<PAGE> 1
As filed with the Securities and Exchange Commission on August 14, 1997
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
CISCO SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
California 77-0059951
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
---------------
255 West Tasman Drive
San Jose, California 95134
(408) 526-4000
---------------
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
---------------
John T. Chambers
President and Chief Executive Officer
Cisco Systems, Inc.
255 West Tasman Drive
San Jose, California 95134
(408) 526-4000
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
---------------
Copy to:
Edward M. Leonard, Esq.
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
(415) 424-0160
---------------
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===========================================================================================================================
Title of Each Amount Proposed Maximum Proposed Maximum Amount
Class of Securities to Be Offering Aggregate of Registration
to be Registered Registered Price Per Share(1) Offering Price(1) Fee
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 1,801,182 $74.875 $134,863,502.25 $40,867.73
no par value per share
===========================================================================================================================
</TABLE>
(1) The price of $74.875, which was the average of the high and low prices of
the Common Stock on the Nasdaq National Market System on August 13, 1997, is set
forth solely for the purpose of computing the registration fee pursuant to Rule
457(c).
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment that specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
===============================================================================
<PAGE> 2
1,801,182 Shares
CISCO SYSTEMS, INC.
Common Stock
Ardent Communications Corporation
This Prospectus relates to the public offering, which is not being
underwritten, of 1,801,182 shares of Common Stock, no par value per share, of
Cisco Systems, Inc. (the "Company" or the "Registrant"). All 1,801,182 shares
(the "Shares") may be offered by certain shareholders of the Company or by
pledgees, donees, transferees or other successors in interest that receive such
shares as a gift, partnership distribution or other non-sale related transfer
(the "Selling Shareholders"). All of the Shares were originally issued by the
Company in connection with the acquisition of Ardent Communications Corporation
("Ardent"), by and through the acquisition of all of the common stock and
options to purchase common stock of Ardent whereby Ardent was merged with and
into the Company with the Company as the surviving corporation. The Shares were
issued pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), provided by Section
4(2) thereof. The Shares are being registered by the Company pursuant to section
3 of the Agreement of Merger between the Company and Ardent.
The Shares may be offered by the Selling Shareholders from time to time
in transactions in the over-the-counter market, in negotiated transactions, or a
combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. The Selling Shareholders may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Shareholders and/or the purchasers of the Shares
for whom such broker-dealers may act as agents or to whom they sell as
principals, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions). See "Plan of Distribution."
The Company will not receive any of the proceeds from the sale of the
Shares. The Company has agreed to bear certain expenses in connection with the
registration of the Shares being offered and sold by the Selling Shareholders.
The Company's Common Stock is quoted on the Nasdaq National Market
under the symbol "CSCO." On August 13, 1997 the average of the high and low
price for the Common Stock was $74.875.
-------------------------------
The Selling Shareholders and any broker-dealers or agents that
participate with the Selling Shareholders in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act, and any commissions received by them and any profit on the
resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
-------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
===============================================================================
The date of this Prospectus is August 14, 1997
<PAGE> 3
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offering made hereby, and if given or made, such information or
representations must not be relied upon as having been authorized by the
Company, any Selling Shareholder or by any other person. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that information herein is correct as of any time
subsequent to the date hereof. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any security other than the securities
covered by this Prospectus, nor does it constitute an offer to or solicitation
of any person in any jurisdiction in which such offer or solicitation may not
lawfully be made.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, information statements and
other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at 75 Park Place,
New York, New York 10007 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material can be obtained by mail from the
Public Reference Branch of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Common Stock of the Company is
quoted on the Nasdaq National Market, and such material may also be inspected at
the offices of Nasdaq Operations, 1735 K Street N.W. Washington, D.C. 20006. The
Commission maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of the Commission's web site is
http://www.sec.gov.
The Company has filed with the Commission a registration statement on
Form S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the Common
Stock offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information regarding the Company and the Common Stock offered hereby, reference
is hereby made to the Registration Statement and to the exhibits and schedules
filed therewith. The Registration Statement, including the exhibits and
schedules thereto, may be inspected at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and copies of all or any part thereof may be obtained from such
office upon payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 0-18225)
pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended July
28, 1996, filed October 25, 1996;
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
October 26, 1996, January 25, 1997 and April 26, 1997;
3. The Company's Current Reports on Form 8-K filed on October 1, 1996, as
amended on Form 8-K/A filed on October 15, 1996, and on January 22, 1997;
4. Definitive Proxy Statement dated October 7, 1996, filed in connection
with the Company's 1996 Annual Meeting of Shareholders;
2.
<PAGE> 4
5. The description of the Company's Common Stock, no par value per share,
contained in its Registration Statement on Form 8-A filed on January 8, 1990,
including any amendment or report filed for the purpose of updating such
description; and
6. All reports and other documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering.
Any statement contained in a document incorporated by reference herein
shall be deemed to be incorporated by reference in this Prospectus and to be
part hereof from the date of filing of such documents. Any statement modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus. The Company will provide without charge to
each person to whom this Prospectus is delivered a copy of any or all of such
documents which are incorporated herein by reference (other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
into the documents that this Prospectus incorporates). Written requests for
copies should be directed to Larry R. Carter, Chief Financial Officer and
Secretary, at the principal executive offices of Cisco Systems, Inc., 255 West
Tasman Drive, San Jose, California 95134. The Company's telephone number is
(408) 526-4000.
3.
<PAGE> 5
THE COMPANY
The principal executive offices of the Company are located at 255 West
Tasman Drive, San Jose, California 95134. The Company's telephone number is
(408) 526-4000.
PLAN OF DISTRIBUTION
The Company will receive no proceeds from this offering. The Shares
offered hereby may be sold by the Selling Shareholders from time to time in
transactions in the over-the-counter market, in negotiated transactions, or a
combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. The Selling Shareholders may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Shareholders and/or the purchasers of the Shares
for whom such broker-dealers may act as agents or to whom they sell as
principals, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions).
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The Selling Shareholders and any broker-dealers or agents that
participate with the Selling Shareholders in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of the Securities Act, and any
commissions received by them and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Shares may not simultaneously engage
in market making activities with respect to the Common Stock of the Company for
a period of two business days prior to the commencement of such distribution. In
addition and without limiting the foregoing, each Selling Shareholder will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of shares of the
Company's Common Stock by the Selling Shareholders.
4.
<PAGE> 6
SELLING SHAREHOLDERS
The following table sets forth the number of shares of Common Stock
owned by each of the Selling Shareholders. Except as indicated, none of the
Selling Shareholders has had a material relationship with the Company within the
past three years other than as a result of the ownership of the Shares or other
securities of the Company. Because the Selling Shareholders may offer all or
some of the Shares which they hold pursuant to the offering contemplated by this
Prospectus, and because there are currently no agreements, arrangements or
understandings with respect to the sale of any of the Shares, no estimate can be
given as to the amount of Shares that will be held by the Selling Shareholders
after completion of this offering. The Shares offered by this Prospectus may be
offered from time to time by the Selling Shareholders named below.
<TABLE>
<CAPTION>
Number of Number of
Shares Percent of Shares
Beneficially Outstanding Registered for
Name of Selling Shareholder Owned Shares Sale Hereby(1)
- --------------------------- ------------ ----------- --------------
<S> <C> <C> <C>
Yin-Chieh Chen 488,968 * 488,968
Wu Fu Chen 452,748 * 452,748
Sequoia Capital VII 344,107 * 344,107
Cherng-Daw Hwang 188,645 * 188,645
Wen-Hau Chen 143,370 * 143,370
Joe Golden 83,004 * 83,004
Sherry Xiabo Wei 33,202 * 33,202
Shyh-Yih Hao 18,110 * 18,110
Sequoia Technology Partners VII 16,740 * 16,740
Sequoia 1995 11,160 * 11,160
A-Wei Wang Chen 3,018 * 3,018
Lon-Lan Chen 3,018 * 3,018
Ping-Huang Chen 3,018 * 3,018
San-Lang Chen 3,018 * 3,018
Wan-Chu Chou 3,018 * 3,018
Yi-Lung Chen 3,018 * 3,018
Yu-Nu Chen 3,018 * 3,018
---------- ----------
Total 1,801,182 * 1,801,182
========= =========
</TABLE>
- ----------------------------------
* Represents beneficial ownership of less than 1%.
(1) This Registration Statement shall also cover any additional shares of Common
Stock which become issuable in connection with the shares registered for sale
hereby by reason of any stock divided, stock split, recapitalization or other
similar transaction effected without the receipt of consideration which results
in an increase in the number of the Registrant's outstanding shares of Common
Stock.
5.
<PAGE> 7
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Brobeck, Phleger & Harrison LLP, Palo Alto, California.
EXPERTS
The consolidated balance sheets as of July 28, 1996 and July 30, 1995 and
the consolidated statements of operations, shareholders' equity and cash flows
for each of the three years in the period ended July 28, 1996 incorporated by
reference in this prospectus, have been incorporated herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
6.
<PAGE> 8
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates except
the SEC registration fee.
<TABLE>
<S> <C>
SEC Registration fee $40,868
Legal fees and expenses 15,000
Accounting fees and expenses 5,000
Miscellaneous 500
------
Total 61,368
======
</TABLE>
Item 15. Indemnification of Directors and Officers
Section 317 of the California Corporations Code authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit indemnification (including
reimbursement of expenses incurred) under certain circumstances for liabilities
arising under the Securities Act. The Registrant's Restated Articles of
Incorporation, as amended and Amended Bylaws provide for indemnification of its
directors, officers, employees and other agents to the maximum extent permitted
by the California Corporations Code. In addition, the Company has entered into
Indemnification Agreements with each of its directors and officers.
Item 16. Exhibits
2.1 Agreement and Plan of Reorganization.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Accountants.
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in the Opinion of
Counsel filed as Exhibit 5.1 hereto).
24.1 Power of Attorney (included on page II-3 of this Registration
Statement).
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement: (i) to include any
prospectus required by section 10(a)(3) of the Securities Act; (ii) to reflect
in the prospectus any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement; provided, however, that (i) and (ii)
do not apply if the Registration Statement is on Form S-3 or Form S-8, and the
information required to be included in
II-1
<PAGE> 9
a post-effective amendment by (i) and (ii) is contained in periodic reports
filed with or furnished to the Commission by the Registrant pursuant to Section
13 or Section 15(d) of the Exchange Act that are incorporated by reference in
the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-2
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Santa Clara,
State of California, on this 14th day of August, 1997.
CISCO SYSTEMS, INC.
Dated: August 14, 1997 By: /s/ JOHN T. CHAMBERS
--------------------
John T. Chambers,
President, Chief Executive Officer
and Director
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints John T. Chambers and Larry R. Carter, and each of them,
as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ JOHN T. CHAMBERS President, Chief Executive August 14, 1997
- ---------------------------------- Officer and Director
John T. Chambers (Principal Executive Officer)
/s/ LARRY R. CARTER Vice President, Finance and August 14, 1997
- ---------------------------------- Administration, Chief Financial
Larry R. Carter Officer and Secretary
(Principal Financial and Accounting Officer)
/s/ JOHN P. MORGRIDGE Chairman of the Board and Director August 14, 1997
- ----------------------------------
John P. Morgridge
</TABLE>
II-3
<PAGE> 11
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ DONALD T. VALENTINE Director August 14, 1997
- ----------------------------------
Donald T. Valentine
/s/ JAMES F. GIBBONS Director August 14, 1997
- ----------------------------------
James F. Gibbons
/s/ ROBERT L. PUETTE Director August 14, 1997
- ----------------------------------
Robert L. Puette
/s/ MASAYOSHI SON Director August 14, 1997
- ----------------------------------
Masayoshi Son
/s/ STEVEN M. WEST Director August 14, 1997
- ----------------------------------
Steven M. West
/s/ RICHARD M. MOLEY Director August 14, 1997
- ----------------------------------
Richard M. Moley
/s/ EDWARD R. KOZEL Director August 14, 1997
- ----------------------------------
Edward R. Kozel
/s/ CAROL A. BARTZ Director August 14, 1997
- ----------------------------------
Carol A. Bartz
</TABLE>
II-4
<PAGE> 12
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
- ------- -------------
<S> <C>
2.1 Agreement and Plan of Reorganization
5.1 Opinion of Brobeck, Phleger & Harrison LLP
23.1 Consent of Independent Accountants
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in the
Opinion of Counsel filed as Exhibit 5.1)
24.1 Power of Attorney (included on page II-3 of this Registration
Statement)
</TABLE>
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
<PAGE> 2
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
CISCO SYSTEMS, INC.
AND
ARDENT COMMUNICATIONS CORPORATION
June 23, 1997
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Closing; Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Articles of Incorporation; Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 Surrender of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.8 No Further Ownership Rights in Target Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.9 Lost, Stolen or Destroyed Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.10 Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.11 Exemption from Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.12 Taking of Necessary Action; Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TARGET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.5 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.8 Restrictions on Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.9 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.10 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.15 Certain Agreements Affected by the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.16 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.17 Interested Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.19 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.20 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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2.21 Complete Copies of Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.22 Brokers' and Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.23 Voting Agreement; Irrevocable Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.24 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.25 Board Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.26 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.27 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.28 Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.29 Representations Complete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.30 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.31 No Breach of Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.32 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.33 Third Party Novation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.4 SEC Documents; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.5 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.8 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.9 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.10 Complete Copies of Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.11 Broker's and Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.12 Board Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.13 Representations Complete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.1 Conduct of Business of Target and Acquiror . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.2 Conduct of Business of Target . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.3 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE V
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.1 Preparation of Information Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.2 Meeting of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.3 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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5.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.5 Public Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.6 Consents; Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.7 Shareholder Representation Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.8 Voting Agreement/Irrevocable Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.9 Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.10 Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.11 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.12 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.13 Form S-8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.14 Listing of Additional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.15 Emloyees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.16 Employment Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.17 Benefit Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.18 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.19 Treatment as Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.20 Best Efforts and Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.21 Conversion of Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VI
CONDITIONS TO THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.1 Conditions to Obligations of Each Party to Effect the Merger . . . . . . . . . . . . . . . . . . . . . . . 40
6.2 Additional Conditions to Obligations of Target . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.3 Additional Conditions to the Obligations of Acquiror . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.3 Expenses and Termination Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.4 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.5 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VIII
ESCROW AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.1 Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.3 Damage Threshold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.4 Escrow Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.5 Claims upon Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.6 Objections to Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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8.7 Resolution of Conflicts; Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.8 Shareholders' Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.9 Actions of the Shareholders' Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.10 Third-Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE IX
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.1 Non-Survival at Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.5 Entire Agreement; Nonassignability; Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.7 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.9 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
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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 2.30 - List of Material Contracts
Schedule 2.32 - Third Party Consents
Schedule 2.33 - Third Party Novation
Schedule 5.7(a) - Target Affiliates
Schedule 5.11 - Holders of Outstanding Target Options
Schedule 5.15(a) - List of Employees
Schedule 6.3(f) - Target Anticipated Charges
EXHIBITS
Exhibit A - Agreement of Merger
Exhibit B - Exchange Ratio
Exhibit C - Shareholder Representation Agreement
Exhibit D - Voting Agreement
Exhibit E - Escrow Agreement
Exhibit F - Acquiror's Legal opinion
Exhibit G - Target's Legal opinion
Exhibit H-1, et seq. - Employment Agreement
Exhibit I - Employment Agreement for Wu-Fu Chen
v.
<PAGE> 8
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is
made and entered into as of June 23, 1997, by and between Cisco Systems, Inc.,
a California corporation ("Acquiror") and Ardent Communications Corporation, a
California corporation ("Target").
RECITALS
A. The Boards of Directors of Target and Acquiror
believe it is in the best interests of their respective companies and the
shareholders of their respective companies that Target and Acquiror combine
into a single company through the statutory merger of Target with and into
Acquiror (the "Merger") and, in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, each
outstanding share of capital stock of Target ("Target Capital Stock") shall be
converted into shares of common stock of Acquiror ("Acquiror Common Stock"), at
the rate set forth herein.
C. Target and Acquiror 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) of
the Code.
E. Concurrent with the execution of this Agreement and
as an inducement to Acquiror to enter into this Agreement, certain of the
affiliates of Target who are shareholders, 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.
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 Agreement of
1.
<PAGE> 9
Merger attached hereto as Exhibit A (the "Agreement of Merger") and the
applicable provisions of the California Corporations Code ("California Law"),
Target shall be merged with and into Acquiror, the separate corporate existence
of Target shall cease and Acquiror shall continue as the surviving corporation.
Acquiror 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 Agreement of Merger, together with the required
officers' certificates, with the Secretary of State of the State of California,
in accordance with the relevant provisions of California Law (the time of such
filing being the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in this Agreement, the Agreement of
Merger and the applicable provisions of California Law. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all
the property, rights, privileges, powers and franchises of Target shall vest in
the Surviving Corporation, and all debts, liabilities and duties of Target
shall become the debts, liabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of
Incorporation of Acquiror, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended as provided by California Law and such Articles of
Incorporation.
(b) The Bylaws of Acquiror, 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 Acquiror, as in effect immediately prior to the Effective Time,
shall be the directors of the Surviving Corporation, until their respective
successors are duly elected or appointed and qualified. The officers of
Acquiror, as in effect immediately prior to the Effective Time, shall be the
officers of the Surviving Corporation, until their respective successors are
duly elected or appointed and qualified.
2.
<PAGE> 10
1.6 Effect on Capital Stock. By virtue of the Merger and
without any action on the part of Acquiror, Target or the holders of any of
Target's securities:
(a) Conversion of Target Capital Stock. The
maximum number of shares of Acquiror Common Stock to be issued (including
Acquiror Common Stock to be reserved for issuance upon exercise of options to
purchase shares of Target Common Stock ("Target Options") assumed by Acquiror)
in exchange for the acquisition by Acquiror of all outstanding Target Capital
Stock including shares held by Acquiror and to be cancelled pursuant to Section
1.6(b) below, and all unexpired and unexercised options to acquire Target
Capital Stock shall be equal to the greater of that number of shares of
Acquiror Common Stock obtained by dividing $232,500,000 by (i) the average of
the closing bid price for a share of Acquiror Common Stock as quoted on the
Nasdaq National Market for the ten (10) trading days immediately preceding and
ending on the trading day immediately prior to the date of this Agreement or
(ii) the average of the closing bid price for a share of Acquiror Common Stock
as quoted on the Nasdaq National Market for the ten (10) trading days
immediately preceding and ending on the trading day that is five (5) calendar
days prior to the Closing Date (the "Total Acquiror Shares"), reduced as a
result of any Dissenting Shares (as defined below) and any shares held by
Acquiror and cancelled pursuant to Section 1.6(b) below. No other adjustment
shall be made in the number of shares of Acquiror Common Stock issued in the
Merger as a result of (x) any increase or decrease in the market price of
Acquiror Common Stock prior to the Effective Time not otherwise required by the
immediately preceding sentence, or (y) any cash proceeds received by Target
from the date hereof to the Closing Date pursuant to the exercise of currently
outstanding options to acquire Target Capital Stock. Subject to the terms and
conditions of this Agreement and the Agreement of Merger as of the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any shares of Target Capital Stock:
(A) At the Effective Time, each share of Target
Common Stock (assuming the conversion of all outstanding
Target Preferred Stock into Common Stock prior to the
Effective Time) issued and outstanding immediately prior to
the Effective Time (other than shares to be cancelled pursuant
to Section 1.6(b) and shares, if any, held by persons who have
not voted such shares for approval of the Merger and with
respect to which such persons shall become entitled to
exercise dissenters' rights in accordance with Chapter 13 of
California Law ("Dissenting Shares")) shall be converted and
exchanged for such number of shares of Acquiror Common Stock
as shall be determined in accordance with item (i) of Exhibit
B hereof (the "Exchange Ratio").
(B) At the Effective Time, each Target Option
granted and outstanding immediately prior to the Effective
Time shall be converted and exchanged for options to purchase
such number of shares of Acquiror
3.
<PAGE> 11
Common Stock as shall be determined in accordance with item
(ii) of Exhibit B hereof.
(b) Cancellation of Target Capital Stock Owned by
Acquiror or Target. At the Effective Time, all shares of Target Capital Stock
that are owned by Target as treasury stock, each share of Target Capital 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 1996 Stock Option Plan, as amended (the "Target Stock Option
Plan"), and all options to purchase Target Common Stock then outstanding under
the Target Stock Option Plan shall be assumed by Acquiror in accordance with
Section 5.11.
(d) 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 Capital Stock),
reorganization, recapitalization or other like change with respect to Acquiror
Common Stock or Target Capital Stock occurring after the date hereof and prior
to the Effective Time.
(e) Fractional Shares. No fraction of a share of
Acquiror Common Stock will be issued, but in lieu thereof each holder of shares
of Target Capital 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 closing bid price
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 (the "Closing
Price").
(h) Dissenters' Rights. Any Dissenting Shares
shall not be converted into Acquiror Common Stock but shall instead be
converted into the right to receive such consideration as may be determined to
be due with respect to such Dissenting Shares pursuant to California Law.
Target agrees that, except with the prior written consent of Acquiror, or as
required under California Law, it will not voluntarily make any payment with
respect to, or settle or offer to settle, any such purchase demand. Each holder
of Dissenting Shares ("Dissenting Shareholder") who, pursuant to the provisions
of California law, becomes entitled to payment of the fair value for shares of
Target Capital Stock shall receive payment therefor (but only after the value
therefor shall have been agreed upon or finally determined pursuant to such
provisions). If, after the Effective Time, any Dissenting Shares shall lose
their status as Dissenting Shares, Acquiror shall issue and deliver, upon
surrender by such shareholder of certificate or certificates representing
shares of Target Capital Stock, the number of shares of
4.
<PAGE> 12
Acquiror Common Stock to which such shareholder would otherwise be entitled
under this Section 1.6 and the Agreement of Merger less the number of shares
allocable to such shareholder that have been deposited in the Escrow Fund (as
defined below) in respect of such shares of Acquiror Common Stock pursuant to
Section 1.7(c) and Article VIII hereof.
1.7 Surrender of Certificates.
(a) Exchange Agent. BankBoston, N.A. 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
Capital Stock outstanding immediately prior to the Effective Time less the
number of shares of Acquiror Common Stock to be deposited into an escrow fund
(the "Escrow Fund") pursuant to the requirements of Article VIII and (ii) cash
in an amount sufficient to permit payment of cash in lieu of fractional shares
pursuant to Section 1.6(e).
(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 Capital 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
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 less the number of shares of Acquiror Common
Stock to be deposited in the Escrow Fund on such holder's behalf pursuant to
Article VIII hereof 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 Capital 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
5.
<PAGE> 13
Acquiror Common Stock into which such shares of Target Capital 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. As soon as
practicable after the Effective Time, and subject to and in accordance with the
provisions of Article VIII hereof, Acquiror shall cause to be distributed to
the Escrow Agent (as defined in Article VIII hereof) a certificate or
certificates representing seven and five tenths percent (7.5%) of the Total
Acquiror Shares which shall be registered in the name of the Escrow Agent as
nominee for the holders of Certificates cancelled pursuant to this Section 1.7.
Such shares shall be beneficially owned by such holders and shall be held in
escrow and shall be available to compensate Acquiror for certain damages as
provided in Article VIII. To the extent not used for such purposes, such
shares shall be released, all as provided in Article VIII hereof.
(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 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.
(g) Dissenting Shares. The provisions of this
Section 1.7 shall also apply to Dissenting Shares that lose their status as
such, except that the obligations of Acquiror under this Section 1.7 shall
commence on the date of loss of such status and
6.
<PAGE> 14
the holder of such shares shall be entitled to receive in exchange for such
shares the number of shares of Acquiror Common Stock to which such holder is
entitled pursuant to Section 1.6 hereof.
1.8 No Further Ownership Rights in Target Capital Stock.
All shares of Acquiror Common Stock issued upon the surrender for exchange of
shares of Target Capital 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 Capital
Stock, and there shall be no further registration of transfers on the records
of the Surviving Corporation of shares of Target Capital 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 Consequences. It is intended by the parties
hereto that the Merger shall constitute a reorganization within the meaning of
Section 368 of the Code.
1.11 Exemption from Registration. The shares of Acquiror
Common Stock to be issued in connection with the Merger will be issued in a
transaction exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"), by reason of Section 4(2) thereof. Acquiror
shall use reasonable best efforts to prepare and file, as promptly as
practicable, and, in any event, within 20 days following the Closing, a
registration statement with the Securities and Exchange Commission (the "SEC")
covering the resale of such shares of Acquiror Common Stock issued in
connection with the Merger and Acquiror shall use reasonable best efforts to
cause such registration statement to become effective as promptly as
practicable after filing and to keep such registration statement effective
until two (2) years after the Effective Time. Any such registration shall be
subject to the normal terms and conditions used in connection with resale
prospectuses.
1.12 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
7.
<PAGE> 15
possession to all assets, property, rights, privileges, powers and franchises
of Target, the officers and directors of Target are fully authorized in the
name of their respective corporations or otherwise to take, and will take, all
such lawful and necessary action, so long as such action is not inconsistent
with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TARGET
In this Agreement, any reference to any event, change,
condition or effect being "material" with respect to any entity or group of
entities means any material event, change, condition or effect related to the
condition (financial or otherwise), properties, assets (including intangible
assets), liabilities, business, operations, or results of operations of such
entity or group of entities. In this Agreement, any reference to a "Material
Adverse Effect" with respect to any entity or group of entities means any
event, change or effect that is materially adverse to the condition (financial
or otherwise), properties, assets, liabilities, business, operations, or
results of operations of such entity and its subsidiaries, taken as a whole.
In this Agreement, any reference to a party's "knowledge"
means such party's actual knowledge after due and diligent inquiry of officers,
directors and other employees of such party reasonably believed to have
knowledge of such matters.
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
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
Articles of Incorporation and Bylaws or other charter documents, as applicable,
of Target and each of its subsidiaries, each as amended to date, to Acquiror.
Neither Target nor any of its subsidiaries is in violation of any of the
provisions of its Articles of Incorporation or Bylaws or equivalent
organizational documents. Target is the 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,
8.
<PAGE> 16
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. Target does not directly or indirectly own any equity or
similar interest in, or any interest convertible or exchangeable or exercisable
for, any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity.
2.2 Capital Structure. The authorized capital stock of
Target consists of 30,000,000 shares of Common Stock and 14,000,000 shares of
Preferred Stock, of which there were issued and outstanding as of the close of
business on June 23, 1997, 5,470,000 shares of Common Stock, 3,000,000 shares
of Series A Preferred Stock (the "Series A Preferred") and 11,000,000 shares of
Series B Preferred Stock (the "Series B Preferred"). There are no other
outstanding shares of capital stock or voting securities and no outstanding
commitments to issue any shares of capital stock or voting securities after
June 23, 1997 other than pursuant to the exercise of options outstanding as of
such date under the Target Stock Option Plan. All outstanding shares of Target
Capital 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
Articles of Incorporation or Bylaws of Target or any agreement to which Target
is a party or by which it is bound. As of the close of business on June 23,
1997, Target has reserved (i) sufficient shares of Common Stock for issuance
upon conversion of the Series A Preferred and the Series B Preferred, and (ii)
3,780,000 shares of Common Stock for issuance to employees and consultants
pursuant to the Target Stock Option Plan, of which no shares have been issued
pursuant to option exercises or direct stock purchases, 3,629,500 shares are
subject to outstanding, unexercised options, and no shares are subject to
outstanding stock purchase rights. Since June 23, 1997, Target has not issued
or granted additional options under the Target Stock Option Plan. Except for
(i) the rights created pursuant to this Agreement and (ii) Target's right to
repurchase any unvested shares under the Target Stock Option Plan, there are no
other options, warrants, calls, rights, commitments or agreements of any
character to which Target is a party or by which it is bound obligating Target
to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of capital stock of Target
or obligating Target to grant, extend, accelerate the vesting of, change the
price of, or otherwise amend or enter into any such option, warrant, call,
right, commitment or agreement. There are no contracts, commitments or
agreements relating to voting, purchase or sale of Target's capital stock (i)
between or among Target and any of its shareholders and (ii) to the best of
Target's knowledge, between or among any of Target's shareholders, except for
the shareholders delivering Irrevocable Proxies (as defined below). The terms
of the Target Stock Option Plan 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
shareholders, or otherwise and without any acceleration of the exercise
schedule or
9.
<PAGE> 17
vesting provisions in effect for those options. True and complete copies of
all agreements and instruments relating to or issued under the Target Stock
Option Plan have been provided 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 provided to Acquiror. All outstanding Common Stock, Series A Preferred
and Series B Preferred was issued in compliance with all applicable federal and
state securities laws.
2.3 Authority. Target has 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 Target, subject only to the
approval of the Merger by Target's shareholders as contemplated by Section
6.1(a). This 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. The execution and delivery of this
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 Articles of Incorporation or
Bylaws of Target or any of its subsidiaries, as amended, or (ii) any material
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Target or any of its subsidiaries
or any of their properties or assets. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality ("Governmental Entity") is required by or with respect to
Target or any of its subsidiaries in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby,
except for (i) the filing of the Agreement of Merger, together with the
required officers' certificates, as provided in Section 1.2; (ii) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state securities laws and the
securities laws of any foreign country; (iii) such filings as may be required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
("HSR"); and (iv) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material Adverse
Effect on Target and would not prevent, or materially alter or delay any of the
transactions contemplated by this Agreement.
2.4 Financial Statements. Target has delivered to
Acquiror its unaudited financial statements for the twelve-month period ended
April 30, 1996, and its unaudited financial statements (balance sheet,
statement of operations and statement of cash flows) on a consolidated basis as
at, and for the one-month period ended May 31, 1997 (collectively, the
"Financial Statements"). The Financial Statements are complete
10.
<PAGE> 18
and correct in all material respects and have been prepared in accordance with
generally accepted accounting principles (except that the financial statements
do not have notes thereto) applied on a consistent basis throughout the periods
indicated and with each other. The Financial Statements accurately set out and
describe the financial condition and operating results of Target as of the
dates, and for the periods, indicated therein, subject to normal year-end audit
adjustments. Target maintains and will continue to maintain a standard system
of accounting established and administered in accordance with generally
accepted accounting principles.
2.5 Absence of Certain Changes. Since May 31, 1997, (the
"Target Balance Sheet Date"), Target has conducted its business in the ordinary
course consistent with past practice and there has not occurred: (i) any
change, event or condition (whether or not covered by insurance) that has
resulted in, or might reasonably be expected to result in, a Material Adverse
Effect to Target; (ii) any acquisition, sale or transfer of any material asset
of Target or any of its subsidiaries; (iii) any change in accounting methods or
practices (including any change in depreciation or amortization policies or
rates) by Target or any 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 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;
(vi) any amendment or change to the Articles of Incorporation or Bylaws of
Target; (vii) any increase in or modification of the compensation or benefits
payable or to become payable by Target to any of its directors or employees or
(viii) any negotiation or agreement by Target or any of its subsidiaries to do
any of the things described in the preceding clauses (i) through (vii) (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 for the period ended May 31, 1997 (the "Target Balance Sheet"),
(ii) those incurred in the ordinary course of business and not required to be
set forth in the Target Balance Sheet under generally accepted accounting
principles, (iii) those incurred in the ordinary course of business since the
Target Balance Sheet Date and consistent with past practice; and (iv) those
incurred in connection with the execution of this Agreement.
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
11.
<PAGE> 19
or any of their respective officers or directors (in their capacities as such).
There is no judgment, decree or order against Target or any of its
subsidiaries, or, to the knowledge of Target and its subsidiaries, any of their
respective directors or officers (in their capacities as such), that could
prevent, enjoin, or materially alter delay any of the transactions contemplated
by this Agreement, or that could reasonably be expected to have a Material
Adverse Effect on Target. All litigation to which Target is a party (or, to
the knowledge of Target, threatened to become a party) is disclosed in the
Target Disclosure Schedule.
2.8 Restrictions on Business Activities. There is no
agreement, judgment, injunction, order or decree binding upon Target or any of
its subsidiaries which has or could reasonably be expected to have the effect
of prohibiting or impairing any current or future business practice of Target
or any of its subsidiaries, any acquisition of property by Target or any of its
subsidiaries or the conduct of business by Target or any of its subsidiaries as
currently conducted or as proposed to be 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 such Target
Authorizations could not reasonably be expected to have a Material Adverse
Effect on Target.
2.10 Title to Property. Target and its subsidiaries have
good and marketable 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 with respect to 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 and (iii) liens securing debt which is reflected on the Target
Balance Sheet. 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.
12.
<PAGE> 20
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 source code and/or object code form), and tangible or
intangible proprietary information or material ("Intellectual Property") that
are used or proposed to be used in the business of Target and its subsidiaries
as currently conducted or as proposed to be conducted by Target and its
subsidiaries.
(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, 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 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.
(c) There is no unauthorized use, disclosure,
infringement or misappropriation of any Intellectual Property rights of 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 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.
(e) All patents, registered trademarks, service marks and
copyrights held by Target are valid and subsisting. Target (i) has not been
sued in 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
13.
<PAGE> 21
party; (ii) has no knowledge that the manufacturing, marketing, licensing or
sale of its products infringes any patent, trademark, service mark, copyright,
trade secret or other proprietary right of any third party and (iii) 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.
(f) Target has secured valid written assignments from all
consultants and employees who 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 has taken all necessary and appropriate steps
to protect and preserve the confidentiality of all Intellectual Property not
otherwise protected by patents, patent applications or copyright ("Confidential
Information"). 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. All use,
disclosure or appropriation of Confidential Information not owned by Target has
been pursuant to the terms of a written agreement between Target and the owner
of such Confidential Information, or is otherwise lawful.
2.12 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any federal,
state or local laws, ordinances, codes, regulations, rules, policies and orders
that are intended to assure the protection of the environment, or that
classify, regulate, call for the remediation of, require reporting with respect
to, or list or define air, water, groundwater, solid waste, hazardous or toxic
substances, materials, wastes, pollutants or contaminants, or which are
intended to assure the safety of employees, workers or other persons, including
the public.
(ii) "Hazardous Materials" shall mean any toxic or hazardous
substance, material or waste or any pollutant or contaminant, or infectious or
radioactive substance or material, including without limitation, those
substances, materials and wastes defined in or regulated under any
Environmental and Safety Laws.
(iii) "Property" shall mean all real property leased or owned
by Target or its subsidiaries either currently or in the past.
(iv) "Facilities" shall mean all buildings and improvements
on the Property of Target or its subsidiaries.
(b) Target represents and warrants as follows: (i) to
Target's knowledge, no methylene chloride or asbestos is contained in or has
been used at or released from
14.
<PAGE> 22
the Facilities; (ii) to Target's knowledge all Hazardous Materials and wastes
have been disposed of in accordance with all Environmental and Safety Laws; and
(iii) Target and its subsidiaries have received no notice (verbal or written)
of any noncompliance of the Facilities or its past or present operations with
Environmental and Safety Laws; (iv) no notices, administrative actions or suits
are pending or to Target's knowledge, threatened relating to a violation of any
Environmental and Safety Laws; (v) to Target's knowledge, neither Target nor
its subsidiaries are a potentially responsible party under the federal
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
or state analog statute, arising out of events occurring prior to the Closing
Date; (vi) to Target's knowledge, there have not been in the past, and are not
now, any Hazardous Materials on, under or migrating to or from the Facilities
or Property; (vii) there have not been in the past, and are not now, any
underground tanks or underground improvements at, on or under the Property
including without limitation, treatment or storage tanks, sumps, or water, gas
or oil wells; (viii) to Target's knowledge, there are no polychlorinated
biphenyls (PCBs) deposited, stored, disposed of or located on the Property or
Facilities or any equipment on the Property containing PCBs at levels in excess
of 50 parts per million; (ix) to Target's knowledge, there is no formaldehyde
on the Property or in the Facilities, nor any insulating material containing
urea formaldehyde in the Facilities; (x) to Target's knowledge, the Facilities
and Target's and its subsidiaries uses and activities therein have at all times
complied with all Environmental and Safety Laws; and (xi) to Target's
knowledge, Target and its subsidiaries have all the permits and licenses
required to be issued under Federal, State or local laws regarding
Environmental and Safety Laws and are in full compliance with the terms and
conditions of those permits.
2.13 Taxes. Target and each of its subsidiaries, and any
consolidated, combined, unitary or aggregate group for Tax (as defined below)
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 them and have paid
all Taxes shown thereon to be due. Target has paid or provided adequate
accruals in accordance with generally accepted accounting principles in its
Financial Statements for all Taxes payable with respect to taxable periods or
portions thereof through May 31, 1997, whether or not such Taxes are shown as
being due on any Tax Returns. Target will incur no Taxes for periods after May
31, 1997 through the Closing Date except in the ordinary course of business.
There is (i) no material claim for Taxes that is a lien against the property of
Target or any of its subsidiaries or, to Target's knowledge, 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 being conducted by a Tax authority, (iii) no extension of the
statute of limitations on the assessment of any Taxes granted by Target or any
of its subsidiaries and currently in effect, and (iv) 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 (other than agreements or arrangements for which shareholder
approval meeting the requirements of Section 280G(b)(5)(B) will be obtained
prior to the Closing) or 404 of
15.
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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.
2.14 Employee Benefit Plans.
(a) Schedule 2.14 lists, with respect to Target,
any subsidiary of Target and any trade or business (whether or not
incorporated) which is treated as a single employer with Target (an "ERISA
Affiliate") within the meaning of Section 414(b), (c), (m) or (o) of the Code,
(i) all material employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), (ii)
each loan to a non-officer employee in excess of $10,000, loans to officers and
directors and any stock option, stock purchase, phantom stock, stock
appreciation right, supplemental retirement, severance, sabbatical, medical,
dental, vision care, disability, employee relocation, cafeteria benefit (Code
section 125) or dependent care (Code Section 129), life insurance or accident
insurance plans, programs or arrangements, (iii) all bonus, pension, profit
sharing, savings, deferred compensation or incentive plans, programs or
arrangements, (iv) other fringe or employee benefit plans, programs or
arrangements that apply to senior management of Target and that do not
generally apply to all employees, and (v) any current or former employment or
executive compensation or severance agreements, written or otherwise, as to
which unsatisfied obligations of
16.
<PAGE> 24
Target of greater than $10,000 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 to Target's
knowledge, nothing has occurred since the issuance of each such letter which
could reasonably be expected to cause the loss of the tax-qualified status of
any Target Employee Plan subject to Code Section 401(a).
(c) (i) None of the Target Employee Plans
promises or provides retiree medical or other retiree welfare benefits to any
person; (ii) to Target's knowledge, 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) to Target's knowledge,
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 material respect in default under or violation of, and
have no knowledge of any material default or violation by any other party to,
any of the Target Employee Plans; (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; (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
17.
<PAGE> 25
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, Target has prepared in good faith and
timely filed all requisite governmental reports (which were true and correct as
of the date filed) and has properly and timely filed and distributed or posted
all notices and reports to employees required to be filed, distributed or
posted with respect to each such Target Employee Plan. 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 the extent that such
failure to comply would not, in the aggregate, have a Material Adverse Effect.
(e) The consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or former
employee or other service provider of Target, any Target subsidiary or any
other ERISA Affiliate to severance benefits or any other payment, except as
expressly provided in this Agreement, or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee or
service provider.
(f) There has been no amendment to, written
interpretation or announcement (whether or not written) by Target, any Target
subsidiary or other ERISA Affiliate relating to, or change in participation or
coverage under, any Target Employee Plan which would materially increase the
expense of maintaining such Plan above the level of expense incurred with
respect to that Plan for the most recent fiscal year included in Target's
financial statements.
2.15 Certain Agreements Affected by the Merger. Neither
the execution and delivery of this Agreement nor the consummation of the
transaction contemplated hereby will (i) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute,
bonus or otherwise) becoming due to
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<PAGE> 26
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. To Target's knowledge, Target and
each of its subsidiaries are in compliance in all material 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. There are no pending claims against Target or any
of its subsidiaries under any workers compensation plan or policy or for long
term disability. There are no controversies pending or, to the knowledge of
Target or any of its subsidiaries, threatened, between Target or any of its
subsidiaries and any of their respective employees, which controversies have or
could reasonably be expected to have a Material Adverse Effect on Target.
Neither Target nor any of its subsidiaries is a party to any collective
bargaining agreement or other labor unions contract nor does Target nor any of
its subsidiaries know of any activities or proceedings of any labor union or
organize any such employees.
2.17 Interested Party Transactions. 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.
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 with the terms of such policies and
bonds. Target has no knowledge of any threatened termination of, or material
premium increase with respect to, any of such policies.
2.19 Compliance With Laws. Each of Target and its
subsidiaries has complied with, are not in violation of, and have not received
any notices of violation with respect to, any federal, state, local or foreign
statute, law or regulation with respect to the conduct of its business, or the
ownership or operation of its business, except for such violations or failures
to comply as could not be reasonably expected to have a Material Adverse Effect
on Target.
2.20 Minute Books. The minute books of Target and its
subsidiaries made available to Acquiror contain a complete and accurate
summary, in all material respects, of all meetings of directors and
shareholders or actions by written consent since
19.
<PAGE> 27
the time of incorporation of Target and the respective subsidiaries through the
date of this Agreement, and reflect all transactions referred to in such
minutes accurately in all material respects.
2.21 Complete Copies of Materials. Target has delivered
or made available true and complete copies of each document which has been
requested by Acquiror or its counsel in connection with their legal and
accounting review of Target and its subsidiaries.
2.22 Brokers' and Finders' Fees. 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.
2.23 Voting Agreement; Irrevocable Proxies. All of the
persons and/or entities deemed "Affiliates" of Target within the meaning of
Rule 145 promulgated under the Securities Act, and holders of more than 51% of
the sum of (i) all of the Target Common Stock issued and outstanding and (ii)
all of the Target Preferred Stock issued and outstanding, have agreed in
writing to vote for approval of the Merger pursuant to voting agreements
attached hereto as Exhibit D ("Voting Agreements"), and pursuant to Irrevocable
Proxies attached thereto as Exhibit A ("Irrevocable Proxies").
2.24 Vote Required. The affirmative vote of the holders
of a majority of each class of the shares of Target Capital Stock outstanding
on the record date set for the Target Shareholders Meeting is the only vote of
the holders of any of Target's Capital Stock necessary to approve this
Agreement and the transactions contemplated hereby.
2.25 Board Approval. The Board of Directors of Target has
unanimously (i) approved this Agreement and the Merger, (ii) determined that
the Merger is in the best interests of the shareholders of Target and is on
terms that are fair to such shareholders and (iii) recommended that the
shareholders of Target approve this Agreement and the Merger.
2.26 Inventory. The inventories shown on the Financial
Statements or thereafter acquired by Target, consisted of items of a quantity
and quality usable or salable in the ordinary course of business. Since May
31, 1997, Target has continued to replenish inventories in a normal and
customary manner consistent with past practices. Target has not received
written or oral notice that it will experience in the foreseeable future any
difficulty in obtaining, in the desired quantity and quality and at a
reasonable price and upon reasonable terms and conditions, the raw materials,
supplies or component products required for the manufacture, assembly or
production of its products. The values at which inventories are carried
reflect the inventory valuation policy of Target, which is consistent with its
past practice and in accordance with
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<PAGE> 28
generally accepted accounting principles applied on a consistent basis. Since
May 31, 1997, due provision was made on the books of Target in the ordinary
course of business consistent with past practices to provide for all
slow-moving, obsolete, or unusable inventories to their estimated useful or
scrap values and such inventory reserves are adequate to provide for such
slow-moving, obsolete or unusable inventory and inventory shrinkage. As of May
31, 1997, Target did not have any inventory in the distribution channel.
2.27 Accounts Receivable. Subject to any reserves set
forth in the Financial Statements, the accounts receivable shown on the
Financial Statements represent and will represent bona fide claims against
debtors for sales and other charges, and are not subject to discount except for
normal cash and immaterial trade discounts. The amount carried for doubtful
accounts and allowances disclosed in the Financial Statements is sufficient to
provide for any losses which may be sustained on realization of the
receivables.
2.28 Customers and Suppliers. As of the date hereof, no
customer which individually accounted for more than 1% of Target's gross
revenues during the 12 month period preceding the date hereof, and no supplier
of Target, has canceled or otherwise terminated, or made any written threat to
Target to cancel or otherwise terminate its relationship with Target, or has at
any time on or after the date hereof decreased materially its services or
supplies to Target in the case of any such supplier, or its usage of the
services or products of Target in the case of such customer, and to Target's
knowledge, no such supplier or customer intends to cancel or otherwise
terminate its relationship with Target or to decrease materially its services
or supplies to Target or its usage of the services or products of Target, as
the case may be. From and after the date hereof, no customer which
individually accounted for more than 5% of Target's gross revenues during the
12 month period preceding the Closing Date, has canceled or otherwise
terminated, or made any written threat to Target to cancel or otherwise
terminate, for any reason, including without limitation the consummation of the
transactions contemplated hereby, its relationship with Target, and to Target's
knowledge, no such customer intends to cancel or otherwise terminate its
relationship with Target or to decrease materially its usage of the services or
products of 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.
2.29 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, 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
21.
<PAGE> 29
misleading; provided, however, that it is understood that any financial
projections delivered by Target represent only Target's best estimate under the
circumstances of what it reasonably believes (although it is not aware of any
fact or information that would lead it to believe that such projections are
misleading in any material respect) and are based upon assumptions set forth in
such projections that Target believes were reasonable as of the time such
projections were made. Target does not make any other representation or
warranty regarding such projections other than as set forth in this Section
2.29.
2.30 Material Contracts. Except for the material
contracts described in Schedule 2.30 (collectively, the "Material Contracts")
Target is not a party to or bound by any material contract, including without
limitation:
(a) any distributor, sales, advertising, agency
or manufacturer's representative contract;
(b) any continuing contract for the purchase of
materials, supplies, equipment or services involving in the case of any such
contact more than $20,000 over the life of the contract;
(c) any contract that expires or may be renewed
at the option of any person other than the Target so as to expire more than one
year after the date of this Agreement;
(d) any trust indenture, mortgage, promissory
note, loan agreement or other contract for the borrowing of money, any currency
exchange, commodities or other hedging arrangement or any leasing transaction
of the type required to be capitalized in accordance with GAAP;
(e) any contract for capital expenditures in
excess of $20,000 in the aggregate;
(f) any contract limiting the freedom of the
Target to engage in any line of business or to compete with any other Person as
that term is defined in the Exchange Act, as defined herein, or any
confidentiality, secrecy or non-disclosure contract;
(g) any contract pursuant to which the Target is
a lessor of any machinery, equipment, motor vehicles, office furniture,
fixtures or other personal property;
(h) any contract with any person with whom the
Target does not deal at arm's length within the meaning of the Internal Revenue
Code; or
22.
<PAGE> 30
(i) any agreement of guarantee, support,
indemnification, assumption or endorsement of, or any similar commitment with
respect to, the obligations, liabilities (whether accrued, absolute, contingent
or otherwise) or indebtedness of any other Person.
2.31 No Breach of Material Contracts. The Target has
performed all of the obligations required to be performed by it and is entitled
to all benefits under, and is not alleged to be in default in respect of any
Material Contract. Each of the Material Contracts is in full force and effect,
unamended, and there exists no default or event of default or event,
occurrence, condition or act, with respect to Target or to Target's knowledge
with respect to the other contracting party, which, with the giving of notice,
the lapse of the time or the happening of any other event or conditions, would
become a default or event of default under any Material Contract. True,
correct and complete copies of all Material Contracts have been delivered to
the Acquiror.
2.32 Third Party Consents. Schedule 2.32 lists all
contracts, under the heading "Contracts Requiring Novation or Consent to
Assignment," that require a novation or consent to assignment, as the case may
be, prior to the Effective Time so that Acquiror shall be made a party in place
of Target or as assignee (the "Contracts Requiring Novation or Consent to
Assignment"). Such list is complete and accurate.
2.33 Third Party Novation. Schedule 2.33 includes every
contract which, if no novation occurs to make Acquiror a party thereto or if no
consent to assignment is obtained, would have a material adverse effect on
Acquiror's ability to operate the business in the same manner as the business
was operated by Target prior to the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
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 represents and warrants to
Target as follows:
3.1 Organization, Standing and Power. Each of Acquiror
and its subsidiaries 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 qualified and in good standing would
have a Material Adverse Effect on Acquiror. Acquiror has delivered a
23.
<PAGE> 31
true and correct copy of the Articles of Incorporation and Bylaws or other
charter documents, as applicable, of Acquiror and each of its subsidiaries,
each as amended to date, 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 June 4, 1997, 669,703,621 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 June 4, 1997 upon the exercise of
options issued under the Acquiror Amended and Restated 1987 Stock Option Plan,
Acquiror 1996 Stock Incentive 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,
StrataCom, Inc. 1986 Incentive Stock Option Plan, StrataCom, Inc. 1992
Directors' Stock Option Plan, StrataCom, Inc. 1994 Stock Option Plan, Telebit
1995 Stock Option Plan, Nashoba Networks, Inc. 1992 Stock Option Plan, Granite
Systems, Inc. 1995 Stock Option Plan, Telesend, Inc. 1995 Stock Option Plan,
and Netsys Technologies, Inc. 1995 Stock Option Plan (collectively, the
"Acquiror Stock Option Plans"). All outstanding shares of Acquiror 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 June 4, 1997,
Acquiror has reserved 273,274,877 shares of Common Stock for issuance to
employees, directors and independent contractors pursuant to the Acquiror Stock
Option Plans, of which 168,852,854 shares have been issued pursuant to option
exercises, and 90,843,593 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
24.
<PAGE> 32
character to which Acquiror is a party or by which it is bound obligating
Acquiror 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 obligating Acquiror 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 Reorganization will be duly authorized,
validly issued, fully paid, and non-assessable and issued in compliance with
all applicable state and federal securities laws.
3.3 Authority. Acquiror has 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. This
Agreement has been duly executed and delivered by Acquiror and constitutes the
valid and binding obligations of Acquiror. 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. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity, is
required by or with respect to Acquiror or any of its subsidiaries in
connection with the execution and delivery of this Agreement by Acquiror or the
consummation by Acquiror of the transactions contemplated hereby, except for
(i) the filing of the Agreement of Merger, together with the required officers'
certificates, as provided in Section 1.2, (ii) the filing of a registration
statement with the SEC within 20 days after the Closing Date covering the
resale of such shares of Acquiror Common Stock, (iii) the filing of a Form 8-K
with the SEC and National Association of Securities Dealers ("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 Plan assumed by Acquiror, (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, materially alter or delay any of the transactions
contemplated by this Agreement, and (viii) the filing of a registration
statement on Form S-8 with the SEC, or other applicable form covering the
shares of Acquiror Common Stock issuable pursuant to outstanding options under
the Target Stock Option Plan assumed by Acquiror.
25.
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3.4 SEC Documents; Financial Statements. Acquiror has
furnished to Target a true and complete copy of each statement, report,
registration statement (with the prospectus in the form filed pursuant to Rule
424(b) of the Securities Act), definitive proxy statement, and other filing
filed with the SEC by Acquiror since July 31, 1994, 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. As of their respective filing dates, the Acquiror 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 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-Qs, as permitted by Form 10-Q of the SEC). The Acquiror Financial
Statements fairly present the consolidated financial condition and operating
results of Acquiror and its subsidiaries at the dates and during the periods
indicated therein (subject, in the case of unaudited statements, to normal,
recurring year-end adjustments). There has been no change in Acquiror
accounting policies except as described in the notes to the Acquiror Financial
Statements.
3.5 Absence of Certain Changes. Since January 25, 1997
(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 has
resulted in, or might reasonably be expected to 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; (iii) any change in accounting
methods or practices (including any change in depreciation or amortization
policies or rates) by Acquiror or any revaluation by Acquiror of any of its
assets; (iv) any declaration, setting aside, or payment of a dividend or other
distribution with respect to
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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 provided 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; 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 (vi) (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 25, 1997 (the "Acquiror Balance Sheet"), (ii) those
incurred in the ordinary course of business and 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, could reasonably be expected to 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 could prevent, enjoin, or materially alter or delay any of the
transactions contemplated by this Agreement, or that could reasonably be
expected to have a Material Adverse Effect on Acquiror.
3.8 Governmental Authorization. Acquiror 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 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 could not reasonably be expected to have a
Material Adverse Effect on Acquiror.
3.9 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
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respect to, any federal, state, local or foreign statute, law or regulation
with respect to the conduct of its business, or the ownership or operation of
its business, except for such violations or failures to comply as could not be
reasonably expected to have a Material Adverse Effect on Acquiror.
3.10 Complete Copies of Materials. Acquiror has delivered
or made available true and complete copies of each document which has been
requested by Target or its counsel in connection with their legal and
accounting review of Acquiror and its subsidiaries.
3.11 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.
3.12 Board Approval. The Board of Directors of Acquiror
has approved this Agreement and the Merger.
3.13 Representations Complete. None of the
representations or warranties made by Acquiror herein or in any Schedule
hereto, including the Acquiror Disclosure Schedule, or certificate furnished by
Acquiror 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 course in
substantially the same manner as heretofore conducted. Target further agrees
to pay and to cause its subsidiaries to pay debts and Taxes when due subject
(i) to good faith disputes over such debts or Taxes and (ii) to Acquiror's
consent to the filing of material Tax Returns if applicable, 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, keep available the services of its and its
subsidiaries' present officers and key employees and preserve its and its
subsidiaries' relationships with customers, suppliers, distributors, licensors,
licensees, and others
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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 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 could 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 Articles of Incorporation or Bylaws, provided that Target may
amend its Articles of Incorporation to allow holders of a majority of the
Preferred Stock to convert all shares of Preferred Stock into Common Stock;
(b) Dividends; Changes in Capital Stock. Declare
or pay any dividends on or make any other distributions (whether in cash, stock
or property) in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of
shares in connection with any termination of service to it or its subsidiaries;
(c) Stock Option Plans, Etc. Accelerate, amend
or change the period of exercisability or vesting of options or other rights
granted under its stock plans or authorize cash payments in exchange for any
options or other rights granted under any of such plans, except as required
under written agreements outstanding on the date hereof and provided that
Target may amend its option agreements and common stock purchase agreements in
order to provide that upon the earlier of Target's acquisition or first
customer shipment of one of Target's products, the vesting schedule will be
changed to a four year vesting schedule pursuant to which twenty-five percent
(25%) of the shares subject to the option would vest on the first anniversary
of the vesting commencement date and 1/36th of the remaining shares would vest
on a monthly basis thereafter.
(d) Other. Take, or agree in writing or
otherwise to take, any of the actions described in Sections 4.1(a) through (c)
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.
4.2 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
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to do, cause or permit any of the following, without the prior written consent
of Acquiror:
(a) Material Contracts. Enter into any material
contract or commitment, or violate, amend or otherwise modify or waive any of
the terms of any of its material contracts, other than in the ordinary course
of business consistent with past practice;
(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 the date of this Agreement; provided,
however, that Target may seek shareholder approval of an increase of 280,000
shares under Target's 1996 Stock Option Plan and Target may grant options for
the purchase of Target Common Stock under Target's 1996 Stock Option Plan not
to exceed the Plan limit of 3,780,000 shares;
(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
other exclusive rights of any type or scope 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
parent's/subsidiaries' business, taken as a whole;
(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;
(g) Leases. Enter into any operating lease in
excess of $10,000;
(h) Payment of Obligations. Pay, discharge or
satisfy in an amount in excess of $10,000 in any one case or $25,000 in the
aggregate, 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;
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(i) Capital Expenditures. Make any 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) Termination or Waiver. Terminate or waive
any right of substantial value, other than in the ordinary course of business;
(l) Employee Benefit Plans; New Hires; Pay
Increases. Adopt or amend any employee benefit or stock purchase or option
plan, or hire any new director level or officer level employee, pay any special
bonus or special remuneration to any employee or director (except payments made
pursuant to written agreements outstanding on the date hereof), or increase the
salaries or wage rates of its employees;
(m) Severance Arrangements. Grant any severance
or termination pay (i) to any director or officer or (ii) to any other employee
except payments made pursuant to standard written agreements outstanding on the
date hereof;
(n) 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;
(o) Acquisitions. Acquire or agree to acquire by
merging or consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to its and its subsidiaries' business, taken
as a whole;
(p) 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, file any material Tax Return
or any amendment to a material Tax Return, enter into any closing agreement,
settle any claim or assessment in respect of Taxes, or consent to any extension
or waiver of the limitation period applicable to any claim or assessment in
respect of Taxes, provided that Acquiror shall not unreasonably withhold its
consent to any of the foregoing;
(q) 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
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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;
(r) 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
(s) Other. Take or agree in writing or otherwise
to take, any of the actions described in Sections 4.2(a) through (r) 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 (as defined in Section 7.3(f)) 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. Notwithstanding
the immediately preceding sentence, if an unsolicited Takeover Proposal, or an
unsolicited written expression of interest that can reasonably be expected to
lead to a Takeover Proposal, shall be received by the Board of Directors of
Target, then, to the extent the Board of Directors of Target believes in good
faith (after consultation with its financial advisor) that such Takeover
Proposal would, if consummated, result in a transaction more favorable to
Target's shareholders from a financial point of view than the transaction
contemplated by the Agreement (any such more favorable Takeover Proposal being
referred to in this Agreement as a "Superior Proposal") and the Board of
Directors of Target determines in good faith after consultation with outside
legal counsel that it is necessary for the Board of Directors of Target to
comply with its fiduciary duties to shareholders under applicable law, Target
and its officers, directors, employees, investment bankers, financial advisors,
attorneys, accountants and other representatives retained by it may furnish in
connection therewith information and take such other actions as are consistent
with the fiduciary obligations of Target's Board of Directors, and such actions
shall not be considered a breach of this Section 4.3 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 parties; provided further that (A) the Board of Directors of
Target has determined, with the advice of Target's
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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 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 nonpublic 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.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of Information Statement. As soon as
practicable after the execution of this Agreement, Target shall prepare, with
the cooperation of Acquiror, an Information Statement for the shareholders of
Target to approve this Agreement, the Agreement of Merger and the transactions
contemplated hereby and thereby. The Information Statement shall constitute a
disclosure document for the offer and issuance of the shares of Acquiror Common
Stock to be received by the holders of Target Capital Stock in the Merger.
Acquiror and Target shall each use its best efforts to cause the Information
Statement to comply with applicable federal and state securities laws
requirements. Each of Acquiror and Target agrees to provide promptly to the
other such information concerning its business and financial statements and
affairs as, in the reasonable judgment of the providing party or its counsel,
may be required or appropriate for inclusion in the Information Statement, or
in any amendments or supplements thereto, and to cause its counsel and auditors
to cooperate with the other's counsel and auditors in the preparation of the
Information Statement. Target will promptly advise Acquiror, and Acquiror will
promptly advise Target, in writing if at any time prior to the Effective Time
either Target or Acquiror shall obtain knowledge of any facts that might make
it necessary or appropriate to amend or supplement the Information Statement in
order to make the statements contained or incorporated by
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reference therein not misleading or to comply with applicable law. Subject to
the provisions of Section 4.3, the Information Statement shall contain the
recommendation of the Board of Directors of Target that the Target shareholders
approve the Merger and this Agreement and the conclusion of the Board of
Directors that the terms and conditions of the Merger are fair and reasonable
to the shareholders of Target; provided that such recommendation may not be
included or may be withdrawn if previously included if Target's Board of
Directors believes in good faith that a Superior Proposal has been made and,
upon written advice of its outside legal counsel, shall determine that to
include such recommendation or not withdraw such recommendation if previously
included would constitute a breach of the Board's fiduciary duty under
applicable law. Anything to the contrary contained herein notwithstanding,
Target shall not include in the Information Statement any information with
respect to Acquiror or its affiliates or associates, the form and content of
which information shall not have been approved by Acquiror prior to such
inclusion.
5.2 Meeting of Shareholders. Target shall promptly after
the date hereof take all action necessary in accordance with California Law and
its Articles of Incorporation and Bylaws to convene the Target Shareholders
Meeting within forty-five (45) days of the date of this Agreement. Target
shall consult with Acquiror regarding the date of the Target Shareholders
Meeting and use all reasonable efforts and shall not postpone or adjourn (other
than for the absence of a quorum) the Target Shareholders Meeting without the
consent of Acquiror. Target shall use its best efforts to solicit from
shareholders of Target proxies in favor of the Merger and shall take all other
action necessary or advisable to secure the vote or consent of shareholders
required to effect the Merger.
5.3 Access to Information.
(a) Each party shall afford the other party 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 such
party's and its subsidiaries' properties, books, contracts, commitments and
records, and (ii) all other information concerning the business, properties and
personnel of such party and its subsidiaries as the other party may reasonably
request. Each party agrees to provide to the other party 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
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contained herein or the conditions to the obligations of the parties to
consummate the Merger.
5.4 Confidentiality. The parties acknowledge that
Acquiror and Target have previously executed a non-disclosure agreement dated
June 26, 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 otherwise making any public statement or making
any other public (or non-confidential) disclosure (whether or not in response
to an inquiry) regarding the terms of this Agreement and the transactions
contemplated hereby, and neither shall issue any such press release or make any
such statement or disclosure without the prior approval of the other (which
approval shall not be unreasonably withheld), except as may be required by law
or by obligations pursuant to any listing agreement with any national
securities exchange or with the NASD.
5.6 Consents; Cooperation.
(a) Each of Acquiror and Target shall promptly apply for
or otherwise seek, and use its 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 commercially reasonable
efforts to obtain all necessary consents, waivers and approvals under any of
its material contracts in connection with the Merger for the assignment thereof
or otherwise. The parties hereto will consult and cooperate with one another,
and consider in good faith the views of one another, in connection 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
commercially 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 the 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 commercially reasonable
efforts vigorously to contest and resist any such action or proceeding and to
have vacated, lifted, reversed, or overturned any
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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) December 15, 1997 or (ii)
the date of a ruling preliminarily enjoining the Merger issued by a court of
competent jurisdiction. Each of Acquiror and Target shall use all commercially
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 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 Shareholder Representation Agreements.
(a) Schedule 5.7(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.
(b) 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 prior to the Effective Time) from each of the
securityholders of Target, an executed Shareholder Representation Agreement
(the "Shareholder Representation Agreement") in the form attached hereto as
Exhibit C.
5.8 Voting Agreement/Irrevocable Proxies. Target shall
use its best efforts, on behalf of Acquiror and pursuant to the request of
Acquiror, to cause holders of more than 51% of the sum of (a) all shares of
Target Common Stock issued and outstanding and (b) all shares of Target
Preferred Stock issued and outstanding to execute and deliver to Acquiror a
Voting Agreement substantially in the form of Exhibit D and an Irrevocable
Proxy substantially in the form of Exhibit A attached thereto concurrently with
the execution of this Agreement and in any event prior to the time that the
Information Statement is mailed to the shareholders of Target.
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5.9 Legal Requirements. Each of Acquiror 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.
5.10 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 reasonable 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.
5.11 Employee Benefit Plans. At the Effective Time, the
Target Stock Option Plan and each outstanding option to purchase shares of
Target Common Stock under the Target Stock Option Plan, whether vested or
unvested, will be assumed by Acquiror. Schedule 5.11 hereto sets forth a true
and complete list as of the date hereof of all holders of outstanding options
under the Target Stock Option Plan 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 shall deliver to Acquiror an updated Schedule 5.11 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 Plan 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 Plan and the documents governing the outstanding options under
such Plan, the Merger will not terminate any of the outstanding options under
the Target Stock Option Plan 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
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assumption of the options in the Merger, except as set forth in Section 4.1(c)
and Section 4.2(b) hereof. It is the intention of the parties that the options
so assumed by Acquiror qualify following the Effective Time as incentive stock
options as defined in Section 422 of the Code to the extent such options
qualified as incentive stock options prior to the Effective Time. Within 15
business 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 Plan a document in form and substance
satisfactory to Target evidencing the foregoing assumption of such option by
Acquiror.
5.12 Escrow Agreement. On or before the Effective Time,
the Escrow Agent and the Shareholders' Agent (as defined in Article VIII
hereto) will execute the Escrow Agreement contemplated by Article VIII in the
form attached hereto as Exhibit E ("Escrow Agreement").
5.13 Form S-8. Acquiror agrees to file, no later than 20
days after the Closing, a registration statement on Form S-8 covering the
shares of Acquiror Common Stock issuable pursuant to outstanding options under
the Target Stock Option Plan assumed by Acquiror. Target shall cooperate with
and assist Acquiror in the preparation of such registration statement.
5.14 Listing of Additional Shares. Prior to the Effective
Time, Acquiror shall file with the Nasdaq Market 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 Plan assumed by
Acquiror.
5.15 Emloyees. Set forth on Schedule 5.15 is a list of
employees of Target to whom Acquiror will make an offer of employment pursuant
to an Employment and Non-Competition Agreement, substantially in the form of
Exhibit I hereto for Wu-Fu Chen and Exhibit H- 1, et seq., hereto for the
others on Schedule 5.15. Acquiror will negotiate in good faith to enter into
an agreement with the employees on Schedule 5.15. Target shall cooperate with
Acquiror to assist Acquiror in entering into an agreement with such employees.
5.16 Employment Policy. Acquiror and Target shall adopt
and maintain in effect from the Closing for a minimum period of twenty-four
(24) months thereafter, an employment policy applicable to all employees of
Target (other than those employees of Target who execute employment agreements
with Acquiror as set forth on Exhibits H-1, et seq., whose employment shall be
governed by such agreements), that shall provide: (i) no such employee shall be
required to relocate to a facility outside the San Francisco Bay Area other
than the one at which such employee is employed as of the Closing without the
prior written approval of each of Wu-Fu Chen and John Chambers, and (ii) that
no such employee may be terminated unless such termination is reviewed and
approved in writing by each of Wu-Fu Chen and John Chambers.
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Notwithstanding the foregoing, if Wu-Fu Chen and/or John Chambers is not
employed by either Target or Acquiror such relocation or termination shall
require the approval of Joseph Golden and/or Larry Carter, respectively.
Termination pursuant to this policy shall be without prejudice to any other
right or remedy to which the employer may be entitled either at law or in
equity.
5.17 Benefit Arrangements. Acquiror covenants and agrees
that to the extent the existing benefit plans and arrangements provided by
Target to its employees are terminated or frozen with respect to benefit
accrual or participation on or after the Effective Time, such employees shall
be entitled to participate in all benefit plans and arrangements which are
available and subsequently become available to Acquiror's employees on the same
basis as Target's employees. For purposes of satisfying the terms and
conditions of such plans, Acquiror shall give full credit for eligibility,
vesting or benefit accrual for each participant's period of service at Target
prior to the Effective Time.
5.18 Expenses. Whether or not the Merger is consummated,
all costs and expenses incurred in connection with this Agreement, the
Agreement of Merger and the transactions contemplated hereby and thereby shall
be paid by the party incurring such expense; provided, however, that any
out-of-pocket expenses incurred by Target in excess of $160,000 for fees and
expenses of legal counsel plus any other expenses, including, without
limitation, fees and expenses of financial advisors and accountants, if any,
shall remain an obligation of Target's shareholders. If Acquiror or Target
receives any invoices for amounts in excess of said amounts, it may, with
Acquiror's written approval, pay such fees; provided, however, that such
payment shall, if not promptly reimbursed by the Target shareholders at
Acquiror's request, constitute "Damages" recoverable under the Escrow Agreement
and such Damages shall not be subject to the Escrow Basket.
5.19 Treatment as Reorganization. Neither Target nor
Acquiror shall take any action prior to or following the Closing that would
cause the merger to fail to qualify as a "reorganization" within the meaning of
Section 368(a) of the Code.
5.20 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.
5.21 Conversion of Preferred Stock. Target shall use its
reasonable best efforts to ensure that all of Target's outstanding Preferred
Stock shall have been
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converted into Common Stock in accordance with the Articles of Incorporation of
Target.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each party to this Agreement to
consummate and effect this Agreement and the transactions contemplated hereby
shall be subject to the satisfaction at or prior to the Effective Time of each
of the following conditions, any of which may be waived, in writing, by
agreement of all the parties hereto:
(a) Shareholder Approval. This Agreement and the
Merger shall have been approved and adopted by the holders of a majority of the
shares of Target Common Stock and Target Preferred Stock outstanding as of the
record date set for the Target Shareholders Meeting, and any agreements or
arrangements that may result in the payment of any amount that would not be
deductible by reason of Section 280G of the Code shall have been approved by
such number of shareholders of Target as is required by the terms of Section
280G(b)(5)(B).
(b) 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. 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.
(c) Governmental Approval. Acquiror and Target
and their respective subsidiaries shall have timely obtained from each
Governmental Entity all approvals, waivers and consents, if any, necessary for
consummation of or in connection with the Merger and the several transactions
contemplated hereby, including such approvals, waivers and consents as may be
required under the Securities Act, under state Blue Sky laws, and under HSR.
(d) Tax Opinion. Acquiror and Target shall have
received substantially identical written opinions of Acquiror's legal counsel
and Target's legal counsel, respectively, in form and substance reasonably
satisfactory to them, and dated
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on or about the Closing Date 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 and Target and certain shareholders of
Target.
(e) Escrow Agreement. Acquiror, Target, Escrow
Agent and the Shareholder's Agent (as defined in Article VIII hereto) shall
have entered into an Escrow Agreement substantially in the form attached hereto
as Exhibit E.
6.2 Additional Conditions to Obligations of Target. The
obligations of Target to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Target:
(a) Representations, Warranties and Covenants.
Except as disclosed in the Acquiror Disclosure Schedule dated the date of this
Agreement, (i) the representations and warranties of Acquiror in this Agreement
shall be true and correct in all material respects (except for such
representations and warranties that are qualified by their terms by a reference
to materiality which representations and warranties as so qualified shall be
true in all respects) on and as of the Effective Time as though such
representations and warranties were made on and as of such time and (ii)
Acquiror shall have performed and complied in all material respects with all
covenants, obligations and conditions of this Agreement required to be
performed and complied with by them as of the Effective Time.
(b) Certificate of Acquiror. Target shall have
been provided with a certificate executed on behalf of Acquiror by its
President and its Chief Financial Officer to the effect that, as of the
Effective Time:
(i) except as disclosed in the Acquiror
Disclosure Schedule dated the date of this Agreement, all representations and
warranties made by Acquiror under this Agreement are true and complete in all
material respects; and
(ii) all covenants, obligations and
conditions of this Agreement to be performed by Acquiror on or before such date
have been so performed in all material respects.
(c) Legal Opinion. Target shall have received a
legal opinion from Acquiror's legal counsel substantially in the form of
Exhibit F hereto.
6.3 Additional Conditions to the Obligations of Acquiror.
The obligations of Acquiror to consummate and effect this Agreement and the
transactions
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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, Warranties and Covenants.
Except as disclosed in the Target Disclosure Schedule dated the date of this
Agreement and as specifically contemplated by this Agreement, (i) the
representations and warranties of Target in this Agreement shall be true and
correct in all material respects (except for such representations and
warranties that are qualified by their terms by a reference to materiality
which representations and warranties as so qualified shall be true in all
respects) on and as of the Effective Time as though such representations and
warranties were made on and as of such time and (ii) Target shall have
performed and complied in all material respects with all covenants, obligations
and conditions of this Agreement required to be performed and complied with by
it as of the Effective Time.
(b) Certificate of Target. Acquiror shall have
been provided with a certificate executed on behalf of Target by its President
and Chief Financial Officer to the effect that, as of the Effective Time:
(i) except as set forth in the Target
Disclosure Schedule dated the date of this Agreement and as specifically
contemplated by this Agreement, all representations and warranties made by
Target under this Agreement are true and complete in all material respects; and
(ii) all covenants, obligations and
conditions of this Agreement to be performed by Target on or before such date
have been so performed in all material respects.
(c) Third Party Consents. Acquiror shall have
been furnished with evidence satisfactory to it of the consent or approval of
those persons whose consent or approval shall be required in connection with
the Merger under the contracts of Target set forth on Schedule 2.33 hereto, if
failure to obtain such consents or approvals would or would reasonably be
expected to have a Material Adverse Effect on Target.
(d) Injunctions or Restraints on Merger and
Conduct of Business. No proceeding brought by any administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking to prevent the consummation of the Merger shall be pending.
In addition, 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.
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(e) Legal Opinion. Acquiror shall have received
a legal opinion from Target's legal counsel, in substantially the form of
Exhibit G.
(f) No Material Adverse Changes. Except as
disclosed in Schedule 6.3(f), there shall not have occurred any material
adverse change in the financial condition, properties, assets (including
intangible assets), liabilities, business, operations or results of operations
of Target and its subsidiaries, taken as a whole.
(g) Voting Agreements. Acquiror shall have
received from holders of more than 51% of the sum of (a) all shares of Target
Common Stock issued and outstanding and (b) all shares of Target Preferred
Stock issued and outstanding an executed Voting Agreement in substantially the
form attached hereto as Exhibit D.
(h) Resignation of Directors. The directors of
Target in office immediately prior to the Effective Time shall have resigned as
directors of Target effective as of the Effective Time.
(i) Employment and Non-Competition Agreements.
The employees of Target set forth on Schedule 5.15 shall have accepted
employment with Acquiror and shall have entered into an Employment and
Non-Competition Agreement substantially in the form attached hereto as Exhibit
I (for Wu-Fu Chen) and Exhibits H-1, et. seq. for the other employees.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. At any time prior to the Effective
Time, whether before or after approval of the matters presented in connection
with the Merger by the shareholders of Target, this Agreement may be
terminated:
(a) by mutual consent duly authorized by the
Board of Directors of Acquiror and Target;
(b) by either Acquiror or Target, if, without
fault of the terminating party, the Closing shall not have occurred on or
before August 29, 1997, (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 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);
(c) by Acquiror, if (i) Target shall breach any
representation, warranty, obligation or agreement hereunder and such breach
shall not have been cured
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within ten (10) business days of receipt by Target of written notice of such
breach, (ii) the Board of Directors of Target shall have withdrawn or modified
its recommendation of this Agreement or the Merger in a manner adverse to
Acquiror or shall have resolved to do any of the foregoing, or (iii) for any
reason Target fails to call and hold the Target Shareholders Meeting by August
29, 1997, provided that the right to terminate this Agreement by Acquiror under
this Section 7.1(c)(i), (ii) and (iii) shall not be available to Acquiror where
Acquiror is at that time in willful breach of this Agreement;
(d) by Target, if Acquiror shall breach any
representation, warranty, obligation or agreement hereunder and such breach
shall not have been cured within ten (10) days following receipt by Acquiror of
written notice of such breach, 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(e)) 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 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 shareholders of Target; or
(f) by Acquiror if (i) any permanent injunction
or other order of a court or other competent authority preventing the
consummation of the Merger shall have become final and nonappealable or (ii) if
any required approval of the shareholders of Target shall not have been
obtained by reason of the failure to obtain the required vote upon a vote held
at a duly held meeting of shareholders or at any adjournment thereof.
(g) by Target if (i) any permanent injunction or
other order of a court or other competent authority preventing the consummation
of the Merger shall have become final and nonappealable or (ii) if any required
approval of the shareholders of Target shall not have been obtained by reason
of the failure to obtain the required vote upon a vote held at a duly held
meeting of shareholders or at any adjournment thereof.
7.2 Effect of Termination. In the event of termination
of this Agreement as provided in Section 7.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of
Acquiror or Target or their respective officers, directors, shareholders or
affiliates, except to the extent that such termination results from the breach
by a party hereto of any of its representations, warranties or covenants set
forth in this Agreement; provided that, the provisions of Section 5.4
(Confidentiality), Section 7.3 (Expenses and Termination Fees) and this
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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) and
7.3(d), 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.
(b) In the event that (i) either Acquiror or
Target shall terminate this Agreement pursuant to Section 7.1(e), (ii) Acquiror
shall terminate this Agreement pursuant to Section 7.1(f)(ii) following a
failure of the shareholders of Target to approve this Agreement and, prior to
the time of the meeting of Target's shareholders, there shall have been (A) a
Trigger Event with respect to Target or (B) a Takeover Proposal which at the
time of the meeting of Target's shareholders shall not have been (x) rejected
by Target and (y) withdrawn by the third party, or (iii) Acquiror shall
terminate this Agreement pursuant to Section 7.1(c), due in whole or in part to
any failure by Target to use its best efforts to perform and comply with all
agreements and conditions required by this Agreement to be performed or
complied with by Target prior to or on the Closing Date or any failure by
Target's affiliates to take any actions required to be taken hereby, and prior
thereto there shall have been (A) a Trigger Event or (B) a Takeover Proposal
which shall not have been (x) rejected by Target and (y) withdrawn by the third
party, then Target shall 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 $14,000,000.
(c) 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); and, in the event any Takeover Proposal or
Trigger Event is consummated (as defined in Section 7.3(g) within twelve months
of the later of (x) such termination of this Agreement and (y) the payment of
the above- described expenses, Target shall promptly pay to Acquiror the
additional sum of $8,000,000.
(d) In the event that Target shall terminate this
Agreement pursuant to Section 7.1(d) Acquiror shall promptly reimburse Target
for all of the out-of-pocket costs and expenses incurred by Target in
connection with this Agreement and the
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transactions contemplated hereby (including, without limitation, the fees and
expenses of its advisors, accountants and legal counsel).
(e) As used herein, a "Trigger Event" shall occur
if any Person (as that term is defined in Section 13(d) of the Exchange Act and
the regulations promulgated thereunder) acquires securities representing 10% 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 10% 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 10% 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 a significant
portion of 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 a significant portion of 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.
(f) For purposes of this Agreement, "Takeover
Proposal" means any offer or proposal for, or any indication of interest in, a
merger or other business combination involving Target or any of its
subsidiaries or the acquisition of 20% or more of the outstanding shares of
capital stock of Target, or a significant portion of the assets of, Target or
any of its subsidiaries, other than the transactions contemplated by this
Agreement.
(g) 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
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shall occur on the date any Person (other than any shareholder which currently
owns 10% or more of the outstanding shares of capital stock of Target) or any
of its affiliates or associates would beneficially own securities representing
10% or more of the voting power of Target, following a tender or exchange
offer.
7.4 Amendment. The boards of directors of the parties
hereto may cause this Agreement to be amended at any time by execution of an
instrument in writing signed on behalf of each of the parties hereto; provided
that an amendment made subsequent to adoption of the Agreement by the
shareholders of Target shall not (i) alter or change the amount or kind of
consideration to be received on conversion of the Target Capital Stock, (ii)
alter or change any term of the Articles of Incorporation of the Surviving
Corporation to be effected by the Merger, or (iii) alter or change any of the
terms and conditions of the Agreement if such alteration or change would
adversely affect the holders of Target Capital 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
ESCROW AND INDEMNIFICATION
8.1 Escrow Fund. As soon as practicable after the
Effective Time, 135,088 shares (the "Escrow Shares") shall be registered in the
name of, and be deposited with, State Street Bank and Trust Company of
California, N.A. (or other institution selected by Acquiror with the reasonable
consent of Target) as escrow agent (the "Escrow Agent"), such deposit to
constitute the Escrow Fund and to be governed by the terms set forth herein and
in the Escrow Agreement attached hereto as Exhibit E. The Escrow Fund (but only
up to the number of shares of Acquiror Common Stock, originally placed in the
Escrow Fund) shall be available to compensate Acquiror pursuant to the
indemnification obligations of the shareholders of Target.
8.2 Indemnification.
(a) Subject to the limitations set forth in this Article
VIII, the shareholders of Target will indemnify and hold harmless Acquiror and
the Surviving Corporation and its respective officers, directors, agents and
employees, and each person, if any, who controls or may control Acquiror or the
Surviving Corporation within the
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meaning of the Securities Act (hereinafter referred to individually as an
"Indemnified Person" and collectively as "Indemnified Persons") from and
against any and all losses, costs, damages, liabilities and expenses arising
from claims, demands, actions, causes of action, including, without limitation,
reasonable legal fees, net of any recoveries under existing insurance policies,
indemnities from third parties, in the case of third party claims, by any
amount actually recovered by Acquiror pursuant to counterclaims made by any of
them directly relating to the facts giving rise to such third party claims
(collectively, "Damages") arising out of any misrepresentation or breach of or
default in connection with any of the representations, warranties, covenants
and agreements given or made by Target in this Agreement, the Target Disclosure
Schedules or any exhibit or schedule to this Agreement. Acquiror and its
affiliates shall act in good faith and in a commercially reasonable manner to
mitigate any Damages they may suffer. The Escrow Fund shall be the sole and
exclusive remedy for any claims, demands, actions or other causes of action
brought against Target or its shareholders, officers or directors.
(b) Acquiror and Target each acknowledge that such
Damages, if any, would relate to unresolved contingencies existing at the
Effective Time, which if resolved at the Effective Time would have led to a
reduction in the total number of shares Acquiror would have agreed to issue in
connection with the Merger. Nothing in this Agreement shall limit the
liability (i) of Target for any breach of any representation, warranty or
covenant if the Merger does not close, or (ii) of any Target shareholder in
connection with any breach by such shareholder of the Shareholder
Representation Agreement, Irrevocable Proxy or continuity of interest
certificate(s) delivered in connection with the tax opinions to be rendered
pursuant to Section 6.1(e).
8.3 Damage Threshold. Notwithstanding the foregoing,
Acquiror may not receive any shares from the Escrow Fund unless and until an
Officer's Certificate or Certificates (as defined in Section 8.5 below)
identifying Damages the aggregate amount of which exceeds $150,000 (which
aggregate amount cannot include any individual Damage items of $5,000 or less)
has been delivered to the Escrow Agent as provided in Section 8.5 below and
such amount is determined pursuant to this Article VIII to be payable, in which
case Acquiror shall receive shares equal in value to the full amount of
Damages; provided, however, that in no event shall Acquiror receive more than
the number of shares of Acquiror Common Stock originally placed in the Escrow
Fund. In determining the amount of any Damage attributable to a breach, any
materiality standard contained in a representation, warranty or covenant of
Acquiror shall be disregarded.
8.4 Escrow Period. The Escrow Period shall terminate (a)
with respect to half of the Escrow Shares at the expiration of six (6) months
after the Effective Time, provided, however, that any claims made pursuant to
Section 8.5 during such period shall be withheld providing resolution of such
claim and (b) with respect to the remaining Escrow Shares, at the expiration of
twelve (12) months after the Effective Time; provided, however, that a portion
of the Escrow Shares, which is necessary to satisfy any
48.
<PAGE> 56
unsatisfied claims specified in any Officer's Certificate theretofore delivered
to the Escrow Agent prior to termination of the Escrow Period with respect to
facts and circumstances existing prior to expiration of the Escrow Period,
shall remain in the Escrow Fund until such claims have been resolved. Claims
made during the first six (6) months shall first be allocated to the Escrow
Shares otherwise distrubitable pursuant to Section 8.4(a).
8.5 Claims upon Escrow Fund.
(a) Upon receipt by the Escrow Agent on or before the
last day of the Escrow Period of a certificate signed by any officer of
Acquiror (an "Officer's Certificate"):
(i) stating that, with respect to the
indemnification obligations of the shareholders of Target set
forth in Section 8.2(a), Damages exist in an aggregate amount
greater than $150,000 (which aggregate amount cannot include
any individual Damage items of $5,000 or less), and
(ii) specifying in reasonable detail the individual
items of such Damages included in the amount so stated, the
date each such item was paid, or properly accrued or arose,
the nature of the misrepresentation, breach of warranty or
claim to which such item is related,
the Escrow Agent shall, subject to the provisions of Section 8.6, deliver to
Acquiror out of the Escrow Fund, as promptly as practicable, Acquiror Common
Stock or other assets held in the Escrow Fund having a value equal to such
Damages.
(b) For the purpose of compensating Acquiror for its
Damages pursuant to this Agreement, the Acquiror Common Stock in the Escrow
Fund shall be valued at the Closing Price. The Escrow Agent will learn what
the Closing Price is pursuant to the Certificate furnished pursuant to Section
1(b) of the Escrow Agreement.
8.6 Objections to Claims. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such Officer's
Certificate shall be delivered to the Shareholders' Agent (defined in Section
8.8 below) and for a period of forty-five (45) days after receipt by the Escrow
Agent of such Officer's Certificate, the Escrow Agent shall make no delivery of
Acquiror Common Stock or other property pursuant to Section 8.5 hereof unless
the Escrow Agent shall have received written authorization from the
Shareholders' Agent to make such delivery. After the expiration of such
forty-five (45) day period, the Escrow Agent shall make delivery of the
Acquiror Common Stock or other property in the Escrow Fund in accordance with
Section 8.5 hereof, provided that no such payment or delivery may be made if
the Shareholders' Agent shall object in a written statement to the claim made
in the Officer's Certificate,
49.
<PAGE> 57
and such statement shall have been delivered to the Escrow Agent and to
Acquiror prior to the expiration of such forty-five (45) day period.
8.7 Resolution of Conflicts; Arbitration.
(a) In case the Shareholders' Agent shall so object in
writing to any claim or claims by Acquiror made in any Officer's Certificate,
Acquiror shall have forty-five (45) days to respond in a written statement to
the objection of the Shareholders' Agent. If after such forty-five (45) day
period there remains a dispute as to any claims, the Shareholders' Agent and
Acquiror shall attempt in good faith for sixty (60) days to agree upon the
rights of the respective parties with respect to each of such claims. If the
Shareholders' Agent and Acquiror should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties and shall be
furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on
any such memorandum and shall distribute the Acquiror Common Stock or other
property from the Escrow Fund in accordance with the terms thereof.
(b) If no such agreement can be reached after good faith
negotiation, either Acquiror or the Shareholders' Agent may, by written notice
to the other, demand arbitration of the matter unless the amount of the damage
or loss is at issue in pending litigation with a third party, in which event
arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either such event the matter shall be
settled by arbitration conducted by three arbitrators. Within fifteen (15)
days after such written notice is sent, Acquiror and the Shareholders' Agent
shall each select one arbitrator, and the two arbitrators so selected shall
select a third arbitrator. The decision of the arbitrators as to the validity
and amount of any claim in such Officer's Certificate shall be binding and
conclusive upon the parties to this Agreement, and notwithstanding anything in
Section 8.6 hereof, the Escrow Agent shall be entitled to act in accordance
with such decision and make or withhold payments out of the Escrow Fund in
accordance therewith.
(c) Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. Any such arbitration shall be
held in Santa Clara or San Mateo County, California under the commercial rules
then in effect of the American Arbitration Association. For purposes of this
Section 8.7(c), in any arbitration hereunder in which any claim or the amount
thereof stated in the Officer's Certificate is at issue, Acquiror shall be
deemed to be the Non-Prevailing Party unless the arbitrators award Acquiror
more than one- half (1/2) of the amount in dispute, plus any amounts not in
dispute; otherwise, the Target shareholders for whom shares of Target Common
Stock otherwise issuable to them have been deposited in the Escrow Fund shall
be deemed to be the Non-Prevailing Party. The Non-Prevailing Party to an
arbitration shall pay its own expenses, the fees of each arbitrator, the
administrative fee of the American Arbitration Association, and the expenses,
including without limitation, attorneys' fees and costs, reasonably incurred by
the other party to the arbitration.
50.
<PAGE> 58
8.8 Shareholders' Agent.
(a) Joseph Golden shall be constituted and appointed as
agent ("Shareholders' Agent") for and on behalf of the Target shareholders to
give and receive notices and communications, to authorize delivery to Acquiror
of the Acquiror Common Stock or other property from the Escrow Fund in
satisfaction of claims by Acquiror, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration
and comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of the
Shareholders' Agent for the accomplishment of the foregoing. Such agency may
be changed by the holders of a majority in interest of the Escrow Fund from
time to time upon not less than 10 days' prior written notice to Acquiror. No
bond shall be required of the Shareholders' Agent, and the Shareholders' Agent
shall receive no compensation for his services. Notices or communications to
or from the Shareholders' Agent shall constitute notice to or from each of the
Target shareholders.
(b) The Shareholders' Agent shall not be liable for any
act done or omitted hereunder as Shareholders' Agent while acting in good faith
and in the exercise of reasonable judgment, and any act done or omitted
pursuant to the advice of counsel shall be conclusive evidence of such good
faith. The Target shareholders shall severally indemnify the Shareholders'
Agent and hold him harmless against any loss, liability or expense incurred
without gross negligence or bad faith on the part of the Shareholders' Agent
and arising out of or in connection with the acceptance or administration of
his duties hereunder.
(c) The Shareholders' Agent shall have reasonable access
to information about Target and the reasonable assistance of Target's officers
and employees for purposes of performing its duties and exercising its rights
hereunder, provided that the Shareholders' Agent shall treat confidentially and
not disclose any nonpublic information from or about Target to anyone (except
on a need to know basis to individuals who agree to treat such information
confidentially).
8.9 Actions of the Shareholders' Agent. A decision, act,
consent or instruction of the Shareholders' Agent shall constitute a decision
of all Target shareholders for whom shares of Acquiror Common Stock otherwise
issuable to them are deposited in the Escrow Fund and shall be final, binding
and conclusive upon each such Target shareholder, and the Escrow Agent and
Acquiror may rely upon any decision, act, consent or instruction of the
Shareholders' Agent as being the decision, act, consent or instruction of each
and every such Target shareholder. The Escrow Agent and Acquiror are hereby
relieved from any liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of the Shareholders'
Agent.
8.10 Third-Party Claims. In the event Acquiror becomes
aware of a third-party claim which Acquiror believes may result in a demand
against the Escrow
51.
<PAGE> 59
Fund, Acquiror shall promptly notify the Shareholders' Agent of such claim, and
the Shareholders' Agent and the Target shareholders for whom shares of Acquiror
Common Stock otherwise issuable to them are deposited in the Escrow Fund shall
be entitled, at their expense, to participate in any defense of such claim.
Acquiror shall have the right in its sole discretion to settle any such claim;
provided, however, that Acquiror may not effect the settlement of any such
claim without the consent of the Shareholders' Agent, which consent shall not
be unreasonably withheld. In the event that the Shareholders' Agent has
consented to any such settlement, the Shareholders' Agent shall have no power
or authority to object under Section 8.6 or any other provision of this Article
VIII to the amount of any claim by Acquiror against the Escrow Fund for
indemnity with respect to such settlement.
ARTICLE IX
GENERAL PROVISIONS
9.1 Non-Survival at Effective Time. The representations
and warranties set forth in Articles III and IV will survive until the first
anniversary of the Closing. The 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 (Shareholder Representation
Agreement), 5.11 (Employee Benefit Plans), 5.13 (Form S-8), 5.20 (Best Efforts
and Further Assurances), 7.3 (Expenses and Termination Fees), 7.4 (Amendment),
Article VIII and this Article IX shall survive the Effective Date and the
Closing.
9.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally
or by commercial delivery service, or mailed by registered or certified mail
(return receipt requested) or sent via facsimile (with confirmation of receipt)
to the parties at the following address (or at such other address for a party
as shall be specified by like notice):
(a) if to Acquiror, to:
Cisco Systems, Inc.
170 W. Tasman Drive
San Jose, CA 95134
Attention: President
Facsimile No.: (408) 526-4100
Telephone No.: (408) 526-4000
52.
<PAGE> 60
with a copy to:
Brobeck, Phleger & Harrison LLP
2200 Geng Road
Two Embarcadero Place
Palo Alto, CA 94303
Attention: Edward M. Leonard
Facsimile No.: (415) 496-2921
Telephone No.: (415) 424-0160
(b) if to Target, to:
Ardent Communications Corporation
3801 Zanker Road
San Jose, CA 95134
Attention: President
Facsimile No.: (408) 324-0261
Telephone No.: (408) 324-0260
with a copy to:
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94040
Attention: David C. Lee
Facsimile No.: (415) 233-8386
Telephone No.: (415) 854-4488
9.3 Interpretation. When a reference is made in this
Agreement to Exhibits, such reference shall be to an Exhibit to this Agreement
unless otherwise indicated. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." The phrase "made available" in this Agreement shall mean
that the information referred to has been made available if requested by the
party to whom such information is to be made available. The phrases "the date
of this Agreement", "the date hereof", and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to June 23, 1997. 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.
9.4 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.
53.
<PAGE> 61
9.5 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 and
except for the Agreement, dated November 27, 1996, by and among Acquiror,
Target and certain shareholders of Target, which shall continue in full force
and effect until the Effective Time, and shall survive any termination of this
Agreement and 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) and (c)-(e), 1.7, 1.9-1.11, 5.11 and 5.13; and (c)
shall not be assigned by operation of law or otherwise except as otherwise
specifically provided.
9.6 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.
9.7 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.
9.8 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws that might otherwise govern under
applicable principles of conflicts of law. Each of the parties hereto
irrevocably consents to the exclusive jurisdiction of any court located within
the State of California, in connection with any matter based upon or arising
out of this Agreement or the matters contemplated herein, agrees that process
may be served upon them in any manner authorized by the laws of the State of
California for such persons and waives and covenants not to assert or plead any
objection which they might otherwise have to such jurisdiction and such
process.
9.9 Rules of Construction. The parties hereto agree that
they have been represented by counsel during the negotiation, preparation and
execution of this
54.
<PAGE> 62
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.
55.
<PAGE> 63
IN WITNESS WHEREOF, Target and Acquiror 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/ Wu-Fu Chen
--------------------------------
Name: Wu-Fu Chen
--------------------------
Title: President and Chief
Executive Officer
--------------------------------
ACQUIROR
By: /s/ Larry Carter
------------------------------
Name: Larry Carter
------------------------
Title: Chief Financial Officer
------------------------
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
<PAGE> 64
SCHEDULE 2.10
TARGET REAL PROPERTY
Will be furnished supplementally upon request by the Securities and
Exchange Commission.
<PAGE> 65
SCHEDULE 2.11
TARGET INTELLECTUAL PROPERTY
Will be furnished supplementally upon request by the Securities and
Exchange Commission.
<PAGE> 66
SCHEDULE 2.14
TARGET EMPLOYEE PLANS
Will be furnished supplementally upon request by the Securities and
Exchange Commission.
<PAGE> 67
SCHEDULE 2.30
LIST OF MATERIAL CONTRACTS
Will be furnished supplementally upon request by the Securities and
Exchange Commission.
<PAGE> 68
SCHEDULE 2.32
THIRD PARTY CONSENTS
Will be furnished supplementally upon request by the Securities and
Exchange Commission.
<PAGE> 69
SCHEDULE 2.33
THIRD PARTY NOVATION
Will be furnished supplementally upon request by the Securities and
Exchange Commission.
<PAGE> 70
SCHEDULE 5.7(A)
TARGET AFFILIATES
Will be furnished supplementally upon request by the Securities and
Exchange Commission.
<PAGE> 71
SCHEDULE 5.11
HOLDERS OF OUTSTANDING TARGET OPTIONS
Will be furnished supplementally upon request by the Securities and
Exchange Commission.
<PAGE> 72
SCHEDULE 5.15(A)
LIST OF EMPLOYEES
Will be furnished supplementally upon request by the Securities and
Exchange Commission.
<PAGE> 73
SCHEDULE 6.3(F)
TARGET ANTICIPATED CHARGES
Will be furnished supplementally upon request by the Securities and
Exchange Commission.
<PAGE> 74
EXHIBIT A
AGREEMENT OF MERGER
<PAGE> 75
AGREEMENT OF MERGER
OF
CISCO SYSTEMS, INC.
AND
ARDENT COMMUNICATIONS CORPORATION
This Agreement of Merger, dated as of the 25th day of July,
1997 ("Merger Agreement"), between Cisco Systems, Inc., a California
corporation ("Acquiror"), and Ardent Communications Corporation, a California
corporation ("Target").
RECITALS
A. Target was incorporated in the State of California on June 20,
1996 and on the date hereof has 5,470,000 shares of Common Stock outstanding
("Target Common Stock"), 3,000,000 shares of Series A Preferred Stock
outstanding (the "Target Series A Preferred Stock") and 11,000,000 shares of
Series B Preferred Stock outstanding (the "Target Series B Preferred Stock").
The Target Series A Preferred Stock and Series B Preferred Stock are
hereinafter referred to as the "Target Preferred Stock," and together with the
Target Common Stock as the "Target Shares."
B. Acquiror and Target have entered into an Agreement and Plan of
Reorganization (the "Agreement and Plan of Reorganization") providing for
certain representations, warranties, covenants and agreements in connection
with the transactions contemplated hereby. This Merger Agreement and the
Agreement and Plan of Reorganization are intended to be construed together to
effectuate their purpose.
C. The Boards of Directors of Target and Acquiror deem it
advisable and in their mutual best interests and in the best interests of the
shareholders of Target, that Target be acquired by Acquiror through a merger
("Merger") of Target with and into Acquiror.
D. The Boards of Directors of Acquiror and Target and the
shareholders of Target have approved the Merger.
<PAGE> 76
AGREEMENTS
The parties hereto hereby agree as follows:
1. Target shall be merged with and into Acquiror, and
Acquiror shall be the surviving corporation.
2. The Merger shall become effective at such time (the
"Effective Time" of the Merger) as this Merger Agreement and the officers'
certificate of Target is filed with the Secretary of State of the State of
California pursuant to Section 1103 of the Corporations Code of the State of
California.
3. Immediately prior to the Effective Time of the
Merger, each share of Target Preferred Stock will convert to Target Common
Stock. At the Effective Time of the Merger (i) all shares of Target Common
Stock that are owned directly or indirectly by Target, Acquiror or any other
subsidiary of Acquiror shall be cancelled, and no securities of Acquiror or
other consideration shall be delivered in exchange therefor, and (ii) each of
the issued and outstanding shares of Target Common Stock (other than shares, if
any, held by persons who have not voted such shares for approval of the Merger
and with respect to which such persons shall become entitled to exercise
dissenters' rights in accordance with Chapter 13 of the California Corporations
Code, referred to hereinafter as "Dissenting Shares") shall be converted
automatically into and exchanged for .150916 of a share of Acquiror Common
Stock; provided, however, that no more than 3,486,084 shares of Common Stock of
Acquiror shall be issued in such exchange (including Acquiror Common Stock
reserved for issuance upon exercise of Target options assumed by Acquiror).
Those shares of Acquiror Common Stock to be issued as a result of the Merger
are referred to herein as the "Acquiror Shares".
4. Any Dissenting Shares shall not be converted into
Acquiror Common Stock but shall be converted into the right to receive such
consideration as may be determined to be due with respect to such Dissenting
Shares pursuant to the law of the State of California. If after the Effective
Time any Dissenting Shares shall lose their status as Dissenting Shares, then
as of the occurrence of the event which causes the loss of such status, such
shares shall be converted into Acquiror Common Stock in accordance with Section
3.
5. Notwithstanding any other term or provision hereof
but subject to the proviso in the second sentence of Section 3, no fractional
shares of Acquiror Common Stock shall be issued, but in lieu thereof each
holder of Target Shares who would otherwise, but for rounding as provided
herein, be entitled to receive a fraction of a share of Acquiror Common Stock
shall receive from Acquiror an amount of cash equal to the per share market
value of Acquiror Common Stock (deemed to be $78.11) multiplied by the fraction
of a share of Acquiror Common Stock to which such holder would otherwise be
entitled. The fractional share interests of each Target shareholder
2.
<PAGE> 77
shall be aggregated, so that no Target shareholder shall receive cash in an
amount greater than the value of one full share of Acquiror Common Stock.
6. The conversion of Target Common Stock into Acquiror
Common Stock as provided by this Merger Agreement shall occur automatically at
the Effective Time of the Merger without action by the holders thereof. Each
holder of Target Common Stock shall thereupon be entitled to receive shares of
Acquiror Common Stock in accordance with Section 3. Such shareholder shall
receive certificates that represent that number of shares of Acquiror Common
Stock in accordance with the following procedures:
(a) As soon as practicable after the Effective
Time of the Merger, Acquiror shall make available for exchange in accordance
with Section 3, through such reasonable procedures as Acquiror may adopt, the
shares of Acquiror Common Stock issuable pursuant to Section 3 in exchange for
outstanding shares of Target Common Stock.
(b) Within 15 days after the Effective Time of
the Merger, the Exchange Agent (as defined in Section 1.7 of the Agreement and
Plan of Reorganization) shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time of the Merger
represented outstanding shares of Target Shares (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the certificates shall pass, only upon delivery of the certificates to
the Exchange Agent and shall be in such form and have such other provisions as
Acquiror may reasonably specify) and (ii) instructions for use in effecting the
surrender of the certificates in exchange for certificates evidencing Acquiror
Common Stock. 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 executed, the holder of such
certificate shall be entitled to receive in exchange therefor the number of
shares of Acquiror Common Stock to which the holder of Target Shares is
entitled pursuant to Section 3 hereof and is represented by the certificate so
surrendered, along with a check representing the value of any fractional shares
as defined pursuant to Section 5 hereof, less such number of shares to be
deposited in an escrow fund on such holder's behalf pursuant to Article VIII of
the Agreement and Plan of Reorganization. The certificate so surrendered shall
forthwith be cancelled. As soon as practicable after the Effective Time, and
subject to and in accordance with the provisions of Article VIII of the
Agreement and Plan of Reorganization, Acquiror shall cause to be distributed to
the Escrow Agent (as defined in Article VIII of the Agreement and Plan of
Reorganization) a certificate or certificates representing 135,088 shares of
Acquiror Common Stock which shall be registered in the name of the Escrow Agent
as nominee for the holders of Certificates cancelled pursuant to this Section
6(b). Such shares shall be beneficially owned by such holders and shall be
held in escrow and shall be available to compensate Acquiror for certain
damages as provided in Article VIII of the Agreement and Plan of
Reorganization. To the extent not used for such purposes, such shares shall be
released, all as provided in Article VIII
3.
<PAGE> 78
of the Agreement and Plan of Reorganization. In the event of a transfer of
ownership of Target Shares which is not registered in the transfer records of
Target, Acquiror Common Stock may be delivered to a transferee if the
certificate representing such Target Shares is presented to Acquiror and
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 6, each certificate shall be deemed
at any time after the Effective Time of Merger to represent the right to
receive upon such surrender such number of shares of Acquiror Common Stock as
provided by Section 3 and the provisions of applicable law.
(c) No dividends on the Acquiror Shares shall be
paid to the holder of any unsurrendered certificate until the holder of record
of such certificate shall surrender such certificate. Subject to the effect,
if any, of applicable escheat and other laws, following surrender of any
certificate, there shall be delivered to the person entitled thereto, without
interest, the amount of dividends theretofore paid with respect to the Acquiror
Shares so withheld as of any date subsequent to the Effective Time of the
Merger and prior to such date of delivery.
(d) All Acquiror Shares delivered upon the
surrender for exchange of Target Shares in accordance with the terms hereof
shall be deemed to have been delivered in full satisfaction of all rights
pertaining to such Target Shares. There shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the
Target Shares that were outstanding immediately prior to the Effective Time of
the Merger. If, after the Effective Time of the Merger, certificates are
presented to Acquiror for any reason, they shall be cancelled and exchanged as
provided in this Section 6.
7. At the Effective Time of the Merger, the separate
existence of Target shall cease, and Acquiror shall succeed, without other
transfer, to all of the rights and properties of Target and shall be subject to
all the debts and liabilities thereof in the same manner as if Acquiror had
itself incurred them. All rights of creditors and all liens upon the property
of each corporation shall be preserved unimpaired, provided that such liens
upon property of Target shall be limited to the property affected thereby
immediately prior to the Effective Time of the Merger.
8. This Merger Agreement is intended as a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended.
9. (a) The Amended and Restated Articles of
Incorporation of Acquiror in effect immediately prior to the Effective Time
shall be the Amended and Restated Articles of Incorporation of the Surviving
Corporation unless and until thereafter amended.
(b) The Bylaws of Acquiror in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
unless and until
4.
<PAGE> 79
amended or repealed as provided by applicable law, the Articles of
Incorporation of the Surviving Corporation and such Bylaws.
(c) The directors and officers of Acquiror
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation.
10. (a) Notwithstanding the approval of this Merger
Agreement by the shareholders of Target, this Merger Agreement may be
terminated at any time prior to the Effective Time of the Merger by mutual
agreement of the Boards of Directors of Acquiror and Target.
(b) Notwithstanding the approval of this Merger
Agreement by the shareholders of Target, this Merger Agreement shall terminate
forthwith in the event that the Agreement and Plan of Reorganization shall be
terminated as therein provided.
(c) In the event of the termination of this
Merger Agreement as provided above, this Merger Agreement shall forthwith
become void and there shall be no liability on the part of Target or Acquiror
or their respective officers or directors, except as otherwise provided in the
Agreement and Plan of Reorganization.
(d) This Merger Agreement may be signed in one or
more counterparts, each of which shall be deemed an original and all of which
shall constitute one agreement.
(e) This Merger Agreement may be amended by the
parties hereto any time before or after approval hereof by the shareholders of
Target, but, after such approval, no amendments shall be made which by law
require the further approval of such shareholders without obtaining such
approval. This Merger Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
5.
<PAGE> 80
IN WITNESS WHEREOF, the parties have executed this Merger
Agreement as of the date first written above.
CISCO SYSTEMS, INC.
By: /s/ John T. Chambers
-------------------------------
John T. Chambers, President
and Chief Executive Officer
By: /s/ Larry R. Carter
------------------------------------------
Larry R. Carter, Secretary
6.
[SIGNATURE PAGE TO AGREEMENT OF MERGER]
<PAGE> 81
ARDENT COMMUNICATIONS CORPORATION
By: /s/ Joseph Golden
--------------------------------
Joseph Golden, Chief Operating
Officer and Vice President of
Marketing and Operations
By: /s/ Joseph Golden
--------------------------
Joseph Golden
Assistant Secretary
7.
[SIGNATURE PAGE TO AGREEMENT OF MERGER]
<PAGE> 82
OFFICERS' CERTIFICATE
OF
ARDENT COMMUNICATIONS CORPORATION
Joseph Golden, Chief Operating Officer, Vice President of
Marketing and Operations and Assistant Secretary, of Ardent Communications
Corporation, a corporation duly organized and existing under the laws of the
State of California (the "Corporation"), do hereby certify:
1. That he is the duly elected, acting and qualified
Chief Operating Officer, Vice President of Marketing and Operations and the
Assistant Secretary of the Corporation.
2. There are two authorized classes of shares,
consisting of 30,000,000 shares of Common Stock and 14,000,000 shares of
Preferred Stock. There were 5,470,000 shares of Common Stock, 3,000,000 shares
of Series A Preferred Stock and 11,000,000 shares of Series B Preferred Stock
outstanding and entitled to vote on the Agreement of Merger in the form
attached.
3. The Agreement of Merger in the form attached was duly
approved by the board of directors of the Corporation in accordance with the
General Corporation Law of the State of California.
4. Approval of the Agreement of Merger by the holders of
at least 51% of the outstanding shares of Common Stock, 51% of the outstanding
shares of Series A Preferred Stock and 51% of the outstanding shares of Series
B Preferred Stock was required. The percentage of the outstanding shares of
each class of the Corporation's shares entitled to vote on the Agreement of
Merger which voted to approve the Agreement of Merger equaled or exceeded the
vote required.
<PAGE> 83
Each of the undersigned declares under penalty of perjury that
the statements contained in the foregoing certificate are true of their own
knowledge. Executed in _____________, California, on ____________, 1997.
----------------------------------------
_______________, Chief Operating Officer
and Vice President of Marketing and
Operations
----------------------------------
Joseph Golden, Assistant Secretary
2.
<PAGE> 84
EXHIBIT B
EXCHANGE RATIO
Item (i).
The greater of that number of shares of Acquiror Common Stock
equal to $232,500,000 divided by (i) the average of the closing bid price for a
share of Acquiror Common Stock as quoted on the NASDAQ National Market for the
ten (10) trading days immediately preceding and ending on the trading day
immediately prior to the date of this Agreement or (ii) the average of the
closing bid price for a share of Acquiror Common Stock as quoted on the NASDAQ
National Market for the ten (10) trading days immediately preceding and ending
on the trading day that is five (5) calendar days prior to the Closing Date
(the "Total Acquiror Shares") shall be available for the conversion and
exchange of all outstanding Target Common Stock (assuming the conversion of all
Target Series A Preferred Stock and Series B Preferred Stock (collectively,
"Target Preferred Stock")), the assumption of all outstanding Target Options
and the conversion of all Target Rights into rights to acquire Acquiror Common
Stock, all as set forth in Section 1.6 of the Agreement. The exact exchange
ratio for Target Common Stock shall be determined by dividing 3,486,084 (or
such lesser number as remains after giving effect to the Target Preferred Stock
liquidation preference, if any) by the sum of (i) the number of shares of
outstanding Target Common Stock (after conversion of the Target Preferred
Stock) and (ii) the number of shares of Target Common Stock underlying all
outstanding Target Options and Target Rights. If the Liquidation Rights
contained in Article III(2) of Target's Amended and Restated Articles of
Incorporation shall apply, then the exchange ratio for Target Preferred Stock
shall be determined in accordance with such Article III(2) and the 3,486,084
share number in the preceding sentence shall be reduced to the extent necessary
to satisfy the aggregate Target Preferred Stock liquidation preference as so
determined. Of such 3,486,084 shares of Acquiror Common Stock exchanged for
shares of Target Preferred and Common Stock, seven and five tenths percent
(7.5%) shall be deposited in the Escrow Fund as set forth in Section 8.1 of the
Agreement.
Assuming the conversion of each outstanding share of Target
Preferred Stock to Target Common Stock immediately prior to the Effective Time
of the Merger, each share of Target Common Stock issued and outstanding
immediately following the conversion of Target Preferred Stock prior to the
Effective Time (other than cancelled
<PAGE> 85
shares and Dissenting Shares) shall be exchanged for .150916(1) of a share of
Acquiror Common Stock. The calculation of the foregoing exchange ratio shall
be determined by referring to the capitalization numbers that include all
shares of capital stock owned by Acquiror immediately prior to the Effective
Time.
Item (ii).
Each Target Option shall become exercisable for that number of
whole shares of Acquiror Common Stock equal to the product of (a) the number of
shares of Target Common Stock that were purchasable under such Target Option
and (b) .150916(1) (as calculated pursuant to Item (i) above), such product
rounded down to the nearest whole number of shares of Acquiror Common Stock.
The exercise price of each Target Option shall equal the quotient obtained by
dividing (a) the per share exercise price of the Target Option by (b) .150916(1)
(as calculated pursuant to Item (i) above.)
Each Target Right shall become exercisable for that number of
whole shares of Acquiror Common Stock equal to the product of (a) the number of
shares of Target Common Stock that were purchasable under such Target Right and
(b) .150916(1) (as calculated pursuant to Item (i) above), such product rounded
down to the nearest whole number of shares of Acquiror Common Stock. The
exercise price of each Target Right shall equal the quotient obtained by
dividing (a) the per share exercise price of the Target Right by (b) .150916(1)
(as calculated pursuant to Item (i) above.)
____________________
(1) See Tab __, certified copy of the Agreement of Merger, for
the final, revised exchange ratio.
<PAGE> 86
EXHIBIT C
SHAREHOLDER REPRESENTATION AGREEMENT
THIS SHAREHOLDER'S REPRESENTATION AGREEMENT (the "Shareholder's
Agreement") is entered into as of the 23rd day of June, 1997 between Cisco
Systems, Inc., a California corporation ("Acquiror"), and the undersigned
shareholder (the "Shareholder") of Ardent Communications Corporation, a
California corporation ("Target").
RECITALS
A. Target and Acquiror, a California corporation, have entered
into an Agreement and Plan of Reorganization, dated as of June 23, 1997 (the
"Reorganization Agreement"), pursuant to which Target will be merged into
Acquiror (the "Merger").
B. Upon the consummation of the Merger and in connection
therewith, the undersigned Shareholder will become the owner of shares of
Common Stock of Acquiror (the "Acquiror Shares").
C. The parties to the Reorganization Agreement intend to adopt a
plan of reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code") and intend to cause the Merger to
qualify as a "reorganization" under the provisions of Section 368(a)(1)(A) of
the Code.
D. Pursuant to the Reorganization Agreement, an Escrow Agreement
attached thereto as Exhibit E (the "Escrow Agreement") shall be entered into
between the Acquiror and Joseph Golden as agent ("Shareholders' Agent") of the
former shareholders of Target;
E. Concurrent with the execution of the Reorganization Agreement
and as an inducement to Acquiror to enter into the Reorganization Agreement,
certain of the affiliates of Target who are shareholders, 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.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, provisions and covenants set forth in the Reorganization Agreement
and in this Shareholder's Agreement, it is hereby agreed as follows:
<PAGE> 87
1. The undersigned Shareholder hereby agrees that:
(a) (i) The undersigned Shareholder has, and as
of the Effective Time of the Merger will have, no present plan or intent (a
"Plan") to engage in a sale, exchange, transfer, pledge, disposition or any
other transaction (other than a distribution by a partnership to its partners)
that results in any reduction in the risk of ownership (collectively, a "Sale")
of more than fifty percent (50%) of the shares of Acquiror Common Stock to be
acquired by the undersigned Shareholder upon consummation of the Merger. If
Shareholder is a partnership, Shareholder is not aware of any present plan or
intention on the part of its partners to engage in a Sale or Sales of any of
the shares of Acquiror Common Stock, if any, to be distributed by Shareholder.
If all of the shares of Acquiror Common Stock to be received by Shareholder in
the Merger were distributed to its partners in accordance with their
partnership interests, no such partner would receive shares of Acquiror Common
Stock having a value greater than one percent (1%) of the fair market value of
the shares of Target's capital stock outstanding immediately prior to the
Merger. The undersigned Shareholder is not aware of, or participating in, any
plan or intent on the part of Target's shareholders (a "Plan") to engage in
Sales of the shares of Acquiror Common Stock to be issued in the Merger such
that the aggregate fair market value, as of the Effective Time of the Merger,
of the shares subject to such Sales would exceed fifty percent (50%) of the
aggregate fair market value of all shares of outstanding Target Capital Stock
immediately prior to the Merger. A sale of Acquiror Common Stock shall be
considered to have occurred pursuant to a Plan if such Sale occurs in a
transaction that is in contemplation of, or related or pursuant to, the
Reorganization Agreement (a "Related Transaction"). In addition, shares of
Target Common Stock (A) exchanged for cash in lieu of fractional shares of
Acquiror Common Stock and (B) with respect to which a Sale occurred in a
Related Transaction prior to the Merger shall be considered to have been shares
of outstanding Target Common Stock that were exchanged for Acquiror Common
Stock in the Merger and then disposed of pursuant to a Plan. For this purpose,
any Sales of Target stock by a Target shareholder to Acquiror at any time prior
to the Merger shall be considered to be a Related Transaction. If any of the
undersigned Shareholder's representations in this subsection ceases to be true
at any time prior to the Effective Time of the Merger, the undersigned
Shareholder shall deliver to each of Target and Acquiror, prior to the
Effective Time of the Merger, a written statement to that effect. Except as
otherwise set forth in Appendix A, the undersigned Shareholder has not engaged
in a Sale of any shares of Target Common Stock since June 1, 1996.
(ii) The undersigned Shareholder is
currently the owner of that number of shares of Target Common and Preferred
Stock ("Target Capital Stock") set forth on the signature page hereto and,
except as otherwise set forth on the signature page hereto, (A) has held such
Target Capital Stock at all times since the date set forth on such signature
page, and (B) did not acquire any shares of Target Capital Stock in
contemplation of the Merger. These securities constitute the undersigned's
entire interest in the outstanding capital stock of Target. No other person or
entity not a
2.
<PAGE> 88
signatory to this Agreement has a beneficial interest in or a right to acquire
such shares of Target Capital Stock or any portion of such shares of Target
Capital Stock (except, with respect to shareholders which are partnerships,
partners of such shareholders). The undersigned's Shareholder's principal
residence or place of business is set forth on the signature page hereto.
The undersigned Shareholder understands and
acknowledges that Target, Acquiror and their respective shareholders, as well
as legal counsel to Target and Acquiror, are entitled to rely on (x) the truth
and accuracy of the undersigned Shareholder's representations contained herein
and (y) the undersigned Shareholder's performance of the obligations set forth
herein.
(b) Subject to paragraph (a) of this Section 1, the
undersigned Shareholder agrees not to offer, sell, exchange, transfer, pledge
or otherwise dispose of any of the Acquiror Shares unless at that time either:
(i) such transaction is permitted pursuant to the
provisions of Rule 144 under the Securities Act;
(ii) counsel representing the undersigned
Shareholder, satisfactory to Acquiror, shall have advised Acquiror in a written
opinion letter satisfactory to Acquiror and Acquiror's counsel, and upon which
Acquiror and its counsel may rely, that no registration under the Securities
Act is required in connection with the proposed sale, transfer or other
disposition;
(iii) a registration statement under the Securities
Act covering the Acquiror Shares proposed to be sold, transferred or otherwise
disposed of, describing the manner and terms of the proposed sale, transfer or
other disposition, and containing a current prospectus, is filed with the SEC
and made effective under the Securities Act; or
(iv) an authorized representative of the SEC shall
have rendered written advice to the undersigned Shareholder (sought by the
undersigned Shareholder or counsel to the undersigned Shareholder, with a copy
thereof and of all other related communications delivered to Acquiror) to the
effect that the SEC will take no action, or that the staff of the SEC will not
recommend that the SEC take action, with respect to the proposed offer, sale,
exchange, transfer, pledge or other disposition if consummated.
(c) All certificates representing Acquiror Shares
deliverable to a Shareholder pursuant to the Reorganization Agreement and in
connection with the Merger and any certificates subsequently issued with
respect thereto or in substitution therefor shall bear a legend that such
shares of Acquiror Common Stock may only be sold or disposed of in accordance
with (i) the provisions of Rule 144 under the Securities Act, (ii) pursuant to
an effective Registration Statement or (iii) pursuant to an exemption provided
by the Securities Act. Acquiror, at its discretion, may cause stop transfer
3.
<PAGE> 89
orders to be placed with its transfer agent with respect to the certificates
for such Acquiror Shares but not as to the certificates for any part of the
Acquiror Shares as to which said legend is no longer appropriate.
(d) The undersigned Shareholder will observe and comply
with the Securities Act and the General Rules and Regulations thereunder, as
now in effect and as from time to time amended and including those hereafter
enacted or promulgated, in connection with any offer, sale, exchange, transfer,
pledge or other disposition of the Acquiror Shares or any part thereof.
(e) The undersigned Shareholder undertakes and agrees to
indemnify and hold harmless Acquiror, Target, and each of their respective
current and future officers and directors and each person, if any, who now or
hereafter controls or may control Acquiror or Target within the meaning of the
Securities Act (an "Indemnified Person") from and against any and all claims,
demands, actions, causes of action, losses, costs, damages, liabilities and
expenses ("Claims") based upon, arising out of or resulting from any breach or
nonfulfillment of any undertaking, covenant or agreement made by the
undersigned Shareholder in subsection (a), (b) or (c) of this Section 1, or
caused by or attributable to the undersigned Shareholder, or the undersigned
Shareholder's agents or employees, or representatives, brokers, dealers and/or
underwriters insofar as they are acting on behalf of and in accordance with the
instruction of or with the knowledge of the undersigned Shareholder, in
connection with or relating to any offer, sale, pledge, transfer or other
disposition of any of the Acquiror Shares by or on behalf of the undersigned
Shareholder, which claim or claims result from any breach or nonfulfillment as
set forth above. The indemnification set forth herein shall be in addition to
any liability that the undersigned Shareholder may otherwise have to the
Indemnified Persons.
(f) Promptly after receiving definitive notice of any
Claim in respect of which an Indemnified Person may seek indemnification under
this Shareholder's Agreement, such Indemnified Person shall submit notice
thereof to the undersigned Shareholder. The omission by the Indemnified Person
so to notify the undersigned Shareholder of any such Claim shall not relieve
the undersigned Shareholder from any liability the undersigned Shareholder may
have hereunder except to the extent that (i) such liability was caused or
increased by such omission, or (ii) the ability of the undersigned Shareholder
to reduce or defend against such liability was adversely affected by such
omission. The omission of the Indemnified Person so to notify the undersigned
Shareholder of any such Claim shall not relieve the undersigned Shareholder
from any liability the undersigned Shareholder may have otherwise than
hereunder. The Indemnified Persons and the undersigned Shareholder shall
cooperate with and assist one another in the defense of any Claim and any
action, suit or proceeding arising in connection therewith.
4.
<PAGE> 90
2. The undersigned Shareholder agrees to maintain in
strictest confidence information about the Reorganization Agreement and the
Merger, including information about the existence of this agreement and such
Merger, and not to disclose any such information without prior written approval
of the Target and Acquiror.
3. From and after the Effective Time of the Merger and
for so long as necessary in order to permit the undersigned Shareholder to sell
the Acquiror Shares pursuant to Rule 144 under the Securities Act, Acquiror
will file on a timely basis all reports required to be filed by it pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, referred to in
paragraph (c) of Rule 144 under the Securities Act in order to permit the
undersigned Shareholder to sell the Acquiror Shares, pursuant to the terms and
conditions of Rule 144.
4. No waiver by any party hereto of any condition or of
any breach of any provision of this Shareholders Agreement shall be effective
unless in writing.
5. All notices, requests, demands or other
communications that are required or may be given pursuant to the terms of this
Shareholder's Agreement shall be in writing and shall be deemed to have been
duly given if delivered by hand or mailed by registered or certified mail,
postage prepaid, as follows:
(a) If to the Shareholder, at the address set
forth below the Shareholder's signature at the end hereof.
(b) If to Acquiror, Target or the other
Indemnified Persons:
Cisco Systems, Inc.
170 W. Tasman Drive
San Jose, CA 95134
Attention: President
Fax: (408) 526-4100
Tel: (408) 526-4000
with a copy (which shall not constitute notice) to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
Attention: Edward M. Leonard
Fax: (415) 496-2921
Tel: (415) 424-0160
and
5.
<PAGE> 91
Ardent Communications Corporation
3801 Zanker Road
San Jose, CA 95134
Attention: President
Fax: (408) 324-0261
Tel: (408) 324-0260
With a copy (which shall not constitute notice) to:
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Attention: David C. Lee
Fax: (415) 233-8386
Tel: (415) 854-4488
or to such other address as any party hereto or any Indemnified Person may
designate for itself by notice given as herein provided.
6. Shareholder understands that pursuant to the
Reorganization Agreement, Acquiror and Shareholder's Agent shall enter into the
Escrow Agreement and that Shareholder shall be bound by the provisions of the
Escrow Agreement and Article VIII of the Reorganization Agreement ("Article
VIII"), both of which are attached hereto as Exhibit A and Exhibit B,
respectively; and as such, Shareholder agrees to appoint Joseph Golden as
Shareholder's Agent and further agrees to be bound by the terms of the Escrow
Agreement and Article VIII.
7. For the convenience of the parties hereto, this
Shareholder's Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same document.
8. This Shareholder's Agreement shall be enforceable by,
and shall inure to the benefit of and be binding upon, the parties hereto and
their respective successors and assigns. Moreover, this Shareholder's
Agreement shall be enforceable by, and shall inure to the benefit of, the
Indemnified Persons and their respective successors and assigns. As used
herein, the term "successors and assigns" shall mean, where the context so
permits, heirs, executors, administrators, trustees and successor trustees, and
personal and other representatives.
9. This Shareholder's Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the State of
California.
6.
<PAGE> 92
10. If a court of competent jurisdiction determines that
any provision of this Shareholder's Agreement is unenforceable or enforceable
only if limited in time and/or scope, this Shareholder's Agreement shall
continue in full force and effect with such provision stricken or so limited.
11. All capitalized terms used herein shall have the
meaning defined in the Reorganization Agreement, unless otherwise defined
herein.
7.
<PAGE> 93
IN WITNESS WHEREOF, the parties have caused this Shareholder's
Agreement to be executed as of the date first above written.
ACQUIROR SHAREHOLDER
By:
------------------------------ -------------------------------
(Signature)
Name:
---------------------------- ------------------------------
(Print Name)
Title:
--------------------------- -------------------------------
(Print Address)
-------------------------------
(Print Address)
-------------------------------
(Print Telephone Number)
-------------------------------
(Social Security or Tax I.D. Number)
Total Number of Shares of Target Capital Stock owned on the date hereof:
Common Stock: __________________________________
Series A Preferred Stock: __________________________________
Series B Preferred Stock: __________________________________
State of Residence: __________________________________
[SIGNATURE PAGE TO SHAREHOLDER'S REPRESENTATION AGREEMENT]
<PAGE> 94
APPENDIX A
<PAGE> 95
EXHIBIT A
ESCROW AGREEMENT
SEE EXHIBIT E OF REORGANIZATION AGREEMENT.
<PAGE> 96
EXHIBIT B
ARTICLE VIII
SEE REORGANIZATION AGREEMENT.
<PAGE> 97
EXHIBIT D
TARGET VOTING AGREEMENT
This Voting Agreement (the "Agreement") is made and entered into as of
June 23, 1997, between Cisco Systems, Inc., a California corporation
("Acquiror"), and the undersigned shareholder ("Shareholder") of Ardent
Communications Corporation, a corporation existing under the laws of California
("Target").
RECITALS
WHEREAS, pursuant to an Agreement and Plan of Reorganization
dated as of June 23, 1997, by and between Acquiror and Target (such agreement
as it may be amended or restated is hereinafter referred to as the
"Reorganization Agreement"), the parties agreed that on the signing of the
Reorganization Agreement, Acquiror and Shareholder would execute and deliver a
Voting Agreement containing the terms and conditions set forth in an Exhibit to
the Reorganization Agreement together with such other terms and conditions as
may be agreed to by the parties to the Reorganization Agreement acting
reasonably;
WHEREAS, Acquiror has agreed to acquire the outstanding
securities of Target pursuant to a statutory merger of Target with and into
Acquiror (the "Merger") effected in part through the conversion of each
outstanding share of capital stock of Target (the "Target Capital Stock"), into
shares of common stock of Acquiror at the rate set forth in the Reorganization
Agreement (the "Transaction");
WHEREAS, in order to induce Acquiror to enter into the
Transaction, Target has agreed to use its best efforts to solicit the proxy of
certain significant shareholders of Target on behalf of Acquiror, and to cause
certain significant shareholders of Target to execute and deliver voting
agreements to Acquiror;
WHEREAS, Shareholder is the registered and beneficial owner of
such number of shares of the outstanding capital stock of Target as is
indicated on the final page of this Agreement (the "Shares"); and
WHEREAS, in order to induce Acquiror to enter into the
Transaction, Shareholder agrees not to transfer or otherwise dispose of any of
the Shares, or any other shares in the capital of Target acquired by
Shareholder 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 in the
capital of Target so as to facilitate consummation of the Transaction.
<PAGE> 98
NOW, THEREFORE, the parties agree as follows:
1. Agreement to Retain Shares.
1.1 Transfer and Encumbrance. Shareholder agrees not to
transfer (except as may be specifically required by court order or by operation
of law), sell, exchange, pledge or otherwise dispose of or encumber the Shares
or any New Shares (as defined below), 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) the Effective
Time of the Transaction, (ii) termination of the Reorganization Agreement.
1.2 New Shares. Shareholder agrees that any shares in
the capital of Target that Shareholder purchases or with respect to which
Shareholder otherwise acquires beneficial ownership after the date of this
Agreement and prior to the Expiration Date ("New Shares") shall be subject to
the terms and conditions of this Agreement to the same extent as if they
constituted Shares.
2. Agreement to Vote Shares. Prior to the Expiration Date, at
every meeting of the shareholders of Target called with respect to any of the
following, and at every adjournment thereof, and on every action or approval by
written resolution of the shareholders of Target with respect to any of the
following, Shareholder shall vote the Shares and any New Shares (i) in favor of
approval of the Transaction and any matter that could reasonably be expected to
facilitate the Transaction and (ii) against any proposal for any
recapitalization, merger, sale of assets or other business combination (other
than the Transaction) between Target and any person or entity other than
Acquiror or any other action or agreement that would result in a breach of any
covenant, representation or warranty or any other obligation or agreement of
Target under an acquisition agreement in respect of the Transaction or which
would result in any of the conditions to the completion of the Transaction not
being fulfilled.
3. Irrevocable Proxy. Shareholder hereby agrees to timely
deliver to Acquiror a duly executed proxy in the form attached hereto as
Exhibit A (the "Proxy") with respect to each meeting of shareholders of Target,
such Proxy to cover the total number of Shares and New Shares in respect of
which Shareholder is entitled to vote at any such meeting. In the event that
Shareholder is unable to provide any such Proxy in a timely manner, Shareholder
hereby grants Acquiror a power of attorney to execute and deliver such Proxy
for and on behalf of Shareholder, such power of attorney, which being coupled
with an interest, shall survive any death, disability, bankruptcy, or any other
such impediment. Upon the execution of this Agreement by the Shareholder, the
Shareholder hereby revokes any and all prior proxies given by the Shareholder
with respect to the Shares and agrees not to grant any subsequent proxies with
respect to the Shares until after the Expiration Date.
2.
<PAGE> 99
4. Representations, Warranties and Covenants of Shareholder.
Shareholder hereby represents, warrants and covenants to Acquiror that
Shareholder (i) is the beneficial owner of the Shares, which at the date of
this Agreement and at all times up until the Expiration Date will be free and
clear of any liens, claims, options, charges or other encumbrances; (ii) does
not beneficially own shares in the capital of Target other than the Shares; and
(iii) has full power and authority to make, enter into and carry out the terms
of this Agreement and the Proxy.
5. Additional Documents. Shareholder hereby covenants and agrees
to execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Acquiror, to carry out the purpose and intent of this
Agreement.
6. Consent and Waiver. Shareholder hereby gives any consents or
waivers that are reasonably required for the consummation of the Transaction
under the terms of any agreement to which Shareholder is a party or pursuant to
any rights Shareholder may have.
7. Termination. This Agreement and the Proxy delivered in
connection herewith shall terminate and shall have no further force or effect
as of the Expiration Date.
8. Confidentiality. Shareholder agrees (i) to hold any
information regarding this Agreement and the Transaction in strict confidence,
and (ii) not to divulge any such information to any third person, until such
time as the Transaction has been publicly disclosed by Acquiror.
9. Miscellaneous.
9.1 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.
9.2 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 Shareholder as a shareholder of
Target only with respect to the specific matters set forth herein.
3.
<PAGE> 100
9.3 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.
9.4 Specific Performance; Injunctive Relief. The parties
hereto acknowledge that Acquiror will be irreparably harmed and that there will
be no adequate remedy at law for a violation of any of the covenants or
agreements of Shareholder set forth herein. Therefore, it is agreed that, in
addition to any other remedies that may be available to Acquiror upon any such
violation, Acquiror shall have the right to enforce such covenants and
agreements by specific performance, injunctive relief or by any other means
available to Acquiror at law or in equity and the Shareholder hereby waives any
and all defenses which could exist in its favor in connection with such
enforcement and waives any requirement for the security or posting of any bond
in connection with such enforcement.
9.5 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.
9.6 Governing Law. This Amendment shall be governed by,
construed and enforced in accordance with the laws of the State of California.
9.7 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 matter.
9.8 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.
9.9 Effect of Headings. The section headings herein are
for convenience only and shall not affect the construction or interpretation of
this Agreement.
4.
<PAGE> 101
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed on the day and year first above written.
ACQUIROR
By:
------------------------------
Title:
---------------------------
Address:
------------------------
SHAREHOLDER
By:
------------------------------
Shareholder's Address for Notice:
---------------------------------
---------------------------------
---------------------------------
Shares beneficially owned:
____________ shares of Target Common
Stock
____________ shares of Target Series A
Preferred Stock
____________ shares of Target Series B
Preferred Stock
[SIGNATURE PAGE TO TARGET VOTING AGREEMENT]
<PAGE> 102
EXHIBIT A
IRREVOCABLE PROXY
TO VOTE STOCK OF
TARGET
The undersigned shareholder of Ardent Communications Corporation, a
California corporation ("Target"), hereby irrevocably (to the full extent
permitted by Section 705 of the California Corporations Code) appoints the
members of the Board of Directors of Cisco Systems, Inc., a California
corporation ("Acquiror"), and each of them, or any other designee of Acquiror,
as the sole and exclusive attorneys and proxies of the undersigned, with full
power of substitution and resubstitution, to vote and exercise all voting and
related rights (to the full extent that the undersigned is entitled to do so)
with respect to all of the shares of capital stock of Target that now are or
hereafter may be beneficially owned by the undersigned, and any and all other
shares or securities of Target issued or issuable in respect thereof on or
after the date hereof (collectively, the "Shares") in accordance with the terms
of this Proxy. The Shares beneficially owned by the undersigned shareholder of
Target as of the date of this Proxy are listed on the final page of this Proxy.
Upon the undersigned's execution of this Proxy, any and all prior proxies given
by the undersigned with respect to any Shares are hereby revoked and the
undersigned agrees not to grant any subsequent proxies with respect to the
Shares until after the Expiration Date (as defined below).
This Proxy is irrevocable (to the extent provided in Section 705 of
the California Corporations Code), is granted in consideration of Acquiror
entering into that certain Agreement and Plan of Reorganization between Target
and Acquiror. The Reorganization Agreement provides for the merger of Target
with and into Acquiror (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, (ii) the close of business on October 31, 1997 and
(iii) the date of termination of the Reorganization Agreement.
<PAGE> 103
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 603 of the California Corporations
Code), at every annual, special or adjourned meeting of the shareholders of
Target and in every written consent in lieu of such meeting as follows:
[ ] 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.
[ ] Against approval of the Merger and the Reorganization
Agreement and against any matter that could reasonably be
expected to facilitate the Merger.
The attorneys and proxies named above may not exercise this Proxy on
any other matter except as provided above. The undersigned shareholder may
vote the Shares on all other matters.
All authority herein conferred shall survive the death or incapacity
of the undersigned and any obligation of the undersigned hereunder shall be
binding upon the heirs, personal representatives, successors and assigns of the
undersigned.
This Proxy is coupled with an interest and is irrevocable.
Dated: _____________, 1997
-----------------------------
(Signature of Shareholder)
-----------------------------
(Print Name of Shareholder)
Shares beneficially owned:
_________ shares of Target Common
Stock
_________ shares of Series A Target
Preferred Stock
_________ shares of Series B Target
Preferred Stock
[SIGNATURE PAGE TO PROXY]
<PAGE> 104
EXHIBIT E
ESCROW AGREEMENT
This Escrow Agreement is made as of this 25th day of July,
1997, by and among State Street Bank and Trust Company of California, N.A.
("Escrow Agent"), Cisco Systems, Inc., a California corporation ("Acquiror"),
and Joseph Golden as agent ("Shareholders' Agent") of the former shareholders
of Ardent Communications Corporation, a California corporation ("Target").
Terms not otherwise defined herein shall have the meaning set forth in the
Reorganization Agreement (as defined below).
WITNESSETH
WHEREAS, Acquiror and Target have entered into an Agreement
and Plan of Reorganization (the "Reorganization Agreement"), dated as of June
23, 1997, providing for the merger of Target with and into Acquiror (the
"Merger"); and
WHEREAS, pursuant to Article VIII of the Reorganization
Agreement, a copy of which is attached hereto as Annex A ("Article VIII"), an
escrow fund (the "Escrow Fund") will be established to compensate Acquiror for
certain Damages (as defined in Article VIII) arising out of any
misrepresentation or breach or default in connection with any of the
representations, warranties, covenants and agreements given or made by Target
in the Reorganization Agreement, the Target Disclosure Schedule or any exhibit
or schedule to the Reorganization Agreement; and
WHEREAS, the Shareholders' Agent has been constituted as agent
for and on behalf of the former shareholders of Target (individually a
"Shareholder" and collectively the "Shareholders") to undertake certain
obligations specified in Article VIII; and
WHEREAS, Article VIII provides for an Escrow Fund of 135,088
shares of the Total Acquiror Shares upon the Merger, such escrow to be held by
the Escrow Agent; and
WHEREAS, the parties hereto desire to set forth further terms
and conditions in addition to those set forth in the Reorganization Agreement
relating to the operation of the Escrow Fund.
NOW, THEREFORE, the parties hereto, in consideration of the
mutual covenants contained herein, and intending to be legally bound, hereby
agree as follows:
1. Escrow and Escrow Shares. Pursuant to the
Reorganization Agreement, Acquiror shall, through its stock transfer agent
(initially, Boston EquiServe LLP), deposit in escrow with the Escrow Agent, as
escrow agent, within five (5) business days of the Effective Time (as defined
in the Reorganization Agreement) of the Merger (a)
<PAGE> 105
a stock certificate or certificates representing 135,088 shares (the "Escrow
Shares") which shall be registered in the name of the Escrow Agent as nominee
for the beneficial owners of such shares and (b) a certificate which specifies
the date on which the Effective Time occurs and the Closing Price). The Escrow
Shares shall be held and distributed by the Escrow Agent in accordance with the
terms and conditions Article VII and this Agreement, provided that in no event
shall more than 135,088 shares of Acquiror Common Stock be distributed to
Acquiror. The number of Escrow Shares beneficially owned by each Shareholder,
the address of each shareholder and the taxpayer identification of each
shareholder are set forth in Annex B attached hereto.
2. Rights and Obligations of the Parties. The Escrow
Agent shall be entitled to such rights and shall perform such duties of the
escrow agent as set forth herein and in Article VIII (collectively, the
"Duties"), in accordance with the terms and conditions of this Agreement and
Article VIII. Acquiror, Target and the Shareholders' Agent shall be entitled
to their respective rights and shall perform their respective duties and
obligations as set forth herein and in Article VIII, in accordance with the
terms hereof and thereof. In the event that the terms of this Agreement
conflict in any way with the provisions of Article VIII, Article VIII shall
control.
3. Escrow Period. Subject to Section 4(c), the Escrow
Period shall terminate with respect to half of the Escrow Shares at the
expiration of six (6) months after the Effective Time and with respect to the
remaining Escrow Shares at the expiration of twelve (12) months after the
Effective Time.
4. Duties of Escrow Agent. In addition to the Duties
set forth in Article VIII, the Duties of the Escrow Agent shall include the
following:
(a) The Escrow Agent shall hold and safeguard the
Escrow Shares during the Escrow Period, shall treat such Escrow Fund as a trust
fund in accordance with the terms of this Agreement and Article VIII and not as
the property of Acquiror, and shall hold and dispose of the Escrow Shares only
in accordance with the terms hereof.
(b) The Escrow Shares shall be voted by the
Escrow Agent on behalf of the shareholders in accordance with the instructions
received by the Escrow Agent from the Shareholders' Agent. In the absence of
such instructions, the Escrow Agent need not vote such shares.
(c) Promptly following termination of the Escrow
Period as set forth in Section 3 hereof, but not later than five (5) business
days following termination the Escrow Agent shall deliver to the Acquiror's
stock transfer agent (initially Boston EquiServe), for delivery to the
Shareholders the proper number of Escrow Shares to satisfy any unsatisfied
claims specified in any Officer's Certificate theretofore delivered to the
Escrow Agent prior to termination of the Escrow Period with respect to facts
and circumstances existing prior to expiration of the Escrow Period, and to pay
expenses as provided in Section 11(b) hereof. As soon as all such claims have
been resolved, the Escrow
2.
<PAGE> 106
Agent shall deliver to such Shareholders all of the Escrow Shares in the Escrow
Fund and not required to satisfy such claims and expenses. Each Shareholder
shall receive that number of Escrow Shares which bears the same relationship to
the total number of Escrow Shares in the Escrow Fund and available for
distribution as the number of Escrow Shares set forth opposite the name of each
such Shareholder on Annex B hereto bears to 135,088, as calculated by Acquiror
and confirmed by the Escrow Agent.
(d) To the extent directed to do so by the
Shareholders' Agent, the Escrow Agent shall sell up to 100 of the shares of
Acquiror Common Stock held in the Escrow Fund (or such greater number as
consented to in writing by Acquiror, which consent shall not be unreasonably
withheld) and shall apply the proceeds of such sale to pay expenses incurred by
the Shareholders' Agent on behalf of the Shareholders as provided in Section
11(b) hereof.
5. Distribution.
(a) Any cash dividends, dividends payable in
securities or other distributions of any kind (but excluding any shares of
Acquiror capital stock received upon a stock split or stock dividend) shall be
promptly distributed by the Escrow Agent to the beneficial holder of the Escrow
Shares to which such distribution relates. Any shares of Acquiror Common Stock
received by the Escrow Agent upon a stock split made in respect of any
securities in the Escrow Fund shall be added to the Escrow Fund and become a
part thereof. Any provision hereof or of Article VIII shall be adjusted to
appropriately reflect any stock split or reverse stock split. Before any
distribution is made to any shareholder, such shareholder shall furnish to the
Escrow Agent an IRS Form W-9 or any other documentation the Escrow Agent may
reasonably require. All income earned on the Escrow fund shall be allocable to
the shareholders in accordance with the ownership percentages set forth in
Annex B.
(b) Pursuant to Section 8.5(b) of the
Reorganization Agreement, "for the purpose of compensating Acquiror for its
Damages pursuant to this Agreement, the Acquiror Common Stock in the Escrow
Fund shall be valued at the Closing Price." If the value to be distributed to
the Acquiror (or to any Shareholder upon a termination of the escrow) is not
evenly divisible by the Closing Price, the Escrow Agent shall round down the
number of shares to be distributed to the next highest number of shares and
shall distribute that number. In lieu of the fractional interest not
distributed, the Acquiror shall furnish to the Escrow Agent, and the Escrow
Agent in turn will distribute, cash equal to such fractional interests
multiplied by the Closing Price. The Acquiror shall be deemed to have
purchased such fractional interests with respect to which it has furnished
funds to the Escrow Agent. Accordingly, the Escrow Agent, upon receipt of such
funds, shall deliver the corresponding number of shares to the Acquiror. In
all events, the Acquiror shall so purchase only a whole number of shares. Any
cash so received from the Acquiror and not so immediately distributed by the
Escrow Agent shall be retained by the Escrow Agent as part of the Escrow Fund.
3.
<PAGE> 107
6. Exculpatory Provisions.
(a) The Escrow Agent shall be obligated only for
the performance of such Duties as are specifically set forth herein and in
Article VIII and may rely and shall be protected in relying or refraining from
acting on any instrument reasonably believed to be genuine and to have been
signed or presented by the proper party or parties. The Escrow Agent shall not
be liable for forgeries or false personations. The Escrow Agent shall not be
liable for any act done or omitted hereunder as escrow agent except for gross
negligence or wilful misconduct. The Escrow Agent shall, in no case or event
be liable for any representations or warranties of Target or Acquiror. Any act
done or omitted pursuant to the advice or opinion of counsel shall be
conclusive evidence of the good faith of the Escrow Agent.
(b) The Escrow Agent is hereby expressly
authorized to disregard any and all warnings given by any of the parties hereto
or by any other person, excepting only orders or process of courts of law or
arbitrations as provided in Section 8.7 of the Reorganization Agreement, and is
hereby expressly authorized to comply with and obey orders, judgments or
decrees of any court or rulings of any arbitrators. In case the Escrow Agent
obeys or complies with any such order, judgment or decree of any court or such
ruling of any arbitrator, the Escrow Agent shall not be liable to any of the
parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment, decree or arbitrators' ruling being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
(c) The Escrow Agent shall not be liable in any
respect on account of the identity, authority or rights of the parties
executing or delivering or purporting to execute or deliver the Agreement or
any documents or papers deposited or called for thereunder.
(d) The Escrow Agent shall not be liable for the
outlawing of any rights under any statute of limitations with respect to the
Agreement or any documents deposited with the Escrow Agent.
7. Alteration of Duties. The Duties may be altered,
amended, modified or revoked only by a writing signed by all of the parties
hereto.
8. Resignation and Removal of the Escrow Agent. The
Escrow Agent may resign as Escrow Agent at any time with or without cause by
giving at least thirty (30) days' prior written notice to each of Acquiror and
the Shareholders' Agent, such resignation to be effective thirty (30) days
following the date such notice is given. In addition, Acquiror and the
Shareholders' Agent may jointly remove the Escrow Agent as escrow agent at any
time with or without cause, by an instrument (which may be executed in
counterparts) given to the Escrow Agent, which instrument shall designate the
effective date of such removal. In the event of any such resignation or
removal, a successor escrow agent which shall be a bank or trust company
organized under the laws of the United States of America or of the
4.
<PAGE> 108
State of California having (or if such bank or trust company is a member of a
bank holding company, its bank holding company has) a combined capital and
surplus of not less than $50,000,000, shall be appointed by the Shareholders'
Agent with the approval of Acquiror, which approval shall not be unreasonably
withheld. Any such successor escrow agent shall deliver to Acquiror and the
Shareholders' Agent a written instrument accepting such appointment, and
thereupon it shall succeed to all the rights and duties of the escrow agent
hereunder and shall be entitled to receive the Escrow Fund.
9. Further Instruments. If the Escrow Agent reasonably
requires other or further instruments in connection with performance of the
Duties, the necessary parties hereto shall join in furnishing such instruments.
10. Disputes. It is understood and agreed that should
any dispute arise with respect to the delivery and/or ownership or right of
possession of the securities held by the Escrow Agent hereunder, the Escrow
Agent is authorized and directed to act in accordance with, and in reliance
upon, the terms hereof and of Article VIII.
11. Escrow Fees and Expenses.
(a) Acquiror shall pay the Escrow Agent such fees
as are established by the Fee Schedule attached hereto as Annex C.
(b) Any out-of-pocket fees and expenses incurred
by the Shareholders' Agent shall be paid out of the Escrow Fund in preference
to other distributions from such Escrow Fund; provided, however, that the
aggregate of such payments shall not exceed the proceeds of sales of shares
made pursuant to Section 4(d) hereof if and to the extent that this would
reduce the number of shares distributed to Acquiror, and provided further that
under no circumstances will the Shareholders' Agent have personal liability for
any such fees and expenses.
12. Indemnification. In consideration of the Escrow
Agent's acceptance of this appointment, the other parties hereto, jointly and
severally, agree to indemnify and hold the Escrow Agent harmless as to any
liability incurred by it to any person, firm or corporation by reason of its
having accepted such appointment or in carrying out the terms hereof and the
Reorganization Agreement, and to reimburse the Escrow Agent for all its costs
and expenses, including, among other things, counsel fees and expenses,
reasonably incurred by reason of any matter as to which an indemnity is paid;
provided, however, that no indemnity need be paid in case of the Escrow Agent's
negligence, wilful misconduct or breach of this Agreement.
5.
<PAGE> 109
13. General.
(a) Any notice given hereunder shall be in
writing and shall be deemed effective upon the earlier of personal delivery or
the third day after mailing by certified or registered mail, postage prepaid as
follows:
To Acquiror:
Cisco Systems, Inc.
170 W. Tasman Drive
San Jose, CA 95134
Attention: President
With a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
Attention: Edward M. Leonard
To Shareholders' Agent:
Joseph Golden
653 Mountain View Avenue
Mountain View, CA 94041
With a copy to:
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Attention: David C. Lee
To the Escrow Agent:
State Street Bank and Trust Company of California,
N.A.
725 South Figueroa Street
Suite 3100
Los Angeles, CA 90017
Attention: Corporate Trust Department
(Cisco Systems, Inc./Ardent
Communications Corporation 97 Escrow)
6.
<PAGE> 110
or to such other address as any party may have furnished in writing to the
other parties in the manner provided above.
(b) The Officer's Certificate as defined in
Article VIII may be signed by the President, Vice President or Chief Financial
Officer of Acquiror.
(c) The captions in this Escrow Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Escrow Agreement.
(d) This Escrow Agreement may be executed in any
number of counterparts, each of which when so executed shall constitute an
original copy hereof, but all of which together shall constitute one agreement.
(e) No party may, without the prior express
written consent of each other party, assign this Escrow Agreement in whole or
in part. This Escrow Agreement shall be binding upon and inure to the benefit
of the respective successors and assigns of the parties hereto.
(f) This Escrow Agreement shall be governed by
and construed in accordance with the laws of the State of California as applied
to contracts made and to be performed entirely within the State of California.
The parties to this Escrow Agreement hereby agree to submit to personal
jurisdiction in the State of California.
7.
<PAGE> 111
IN WITNESS WHEREOF, each of the parties has executed this
Agreement as of the date first above written.
State Street Bank and Trust Company of
California, N.A. as Escrow Agent
By /s/ Jeanie Mar
--------------------------------
Name: Jeanie Mar
Title: Assistant Vice President
ACQUIROR
By /s/ John T. Chambers
--------------------------------
Name: John T. Chambers
Title:
SHAREHOLDERS' AGENT
/s/ Joseph Golden
----------------------------------
[SIGNATURE PAGE TO ESCROW AGREEMENT]
<PAGE> 112
ANNEX A
ARTICLE VIII OF THE
AGREEMENT AND PLAN OF REORGANIZATION
<PAGE> 113
ANNEX B
ESCROW SHARES OF FORMER SHAREHOLDERS OF
ARDENT COMMUNICATIONS CORPORATION
<PAGE> 114
ANNEX C
ESCROW AGENT FEE SCHEDULE
<PAGE> 115
EXHIBIT F
ACQUIROR'S LEGAL OPINION
See Exhibit 5.1.
<PAGE> 116
EXHIBIT G
TARGET'S LEGAL OPINION
<PAGE> 117
[VENTURE LAW GROUP LETTERHEAD]
July 25, 1997
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134-1706
Ladies and Gentlemen:
We have acted as counsel for Ardent Communications Corporation, a
California corporation ("Target"), in connection with the negotiation and
execution of the Agreement and Plan of Reorganization between Cisco Systems,
Inc. ("Acquiror") and Target, dated June 23, 1997 (the ""Reorganization
Agreement"), and the Agreement of Merger between Acquiror and Target dated July
25, 1997 (the "Merger Agreement"). This opinion is given to you in compliance
with Section 6.3(e) of the Reorganization Agreement. The Reorganization
Agreement and the Agreement of Merger are referred to herein collectively as
the "Agreements." Unless defined herein, capitalized terms have the meaning
given them in the Agreements.
In rendering this opinion, we have made such legal and factual
examinations and inquiries as we have deemed advisable or necessary for the
purpose of rendering this opinion. In addition, we have examined originals or
copies of documents, corporate records and other writings which we consider
relevant for the purposes of this opinion. In such examination we have assumed
the genuineness of all signatures on original documents, the conformity to
original documents of all copies submitted to us and the due execution and
delivery of all documents where due execution and delivery are a prerequisite
to the effectiveness thereof. In making our examination of documents executed
by entities or persons other than Target, we have assumed that each other
entity had the power to enter into and perform all its obligations thereunder
and we also have assumed the due authorization by each such other entity of
all requisite actions and the due execution and delivery of such documents by
each such other entity.
Whenever our opinion herein with respect to the existence or absence of
facts is indicated to be based on our knowledge or belief, it is intended to
signify that in the course of our representation of Target in connection with
the transactions referred to in the first paragraph hereof, no information has
come to the attention of individual attorneys within the firm principally
responsible for handling current matters for the Company that would give them
actual knowledge of the existence or absence of such facts. We have not
undertaken any independent investigation to determine the existence or absence
of such facts, and no
<PAGE> 118
[VENTURE LAW GROUP LETTERHEAD]
Cisco Systems, Inc.
Page 2
inference as to our knowledge of the existence or absence of such facts should
be drawn from the fact of our representation of Target.
In rendering the opinion set forth in paragraph 1 below, (a) in order
to determine in which states qualification is appropriate, we have assumed that
qualification may be required only in those states in which Target owns or
leases real property, maintains offices or has employees, and we have relied on
Target's listing of those states in the Management Certificate of even date
herewith, executed by Joseph Golden, Chief Operating Officer of Target (the
"Management Certificate"), and (b) as to the qualification and good standing of
Target in the states so identified in such Management Certificate, we have
relied exclusively on certificates of public officials, although we have not
obtained tax good standing certificates (other than a California franchise tax
certificate for Target) and no opinion is provided with respect to tax good
standing (other than with respect to Target in California).
In rendering the opinion set forth in paragraph 2 below, relating to
the fully paid status of all of Target's capital stock, we have relied without
independent verification on the Management Certificate to the effect that
Target has received the consideration approved by the Board of Directors for
all of the issued shares of capital stock of Target.
The opinions hereinafter are subject to the following further
qualifications:
(i) Our opinions are qualified by the effect of bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar laws
relating to or affecting the rights of creditors generally, including, without
limitation, laws relating to fraudulent transfers or conveyances, preferences
and equitable subordination;
(ii) Our opinions are qualified by the limitations imposed
by general principles of equity upon the availability of equitable remedies or
the enforcement of provisions of the Agreements; and the effect of judicial
decisions which have held that certain provisions are unenforceable when their
enforcement would violate the implied covenant of good faith and fair dealing,
or would be commercially unreasonable, or where their breach is not material;
(iii) Our opinions are qualified by a requirement that
provisions of the Agreements may only be waived in writing and will not be
enforced to the extent an oral agreement has been executed modifying provisions
of the Agreements;
(iv) Our opinions are based upon current statutes, rules,
regulations, cases and official interpretive opinions, and it covers certain
items that are not directly or definitively addressed by such authorities;
-2-
<PAGE> 119
[VENTURE LAW GROUP LETTERHEAD]
Cisco Systems, Inc.
Page 3
(v) Our opinions are qualified by the effect of judicial
decisions which may permit the introduction of extrinsic evidence to modify the
terms or the interpretation of the Agreements;
(vi) Our opinions are qualified by the enforceability of
provisions of the Agreements which purport to make determinations conclusive;
(vii) Our opinions are qualified by the enforceability of
provisions of the Agreements expressly or by implication waiving broadly or
vaguely stated rights, or waiving rights granted by law where such waivers are
against public policy;
(viii) Our opinions are qualified by the enforceability of
provisions of the Agreements providing that rights or remedies are not
exclusive, that every right or remedy is cumulative, or that the election of a
particular remedy or remedies does not preclude recourse to one or more other
remedies; and
(ix) Our opinions are qualified by provisions in the
Agreements purporting to provide for indemnification and contribution under
certain circumstances that may be unenforceable.
Based upon and subject to the foregoing, and subject to the further
assumptions, limitations and exceptions set forth herein, and except as
otherwise set forth on the Target Disclosure Schedule attached to the
Reorganization Agreement, we are of the opinion that:
1. Target is a corporation duly organized, validly existing and in
good standing under the laws of the State of California, has the corporate
power and authority to own, operate and lease its properties and carry on its
business as now conducted.
2. The authorized capital stock of Target consists of 30,000,000
shares of Common Stock, no par value, and 14,000,000 shares of Preferred Stock,
no par value. At the close of business on June 23, 1997, 3,000,000 shares of
Series A Preferred Stock were issued and outstanding and 11,000,000 shares of
Series B Preferred Stock were issued and outstanding. At the close of business
on June 23, 1997, 5,470,000 shares of Common Stock were issued and
outstanding, all of which have been duly authorized and are validly issued,
fully paid and nonassessable. On the close of business on June 23, 1997,
3,629,500 shares of Common Stock were subject to issuance upon exercise of
outstanding options under Target's 1996 Stock Option Plan;
3. The Reorganization Agreement and the Merger Agreement have been
approved and adopted by the shareholders of Target; Target has corporate power
and authority to execute, deliver, and perform its obligations under the
Reorganization
-3-
<PAGE> 120
[VENTURE LAW GROUP LETTERHEAD]
Cisco Systems, Inc.
Page 4
Agreement and the Merger Agreement; Target has taken the requisite corporate
action to approve and adopt the Reorganization Agreement and the Merger
Agreement and to approve and to authorize the carrying out of the transactions
contemplated thereunder; and the Reorganization Agreement and the Merger
Agreement have been duly executed and delivered by Target and constitute
legal, valid and binding obligations of Target; provided that enforceability
of the indemnity obligations contained in such agreements may be limited by
public policy;
4. The execution, delivery and performance of the Reorganization
Agreement by Target, the execution and delivery of the Merger Agreement by
Target and the carrying out of the transactions contemplated by the
Reorganization Agreement and by the Merger Agreement to be carried out by
Target did not and will not conflict with or constitute a violation under the
charter documents of Target;
5. To our knowledge, no suit, action or legal, administrative,
arbitration or other proceeding or governmental investigation is pending or
threatened to which Target or any of its assets or properties is a party
which seeks to prohibit, restrain or enjoin the transactions contemplated by
the Reorganization Agreement or the Merger Agreement; and
6. There is no consent, approval, authorization, order,
registration, qualification or filing of or with any court or any regulatory
authority or other governmental body required by Target or with respect to its
assets or properties or otherwise for the consummation of the transactions
contemplated by the Reorganization Agreement and the Merger Agreement that has
not been obtained, except for (i) such consents, approvals, authorizations,
registration or qualifications as may be required under state securities or
Blue Sky laws in connection with the offer and sale of Acquiror Common Stock
pursuant to the Merger, and (ii) acceptance for filing of the Merger Agreement
together with any appropriate tax clearance certificate by the California
Secretary of State and (iii) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not have a
Material Adverse Effect on Target.
We express no opinion as to matters governed by any laws other than the
laws of the State of California and the federal law of the United States of
America. We express no opinion as to whether the laws of any particular
jurisdiction apply, and no opinion to the extent that the laws of any
jurisdiction other than those identified above are applicable to the
Agreements or the transactions contemplated thereby.
This opinion is furnished to you pursuant to Section 6.3(e) of the
Reorganization Agreement and is solely for your benefit and may not be relied
on in any manner or for any purpose by, nor may copies be delivered to, any
other person. We assume no obligation to
<PAGE> 121
[VENTURE LAW GROUP LETTERHEAD]
Cisco Systems, Inc.
Page 5
inform you of any facts, circumstances, events or changes in the law that may
hereafter be brought to our attention that may alter, affect or modify the
opinions expressed herein.
Sincerely,
VENTURE LAW GROUP,
A Professional Corporation
Venture Law Group
/s/ VENTURE LAW GROUP
--------------------------------------
EJB
<PAGE> 122
EXHIBIT H-1, ET SEQ.
EMPLOYMENT AGREEMENTS FOR THE FOLLOWING INDIVIDUALS:
JOSEPH GOLDEN
WEN-HAU CHEN
CHERNG DAW HWANG
RODNEY KAY
<PAGE> 123
July 21, 1997
Dear Mr. Golden:
We are pleased to offer you the position of Director, Operations
reporting to Wu-Fu Chen. This letter, if accepted, sets forth the terms of your
employment with Cisco Systems, Inc. (hereafter "Acquiror") going forward. You
will receive an annual salary of $175,000.00, less all applicable deductions. In
addition, you would participate in all Acquiror benefits for which you are
eligible, including Acquiror's stock option program. You would be eligible for
the Senior Management Incentive Bonus Plan of Acquiror applicable to your
position for the current fiscal year that would be pro-rated based on your
tenure with the Company this fiscal year. This offer is contingent on the
occurrence of the closing of Acquiror's acquisition of Ardent Communications
Corporation (hereafter "Target") and, if you accept this offer, it would take
effect as of that Closing Date. The remaining terms of your employment would be
as follows:
Term of Employment
You agree to remain employed for a period of two (2) years after
the Closing Date. Nevertheless, subject to the terms of this letter either you
or Acquiror may terminate your employment at any time for any reason, with or
without cause, by giving written notice of such termination. This will be true
during and after the two (2) year period. However, if Acquiror wishes to
terminate your employment "Without Cause" within two years after the Closing
Date, it must first obtain the approval of each of Wu-Fu Chen and John Chambers,
before taking such action. If Wu-Fu Chen is not employed by either Target or
Acquiror, then such termination shall require the approval of Cherng-Daw Hwang.
If John Chambers is not employed by Acquiror, then such termination shall
require the approval of Larry Carter.
If Acquiror terminates your employment "Without Cause" or if you
resign your employment for "Good Cause" prior to two (2) years after the Closing
Date, then Acquiror will pay you, as severance, a lump sum payment equal to six
times your monthly salary, less applicable deductions. All benefits and stock
vesting would terminate as of the date of termination of your employment. You
would, of course, be paid your salary through your date of termination, for the
value of all unused vacation earned through that date, and allowed to continue
your medical coverage to the extent provided for by COBRA, but you would not be
entitled to any additional payments or benefits except as set forth herein.
<PAGE> 124
July 21, 1997
If you resigned "Without Good Cause" or your employment were
terminated for "Cause" within two (2) years of the Closing Date, then you would
be paid all salary and benefits through the date of termination of your
employment, but nothing else. A termination for "Cause" shall mean a termination
for any of the following reasons: (i) your failure to perform your material
duties after receipt of a written warning issued which is consistent with
Acquiror's performance review policies in effect at such time, (ii) engaging in
misconduct which is demonstrably injurious to Acquiror; (iii) being convicted of
a felony by a court of competent jurisdiction; (iv) committing an act of fraud
against, or the misappropriation of property belonging to Acquiror; or (v)
material breach of this agreement or any confidentiality or proprietary
information agreement between you and Acquiror; provided, however, that if such
"Cause" is reasonably curable, the Company shall not terminate your employment
hereunder unless it first gives you notice of its intention to terminate and the
grounds of such termination and you have not, within 30 days following the
receipt of such notice, cured such "Cause." Acquiror will provide written notice
of the reason for termination in the case of any termination for "Cause." A
termination for any other reason shall be a termination "Without Cause." A
resignation for "Good Cause" will occur if you resign your employment within
thirty (30) days of the occurrence of any of the following events: (1) Any
reduction in your base salary as specified herein, unless such reduction is
pursuant to a change in Acquiror's compensation policies generally; (2) a
material reduction in your job duties (the position initially assigned to you
hereunder), or (3) notice that you must relocate to an facility outside of the
San Francisco Bay Area. A resignation by you in any other circumstances will be
considered a resignation "Without Good Cause."
If your employment with Acquiror were to continue after two (2)
years beyond the Closing Date, then your employment would continue to be on an
"at-will" basis. This means that either you or Acquiror could terminate your
employment at any time for any reason with or without cause and without the
obligation to pay you, or your right to, any severance payment except as may be
provided at such time under Acquiror's employee benefit plans for which you are
eligible.
Your Position
You will initially have the title of Director, Operations
reporting to Wu-Fu Chen. You will have whatever reasonable duties are assigned
to you. Acquiror may change your title and duties as it sees fit although such
change may constitute "Good Cause" for your resignation.
2.
<PAGE> 125
July 21, 1997
Non-Competition
You understand and agree that this agreement is entered into in
connection with the acquisition by Acquiror of all of the outstanding stock of
Target. You further understand and agree that you were a substantial shareholder
or optionholder of Target; a key and significant member of the management of
Target; and that Acquiror paid you substantial consideration in order to
purchase your stock and/or option interest in Target. In addition, the parties
agree that, prior to acquisition by Acquiror of the stock of Target, Acquiror
was engaged in its business in each of the fifty states of the United States and
in Canada. Acquiror represents and you understand that, following the
acquisition by Acquiror of the stock of Target, Acquiror will continue
conducting such business in all parts of the United States and in Canada.
You agree that during your employment with Acquiror you will not
engage in any other employment, business, or business related activity unless
you receive Acquiror's prior written approval to hold such outside employment or
engage in such business or activity. Such written approval will not be
unreasonably withheld if such outside employment, business, or activity would
not in any way be competitive with the business or proposed business of Acquiror
or otherwise conflict with or adversely affect in any way your performance of
your employment obligations to Acquiror.
Commencing on the Closing Date and continuing until the later of
the date of termination of your employment with Acquiror or two (2) years after
the Closing Date, except as provided below, you will not, as an employee, agent,
consultant, advisor, independent contractor, general partner, officer, director,
stockholder, investor, lender or guarantor of any corporation, partnership or
other entity, or in any other capacity directly or indirectly:
1. participate or engage in the design, development, manufacture,
production, marketing, sale or servicing of any product, or the provision of any
service, that directly relates to routing, WAN switching (including ATM and
Frame Relay switching), LAN switching (including Ethernet, Fast Ethernet and
Gigabit Ethernet switching), or Layer 3 switching (including IP and
Multiprotocol switching), network management, or internetworking or networking
software (the "Business") in the United States or Canada;
2. induce or attempt to induce any person who at the time of such
inducement is an employee of Acquiror to perform work or services for any other
person or entity other than Acquiror; or
3.
<PAGE> 126
July 21, 1997
3. permit your name to be used in connection with a competitive
Business. Notwithstanding the foregoing, you may own, directly or indirectly,
solely as an investment, up to one percent (1%) of any class of "publicly traded
securities" of any person or entity which owns a competitive Business. The term
"publicly traded securities" shall mean securities that are traded on a national
securities exchange or listed on the National Association of Securities Dealers
Automated Quotation System.
If your employment were terminated "Without Cause" or you
resigned your employment for "Good Cause" within two years of the Closing Date,
then this non-competition clause will expire upon the earlier of the following
two dates (a) six months from the date of termination of your employment or (b)
two years after the Closing Date. If any restriction set forth in this
non-competition section is found by a court to be unreasonable, then you agree,
and hereby submit, to the reduction and limitation of such prohibition to such
area or period as shall be deemed reasonable. You acknowledge that the services
that you will provide to Acquiror under this agreement are unique and that
irreparable harm will be suffered by Acquiror in the event of the breach by you
of any of your obligations under this agreement, and that Acquiror will be
entitled, in addition to its other rights, to enforce by an injunction or decree
of specific performance the obligations set forth in this agreement. Any claims
asserted by you against Acquiror shall not constitute a defense in any
injunction action brought by Acquiror to obtain specific enforcement of said
paragraphs.
Arbitration
We each agree that any and all disputes between us which arise
out of your employment, the termination of your employment, or under the terms
of this agreement (except for any claim arising out of or relating to the
non-competition clauses of this agreement) shall be resolved through final and
binding arbitration. This shall include, without limitation, disputes relating
to this agreement, any disputes regarding your employment by Acquiror or the
termination thereof, claims for breach of contract or breach of the covenant of
good faith and fair dealing, and any claims of discrimination or other claims
under any federal, state or local law or regulation now in existence or
hereinafter enacted and as amended from time to time concerning in any way the
subject of your employment with Acquiror or its termination. The only claims not
covered by this section are claims for benefits under the workers' compensation
laws or unemployment insurance laws or claims under the non-competition clauses
of this agreement. Binding arbitration will be conducted in the San Francisco
Bay Area in accordance with the rules and regulations of the American
Arbitration Association. The parties will split the cost of the arbitration
filing and hearing fees, and the cost of the
4.
<PAGE> 127
July 21, 1997
arbitrator; each side will bear its own attorneys' fees, unless otherwise
decided by the arbitrator. You understand and agree that arbitration shall be
instead of any civil litigation, that each side waives its right to a jury
trial, and that the arbitrator's decision shall be final and binding to the
fullest extent permitted by law and enforceable by any court having jurisdiction
thereof.
Miscellaneous Provisions
This agreement will be the entire agreement between you and
Acquiror relating to your employment and the additional matters provided for
herein. This agreement supersedes and replaces any prior verbal or written
agreements between the parties except as provided for herein. This Agreement may
be executed in one or more counterparts, all of which shall be considered one
and the same. This agreement may be amended or altered only in a writing signed
by you and Acquiror. This agreement shall be construed and interpreted in
accordance with the laws of the State of California. Each provision of this
agreement is severable from the others, and if any provision hereof shall be to
any extent unenforceable it and the other provisions shall continue to be
enforceable to the full extent allowable, as if such offending provision had not
been a part of this agreement. This offer is also contingent on you executing
the Acquiror Proprietary Information and Inventions Agreement, a copy of which
is attached hereto.
5.
<PAGE> 128
July 21, 1997
If you have any questions about this offer, please contact me. If
you find this offer acceptable, please sign and date this letter below and
return it to me.
Sincerely,
/s/ John T. Chambers
--------------------------------
I agree to the terms and conditions in this offer.
/s/ Joseph Golden
- -------------------------------
Dated: July 23, 1997
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
<PAGE> 129
July 21, 1997
Dear Mr. Chen:
We are pleased to offer you the position of Director, Engineering
reporting to Wu-Fu Chen. This letter, if accepted, sets forth the terms of your
employment with Cisco Systems, Inc. (hereafter "Acquiror") going forward. You
will receive an annual salary of $150,000.00, less all applicable deductions. In
addition, you would participate in all Acquiror benefits for which you are
eligible, including Acquiror's stock option program. You would be eligible for
the Senior Management Incentive Bonus Plan of Acquiror applicable to your
position for the current fiscal year that would be pro-rated based on your
tenure with the Company this fiscal year. This offer is contingent on the
occurrence of the closing of Acquiror's acquisition of Ardent Communications
Corporation (hereafter "Target") and, if you accept this offer, it would take
effect as of that Closing Date. The remaining terms of your employment would be
as follows:
Term of Employment
You agree to remain employed for a period of two (2) years after
the Closing Date. Nevertheless, subject to the terms of this letter either you
or Acquiror may terminate your employment at any time for any reason, with or
without cause, by giving written notice of such termination. This will be true
during and after the two (2) year period. However, if Acquiror wishes to
terminate your employment "Without Cause" within two years after the Closing
Date, it must first obtain the approval of each of Wu-Fu Chen and John Chambers,
before taking such action. If Wu-Fu Chen is not employed by either Target or
Acquiror, then such termination shall require the approval of Joseph Golden. If
John Chambers is not employed by Acquiror, then such termination shall require
the approval of Larry Carter.
If Acquiror terminates your employment "Without Cause" or if you
resign your employment for "Good Cause" prior to two (2) years after the Closing
Date, then Acquiror will pay you, as severance, a lump sum payment equal to six
times your monthly salary, less applicable deductions. All benefits and stock
vesting would terminate as of the date of termination of your employment. You
would, of course, be paid your salary through your date of termination, for the
value of all unused vacation earned through that date, and allowed to continue
your medical coverage to the extent provided for by COBRA, but you would not be
entitled to any additional payments or benefits except as set forth herein.
<PAGE> 130
July 21, 1997
If you resigned "Without Good Cause" or your employment were
terminated for "Cause" within two (2) years of the Closing Date, then you would
be paid all salary and benefits through the date of termination of your
employment, but nothing else. A termination for "Cause" shall mean a termination
for any of the following reasons: (i) your failure to perform your material
duties after receipt of a written warning issued which is consistent with
Acquiror's performance review policies in effect at such time, (ii) engaging in
misconduct which is demonstrably injurious to Acquiror; (iii) being convicted of
a felony by a court of competent jurisdiction; (iv) committing an act of fraud
against, or the misappropriation of property belonging to Acquiror; or (v)
material breach of this agreement or any confidentiality or proprietary
information agreement between you and Acquiror; provided, however, that if such
"Cause" is reasonably curable, the Company shall not terminate your employment
hereunder unless it first gives you notice of its intention to terminate and the
grounds of such termination and you have not, within 30 days following the
receipt of such notice, cured such "Cause." Acquiror will provide written notice
of the reason for termination in the case of any termination for "Cause." A
termination for any other reason shall be a termination "Without Cause." A
resignation for "Good Cause" will occur if you resign your employment within
thirty (30) days of the occurrence of any of the following events: (1) Any
reduction in your base salary as specified herein, unless such reduction is
pursuant to a change in Acquiror's compensation policies generally; (2) a
material reduction in your job duties (the position initially assigned to you
hereunder), or (3) notice that you must relocate to an facility outside of the
San Francisco Bay Area. A resignation by you in any other circumstances will be
considered a resignation "Without Good Cause."
If your employment with Acquiror were to continue after two (2)
years beyond the Closing Date, then your employment would continue to be on an
"at-will" basis. This means that either you or Acquiror could terminate your
employment at any time for any reason with or without cause and without the
obligation to pay you, or your right to, any severance payment except as may be
provided at such time under Acquiror's employee benefit plans for which you are
eligible.
Your Position
You will initially have the title of Director, Engineering
reporting to Wu-Fu Chen. You will have whatever reasonable duties are assigned
to you. Acquiror may change your title and duties as it sees fit although such
change may constitute "Good Cause" for your resignation.
2.
<PAGE> 131
July 21, 1997
Non-Competition
You understand and agree that this agreement is entered into in
connection with the acquisition by Acquiror of all of the outstanding stock of
Target. You further understand and agree that you were a substantial shareholder
or optionholder of Target; a key and significant member of the management of
Target; and that Acquiror paid you substantial consideration in order to
purchase your stock and/or option interest in Target. In addition, the parties
agree that, prior to acquisition by Acquiror of the stock of Target, Acquiror
was engaged in its business in each of the fifty states of the United States and
in Canada. Acquiror represents and you understand that, following the
acquisition by Acquiror of the stock of Target, Acquiror will continue
conducting such business in all parts of the United States and in Canada.
You agree that during your employment with Acquiror you will not
engage in any other employment, business, or business related activity unless
you receive Acquiror's prior written approval to hold such outside employment or
engage in such business or activity. Such written approval will not be
unreasonably withheld if such outside employment, business, or activity would
not in any way be competitive with the business or proposed business of Acquiror
or otherwise conflict with or adversely affect in any way your performance of
your employment obligations to Acquiror.
Commencing on the Closing Date and continuing until the later of
the date of termination of your employment with Acquiror or two (2) years after
the Closing Date, except as provided below, you will not, as an employee, agent,
consultant, advisor, independent contractor, general partner, officer, director,
stockholder, investor, lender or guarantor of any corporation, partnership or
other entity, or in any other capacity directly or indirectly:
1. participate or engage in the design, development, manufacture,
production, marketing, sale or servicing of any product, or the provision of any
service, that directly relates to routing, WAN switching (including ATM and
Frame Relay switching), LAN switching (including Ethernet, Fast Ethernet and
Gigabit Ethernet switching), or Layer 3 switching (including IP and
Multiprotocol switching), network management, or internetworking or networking
software (the "Business") in the United States or Canada;
2. induce or attempt to induce any person who at the time of such
inducement is an employee of Acquiror to perform work or services for any other
person or entity other than Acquiror; or
3.
<PAGE> 132
July 21, 1997
3. permit your name to be used in connection with a competitive
Business. Notwithstanding the foregoing, you may own, directly or indirectly,
solely as an investment, up to one percent (1%) of any class of "publicly traded
securities" of any person or entity which owns a competitive Business. The term
"publicly traded securities" shall mean securities that are traded on a national
securities exchange or listed on the National Association of Securities Dealers
Automated Quotation System.
If your employment were terminated "Without Cause" or you
resigned your employment for "Good Cause" within two years of the Closing Date,
then this non-competition clause will expire upon the earlier of the following
two dates (a) six months from the date of termination of your employment or (b)
two years after the Closing Date. If any restriction set forth in this
non-competition section is found by a court to be unreasonable, then you agree,
and hereby submit, to the reduction and limitation of such prohibition to such
area or period as shall be deemed reasonable. You acknowledge that the services
that you will provide to Acquiror under this agreement are unique and that
irreparable harm will be suffered by Acquiror in the event of the breach by you
of any of your obligations under this agreement, and that Acquiror will be
entitled, in addition to its other rights, to enforce by an injunction or decree
of specific performance the obligations set forth in this agreement. Any claims
asserted by you against Acquiror shall not constitute a defense in any
injunction action brought by Acquiror to obtain specific enforcement of said
paragraphs.
Arbitration
We each agree that any and all disputes between us which arise
out of your employment, the termination of your employment, or under the terms
of this agreement (except for any claim arising out of or relating to the
non-competition clauses of this agreement) shall be resolved through final and
binding arbitration. This shall include, without limitation, disputes relating
to this agreement, any disputes regarding your employment by Acquiror or the
termination thereof, claims for breach of contract or breach of the covenant of
good faith and fair dealing, and any claims of discrimination or other claims
under any federal, state or local law or regulation now in existence or
hereinafter enacted and as amended from time to time concerning in any way the
subject of your employment with Acquiror or its termination. The only claims not
covered by this section are claims for benefits under the workers' compensation
laws or unemployment insurance laws or claims under the non-competition clauses
of this agreement. Binding arbitration will be conducted in the San Francisco
Bay Area in accordance with the rules and regulations of the American
Arbitration Association. The parties will split the cost of the arbitration
filing and hearing fees, and the cost of the
4.
<PAGE> 133
July 21, 1997
arbitrator; each side will bear its own attorneys' fees, unless otherwise
decided by the arbitrator. You understand and agree that arbitration shall be
instead of any civil litigation, that each side waives its right to a jury
trial, and that the arbitrator's decision shall be final and binding to the
fullest extent permitted by law and enforceable by any court having jurisdiction
thereof.
Miscellaneous Provisions
This agreement will be the entire agreement between you and
Acquiror relating to your employment and the additional matters provided for
herein. This agreement supersedes and replaces any prior verbal or written
agreements between the parties except as provided for herein. This Agreement may
be executed in one or more counterparts, all of which shall be considered one
and the same. This agreement may be amended or altered only in a writing signed
by you and Acquiror. This agreement shall be construed and interpreted in
accordance with the laws of the State of California. Each provision of this
agreement is severable from the others, and if any provision hereof shall be to
any extent unenforceable it and the other provisions shall continue to be
enforceable to the full extent allowable, as if such offending provision had not
been a part of this agreement. This offer is also contingent on you executing
the Acquiror Proprietary Information and Inventions Agreement, a copy of which
is attached hereto.
5.
<PAGE> 134
July 21, 1997
If you have any questions about this offer, please contact me. If
you find this offer acceptable, please sign and date this letter below and
return it to me.
Sincerely,
/s/ John T. Chambers
-------------------------------
I agree to the terms and conditions in this offer.
/s/ Wen-Hau Chen
- ------------------------------
Dated: July 23, 1997
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
<PAGE> 135
July 21, 1997
Dear Mr. Hwang:
We are pleased to offer you the position of Director, Engineering
reporting to Wu-Fu Chen. This letter, if accepted, sets forth the terms of your
employment with Cisco Systems, Inc. (hereafter "Acquiror") going forward. You
will receive an annual salary of $160,000.00, less all applicable deductions. In
addition, you would participate in all Acquiror benefits for which you are
eligible, including Acquiror's stock option program. You would be eligible for
the Senior Management Incentive Bonus Plan of Acquiror applicable to your
position for the current fiscal year that would be pro-rated based on your
tenure with the Company this fiscal year. This offer is contingent on the
occurrence of the closing of Acquiror's acquisition of Ardent Communications
Corporation (hereafter "Target") and, if you accept this offer, it would take
effect as of that Closing Date. The remaining terms of your employment would be
as follows:
Term of Employment
You agree to remain employed for a period of two (2) years after
the Closing Date. Nevertheless, subject to the terms of this letter either you
or Acquiror may terminate your employment at any time for any reason, with or
without cause, by giving written notice of such termination. This will be true
during and after the two (2) year period. However, if Acquiror wishes to
terminate your employment "Without Cause" within two years after the Closing
Date, it must first obtain the approval of each of Wu-Fu Chen and John Chambers,
before taking such action. If Wu-Fu Chen is not employed by either Target or
Acquiror, then such termination shall require the approval of Joseph Golden. If
John Chambers is not employed by Acquiror, then such termination shall require
the approval of Larry Carter.
If Acquiror terminates your employment "Without Cause" or if you
resign your employment for "Good Cause" prior to two (2) years after the Closing
Date, then Acquiror will pay you, as severance, a lump sum payment equal to six
times your monthly salary, less applicable deductions. All benefits and stock
vesting would terminate as of the date of termination of your employment. You
would, of course, be paid your salary through your date of termination, for the
value of all unused vacation earned through that date, and allowed to continue
your medical coverage to the extent provided for by COBRA, but you would not be
entitled to any additional payments or benefits except as set forth herein.
<PAGE> 136
July 21, 1997
If you resigned "Without Good Cause" or your employment were
terminated for "Cause" within two (2) years of the Closing Date, then you would
be paid all salary and benefits through the date of termination of your
employment, but nothing else. A termination for "Cause" shall mean a termination
for any of the following reasons: (i) your failure to perform your material
duties after receipt of a written warning issued which is consistent with
Acquiror's performance review policies in effect at such time, (ii) engaging in
misconduct which is demonstrably injurious to Acquiror; (iii) being convicted of
a felony by a court of competent jurisdiction; (iv) committing an act of fraud
against, or the misappropriation of property belonging to Acquiror; or (v)
material breach of this agreement or any confidentiality or proprietary
information agreement between you and Acquiror; provided, however, that if such
"Cause" is reasonably curable, the Company shall not terminate your employment
hereunder unless it first gives you notice of its intention to terminate and the
grounds of such termination and you have not, within 30 days following the
receipt of such notice, cured such "Cause." Acquiror will provide written notice
of the reason for termination in the case of any termination for "Cause." A
termination for any other reason shall be a termination "Without Cause." A
resignation for "Good Cause" will occur if you resign your employment within
thirty (30) days of the occurrence of any of the following events: (1) Any
reduction in your base salary as specified herein, unless such reduction is
pursuant to a change in Acquiror's compensation policies generally; (2) a
material reduction in your job duties (the position initially assigned to you
hereunder), or (3) notice that you must relocate to an facility outside of the
San Francisco Bay Area. A resignation by you in any other circumstances will be
considered a resignation "Without Good Cause."
If your employment with Acquiror were to continue after two (2)
years beyond the Closing Date, then your employment would continue to be on an
"at-will" basis. This means that either you or Acquiror could terminate your
employment at any time for any reason with or without cause and without the
obligation to pay you, or your right to, any severance payment except as may be
provided at such time under Acquiror's employee benefit plans for which you are
eligible.
Your Position
You will initially have the title of Director, Engineering
reporting to Wu-Fu Chen. You will have whatever reasonable duties are assigned
to you. Acquiror may change your title and duties as it sees fit although such
change may constitute "Good Cause" for your resignation.
2.
<PAGE> 137
July 21, 1997
Non-Competition
You understand and agree that this agreement is entered into in
connection with the acquisition by Acquiror of all of the outstanding stock of
Target. You further understand and agree that you were a substantial shareholder
or optionholder of Target; a key and significant member of the management of
Target; and that Acquiror paid you substantial consideration in order to
purchase your stock and/or option interest in Target. In addition, the parties
agree that, prior to acquisition by Acquiror of the stock of Target, Acquiror
was engaged in its business in each of the fifty states of the United States and
in Canada. Acquiror represents and you understand that, following the
acquisition by Acquiror of the stock of Target, Acquiror will continue
conducting such business in all parts of the United States and in Canada.
You agree that during your employment with Acquiror you will not
engage in any other employment, business, or business related activity unless
you receive Acquiror's prior written approval to hold such outside employment or
engage in such business or activity. Such written approval will not be
unreasonably withheld if such outside employment, business, or activity would
not in any way be competitive with the business or proposed business of Acquiror
or otherwise conflict with or adversely affect in any way your performance of
your employment obligations to Acquiror.
Commencing on the Closing Date and continuing until the later of
the date of termination of your employment with Acquiror or two (2) years after
the Closing Date, except as provided below, you will not, as an employee, agent,
consultant, advisor, independent contractor, general partner, officer, director,
stockholder, investor, lender or guarantor of any corporation, partnership or
other entity, or in any other capacity directly or indirectly:
1. participate or engage in the design, development, manufacture,
production, marketing, sale or servicing of any product, or the provision of any
service, that directly relates to routing, WAN switching (including ATM and
Frame Relay switching), LAN switching (including Ethernet, Fast Ethernet and
Gigabit Ethernet switching), or Layer 3 switching (including IP and
Multiprotocol switching), network management, or internetworking or networking
software (the "Business") in the United States or Canada;
2. induce or attempt to induce any person who at the time of such
inducement is an employee of Acquiror to perform work or services for any other
person or entity other than Acquiror; or
3.
<PAGE> 138
July 21, 1997
3. permit your name to be used in connection with a competitive
Business. Notwithstanding the foregoing, you may own, directly or indirectly,
solely as an investment, up to one percent (1%) of any class of "publicly traded
securities" of any person or entity which owns a competitive Business. The term
"publicly traded securities" shall mean securities that are traded on a national
securities exchange or listed on the National Association of Securities Dealers
Automated Quotation System.
If your employment were terminated "Without Cause" or you
resigned your employment for "Good Cause" within two years of the Closing Date,
then this non-competition clause will expire upon the earlier of the following
two dates (a) six months from the date of termination of your employment or (b)
two years after the Closing Date. If any restriction set forth in this
non-competition section is found by a court to be unreasonable, then you agree,
and hereby submit, to the reduction and limitation of such prohibition to such
area or period as shall be deemed reasonable. You acknowledge that the services
that you will provide to Acquiror under this agreement are unique and that
irreparable harm will be suffered by Acquiror in the event of the breach by you
of any of your obligations under this agreement, and that Acquiror will be
entitled, in addition to its other rights, to enforce by an injunction or decree
of specific performance the obligations set forth in this agreement. Any claims
asserted by you against Acquiror shall not constitute a defense in any
injunction action brought by Acquiror to obtain specific enforcement of said
paragraphs.
Arbitration
We each agree that any and all disputes between us which arise
out of your employment, the termination of your employment, or under the terms
of this agreement (except for any claim arising out of or relating to the
non-competition clauses of this agreement) shall be resolved through final and
binding arbitration. This shall include, without limitation, disputes relating
to this agreement, any disputes regarding your employment by Acquiror or the
termination thereof, claims for breach of contract or breach of the covenant of
good faith and fair dealing, and any claims of discrimination or other claims
under any federal, state or local law or regulation now in existence or
hereinafter enacted and as amended from time to time concerning in any way the
subject of your employment with Acquiror or its termination. The only claims not
covered by this section are claims for benefits under the workers' compensation
laws or unemployment insurance laws or claims under the non-competition clauses
of this agreement. Binding arbitration will be conducted in the San Francisco
Bay Area in accordance with the rules and regulations of the American
Arbitration Association. The parties will split the cost of the arbitration
filing and hearing fees, and the cost of the
4.
<PAGE> 139
July 21, 1997
arbitrator; each side will bear its own attorneys' fees, unless otherwise
decided by the arbitrator. You understand and agree that arbitration shall be
instead of any civil litigation, that each side waives its right to a jury
trial, and that the arbitrator's decision shall be final and binding to the
fullest extent permitted by law and enforceable by any court having jurisdiction
thereof.
Miscellaneous Provisions
This agreement will be the entire agreement between you and
Acquiror relating to your employment and the additional matters provided for
herein. This agreement supersedes and replaces any prior verbal or written
agreements between the parties except as provided for herein. This Agreement may
be executed in one or more counterparts, all of which shall be considered one
and the same. This agreement may be amended or altered only in a writing signed
by you and Acquiror. This agreement shall be construed and interpreted in
accordance with the laws of the State of California. Each provision of this
agreement is severable from the others, and if any provision hereof shall be to
any extent unenforceable it and the other provisions shall continue to be
enforceable to the full extent allowable, as if such offending provision had not
been a part of this agreement. This offer is also contingent on you executing
the Acquiror Proprietary Information and Inventions Agreement, a copy of which
is attached hereto.
5.
<PAGE> 140
July 21, 1997
If you have any questions about this offer, please contact me. If
you find this offer acceptable, please sign and date this letter below and
return it to me.
Sincerely,
/s/ John T. Chambers
----------------------------------
I agree to the terms and conditions in this offer.
/s/ Cherng Daw Hwang
- -------------------------------
Dated: July 27, 1997
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
<PAGE> 141
July 21, 1997
Dear Mr. Kay:
We are pleased to offer you the position of Director, Marketing
reporting to Wu-Fu Chen. This letter, if accepted, sets forth the terms of your
employment with Cisco Systems, Inc. (hereafter "Acquiror") going forward. You
will receive an annual salary of $140,000.00, less all applicable deductions. In
addition, you would participate in all Acquiror benefits for which you are
eligible, including Acquiror's stock option program. You would be eligible for
the Senior Management Incentive Bonus Plan of Acquiror applicable to your
position for the current fiscal year that would be pro-rated based on your
tenure with the Company this fiscal year. This offer is contingent on the
occurrence of the closing of Acquiror's acquisition of Ardent Communications
Corporation (hereafter "Target") and, if you accept this offer, it would take
effect as of that Closing Date. The remaining terms of your employment would be
as follows:
Term of Employment
You agree to remain employed for a period of two (2) years after
the Closing Date. Nevertheless, subject to the terms of this letter either you
or Acquiror may terminate your employment at any time for any reason, with or
without cause, by giving written notice of such termination. This will be true
during and after the two (2) year period. However, if Acquiror wishes to
terminate your employment "Without Cause" within two years after the Closing
Date, it must first obtain the approval of each of Wu-Fu Chen and John Chambers,
before taking such action. If Wu-Fu Chen is not employed by either Target or
Acquiror, then such termination shall require the approval of Joseph Golden. If
John Chambers is not employed by Acquiror, then such termination shall require
the approval of Larry Carter.
If Acquiror terminates your employment "Without Cause" or if you
resign your employment for "Good Cause" prior to two (2) years after the Closing
Date, then Acquiror will pay you, as severance, a lump sum payment equal to six
times your monthly salary, less applicable deductions. All benefits and stock
vesting would terminate as of the date of termination of your employment. You
would, of course, be paid your salary through your date of termination, for the
value of all unused vacation earned through that date, and allowed to continue
your medical coverage to the extent provided for by COBRA, but you would not be
entitled to any additional payments or benefits except as set forth herein.
<PAGE> 142
July 21, 1997
If you resigned "Without Good Cause" or your employment were
terminated for "Cause" within two (2) years of the Closing Date, then you would
be paid all salary and benefits through the date of termination of your
employment, but nothing else. A termination for "Cause" shall mean a termination
for any of the following reasons: (i) your failure to perform your material
duties after receipt of a written warning issued which is consistent with
Acquiror's performance review policies in effect at such time, (ii) engaging in
misconduct which is demonstrably injurious to Acquiror; (iii) being convicted of
a felony by a court of competent jurisdiction; (iv) committing an act of fraud
against, or the misappropriation of property belonging to Acquiror; or (v)
material breach of this agreement or any confidentiality or proprietary
information agreement between you and Acquiror; provided, however, that if such
"Cause" is reasonably curable, the Company shall not terminate your employment
hereunder unless it first gives you notice of its intention to terminate and the
grounds of such termination and you have not, within 30 days following the
receipt of such notice, cured such "Cause." Acquiror will provide written notice
of the reason for termination in the case of any termination for "Cause." A
termination for any other reason shall be a termination "Without Cause." A
resignation for "Good Cause" will occur if you resign your employment within
thirty (30) days of the occurrence of any of the following events: (1) Any
reduction in your base salary as specified herein, unless such reduction is
pursuant to a change in Acquiror's compensation policies generally; (2) a
material reduction in your job duties (the position initially assigned to you
hereunder), or (3) notice that you must relocate to an facility outside of the
San Francisco Bay Area. A resignation by you in any other circumstances will be
considered a resignation "Without Good Cause."
If your employment with Acquiror were to continue after two (2)
years beyond the Closing Date, then your employment would continue to be on an
"at-will" basis. This means that either you or Acquiror could terminate your
employment at any time for any reason with or without cause and without the
obligation to pay you, or your right to, any severance payment except as may be
provided at such time under Acquiror's employee benefit plans for which you are
eligible.
Your Position
You will initially have the title of Director, Marketing,
reporting to Wu-Fu Chen. You will have whatever reasonable duties are assigned
to you. Acquiror may change your title and duties as it sees fit although such
change may constitute "Good Cause" for your resignation.
2.
<PAGE> 143
July 21, 1997
Non-Competition
You understand and agree that this agreement is entered into in
connection with the acquisition by Acquiror of all of the outstanding stock of
Target. You further understand and agree that you were a substantial shareholder
or optionholder of Target; a key and significant member of the management of
Target; and that Acquiror paid you substantial consideration in order to
purchase your stock and/or option interest in Target. In addition, the parties
agree that, prior to acquisition by Acquiror of the stock of Target, Acquiror
was engaged in its business in each of the fifty states of the United States and
in Canada. Acquiror represents and you understand that, following the
acquisition by Acquiror of the stock of Target, Acquiror will continue
conducting such business in all parts of the United States and in Canada.
You agree that during your employment with Acquiror you will not
engage in any other employment, business, or business related activity unless
you receive Acquiror's prior written approval to hold such outside employment or
engage in such business or activity. Such written approval will not be
unreasonably withheld if such outside employment, business, or activity would
not in any way be competitive with the business or proposed business of Acquiror
or otherwise conflict with or adversely affect in any way your performance of
your employment obligations to Acquiror.
Commencing on the Closing Date and continuing until the later of
the date of termination of your employment with Acquiror or two (2) years after
the Closing Date, except as provided below, you will not, as an employee, agent,
consultant, advisor, independent contractor, general partner, officer, director,
stockholder, investor, lender or guarantor of any corporation, partnership or
other entity, or in any other capacity directly or indirectly:
1. participate or engage in the design, development, manufacture,
production, marketing, sale or servicing of any product, or the provision of any
service, that directly relates to routing, WAN switching (including ATM and
Frame Relay switching), LAN switching (including Ethernet, Fast Ethernet and
Gigabit Ethernet switching), or Layer 3 switching (including IP and
Multiprotocol switching), network management, or internetworking or networking
software (the "Business") in the United States or Canada;
2. induce or attempt to induce any person who at the time of such
inducement is an employee of Acquiror to perform work or services for any other
person or entity other than Acquiror; or
3.
<PAGE> 144
July 21, 1997
3. permit your name to be used in connection with a competitive
Business. Notwithstanding the foregoing, you may own, directly or indirectly,
solely as an investment, up to one percent (1%) of any class of "publicly traded
securities" of any person or entity which owns a competitive Business. The term
"publicly traded securities" shall mean securities that are traded on a national
securities exchange or listed on the National Association of Securities Dealers
Automated Quotation System.
If your employment were terminated "Without Cause" or you
resigned your employment for "Good Cause" within two years of the Closing Date,
then this non-competition clause will expire upon the earlier of the following
two dates (a) six months from the date of termination of your employment or (b)
two years after the Closing Date. If any restriction set forth in this
non-competition section is found by a court to be unreasonable, then you agree,
and hereby submit, to the reduction and limitation of such prohibition to such
area or period as shall be deemed reasonable. You acknowledge that the services
that you will provide to Acquiror under this agreement are unique and that
irreparable harm will be suffered by Acquiror in the event of the breach by you
of any of your obligations under this agreement, and that Acquiror will be
entitled, in addition to its other rights, to enforce by an injunction or decree
of specific performance the obligations set forth in this agreement. Any claims
asserted by you against Acquiror shall not constitute a defense in any
injunction action brought by Acquiror to obtain specific enforcement of said
paragraphs.
Arbitration
We each agree that any and all disputes between us which arise
out of your employment, the termination of your employment, or under the terms
of this agreement (except for any claim arising out of or relating to the
non-competition clauses of this agreement) shall be resolved through final and
binding arbitration. This shall include, without limitation, disputes relating
to this agreement, any disputes regarding your employment by Acquiror or the
termination thereof, claims for breach of contract or breach of the covenant of
good faith and fair dealing, and any claims of discrimination or other claims
under any federal, state or local law or regulation now in existence or
hereinafter enacted and as amended from time to time concerning in any way the
subject of your employment with Acquiror or its termination. The only claims not
covered by this section are claims for benefits under the workers' compensation
laws or unemployment insurance laws or claims under the non-competition clauses
of this agreement. Binding arbitration will be conducted in the San Francisco
Bay Area in accordance with the rules and regulations of the American
Arbitration Association. The parties will split the cost of the arbitration
filing and hearing fees, and the cost of the
4.
<PAGE> 145
July 21, 1997
arbitrator; each side will bear its own attorneys' fees, unless otherwise
decided by the arbitrator. You understand and agree that arbitration shall be
instead of any civil litigation, that each side waives its right to a jury
trial, and that the arbitrator's decision shall be final and binding to the
fullest extent permitted by law and enforceable by any court having jurisdiction
thereof.
Miscellaneous Provisions
This agreement will be the entire agreement between you and
Acquiror relating to your employment and the additional matters provided for
herein. This agreement supersedes and replaces any prior verbal or written
agreements between the parties except as provided for herein. This Agreement may
be executed in one or more counterparts, all of which shall be considered one
and the same. This agreement may be amended or altered only in a writing signed
by you and Acquiror. This agreement shall be construed and interpreted in
accordance with the laws of the State of California. Each provision of this
agreement is severable from the others, and if any provision hereof shall be to
any extent unenforceable it and the other provisions shall continue to be
enforceable to the full extent allowable, as if such offending provision had not
been a part of this agreement. This offer is also contingent on you executing
the Acquiror Proprietary Information and Inventions Agreement, a copy of which
is attached hereto.
5.
<PAGE> 146
July 21, 1997
If you have any questions about this offer, please contact me. If
you find this offer acceptable, please sign and date this letter below and
return it to me.
Sincerely,
/s/ John T. Chambers
----------------------------
I agree to the terms and conditions in this offer.
/s/ Rodney Kay
- ---------------------------
Dated: July 23, 1997
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
<PAGE> 147
EXHIBIT I
EMPLOYMENT AGREEMENT FOR WU-FU CHEN
<PAGE> 148
July 17, 1997
Dear Mr. Chen:
We are pleased to offer you the position of Vice President,
Technology, reporting to Alex Mendez. This letter, if accepted, sets forth the
terms of your employment with Cisco Systems, Inc. (hereafter "Acquiror") going
forward. You will receive an annual salary of $220,000.00, less all applicable
deductions. In addition, you would participate in all Acquiror benefits for
which you are eligible, including Acquiror's stock option program. You would be
eligible for a bonus under the Senior Management Incentive Bonus Plan of
Acquiror applicable to your position for the current fiscal year that would be
pro-rated based on your tenure with the Company this fiscal year. This offer is
contingent on the occurrence of the closing of Acquiror's acquisition of Ardent
Communications Corporation (hereafter "Target") and, if you accept this offer,
it would take effect as of that Closing Date. The remaining terms of your
employment would be as follows:
Travel and Relocation Expenses
Acquiror shall pay all of your travel and living expenses
incurred in connection with your employment by Acquiror while your place of
residence is outside the state of California, including, but not limited to, the
rental of housing selected by you and commuting costs (including airfare)
between your place of residence and your place of work with Acquiror. A
relocation package will be provided to you, in which Acquiror will manage your
move. We anticipate that the following services will be used to assist with
relocating to California from your current place of residence:
a) Househunting trip: If taken prior to actual start date,
one round-trip airfare for employee and spouse only, in
addition to hotel accommodations, rental or one compact
automobile, and reasonable expenses for 5 days;
b) Shipment of household goods from one primary residence,
including a maximum of one automobile;
c) Air economy travel for employee, spouse and dependent
family members who permanently reside with the employee
and who will be relocating to the new household;
<PAGE> 149
Mr. Chen July 17, 1997
d) A miscellaneous relocation allowance of 1 month's salary,
less applicable taxes, to be disbursed within 30 days of
start date. This sum is intended to cover non-receipted
miscellaneous expenses;
e) Area orientation session with an Acquiror-approved
vendor;
f) Year end tax gross up on items a, e, g, and h at
Acquiror's gross up rates of 28% federal and 6% state;
g) Closing Cost Assistance up to 8% calculated on the sale of
your existing primary residence, not to exceed $40,000;
h) Eligibility to participate in the Advanced Marketing
Program.
Term of Employment
You agree to remain employed for a period of one (1) year after
the Closing Date. Nevertheless, subject to the terms of this letter either you
or Acquiror may terminate your employment at any time for any reason, with or
without cause, by giving written notice of such termination. This will be true
during and after the one (1) year period. However, if Acquiror wishes to
terminate your employment "Without Cause" within one (1) year after the Closing
Date, it must first obtain the approval of each of Cherng-Daw Hwang and John
Chambers, before taking such action. If Cherng-Daw Hwang is not employed by
either Target or Acquiror, then such termination shall require the approval of
Joseph Golden. If John Chambers is not employed by Acquiror, then such
termination shall require the approval of Larry Carter.
If Acquiror terminates your employment "Without Cause" or if you
resign your employment for "Good Cause" prior to one (1) year after the Closing
Date, then Acquiror will pay you, as severance, a lump sum payment equal to six
times your monthly salary, less applicable deductions. All benefits and stock
vesting would terminate as of the date of termination of your employment. You
would, of course, be paid your salary through your date of termination, for the
value of all unused vacation earned through that date, and allowed to continue
your medical coverage to the extent provided for by COBRA, but you would not be
entitled to any additional payments or benefits except as set forth herein.
If you resigned "Without Good Cause" or your employment were
terminated for "Cause" within one (1) year of the Closing Date, then you would
be paid
2.
<PAGE> 150
Mr. Chen July 17, 1997
all salary and benefits through the date of termination of your employment, but
nothing else. A termination for "Cause" shall mean a termination for any of the
following reasons: (i) your failure to perform your material duties after
receipt of a written warning issued which is consistent with Acquiror's
performance review policies in effect at such time, (ii) engaging in misconduct
which is demonstrably injurious to Acquiror; (iii) being convicted of a felony
by a court of competent jurisdiction; (iv) committing an act of fraud against,
or the misappropriation of property belonging to Acquiror; or (v) material
breach of this agreement or any confidentiality or proprietary information
agreement between you and Acquiror; provided, however, that if such "Cause" is
reasonably curable, the Company shall not terminate your employment hereunder
unless it first gives you notice of its intention to terminate and the grounds
of such termination and you have not, within 30 days following the receipt of
such notice, cured such "Cause." Acquiror will provide written notice of the
reason for termination in the case of any termination for "Cause." A termination
for any other reason shall be a termination "Without Cause." A resignation for
"Good Cause" will occur if you resign your employment within thirty (30) days of
the occurrence of any of the following events: (1) Any reduction in your base
salary as specified herein, unless such reduction is pursuant to a change in
Acquiror's compensation policies generally; (2) a material reduction in your job
duties (the position initially assigned to you hereunder), or (3) notice that
you must relocate to an facility outside of the San Francisco Bay Area. A
resignation by you in any other circumstances will be considered a resignation
"Without Good Cause."
If your employment with Acquiror were to continue after one (1)
year beyond the Closing Date, then your employment would continue to be on an
"at-will" basis. This means that either you or Acquiror could terminate your
employment at any time for any reason with or without cause and without the
obligation to pay you, or your right to, any severance payment except as may be
provided at such time under Acquiror's employee benefit plans for which you are
eligible.
Your Position
You will initially have the title of Vice President, Technology,
reporting to Alex Mendez. You will have whatever reasonable duties are assigned
to you. Acquiror may change your title and duties as it sees fit although such
change may constitute "Good Cause" for your resignation.
3.
<PAGE> 151
Mr. Chen July 17, 1997
Non-Competition
You understand and agree that this agreement is entered into in
connection with the acquisition by Acquiror of all of the outstanding stock of
Target. You further understand and agree that you were a substantial shareholder
or optionholder of Target; a key and significant member of the management of
Target; and that Acquiror paid you substantial consideration in order to
purchase your stock and/or option interest in Target. In addition, the parties
agree that, prior to acquisition by Acquiror of the stock of Target, Acquiror
was engaged in its business in each of the fifty states of the United States and
in Canada. Acquiror represents and you understand that, following the
acquisition by Acquiror of the stock of Target, Acquiror will continue
conducting such business in all parts of the United States and in Canada.
You agree that during your employment with Acquiror you will not
engage in any other employment, business, or business related activity unless
you receive Acquiror's prior written approval to hold such outside employment or
engage in such business or activity. Such written approval will not be
unreasonably withheld if such outside employment, business, or activity would
not in any way be competitive with the business or proposed business of Acquiror
or otherwise conflict with or adversely affect in any way your performance of
your employment obligations to Acquiror.
Commencing on the Closing Date and continuing until the later of
the date of termination of your employment with Acquiror or one (1) year after
the Closing Date, except as provided below, you will not, as an employee, agent,
consultant, advisor, independent contractor, general partner, officer, director,
stockholder, investor, lender or guarantor of any corporation, partnership or
other entity, or in any other capacity directly or indirectly:
1. participate or engage in the design, development, manufacture,
production, marketing, sale or servicing of any product, or the provision of any
service, that directly relates to routing, WAN switching (including ATM and
Frame Relay switching), LAN switching (including Ethernet, Fast Ethernet and
Gigabit Ethernet switching), or Layer 3 switching (including IP and
Multiprotocol switching), network management, or internetworking or networking
software (the "Business") in the United States or Canada;
2. induce or attempt to induce any person who at the time of such
inducement is an employee of Acquiror to perform work or services for any other
person or entity other than Acquiror; or
4.
<PAGE> 152
Mr. Chen July 17, 1997
3. permit your name to be used in connection with a competitive
Business. Notwithstanding the foregoing, you may own, directly or indirectly,
solely as an investment, up to one percent (1%) of any class of "publicly traded
securities" of any person or entity which owns a competitive Business. The term
"publicly traded securities" shall mean securities that are traded on a national
securities exchange or listed on the National Association of Securities Dealers
Automated Quotation System.
If your employment were terminated "Without Cause" or you
resigned your employment for "Good Cause" within one (1) year of the Closing
Date, then this non-competition clause will expire upon the earlier of the
following two dates (a) six months from the date of termination of your
employment or (b) one (1) year after the Closing Date. If any restriction set
forth in this non-competition section is found by a court to be unreasonable,
then you agree, and hereby submit, to the reduction and limitation of such
prohibition to such area or period as shall be deemed reasonable. You
acknowledge that the services that you will provide to Acquiror under this
agreement are unique and that irreparable harm will be suffered by Acquiror in
the event of the breach by you of any of your obligations under this agreement,
and that Acquiror will be entitled, in addition to its other rights, to enforce
by an injunction or decree of specific performance the obligations set forth in
this agreement. Any claims asserted by you against Acquiror shall not constitute
a defense in any injunction action brought by Acquiror to obtain specific
enforcement of said paragraphs. Acquiror agrees to indemnify you against any
claims, damages, expenses or costs (including attorney's fees and costs) or
other liabilities arising from your non-competition agreements with Cascade
Communications, Inc. and Arris Networks, Inc.
Arbitration
We each agree that any and all disputes between us which arise
out of your employment, the termination of your employment, or under the terms
of this agreement (except for any claim arising out of or relating to the
non-competition clauses of this agreement) shall be resolved through final and
binding arbitration. This shall include, without limitation, disputes relating
to this agreement, any disputes regarding your employment by Acquiror or the
termination thereof, claims for breach of contract or breach of the covenant of
good faith and fair dealing, and any claims of discrimination or other claims
under any federal, state or local law or regulation now in existence or
hereinafter enacted and as amended from time to time concerning in any way the
subject of your employment with Acquiror or its termination. The only claims not
covered by this section are claims for benefits under the workers' compensation
laws or unemployment insurance laws or claims under the non-competition clauses
of this
5.
<PAGE> 153
Mr. Chen July 17, 1997
agreement. Binding arbitration will be conducted in the San Francisco Bay Area
in accordance with the rules and regulations of the American Arbitration
Association. The parties will split the cost of the arbitration filing and
hearing fees, and the cost of the arbitrator; each side will bear its own
attorneys' fees, unless otherwise decided by the arbitrator. You understand and
agree that arbitration shall be instead of any civil litigation, that each side
waives its right to a jury trial, and that the arbitrator's decision shall be
final and binding to the fullest extent permitted by law and enforceable by any
court having jurisdiction thereof.
Repurchase Option
Acquiror acknowledges that Mr. Chen entered into a Common Stock
Purchase Agreement dated June 21, 1996, with Target which survives the closing
of the acquisition and which provides that the Repurchase Option over certain
shares of Mr. Chen's Common Stock shall lapse according to the following
schedule: in the event Acquiror acquires all of the outstanding shares of
Target, up to twenty-five percent (25%) of the Shares shall remain subject to
the Repurchase Option; 1/12th of such Shares shall be released from the
Repurchase Option at the end of each month following the closing of such
acquisition by Acquiror until all such Shares are released from the Repurchase
Option.
Miscellaneous Provisions
This agreement will be the entire agreement between you and
Acquiror relating to your employment and the additional matters provided for
herein. This agreement supersedes and replaces any prior verbal or written
agreements between the parties except as provided for herein. This Agreement may
be executed in one or more counterparts, all of which shall be considered one
and the same. This agreement may be amended or altered only in a writing signed
by you and Acquiror. This agreement shall be construed and interpreted in
accordance with the laws of the State of California. Each provision of this
agreement is severable from the others, and if any provision hereof shall be to
any extent unenforceable it and the other provisions shall continue to be
enforceable to the full extent allowable, as if such offending provision had not
been a part of this agreement. This offer is also contingent on you executing
the Acquiror Proprietary Information and Inventions Agreement, a copy of which
is attached hereto.
6.
<PAGE> 154
Mr. Chen July 17, 1997
If you have any questions about this offer, please contact me. If
you find this offer acceptable, please sign and date this letter below and
return it to me.
Sincerely,
/s/ John T. Chambers
---------------------------
I agree to the terms and conditions in this offer.
/s/ Wu-Fu Chen
- ---------------------------
Dated: July 25, 1997
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
<PAGE> 1
EXHIBIT 5.1
OPINION OF BROBECK, PHLEGER & HARRISON LLP
<PAGE> 2
July 25, 1997
Ardent Communications Corporation
3801 Zanker Road
San Jose, CA 95134
Ladies and Gentlemen:
We have acted as counsel for Cisco Systems, Inc., a California
corporation ("Acquiror"), in connection with the merger (the "Merger") of Ardent
Communications Corporation, a California corporation ("Target"), with and into
Acquiror, pursuant to the Agreement and Plan of Reorganization between Acquiror
and Target, dated as of June 23, 1997 (the "Reorganization Agreement"), and the
Agreement of Merger between Acquiror and Target, dated as of July 25, 1997 (the
"Merger Agreement"). This opinion is rendered to you pursuant to Section 6.2(c)
of the Reorganization Agreement. Capitalized terms used herein and not otherwise
defined shall have the same meaning given to such terms in the Reorganization
Agreement.
In connection with this opinion, we have examined originals, or
copies certified or otherwise identified to our satisfaction, of such documents,
corporate records, certificates, including certificates of public officials, and
other instruments as we have deemed necessary or advisable for purposes of this
opinion, including the Restated Articles of Incorporation and Bylaws of Acquiror
and the records of the Board of Directors relating to the Merger. In addition,
in connection with the Merger, we have reviewed the Reorganization Agreement,
the Merger Agreement and Shareholder's Representation Agreements between certain
Target shareholders and Acquiror.
In such examination and review we have assumed the genuineness of
all signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such copies; and that there are no extrinsic
agreements or understandings among the parties to the Reorganization Agreement
and the Merger Agreement that would modify or interpret the terms of the
Reorganization Agreement and the Merger Agreement or the respective rights or
obligations of the parties thereunder. As to any facts material to the opinions
hereinafter expressed which we did not independently establish or verify, we
have relied without investigation, upon certificates, statements and
representations of representatives of Acquiror. During the course of our
discussion with such officers and
<PAGE> 3
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representatives and our review of the documents described above in connection
with the preparation of these opinions, no facts were disclosed to us that
caused us to conclude that any such certificate, statement or representation is
untrue. In making our examination of the documents executed by entities other
than Acquiror, we have assumed that each such other entity had the power to
enter into and perform all its obligations thereunder and the due authorization,
execution and delivery of, such documents by each such entity.
The opinions hereinafter expressed are qualified to the extent
that (a) the validity or enforceability of any of the agreements, documents or
obligations referred to herein may be subject to or affected by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting the rights and remedies of creditors generally, and (b) the
enforceability of such agreements, documents or obligations may be limited by
general principles of equity, including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing, and public policy,
whether applied by a court of law or equity. We do not express any opinion
herein as to the availability of any equitable or other specific remedy upon
breach of any of the agreements, documents or obligations referred to herein. We
render or imply no opinion with respect to compliance with applicable anti-fraud
statutes, rules or regulations of applicable state or Federal law.
Based upon and subject to the foregoing, and subject to the
further assumptions, limitations, qualifications, and exceptions set forth
herein, we are of the opinion that:
1. Acquiror is a corporation duly organized, validly existing and
in good standing under the laws of the State of California, has the corporate
power and authority to own, operate and lease its properties and carry on its
business as now conducted;
2. 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. At the close of business on July 24, 1997, no
shares of Preferred Stock were issued and outstanding. At the close of business
on July 24, 1997, 667,869,357 shares of Common Stock were issued and
outstanding, all of which have been duly authorized and are validly issued,
fully paid and nonassessable. On the close of business on July 24, 1997,
888,724,339 shares of Common Stock were subject to issuance upon exercise of
outstanding options;
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3. Acquiror has full corporate power and authority to execute,
deliver, and perform its obligations under the Reorganization Agreement and the
Merger Agreement; Acquiror has taken all requisite corporate action to approve
and adopt the Reorganization Agreement and the Merger Agreement and to approve
and to authorize the carrying out of the transactions contemplated thereunder;
and the Reorganization Agreement and the Merger Agreement have been duly
executed and delivered by Acquiror and constitute legal, valid and binding
obligations of Acquiror; provided that enforceability of the indemnity
obligations contained in such agreements may be limited by public policy;
4. The approval of the shareholders of Acquiror is not required
for the consummation of the transactions contemplated by the Reorganization
Agreement and the Merger Agreement; the shares of Acquiror Common Stock to be
delivered in exchange for shares of Target Common Stock will, when issued as
contemplated by the Reorganization Agreement and the Merger Agreement, be
validly issued, fully paid and non-assessable; a sufficient number of shares of
Acquiror Common Stock have been duly and validly reserved for issuance upon
exercise of Target Options being assumed by Acquiror pursuant to section 1.6 of
the Reorganization Agreement, and such reserved shares, when issued in
accordance with the terms of such options, will be validly issued, fully paid
and nonassessable;
5. The execution, delivery and performance of the Reorganization
Agreement by Acquiror, the execution and delivery of the Merger Agreement by
Acquiror and the carrying out of the transactions contemplated by the
Reorganization Agreement and by the Merger Agreement to be carried out by
Acquiror did not and will not conflict with or constitute a violation under the
charter documents of Acquiror;
6. To our knowledge, no suit, action or legal, administrative,
arbitration or other proceeding or governmental investigation is pending or
threatened to which Acquiror or any of its assets or properties is a party which
seeks to prohibit, restrain or enjoin the transactions contemplated by the
Reorganization Agreement or the Merger Agreement;
7. There is no consent, approval, authorization, order,
registration, qualification or filing of or with any court or any regulatory
authority or other governmental body (either foreign or domestic) required by
Acquiror or with respect to its assets or properties or otherwise for the
consummation of the transactions contemplated by the Reorganization Agreement
and the Merger Agreement that has not been obtained, except for (i) such
consents, approvals, authorizations, registration or
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qualifications as may be required under state securities or Blue Sky laws in
connection with the offer and sale of Acquiror Common Stock pursuant to the
Merger, and (ii) acceptance for filing of the Merger Agreement together with any
appropriate tax clearance certificate by the California Secretary of State. Our
opinion herein, however, is subject to the timely and proper completion of all
filings and other actions contemplated above in this paragraph 7 where such
filings and actions are to be undertaken on or after the date hereof; and
8. The shares of Acquiror Common Stock to be issued and delivered
in exchange for shares of Target Common Stock pursuant to the Reorganization
Agreement will, when issued, be exempt from registration under Section 5 of the
Securities Act of 1933, as amended (the "Act") pursuant to Section 4(2) of the
Act.
With respect to the opinion set forth in paragraph (8), we have
relied without independent verification upon the accuracy and completeness of
the representations and warranties of the Target shareholders contained in the
Shareholder's Representation Agreement and discussions with the officers of
Target and its legal counsel regarding the nature and sophistication of certain
shareholders of Target who will be receiving Acquiror Common Stock pursuant to
the Merger.
With respect to the opinions set forth in the third and fourth
sentences of paragraph (2) as to the number of issued and outstanding shares of
Common Stock and to the effect that such shares have been validly issued and are
fully paid and nonassessable, and as to the number of shares of Common Stock
subject to outstanding options, we have: (i) relied, without independent
verification, on a certificate of the transfer agent and registrar of Acquiror
("Transfer Agent") dated as of July 24, 1997 as to the matters set forth
therein, (ii) relied, without independent verification, on a certificate of an
officer of Acquiror, dated as of July 25, 1997 with respect to certain of the
factual matters set forth therein, and (iii) reviewed procedures used by
Acquiror and the Transfer Agent when issuing or authorizing the issuance of
shares. We note, however, that we have not (x) reviewed Acquiror's stock
records, (y) verified procedures used by or obtained records from Acquiror's
Transfer Agent, or (z) independently verified that each issued and outstanding
share of Common Stock has been fully paid.
Whenever our opinion herein with respect to the existence or
absence of facts is indicated to be based upon our knowledge, such expression
means that in the course of our representation of Acquiror in connection with
the Merger nothing has come to our attention that would give us actual knowledge
of the existence or absence of
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such facts. We have undertaken no independent factual investigation to determine
the existence or absence of such facts.
This opinion relates solely to the laws of the State of
California and applicable Federal laws of the United States, and we express no
opinion with respect to the effect or applicability of the laws of other
jurisdictions.
The opinions expressed herein are solely for your benefit in
connection with the above transactions and may not be relied upon in any manner
or for any purpose by any other person.
Sincerely,
/s/ Brobeck, Phleger & Harrison LLP
--------------------------------------
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement on Form S-3 of Cisco Systems, Inc. for the registration of 1,801,182
shares of its common stock, of our reports dated August 13, 1996, except for
Note 3 for which the date is October 14, 1996, on our audits of the consolidated
financial statements and financial statement schedule of Cisco Systems, Inc. as
of July 28, 1996 and July 30, 1995, and for the years ended July 28, 1996, July
30, 1995 and July 31, 1994 which reports are included in the Company's 1996
Annual Report on Form 10-K, filed with the Securities and Exchange Commission.
We also consent to the reference to our firm under the caption "Experts."
San Jose, California
August 12, 1997
