<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
TELEBIT CORPORATION
(NAME OF ISSUER)
Common Stock, no par value
(TITLE OF CLASS OF SECURITIES)
87926F10
(CUSIP NUMBER)
Larry R. Carter
170 West Tasman Drive
San Jose, CA 95134
(408) 526-4000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS)
July 21, 1996
(DATE OF EVENT WHICH REQUIRES FILING
OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box. / /
Check the following box if a fee is being paid with the statement /X/.
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class.) (See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
(Continued on following pages)
- -------------------
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
<PAGE> 2
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE> 3
- ----------------------------------- ----------------------------------
CUSIP NO. 87926F10 13D
- ----------------------------------- ----------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Cisco Systems, Inc.
I.R.S. I.D. # 77-0059951
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) / / (b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
State of California
- ------------------------------------------------------------------------------
7 SOLE VOTING POWER
-------
NUMBER ----------------------------------------------------------------
OF 8 SHARED VOTING POWER
SHARES 2,262,103
BENEFICIALLY ----------------------------------------------------------------
OWNED BY 9 SOLE DISPOSITIVE POWER
REPORTING -------
PERSON ----------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
-------
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,262,103
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN
SHARES* / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
16.4%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT
<PAGE> 4
Neither the filing of this Schedule 13D nor any of its contents shall be deemed
to constitute an admission by Cisco Systems, Inc. that it is the beneficial
owner of any of the Common Stock referred to herein for purposes of Section
13(d) of the Securities Exchange Act of 1934, as amended (the "Act"), or for any
other purpose, and such beneficial ownership is expressly disclaimed.
<PAGE> 5
ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D relates to the common stock, no par
value (the "Issuer Common Stock"), of Telebit Corporation, a California
corporation ( "Telebit" or the "Issuer"). The principal executive offices of the
Issuer are located at One Executive Drive, Chelmsford, MA 01824.
ITEM 2. IDENTITY AND BACKGROUND.
(a) The name of the person filing this statement is Cisco Systems, Inc.,
a California corporation ("Cisco").
(b) The address of the principal office of Cisco is 170 West Tasman
Drive, San Jose, California 95134.
(c) Cisco is a leading supplier of high-performance, multimedia,
multiprotocal internetworking solutions. Cisco technology is used to build
enterprise-wide networks that link geographically dispersed local-area and
wide-area networks to form a single information infrastructure. Cisco products
include software-based routers, bridges, workgroup systems, ATM switches, access
servers and router management applications. Set forth in Schedule A is the name
and present principle occupation or employment and the name, principal business
and address of any corporation or other organization in which such employment is
conducted, of each of Cisco's directors and executive officers, as of the date
hereof.
(d) During the past five years, neither Cisco nor, to Cisco's best
knowledge, any person named in Schedule A to this Statement, has been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) During the past five years, neither Cisco nor, to Cisco's best
knowledge, any person named in Schedule A to this Statement, was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
as a result of which such person was or is subject to a judgment, decree or
final order enjoining future violations of or prohibiting or mandating activity
subject to Federal or State securities laws or finding any violation with
respect to such laws.
(f) Not applicable.
<PAGE> 6
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to an Agreement and Plan of Reorganization dated July 21,
1996 (the "Reorganization Agreement"), among Cisco, Cobra Acquisition
Corporation, a California corporation and wholly-owned subsidiary of Cisco
("Merger Sub") and the Issuer, and subject to the conditions set forth therein
(including approval by the shareholders of the Issuer), Merger Sub will be
merged with and into the Issuer (the "Merger"), with each share of Issuer Common
Stock and certain outstanding options therefor being converted into the right to
receive $13.35 per share. The aggregate cash consideration to be paid by Cisco
is approximately $184,400,000. The source of the consideration for the Merger is
Cisco's working capital. Cisco will also assume certain outstanding options of
the Issuer. The foregoing summary of the Merger is qualified in its entirety by
reference to the copy of the Reorganization Agreement included as Exhibit 1 to
this Schedule 13D and incorporated herein in its entirety by reference.
ITEM 4. PURPOSE OF TRANSACTION.
(a) - (b) As described in Item 3 above, this schedule relates to the Merger
of Merger Sub, a wholly-owned subsidiary of Cisco, with and into Issuer in a
statutory merger pursuant to the California Corporations Code. At the effective
time of the Merger, the separate existence of Merger Sub will cease to exist and
Issuer will continue as the surviving corporation and as a wholly-owned
subsidiary of Cisco (the "Surviving Corporation").
As an inducement to Cisco to enter into the Reorganization Agreement,
each shareholder who is a party to the Voting Agreement, dated as of July 21,
1996 (the "Voting Agreement"), among the parties thereto (collectively, the
"Voting Agreement Shareholders") and Cisco, has, by executing the Voting
Agreement, irrevocably appointed Cisco (or any nominee of Cisco) as his, hers or
its lawful attorney and proxy. Such proxy gives Cisco the limited right to vote
each of the 2,262,103 shares (the "Shares") of Issuer Common Stock beneficially
and collectively owned by the Voting Agreement Shareholders in all matters
related to the Merger and the sale of certain assets by the Issuer to a third
party pursuant to an Asset Purchase Agreement dated July 21, 1996 (the "Asset
Transaction"). The Voting Agreement Shareholders and the number of shares
beneficially owned by each of them is set forth in Schedule B hereto which is
hereby incorporated by reference. In exercising its right to vote the Shares as
lawful attorney and proxy of the Voting Agreement Shareholders, Cisco (or any
nominee of Cisco) will be limited, at every Telebit shareholders meeting and
every written consent in lieu of such meeting, to vote the Shares (i) in favor
of approval of the Merger, the Reorganization Agreement and the Asset
Transaction and in favor of any matter that could reasonably be expected to
facilitate the Merger and the Asset Transaction and (ii) against any proposal
for any recapitalization, merger, sale of assets or other business combination
(other than the Merger and the Asset Transaction) between the Issuer and
<PAGE> 7
any person or entity other than Cisco or any other action or agreement that
would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of Issuer under the Reorganization Agreement or
which could result in any of the conditions to Issuer's obligations under the
Reorganization Agreement not being fulfilled. The Voting Agreement Shareholders
may vote the Shares on all other matters. The Voting Agreement terminates upon
the earlier to occur of (i) such date and time as the Merger shall become
effective in accordance with the terms and provisions of the Reorganization
Agreement and (ii) six months after the date of termination of the
Reorganization Agreement (subject to certain exceptions). The foregoing summary
of the Voting Agreement is qualified in its entirety by reference to the copy of
the Voting Agreement included as Exhibit 2 to this Schedule 13D and incorporated
herein in its entirety by reference.
Pursuant to the Reorganization Agreement, Cisco and Issuer entered
into a Stock Option Agreement, dated July 21, 1996 ("Option Agreement"). The
Option Agreement grants Cisco the right, under certain conditions, to purchase
up to 2,071,000 shares of Issuer Common Stock at a price of $13.35 per share
subject to adjustment under certain specified conditions. Subject to certain
conditions, the Option Agreement may be exercised in whole or in part by Cisco
after the occurrence of any of the events described in Sections 7.3(b),
7.3(c)(i) and 7.3(c)(ii) of the Reorganization Agreement or if a Takeover
Proposal or Trigger Event is consummated as set forth in Section 7.3(d) of the
Reorganization Agreement. At any time during which the Option Agreement is
exercisable, Cisco shall have the right to sell to Issuer and Issuer shall be
obligated to repurchase from Cisco, and, subject to Section 7(c) of the Option
Agreement, Issuer shall have the right to repurchase from Cisco and Cisco shall
be obligated to sell to Issuer, all or any portion of the Issuer shares
purchased by Cisco pursuant to the Option Agreement. The foregoing summary of
the Option Agreement is qualified in its entirety by reference to the copy of
the Option Agreement included as Exhibit 3 to this Schedule 13D and incorporated
herein in its entirety by reference.
(c) Not applicable.
(d) Upon consummation of the Merger, the directors and officers of Merger
Sub shall be the initial directors and officers of the Surviving Corporation,
until their respective successors are duly elected or appointed and qualified.
(e) Other than as a result of the Merger described in Item 3 above, not
applicable.
(f) Not applicable.
(g) Upon consummation of the Merger, the Articles of Incorporation of
Merger Sub, as in effect immediately prior to the Merger, shall be the Articles
of Incorporation of the Surviving Corporation until thereafter amended as
provided by
<PAGE> 8
California Law and such Articles of Incorporation; provided, however, that
Article I of the Articles of Incorporation of the Surviving Corporation shall be
amended to change the name of the Surviving Corporation to a name other than
Telebit Corporation. Upon consummation of the Merger, the Bylaws of Merger Sub,
as in effect immediately prior to the Merger, shall be the Bylaws of the
Surviving Corporation until thereafter amended.
(h) - (i) If the Merger is consummated as planned, the Issuer Common Stock
will be deregistered under the Act and delisted from The Nasdaq National Market.
(j) Other than described above, Cisco currently has no plan or proposals
which relate to, or may result in, any of the matters listed in Items 4(a) - (j)
of Schedule 13D (although Cisco reserves the right to develop such plans).
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) - (b) As a result of the Voting Agreement, Cisco may be deemed to be
the beneficial owner of at least 2,262,103 shares of Issuer Common Stock. Such
Issuer Common Stock constitutes approximately 16.4% of the issued and
outstanding shares of Issuer Common Stock (assuming the exercise of certain
outstanding options).
Cisco has shared power to vote all of the Shares for the limited
purposes described above. Cisco does not have the sole power to vote or to
direct the vote or to dispose or to direct the disposition of any shares of
Issuer Common Stock. To the best of Cisco's knowledge, no shares of Issuer
Common Stock are beneficially owned by any of the persons named in Schedule A.
(c) Neither Cisco, nor, to the knowledge of Cisco, any person named in
Schedule A, has affected any transaction in the Issuer Common Stock during the
past 60 days.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Other than the Reorganization Agreement, Voting Agreement and Option
Agreement, to the best knowledge of Cisco, there are no contracts, arrangements,
<PAGE> 9
understandings or relationships (legal or otherwise) among the persons named in
Item 2 and between such persons and any person with respect to any securities of
the Issuer, including but not limited to transfer or voting of any of the
securities, finder's fees, joint ventures, loan or option arrangements, puts or
calls, guarantees of profits, division of profits or loss, or the giving or
withholding of proxies.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
The following documents are filed as exhibits:
1. Agreement and Plan of Reorganization, dated July 21,
1996, by and among Cisco Systems, Inc., a California
corporation, Cobra Acquisition Corporation, a California
corporation and wholly-owned subsidiary of Cisco Systems,
Inc., and Telebit Corporation, a California corporation.
2. Voting Agreement, dated July 21, 1996, by and among Cisco
Systems, Inc., a California corporation and certain
stockholders of Telebit Corporation, a California
corporation.
3. Stock Option Agreement, dated July 21, 1996, by and
between Cisco Systems, Inc., a California corporation,
and Telebit Corporation, a California corporation.
<PAGE> 10
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
Dated: August 9, 1996
CISCO SYSTEMS, INC.
By: /s/ Larry R. Carter
--------------------------------
Vice President, Finance and
Administration and Chief
Financial Officer
<PAGE> 11
SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS OF
CISCO SYSTEMS, INC.
Present Principle
Occupation Including
Name and Title Name of Employer
Larry R. Carter Vice President, Finance and Administration,
Chief Financial Officer and Secretary of Cisco
Systems, Inc.
John T. Chambers President, Chief Executive Officer and Director
of Cisco Systems, Inc.
Dr. Michael S. Frankel Director of Cisco Systems, Inc. and Vice
President and Division Director of SRI
International, 333 Ravenswood Avenue, Menlo
Park, CA 94025.
Dr. James F. Gibbons Director of Cisco Systems, Inc. and Dean,
School of Engineering, Stanford University,
Stanford, CA 94305.
Edward R. Kozel Vice President, Business Development, and
Chief Technical Officer of Cisco Systems, Inc.
Donald A. LeBeau Senior Vice President, Worldwide Sales of
Cisco Systems, Inc.
Richard M. Moley Director of Cisco Systems, Inc. and Vice
President and General Manager of StrataCom,
Inc., a wholly-owned subsidiary of Cisco
Systems, Inc.
John P. Morgridge Chairman of the Board of Directors of Cisco
Systems, Inc.
Robert L. Puette Director of Cisco Systems, Inc. and President
and Chief Executive Officer of NetFRAME
Systems, Inc., 1545 Barber Lane, Milpitas, CA
95035.
Carl Redfield Vice President, Manufacturing of Cisco Systems,
Inc.
<PAGE> 12
Masayoshi Son Director of Cisco Systems, Inc. and President
and Chief Executive Officer of SOFTBANK
Corporation, 3-42-3 Nihonbashi-Hamacho,
Chuo-Ku, Tokyo 103.
Donald T. Valentine Director of Cisco Systems, Inc. and Partner of
Sequoia Capital, 3000 Sand Hill
Road, #4-280, Menlo Park, CA 94025.
Selby Wellman Senior Vice President of Business Units
Steve M. West Director of Cisco Systems, Inc. and President of
Infotainment Business Unit/EDS, 5400 Legacy
Drive, H1-5C-61, Plano, TX 75024.
<PAGE> 13
SCHEDULE B
<TABLE>
<CAPTION>
Stockholder Shares Beneficially Owned
- ----------- -------------------------
<S> <C>
New Enterprise Associates VI, Limited Partnership
New Enterprise Associates III, Limited Partnership
New Enterprise Associates V, Limited Partnership
The Silverado Fund I Limited Partnership
C. Richard Kramlich
2490 Sand Hill Road
Menlo Park, CA 94025 956,282
James D. Norrod 561,891
Brian D. Cohen 210,491
Michael K. Ballard 282,834
John D. Kirwin 100,237
Mark R. Wilson 139,868
Scott J. Loftesness 10,500
=========
TOTAL 2,262,103
</TABLE>
<PAGE> 1
EXHIBIT 1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CISCO SYSTEMS, INC.,
COBRA ACQUISITION CORPORATION
AND
TELEBIT CORPORATION
July 21, 1996
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER...................................................... 2
1.1 The Merger.................................................. 2
1.2 Closing; Effective Time..................................... 2
1.3 Effect of the Merger........................................ 2
1.4 Articles of Incorporation; Bylaws........................... 2
1.5 Directors and Officers...................................... 3
1.6 Effect on Capital Stock..................................... 3
1.7 Surrender of Certificates................................... 3
1.8 No Further Ownership Rights in Target Common Stock.......... 5
1.9 Lost, Stolen or Destroyed Certificates...................... 5
1.10 Taking of Necessary Action; Further Action.................. 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF TARGET....................... 5
2.1 Organization, Standing and Power............................ 6
2.2 Capital Structure........................................... 7
2.3 Authority................................................... 8
2.4 SEC Documents; Financial Statements......................... 9
2.5 Absence of Certain Changes.................................. 10
2.6 Absence of Undisclosed Liabilities.......................... 10
2.7 Litigation.................................................. 10
2.8 Restrictions on Business Activities......................... 11
2.9 Governmental Authorization.................................. 11
2.10 Title to Property........................................... 11
2.11 Intellectual Property....................................... 11
2.12 Environmental Matters....................................... 13
2.13 Taxes....................................................... 14
2.14 Employee Benefit Plans...................................... 15
2.15 Certain Agreements Affected by the Merger................... 17
2.16 Employee Matters............................................ 17
2.17 Interested Party Transactions............................... 18
2.18 Insurance................................................... 18
2.19 Compliance With Laws........................................ 18
2.20 Brokers' and Finders' Fees.................................. 18
2.21 Proxy Statement............................................. 18
2.22 Opinion of Financial Advisor................................ 19
2.23 Vote Required............................................... 19
2.24 Board Approval.............................................. 19
2.25 Representations Complete.................................... 19
2.26 Effect of Asset Sale on Representations and Warranties...... 19
i.
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND
MERGER SUB........................................................ 20
3.1 Organization, Standing and Power................................. 20
3.2 Authority........................................................ 20
3.3 SEC Documents; Financial Statements.............................. 21
3.4 Litigation....................................................... 21
3.5 Proxy Statement.................................................. 22
3.6 Board Approval................................................... 22
3.7 Financing........................................................ 22
3.8 Broker's and Finders' Fees....................................... 22
3.9 Representations Complete......................................... 22
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME................................. 23
4.1 Conduct of Business of Target.................................... 23
4.2 No Solicitation.................................................. 26
ARTICLE V ADDITIONAL AGREEMENTS................................................ 28
5.1 Proxy Statement.................................................. 28
5.2 Meeting of Shareholders.......................................... 28
5.3 Access to Information............................................ 29
5.4 Confidentiality.................................................. 29
5.5 Public Disclosure................................................ 29
5.6 Consents; Cooperation............................................ 29
5.7 Other Operational Covenants...................................... 30
5.8 Legal Requirements............................................... 31
5.9 Employee Benefit Plans........................................... 31
5.10 Form S-8......................................................... 33
5.11 Option Agreement................................................. 33
5.12 Nasdaq Quotation................................................. 33
5.13 Indemnification.................................................. 34
5.14 Best Efforts and Further Assurances.............................. 35
ARTICLE VI CONDITIONS TO THE MERGER............................................ 35
6.1 Conditions to Obligations of Each Party to Effect the Merger..... 35
6.2 Additional Conditions to Obligations of Target................... 36
6.3 Additional Conditions to the Obligations of Acquiror and Merger
Sub.............................................................. 36
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.................................. 38
7.1 Termination...................................................... 38
7.2 Effect of Termination............................................ 39
</TABLE>
ii.
<PAGE> 4
7.3 Expenses and Termination Fees.................................. 39
7.4 Amendment...................................................... 42
7.5 Extension; Waiver.............................................. 42
ARTICLE VIII GENERAL PROVISIONS.............................................. 43
8.1 Non-Survival at Effective Time................................. 43
8.2 Notices........................................................ 43
8.3 Interpretation................................................. 44
8.4 Counterparts................................................... 44
8.5 Entire Agreement; Nonassignability; Parties in Interest........ 44
8.6 Severability................................................... 45
8.7 Remedies Cumulative............................................ 45
8.8 Governing Law.................................................. 45
8.9 Rules of Construction.......................................... 45
SCHEDULES
Target Disclosure Schedule
Schedule 2.10 - Target Real Property
Schedule 2.11 - Target Intellectual Property
Schedule 2.14 - Target Employee Plans
Schedule 5.9 - Outstanding Options
Schedule 6.3 - Required Employment Agreements
EXHIBITS
Exhibit A - Agreement of Merger
Exhibit B - Voting Agreement
Exhibit C - Option Agreement
iii.
<PAGE> 5
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of July 21, 1996, by and among Cisco Systems, Inc., a California
corporation ("Acquiror"), Cobra Acquisition Corporation, a California
corporation ("Merger Sub") and wholly owned subsidiary of Acquiror, and Telebit
Corporation, a California corporation ("Target").
RECITALS
A. The Boards of Directors of Target, Acquiror and Merger Sub have each
determined that it is in the best interests of their respective companies and
the shareholders of their respective companies that Target and Merger Sub
combine into a single company through the statutory merger of Merger Sub with
and into Target (the "Merger") and, in furtherance thereof, have approved the
Merger.
B. Pursuant to the Merger, among other things, the outstanding shares
of Target Common Stock, no par value ("Target Common Stock"), shall be converted
into thirteen dollars and thirty-five cents ($13.35) per share.
C. Target, Acquiror and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
D. Concurrent with the execution of this Agreement and as an inducement
to Acquiror and Merger Sub to enter into this Agreement, (a) Target and Acquiror
have entered into a stock option agreement dated the date hereof (the "Option
Agreement") providing for the purchase by Acquiror of newly-issued shares of
Target's Common Stock, and (b) certain shareholders of Target have on the date
hereof entered into a Voting Agreement in the form attached hereto as Exhibit B,
which provides that each such shareholder will vote the shares of Target's
Common Stock owned by such person to approve the Merger and against any
competing proposals.
E. Also, concurrent with the execution of this Agreement, Target and
Telebit (Newco) Inc., a Delaware corporation ("Newco"), have entered into an
Asset Purchase Agreement dated of even date herewith (the "Asset Purchase
Agreement"), which agreement provides for the sale of certain of Target's assets
to Newco and the assumption of certain of Target's obligations and liabilities
by Newco.
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties agree as follows:
<PAGE> 6
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement, the Agreement of
Merger attached hereto as Exhibit A (the "Agreement of Merger") and the
applicable provisions of the California Corporations Code ("California Law"),
Merger Sub shall be merged with and into Target, the separate corporate
existence of Merger Sub shall cease and Target shall continue as the surviving
corporation. Target as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "Surviving Corporation."
1.2 Closing; Effective Time. The closing of the transactions
contemplated hereby (the "Closing") shall take place as soon as practicable (and
in any event within two business days) after the satisfaction or waiver of each
of the conditions set forth in Article VI hereof or at such other time as the
parties hereto agree (the "Closing Date"). The Closing shall take place at the
offices of Brobeck, Phleger & Harrison LLP, Palo Alto, California, or at such
other location as the parties hereto agree. On the Closing Date, the parties
hereto shall cause the Merger to be consummated by filing the Agreement of
Merger with the Secretary of State of the State of California, in accordance
with the relevant provisions of California Law (the time of such filing being
the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Agreement of Merger and the
applicable provisions of California Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Target and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Target and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by California Law and such Articles of Incorporation; provided,
however, that Article I of the Articles of Incorporation of the Surviving
Corporation shall be amended to change the corporate name of the Surviving
Corporation to a name other than Target's present corporate name or a corporate
name closely resembling Target's present corporate name.
(b) The Bylaws of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
2.
<PAGE> 7
1.5 Directors and Officers. At the Effective Time, the directors of
the Merger Sub shall be the initial directors of the Surviving Corporation, who
shall survive until their successors are duly elected or appointed and
qualified, and the officers of Merger Sub shall be the initial officers of the
Surviving Corporation, who shall survive until their respective successors are
duly elected or appointed and qualified.
1.6 Effect on Capital Stock. By virtue of the Merger and without any
action on the part of Merger Sub, Target or the holders of any of the following
securities:
(a) Conversion of Target Common Stock. At the Effective Time,
each share of Target Common Stock issued and outstanding immediately prior to
the Effective Time (other than any shares of Target Common Stock to be canceled
pursuant to Section 1.6(b)) will be canceled and extinguished and be converted
automatically into the right to receive thirteen dollars and thirty-five cents
($13.35) (the "Merger Consideration").
(b) Cancellation of Target Common Stock Owned by Acquiror or
Target. At the Effective Time, all shares of Target Common Stock that are owned
by Target as treasury stock and each share of Target Common Stock owned by
Acquiror or any direct or indirect wholly owned subsidiary of Acquiror or of
Target immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) Capital Stock of Merger Sub. At the Effective Time, each
share of Common Stock, no par value, of Merger Sub ("Merger Sub Common Stock")
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock, $.01 par value, 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.
(d) Adjustments to Merger Consideration. The Merger
Consideration shall be appropriately adjusted to reflect fully the effect of any
stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Target Common Stock),
reorganization, recapitalization or other like change with respect to Target
Common Stock occurring after the date hereof and prior to the Effective Time.
1.7 Surrender of Certificates.
(a) Exchange Agent. The First National Bank of Boston shall
act as exchange agent (the "Exchange Agent") in the Merger.
3.
<PAGE> 8
(b) Acquiror to Provide Cash. Promptly after the Effective
Time, Acquiror shall deliver to the Exchange Agent for exchange in accordance
with this Article 1, through such reasonable procedures as Acquiror may adopt,
cash in an amount sufficient to permit payment (i) pursuant to Section 1.6(a) in
exchange for shares of Target Common Stock outstanding immediately prior to the
Effective Time and (ii) pursuant to Section 5.9 upon cancellation of outstanding
vested options to acquire shares of Target Common Stock.
(c) Exchange Procedures. Promptly after the Effective Time,
the Surviving Corporation shall cause to be mailed to each bolder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
Effective Time represented outstanding shares of Target Common Stock, whose
shares were converted into the right to receive cash pursuant to Section 1.6,
(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
receipt of the Certificates by the Exchange Agent, and shall be in such form and
have such other provisions as Acquiror may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for cash. Upon surrender of a Certificate for cancellation to the Exchange Agent
or to such other agent or agents as may be appointed by Acquiror, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, the holder of such Certificate shall be entitled
to receive in exchange therefor cash representing the payment which such holder
has the right to receive pursuant to Section 1.6, and the Certificate so
surrendered shall forthwith be canceled. Until so surrendered, each outstanding
Certificate that, prior to the Effective Time, represented shares of Target
Common Stock will be deemed from and after the Effective Time, for all corporate
purposes, other than the payment of dividends, to evidence the right to receive
an amount in cash in accordance with Section 1.6.
(d) Transfers of Ownership. If any payment pursuant to Section
1.6 is to be made to a name other than that in which the Certificate surrendered
in exchange therefor is registered, it will be a condition of the payment
thereof that the Certificate so surrendered will be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
payment will have paid to Acquiror or any agent designated by it any transfer or
other taxes required by reason of the payment of such cash to any name other
than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of Acquiror or any agent designated by it that
such tax has been paid or is not payable.
(e) No Liability. Notwithstanding anything to the contrary in
this Section 1.7, none of the Exchange Agent, the Surviving Corporation or any
party hereto shall be liable to any person for any amount properly paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
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1.8 No Further Ownership Rights in Target Common Stock. All cash paid
upon the surrender for exchange of shares of Target Common Stock in accordance
with the terms hereof shall be deemed to have been paid in full satisfaction of
all rights pertaining to such shares of Target Common Stock, and there shall be
no further registration of transfers on the records of the Surviving Corporation
of shares of Target Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
pay in exchange for such lost, stolen or destroyed Certificates, upon the making
of an affidavit of that fact by the holder thereof, such amount in cash as may
be required pursuant to Section 1.6; provided, however, that Acquiror may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Acquiror, the Surviving Corporation or the Exchange Agent with respect
to the Certificates alleged to have been lost, stolen or destroyed.
1.10 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Target and Merger Sub, the officers and directors of Target
and Merger Sub are fully authorized in the name of their respective corporations
or otherwise to take, and will take, all such lawful and necessary action, so
long as such action is not inconsistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TARGET
In this Agreement, any reference to any event, change, condition or
effect being "material" with respect to any entity or group of entities means
any material event, change, condition or effect related to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business, operations or results of operations of such entity or
group of entities. In this Agreement, any reference to a "Material Adverse
Effect" with respect to any entity or group of entities means any event, change
or effect that is materially adverse to the condition (financial or otherwise),
properties, assets, liabilities, business, operations or results of operations
of such entity and its subsidiaries, taken as a whole; provided, however, that a
"Material Adverse Effect" with respect to Target shall not include any adverse
effect on the revenues or gross margins of Target (or the direct consequences
thereof) following the date of this Agreement which is attributable to a delay
of, reduction in or cancellation or change in the terms of product orders by
customers of Target. In the event of any litigation regarding the foregoing
provision, Target shall be required to sustain the burden of reasonably
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demonstrating that any such delay, reduction, cancellation or change is directly
attributable to the transactions contemplated by this Agreement.
In this Agreement, any reference to a party's "knowledge" means such
party's actual knowledge after reasonable inquiry of officers, directors and
other employees of such party charged with senior administrative or operational
responsibility for such matters. Also, for purposes of this Article II, the
transactions contemplated by the Asset Purchase Agreement, the Preferred Stock
Purchase and Noteholder Rights Agreement and the MICA License (as such terms are
defined in the Asset Purchase Agreement) shall not be deemed to be "transactions
contemplated by this Agreement."
Except as disclosed in a document of even date herewith and delivered
by Target to Acquiror prior to the execution and delivery of this Agreement and
referring to the representations and warranties in this Agreement (the "Target
Disclosure Schedule") and except for (i) the effect of the execution by Target
of the Asset Purchase Agreement and the Preferred Stock Purchase and Noteholder
Rights Agreement concurrently with the execution of this Agreement, (ii)
Target's agreement to consummate the transactions, and execute and perform the
other documents and instruments, contemplated by such other agreements
(including, without limitation, the execution and delivery of the MICA License),
and (iii) Target's performance of its obligations under such other agreements
(all such matters taken together, the "Pre-Closing Asset Transaction"), Target
represents and warrants to Acquiror and Merger Sub as follows:
2.1 Organization, Standing and Power. Each of Target and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Each of Target and
its subsidiaries has the corporate power to own its properties and to carry on
its business as now being conducted and as proposed to be conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified and in good standing would have a Material
Adverse Effect on Target. Target has delivered (or as to the subsidiary
documents, made available) a true and correct copy of the Restated Articles of
Incorporation, as amended (the "Articles of Incorporation"), and Bylaws, as
amended, or other charter documents, as applicable, of Target and each of its
subsidiaries, each as amended to date, to Acquiror. Neither Target nor any of
its subsidiaries is in violation of any of the provisions of its Articles of
Incorporation or Bylaws or equivalent organizational documents. Target is the
record or beneficial owner of all outstanding shares of capital stock of each of
its subsidiaries and all such shares are duly authorized, validly issued, fully
paid and nonassessable. All of the outstanding shares of capital stock of each
such subsidiary are owned by Target free and clear of all liens, charges, claims
or encumbrances or rights of others. There are no outstanding subscriptions,
options, warrants, puts, calls, rights, exchangeable or convertible securities
or other commitments or agreements of any character relating to the issued or
unissued capital stock or other securities of any such subsidiary, or otherwise
obligating Target or any such subsidiary to issue, transfer, sell, purchase,
redeem or otherwise acquire any such securities. Except as disclosed in the
Target SEC Documents (as defined in Section
6.
<PAGE> 11
2.4), Target does not directly or indirectly own any equity or similar interest
in, or any interest convertible or exchangeable or exercisable for, any equity
or similar interest in, any corporation, partnership, joint venture or other
business association or entity.
2.2 Capital Structure. The authorized capital stock of Target consists
of 40,000,000 shares of Common Stock, no par value, and no shares of Preferred
Stock, no par value, of which there were issued and outstanding as of the close
of business on July 18, 1996, 13,806,692 shares of Common Stock and no shares of
Preferred Stock. There are no other outstanding shares of capital stock or
voting securities of Target and no outstanding commitments to issue any shares
of capital stock or voting securities of Target after July 18, 1996 other than
pursuant to the Option Agreement, the exercise of options or purchase rights
outstanding as of such date under (i) the following stock option plans of Target
(collectively, the "Target Option Plans"): the Target 1985 Employee Stock
Incentive Program (the "1985 Plan), the assumed 1987 Octocom Stock Option Plan
(the "1987 Plan"), the 1994 Non-Employee Director Stock Option Plan (the "1994
Plan") and the 1995 Stock Option Plan (the "1995 Plan") or (ii) the Target 1990
Employee Stock Purchase Plan (the "Target ESPP"). All outstanding shares of
Target Common Stock are duly authorized, validly issued, fully paid and
nonassessable and are free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof and restrictions
imposed by applicable securities laws, and are not subject to preemptive rights
or rights of first refusal created by statute, the Articles of Incorporation or
Bylaws of Target or any agreement to which Target is a party or by which it is
bound. As of the close of business on July 18, 1996, Target has reserved (i)
4,300,225 shares of Common Stock for issuance to employees, consultants and
directors pursuant to the Target Stock Option Plans, of which 1,969,722 shares
have been issued pursuant to option exercises or direct stock purchases,
1,761,062 shares are subject to outstanding, unexercised options, and no shares
are subject to outstanding stock purchase rights, and (ii) 660,000 shares of
Common Stock for issuance to employees pursuant to the Target ESPP, of which
452,663 shares have been issued. Since July 18, 1996, Target has not (i) issued
or granted additional options under the Target Stock Option Plans, or (ii)
accepted contributions to or enrollments in the Target ESPP. Except for (i) the
rights created pursuant to this Agreement, the Option Agreement, the Employment
Agreements listed in Schedule 2.14, the Target Stock Option Plans and the Target
ESPP and (ii) Target's right to repurchase any unvested shares under the Target
Stock Option Plans, there are no other options, warrants, calls, rights,
commitments or agreements of any character to which Target is a party or by
which it is bound obligating Target to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of capital stock of Target or obligating Target to grant, extend,
accelerate the vesting of, change the price of, or otherwise amend or enter into
any such option, warrant, call, right, commitment or agreement. There are no
contracts, commitments or agreements relating to voting, purchase or sale of
Target's capital stock (i) between or among Target and any of its shareholders
and (ii) to the best of Target's knowledge, between or among any of Target's
shareholders, except for the shareholders who have executed the Voting
Agreements referred to in Recital D of this Agreement. The terms of the Target
Stock Option Plans permit the assumption or substitution of options to purchase
Acquiror
7.
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Common Stock as provided in this Agreement, without the consent or approval of
the holders of such securities, the Target shareholders, or otherwise and
without any acceleration of the exercise schedule or vesting provisions in
effect for those options (except as otherwise provided in one or more of the
Employment Agreements listed in Schedule 2.14). The current "Purchase Period"
(as defined in the Target ESPP) commenced under the Target ESPP on June 1, 1996
and will end prior to the Effective Time as provided in this Agreement, and
except for the purchase rights granted on such commencement date to participants
in the current Purchase Period, there are no other purchase rights or options
outstanding under the Target ESPP. True and complete copies of all agreements
and instruments presently in effect relating to or issued under the Target Stock
Option Plans or Target ESPP have been delivered or made available to Acquiror
and such agreements and instruments have not been amended, modified or
supplemented, and there are no agreements to amend, modify or supplement such
agreements or instruments in any case from the form delivered to Acquiror.
2.3 Authority. Target has all requisite corporate power and authority
to enter into this Agreement and the Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Option Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Target, subject only to the approval of the
Merger by Target's shareholders as contemplated by Section 6.1(a). Each of this
Agreement and the Option Agreement has been duly executed and delivered by
Target and constitutes the valid and binding obligation of Target enforceable
against Target in accordance with its terms except as enforceability may be
limited by bankruptcy and other laws affecting the rights and remedies of
creditors generally and general principles of equity. The execution and delivery
of this Agreement and the Option Agreement by Target does not, and the
consummation of the transactions contemplated hereby or by the Option Agreement
will not, conflict with, or result in any violation of, or default under (with
or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under (i) any provision of the Articles of Incorporation or Bylaws of
Target or any of its subsidiaries, as amended, or (ii) any material mortgage,
indenture, lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Target or any of its subsidiaries or any of their
properties or assets, except where such conflict, violation, default,
termination, cancellation or acceleration with respect to the foregoing
provisions of (ii) would not have had and would not reasonably be expected to
have a Material Adverse Effect on Target. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality ("Governmental Entity") is required by or with respect to Target
or any of its subsidiaries in connection with the execution and delivery of this
Agreement, the Option Agreement, or the consummation of the transactions
contemplated hereby and thereby, except for (i) the filing of the Agreement of
Merger as provided in Section 1.2, (ii) the filing with the Securities and
Exchange Commission (the "SEC") and the National Association of Securities
Dealers, Inc. (the "NASD") of the Proxy Statement (as defined
8.
<PAGE> 13
in Section 2.23) relating to the Target Shareholders Meeting (as defined in
Section 2.21), (iii) such other filings as may be required under the Securities
Exchange Act of 1934, as amended (the "Securities Exchange Act"), (iv) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state securities laws and the
securities laws of any foreign country, (v) such filings as may be required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
("HSR"), and (vi) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material Adverse
Effect on Target and would not prevent, or materially alter or delay any of the
transactions contemplated by this Agreement or the Option Agreement.
2.4 SEC Documents; Financial Statements. Target has furnished or made
available to Acquiror a true and complete copy of each statement, report,
registration statement (with the prospectus in the form filed pursuant to Rule
424(b) of the Securities Act of 1933, as amended (the "Securities Act")),
definitive proxy statement and other filing filed with the SEC by Target since
April 27, 1990, and, prior to the Effective Time, Target will have furnished
Acquiror with, or made available to Acquiror, true and complete copies of any
additional documents filed with the SEC by Target prior to the Effective Time
(collectively, the "Target SEC Documents"). In addition, Target has delivered or
made available to Acquiror all exhibits to the Target SEC Documents filed prior
to the date hereof, and will promptly deliver to Acquiror all exhibits to any
additional Target SEC Documents filed prior to the Effective Time. All documents
required to be filed as exhibits to the Target SEC Documents have been so filed,
and all material contracts so filed as exhibits are in full force and effect,
except those which have expired or been terminated in accordance with their
terms, and neither Target nor any of its subsidiaries is in default thereunder,
except where default would not have a Material Adverse Effect. As of their
respective filing dates, the Target SEC Documents complied in all material
respects with the requirements of the Securities Exchange Act and the Securities
Act, and as of their respective dates none of the Target SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances in which they were made, not misleading, except to
the extent corrected by a subsequently filed Target SEC Document. The financial
statements of Target, including the notes thereto, included in the Target SEC
Documents (the "Target Financial Statements") were complete and correct in all
material respects as of their respective dates, complied as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto as of their respective
dates, and have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent throughout the periods indicated and
consistent with each other (except as may be indicated in the notes thereto or,
in the case of unaudited statements included in Quarterly Reports on Form 10-Q,
as permitted by Form 10-Q of the SEC). The Target Financial Statements fairly
present the consolidated financial condition and operating results of Target and
its subsidiaries at the dates and during the periods indicated therein (subject,
in the case of unaudited statements, to normal, recurring year-end adjustments).
There has been no change in
9.
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Target accounting policies except as described in the notes to the Target
Financial Statements.
2.5 Absence of Certain Changes. Since March 30, 1996 (the "Target
Balance Sheet Date"), Target has conducted its business in the ordinary course
consistent with past practice and there has not occurred: (i) any change, event
or condition (whether or not covered by insurance) that has resulted in, or
might reasonably be expected to result in, a Material Adverse Effect to Target;
(ii) any acquisition, sale or transfer of any material asset of Target or any of
its subsidiaries other than in the ordinary course of business and consistent
with past practice; (iii) any material change in accounting methods or practices
(including any change in depreciation or amortization policies or rates) by
Target or any material revaluation by Target of any of its or any of its
subsidiaries' assets; (iv) any declaration, setting aside, or payment of a
dividend or other distribution with respect to the shares of Target, or any
direct or indirect redemption, purchase or other acquisition by Target of any of
its shares of capital stock; (v) any material contract entered into by Target or
any of its subsidiaries, other than in the ordinary course of business and as
provided to Acquiror, or any material amendment or termination of, or default
under, any material contract to which Target or any of its subsidiaries is a
party or by which it is bound; or (vi) any negotiation or agreement by Target or
any of its subsidiaries to do any of the things described in the preceding
clauses (i) through (v) (other than negotiations with Acquiror and its
representatives regarding the transactions contemplated by this Agreement).
2.6 Absence of Undisclosed Liabilities. Target has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet included in Target's Quarterly Report on Form 10-Q for the period
ended March 30, 1996 (the "Target Balance Sheet"), (ii) those incurred in the
ordinary course of business and not required to be set forth in the Target
Balance Sheet under generally accepted accounting principles, (iii) those
incurred in the ordinary course of business since the Target Balance Sheet Date
and consistent with past practice; and (iv) those incurred in connection with
the execution of this Agreement and the Option Agreement.
2.7 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Target or any of its
subsidiaries, threatened against Target or any of its subsidiaries or any of
their respective properties or any of their respective officers or directors (in
their capacities as such) that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on Target. There is no
judgment, decree or order against Target or any of its subsidiaries, or, to the
knowledge of Target and its subsidiaries, any of their respective directors or
officers (in their capacities as such), that could reasonably be expected to
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement, or that could reasonably be expected to have a Material
Adverse Effect on Target.
10.
<PAGE> 15
2.8 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon Target or any of
its subsidiaries which has or reasonably could be expected to have the effect of
prohibiting or materially impairing any current or future business practice of
Target or any of its subsidiaries, any acquisition of property by Target or any
of its subsidiaries or the conduct of business by Target or any of its
subsidiaries.
2.9 Governmental Authorization. Target and each of its subsidiaries
have obtained each federal, state, county, local or foreign governmental
consent, license, permit, grant, or other authorization of a Governmental Entity
(i) pursuant to which Target or any of its subsidiaries currently operates or
holds any interest in any of its properties or (ii) that is required for the
operation of Target's or any of its subsidiaries' business or the holding of any
such interest ((i) and (ii) herein collectively called "Target Authorizations"),
and all of such Target Authorizations are in full force and effect, except where
the failure to obtain or have any of such Target Authorizations could not
reasonably be expected to have a Material Adverse Effect on Target.
2.10 Title to Property. Target and its subsidiaries have good and
valid title to all of their respective properties, interests in properties and
assets, real and personal, reflected in the Target Balance Sheet or acquired
after the Target Balance Sheet Date (except properties, interests in properties
and assets sold or otherwise disposed of since the Target Balance Sheet Date in
the ordinary course of business), or in the case of leased properties and
assets, valid leasehold interests in, free and clear of all mortgages, liens,
pledges, charges or encumbrances of any kind or character, except (i) the lien
of current taxes not yet due and payable, (ii) such imperfections of title,
liens and easements as do not and will not materially detract from or interfere
with the use of the properties subject thereto or affected thereby, or otherwise
materially impair business operations involving such properties, (iii) liens
securing debt which is reflected on the Target Balance Sheet, and (iv) liens
that in the aggregate would not have a Material Adverse Effect. The plants,
property and equipment of Target and its subsidiaries that are used in the
operations of their businesses are in good operating condition and repair,
ordinary wear and tear excepted. All properties used in the operations of Target
and its subsidiaries are reflected in the Target Balance Sheet to the extent
generally accepted accounting principles require the same to be reflected.
Schedule 2.10 identifies each parcel of real property owned or leased by Target
or any of its subsidiaries.
2.11 Intellectual Property.
(a) Target and its subsidiaries own, or are licensed or
otherwise possess legally enforceable rights to use all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
maskworks, net lists, schematics, technology, know-how, trade secrets,
inventory, ideas, algorithms, processes, computer software programs or
applications (in both source code and object code form), and tangible or
intangible proprietary information or material ("Intellectual Property") that
are used in the business of Target and its subsidiaries, except to the extent
that the
11.
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failure to have such rights have not had and would not reasonably be expected to
have a Material Adverse Effect on Target.
(b) Schedule 2.11 lists (i) all patents and patent applications
and all registered and unregistered trademarks, trade names and service marks,
registered and unregistered copyrights, and maskworks, which Target considers to
be material to its business and included in the Intellectual Property, including
the jurisdictions in which each such Intellectual Property right has been issued
or registered or in which any application for such issuance and registration has
been filed, (ii) all licenses, sublicenses and other agreements as to which
Target is a party and pursuant to which any person is authorized to use any
Intellectual Property (except for non-material licenses entered into by Target
in the ordinary course of business), and (iii) all licenses, sublicenses and
other agreements as to which Target is a party and pursuant to which Target is
authorized to use any third party patents, trademarks or copyrights, including
software ("Third Party Intellectual Property Rights") which are incorporated in,
are, or form a part of any Target product that is material to its business.
(c) There is no unauthorized use, disclosure, infringement or
misappropriation of any Intellectual Property rights of Target or any of its
subsidiaries, any trade secret material to Target or any of its subsidiaries, or
any Intellectual Property right of any third party to the extent licensed by or
through Target or any of its subsidiaries, by any third party, including any
employee or former employee of Target or any of its subsidiaries. Neither Target
nor any of its subsidiaries has entered into any agreement to indemnify any
other person against any charge of infringement of any Intellectual Property,
other than indemnification provisions contained in purchase orders and other
agreements arising in the ordinary course of business.
(d) Target is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations under this
Agreement, in breach of any license, sublicense or other agreement relating to
the Intellectual Property or Third Party Intellectual Property Rights, the
breach of which would have a Material Adverse Effect on Target.
(e) All patents, registered trademarks, service marks and
copyrights held by Target are valid and subsisting. Target (i) is not a party to
any pending suit, action or proceeding which involves a claim of infringement of
any patents, trademarks, service marks, copyrights or violation of any trade
secret or other proprietary right of any third party and (ii) has not brought
any action, suit or proceeding for infringement of Intellectual Property or
breach of any license or agreement involving Intellectual Property against any
third party. The manufacture, marketing, licensing or sale of Target's products
does not infringe any patent, trademark, service mark, copyright, trade secret
or other proprietary right of any third party, except where such infringement
would not have a Material Adverse Effect on Target.
(f) Target has secured valid written assignments from all
consultants and employees who contributed to the creation or development of
12.
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Intellectual Property of the rights to such contributions that Target does not
already own by operation of law.
(g) Target believes it has taken all reasonable and appropriate
steps to protect and preserve the confidentiality of all Intellectual Property
not otherwise protected by patents, or patent applications or copyright
("Confidential Information"). To Target's knowledge, all use, disclosure or
appropriation of Confidential Information owned by Target by or to a third party
has been pursuant to the terms of a written agreement between Target and such
third party. To Target's knowledge, all use, disclosure or appropriation of
Confidential Information not owned by Target has been pursuant to the terms of a
written agreement between Target and the owner of such Confidential Information,
or is otherwise lawful.
2.12 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any
federal, state or local laws, ordinances, codes, regulations, rules, policies
and orders that are intended to assure the protection of the environment, or
that classify, regulate, call for the remediation of, require reporting with
respect to, or list or define air, water, groundwater, solid waste, hazardous or
toxic substances, materials, wastes, pollutants or contaminants, or which are
intended to assure the safety of employees, workers or other persons, including
the public.
(ii) "Hazardous Materials" shall mean any toxic or
hazardous substance, material or waste or any pollutant or contaminant, or
infectious or radioactive substance or material, including without limitation,
those substances, materials and wastes defined in or regulated under any
Environmental and Safety Laws.
(iii) "Property" shall mean all real property leased or
owned by Target or its subsidiaries either currently or in the past.
(iv) "Facilities" shall mean all buildings and
improvements on the Property of Target or its subsidiaries.
(b) Target represents and warrants that, except in all cases as,
in the aggregate, would not have a Material Adverse Effect on Target, as
follows: (i) no methylene chloride or asbestos is contained in or has been used
at or released from the Facilities; (ii) all Hazardous Materials and wastes have
been disposed of in accordance with all Environmental and Safety Laws; (iii)
Target and its subsidiaries have received no notice (verbal or written) of any
noncompliance of the Facilities or its past or present operations with
Environmental and Safety Laws; (iv) no notices, administrative actions or suits
are pending or, to Target's knowledge, threatened relating to a violation of any
Environmental and Safety Laws; (v) neither Target nor its subsidiaries has been
notified in writing that it is a potentially responsible party under the federal
Comprehensive
13.
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Environmental Response, Compensation and Liability Act (CERCLA), or state analog
statute, arising out of events occurring prior to the Closing Date; (vi) to
Target's knowledge, there have not been in the past, and are not now, releases
by Target of any Hazardous Materials on, under or migrating to or from the
Facilities or Property; (vii) to Target's knowledge, there have not been in the
past, and are not now, any underground tanks or underground improvements at, on
or under the Property including without limitation, treatment or storage tanks,
sumps, or water, gas or oil wells; (viii) to Target's knowledge, there are no
polychlorinated biphenyls (PCBS) deposited, stored, disposed of or located on
the Property or Facilities or any equipment on the Property containing PCBs at
levels in excess of 50 parts per million; (ix) to Target's knowledge, there is
no formaldehyde on the Property or in the Facilities, nor any insulating
material containing urea formaldehyde in the Facilities; (x) the Facilities and
Target's and its subsidiaries uses and activities therein have at all times
complied with all Environmental and Safety Laws; and (xi) Target and its
subsidiaries have all the permits and licenses required to be issued and are in
full compliance with the terms and conditions of those permits.
2.13 Taxes. Except with respect to such exceptions as would not be
reasonably expected to have a Material Adverse Effect on Target:
Target has timely filed all Tax Returns required to be filed by it, has
timely filed or caused to be timely filed all Tax Returns required to be filed
by each of its subsidiaries for periods during which such corporations were
subsidiaries of Target, has paid all Taxes shown thereon to be due and has
provided adequate accruals in accordance with generally accepted accounting
principles in its financial statements for any Taxes not yet due and payable.
Except as disclosed in the SEC Documents, (i) no material claim for Taxes has
become a lien against the property of Target or any of its subsidiaries or is
being asserted against Target or any of its subsidiaries other than liens for
Taxes not yet due and payable, (ii) no audit of any Tax Return of Target or any
of its subsidiaries is being conducted by a Tax authority, (iii) no extension of
the statute of limitations on the assessment of any Taxes has been granted by
Target or any of its subsidiaries and is currently in effect, (iv) there is no
agreement, contract or arrangement to which Target or any of its subsidiaries is
a party that may result in the payment of any amount that would not be
deductible by reason of Sections 280G of the Code. Target has not been and will
not be required to include any material adjustment in Taxable income for any Tax
period (or portion thereof) pursuant to Section 481 of the Code or any
comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the Merger, and (v)
neither Target nor any of its subsidiaries is a party to any tax sharing or tax
allocation agreement nor does Target or any of its subsidiaries owe any amount
under any such agreement. For purposes of this Agreement, the following terms
have the following meanings: "Tax" (and, with correlative meaning, "Taxes" and
"Taxable") means (i) any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, environmental or windfall profit tax, custom, duty or other
tax, governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed
14.
<PAGE> 19
by any Governmental Entity (a "Tax authority") responsible for the imposition of
any such tax (domestic or foreign), (ii) any liability for the payment of any
amounts of the type described in (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any Taxable period and
(iii) any liability for the payment of any amounts of the type described in (i)
or (ii) as a result of any obligation to indemnify any other person. As used
herein, "Tax Return" shall mean any return, statement, report or form
(including, without limitation,) estimated Tax returns and reports, withholding
Tax returns and reports and information reports and returns required to be filed
with respect to Taxes.
2.14 Employee Benefit Plans.
(a) Schedule 2.14 lists, with respect to Target, any subsidiary
of Target and any trade or business (whether or not incorporated) which is
treated as a single employer with Target (an "ERISA Affiliate") within the
meaning of Section 414(b), (c), (m) or (o) of the Code, (i) all material
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), (ii) each loan to a
non-officer employee in excess of $50,000, loans to officers and directors and
any stock option, stock purchase, phantom stock, stock appreciation right,
supplemental retirement, severance, sabbatical, medical, dental, vision care,
disability, employee relocation, cafeteria benefit (Code section 125) or
dependent care (Code Section 129), life insurance or accident insurance plans,
programs or arrangements, (iii) all bonus, pension, profit sharing, savings,
deferred compensation or incentive plans, programs or arrangements, (iv) other
fringe or employee benefit plans, programs or arrangements that apply to senior
management of Target and that do not generally apply to all employees, and (v)
any current or former employment or executive compensation or severance
agreements, written or otherwise, as to which unsatisfied obligations of Target
of greater than $50,000 remain for the benefit of, or relating to, any present
or former employee, consultant or director of Target (together, the "Target
Employee Plans").
(b) Target has furnished to Acquiror a copy of each of the
Target Employee Plans and related plan documents (including trust documents,
insurance policies or contracts, employee booklets, summary plan descriptions
and other authorizing documents, and, to the extent still in its possession, any
material employee communications relating thereto) and has, with respect to each
Target Employee Plan which is subject to ERISA reporting requirements, provided
copies of the Form 5500 reports filed for the last three plan years. Any Target
Employee Plan intended to be qualified under Section 401(a) of the Code has
either obtained from the Internal Revenue Service a favorable determination
letter as to its qualified status under the Code, including all amendments to
the Code effected by the Tax Reform Act of 1986 and subsequent legislation, or
has applied to the Internal Revenue Service for such a determination letter
prior to the expiration of the requisite period under applicable Treasury
Regulations or Internal Revenue Service pronouncements in which to apply for
such determination letter and to make any amendments necessary to obtain a
favorable determination. Target has also furnished Acquiror with the most recent
Internal
15.
<PAGE> 20
Revenue Service determination letter issued with respect to each such Target
Employee Plan, and nothing has occurred since the issuance of each such letter
which could reasonably be expected to cause the loss of the tax-qualified status
of any Target Employee Plan subject to Code Section 401(a).
(c) (i) None of the Target Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person; (ii) there has
been no "prohibited transaction," as such term is defined in Section 406 of
ERISA and Section 4975 of the Code, with respect to any Target Employee Plan,
which could reasonably be expected to have, in the aggregate, a Material Adverse
Effect; (iii) each Target Employee Plan has been administered in accordance with
its terms and in compliance with the requirements prescribed by any and all
statutes, rules and regulations (including ERISA and the Code), except as would
not have, in the aggregate, a Material Adverse Effect, and Target and each
subsidiary or ERISA Affiliate have performed all obligations required to be
performed by them under, are not in any respect in default under or violation
of, and have no knowledge of any default or violation by any other party to, any
of the Target Employee Plans, which default or violation could reasonably be
expected to have a Material Adverse Effect on Target; (iv) neither Target nor
any subsidiary or ERISA Affiliate is subject to any liability or penalty under
Sections 4976 through 4980 of the Code or Title I of ERISA with respect to any
of the Target Employee Plans, which liability or penalty could be reasonably
expected to have a Material Adverse Effect on Target; (v) all material
contributions required to be made by Target or any subsidiary or ERISA Affiliate
to any Target Employee Plan have been made on or before their due dates and a
reasonable amount has been accrued for contributions to each Target Employee
Plan for the current plan years; (vi) with respect to each Target Employee Plan,
no "reportable event" within the meaning of Section 4043 of ERISA (excluding any
such event for which the thirty (30) day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event described in
Section 4062, 4063 or 4041 of ERISA has occurred; and (vii) no Target Employee
Plan is covered by, and neither Target nor any subsidiary or ERISA Affiliate has
incurred or expects to incur any liability under Title IV of ERISA or Section
412 of the Code. With respect to each Target Employee Plan subject to ERISA as
either an employee pension plan within the meaning of Section 3(2) of ERISA or
an employee welfare benefit plan within the meaning of Section 3(1) of ERISA,
Target has prepared in good faith and timely filed all requisite governmental
reports (which were true and correct as of the date filed) and has properly and
timely filed and distributed or posted all notices and reports to employees
required to be filed, distributed or posted with respect to each such Target
Employee Plan, except where the failure to take such action would not have a
Material Adverse Effect on Target. No suit, administrative proceeding, action or
other litigation has been brought, or to the best knowledge of Target is
threatened, against or with respect to any such Target Employee Plan, including
any audit or inquiry by the IRS or United States Department of Labor. Neither
Target nor any Target subsidiary or other ERISA Affiliate is a party to, or has
made any contribution to or otherwise incurred any obligation under, any
"multiemployer plan" as defined in Section 3(37) of ERISA.
16.
<PAGE> 21
(d) With respect to each Target Employee Plan, Target and each
of its United States subsidiaries have complied with (i) the applicable health
care continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") and the proposed regulations thereunder and
(ii) the applicable requirements of the Family Leave Act of 1993 and the
regulations thereunder, except to the extent that such failure to comply would
not, in the aggregate, have a Material Adverse Effect.
(e) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other service
provider of Target, any Target subsidiary or any other ERISA Affiliate to
severance benefits or any other payment, except as expressly provided in this
Agreement, or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due any such employee or service provider.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by Target, any Target subsidiary or other
ERISA Affiliate relating to, or change in participation or coverage under, any
Target Employee Plan which would materially increase the expense of maintaining
such Plan above the level of expense incurred with respect to that Plan for the
most recent fiscal year included in Target's financial statements.
2.15 Certain Agreements Affected by the Merger. Neither the execution
and delivery of this Agreement nor the consummation of the transaction
contemplated hereby will (i) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute, bonus or
otherwise) becoming due to any director or employee of Target or any of its
subsidiaries, (ii) materially increase any benefits otherwise payable by Target
or (iii) result in the acceleration of the time of payment or vesting of any
such benefits.
2.16 Employee Matters. Target and each of its subsidiaries are in
compliance in all respects with all currently applicable laws and regulations
respecting employment, discrimination in employment, terms and conditions of
employment, wages, hours and occupational safety and health and employment
practices, and is not engaged in any unfair labor practice, except where the
failure to be in compliance or the engagement in such unfair labor practices
would not have a Material Adverse Effect on Target. There are no pending claims
against Target or any of its subsidiaries under any workers compensation plan or
policy or for long term disability. Neither Target nor any of its subsidiaries
has any obligations under COBRA with respect to any former employees or
qualifying beneficiaries thereunder, except for obligations that would not have
a Material Adverse Effect on Target. There are no controversies pending or, to
the knowledge of Target or any of its subsidiaries, threatened, between Target
or any of its subsidiaries and any of their respective employees, which
controversies have or could reasonably be expected to have a Material Adverse
Effect on Target. Neither Target nor any of its subsidiaries is a party to any
collective bargaining agreement or other
17.
<PAGE> 22
labor union contract nor does Target nor any of its subsidiaries know of any
activities or proceedings of any labor union to organize any such employees.
2.17 Interested Party Transactions. Except as disclosed in the Target
SEC Documents, neither Target nor any of its subsidiaries is indebted to any
director, officer, employee or agent of Target or any of its subsidiaries
(except for amounts due as normal salaries and bonuses and in reimbursement of
ordinary expenses), and no such person is indebted to Target or any of its
subsidiaries, and there have been no other transactions of the type required to
be disclosed pursuant to Items 402 and 404 of Regulation S-K under the
Securities Act and the Exchange Act since April 27, 1990.
2.18 Insurance. Target and each of its subsidiaries have policies of
insurance and bonds of the type and in amounts customarily carried by persons
conducting businesses or owning assets similar to those of Target and its
subsidiaries. There is no material claim pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and Target and its subsidiaries are
otherwise in compliance in all material respects with the terms of such policies
and bonds. Target has no knowledge of any threatened termination of, or material
premium increase with respect to, any of such policies.
2.19 Compliance With Laws. Each of Target and its subsidiaries has
complied with, are not in violation of, and have not received any notices of
violation with respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures to comply as
could not be reasonably expected to have a Material Adverse Effect on Target.
2.20 Brokers' and Finders' Fees. Except for the fees of Allen and
Company Incorporated, whose fees will be paid in the manner contemplated by the
Asset Purchase Agreement, Target has not incurred, nor will it incur, directly
or indirectly, any liability for brokerage or finders' fees or agents'
commissions or investment bankers' fees or any similar charges in connection
with this Agreement or any transaction contemplated hereby. Target has prior to
the date hereof furnished to Acquiror a copy of Target's engagement letter with
Allen and Company Incorporated in connection with the transactions contemplated
by this Agreement and the Asset Purchase Agreement.
2.21 Proxy Statement. The information supplied by Target for inclusion
in the proxy statement to be sent to the shareholders of Target in connection
with the meeting of Target's shareholders to consider the Merger (the "Target
Shareholders Meeting") (such proxy statement as amended or supplemented is
referred to herein as the "Proxy Statement") shall not, on the date the Proxy
Statement is first mailed to Target's shareholders, at the time of the Target
Shareholders Meeting and at the Effective Time, contain any untrue statement of
a material fact, or omit to state any material fact necessary in order to made
the statements made therein, in light of the circumstances under which they are
made, not misleading; or omit to state any material
18.
<PAGE> 23
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of proxies for the Target Shareholders Meeting which
has become misleading. If at any time prior to the Effective Time any event or
information should be discovered by Target which should be set forth in a
supplement to the Proxy Statement, Target shall promptly inform Acquiror and
Merger Sub. Notwithstanding the foregoing, Target makes no representation,
warranty or covenant with respect to any information supplied by Acquiror or
Merger Sub which is contained in any of the foregoing documents.
2.22 Opinion of Financial Advisor. Target has been advised in writing
by its financial advisor, Allen and Company Incorporated, that in such advisor's
opinion, as of the date hereof, the consideration to be received by the
shareholders of Target in the Merger is fair, from a financial point of view, to
the shareholders of Target.
2.23 Vote Required. The affirmative vote of the holders of a majority
of the shares of Target Common Stock outstanding on the record date set for the
Target Shareholders Meeting is the only vote of the holders of any of Target's
capital stock necessary to approve the Merger.
2.24 Board Approval. The Board of Directors of Target has, prior to
the execution hereof, (i) approved this Agreement and the Merger, (ii)
determined that the Merger is in the best interests of the shareholders of
Target and is on terms that are fair to such shareholders and (iii) determined
to recommend that the shareholders of Target approve this Agreement and
consummation of the Merger, subject to the terms of Sections 4.2 and 5.1 hereof.
2.25 Representations Complete. None of the representations or
warranties made by Target herein or in any Schedule hereto, including the Target
Disclosure Schedule, or certificate furnished by Target pursuant to this
Agreement, or the Target SEC Documents, when all such documents are read
together in their entirety, contains or will contain at the Effective Time any
untrue statement of a material fact, or omits or will omit at the Effective Time
to state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
2.26 Effect of Asset Sale on Representations and Warranties.
Notwithstanding the express language of the representations and warranties made
herein by Target in Sections 2.7-2.11, such representations and warranties shall
only be deemed to be representations and warranties with respect to Target and
its business after giving effect to the transactions contemplated by the Asset
Purchase Agreement and only with respect to the Excluded Assets and the Excluded
Liabilities (as such terms are defined in the Asset Purchase Agreement).
19.
<PAGE> 24
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Acquiror and Merger Sub represent and warrant to Target as follows:
3.1 Organization, Standing and Power. Each of Acquiror and Merger Sub
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. Each of Acquiror and Merger Sub has
the corporate power to own its properties and to carry on its business as now
being conducted and as proposed to be conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the failure to be
so qualified and in good standing would have a Material Adverse Effect on
Acquiror. Acquiror has delivered a true and correct copy of the Articles of
Incorporation and Bylaws or other charter documents, as applicable, of Acquiror
to Target. Neither Acquiror nor Merger Sub is in violation of any of the
provisions of its Articles of Incorporation or Bylaws or equivalent
organizational documents. Acquiror is the owner of all outstanding shares of
capital stock of Merger Sub and all such shares are duly authorized, validly
issued, fully paid and nonassessable.
3.2 Authority. Acquiror and Merger Sub have all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Acquiror and Merger
Sub enforceable against such parties in accordance with its terms except as
enforceability may be limited by bankruptcy and other laws affecting the rights
and remedies of creditors generally and general principles of equity. The
execution and delivery of this Agreement has been duly executed and delivered by
Acquiror and Merger Sub and constitutes the valid and binding obligations of
Acquiror and Merger Sub. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or default under (with or without notice or
lapse of time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under (i) any provision of
the Articles of Incorporation or Bylaws of Acquiror or Merger Sub, as amended,
or (ii) any material mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Acquiror or Merger Sub
or their properties or assets, except where such conflict, violation, default,
termination, cancellation or acceleration with respect to the foregoing
provisions of (ii) would not have had and would not reasonably be expected to
have a Material Adverse Effect on Acquiror. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity, is required by or with respect to Acquiror or Merger Sub in connection
with the execution and delivery of this Agreement by Acquiror and Merger Sub or
the consummation by Acquiror and Merger Sub of the transactions contemplated
hereby, except for (i) the filing of the Agreement of Merger as provided in
Section 1.2, (ii) any filings as may be required under applicable state
securities laws and the securities laws of any foreign
20.
<PAGE> 25
country, (iii) such filings as may be required under HSR, and (iv) such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not have a Material Adverse Effect on Acquiror and would
not prevent or materially alter or delay any of the transactions contemplated by
this Agreement.
3.3 SEC Documents; Financial Statements. Acquiror has furnished or
made available to Target a true and complete copy of each statement, report,
registration statement (with the prospectus in the form filed pursuant to Rule
424(b) of the Securities Act), definitive proxy statement, and other filing
filed with the SEC by Acquiror since July 26, 1992, and, prior to the Effective
Time, Acquiror will have furnished Target with true and complete copies of any
additional documents filed with the SEC by Acquiror prior to the Effective Time
(collectively, the "Acquiror SEC Documents"). In addition, Acquiror has made
available to Target all exhibits to the Acquiror SEC Documents filed prior to
the date hereof, and will promptly make available to Target all exhibits to any
additional Acquiror SEC Documents filed prior to the Effective Time. All
documents required to be filed as exhibits to the Target SEC Documents have been
so filed, and all material contracts so filed as exhibits are in full force and
effect, except those which have expired or terminated in accordance with their
terms, and neither Acquiror nor any of its subsidiaries is in default thereunder
except for defaults which will not have a Material Adverse Effect on Acquiror.
As of their respective filing dates, the Acquiror SEC Documents complied in all
material respects with the requirements of the Securities Exchange Act and the
Securities Act, and none of the Acquiror SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the extent
corrected by a subsequently filed Acquiror SEC Document. The financial
statements of Acquiror, including the notes thereto, included in the Acquiror
SEC Documents (the "Acquiror Financial Statements") were complete and correct in
all material respects as of their respective dates, complied as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto as of their respective
dates, and have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent throughout the periods indicated and
consistent with each other (except as may be indicated in the notes thereto or,
in the case of unaudited statements included in Quarterly Reports on Form 10-Q,
as permitted by Form 10-Q of the SEC). The Acquiror Financial Statements fairly
present the consolidated financial condition and operating results of Acquiror
and its subsidiaries at the dates and during the periods indicated therein
(subject, in the case of unaudited statements, to normal, recurring year-end
adjustments). There has been no change in Acquiror accounting policies except as
described in the notes to the Acquiror Financial Statements.
3.4 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Acquiror or any of its
subsidiaries, threatened against Acquiror or any of its subsidiaries or any of
their respective properties or any of their respective officers or directors (in
their capacities as such) that,
21.
<PAGE> 26
individually or in the aggregate, could reasonably be expected to have a
material adverse effect on the ability of Acquiror to consummate the
transactions contemplated by this Agreement. There is no judgment, decree or
order against Acquiror or any of its subsidiaries or, to the knowledge of
Acquiror or any of its subsidiaries, any of their respective directors or
officers (in their capacities as such) that could prevent, enjoin, alter or
materially delay any of the transactions contemplated by this Agreement, or that
could reasonably be expected to have a material adverse effect on the ability of
Acquiror to consummate the transactions contemplated by this Agreement.
3.5 Proxy Statement. The information supplied by Acquiror for
inclusion in the Proxy Statement shall not, on the date the Proxy Statement is
first mailed to Target's shareholders, at the time of the Target Shareholders
Meeting and at the Effective Time, contain any untrue statement of a material
fact, or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which it is made, not
misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Target Shareholders Meeting which has become misleading. If at
any time prior to the Effective Time any event or information should be
discovered by Acquiror or Merger Sub which should be set forth in a supplement
to the Proxy Statement, Acquiror or Merger Sub will promptly inform Target.
Notwithstanding the foregoing, Acquiror and Merger Sub make no representation,
warranty or covenant with respect to any information supplied by Target which is
contained in any of the foregoing documents.
3.6 Board Approval. The Boards of Directors of Acquiror and Merger Sub
have unanimously (i) approved this Agreement and the Merger, (ii) determined
that the Merger is in the best interests of their respective shareholders and is
on terms that are fair to such shareholders and (iii) recommended that the
shareholder of Merger Sub approve this Agreement and the consummation of the
Merger.
3.7 Financing. Acquiror posses sufficient funds to enable it to
acquire all issued and outstanding shares of Target's Common Stock on a fully
diluted basis (including the payments required by Section 5.9) pursuant to the
Merger and to pay all fees and expenses payable by Acquiror related to the
transactions contemplated by this Agreement.
3.8 Broker's and Finders' Fees. Except for the fees of Merrill Lynch &
Co., whose fees will be paid by Acquiror, Acquiror has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
3.9 Representations Complete. None of the representations or
warranties made by Acquiror or Merger Sub herein or in any Schedule hereto or
certificate furnished by Acquiror or Merger Sub pursuant to this Agreement, or
the Acquiror SEC Documents, when all such documents are read together in their
entirety,
22.
<PAGE> 27
contains or will contain at the Effective Time any untrue statement of a
material fact, or omits or will omit at the Effective Time to state any material
fact necessary in order to make the statements contained herein or therein, in
the light of the circumstances under which made, not misleading.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of Target. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Target agrees (except to the extent expressly
contemplated by this Agreement or as consented to in writing by Acquiror), to
carry on its and its subsidiaries' business in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted, to pay and to
cause its subsidiaries to pay debts and Taxes when due subject to good faith
disputes over such debts or taxes, to pay or perform other obligations when due,
and to use all reasonable efforts consistent with past practice and policies to
preserve intact its and its subsidiaries' present business organizations, use
its reasonable efforts consistent with past practice to keep available the
services of its and its subsidiaries' present officers and key employees and use
its reasonable efforts consistent with past practice to preserve its and its
subsidiaries' relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it or its subsidiaries, to
the end that its and its subsidiaries' goodwill and ongoing businesses shall be
unimpaired at the Effective Time. Target agrees to use its best efforts to
promptly notify Acquiror of any event or occurrence not in the ordinary course
of its or its subsidiaries' business, and of any event which could reasonably be
expected to have a Material Adverse Effect on Target. Without limiting the
foregoing, except as expressly contemplated by this Agreement, Target shall not
do, cause or permit any of the following, or allow, cause or permit any of its
subsidiaries to do, cause or permit any of the following, without the prior
written consent of Acquiror:
(a) Charter Documents. Cause or permit any amendments to its
Articles of Incorporation or Bylaws;
(b) Dividends; Changes in Capital Stock. Declare or pay any
dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of shares
in connection with any termination of service to it or its subsidiaries;
(c) Stock Option Plans, Etc. Except as otherwise disclosed in
the Target Disclosure Schedule, accelerate, amend or change the period of
exercisability or vesting of options or other rights granted under its employee
stock plans or director
23.
<PAGE> 28
stock plans or authorize cash payments in exchange for any options or other
rights granted under any of such plans;
(d) Material Contracts. Except in connection with the Pre-
Closing Asset Transaction, enter into any contract or commitment, or violate,
amend or otherwise modify or waive any of the terms of any of its contracts,
other than in the ordinary course of business consistent with past practice and
in no event shall such contract, commitment, amendment, modification or waiver
be in excess of $1,000,000;
(e) Issuance of Securities. Issue, deliver or sell or authorize
or propose the issuance, delivery or sale of, or purchase or propose the
purchase of, any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than the issuance of shares of its Common Stock
pursuant to the exercise of stock options, warrants or other rights therefor
outstanding as of the date of this Agreement and other than issuances under the
Target ESPP in the ordinary course of business consistent with past practice;
(f) Intellectual Property. Except in connection with the
Pre-Closing Asset Transaction, transfer to any person or entity any rights to
its Intellectual Property other than in the ordinary course of business
consistent with past practice;
(g) Exclusive Rights. Except in connection with the Pre-Closing
Asset Transaction, enter into or amend any agreements pursuant to which any
other party is granted exclusive marketing or other exclusive rights of any type
or scope with respect to any of its products or technology;
(h) Dispositions. Except in connection with the Pre-Closing
Asset Transaction, sell, lease, license or otherwise dispose of or encumber any
of its properties or assets which are material, individually or in the
aggregate, to its and its subsidiaries' business, taken as a whole, except in
the ordinary course of business consistent with past practice;
(i) Indebtedness. Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others other than in the ordinary course of
business consistent with past practice;
(j) Leases. Enter into any operating lease other than in the
ordinary course of business consistent with past practice;
(k) Payment of Obligations. Pay, discharge or satisfy in an
amount in excess of $10,000 in any one case or $100,000 in the aggregate, any
claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than (i) in the ordinary course of
business, other than the payment, discharge or satisfaction of liabilities
reflected or reserved against in the Target Financial
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Statements, (ii) the payment of the transaction expenses associated with the
transactions contemplated by this Agreement and the Pre-Closing Asset
Transaction and (iii) in connection with the Pre-Closing Asset Transaction;
(l) Capital Expenditures. Make any capital expenditures,
capital additions or capital improvements except in the ordinary course of
business and consistent with past practice;
(m) Insurance. Materially reduce the amount of any material
insurance coverage provided by existing insurance policies;
(n) Employee Benefit Plans; New Hires; Pay Increases. Adopt or
amend any employee benefit or stock purchase or option plan, execute or amend
any employment agreement with any of Target's officers (including Target's
employment agreement with James Norrod), or hire any new director level or
officer level employee, pay any special bonus or special remuneration to any
employee or director, or increase the salaries or wage rates of its employees
other than increases paid to its non-officer employees in the ordinary course of
business consistent with past practice;
(o) Severance Arrangements. Grant any severance or termination
pay (i) to any director or officer or (ii) to any other employee except (A)
payments made pursuant to written agreements outstanding on the date hereof
which have been disclosed in the Target Disclosure Schedule or (B) grants which
are made in the ordinary course of business in accordance with its standard past
practice;
(p) Lawsuits. Commence a lawsuit other than (i) for the routine
collection of bills, (ii) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a valuable
aspect of its business, provided that it consults with Acquiror prior to the
filing of such a suit, or (iii) for a breach of this Agreement or the
Confidentiality Agreement (as defined in Section 5.4);
(q) Acquisitions. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to its and its subsidiaries' business, taken as a whole, or acquire
or agree to acquire any equity securities of any corporation, partnership,
association or business organization;
(r) Taxes. Other than in the ordinary course of business or
with respect to the matters set forth on the Target Disclosure Schedule, make or
change any material election in respect of Taxes, adopt or change any accounting
method in respect of Taxes, file any material Tax Return or any amendment to a
material Tax Return, enter into any closing agreement, settle any claim or
assessment in respect of Taxes, or
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consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(s) Notices. Target shall give all notices and other
information required to be given to the employees of Target, any collective
bargaining unit representing any group of employees of Target, and any
applicable government authority under the WARN Act, the National Labor Relations
Act, the Internal Revenue Code, the Consolidated Omnibus Budget Reconciliation
Act, and other applicable law in connection with the transactions provided for
in this Agreement;
(t) Revaluation. Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; or
(u) Other. Take or agree in writing or otherwise to take, any
of the actions described in Sections 4.1(a) through (t) above, or any action
which would make any of its representations or warranties contained in this
Agreement untrue or incorrect or prevent it from performing or cause it not to
perform its covenants hereunder.
Notwithstanding the express terms of this Section 4.1, nothing herein shall be
interpreted so as to prohibit Target from taking any action with respect to the
Purchased Assets, the Assumed Liabilities or the Business (as such terms are
defined in the Asset Purchase Agreement) that would otherwise be contemplated or
permitted with respect thereto under the terms of the Asset Purchase Agreement;
provided, however, that Target agrees that it shall not seek to amend or waive,
or consent to an amendment or waiver of, any provision of the Asset Purchase
Agreement or the Preferred Stock Purchase and Noteholder Rights Agreement or any
of the forms of agreement contemplated by such agreements without the prior
written consent of Acquiror.
4.2 No Solicitation. From and after the date hereof until the earlier
of the Effective Time or the termination of this Agreement in accordance with
Article VII, Target and its subsidiaries and the officers, directors, employees
or other agents of Target and its subsidiaries will not, directly or indirectly,
(i) take any action to solicit, initiate or encourage any Takeover Proposal
(defined below) or (ii) subject to the terms of the immediately following
sentence, engage in negotiations with, or disclose any nonpublic information
relating to Target or any of it subsidiaries to, or afford access to the
properties, books or records of Target or any of its subsidiaries to, any person
that has advised Target that it may be considering making, or that has made, a
Takeover Proposal; provided, nothing herein shall prohibit Target's Board of
Directors from taking and disclosing to Target's shareholders a position with
respect to a tender offer pursuant to Rules 14d-9 and 14e-2 promulgated under
the Exchange Act. Notwithstanding the immediately preceding sentence, if an
unsolicited Takeover Proposal, or an unsolicited written expression of interest
that can reasonably be expected to lead to a Takeover Proposal, shall be
received by the Board of Directors of Target, then, to the extent the Board of
Directors of Target believes in good faith (after consultation with its
financial
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advisor) that such Takeover Proposal would, if consummated, result in a
transaction more favorable to Target's shareholders from a financial point of
view than the transaction contemplated by the Agreement (any such more favorable
Takeover Proposal being referred to in this Agreement as a "Superior Proposal")
and the Board of Directors of Target determines in good faith after consultation
with outside legal counsel that it would be inconsistent with the Board of
Directors' fiduciary duties to shareholders under applicable law, Target and its
officers, directors, employees, investment bankers, financial advisors,
attorneys, accountants and other representatives retained by it may furnish in
connection therewith information and take such other actions as are consistent
with the fiduciary obligations of Target's Board of Directors, and such actions
shall not be considered a breach of this Section 4.2 or any other provisions of
this Agreement, provided that in each such event Target notifies Acquiror of
such determination by the Target Board of Directors and provides Acquiror with a
true and complete copy of the Superior Proposal received from such third party,
if the Superior Proposal is in writing, or a complete written summary thereof,
if it is not in writing, and provides Acquiror with all documents containing or
referring to non-public information of Target that are supplied to such third
party; provided, further, that (A) the Board of Directors of Target has
determined, with the advice of Target's investment bankers, that such third
party is capable of making a Superior Proposal upon satisfactory completion of
such third party's review of the information supplied by Target, (B) the third
party has stated that it intends to make a Superior Proposal, (C) Target may not
provide any non-public information to any such third party if it has not prior
to the date thereof provided such information to Acquiror or Acquiror's
representatives, and (D) Target provides such non-public information pursuant to
a non-disclosure agreement substantially the same as or otherwise at least as
restrictive on such third party as the Confidentiality Agreement is on Acquiror;
provided, however, that Target shall not, and shall not permit any of its
officers, directors, employees or other representatives to agree to or endorse
any Takeover Proposal unless Target shall have terminated this Agreement
pursuant to Section 7.1(e) and paid Acquiror all amounts payable to Acquiror
pursuant to Section 7.3(b). Target will promptly notify Acquiror after receipt
of any Takeover Proposal or any notice that any person is considering making a
Takeover Proposal or any request for non-public information relating to Target
or any of its subsidiaries or for access to the properties, books or records of
Target or any of its subsidiaries by any person that has advised Target that it
may be considering making, or that has made, a Takeover Proposal and will keep
Acquiror fully informed of the status and details of any such Takeover Proposal
notice, request or any correspondence or communications related thereto and
shall provide Acquiror with a true and complete copy of such Takeover Proposal
notice or request or correspondence or communications related thereto, if it is
in writing, or a complete written summary thereof, if it is not in writing. For
purposes of this Agreement, "Takeover Proposal" means any offer or proposal for,
or any indication of interest in, a merger or other business combination
involving Target or any of its subsidiaries or the acquisition of any
significant equity interest in, or a significant portion of the assets of,
Target or any of its subsidiaries, other than the transactions contemplated by
this Agreement. Neither the execution by Target of the Asset Purchase Agreement
nor the consummation of the Pre-Closing Asset Transaction nor the
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disclosure of information regarding Target to the Acquiror under the Asset
Purchase Agreement shall be deemed to be a breach of this Section 4.2.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement. As promptly as practicable after the execution of
this Agreement, Target and Acquiror shall prepare, and Target shall file with
the SEC, preliminary proxy materials relating to the approval of the Merger and
the transactions contemplated hereby by the shareholders of Target and, as
promptly as practicable following receipt of SEC comments thereon, Target shall
file with the SEC definitive proxy materials which comply in form with
applicable SEC requirements. Target will notify Acquiror promptly of the receipt
of any comments from the SEC or its staff and of any request by the SEC or its
staff or any other government officials for amendments or supplements to the
Proxy Statement or any other filing or for additional information and will
supply Acquiror with copies of all correspondence between Target or any of its
representatives, on the one hand, and the SEC, or its staff or any other
government officials, on the other hand, with respect to the Proxy Statement or
other filing. The Proxy Statement and the other filings shall comply in all
material respects with all applicable requirements of law. Whenever any event
occurs that is required to be set forth in an amendment or supplement to the
Proxy Statement or any other filing, Target shall promptly inform Acquiror of
such occurrence and cooperate in filing with the SEC or its staff or any other
government officials, and/or mailing to shareholders of Target, such amendment
or supplement. Subject to the provisions of Section 4.2, the Proxy Statement
shall include the recommendation of the Board of Directors of Target in favor of
the Merger; provided that such recommendation may not be included or may be
withdrawn if previously included if Target's Board of Directors believes in good
faith that a Superior Proposal has been made and, upon written advice of its
outside legal counsel, shall determine that to include such recommendation or
not withdraw such recommendation if previously included would constitute a
breach of the Board's fiduciary duty under applicable law.
5.2 Meeting of Shareholders. Target shall promptly after the date
hereof take all action necessary in accordance with California Law and its
Articles of Incorporation and Bylaws to convene the Target Shareholders Meeting
within 45 days of the filing of the definitive proxy materials. Target shall
consult with Acquiror regarding the date of the Target Shareholders Meeting and
use all reasonable efforts and shall not postpone or adjourn (other than for the
absence of a quorum) the Target Shareholders Meeting without the consent of
Acquiror. Subject to Section 5.1, Target shall use its best efforts to solicit
from shareholders of Target proxies in favor of the Merger and shall take all
other action necessary or advisable to secure the vote or consent of
shareholders required to effect the Merger.
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5.3 Access to Information.
(a) Target shall afford Acquiror and its accountants, counsel
and other representatives, upon reasonable advance notice, reasonable access
during normal business hours during the period prior to the Effective Time to
(i) all of Target's and its subsidiaries' properties, books, contracts,
commitments and records, and (ii) all other information concerning the business,
properties and personnel of Target and its subsidiaries as Acquiror may
reasonably request. Target agrees to provide to Acquiror and its accountants,
counsel and other representatives copies of internal financial statements
promptly upon request.
(b) Subject to compliance with applicable law, from the date
hereof until the Effective Time, each of Acquiror and Target shall confer on a
regular and frequent basis with one or more representatives of the other party
to report operational matters of materiality and the general status of ongoing
operations.
(c) No information or knowledge obtained in any investigation
pursuant to this Section 5.3 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
5.4 Confidentiality. The parties acknowledge that each of Acquiror
and Target have previously executed a non-disclosure agreement dated May 29,
1996, as amended on June 6, 1996 (as amended, the "Confidentiality Agreement"),
which Confidentiality Agreement shall continue in full force and effect in
accordance with its terms.
5.5 Public Disclosure. Unless otherwise permitted by this Agreement,
Acquiror and Target shall consult with each other before issuing any press
release or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange or with
the NASD.
5.6 Consents; Cooperation.
(a) Each of Acquiror and Target shall promptly apply for or
otherwise seek, and use its reasonable efforts to obtain, all consents and
approvals required to be obtained by it for the consummation of the Merger,
including those required under HSR, and shall use its reasonable efforts to
obtain all necessary consents, waivers and approvals under any of its material
contracts in connection with the Merger for the assignment thereof or otherwise.
The parties hereto will consult and cooperate with one another, and consider in
good faith the views of one another, in connection
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with any analyses, appearances, presentations, memoranda, briefs, arguments,
opinions and proposals made or submitted by or on behalf of any party hereto in
connection with proceedings under or relating to HSR or any other federal or
state antitrust or fair trade law.
(b) Each of Acquiror and Target shall use all reasonable
efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the transactions contemplated by this
Agreement under HSR, the Sherman Act, as amended, the Clayton Act, as amended,
the Federal Trade Commission Act, as amended, and any other Federal, state or
foreign statutes, rules, regulations, orders or decrees that are designed to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade (collectively, "Antitrust Laws"). In
connection therewith, if any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law, each of
Acquiror and Target shall cooperate and use all reasonable efforts vigorously to
contest and resist any such action or proceeding and to have vacated, lifted,
reversed, or overturned any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent (each an "Order"), that is in effect and
that prohibits, prevents, or restricts consummation of the Merger or any such
other transactions, unless by mutual agreement Acquiror and Target decide that
litigation is not in their respective best interests. Notwithstanding the
provisions of the immediately preceding sentence, it is expressly understood and
agreed that neither Acquiror nor Target shall have an obligation to litigate or
contest any administrative or judicial action or proceeding or any Order beyond
November 30, 1996. Each of Acquiror and Target shall use all reasonable efforts
to take such action as may be required to cause the expiration of the notice
periods under the HSR or other Antitrust Laws with respect to such transactions
as promptly as possible after the execution of this Agreement.
(c) Notwithstanding anything to the contrary in Section 5.6(a)
or (b), (i) neither Acquiror nor any of it subsidiaries shall be required to
divest any of their respective businesses, product lines or assets, or to take
or agree to take any other action or agree to any limitation that could
reasonably be expected to have a Material Adverse Effect on Acquiror or of
Acquiror combined with the Surviving Corporation after the Effective Time or
(ii) neither Target nor its subsidiaries shall be required to divest any of
their respective businesses, product lines or assets, or to take or agree to
take any other action or agree to any limitation that could reasonably be
expected to have a Material Adverse Effect on Target.
5.7 Other Operational Covenants.
(a) Target agrees to use reasonable efforts to ensure that on
the Closing Date its cash and cash equivalents balance equals or exceeds
$3,500,000.
(b) Target agrees to use in the period prior to the Effective
Time reasonable efforts to meet the product development schedule for its MICA
products that
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has been previously disclosed to Acquiror. In connection therewith, Target shall
promptly notify Acquiror in the event Target shall experience any material
delays in the product development schedule or if any material issues with
respect to the technology used in the MICA products shall arise prior to the
Effective Time.
5.8 Legal Requirements. Each of Acquiror, Merger Sub and Target will,
and will cause their respective subsidiaries to, take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed on
them with respect to the consummation of the transactions contemplated by this
Agreement and will promptly cooperate with and furnish information to any party
hereto necessary in connection with any such requirements imposed upon such
other party in connection with the consummation of the transactions contemplated
by this Agreement and will take all reasonable actions necessary to obtain (and
will cooperate with the other parties hereto in obtaining) any consent,
approval, order or authorization of, or any registration, declaration or filing
with, any Governmental Entity or other person, required to be obtained or made
in connection with the taking of any action contemplated by this Agreement. Each
of Acquiror and Target further agrees to notify the other promptly of the
receipt of any comments from any government officials for amendments or
supplements to any filing or for additional information and will supply the
other with copies of all correspondence between such company or any of its
representatives, on the one hand, and the government officials, on the other
hand, with respect to such filing. All filings shall comply in all material
respects with all applicable requirements of law. Whenever any event occurs
which is required to be set forth in an amendment or supplement to any such
filing, Acquiror or Target, as the case may be, shall promptly inform the other
of such occurrence and cooperate in filing with the government officials.
5.9 Employee Benefit Plans.
(a) Each option outstanding at the Effective Time under the
Target Stock Option Plans shall, to the extent exercisable at that time for
vested shares of Target Common Stock (including any shares which, in accordance
with the provisions of those Plans or the Employment Agreements listed in
Schedule 2.14, vest on an accelerated basis in connection with the Merger), be
cancelled, and the holder of each such cancelled option shall be entitled to
receive a cash sum per vested share of Target Common Stock subject to the
cancelled option equal to the Merger Consideration payable per share of Target
Common Stock less the exercise price per share of Target Common Stock in effect
under that option immediately prior to the Effective Time. Each option
outstanding at the Effective Time under the 1995 Plan which is held by an
employee of Target who shall continue his or her employment with Target
following the Effective Time shall, to the extent that option is not at such
time exercisable for vested shares of Target Common Stock, be assumed by
Acquiror and converted into an option to purchase shares of Acquiror Common
Stock in accordance with the procedure set forth in Section 5.9(b) below. Each
option outstanding at the Effective Time under the 1995 Plan which is held by an
employee of Target who shall transfer employment directly from Target to Newco
following the Effective Time shall, to the extent that option is not
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at such time exercisable for vested shares of Target Common Stock, be treated in
the manner determined by Newco, and Acquiror shall, upon written receipt of
notice from Newco as to such manner of treatment, take all reasonable
ministerial action necessary to effect any required allocation of outstanding
options under the 1995 Plan between those options assumed by Acquiror and any
options to be assumed by Newco. All other options outstanding at the Effective
Time under the Target Option Plans shall, to the extent not exercisable for
vested shares of Target Common Stock at that time, terminate and cease to be
outstanding at the Effective Time and shall not be assumed by either Acquiror or
Newco. Schedule 5.9 hereto sets forth a true and complete list as of the date
hereof of (i) all holders of outstanding options under the Target Stock Option
Plans, specifically identifying those holders whose employment with Target is
presently anticipated to continue following the Effective Time, (ii) the number
of shares of Target capital stock subject to each such option, (iii) the
exercise or vesting schedule in effect for that option, (iv) the exercise price
payable per share of Target Common Stock and (v) the term of each such option.
On the Closing Date, Target shall, in cooperation with Acquiror, deliver to
Acquiror an updated Schedule 5.9 hereto current as of such date.
(b) Each outstanding option under the 1995 Plan which is to be
assumed by Acquiror under Section 5.9(a) shall continue to have, and be subject
to, the same terms and conditions in effect for that option immediately prior to
the Effective Time, except for the following adjustments to reflect the Merger
Consideration:
(i) the number of whole shares of Acquiror Common Stock
subject to that option shall be determined by multiplying the number of
unvested shares of Target Common Stock subject to that option
immediately prior to the Effective Time by a fraction the numerator of
which is the Merger Consideration payable per share of Target Common
Stock and the denominator of which is the average of the closing
selling prices per share of Acquiror Common Stock for the five trading
days ending with the second trading day immediately preceding the
Closing Date and then rounding that number down to the nearest whole
number of shares of Acquiror Common Stock, and
(ii) the per share exercise price for the shares of
Acquiror Common Stock issuable upon exercise of each such assumed
option shall be determined by multiplying the exercise price per share
of Target Common Stock at which such option is exercisable immediately
prior to the Effective Time by a fraction the numerator of which is
[the average of the closing selling prices per share of Acquiror Common
Stock for the five trading days ending with the second trading day
immediately preceding the Closing Date and the denominator of which is
the Merger Consideration payable per share of Target Common Stock and
then rounding that dollar amount up to the nearest whole cent.
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Consistent with the terms of the Target Stock Option Plans and the
documents governing the outstanding options under those Plans, the Merger shall
not result in the termination of any outstanding options under the 1995 Plan
which are so assumed by Acquiror or accelerate the exercisability or vesting of
those assumed options or the shares of Acquiror Common Stock which will be
subject to those options upon the Acquiror's assumption of the options in the
Merger. It is the intention of the parties that the options so assumed by
Acquiror qualify following the Effective Time as incentive stock options as
defined in Section 422 of the Code to the extent such options qualified as
incentive stock options prior to the Effective Time. Within 10 business days
after the Effective Time, Acquiror will issue to each person who, immediately
prior to the Effective Time is a holder of an outstanding option under the 1995
Plan which is to be assumed by Acquiror hereunder a document in form and
substance satisfactory to Target evidencing the foregoing assumption of such
option by Acquiror.
(c) Outstanding purchase rights under the Target ESPP shall be
exercised upon the earlier of (i) the next scheduled purchase date under the
Target ESPP or (ii) immediately prior to the Effective Time, and each
participant in the Target ESPP shall accordingly be issued shares of Target
Common Stock at that time which shall automatically be converted at the
Effective Time into the right to receive the Merger Consideration payable per
share of Target Common Stock in the Merger. The Target ESPP shall terminate with
such exercise date, and no purchase rights shall be subsequently granted or
exercised under the Target ESPP. Target employees who meet the eligibility
requirements for participation in the Acquiror Employee Stock Purchase Plan
shall be eligible to begin payroll deductions under that plan as of the start
date of the first offering period thereunder beginning at least thirty (30) days
after the Effective Time.
5.10 Form S-8. Acquiror agrees to file, no later than thirty (30) days
after the Closing, a registration statement on Form S-8 covering the shares of
Acquiror Common Stock issuable pursuant to outstanding options under the 1995
Plan assumed by Acquiror. Target shall cooperate with and assist Acquiror in the
preparation of such registration statement.
5.11 Option Agreement. Concurrently with the execution of this
Agreement, Target shall deliver to Acquiror an executed Option Agreement in the
form of Exhibit C attached hereto.
5.12 Nasdaq Quotation. Target agrees to continue the quotation of
Target Common Stock on the Nasdaq National Market during the term of the
Agreement so that, to the extent necessary, appraisal rights will not be
available to shareholders of Target under Sections 1300 et seq. of the
California Law.
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5.13 Indemnification.
(a) After the Effective Time, Acquiror will, and will cause the
Surviving Corporation to, indemnify and hold harmless the present and former
officers, directors, employees and agents of Target (the "Indemnified Parties")
in respect of acts or omissions occurring on or prior to the Effective Time to
the extent permitted by law and to the extent provided under Target's Articles
of Incorporation and Bylaws or any indemnification agreement with Target
officers and directors to which Target is a party, in each case in effect on the
date hereof; provided that such indemnification shall be subject to any
limitation imposed from time to time under applicable law. Without limitation of
the foregoing, in the event any such Indemnified Party is or becomes involved in
any capacity in any action, proceeding or investigation in connection with any
matter relating to this Agreement or the transactions contemplated hereby
occurring on or prior to the Effective Time, Acquiror shall, or shall cause the
Surviving Corporation to, pay as incurred such Indemnified Party's reasonable
legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith.
(b) For four years after the Effective Time, Acquiror will
either (i) at all times maintain at least $500,000,000 in cash, marketable
securities and unrestricted lines of credit to be available to indemnify the
Indemnified Parties in accordance with Section 5.15(a) above (but such amount
shall not be construed as a limitation of any such indemnification), or (ii)
cause the Surviving Corporation to use its best efforts to provide officers' and
directors' liability insurance in respect of acts or omissions occurring on or
prior to the Effective Time covering each such person currently covered by
Target's officers' and directors' liability insurance policy on terms
substantially similar to those of such policy in effect on the date hereof,
provided that in satisfying its obligation under this Section , Acquiror shall
not be obligated to cause the Surviving Corporation to pay premiums in excess of
150% of the amount per annum Target paid in its last full fiscal year, which
amount has been disclosed to Acquiror, and if the Surviving Corporation is
unable to obtain the insurance required by this Section 5.15, it shall obtain as
much comparable insurance as possible for an annual premium equal to such
maximum amount.
(c) To the extent there is any claim, action, suit, proceeding
or investigation (whether arising before or after the Effective Time) against an
Indemnified Party that arises out of or pertains to any action or omission in
his or her capacity as a director, officer, employee, fiduciary or agent of
Target occurring prior to the Effective Time, or arises out of or pertains to
the transactions contemplated by this Agreement for a period of four years after
the Effective Time (whether arising before or after the Effective Time), such
Indemnified Party shall be entitled to be represented by counsel and following
the Effective Time (i) any counsel retained by the Indemnified Parties shall be
reasonably satisfactory to the Surviving Corporation and Acquiror, (ii) the
Surviving Corporation and Acquiror shall pay the reasonable fees and expenses of
such counsel, promptly after statements therefor are received and (iii) the
Surviving Corporation and Acquiror will cooperate in the defense of any such
matter; provided,
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however, that neither the Surviving Corporation nor Acquiror shall be liable for
any settlement effected without its written consent (which consent shall not be
unreasonably withheld); and provided, further, that, in the event that any claim
or claims for indemnification are asserted or made within such four-year period,
all rights to indemnification in respect of any such claim or claims shall
continue until the disposition of any and all such claims. The Indemnified
Parties as a group may retain only one law firm (in addition to local counsel)
to represent them with respect to any single action unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Parties.
(d) The provisions of this Section 5.15 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and representatives.
5.14 Best Efforts and Further Assurances. Each of the parties to this
Agreement shall use its best efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to closing under
this Agreement. Each party hereto, at the reasonable request of another party
hereto, shall execute and deliver such other instruments and do and perform such
other acts and things as may be necessary or desirable for effecting completely
the consummation of this Agreement and the transactions contemplated hereby.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to consummate and effect
this Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by agreement of all the
parties hereto:
(a) Shareholder Approval. This Agreement and the Merger shall
have been approved and adopted by the requisite vote of the shareholders of
Target under California Law.
(b) Proxy Statement. The SEC shall have approved the Proxy
Statement prior to Target's distribution of the Proxy Statement to its
shareholders. No stop order suspending the distribution or use of the Proxy
Statement or any part thereof shall have been issued and no proceeding for that
purpose, shall have been initiated or threatened by the SEC; and all requests
for additional information on the part of the SEC shall have been complied with
to the reasonable satisfaction of the parties hereto.
(c) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing
35.
<PAGE> 40
the consummation of the Merger shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the foregoing
be pending; nor shall there be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal or prevents or
prohibits the Merger. In the event an injunction or other order shall have been
issued, each party agrees to use its reasonable diligent efforts to have such
injunction or other order lifted.
(d) Governmental Approval. Acquiror, Target and Merger Sub and
their respective subsidiaries shall have timely obtained from each Governmental
Entity all approvals, waivers and consents, if any, necessary for consummation
of or in connection with the Merger and the several transactions contemplated
hereby, including such approvals, waivers and consents as may be required under
the Securities Act, under state Blue Sky laws, and under HSR.
6.2 Additional Conditions to Obligations of Target. The obligations
of Target to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, by Target:
(a) Representations, Warranties and Covenants. (i) The
representations and warranties of Acquiror and Merger Sub in this Agreement
shall be true and correct in all material respects on and as of the Effective
Time as though such representations and warranties were made on and as of such
time and (ii) Acquiror and Merger Sub shall have performed and complied in all
material respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by them as of the Effective
Time.
(b) Certificate of Acquiror. Target shall have been provided
with a certificate executed on behalf of Acquiror by its President and its Chief
Financial Officer to the effect that, as of the Effective Time:
(i) all representations and warranties made by Acquiror
and Merger Sub under this Agreement are true and complete in all material
respects; and
(ii) all covenants, obligations and conditions of this
Agreement to be performed by Acquiror and Merger Sub on or before such date have
been so performed in all material respects.
6.3 Additional Conditions to the Obligations of Acquiror and Merger
Sub. The obligations of Acquiror and Merger Sub to consummate and effect this
Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by Acquiror:
36.
<PAGE> 41
(a) Representations, Warranties and Covenants. (i) The
representations and warranties of Target in this Agreement shall be true and
correct in all material respects on and as of the Effective Time as though such
representations and warranties were made on and as of such time and (ii) Target
shall have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by it as of the Effective Time.
(b) Certificate of Target. Acquiror shall have been provided
with a certificate executed on behalf of Target by its President and Chief
Financial Officer to the effect that, as of the Effective Time:
(i) all representations and warranties made by Target
under this Agreement are true and complete in all material respects; and
(ii) all covenants, obligations and conditions of this
Agreement to be performed by Target on or before such date have been so
performed in all material respects.
(c) Third Party Consents. Acquiror shall have been furnished
with evidence satisfactory to it of the consent or approval of those persons
whose consent or approval shall be required in connection with the Merger under
any material contract of Target or any of its subsidiaries or otherwise (after
giving effect to the transactions contemplated by the Asset Purchase Agreement),
except where the failure to obtain such consent would not have a Material
Adverse Effect on Target.
(d) Injunctions or Restraints on Conduct of Business. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint provision materially limiting or restricting Acquiror's conduct or
operation of the business of Target and its subsidiaries following the Merger
(after giving effect to the transactions contemplated by the Asset Purchase
Agreement) shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other Governmental Entity, domestic or
foreign, seeking the foregoing be pending.
(e) No Material Adverse Changes. There shall not have occurred
any material adverse change in the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations, results of operations or prospects of Target and its subsidiaries,
taken as a whole; provided, however, that a material adverse change for purposes
of this Section 6.3(e) with respect to Target shall not include any adverse
effect on the revenues or gross margins of Target (or the direct consequences
thereof) following the date of this Agreement which is attributable to a delay
of, reduction in or cancellation or change in the terms of product orders by
customers of Target. In the event of any litigation regarding the foregoing
provision Target shall be required to sustain the burden of reasonably
demonstrating that any such delay, reduction, cancellation or change is directly
attributable to the transactions contemplated by this Agreement.
37.
<PAGE> 42
(f) Employment Agreements. The employees of Target set forth
on Schedule 6.3 shall have accepted employment with Acquiror and shall have
entered into an employment agreements with Acquiror, in form and substance
reasonably satisfactory to Acquiror, and such agreements shall remain in full
force and effect (with such condition being subject to the further condition
that in its negotiations regarding employment with such employees of Target,
Acquiror shall offer such employees a total compensation package no less
favorable to the employee than the total compensation package presently being
offered under the terms of such employee's present employment with Target).
(g) Asset Sale. The "Closing" contemplated by the Asset
Purchase Agreement shall have occurred.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. At any time prior to the Effective Time, whether
before or after approval of the matters presented in connection with the Merger
by the shareholders of Target, this Agreement may be terminated:
(a) by mutual consent duly authorized by the Board of Directors
of Acquiror and Target;
(b) by either Acquiror or Target, if, without fault of the
terminating party, the Closing shall not have occurred on or before December 31,
1996 (or such later date as may be agreed upon in writing by the parties
hereto);
(c) by Acquiror, if (i) Target shall breach any of its
representations, warranties or obligations hereunder and such breach shall not
have been cured within ten business days of receipt by Target of written notice
of such breach, (ii) the Board of Directors of Target shall have withdrawn or
modified its recommendation of this Agreement or the Merger in a manner adverse
to Acquiror or shall have resolved to do any of the foregoing, or (iii) for any
reason Target fails to call and hold the Target Shareholders Meeting by November
15, 1996;
(d) by Target, if Acquiror shall breach any of its
representations, warranties or obligations hereunder and such breach shall not
have been cured within ten days following receipt by Acquiror of written notice
of such breach;
(e) by either Acquiror or Target if a Trigger Event (as defined
in Section 7.3(f)) or Takeover Proposal shall have occurred and the Board of
Directors of Target in connection therewith, after consultation with its legal
counsel, withdraws or modifies its approval and recommendation of this Agreement
and the transactions contemplated hereby in a manner adverse to Acquiror after
determining that to cause
38.
<PAGE> 43
Target to proceed with the transactions contemplated hereby would not be
consistent with the Board of Directors' fiduciary duty to the shareholders of
Target; or
(f) by either Acquiror or Target if (i) any permanent
injunction or other order of a court or other competent authority preventing the
consummation of the Merger shall have become final and nonappealable or (ii) if
any required approval of the shareholders of Target shall not have been obtained
by reason of the failure to obtain the required vote upon a vote held at a duly
held meeting of shareholders or at any adjournment thereof.
7.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Acquiror, Merger
Sub or Target or their respective officers, directors, shareholders or
affiliates, except to the extent that such termination results from the breach
by a party hereto of any of its representations, warranties or covenants set
forth in this Agreement; provided that, the provisions of Section 5.4
(Confidentiality), Section 7.3 (Expenses and Termination Fees) and this Section
7.2 shall remain in full force and effect and survive any termination of this
Agreement.
7.3 Expenses and Termination Fees.
(a) Subject to subsections (b), (c), (d), (e) and (i) of this
Section 7.3, whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby (including, without limitation, the fees and expenses of its advisers,
accountants and legal counsel) shall be paid by the party incurring such
expense, except that expenses incurred in connection with printing the Proxy
Statement, filing fees incurred in connection with the Proxy Statement and fees
shall be shared equally by Target and Acquiror.
(b) In the event that (i) either Acquiror or Target shall
terminate this Agreement pursuant to Section 7.1(e), (ii) either Acquiror or
Target shall terminate this Agreement pursuant to Section 7.1(f)(ii) following a
failure of the shareholders of Target to approve this Agreement and, prior to
the time of the meeting of Target's shareholders, there shall have been (A) a
Trigger Event or (B) a Takeover Proposal, which at the time of the meeting of
Target's shareholders shall not have been rejected by Target, or (iii) Acquiror
shall terminate this Agreement pursuant to Section 7.1(c)(iii) and, prior
thereto, there shall have been (A) a Trigger Event or (B) a Takeover Proposal,
which shall not have been rejected by Target, then Target shall immediately
reimburse Acquiror for all of the out-of-pocket costs and expenses incurred by
Acquiror in connection with this Agreement and the transactions contemplated
hereby (including, without limitation, the fees and expenses of its advisors,
accountants and legal counsel) up to an aggregate amount not in excess of
$1,000,000, and, in addition, Target shall promptly pay to Acquiror the sum of
$8,000,000.
39.
<PAGE> 44
(c) In the event that (i) either Acquiror or Target shall
terminate this Agreement pursuant to Section 7.1(f)(ii) following a failure of
the shareholders of Target to approve this Agreement and prior to the time of
the meeting of Target's shareholders, there shall have been (A) a Trigger Event
or (B) a Takeover Proposal, which at the time of the meeting of Target's
shareholders shall have been (x) rejected by Target and (y) not withdrawn by the
third party, or (ii) Acquiror shall terminate this Agreement pursuant to Section
7.1(c)(iii) and, prior thereto, there shall have been (A) a Trigger Event or (B)
a Takeover Proposal, which shall have been rejected by Target, Target shall
immediately reimburse Acquiror for all of the out-of-pocket costs and expenses
incurred by Acquiror in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, the fees and expenses of its
advisors, accountants and legal counsel) up to an aggregate amount not in excess
of $1,000,000, and, in addition, Target shall promptly pay to Acquiror the sum
of $3,000,000; and, in the event any Takeover Proposal or Trigger Event is
consummated (as defined in Section 7.3(h)(i)) within six months of the later of
(x) such termination of this Agreement and (y) the payment of the
above-described expenses, Target shall promptly pay Acquiror the additional sum
of $5,000,000.
(d) In the event that either Acquiror or Target shall terminate
this Agreement pursuant to Section 7.1(f)(ii) following a failure of the
shareholders of Target to approve this Agreement and, prior to the time of the
meeting of Target's shareholders, there shall have been (A) a Trigger Event or
(B) a Takeover Proposal (as defined in Section 7.3(g)(ii)), which at the time of
the meeting of Target's shareholders shall have been (x) rejected by Target and
(y) withdrawn by the third party, Target shall immediately reimburse Acquiror
for all of the out-of-pocket costs and expenses incurred by Acquiror in
connection with this Agreement and the transactions contemplated hereby
(including, without limitation, the fees and expenses of its advisors,
accountants and legal counsel) up to an aggregate amount not in excess of
$1,000,000, and, in addition, in the event any Takeover Proposal or Trigger
Event is consummated (as defined in Section 7.3(h)(ii)) within seven months of
the later of (x) such termination of this Agreement and (y) the payment of the
above-described expenses, Target shall promptly pay to Acquiror the additional
sum of $8,000,000.
(e) Except as otherwise contemplated by this Section 7.3, In
the event that (i) Acquiror shall terminate this Agreement pursuant to Section
7.1(c) or (ii) Acquiror shall terminate this Agreement pursuant to Section
7.1(f)(ii), Target shall promptly reimburse Acquiror for all of the
out-of-pocket costs and expenses incurred by Acquiror in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisors, accountants and legal
counsel) up to an aggregate amount not in excess of $1,000,000.
(f) As used herein, a "Trigger Event" shall occur if any Person
acquires securities representing 20% or more, or commences a tender or exchange
offer following the successful consummation of which the offeror and its
affiliate would beneficially own securities representing 20% or more, of the
voting power of Target; provided, however, a Trigger Event shall not be deemed
to include the acquisition by any
40.
<PAGE> 45
Person of securities representing 20% or more of Target if such Person has
acquired such securities not with the purpose nor with the effect of changing or
influencing the control of Target, nor in connection with or as a participant in
any transaction having such purpose or effect, including without limitation not
in connection with such Person (i) making any public announcement with respect
to the voting of such shares at any meeting to consider any merger,
consolidation, sale of substantial assets or other business combination or
extraordinary transaction involving Target, (ii) making, or in any way
participating in, any "solicitation" of "proxies" (as such terms are defined or
used in Regulation 14A under the Securities Exchange Act) to vote any voting
securities of Target (including, without limitation, any such solicitation
subject to Rule 14a-11 under the Securities Exchange Act) or seeking to advise
or influence any Person with respect to the voting of any voting securities of
Target, directly or indirectly, relating to a merger or other business
combination involving Target or the sale or transfer of any material assets
(excluding the sale or disposition of assets in the ordinary course of business)
of Target, (iii) forming, joining or in any way participating in any "group"
within the meaning of Section 13(d)(3) of the Securities Exchange Act with
respect to any voting securities of Target, directly or indirectly, relating to
a merger or other business combination involving Target or the sale or transfer
of any material assets (excluding the sale or disposition of assets in the
ordinary course of business) of Target, or (iv) otherwise acting, alone or in
concert with others, to seek control of Target or to seek to control or
influence the management or policies of Target.
(g) (i) As used in Section 7.3(b) and 7.3(c), "Takeover Proposal"
shall occur if there is an offer or proposal for, or any indication of interest
in (where such indication of interest has been disclosed publicly), a merger or
other business combination involving Target or the acquisition of 20% or more of
the outstanding shares of capital stock of Target or the sale or transfer of any
material assets (excluding the sale or disposition of assets in the ordinary
course of business) of Target, or any of its subsidiaries, other than
transactions contemplated by this Agreement or the transactions associated with
the Pre-Closing Asset Transaction.
(ii) As used in Section 7.3(d), "Takeover Proposal" shall
occur if there is an offer or proposal for, or any indication of interest in
(where such indication of interest has been disclosed publicly), a merger or
other business combination involving Target or the acquisition of 40% or more of
the outstanding shares of capital stock of Target or the sale or transfer of any
material assets (excluding the sale or disposition of assets in the ordinary
course of business) of Target, or any of its subsidiaries, other than
transactions contemplated by this Agreement or the transactions associated with
the Pre-Closing Asset Transaction.
(h) (i) For purposes of Section 7.3(c) above, (A) "consummation"
of a Takeover Proposal shall occur on the date a written agreement is entered
into with respect to a merger or other business combination involving Target or
the acquisition of 20% or more of the outstanding shares of capital stock of
Target, or sale or transfer of any material assets (excluding the sale or
disposition of assets in the ordinary course of business and the transactions
associated with the Pre-Closing Asset Transaction) of
41.
<PAGE> 46
Target or any of its subsidiaries and (B) "consummation" of a Trigger Event
shall occur on the date any Person or any of its affiliates or associates would
beneficially own securities representing 20% or more of the voting power of
Target following a tender or exchange offer.
(ii) For purposes of Section 7.3(d) above, (A)
"consummation" of a Takeover Proposal shall occur on the date a written
agreement is entered into with respect to a merger or other business combination
involving Target or the public announcement of the initiation of such a merger
or business combination or the acquisition of 40% or more of the outstanding
shares of capital stock of Target, or any sale or transfer of any material
assets (excluding the sale or disposition of assets in the ordinary course of
business and the transactions associated with the Pre-Closing Asset Transaction)
of Target and (B) "consummation" of a Trigger Event shall occur on the date (x)
any Person or any of its affiliates or associates would beneficially own
securities representing 20% or more of the voting power of Target following a
tender or exchange or (y) Target files a Schedule 14D-9 with the SEC
recommending that the Target security holders accept the tender offer.
(i) In the event that Target shall terminate this Agreement
pursuant to Section 7.1(d), Acquiror shall promptly reimburse Target for all of
the out-of-pocket costs and expenses incurred by Target in connection with this
Agreement and the transactions contemplated hereby (including without limitation
the fees and expenses of its advisors, accountants and legal counsel) up to an
aggregate amount not in excess of $1,000,000.
7.4 Amendment. The boards of directors of the parties hereto may
cause this Agreement to be amended at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto; provided that an
amendment made subsequent to adoption of the Agreement by the shareholders of
Target or Merger Sub shall not (i) alter or change the amount or kind of
consideration to be received on conversion of the Target Common Stock, (ii)
alter or change any term of the Articles of Incorporation of the Surviving
Corporation to be effected by the Merger, or (iii) alter or change any of the
terms and conditions of the Agreement if such alteration or change would
adversely affect the holders of Target Common Stock or Merger Sub Common Stock.
7.5 Extension; Waiver. At any time prior to the Effective Time any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
42.
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ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival at Effective Time. The representations, warranties
and agreements set forth in this Agreement shall terminate at the Effective
Time, except that the agreements set forth in Article I, Section 5.4
(Confidentiality), 5.9 (Employee Benefit Plans), 5.10 (Form S-8), 5.15 (Best
Efforts and Further Assurances), 7.3 (Expenses and Termination Fees), 7.4
(Amendment), and this Article VIII shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
at the following address (or at such other address for a party as shall be
specified by like notice):
(a) if to Acquiror or Merger Sub, to:
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, California 95134
Attention: President
Facsimile No.: (408) 526-4100
Telephone No.: (408) 526-4000
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
Attention: Edward M. Leonard, Esq.
Facsimile No.: (415) 496-2885
Telephone No.: (415) 424-0160
43.
<PAGE> 48
(b) if to Target, to:
Telebit Corporation
One Executive Drive
Chelmsford, Massachusetts 01824
Attention: Brian D. Cohen
Facsimile No.: (508) 656-9304
Telephone No.: (508) 441-2181
with a copy to:
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, Massachusetts 02110
Attention: William J. Schnoor, Jr.
Facsimile No.: (617) 248-7100
Telephone No.: (617) 248-7000
8.3 Interpretation. When a reference is made in this Agreement to
Exhibits or Schedules, such reference shall be to an Exhibit or Schedule to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The phrase "made available" in this Agreement shall
mean that the information referred to has been made available if requested by
the party to whom such information is to be made available. The phrases "the
date of this Agreement", "the date hereof", and terms of similar import, unless
the context otherwise requires, shall be deemed to refer to July 21, 1996. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. All references to "dollars" and "cents" in this Agreement shall
be deemed to be references to United States dollars and cents.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Nonassignability; Parties in Interest. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Target Disclosure Schedule (a) constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, except for the
Confidentiality Agreement, which shall continue in full
44.
<PAGE> 49
force and effect, and shall survive any termination of this Agreement or the
Closing, in accordance with its terms; (b) are not intended to confer upon any
other person any rights or remedies hereunder, except as set forth in Sections
1.6(a)-(c), and 1.7-1.9; and (c) shall not be assigned by operation of law or
otherwise except as otherwise specifically provided.
8.6 Severability. In the event that any provision of this Agreement,
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.7 Remedies Cumulative. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or equity
upon such party, and the exercise by a party of any one remedy will not preclude
the exercise of any other remedy.
8.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws that might otherwise govern under applicable
principles of conflicts of law. Each of the parties hereto irrevocably consents
to the exclusive jurisdiction of any court located within the State of
California in connection with any matter based upon or arising out of this
Agreement or the matters contemplated herein, agrees that process may be served
upon them in any manner authorized by the laws of the State of California for
such persons and waives and covenants not to assert or plead any objection which
they might otherwise have to such jurisdiction and such process.
8.9 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation, preparation and execution of
this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
[Remainder of page intentionally left blank]
45.
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IN WITNESS WHEREOF, Target, Acquiror and Merger Sub have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized, all as of the date first written above.
CISCO SYSTEMS, INC.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
COBRA ACQUISITION CORPORATION
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
TELEBIT CORPORATION
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
46.
<PAGE> 1
EXHIBIT 2
TELEBIT CORPORATION
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement") is made and entered into as of
July 21, 1996, between Cisco Systems, Inc., a California corporation
("Acquiror"), and the undersigned shareholder ("Shareholder") of Telebit
Corporation, a California corporation ("Target").
RECITALS
A. Pursuant to an Agreement and Plan of Reorganization (the
"Reorganization Agreement"), dated as of July 21, 1996 by and among Acquiror,
Cobra Acquisition Corporation, a California corporation ("Merger Sub") and
wholly owned subsidiary of Acquiror, and Target, Merger Sub is merging with and
into Target (the "Merger") and Target, as the surviving corporation of the
Merger, will thereby become a wholly owned subsidiary of Acquiror;
B. Pursuant to Section 5.7 of the Reorganization Agreement and a
written request from Acquiror, in order to induce Acquiror to enter into the
Reorganization Agreement, Target has agreed to use its best efforts to solicit
the proxy of certain significant shareholders of Target on behalf of Acquiror,
and to cause certain significant shareholders of Target to execute and deliver
to Acquiror Voting Agreements; and
C. The Shareholder is the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
such number of shares of the outstanding Common Stock, no par value per share,
of Target as is indicated on the final page of this Agreement (the "Shares").
NOW, THEREFORE, the parties agree as follows:
1. Agreement to Retain Shares.
1.1 Transfer and Encumbrance. Shareholder agrees not to transfer
(except as may be specifically required by court order), sell, exchange, pledge
(except in connection with a bona fide loan transaction, provided that any
pledgee agrees not to transfer, sell, exchange, pledge or otherwise dispose of
or encumber the Shares or any New Shares (as defined in Section 1.2) prior to
the Expiration Date and to be subject to the Proxy (as defined in Section 3)) or
otherwise dispose of or encumber the Shares or any New Shares, or to make any
offer or agreement relating thereto, at any time prior to
<PAGE> 2
the Expiration Date. As used herein, the term "Expiration Date" shall mean the
earlier to occur of (i) such date and time as the Merger shall become effective
in accordance with the terms and provisions of the Reorganization Agreement, and
(ii) six months after the date of termination of the Reorganization Agreement
(unless the Reorganization Agreement shall have been terminated in the
circumstances contemplated by any of Sections 7.1(a), (d) or (f)(i) thereof, in
which case this six-month extension shall not be effective or applicable).
1.2 New Shares. Shareholder agrees that any shares of capital
stock of Target that Shareholder purchases or with respect to which Shareholder
otherwise acquires beneficial ownership after the date of this Agreement and
prior to the Expiration Date ("New Shares") shall be subject to the terms and
conditions of this Agreement to the same extent as if they constituted Shares.
2. Agreement to Vote Shares. At every meeting of the shareholders of
Target called with respect to any of the following, and at every adjournment
thereof, and on every action or approval by written consent of the shareholders
of Target with respect to any of the following, Shareholder shall vote the
Shares and any New Shares (i) in favor of approval of the Reorganization
Agreement and the Merger and the transactions contemplated by the Asset Purchase
Agreement dated of even date herewith (the "Asset Purchase Agreement") between
Target and Telebit (Newco) Inc. (the "Asset Transaction") and any matter that
could reasonably be expected to facilitate the Merger and the Asset Transaction
and (ii) against any proposal for any recapitalization, merger, sale of assets
or other business combination (other than the Merger and the Asset Transaction)
between Target and any person or entity other than Acquiror or any other action
or agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of Target under the Reorganization
Agreement or the Asset Transaction or which could result in any of the
conditions to Target's obligations under the Reorganization Agreement or the
Asset Transaction not being fulfilled. This Agreement is intended to bind
Shareholder as a shareholder of Target only with respect to the specific matters
set forth herein.
3. Irrevocable Proxy. Concurrently with the execution of this
Agreement, Shareholder agrees to deliver to Acquiror a proxy in the form
attached hereto as Exhibit A (the "Proxy"), which shall be irrevocable to the
extent provided in Section 705 of the California General Corporation Law,
covering the total number of Shares and New Shares beneficially owned or as to
which beneficial ownership is acquired (as such term is defined in Rule 13d-3
under the Exchange Act) by Shareholder set forth therein.
4. Representations, Warranties and Covenants of Shareholder.
Shareholder hereby represents, warrants and covenants to Acquiror that
Shareholder (i) is the beneficial owner of the Shares, which at the date of this
Agreement and at all times up until the Expiration Date will be free and clear
of any liens, claims, options, charges or other encumbrances; (ii) does not
beneficially own any shares of capital stock of Target
2.
<PAGE> 3
other than the Shares (excluding shares as to which Shareholder currently
disclaims beneficial ownership in accordance with applicable law); and (iii) has
full power and authority to make, enter into and carry out the terms of this
Agreement and the Proxy.
5. Additional Documents. Shareholder hereby covenants and agrees to
execute and deliver any additional documents necessary, in the reasonable
opinion of Acquiror, to carry out the purpose and intent of this Agreement.
6. Consent and Waiver. Shareholder hereby gives any consents or
waivers that are reasonably required for the consummation of the Merger under
the terms of any agreement to which Shareholder is a party or pursuant to any
rights Shareholder may have.
7. Termination. This Agreement and the Proxy delivered in
connection herewith shall terminate and shall have no further force or effect as
of the Expiration Date.
8. Miscellaneous.
8.1 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
8.2 Binding Effect and Assignment. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but,
except as otherwise specifically provided herein, neither this Agreement nor any
of the rights, interests or obligations of the parties hereto may be assigned by
either of the parties without the prior written consent of the other.
8.3 Amendment and Modification. This Agreement may not be
modified, amended, altered or supplemented except by the execution and delivery
of a written agreement executed by the parties hereto.
8.4 Specific Performance; Injunctive Relief. The parties hereto
acknowledge that Acquiror will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
Shareholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Acquiror upon any such violation,
Acquiror shall have the right to enforce such covenants and agreements by
specific performance, injunctive relief or by any other means available to
Acquiror at law or in equity.
3.
<PAGE> 4
8.5 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
commercial delivery service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with confirmation of receipt) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Acquiror, to:
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, California 95134
Attention: President
Facsimile No.: (408) 526-4100
Telephone No.: (408) 526-4000
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
Attn: Edward M. Leonard, Esq.
Facsimile No.: (415) 496-2885
Telephone No.: (415) 424-0160
(b) if to Shareholder, to:
The address set forth under Shareholder's name on the
signature page hereof.
8.6 Governing Law. This Amendment shall be governed by,
construed and enforced in accordance with the internal laws of the State of
California.
8.7 Entire Agreement. This Agreement and the Proxy contain the
entire understanding of the parties in respect of the subject matter hereof, and
supersede all prior negotiations and understandings between the parties with
respect to such subject matters.
8.8 Counterpart. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
4.
<PAGE> 5
8.9 Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction or interpretation of this
Agreement.
5.
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
CISCO SYSTEMS, INC.
By:
--------------------------------------
Title:
-----------------------------------
SHAREHOLDER
-----------------------------------------
Name:
Shareholder's Address for Notice:
-----------------------------------------
-----------------------------------------
-----------------------------------------
Shares beneficially owned:
shares of Target Common Stock
-----------
[SIGNATURE PAGE TO VOTING AGREEMENT]
6.
<PAGE> 7
EXHIBIT A
IRREVOCABLE PROXY
TO VOTE STOCK OF
TELEBIT CORPORATION
The undersigned shareholder of Telebit Corporation, a California
corporation ("Target"), hereby irrevocably (to the full extent permitted by
Section 705 of the California General Corporation Law) appoints the members of
the Board of Directors of Cisco Systems, Inc., a California corporation
("Acquiror"), and each of them, as the sole and exclusive attorneys and proxies
of the undersigned, with full power of substitution and resubstitution, to vote
and exercise all voting and related rights (to the full extent that the
undersigned is entitled to do so) with respect to all of the shares of capital
stock of Target that now are or hereafter may be beneficially owned by the
undersigned, and any and all other shares or securities of Target issued or
issuable in respect thereof on or after the date hereof (collectively, the
"Shares") in accordance with the terms of this Proxy. The Shares beneficially
owned by the undersigned shareholder of Target as of the date of this Proxy are
listed on the final page of this Proxy. Upon the undersigned's execution of this
Proxy, any and all prior proxies given by the undersigned with respect to any
Shares are hereby revoked and the undersigned agrees not to grant any subsequent
proxies with respect to the Shares until after the Expiration Date (as defined
below).
This Proxy is irrevocable (to the extent provided in Section 705 of the
California General Corporation Law), is granted pursuant to that certain Voting
Agreement, dated as of July 21, 1996, by and among Acquiror and the undersigned
shareholder (the "Voting Agreement"), and is granted in consideration of
Acquiror entering into that certain Agreement and Plan of Reorganization, dated
as of July 21, 1996, by and among Target, Acquiror and Cobra Acquisition
Corporation, a California corporation ("Merger Sub") and wholly owned subsidiary
of Acquiror (the "Reorganization Agreement"). The Reorganization Agreement
provides for the merger of Merger Sub with and into Target (the "Merger"). As
used herein, the term "Expiration Date" shall mean the earlier to occur of (i)
such date and time as the Merger shall become effective in accordance with the
terms and provisions of the Reorganization Agreement and (ii) six months after
the date of termination of the Reorganization Agreement (unless the
Reorganization Agreement shall have been terminated in the circumstances
contemplated by any of Sections 7.1(a), (d) or (f)(i) thereof, in which case
this six-month extension shall not be effective or applicable).
The attorneys and proxies named above, and each of them are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Shares, and to
exercise all voting and other rights of the undersigned with respect to the
Shares (including, without limitation,
<PAGE> 8
the power to execute and deliver written consents pursuant to Section 603 of the
California General Corporation Law), at every annual, special or adjourned
meeting of the shareholders of Target and in every written consent in lieu of
such meeting (i) in favor of approval of the Merger and the Reorganization
Agreement and the transactions contemplated by the Asset Purchase Agreement
dated of even date herewith (the "Asset Purchase Agreement") between Target and
Telebit (Newco) Inc. (the "Asset Transaction") and in favor of any matter that
could reasonably be expected to facilitate the Merger and the Asset Transaction
and (ii) against any proposal for any recapitalization, merger, sale of assets
or other business combination (other than the Merger and the Asset Transaction)
between Target and any person or entity other than Acquiror or any other action
or agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of Target under the Reorganization
Agreement or the Asset Purchase Agreement or which could result in any of the
conditions to Target's obligations under the Reorganization Agreement or the
Asset Purchase Agreement not being fulfilled. The attorneys and proxies named
above may not exercise this Proxy on any other matter except as provided above.
The undersigned shareholder may vote the Shares on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
This Proxy is irrevocable (to the extent provided in Section 705 of the
California General Corporation Law).
Dated: July 21, 1996
-----------------------------------------
(Signature of Shareholder)
-----------------------------------------
(Print Name of Shareholder)
Shares beneficially owned:
shares of Target Common Stock
---------
[SIGNATURE PAGE TO PROXY]
<PAGE> 1
EXHIBIT 3
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement"), dated as of July 21,
1996, by and between Cisco Systems, Inc., a California corporation ("Acquiror"),
and Telebit Corporation, a California corporation ("Target").
WHEREAS, concurrently with the execution and delivery of this
Agreement, Target, Acquiror and Cobra Acquisition Corporation, a California
corporation ("Merger Sub"), are entering into an Agreement and Plan of
Reorganization, dated as of the date hereof (the "Reorganization Agreement"),
which provides that, among other things, upon the terms and subject to the
conditions thereof, Merger Sub will be merged with and into Target (the
"Merger"), with Target continuing as the surviving corporation; and
WHEREAS, as a condition and inducement to Acquiror's willingness to
enter into the Reorganization Agreement, Acquiror has required that Target
agree, and Target has so agreed, to grant to Acquiror an option with respect to
certain shares of Target's common stock on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Reorganization Agreement,
the parties hereto agree as follows:
1. Grant of Option. Target hereby grants Acquiror an irrevocable option
(the "Target Option") to purchase up to 2,071,000 shares (the "Target Shares")
of common stock, no par value per share, of Target (the "Target Common Stock")
in the manner set forth below at a price (the "Exercise Price") of thirteen
dollars and thirty-five cents ($13.35) per Target Share, payable in cash;
provided, however, that in the event either (i) Acquiror and Target shall at any
time following the date hereof agree to an increase in the Merger Consideration
price per Target Share payable in the Merger (as evidenced by the execution of a
written definitive agreement providing for such increased price), or (ii)
Acquiror shall at any time following the date hereof commence a tender or
exchange offer for Target Shares at a price per Target Share greater than the
Merger Consideration (as evidenced by the filing of a Schedule 14D-1 with the
Securities and Exchange Commission), then the Exercise Price hereunder shall
automatically be increased to such higher agreed or offered price per Target
Share. Capitalized terms used herein but not defined herein shall have the
meanings set forth in the Reorganization Agreement.
<PAGE> 2
2. Exercise of Option. The Target Option may be exercised by Acquiror,
in whole or in part at any time or from time to time after the occurrence of any
of the events described in Sections 7.3(b), 7.3(c)(i) and 7.3(c)(ii) of the
Reorganization Agreement or if a Takeover Proposal or Trigger Event is
consummated as set forth in Section 7.3(d) of the Reorganization Agreement. In
the event Acquiror wishes to exercise the Target Option, Acquiror shall deliver
to Target a written notice (an "Exercise Notice") specifying the total number of
Target Shares it wishes to purchase. Each closing of a purchase of Target Shares
(a "Closing") shall occur at a place, on a date and at a time designated by
Acquiror in an Exercise Notice delivered at least two business days prior to the
date of the Closing. The Target Option shall terminate upon the earlier of: (i)
the Effective Time; (ii) the termination of the Reorganization Agreement
pursuant to Section 7.1 thereof (other than a termination in connection with
which Acquiror is entitled to the payment specified in Sections 7.3(b), (c) or
(d) thereof); or (iii) 180 days following any termination of the Reorganization
Agreement in connection with which Acquiror is entitled to the payment specified
in Sections 7.3(b) or (c) thereof (or if, at the expiration of such 180-day
period, the Target Option cannot be exercised by reason of any applicable
judgment, decree, order, law or regulation, ten business days after such
impediment to exercise shall have been removed or shall have become final and
not subject to appeal, but in no event under this clause (iii) later than July
21, 1998, or (iv) 210 days following any termination of the Reorganization
Agreement in connection with which Acquiror is entitled to a payment as
specified in Section 7.3(d) thereof (or if, at the expiration of such 210-day
period, the Target Option cannot be exercised by reason of any applicable
judgment, decree, order, law or regulation, 10 business days after such
impediment to exercise shall have been removed or shall have become final and
not subject to appeal), but in no event under this clause (iv) later than July
21, 1998. Notwithstanding the foregoing, the Target Option may not be exercised
if Acquiror is in material breach of any of its representations, warranties,
covenants or agreements contained in this Agreement or in the Reorganization
Agreement or the Confidentiality Agreement (as defined in the Reorganization
Agreement).
3. Conditions to Closing. The obligation of Target to issue the Target
Shares to Acquiror hereunder is subject to the conditions that (i) all waiting
periods, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder ("HSR Act"),
applicable to the issuance of the Target Shares hereunder shall have expired or
have been terminated; (ii) all consents, approvals, orders or authorizations of,
or registrations, declarations or filings with, any Federal, state or local
administrative agency or commission or other Federal state or local governmental
authority or instrumentality, if any, required in connection with the issuance
of the Target Shares hereunder shall have been obtained or made, as the case may
be; and (iii) no preliminary or permanent injunction or other order by any court
of competent jurisdiction prohibiting or otherwise restraining such issuance
shall be in effect.
2.
<PAGE> 3
4. Closing. At any Closing, (a) Target will deliver to Acquiror a
single certificate in definitive form representing the number of Target Shares
designated by Acquiror in its Exercise Notice, such certificate to be registered
in the name of Acquiror and to bear the legend set forth in Section 13, and (b)
Acquiror will deliver to Target the aggregate price for the Target Shares so
designated and being purchased by wire transfer of immediately available funds
or certified check or bank check. At any Closing at which Acquiror is exercising
the Target Option in part, Acquiror shall present and surrender this Agreement
to Target, and Target shall deliver to Acquiror an executed new agreement with
the same terms as this Agreement evidencing the right to purchase the balance of
the shares of Target Common Stock purchasable hereunder.
5. Representations and Warranties of Target. Target represents and
warrants to Acquiror that (a) Target is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder, (b) the execution and delivery of this Agreement by
Target and the consummation by Target of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Target and no other corporate proceedings on the part of Target are necessary to
authorize this Agreement or any of the transactions contemplated hereby, (c)
this Agreement has been duly executed and delivered by Target and constitutes a
valid and binding obligation of Target, and, assuming this Agreement constitutes
a valid and binding obligation of Acquiror, is enforceable against Target in
accordance with its terms, except as enforceability may be limited by bankruptcy
and other laws affecting the rights and remedies of creditors generally and
general principles of equity, (d) Target has taken all necessary corporate
action to authorize and reserve for issuance and to permit it to issue, upon
exercise of the Target Option, and at all times from the date hereof through the
expiration of the Target Option will have reserved, 2,071,000 unissued Target
Shares, all of which, upon their issuance and delivery in accordance with the
terms of this Agreement, will be validly issued, fully paid and nonassessable,
(e) upon delivery of the Target Shares to Acquiror upon the exercise of the
Target Option, Acquiror will acquire the Target Shares free and clear of all
claims, liens, charges, encumbrances and security interests of any nature
whatsoever, other than liens and encumbrances created by or imposed upon the
holders thereof and restrictions imposed by applicable securities laws, (f)
except as described in Sections 2.2 and 2.3 of the Reorganization Agreement, the
execution and delivery of this Agreement by Target does not, and the performance
of this Agreement by Target will not, conflict with, or result in any violation
of, or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or the loss of a benefit under, or the creation of a lien, pledge, security
interest or other encumbrance on assets pursuant to (any such conflict,
violation, default, right of termination, cancellation or acceleration, loss or
creation, a "Violation"), (A) any provision of the Restated Articles of
Incorporation, as amended, or Bylaws, as amended, of Target or (B) any
provisions of any material mortgage, indenture, lease, contract or other
agreement, instrument, permit, concession, franchise, or license or (C) any
3.
<PAGE> 4
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Target or its properties or assets, which Violation, in the case of each of
clauses (B) and (C), would have a Material Adverse Effect on Target and (g)
except as described in Sections 2.2 and 2.3 of the Reorganization Agreement, the
execution and delivery of this Agreement by Target does not, and the performance
of this Agreement by Target will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority.
6. Representations and Warranties of Acquiror. Acquiror represents
and warrants to Target that (a) Acquiror is a corporation duly organized,
validly existing and in good standing under the laws of the State of California
and has the corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder, (b) the execution and delivery of this
Agreement by Acquiror and the consummation by Acquiror of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Acquiror and no other corporate proceedings on the part of
Acquiror are necessary to authorize this Agreement or any of the transactions
contemplated hereby, (c) this Agreement has been duly executed and delivered by
Acquiror and constitutes a valid and binding obligation of Acquiror, and,
assuming this Agreement constitutes a valid and binding obligation of Target, is
enforceable against Acquiror in accordance with its terms, except as
enforceability may be limited by bankruptcy and other laws affecting the rights
and remedies of creditors generally and general principles of equity, (d) except
as described in Section 3.3 of the Reorganization Agreement, the execution and
delivery of this Agreement by Acquiror does not, and the performance of this
Agreement by Acquiror will not, result in any Violation pursuant to, (A) any
provision of the Articles of Incorporation or Bylaws of Acquiror, (B) any
provisions of any material mortgage, indenture, lease, contract or other
agreement, instrument, permit, concession, franchise, or license or (C) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Acquiror or its properties or assets, which Violation, in the case of each of
clauses (B) and (C), would have a Material Adverse Effect on Acquiror, (e)
except as described in Section 3.2 of the Reorganization Agreement and Section
3(i) of this Agreement, the execution and delivery of this Agreement by Acquiror
does not, and the performance of this Agreement by Acquiror will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority and (f) any Target
Shares acquired upon exercise of the Target Option will not be, and the Target
Option is not being, acquired by Acquiror with a view to the public distribution
thereof. Acquiror is an "accredited investor" within the meaning of Rule 501 of
the Securities Act.
7. Certain Repurchases.
(a) Put and Call. At any time during which the Target Option is
exercisable pursuant to Section 2 (the "Repurchase Period"), upon demand by
Acquiror, Acquiror shall have the right to sell to Target (or any successor
entity thereof) and
4.
<PAGE> 5
Target (or such successor entity) shall be obligated to repurchase from Acquiror
(the "Put"), and upon demand by Target, subject to Section 7(c) hereof, Target
(or any successor entity thereof) shall have the right to repurchase from
Acquiror and Acquiror shall be obligated to sell to Target (or such successor
entity) (the "Call"), all or any portion of the Target Option, at the price set
forth in subparagraph (i) below, or, at any time prior to July 21, 1998, all or
any portion of the Target Shares purchased by Acquiror pursuant thereto, at a
price set forth in subparagraph (ii) below:
(i) the difference between the "Market/Tender Offer Price"
for shares of Target Common Stock as of the date (the "Notice Date") notice of
exercise of the Put or Call, as the case may be, is given to the other party
(defined as the higher of (A) the price per share offered as of the Notice Date
pursuant to any tender or exchange offer or other Takeover Proposal (as defined
in the Reorganization Agreement) which was made prior to the Notice Date and not
terminated or withdrawn as of the Notice Date (the "Tender Price") or (B) the
average of the closing prices of shares of Target Common Stock on the Nasdaq
National Market for the ten trading days immediately preceding the Notice Date,
(the "Market Price")), and the Exercise Price, multiplied by the number of
Target Shares purchasable pursuant to the Target Option (or portion thereof with
respect to which Acquiror or Target is exercising its rights under this Section
7), but only if the Market/Tender Offer Price is greater than the Exercise
Price;
(ii) the Exercise Price paid by Acquiror for the Target
Shares acquired pursuant to the Target Option plus the difference between the
Market/Tender Offer Price and the Exercise Price, but only if the Market/Tender
Offer Price is greater than the Exercise Price, multiplied by the number of
Target Shares so purchased. For purposes of this clause (ii), the Tender Price
shall be the highest price per share offered pursuant to a tender or exchange
offer or other Takeover Proposal during the Repurchase Period.
(b) Payment and Redelivery of Target Option or Shares. In the
event Acquiror or Target exercises its rights under this Section 7, Target
shall, within ten business days of the Notice Date, pay the required amount to
Acquiror in immediately available funds and Acquiror shall surrender to Target
the Target Option or the certificates evidencing the Target Shares purchased by
Acquiror pursuant thereto, and Acquiror shall warrant that it owns such shares
and that such shares are then free and clear of all liens, claims, charges and
encumbrances of any kind or nature whatsoever.
(c) Limitation on Call. The Call shall not be exercisable by
Target (or any successor entity thereof) unless substantially concurrently
therewith Target has consummated the transaction contemplated by a Takeover
Proposal or the shareholders of Target have transferred their shares of Target
Common Stock pursuant to a tender or exchange offer or other Takeover Proposal.
5.
<PAGE> 6
8. Voting of Shares. Following the date hereof and prior to the
Expiration Date (as defined in Section 9(b)), Acquiror shall vote any shares of
Target Common Stock acquired pursuant to this Agreement ("Restricted Shares") on
each matter submitted to a vote of shareholders of Target for and against such
matter in the same proportion as the vote of all other shareholders of Target
are voted (whether by proxy or otherwise) for and against such matter.
9. Restrictions on Certain Actions.
(a) Restrictions. Other than pursuant to the
Reorganization Agreement, following the date hereof and prior to the Expiration
Date, without the prior written consent of Target, Acquiror shall not, nor shall
Acquiror permit its affiliates to, directly or indirectly, alone or in concert
or conjunction with any other Person or Group (as defined in Section 9(b)), (i)
in any manner acquire, agree to acquire or make any proposal to acquire, any
securities of, equity interest in, or any material property of, Target (other
than pursuant to this Agreement or the Reorganization Agreement), (ii) except at
the specific written request of Target, propose to enter into any merger or
business combination involving Target or to purchase a material portion of the
assets of Target, (iii) make or in any way participate in any "solicitation" of
"proxies" (as such terms are used in Regulation 14A promulgated under the
Exchange Act) to vote, or seek to advise or influence any Person with respect to
the voting of, any voting securities of Target, (iv) form, join or in any way
participate in a Group with respect to any voting securities of Target, (v) seek
to control or influence the management, Board of Directors or policies of
Target, (vi) disclose any intention, plan or arrangement inconsistent with the
foregoing, (vii) advise, assist or encourage any other Person in connection with
the foregoing or (viii) request Target (or its directors, officers, employees or
agents) to amend or waive any provisions of this Section 9, or take any action
which may require Target to make a public announcement regarding the possibility
of a business combination or merger with such party. Target shall not adopt any
Rights Agreement in any manner which would cause Acquiror, if Acquiror has
complied with its obligations under this Agreement, to become an "Acquiring
Person" under such Rights Agreement solely by reason of the beneficial ownership
of the shares purchasable hereunder.
(b) Certain Definitions. For purposes of this Agreement,
(i) the term "Person" shall mean any corporation, partnership, individual,
trust, unincorporated association or other entity or Group (within the meaning
of Section 13(d)(3) of the Exchange Act), (ii) the term "Expiration Date" with
respect to any obligation or restriction imposed on one party shall mean the
earlier to occur of (A) the third anniversary of the date hereof or (B) such
time as the other party shall have suffered a Change of Control and (iii) a
"Change of Control" with respect to one party shall be deemed to have occurred
whenever (A) there shall be consummated (1) any consolidation or merger of such
party in which such party is not the continuing or surviving corporation, or
pursuant to which shares of such party's common stock would be converted in
whole or in part into cash, other securities or other property, other than
6.
<PAGE> 7
a merger of such person in which the holders of such party's common stock
immediately prior to the merger have substantially the same proportionate
ownership of common stock of the surviving corporation immediately after the
merger, or (2) any sale, lease, exchange or transfer (in one transaction or a
series of related transactions) of all or substantially all the assets of such
party, or (B) the shareholders of such party shall approve any plan or proposal
for the liquidation or dissolution of such party, or (C) any party, other than
such party or a subsidiary thereof or any employee benefit plan sponsored by
such party or a subsidiary thereof or a corporation owned, directly or
indirectly, by the shareholders of such party in substantially the same
proportions as their ownership of stock of such party, shall become the
beneficial owner of securities of such party representing 25% or more of the
combined voting power of then outstanding securities ordinarily (and apart from
rights accruing in special circumstances) having the right to vote in the
election of directors, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise, or (D) at any time
during the period commencing on the date of this Agreement and ending on the
Expiration Date, individuals who at the date hereof constituted the Board of
Directors of such party shall cease for any reason to constitute at least a
majority thereof, unless the election or the nomination for election by such
party's shareholders of each new director during the period commencing on the
date of this Agreement and ending on the Expiration Date was approved by a vote
of at least two-thirds of the directors then still in office who were directors
at the date hereof, or (E) any other event shall occur with respect to such
party that would be required to be reported in response to Item 6(e) (or any
successor provision) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act.
10. Restrictions on Transfer.
(a) Restrictions on Transfer. Prior to the Expiration
Date, Acquiror shall not, directly or indirectly, by operation of law or
otherwise, sell, assign, pledge, or otherwise dispose of or transfer any
Restricted Shares beneficially owned by Acquiror, other than (i) pursuant to
Section 7, or (ii) in accordance with Section 10(b) or 11.
(b) Permitted Sales. Following the termination of the
Reorganization Agreement, Acquiror shall be permitted to sell any Restricted
Shares beneficially owned by it if such sale is made pursuant to a tender or
exchange offer that has been approved or recommended, or otherwise determined to
be fair and in the best interests of the shareholders of Target, by a majority
of the members of the Board of Directors of Target (which majority shall include
a majority of directors who were directors prior to the announcement of such
tender or exchange offer).
11. Registration Rights.
(a) Following the termination of the Reorganization
Agreement, Acquiror may by written notice (the "Registration Notice") to Target
request Target to
7.
<PAGE> 8
register under the Securities Act all or any part of the Restricted Shares
beneficially owned by Acquiror (the "Registrable Securities") pursuant to a bona
fide firm commitment underwritten public offering in which Acquiror and the
underwriters shall effect as wide a distribution of such Registrable Securities
as is reasonably practicable and shall use their best efforts to prevent any
Person (including any Group) and its affiliates from purchasing through such
offering Restricted Shares representing more than 1% of the outstanding shares
of Common Stock of Target on a fully diluted basis (a "Permitted Offering"). The
Registration Notice shall include a certificate executed by Acquiror and its
proposed managing underwriter, which underwriter shall be an investment banking
firm of nationally recognized standing (the "Manager"), stating that (i) they
have a good faith intention to commence promptly a Permitted Offering and (ii)
the Manager in good faith believes that, based on the then prevailing market
conditions, it will be able to sell the Registrable Securities at a per share
price equal to at least 80% of the Fair Market Value of such shares. For
purposes of this Section 11, the term "Fair Market Value" shall mean the per
share average of the closing sale prices of Target's Common Stock on the Nasdaq
National Market for the ten trading days immediately preceding the date of the
Registration Notice. Target (and/or any Person designated by Target) shall
thereupon have the option exercisable by written notice delivered to Acquiror
within ten business days after the receipt of the Registration Notice,
irrevocably to agree to purchase all or any part of the Registrable Securities
for cash at a price (the "Option Price") equal to the product of (i) the number
of Registrable Securities and (ii) the Fair Market Value of such shares. Any
such purchase of Registrable Securities by Target hereunder shall take place at
a closing to be held at the principal executive offices of Target or its counsel
at any reasonable date and time designated by Target and/or such designee in
such notice within 10 business days after delivery of such notice. Any payment
for the shares to be purchased shall be made by delivery at the time of such
closing of the Option Price in immediately available funds.
(b) If Target does not elect to exercise its option to
purchase pursuant to Section 11(a) with respect to all Registrable Securities,
it shall use its best efforts to effect, as promptly as practicable, the
registration under the Securities Act of the unpurchased Registrable Securities;
provided, however, that (i) Acquiror shall not be entitled to more than an
aggregate of two effective registration statements hereunder and (ii) Target
will not be required to file any such registration statement during any period
of time (not to exceed 40 days after such request in the case of clause (A)
below or 90 days in the case of clauses (B) and (C) below) when (A) Target is in
possession of material non-public information which it reasonably believes would
be detrimental to be disclosed at such time and, in the written opinion of
counsel to Target, such information would have to be disclosed if a registration
statement were filed at that time; (B) Target is required under the Securities
Act to include audited financial statements for any period in such registration
statement and such financial statements are not yet available for inclusion in
such registration statement; or (C) Target determines, in its reasonable
judgment, that such registration would interfere with any financing, acquisition
or other material transaction involving Target or any of its affiliates. If
consummation of the sale
8.
<PAGE> 9
of any Registrable Securities pursuant to a registration hereunder does not
occur within 120 days after the filing with the SEC of the initial registration
statement, the provisions of this Section 11 shall again be applicable to any
proposed registration; provided, however, that Acquiror shall not be entitled to
request more than two registrations pursuant to this Section 11. Target shall
use its best efforts to cause any Registrable Securities registered pursuant to
this Section 11 to be qualified for sale under the securities or Blue Sky laws
of such jurisdictions as Acquiror may reasonably request and shall continue such
registration or qualification in effect in such jurisdiction; provided, however,
that Target shall not be required to qualify to do business in, or consent to
general service of process in, any jurisdiction by reason of this provision.
(c) The registration rights set forth in this Section 11
are subject to the condition that Acquiror shall provide Target with such
information with respect to Acquiror's Registrable Securities, the plans for the
distribution thereof, and such other information with respect to Acquiror as, in
the reasonable judgment of counsel for Target, is necessary to enable Target to
include in such registration statement all material facts required to be
disclosed with respect to a registration thereunder.
(d) If Target's securities of the same type as the
Registrable Securities are then authorized for quotation or trading or listing
on the New York Stock Exchange, Nasdaq National Market System, or any other
securities exchange or automated quotations system, Target, upon the request of
Acquiror, shall promptly file an application, if required, to authorize for
quotation, trading or listing the shares of Registrable Securities on such
exchange or system and will use its reasonable efforts to obtain approval, if
required, of such quotation, trading or listing as soon as practicable.
(e) A registration effected under this Section 11 shall be
effected at Target's expense, except for underwriting discounts and commissions
and the fees and the expenses of counsel to Acquiror, and Target shall provide
to the underwriters such documentation (including certificates, opinions of
counsel and "comfort" letters from auditors) as are customary in connection with
underwritten public offerings as such underwriters may reasonably require. In
connection with any such registration, the parties agree (i) to indemnify each
other and the underwriters in the customary manner and (ii) to enter into an
underwriting agreement in form and substance customary to transactions of this
type with the Manager and the other underwriters participating in such offering.
12. Adjustment Upon Changes in Capitalization.
(a) In the event of any change in Target Common Stock by
reason of stock dividends, splitups, mergers (other than the Merger),
recapitalizations, combinations, exchange of shares or the like, the type and
number of shares or securities subject to the Target Option, and the purchase
price per share provided in Section 1, shall be adjusted appropriately, and
proper provision shall be made in the agreements
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<PAGE> 10
governing such transaction so that Acquiror shall receive, upon exercise of the
Target Option, the number and class of shares or other securities or property
that Acquiror would have received in respect of the Target Common Stock if the
Target Option had been exercised immediately prior to such event or the record
date therefor, as applicable.
(b) In the event that Target shall enter in an agreement: (i)
to consolidate with or merge into any person, other than Acquiror or one of its
Subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than Acquiror or one
of its Subsidiaries, to merge into Target and Target shall be the continuing or
surviving corporation, but, in connection with such merger, in the
then-outstanding shares of Target Common Stock shall be changed into or
exchanged for stock or other securities of Target or any other person or cash or
any other property or the outstanding shares of Target Common Stock immediately
prior to such merger shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the merged company; or (iii) to sell
or otherwise transfer all or substantially all of its assets to any person,
other than Acquiror or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions so that upon
the consummation of any such transaction and upon the terms and conditions set
forth herein, Acquiror shall receive for each Target Share with respect to which
the Target Option has not been exercised an amount of consideration in the form
of and equal to the per share amount of consideration that would be received by
the holder of one share of Target Common Stock less the Exercise Price (and, in
the event of an election or similar arrangement with respect to the type of
consideration to be received by the holders of Target Common Stock, subject to
the foregoing, proper provision shall be made so that the holder of the Target
Option would have the same election or similar rights as would the holder of the
number of shares of Target Common Stock for which the Target Option is then
exercisable).
13. Restrictive Legends. Each certificate representing shares of
Target Common Stock issued to Acquiror hereunder shall include a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD ONLY
IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH
SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH
IN THE STOCK OPTION AGREEMENT, DATED AS OF JULY 21, 1996, A COPY OF WHICH MAY BE
OBTAINED FROM THE ISSUER.
10.
<PAGE> 11
14. Binding Effect; No Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Except as expressly provided for in this
Agreement, neither this agreement nor the rights or the obligations of either
party hereto are assignable, except by operation of law, or with the written
consent of the other party. Nothing contained in this Agreement, express or
implied, is intended to confer upon any person other than the parties hereto and
their respective permitted assigns any rights or remedies of any nature
whatsoever by reason of this Agreement. Any Restricted Shares sold by Acquiror
in compliance with the provisions of Section 11 shall, upon consummation of such
sale, be free of the restrictions imposed with respect to such shares by this
Agreement, unless and until Acquiror shall repurchase or otherwise become the
beneficial owner of such shares, and any transferee of such shares shall not be
entitled to the rights of Acquiror. Certificates representing shares sold in a
registered public offering pursuant to Section 11 shall not be required to bear
the legend set forth in Section 13.
15. Specific Performance. The parties recognize and agree that if for
any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate and
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to other
remedies, the other party shall be entitled to an injunction restraining any
violation or threatened violation of the provisions of this Agreement. In the
event that any action should be brought in equity to enforce the provisions of
this Agreement, neither party will allege, and each party hereby waives the
defense, that there is adequate remedy at law.
16. Entire Agreement. This Agreement and the Reorganization Agreement
(including the Target Disclosure Schedule and the Acquiror Disclosure Schedule
relating thereto) constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof.
17. Further Assurance. Each party will execute and deliver all such
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
18. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provision of this
Agreement to be null, void or unenforceable, the parties hereto shall negotiate
in good faith the execution and delivery of an amendment to this Agreement in
order, as nearly as possible, to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision. Each party agrees
that, should any court or other competent authority hold any provision
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<PAGE> 12
of this Agreement or part hereof to be null, void or unenforceable, or order any
party to take any action inconsistent herewith, or not take any action required
herein, the other party shall not be entitled to specific performance of such
provision or part hereof or to any other remedy, including but not limited to
money damages, for breach hereof or of any other provision of this Agreement or
part hereof as the result of such holding or order.
19. Notices. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally, telegraphed or
telecopied or sent by certified or registered mail, postage prepaid, and shall
be deemed to be given, dated and received when so delivered personally,
telegraphed or telecopied or, if mailed, five business days after the date of
mailing to the following address or telecopy number, or to such other address or
addresses as such person may subsequently designate by notice given hereunder.
(a) if to Acquiror, to:
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, California 95134
Attention: President
Facsimile No.: (408) 526-4100
Telephone No.: (408) 526-4000
with a copy to:
Brobeck, Phleger & Harrison LLP
2200 Geng Road
Two Embarcadero Place
Palo Alto, CA 94303
Attn: Edward M. Leonard, Esq.
Facsimile No.: (415) 496-2885
Telephone No.: (415) 424-0160
(b) if to Target, to:
Telebit Corporation
One Executive Drive
Chelmsford, Massachusetts 01824
Attention: Brian D. Cohen
Facsimile No.: (508) 656-9304
Telephone No.: (508) 441-2181
12.
<PAGE> 13
with a copy to:
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, Massachusetts 02110
Attn: William J. Schnoor, Esq.
Facsimile No.: (617) 248-7100
Telephone No.: (617) 248-7000
20. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California applicable to agreements
made and to be performed entirely within such State without regard to any
applicable conflicts of law rules.
21. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
22. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same instrument.
23. Expenses. Except as otherwise expressly provided herein or in
the Reorganization Agreement, all costs and expenses incurred in connection with
the transactions contemplated by this Agreement shall be paid by the party
incurring such expenses.
24. Amendments; Waiver. This Agreement may be amended by the parties
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
13.
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
CISCO SYSTEMS, INC.
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
TELEBIT CORPORATION
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
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