<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
STRATACOM, INC.
- --------------------------------------------------------------------------------
(NAME OF ISSUER)
Common Stock, $.01 Par Value
- --------------------------------------------------------------------------------
(TITLE OF CLASS OF SECURITIES)
8626831
- --------------------------------------------------------------------------------
(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)
April 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. 8626831 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*
00
- --------------------------------------------------------------------------------
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 ------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 4,220,850
OWNED BY ------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON -------
WITH ------------------------------------------------
10 SHARED DISPOSITIVE POWER
-------
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,220,850
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN
SHARES*
/ /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
5.56%
- --------------------------------------------------------------------------------
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, par value
$.01 per share (the "Issuer Common Stock"), of StrataCom, Inc., a Delaware
corporation (the "Issuer"). The principal executive offices of the Issuer are
located at 1400 Parkmoor Avenue, San Jose, California 95126.
ITEM 2. IDENTITY AND BACKGROUND.
(a) The name of the persons filing this statement are Cisco Systems, Inc.,
a California corporation ("Cisco").
(b) The address of the principal office and principal business 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 April 21,
1996 (the "Reorganization Agreement"), among Cisco, Jet Acquisition Corporation,
a Delaware corporation and wholly-owned subsidiary of Cisco ("Merger Sub") and
the Issuer, and subject to the conditions set forth therein (including approval
by stockholders of the Issuer), Merger Sub will be merged with and into the
Issuer (the "Merger"), with each share of Issuer Common Stock being converted
into the right to receive that number of shares of Cisco Common Stock, no par
value ("Cisco Common Stock"), obtained by dividing $50.00 by the average of the
closing prices of Cisco's Common Stock as quoted on the Nasdaq National Market
for the fifteen trading days immediately preceding (and including) the fifth
trading day prior to the StrataCom stockholders meeting; provided that, if the
actual quotient obtained thereby is less than one, the quotient shall be one,
and if the actual quotient obtained thereby is more than 1.2195, the quotient
shall be 1.2195 (the "Exchange Ratio"). In total, Cisco will issue approximately
75,968,707 shares of Cisco Common Stock in exchange for all 75,968,707
outstanding shares of Issuer Common Stock (based on an assumed Exchange Ratio of
1.0 (the "Assumed Exchange Ratio")). 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 statement relates to the
Merger of Merger Sub, a wholly-owned subsidiary of Cisco, with and into Issuer
in a statutory merger pursuant to the Delaware General Corporation Law. 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"). Holders of
outstanding Issuer Common Stock will receive, in exchange for each share of
Issuer Common Stock held by them, 1.0 shares of Cisco Common Stock (based on the
Assumed Exchange Ratio). Cisco will assume the Issuer 1986 Incentive Stock
Option Plan, 1992 Directors' Stock Option Plan, 1994 Stock Option Plan and 1992
Employee Stock Purchase Plan as well as the outstanding options issued under
such plans.
As an inducement to Cisco to enter into the Reorganization Agreement,
each stockholder who is a party to the Voting Agreement, dated as of April 21,
1996 (the "Voting Agreement") among the parties thereto (collectively, the
"Voting Agreement Stockholders"), 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 4,220,850 shares of Issuer Common Stock beneficially and
collectively owned by the Voting Agreement Stockholders in all matters related
to the Merger. The shared voting power with the
<PAGE> 7
certain shareholders of Issuer relates to 4,220,850 shares of Issuer Common
Stock (the "Shares"). The Voting Agreement Stockholders and the number of shares
beneficially owned by each of them is set forth in Schedule B hereto which is
hereby incorporated by this reference. 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.
In exercising its right to vote the Shares as lawful attorney and proxy
of the Voting Agreement Stockholders, Cisco (or any nominee of Cisco) will be
limited, at every StrataCom Stockholders Meeting and every written consent in
lieu of such meeting to vote the Shares (i) in favor of approval of the Merger
and the Reorganization Agreement and in favor of any matter that could
reasonably be expected to facilitate the Merger and (ii) against any proposal
for any recapitalization, merger, sale of assets or other business combination
(other than the Merger) between Issuer and 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 Stockholder 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) the date of termination
of the Reorganization Agreement.
Pursuant to the Reorganization Agreement, Cisco and Issuer entered into
a Stock Option Agreement, dated April 21, 1996 ("Option Agreement"). The Option
Agreement grants Cisco the right, under certain conditions, to purchase up to
11,395,300 shares of Issuer Common Stock at a price of $50.00 per share. 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 of the Surviving
Corporation shall be John T. Chambers and Larry R. Carter. The officers of the
<PAGE> 8
Surviving Corporation shall be the initial officers of Merger Sub, 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 Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Merger, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by Delaware Law and such Certificate of Incorporation;
provided, however, that Article I of the Certificate of Incorporation of the
Surviving Corporation shall be amended to read as follows: "The name of the
corporation is StrataCom, Inc." 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 4,220,850 shares of Issuer Common Stock. Such
Issuer Common Stock constitutes approximately 5.56% of the issued and
outstanding shares of Issuer Common Stock.
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.
<PAGE> 9
(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,
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 April 21, 1996, by
and among Cisco Systems, Inc., a California corporation, Jet
Acquisition Corporation, a Delaware corporation and
wholly-owned subsidiary of Cisco Systems, Inc., and StrataCom,
Inc. a Delaware corporation.
2. Voting Agreement, dated April 21, 1996, by and among Cisco
Systems, Inc., a California corporation and certain
stockholders of StrataCom, Inc., a Delaware corporation.
3. Stock Option Agreement, dated April 21, 1996, by and between
Cisco Systems, Inc., a California corporation, and StrataCom,
Inc., a Delaware 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: May 1, 1996
CISCO SYSTEMS, INC.
By: /s/ LARRY R. CARTER
------------------------------
<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.
Frank J. Marshall Vice President and General Manager, Core Business
Unit 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 Vice Chairman of the Board of Directors of Cisco
Systems, Inc. and Partner of Sequoia Capital, 3000
Sand Hill Road, #4-280, Menlo Park, CA 94025.
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>
Richard M. Moley 2,388,268
Sanjay Subhedar 369,974
M. Kenneth Oshman 1,260,000
Richard W. Lowenthal 202,608
</TABLE>
<PAGE> 1
EXHIBIT 1
Agreement and Plan of Reorganization
<PAGE> 2
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CISCO SYSTEMS, INC.,
JET ACQUISITION CORPORATION
AND
STRATACOM, INC.
April 21, 1996
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
THE MERGER........................................................................ A-2
1.1 The Merger............................................. A-2
1.2 Closing; Effective Time................................ A-2
1.3 Effect of the Merger................................... A-2
1.4 Certificate of Incorporation; Bylaws................... A-2
1.5 Directors and Officers................................. A-3
1.6 Effect on Capital Stock................................ A-3
1.7 Surrender of Certificates.............................. A-4
1.8 No Further Ownership Rights in Target Common Stock..... A-6
1.9 Lost, Stolen or Destroyed Certificates................. A-6
1.10 Tax and Accounting Consequences........................ A-6
1.11 Taking of Necessary Action; Further Action............. A-6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TARGET.......................................... A-6
2.1 Organization, Standing and Power....................... A-7
2.2 Capital Structure...................................... A-8
2.3 Authority.............................................. A-9
2.4 SEC Documents; Financial Statements.................... A-10
2.5 Absence of Certain Changes............................. A-11
2.6 Absence of Undisclosed Liabilities..................... A-11
2.7 Litigation............................................. A-11
2.8 Restrictions on Business Activities.................... A-11
2.9 Governmental Authorization............................. A-12
2.10 Title to Property...................................... A-12
2.11 Intellectual Property.................................. A-12
2.12 Environmental Matters.................................. A-14
2.13 Taxes.................................................. A-15
2.14 Employee Benefit Plans................................. A-16
2.15 Certain Agreements Affected by the Merger.............. A-18
2.16 Employee Matters....................................... A-18
2.17 Interested Party Transactions.......................... A-19
2.18 Insurance.............................................. A-19
2.19 Compliance With Laws................................... A-19
2.20 Pooling of Interests................................... A-19
2.21 Brokers' and Finders' Fees............................. A-19
2.22 Registration Statement; Proxy Statement/Prospectus..... A-19
</TABLE>
i.
<PAGE> 4
<TABLE>
<S> <C>
2.23 Opinion of Financial Advisor......................... A-20
2.24 Vote Required........................................ A-20
2.25 Board Approval....................................... A-20
2.26 Section 203 of the DGCL Not Applicable............... A-20
2.27 Customers and Suppliers.............................. A-20
2.28 Product Specifications............................... A-21
2.29 Target Rights Agreement.............................. A-21
2.30 Representations Complete............................. A-21
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB....................... A-21
3.1 Organization, Standing and Power..................... A-21
3.2 Capital Structure.................................... A-22
3.3 Authority............................................ A-23
3.4 SEC Documents; Financial Statements.................. A-24
3.5 Absence of Certain Changes........................... A-24
3.6 Absence of Undisclosed Liabilities................... A-25
3.7 Litigation........................................... A-25
3.8 Restrictions on Business Activities.................. A-25
3.9 Governmental Authorization........................... A-25
3.10 Compliance With Laws................................. A-26
3.11 Pooling of Interests................................. A-26
3.12 Broker's and Finders' Fees........................... A-26
3.13 Registration Statement; Proxy Statement/Prospectus... A-26
3.14 Board Approval....................................... A-27
3.15 Opinion of Financial Advisor......................... A-27
3.16 Intellectual Property................................ A-27
3.17 Representations Complete............................. A-27
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME............................................. A-27
4.1 Conduct of Business of Target and Acquiror........... A-27
4.2 Conduct of Business of Target........................ A-29
4.3 No Solicitation...................................... A-31
ARTICLE V
ADDITIONAL AGREEMENTS........................................................... A-33
5.1 Proxy Statement/Prospectus; Registration Statement... A-33
5.2 Meeting of Stockholders.............................. A-33
5.3 Access to Information................................ A-34
5.4 Confidentiality...................................... A-34
</TABLE>
ii.
<PAGE> 5
<TABLE>
<S> <C>
5.5 Public Disclosure................................................... A-34
5.6 Consents; Cooperation............................................... A-35
5.7 Pooling Accounting.................................................. A-36
5.8 Affiliate Agreements................................................ A-36
5.9 Voting Agreement.................................................... A-37
5.10 Legal Requirements.................................................. A-37
5.11 Blue Sky Laws....................................................... A-37
5.12 Employee Benefit Plans.............................................. A-37
5.13 Letter of Acquiror's and Target's Accountants....................... A-39
5.14 Form S-8............................................................ A-39
5.15 Indemnification..................................................... A-40
5.16 Option Agreement.................................................... A-41
5.17 Listing of Additional Shares........................................ A-41
5.18 Nasdaq Quotation.................................................... A-41
5.19 Employees........................................................... A-41
5.20 Pooling Letters..................................................... A-41
5.21 Best Efforts and Further Assurances................................. A-42
5.22 Target Rights Agreement............................................. A-42
ARTICLE VI
CONDITIONS TO THE MERGER....................................................................... A-42
6.1 Conditions to Obligations of Each Party to Effect the Merger........ A-42
6.2 Additional Conditions to Obligations of Target...................... A-44
6.3 Additional Conditions to the Obligations of Acquiror and Merger
Sub................................................................. A-45
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER.............................................................. A-46
7.1 Termination......................................................... A-46
7.2 Effect of Termination............................................... A-48
7.3 Expenses and Termination Fees....................................... A-48
7.4 Amendment........................................................... A-52
7.5 Extension; Waiver................................................... A-52
</TABLE>
iii.
<PAGE> 6
<TABLE>
<S> <C>
ARTICLE VIII
GENERAL PROVISIONS....................................................................... A-52
8.1 Non-Survival at Effective Time................................ A-52
8.2 Notices....................................................... A-52
8.3 Interpretation................................................ A-53
8.4 Counterparts.................................................. A-54
8.5 Entire Agreement; Nonassignability; Parties in Interest....... A-54
8.6 Severability.................................................. A-54
8.7 Remedies Cumulative........................................... A-54
8.8 Governing Law................................................. A-54
8.9 Rules of Construction......................................... A-55
</TABLE>
iv.
<PAGE> 7
SCHEDULES
Target Disclosure Schedule
Acquiror Disclosure Schedule
Schedule 2.10 - Target Real Property
Schedule 2.11 - Target Intellectual Property
Schedule 2.14 - Target Employee Plans
Schedule 5.8(a) - Target Affiliates
Schedule 5.8(b) - Acquiror Affiliates
Schedule 5.9 - Target Voting Agreement Signatories
Schedule 5.12 - Outstanding Options
Schedule 5.12(b) - ESPP
Schedule 5.19 - List of Employees
EXHIBITS
Exhibit A - Certificate of Merger
Exhibit B-1 - Target Affiliate Agreement
Exhibit B-2 - Acquiror Affiliate Agreement
Exhibit C - Voting Agreement
Exhibit D - Option Agreement
Exhibit E-1,
et. seq. - Employment and Non-Competition Agreement
Exhibit F - Acquiror's Legal Opinion
Exhibit G - Target's Legal Opinion
v.
<PAGE> 8
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is
made and entered into as of April 21, 1996, by and among Cisco Systems, Inc., a
California corporation ("Acquiror"), Jet Acquisition Corporation, a Delaware
corporation ("Merger Sub") and wholly owned subsidiary of Acquiror, and
StrataCom, Inc., a Delaware corporation ("Target").
RECITALS
A. The Boards of Directors of Target, Acquiror and Merger Sub
believe it is in the best interests of their respective companies and the
stockholders 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, $.01 par value ("Target Common Stock"), shall be
converted into shares of Acquiror Common Stock, no par value ("Acquiror Common
Stock"), at the rate set forth herein.
C. Target, Acquiror and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
D. The parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code.
E. The parties intend to cause the Merger to be accounted for
as a pooling of interests pursuant to APB Opinion No. 16, Staff Accounting
Series Releases 130, 135 and 146 and Staff Accounting Bulletins Topic Two.
F. 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 of the affiliates of Target who
are stockholders, officers or directors have on the date hereof entered into an
agreement to vote the shares of Target's Common Stock owned by such person to
approve the Merger and against any competing proposals.
A-1
<PAGE> 9
NOW, THEREFORE, in consideration of the covenants and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
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
Certificate of Merger attached hereto as Exhibit A (the "Certificate of Merger")
and the applicable provisions of the Delaware General Corporation Law ("Delaware
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
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, Two Embarcadero Place, 2200 Geng Road, Palo Alto, California, or
at such other location as the parties hereto agree. In connection with the
Closing, the parties hereto shall cause the Merger to be consummated by filing
the Certificate of Merger with the Secretary of State of the State of Delaware
and with the Recorder of the County in which the registered office of each of
Target and Merger Sub is located, in accordance with the relevant provisions of
Delaware 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 Certificate of Merger and
the applicable provisions of Delaware 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 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of
Incorporation of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended as provided by Delaware Law and such Certificate of
Incorporation; provided, however, that Article I of
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the Certificate of Incorporation of the Surviving Corporation shall be amended
to read as follows: "The name of the corporation is StrataCom, Inc."
(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.
1.5 Directors and Officers. At the Effective Time, the
directors of the Surviving Corporation shall be John T. Chambers and Larry R.
Carter. The officers of the Surviving Corporation shall be the initial officers
of Merger Sub, 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 together with the corresponding Right
(as defined in the Rights Agreement dated as of January 25, 1996 (the "Target
Rights Agreement") between Target and The First National Bank of Boston (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 that number of shares of Acquiror Common Stock obtained by
dividing $50.00 by the average of the closing prices of Acquiror's Common Stock
as quoted on the Nasdaq National Market for the fifteen trading days immediately
preceding (and including) the fifth trading day prior to the Target Stockholders
Meeting (as defined in Section 2.22 of this Agreement); provided that, if the
actual quotient obtained thereby is less than one, the quotient shall be one,
and if the actual quotient obtained thereby is more than 1.2195, the quotient
shall be 1.2195 (the "Exchange Ratio").
(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) Target Stock Option Plans. At the Effective Time,
the Target 1986 Incentive Stock Option Plan, the Target 1992 Directors' Stock
Option Plan and the Target 1994 Stock Option Plan (collectively, the "Target
Stock Option Plans") and all options to purchase Target Common Stock then
outstanding under the Target Stock Option Plans shall be assumed by Acquiror in
accordance with Section 5.12.
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(d) Capital Stock of Merger Sub. At the Effective
Time, each share of Common Stock, $.0001 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.
(e) Adjustments to Exchange Ratio. The Exchange Ratio
shall be adjusted to reflect fully the effect of any stock split, reverse split,
stock dividend (including any dividend or distribution of securities convertible
into Acquiror Common Stock or Target Common Stock), reorganization,
recapitalization or other like change with respect to Acquiror Common Stock or
Target Common Stock occurring after the date hereof and prior to the Effective
Time.
(f) Fractional Shares. No fraction of a share of
Acquiror Common Stock will be issued, but in lieu thereof each holder of shares
of Target Common Stock who would otherwise be entitled to a fraction of a share
of Acquiror Common Stock (after aggregating all fractional shares of Acquiror
Common Stock to be received by such holder) shall receive from Acquiror an
amount of cash (rounded to the nearest whole cent) equal to the product of (i)
such fraction, multiplied by (ii) the average of the closing prices of a share
of Acquiror Common Stock for the ten most recent days that Acquiror Common Stock
has traded ending on the trading day immediately prior to the Effective Time, as
reported on the Nasdaq National Market.
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.
(b) Acquiror to Provide Common Stock and Cash.
Promptly after the Effective Time, Acquiror shall make available to the Exchange
Agent for exchange in accordance with this Article I, through such reasonable
procedures as Acquiror may adopt, (i) the shares of Acquiror Common Stock
issuable pursuant to Section 1.6(a) in exchange for shares of Target Common
Stock outstanding immediately prior to the Effective Time and (ii) cash in an
amount sufficient to permit payment of cash in lieu of fractional shares
pursuant to Section 1.6(f).
(c) Exchange Procedures. Promptly after the Effective
Time, the Surviving Corporation shall cause to be mailed to each holder 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 shares of Acquiror
Common Stock (and cash in lieu of fractional shares) pursuant to Section 1.6,
(i) a letter of transmittal (which shall specify that
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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 certificates representing shares of Acquiror Common Stock (and cash
in lieu of fractional shares). 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 a certificate
representing the number of whole shares of Acquiror Common Stock and payment in
lieu of fractional shares 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 ownership of the number of full shares of Acquiror
Common Stock into which such shares of Target Common Stock shall have been so
converted and the right to receive an amount in cash in lieu of the issuance of
any fractional shares in accordance with Section 1.6.
(d) Distributions With Respect to Unexchanged Shares.
No dividends or other distributions with respect to Acquiror Common Stock with a
record date after the Effective Time will be paid to the holder of any
unsurrendered Certificate with respect to the shares of Acquiror Common Stock
represented thereby until the holder of record of such Certificate shall
surrender such Certificate. Subject to applicable law, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Acquiror Common Stock issued in
exchange therefor, without interest, at the time of such surrender, the amount
of any such dividends or other distributions with a record date after the
Effective Time theretofore payable (but for the provisions of this Section
1.7(d)) with respect to such shares of Acquiror Common Stock.
(e) Transfers of Ownership. If any certificate for
shares of Acquiror Common Stock is to be issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it will be
a condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Acquiror or any agent designated by
it any transfer or other taxes required by reason of the issuance of a
certificate for shares of Acquiror Common Stock in 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.
(f) No Liability. Notwithstanding anything to the
contrary in this Section 1.7, none of the Exchange Agent, the Surviving
Corporation or any party hereto
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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.
1.8 No Further Ownership Rights in Target Common Stock. All
shares of Acquiror Common Stock issued upon the surrender for exchange of shares
of Target Common Stock in accordance with the terms hereof (including any cash
paid in lieu of fractional shares) shall be deemed to have been issued 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
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of
Acquiror Common Stock (and cash in lieu of fractional shares) 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 Tax and Accounting Consequences. It is intended by the
parties hereto that the Merger shall (i) constitute a reorganization within the
meaning of Section 368(a) of the Code and (ii) qualify for accounting treatment
as a pooling of interests.
1.11 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,
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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 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 and
directors of such party.
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"), 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 a true and correct copy of the
Amended and Restated Certificate of Incorporation, as amended (the "Certificate
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 Certificate of Incorporation or Bylaws or equivalent
organizational documents. Target is the 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 2.4), Target does not directly or indirectly
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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 200,000,000 shares of Common Stock, $.01 par value, and 2,000,000
shares of Preferred Stock, $.01 par value, of which there were issued and
outstanding as of the close of business on April 21, 1996, 75,968,707 shares of
Common Stock and no shares of Preferred Stock. As of April 21, 1996, there were
no other outstanding commitments to issue any shares of capital stock or voting
securities of Target other than pursuant to the Option Agreement, the exercise
of options outstanding as of such date under the Target Stock Option Plans or
pursuant to the Target 1992 Employee Stock Purchase Plan (the "Target ESPP").
All outstanding shares of Target Common Stock are duly authorized, validly
issued, fully paid and non-assessable and are free of any liens or encumbrances
other than any liens or encumbrances created by or imposed upon the holders
thereof, and are not subject to preemptive rights or rights of first refusal
created by statute, the Certificate 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 April 21, 1996, Target has reserved (i) 34,160,000 shares of Common
Stock for issuance to employees, consultants and directors pursuant to the
Target Stock Option Plans, of which 20,721,831 shares have been issued pursuant
to option exercises or direct stock purchases, 11,897,101 shares are subject to
outstanding, unexercised options, and no shares are subject to outstanding stock
purchase rights, and (ii) 1,500,000 shares of Common Stock for issuance to
employees pursuant to the Target ESPP, of which 1,088,876 shares have been
issued. Except as expressly permitted by the terms of this Agreement, since
April 21, 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 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 stockholders
and (ii) to Target's knowledge, between or among any of Target's stockholders,
except for the stockholders named in Schedule 5.9 of this Agreement. The terms
of the Target Stock Option Plans permit the assumption or substitution of
options to purchase Acquiror Common Stock as provided in this Agreement, without
the consent or approval of the holders of such securities, the Target
stockholders, or otherwise and without any acceleration of the exercise schedule
or vesting provisions in effect for those options. The current "Purchase Period"
(as defined
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in the Target ESPP) commenced under the Target ESPP on April 1, 1996 and will
end as provided in Section 5.12(b) of 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
relating to or issued under the Target Stock Option Plans or Target ESPP have
been 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
made available 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 stockholders 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 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 Certificate 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, to the knowledge of Target, 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 Certificate 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 in Section 2.22) relating to the
Target Stockholders Meeting (as defined in Section 2.22), (iii) 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
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country; (iv) such filings as may be required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("HSR"); and (v) 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
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 June 30, 1993,
and, prior to the Effective Time, Target will have furnished Acquiror with 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 made available to Acquiror all exhibits to the Target SEC
Documents filed prior to the date hereof, and will promptly make available 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 in accordance with
their terms, and neither Target nor any of its subsidiaries is in default
thereunder, except where any such default has not resulted in and is not
reasonably expected to result in any Material Adverse Effect on Target. As of
their respective filing dates, the Target SEC Documents complied in all material
respects with the requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the Securities Act, and 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) in all material
respects. There has been no material change in Target accounting policies except
as described in the notes to the Target Financial Statements.
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2.5 Absence of Certain Changes. Since December 31, 1995 (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 would 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 which would result in a
Material Adverse Effect on Target; 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 Annual Report on Form 10-K for the period
ended December 31, 1995 (the "Target Balance Sheet"), (ii) those 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.
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, would 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 would prevent, enjoin, materially alter or materially delay any
of the transactions contemplated by this Agreement, or that would have a
Material Adverse Effect on Target.
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 the effect of prohibiting or materially impairing any
current or future business
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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 as currently conducted 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 would not 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 or (iv) those which
would not have a Material Adverse Effect on Target. 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. 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 as currently conducted
or as proposed to be conducted by Target and its subsidiaries, except to the
extent that the
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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, and (iii) all material 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 or customer 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 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.
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(f) Target has a policy to secure valid written
assignments from all consultants and employees who contribute or have
contributed to the creation or development of 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. Except in all cases as, in the
aggregate, have not had and would not have a Material Adverse Effect on Target,
Target and each of its subsidiaries (i) have obtained all applicable permits,
licenses and other authorizations that are required under Federal, state or
local laws relating to pollution or protection of the environment, including
laws relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants or hazardous or toxic materials or wastes into ambient
air, surface water, ground water or land or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or hazardous or toxic
materials or wastes by Target or its subsidiaries (or their respective agents);
(ii) are in compliance with all terms and conditions of such required permits,
licenses and authorizations, and also are in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in such laws or contained in any
regulation, code, plan, order, decree, judgment, notice or demand letter issued,
entered, promulgated or approved thereunder; (iii) as of the date hereof, are
not aware of and have not received notice of any event, condition, circumstance,
activity, practice, incident, action or plan that is reasonably likely to
interfere with or prevent continued compliance or that would give rise to any
common law or statutory liability, or otherwise form the basis of any claim,
action, suit or proceeding, based on or resulting from Target's or any of its
subsidiaries (or any of their respective agents) manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling, or the
emission, discharge or release into the environment of any pollutant,
contaminant or hazardous or toxic material or waste; (iv) has not disposed of
any pollutants, contaminants or hazardous or toxic materials or wastes into the
soil or groundwater at any properties owned or leased by Target, either now or
in the past, or at any other property that would result in any assessment or
remedial action; and (v) have taken all actions necessary under applicable
requirements of Federal, state or local laws, rules or regulations to register
any products or materials required to be registered by Target or its
subsidiaries (or any of their respective agents) thereunder.
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2.13 Taxes. Except to the extent the failure to do so would
not have a Material Adverse Effect, Target and each of its subsidiaries, and any
consolidated, combined, unitary or aggregate group for Tax purposes of which
Target or any of its subsidiaries is or has been a member have timely filed all
Tax Returns required to be filed by it, have 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 that have not
been paid, whether or not shown as being due on any Tax returns. Except as
disclosed in the Target Disclosure Schedule, (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, and (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 or 404 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 or 263A 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. 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 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 express or implied 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. Target and each of its
subsidiaries are in full compliance with all terms and conditions of any Tax
exemptions or other Tax-sparing agreement or order of a foreign government and
the consummation of the Merger shall not have any adverse effect on the
continued validity and effectiveness of any such Tax exemptions or other
Tax-sparing agreement or order.
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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 employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and subject to 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,
(iii) all 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,
bonus, pension, profit sharing, savings, deferred compensation or incentive
plans, programs or arrangements which are not employee benefit plans as
otherwise covered under clause (i) above, (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 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) Other than continued health care coverage
required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"), none of the Target Employee Plans promises or provides
retiree medical or
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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 and which individually or in the aggregate could reasonably be
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 or 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 and
Target has prepared in good faith and timely filed all requisite governmental
reports (which were true and correct as of the date filed) and, to Target's
knowledge, Target 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. 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.
(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
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the extent that such failure to comply would not, in the aggregate, have a
Material Adverse Effect on Target.
(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 which would have a Material Adverse Effect on
Target. 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 would have a Material
Adverse Effect on Target. Neither Target nor any of its subsidiaries is a party
to any collective bargaining agreement or other 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.
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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 June 30, 1993.
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
would not have a Material Adverse Effect on Target.
2.20 Pooling of Interests. To the knowledge of Target, neither
Target nor any of its subsidiaries nor, any of their respective directors,
officers or stockholders has taken any action that would prevent Acquiror from
accounting for the Merger as a pooling of interests.
2.21 Brokers' and Finders' Fees. Except for payment
obligations to Montgomery Securities disclosed to Acquiror, 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.
2.22 Registration Statement; Proxy Statement/Prospectus. The
information supplied by Target for inclusion in the registration statement on
Form S-4 (or such other or successor form as shall be appropriate) pursuant to
which the shares of Acquiror Common Stock to be issued in the Merger will be
registered with the SEC (the "Registration Statement") shall not at the time the
Registration Statement (including any amendments or supplements thereto) is
declared effective by the SEC contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The information supplied by
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Target for inclusion in the proxy statement/prospectus to be sent to the
stockholders of Target in connection with the meeting of Target's stockholders
to consider the Merger (the "Target Stockholders Meeting") (such proxy
statement/prospectus 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 stockholders, at the time of the Target Stockholders Meeting and at the
Effective Time, contain any statement which, at such time, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not false or 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
Stockholders Meeting which has become false or 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 an amendment to the Registration Statement or 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.
2.23 Opinion of Financial Advisor. Target has been advised in
writing by its financial advisor, Montgomery Securities, that in such advisor's
opinion, as of the date hereof, the consideration to be received by the
stockholders of Target is fair, from a financial point of view, to the
stockholders of Target.
2.24 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 Stockholders Meeting is the only vote of the holders of any of
Target's capital stock necessary to approve this Agreement and the transactions
contemplated hereby.
2.25 Board Approval. The Board of Directors of Target has,
prior to the date hereof, unanimously (i) approved this Agreement and the
Merger, (ii) determined that the Merger is in the best interests of the
stockholders of Target and is on terms that are fair to such stockholders and
(iii) determined to recommend that the stockholders of Target approve this
Agreement and consummation of the Merger.
2.26 Section 203 of the DGCL Not Applicable. The Board of
Directors of Target has taken all actions so that the restrictions contained in
Section 203 of the Delaware Law applicable to a "business combination" (as
defined in Section 203) will not apply to the execution, delivery or performance
of this Agreement or the Option Agreement or the consummation of the Merger or
the other transactions contemplated by this Agreement or by the Option
Agreement.
2.27 Customers and Suppliers. As of the date hereof, no
customer which individually accounted for more than $3,500,000 of Target's gross
revenues during the 12 month period preceding the date hereof has indicated to
Target that it will stop, or
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materially decrease the rate of, buying services or products of Target, or has
at any time on or after December 31, 1995 decreased materially its usage of the
services or products of Target. As of the date hereof, no material supplier of
Target has indicated that it will stop, or materially decrease the rate of,
supplying materials, products or services to Target. Target has not knowingly
breached, so as to provide a benefit to Target that was not intended by the
parties, any agreement with, or engaged in any fraudulent conduct with respect
to, any customer or supplier of Target.
2.28 Product Specifications. Each of the IPX product family,
BPX/AXIS product families, IGX product family and FastPad product family are
manufactured and released in substantial conformance with Target's product
technical specifications and release test methods.
2.29 Target Rights Agreement. Neither the execution and
delivery of this Agreement, the Option Agreement or the Voting Agreement by the
parties hereto and thereto nor the consummation by Acquiror and Merger Sub of
the transactions contemplated hereby and thereby will cause Acquiror or any of
its affiliates or associates to be within the definition of "Acquiring Person"
(as defined in the Target Rights Agreement) for purposes of the Target Rights
Agreement.
2.30 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.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Except as disclosed in a document of even date herewith and
delivered by Acquiror to Target prior to the execution and delivery of this
Agreement and referring to the representations and warranties in this Agreement
(the "Acquiror Disclosure Schedule"), Acquiror and Merger Sub represent and
warrant to Target as follows:
3.1 Organization, Standing and Power. Each of Acquiror and its
subsidiaries, including 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 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
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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 any of its subsidiaries 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 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 Acquiror 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 Acquiror or any such subsidiary
to issue, transfer, sell, purchase, redeem or otherwise acquire any such
securities. Except as disclosed in the Acquiror SEC Documents (as defined in
Section 3.4), Acquiror 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.
3.2 Capital Structure. The authorized capital stock of
Acquiror consists of 1,200,000,000 shares of Common Stock, no par value, and
5,000,000 shares of Preferred Stock, no par value, of which there were issued
and outstanding as of the close of business on April 19, 1996, 569,029,371
shares of Common Stock and no shares of Preferred Stock. There are no other
outstanding shares of capital stock or voting securities of Acquiror other than
shares of Acquiror Common Stock issued after April 19, 1996 upon the exercise of
options issued under the Acquiror Amended and Restated 1987 Stock Option Plan,
Crescendo Communications, Inc. 1990 Stock Option Plan, Newport Systems Solution,
Inc. 1990 Stock Option Plan, Combinet, Inc. Incentive and Non-Qualified Stock
Option Plan, Grand Junction Networks, Inc. 1992 Stock Plan, Kalpana, Inc. 1989
Stock Option Plan, TGV Software, Inc. 1990 Stock Option Plan and TGV Software,
Inc. 1995 Stock Option Plan (collectively, the "Acquiror Stock Option Plans").
The authorized capital stock of Merger Sub consists of 1,000 shares of Common
Stock, $.0001 par value, all of which are issued and outstanding and are held by
Acquiror. All outstanding shares of Acquiror and Merger Sub have been duly
authorized, validly issued, fully paid and are nonassessable and free of any
liens or encumbrances other than any liens or encumbrances created by or imposed
upon the holders thereof. As of the close of business on April 19, 1996,
Acquiror has reserved 228,347,598 shares of Common Stock for issuance to
employees, directors and independent contractors pursuant to the Acquiror Stock
Option Plans, of which 151,190,953 shares have been issued pursuant to option
exercises, and 54,302,954 shares are subject to outstanding, unexercised
options. Other than pursuant to this Agreement and the Acquiror 1989 Employee
Stock Purchase Plan, there are no other options, warrants, calls, rights,
commitments or agreements of any character to which Acquiror or Merger Sub is a
party or by which either of them is bound obligating Acquiror or Merger
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Sub to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the capital stock of
Acquiror or Merger Sub or obligating Acquiror or Merger Sub to grant, extend or
enter into any such option, warrant, call, right, commitment or agreement. The
shares of Acquiror Common Stock to be issued pursuant to the Merger will be duly
authorized, validly issued, fully paid, and non-assessable.
3.3 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, and the approval of the shareholders of Acquiror is not required for
Acquiror to enter into this Agreement and consummate the Merger. 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 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 Acquiror or any of its subsidiaries
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, to the knowledge of Acquiror with respect to,
Acquiror or any of its subsidiaries 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 Certificate of Merger as provided in Section 1.2, (ii) the
filing with the SEC and NASD of the Registration Statement, (iii) the filing of
a Form 8-K with the SEC and NASD within 15 days after the Closing Date, (iv) any
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 HSR, (vi) the filing with the Nasdaq National Market of a Notification
Form for Listing of Additional Shares with respect to the shares of Acquiror
Common Stock issuable upon conversion of the Target Common Stock in the Merger
and upon exercise of the options under the Target Stock Option Plans assumed by
Acquiror, and (vii) 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.
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3.4 SEC Documents; Financial Statements. Acquiror has 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 June 30, 1993, 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 in accordance with their terms, and
neither Acquiror nor any of its subsidiaries is in default thereunder, except
where such default has not resulted in and is not reasonably expected to result
in any 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 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) in all material
respects. There has been no material change in Acquiror accounting policies
except as described in the notes to the Acquiror Financial Statements.
3.5 Absence of Certain Changes. Since January 28, 1996 (the
"Acquiror Balance Sheet Date"), Acquiror 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 would
result in a Material Adverse Effect to Acquiror; (ii) any acquisition, sale or
transfer of any material asset of Acquiror 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
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any change in depreciation or amortization policies or rates) by Acquiror or any
material revaluation by Acquiror of any of its assets; (iv) any declaration,
setting aside, or payment of a dividend or other distribution with respect to
the shares of Acquiror, or any direct or indirect redemption, purchase or other
acquisition by Acquiror of any of its shares of capital stock; (v) any material
contract entered into by Acquiror, other than in the ordinary course of business
and as made available to Target, or any material amendment or termination of, or
default under, any material contract to which Acquiror is a party or by which it
is bound which would result in a Material Adverse Effect on Acquiror; or (vi)
any negotiation or agreement by Acquiror or any of its subsidiaries to do any of
the things described in the preceding clauses (i) through (v) (other than
negotiations with Target and its representatives regarding the transactions
contemplated by this Agreement).
3.6 Absence of Undisclosed Liabilities. Acquiror 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 Acquiror's Quarterly Report on Form 10-Q for the
period ended January 28, 1996 (the "Acquiror Balance Sheet"), (ii) those not
required to be set forth in the Acquiror Balance Sheet under generally accepted
accounting principles, and (iii) those incurred in the ordinary course of
business since the Acquiror Balance Sheet Date and consistent with past
practice.
3.7 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 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, individually or in the aggregate,
would have a Material Adverse Effect on Acquiror. 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 would prevent, enjoin, materially
alter or materially delay any of the transactions contemplated by this
Agreement, or that would have a Material Adverse Effect on Acquiror.
3.8 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon Acquiror or any of
its subsidiaries which has the effect of prohibiting or materially impairing any
current or future business practice of Acquiror or any of its subsidiaries, any
acquisition of property by Acquiror or any of its subsidiaries or the conduct of
business by Acquiror or any of its subsidiaries as currently conducted or as
proposed to be conducted by Acquiror or any of its subsidiaries.
3.9 Governmental Authorization. Acquiror and each of its
subsidiaries have obtained each federal, state, county, local or foreign
governmental consent, license,
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permit, grant, or other authorization of a Governmental Entity (i) pursuant to
which Acquiror 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
Acquiror's or any of its subsidiaries' business or the holding of any such
interest ((i) and (ii) herein collectively called "Acquiror Authorizations"),
and all of such Acquiror Authorizations are in full force and effect, except
where the failure to obtain or have any of such Acquiror Authorizations would
not have a Material Adverse Effect on Acquiror.
3.10 Compliance With Laws. Each of Acquiror 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 would not have a Material Adverse Effect on Acquiror.
3.11 Pooling of Interests. To the knowledge of Acquiror,
neither Acquiror nor any of its subsidiaries nor any of their respective
directors, officers or stockholders has taken any action that would prevent
Acquiror from accounting for the Merger as a pooling of interests.
3.12 Broker's and Finders' Fees. 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.
3.13 Registration Statement; Proxy Statement/Prospectus. The
information supplied by Acquiror and Merger Sub for inclusion in the
Registration Statement shall not, at the time the Registration Statement
(including any amendments or supplements thereto) is declared effective by the
SEC, 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 they were made, not misleading. 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 stockholders, at the time of the
Target Stockholders Meeting and at the Effective Time, contain any statement
which, at such time, is false or misleading with respect to any 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 false or
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 Stockholders Meeting which has become false or
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 an
amendment to the Registration Statement or 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
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any information supplied by Target which is contained in any of the foregoing
documents.
3.14 Board Approval. The Boards of Directors of Acquiror and
Merger Sub have prior to the date hereof unanimously (i) approved this Agreement
and the Merger, (ii) determined that the Merger is in the best interests of
their respective stockholders and is on terms that are fair to such stockholders
and (iii) determined to recommend that the stockholder of Merger Sub approve
this Agreement and the consummation of the Merger.
3.15 Opinion of Financial Advisor. Acquiror has been advised
in writing by its financial advisor, Merrill Lynch & Co., that in such advisor's
opinion as of the date hereof, the consideration to be paid by Acquiror is fair
to Acquiror from a financial point of view.
3.16 Intellectual Property. Acquiror 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 ("Acquiror
Intellectual Property") that are used or proposed to be used in the business of
Acquiror and its subsidiaries as currently conducted or as proposed to be
conducted by Acquiror and its subsidiaries, except to the extent that the
failure to have such rights have not had and would not reasonably be expected to
have a Material Adverse Effect on Acquiror.
3.17 Representations Complete. None of the representations or
warranties made by Acquiror or Merger Sub herein or in any Schedule hereto,
including the Acquiror Disclosure Schedule, 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, 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 and Acquiror. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, each of Target and Acquiror
agrees (except to the extent expressly contemplated by this Agreement or as
consented to in writing by the other), to carry on its and its subsidiaries'
business in the usual, regular and ordinary
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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. Each of Target and Acquiror agrees to use its
best efforts to promptly notify the other of any event or occurrence not in the
ordinary course of its or its subsidiaries' business, and of any event which
would have a Material Adverse Effect. Without limiting the foregoing, except as
expressly contemplated by this Agreement, neither Target nor Acquiror shall 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 the other:
(a) Charter Documents. Cause or permit any amendments
to its Certificate of Incorporation or Bylaws;
(b) Dividends; Changes in Capital Stock. Except as
set forth in the Acquiror Disclosure Schedule, 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 set forth 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 stock plans or authorize cash payments in exchange for
any options or other rights granted under any of such plans.
(d) Pooling. Take any action, which to the knowledge
of such party would prevent Acquiror from accounting for the Merger as a pooling
of interests; or
(e) Other. Take, or agree in writing or otherwise to
take, any of the actions described in Sections 4.1(a) through (d) above, or any
action which would make any of its representations or warranties contained in
this Agreement untrue or
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incorrect or prevent it from performing or cause it not to perform its covenants
hereunder.
4.2 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, 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, which consent shall
not be unreasonably withheld:
(a) Material Contracts. Except for contracts or
commitments entered into, and violations, amendments, modifications and waivers
of contracts, in the ordinary course of business consistent with past practice
in an amount less than $10,000,000 in any one case, and except for contracts or
commitments entered into, and violations, amendments, modifications and waivers
of contracts, not in the ordinary course of business consistent with past
practice in an amount less than $3,500,000 in any one case, enter into any
contract or commitment, or violate, amend or otherwise modify or waive any of
the terms of any of its contracts;
(b) 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 April 21, 1996; provided, however, that Target may, in the
ordinary course of business consistent with past practice, grant options for the
purchase of Target Common Stock under the Target Option Plans (not to exceed an
aggregate of 750,000 options to purchase shares of Target Common Stock granted
after April 21, 1996; provided not more than 150,000 of such options may be
granted in any one month period).
(c) Intellectual Property. Transfer to any person or
entity any rights to its Intellectual Property other than in the ordinary course
of business consistent with past practice;
(d) Exclusive Rights. Enter into or amend any
agreements pursuant to which any other party is granted exclusive marketing or
distribution rights with respect to any of its products or technology;
(e) Dispositions. 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;
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(f) 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, except in the ordinary course of
business consistent with past practice;
(g) Leases. Enter into any operating lease, except in
the ordinary course of business consistent with past practice;
(h) Payment of Obligations. Pay, discharge or satisfy
in an amount in excess of $50,000 in any one case, any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise)
arising other than in the ordinary course of business, other than the payment,
discharge or satisfaction of liabilities reflected or reserved against in the
Target Financial Statements;
(i) Capital Expenditures. Make any material capital
expenditures, capital additions or capital improvements except in the ordinary
course of business and consistent with past practice;
(j) Insurance. Materially reduce the amount of any
material insurance coverage provided by existing insurance policies;
(k) Employee Benefit Plans; New Hires; Pay Increases.
Adopt or amend any material employee benefit or stock purchase or option plan,
or hire any new officer level employee (except that it may hire a replacement
for any current officer level employee if it first provides Acquiror five days
prior written notice regarding such hiring decision), hire any director level
employee in departments other than sales, marketing or engineering without first
providing Acquiror five days prior written notice of such hire, pay any special
bonus or special remuneration to any employee or director, or increase the
salaries or wage rates of its employees;
(l) 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 standard written agreements outstanding on
the date hereof or (B) grants which are made in the ordinary course of business
in accordance with its standard past practice;
(m) 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;
(n) 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
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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;
(o) Taxes. Other than in the ordinary course of
business, make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(p) 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;
(q) 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
(r) Other. Take or agree in writing or otherwise to
take, any of the actions described in Sections 4.2(a) through (q) 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.
4.3 No Solicitation. 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 stockholders
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 Target reasonably expects 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 advisor) that such Takeover Proposal
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would, if consummated, result in a transaction more favorable to Target's
stockholders 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
is necessary for the Board of Directors of Target to comply with its fiduciary
duties to stockholders 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 4.3 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 at least as restrictive as to confidential
information as the Confidentiality Agreement (as defined in Section 5.4);
provided, however, that Target shall not, and shall not permit any of its
officers, directors, employees (acting on behalf of Target) 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 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
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course of business) of Target, other than the transactions contemplated by this
Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration 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 stockholders of Target and, as promptly as
practicable following receipt of SEC comments thereon, Acquiror shall file with
the SEC a Registration Statement on Form S-4 (or such other or successor form as
shall be appropriate), which complies in form with applicable SEC requirements
and shall use all reasonable efforts to cause the Registration Statement to
become effective as soon thereafter as practicable; provided, however, that
Acquiror shall have no obligation to agree to account for the Merger as a
"purchase" in order to cause the Registration Statement to become effective.
Each of Acquiror and Target will notify the other 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 Registration
Statement or any other 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 SEC, or its staff or any other
government officials, on the other hand, with respect to the Registration
Statement or other filing. The Registration Statement and the other 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 the Registration Statement or any other filing, Acquiror or
Target, as the case may be, shall promptly inform the other of such occurrence
and cooperate in filing with the SEC or its staff or any other government
officials, and/or mailing to stockholders of Acquiror, such amendment or
supplement. Subject to the provisions of Section 4.3, 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 or, 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 Stockholders. Target shall promptly after the
date hereof take all action necessary in accordance with Delaware Law and its
Certificate of Incorporation and Bylaws to convene the Target Stockholders
Meeting as promptly as practicable after the Registration Statement is declared
effective by the SEC. Target shall consult with Acquiror regarding the date of
the Target Stockholders Meeting and
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use all reasonable efforts not to postpone or adjourn (other than for the
absence of a quorum) the Target Stockholders Meeting without the consent of
Acquiror, which consent shall not be required where Target determines in good
faith, after consultation with outside legal counsel that it is necessary to
postpone or adjourn the Target Stockholders Meeting in order to comply with its
fiduciary duties to stockholders under applicable law. Subject to Section 5.1,
Target shall use its best efforts to solicit from stockholders of Target proxies
in favor of the Merger and shall take all other action necessary or advisable to
secure the vote or consent of stockholders required to effect the Merger.
5.3 Access to Information.
(a) Target shall afford Acquiror and its accountants,
counsel and other representatives, 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. Acquiror shall
afford Target and its accountants, counsel and other representatives, reasonable
access during normal business hours during the period prior to the Effective
Time to (i) all of Acquiror's and its subsidiaries' properties, books,
contracts, commitments and records, and (ii) all other information concerning
the business, properties and personnel of Acquiror and its subsidiaries as
Target may reasonably request. Acquiror agrees to provide to Target 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
April 14, 1996 (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
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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 in exercise of the
fiduciary duties of the Board of Directors, 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 best 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,
except where the failure to obtain such consents under material contracts would
not have a Material Adverse Effect on Target. The parties hereto will consult
and cooperate with one another, and consider in good faith the views of one
another, in connection with any analyses, appearances, presentations, memoranda,
briefs, arguments, opinions and proposals made or submitted by or 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 best 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 Acquiror shall have no obligation to litigate or contest any
administrative or judicial action or proceeding or any Order beyond the earlier
of (i) November 15, 1996 or (ii) the date of a ruling preliminary enjoining the
Merger issued by a court of competent
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jurisdiction. 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 Pooling Accounting. Acquiror and Target shall each use its
best efforts to cause the business combination to be effected by the Merger to
be accounted for as a pooling of interests. Each of Acquiror and Target shall
use its best efforts to cause its "Affiliates" (as defined in Section 5.8) not
to take any action that would prevent Acquiror from accounting for the business
combination to be effected by the merger as a pooling of interest.
5.8 Affiliate Agreements.
(a) Schedule 5.8(a) sets forth those persons who may
be deemed "Affiliates" of Target within the meaning of Rule 145 promulgated
under the Securities Act ("Rule 145"). Target shall provide Acquiror such
information and documents as Acquiror shall reasonably request for purposes of
reviewing such list. Target shall use its best efforts to deliver or cause to be
delivered to Acquiror, concurrently with the execution of this Agreement (and in
each case at least thirty (30) days prior to the Effective Time) from each of
the Affiliates of Target, an executed Affiliate Agreement in the form attached
hereto as Exhibit B-1. Acquiror and Merger Sub shall be entitled to place
appropriate legends on the certificates evidencing any Acquiror Common Stock to
be received by such Affiliates of Target pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for Acquiror Common Stock, consistent with the terms of such Affiliates
Agreements.
(b) Schedule 5.8(b) sets forth those persons who may
be deemed "Affiliates" of Acquiror within the meaning of Rule 145. Acquiror
shall provide Target such information and documents as Target shall reasonably
request for purposes of reviewing such list. Acquiror shall use its best efforts
to deliver or cause to be delivered to Target, concurrently with the execution
of this Agreement (and in each case at least thirty (30) days prior to the
Effective Time) from each of the Affiliates of Acquiror, an executed Affiliate
Agreement in the form attached hereto as Exhibit B-2.
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5.9 Voting Agreement. Target shall use its best efforts, on
behalf of Acquiror and pursuant to the request of Acquiror, to cause each Target
stockholder named in Schedule 5.9 to execute and deliver to Acquiror a Voting
Agreement substantially in the form of Exhibit C attached hereto concurrent with
the execution of this Agreement.
5.10 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.
5.11 Blue Sky Laws. Acquiror shall take such steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of the Acquiror Common Stock in connection
with the Merger. Target shall use its best efforts to assist Acquiror as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable in connection with the issuance of Acquiror Common Stock in
connection with the Merger.
5.12 Employee Benefit Plans.
(a) At the Effective Time, the Target Stock Option Plans and
each outstanding option to purchase shares of Target Common Stock under the
Target Stock Option Plans, whether vested or unvested, will be assumed by
Acquiror. Schedule 5.12 hereto sets forth a true and complete list as of
the date hereof of all holders of outstanding options under the Target Stock
Option Plans, including the number of shares of Target capital stock subject to
each such option, the exercise or vesting schedule, the exercise price per share
and the term of each such option. On the Closing Date, Target
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shall deliver to Acquiror an updated Schedule 5.12 hereto current as of
such date. Each such option so assumed by Acquiror under this Agreement shall
continue to have, and be subject to, the same terms and conditions set forth in
the Target Stock Option Plans and the documents governing the outstanding
options under those Plans, immediately prior to the Effective Time, except that
(i) such option will be exercisable for that number of whole shares of Acquiror
Common Stock equal to the product of the number of shares of Target Common Stock
that were issuable upon exercise of such option immediately prior to the
Effective Time multiplied by the Exchange Ratio and rounded 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 such
assumed option will be equal to the quotient determined by dividing the exercise
price per share of Target Common Stock at which such option was exercisable
immediately prior to the Effective Time by the Exchange Ratio, rounded up to the
nearest whole cent. Consistent with the terms of the Target Stock Option Plans
and the documents governing the outstanding options under those Plans and except
as set forth in the Target Disclosure Schedule, the Merger will not terminate
any of the outstanding options under such Plans or accelerate the exercisability
or vesting of such 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. As soon as reasonably
practical but in no event more than 30 days after the Effective Time, Acquiror
will issue to each person who, immediately prior to the Effective Time was a
holder of an outstanding option under the Target Stock Option Plans a document
in form and substance satisfactory to Target evidencing the foregoing assumption
of such option by Acquiror.
(b) Outstanding purchase rights under the Target ESPP
shall be exercised or assumed, and the Target ESPP shall be terminated, as
follows:
(i) If it is determined on or before June 20,
1996 that the Effective Time shall occur before July 1, 1996, outstanding
purchase rights under the Target ESPP shall be exercised 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 be converted into
shares of Acquiror Common Stock in the Merger. The Target ESPP, and all
outstanding purchase rights thereunder, shall terminate with such exercise date,
and no purchase rights shall be subsequently granted or exercised under the
Target ESPP.
(ii) If it is determined on or before June 20,
1996 that the Effective Time shall occur on or after July 1, 1996, the Target
ESPP and all outstanding purchase rights thereunder shall be assumed by Acquiror
at the Effective Time. Schedule 5.12(b) hereto sets forth a true and complete
list as of the date hereof of all holders of outstanding purchase rights under
the Target ESPP, including payroll
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deduction amount elected by each holder and the price per share of Target Stock
at the beginning of the current offering period. On the Closing Date, Target
shall deliver to Acquiror an updated Schedule 5.12(b) current as of such
date. Each such purchase right so assumed by Acquiror under this Agreement shall
continue to have, and be subject to, the same terms and conditions set forth in
the Target ESPP and the documents governing the outstanding purchase rights
under the Target ESPP, immediately prior to the Effective Time, except that the
purchase price of shares of Acquiror Common Stock and the number of shares of
Acquiror Common Stock to be issued upon the exercise of such purchase right
shall be adjusted in accordance with the Exchange Ratio. The assumed outstanding
purchase rights under the Target ESPP shall be exercised immediately prior to
the first offering period under the Acquiror Employee Stock Purchase Plan
occurring after the Effective Time, and each participant in the Target ESPP
shall accordingly be issued shares of Acquiror Common Stock at that time. The
Target ESPP, and all outstanding purchase rights thereunder, 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 after the Effective Time.
5.13 Letter of Acquiror's and Target's Accountants.
(a) Acquiror shall use all reasonable efforts to cause
to be delivered to Target a Procedures Letter pursuant to SAS 76 of Acquiror's
independent auditors, dated a date within two business days before the date on
which the Registration Statement shall become effective and addressed to
Acquiror and Target, in form reasonably satisfactory to Target and customary in
scope and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement.
(b) Target shall use all reasonable efforts to cause
to be delivered to Acquiror a Procedures Letter pursuant to SAS 76 of Target's
independent auditors, dated a date within two business days before the date on
which the Registration Statement shall become effective and addressed to
Acquiror and Target, in form reasonably satisfactory to Acquiror and customary
in scope and substance for letters delivered by independent public accountants
in connection with registration statements similar to the Registration
Statement.
5.14 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 and
purchase rights under the Target Stock Option Plans and Target ESPP assumed by
Acquiror. Target shall cooperate with and assist Acquiror in the preparation of
such registration statement.
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5.15 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
Certificate 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
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counsel, promptly after statements therefor are received and (iii) the Surviving
Corporation and Acquiror will cooperate in the defense of any such matter;
provided, 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.
5.16 Option Agreement. Concurrently with the execution of this
Agreement, Target shall deliver to Acquiror an executed Option Agreement in the
form of Exhibit D attached hereto. Target agrees to fully perform its
obligations under the Option Agreement.
5.17 Listing of Additional Shares. Prior to the Effective Time,
Acquiror shall file with the Nasdaq National Market a Notification Form for
Listing of Additional Shares with respect to the shares referred to in Section
6.1(f).
5.18 Nasdaq Quotation. Target and Acquiror agree to continue
the quotation of Target Common Stock and Acquiror Common Stock, respectively, on
the Nasdaq National Market during the term of the Agreement so that, to the
extent necessary, appraisal rights will not be available to stockholders of
Target under Section 262 of the Delaware Law.
5.19 Employees. Concurrently with the execution of this
Agreement, each of the individuals named in Parts I and II of Schedule 5.19
shall have delivered to Acquiror an executed Employment Agreement in the form of
Exhibit E-1, et. seq., and Target shall use its best efforts to cause each of
the individuals named in Part III of Schedule 5.19 to deliver to Acquiror an
executed Employment Agreement substantially in the form of Exhibit E-1, et. seq.
5.20 Pooling Letters.
(a) Target shall use all reasonable efforts to cause
to be delivered to Acquiror a letter of Target's independent auditors, dated on
or prior to the date of this Agreement and confirmed in writing two business
days before the date of the Proxy Statement to the effect that the Merger
qualifies for pooling of interest accounting
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treatment if consummated in accordance with this Agreement and in a form
reasonably satisfactory to Acquiror and customary in scope and substance for
letters delivered by independent public accountants in connection with
transactions of this type.
(b) Acquiror shall use all reasonable efforts to cause
to be delivered to Target a letter of Acquiror's independent auditors, dated on
or prior to the date of this Agreement and confirmed in writing two business
days before the date of the Proxy Statement to the effect that the Merger
qualifies for pooling of interest accounting treatment if consummated in
accordance with this Agreement and in a form reasonably satisfactory to Target
and customary in scope and substance for letters delivered by independent public
accountants in connection with transactions of this type.
5.21 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.
5.22 Target Rights Agreement. Target hereby agrees that it has
taken and will continue to take all necessary action to ensure that none of the
transactions contemplated by this Agreement, the Option Agreement or the Voting
Agreement will cause (i) Acquiror or any of its affiliates or associates to
become an Acquiring Person (as defined in the Target Rights Agreement) for
purposes of the Target Rights Agreement, or (ii) otherwise affect in any way the
Rights under the Target Rights Agreement, including by causing such Rights to
separate from the underlying shares or by giving such holders the right to
acquire securities of any party hereto.
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) Stockholder Approval. This Agreement and the
Merger shall have been approved and adopted by the requisite vote of the
stockholders of Target (as described in Section 2.24) under Delaware Law.
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(b) Registration Statement Effective. The SEC shall
have declared the Registration Statement effective. No stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued and no proceeding for that purpose, and no similar proceeding in respect
of the Proxy Statement, shall have been initiated or threatened by the SEC.
(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 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. All material
authorizations, consents, orders or approvals of, or declarations or filings
with, or expiration of waiting periods imposed by, any Governmental Entity
necessary for the consummation of the transactions contemplated by this
Agreement and the Certificate of Merger shall have been filed, expired or been
obtained, other than those that, individually or in the aggregate, the failure
to be filed, expired or obtained would not, in the reasonable opinion of
Acquiror after consultation with Target, have a Material Adverse Effect on
Target or Acquiror.
(e) Tax Opinion. Acquiror and Target shall have
received substantially identical written opinions of Brobeck, Phleger & Harrison
LLP, legal counsel to Acquiror, and Wilson, Sonsini, Goodrich & Rosati, legal
counsel to Target, respectively, in form and substance reasonably satisfactory
to them, and shall be to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code, and such
opinions shall not have been withdrawn. In rendering such opinions, counsel
shall be entitled to rely upon, among other things, reasonable assumptions as
well as representations of Acquiror, Merger Sub and Target and certain
stockholders of Target.
(f) Listing of Additional Shares. The filing with the
Nasdaq National Market of a Notification Form for Listing of Additional Shares
with respect to the shares of Acquiror Common Stock issuable upon conversion of
the Target Common Stock in the Merger and upon exercise of the options under the
Target Stock Option Plans assumed by Acquiror shall have been made.
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(g) Letter from Accountants. Prior to the Effective
Time, each of Acquiror and Target shall have received a letter from each of
Arthur Andersen LLP, independent auditors, and Coopers & Lybrand LLP,
independent auditors, confirming that the Merger qualifies for pooling of
interests accounting treatment if consummated in accordance with this Agreement.
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 and Warranties. The
representations and warranties of Acquiror and Merger Sub contained in this
Agreement shall be true and correct as of the Effective Time, with the same
force and effect as if made on and as of the Effective Time, except for such
inaccuracies as individually or in the aggregate that would not have a Material
Adverse Effect on Acquiror and Target shall have received a certificate to such
effect signed on behalf of Acquiror by the President and Chief Financial Officer
of Acquiror;
(b) Agreements and Covenants. Acquiror and Merger Sub
shall have performed or complied in all material respects with all covenants,
obligations, conditions and agreements required by this Agreement to be
performed or complied with by them on or prior to the Effective Time; and,
Target shall have received a certificate to such effect signed by the President
and Chief Financial Officer of Acquiror;
(c) Legal Opinion. Target shall have received a legal
opinion from Brobeck, Phleger & Harrison LLP, counsel to Acquiror, substantially
in the form of Exhibit F hereto.
(d) 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 or results of operations of Acquiror and its subsidiaries, taken as a
whole.
(e) Third Party Consents. Target 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 Acquiror or any of its subsidiaries or
otherwise, except where the failure to obtain such consent or approval would not
have a Material Adverse Effect on Acquiror.
(f) 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 limiting or restricting Acquiror's business following the
Merger shall be in effect, nor
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shall any proceeding brought by an administrative agency or commission or other
Governmental Entity, domestic or foreign, seeking the foregoing be pending
except where the existence of any of the foregoing items would not have a
Material Adverse Effect on Acquiror.
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:
(a) Representations and Warranties. The
representations and warranties of Target contained in this Agreement shall be
true and correct as of the Effective Time, with the same force and effect as if
made on and as of the Effective Time, except, for such inaccuracies as
individually or in the aggregate that would not have a Material Adverse Effect
on Target; and, Acquiror and Merger Sub shall have received a certificate to
such effect signed on behalf of Target by the President and Chief Financial
Officer of Target;
(b) Agreements and Covenants. Target shall have
performed or complied in all material respects with all agreements, covenants,
obligations and conditions required by this Agreement to be performed or
complied with by it on or prior to the Effective Time, and the Acquiror and
Merger Sub shall have received a certificate to such effect signed by the
President and Chief Financial Officer of Target;
(c) Legal Opinion. Acquiror shall have received a
legal opinion from Wilson, Sonsini, Goodrich & Rosati, legal counsel to Target,
in substantially the form of Exhibit G.
(d) 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, except where the failure to obtain such consent or approval would not
have a Material Adverse Effect on Target.
(e) 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 limiting or restricting Acquiror's conduct or operation of
the business of Target and its subsidiaries, following the Merger 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, except where the existence of any of the foregoing items
would not have a Material Adverse Effect on Target.
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(f) 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 or results of operations of Target and its subsidiaries, taken as a
whole provided, however, that a material adverse change for purposes of this
Section 6.3(f) 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
(g) Affiliate Agreements. Acquiror shall have received
from each of the Affiliates of Target an executed Affiliate Agreement in
substantially the form attached hereto as Exhibit B-1.
(h) Employment and Non-Competition Agreements. Each of
the employees of Target set forth on Part I of Schedule 5.19 shall not have
terminated the Employment and Non-Competition Agreements substantially in the
form attached hereto as Exhibits E-1, et. seq., entered into and delivered to
Acquiror on the date of this Agreement and three of the employees of Target set
forth on Part II of Schedule 5.19 shall not have terminated the Employment and
Non-Competition Agreements substantially in the form attached hereto as Exhibits
E-1, et. seq., entered into and delivered to Acquiror on the date of this
Agreement.
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 stockholders of Target, this Agreement may be terminated:
(a) by mutual written 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 November
15, 1996 (provided, a later date may be agreed upon in writing by the parties
hereto, and provided further that the right to terminate this Agreement under
this Section 7.1(b) shall not be available to any party whose action or failure
to act has been the cause of or resulted in the failure of the Merger to occur
on or before such date and such action or failure to act constitutes a breach of
this Agreement);
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(c) by Acquiror, if (i) upon a breach of any
representation, warranty, covenant or agreement on the part of Target set forth
in this Agreement, or if any representation or warranty of Target shall have
become untrue, in either case such that the conditions set forth in Section
6.3(a) or Section 6.3(b) would not be satisfied as of the time of such breach or
as of the time such representation or warranty shall have become untrue and such
inaccuracy in Target's representations and warranties or breach by Target shall
not have been cured within five business days of receipt by Target of written
notice thereof, provided that the right to terminate this Agreement by Acquiror
under this Section 7.1(c)(i) shall not be available to Acquiror where Acquiror
is at that time in willful breach of this Agreement; (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, provided that the right to terminate this Agreement by
Acquiror under this Section 7.1(c)(ii) shall not be available to Acquiror where
Acquiror is at that time in willful breach of this Agreement, or (iii) for any
reason Target fails to call and hold the Target Stockholders Meeting by
September 1, 1996 and Target is at that time in willful breach of this
Agreement, provided that the right to terminate this Agreement by Acquiror under
this Section 7.1(c)(iii) shall not be available to Acquiror where Acquiror is at
that time in willful breach of this Agreement;
(d) by Target upon a breach of any representation,
warranty, covenant or agreement on the part of Acquiror set forth in this
Agreement, or if any representation or warranty of Acquiror shall have become
untrue, in either case such that the conditions set forth in Section 6.2(a) or
Section 6.2(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue and such
inaccuracy in Acquiror's representations and warranties or breach by Acquiror
shall not have been cured within five business days of receipt by Acquiror of
written notice thereof, provided that the right to terminate this Agreement by
Target under this Section 7.1(d) shall not be available to Target where Target
is at that time in willful breach of this Agreement;
(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 after, in the case of the
termination by Target, determining that to cause Target to proceed with the
transactions contemplated hereby would not be consistent with the Board of
Directors' fiduciary duty to the stockholders of Target;
(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 stockholders of Target shall not have been obtained
by reason of the failure to
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obtain the required vote upon a vote held at a duly held meeting of stockholders
or at any adjournment thereof; or
(g) by Target, in the event (i) of the acquisition, by
any person or group of persons (other than persons or groups of persons who (A)
acquired shares of Acquiror Common Stock pursuant to any merger of Acquiror in
which Acquiror was the surviving corporation and stockholders of Acquiror
represent less than 70% of the outstanding shares of the surviving corporation
following such transaction or any acquisition by Acquiror of all or
substantially all of the capital stock or assets of another person or (B)
disclose their beneficial ownership of shares of Acquiror Common Stock on
Schedule 13G under the Exchange Act), of beneficial ownership of 30% or more of
the outstanding shares of Acquiror Common Stock (the terms "person," "group" and
"beneficial ownership" having the meanings ascribed thereto in Section 13(d) of
the Exchange Act and the regulations promulgated thereunder), (ii) the Board of
Directors of Acquiror accepts or publicly recommends acceptance of an offer from
a third party to acquire 50% or more of the outstanding shares of Acquiror
Common Stock or of Acquiror's consolidated assets; or (iii) Acquiror acquires or
agrees 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 and such acquisition requires the approval of the stockholders
of Acquiror in accordance with California law.
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, stockholders or
affiliates, except to the extent that such termination results from the willful
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 Sections 7.3(b), 7.3(c), 7.3(d) and
7.3(e), 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
Materials and the Registration Statement, registration and filing fees incurred
in connection with the Registration Statement, the Proxy Materials and the
listing of additional shares pursuant to Section 6.1(f) and fees, costs and
expenses associated with compliance with applicable state securities laws in
connection with the Merger shall be shared equally by Target and Acquiror.
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(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 stockholders of Target to approve this Agreement and,
prior to the time of the meeting of Target's stockholders, there shall have been
(A) a Trigger Event or (B) a Takeover Proposal, which at the time of the meeting
of Target's stockholders 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), and, in addition, Target shall
promptly pay to Acquiror the sum of $80,000,000.
(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 stockholders of Target to approve this Agreement and, prior to
the time of the meeting of Target's stockholders, there shall have been (A) a
Trigger Event or (B) a Takeover Proposal, which at the time of the meeting of
Target's stockholders 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), and, in addition,
Target shall promptly pay to Acquiror the sum of $40,000,000; 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 to Acquiror the additional sum of $40,000,000.
(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 stockholders of Target to approve this Agreement and, prior to the time of
the meeting of Target's stockholders, 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 stockholders 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), 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 $80,000,000.
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(e) 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).
(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 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 Exchange Act) to vote any
voting securities of Target (including, without limitation, any such
solicitation subject to Rule 14a-11 under the 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 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.
(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
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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.
(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) of Target
or any of its subsidiaries and (B) "consummation" of a Trigger Event shall occur
on the date (x) Target takes any action to (1) exclude any Person or any of its
affiliates or associates that beneficially owns securities representing 20% or
more of the voting power of Target from becoming an Acquiring Person (as defined
in the Target Rights Agreement) for purposes of the Target Rights Agreement or
(2) otherwise affect in any way the Rights under the Target Rights Agreement to
prevent such Rights from separating from the underlying shares of Target held by
any Person or any of its affiliates or associates that beneficially owns
securities representing 20% or more of the voting power of Target or otherwise
giving such holders the right to acquire securities of Target or (y) 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) of Target and (B) "consummation" of a Trigger Event shall occur on the
date (x) Target takes any action to (1) exclude any Person or any of its
affiliates or associates that beneficially owns securities representing 20% or
more of the voting power of Target from becoming an Acquiring Person (as defined
in the Target Rights Agreement) for purposes of the Target Rights Agreement or
(2) otherwise affect in any way the Rights under the Target Rights Agreement to
prevent such Rights from separating from the underlying shares of Target held by
any Person or any of its affiliates or associates that beneficially owns
securities representing 20% or more of the voting power of Target or otherwise
giving such holders the right to acquire securities of Target, (y) 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, or (z) Target files a Schedule 14D-9 with the SEC recommending
that the Target security holders accept the tender offer.
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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 stockholders 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 Certificate 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.
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) 5.7 (Pooling Accounting), 5.8 (Affiliates), 5.12 (Employee
Benefit Plans), 5.14 (Form S-8), 5.15 (Indemnification), 5.21 (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):
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(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
(b) if to Target, to:
StrataCom, Inc.
1400 Parkmoor Avenue
San Jose, California 95126
Attention: President
Facsimile No.: (408) 999-0836
Telephone No.: (408) 294-7600
with a copy to:
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Larry W. Sonsini, Esq.
Facsimile No.: (415) 493-6811
Telephone No.: (415) 493-9300
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
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hereof", and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to April 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.
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 and the
Acquiror 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 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 (f), 1.7-1.9, 5.12, 5.14 and
5.15; 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
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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.
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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.
TARGET
By: /s/ Richard M. Moley
-------------------------------
Name: Richard M. Moley
Title: President and CEO
ACQUIROR
By: /s/ John T. Chambers
-------------------------------
Name: John T. Chambers
Title: President and CEO
MERGER SUB
By: /s/ John T. Chambers
-------------------------------
Name: John T. Chambers
Title: President and CEO
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
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<PAGE> 1
EXHIBIT 2
Voting Agreement
<PAGE> 2
TARGET
VOTING AGREEMENT
This Voting Agreement (the "Agreement") is made and entered into as of
April 21, 1996, between Cisco Systems, Inc. a California corporation
("Acquiror"), and the undersigned stockholder ("Stockholder") of StrataCom,
Inc., a Delaware corporation ("Target").
RECITALS
A. Pursuant to an Agreement and Plan of Reorganization dated as of
April 21, 1996 (the "Reorganization Agreement") by and among Acquiror, Jet
Acquisition Corporation a Delaware 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 5.9 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 stockholders of Target on behalf of Acquiror,
and to cause certain significant stockholders of Target to execute and deliver
to Acquiror Voting Agreements;
C. The Stockholder 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, $0.01 par value per
share, of Target as is indicated on the final page of this Agreement (the
"Shares"); and
D. In consideration of the execution of the Reorganization Agreement by
Acquiror, Stockholder agrees not to transfer or otherwise dispose of any of the
Shares, or any other shares of capital stock of Target acquired by Stockholder
hereafter and prior to the Expiration Date (as defined in Section 1.1 below),
and agrees to vote the Shares and any other such shares of capital stock of
Target so as to facilitate consummation of the Merger.
<PAGE> 3
NOW, THEREFORE, the parties agree as follows:
1. Agreement to Retain Shares.
1.1 Transfer and Encumbrance. Stockholder agrees not to
transfer (except as may be specifically required by court order or by operation
of law), 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 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) the date of termination of the Reorganization
Agreement.
1.2 New Shares. Stockholder agrees that any shares of capital
stock of Target that Stockholder purchases or with respect to which Stockholder
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 stockholders 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 stockholders
of Target with respect to any of the following, Stockholder shall vote the
Shares and any New Shares (i) in favor of approval of the Reorganization
Agreement and the Merger and any matter that could reasonably be expected to
facilitate the Merger and (ii) against any proposal for any recapitalization,
merger, sale of assets or other business combination (other than the Merger)
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 which would result in any of the conditions to Target's obligations
under the Reorganization Agreement not being fulfilled.
3. Irrevocable Proxy. Concurrently with the execution of this
Agreement, Stockholder 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 212 of the Delaware 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 Stockholder set forth therein.
<PAGE> 4
4. Representations, Warranties and Covenants of Stockholder.
Stockholder hereby represents, warrants and covenants to Acquiror that
Stockholder (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 other than the Shares
(excluding shares as to which Stockholder 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. Stockholder hereby covenants and agrees to
execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Acquiror, to carry out the purpose and intent of this
Agreement.
6. Consent and Waiver. Stockholder hereby gives any consents or waivers
that are reasonably required for the consummation of the Merger under the terms
of any agreement to which Stockholder is a party or pursuant to any rights
Stockholder 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. This
Agreement is intended to bind Stockholder as a stockholder of Target only with
respect to the specific matters set forth herein.
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
<PAGE> 5
adequate remedy at law for a violation of any of the covenants or agreements of
Stockholder 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.
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 or Merger Sub, to:
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 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 Target, to:
StrataCom, Inc.
1400 Parkmoor Avenue
San Jose, CA 95126
Attention: President
Facsimile No.: (408) 999-0836
Telephone No.: (408) 294-7600
<PAGE> 6
with a copy to:
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attn: Larry W. Sonsini, Esq.
Facsimile No.: (415) 493-6811
Telephone No.: (415) 496-9300
8.6 Governing Law. This Amendment shall be governed by,
construed and enforced in accordance with the internal laws of the State of
Delaware.
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.
8.9 Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction or interpretation of this
Agreement.
<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed on the day and year first above written.
ACQUIROR
_________________________________________________
Larry R. Carter
Vice President, Finance and Administration, Chief
Financial Officer and Secretary
STOCKHOLDER
By: _____________________________________________
Stockholder's Address for Notice:
_________________________________________________
_________________________________________________
_________________________________________________
Shares beneficially owned:
____________ shares of Target Common Stock
[SIGNATURE PAGE TO VOTING AGREEMENT]
<PAGE> 8
EXHIBIT A
IRREVOCABLE PROXY
TO VOTE STOCK OF
TARGET
The undersigned stockholder of StrataCom, Inc., a Delaware corporation
("Target"), hereby irrevocably (to the full extent permitted by Section 212 of
the Delaware 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 stockholder 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 212 of the
Delaware General Corporation Law), is granted pursuant to that certain Voting
Agreement dated as of April 21, 1996, by and among Acquiror and the undersigned
stockholder (the "Voting Agreement"), and is granted in consideration of
Acquiror entering into that certain Agreement and Plan of Reorganization, dated
April 21, 1996, by and among Target, Acquiror and Jet Acquisition Corporation, a
Delaware 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) the date of termination of the
Reorganization Agreement.
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, the power to execute and deliver written
consents pursuant to Section 228 of the Delaware General Corporation Law), at
every annual, special or adjourned meeting of the stockholders of Target and in
every written consent in lieu of such meeting (i) in
<PAGE> 9
favor of approval of the Merger and the Reorganization Agreement and in favor of
any matter that could reasonably be expected to facilitate the Merger and (ii)
against any proposal for any recapitalization, merger, sale of assets or other
business combination (other than the Merger) 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 which could result in
any of the conditions to Target's obligations under the Reorganization 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 stockholder
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 212 of the
Delaware General Corporation Law).
Dated: April 21, 1996
_______________________________________
(Signature of Stockholder)
_______________________________________
(Print Name of Stockholder)
Shares beneficially owned:
_________ shares of Target Common Stock
[SIGNATURE PAGE TO PROXY]
<PAGE> 1
EXHIBIT 3
Stock Option Agreement
<PAGE> 2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "Agreement"), dated as of April
21, 1996, by and between Cisco Systems, Inc., a California corporation
("Acquiror"), and StrataCom, Inc., a Delaware corporation ("Target").
WHEREAS, concurrently with the execution and delivery of this
Agreement, Target, Acquiror and Jet Acquisition Corporation, a Delaware
corporation ("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,
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 11,395,300 shares
(the "Target Shares") of common stock, par value $.01 per share, of Target (the
"Target Common Stock") in the manner set forth below at a price (the "Exercise
Price") of $50.00 per Target Share, payable in cash. Capitalized terms used
herein but not defined herein shall have the meanings set forth in the
Reorganization Agreement.
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
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<PAGE> 3
Agreement pursuant to Section 7.1 thereof (other than a termination in
connection with which Acquiror is entitled to any payments as specified in
Sections 7.3(b), (c) and (d) thereof); (iii) 180 days following any termination
of the Reorganization Agreement in connection with which Acquiror is entitled to
a payment as specified in Sections 7.3(b) and (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 May 15, 1997; 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, 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 (iv) later than
May 15, 1997. Notwithstanding the foregoing, (i) 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; and (ii) in the event Acquiror receives more than the
sum of (x) $40,000,000 and (y) the Exercise Price multiplied by the number of
Target Shares purchased by Acquiror pursuant to the Target Option, in connection
with a sale or other disposition of the Target Shares, all proceeds in excess of
such amount shall be remitted to Target.
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.
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
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<PAGE> 4
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 Delaware
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, 11,395,300 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, (f) except as described in Sections
2.2 and 2.3 of the Reorganization Agreement, and except as may be required under
the Securities Act of 1933, as amended (the "Securities Act"), 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 Certificate of Incorporation, as amended,
or Amended and Restated By-laws, 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 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.
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<PAGE> 5
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
By-laws 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 3.3 of the Reorganization
Agreement and Section 3(i) of this Agreement, and except as may be required
under the Securities Act, 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.
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 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 May 15, 1997 all or any portion of the Target Shares purchased by
Acquiror pursuant thereto, at a price set forth in subparagraph (ii) below:
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<PAGE> 6
(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;
(iii) provided further that in no event shall
the proceeds payable to Acquiror pursuant to Sections 7(a)(i) and (ii) exceed
the sum of (x) $40,000,000 and (y) the Exercise Price multiplied by the number
of Target Shares purchased. For purposes of clauses (i) and (ii) of this Section
7(a), 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 stockholders of Target have transferred their shares of
Target Common Stock pursuant to a tender or exchange offer or other Takeover
Proposal.
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
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<PAGE> 7
matter submitted to a vote of stockholders of Target for and against such matter
in the same proportion as the vote of all other stockholders 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 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,
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<PAGE> 8
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 stockholders 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 stockholders 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 20%
or more, or commences a tender or exchange offer following the successful
consummation of which the offeror and its affiliates would beneficially own
securities representing 20% 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; provided, however, that a Change in Control
shall not be deemed to include the acquisition by any party of securities
representing 20% or more of Target if such party 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
party (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
Exchange Act) to vote any voting securities of Target (including, without
limitation, any such solicitation subject to Rule 14a-11 under the Exchange Act)
or seeking to advise or influence any party 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
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, 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 stockholders 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.
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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 stockholders 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 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
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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 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
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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 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
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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 APRIL 21, 1996,
A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER.
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.
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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 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 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
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with a copy to:
Brobeck, Phleger & Harrison LLP
2200 Geng Road
Two Embarcadero Place
Palo Alto, CA 94303
Attention: Edward M. Leonard, Esq.
Facsimile No.: (415) 496-2885
Telephone No.: (415) 424-0160
(b) if to Target, to:
StrataCom, Inc.
1400 Parkmoor Avenue
San Jose, California 95126
Attention: President
Facsimile No.: (408) 999-0836
Telephone No.: (408) 294-7600
with a copy to:
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Larry W. Sonsini, Esq.
Facsimile No.: (415) 493-6811
Telephone No.: (415) 493-9300
20. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware 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
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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.
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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: s/s Larry R. Carter
-------------------
Name: Larry R. Carter
Title: Vice President and CFO
STRATACOM, INC.
By: s/s Richard M. Moley
--------------------
Name: Richard M. Moley
Title: CEO and President
[SIGNATURE PAGE TO OPTION AGREEMENT]
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