall take place as
promptly as practicable (and in any event within three business days) after
satisfaction or waiver of the conditions set forth in Article VII, at a closing
(the "Closing") to be held at the offices of Sheppard, Mullin, Richter & Hampton
LLP, 333 South Hope Street, Los Angeles, California 90071, unless another date,
time or place is agreed to by Parent and the Company.
SECTION 1.03 Effective Time. At the time of the Closing, the parties
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,
in such form as required by, and executed in accordance with the relevant
provisions of, the DGCL (the date and time of such filing, or such later date or
time as set forth therein, being the "Effective Time").
SECTION 1.04 Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
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SECTION 1.05 Certificate of Incorporation; Bylaws; Directors and
Officers of Surviving Corporation. At the Effective Time:
(a) the Certificate of Incorporation and the Bylaws of Merger Sub,
as in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation and the Bylaws of the Surviving Corporation (except that
Article I of the Certificate of Incorporation shall be amended as of the
Effective Time to read as follows: "The name of the Corporation is Das Devices,
Inc.");
(b) the officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation from and after
the Effective Time, in each case until their successors are elected or appointed
and qualified or until their resignation or removal. If, at the Effective Time,
a vacancy shall exist in any office of the Surviving Corporation, such vacancy
may thereafter be filled in the manner provided by Law and the Certificate of
Incorporation and Bylaws of the Surviving Corporation. As used in this
Agreement, "Law" means any federal, state or local statute, law, ordinance,
regulation, rule, code, order, judgment, writ, stipulation, award, injunction,
decree or other requirement or rule of law of the United States or any other
jurisdiction; and
(c) the directors of Merger Sub immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation from and after
the Effective Time, in each case until their successors are elected or appointed
and qualified or until their resignation or removal. If, at the Effective Time,
a vacancy shall exist on the Board of Directors of the Surviving Corporation,
such vacancy may thereafter be filled 'in the manner provided by Law and the
Certificate of Incorporation and Bylaws of the Surviving Corporation.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01 Payment of Merger Consideration.
(a) Certain Definitions. For all purposes of this
Agreement, the following terms shall have the following
meanings:
"Company Capital Stock" shall mean shares of Company Common
Stock, Company Series A Preferred, Company Series B Preferred, Company
Series C Preferred, Company Series D Preferred, and Company Series E
Preferred.
"Company Common Stock" shall mean shares of common stock,
$0.001 par value per share, of the Company.
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"Company Preferred Stock" shall mean, collectively, shares of
Company Series A Preferred, Company Series B Preferred, Company Series C
Preferred, Company Series D Preferred, and Company Series E Preferred.
"Company Series A Preferred" shall mean shares of Series A
Preferred Stock, $0.001 par value per share, of the Company.
"Company Series B Preferred" shall mean shares of Series B
Preferred Stock, $0.001 par value per share, of the Company.
"Company Series C Preferred" shall mean shares of Series C
Preferred Stock, $0.001 par value per share, of the Company.
"Company Series D Preferred" shall mean shares of Series D
Preferred Stock, $0.001 par value per share, of the Company.
"Company Series E Preferred" shall mean shares of Series E
Preferred Stock, $0.001 par value per share, of the Company.
"Merger Consideration" shall mean 13,051,872
shares of Parent Common Stock.
"Non-Competition Payments" shall mean an aggregate of not
greater than $1,625,000 in competition payments to be made in accordance with
items 25, 26 and 27 of Schedule 3.11 (the "Non-Competition Agreements") of the
Company Disclosure Schedules. Such non-competition payments are payable in full
at the Closing in shares of Parent Common Stock from the Merger Consideration.
"Parent Common Stock" shall mean shares of the common stock,
par value $0.01, of Parent.
"Promissory Notes" means those certain notes issued and to be
issued by the Company after the date hereof, in the aggregate principal
amount of $10,000,000 which notes are payable in full at the Closing in
shares of Parent Common Stock from the Merger Consideration.
"Trading Price" shall mean the average closing sales price of
the Parent Common Stock as reported on the New York Stock Exchange for the
five (5) consecutive trading days ending the day prior to the Closing
Date.
(b) Repayment of Promissory Notes. Prior and in preference to any
delivery of Merger Consideration to holders of Company Common Stock and Company
Preferred Stock and the Non-Competition Agreements, the holders of Promissory
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Notes will be entitled to receive repayment of such Promissory Notes according
to the terms and conditions of each such Promissory Note. Such number of
shares of Parent Common Stock required to repay the Promissory Notes is
herein referred to as the "Promissory Note Consideration."
After payment of the Promissory Note Consideration as set forth in
Section 2.01(b) above, then any remaining shares of Parent Common Stock
comprising the Merger Consideration shall be distributed as follows:
(c) Payment of Non-Competition Consideration. Prior and in
preference to and delivery of Merger Consideration to holders of Company Common
Stock and Company Preferred Stock, the holders of Non-Competition Agreements
will be entitled to receive repayment of such Non-Competition Agreements
according to the terms and conditions of each such Non-Competition Agreements.
Such number of shares of Parent Common Stock required to repay the
Non-Competition Agreements is herein referred to as the "Non-Competition
Consideration".
After payment of the Non-Competition Consideration as set forth in
Section 2.01(c) above, then any remaining shares of Parent Common Stock
comprising the Merger Consideration
shall be distributed as follows:
(d) Thereafter, the Merger Consideration shall be payable at the
Closing to the holders of the Company's Capital Stock in accordance with the
Company's Certificate of Incorporation as in effect immediately prior to the
Effective Time; provided, however, that for purposes of this Section 2.01, the
Merger Consideration payable to the holders of the Company's outstanding Capital
Stock at the Effective Time shall be reduced by that number of shares of Parent
Common Stock equal to the number of shares of Parent Common Stock that would
have been issued to the holders of options and warrants for Company Capital
Stock, with or without the passage of time or satisfaction of other conditions,
(collectively, "Company Options and Warrants") assuming the holders of Company
Options and Warrants had exercised such Company Options and Warrants in full
(the "Parent Reserved Shares"). Parent hereby covenants to assume the Company
Options and Warrants in accordance with their terms, as provided below, and
further covenants to assume the Parent Reserve Shares upon exercise or
conversion of such assumed Company Options and Warrants. For purposes of
illustration, a holder of a warrant exercisable for 100 shares of Company Series
E Preferred Stock shall, upon exercise of such assumed warrant in accordance
with its terms and upon delivery by such holder of the consideration therefor
(including a cashless exercise), be entitled to that number of Shares of Parent
Common Stock that a holder of 100 shares of outstanding Company Series E
Preferred Stock shall receive at the Closing. Similarly, a holder of an option
exercisable for 100 shares of Company Common Stock shall, upon exercise of such
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assumed option in accordance with its terms and upon delivery by such holder
of the consideration therefor (including a cashless exercise), be entitled to
that number of shares of Parent Common Stock that a holder of 100 shares of
outstanding Company Common Stock shall receive at the Closing. At the Closing,
the Company shall provide a certificate as to the capitalization of the Company
which certifies as to the following: (1) the outstanding shares of Company
Common Stock, (2) the outstanding shares of Company Preferred Stock, (3) the
number of shares of Company Common Stock underlying outstanding but unexercised
warrants and/or options for Company Common Stock which Parent shall be obligated
to assume pursuant to this Section 2.01(c), (4) the number of shares, by series,
of Company Preferred Stock underlying outstanding but unexercised warrants
and/or options for Company Preferred Stock which Parent shall be required to
assume pursuant to this Section 2.01(c).
(e) Company Stock Options and Warrants to Purchase Company Capital
Stock.
(i) At the Effective Time, each outstanding option or warrant
to purchase shares of Company Common Stock (each a "Company Option"), whether or
not exercisable, will be assumed by Parent in accordance with their terms. It is
the intention of the parties that Company Options assumed by Parent following
the Closing will, to the extent permitted by applicable law, qualify as
incentive stock options as defined in Section 422 of the Code, to the extent
Company Options qualified as incentive stock options immediately prior to the
Closing. After the Effective Time, Parent will issue to each holder of an
outstanding Company Option a notice describing the foregoing assumption of such
Company Options.
(ii) At the Effective Time, each outstanding warrant to
purchase shares of Company Preferred Stock (each a "Company Warrant"), whether
or not exercisable, will be assumed by Parent in accordance with their terms,
provided, however, that with respect to any warrants or rights to purchase
Company Preferred Stock on a net-exercise or "cashless" basis (including, but
not limited to, the Series C Warrants described on the Company Disclosure
Schedule), any holder of such warrants or rights shall be deemed a holder of
such Company Preferred Stock for purposes of this Section 2.01; except that such
holder shall not receive that number of shares of Parent Common Stock of the
Merger Consideration equal in value, based upon the Trading Price, to the
consideration to be paid in order to exercise such Company Option or Company
Warrant.
(f) Capital Stock of Merger Sub. Each share of common stock, par
value of $0.01 per share, of Merger Sub ("Merger Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into and
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exchanged for one validly issued, fully paid and nonassessable share of common
stock of the Surviving Corporation. Each stock certificate of Merger Sub
evidencing ownership of any such shares shall continue to evidence ownership of
such shares of capital stock of the Surviving Corporation.
(g) Fractional Shares. No fraction of a share of Parent Common Stock
will be issued, but in lieu thereof, each holder of shares of Company Capital
Stock (including Company Capital Stock issuable upon exercise of outstanding
Company Options at the Effective Time) who would otherwise be entitled to a
fraction of a share of Parent Common Stock (after aggregating all fractional
shares of Parent Common Stock to be received by such holder) shall be entitled
to received from Parent an amount of cash (rounded to the nearest whole cent)
equal to the product of (i) such fraction and (ii) the Trading Price.
(h) Employee Benefit Plan Shares. For all purposes of this
Agreement, unless otherwise specified, any shares held by employee benefit plans
of the Company (i) shall be deemed to be issued and outstanding, (ii) shall not
be deemed to be held in the treasury of the Company and (iii) shall be converted
into shares of Parent Common Stock in accordance with Section 2.01(c) above.
SECTION 2.02 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Capital Stock held by a holder who has exercised and
perfected appraisal rights for such shares in accordance with Delaware Law and
who, as of the Effective Time, has not effectively withdrawn or lost such
appraisal rights ("Dissenting Shares"), shall not be converted into or represent
a right to receive the consideration for such Company Capital Stock pursuant to
Section 2.01, but the holder thereof shall only be entitled to such rights as
are granted by Delaware Law.
(b) Notwithstanding the provisions of subsection (a), if any holder
of Dissenting Shares shall effectively withdraw or lose (through failure to
perfect or otherwise) his other appraisal rights, then, as of the later of the
Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive the
consideration for Company Capital Stock as provided in Section 2.01, without
interest thereon, upon surrender of the certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any written
demand for appraisal received by the Company prior to the Closing Date pursuant
to the applicable provisions of Delaware Law and (ii) the opportunity to
participate in all negotiations and proceedings with respect to such demands.
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The Company shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to any such demands or offer to
settle any such demands.
SECTION 2.03 Exchange of Certificates. (a) Exchange Agent. As of the
Effective Time, Parent shall deposit, or shall cause to be deposited, with a
bank or trust company designated by Parent and reasonably acceptable to the
Company (the "Exchange Agent"), for the benefit of the holders of shares of
Company Capital Stock, for exchange in accordance with this Article II, through
the Exchange Agent, certificates representing the shares of Parent Common Stock
(such certificates for shares of Parent Common Stock, together with cash in lieu
of fractional shares and any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 2.01 in exchange for outstanding shares of Company Capital Stock. The
Exchange Agent shall, pursuant to irrevocable instructions, deliver the Parent
Common Stock contemplated to be issued pursuant to Section 2.01 out of the
Exchange Fund. Except as contemplated by Section 2.02(e) hereof, the Exchange
Fund shall not be used for any other purpose.
(b) Exchange Procedures. Promptly after the Effective Time, 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 Company Capital Stock (the "Certificates") (i)
a letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Exchange Agent, and shall be in customary
form) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent Common
Stock. Upon surrender of a Certificate for cancellation to the Exchange Agent
together with such letter of transmittal, duly executed, 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 a certificate
representing that number of whole shares of Parent Common Stock which such
holder has the right to receive in respect of the shares of Company Capital
Stock formerly represented by such Certificate (after taking into account all
shares of Company Capital Stock then held by such holder), cash in lieu of
fractional shares of Parent Common Stock to which such holder is entitled
pursuant to Section 2.02(e) and any dividends or other distributions to which
such holder is entitled pursuant to Section 2.02(c), and the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued on
any cash in lieu of fractional shares or on any unpaid dividends and
distributions payable to holders of Certificates. Notwithstanding anything to
the contrary contained herein, no certificate representing Parent Common Stock
or cash in lieu of a fractional share interest shall be delivered to a person
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who is an Affiliate of Parent or the Company unless such affiliate has
theretofore executed and delivered to Parent the agreement referred to in
Section 6.04(a). In the event of a transfer of ownership of shares of Company
Capital Stock which is not registered in the transfer records of the Company, a
certificate representing the proper number of shares of Parent Common Stock may
be issued to a transferee if the Certificate representing such shares of Company
Capital Stock is 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 certificate representing shares of Parent Common Stock, cash in
lieu of any fractional shares of Parent Common Stock to which such holder is
entitled pursuant to Section 2.02(e) and any dividends or other distributions to
which such holder is entitled pursuant to Section 2.02(c).
(c) Distributions with Respect to Unexchanged Shares of Parent
Common Stock. No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of fractional shares shall be paid to any such holder pursuant
to Section 2.02(e), until the holder of such Certificate shall surrender such
Certificate. Subject to the effect of escheat, tax or other applicable Laws,
following surrender of any such Certificate, there shall be paid to the holder
of the certificates representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, (i) promptly, the amount of any cash
payable with respect to a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.02(e) and the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock and (ii) at the
appropriate payment date, the amount of dividends or other distributions, with a
record date after the Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole shares of Parent
Common Stock.
(d) No Further Rights in Company Capital Stock. All shares of Parent
Common Stock issued upon conversion of the shares of Company Capital Stock in
accordance with the terms hereof (including any cash paid pursuant to Section
2.03(c) or (e)) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Capital Stock, subject, however,
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to the Surviving Corporation's obligation to pay dividends or make any
other distribution with respect to shares of Company Capital Stock with a
record date prior to the Effective Time which have been declared or made by
the Company on such shares of Company Capital Stock in accordance with the
terms of this Agreement (to the extent permitted under Section 5.01) prior
to the date hereof and which remain unpaid at the Effective Time.
(e) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution with respect to Parent
Common Stock shall be payable on or with respect to any fractional share and
such fractional share interests will not entitle the owner thereof to any rights
of a stockholder of Parent.
(ii) Parent shall pay to the Exchange Agent an amount in cash
sufficient for the Exchange Agent to pay each holder of Company Capital Stock an
amount in cash equal to the product obtained by multiplying (x) the fractional
share interest to which such holder would otherwise be entitled (after taking
into account all shares of Company Capital Stock held at the Effective Time by
such holder) by (y) the closing price for a share of Parent Common Stock on the
NYSE Composite Transaction Tape on the first business day immediately following
the Effective Time.
(iii) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of Company Capital Stock with
respect to any fractional share interests, the Exchange Agent shall promptly pay
such amounts to such holders of Company Capital Stock subject to and in
accordance with the terms of Section 2.02(c).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of Company Capital Stock for one year
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of Company Capital Stock who have not theretofore complied with this
Article II shall thereafter look only to Parent for the shares of Parent Common
Stock, any cash in lieu of fractional shares of Parent Common Stock to which
they are entitled pursuant to Section 2.02(e) and any dividends or other
distributions with respect to Parent Common Stock to which they are entitled
pursuant to Section 2.02(c), in each case, without any interest thereon.
(g) No Liability. Neither Parent nor the Company shall be liable to
any holder of shares of Company Capital Stock for any such shares of Parent
Common Stock (or dividends or distributions with respect thereto) or cash from
the Exchange Fund delivered to a public official pursuant to any abandoned
property, escheat or similar Law.
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(h) 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
Parent, the posting by such person of a bond, in such reasonable amount as
Parent may direct, as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the shares of Parent Common Stock,
any cash in lieu of fractional shares of Parent Common Stock to which the
holders thereof are entitled pursuant to Section 2.02(e) and any dividends or
other distributions to which the holders thereof are entitled pursuant to
Section 2.02(c), in each case, without any interest thereon.
(i) Withholding. Parent or the Exchange Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Company Capital Stock such amounts as Parent or the
Exchange Agent are required to deduct and withhold under the Code, or any
provision of state, local or foreign tax law, with respect to the making of such
payment. To the extent that amounts are so withheld by Parent or the Exchange
Agent, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of Company Capital Stock in respect of whom
such deduction and withholding was made by Parent or the Exchange Agent.
SECTION 2.04 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Capital Stock thereafter on the
records of the Company. From and after the Effective Time, the holders of
certificates representing shares of Company Capital Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Company Capital Stock except as otherwise provided
herein or by Law. On or after the Effective Time, any Certificates presented to
the Exchange Agent or Parent for any reason shall be converted into the shares
of Parent Common Stock, any cash in lieu of fractional shares of Parent Common
Stock to which the holders thereof are entitled pursuant to Section 2.02(e) and
any dividends or other distributions to which the holders thereof are entitled
pursuant to Section 2.02(c).
SECTION 2.05 Registration of Assumed Company Options. Parent shall
take all corporate action necessary to reserve and make available for issuance a
sufficient number of shares of Parent Common Stock for delivery under Company
Stock Options assumed by Parent. At or prior to the Effective Time, Parent shall
file a registration statement on Form S-8 (or any successor or other appropriate
forms) with respect to the shares of Parent Common Stock subject to such options
and shall use its best efforts to maintain the effectiveness of such
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registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
options remain outstanding.
SECTION 2.06 Restricted Stock. At the Effective Time, any restricted
shares of Company Capital Stock awarded pursuant to any plan, arrangement or
transaction and outstanding immediately prior to the Effective Time shall be
assumed by Parent and converted into restricted shares of Parent Common Stock in
accordance with Section 2.01 hereof, subject to the same terms, conditions and
restrictions as in effect immediately prior to the Effective Time, except to the
extent that such terms, conditions and restrictions may be altered in accordance
with their terms as a result of the Merger contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent as of the date
hereof that:
SECTION 3.01 Organization and Qualification, Subsidiaries. Each of
the Company and each subsidiary of the Company (the "Company Subsidiaries") has
been duly organized and is validly existing and in good standing (to the extent
applicable) under the laws of the jurisdiction of its incorporation or
organization, as the case may be, and has the requisite corporate power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power, authority and governmental approvals would not, individually or in
the aggregate, have a Company Material Adverse Effect. Each of the Company and
each Company Subsidiary is duly qualified or licensed to do business, and is in
good standing (to the extent applicable), 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 any change in or effect on the business
of the Company and the Company Subsidiaries that is, or is reasonably likely to
be, materially adverse to the business, assets (including intangible assets),
liabilities (contingent or otherwise), condition (financial or otherwise) or
results of operations of the Company and the Company Subsidiaries taken as a
whole (a "Company Material Adverse Effect"). Section 3.01 (a) of the Disclosure
Schedule delivered by the Company to Parent prior to the execution of this
Agreement (the "Company Disclosure Schedule") sets forth a complete and correct
list of all of the Company Subsidiaries. Except as set forth in Section 3.01(b)
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of the Company Disclosure Schedule, neither the Company nor any Company
Subsidiary holds any interest in any corporation, limited liability company,
partnership, joint venture or other legal entity of any kind.
SECTION 3.02 Certificate of Incorporation and Bylaws. The copy of the
Company's Restated Certificate of Incorporation and the copy of the Company's
Bylaws, as heretofore delivered by the Company to Parent, are complete and
correct copies thereof. Such Restated Certificate of Incorporation and Bylaws
are in full force and effect. The Company is not in violation of any of the
provisions of its Restated Certificate of Incorporation or Bylaws.
SECTION 3.03 Capitalization and Voting Rights. The authorized capital
of the Company consists of:
(a) Preferred Stock. One hundred twenty-four million, nine hundred
thousand, two hundred seventeen (124,900,217) shares of Preferred Stock (the
"Preferred Stock") having the rights, preferences and privileges as set forth in
the Certificate and designated as follows:
(i) nine million nine hundred seventy-eight thousand thirteen
(9,978,013) shares of which have been designated Series A Preferred Stock, all
of which are currently issued and outstanding;
(ii) thirty-nine million three hundred forty- seven thousand
eight hundred seventy-one (39,347,871) shares of which have been designated
Series B Preferred Stock, thirty-eight million seven hundred eight thousand nine
hundred eighty-one (38,708,981) of which are currently issued and outstanding;
(iii) ten million five hundred seventy-three thousand three
hundred thirty-three (10,573,333) shares of which have been designated Series C
Preferred Stock, none of which are outstanding, but all of which are subject to
outstanding warrants to purchase the Series C Preferred Stock (the "Series C
Warrants");
(iv) twenty-five million (25,000,000) shares of which have
been designated Series D Preferred Stock, nineteen million two hundred
seventy-one thousand six hundred twenty-five (19,271,625) of which are currently
issued and outstanding; and
(v) forty million (40,000,000) shares of which have been
designated Series E Preferred Stock, twenty million nine hundred twenty-one
thousand seven hundred forty-six (20,921,746) of which are currently issued and
outstanding.
(b) Common Stock. Two hundred fifty million (250,000,000) shares of
common stock ("Common Stock") of which twenty-four million three hundred
twenty-eight thousand eight hundred forty-six (24,328,846) shares are
outstanding.
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(c) The outstanding shares of Common Stock, Series A Preferred
Stock, Series B Stock and Series D and Series E Preferred Stock are all duly and
validly authorized and issued, fully paid and nonassessable and have been issued
in accordance with the registration or qualification provisions of the
Securities Act and any relevant state securities laws or pursuant to valid
exemptions therefrom. Except for (i) the conversion privileges of the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the
Series D Preferred Stock and the Series E Preferred Stock, (ii) the Series C
Warrants (iii) the rights provided in paragraph 2.2 of the Company's Investors'
Rights Agreement, (iv) the outstanding warrants and options as set forth on
Schedule 3.03 and (v) there are no outstanding options, warrants, rights
(including conversion or preemptive rights and rights of first refusal), or
agreements for the purchase or acquisition from the Company of any shares of its
capital stock. The Company has reserved an aggregate of twenty-five million
(25,000,000) shares of its Common Stock for purchase upon exercise of options to
be granted in the future under the Company's 1997 Stock Option Plan and has
outstanding options to purchase 8,500,000 shares of Common Stock outside of such
Plan. Except as set forth in the Company's Certificate of Incorporation and
herein, the Company is not a party or subject to any agreement or understanding
between any persons that affects or relates to the voting or giving of written
consents with respect to any security or the voting by a director of the
Company.
SECTION 3.04 Authority Relative to this Agreement. The Company has
all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the Merger.
The execution and delivery of this Agreement by the Company and the consummation
by the Company of the Merger contemplated hereby have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the Merger (other than, with respect to the Merger, the adoption of
this Agreement by the affirmative vote as required by the DGCL, the applicable
provisions of the CGCL, and the Company's Certificate of Incorporation. This
Agreement has been duly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by the other parties hereto and
thereto, constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
SECTION 3.05 No Conflict; Required Filings and
Consents. (a) The execution and delivery of this Agreement by
the Company does not, and the performance by the Company of its
obligations hereunder and the consummation of the Merger will
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not, (i) conflict with or violate any provision of the Restated Certificate of
Incorporation or Bylaws of the Company or any equivalent organizational
documents of any Company Subsidiary, (ii) assuming that all consents, approvals,
authorizations and permits described in Section 3.05(b) have been obtained and
all filings and notifications described in Section 3.05(b) have been made,
conflict with or violate any Law applicable to the Company or any Company
Subsidiary or by which any property or asset of the Company or any Company
Subsidiary is bound or affected or (iii) except as set forth in Section 3.05(a)
of the Company Disclosure Schedule, result in any breach of or constitute a
default (or an event which with the giving of 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 Company or any Company
Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, Company Permit, franchise or other instrument or
obligation, except, with respect to clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which would
neither, individually or in the aggregate, (A) have a Company Material Adverse
Effect nor (B) prevent or materially delay the performance by the Company of its
obligations pursuant to this Agreement or the consummation of the Merger.
(b) The execution and delivery of this Agreement by the Company does
not, and the performance by the Company of its obligations hereunder or the
consummation of the Merger will not, require any consent, approval,
authorization or permit of, or filing by the Company with or notification by the
Company to, any United States federal, state or local or any supranational or
foreign governmental, regulatory or administrative authority, agency or
commission or any court, tribunal or arbitral body (a "Governmental Entity"),
except (i) applicable requirements of the Securities Exchange Act of 1934, as
amended (together with the rules and regulations promulgated thereunder, the
"Exchange Act"), the Securities Act of 1933, as amended (together with the rules
and regulations promulgated thereunder, the "Securities Act"), state securities
or "blue sky" laws ("Blue Sky Laws"), the rules and regulations of the NYSE,
state takeover laws, the premerger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act"), the filing and recordation of the
Certificate of Merger as required by the DGCL, and as set forth in Section
3.05(b) of the Company Disclosure Schedule, and (ii) where failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not (A) prevent or materially delay the performance by the
Company of its obligations pursuant to this Agreement and the consummation of
the Merger or (B) individually or in the aggregate have a Company Material
Adverse Effect.
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SECTION 3.06 Permits; Compliance with Laws. Each of the Company and
the Company Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Entity necessary for the
Company or any Company Subsidiary to own, lease and operate its properties or to
carry on its business as it is now being conducted (the "Company Permits"), and
all such Company Permits are valid and in full force and effect, except where
the failure to have, or the suspension or cancellation of, any of the Company
Permits, or the failure of any of such Company Permits to be valid and in full
force and effect, would not, individually or in the aggregate, (i) have a
Company Material Adverse Effect, or (ii) except as described in Section 3.05(b)
of the Company Disclosure Schedule, prevent or materially delay the performance
by the Company of its obligations pursuant to this Agreement and the
consummation of the Merger, and, as of the date of this Agreement, no suspension
or cancellation of any of the Company Permits is pending or, to the knowledge of
the Company, threatened, except where the failure to have, or the suspension or
cancellation of, any of the Company Permits would not, individually or in the
aggregate, (i) have a Company Material Adverse Effect or (ii) prevent or
materially delay the performance by the Company of its obligations pursuant to
this Agreement and the consummation of the Merger. Except as disclosed in
Section 3.06(a) of the Company Disclosure Schedule, neither the Company nor any
Company Subsidiary is in conflict with, or in default or violation of, (i) any
Law applicable to the Company or any Company Subsidiary or by which any property
or asset of the Company or any Company Subsidiary is bound or affected or (ii)
any Company Permits, except in the case of clauses (i) and (ii) for any such
conflicts, defaults or violations that would neither individually or in the
aggregate, (A) have a Company Material Adverse Effect nor (B) prevent or
materially delay the performance by the Company of its obligations pursuant to
this Agreement and the consummation of the Merger.
SECTION 3.07 SEC Filings; Financial Statements. (a) The Company is
not subject to the periodic reporting requirements of the Exchange Act or
required to file any form, report or other document with the SEC, any stock
exchange or any other comparable Governmental Entity.
(b) Except as set forth on Section 3.07(b)(i) of the Company
Disclosure Schedule, the consolidated financial statements (including, in each
case, any notes thereto) contained in Section 3.07(b)(i) of the Company
Disclosure Schedule was prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods indicated (except as may be indicated in the notes thereto) and each
presented fairly, in all material respects, the consolidated financial position
of the Company and the consolidated Company Subsidiaries as at the respective
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dates thereof and the consolidated results of operations and consolidated
cash flows for the respective periods indicated therein, except as otherwise
noted therein (subject, in the case of unaudited statements, to normal and
recurring year-end adjustments which were not and are not expected, individually
or in the aggregate, to have a Company Material Adverse Effect). The books and
records of the Company and the Company Subsidiaries are being maintained in
accordance with GAAP and any other applicable legal and accounting requirements.
(c) Except as and to the extent set forth on Section 3.07(c) of the
Company Disclosure Schedule, none of the Company or any Company Subsidiary has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would result in the stockholders' equity of the
Company as of October 31, 1998 as set forth in the Company Disclosure Schedule
not fairly reflecting the financial condition of the Company and the Company
Subsidiaries, taken as a whole, in accordance with GAAP, except for liabilities
or obligations incurred in the ordinary course of business since October 31,
1998 that would not, individually or in the aggregate, have a Company Material
Adverse Effect.
SECTION 3.08 Absence of Certain Changes or Events. Since October 31,
1998, except as contemplated by or as disclosed in this Agreement, as set forth
in Section 3.08 of the Company Disclosure Schedule the Company and the Company
Subsidiaries have conducted their businesses only in the ordinary course and in
a manner consistent with past practice and, since such date, there has not been
(i) any Company Material Adverse Effect or any event or development that would
have a Company Material Adverse Effect, excluding any changes and effects
resulting from changes in economic, regulatory or political conditions or
changes in conditions generally applicable to the industries in which the
Company and the Company Subsidiaries are involved, (ii) any event that could
reasonably be expected to prevent or materially delay the performance of its
obligations pursuant to this Agreement and the consummation of the Merger by the
Company, (iii) except as required by law after the date of this Agreement, any
material change by the Company in its accounting methods, principles or
practices, (iv) any declaration, setting aside or payment of any dividend or
distribution in respect of the shares of Company Capital Stock or any
redemption, purchase or other acquisition of any of the Company's securities or
(v) any increase in the compensation or benefits or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any executive officers of the
Company or any Company Subsidiary except in the ordinary course of business
consistent with past practice.
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SECTION 3.09 Employee Benefit Plans; Labor Matters. (a) With respect
to each employee benefit plan, program, arrangement and contract (including,
without limitation, any "employee benefit plan", as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
maintained or contributed to by the Company or any Company Subsidiary, or with
respect to which the Company or any Company Subsidiary could incur liability
under Section 4069, 4212(c) or 4204 of ERISA (the "Company Benefit Plans"), the
Company has delivered (or will, within 15 days of the date hereof, deliver) to
Parent a true and correct copy of (i) such Company Benefit Plan and the most
recent summary plan description related to each Company Benefit Plan for which a
summary plan description is required, (ii) each trust agreement or other funding
arrangement relating to such Company Benefit Plan, (iii) the most recent annual
report (Form 5500) filed with the Internal Revenue Service (the "IRS"), (iv) the
most recent actuarial report or financial statement relating to a Company
Benefit Plan and (v) the most recent determination letter issued by the IRS with
respect to any Company Benefit Plan qualified under Section 401(a) of the Code.
(b) Each Company Benefit Plan has been administered in all material
respects in accordance with its terms and all contributions required to be made
under the terms of any of the Company Benefit Plans as of the date of this
Agreement have been timely made or have been reflected on the most recent
consolidated balance sheet included in Section 3.09 of the Company Disclosure
Schedule. Except as set forth in Section 3.09(b) of the Company Disclosure
Schedule, with respect to the Company Benefit Plans, no event has occurred and,
to the knowledge of the Company, there exists no condition or set of
circumstances in connection with which the Company or any Company Subsidiary
could be subject to any liability under the terms of such Company Benefit Plans,
ERISA, the Code or any other applicable Law which, in any case, would
individually or in the aggregate have a Company Material Adverse Effect.
(c) As of the date of this Agreement, there is no labor dispute,
strike or work stoppage against the Company or any Company Subsidiary pending
or, to the knowledge of the Company, threatened which may interfere with the
respective business activities of the Company or any Company Subsidiary, except
where such dispute, strike or work stoppage would not have a Company Material
Adverse Effect. Except as set forth on Section 3.09(d) of the Company Disclosure
Schedule, as of the date of this Agreement, to the knowledge of the Company,
none of the Company, any Company Subsidiary, or any of their respective
representatives or employees has committed any unfair labor practice in
connection with the operation of the respective businesses of the Company or any
Company Subsidiary, and there is no charge or complaint against the Company
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or any Company Subsidiary by the National Labor Relations Board or any
comparable governmental agency pending or threatened in writing, except where
such unfair labor practice, charge or complaint would not have a Company
Material Adverse Effect.
(d) The Company has made available to Parent true and complete
copies of (i) all employment agreements with executive officers of the Company
and with each other officer of the Company and of each Company Subsidiary, (ii)
all severance plans, agreements, programs and policies of the Company and each
Company Subsidiary with or relating to their respective employees, and (iii) all
plans, programs, agreements and other arrangements of the Company and each
Company Subsidiary with or relating to their respective employees which contain
"change of control" provisions.
(e) Except as set forth in Section 3.09(f) of the Company Disclosure
Schedule, no amount paid or payable by the Company or any Company Subsidiary in
connection with the transactions contemplated hereby either solely as a result
thereof or as a result of such transactions in conjunction with any other events
will be an "excess parachute payment" within the meaning of Section 280G of the
Code.
(f) Except as provided in Section 3.09(g) of the Company Disclosure
Schedule, except as otherwise required by Law, no Company Benefit Plan provides
retiree medical or retiree life insurance benefits to any person.
SECTION 3.10 Accounting and Tax Matters. Except as disclosed in
Section 3.10 of the Company Disclosure Schedule, neither the Company nor, to the
knowledge of the Company, any of its affiliates has taken or agreed to take any
action (other than actions contemplated by this Agreement) that would prevent
the Merger from constituting a transaction qualifying under Section 368(a) of
the Code. The Company is not aware of any agreement, plan or other circumstance
that would prevent the Merger from so qualifying under Section 368(a) of the
Code.
SECTION 3.11 Contracts; Company Debt Instruments. Except as disclosed
in Section 3.11 of the Company Disclosure Schedule, there is no contract or
agreement that is material to the business, financial condition or results of
operations of the Company and the Company Subsidiaries taken as a whole (each, a
"Company Material Contract"). Except as disclosed in Section 3.11 of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary is in
violation of or in default under (nor does there exist any condition which with
the passage of time or the giving of notice would cause such a violation of or
default under) any loan or credit agreement, note, bond, mortgage, indenture or
lease, or any other contract, agreement, arrangement or understanding to which
it is a party or by which it or any of its properties or assets is bound, except
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for violations or defaults that would not, individually or in the aggregate,
result in a Company Material Adverse Effect. Set forth in Section 3.11 of the
Company Disclosure Schedule is a list of indebtedness of the Company and the
Company Subsidiaries as of October 31, 1998.
SECTION 3.12 Litigation. Except as disclosed in Section 3.12 of the
Company Disclosure Schedule, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
the Company or any Company Subsidiary before any Governmental Entity that,
individually or in the aggregate, is reasonably likely to have a Company
Material Adverse Effect, and, except as disclosed to Parent, to the knowledge of
the Company, there are no existing facts or circumstances that would be
reasonably likely to result in such a suit, claim, action, proceeding or
investigation. Except as disclosed to Parent, the Company is not aware of any
facts or circumstances which would result in the denial of insurance coverage
under policies issued to the Company and the Company Subsidiaries in respect of
such suits, claims, actions, proceedings and investigations, except in any case
as would not, individually or in the aggregate, have a Company Material Adverse
Effect. Except as disclosed in Section 3.12 of the Company Disclosure Schedule,
neither the Company nor any Company Subsidiary is subject to any outstanding
order, writ, injunction or decree which, insofar as can be reasonably foreseen,
individually or in the aggregate, would have a Company Material Adverse Effect.
SECTION 3.13 Environmental Matters. Except as disclosed in Section
3.13 of the Company Disclosure Schedule or as would not, individually or in the
aggregate, have a Company Material Adverse Effect:
(a) the Company and the Company Subsidiaries (i) are in compliance
with all, and are not subject to any asserted liability or, to the Company's
knowledge, any liability, in each case with respect to any, applicable
Environmental Laws (as defined below), (ii) hold or have, applied for all
Environmental Permits (as defined below) and (iii) are in compliance with their
respective Environmental Permits;
(b) neither the Company nor any Company Subsidiary has received any
written notice, demand, letter, claim or request for information alleging that
the Company or any of its Subsidiaries may be in violation of, or liable under,
any Environmental Law;
(c) neither the Company nor any Company Subsidiary (i) has entered
into or agreed to any consent decree or order or is subject to any judgment,
decree or judicial order relating to compliance with Environmental Laws,
Environmental Permits or the investigation, sampling, monitoring, treatment,
remediation, removal or cleanup of Hazardous Materials (as defined below) and,
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to the knowledge of the Company, no investigation, litigation or other
proceeding is pending or threatened in writing with respect thereto, or (ii) is
an indemnitor in connection with any threatened or asserted claim by any
third-party indemnitee for any liability under any Environmental Law or relating
to any Hazardous Materials;
(d) to the knowledge of the Company, none of the real property owned
or leased by the Company or any Company Subsidiary is listed or, proposed for
listing on the "National Priorities List" under CERCLA, as updated through the
date hereof, or any similar state or foreign list of sites requiring
investigation or cleanup; and
For purposes of this Agreement:
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended as of the date hereof.
"Environmental Laws" means any federal, state, local or foreign
statute, law, ordinance, regulation, rule, code, treaty, writ or order and any
enforceable judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree, judgment, stipulation,
injunction, permit, authorization, policy, opinion, or agency requirement, in
each case having the force and effect of law, relating to the pollution,
protection, investigation or restoration of the environment, health and safety
or natural resources, including, without limitation, those relating to the use,
handling, presence, transportation, treatment, storage, disposal, release,
threatened release or discharge of Hazardous Materials or noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property or to the siting, construction, operation, closure and post-closure
care of, waste disposal, handling and transfer facilities.
"Environmental Permits" means any permit, approval, identification
number, license and other authorization required under any applicable
Environmental Law.
"Hazardous Materials" means (a) any petroleum, petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials or polychlorinated biphenyls or (b) any chemical, material or other
substance defined or regulated as toxic or hazardous or as a pollutant or
contaminant or waste under any applicable Environmental Law.
SECTION 3.14 Taxes. (a) Except as set forth in Section 3.14 of the
Company Disclosure Schedule and except for such matters that, individually or in
the aggregate, would not have a Company Material Adverse Effect, (i) the Company
and each of the Company Subsidiaries have timely filed or shall timely file
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all returns and reports required to be filed by them with any taxing
authority with respect to Taxes for any period ending on or before the Effective
Time, taking into account any extension of time to file granted to or obtained
on behalf of the Company and the Company Subsidiaries, (ii) all Taxes that are
due prior to the Effective Time have been paid or shall be paid on or before the
applicable due date, (iii) as of the date hereof, no deficiency for any amount
of Tax has been asserted or assessed by a taxing authority against the Company
or any of the Company Subsidiaries and (iv) the Company and each of the Company
Subsidiaries have provided adequate reserves in their financial statements for
any Taxes that have not been paid, whether or not shown as being due on any
returns. As used in this Agreement, "Taxes" shall mean any and all taxes, fees,
levies, duties, tariffs, imposts and other charges of any kind (together with
any and all interest, penalties, additions to tax and additional amounts imposed
with respect thereto) imposed by any government or taxing authority, including,
without limitation, taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes;
license, registration and documentation fees; and customers' duties, tariffs and
similar charges.
(b) Except as set forth in Section 3.14 of the Company Disclosure
Schedule, to the best of the Company's knowledge, no disputes or audits
regarding Taxes are pending against, and no claims for Taxes have been received
in writing by the Company or any of the Company Subsidiaries, other than
disputes, audits and claims that are not reasonably likely to have a Company
Material Adverse Effect.
(c) There are no Tax liens upon any property or assets of the
Company or any of the Company Subsidiaries except liens for current Taxes not
yet due and liens which have not had and are not reasonably likely to have a
Company Material Adverse Effect.
SECTION 3.15 Non-Competition Agreements. Except as set forth on
Section 3.15 of the Company Disclosure Schedule, neither the Company nor any
Company Subsidiary is a party to any agreement which purports to restrict or
prohibit the Company and the Company Subsidiaries individually or collectively
from, directly or indirectly, engaging in any business involving the design,
manufacture and sale of recording heads for disk drives or any other businesses
currently engaged in by the Company, or any corporations affiliated with the
Company. None of the Company's officers, directors or key employees is a party
to any agreement which, by virtue of such person's relationship with the
Company, restricts the Company or any Company Subsidiary or affiliate from,
directly or indirectly, engaging in any of the businesses described above.
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SECTION 3.16 Brokers. No broker, finder or investment banker (other
than Lehman Brothers) is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger based upon arrangements made by or on
behalf of the Company. The Company has heretofore made available to Parent
complete and correct copies of all agreements between the Company and Lehman
Brothers pursuant to which such firm would be entitled to any payment relating
to the Merger.
SECTION 3.17 Insurance. Set forth on Schedule 3.18 of the Company
Disclosure Schedule is a description of material insurance policies maintained
by the Company with respect to the businesses of the Company and the Company
Subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and
warrant to the Company as of the date hereof that:
SECTION 4.01 Organization and Qualification; Subsidiaries. Each of
Parent, Merger Sub and each other subsidiary of Parent (together with Merger
Sub, the "Parent Subsidiaries") has been duly organized and is validly existing
and in good standing (to the extent applicable) under the laws of the
jurisdiction of its incorporation or organization, as the case may be, and has
the requisite corporate power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing or in good standing or to have such power, authority and governmental
approvals would not, individually or in the aggregate, have a Parent Material
Adverse Effect. Each of Parent and each Parent Subsidiary is duly qualified or
licensed to do business, and is in good standing (to the extent applicable), 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 any
change in or effect on the business of Parent and the Parent Subsidiaries that
is, or is reasonably likely to be, materially adverse to the business, assets
(including intangible assets), liabilities (contingent or otherwise), condition
(financial or otherwise) or results of operations of Parent and the Parent
Subsidiaries taken as a whole (a "Parent Material Adverse Effect").
Section 4.01(a) of the Disclosure Schedule delivered by Parent to the Company
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prior to the execution of this Agreement (the "Parent Disclosure Schedule") sets
forth a complete and correct list of all of Parent Subsidiaries. Except as set
forth in Section 4.01(b) of the Parent Disclosure Schedule, neither Parent nor
any Parent Subsidiary holds any interest in any corporation, limited liability
company, partnership, joint venture or other legal entity of any kind.
SECTION 4.02 Certificate of Incorporation and Bylaws. The copy of
Parent's Certificate of Incorporation that is incorporated by reference as an
exhibit to Parent's Form 10-Q for the period ending July 4, 1998 and the copy
of Parent's Bylaws that is incorporated by reference as an exhibit to Parent's
Form 10-K for the period ending September 30, 1997 (the "Parent 1997 10-K") are
complete and correct copies thereof. Parent has heretofore furnished to the
Company a complete and correct copy of the Certificate of Incorporation and
Bylaws of Merger Sub. Such Certificate of Incorporation, Certificate of
Incorporation and Bylaws of Parent and Merger Sub are in full force and effect.
Neither Parent nor Merger Sub is in violation of any of the provisions of its
Certificate of Incorporation or Bylaws.
SECTION 4.03 Capitalization. The authorized capital stock of Parent
consists of 80,000,000 shares of Parent Common Stock and 5,000,000 shares of
preferred stock (the "Parent Preferred Stock"). As of November 23, 1998, (i)
24,103,294 shares of Parent Common Stock were issued and outstanding, all of
which were validly issued, fully paid and nonassessable, (ii) no shares of
Parent Preferred Stock were issued and outstanding, (iii) 130,552 shares of
Parent Common Stock were held in the treasury of Parent or by Parent
Subsidiaries, (iv) 6,199,947 shares of Parent Common Stock were reserved for
future issuance pursuant to the terms of Parent's 7% Convertible Subordinated
Debentures due 2006 (the "Parent Subordinated Notes"), (v) 6,622,695 shares of
Parent Common Stock were reserved for issuance pursuant to outstanding options
or warrants to purchase shares of Parent Common Stock ("Parent Stock Options")
issued under the benefits plans set forth on Section 4.03(v) of the Parent
Disclosure Schedule or otherwise (the "Parent Stock Plans"). Between July 4,
1998 and the date of this Agreement, no Parent Stock Options have been granted
and no awards have been made under Parent Stock Plans, and no shares of Parent
Common Stock (or securities convertible into Parent Common Stock) have been
issued other than shares of Parent Common Stock reserved for issuance as set
forth in this Section 4.03. Except for Parent Stock Options granted pursuant to
Parent Stock Plans and shares of Parent Common Stock issuable upon the exercise
of warrants and upon the conversion of the Parent Subordinated Notes or pursuant
to agreements or arrangements described in Section 4.03 of the Parent Disclosure
Schedule, there are no options, warrants or other rights, agreements,
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arrangements or commitments of any character to which Parent is a party or by
which Parent is bound relating to the issued or unissued capital stock of Parent
or any Parent Subsidiary or obligating Parent or any Parent Subsidiary to issue
or sell any shares of capital stock of, or other equity interests in, Parent or
any Parent Subsidiary. All shares of Parent Common Stock subject to issuance as
aforesaid, upon issuance prior to the Effective Time 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. Except as set forth in
Section 4.03 of the Parent Disclosure Schedule, there are no outstanding
contractual obligations of Parent or any Parent Subsidiary to repurchase, redeem
or otherwise acquire any shares of Parent Common Stock or any capital stock of
any Parent Subsidiary. Except as disclosed in Section 4.03 of the Parent
Disclosure Schedule, each outstanding share of capital stock of each Parent
Subsidiary is duly authorized, validly issued, fully paid and nonassessable and
each such share owned by Parent or another Parent Subsidiary is free and clear
of all security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on Parent's or such other Parent Subsidiary's
voting rights, charges and other encumbrances of any nature whatsoever, except
where the failure to own such shares free and clear would not, individually or
in the aggregate, have a Parent Material Adverse Effect. Except as set forth in
Section 4.03 of the Parent Disclosure Schedule or as set forth in the Parent
Reports (as hereinafter defined), there are no material outstanding contractual
obligations of Parent or any Parent Subsidiary to provide funds to, or make any
material investment (in the form of a loan, capital contribution or otherwise)
in, any Parent Subsidiary which is not wholly owned by Parent or in any other
person.
SECTION 4.04 Authority Relative to this Agreement. Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the Merger. Each of (i) the execution and delivery of this Agreement by Parent
and Merger Sub and the consummation by Parent and Merger Sub of the transactions
contemplated hereby, (ii) the amendment to the Certificate of Incorporation of
Parent to increase the number of authorized shares of Parent Common Stock to a
number sufficient to consummate the transactions contemplated hereby (the
"Certificate Amendment") and (iii) the issuance (the "Share Issuance") of shares
of Parent Common Stock in the Merger (including the shares of Parent Common
Stock to be issued to the holders of the Promissory Notes), have been duly and
validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of Parent or Merger Sub are necessary to authorize this
Agreement or to consummate such transactions (other than, with respect to (a)
the adoption of the Certificate Amendment, the affirmative vote of a majority of
the votes entitled to be cast and (b) the adoption of the Share Issuance,
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the approval thereof by the affirmative vote of a majority of votes cast by the
holders of outstanding shares of Parent Common Stock at the Parent Stockholders'
Meeting). This Agreement has been duly executed and delivered by Parent and
Merger Sub and, assuming the due authorization, execution and delivery by the
Company, this Agreement constitutes a legal, valid and binding obligation of
each of Parent and Merger Sub, enforceable against Parent and Merger Sub, as the
case may be, 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 Merger Sub, do not, and
the performance by Parent and Merger Sub of their respective obligations
hereunder and the consummation of the Merger will not, (i) conflict with or
violate any provision of the Certificate of Incorporation or Bylaws of Parent or
any equivalent organizational documents of any Parent Subsidiary, (ii) assuming
that all consents, approvals, authorizations and permits described in Section
4.05(b) have been obtained and all filings and notifications described in
Section 4.05(b) have been made, conflict with or violate any Law applicable to
Parent or any Parent Subsidiary or by which any property or asset of Parent or
any Parent Subsidiary is bound or affected or (iii) except as set forth in
Section 4.05(a) of the Parent Disclosure Schedule, result in any breach of or
constitute a default (or an event which with the giving of 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 Parent or
any Parent subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, Parent Permit, franchise or other
instrument or obligation, except, with respect to clauses (ii) and (iii), for
any such conflicts, violations, breaches, defaults or other occurrences which
would neither, individually or in the aggregate, (A) have a Parent Material
Adverse Effect nor (B) prevent or materially delay the performance by Parent or
Merger Sub of their respective obligations pursuant to this Agreement or the
consummation of the Merger.
(b) The execution and delivery of this Agreement by each of Parent
and Merger Sub does not, and the performance by Parent and Merger Sub of their
respective obligations hereunder or the consummation of the Merger will not,
require any consent, approval, authorization or permit of, or filing by Parent
or Merger Sub with or notification by Parent or Merger Sub to, any Governmental
Entity, except (i) applicable requirements of the Exchange Act, the Securities
Act, Blue Sky Laws, the rules and regulations of the NYSE, state takeover laws,
the premerger notification requirements of the HSR Act, the filing and
recordation of the Certificate of Merger as required by the DGCL, and as set
forth in Section 4.05(b) of the Parent Disclosure Schedule, and (ii) where
failure to obtain such consents, approvals, authorizations or permits, or to
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make such filings or notifications, would not (A) prevent or materially delay
the performance by Parent or Merger Sub of their respective obligations pursuant
to this Agreement and the consummation of the Merger or (B) individually or in
the aggregate have a Parent Material Adverse Effect.
SECTION 4.06 Permits; Compliance with Laws. Each of Parent and the
Parent Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for Parent or any
Parent Subsidiary to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Parent Permits"), and all such
Parent Permits are valid and in full force and effect, except where the failure
to have, or the suspension or cancellation of, any of Parent Permits, or the
failure of any such Parent Permits to be valid and in full force and effect,
would not, individually or in the aggregate, (i) have a Parent Material Adverse
Effect, or (ii) prevent or materially delay the performance by Parent or Merger
Sub of their respective obligations pursuant to this Agreement and the
consummation of the Merger, and, as of the date of this Agreement, no suspension
or cancellation of any of Parent Permits is pending or, to the knowledge of
Parent, threatened, except where the failure to have, or the suspension or
cancellation of, any of Parent Permits would not, individually or in the
aggregate, (i) have a Parent Material Adverse Effect or (ii) prevent or
materially delay the performance by Parent or Merger Sub of their respective
obligations pursuant to this Agreement and the consummation of the Merger.
Except as disclosed in Section 4.06 of the Parent Disclosure Schedule, neither
Parent nor any Parent Subsidiary is in conflict with, or in default or violation
of, (i) any Law applicable to Parent or any Parent Subsidiary or by which any
property or asset of Parent or any Parent Subsidiary is bound or affected or
(ii) any Parent Permits, except in the case of clauses (i) and (ii) for any such
conflicts, defaults or violations that would neither individually or in the
aggregate, (A) have a Parent Material Adverse Effect nor (B) prevent or
materially delay the performance by Parent or Merger Sub of their respective
obligations pursuant to this Agreement and the consummation of the Merger.
SECTION 4.07 SEC Filings; Financial Statements. (a) No Parent
Subsidiary is subject to the periodic reporting requirements of the Exchange Act
or required to file any form, report or other document with the SEC, NYSE, any
other stock exchange or any other comparable Governmental Entity. Except as
disclosed in Section 4.07(a) of the Parent Disclosure Schedule, Parent has
timely filed all forms, reports and documents required to be filed by it with
the SEC, the NYSE, any other stock exchange or comparable Governmental Entity
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since January 1, 1995 through the date of this Agreement (collectively and as
amended, the "Parent Reports"). None of such forms, reports or documents,
including, without limitation, any financial statements or schedules included or
incorporated by reference therein, contained, when filed, any untrue statement
of a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except as would not have a Parent Material Adverse Effect, each
Parent Report was prepared in accordance with the requirements of the Securities
Act, the Exchange Act, the NYSE, other stock exchange or comparable Governmental
Entity, as the case may be.
(b) Each of the consolidated financial statements (including, in
each case, any notes thereto) contained in the Parent Reports and the
consolidated financial statements at July 4, 1998 set forth in Section 4.07(b)
of the Parent Disclosure Schedule were prepared in accordance with GAAP applied
on a consistent basis throughout the periods indicated (except as may be
indicated in the notes thereto) and each presented fairly, in all material
respects, the consolidated financial position of Parent and the consolidated
Parent Subsidiaries as at the respective dates thereof and the consolidated
results of their operations and their consolidated cash flows for the respective
periods indicated therein, except as otherwise noted therein (subject, in the
case of unaudited statements, to normal and recurring year-end adjustments which
were not and are not expected, individually or in the aggregate, to have a
Parent Material Adverse Effect). The books and records of Parent and the Parent
Subsidiaries have been, and are being, maintained in accordance with GAAP and
any other applicable legal and accounting requirements.
(c) Except as and to the extent set forth on the consolidated
balance sheet of Parent and the Parent Subsidiaries as set forth in Schedule
4.07(b) of the Parent Disclosure Schedule, including the notes thereto, none of
Parent or any Parent Subsidiary has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on a balance sheet or in notes thereto prepared in accordance with
GAAP, except for liabilities or obligations incurred in the ordinary course of
business since July 4, 1998 that would not, individually or in the aggregate,
have a Parent Material Adverse Effect.
SECTION 4.08 Absence of Certain Changes or Events. Since July 4,
1998, except as contemplated by or as disclosed in this Agreement, as set forth
in Section 4.08 of the Parent Disclosure Schedule or as disclosed in any Parent
Report filed since July 4, 1998, Parent and the Parent Subsidiaries have
conducted their businesses only in the ordinary course and in a manner
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consistent with past practice and, since such date, there has not been (i) any
Parent Material Adverse Effect or any event or development that would have a
Parent Material Adverse Effect, excluding any changes and effects resulting from
changes in economic, regulatory or political conditions or changes in conditions
generally applicable to the industries in which Parent and the Parent
Subsidiaries are involved, (ii) any event that could reasonably be expected to
prevent or materially delay the performance of Parent's and Merger Sub's
obligations pursuant to this Agreement and the consummation of the Merger by
Parent and Merger Sub, (iii) any material change by Parent in its accounting
methods, principles or practices, (iv) any declaration, setting aside or payment
of any dividend or distribution in respect of the shares of Parent Common Stock
or any redemption, purchase or other acquisition of any of Parent's securities
or (v) any increase in the compensation or benefits or establishment of any
bonus, insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any executive officers of
Parent or any Parent Subsidiary except in the ordinary course of business
consistent with past practice.
SECTION 4.09 Employee Benefit Plans; Labor Matters. (a) With respect
to each employee benefit plan, program, arrangement and contract (including,
without limitation, any "employee benefit plan", as defined in Section 3(3) of
ERISA maintained or contributed to by Parent or any Parent Subsidiary, or with
respect to which Parent or any Parent Subsidiary could incur liability under
Section 4069, 4212(c) or 4204 of ERISA (the "Parent Benefit Plans"), Parent has
delivered (or will, within 15 days of the date hereof, deliver) to the Company a
true and correct copy of (i) such Parent Benefit Plan and the most recent
summary plan description related to each Company Benefit Plan for which a
summary plan description is required, (ii) each trust agreement or other funding
arrangement relating to such Parent Benefit Plan, (iii) the most recent annual
report (Form 5500) filed with the IRS, (iv) the most recent actuarial report or
financial statement relating to a Parent Benefit Plan and (v) the most recent
determination letter issued by the IRS with respect to any Parent Benefit Plan
qualified under Section 401(a) of the Code.
(b) Each Parent Benefit Plan has been administered in all material
respects in accordance with its terms and all contributions required to be made
under the terms of any of the Parent Benefit Plans as of the date of this
Agreement have been timely made or have been reflected on the most recent
consolidated balance sheet filed or incorporated by reference in the Parent
Reports prior to the date of this Agreement. Except as set forth in
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Section 4.09(b) of the Parent Disclosure Schedule, with respect to the Parent
Benefit Plans, no event has occurred and, to the knowledge of Parent, there
exists no condition or set of circumstances in connection with which Parent or
any Parent Subsidiary could be subject to any liability under the terms of such
Parent Benefit Plans, ERISA, the Code or any other applicable Law which, in any
case, would individually or in the aggregate have a Parent Material Adverse
Effect.
(c) As of the date of this Agreement, there is no labor dispute,
strike or work stoppage against Parent or any Parent Subsidiary pending or, to
the knowledge of Parent, threatened which may interfere with the respective
business activities of Parent or any Parent Subsidiary, except where such
dispute, strike or work stoppage would not have a Parent Material Adverse
Effect. As of the date of this Agreement, to the knowledge of the Parent, none
of Parent, any Parent Subsidiary, or any of their respective representatives or
employees has committed any unfair labor practice in connection with the
operation of the respective businesses of Parent or any Parent Subsidiary, and
there is no charge or complaint against Parent or any Parent Subsidiary by the
National Labor Relations Board or any comparable governmental agency pending or
threatened in writing, except where such unfair labor practice, charge or
complaint would not have a Parent Material Adverse Effect.
(d) Parent has made available to the Company true and complete
copies of (i) all employment agreements with executive officers of Parent and
with each other officer of Parent and of each Parent Subsidiary (ii) all
severance plans, agreements, programs and policies of Parent and each Parent
Subsidiary with or relating to their respective employees, and (iii) all plans,
programs, agreements and other arrangements of Parent and each Parent Subsidiary
with or relating to their respective employees which contain "change of control"
provisions.
(e) No amount paid or payable by Parent or any Parent Subsidiary in
connection with the transactions contemplated hereby either solely as a result
thereof or as a result of such transactions in conjunction with any other events
will be an "excess parachute payment" within the meaning of Section 280G of the
Code.
(f) Except as provided in Section 4.09(g) of the Parent Disclosure
Schedule or as otherwise required by Law, no Parent Benefit Plan provides
retiree medical or retiree life insurance benefits to any person.
SECTION 4.10 Accounting and Tax Matters. (a) Except as disclosed in
the Parent Reports, neither Parent nor, to the knowledge of Parent, any of its
affiliates has taken or agreed to take any action (other than actions
contemplated by this Agreement) that would prevent the Merger from constituting
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a transaction qualifying under Section 368(a) of the Code. Parent is not aware
of any agreement, plan or other circumstance that would prevent the Merger from
so qualifying under Section 368(a) of the Code.
SECTION 4.11 Contracts; Parent Debt Instruments. Except as disclosed
in the Parent Reports or in Section 4.11 (a) of the Parent Disclosure Schedule,
there is no contract or agreement that is material to the business, financial
condition or results of operations of Parent and the Parent Subsidiaries taken
as a whole (each, a "Parent Material Contract"). Except as disclosed in the
Parent Reports or in Section 4.11(b) of the Parent Disclosure Schedule, neither
the Parent nor any Parent Subsidiary is in violation of or in default under (nor
does there exist any condition which with the passage of time or the giving of
notice would cause such a violation of or default under) any loan or credit
agreement, note, bond, mortgage, indenture or lease, or any other contract,
agreement, arrangement or understanding to which it is a party or by which it or
any of its properties or assets is bound, except for violations or defaults that
would not, individually or in the aggregate, result in a Parent Material Adverse
Effect. Set forth in Section 4.11(c) of the Parent Disclosure Schedule is a
description of any material changes to the amount and terms of the indebtedness
of Parent and the Parent Subsidiaries as described in the notes to the financial
statements incorporated in the Parent 1997 10-K.
SECTION 4.12 Litigation. Except as disclosed in the Parent Reports or
in Section 4.12 of the Parent Disclosure Schedule, there is no suit, claim,
action, proceeding or investigation pending or, to the knowledge of Parent,
threatened against Parent or any Parent Subsidiary before any Governmental
Entity that, individually or in the aggregate, is reasonably likely to have a
Parent Material Adverse Effect, and, except as disclosed to the Company, to the
knowledge of Parent, there are no existing facts or circumstances that would be
reasonably likely to result in such a suit, claim, action, proceeding or
investigation. Except as disclosed to the Company, Parent is not aware of any
facts or circumstances which would result in the denial of insurance coverage
under policies issued to Parent and the Parent Subsidiaries in respect of such
suits, claims, actions, proceedings and investigations, except in any case as
would not, individually or in the aggregate, have a Parent Material Adverse
Effect. Except as disclosed in the Parent Reports or in Section 4.12 of the
Parent Disclosure Schedule, neither Parent nor any Parent Subsidiary is subject
to any outstanding order, writ, injunction or decree which, insofar as can be
reasonably foreseen, individually or in the aggregate, would have a Parent
Material Adverse Effect.
SECTION 4.13 Environmental Matters. Except as disclosed in the Parent
Reports or in Section 4.13 of the Parent Disclosure Schedule or as would
not, individually or in the aggregate, have a Parent Material Adverse Effect.
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(a) Parent and the Parent Subsidiaries (i) are in compliance with
all, and are not subject to any asserted liability or, to Parent's knowledge,
any liability, in each case with respect to any, applicable Environmental Laws,
(ii) hold or have applied for all Environmental Permits and (iii) are in
compliance with their respective Environmental Permits;
(b) neither Parent nor any Parent Subsidiary has received any
written notice, demand, letter, claim or request for information alleging that
Parent or any of its Subsidiaries may be in violation of, or liable under, any
Environmental Law;
(c) neither Parent nor any Parent Subsidiary (i) has entered into or
agreed to any consent decree or order or is subject to any judgment, decree or
judicial order relating to compliance with Environmental Laws, Environmental
Permits or the investigation, sampling, monitoring, treatment, remediation,
removal or cleanup of Hazardous Materials and, to the knowledge of Parent, no
investigation, litigation or other proceeding is pending or threatened in
writing with respect thereto, or (ii) is an indemnitor in connection with any
threatened or asserted claim by any third-party indemnitee for any liability
under any Environmental Law or relating to any Hazardous Materials; and
(d) to the knowledge of Parent, none of the real property owned or
leased by Parent or any Parent Subsidiary is listed or, proposed for listing on
the "National Priorities List" under CERCLA, as updated through the date hereof,
or any similar state or foreign list of sites requiring investigation or
cleanup.
SECTION 4.14 Taxes. (a) Except as set forth in Section 4.14 of the
Parent Disclosure Schedule and except for such matters that, individually or in
the aggregate, would not have a Parent Material Adverse Effect, (i) Parent and
each of the Parent Subsidiaries have timely filed or shall timely file all
returns and reports required to be filed by them with any taxing authority with
respect to Taxes for any period ending on or before the Effective Time, taking
into account any extension of time to file granted to or obtained on behalf of
Parent and the Parent Subsidiaries, (ii) all Taxes that are due prior to the
Effective Time have been paid or shall be paid on or before the applicable due
date, (iii) as of the date hereof, no deficiency for any amount of Tax has been
asserted or assessed by a taxing authority against Parent or any of the Parent
Subsidiaries and (iv) Parent and each of the Parent Subsidiaries have provided
adequate reserves in their financial statements for any Taxes that have not been
paid, whether or not shown as being due on any returns.
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(b) To the best of Parent's knowledge, no Tax disputes or audits are
pending against, and no claims for Taxes have been received in writing by or any
of Parent Subsidiaries, other than disputes, audits and claims that are not
reasonably likely to have a Parent Material Adverse Effect.
(c) There are no Tax liens upon any property or assets of Parent or
any of the Parent Subsidiaries except liens for current Taxes not yet due and
liens which have not had and are not reasonably likely to have a Parent Material
Adverse Effect.
SECTION 4.15 Non-Competition Agreements. Except as set forth on
Section 4.15 of the Parent Disclosure Schedule, neither Parent nor any Parent
Subsidiary is a party to any agreement which purports to restrict or prohibit in
any material respect Parent and the Parent Subsidiaries collectively from,
directly or indirectly, engaging in any business involving the design,
manufacture and sale of recording heads for disk drives or any other businesses
currently engaged in by Parent or any corporations affiliated with Parent. None
of Parent's officers, directors or key employees is a party to any agreement
which, by virtue of such person's relationship with Parent, restricts in any
material respect Parent or any Parent Subsidiary or affiliate from, directly or
indirectly, engaging in any of the businesses described above.
SECTION 4.16 Opinion of Financial Advisor. Gleacher Natwest, Inc.
("GNI") has delivered to the board of directors of Parent its written opinion to
the effect that, as of the date of the opinion, the consideration was fair to
Parent from a financial point of view. GNI has authorized the inclusion of its
opinion in the Joint Proxy Statement and Parent shall promptly, after the date
of this Agreement, deliver a signed copy of such opinion to the Company.
SECTION 4.17 Brokers. No broker, finder or investment banker (other
than GNI) is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger based upon arrangements made by or on behalf of
Parent. Parent has heretofore made available to the Company complete and correct
copies of all agreements between Parent, on the one hand, and GNI, on the other
hand, pursuant to which such firm would be entitled to any payment relating to
the Merger.
SECTION 4.18 Insurance. Parent maintains insurance coverage with
reputable insurers in such amounts and covering such risks as are in accordance
with normal industry practice for companies engaged in businesses similar to
that of Parent (taking into account the cost and availability of such
insurance).
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SECTION 4.19 Ownership of Merger Sub; No Prior Activities. (a) Merger Sub
was formed solely for the purpose of engaging in the transactions contemplated
by this Agreement.
(b) As of the Effective Time, all of the outstanding capital stock
of Merger Sub will be owned directly by Parent. As of the Effective Time, there
will be no options, warrants or other rights, agreements, arrangements or
commitments to which Merger Sub is a party of any character relating to the
issued or unissued capital stock of, or other equity interests in, Merger Sub or
obligating Merger Sub to grant, issue or sell any shares of the capital stock
of, or other equity interests in, Merger Sub, by sale, lease, license or
otherwise. There are no obligations, contingent or otherwise, of Merger Sub to
repurchase, redeem or otherwise acquire any shares of the capital stock of
Merger Sub.
(c) 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 contemplated by this Agreement, Merger 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.
ARTICLE V
COVENANTS
SECTION 5.01 Conduct of Business by the Company Pending the Closing.
The Company agrees that, between the date of this Agreement and the Effective
Time, except as set forth in Section 5.01 of the Company Disclosure Schedule or
as expressly contemplated by any other provision of this Agreement (including,
without limitation, Section 5.12(b)), unless Parent shall otherwise agree in
writing, which agreement shall not be unreasonably withheld or delayed, (x) the
respective businesses of the Company and the Company Subsidiaries shall be
conducted only in, and the Company and the Company Subsidiaries shall not take
any action except in, the ordinary course of business consistent with past
practice, (y) the Company shall use commercially reasonable efforts to keep
available the services of such of the current officers, significant employees
and consultants of the Company and the Company Subsidiaries and to preserve the
current relationships of the Company and the Company Subsidiaries with such of
the customers, suppliers and other persons with which the Company or any Company
Subsidiary has significant business relations in order to preserve substantially
intact its business organization. By way of amplification and not limitation,
except as set forth in Section 5.01 of the Company Disclosure Schedule or as
expressly contemplated by any other provision of this Agreement, neither the
Company nor any Company Subsidiary shall, between the date of this Agreement and
the Effective Time, directly or indirectly, do, or agree to do, any of the
following without the prior written consent of Parent, which consent shall not
be unreasonably withheld or delayed:
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(a) amend or otherwise change its certificate of incorporation or
bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee or encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license or encumbrance of any property or
assets of the Company or any Company Subsidiary, except in the ordinary course
of business and in a manner consistent with past practice or in an aggregate
amount not in excess of $150,000. The Company shall also provide Parent with
prior written notice of the issuance, sale or grant of any shares of capital
stock of the Company or any Company Subsidiary of any class, or securities
convertible into or exchangeable or exercisable for any shares of such capital
stock, or any options, warrants 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 Company or any Company
Subsidiary (except for the issuance of shares of Company Common Stock issuable
pursuant to the Company Stock Options outstanding on the date of this Agreement,
or the declaration, setting aside, making or payment of any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock;
(c) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization or person or any division
thereof or any assets; (ii) 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 for borrowed
money, except for (x) indebtedness for borrowed money incurred in the ordinary
course of business and consistent with past practice and incurred to refinance
outstanding indebtedness for borrowed money existing on the date of this
Agreement and (y) the Promissory Notes, (iii) terminate, cancel or request any
material change in, or agree to any material change in, any Company Material
Contract or enter into any contract or agreement material to the business,
results of operations or financial condition of the Company and the Company
Subsidiaries taken as a whole, in either case other than in the ordinary course
of business, consistent with past practice; (iv) make or authorize any capital
expenditure, other than capital expenditures in the ordinary course of business
consistent with past practice that are not, in the aggregate, in excess of
$1,000,000 or (v) enter into or amend any contract, agreement, commitment or
arrangement that, if fully performed, would not be permitted under this Section
5.01(c);
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(d) increase the compensation payable or to become payable to its
officers or employees, except for increases in accordance with past practices in
salaries or wages of employees or officers of the Company or any Company
Subsidiary who are not executive officers of the Company, or grant any rights to
severance or termination pay to, or enter into any employment or severance
agreement with, any director, officer or other employee of the Company or any
Company Subsidiary, or establish, adopt, enter into or amend any bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee of the Company or any Company Subsidiary, except
to the extent required by applicable Law or the terms of a collective bargaining
agreement;
(e) take any action with respect to accounting policies or
procedures, other than actions in the ordinary course of business and consistent
with past practice as required by GAAP;
(f) make any tax election or settle or compromise any material
federal, state or local United States income tax liability, or any income tax
liability of any other jurisdiction, other than those made in the ordinary
course of business consistent with past practice and those for which specific
reserves have been recorded on the consolidated balance sheet of the Company and
the consolidated Company Subsidiaries dated as of October 31, 1998 and only to
the extent of such reserves; or
(g) authorize or enter into any formal or informal agreement or
otherwise make any commitment to do any of the foregoing.
SECTION 5.02 Conduct of Business by Parent Pending the Closing.
Parent agrees that, between the date of this Agreement and the Effective Time,
except as set forth in Section 5.02 of the Parent Disclosure Schedule or as
expressly contemplated by any other provision of this Agreement (including,
without limitation, Section 5.12(b)), unless the Company shall otherwise agree
in writing, which agreement shall not be unreasonably withheld or delayed, (x)
the respective businesses of Parent and the Parent Subsidiaries shall be
conducted only in, and Parent and the Parent Subsidiaries shall not take any
action except in, the ordinary course of business consistent with past practice
and (y) Parent shall use its reasonable efforts to keep available the services
of such of the current officers, significant employees and consultants of Parent
and the Parent Subsidiaries and to preserve the current relationships of Parent
and the Parent Subsidiaries with such of the customers, suppliers and other
persons with which Parent or any Parent Subsidiary has significant business
relations in order to preserve substantially intact its business organization.
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By way of amplification and not limitation, except as set forth in Section 5.02
of the Parent Disclosure Schedule or as expressly contemplated by any other
provision of this Agreement, neither Parent nor any Parent Subsidiary shall,
between the date of this Agreement and the Effective Time, directly or
indirectly, do, or agree to do, any of the following without the prior written
consent of the Company, which consent shall not be unreasonably withheld or
delayed:
(a) amend or otherwise change its certificate of incorporation or
bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee or encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license or encumbrance of, any shares of
capital stock of Parent or any Parent Subsidiary of any class, or securities
convertible into or exchangeable or exercisable for any shares of such capital
stock, or any options, warrants 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 Parent or any Parent Subsidiary
(except for the issuance of (A) shares of Parent Common Stock issuable pursuant
to Parent Stock Options outstanding on the date of this Agreement and the grant,
in the ordinary course of business, consistent with past practices and on terms
no more favorable than customary prior grants, of Parent Stock Options to
acquire shares of Parent Common Stock and the shares of Parent Common Stock
issuable pursuant to such Parent Stock Options, in accordance with the terms of
the Parent Stock Plans, (B) a maximum of 6,199,947 shares of Parent Common Stock
issuable pursuant to the Parent Subordinated Notes;
(c) (i) acquire (including, without limitation, by merger,
consolidation or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization or person or any division
thereof or any assets; (ii) 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 for borrowed
money, except for indebtedness for borrowed money incurred in the ordinary
course of business and consistent with past practice and incurred to refinance
outstanding indebtedness for borrowed money existing on the date of this
Agreement; (iii) terminate, cancel or request any material change in, or agree
to any material change in, any Parent Material Contract or enter into any
contract or agreement material to the business, consistent with past practice;
(iv) make or authorize any capital expenditure, other than capital expenditures
in the ordinary course of business consistent with past practice that are not,
in the aggregate, in excess of $10 million or (v) enter into or amend any
contract, agreement, commitment or arrangement that, if fully performed, would
not be permitted under this Section 5.02(c);
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(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock;
(e) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(f) take any action with respect to accounting policies or
procedures, other than actions in the ordinary course of business and consistent
with past practice, as required by GAAP or as may be required by the SEC; or
(g) authorize or enter into any formal or informal agreement or
otherwise make any commitment to do any of the foregoing.
SECTION 5.03 Cooperation. The Company and Parent shall coordinate and
cooperate in connection with (i) the preparation of the Registration Statement
and the Joint Proxy Statement, (ii) determining whether any action by or in
respect of, or filing with, any Governmental Entity is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any
Parent Material Contracts or any Company Material Contracts, in connection with
the consummation of the Merger and (iii) seeking any such actions, consents,
approvals or waivers or making any such filings, furnishing information required
in connection therewith or with the Registration Statement and the Joint Proxy
Statement and timely seeking to obtain any such actions, consents, approvals or
waivers.
SECTION 5.04 Notices of Certain Events. Each of Parent and the
Company shall give prompt notice to the other of (i) any notice or other
communication from any person alleging that the consent of such person is or may
be required in connection with the Merger; (ii) any notice or other
communication from any Governmental Entity in connection with the Merger; (iii)
any actions, suits, claims, investigations or proceedings commenced or, to its
knowledge, threatened against, relating to or involving or otherwise affecting
Parent, the Company, the Parent Subsidiaries or the Company Subsidiaries that
relate to the consummation of the Merger; (iv) the occurrence of a default or
event that, with the giving of notice or lapse of time or both, will become a
default under any Company Material Contract or Parent Material Contract; and (v)
any change that is reasonably likely to result in a Company Material Adverse
Effect or a Parent Material Adverse Effect or is reasonably likely to delay or
impede the ability of either the Company or Parent to perform its respective
obligations pursuant to this Agreement and to effect the consummation of the
Merger.
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SECTION 5.05 Access to Information; Confidentiality. (a) Except as
prohibited by any confidentiality agreement or similar agreement or arrangement
to which Parent or the Company or any of the Parent Subsidiaries or the Company
Subsidiaries is a party or by applicable Law or the regulations or requirements
of any stock exchange or other regulatory organization with whose rules a party
hereto is required to comply, from the date of this Agreement to the Effective
Time, Parent and the Company shall (and shall cause the Parent Subsidiaries and
the Company Subsidiaries, respectively, to): (i) provide to the other (and its
officers, directors, employees, accountants, consultants, legal counsel, agents
and other representatives (collectively, "Representatives")) access at
reasonable times upon prior notice to its and its subsidiaries' officers,
employees, agents, properties, offices and other facilities and to the books and
records thereof, and (ii) furnish promptly such information concerning its and
its subsidiaries' business, properties, contracts, assets, liabilities and
personnel as the other party or its Representatives may reasonably request. No
investigation conducted pursuant to this Section 5.05 shall affect or be deemed
to modify any representation or warranty made in this Agreement.
(b) The parties hereto shall comply with their respective
obligations under the Confidentiality Agreement heretofore entered into by
Parent and the Company (the "Confidentiality Agreement") with respect to the
information disclosed pursuant to this Agreement.
SECTION 5.06 No Solicitation of Transactions. (a) Each party to this
Agreement shall not, directly or indirectly, and shall instruct its officers,
directors, employees, subsidiaries, agents or advisors or other representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it), not to, directly or indirectly, solicit, initiate or knowingly
encourage (including by way of furnishing nonpublic information), or take any
other action knowingly to facilitate, any inquiries or the making of any
proposal or offer (including, without limitation, any proposal or offer to its
stockholders) that constitutes, or may reasonably be expected to lead to, any
Competing Transaction, or enter into or maintain or continue discussions or
negotiate with any person in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or endorse any Competing Transaction, or
authorize or permit any of the officers, directors or employees of such party or
any of its subsidiaries, or any investment banker, financial advisor, attorney,
accountant or other representative retained by such party or any of such party's
subsidiaries, to take any such action; provided, however, that nothing contained
in this Section 5.06 shall prohibit the Board of Directors of Parent or the
Company from furnishing information to, or entering into discussions or
negotiations with, any person in connection with an unsolicited (from
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the date of this Agreement) proposal by such person to acquire such party
pursuant to a merger, consolidation, share exchange, tender offer, exchange
offer, business combination or other similar transaction or to acquire all or
substantially all of the assets of such party or any of its subsidiaries, if,
and only to the extent that, (i) such Board of Directors, after consultation
with outside legal counsel (which may include its regularly engaged outside
legal counsel), determines in good faith that such action is required for such
Board of Directors to comply with its duties to its stockholders imposed by
applicable Law and (ii) prior to furnishing such information to, or entering
into discussions or negotiations with, such person, such party obtains from such
person an executed confidentiality agreement on terms no less favorable to the
Company or Parent, as the case may be, than those contained in the
Confidentiality Agreement. Each party hereto shall notify the other parties
hereto promptly if any proposal or offer, or any inquiry or contact with any
person with respect thereto, regarding a Competing Transaction is made. Each
party hereto immediately shall cease and cause to be terminated all existing
discussions or negotiations with any parties conducted heretofore with respect
to a Competing Transaction. Each party hereto agrees not to release any third
party from, or waive any provision of, any confidentiality or standstill
agreement to which it is a party. Notwithstanding the foregoing, either party
may enter into a confidentiality agreement containing a standstill provision
which permits, or waives compliance with any existing standstill agreement in
order to permit, a third party to make a confidential takeover proposal to the
Board of Directors which could reasonably be expected to result in a Competing
Transaction; provided, however, that either party may then further waive
compliance with a standstill agreement in order to permit a third party to make
such takeover proposal to such party's stockholders so as to enable the Company
or Parent to terminate this Agreement pursuant to the provisions of Section
8.01(i) or (j), as the case may be; provided further that nothing in this
Section 5.06(a) shall affect the obligation of the Company or Parent to pay the
Company Termination Fee or the Parent Termination Fee (each as hereinafter
defined) pursuant to the terms of Section 8.05.
(b) A "Competing Transaction" means any of the following involving
the Company or Parent, as the case may be (other than the Merger contemplated by
this Agreement): (i) a merger, consolidation, share exchange, business
combination or other similar transaction, (ii) any sale, lease, exchange,
transfer or other disposition of 25 percent or more of the assets of such party
and its subsidiaries, taken as a whole, or of assets of such party and its
subsidiaries generating 25 percent or more of such party's revenues or operating
income, or (iii) a tender offer or exchange offer for 25 percent or more of the
outstanding voting securities of such party.
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SECTION 5.07 Plan of Reorganization. This Agreement is intended to
constitute a "plan of reorganization" within the meaning of Section 1.368-2(g)
of the income tax regulations promulgated under the Code. From and after the
date of this Agreement, each party hereto shall use all reasonable efforts to
cause the Merger to qualify, and shall not, without the prior written consent of
the other parties hereto, knowingly take any actions or cause any actions to be
taken which could prevent the Merger from qualifying as a reorganization under
the provisions of Section 368(a) of the Code.
SECTION 5.08 Subsequent Financial Statements. As of their respective
dates, none of the financial statements prepared by Parent, Parent Subsidiaries
or by the Company after the date of this Agreement shall contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The respective audited
financial statements and unaudited interim financial statements of each of the
Company and Parent, as the case may be, shall fairly present the financial
position of such party and its Subsidiaries as at the dates thereof and the
results of their operations and cash flows for the periods then ended in
accordance with GAAP applied on a consistent basis and subject, in the case of
unaudited interim financial statements, to normal year-end adjustments.
SECTION 5.09 Control of Operations. Nothing contained in this
Agreement shall give Parent, directly or indirectly, the right to control or
direct the operations of the Company and the Company Subsidiaries prior to the
Effective Time. Nothing contained in this Agreement shall give the Company,
directly or indirectly, the right to control or direct the operations of Parent
and the Parent Subsidiaries prior to the Effective Time. Prior to the Effective
Time, each of Parent and the Company shall exercise, consistent with the terms
and conditions of this Agreement, complete control and supervision over its
respective operations.
SECTION 5.10 Further Action; Consents; Filings. (a) Upon the terms
and subject to the conditions hereof, each of the parties hereto shall use all
reasonable 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 otherwise to consummate and make effective the Merger, (ii)
obtain from Governmental Entities any consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained or made by Parent,
the Company or the Surviving Corporation or any of their subsidiaries in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the Merger, (iii) make all necessary filings, and thereafter
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make any other required or appropriate submissions, with respect to this
Agreement and the Merger required under (A) the rules and regulations of the
NYSE, including the filing of a listing application covering the Shares of
Parent Common Stock to be issued to the Company's stockholders and the holders
of the Promissory Notes in the Merger and upon exercise of the options pursuant
to Section 2.04, (B) the Securities Act, the Exchange Act and any other
applicable federal or state securities Laws, (C) the HSR Act and (D) any other
applicable Law and (iv) obtain any consents necessary such that the Merger will
not constitute a change of control, or any similar event, which constitutes a
default (or an event which with notice or lapse of time or both would become a
default) under any material contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company, Parent or any
of their subsidiaries is a party. The parties hereto shall cooperate and consult
with each other in connection with the making of all such filings, including by
providing copies of all such documents to the nonfiling parties and their
advisors prior to filing, and any comments of the nonfiling parties and their
advisors shall be considered prior to the filing of such document. No party
shall consent to any voluntary extension of any statutory deadline or waiting
period or to any voluntary delay of the consummation of the Merger at the behest
of any Governmental Entity without the consent and agreement of the other
parties hereto.
(b) Without limiting the generality of the foregoing, and subject to
the following sentence, each of the parties hereto agrees, and shall cause each
of its respective Subsidiaries to cooperate and to use their commercially
reasonable efforts to obtain any government clearances required for completion
of the Merger (including compliance with the HSR Act), to respond to any
government requests for information, and to contest and resist any action,
including any legislative, administrative or judicial action, and to have
vacated, lifted, reversed or overturned any Governmental Order (whether
temporary, preliminary or permanent) that restricts, prevents or prohibits the
consummation of the Merger, including, without limitation, by vigorously
pursuing all available avenues of administrative and judicial appeal and all
available legislative action. Each of the parties hereto also agrees to take or
cause to be taken the following actions: (i) provide promptly to Governmental
Entities with regulatory jurisdiction over enforcement of any applicable
antitrust laws ("Government Antitrust Entity") information and documents
requested by any Government Antitrust Entity or necessary, proper or advisable
to permit consummation of the transactions contemplated by this Agreement; (ii)
file any Notification and Report Form and related material required under the
HSR Act as soon as practicable after the date hereof, and thereafter use its
reasonable efforts to certify as soon as practicable its substantial compliance
with any requests for additional information or documentary material that may be
made under the HSR Act; (iii) deliver the proffer of Parent and the Company of
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their willingness to (A) sell or otherwise dispose of, or hold separate and
agree to sell or otherwise dispose of, such assets, categories of assets or
businesses of Parent or Parent Subsidiaries or Company or Company Subsidiaries,
as applicable, and (B) terminate such existing relationships and contractual
rights and obligations (and, in each case, to enter into agreements with the
relevant Government Antitrust Entity giving effect thereto) in each case with
respect to the foregoing clause (A) or (B), if such action is necessary or
reasonably advisable for the purpose of avoiding or preventing any action by any
Government Antitrust Entity which would restrain, enjoin or otherwise prevent or
materially delay consummation of the transactions contemplated by this
Agreement; provided however; that no party shall be required to take any actions
described in this clause (iii) if such actions would be reasonably likely,
individually or in the aggregate, to have a Parent Material Adverse Effect after
giving effect to the Merger; and (iv) Parent or the Company, as applicable,
shall take promptly, in the event that any permanent of preliminary injunction
or other order is entered or becomes reasonably foreseeable to be entered in any
proceeding that would make consummation of the transactions contemplated hereby
in accordance with the terms of this Agreement unlawful or that would prevent or
delay consummation of the transactions contemplated hereby, any and all steps
(including the appeal thereof, the posting of a bond or the taking of the steps
contemplated by clause (iii) of this subsection (b)) necessary to vacate, modify
or suspend such injunction or order so as to permit such consummation prior to
the deadline specified in Section 8.01(b). The parties hereto will consult and
cooperate with one another, and consider in good faith the views of one another,
in connection with any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or in behalf of any party
hereto in connection with proceedings under or relating to the HSR Act or any
other federal, state or foreign antitrust or fair trade law. The parties hereto
will provide to the other copies of all correspondence between it (or its
advisors) and any Government Antitrust Entity relating to this Agreement or any
of the matters described in this Section 5.12(b). The parties hereto agree that
all material telephonic calls and meetings with a Government Antitrust Entity
regarding the transactions contemplated hereby or any of the matters described
in this Section 5.12(b) shall include representatives of each of Parent and the
Company. Parent shall coordinate and be the principal spokesperson in connection
with any proceedings or negotiations with any Governmental Entity relating to
any of the foregoing, provided that it shall afford the Company a reasonable
opportunity to participate therein.
SECTION 5.11 Stockholder Rights Plan. Notwithstanding the limitations set
forth in this Agreement with respect to the conduct of the Parent's business
prior to the Effective Time, including the limitations set forth in
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Sections 5.01 and 5.02, Parent may, at any time prior to the Effective Time,
take all actions necessary to adopt and implement a stockholder rights plan or
amend its existing stockholder rights plan, provided that the terms of such
stockholder rights plan shall specifically exclude the consummation of the
Merger as contemplated by this Agreement.
SECTION 5.12 Employee Benefit Plans. (a) Following the Effective
Time, Parent shall arrange for each employee of the Company or any Company
Subsidiary to participate in any counterpart Parent Benefit Plans in accordance
with the eligibility criteria thereof, provided that (i) such participants shall
receive full credit for years of service with the Company or any Company
Subsidiary (and service otherwise credited by the Company or any Company
Subsidiary) prior to the Effective Time for all purposes for which such service
was recognized under the Company Benefit Plans including, but not limited to,
eligibility to participate, vesting, and, to the extent not duplicative of
benefits received under such Company Benefit Plan, the amount of benefits, (ii)
such participants shall participate in the Parent Benefit Plans on terms no less
favorable than those offered by Parent to similarly situated employees of
Parent, and (iii) Parent shall cause any and all pre-existing condition
limitations, eligibility waiting periods and evidence of insurability
requirements under any group plans to be waived with respect to such
participants and their eligible dependents and shall provide each such
participant with credit for any co- payments and deductibles paid prior to the
Effective Time for purposes of satisfying any applicable deductible,
out-of-pocket, or similar requirements under any health plans in which such
participants are eligible to participate after the Effective Time.
Notwithstanding any of the foregoing to the contrary, none of the provisions
contained herein shall operate to duplicate any benefit provided to any employee
of the Company or the funding of any such benefit.
(b) Following the Effective Time, Parent shall cause the Surviving
Corporation to honor and perform, pursuant to their terms, all employee benefit
obligations to current and former employees and directors of the Company under
any Company Benefit Plans; provided however, that nothing contained herein shall
limit any reserved right in any Company Benefit Plan to amend, modify, suspend,
revoke or terminate any such plan.
(c) To the extent that Parent elects to terminate after the
Effective Time any employee pension benefit plan maintained by the Company or
any Company Subsidiary which is a defined benefit plan, then all accrued
benefits thereunder shall be fully vested and the accrued benefits shall be paid
as promptly as practicable to participants thereunder who so elect in a lump sum
payment.
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 Registration Statement; Joint Proxy Statement. (a) As
promptly as practicable after the execution of this Agreement, (i) Parent and
the Company shall jointly prepare and file with the SEC a joint proxy statement
with respect to the Merger relating to the special meeting of the Company's
stockholders (the "Company Stockholders' Meeting") and the annual meeting of the
Parent's stockholders (the "Parent Stockholders' Meeting" and, together with the
Company Stockholders' Meeting, the "Stockholders' Meetings") to be held in
connection with the Merger (together with any amendments thereto, the "Joint
Proxy Statement") and (ii) Parent shall prepare and file with the SEC a
registration statement on Form S-4 (together with all amendments thereto, the
"Registration Statement"), in connection with the registration under the
Securities Act of the issuance of Parent Common Stock to the Company's
stockholders and the holders of the Promissory Notes pursuant to the Merger, in
which the Joint Proxy Statement shall be included as a prospectus. Copies of the
Joint Proxy Statement shall be provided to the NYSE in accordance with the rules
of such exchange. Each of the parties hereto shall use best efforts to cause the
Registration Statement to become effective as promptly as practicable, and,
prior to the effective date of the Registration Statement, the parties hereto
shall take all action required under any applicable Laws in connection with the
issuance of shares of Parent Common Stock pursuant to the Merger. Parent or the
Company, as the case may be, shall furnish all information concerning Parent or
the Company as the other party may reasonably request in connection with such
actions and the preparation of the Registration Statement and Joint Proxy
Statement. As promptly as practicable after the effective date of the
Registration Statement, the Joint Proxy Statement shall be mailed to the
stockholders of Parent and the Company. Each of the parties hereto shall cause
the Joint Proxy Statement to comply as to form and substance in all material
respects with the applicable requirements of (i) the Exchange Act, (ii) the
NYSE, (iii) the Securities Act and (iv) the DGCL.
(b) (i) approval of this Agreement and the recommendation of the
Board of Directors of the Company to the Company's stockholders that they vote
in favor of adoption of this Agreement; provided, however, that the Board of
Directors of the Company may, at any time prior to the Effective Time, withdraw,
modify or change any such recommendation to the extent that the Board of
Directors of the Company determines in good faith, after consultation with
outside legal counsel (who may be the Company's regularly engaged outside legal
counsel), that such withdrawal, modification or change of its recommendation is
required by its fiduciary duties to the Company's stockholders under applicable
Law.
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(ii) The Joint Proxy Statement shall include the approval of
this Agreement and the recommendation of the Board of Directors of Parent to
Parent's stockholders that they vote in favor of the Share Issuance contemplated
hereby. In addition, the Joint Proxy Statement shall include the opinion of GNI
referred to in Section 4.16.
(c) No amendment or supplement to the, Joint Proxy Statement or the
Registration Statement shall be made without the prior review of Parent and the
Company, and any comments of Parent or the Company shall be considered prior to
filing such amendment or supplement, to the extent practicable. Each of the
parties hereto shall advise the other parties hereto, promptly after it receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop
order, of the suspension of the qualification of the Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or of any request by the SEC or the NYSE for amendment of the Joint Proxy
Statement or the Registration Statement or comments thereon and responses
thereto or requests by the SEC for additional information
(d) The information supplied by the Company for inclusion in the
Registration Statement and the Joint Proxy Statement shall not, at (i) the time
the Registration Statement is filed with the SEC, (ii) if different, the time
the Registration Statement is declared effective, (iii) the time the Joint Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
the stockholders of the Company and Parent, (iv) the time of the Company
Stockholders' Meeting, (v) the time of the Parent Stockholders' Meeting and (vi)
the Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. If at any time prior to the Effective Time any event or
circumstance relating to the Company or any Company Subsidiary, or their
respective officers or directors, should be discovered by the Company that
should be set forth in an amendment or a supplement to the Registration
Statement or Joint Proxy Statement, the Company shall promptly inform Parent.
All documents that the Company is responsible for filing with the SEC in
connection with the Merger will comply as to form in all material respects with
the applicable requirements of the DGCL, the Securities Act and the Exchange Act
and, to the extent applicable, the NYSE.
(e) The information supplied by Parent for inclusion in the
Registration Statement and the Joint Proxy Statement shall not, at (i) the time
the Registration Statement is filed with the SEC, (ii) if different, the time
the Registration Statements declared effective, (iii) the time the Joint Proxy
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Statement (or any amendment thereof or supplement thereto) is first mailed to
the stockholders of Parent and the Company, (iv) the time of the Company
Stockholders' Meeting, (v) the time of the Parent Stockholders' Meeting and (vi)
the Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. If, at any time prior to the Effective Time, any event or
circumstance relating to Parent or any Parent Subsidiary, or their respective
officers or directors, should be discovered by Parent that should be set forth
in an amendment or a supplement to the Registration Statement or Joint Proxy
Statement, Parent shall promptly inform the Company. All documents that Parent
is responsible for filing with the SEC in connection with the Merger will comply
as to form in all material respects with the applicable requirements of the
DGCL, the Securities Act and the Exchange Act and the NYSE.
SECTION 6.02 Stockholders' Meetings. The Company shall call and hold
the Company Stockholders' Meeting, and Parent shall call and hold the Parent
Stockholders' Meeting, in each case as promptly as practicable, for the purpose,
in the case of the Company Stockholders' Meeting, of voting upon the adoption of
this Agreement and the Merger contemplated hereby, and, in the case of the
Parent Stockholders' Meeting, of voting upon the adoption of [the Certificate
Amendment and] the Share Issuance pursuant to the Joint Proxy Statement, and
each of Parent and the Company shall use its reasonable efforts to hold the
Stockholders' Meetings on the same day and as soon as practicable after the date
on which the Registration Statement becomes effective. The Company shall use its
reasonable efforts to solicit from its stockholders proxies in favor of the
adoption of this Agreement pursuant to the Joint Proxy Statement and shall take
all other action necessary or advisable to secure the vote or consent of
stockholders required by the DGCL or applicable stock exchange requirements to
obtain such approval, except to the extent that the Board of Directors of the
Company determines in good faith after consultation with outside legal counsel
(who may be the Company's regularly engaged outside legal counsel) that the
withdrawal, modification or change of its recommendation is required by its
fiduciary duties to the Company stockholders under applicable Law. Parent shall
use its reasonable efforts to solicit from its stockholders proxies in favor of
the Share Issuance contemplated hereby pursuant to the Joint Proxy Statement,
and shall take all other action necessary or advisable to secure the vote or
consent of stockholders required by the DGCL or applicable stock exchange
requirements to obtain such approval, except to the extent that the Board of
Directors of Parent determines in good faith after consultation with outside
legal counsel (who may be Parent's regularly engaged outside legal counsel) that
the withdrawal, modification or change of its recommendation is required by its
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fiduciary duties to Parent's stockholders under applicable Law. Each of the
parties hereto, subject to the exercise of their fiduciary duties to their
respective stockholders, as described in this Section 6.02, shall take all other
action necessary or, in the opinion of the other parties hereto, advisable to
promptly and expeditiously secure any vote or consent of stockholders required
by applicable Law and such party's Certificate of Incorporation and Bylaws to
effect the Merger.
SECTION 6.03 Post-Merger Directors and Chief Executive Officer of
Parent. (a) The Board of Directors of Parent shall take such action as may be
necessary to cause Parent's Board of Directors immediately following the
Effective Time to be composed of seven members, and to cause two persons
designated by the Board of Directors of the Company prior to the Closing (the
"Company Designees") to be elected to Parent's Board of Directors. In
furtherance thereof, Parent shall increase the size of its Board of Directors to
effectuate the foregoing sentence. The Company Designees shall serve in
accordance with the Restated Certificate of Incorporation and Bylaws of Parent
until their respective successors are duly elected or appointed and qualified.
(b) The current Chairman of the Board and Chief Executive Officer of
Parent shall remain as Chairman of the Board and Chief Executive Officer of
Parent following the Effective Time.
SECTION 6.04 Affiliates. Not less than 45 days prior to the Effective
Time, the Company shall deliver to Parent a list of names and addresses of those
persons, in the Company's reasonable judgment, at the record date for the
Company Stockholders' Meeting, who were Affiliates of the Company. The Company
shall provide Parent such information and documents as Parent shall reasonably
request for purposes of reviewing such list. The Company shall use its
reasonable efforts to deliver or cause to be delivered to Parent, prior to the
Effective Time, an affiliate letter in the form attached hereto as Exhibit
6.04(a) (the "Company Affiliate Letter"), executed by each of the Affiliates of
the Company identified in the above-referenced list. The foregoing
notwithstanding, (i) Affiliates may not offer for sale, sell, or otherwise
dispose of the Parent Common Stock to be received by any person Parent
reasonably identifies (by written notice to the Company) as being a person who
may be deemed an "affiliate", including, without limitation, all institutional
stockholders of the Company, within the meaning of Rule 145 of the rules and
regulations of the Securities Act or applicable SEC accounting releases (an
"Affiliate"), until the earlier to occur of (i) 48 hours after results covering
30 days of post-merger combined operations of Parent and the Company have been
filed with the Securities and Exchange Commission, sent to stockholders of
Parent or otherwise publicly issued, or (ii) 60 days following the Effective
Time. Parent shall be entitled to place legends as specified in the Company
Affiliate Letter on the certificates evidencing any of the Parent Common Stock
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to be received by any Affiliate and to issue appropriate stop transfer
instructions to the transfer agent for the Parent Common Stock, consistent with
the terms of the Company Affiliate Letter, regardless of whether such person has
executed the Company Affiliate Letter.
SECTION 6.05 Assumption of Debt. With respect to the Company's
indebtedness identified on Section 6.05 of the Company Disclosure Schedule
issued by the Company under an indenture qualified under the Trust Indenture Act
of 1939 (the "Company Indentures"), if required by the Company Indentures, the
Surviving Corporation shall execute and deliver to the trustee under each
Company Indenture a supplemental indenture, in form satisfactory to the trustee,
expressly assuming the obligations of the Company with respect to the due and
punctual payment of the principal of (and premium, if any) and interest on such
indebtedness and the due and punctual performance of all the terms, covenants
and conditions of the Company Indentures to be kept or performed by the Company,
and shall deliver such supplemental indenture to the trustee under each Company
Indenture. Holders of any Company convertible debt instruments who convert after
the Effective Time shall be entitled to receive Parent Common Stock based on a
ratio determined in accordance with Section 2.01(a).
SECTION 6.06 Indemnification of Directors and Officers. (a) Parent
and Merger Sub agree that the indemnification obligations set forth in the
Company's Restated Certificate of Incorporation and Bylaws, in each case as of
the date of this Agreement, shall survive the Merger (and, prior to the
Effective Time, Parent shall cause the Certificate of Incorporation and Bylaws
of Merger Sub to reflect such provisions) and shall not be amended, repealed or
otherwise modified for a period of three years after the Effective Time in any
manner that would adversely affect the rights thereunder of the individuals who
on or prior to the Effective Time were directors, officers, employees or agents
of the Company or the Company Subsidiaries.
(b) The Company shall, to the fullest extent permitted under
applicable Law and regardless of whether the Merger becomes effective, indemnify
and hold harmless, and, after the Effective Time, the Surviving Corporation
shall, to the fullest extent permitted under applicable Law, indemnify and hold
harmless, each present and former director, officer, trustee, fiduciary,
employee or agent of the Company and each Company Subsidiary and each such
person who served at the request of the Company or any Company Subsidiary as a
director, officer, trustee, partner, fiduciary, employee or agent of another
corporation, partnership, joint venture, trust, pension or other employee
benefit plan or enterprise (collectively, the "Indemnified Parties") against all
costs and expenses (including reasonable attorneys' fees), judgments, fines,
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losses, claims, damages, liabilities and settlement amounts paid in connection
with any claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), whether civil, administrative or
investigative, arising out of or pertaining to any action or omission in their
capacity as an officer or director, in each case occurring before the Effective
Time (including the transactions contemplated by this Agreement). Without
limiting the foregoing, in the event of any such claim, action, suit, proceeding
or investigation, the Company or the Surviving Corporation, as the case may be,
shall defend such action with counsel selected by Company or the Surviving
Corporation as the case may be, which counsel shall be reasonably satisfactory
to the Indemnified Party.
(c) Following the Effective Time, Parent will fully guaranty the
prompt payment and performance of all obligations of the Surviving Corporation
pursuant to this Section 6.06 and under any and all director and officer
indemnification agreements entered into by the Company and/or any Company
Subsidiary.
(d) The obligations of the Company, the Surviving Corporation, and
Parent under this Section 6.06 shall not be terminated or modified in such a
manner as to adversely affect any Indemnified Party without the consent of such
affected party (it being expressly agreed that each such party shall be a
third-party beneficiary of this Section 6.06).
(e) The rights of an Indemnified Party to indemnification and
advancement of expenses under this Section 6.06 shall not be deemed exclusive of
any other rights which the Indemnified Party may at any time be entitled to
under applicable Law, any charter or bylaw provision, any agreement, vote of
stockholders, resolution of disinterested directors or otherwise.
(f) For three years from the Effective Time, the Surviving
Corporation shall provide (to the extent available in the market) to the
Company's current directors and officers liability insurance protection of the
same kind and scope as that provided by the Company's directors' and officers'
liability insurance policies (copies of which have been made available to
Parent); provided, however, that in no event shall the Surviving Corporation be
required to expend more than 200% of the current amount expended by the Company
(the "Insurance Amount") to maintain or procure insurance coverage pursuant
hereto and further provided that if the Surviving Corporation is unable to
maintain or obtain the insurance called for by this Section 6.06(c), it shall
use its commercially reasonable efforts to obtain as much comparable insurance
as is available for the Insurance Amount.
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SECTION 6.07 No Shelf Registration. Parent shall not be required to
amend or maintain the effectiveness of the Registration Statement for the
purpose of permitting resale of the shares of Parent Common Stock received
pursuant hereto by the persons who may be deemed to be "affiliates" of the
Company within the meaning of Rule 145 promulgated under the Securities Act.
SECTION 6.08 Public Announcements. The initial press release
concerning the Merger shall be a joint press release and, thereafter, Parent and
the Company shall consult with each other before issuing any press release or
otherwise making any public statements with respect to this Agreement or the
Merger and shall not issue any such press release or make any such public
statement without the prior written approval of the other, except to the extent
required by applicable Law or, in the case of Parent, the requirements of the
NYSE, in which case the issuing party shall use its reasonable efforts to
consult with the other party before issuing any such release or making any such
public statement.
SECTION 6.09 Stock Exchange Listing. Each of the parties hereto shall
use its reasonable efforts to obtain, prior to the Effective Time, the approval
for listing on the NYSE, effective upon official notice of issuance, of the
shares of Parent Common Stock issuable to the Company's stockholders and the
holders of the Promissory Notes in the Merger and upon the exercise of options
pursuant to Section 2.04 hereof.
SECTION 6.10 Blue Sky. Each of the parties hereto shall use all
reasonable efforts to obtain prior to the Effective Time all necessary blue sky
permits and approvals required under Blue Sky Laws to permit the distribution of
the shares of Parent Common Stock to be issued in accordance with the provisions
of this Agreement.
SECTION 6.11 Agreements with Respect to Promissory Notes. (a) The
Company makes the same representations and warranties to the holders of
Promissory Notes as the Company makes to the Parent pursuant to Article III of
this Agreement.
(b) Parent makes the same representations and warranties to the
holders of Promissory Notes who receive shares of Parent Common Stock pursuant
to the Merger as Parent makes to the Company pursuant to Article IV of this
Agreement.
(c) Notwithstanding Section 6.07, Parent shall be required to
provide holders of Promissory Notes who receive shares of Parent Common Stock
pursuant to the Merger a current prospectus pursuant to an effective
registration statement that may be reasonably required by such holders for the
purposes of resale of such shares of Parent Common Stock and will take such
further action at any time, and from time to time, to amend or supplement the
prospectus or registration statement in order to comply with the Securities Act
and the rules and regulations of the Commission promulgated thereunder.
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(d) The obligations of the Company, the Surviving Corporation and
Parent under this Section 6.11 shall not be terminated or modified on such a
manner as to adversely affect any holder of the Promissory Notes without the
consent of such affected party (it being expressly agreed that each such party
shall be a third-party beneficiary of this Section 6.11).
SECTION 6.12 Acknowledgment of Matters Concerning Legal
Representation. Each party hereto, and each third party beneficiary hereunder is
hereby noticed and acknowledges and agrees that such counsel set forth below its
respective client's name in each of Section 9.02(a) and Section 9.02(b)
represents only such client and no other person. Additionally, Parent (on behalf
of itself and the Company at the Closing) shall wire transfer to each of
Sheppard, Mullin, Richter & Hampton LLP and to Wilson Sonsini Goodrich & Rosati
amounts equal to all legal fees incurred in connection with the transactions
contemplated hereby and all legal fees owed by either of Parent or the Company
to its counsel which have not then been paid.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01 Conditions to the Obligations of Each Party to
Consummate the Merger. The obligations of the parties hereto to consummate the
Merger, or to permit the consummation of the Merger, are subject to the
satisfaction or, if permitted by applicable Law, waiver of the following
conditions:
(a) the Registration Statement shall have been declared effective by
the SEC under the Securities Act and no stop order suspending the effectiveness
of the Registration Statement shall have been issued by the SEC and no
proceeding for that purpose shall have been initiated by the SEC and not
concluded or withdrawn;
(b) this Agreement shall have been duly adopted by the requisite
vote of stockholders of the Company and the matters specified in Section 4.04
shall have been approved by the requisite vote of stockholders of Parent;
(c) no court of competent jurisdiction shall have issued or entered
any order, writ, injunction or decree, and no other Governmental Entity shall
have issued any order, which is then in effect and has the effect of making the
Merger illegal or otherwise prohibiting its consummation;
(d) any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act or any other applicable
competition, merger control or similar Law shall have expired or been
terminated;
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(e) the shares of Parent Common Stock issuable to the Company's
stockholders and the holders of the Promissory Notes in the Merger and upon the
exercise of options pursuant to Section 2.04 hereof shall have been authorized
for listing on the NYSE, subject to official notice of issuance; and
SECTION 7.02 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger, or to permit the
consummation of the Merger, are subject to the satisfaction or, if permitted by
applicable Law, waiver of the following further conditions:
(a) Parent shall have performed or complied in all material respects
with all material agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective Time and the
Company shall have received a certificate of the Chairman and Chief Executive
Officer of Parent to that effect;
(b) the Company shall have received the opinion of Wilson Sonsini
Goodrich & Rosati, in form and substance reasonably satisfactory to the Company,
based upon facts, representations and assumptions set forth in such opinion
which are consistent with the state of facts existing at the Effective Time, to
the effect that (i) the Merger will be treated for federal income tax purposes
as a reorganization qualifying under the provisions of section 368(a) of the
Code, and Parent ' Merger Sub and the Company will each be a party to the
reorganization, (ii) no gain or loss will be recognized by Parent, Merger Sub or
the Company as a result of the Merger, and (iii) no gain or loss will be
recognized by the stockholders of the Company who exchange their Company Capital
Stock solely for Parent Common Stock pursuant to the Merger (except with respect
to cash received in lieu of a fractional share interest). In rendering such
opinion, counsel may require and rely upon representations contained in
certificates of officers of Parent and the Company; and
(c) Parent shall have taken all action necessary to cause the
Company Designees to become members of the Parent Board of Directors, as of the
Effective Time, as contemplated by Section 6.03.
SECTION 7.03 Conditions to the Obligations of Parent. The obligations
of Parent to consummate the Merger, or to permit the consummation of the Merger,
are subject to the satisfaction or, if permitted by applicable Law, waiver of
the following further conditions:
(a) the Company shall have performed or complied in all material
respects with all material agreements and covenants required by this Agreement
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to be performed or complied with by it on or prior to the Effective Time and
Parent shall have received a certificate of the Chairman or President and Chief
Financial Officer of the Company to that effect;
(b) Parent shall have received the opinion of Sheppard, Mullin,
Richter & Hampton LLP, in form and substance reasonably satisfactory to Parent,
based upon facts, representations and assumptions set forth in such opinion
which are consistent with the state of facts existing at the Effective Time, to
the effect that (i) the Merger will be treated for federal income tax purposes
as a reorganization qualifying under the provisions of Section 368(a) of the
Code, and Parent, Merger Sub and the Company will each be a party to the
reorganization, (ii) no gain or loss will be recognized by Parent, Merger Sub or
the Company as a result of the Merger, and (iii) no gain or loss will be
recognized by the stockholders of the Company who exchange their Company Capital
Stock solely for Parent Common Stock pursuant to the Merger (except with respect
to cash received in lieu of a fractional share interest). In rendering such
opinion, counsel may require and rely upon representations contained in
certificates of officers of Parent and the Company.
(c) In the event that the conditions set forth in Section 7.1(l) and
7.2(j) (the "conditions") of that Securities Purchase Agreement heretofore
entered into by Parent and certain investors (the "Investors") to purchase not
less than $15 million of Parent Common Stock (the "Securities Purchase
Agreement") shall not have been satisfied, Parent shall receive at the Closing
from the Investors or other investors not less than $15 million in Parent equity
securities on terms in all material respects no less favorable to Parent than
those contained in the Securities Purchase Agreement; provided however, that
Parents' right to terminate this Agreement is subject to proviso (iii) in
8.01(b). If the condition set forth in Section 7.1(1) and 7.2(j) of the
Securities Purchase Agreement shall have been satisfied, this condition shall be
deemed to have been satisfied.
(d) The Company shall have entered into the Non-Competition
Agreements payable at the Closing out of the Merger Consideration in shares of
Parent Common Stock.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER\
SECTION 8.01 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, notwithstanding
any requisite adoption of this Agreement, as follows:
(a) by mutual written consent duly authorized by the Boards of
Directors of each of Parent and the Company;
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(b) by either Parent or the Company, if the Effective Time shall not
have occurred on or before April 30, 1999; provided, however, that (i) 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 shall
have caused, or resulted in, the failure of the Effective Time to occur on or
before such date; (ii) this Agreement may be extended not more than 60 days by
Parent or the Company by written notice to the other party if the Merger shall
not have been consummated as a direct result of (A) the Company or Parent having
failed to receive all regulatory approvals or consents required to be obtained
by the Company or Parent with respect to the Merger in order to satisfy the
condition set forth in Section 7.01(e) or (B) the existence of litigation or any
governmental proceeding seeking to prevent or prohibit consummation of the
Merger and (iii) in the event the conditions (as defined in Section 7.03(c)) are
not met, the date set forth above shall automatically be extended for an
additional sixty (60) days.
(c) by either Parent or the Company, if any Governmental Order,
writ, injunction or decree preventing the consummation of the Merger shall have
been entered by any court of competent jurisdiction and shall have become final
and nonappealable;
(d) by Parent, if (i) in accordance with the provisions of Section
6.01.(b)(i), the Board of Directors of the Company withdraws, modifies or
changes its recommendation of this Agreement and the Merger in a manner adverse
to Parent or its stockholders or shall have resolved to do so, or if the Board
of Directors of the Company shall have refused to affirm its recommendation of
this Agreement and the Merger as promptly as practicable (but in any event
within three business days) after receipt of any request by Parent, (ii) the
Board of Directors of the Company shall have recommended to the stockholders of
the Company a Competing Transaction or shall have resolved to do so or (iii) a
tender offer or exchange offer for 20% or more of the outstanding shares of
capital stock of the Company is commenced and the Board of Directors of the
Company fails to recommend against acceptance of such tender offer or exchange
offer by its stockholders (including by taking no position with respect to the
acceptance of such tender offer or exchange offer by its stockholders);
(e) by the Company, if (i) the Board of Directors of Parent
withdraws, modifies or changes its recommendation of this Agreement and the
Merger in a manner adverse to the Company or its stockholders or shall have
resolved to do so, or if the Board of Directors of Parent shall have refused to
affirm its recommendation of this Agreement and the Merger as promptly as
practicable (but in any event within three business days) after receipt of any
request by the Company, (ii) the Board of Directors of Parent shall have
recommended to the stockholders of Parent a Competing Transaction or shall
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have resolved to do so or (iii) a tender offer or exchange offer for 20% or more
of the outstanding shares of capital stock of Parent is commenced and the Board
of Directors of Parent fails to recommend against acceptance of such tender
offer or exchange offer by its stockholders (including by taking no position
with respect to the acceptance of such tender offer or exchange offer by its
stockholders);
(f) by Parent or the Company, (i) if the transactions contemplated
by this Agreement shall not have been approved by the requisite votes for
adoption at the Company Stockholders' Meeting or any adjournment or postponement
thereof or (ii) if the transactions contemplated by this Agreement shall not
have been approved by the requisite votes for approval at the Parent
Stockholders' Meeting or any adjournment or postponement thereof,
(g) by Parent, upon a material breach of any covenant or agreement
on the part of the Company set forth in this Agreement, or if, any
representation or warranty of the Company shall have been untrue on the date of
this Agreement, in either case such that the conditions set forth in Section
7.03 would not be satisfied (a "Terminating Company Breach"); provided, however,
that, if such Terminating Company Breach is curable by the Company through the
exercise of its reasonable efforts and for so long as the Company continues to
exercise such reasonable efforts, Parent may not terminate this Agreement under
this Section 8.01(g); and provided further that the preceding proviso shall not
in any event be deemed to extend any date set forth in paragraph (b) of this
Section 8.01;
(h) by the Company, upon a material breach of any covenant or
agreement on the part of Parent set forth in this Agreement, or if any
representation or warranty of Parent shall have been untrue on the date of this
Agreement, in either case such that the conditions set forth in Section 7.02
would not be satisfied (a "Terminating Parent Breach"); provided however, that,
if such Terminating Parent Breach is curable by Parent through the exercise of
its reasonable efforts and for so long as Parent continues to exercise such
reasonable efforts, the Company may not terminate this Agreement under this
Section 8.01(h); and provided further, that the preceding proviso shall not in
any event be deemed to extend any date set forth in paragraph (b) of this
Section 8.01;
(i) by the Company, if the Board of Directors of the Company shall,
following receipt of written advice of outside legal counsel (who may be the
Company's regularly engaged outside legal counsel) that failure to so terminate
would be required in order to exercise its fiduciary duties to its stockholders
under applicable Law, in good faith have withdrawn, modified or changed its
recommendation of the adoption of this Agreement and the Merger in a manner
adverseto Parent; provided that such termination under this Section 8.01(i)
shall not be effective until the Company has made payment to Parent of the
amounts required to be paid pursuant to Section 8.05(b).
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SECTION 8.02 Effect of Termination. Except as provided in Section
9.01, in the event of termination of this Agreement pursuant to Section 8.01,
this Agreement, shall forthwith become void, there shall be no liability under
this Agreement on the part of Parent or the Company or any of their respective
officers or directors, and all rights and obligations of each party hereto shall
cease, subject to the remedies of the parties hereto set forth in Section
8.05(b) through and including (f); provided, however, that nothing herein shall
relieve any party hereto from liability for the willful or intentional breach of
any of its representations and warranties or the willful or intentional breach
of any of its covenants or agreements set forth in this Agreement; provided
further, that the Confidentiality Agreement shall survive any termination of
this Agreement.
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
adoption of this Agreement by the stockholders of the Company, no amendment may
be made, except such amendments that have received the requisite stockholder
approval and such amendments as are permitted to be made without stockholder
approval under the DGCL, provided further, that Articles III and IV, and
Sections 2.01(b), 6.01(a)(ii) (with respect to registration of Parent Common
Stock issuable to holders of the Promissory Notes) and 6.11 cannot be amended
without the prior written consent of the holders of the Promissory Notes (it
being expressly agreed that such holders shall be third-party beneficiaries of
such Articles and Sections). 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 or waive compliance with the
performance of any obligation or other act of any other party hereto or (b)
waive any inaccuracy in the representations and warranties contained herein or
in any document delivered pursuant hereto. 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.
SECTION 8.05 Fees and Expenses. (a) Except as set forth in this
Section 8.05, all Expenses incurred in connection with this Agreement and the
Merger shall be paid by the party incurring such Expenses, whether or not the
Merger is consummated, except that Parent and the Company each shall pay
one-half of all Expenses incurred solely for printing, filing and mailing
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the Registration Statement and the Joint Proxy Statement and all SEC and other
regulatory filing fees incurred in connection with the Registration Statement
and the Joint Proxy Statement and the fee required to be paid in connection with
the HSR Act. "Expenses", as used in this Agreement, shall include all reasonable
out-of-pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a party
hereto and its affiliates) incurred by a party or on its behalf in connection
with or related to the authorization, preparation, negotiation, execution and
performance of its obligations pursuant to this Agreement and the consummation
of the Merger, the preparation, printing, filing and mailing of the Registration
Statement and the Joint Proxy Statement, the solicitation of stockholder
approvals, the filing of HSR Act notice and all other matters related to the
closing of the Merger.
(b) The Company agrees that, if:
(i) the Company shall terminate this Agreement
pursuant to Section 8.01(i),
(ii) Parent shall terminate this Agreement pursuant to Section
8.01(d),
(iii) Parent or the Company shall terminate this Agreement
pursuant to Section 8.01(f)(i), or
(iv) Parent shall terminate this Agreement pursuant to Section
8.01(g),
then, in the case of (i), prior to such termination, or in the case of (ii),
(iii) or (iv), promptly after such termination, the Company shall pay to Parent
an amount equal to $3,000,000 (the "Company Termination Fee").
(c) Parent agrees that, if:
(i) the Company shall terminate this Agreement
pursuant to Section 8.01(e),
(ii) the Company or Parent shall terminate this Agreement
pursuant to Section 8.01(f)(ii), or
(iii) The Company shall terminate this Agreement pursuant to
Section 8.01(h),
then, promptly after such termination, Parent shall pay to the Company an amount
equal to $3,000,000 (the "Parent Termination Fee"). Parent shall, in addition to
paying the Company the Parent Termination Fee, loan to the Company seven million
dollars ($7,000,000) pursuant to the subordinated promissory note attached
hereto as Exhibit A. Such promissory note shall have a five-year term and will
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bear interest at a rate equal to the rate of interest publicly announced by Bank
of America NT & SA, in the City of San Francisco, from time to time as such
bank's reference rate plus 5.00%.
(d) (i) The Company agrees that, if Parent terminates this Agreement
pursuant to Section 8.01(g), the Company shall reimburse Parent for Parent's
Expenses incurred in connection with pursuing the Merger and (ii) Parent agrees
that, if the Company terminates this Agreement pursuant to Section 8.01(h),
Parent shall reimburse the Company for the Company's Expenses incurred in
connection with pursuing the Merger; provided, however, that no party shall be
obligated to reimburse the other party for Expenses in excess of $250,000 in the
aggregate.
(e) Any payment required to be made pursuant to Section 8.05(a),
(b), (c) or (d) shall be made to the party entitled to receive such payment not
later than two business days after delivery to the other party of notice of
demand for payment and shall be made by wire transfer of immediately available
funds to an account designated by the party entitled to receive payment in the
notice of demand for payment delivered pursuant to this Section 8.05(e).
(f) In the event that Parent or the Company, as the case may be,
shall fail to pay the Parent Termination Fee or the Company Termination Fee, as
the case may be, the amount of any such Parent Termination Fee or Company
Termination Fee shall be increased to include the costs and expenses actually
incurred by the other (including, without limitation, fees and expenses of
counsel) in connection with the collection under and enforcement of this Section
8.05, together with interest on such unpaid Parent Termination Fee or Company
Termination Fee, commencing on the date that such Parent Termination Fee or
Company Termination Fee became due, at a rate equal to the rate of interest
publicly announced by Bank of America NT & SA, in the City of San Francisco,
from time to time, as such bank's reference rate plus 5.00%.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01 Non-Survival of Representations and Warranties. The
representations, warranties, covenants and agreements in this Agreement shall
terminate at the Effective Time; provided however, that each of the Company's
Representations and Warranties and each of the Parent's Representations and
Warranties shall be made only as of the date hereof, (and no other date), and
shall remain effective through the Effective Time solely for purposes of making
a determination as to whether such Representations and Warranties were true and
correct as of the date hereof pursuant to Sections 8.01(g) and 8.01(h), or upon
the termination of this Agreement pursuant to Section 8.01, as the case may be,
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except for those covenants and agreements contained herein that by their terms
apply or are to be performed in whole or in part after the Effective Time or
after termination of this Agreement. This Section 9.01 shall not limit any
covenant or agreement of the parties which by its terms contemplates performance
after the Effective Time or after termination of this Agreement. Each party
agrees that, except for the representations and warranties contained in this
Agreement, the Parent Disclosure Schedule and the Company Disclosure Schedule,
no party hereto has made any other representations and warranties, and each
party hereby disclaims any other representations and warranties made by itself
or any of its officers, directors, employees, agents, financial and legal
advisors or other representatives, with respect to the execution and delivery of
this Agreement or the Merger contemplated herein, notwithstanding the delivery
or disclosure to any other party or any party's representatives of any
documentation or other information with respect to any one or more of the
foregoing.
SECTION 9.02 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or facsimile, by certified mail (postage prepaid, return receipt
requested) or by a nationally recognized courier service to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 9.02):
(a) if to the Company:
Das Devices, Inc.
1504 McCarthy Boulevard
Milpitas, California 95035
Attention: Bert Zaccaria
Telecopier: (408) 894-9816
with a copy to:
Wilson, Sonsini, Goodrich &
Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: David J. Segre, Esq.
Fax: (650) 496-7556
(b) if to Parent or Merger Sub:
Applied Magnetics Corporation
75 Robin Hill Road
Goleta, California 93117
Attention: Craig D. Crisman
Telecopier: (805) 967-2677
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with a copy to:
Sheppard, Mullin, Richter & Hampton LLP
333 South Hope Street, 48th Floor
Los Angeles, California 90071
Attention: James J. Slaby, Esq.
Telecopier: (323) 620-1398
SECTION 9.03 Certain Definitions. For purposes of this Agreement, the
following terms have the following meanings:
(a) "affiliate" has the meaning specified in Rule 144 promulgated by
the SEC under the Securities Act;
(b) "beneficial owner" with respect to any shares of capital stock
means a person who shall be deemed to be the beneficial owner of such shares (i)
which such person or any of its affiliates or associates (as such term is
defined in Rule 12b-2 promulgated under the Exchange Act) beneficially owns,
directly or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether such
right is exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon the exercise of
consideration rights, exchange rights, warrants or options, or otherwise, or (B)
the right to vote pursuant to any agreement, arrangement or understanding, or
(iii) which are beneficially owned, directly or indirectly, by any other persons
with whom such person or any of its affiliates or associates or person with whom
such person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock;
(c) "business day" means 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 by law or executive order to close in The City of Los
Angeles, USA;
(d) "$" means United States Dollars;
(e) "Governmental Order" means any order, writ, judgment,
injunction, decree, stipulation, determination or award entered* by or with any
Governmental Entity;
(f) "knowledge" means, with respect to any matter in question, that
the executive officers (including Chairman of the Board of Directors) of Parent
or the Company, as the case may be, have actual knowledge of such matter;
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(g) "person" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including, without
limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act),
trust, association, entity or government or political subdivision, agency or
instrumentality of a government; and
(h) "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 of such person) owns, directly or indirectly, more than fifty
percent 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.
SECTION 9.04 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Merger is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner to the fullest
extent permitted by applicable Law in order that the Merger may be consummated
as originally contemplated to the fullest extent possible.
SECTION 9.05 Assignment; Binding Effect; Benefit. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of Law or otherwise)
without the prior written consent of the other parties hereto. Subject to the
preceding sentence, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Notwithstanding anything contained in this Agreement to the contrary,
other than Sections 6.06 and 6.11, which shall survive the Effective Time and be
enforceable by the beneficiaries thereof as contemplated by Sections 6.06(e) and
6.11(d), and Sections 2.01(b) and 6.01(a)(ii), nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective successors and permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
SECTION 9.06 Incorporation of Exhibits. The Parent Disclosure
Schedule, the Company Disclosure Schedule and all Exhibits attached hereto
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and referred to herein are hereby incorporated herein and made a part of this
Agreement for all purposes as if fully set forth herein.
SECTION 9.07 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement were
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 in equity.
SECTION 9.08 Governing Law. Except to the extent that the Laws of the
jurisdiction of organization of any party hereto, or any other jurisdiction, are
mandatorily applicable to the Merger or to matters arising under or in
connection with this Agreement, this Agreement shall be governed by the Laws of
the State of Delaware. All actions and proceedings arising out of or relating to
this Agreement shall be heard and determined in any state or federal court
sitting in the State of Delaware.
SECTION 9.09 Consent to Jurisdiction; Venue. (a) Each of the parties
hereto irrevocably submits to the exclusive jurisdiction of the state courts of
Delaware and to the jurisdiction of the United States District Court for
Delaware for the purpose of any action or proceeding arising out of or relating
to this Agreement, and each of the parties hereto irrevocably agrees that all
claims in respect to such action or proceeding may be heard and determined
exclusively in any Delaware state or federal court sitting in Delaware. Each of
the parties hereto agrees that a final judgment in any action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any, other manner provided by Law.
(b) Each of the parties hereto irrevocably consents to the service
of any summons and complaint and any other process in any other action or
proceeding relating to the Merger, on behalf of itself or its property, by the
personal delivery of copies of such process to such party. Nothing in this
Section 9.09 shall affect the right of any party hereto to serve legal process
in any other manner permitted by Law.
SECTION 9.10 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement,
SECTION 9.11 Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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SECTION 9.12 Entire Agreement. This Agreement (including the
Exhibits, the Parent Disclosure Schedule and the Company Disclosure Schedule)
and the Confidentiality Agreement constitute the entire agreement among the
parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
APPLIED MAGNETICS CORPORATION
By:/s/ Craig D. Crisman
------------------------------
Craig D. Crisman
Title:Chairman of the
Board and Chief
Executive Officer
DAS DEVICES, INC.
By: /s/ Mitchel Underseth
------------------------------
Name: Mitchel Underseth
Title:Chief Financial
Officer
AMC MERGER SUBSIDIARY, INC.
By: /s/ Craig D. Crisman
----------------------------
Name: Craig D. Crisman
Title:President
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EXHIBIT 2.2
SECURITIES PURCHASE AGREEMENT
dated as of
November 24, 1998
by and among
APPLIED MAGNETICS CORPORATION,
SIERRA VENTURES VI,
WATERSHED PARTNERS, L.P.,
WATERSHED CAYMAN, L.L.C.,
HAUSSMAN HOLDINGS,
EAST RIVER VENTURES, L.L.C.
and
THE CHASE MANHATTAN BANK,
as Trustee for
FIRST PLAZA GROUP TRUST
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TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS.....................................................1
SECTION 1.1 Definitions.............................................1
ARTICLE 2 PURCHASE AND SALE...............................................7
SECTION 2.1 Purchase and Sale.......................................7
SECTION 2.2 Closing.................................................7
ARTICLE 3 STOCKHOLDER APPROVAL............................................7
SECTION 3.1 Stockholders' Meeting...................................7
SECTION 3.2 Proxy Material and Other Filings........................7
SECTION 3.3 Required Vote...........................................8
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................9
SECTION 4.2 Authority; No Conflict..................................9
SECTION 4.3 Due Authorization and Validity of
Shares.................................................10
SECTION 4.4 Brokers and Finders; Advisors..........................10
SECTION 4.5 Governmental Regulations...............................11
SECTION 4.6 No Violation of Regulations of Board
of Governors of Federal Reserve System.................11
SECTION 4.7 Listing of Common Stock................................11
SECTION 4.8 Proxy Material.........................................11
SECTION 4.9 Private Offering.......................................11
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
...................................................................12
SECTION 5.1 Organization and Existence.............................12
SECTION 5.2 Authorization..........................................12
SECTION 5.3 Governmental Authorization.............................12
SECTION 5.4 Brokers and Finders; Advisors..........................12
SECTION 5.5 Proxy Material.........................................13
SECTION 5.6 Purchase Entirely for Own Account......................13
SECTION 5.7 Disclosure of Information..............................13
SECTION 5.8 Investment Experience..................................13
SECTION 5.9 Accredited Investor....................................13
SECTION 5.10 Restricted Securities..................................14
SECTION 5.11 Company Reliance.......................................14
ARTICLE 6 COVENANTS OF THE INVESTORS AND THE COMPANY.....................14
SECTION 6.1 Best Efforts...........................................14
SECTION 6.2 Operation of Business..................................14
SECTION 6.3 Certain Consents and Approvals.........................14
ARTICLE 7 CONDITIONS TO CLOSING..........................................15
SECTION 7.1 Conditions to Obligations of the
Investors..............................................15
SECTION 7.2 Conditions to Obligations of the
Company................................................16
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ARTICLE 8 TERMINATION....................................................18
SECTION 8.1 Grounds for Termination................................18
SECTION 8.2 Effect of Termination..................................19
ARTICLE 9 MISCELLANEOUS..................................................19
SECTION 9.1 Notices................................................19
SECTION 9.2 Amendments; No Waivers.................................21
SECTION 9.3 Expenses...............................................22
SECTION 9.4 Successors and Assigns.................................22
SECTION 9.5 Choice of Law..........................................22
SECTION 9.6 Entire Agreement; Amendments and
Waivers................................................22
SECTION 9.7 Multiple Counterparts..................................23
SECTION 9.8 Invalidity.............................................23
SECTION 9.9 Titles.................................................23
SECTION 9.10 Publicity..............................................23
SECTION 9.11 Survival...............................................23
SECTION 9.12 Burden and Benefit.....................................24
SECTION 9.13 Waiver of Jury Trial...................................24
SECTION 9.14 Attorneys' Fees........................................24
SECTION 9.15 Representation by Counsel..............................24
SECTION 9.16 No Interpretation Against Drafter......................25
SECTION 9.17 Counterparts; Effectiveness............................25
SECTION 9.18 Captions...............................................25
Investor and Investment Amount ANNEX 1
Registration Rights Agreement EXHIBIT A
Opinion of Sheppard, Mullin, Richter & Hampton, LLP EXHIBIT B
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT is made and effective as of
November 24, 1998, by and among Applied Magnetics Corporation, a Delaware
corporation (the "Company"), and each other person whose name appears on the
signature pages hereof (collectively, the "Investors" and, individually, an
"Investor").
RECITALS
A. The Investors desire to make an investment of up to $20,000,000
(but in no event less than $15,000,000) in the common stock, $0.10 par value
(the "Common Stock"), of the Company.
B. The Investors desire to purchase from the Company, and the
Company desires to issue and sell to the Investors, such shares on the terms and
subject to the conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 Definitions. The following terms, as used herein, have
the following meanings:
"Affiliate" shall have the meaning set forth in the Exchange Act.
Without limiting the foregoing, all directors and executive officers of a
Person that is a corporation, all general partners of a Person that is a
limited partnership and all managing members of a Person that is a limited
liability company, shall be deemed Affiliates of such Person for all
purposes hereunder.
"Agreement" shall mean this Securities Purchase Agreement.
"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 on commercially
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provided, reasonable terms; however, that an obligation to use Best Efforts
under this Agreement shall not in any event require the Person subject to
that obligation to pay any material consent fee or take actions that would
result in a Material Adverse Change in the benefits to such Person of this
Agreement and the Transaction.
"Breach" shall mean, and a breach of a representation, warranty,
covenant, obligation or other provision of this Agreement will be deemed
to have occurred 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" mean any day except a Saturday, Sunday or other day
on which the NYSE is closed.
"Closing" shall have the meaning set forth in
Section 2.2.
"Closing Date" shall mean the date of the Closing.
"Commission" shall mean the United States Securities
and Exchange Commission.
"Common Stock" shall mean the common stock, $0.10 par
value, of the Company.
"Company" shall mean Applied Magnetics Corporation.
"Company Information" shall mean any information in the Proxy
Material which is not Purchaser Information.
"Consent" shall mean any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
"Contract" shall mean any document filed as an exhibit pursuant to
Item 601 of Regulation S-K to any Annual Report on Form 10-K, Quarterly
Report on Form 10-Q, Current Report on Form 8-K, proxy statement or
registration statement filed by the Company pursuant to the Securities Act
or the Exchange Act.
"Disclosure Schedules" shall mean the schedules prepared and
delivered by the parties hereto and dated as of the date hereof which set
forth the exceptions to the representations and warranties contained
herein and certain other information called for by this Agreement. Unless
otherwise specified, each reference in this Agreement to any numbered
schedule is a reference to that numbered schedule which is included in
the Disclosure Schedules.
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"Encumbrance" shall mean any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge, security
interest, right of first refusal or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income or exercise of any
other attribute of ownership.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor law, and the rules and regulations issued
pursuant to that Act or any successor law.
"Governmental Authorization" shall mean any approval, Consent,
license, permit, waiver or other authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental
Body or pursuant to any Legal Requirement.
"Governmental Body" shall mean any:
(a) nation, state, county, city, town, village, district
or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other
government; or
(c) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory
or taxing authority or power of any nature.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, or any successor law, and the rules and
regulations issued pursuant to that Act or any successor law.
"Investors" and "Investor" shall have the meanings set forth in the
first paragraph of this Agreement.
"Knowledge" shall mean and an individual will be deemed to have
"Knowledge" of a particular fact or other matter if such individual is
actually aware of such fact or other matter, provided that such individual
shall be required to make a reasonable investigation of the circumstances
related thereto in light of the facts known to such individual.
"Legal Requirement" shall mean any federal, state,
local, municipal, foreign, international, multinational or
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other administrative order, constitution, law, ordinance, principle of
common law, regulation, statute or treaty.
"Liability" shall mean any liability, indebtedness or obligation,
whether accrued, absolute, contingent, matured or unmatured.
"Market Price" shall mean 80% of the lesser of (a) the average of
the daily closing prices per share of the Common Stock for the five
Trading Days prior to the date of the Merger Agreement and (b) the average
of the daily closing prices per share of the Common Stock for the five
Trading Days prior to the effective date of the Merger. The closing price
for each day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on the NYSE.
"Material Adverse Effect" or "Material Adverse Change" shall mean
any material adverse effect or change in the condition (financial or
other), business, results of operations, liabilities, operations or
prospects of any party, its business and/or assets or on the ability of
such party to consummate the Transaction, or any event or condition which
could, with the passage of time, reasonably be expected to constitute a
"Material Adverse Effect" or "Material Adverse Change."
"Merger" shall mean the merger of AMC Merger
Subsidiary, Inc. with and into Das Devices, Inc.
contemplated by the Merger Agreement.
"Merger Agreement" shall mean that certain Agreement
and Plan of Merger of even date herewith by and among the
Company, Das Devices, Inc. and AMC Merger Subsidiary, Inc.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Order" shall mean any award, decision, injunction, judgment, order,
ruling, subpoena or verdict entered, issued, made or rendered by any
court, administrative agency or other Governmental Body or by any
arbitrator.
"Organizational Documents" shall mean (a) the articles or
certificate of incorporation, all certificates of determination and
designation, and the bylaws of a corporation; (b) the partnership
agreement and any statement of partnership of a general partnership; (c)
the limited partnership agreement and the certificate or articles of
limited partnership of a limited partnership; (d) the operating agreement,
limited liability company agreement and the certificate or articles of
organization or formation of a limited
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liability company; (e) any charter or similar document adopted or filed in
connection with the creation, formation or organization of a Person
(including, without limitation, any trust); and (f) any amendment to any
of the foregoing.
"Other Filings" shall have the meaning set forth on
Section 3.2.
"Permitted Encumbrances" shall mean any (i) Encumbrances for taxes,
assessments or governmental charges or landlords', mechanics', workmens',
materialmans' or other similar liens, in each case not yet due or
delinquent or which are being contested in good faith and which, in the
aggregate, are not material in amount, do not materially detract from the
value of the property or assets subject thereto or interfere with the
present use thereof, (ii) Encumbrances of the owner of real property in
which the Company owns a leasehold interest, secured by such real
property, which, in the aggregate, do not materially detract from the
value of the Company's interest in such real property or interfere with
the Company's present use thereof and (iii) liens or Encumbrances that in
the aggregate are not material in amount, do not materially detract from
the value of the property or assets subject thereto or interfere with the
present use 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 Body.
"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 Body or
arbitrator.
"Proxy Material" shall mean the proxy materials (as amended and
supplemented) to be used in connection with the Stockholder Meeting.
"Purchaser Information" shall mean any information with respect to
any of the Investors which shall have been supplied in writing by them or
any of their Representatives for use in or in preparing the Proxy
Material.
"Registration Rights Agreement" shall have the meaning
set forth in Section 7.1(j).
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"Representative" shall mean any officer, director, principal,
attorney, agent, employee or other representative.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any successor law, and the rules and regulations issued pursuant to
that Act or any successor law.
"Shares" shall mean the shares of the Common Stock of the Company to
be purchased by the Investors under this Agreement.
"Stockholder Approval" shall mean the approval of the Company's
stockholders of the issuance of the Shares pursuant to this Agreement.
"Stockholder Meeting" shall have the meaning set forth
in Section 3.1.
"Subsidiary" shall mean, with respect to any Person (for the
purposes of this definition, the "Owner"), any corporation or other Person
of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or
similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than
securities or other interests having such power only upon the happening of
a contingency that has not occurred), are held by the Owner or one or more
of its Subsidiaries.
"Threatened" shall describe any claim, Proceeding, dispute, action
or other matter if (i) any demand or statement has been made (orally or in
writing) with respect to such claim, Proceeding, dispute, action or other
matter, or (ii) any notice has been given (orally or in writing) with
respect thereto.
"Transaction" shall mean the purchase and sale of the
Shares contemplated by this Agreement.
"Trading Day" shall mean a day on which the principal national
securities exchange on which the Common Stock is listed or admitted to
trading is open for the transaction of business or, if the Common Stock is
not listed or admitted to trading on any national securities exchange, a
Business Day.
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ARTICLE 2
PURCHASE AND SALE
SECTION 2.1 Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, the Company agrees to issue and sell to each of
the Investors, and each of the Investors agrees to purchase from the Company, at
the Closing the largest whole number of shares of Common Stock determined by
dividing (x) the purchase price set forth opposite such Investor's name on Annex
1 by (y) the Market Price.
SECTION 2.2 Closing. The closing (the "Closing") of the purchase and
sale of the Shares hereunder shall take place at the offices of Sheppard,
Mullin, Richter & Hampton, LLP, 333 South Hope Street, Forty-Eighth Floor, Los
Angeles, California 90071 on the third Business Day after all the conditions to
the parties' respective obligations under Article 7 are satisfied or waived as
provided herein, or at such other time or place as the parties may agree. At the
Closing:
(a) Each of the Investors shall deliver to the Company the
amount set forth opposite its name on Annex 1 hereto in immediately
available funds by wire or intrabank transfer to an account of the Company
designated by the Company by notice to the Investor given not later than
three Business Days prior to the Closing Date.
(b) The Company shall deliver to each of the Investors
certificates for the shares of Common Stock purchased, duly registered in
the name of the Investor in such denominations as the Investor may
designate to the Company by notice given not less than three Business Days
prior to the Closing.
ARTICLE 3
STOCKHOLDER APPROVAL
SECTION 3.1 Stockholders' Meeting. The Company, acting through its
Board of Directors, shall duly call, give notice of, convene and hold an annual
or special meeting (the "Stockholder Meeting") of its stockholders as soon as
practicable for the purpose of considering and taking action upon the Merger and
the issuance of the Shares pursuant to the terms of this Agreement.
SECTION 3.2 Proxy Material and Other Filings. The Company shall
promptly prepare and file with the Commission under the Exchange Act, and shall
use all reasonable efforts to have promptly cleared by the Commission, and
promptly thereafter shall mail to its stockholders, the Proxy Material. The
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Company shall provide the Investors with a reasonable opportunity to review and
comment upon the Proxy Material prior to its filing with the Commission and
distribution to the Company's stockholders, and the Investors shall use their
best efforts to provide their comments thereon as promptly as practicable after
delivery of such Proxy Material to the Investors. As soon as practicable after
the date hereof, the Company shall properly prepare and file any other filings
required under the Exchange Act or any other federal or state laws relating to
the transactions contemplated herein (collectively, "Other Filings"). The
Company shall notify the Investors promptly of the receipt of any comments of
the Commission and of any request by the Commission for amendments or
supplements to the Proxy Material or by any other governmental official with
respect to any Other Filings or for additional information and shall supply the
Investors with copies of all correspondence between the Company and its
Representatives, on the one hand, and the Commission or the members of its staff
or any other appropriate government official, on the other hand, with respect to
the Proxy Material or any Other Filings. The Company and the Investors shall
each use their best efforts to obtain and furnish the information required to be
included in the Proxy Material and any Other Filings; and the Company, after
consultation with the Investors, shall use its best efforts (and the Investors
agree to reasonably cooperate with the Company in connection therewith) to
respond promptly to any comments made by the Commission with respect to the
Proxy Material and any Other Filings and any preliminary version thereof and
cause the Proxy Material and related form of proxy to be mailed to its
stockholders at the earliest practicable time. The Company shall notify the
Investors of its intention to mail the Proxy Material to the stockholders of the
Company at least 48 hours prior to the intended time of such mailing.
SECTION 3.3 Required Vote. The stockholder vote required to approve
the issuance of the Shares pursuant to this Agreement shall be a majority of the
issued and outstanding shares of Common Stock. As part of the same approval of
the Merger, the Company shall use its best efforts to solicit from holders of
Common Stock proxies in favor of the issuance of the Shares pursuant to this
Agreement and to take all other action necessary or, in the reasonable judgment
of the Investors, helpful to secure the Stockholder Approval.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investors as of
the date hereof and as of the Closing Date that:
SECTION 4.1 Representations Under the Merger Agreement. Each
representation and warranty of the Company contained in Article IV of the Merger
Agreement and, provided that the Merger is consummated, each representation and
warranty of Das Devices, Inc. contained in Article III of the Merger Agreement
is true and correct in all material respects.
SECTION 4.2 Authority; No Conflict.
(a) This Agreement has, and the Registration Rights Agreement
when executed and delivered in accordance with this Agreement will be,
duly executed and delivered by the Company, and will constitute the legal,
valid, and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, in each case except as
such enforceability may be limited by (i) bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance, fraudulent transfer,
preferential transfer or distribution laws and other similar laws
affecting creditors' rights generally, (ii) the general principles of
equity, regardless of whether asserted in a proceeding in equity or at law
and (iii) public policy issues that may affect the enforceability of
provisions of the Registration Rights Agreement with respect to
indemnification and contribution. The Company has all requisite corporate
power, authority and capacity to execute and deliver this Agreement and
the Registration Rights Agreement and to perform its obligations hereunder
and thereunder.
(b) Neither the execution and delivery of this Agreement and
the Registration Rights Agreement nor the consummation or performance of
the Transaction will, directly or indirectly (with or without notice or
lapse of time):
(i) contravene, conflict with or result in
a violation of any provision of the Organizational
Documents of the Company;
(ii) contravene, conflict with or result in a violation
of, or give any Governmental Body or other Person the right to
exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which the Company or any of the assets
owned or used by the Company, may be subject;
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(iii) contravene, conflict with or result in a violation
of any of the terms or requirements of, or give any Governmental
Body the right to revoke, withdraw, suspend, cancel, terminate or
modify, any Governmental Authorization that is held by the Company
or that otherwise relates to the business of, or any of the assets
owned or used by, the Company;
(iv) contravene, conflict with or result in a violation
or breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate or modify, any
Contract; or
(v) result in the imposition or creation of any
Encumbrance (other than a Permitted Encumbrance) upon or with
respect to any of the assets owned or used by the Company,
except in the case of each of clauses (ii) through (v) above, for such
contraventions, conflicts, violations, Liabilities, reassessments, revaluations,
breaches or creations of Encumbrances which, individually and in the aggregate,
would not have a Material Adverse Effect on the Company and its Subsidiaries,
taken as a whole.
The Company is not, and will not be, required to give any notice to
or obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation of the Transaction, except for
(i) the Stockholder Approval, (ii) any Consent required under the HSR Act and
(iii) the approval by the NYSE to list the Shares.
SECTION 4.3 Due Authorization and Validity of Shares. The shares of
Common Stock to be issued and sold by the Company hereunder have been duly
authorized and, when delivered against payment therefor as contemplated hereby,
will be validly issued, fully paid and non-assessable and will not be subject to
any preemptive or similar rights.
SECTION 4.4 Brokers and Finders; Advisors. The Company has incurred
no obligation or Liability for brokerage or finders' fees or agents' commissions
or other similar payment in connection with the Transaction. The Company agrees
to indemnify the Investors against, and to hold the Investors harmless from, any
claims for brokerage or similar commissions or other compensation which may be
made against the Investors by any third party in connection with the
Transaction, which claim is based upon such third party having acted as broker,
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finder, investment banker, advisor, consultant or appraiser or in any similar
capacity on behalf of the Company.
SECTION 4.5 Governmental Regulations. None of the Company nor any of
its Subsidiaries is, or will upon issuance and sale of the Shares and the use of
the proceeds as contemplated by this Agreement be, subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Federal Power Act, the Interstate Commerce
Act or to any federal or state statute or regulation limiting its ability to
incur indebtedness for borrowed money.
SECTION 4.6 No Violation of Regulations of Board of Governors of
Federal Reserve System. Neither the Company nor any agent thereof acting on the
behalf of the Company has taken, and none of them will take, any action that
might cause this Agreement or the issuance or sale of the Shares, or the
application of proceeds thereof, to violate Section 7 of the Exchange Act or any
regulation issued pursuant thereto, including, without limitation, Regulation G,
T, U or X of the Board of Governors of the Federal Reserve System, in each case
as in effect now or as the same may hereafter be in effect on the Closing Date.
SECTION 4.7 Listing of Common Stock. The outstanding Common Stock is
listed on the NYSE, and the Company's listing agreement with respect thereto is
in full force and effect. No action has been taken or threatened by the NYSE
with respect to the delisting or permanent suspension from trading of the Common
Stock.
SECTION 4.8 Proxy Material. The Company Information contained in the
Proxy Material will not, at the date of mailing to the Company's stockholders or
at the date of the Stockholder Meeting, contain any statement which, at the time
and in light of the circumstances under which it is made, is false or misleading
with respect to any material fact required to be stated therein or necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the Stockholder Meeting. The Proxy Material will
comply as to form in all material respects with the Exchange Act and the rules
and regulations of the Commission thereunder.
SECTION 4.9 Private Offering. Assuming the representations of the
Investors are true and complete, the sale of the Shares is exempt from the
registration and prospectus delivery requirements of the Securities Act.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each of the Investors hereby represents and warrants to the Company
as of the date hereof and as of the Closing Date that, as to itself:
SECTION 5.1 Organization and Existence. Such Investor is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has all necessary powers, and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
SECTION 5.2 Authorization.
(a) The execution, delivery and performance by the Investor of
this Agreement and the Registration Rights Agreement are within the powers
of such Investor and have been duly authorized by all necessary action on
the part of the Investor and its general partner, if any. This Agreement
constitutes the valid and binding agreement of such Investor.
(b) Neither the execution and delivery of this Agreement and
the Registration Rights Agreement nor the consummation or performance of
the Transaction will, directly or indirectly (with or without notice or
lapse of time), contravene, conflict with or result in a violation of any
provision of the Organizational Documents of such Investor.
SECTION 5.3 Governmental Authorization. The execution, delivery and
performance by such Investor of this Agreement requires no consent, approval or
authorization of, or filing, registration or qualification with, any
governmental body, agency, official or authority on the part of the Investor,
other than (i) pursuant to the HSR Act or (ii) such actions or filings which
have been taken or made or will have been taken or made prior to the Closing
Date.
SECTION 5.4 Brokers and Finders; Advisors. Such Investor has
incurred no obligation or Liability for brokerage or finders' fees or agents'
commissions or other similar payment in connection with the Transaction
contemplated by this Agreement. Such Investor agrees to indemnify the Company
against, and to hold the Company harmless from, any claims for brokerage or
similar commissions or other compensation which may be made against the Company
by any third party in connection with the Transaction, which claim is based upon
such third party having acted as broker, finder, investment banker, advisor,
consultant or appraiser or in any similar capacity on behalf of such Investor.
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SECTION 5.5 Proxy Material. The Purchaser Information contained in
the Proxy Material will not, at the date of mailing to the Company's
stockholders or at the date of the Stockholder Meeting, contain any statement
which, at the time and in light of the circumstances under which it is made, is
false or misleading with respect to any material fact required to be stated
therein or necessary to correct any statement in any earlier communication with
respect to the solicitation of proxies for the Stockholder Meeting.
SECTION 5.6 Purchase Entirely for Own Account. This Agreement is
made with the Investors in reliance upon the representation of each of the
Investors to the Company, which by an Investor's execution of this Agreement the
Investor hereby confirms, that the Shares will be acquired for investment for
the Investor's own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof in contravention of applicable
law, and that the Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same in contravention of
applicable law. Each of the Investors further represents that it does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Shares.
SECTION 5.7 Disclosure of Information. Such Investor and its
Representatives have received all the information that any of them considers
necessary or appropriate for deciding whether to purchase the Shares. Such
Investor further represents that it has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
offering of the Shares. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Article 4 of this Agreement or
the right of the Investors to rely thereon.
SECTION 5.8 Investment Experience. Such Investor is an institutional
investor in securities of companies in the development or growth stage and
acknowledges that it is able to fend for itself, can bear the economic risk of
its investment and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Shares.
SECTION 5.9 Accredited Investor. Such Investor is and at the Closing
will be an "accredited investor" within the meaning of Rule 501 of Regulation D,
as presently in effect.
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SECTION 5.10 Restricted Securities. Such Investor understands that
the Shares it is purchasing are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act only in certain limited circumstances. In this connection,
such Investor represents that it is familiar with Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act. Such Investor acknowledges and consents to the inclusion on any
certificates representing the Shares of such legends as shall be required by
applicable law.
SECTION 5.11 Company Reliance. Such Investor acknowledges that its
representations and warranties are being relied upon by the Company in order to,
among other things, structure the transactions contemplated by this Agreement to
comply with the applicable federal and state securities laws.
ARTICLE 6
COVENANTS OF THE INVESTORS AND THE COMPANY
SECTION 6.1 Best Efforts. Subject to the terms and conditions of
this Agreement, each of the Company and the Investors shall use their Best
Efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary or desirable under applicable laws and regulations to
consummate the Transaction. The Company and the Investors agree to execute and
deliver such other documents, certificates, agreements and other writings and to
take such other actions as may be necessary or desirable in order to consummate
or implement expeditiously the transactions contemplated hereby.
SECTION 6.2 Operation of Business. Between the date of this
Agreement and the Closing, the Company will conduct its business only as set
forth in Section 5.02 of the Merger Agreement. The Company also agrees that
Section 5.02 of the Merger Agreement will not be amended without the written
consent of the Investors.
SECTION 6.3 Certain Consents and Approvals.
(a) Each party shall use its Best Efforts to file or cause to
be filed any reports, notifications or other information that may be
required under the HSR Act and to furnish or cause to be furnished to the
other all such information in its possession as may be reasonably
necessary for the completion of the reports, notifications or submissions
to be filed by the other. Each party hereto agrees to use its Best
Efforts to comply and cause its Affiliates to comply in full and timely
manner with any request from a Governmental Body for additional
information.
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(b) The Company shall use its Best Efforts to cause
Stockholder Approval to be obtained at the Stockholder Meeting to be held
on or before April 30, 1999.
(c) The Company shall use its Best Efforts to cause the Shares
to be listed on the NYSE (subject to notice of issuance) and to maintain,
at all times while any Shares are outstanding, the effectiveness of such
listing on the NYSE.
ARTICLE 7
CONDITIONS TO CLOSING
SECTION 7.1 Conditions to Obligations of the Investors. The
obligation of an Investor to consummate the purchase of the Shares to be
purchased by it pursuant to this Agreement is subject to the satisfaction of the
following conditions:
(a) The representations and warranties of the Company and of
Das Devices, Inc. contained in this Agreement, the Merger Agreement and
any certificate delivered by the Company pursuant hereto or thereto shall
be true and correct in all material respects as of the Closing Date as
though made on and as of such date;
(b) The Company shall have performed and complied in all
material respects with its covenants and agreements contained in this
Agreement or the Merger Agreement or contemplated hereby or thereby to be
performed or complied with on or before the Closing Date;
(c) The Company shall have delivered to such Investor a
certificate signed by its chief executive officer to the effect that the
conditions set forth in Section 7.1(a) and (b) have been satisfied;
(d) Stockholder Approval shall have been duly and validly
obtained;
(e) No Material Adverse Change shall have occurred with
respect to the Company or Das Devices, Inc. since July 4, 1998;
(f) The Company shall have duly received all authorizations,
consents, approvals, licenses, franchises,
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permits and certificates by or of, and shall have made all filings and
effected all registrations and qualifications with, all federal, state and
local Governmental Authorities necessary for the issuance of the Shares,
and all thereof shall be in full force and effect at the time of Closing
and shall be effective to permit such issuance. The Shares shall have been
duly approved for listing on the NYSE (subject to notice of issuance) and
such approval shall be in full force and effect at the time of Closing;
(g) No injunction or other court order restraining or
prohibiting the consummation of the Transaction shall have been issued and
be in effect on the Closing Date, and no action, suit or other proceeding,
by any Governmental Authority or any other party, shall be pending or
Threatened, that in the reasonable opinion of such Investor (after
consultation with the Company) has a substantial likelihood of success,
seeking to restrain or prohibit the purchase and sale of the Shares
hereunder or seeking material damages with respect thereto;
(h) Any waiting period required under the HSR Act, including
any extension thereof, that is applicable to the Transaction shall have
expired or been earlier terminated;
(i) The Merger shall have been consummated on the terms and
conditions set forth in the Merger Agreement;
(j) The Company shall have executed and delivered to such
Investor the Registration Rights Agreement in substantially the form
attached hereto as Exhibit A (the "Registration Rights Agreement");
(k) Such Investor shall have received the opinion of Sheppard,
Mullin, Richter & Hampton, LLP in substantially the form attached hereto
as Exhibit B; and
(l) Not less than $15,000,000 of Shares shall be purchased by
the Investors at the Closing.
SECTION 7.2 Conditions to Obligations of the Company. The obligation
of the Company to consummate the sale to an Investor of the Shares to be
purchased by it pursuant to this Agreement is subject to the satisfaction of the
following conditions:
(a) The representations and warranties of such Investor
contained in this Agreement and in any certificate delivered by such
Investor pursuant hereto shall be true and correct in all material
respects at and as of the date hereof;
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(b) Such Investor shall have performed and complied in all
material respects with its covenants and agreements contained in this
Agreement or contemplated hereby to be performed or complied with on or
before the Closing Date;
(c) Such Investor shall have delivered to the Company a
certificate signed by its authorized representative to the effect that the
conditions set forth in Section 7.2(a) and (b) have been satisfied;
(d) No injunction or other court order restraining or
prohibiting the consummation of the Transaction shall have been issued and
be in effect on the Closing Date, and no action, suit or other proceeding
by any Governmental Authority or any other party shall be pending or
Threatened, that in the reasonable opinion of the Company (after
consultation with the Investors) has a substantial likelihood of success,
seeking to restrain or prohibit the purchase and sale of the Shares
hereunder or seeking material damages with respect thereto;
(e) Any waiting period required under the HSR Act, including
any extension thereof, that is applicable to the Transaction shall have
expired or been earlier terminated;
(f) Stockholder Approval shall have been duly and validly
obtained;
(g) The Company shall have duly received all authorizations,
consents, approvals, licenses, franchises, permits and certificates by or
of, and shall have made all filings and effected all registrations and
qualifications with, all federal, state and local Governmental Authorities
necessary for the issuance of the Shares, and all thereof shall be in full
force and effect at the time of the filing and shall be effective to
permit such issuance. The Shares shall have been duly approved for listing
on the NYSE (subject to notice of issuance) and such approval shall be in
full force and effect at the time of Closing;
(h) The Merger shall have been consummated on the terms and
conditions set forth in the Merger Agreement;
(i) Such Investor shall have executed and delivered to the
Company the Registration Rights Agreement; and
(j) Not less than $15,000,000 of Shares shall be purchased by
the Investors at the Closing.
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ARTICLE 8
TERMINATION
SECTION 8.1 Grounds for Termination. The obligation of an Investor
to purchase any Shares hereunder, and the obligation of the Company to sell any
Shares to an Investor hereunder, may be terminated at any time prior to the
Closing:
(a) by mutual written agreement of the Company
and such Investor;
(b) by either the Company or such Investor if the Closing
shall not have been consummated for any reason on or before April 30,
1999;
(c) by either the Company or such Investor if consummation of
the Transaction would violate any order, decree or judgment of any court
or Governmental Body having competent jurisdiction;
(d) by the Company, on the one hand, or by such Investor, on
the other hand, if a material Breach of any provision of this Agreement
has been committed by the other party (i.e., the Company, on the one hand,
or the Investor, on the other) and such material Breach has not been
expressly waived in writing;
(e) (i) by such Investor if any of the conditions in Section
7.1 have not been satisfied as of the Closing or if satisfaction of such a
condition is or becomes impossible (other than through the failure of such
Investor to comply with its obligations under this Agreement) and such
Investor has not expressly waived such condition in writing on or before
the Closing; or (ii) by the Company, if any of the conditions in Section
7.2 have not been satisfied as of the Closing or if satisfaction of such a
condition is or becomes impossible (other than through the failure of the
Company to comply with its obligations under this Agreement) and the
Company has not expressly waived such condition in writing on or before
the Closing; or
(f) by the Company if the closing price per share of the
Common Stock on the Trading Day immediately preceding the Closing Date
shall be less than $4.00.
The party desiring to terminate this Agreement shall give
notice of such termination to the other party.
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SECTION 8.2 Effect of Termination. If this Agreement is terminated
as permitted by Section 8.1, termination shall be without liability of any party
(or any stockholder, director, officer, employee, agent, consultant or
Representative of such party) to any other party to this Agreement; provided,
however, that if such termination shall result from the willful and intentional
failure of any party to fulfill a condition to the performance of the
obligations of the other parties, the willful and intentional failure of any
party to perform a covenant of this Agreement or the willful and intentional
breach by any party of any representation, warranty or agreement contained
herein, such party shall be fully liable for any and all damages incurred or
suffered by the other parties as a result of such failure or breach.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 Notices. All notices, requests, offers, acceptances,
consents, and other communications to be given pursuant hereto shall be in
writing and be effective upon receipt and may be given by overnight courier, by
hand delivery or facsimile transmission and shall be given at the addresses or
facsimile numbers set forth below, with copies provided as follows:
If notice is given to the Company, to:
Applied Magnetics Corporation
75 Robin Hill Road
Goleta, California 93117
Attention: Chief Executive Officer
Telecopier: (805) 967-2677
with a copy to:
Sheppard, Mullin, Richter & Hampton LLP
333 South Hope Street, 48th Floor
Los Angeles, CA 90071
Attention: James J. Slaby, Esq.
Fax: (213) 620-1398
If notice is given to the Investors, to:
Sierra Ventures VI
3000 Sand Hill Road
Building 4, Suite 210
Menlo Park, CA 94025
Attention: Jeffrey M. Drazen
Telecopier: (650) 854-5593
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Watershed Partners, L.P.
Watershed Cayman, L.L.C.
Haussman Holdings
c/o Brookhaven Capital
3000 Sand Hill Road
Building 3, Suite 105
Menlo Park, CA 94025
Attention: Dan Coleman
Telecopier: ____________
East River Ventures, L.L.C.
645 Madison Avenue
New York, New York 10022
Attention: Walter Carozza
Telecopier: ____________
JAFCO America Ventures, Inc.
505 Hamilton Avenue, Suite 310
Palo Alto, CA 94301
Attention: Phil Wicklam
Telecopier: (650) 463-8801
The Chase Manhattan Bank,
as trustee for
First Plaza Group Trust
4 Chase Metrotech Center
Brooklyn, New York 11245
Attention: Senior Relationship Manager
Telecopier: (718) 242-8596
with a copy to:
General Motors Investment Management Corporation
767 Fifth Avenue
New York, New York 10153
Attention: Ellen Oster
Telecopier: (212) 418-6123
and
Attention: Jeffrey Barman
Telecopier: (212) 418-3644
with a copy to:
Weil, Gotshal & Manges, L.L.P.
767 Fifth Avenue
New York, New York 10153
Attention: Gerald S. Backman, Esq.
Telecopier: (212) 310-8007
or to such other address or Person as such party may designate by written notice
hereunder and, in the case of any other person becoming a party hereto or bound
hereby, such address as such person shall specify.
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SECTION 9.2 Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived
if, and only if, such amendment or waiver is in writing and signed, in the
case of an amendment, by each of the Investors and the Company, or in the
case of a waiver, by the party against whom the waiver is to be
effective.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 9.3 Expenses. All reasonable costs and expenses incurred by
the Investors, including reasonable expenses of Investors' counsel, in
connection with this Agreement and the Registration Rights Agreement, incurred
on or prior to Closing, shall be paid by the Company at the Closing, or, if the
Closing does not occur, upon termination of this Agreement in the event that
such termination occurs by reason of the fact that (a) the Company chooses not
to continue with the transaction and there has been no material change in the
terms and conditions of the investment as outlined in this Agreement; (b) the
Investors discover through their due diligence procedures or otherwise a
material misrepresentation with respect to the business (e.g., financial
statements, capitalization, etc.) of the Company; or (c) the Company is unable
to satisfy a condition precedent to the Investors' obligation to close;
provided, however, that the aggregate obligation of the Company shall not exceed
$20,000. The Company shall pay its own expenses incurred in connection with this
Agreement and the Registration Rights Agreement. In all other circumstances
under which the Transaction does not close, each party to this Agreement will
bear its own expenses.
SECTION 9.4 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that prior to the Closing
no party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement, other than to an Affiliate, without the
consent of the other parties hereto.
SECTION 9.5 Choice of Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of California (without
giving effect to its choice of law principles), except with respect to matters
of law concerning the internal corporate affairs of any corporate entity which
is a party to or the subject of this Agreement, and as to those matters the law
of the jurisdiction under which the respective entity derives its powers shall
govern.
SECTION 9.6 Entire Agreement; Amendments and Waivers.
This Agreement, together with all exhibits and schedules hereto
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(including the Disclosure Schedules referred to herein), constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. This Agreement may not be amended
except in an instrument in writing signed on behalf of each of the parties
hereto. No amendment, supplement, modification or waiver of this Agreement shall
be binding unless executed in writing by the party to be bound thereby. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
SECTION 9.7 Multiple Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 9.8 Invalidity. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
SECTION 9.9 Titles. The titles, captions or headings of the Articles
and Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
SECTION 9.10 Publicity. Except as required by law, none of the
Company or the Investors shall, directly or through an Affiliate, issue any
press release or make any public statement regarding this Agreement and the
Transaction contemplated hereby, without prior written approval of the other
parties; provided, however, that in the case of announcements, statements,
acknowledgments or revelations which either party is required by law to make,
issue or release, the making, issuing or releasing of any such announcement,
statement, acknowledgment or revelation by the party so required to do so by law
shall not constitute a breach of this Agreement if such party shall have given,
to the extent reasonably possible, not less than two (2) calendar days prior
notice to the other party, and shall have attempted, to the extent reasonably
possible, to clear such announcement, statement, acknowledgment or revelation
with the other party. Each party hereto agrees that it will not unreasonably
withhold any such consent or clearance.
SECTION 9.11 Survival. The representations and
warranties contained in this Agreement, the Merger Agreement and
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<PAGE>
the Registration Rights Agreement or in any certificate or other writing
delivered pursuant hereto or thereto or in connection herewith or therewith
shall survive the Closing, and any investigation by the Investors and the
issuance of the Shares. In the event of termination of this Agreement pursuant
to Section 8.1, the provisions of Sections 8.2, 9.3, and 9.13 shall survive such
termination.
SECTION 9.12 Burden and Benefit. There are no third party
beneficiaries of this Agreement.
SECTION 9.13 Waiver of Jury Trial. Each signatory to this Agreement
hereby waives its respective right to a jury trial of any permitted claim or
cause of action arising out of this Agreement, any of the transactions
contemplated hereby, or any dealings between any of the signatories hereto
relating to the subject matter of this Agreement or any of the transactions
contemplated hereby. The scope of this waiver is intended to be all encompassing
of any and all disputes that may be filed in any court and that relate the
subject matter of this Agreement or any of the transactions contemplated hereby,
including, without limitation, contract claims, tort claims, and all other
common law and statutory claims. This waiver is irrevocable, meaning that it may
not be modified either orally or in writing, and this waiver shall apply to any
subsequent amendments, supplements or other modifications to this Agreement, any
of the transactions contemplated hereby or to any other document or agreement
relating to the transactions contemplated hereby.
SECTION 9.14 Attorneys' Fees. If any party to this Agreement brings
an action to enforce its rights under this Agreement in accordance with the
provision, hereof, the prevailing party shall be entitled to recover its costs
and expenses, including, without limitation, reasonable attorneys' fees and
costs, incurred in connection with such action, including any appeal of such
action.
SECTION 9.15 Representation by Counsel. Each party hereto represents
and agrees with each other that it has been represented by, or had the
opportunity to be represented by, independent counsel of its own choosing, and
that it has had the full right and opportunity to consult with its respective
attorney(s), that to the extent, if any, that it desired, it availed itself of
this right and opportunity, that it or its authorized officers (as the case may
be) have carefully read and fully understand this Agreement in its entirety and
have had it fully explained to them by such party's respective counsel, that
each is fully aware of the contents thereof and its meaning, intent and legal
effect, and that it or its authorized officer (as the case may be) is competent
to execute this Agreement and has executed this Agreement free from coercion,
duress or undue influence.
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SECTION 9.16 No Interpretation Against Drafter. This Agreement is
the product of negotiations between the parties hereto represented by counsel
and any rules of construction relating to interpretation against the drafter of
an agreement shall not apply to this Agreement and are expressly waived.
SECTION 9.17 Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other parties hereto.
SECTION 9.18 Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized signatories as of the day and
year first above written.
Applied Magnetics Corporation
By /s/ Craig D. Crisman
-------------------------
Craig D. Crisman,
Chairman of the Board and
Chief Executive Officer
Sierra Ventures
By /s/ Jeffrey M. Drazen
----------------------------
Jeffrey M. Drazen,
General Partner
Watershed Partners, L.P.
By
------------------------------
[Print Name and Title]
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Watershed Cayman, L.L.C.
By
--------------------------------
[Print Name and Title]
Haussman Holdings
By
-----------------------------------
[Print Name and Title]
East River Ventures, L.L.C.
By
-------------------------------------
[Print Name and Title]
JAFCO America Ventures, Inc.
By
-----------------------------------
[Print Name and Title]
The Chase Manhattan Bank, As
Trustee for First Plaza Group
Trust
By The Chase Manhattan Bank
By
-----------------------------------
[Print Name and Title]
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<PAGE>
ANNEX 1
Aggregate
Investor Purchase Price
- -------- --------------
Sierra Ventures VI $1,250,000
Watershed Partners, L.P. 625,000
Watershed Cayman, L.L.C. 375,000
Haussman Holdings 250,000
East River Ventures, L.L.C. 1,250,000
JAFCO America Ventures, Inc. 1,250,000
The Chase Manhattan Bank, as Trustee 15,000,000
for First Plaza Group Trust
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<PAGE>
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
effective as of ___________, 1999, by and among Applied Magnetics Corporation, a
Delaware corporation (the "Company"), and each other person whose name is set
forth on the signature pages hereof (collectively, the "Investors" and,
individually, an "Investor").
RECITALS
A. Upon the terms and subject to the conditions of a Securities
Purchase Agreement, dated as of November 24, 1998 (the "Securities Purchase
Agreement"), by and among the Company and the Investors, the Investors have
purchased an aggregate of _______ shares of the common stock, $0.10 par value
("Common Stock"), of the Company.
B. A material inducement for the parties to consummate the purchase
and sale of such shares was that the Company enter into this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements of the parties contained herein, the parties agree as
follows:
1. Definitions. As used herein, the terms below shall have the
following meanings. Any such term, unless the context otherwise requires, may be
used in the singular or plural, depending upon the reference.
"Affiliate" shall have the meaning provided in the Exchange Act and
the rules and regulations of the Commission promulgated thereunder.
"Agreement" shall mean this Registration Rights Agreement.
"Closing Date" shall have the meaning provided in the Securities
Purchase Agreement.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Common Stock" shall have the meaning provided in Recital A.
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"Company" shall mean Applied Magnetics Corporation.
"Demand Registration" shall mean a registration made pursuant to
Section 2 or 3(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor law, and the rules and regulations issued pursuant to
that Act or any successor law.
"Form S-3" shall mean such form under the Securities Act as in
effect on the date hereof or any registration form under the Securities Act
subsequently adopted by the Commission which permits inclusion or incorporation
of comparable information by reference to other documents filed by the Company
with the Commission.
"Holder" shall mean any Person who is the record owner of
Registrable Shares, or any permitted assignee thereof in accordance with Section
20.
"Initiating Holders" shall have the meaning provided in Section
3(b).
"Investors" shall have the meaning provided in the first paragraph
of this Agreement.
"Person" shall mean an individual, partnership, limited liability
company, joint venture, corporation, trust or unincorporated organization or any
other similar entity.
"Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document by the
Commission.
"Registrable Shares" shall mean (a) the Shares beneficially owned by
any Holder, (b) any Common Stock of the Company issued to a Holder as a dividend
or other distribution with respect to, or in exchange for or in replacement of,
any of the Shares or (c) any other shares of Common Stock of the Company held by
a Holder; provided, however, that shares of Common Stock shall only be treated
as Registrable Shares if and so long as (i) they have not been sold by the
Investor to or through a broker or dealer or underwriter in a public
distribution or otherwise pursuant to an effective Registration Statement under
the Securities Act, (ii) they have not been sold in a transaction exempt from
the registration and prospectus delivery requirements of the Securities Act
under Section 4(l) thereof (including any sale pursuant to Rule 144 under the
Securities Act or any similar provision) so that all transfer restrictions and
restrictive legends with respect thereto are removed upon the consummation of
such sale, or (iii) if the Holder shall have received from the Company an
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<PAGE>
opinion of counsel reasonably acceptable to the Holder stating that they may
immediately be resold by the Holder pursuant to Rule 144(k) under the Securities
Act without any volume limitation and without any additional unreasonable
expense.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any successor law, and the rules and regulations issued pursuant to that Act
or any successor law.
"Securities Purchase Agreement" shall have the meaning provided in
Recital A.
"Shares" shall mean the shares of Common Stock issued and sold by
the Company to the Investors pursuant to the Securities Purchase Agreement.
"Violation" shall have the meaning provided in Section 8(a).
2. Initial Registration. The Company shall use all reasonable
commercial efforts to effect as soon as practicable after the Closing Date (as
defined in the Securities Purchase Agreement), and in any event within 60 days
of the Closing Date, the registration under the Securities Act for resale of the
Registerable Shares. Such registration shall be deemed to be a Demand
Registration requested pursuant to Section 3(a), subject to all terms and
conditions of this Agreement applicable to such Demand Registration; provided,
however, that (i) the selection of any managing underwriter shall be made as
provided in Section 3(b) by written notice to the Company not less than 30 days
prior to the Closing Date and (ii) the term "Initiating Holders" shall mean,
with respect to the registration referred to in this Section 2, all the Holders.
3. Demand Registration.
(a) General. If the Company shall receive, at any time after
180 days after the Closing Date, a written request from the Holders of at
least the lesser of (x) 1,500,000 Registrable Shares (adjusted for all
stock splits or similar transactions) or (y) Registrable Shares with a
fair market value, based on the closing market price on the trading day
immediately prior to the date of notice (as reported in the Wall Street
Journal), of not less than $10,000,000, that the Company file a
registration statement under the Securities Act covering the registration
of such Registrable Shares, then the Company shall, within ten (10) days
of the receipt thereof, give written notice of such request to all Holders
and shall, subject to the limitations of this Section 3, use all
reasonable commercial efforts to effect as soon as practicable, and in any
event within 90 days of the receipt of such request, the registration
under the Securities Act for resale of all such Registrable Shares and
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all such additional Registrable Shares which the Holders request to be so
registered within thirty (30) days of the mailing of such notice by the
Company in accordance with Section 17 hereof (a "Demand Registration").
(b) Underwriters Cut-back. If the Holders initiating the
registration request under Section 3(a) (the "Initiating Holders") intend
to distribute the Registrable Shares covered by their request by means of
an underwriting, they shall so advise the Company as a part of their
request made pursuant to Section 3(a), and the Company shall include such
information in the written notice referred to in such Section. The
selection of the managing underwriter of any registration under this
Section 3 shall be made by a majority of the Initiating Holders, with the
consent of the Company (such consent not to be unreasonably withheld). In
the case of an underwritten offering, the right of any Holder to include
Registrable Shares in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Shares in the underwriting (unless otherwise mutually
agreed by a majority of the Initiating Holders and such Holder to the
extent provided herein). All Holders proposing to distribute their
securities through such underwriting shall (together with the Company as
provided in Section 5(e)) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting. Notwithstanding any other provision of this Agreement, if
the underwriter advises the Initiating Holders in writing that marketing
factors require a limitation of the number of shares to be underwritten,
then the Initiating Holders shall so advise all Holders of Registrable
Shares which would otherwise be underwritten pursuant hereto, and the
number of shares of Registrable Shares that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount
of Registrable Shares of the Company owned by each Holder; provided,
however, that the number of shares of Registrable Shares to be included in
such underwriting shall not be reduced unless all other securities are
first entirely excluded from the underwriting.
(c) Limit on Demand Registrations. The Company is obligated to
effect only two (2) Demand Registrations pursuant to Section 3(a);
provided, however, that such limitation shall not include a Demand
Registration effected by means of a Form S-3. For purposes of this Section
3(c), no such Demand Registration shall be deemed to have taken place
unless (i) the registration statement filed pursuant to such Demand
Registration has been declared effective by the Commission and sales of
the securities have been permitted consistent with the plan of
distribution described in the registration statement or (ii) a Demand
Registration shall be forfeited by operation of Section 3(f).
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(d) Right to Defer. Notwithstanding the foregoing, if the
Company shall furnish to the Initiating Holders a certificate signed by
the Secretary of the Company stating that, in the good faith judgment of
the Board of Directors of the Company as set forth in a duly adopted
written resolution, there is a reasonable likelihood that the filing of
such registration statement would materially and adversely affect any
existing or prospective material business situation, transaction or
negotiation or otherwise materially and adversely affect the Company and,
therefore, it is necessary to defer the filing of such registration
statement, the Company shall have the right to defer such filing for a
period of not more than 90 days after receipt of the request of the
Initiating Holders; provided, however, that the Company may not use this
right more than once in any twelve month period.
(e) Right to Defer for other Company Offering. Notwithstanding
the foregoing, if the Company receives a request for registration under
Section 3(a) of this Agreement, then the Company may postpone such
registration for forty-five (45) days in order to file a registration
statement for a primary offering of Common Stock. In such event, the
Holders of Registrable Shares shall have the piggyback registration
rights, if any, granted pursuant to Section 4 hereof.
(f) Expenses of Demand Registration. All expenses, other than
underwriting discounts and commissions, stock transfer taxes and the fees
and disbursements of separate counsel, if any, retained by the Holders,
incurred in connection with the first two (2) Demand Registrations,
including (without limitation) all registration, filing and qualification
fees, printers' fees, accounting fees, and fees and disbursements of
counsel for the Company, shall be borne by the Company and, thereafter,
shall be borne by the selling Holders (in proportion to the number of
Registerable Shares included therein). Notwithstanding the foregoing,
however, in the event a registration request is subsequently withdrawn at
the request of the Holders of a majority of the Registrable Shares to be
registered, then either (i) such expenses shall be borne solely by the
Holders that requested Registrable Shares to be included in such
registration and not by the Company (in which case all Holders
participating in such registration shall bear such expenses pro rata based
on the Registrable Shares to be registered), or (ii) one of the demand
registration rights provided for in Section 3(a) shall be deemed
forfeited. The election permitted by the previous sentence shall be made
by the Initiating Holders in proportion to the Registrable Shares to be
registered held by each.
(g) Notwithstanding anything to the contrary contained in this
Agreement, Registerable Shares may not be offered for sale, sold or
otherwise disposed of (other than to an Affiliate of the Holder who shall
agree in writing to be bound by this Section 3(g)) until the earlier to
occur of (i) 48 hours after results covering 30 days of post-merger
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<PAGE>
combined operations of the Company and Das Devices, Inc. have been filed
with the Commission, sent to stockholders of the Company or otherwise
publicly issued by the Company or (ii) 60 days following the Closing Date.
4. Piggy-Back Registration.
(a) General. If, at any time after 180 days after the Closing
Date, the Company proposes to register (including for this purpose a
registration effected by the Company pursuant to Section 3 of this
Agreement) any of its Common Stock under the Securities Act in connection
with the public offering of such securities solely for cash (other than
(i) a registration relating to the sale of securities to participants in a
Company stock plan, or (ii) a transaction pursuant to Rule 145), the
Company shall, at such time, promptly give each Holder written notice of
such registration. Upon the written request of each Holder given within
fifteen (15) days after mailing of such notice by the Company in
accordance with Section 17 hereof, the Company shall cause to be
registered under the Securities Act all of the Registrable Shares that
each such Holder has requested to be registered subject to the underwriter
cutback and other provisions of Section 4(b) hereof.
(b) Underwriting Requirements. In connection with any offering
which constitutes an underwriting, the Company shall not be required under
this Section 4 to include any of the Holders' Registrable Shares in such
underwriting unless they accept the terms of the underwriting as agreed
upon between the Company and the underwriters selected by the Company, and
then only in such quantity as the underwriters determine in their sole
discretion will not materially and adversely affect the distribution of
the Registrable Shares, such determination to be confirmed in writing upon
the request of any Holder. If the total amount of Registrable Shares
requested by Holders to be included in such offering exceeds the amount of
securities sold other than by the Company that the underwriters determine
in their sole discretion is compatible with the success of the offering,
then the Company shall be required to include in the offering only that
number of Registrable Shares which the underwriters determine in their
sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among all selling
Holders according to the total amount of Registrable Shares owned by each
selling Holder or in such other proportions as shall mutually be agreed to
by such selling Holders).
(c) Expenses of Company Registration. The Company shall bear
and pay all expenses incurred in connection with any registration, filing,
qualification or sale of Registrable Shares pursuant to this Section 4,
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<PAGE>
including (without limitation) all registration, filing, and qualification
fees, and printers' fees, accounting fees and the fees and disbursements
of counsel for the Company relating or apportionable thereto, but
excluding underwriting discounts and commissions, stock transfer taxes and
the fees and expenses of separate counsel, if any, retained by the selling
Holders.
5. Obligations of the Company. Whenever required under this
Agreement to effect the registration of any Registrable Shares, the Company
shall, as expeditiously as reasonably possible, use reasonable commercial
efforts to do the following:
(a) Commission Filing. Prepare and file with the Commission a
registration statement with respect to such Registrable Shares and to
cause such registration statement to become effective, and, upon the
request of the Holders of a majority of the Registrable Shares registered
thereunder, keep such registration statement effective for up to 180 days
or until all of the Shares registered thereunder are sold, whichever
occurs sooner.
(b) Amendments. Prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration
statement, and furnish such copies thereof to the Holders and any
underwriters as they may reasonably request.
(c) Prospectus. Furnish to the Holders and any underwriters
such numbers of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and
such other documents as they may reasonably request in order to facilitate
the disposition of Registrable Shares owned by them, and cause all related
filings to be made with the Commission as required by Rule 424.
(d) Blue Sky Qualification. Register and qualify the
Registrable Shares covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders and any underwriters; provided, however, that the
Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service
of process in any such states or jurisdictions.
(e) Underwriting Agreement. In the event of any underwritten
public offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, with the managing
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underwriter of such offering, including, without limitation, delivering
opinions of counsel and "comfort letters" of accountants; provided,
however, that such managing underwriter has been selected consistent with
the provisions of Section 3(b). Each Holder participating in such
underwriting shall also enter into and perform its obligations under such
an agreement.
(f) Prospectus Delivery. Promptly notify each Holder of
Registrable Shares covered by the registration statement at any time when
the Company becomes aware of the happening of any event as a result of
which the registration statement or the prospectus included in such
registration statement or any supplement to the prospectus (as then in
effect) contains any untrue statement of a material fact or omits to state
a material fact necessary to make the statements therein (in the case of
the prospectus, in light of the circumstances under which they were made)
not misleading or, if for any other reason it shall be necessary during
such time period to amend or supplement the registration statement or the
prospectus in order to comply with the Securities Act, whereupon, in
either case, each Holder shall immediately cease to use such registration
statement or prospectus for any purpose and, as promptly as practicable
thereafter, the Company shall prepare and file with the Commission, and
furnish without charge to the appropriate Holders and managing
underwriters, if any, a supplement or amendment to such registration
statement or prospectus which will correct such statement or omission or
effect such compliance and such copies thereof as the Holders and any
underwriters may reasonably request.
6. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement with
respect to the Registrable Shares of any selling Holder that such Holder shall
furnish to the Company such information regarding itself, the Registrable Shares
held by it, and the intended method of disposition of such securities as shall
be required to effect the registration of such Holder's Registrable Shares.
7. Delay of Registration. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.
8. Indemnification. In the event (i) any Registrable Shares are
included in a registration statement under this Agreement or (ii) any other
shares of Common Stock held by the Investors are included in any registration
statement:
(a) Indemnification by the Company. To the fullest extent
permitted by law, the Company will indemnify and hold harmless each
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Holder, each of its directors, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the
Exchange Act, against any losses, claims, damages, or liabilities (joint
or several) to which they may become subject under the Securities Act, the
Exchange Act, or other federal or state law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to
be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of
the Securities Act, the Exchange Act, or any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act,
or any state securities law, and the Company will pay to each such Holder,
director, underwriter or controlling person, as incurred, any legal or
other expenses reasonably incurred by one law firm retained by them, plus
appropriate local counsel in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this Section 8(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of
the Company (which consent shall not be unreasonably withheld), nor shall
the Company be liable in any such case for any such loss, claim, damage,
liability, or action to which any Holder, underwriter or controlling
person may become subject to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by such Holder, underwriter or controlling person. This right
to indemnification shall remain in full force and effect notwithstanding
any investigation made by or on behalf of such Holder or underwriter and
shall survive the transfer of such securities by such Holder.
(b) Indemnification by Selling Holder. To the fullest extent
permitted by law, each selling Holder severally, but not jointly, will
indemnify and hold harmless the Company, each of its directors, each of
its officers who has signed the registration statement, each person, if
any, who controls the Company within the meaning of the Securities Act or
the Exchange Act, any underwriter, any other Holder selling securities in
such registration statement and any controlling person of any such
underwriter or other Holder against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing persons may
become subject, under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages, or
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liabilities (or actions in respect thereto) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with
such registration; provided, however, that the indemnity agreement
contained in this Section 8(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided, further, that in no event
shall any indemnity under this Section 8(b) exceed the net proceeds from
the offering received by such Holder.
(c) Procedures. Promptly after receipt by an indemnified party
under this Section 8 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party
under this Section 8, deliver to the indemnifying party a written notice
of the commencement thereof and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to
assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party (together with all
other indemnified parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel (plus
appropriate local counsel), with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The
failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action, if prejudicial in
any material respect to its ability to defend such action, shall to the
extent prejudicial relieve such indemnifying party of any liability to the
indemnified party under this Section 8, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under
this Section 8.
(d) Contribution. If the indemnification provided for in this
Section 8 from the indemnifying party is unavailable to an indemnified
party hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and
the indemnified parties on the other in connection with the actions which
resulted in such losses, claims, damages, liabilities or expenses, as well
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as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has been made by,
or related to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action;
provided, however, that in no event shall the liability of any selling
Holder hereunder be greater in amount than the difference between the
dollar amount of the proceeds received by such Holder upon the sale of the
Registrable Shares giving rise to such contribution obligation and all
amounts previously contributed by such Holder with respect to such losses,
claims, damages, liabilities and expenses. The amount paid or payable to a
party as a result of the losses, claims damages, liabilities and expenses
referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(e) Survival. The obligations of the Company and Holders under
this Section 8 shall survive the completion of any offering of Registrable
Shares in a registration statement under this Agreement, and otherwise.
9. Reports Under Exchange Act. With a view to making available to
the Holders the benefits of Rule 144 promulgated under the Securities Act and
any other rule or regulation of the Commission that may at any time permit a
Holder to sell securities of the Company to the public without registration
generally or pursuant to a registration on Form S-3, the Company agrees to use
reasonable commercial efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) qualify for registration on Form S-3 for the sale of
Registrable Shares;
-11-
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<PAGE>
(c) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and
the Exchange Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Shares, promptly upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144,
the Securities Act and the Exchange Act, or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3, (ii) a
copy of the most recent annual and/or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested in availing any Holder of
any rule or regulation of the Commission which permits the selling of any
Registrable Shares without registration or pursuant to such form.
10. "Market Stand-Off" Agreement. Each Holder hereby agrees that for
a period of 90 days following the effective date of any registration effected
subsequent thereto pursuant to Sections 1, 2 or 3 (provided the Holders are
given written notice of the offering and the right to participate therein as
provided for in this Agreement), such Holder, if requested by the managing
underwriter, shall not, directly or indirectly sell, offer to sell, contract to
sell (including, without limitation, any short sale), grant any option to
purchase or otherwise transfer or dispose of (other than to donees who agree to
be similarly bound) any securities of the Company held by it at any time during
such period, except Common Stock included in such registration. In addition,
each Holder agrees, if applicable, to acknowledge the undertaking provided for
in this Section 10 by entering into customary written "lock-up" agreements with
the managers of the relevant underwriting. The requirements of this Section 10
shall not apply to a Holder that, at the time of receipt of the referenced
notice from the Company, (i) beneficially owned less than 5% of the outstanding
shares of each class of the capital stock of the Company, (ii) is not an
Affiliate or an employee of the Company and (iii) waives any further benefits of
this Agreement for it or any subsequent assignee or transferee of its
Registrable Shares.
In order to enforce the foregoing covenant, the Company may impose
stop transfer instructions with respect to the Registrable Shares of each Holder
(and the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
11. Amendment of Registration Rights. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or prospectively
only with the written consent of the Company and the holders of sixty-six
percent (66%) of the Registrable Shares then outstanding. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
-12-
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<PAGE>
Holder of any Registrable Shares then outstanding, each future holder of all
such Registrable Shares and the Company.
12. Termination. The rights provided in this Agreement shall
terminate on the second anniversary of the effective date of this Agreement.
13. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED
AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA (WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF).
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
16. Negotiation of Agreement. Each of the parties acknowledges that
it has been represented by independent counsel of its choice throughout all
negotiations that have preceded the execution of this Agreement and that it has
executed the same with consent and upon the advice of said independent counsel.
Each party and its counsel cooperated in the drafting and preparation of this
Agreement and the documents referred to herein, and any and all drafts relating
thereto shall be deemed the work product of the parties and may not be construed
against any party by reason of its preparation. Accordingly, any rule of law or
any legal decision that would require interpretation of any ambiguities in this
Agreement against the party that drafted it is of no application and is hereby
expressly waived. The provisions of this Agreement shall be interpreted in a
reasonable manner to effect the intentions of the parties and this Agreement.
17. Notices. Any notice, request, instruction or other document to
be given hereunder by any party hereto to another party hereto shall be in
writing, shall be deemed to have been duly given or delivered when delivered
personally or telecopied (receipt confirmed, with a copy sent by reputable
overnight courier), or one business day after delivery to a reputable overnight
courier, postage prepaid, to the address of the party set forth below such
person's signature on this Agreement or to such address as the party to whom
notice is to be given may provide in a written notice to each of the other
parties to this Agreement, a copy of which written notice shall be on file with
the Secretary of the Company.
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<PAGE>
18. Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms to the fullest extent permitted by law.
19. Further Assurances. Each of the parties shall, without further
consideration, use reasonable efforts to execute and deliver such additional
documents and take such other action as the other parties, or any of them may
reasonably request to carry out the intent of this Agreement and the
transactions contemplated hereby.
20. Successors and Assigns. This Agreement shall be binding upon,
and all rights hereto shall inure to the benefit of, the parties hereto, and
their respective successors and permitted assigns; provided, however, that a
transferee of Registrable Shares shall be deemed to be a Holder of such
Registerable Shares only if such transferee shall have executed and delivered to
the Company a Registration Rights Agreement Joinder in the form attached hereto
as Exhibit A.
21. Entire Agreement. This Agreement embodies the entire agreement
and understanding of the parties hereto in respect of the actions and
transactions contemplated by this Agreement. There are no restrictions,
promises, inducements, representations, warranties, covenants or undertakings
with regard to the registration of the Company's capital stock pursuant to the
Securities Act, other than those expressly set forth or referred to in this
Agreement.
22. Recapitalizations, etc. The provisions of this Agreement
(including any calculation of share ownership) shall apply, to the full extent
set forth herein with respect to the Registrable Shares, to any and all shares
of capital stock of the Company or any capital stock, partnership units or, any
other security evidencing ownership interests in any successor or assign of the
Company (whether by merger, consolidation, sale of assets or otherwise) that may
be issued in respect of, in exchange for, or in substitution of the Common Stock
by reason of any stock dividend, split, combination, recapitalization,
liquidation, reclassification, merger, consolidation or otherwise.
(Signature Pages Follow)
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
APPLIED MAGNETICS CORPORATION
By: ________________________________
Craig D. Crisman,
Chairman of the Board and
Chief Executive Officer
Address:
75 Robin Hill Road
Goleta, California 93117
Attention: Chief Executive Officer
Telecopier: (805) 967-2677
SIERRA VENTURES VI
By: ________________________________
Jeffrey M. Drazen,
General Partner
Address:
3000 Sand Hill Road
Building #4, Suite 210
Menlo, Park, CA 94025
Attention: Jeffrey M. Drazen
Telecopier: (650) 854-5593
WATERSHED PARTNERS, L.P.
By: ________________________________
--------------------------------
[Print Name and Title]
S-1
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<PAGE>
Address:
c/o Brookhaven Capital
3000 Sand Hill Road
Building #3, Suite 105
Menlo Park, CA 94025
Attention: Dan Coleman
Telecopier: __________
WATERSHED CAYMAN, L.L.C.
By: ________________________________
--------------------------------
[Print Name and Title]
Address:
c/o Brookhaven Capital
3000 Sand Hill Road
Building #3, Suite 105
Menlo Park, CA 94025
Attention: Dan Coleman
Telecopier: __________
HAUSSMAN HOLDINGS
By: ________________________________
--------------------------------
[Print Name and Title]
Address:
c/o Brookhaven Capital
3000 Sand Hill Road
Building #3, Suite 105
Menlo Park, CA 94025
Attention: Dan Coleman
Telecopier: __________
S-2
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<PAGE>
EAST RIVER VENTURES, L.L.C.
By: ________________________________
--------------------------------
[Print Name and Title]
Address:
645 Madison Avenue
New York, New York 10022
Attention: Walter Carozza
Telecopier: (212) 644-5498
JAFCO AMERICA VENTURES, INC.
By: ________________________________
--------------------------------
[Print Name and Title]
Address:
505 Hamilton Avenue,
Suite 310 Palo Alto, CA
94301 Attention: Phil Wiescham
Telecopier: (650) 463-8801
THE CHASE MANHATTAN BANK, AS TRUSTEE FOR
FIRST PLAZA GROUP TRUST
By: The Chase Manhattan Bank
By: ________________________________
--------------------------------
[Print Name and Title]
S-3
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<PAGE>
Exhibit A
REGISTRATION RIGHTS AGREEMENT JOINDER
As of the date set forth below, the undersigned is acquiring from
_________________ _____ shares of the Common Stock (the "Shares"), of Applied
Magnetics Corporation (the "Company"). By execution of this Registration Rights
Agreement Joinder, the undersigned, as successor to ________________ in respect
of the Shares, shall be deemed to be a party to that certain Registration Rights
Agreement, dated as of _________ __, 1999, by and among the Company and the
"Investors" identified on the signature pages thereof (the "Registration Rights
Agreement"). Pursuant to Section 23 of the Registration Rights Agreement, the
undersigned, as successor to ____________________, in respect of the Shares,
shall have all rights, and shall observe all the obligations, applicable to a
"Holder" under such Registration Rights Agreement.
Name:
Address for Notices: with copies to:
----------------------------
By:__________________________
Name:
Title:
Date:
S-4
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<PAGE>
EXHIBIT 99
FOR IMMEDIATE RELEASE Contact: Craig D. Crisman
Chief Executive Officer
(805) 683-5353
APPLIED MAGNETICS CORPORATION AND DAS DEVICES INC. TO MERGE
GOLETA, California, November 25,1998 - APPLIED MAGNETICS CORPORATION (APM:NYSE)
and DAS Devices Inc. today jointly announced that both companies' Boards of
Directors have approved the terms of a merger of the two companies. The
companies have entered into a definite agreement whereby Applied Magnetics will
purchase DAS, with the stockholders of DAS receiving approximately 13 million
registered shares of Applied Magnetics common stock. Applied Magnetics has also
entered into an agreement with certain institutional investors to raise $20
million dollars simultaneously with the completion of the merger, through a
private placement of common equity. Applied Magnetics and DAS have received
opinions from their respective independent financial advisors, to the effect
that the consideration is fair from a financial point of view.
"The combination of these two companies creates a unique synergy that will
combine DAS Devices' proprietary and patented state-of-the-art wafer technology
with Applied Magnetics high volume manufacturing capability" said Craig Crisman,
CEO of Applied Magnetics. The parties believe the merger will enable the company
to accelerate its time to market performance and enhance the production
readiness of giant magneto-resistive (GMR) technology at aerial densities up to
5 gigabits per square inch, capable of recording 6.4 gigabytes on a 3.5 inch
disk. Prototype units for GMR products targeting both 6.4 and 8.5 gigabytes per
3.5" disk are immediately available for customer evaluation. "DAS Devices is
excited about the merger as it will allow us to leverage Applied Magnetics'
worldwide production and customer support capabilities and become a fully
integrated manufacturer" said Bob Genesi, CEO of DAS Devices.
The hard disk drive industry in recent years has been experiencing an increase
in the rate of new product introductions and a corresponding decrease in product
life cycles. As a result, the recording head industry is making a rapid
transition to GMR based technology in 1999. The merger should allow the company
to compete effectively with other head companies and provide a solid foundation
to take a technology leadership role in the years to come.
Forward-looking statements included in this release arc based on estimates and
assumptions made by management of the Company, which, although believed to be
reasonable, are inherently uncertain and difficult to predict. Therefore, undue
reliance should not be placed upon such estimates. Such statements are subject
to certain risks and uncertainties inherent in the Company's business that could
- more -
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<PAGE>
cause actual results to differ materially from those projected. These factors
include, but are not limited to: success transition to volume production of MR
and GMR disk head products with profitable yields; the limited number of
customers and customer changes in short range and long range plans; dependence
on continued customer demand for the Company's inductive thin film products;
competitive pricing pressures; changes in business conditions affecting the
Company's financial position or results of operations which significantly
increase the Company's working capital needs; the Company's inability to
generate or obtain sufficient capital to fund its working capital needs; the
Company's ability to control inventory levels; domestic and international
competition in the Company's product areas; risks related to international
transactions; and general economic risks and uncertainties.
Applied Magnetics Corporation is an independent manufacturer of magnetic
recording heads, head-gimbal assemblies ("HGAs") and headstack assemblies
("HSAs") for computer hard disk drive. Founded in 1957, Applied Magnetics is the
oldest independent U.S. based supplier of disk heads to the merchant market.
Headquartered in Goleta, California, the Company employs over 5,700 around the
world, with facilities in Malaysia, Korea, Singapore and China. The Company's
worldwide web site can be found at www.appmag.com.
# # # #
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