<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 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)
--------------
CALIFORNIA 77-0059951
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
--------------
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. [ ]
--------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================
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, 819,600 Shares $79.44 $65,109,024 $19,730
no par value per share
====================================================================================================================
</TABLE>
(1) The price of $79.44, which was the average of the high and low prices of
the Common Stock on the Nasdaq National Market System on July 31, 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
819,600 SHARES
CISCO SYSTEMS, INC.
COMMON STOCK
--------------
This Prospectus relates to the public offering, which is not being
underwritten, of 819,600 shares of Common Stock, no par value per share, of
Cisco Systems, Inc. (the "Company" or the "Registrant"). All 819,600 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 Skystone Systems Corporation ("Skystone"),
by and through the acquisition of the common stock and options to purchase
common stock of Skystone whereby Skystone became a wholly-owned subsidiary of
the Company. 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 5.13 of the Amended and Restated
Acquisition Agreement, as amended, between the Company and Skystone.
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 July 31, 1997 the average of the high and low price
for the Common Stock was $79.44.
--------------
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 7, 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 filed 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). The Shares offered hereby may be sold
either pursuant to this Registration Statement or pursuant to Rule 144.
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.
5.
<PAGE> 7
<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>
1238671 Ontario Inc. 52,756 * 52,756
1238672 Ontario Inc. 3,556 * 3,556
Barbeau, Nathalie 2,371 * 2,371
Dunn, Julie 592 * 592
Dupras, Lucie 2,371 * 2,371
Edwards, David 13,040 * 13,040
Foster, Michael S 4,742 * 4,742
Furneaux & Company 78,948 * 78,948
Jarrette, Stuart 4,303 * 4,303
Joel-David Dalibard Trust 7,113 * 7,113
Latour, Andree 3,556 * 3,556
Lax, Leo 4,742 * 4,742
Legault, Richard 1,185 * 1,185
Leishman, Caroline 740 * 740
Leishman, Clifford 2,371 * 2,371
Leishman, Susan Carol 2,371 * 2,371
Marc-Antoine Paquin Trust 30,748 * 30,748
Midland Walwyn Capital Inc. in trust for
RSP Account 15H453S n/o James Cummings 2,371 * 2,371
Nossick, Michael 2,963 * 2,963
Opalski, Stefan 237,109 * 237,109
Paquin, Claudette 2,371 * 2,371
Paquin, Ines Rouleau 2,371 * 2,371
Paquin, Irene 4,267 * 4,267
Paquin, Jean-Charles 2,371 * 2,371
Paquin, Jean-Paul 8,180 * 8,180
Paquin, Marc-Antoine 219,401 * 219,401
Penney, Brian 11,855 * 11,855
Quaid, Naill 11,855 * 11,855
Riordon, Amy 4,303 * 4,303
Riordon, Marsha 2,655 * 2,655
Riordon, Spruce 11,855 * 11,855
Roberts, John 3,556 * 3,556
Samhaber, Bruce 3,704 * 3,704
Smeaton, Douglas 13,040 * 13,040
Stemmler, Brian D 25,489 * 25,489
Stockley, Douglas F 7,113 * 7,113
Symons, Kirk 23,710 * 23,710
</TABLE>
6.
<PAGE> 8
<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>
Valeurs Mobilieres Desjardins Fiduciaire
REER #6869SY-3 Madam Gisele Deschamps 2,371 * 2,371
Weinstein, Debbie 1,185 * 1,185
--- -------
Total 819,600 * 819,600
======= === =======
</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.
7.
<PAGE> 9
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 income, retained earnings, and cash flow 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.
8.
<PAGE> 10
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 $19,730
Legal fees and expenses 15,000
Accounting fees and expenses 5,000
Miscellaneous 500
-------
Total $40,230
=======
</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 Amended and Restated Acquisition Agreement.
2.2 Amending Agreement
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Independent Accountants' Consent.
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 a post-effective amendment by (i) and
(ii) is contained in periodic reports filed with or furnished to the
II-1
<PAGE> 11
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> 12
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 7th day of August, 1997.
CISCO SYSTEMS, INC.
Dated: August 7, 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 Officer and August 7, 1997
- ---------------------------------- Director (Principal Executive Officer)
John T. Chambers
/s/ Larry R. Carter Vice President, Finance and August 7, 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 7, 1997
- ----------------------------------
John P. Morgridge
</TABLE>
II-3
<PAGE> 13
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ Donald T. Valentine Director August 7, 1997
- ----------------------------------
Donald T. Valentine
Director
- ----------------------------------
James F. Gibbons
/s/ Robert L. Puette Director August 7, 1997
- ----------------------------------
Robert L. Puette
/s/ Masayoshi Son Director August 7, 1997
- ----------------------------------
Masayoshi Son
/s/ Steven M. West Director August 7, 1997
- ----------------------------------
Steven M. West
/s/ Richard M. Moley Director August 7, 1997
- ----------------------------------
Richard M. Moley
Director
- ----------------------------------
Edward R. Kozel
/s/ Carol A. Bartz Director August 7, 1997
- ----------------------------------
Carol A. Bartz
</TABLE>
II-4
<PAGE> 14
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
- ------- -------------
<S> <C>
2.1 Amended and Restated Acquisition Agreement
2.2 Amending Agreement
5.1 Opinion of Brobeck, Phleger & Harrison LLP
23.1 Independent Accountants' Consent
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
================================================================================
AMENDED AND RESTATED
ACQUISITION AGREEMENT
by and between
CISCO SYSTEMS, INC.
and
SKYSTONE SYSTEMS CORPORATION
dated as of
June 9, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I THE REORGANIZATION.......................................................................... 2
1.1 The Reorganization................................................................... 2
1.2 Acquisition Structure................................................................ 2
1.3 Adjustments to Exchange Ratio........................................................ 4
1.4 Fractional Shares.................................................................... 4
1.5 Tax Consequences..................................................................... 4
1.6 Taking of Necessary Action; Further Action........................................... 4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF TARGET................................................... 4
2.1 Organization, Standing and Power..................................................... 5
2.2 Capital Structure.................................................................... 5
2.3 Authority............................................................................ 6
2.4 Financial Statements................................................................. 7
2.5 Absence of Certain Changes........................................................... 8
2.6 Absence of Undisclosed Liabilities................................................... 8
2.7 Litigation........................................................................... 8
2.8 Restrictions on Business Activities.................................................. 9
2.9 Governmental Authorization........................................................... 9
2.10 Title to Property.................................................................... 9
2.11 Intellectual Property................................................................ 10
2.12 Environmental Matters................................................................ 11
2.13 Taxes................................................................................ 12
2.14 Employee Benefit Plans............................................................... 13
2.15 Certain Agreements Affected by the Reorganization.................................... 14
2.16 Employee Matters..................................................................... 14
2.17 Interested Party Transactions........................................................ 14
2.18 Insurance............................................................................ 15
2.19 Compliance With Laws................................................................. 15
2.20 Minute Books......................................................................... 15
2.21 Complete Copies of Materials......................................................... 15
2.22 Brokers' and Finders' Fees........................................................... 15
2.23 Information Furnished to Shareholders................................................ 15
2.24 Vote Required........................................................................ 16
2.25 Board Approval....................................................................... 16
2.26 Voting Agreements; Irrevocable Proxies............................................... 16
2.27 Inventory............................................................................ 16
2.28 Accounts Receivable.................................................................. 17
2.29 Customers and Suppliers.............................................................. 17
</TABLE>
i.
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
2.30 Material Contracts................................................................... 17
2.32 OC48MUX.............................................................................. 18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ACQUIROR................................................. 19
3.1 Organization, Standing and Power..................................................... 19
3.2 Capital Structure.................................................................... 19
3.3 Authority............................................................................ 20
3.4 SEC Documents; Financial Statements.................................................. 21
3.5 Absence of Certain Changes........................................................... 22
3.6 Absence of Undisclosed Liabilities................................................... 22
3.7 Litigation........................................................................... 22
3.8 Governmental Authorization........................................................... 23
3.9 Compliance With Laws................................................................. 23
3.10 Complete Copies of Materials......................................................... 23
3.11 Broker's and Finders' Fees........................................................... 23
3.12 Board Approval....................................................................... 23
3.13 Representations Complete............................................................. 24
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME........................................................ 24
4.1 Conduct of Business of Target and Acquiror........................................... 24
4.2 Conduct of Business of Target........................................................ 25
4.3 No Solicitation...................................................................... 27
ARTICLE V ADDITIONAL AGREEMENTS....................................................................... 29
5.1 Target Stockholder Materials......................................................... 29
5.2 Meeting of Stockholders.............................................................. 29
5.3 Access to Information................................................................ 30
5.4 Confidentiality...................................................................... 30
5.5 Public Disclosure.................................................................... 30
5.6 Consents; Cooperation Reorganization................................................. 30
5.7 Shareholders' Representation Agreements.............................................. 32
5.8 Voting Agreement..................................................................... 32
5.9 Legal Requirements................................................................... 32
5.10 Securities and Blue Sky Laws......................................................... 32
5.11 Employee Benefit Plans............................................................... 33
5.12 Escrow Agreement..................................................................... 33
5.13 Form S-3; Form S-8................................................................... 33
5.14 Employees............................................................................ 34
5.15 Listing of Additional Shares......................................................... 34
5.16 Intentionally Left Blank............................................................. 34
5.17 Canadian Securities Act.............................................................. 34
5.18 Issuance of Acquiror Common Stock.................................................... 34
5.19 Best Efforts and Further Assurances.................................................. 34
</TABLE>
ii.
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VI CONDITIONS TO THE REORGANIZATION........................................................... 35
6.1 Conditions to Obligations of Each Party to Effect the Reorganization................. 35
6.2 Additional Conditions to Obligations of Target....................................... 36
6.3 Additional Conditions to the Obligations of Acquiror................................. 37
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER......................................................... 39
7.1 Termination.......................................................................... 39
7.2 Effect of Termination................................................................ 40
7.3 Expenses and Termination Fees........................................................ 40
7.4 Amendment............................................................................ 43
7.5 Extension; Waiver.................................................................... 43
ARTICLE VIII ESCROW AND INDEMNIFICATION............................................................... 43
8.1 Escrow Fund.......................................................................... 43
8.2 Indemnification...................................................................... 44
8.3 Damage Threshold..................................................................... 44
8.4 Escrow Period........................................................................ 45
8.5 Claims upon Escrow Fund.............................................................. 45
8.6 Objections to Claims................................................................. 45
8.7 Resolution of Conflicts; Arbitration................................................. 46
8.8 Shareholders' Agent.................................................................. 47
8.9 Actions of the Shareholders' Agent................................................... 47
8.10 Third-Party Claims................................................................... 48
ARTICLE IX GENERAL PROVISIONS......................................................................... 48
9.1 Non-Survival at Effective Time....................................................... 48
9.2 Notices.............................................................................. 48
9.3 Interpretation....................................................................... 49
9.4 Counterparts......................................................................... 50
9.5 Entire Agreement; Nonassignability; Parties in Interest.............................. 50
9.6 Severability......................................................................... 50
9.7 Remedies Cumulative.................................................................. 50
9.8 Governing Law........................................................................ 51
9.9 Rules of Construction................................................................ 51
9.10 Currency............................................................................. 51
9.11 Expenses............................................................................. 51
</TABLE>
iii.
<PAGE> 5
SCHEDULES
Target Disclosure Schedule
Acquiror Disclosure Schedule
Schedule A - Provisions Attaching to the Class A Common Shares and
the Common Shares and Exchangeable Shares
Schedule B - Exchange Ratio
Schedule 2.10 - Target Real Property
Schedule 2.11 - Target Intellectual Property
Schedule 2.14 - Target Employee Plans
Schedule 2.30 - Material Contracts
Schedule 5.11 - Outstanding Target Options and Warrants
Schedule 5.14 - List of Employees
Schedule 6.3(h) - List of Employees Party to Employment and Non-
Competition Agreements
EXHIBITS
Exhibit A - Voting Agreements
Exhibit B - Voting and Exchange Trust Agreement
Exhibit C - Form of Shareholder Representation Agreement
Exhibit D - Form of Escrow Agreement
Exhibit E-1,
et seq. - Employment and Non-Competition Agreement
Exhibit F - Form of Support Agreement
iv.
<PAGE> 6
AMENDED AND RESTATED ACQUISITION AGREEMENT
This AMENDED AND RESTATED ACQUISITION AGREEMENT (this
"Agreement") is made and entered into as of June 9, 1997, by and between Cisco
Systems, Inc., a California corporation ("Acquiror"), and Skystone Systems
Corporation, a corporation incorporated under the Canada Business Corporations
Act ("CBCA") ("Target").
RECITALS
WHEREAS, Acquiror and Target entered into an Acquisition
Agreement dated as of June 9, 1997 (the "Acquisition Agreement") pursuant to
which a Reorganization (as defined and described in the Acquisition Agreement)
was to take place resulting in Acquiror holding all of the issued and
outstanding common shares in the capital of Target, all upon the terms and
subject to the conditions set forth in the Acquisition Agreement;
WHEREAS, Section 5.16 of the Acquisition Agreement
contemplated an Alternative Structure as outlined in Schedule "C" to the
Acquisition Agreement;
WHEREAS, the parties wish to amend the Acquisition Agreement
in order to reflect such Alternative Structure;
WHEREAS, 3381111 Canada Inc., a corporation existing under the
laws of Canada and a wholly-owned subsidiary of Acquiror ("Acquisition
Corporation"), owns common shares in the capital of Target;
WHEREAS, all options to purchase Target Common Stock (the
"Target Stock Options") and all warrants to purchase Target Common Stock (the
"Target Warrants"), whether vested or unvested, will be amended to relate to the
Exchangeable Shares (instead of Target Common Stock);
WHEREAS, the Exchangeable Shares are exchangeable by the
holders for Acquiror Common Stock on a one-for-one basis at any time;
WHEREAS, the parties intend, by executing this Agreement that
the Exchangeable Shares will be generally received by shareholders of Target
without recognition of any gain or loss pursuant to the Income Tax Act (Canada)
(the "Canadian Tax Act"); and
WHEREAS, concurrently with the execution of the Acquisition
Agreement, certain affiliates and security holders of Target agreed to vote in
favor of approval of the Reorganization, pursuant to Voting Agreements attached
hereto as Exhibit A and Irrevocable Proxies in the form attached as an exhibit
to the Voting Agreements;
1.
<PAGE> 7
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
THE REORGANIZATION
1.1 The Reorganization. (a) On the Effective Date (as defined
in Section 1.2 hereof), and subject to and upon the terms and conditions of the
Reorganization (as defined in Section 1.2 hereof), this Agreement and the CBCA,
the steps contemplated by the Reorganization shall be completed in the manner
set forth in Section 1.2 hereof.
(b) Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
7.1 hereof, and subject to the satisfaction or waiver of the conditions set
forth in Article VI hereof, the consummation of the Reorganization (the
"Closing") will take place as promptly as practicable after satisfaction or
waiver of the conditions set forth in Article VI hereof, at the offices of
Brobeck, Phleger & Harrison LLP, Two Embarcadero Place, 2200 Geng Road, Palo
Alto, California 94303 unless another date, time or place is agreed to in
writing by the parties hereto. At the Closing, the parties hereto shall deliver
the documents contemplated hereby together with such other customary documents
as may be reasonably requested by the parties.
1.2 Acquisition Structure. As promptly as practicable after
the satisfaction or waiver of the other conditions set out in Article VI, the
parties hereto shall cause the reorganization to be effected utilizing the
following steps and in the following order (all of such steps are herein
collectively referred to as the "Reorganization"):
(a) each of Target and Acquisition Corporation will be
continued from the CBCA as limited liability companies
under the provisions of the Companies Act of Nova Scotia
("NS Act"). Such continuances (the "Continuances") will
each require a "special resolution" to be effected by
signed consent resolution of all of their respective
shareholders and the issuance of Memorandum and Articles
of Association under the NS Act.
(b) Acquiror will incorporate an unlimited liability company
("Unlimco") under the NS Act as a wholly-owned subsidiary
by way of Memorandum and Articles of Association.
(c) Unlimco, Acquisition Corporation and Target will
amalgamate (the "Amalgamation") by way of Amalgamation
Agreement under the NS Act and the resulting company
("Amalco/Unlimco") will be an unlimited
2.
<PAGE> 8
liability company under the NS Act. Each of the
amalgamating companies will approve the Amalgamation by
"special resolution" to be effected by signed consent
resolution of all of its respective shareholders. The
authorized capital of Amalco/Unlimco will consist of an
unlimited number of Common Shares, an unlimited number of
Class A Common Shares and an unlimited number of
Exchangeable Shares having the respective rights,
privileges, restrictions and conditions as set forth on
"Schedule A" annexed hereto.
Upon the Amalgamation, the shares of each of Unlimco,
Acquisition Corporation and Target will be converted into
shares of Amalco/Unlimco or cancelled as follows:
(i) All of the issued and outstanding shares of both
Unlimco and Acquisition Corporation will be
converted into Common Shares of Amalco/Unlimco;
(ii) All of the issued and outstanding shares of Target
(except those held by Acquisition Corporation) will
be converted into an equal number of Class A Common
Shares of Amalco/Unlimco;
(iii) All of the issued and outstanding shares of Target
held by Acquisition Corporation will be cancelled
without any repayment of capital.
(d) Immediately after the Amalgamation, the Class A Common
Shares of Amalco/Unlimco will be exchanged (the
"Exchange") by amendment to the Memorandum and Articles of
Association into Exchangeable Shares based on the Exchange
Ratio (as defined and determined pursuant to Schedule B
attached hereto). Such amendment will be effected by
signed consent resolution of all of its shareholders (the
"Special Resolution"). A certified copy of this Special
Resolution will be filed with the Companies Branch in Nova
Scotia. For purposes of this Acquisition Agreement, the
"Effective Time" and "Effective Date" will be the date and
time of filing of the certified copy of the Special
Resolution.
1.3 Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Acquiror Common Stock or Target Common Stock), reorganization, recapitalization
or other like change with respect to Acquiror Common Shares or Target Common
Stock occurring after the date hereof and prior to the Effective Date.
3.
<PAGE> 9
1.4 Fractional Shares. No fraction of an Exchangeable Share
will be issued, but in lieu thereof each holder of Class A Common Shares of
Amalco/Unlimco who would otherwise be entitled to a fraction of an Exchangeable
Share (after aggregating all fractional shares of Exchangeable Shares to be
received by such holder) shall receive from Amalco/Unlimco an amount of cash
(rounded to the nearest whole cent) equal to the product of (i) such fraction,
multiplied by (ii) the average closing 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").
1.5 Tax Consequences. It is intended by the parties hereto
that the Exchangeable Shares will be generally received by resident Canadian
Shareholders of Target without recognition of any gain or loss pursuant to the
Canadian Tax Act and resident Canadian Shareholders of Target will not be
required to file U.S. Tax Returns solely as a result of the Reorganization.
1.6 Taking of Necessary Action; Further Action. If, at any
time on or after the Effective Date, any further action is necessary or
desirable to carry out the purposes of this Agreement and the Reorganization,
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 means any
material event, change, condition or effect related to the condition (financial
or otherwise), properties, assets (including intangible assets), liabilities,
business, operations, results of operations or prospects of such entity and its
subsidiaries, taken as a whole. In this Agreement, any reference to a "Material
Adverse Effect" with respect to any entity means any event, change or effect
that, individually or when taken together with all other such events, changes or
effects that have occurred prior to the time of determination of the occurrence
of the Material Adverse Effect, is or is reasonably likely to be materially
adverse to the condition (financial or otherwise), properties, assets,
liabilities, business, operations, results of operations or prospects 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, or who should
reasonably be believed, to have knowledge of such matters.
4.
<PAGE> 10
Except as disclosed in the Target Disclosure Schedule
delivered by Target to Acquiror prior to the execution and delivery of the
Acquisition Agreement, which document refers to the specific Sections or
subsections in the Acquisition Agreement (the sections and subsections of which
correspond to the sections and subsections hereof) to which each such exception
relates (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 (the "Articles of Incorporation"), and Bylaws or other
charter or organizational documents, as applicable, of Target and each of its
subsidiaries, each of the foregoing 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 other charter or organizational
documents. Target is the owner of all outstanding shares in the capital of each
of its subsidiaries and all such shares are duly authorized, validly issued,
fully paid and nonassessable. All of the outstanding shares in the capital of
each such subsidiary are owned by Target free and clear of all liens, charges,
claims or encumbrances, or rights of others. There are no outstanding
subscriptions, options, warrants, puts, calls, rights, exchangeable or
convertible securities or other commitments or agreements of any character
relating to the issued or unissued shares in the capital 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 an unlimited number of common shares, of which there were issued and
outstanding as of the close of business on June 5, 1997, 4,623,731 shares of
Target Common Stock. There are no other outstanding shares in the capital or
voting securities and no outstanding commitments to issue any shares of capital
or voting securities after June 5, 1997 other than pursuant to the exercise of
the Target Stock Options and Target Warrants. All outstanding shares of Target
Common Stock are duly authorized, validly issued, fully paid and non-assessable
and are free of any liens, charges, claims or encumbrances or rights of others
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 5, 1997, Target has reserved, in the aggregate, 2,324,474
shares of Target Common Stock for issuance to employees, consultants and
directors, of which 1,043,750 shares have been issued pursuant to option
exercises or direct stock purchases
5.
<PAGE> 11
thereunder, 1,280,724 shares are subject to outstanding, unexercised options or
warrants granted pursuant to written agreements between the Target and such
optionholders or warrantholders, and no shares are subject to outstanding stock
purchase rights. Since June 5, 1997, Target has not issued or granted additional
options. Except for the rights created pursuant to this Agreement, the Target
Stock Options and the Target Warrants, 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. Other
than the Target Voting Agreement and Irrevocable Proxy contemplated herein and
the Shareholder's Agreement, there are no contracts, commitments or agreements
relating to voting, purchase or sale of Target's capital stock (i) between or
among Target and any of its stockholders and (ii) to the best of Target's
knowledge, between or among any of Target's stockholders. The terms of the
Target Stock Options permit the assumption or substitution of options to
purchase shares exchangeable into Acquiror Common Stock as provided in this
Agreement, without the consent or approval of the holders of such securities,
the Target stockholders, or otherwise and without any acceleration of the
exercise schedule or vesting provisions in effect for those options. True and
complete copies of all agreements and instruments relating to or issued under
Target Stock Options have been made available to Acquiror and such agreements
and instruments have not been amended, modified or supplemented, and there are
no agreements to amend, modify or supplement such agreements or instruments in
any case from the form made available to Acquiror.
2.3 Authority. Target has all requisite corporate power and
authority to enter into this Agreement and 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 Reorganization by Target's stockholders 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, in each case as amended, or (ii)
any material mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Target or any of its
subsidiaries or any of their properties or assets, except where such conflict,
violation, default, termination, cancellation or acceleration with respect to
the foregoing provisions of (ii) would not have had and would not reasonably be
expected to have a Material Adverse Effect on Target. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental
6.
<PAGE> 12
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) applicable requirements, if any, of the
Securities Act (Ontario) (the "OSA") and other relevant Canadian securities
statutes; (ii) a notification under Section 12 of the Investment Canada Act;
(iii) the filing and recordation of (A) a certificate of continuance under the
NS Act, along with Memorandum and Articles of Association, in form satisfactory
to both parties, for Target, (B) the obtaining of requisite Court approval for
the Amalgamation, as required by the NS Act, and the subsequent filing and
recordation under the NS Act of the Amalgamation Agreement, along with
Memorandum and Articles of Association, in form satisfactory to both parties,
(C) the filing and recordation under the NS Act of a certified copy of the
Special Resolution effecting the Exchange, and such other documents as may be
necessary or desirable to effect the Reorganization; (iv) such filings as may be
required under the Hart-Scott- Rodino Antitrust Improvements Act of 1976, as
amended ("HSR"); and (v) such other consents, authorizations, filings, approvals
and registrations which, if not obtained or made, would not have a Material
Adverse Effect on Target and would not prevent, or materially alter or delay any
of the transactions contemplated by this Agreement.
2.4 Financial Statements. Target has delivered to Acquiror its
audited financial statements for each of the years ended September 30, 1995 and
1996, respectively, and its unaudited financial statements (balance sheet and
statement of operations) on a consolidated basis as at, and for the seven-month
period ended April 30, 1997 (collectively, the "Financial Statements"). The
Financial Statements are complete and correct in all material respects and have
been prepared in accordance with Canadian generally accepted accounting
principles ("Canadian GAAP") applied on a consistent basis throughout the
periods indicated and with each other (except that the unaudited financial
statements do not have notes thereto). The Financial Statements accurately set
forth the consolidated financial condition and consolidated operating results of
Target and its subsidiaries as of the dates, and for the periods, indicated
therein, subject to normal and recurring year-end audit adjustments which are
not expected to be material in amount. Target maintains and will continue to
maintain prior to the Effective Date a standard system of accounting established
and administered in accordance with Canadian GAAP.
2.5 Absence of Certain Changes. Since April 30, 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 on
Target; (ii) any acquisition, sale or transfer of any material asset of Target
or any of its subsidiaries other than in the ordinary course of business and
consistent with past practice; (iii) any change in accounting methods or
practices (including any change in depreciation or amortization policies or
rates) by Target or any of its subsidiaries 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
7.
<PAGE> 13
its shares of capital stock; (v) any material contract entered into by Target or
any of its subsidiaries, other than in the ordinary course of business and as
provided to Acquiror prior hereto, or any material amendment or termination of,
or default under, any material contract to which Target or any of its
subsidiaries is a party or by which it is bound; or (vi) any negotiation or
agreement by Target or any of its subsidiaries to do any of the things described
in the preceding clauses (i) through (v) (other than negotiations with Acquiror
and its representatives regarding the transactions contemplated by this
Agreement).
2.6 Absence of Undisclosed Liabilities. Target has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
balance sheet included in the Financial Statements for the year ended September
30, 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 Canadian GAAP, (iii) those incurred in the ordinary course of business
since the Target Balance Sheet Date and consistent with past practice; and (iv)
those incurred in connection with the execution of this Agreement.
2.7 Litigation. There is no private or governmental action,
suit, proceeding, claim, arbitration or investigation pending before any agency,
court or tribunal, foreign or domestic, or, to the knowledge of Target or any of
its subsidiaries, threatened against Target or any of its subsidiaries or any of
their respective properties or any of their respective officers or directors (in
their capacities as such) that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on Target. There is no
judgment, decree or order against Target or any of its subsidiaries, or, to the
knowledge of Target and its subsidiaries, any of their respective directors or
officers (in their capacities as such), that could prevent, enjoin, alter or
materially delay any of the transactions contemplated by this Agreement, or that
could reasonably be expected to have a Material Adverse Effect on Target.
2.8 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon Target or any of
its subsidiaries which has or reasonably could be expected to have the effect of
prohibiting or materially impairing any current or future business practice of
Target or any of its subsidiaries, any acquisition of property by Target or any
of its subsidiaries or the conduct of business by Target or any of its
subsidiaries 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, provincial 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
8.
<PAGE> 14
have any of such Target Authorization could not reasonably be expected to have a
Material Adverse Effect on Target.
2.10 Title to Property. Target and its subsidiaries have good
and valid title to all of their respective properties, interests in properties
and assets, real and personal, reflected in the Target Balance Sheet or acquired
after the Target Balance Sheet Date (except properties, interests in properties
and assets sold or otherwise disposed of since the Target Balance Sheet Date in
the ordinary course of business), or in the case of leased properties and
assets, valid leasehold interests in, free and clear of all mortgages, liens,
pledges, security interests 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 or value 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
Canadian GAAP require the same to be reflected. Schedule 2.10 identifies each
parcel of real property owned or leased by Target or any of its subsidiaries.
The Target has all assets; property and rights necessary to the conduct of its
business after the Closing substantially in the same manner as it was conducted
prior to the Closing.
2.11 Intellectual Property.
(a) Target and its subsidiaries own, or are licensed or
otherwise possess legally enforceable rights to use all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
maskworks, net lists, schematics, technology, know-how, trade secrets,
inventory, ideas, algorithms, processes, computer software programs or
applications (in both source code and/or object code form), and tangible or
intangible proprietary information or material 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 ("Intellectual
Property").
(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 owned by
Target, 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.
9.
<PAGE> 15
(c) There is no unauthorized use, disclosure,
infringement or misappropriation of any Intellectual Property rights of Target
or any of its subsidiaries, any trade secret material to Target or any of its
subsidiaries, or any Intellectual Property right of any third party to the
extent licensed by or through Target or any of its subsidiaries, by any third
party, including, to Target's knowledge, 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 party and (ii) has not brought any
action, suit or proceeding for infringement of Intellectual Property or breach
of any license or agreement involving Intellectual Property against any third
party. The manufacture, marketing, licensing or sale of Target's products does
not infringe any patent, trademark, service mark, copyright, trade secret or
other proprietary right of any third party.
(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 reasonable and appropriate steps
to protect and preserve the confidentiality of all Intellectual Property not
otherwise protected by patents, or patent applications or copyright
("Confidential Information"). 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, provincial or local laws, ordinances, codes, regulations, rules,
policies and orders that are
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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) no
methylene chloride, PCB (as hereinafter defined) or asbestos is contained in or
has been used at or released from the Facilities by Target; (ii) all Hazardous
Materials and wastes have been disposed of in accordance with all Environmental
and Safety Laws; (iii) Target and its subsidiaries have received no notice
(verbal or written) of any noncompliance of the Facilities or its past or
present operations with Environmental and Safety Laws; (iv) no notices,
administrative actions or suits are pending or, to the knowledge of Target,
threatened relating to a violation of any Environmental and Safety Laws; (v)
neither Target nor its subsidiaries are, to Target's knowledge, a potentially
responsible party under the federal Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA), or provincial analogous statute or
comparable legislation in any other jurisdiction, including Environmental
Protection Act (Ontario), 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) to Target's knowledge, there have not been in the past, and are
not now, any underground tanks or underground improvements at, on or under the
Property including without limitation, treatment or storage tanks, sumps, or
water, gas or oil wells; (viii) to Target's knowledge, there are no
polychlorinated biphenyl ("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 or in excess of any limits imposed by
any applicable environmental and safety laws; (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) Target and its
subsidiaries' uses and activities of the Facilities have at all times complied
with all Environmental and Safety Laws; and (xi) Target and its subsidiaries
have all the permits and licenses required to be issued and are in full
compliance with the terms and conditions of those permits, except where the
failure to have such permits and licenses or be in compliance therewith would,
in the aggregate, not have a Material Adverse Effect on Target.
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2.13 Taxes. Target has timely filed all Tax Returns required
to be filed by it, has paid all Taxes shown thereon to be due and has provided
adequate accruals in accordance with generally accepted accounting principles in
the Financial Statements for any Taxes that have not been paid taxable for
periods or portions thereof through April 30, 1997, whether or not shown as
being due on any Tax returns. No material amount of Taxes are or will become
payable by Target for periods after April 30, 1997 through the Closing Date that
have not been fully paid or fully disclosed and fully provided for in the books
and records of the Target and its financial statements. The information
contained in such Tax Returns is correct and complete and such Tax Returns
reflect accurately all liability for taxes of the Target for the periods covered
thereby and (i) no material claim for Taxes has become a lien against the
property of Target or any of its subsidiaries or is being asserted against
Target or any of its subsidiaries other than liens for Taxes not yet due and
payable, (ii) no audit of any Tax Return of Target or any of its subsidiaries is
being conducted by a Tax authority, (iii) no extension of the statutory period
with respect to the assessment or reassessment of the tax or the filing of any
Tax Return or payment of any Taxes has been granted by Target or any of its
subsidiaries and is currently in effect. 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, capital, 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
material compliance with all terms and conditions of any Tax exemptions or other
Tax- sparing agreement or order of a foreign government.
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) (i)
all material employee benefit plans, oral or written, (ii) each loan to a
non-officer employee in excess of $50,000, loans to officers and directors and
any stock option, stock purchase, phantom stock, stock appreciation right,
supplemental retirement, severance, sabbatical, medical, dental, vision care,
disability, employee relocation, cafeteria benefit or dependent care, life
insurance or accident
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insurance plans, programs or arrangements, oral or written, (iii) all bonus,
pension, profit sharing, savings, deferred compensation or incentive plans,
programs or arrangements, oral or written, (iv) all other fringe or employee
benefit plans, programs or arrangements, oral or written, that apply to senior
management of Target and that do not generally apply to all employees, and (v)
any current or former employment or executive compensation or severance
agreements, written or otherwise, as to which unsatisfied obligations of Target
of greater than $50,000 remain for the benefit of, or relating to, any present
or former employee, consultant or director of Target (together, the "Target
Employee Plans").
(b) Target has furnished to Acquiror a copy of each of
the Target Employee Plans and related plan documents (including trust documents,
insurance policies or contracts, employee booklets, summary plan descriptions
and other authorizing documents, and, to the extent still in its possession, any
material employee communications relating thereto). The Target Employee Plans
are duly registered where required by, are in good standing under, and have at
all times been invested and administered in accordance with, all applicable
laws, rules, regulations and terms of the Target Employee Plans. All required
employer and employee contributions and premiums under the Target Employee Plans
have been made, no past service funding obligations exist, there are no
outstanding violations or defaults thereunder, and there are no actions, claims,
pending or threatened (other than routine claims for benefits) relating to any
of the Target Employee Plans. No promise or commitment to increase benefits
under the Target Employee Plans has been made except as required by applicable
law.
(c) Target has no pension plans or group registered
retirement savings plans (as those terms are defined in the Income Tax Act
(Canada)) existing in respect of the employees of Target.
2.15 Certain Agreements Affected by the Reorganization.
Neither the execution and delivery of this Agreement nor the consummation of any
of the transactions contemplated hereby will (i) result in any payment
(including, without limitation, severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due to any director or employee of
Target or any of its subsidiaries, (ii) materially increase any benefits
otherwise payable by Target or (iii) result in the acceleration of the time of
payment or vesting of any such benefits.
2.16 Employee Matters. Target and each of its subsidiaries are
in compliance in all respects with all applicable laws and regulations
respecting employment, discrimination in employment, terms and conditions of
employment, wages, hours and occupational safety and health, pay equity and
employment practices, and is not engaged in any unfair labor practice, except
where the failure to be in compliance or the engagement in such unfair labor
practices would not have a Material Adverse Effect on Target. There are no
pending claims against Target or any of its subsidiaries under any workers
compensation plan or policy or for long term disability. Neither Target nor any
of its subsidiaries has any obligations under any law or regulation with respect
to any former employees or qualifying
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beneficiaries thereunder, except for obligations that would not have a Material
Adverse Effect on Target. There are no controversies pending or, to the
knowledge of Target, 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 union contract nor does Target nor any of its subsidiaries know of any
activities or proceedings of any labor union to organize any such employees.
2.17 Interested Party Transactions. Neither Target nor any of
its subsidiaries is indebted to any shareholder, 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 prudent persons conducting businesses or owning assets similar to those of
Target and its subsidiaries. There is no material claim pending under any of
such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and Target and its
subsidiaries are otherwise in compliance in all material respects with the terms
of such policies and bonds. Target has no knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies.
2.19 Compliance With Laws. Each of Target and its subsidiaries
has complied with, are not in violation of, and have not received any notices of
violation with respect to, any federal, state, local or foreign or provincial
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 have not and 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
of all meetings of directors and stockholders or actions by written resolutions
since 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 or resolutions accurately, except for omissions which are not
material.
2.21 Complete Copies of Materials. Target has delivered or
made available true and complete copies of each document that 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
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investment bankers' fees or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
2.23 Information Furnished to Shareholders. All information
supplied by Target for inclusion in any proxy statement, information statement,
circular or other document sent or made available to the shareholders of Target
in connection with any meeting or any action in lieu of a meeting of Target's
shareholders to consider and/or take action in respect of the Reorganization or
any aspect thereof (the "Target Shareholders Proceeding") (such proxy statement,
information statement, circular and/or other document, as amended or
supplemented, is referred to herein collectively as the "Shareholder Materials")
shall not, on the date the Shareholder Materials are first mailed to Target's
shareholders, at the time of the Target Shareholders Proceeding and at the
Effective Time, contain any statement which, at such time, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies, consents or approvals
for the Target Shareholders Proceeding which has become false or misleading. If
at any time prior to the Effective Time any event or information should be
discovered by Target which should be set forth in an amendment or supplement to
the Shareholder Materials, Target shall promptly inform Acquiror.
Notwithstanding the foregoing, Target makes no representation, warranty or
covenant with respect to any information supplied by Acquiror which is contained
in any of the foregoing documents.
2.24 Vote Required. The only votes of the holders of any of
Target's capital stock necessary to approve the Reorganization and the other
transactions contemplated hereby are (i) a "special resolution" required under
the CBCA to approve the Continuance of Target from the CBCA to the NS Act, (ii)
a resolution approved by three-quarters of the votes cast at a meeting called to
approve the Amalgamation as required under Section 134 of the NS Act, and (iii)
a "special resolution" required under Section 51 of the NS Act to approve the
Exchange.
2.25 Board Approval. The Board of Directors of Target has (i)
approved this Agreement and the Reorganization (including the Articles
contemplated therein), (ii) determined that the Reorganization is in the best
interests of the stockholders of Target and is on terms that are fair to such
shareholders and (iii) recommended that the shareholders of Target approve this
Agreement and consummation of the Reorganization.
2.26 Voting Agreements; Irrevocable Proxies. The holders of
more than two-thirds (2/3) of all shares of Target Common Stock issued and
outstanding, have agreed in writing to vote for approval of the Reorganization
(including the Articles contemplated therein) pursuant to agreements attached
hereto as Exhibit A ("Voting Agreements"), and pursuant to Irrevocable Proxies
in the form attached as an exhibit to the Voting Agreements
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("Irrevocable Proxies"). The foregoing Voting Agreements and Irrevocable Proxies
are in full force and effect and are valid and binding in accordance with their
terms.
2.27 Inventory. The inventories shown on the Financial
Statements or thereafter acquired by Target, consisted of items of a quantity
and quality usable or saleable in the ordinary course of business. Since March
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 generally accepted accounting principles applied on a consistent basis.
Since March 31, 1997, due provision has been 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
30, 1997, of Target had no inventory in the distribution channel.
2.28 Accounts Receivable. Subject to any reserves set forth in
the Financial Statements, the accounts 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 that may be sustained on realization of the receivables.
2.29 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 March 31, 1997 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. 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.
2.30 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:
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(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 Canadian 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 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 or,
to Target's knowledge, any of its shareholders does not deal at arm's length
within the meaning of the Income Tax Act (Canada); or
(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 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.
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2.32 OC48MUX. The design, development, license or sale of the
OC48MUX will not conflict with or trigger any rights under any prior or existing
design or development agreement between Target and any third party.
2.33 Representations Complete. None of the representations or
warranties made by Target herein or in any Schedule hereto, including the Target
Disclosure Schedules, 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 misleading.
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, which document refers to the specific Sections or subsections in this
Agreement to which each such exception relates (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 true and correct copy of
the Articles of Incorporation and Bylaws or other charter or organizational
documents, as applicable, of Acquiror to Target. Neither Acquiror nor any of its
subsidiaries is in violation of any of the provisions of its Articles of
Incorporation or Bylaws or other charter or 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. 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.
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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 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.
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, in each case 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
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applicable to Acquiror or any of its subsidiaries or their properties or assets,
except where such conflict, violation, default, termination, cancellation or
acceleration with respect to the foregoing provisions of (ii) would not have had
and would not reasonably be expected to have a Material Adverse Effect on
Acquiror. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, is required by or 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 applicable
requirements, if any, of the OSA and other relevant Canadian securities
statutes, (ii) notification under Section 12 of the Investment Canada Act, (iii)
the filing and recordation of appropriate Articles as required by the CBCA, (iv)
the filing of a Current Report on Form 8-K with the SEC and the NASD within 15
days after the Closing Date, (v) any filings as may be required under applicable
state securities laws and the securities laws of any foreign country, (vi) such
filings as may be required under HSR, (vii) 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 or exchange of the
Exchangeable Shares in the Reorganization and upon exercise of the options and
warrants under the Target Stock Options and Target Warrants, respectively, and
(vii) such other consents, authorizations, filings, approvals and registrations
which, if not obtained or made, would not have a Material Adverse Effect on
Acquiror and would not prevent or materially alter or delay any of the
transactions contemplated by this Agreement.
3.4 SEC Documents; Financial Statements. Acquiror has made
available to Target a true and complete copy of each statement, report,
registration statement (with the prospectus in the form filed pursuant to Rule
424(b) of the Securities Act), definitive proxy statement, and other filing
filed with the SEC by Acquiror since 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 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
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prepared in accordance with generally accepted accounting principles applied on
a basis consistent throughout the periods indicated and consistent with each
other (except as may be indicated in the notes thereto or, in the case of
unaudited statements included in Quarterly Reports on Form 10-Q, as permitted by
Form 10-Q of the SEC). The Acquiror Financial Statements fairly present the
consolidated financial condition and operating results of Acquiror and its
subsidiaries at the dates and during the periods indicated therein (subject, in
the case of unaudited statements, to normal, recurring year-end adjustments).
There has been no change in Acquiror accounting policies except as described in
the notes to the Acquiror Financial Statements.
3.5 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 other than in the ordinary course of
business and consistent with past practice; (iii) any change in accounting
methods or practices (including any change in depreciation or amortization
policies or rates) by Acquiror or any of its subsidiaries or any revaluation by
Acquiror of any of its or its subsidiaries' assets; (iv) any declaration,
setting aside, or payment of a dividend or other distribution with respect to
the shares of Acquiror, or any direct or indirect redemption, purchase or other
acquisition by Acquiror of any of its shares of capital stock; (v) any material
contract entered into by Acquiror, other than in the ordinary course of business
and as made available to Target prior hereto, 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 (v) (other than negotiations with Target and its
representatives regarding the transactions contemplated by this Agreement).
3.6 Absence of Undisclosed Liabilities. Acquiror has no
material obligations or liabilities of any nature (matured or unmatured, fixed
or contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet included in Acquiror's Quarterly Report on Form 10-Q for the
period ended January 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 GAAP, 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
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knowledge of Acquiror or any of its subsidiaries, any of their respective
directors or officers (in their capacities as such) that could prevent, enjoin,
alter or materially delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a Material Adverse
Effect on 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 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
unanimously (i) approved this Agreement and the Reorganization and (ii)
determined that the Reorganization is in the best interests of its stockholders
and is on terms that are fair to such stockholders.
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, 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.
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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 to (i) good faith disputes
over such debts or taxes and (ii) Acquiror's consent to the filing of any
material Tax Returns) to pay or perform other obligations when due, and to use
all reasonable efforts consistent with past practice and policies to preserve
intact its and its subsidiaries' present business organizations, use its best
efforts consistent with past practice to keep available the services of its and
its subsidiaries' present officers and key employees and use its best efforts
consistent with past practice to preserve its and its subsidiaries'
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it or its subsidiaries, to the end that its
and its subsidiaries' goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Each of Target and Acquiror agrees to 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 on it. 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;
(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 employee stock plans or director stock plans or authorize cash payments in
exchange for any options or other rights granted under any of such plans.
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(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 to do, cause or permit any of the
following, without the prior written consent of Acquiror, which consent shall
not be unreasonably withheld:
(a) Material Contracts. Enter into any contract or
commitment, or violate, amend or otherwise modify or waive any of the terms of
any of its contracts, other than in the ordinary course of business consistent
with past practice and in no event shall such contract, commitment, amendment,
modification or waiver be in excess of $20,000;
(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, with the prior written consent of Acquiror which will not be unreasonably
withheld, grant options for the purchase of Target Common Stock under the Target
Stock Options.
(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 subsidiaries' business, taken
as a whole, except in the ordinary course of business consistent with past
practice;
(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;
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(g) Leases. Enter into any operating lease in excess of
an aggregate 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;
(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, 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 (A) payments made pursuant to standard written agreements outstanding on
the date hereof or (B) grants which are made in the ordinary course of business
in accordance with its standard past practice;
(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, or
acquire or agree to acquire any equity securities of any corporation,
partnership, association or business organization;
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(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;
(q) Notices. Target shall give all notices and other
information required to be given to the employees of Target, and any applicable
governmental authority 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 (defined below) or (ii) subject to the terms of
the immediately following sentence, engage in negotiations with, or disclose any
nonpublic information relating to Target or any of it subsidiaries to, or afford
access to the properties, books or records of Target or any of its subsidiaries
to, any person that has advised Target that it may be considering making, or
that has made, a Takeover Proposal. 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 stockholders
from a financial point of view than the transaction contemplated by the
Agreement (any such more favorable Takeover Proposal being referred to in this
Agreement as a "Superior Proposal") and the Board of Directors of Target
determines in good faith after consultation with outside legal counsel that it
is necessary for the Board of Directors of Target to comply with its fiduciary
duties to 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
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party, if the Superior Proposal is in writing, or a complete and accurate
written summary thereof, if it is not in writing, and provides Acquiror with all
documents containing or referring to non-public information of Target that are
supplied to such third party; provided, further, that (A) the Board of Directors
of Target has determined, with the advice of Target's investment bankers, that
such third party is capable of making a Superior Proposal upon satisfactory
completion of such third party's review of the information supplied by Target,
(B) the third party has stated that it intends to make a Superior Proposal, (C)
Target may not provide any non-public information to any such third party if it
has not prior to the date thereof provided such information to Acquiror or
Acquiror's representatives, (D) Target notifies Acquiror in advance of any
disclosure of non-public information to any such third party, with a description
of the information proposed to be disclosed, and (E) Target provides such
non-public information pursuant to a non-disclosure agreement at least as
restrictive 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 non-public information relating to Target
or any of its subsidiaries or for access to the properties, books or records of
Target or any of its subsidiaries by any person that has advised Target that it
may be considering making, or that has made, a Takeover Proposal and will keep
Acquiror fully informed of the status and details of any such Takeover Proposal
notice, request or any correspondence or communications related thereto and
shall provide Acquiror with a true and complete copy of such Takeover Proposal
notice or request or correspondence or communications related thereto, if it is
in writing, or a complete written summary thereof, if it is not in writing. For
purposes of this Agreement, "Takeover Proposal" means any offer or proposal for,
or any indication of interest in, an amalgamation, acquisition, arrangement,
merger or other business combination involving Target or any of its subsidiaries
or the acquisition of any significant equity interest in, or a significant
portion of the assets of, Target or any of its subsidiaries, other than the
transactions contemplated by this Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Target Stockholder Materials. As soon as practicable after
the execution of this Agreement, Target shall prepare in consultation with
Acquiror, with the reasonable cooperation of Acquiror, the Stockholder Materials
for the shareholders of Target to approve this Agreement, the Reorganization and
the transactions contemplated hereby. Acquiror and Target shall each use its
best efforts to cause the Stockholder Materials to comply with applicable
federal, state and provincial corporate and 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 Stockholder Materials,
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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 Stockholder Materials. 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 Stockholder
Materials in order to make the statements contained or incorporated by reference
therein not misleading or to comply with applicable law. The Stockholder
Materials shall contain the recommendation of the Board of Directors of Target
that the Target shareholders approve the Reorganization and this Agreement and
the conclusion of the Board of Directors that the terms and conditions of the
Reorganization 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 Stockholder Materials 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 Stockholders. Target shall promptly (and in any
event within seven days) after the date hereof take all action necessary in
accordance with Canadian Law and its Amended Articles of Incorporation and
Bylaws to convene the Target Stockholders Proceeding for the purpose of voting
upon the approval of the Reorganization. Target shall consult with Acquiror
regarding the date of any Target stockholders' meeting called for such purpose
and use all reasonable efforts and shall not postpone or adjourn (other than for
the absence of a quorum) the Target Stockholders Proceeding without the consent
of Acquiror. Subject to Section 5.1, Target shall use its best efforts to
solicit from stockholders of Target proxies in favor of the Reorganization and
shall take all other action necessary or advisable to secure the vote or consent
of stockholders required by the CBCA, the NS Act, the OSA and all other
applicable laws to effect the Reorganization.
5.3 Access to Information.
(a) Target shall afford Acquiror and its accountants,
counsel and other representatives, reasonable access during normal business
hours during the period prior to the Effective Time to (i) all of Target's and
its subsidiaries' properties, books, contracts, commitments and records, and
(ii) all other information concerning the business, properties and personnel of
Target and its subsidiaries as Acquiror may reasonably request. Target agrees to
provide to Acquiror and its accountants, counsel and other representatives
copies of internal financial statements promptly upon request.
(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
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basis with one or more representatives of the other party to report operational
matters of materiality and the general status of ongoing operations.
5.4 Confidentiality. The parties acknowledge that each of
Acquiror and Target have previously executed a non-disclosure agreement dated
May 22, 1997 (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 (i) as may be required by law or
(ii) in the case of Acquiror, by obligations pursuant to any listing agreement
with any national securities exchange or with the NASD.
5.6 Consents; Cooperation Reorganization.
(a) Subject to Section 5.17, 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 Reorganization, including those required under the CBCA, NS Act, OSA or HSR
(if any), and shall use commercially reasonable efforts to obtain all necessary
consents, waivers and approvals under any of its material contracts in
connection with the Reorganization 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 the CBCA, NS Act, OSA or HSR or any other federal, state or
provincial antitrust or fair trade law.
(b) Each of Acquiror and Target shall use all reasonable
efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the transactions contemplated by this
Agreement under HSR, the Sherman Act, as amended, the Clayton Act, as amended,
the Federal Trade Commission Act, as amended, and any other federal, state or
foreign or Canadian Federal or provincial 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 at Acquiror's cost and use all
reasonable efforts vigorously to contest and resist any such action or
proceeding
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and to have vacated, lifted, reversed, or overturned any decree, judgment,
injunction or other order, whether temporary, preliminary or permanent (each an
"Order"), that is in effect and that prohibits, prevents, or restricts
consummation of the Reorganization 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) October 31, 1997 or (ii)
the date of a ruling preliminarily enjoining the Reorganization issued by a
court of competent jurisdiction. Each of Acquiror and Target shall use all
reasonable efforts to take such action as may be required to cause the
expiration of the notice periods under HSR or other Antitrust Laws with respect
to such transactions as promptly as possible after the execution of this
Agreement.
(c) Notwithstanding anything to the contrary in Section
5.6(a) or (b), (i) neither Acquiror nor any of it subsidiaries shall be required
to divest any of their respective businesses, product lines or assets, or to
take or agree to take any other action or agree to any limitation that could
reasonably be expected to have a Material Adverse Effect on Acquiror or of
Acquiror combined with Target 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 Shareholders' Representation Agreements. Target will use
its commercially reasonable best efforts to cause all Target shareholders to
execute and deliver to Acquiror a Shareholder's Representation Agreement
substantially in the form attached hereto as Exhibit C (the "Shareholder's
Representation Agreement") which imposes certain restrictions regarding the
resale of Acquiror Common Stock received upon the exercise of rights of holders
of Exchangeable Shares. Acquiror shall be entitled to place appropriate legends
on the certificates evidencing any Acquiror Common Stock or Exchangeable Shares
to be received by such Affiliates of Target pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for Acquiror Common Stock, consistent with the terms of such Shareholders'
Representation Agreements.
5.8 Voting Agreement. Target shall use its commercially
reasonable best efforts, on behalf of Acquiror and pursuant to the request of
Acquiror, to cause each Target stockholder who is not validly bound by a Voting
Agreement and an Irrevocable Proxy to duly execute and deliver to Acquiror a
Voting Agreement substantially in the form of Exhibit A hereto, and an
Irrevocable Proxy substantially in the form as attached as an exhibit thereto,
as soon as practicable following the execution of this Agreement.
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
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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 Securities and 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 Reorganization. Target shall use its best efforts to
assist Acquiror as may be necessary to comply with the securities and blue sky
laws of all jurisdictions which are applicable in connection with the issuance
of Acquiror Common Stock in connection with the Reorganization.
5.11 Employee Benefit Plans. At the Effective Time, the Target
Stock Options and Target Warrants, whether vested or unvested, will be amended
to relate to Exchangeable Shares (instead of Target Common Shares). Target
represents and warrants to Acquiror that Schedule 5.11 hereto sets forth a true
and complete list as of the date hereof of all holders of outstanding options
and warrants of Target, including the number of shares of Target Common Stock
subject to each such option and warrant, the exercise or vesting schedule, the
exercise price per share and the term of each such option and warrant. On the
date immediately preceding the Effective Date, Target shall deliver to Acquiror
an updated Schedule 5.11 hereto current as of such date. Each such option and
warrant so assumed by Acquiror under this Agreement shall continue to have, and
be subject to, the same terms and conditions, immediately prior to the Effective
Date, except that (i) such option will be exercisable for that number of whole
shares of Exchangeable Shares equal to the product of the number of shares of
Target Common Stock that were issuable upon exercise of such option or warrant,
as the case may be, immediately prior to the Effective Date multiplied by the
Exchange Ratio and rounded down to the nearest whole number of shares of
Exchangeable Shares, and (ii) the per share exercise price for the Exchangeable
Shares issuable upon exercise of such assumed option or warrant, as the case may
be, will be equal to the quotient determined by dividing the exercise price per
share of Target Common Stock at which such option or warrant, as the case may
be, was exercisable immediately prior to the Effective Date by the Exchange
Ratio, rounded up to the nearest whole cent. Consistent with the terms of the
documents governing the outstanding options or warrants, as the case may be, the
Reorganization will not terminate any of the outstanding options or warrants or
accelerate the exercisability or vesting of such options or warrants or the
Exchangeable Shares which will be subject to those options upon the Acquiror's
assumption of the options in the Reorganization. Within 20 business days after
the Effective Date, Target will issue to each person who, immediately prior to
the Effective Date was a holder of a Target Option or Target Warrant a document
in form and substance satisfactory to Acquiror.
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5.12 Escrow Agreement. On or before the Effective Date, 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 D ("Escrow Agreement").
5.13 Form S-3; Form S-8. Acquiror agrees to file with the SEC
(i) no later than twenty (20) days after the Closing, a registration statement
on Form S-3 covering the shares of Acquiror Common Stock issuable upon exchange
of Exchangeable Shares issued on the Effective Date pursuant to the
Reorganization, and (ii) no later than twenty (20) days after the Closing, a
registration statement on Form S-8 covering the shares of Acquiror Common Stock
issuable pursuant to Exchangeable Shares issued upon exercise of outstanding
options of Target. Target shall cooperate with and assist Acquiror in the
preparation of such registration statements.
5.14 Employees. Set forth on each of Schedule 5.14 is a list
of employees of Target to whom Acquiror will make an offer of employment
comparable to such employee's current position, effective at the Closing.
Acquiror will negotiate in good faith to hire the employees on Schedule 5.14 and
will incentivize such employees consistent with its policies regarding other
employees of Acquiror, including the issuance of options to purchase the Common
Stock of Acquiror in such amounts and on such terms as determined by Acquiror in
its sole discretion. Target shall cooperate with Acquiror to assist Acquiror in
employing such employees. Acquiror shall have no obligation to make an offer of
employment to any employee of Target except those listed on Schedule 5.14.
5.15 Listing of Additional Shares. Prior to the Effective
Time, Acquiror shall file with the Nasdaq National Market a Notification Form
for Listing of Additional Shares with respect to the shares referred to in
Section 6.1(e).
5.16 Intentionally Left Blank.
5.17 Canadian Securities Act. Acquiror covenants to promptly
apply for, and use its best efforts to obtain prior to closing, and in any event
within 120 days of the Effective Date, all necessary consents, receipts,
approvals, or orders from the applicable Canadian securities regulatory
authorities to ensure that each of the transactions contemplated in this
Agreement, the Support Agreement and the Voting and Exchange Trust Agreement,
may be completed in accordance with the applicable securities laws, regulations,
policies and rules of such Canadian provinces where compliance with such laws,
regulations, policies and rules is required in connection with the transactions.
5.18 Issuance of Acquiror Common Stock. On or prior to the
Effective Time, Acquiror shall issue and deliver to the Trustee under the Voting
and Exchange Trust Agreement that number of Shares of Acquiror Common Stock
issuable of the Exchangeable Shares outstanding at the Effective Time.
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5.19 Best Efforts and Further Assurances. Each of the parties
to this Agreement shall use its best efforts to effectuate the transactions
contemplated hereby and to fulfill and cause to be fulfilled the conditions to
closing under this Agreement. Each party hereto, at the reasonable request of
another party hereto, shall execute and deliver such other instruments and do
and perform such other acts and things as may be necessary or desirable for
effecting completely the consummation of this Agreement and the transactions
contemplated hereby.
ARTICLE VI
CONDITIONS TO THE REORGANIZATION
6.1 Conditions to Obligations of Each Party to Effect the
Reorganization. The respective obligations of each party to this Agreement to
consummate and effect this Agreement, the Reorganization and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, by agreement of all the parties hereto:
(a) Stockholder Approval. This Agreement and the
Reorganization (including the Continuances, the Amalgamation and the Exchange)
shall have been approved and adopted by the unanimous consent resolution of all
shareholders of Target and no other vote is required under the CBCA, the NS Act
or otherwise.
(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 Reorganization, 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
Reorganization, which makes the consummation of the Reorganization illegal. In
the event an injunction or other order shall have been issued, each party agrees
to use reasonable diligent efforts to have such injunction or other order
lifted.
(c) Reorganization. The Reorganization shall have been
effected in accordance with Section 1.2 and all necessary documentation shall
have been issued by the Registrar of Joint Stock Companies under the NS Act,
including the Certificates of Continuance for Target and Acquisition Corporation
and the memorandum and articles of association issued in connection therewith,
the Certificate of Amalgamation and the requisite memorandum and articles of
association of Amalco/Unlimco and the certified copy of the special resolution
approving the Exchange, all in form satisfactory to both parties.
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(d) Governmental Approval. Subject to Section 5.17,
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 Reorganization and the
several transactions contemplated hereby, including such approvals, waivers and
consents as may be required under the CBCA, the NS Act, the OSA, the Securities
Act, state Blue Sky laws, and under HSR.
(e) Listing of Additional Shares. The filing with the
Nasdaq National Market of a Notification Form for Listing of Additional Shares
with respect to the shares of Acquiror Common Stock issuable upon exchange of
the Exchangeable Shares issuable in the Reorganization and upon exercise of the
Target Stock Options and Target Warrants shall have been made.
(f) Tax Opinion. Acquiror and Target shall have received
substantially identical written opinions of Stikeman Elliott and LaBarge
Weinstein, respectively, in form and substance reasonably satisfactory to them,
to the effect that the Exchangeable Shares will be generally received by
resident Canadian shareholders of Target without recognition of any gain or loss
pursuant to the Canadian Tax Act.
(g) Escrow Agreement. 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 D.
6.2 Additional Conditions to Obligations of Target. The
obligations of Target to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Target:
(a) Representations, Warranties and Covenants. (i) The
representations and warranties of Acquiror 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 Date as though such representations and warranties were
made on and as of such date and (ii) Acquiror and 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 Date.
(b) Certificate of Acquiror. Target shall have been
provided with a certificate executed on behalf of Acquiror by its President and
its Chief Financial Officer to the effect that, as of the Effective Time:
(i) all representations and warranties made by
Acquiror under this Agreement are true and complete in all material respects;
and
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(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 each of Brobeck, Phleger & Harrison LLP, general counsel to
Acquiror, and Stikeman Elliott, Canadian counsel to Acquiror, in form and
substance reasonably agreeable to Target.
(d) No Material Adverse Changes. There shall not have
occurred any material adverse change in the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations, results of operations or prospects of Acquiror and its subsidiaries,
taken as a whole.
(e) Third Party Consents. Target shall have been furnished
with evidence satisfactory to it of the consent or approval of those persons
whose consent or approval shall be required in connection with the
Reorganization under any material contract of Acquiror or any of its
subsidiaries or otherwise.
(f) Injunctions or Restraints on Conduct of Business. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint provision limiting or restricting Acquiror's business following the
Reorganization 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.
(g) Support Agreement. Acquiror shall have executed a
Support Agreement substantially in the form attached hereto as Exhibit F.
(h) Voting and Exchange Trust Agreement. Acquiror and a
suitable trustee shall have executed a Voting and Exchange Trust Agreement
substantially in the form of Exhibit B hereto.
(i) Indemnity. Acquiror shall have executed and delivered
an indemnity in favor of the holders of Exchangeable Shares from time to time,
such indemnity to be in a form mutually satisfactory to both parties either to
be in a separate document or to be contained in the Voting and Exchange Trust
Agreement.
6.3 Additional Conditions to the Obligations of Acquiror. The
obligations of Acquiror to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Acquiror:
(a) Representations, Warranties and Covenants. (i) The
representations and warranties of Target in this Agreement shall be true and
correct in all
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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 Date as though such representations and warranties were made on and as
of such date 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 Date.
(b) Certificate of Target. Acquiror shall have been
provided with a certificate executed on behalf of Target by its President and
Chief Financial Officer to the effect that, as of the Effective Time:
(i) all representations and warranties made by Target
under this Agreement are true and complete in all material respects; and
(ii) all covenants, obligations and conditions of this
Agreement to be performed by Target on or before such date have been so
performed in all material respects.
(c) Legal Opinion. Acquiror shall have received a legal
opinion from LaBarge Weinstein, legal counsel to Target, in form and substance
reasonably agreeable to Target.
(d) Third Party Consents. Acquiror shall have been
furnished with evidence satisfactory to it of the consent or approval of those
persons whose consent or approval shall be required in connection with the
Reorganization under any material contract of Target or any of its subsidiaries
or otherwise.
(e) Injunctions or Restraints on Conduct of Business. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint provision limiting or restricting Acquiror's conduct or operation of
the business of Target and its subsidiaries, following the Reorganization 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.
(f) No Material Adverse Changes. There shall not have
occurred any material adverse change in the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations, results of operations or prospects of Target and its subsidiaries,
taken as a whole.
(g) Shareholder Representation Agreements. Acquiror shall
have received from each of the securityholders of Target an executed Shareholder
Representation Agreement in substantially the form attached hereto as Exhibit C.
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(h) Employment and Non-Competition Agreements. The
employees of Target set forth on Schedule 6.3(h) shall have accepted employment
with Acquiror and shall have entered into an Employment and Non-Competition
Agreement substantially in the respective forms attached hereto as Exhibits E-1,
et. seq.
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
Reorganization by the stockholders 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 October 31,
1997 (provided, that a later date as 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
Reorganization 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, in any
material respect, any representation, warranty or obligation hereunder and such
breach shall not have been cured 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
Reorganization 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 Stockholders Meeting by July 31, 1997 (provided that the right to
terminate this Agreement by Acquiror under clause (i), (ii) or (iii) of this
Section 7.1 shall not be available to Acquiror if Acquiror is at that time in
willful breach of this Agreement);
(d) by Target, if Acquiror shall breach, in any material
respect, any representation, warranty or obligation hereunder and such breach
shall not have been cured within five business 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(c) shall not be available to
Target if Target is at that time in willful breach of this Agreement);
(e) by either Acquiror or Target if a Trigger Event (as
defined in Section 7.3(f)) or Takeover Proposal shall have occurred and the
Board of Directors of Target
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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
stockholders of Target;
(f) by either Acquiror or Target if (i) any permanent
injunction or other order of a court or other competent authority preventing the
consummation of the Reorganization shall have become final and nonappealable or
(ii) if any required approval of the stockholders of Target shall not have been
obtained by reason of the failure to obtain the required vote upon a vote held
at a duly held meeting of stockholders or at any adjournment thereof; or
(g) by Target, in the event (i) of the acquisition, by any
person or group of persons (other than persons or groups of persons who (A)
acquired shares of Acquiror Common Stock pursuant to any merger of Acquiror in
which Acquiror was the surviving corporation or any acquisition by Acquiror of
all or substantially all of the capital stock or assets of another person or (B)
disclose their beneficial ownership of shares of Acquiror Common Stock on
Schedule 13G under the Exchange Act), of beneficial ownership of 30% or more of
the outstanding shares of Acquiror Common Stock (the terms "person," "group" and
"beneficial ownership" having the meanings ascribed thereto in Section 13(d) of
the Exchange Act and the regulations promulgated thereunder), or (ii) the Board
of Directors of Acquiror accepts or publicly recommends acceptance of an offer
from a third party to acquire 50% or more of the outstanding shares of Acquiror
Common Stock or of Acquiror's consolidated assets.
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, stockholders or affiliates, except to
the extent that such termination results from the breach by a party hereto of
any of its representations, warranties or covenants set forth in this Agreement;
provided that, the provisions of Section 5.4 (Confidentiality), Section 7.3
(Expenses and Termination Fees) and this Section 7.2 shall remain in full force
and effect and survive any termination of this Agreement.
7.3 Expenses and Termination Fees.
(a) Subject to Sections 7.3(b), (c) and (d), whether or
not the Reorganization 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.
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(b) In the event that (i) either Acquiror or Target shall
terminate this Agreement pursuant to Section 7.1(e), (ii) either Acquiror or
Target shall terminate this Agreement pursuant to Section 7.1(f)(ii) following a
failure of the stockholders of Target to approve this Agreement and, prior to
the time of the meeting of Target's stockholders, there shall have been (A) a
Trigger Event or (B) a Takeover Proposal with respect to Target which at the
time of the Target Stockholder Proceeding 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)(i) or (ii), due in whole or in part to
any failure by Target to use its commercially reasonable 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 with respect to
Target or (B) a Takeover Proposal with respect to Target 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, the Target shall
promptly pay to Acquiror the sum of $5,732,372.
(c) In the event that either Acquiror or Target shall
terminate this Agreement pursuant to Section 7.1(f)(i), 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 addition, shall promptly pay to Acquiror
the sum of $500,000.
(d) 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). In the event that Target consummates, or enters
into an agreement contemplating, an Alternative Transaction (as defined below)
with a Third Party (as defined below) within twelve months following any such
termination of this Agreement, Target shall (at or prior thereto) pay to
Acquiror the sum of $5,732,373. As used herein, "Alternative Transaction" means
(i) a transaction pursuant to which any person (or group of persons) other than
Acquiror or its affiliates (a "Third Party") acquires (or publicly proposes to
acquire) more than 25% of the voting power of Target securityholders, whether
from Target or pursuant to a tender offer or exchange offer or otherwise, (ii) a
merger, amalgamation, reorganization, acquisition or other business combination
involving Target pursuant to which any Third Party acquires (or publicly
proposes to acquire) more than 25% of the outstanding equity securities of
Target or the entity surviving such merger or business combination or (iii) any
other transaction pursuant to which any Third Party acquires (or publicly
proposes to acquire) control of assets (including for this purpose the
outstanding equity securities of
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subsidiaries of Target, and the entity surviving any merger or business
combination including any of them) of Target and its subsidiaries having a fair
market value equal to more than 25% of the fair market value of all the assets
of Target and its subsidiaries, taken as a whole, immediately prior to such
transaction (or proposal).
(e) In the event that Acquiror shall terminate this
Agreement and Acquiror is not thereupon entitled to receive any of the sums or
expense reimbursement provided in Sections 7.3(b) through (d) above, Acquiror
shall promptly reimburse Target 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, Acquiror shall
promptly pay to Target the sum of $5,732,373. Such payments shall be Target's
sole and exclusive remedy in respect of any such termination hereof.
(f) As used herein, a "Trigger Event" shall occur if any
Person, after the date hereof and prior to the Effective Date, acquires, other
than pursuant to an order of a court or other competent authority, securities
which together with other securities owned or controlled represent 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 securityholders;
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.
(g) In the event 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
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expenses incurred by Target in connection with this Agreement and the
transactions contemplated hereby (including, without limitation, the fees and
expenses of its advisors, accountants and legal counsel).
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 Common Stock, (ii) alter or change any term
of the Articles of Incorporation of the Continuing Corporation to be effected by
the Reorganization, or (iii) alter or change any of the terms and conditions of
the Agreement if such alteration or change would adversely affect the holders of
Target Common Stock.
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, 106,031 shares of Acquiror Common Stock and 106,031 shares of Exchangeable
Shares (collectively, 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. The Escrow Fund (but only up to a maximum of 106,031 shares of
each of Acquiror Common Stock and of Exchangeable Shares) shall be available to
compensate Acquiror pursuant to the indemnification obligations of the
shareholders of Target. Notwithstanding anything in this Agreement to the
contrary, the Escrow Fund shall be Acquiror's sole recourse against the
shareholders of Target (which recourse shall be on a pro rata basis) for any
misrepresentation or breach of or default in connection with any of the
representations, warranties, agreements and covenants given or made by Target in
this Agreement, the Target Disclosure Schedules or any exhibit or Schedule to
this Agreement.
8.2 Indemnification.
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(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 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 or indemnities from third parties
(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 security for this
indemnity obligation subject to the limitations in this Agreement.
(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 Reorganization and this Agreement. Nothing in this Agreement
shall limit the liability of (i) Target for any breach of any representation,
warranty or covenant if the Reorganization is not consummated, or (ii) of any
Target shareholder in connection with any breach by such shareholder of the
Voting Agreement, Affiliate 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 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. 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 with
respect to one-half (1/2) of the Escrow Shares (to be comprised of equal amounts
of Acquiror Common Stock and Exchangeable Shares) at the expiration of six
months after the Effective Date, and with respect to the remaining Escrow Shares
at the expiration of twelve (12) months after the Effective Date; provided,
however, that a portion of the Escrow Shares, which, in the reasonable judgment
of Acquiror, subject to the objection of the Shareholders' Agent and the
subsequent arbitration of the matter in the manner provided in Section 8.6
hereof, is necessary 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
42.
<PAGE> 48
circumstances existing prior to expiration of the Escrow Period, shall remain in
the Escrow Fund until such claims have been resolved.
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 Damages existing in an aggregate
amount greater than $150,000, 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 this
Article VIII, deliver to Acquiror out of the Escrow Fund, as promptly as
practicable, Acquiror Common Stock, Exchangeable Shares 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, each Escrow Share in the Escrow Fund shall
be valued at $66.656.
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
8.7 below) and for a period of forty-five (45) days after such delivery, the
Escrow Agent shall make no delivery of Escrow Shares or other property pursuant
to Section 8.4 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 8.4 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, 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
43.
<PAGE> 49
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 Escrow Shares 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 Toronto, Ontario, Canada under the commercial rules then in effect of
the Arbitration Act of Ontario. 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; otherwise, the Target shareholders for whom
shares of Target Common Stock and Exchangeable Shares 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, and the expenses, including without limitation,
attorneys' fees and costs, reasonably incurred by the other party to the
arbitration.
8.8 Shareholders' Agent.
(a) Antoine Paquin 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 Escrow Shares 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
44.
<PAGE> 50
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 Escrow Shares 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 Agent.
8.10 Third-Party Claims. In the event Acquiror becomes aware
of a third-party claim which Acquiror believe may result in a demand against the
Escrow Fund, Acquiror shall notify the Shareholders' Agent of such claim, and
the Shareholders' Agent and the Target shareholders for whom Escrow Shares
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 affect 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 8.5 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.
45.
<PAGE> 51
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's Representation Agreements),
5.11 (Employee Benefit Plans), 5.13 (Form S-3); Form S- 8), 5.16 (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
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
Attention: Edward M. Leonard
Facsimile No.: (415) 496-2885
Telephone No.: (415) 424-0160
Stikeman Elliott
Suite 5300
Commerce Court West
Toronto, Ontario
46.
<PAGE> 52
Canada M5L 1B9
Facsimile No.: (416) 869-0866
Telephone No.: (416) 869-5500
(b) if to Target, to:
Skystone Systems Corporation
146 Colonnade Road, Suite 201
Nepean, Ontario
Canada, KZE 7Y1
Attention: President
Facsimile No.: (613) 226-9561
Telephone No.: (613) 226-9556
with a copy to:
LaBarge Weinstein
33 Preston Street, 11th Floor
Ottawa, Ontario K15 5N4
Attention: Deborah L. Weinstein
Facsimile No.: (613) 231-3900
Telephone No.: (613) 231-3000
9.3 Interpretation. When a reference is made in this Agreement
to Exhibits or Schedules, such reference shall be to an Exhibit or Schedule to
this Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The phrase "made available" in this Agreement shall
mean that the information referred to has been made available if requested by
the party to whom such information is to be made available. The phrases "the
date of this Agreement", "the date hereof", and terms of similar import, unless
the context otherwise requires, shall be deemed to refer to the date specified
in the first paragraph of this Agreement. 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
47.
<PAGE> 53
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
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; (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as set forth in Sections 1.1, 1.3, 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 Province of Ontario 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 Province of Ontario
and the laws of Canada applicable therein 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 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.
48.
<PAGE> 54
9.10 Currency. All references to "$" or "dollars" herein shall
be to the lawful currency of United States dollars.
9.11 Expenses. Except as otherwise set forth herein, each
party will bear its respective expenses and fees of its own accountants,
attorneys, investment bankers and other professionals incurred with respect to
this Agreement and the transactions contemplated hereby. If the Reorganization
is consummated, Acquiror will pay the accounting fees and expenses and
attorneys' fees and expenses, not to exceed $185,000, incurred by Target in
connection with the Reorganization. The stockholders of Target shall pay any
such fees in excess of the above amount, on a pro-rate basis. 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 stockholders at Acquiror's
request, constitute "Damages" recoverable under the Escrow Agreement and such
Damages shall not be subject to the Escrow Basket.
49.
<PAGE> 55
IN WITNESS WHEREOF, Acquiror and Target have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized, all as of the date first written above.
CISCO SYSTEMS, INC.
By: /s/ John T. Chambers
----------------------------------
Name: John T. Chambers
Title: President and Chief Executive
Officer
SKYSTONE SYSTEMS CORPORATION
By: /s/ Antoine Pacquin
-----------------------------------
Name: Antoine Pacquin
Title: President
[SIGNATURE PAGE TO AMENDED AND RESTATED ACQUISITION AGREEMENT]
<PAGE> 1
EXHIBIT 2.2
AMENDING AGREEMENT
THIS AMENDING AGREEMENT is made and entered into as of July
25, 1997 by and between CISCO SYSTEMS, INC., a California corporation
("Acquiror") and SKYSTONE SYSTEMS INCORPORATED ("Skystone"), a corporation
continued and existing under the laws of Nova Scotia.
WHEREAS Acquiror and Skystone are parties to an Amended and
Restated Acquisition Agreement dated as of June 9, 1997 (the "Acquisition
Agreement") pursuant to which a Reorganization (as defined and described in the
Acquisition Agreement) was to take place resulting in Acquiror holding all of
the issued and outstanding common shares in the capital of Target, all upon the
terms and subject to the conditions set forth in the Acquisition Agreement;
AND WHEREAS Acquiror has determined that it would be to its
commercial benefit to establish a Nova Scotia unlimited liability company as a
vehicle for the holding of its investment in Target as contemplated in Schedule
"C" to the Acquisition Agreement (the "Alternative Structure");
AND WHEREAS Target has consented to the amendment of the
Acquisition Agreement and the implementation of the Alternative Structure (with
minor modifications) at the request of Acquiror, subject to the inclusion of the
terms and conditions set out below.
NOW THEREFORE (i) in consideration of Target consenting to the
use of the Nova Scotia unlimited liability company (as contemplated above) in
exchange for Acquiror providing the covenants set forth in Article XIV of the
Voting and Exchange Trust Agreement to be entered into between Acquiror,
Skystone Systems Company and Montreal Trust Company of Canada and (ii) in
consideration of the mutual covenants and agreements herein contained and
intending to be legally bound thereby, the parties hereto hereby agree as
follows:
1. DEFINED TERMS
Terms with initial capitals used herein shall have the same
meanings when used herein as in the Acquisition Agreement.
2. AMENDMENTS
2.1 The fourth recital to the Acquisition Agreement is hereby
deleted in its entirety and replaced with the following:
<PAGE> 2
- 2 -
"WHEREAS, all options to purchase Target Common Stock (the
"Target Common Stock"), whether vested or unvested, will be
assumed by Acquiror and will relate to Acquiror Common Stock
(the "Acquiror Common Stock")".
2.2 Section 1.2 of the Acquisition Agreement is hereby deleted in
its entirety and replaced by the following:
"1.2 Acquisition Structure. As promptly as practicable after
the satisfaction or waiver of the other conditions set out in
Article VI, the parties hereto shall cause the reorganization
to be effected utilizing the following steps and in the
following order (all of such steps are herein collectively
referred to as the "Reorganization"):
(a) each of Target and Acquisition Corporation
will be continued from the CBCA into the
Province of Nova Scotia as limited liability
companies under the provisions of the
Companies Act (Nova Scotia) (the "NS Act").
Such continuances (the "Continuances") will
each require a "special resolution" to be
effected by signed consent resolution of all
of their respective shareholders and the
issuance of Memorandum and Articles of
Association under the NS Act.
(b) Acquiror will incorporate an unlimited
liability company ("Unlimco") under the NS
Act as a wholly-owned subsidiary by way of
Memorandum and Articles of Association.
(c) Acquiror will incorporate another unlimited
liability company ("Special Unlimco") under
the NS Act as a wholly-owned subsidiary by
way of Memorandum and Articles of
Association.
(d) Acquisition Corporation and Special Unlimco
will be amalgamated (the "Special
Amalgamation") by way of amalgamation
agreement under the NS Act and the resulting
company ("Special Amalco") will be an
unlimited liability company under the NS
Act. Each of the amalgamating companies will
approve the amalgamation by "special
resolution" to be effected by signed consent resolution
<PAGE> 3
- 3 -
signed by all of its shareholders. The authorized capital of
Special Amalco will be 25,000,000 shares of common stock.
(e) Target and Unlimco will amalgamate (the "Amalgamation") by way
of Amalgamation Agreement under the NS Act and the resulting
company ("Amalco/Unlimco") will be an unlimited liability
company under the NS Act. Each of the amalgamating companies
will approve the amalgamation by "special resolution" to be
effected by signed consent resolution signed by all of its
shareholders. The authorized capital of Amalco/Unlimco will
consist of 100,000,000 common shares, 10,000,000 Class A
common shares and 10,000,000 Exchangeable Shares having the
respective rights, privileges, restrictions and conditions as
set forth on Schedule "A" annexed hereto.
Upon the Amalgamation the shares of each of the amalgamating
companies will be converted into common shares of
Amalco/Unlimco as follows:
(i) the issued and outstanding shares of Unlimco will be
converted into common shares of Amalco/Unlimco; and
(ii) All of the issued and outstanding shares of Target will
be converted into Class A common shares of
Amalco/Unlimco, except for Target Common Stock held by
holders who give prior notice to Target to convert all
or a designated number of such shares into common shares
of Amalco/Unlimco.
(f) Immediately following the Amalgamation, the memorandum and
articles of association of Amalco will be amended to provide
for the exchange of the Class A common shares of
Amalco/Unlimco into Exchangeable Shares (the "Exchange") based
on the Exchange Ratio (as defined herein) and to split the
issued and outstanding common shares into 50,000,000 such
shares. Such amendment will be effected by signed consent
resolution signed by all shareholders. A certified copy of
this Special Resolution
<PAGE> 4
- 4 -
will be filed with the Companies Branch in Nova Scotia. For
purposes of this Acquisition Agreement, the "Effective Time"
and "Effective Date" will be the date and time of filing of
the certified copy of the Special Resolution."
2.3 Schedule A to the Acquisition Agreement is hereby deleted in
its entirety and replaced by Schedule A annexed hereto.
2.4 Section 2.3 of the Acquisition Agreement is hereby amended by
deleting the words "(iii) the filing and recordation of articles of amendment
and other appropriate reorganization or other documents as required by the CBCA"
with the following:
"(iii) the filing and recordation of (A) a certificate of
continuance under the NS Act, along with Memorandum and Articles
of Association, in form satisfactory to both parties, for Target,
(B) the obtaining of requisite Court approval for each of the
Amalgamation and the Special Amalgamation, as required by the NS
Act, and the subsequent filing and recordation under the NS Act of
the applicable amalgamation agreements, along with a Memorandum
and Articles of Association, in form satisfactory to both parties,
(C) the filing and recordation under the NS Act of a certified
copy of a special resolution effecting the Exchange, and such
other documents as may be necessary or desirable to effect the
Reorganization."
2.5 Section 3.3(iii) is hereby deleted and replaced with "(iii) the
filing and recordation of an appropriate Memorandum and Articles of Association
under the NS Act,".
2.6 Section 5.11 is hereby deleted and replaced with the following:
"Employee Benefit Plan. At the Effective Time, the Target Stock
Options, whether vested or unvested, will be amended to relate to
Acquiror Common Stock (instead of Target Common Stock). Target
represents and warrants to Acquiror that Schedule 5.11 hereto sets
forth a true and complete list as of the date hereof of all
holders of outstanding options of Target, including the number of
shares of Target Common Stock subject to each such option, the
exercise of vesting schedule, the exercise price per share and the
term of each such option. On the date immediately preceding the
Effective 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
<PAGE> 5
- 5 -
conditions, immediately prior to the Effective Date, 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 Date multiplied
by the Exchange Ratio and rounded down to the nearest whole number
of Acquiror Common Stock, and (ii) the per share exercise price
for the 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 Date by the Exchange Ratio, rounded up to the nearest
whole cent. Consistent with the terms of the documents governing
the outstanding options, the Reorganization will not terminate any
of the outstanding options or accelerate the exercisability or
vesting of such options or the Acquiror Common Stock which will be
subject to those options upon the Acquiror's assumption of the
options in the Reorganization. Within 20 business days after the
Effective Date, Target will issue to each person who, immediately
prior to the Effective Date, was a holder of a Target Option a
document in form and substance satisfactory to Acquiror."
2.7 All references in Section 8.1 to the number "106,031" are hereby
deleted and replaced by the number "81,949".
2.8 The reference in Section 9.2(a) to the facsimile number of
Stikeman, Elliott is hereby deleted and replaced with the number "(416)
947-0866".
2.9 The references in Schedule B to the Acquisition Agreement to the
numbers "1,060,313" and "1,160,313" are hereby deleted and replaced by the
numbers "1,062,297" and "1,162,297", respectively.
3. CONFIRMATION. Save and accept as expressly amended hereby, the
Acquisition Agreement shall remain in full force and effect in accordance with
its terms and the Acquisition Agreement and this Amending Agreement shall be
read as one and the same instrument.
4. GOVERNING LAW. This Amending Agreement shall be governed by and
construed in accordance with the laws of the Province of Ontario and the laws of
Canada applicable therein.
<PAGE> 6
- 6 -
5. ENUREMENT. This Amending Agreement shall enure to the benefit of
and shall be binding upon the parties hereto and their respective successors and
assigns.
IN WITNESS WHEREOF, Acquiror and Skystone have caused this
Amending Agreement to be executed and delivered by their respective officers
thereunto duly authorized, all as of the date first above written.
CISCO SYSTEMS, INC.
as per: /s/ John T. Chambers
----------------------
SKYSTONE SYSTEMS INCORPORATED
as per: /s/ Antoine Pacquin
----------------------
<PAGE> 1
EXHIBIT 5.1
July 26, 1997
Skystone Systems Corporation Stikeman, Elliott
146 Colonnade Road, Suite 201 Commerce Court West, Suite 5300
Nepean, Ontario K1S 5N4 Toronto, Ontario M5L 1B9
Ladies and Gentlemen:
We have acted as counsel for Cisco Systems, Inc., a California
corporation ("Cisco"), in connection with the acquisition (the "Acquisition") of
Skystone Systems Corporation, a corporation incorporated under the Canada
Business Corporations Act ("Skystone"), pursuant to the Amended and Restated
Acquisition Agreement by and between Cisco and Skystone, dated as of June 9,
1997, as amended (the "Acquisition Agreement"). This opinion is rendered to you
pursuant to Section 6.2(c) of the Acquisition Agreement. Capitalized terms used
herein and not otherwise defined shall have the same meaning given to such terms
in the Acquisition 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 the Amended and
Restated Bylaws of Cisco and the records of the Board of Directors of Cisco
relating to the Acquisition. In addition, in connection with the Acquisition, we
have reviewed the Acquisition Agreement, the Voting and Exchange Trust
Agreement, the Support Agreement and the Escrow Agreement (collectively, the
"Transaction Documents").
In such examination and review we have assumed, and express no opinion
as to 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 Transaction Documents that would modify or interpret the terms of the
Transaction Documents 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 Cisco. During the course of our discussion with such officers
and representatives and our review of the
<PAGE> 2
Skystone Systems Corporation July 26, 1997
Page 2
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 Cisco, 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. Cisco 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 Cisco 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, 88,724,339 shares of Common Stock
were subject to issuance upon exercise of outstanding options.
3. Cisco has full corporate power and authority to execute,
deliver, and perform its obligations under the Transaction Documents; Cisco has
taken all requisite corporate action to approve and adopt the Transaction
Documents and to approve and to authorize the carrying out of the transactions
contemplated thereunder; and each of the Transaction Documents has been duly
executed and delivered by Cisco.
<PAGE> 3
Skystone Systems Corporation July 26, 1997
Page 3
4. The Acquisition Agreement and Escrow Agreement constitute legal,
valid and binding obligations of Cisco; provided, however, the enforceability of
the indemnity obligations contained in such agreements may be limited by public
policy.
5. The approval of the shareholders of Cisco is not required for
the consummation of the transactions contemplated by the Acquisition Agreement;
the shares of Cisco Common Stock to be delivered in exchange for shares of
Skystone Common Stock will, when issued as contemplated by the Acquisition
Agreement, be validly issued, fully paid and nonassessable.
6. The execution, delivery and performance of the Acquisition
Agreement by Cisco and the carrying out of the transactions contemplated by the
Acquisition Agreement to be carried out by Cisco did not and will not conflict
with or constitute a violation under the charter documents of Cisco.
7. To our knowledge, no suit, action or legal, administrative,
arbitration or other proceeding or governmental investigation is pending or
threatened to which Cisco or any of their assets or properties is a party which
seeks to prohibit, restrain or enjoin the transactions contemplated by the
Acquisition Agreement.
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 Cisco in connection with the Acquisition
nothing has come to our attention that would give us actual knowledge of the
existence or absence of such facts. We have undertaken no independent factual
investigation to determine the existence or absence of such facts.
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 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 Cisco ("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 Cisco, dated
as of July 24, 1997 with respect to certain of the factual matters set forth
therein and (iii) reviewed procedures used by Cisco and the Transfer Agent when
issuing or authorizing the issuance of shares. We note, however, that we have
not (x) reviewed Cisco's stock records, (y) verified procedures used by or
obtained records from Cisco's Transfer Agent or (z) independently verified that
each issued and outstanding share of Common Stock has been fully paid.
<PAGE> 4
Skystone Systems Corporation July 26, 1997
Page 4
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 819,600 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 10K, filed with the Securities and Exchange Commission. We also consent
to the reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
San Jose, California
August 6, 1997
