<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 4, 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)
____________________
LARRY R. CARTER
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
CISCO SYSTEMS, INC.
255 WEST TASMAN DRIVE
SAN JOSE, CALIFORNIA 95134
(408) 526-4000
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
____________________
Copy to:
EDWARD M. LEONARD, ESQ.
BROBECK, PHLEGER & HARRISON LLP
TWO EMBARCADERO PLACE
2200 GENG ROAD
PALO ALTO, CALIFORNIA 94303
(415) 424-0160
____________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
____________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================================
Title of Each Amount Proposed Maximum Proposed Maximum Amount
Class of Securities to Be Offering Aggregate of Registration
to be Registered Registered Price Per Share(1) Offering Price(1) Fee
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 100,340 Shares $49.50 $4,966,830 $1,505.10
no par value per share
=============================================================================================================
</TABLE>
(1) The price of $49.50, which was the average of the high and low prices of
the Common Stock on the Nasdaq National Market System on March 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
100,340 SHARES
CISCO SYSTEMS, INC.
COMMON STOCK
____________________
This Prospectus relates to the public offering, which is not being
underwritten, of 100,340 shares of Common Stock, no par value per share, of
Cisco Systems, Inc. ("Cisco", the "Company" or the "Registrant"). All 100,340
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 by statutory merger of
Telesend, Inc. ("Telesend"), by and through a merger of Telesend with and into
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 1.10 of the Agreement and Plan of
Reorganization between Cisco and Telesend.
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 March 31, 1997 the average of the high and low
price for the Common Stock was $49.50.
_______________________________
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 April 4, 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 of 1933, as amended (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;
2. The Company's Quarterly Reports on Form 10-Q for the quarters
ended October 26, 1996 and January 25, 1997;
3. The Company's Current Reports on Form 8-K filed January 22,
1997 and October 1, 1996, as amended on Form 8-K/A filed on October 15, 1996;
4. Definitive Proxy Statement dated October 7, 1996, filed in
connection with the Company's 1996 Annual Meeting of Shareholders; and
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 dated January 8,
1990, including any amendment or report filed for the purpose of updating such
description.
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, Vice President and
Chief Financial Officer, 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 Cisco are located at 255 West
Tasman Drive, San Jose, California, 95134. Cisco's telephone number is (408)
526-4000.
PLAN OF DISTRIBUTION
The Company will receive no proceeds from this offering. The Shares
offered hereby may be sold by the Selling Shareholders from time to time in
transactions in the over-the-counter market, in negotiated transactions, or a
combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. The Selling Shareholders may effect
such transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions
or commissions from the Selling Shareholders and/or the purchasers of the
Shares for whom such broker-dealers may act as agents or to whom they sell as
principals, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions).
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale
in the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The Selling Shareholders and any broker-dealers or agents that
participate with the Selling Shareholders in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of the Securities Act, and
any commissions received by them and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Shares may not simultaneously engage
in market making activities with respect to the Common Stock of the Company for
a period of two business days prior to the commencement of such distribution.
In addition and without limiting the foregoing, each Selling Shareholder will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of shares of the
Company's Common Stock by the Selling Shareholders.
4.
<PAGE> 6
SELLING SHAREHOLDERS
The following table sets forth the number of shares of Common Stock
owned by each of the Selling Shareholders. Except as indicated, none of the
Selling Shareholders has had a material relationship with the Company within
the past three years other than as a result of the ownership of the Shares or
other securities of the Company. Because the Selling Shareholders may offer all
or some of the Shares which they hold pursuant to the offering contemplated by
this Prospectus, and because there are currently no agreements, arrangements or
understandings with respect to the sale of any of the Shares, no estimate can
be given as to the amount of Shares that will be held by the Selling
Shareholders after completion of this offering. The Shares offered by this
Prospectus may be offered from time to time by the Selling Shareholders named
below.
<TABLE>
<CAPTION>
Number of Number of
Shares Percent of Shares
Beneficially Outstanding Registered for
Name of Selling Shareholder Owned Shares Sale Hereby(1)
- --------------------------- ------------ ----------- --------------
<S> <C> <C> <C>
Sayuri Sharper 50,170 * 50,170
Craig Sharper 50,170 * 50,170
======= === =======
Total 100,340 * 100,340
</TABLE>
__________________________________
* Represents beneficial ownership of less than 1%.
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable in connection with the shares registered for
sale hereby by reason of any stock divided, stock split, recapitalization or
other similar transaction effected without the receipt of consideration which
results in an increase in the number of the Registrant's outstanding shares of
Common Stock.
5.
<PAGE> 7
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
the Company by Brobeck, Phleger & Harrison LLP, Palo Alto, California.
EXPERTS
The consolidated balance sheets as of July 28, 1996 and July 30, 1995 and the
consolidated statements of income, retained earnings, and cash flows for each
of the three years in the period ended July 28, 1996, incorporated by reference
in this prospectus, have been incorporated herein in reliance on the report of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
6.
<PAGE> 8
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates
except the SEC registration fee.
<TABLE>
<S> <C>
SEC Registration fee $ 1,505
Legal fees and expenses 15,000
Accounting fees and expenses 5,000
Miscellaneous
-------
Total 21,505
=======
</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
<TABLE>
<S> <C>
2.1 Agreement and Plan of Reorganization.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Brobeck, Phleger & Harrison (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).
</TABLE>
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
II-1
<PAGE> 9
by (i) and (ii) is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-2
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of San Jose, State of California, on this 4th day of April, 1997.
CISCO SYSTEMS, INC.
By /s/ John T. Chambers
-------------------------------------
John T. Chambers
President and Chief Executive Officer
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
acting individually, as such person's true and lawful attorneys-in-fact and
agents, each with full power of substitution, for such person, 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 such person 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 or her substitutes, may do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ John T. Chambers President, Chief Executive April 4, 1997
- -------------------------- Officer and Director (Principal
John T. Chambers Executive Officer)
/s/ Larry R. Carter Vice President, Finance and April 4, 1997
- -------------------------- Administration, Chief Financial
Larry R. Carter Officer and Secretary
(Principal Financial and Accounting Officer)
/s/ John P. Morgridge Chairman of the Board April 4, 1997
- -------------------------- and Director
John P. Morgridge
</TABLE>
II-3
<PAGE> 11
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Donald T. Valentine Director April 4, 1997
- --------------------------
Donald T. Valentine
/s/ James F. Gibbons Director April 4, 1997
- --------------------------
James F. Gibbons
/s/ Robert L. Puette Director April 4, 1997
- --------------------------
Robert L. Puette
/s/ Masayoshi Son Director April 4, 1997
- --------------------------
Masayoshi Son
/s/ Steven M. West Director April 4, 1997
- --------------------------
Steven M. West
/s/ Richard M. Moley Director April 4, 1997
- --------------------------
Richard M. Moley
/s/ Edward R. Kozel Director April 4, 1997
- --------------------------
Edward R. Kozel
</TABLE>
II-4
<PAGE> 12
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
- ------ -------------
<S> <C>
2.1 Agreement and Plan of Reorganization
5.1 Opinion of Brobeck, Phleger & Harrison LLP
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in the
Opinion of Counsel filed as Exhibit 5.1)
24.1 Power of Attorney (included on page II-3 of this
Registration Statement)
</TABLE>
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
ACQUIROR
AND
TARGET
FEBRUARY 18, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Closing; Effective Time . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Articles of Incorporation; Bylaws . . . . . . . . . . . . . . . . . . 2
1.5 Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Surrender of Certificates . . . . . . . . . . . . . . . . . . . . . . 4
1.7 No Further Ownership Rights in Target Capital Stock . . . . . . . . . 6
1.8 Lost, Stolen or Destroyed Certificates . . . . . . . . . . . . . . . . 6
1.9 Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.10 Exemption from Registration . . . . . . . . . . . . . . . . . . . . . 7
1.11 Taking of Necessary Action; Further Action . . . . . . . . . . . . . . 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TARGET . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . . . 8
2.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.5 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . 10
2.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . 10
2.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.8 Restrictions on Business Activities . . . . . . . . . . . . . . . . . 11
2.9 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . 11
2.10 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . 12
2.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . 13
2.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 15
2.15 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.16 Interested Party Transactions . . . . . . . . . . . . . . . . . . . . 18
2.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.18 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
2.19 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.20 Complete Copies of Materials . . . . . . . . . . . . . . . . . . . . . 18
2.21 Brokers' and Finders' Fees . . . . . . . . . . . . . . . . . . . . . . 18
2.22 Affiliate and Shareholder Agreement; Irrevocable Proxies . . . . . . . 18
2.23 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.24 Board Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.25 Representations Complete . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR . . . . . . . . . . . . . . . . . . . . . . 19
3.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . . . 20
3.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.4 SEC Documents; Financial Statements . . . . . . . . . . . . . . . . . 22
3.5 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . 22
3.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . 23
3.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.8 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . 23
3.9 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.10 Broker's and Finders' Fees . . . . . . . . . . . . . . . . . . . . . . 24
3.11 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 . . . . . . . . . . . . . . . . . . . . 26
4.3 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE V
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.1 Meeting of Shareholders . . . . . . . . . . . . . . . . . . . . . . . 28
5.2 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . 29
5.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.4 Public Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.5 Consents; Cooperation . . . . . . . . . . . . . . . . . . . . . . . . 30
5.6 Affiliate and Shareholder Agreements . . . . . . . . . . . . . . . . . 31
5.7 Shareholder's Representation Agreements . . . . . . . . . . . . . . . 31
5.8 Irrevocable Proxies . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.9 FIRPTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
ii.
<PAGE> 4
<TABLE>
<S> <C>
5.10 Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.11 Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.12 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 32
5.13 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.14 Form S-8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.15 Listing of Additional Shares . . . . . . . . . . . . . . . . . . . . . 33
5.16 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.17 Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.18 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.19 Reasonable Commercial Efforts and Further Assurances . . . . . . . . . 34
5.20 Pulsecom Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.21 Payment of Target Payables . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VI
CONDITIONS TO THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.1 Conditions to Obligations of Each Party to Effect the Merger . . . . . 34
6.2 Additional Conditions to Obligations of Target . . . . . . . . . . . . 35
6.3 Additional Conditions to the Obligations of Acquiror . . . . . . . . . 36
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . 39
7.3 Expenses and Termination Fees . . . . . . . . . . . . . . . . . . . . 39
7.4 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.5 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VIII
ESCROW AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.1 Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.3 Damage Threshold . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.4 Escrow Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.5 Claims upon Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . 43
8.6 Objections to Claims . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.7 Resolution of Conflicts; Arbitration . . . . . . . . . . . . . . . . . 44
8.8 Shareholders' Agent . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.9 Actions of the Shareholders' Agent . . . . . . . . . . . . . . . . . . 46
8.10 Third-Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
iii.
<PAGE> 5
<TABLE>
<S> <C>
8.11 Pulsecom Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE IX
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.1 Non-Survival at Effective Time . . . . . . . . . . . . . . . . . . . . 48
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.5 Entire Agreement; Nonassignability; Parties in Interest . . . . . . . 50
9.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.7 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.9 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
iv.
<PAGE> 6
SCHEDULES
- ---------
Schedule 2.10 - Real Property
Schedule 2.11 - Intellectual Property
Schedule 2.14 - Employee Benefit Plans
Schedule 2.20 - Material Agreements
Schedule 5.7 - Target Affiliates
Schedule 5.13 - Outstanding Target Options
Schedule 5.17 - Employees
Schedule 6.3(c) - Consents
EXHIBITS
- --------
Exhibit A - Agreement of Merger
Exhibit B - Exchange Ratio
Exhibit C - Affiliate and Shareholder Agreement
Exhibit D - Irrevocable Proxies
Exhibit E - Shareholder's Representation Agreement
Exhibit F - FIRPTA Notice
Exhibit G - Escrow Agreement
Exhibit H-1, et seq. - Form of Employment Agreement
Exhibit I - Acquiror's Legal Opinion
Exhibit J - Target's Legal Opinion
v.
<PAGE> 7
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
and entered into as of February 18, 1997, by and between Acquiror, a California
corporation ("Acquiror") and Target, a California corporation ("Target").
RECITALS
A. The Boards of Directors of Target and Acquiror believe it is
in the best interests of their respective companies and the shareholders of
their respective companies that Target and Acquiror combine into a single
company through the statutory merger of Target with and into Acquiror (the
"Merger") and, in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, all of the
outstanding shares of Target Capital Stock, ("Target Capital Stock") shall be
converted into shares of Acquiror Common Stock ("Acquiror Common Stock"), at
the rate set forth herein.
C. Target and Acquiror desire to make certain representations and
warranties and other agreements in connection with the Merger.
D. The parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"), and to cause the Merger to
qualify as a reorganization under the provisions of Section 368(a)(1)(A) of the
Code.
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the parties
agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2)
and subject to and upon the terms and conditions of this Agreement, the
Agreement of Merger attached hereto as Exhibit A (the "Agreement of Merger")
and the applicable provisions of the California Corporations Code ("California
Law"), Target shall be merged with and into Acquiror, the separate corporate
existence of Target shall cease and Acquiror shall continue as the surviving
corporation. Acquiror, as the surviving corporation after the Merger, is
hereinafter sometimes referred to as the "Surviving Corporation."
1.
<PAGE> 8
1.2 Closing; Effective Time. The closing of the transactions
contemplated hereby (the "Closing") shall take place as soon as practicable
after the satisfaction or waiver of each of the conditions set forth in Article
VI hereof or at such other time as the parties hereto agree (the "Closing
Date"). The Closing shall take place at the offices of Brobeck, Phleger &
Harrison LLP, Two Embarcadero Place, 2200 Geng Road, Palo Alto, California, or
at such other location as the parties hereto agree. In connection with the
Closing, the parties hereto shall cause the Merger to be consummated by filing
the Agreement of Merger with the Secretary of State of the State of California,
in accordance with the relevant provisions of California Law (the time of such
filing being the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Agreement of Merger and
the applicable provisions of California Law. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of Target shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Target shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation
of Acquiror, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by California Law and such Articles of Incorporation.
(b) The Bylaws of Acquiror, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter amended.
1.5 Effect on Capital Stock. By virtue of the Merger and without
any action on the part of Acquiror or Target or the holders of any of the
following securities:
(a) Conversion of Target Capital Stock. The maximum
number of shares of Acquiror Common Stock to be issued (including Acquiror
Common Stock to be reserved for issuance upon exercise of options to purchase
shares of Target Common Stock ("Target Options") assumed by Acquiror) in
exchange for the acquisition by Acquiror of all outstanding Target Capital
Stock and all unexpired and unexercised options to acquire Target Capital Stock
shall be 125,490 shares of Acquiror Common Stock, reduced as a result of any
Dissenting Shares (as defined below); provided, however, that such number shall
be adjusted based on the Closing Price (as defined below) as provided in
Exhibit B hereto. No other adjustment shall be made in the number of shares of
Acquiror Common Stock issued in the Merger as a result of any cash proceeds
received by Target from the date hereof to the Closing Date pursuant to the
exercise of currently outstanding options or warrants to acquire Target Capital
Stock. Subject to the terms and conditions of this Agreement and the Agreement
of
2.
<PAGE> 9
Merger, by virtue of the Merger and without any action on the part of the
holder of any shares of Target Capital Stock, at the Effective Time, each share
of Target Common Stock issued and outstanding immediately prior to the
Effective Time as set forth in Section 2.2 hereof (other than shares to be
cancelled pursuant to Section 1.5(b) and shares, if any, held by persons who
have not voted such shares for approval of the Merger and with respect to which
such persons shall become entitled to exercise dissenters' rights in accordance
with Chapter 13 of California Law ("Dissenting Shares")) shall be converted and
exchanged for such number of shares of Acquiror Common Stock as shall be
determined in accordance with Exhibit B hereof (the "Exchange Ratio"); and any
repurchase rights held by Target with respect to any such shares of Target
Common Stock shall be assigned to Acquiror.
Based upon Target's capitalization as set forth in Section 2.2 hereof,
all shares of Target Common Stock (assuming conversion of all Target Preferred
Stock into Target Common Stock) issued and outstanding at the Effective Time
(other than shares to be cancelled pursuant to Section 1.5(b) and Dissenting
Shares, if any) shall be converted and exchanged, without any action on the
part of the holders thereof, for an aggregate of 125,490 (as adjusted as set
forth in Exhibit B hereto) shares of Acquiror Common Stock less such number of
shares of Acquiror Common Stock as shall be issued or reserved for issuance by
Acquiror with respect to Target Options which are assumed by Acquiror pursuant
to Section 5.12 below.
(b) Cancellation of Target Capital Stock Owned by
Acquiror or Target. At the Effective Time, all shares of Target Capital Stock
that are owned by Target as treasury stock, each share of Target Capital Stock
owned by Acquiror or any direct or indirect wholly owned subsidiary of Acquiror
or of Target immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) Target Stock Option Plan. At the Effective Time, the
Target's 1995 Stock Option Plan (the "Target Stock Option Plan") and all
options to purchase Target Common Stock then outstanding under the Target Stock
Option Plan shall be assumed by Acquiror in accordance with Section 5.12.
(d) Adjustments to Exchange Ratio. The Exchange Ratio
shall be adjusted: (i) based on the Closing Price (as defined below) as set
forth in Exhibit B hereto, and (ii) to reflect fully the effect of any stock
split, reverse split, stock dividend (including any dividend or distribution of
securities convertible into Acquiror Common Stock or Target Capital Stock),
reorganization, recapitalization or other like change with respect to Acquiror
Common Stock or Target Capital Stock occurring after the date hereof and prior
to the Effective Time.
(e) Fractional Shares. No fraction of a share of
Acquiror Common Stock shall be issued, but in lieu thereof each holder of
shares of Target Capital Stock who would otherwise be entitled to a fraction of
a share of Acquiror Common Stock (after
3.
<PAGE> 10
aggregating all fractional shares of Acquiror Common Stock to be received by
such holder) shall receive from Acquiror an amount of cash (rounded to the
nearest whole cent) equal to the product of (i) such fraction, multiplied by
(ii) the average closing price of a share of Acquiror Common Stock for the
fifteen 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").
(f) Dissenters' Rights. Any Dissenting Shares shall not
be converted into Acquiror Common Stock but shall instead be converted into the
right to receive such consideration as may be determined to be due with respect
to such Dissenting Shares pursuant to California Law. Target agrees that,
except with the prior written consent of Acquiror, or as required under
California Law, it will not voluntarily make any payment with respect to, or
settle or offer to settle, any such purchase demand. Each holder of Dissenting
Shares ("Dissenting Shareholder") who, pursuant to the provisions of California
law, becomes entitled to payment for shares of Target Capital Stock shall
receive payment therefor (but only after the value therefor shall have been
agreed upon or finally determined pursuant to such provisions). If, after the
Effective Time, any Dissenting Shares shall lose their status as Dissenting
Shares, Acquiror shall issue and deliver, upon surrender by such shareholder of
certificate or certificates representing shares of Target Capital Stock, the
number of shares of Acquiror Common Stock to which such shareholder would
otherwise be entitled under this Section 1.5 and the Agreement of Merger less
the number of shares of Acquiror Common Stock allocable to such shareholder
that have been deposited in the Escrow Fund and Pulsecom Escrow Fund (as
defined below) pursuant to Article VIII hereof.
1.6 Surrender of Certificates.
(a) Exchange Agent. Bank of Boston shall act as exchange
agent (the "Exchange Agent") in the Merger.
(b) Acquiror to Provide Common Stock and Cash. Promptly
after the Effective Time (but in no event later than 10 days after the
Effective Time), Acquiror shall make available to the Exchange Agent for
exchange in accordance with this Article I, through such reasonable procedures
as Acquiror may adopt, (i) the shares of Acquiror Common Stock issuable
pursuant to Section 1.5(a) in exchange for shares of Target Capital Stock
outstanding immediately prior to the Effective Time less the number of shares
of Acquiror Common Stock to be deposited into the escrow fund (the "Escrow
Fund") and Pulsecom escrow fund (the "Pulsecom Escrow Fund") pursuant to the
requirements of Article VIII and (ii) cash in an amount sufficient to permit
payment of cash in lieu of fractional shares pursuant to Section 1.5(e).
(c) Exchange Procedures. Promptly after the Effective
Time (but in no event later than 10 days after the Effective Time), the
Surviving Corporation shall cause to
4.
<PAGE> 11
be mailed to each holder of record of a certificate or certificates (the
"Certificates") which immediately prior to the Effective Time represented
outstanding shares of Target Capital Stock, whose shares were converted into
the right to receive shares of Acquiror Common Stock (and cash in lieu of
fractional shares) pursuant to Section 1.5, (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon receipt of the Certificates by the
Exchange Agent, and shall be in such form and have such other provisions as
Acquiror may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of Acquiror Common Stock (and cash in lieu of fractional shares). Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Acquiror, together with such
letter of transmittal, duly completed and validly executed in accordance with
the instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
shares of Acquiror Common Stock less the number of shares of Acquiror Common
Stock to be deposited in the Escrow Fund and Pulsecom Escrow Fund on such
holder's behalf pursuant to Article VIII hereof and payment in lieu of
fractional shares which such holder has the right to receive pursuant to
Section 1.5, and the Certificate so surrendered shall forthwith be canceled.
Until so surrendered, each outstanding Certificate that, prior to the Effective
Time, represented shares of Target Capital Stock will be deemed from and after
the Effective Time, for all corporate purposes, other than the payment of
dividends, to evidence the ownership of the number of full shares of Acquiror
Common Stock into which such shares of Target Capital Stock shall have been so
converted and the right to receive an amount in cash in lieu of the issuance of
any fractional shares in accordance with Section 1.5. As soon as practicable
after the Effective Time, and subject to and in accordance with the provisions
of Article VIII hereof, Acquiror shall cause to be delivered to the Escrow
Agent (as defined in Article VIII hereof) a certificate or certificates
representing 70% of the shares of Acquiror Common Stock issued at the Closing
which shall be registered in the name of the Escrow Agent as nominee for the
holders of Certificates cancelled pursuant to this Section 1.6. Such shares
shall be beneficially owned by such holders and shall be held in escrow and
shall be available to compensate Acquiror for certain damages as provided in
Article VIII. To the extent not used for such purposes, such shares shall be
released, all as provided in Article VIII hereof.
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions with respect to Acquiror Common Stock with a
record date after the Effective Time will be paid to the holder of any
unsurrendered Certificate with respect to the shares of Acquiror Common Stock
represented thereby until the holder of record of such Certificate shall
surrender such Certificate. Subject to applicable law, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Acquiror Common Stock issued in
exchange therefor, without interest, at the time of such surrender, the amount
of any such dividends or other distributions with a record date after the
Effective Time theretofore payable (but for the provisions of this Section
1.6(d)) with respect to such shares of Acquiror Common Stock.
5.
<PAGE> 12
(e) Transfers of Ownership. If any certificate for
shares of Acquiror Common Stock is to be issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it will
be a condition of the issuance thereof that the Certificate so surrendered will
be properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will have paid to Acquiror or any agent
designated by it any transfer or other taxes required by reason of the issuance
of a certificate for shares of Acquiror Common Stock in any name other than
that of the registered holder of the Certificate surrendered, or established to
the satisfaction of Acquiror or any agent designated by it that such tax has
been paid or is not payable.
(f) No Liability. Notwithstanding anything to the
contrary in this Section 1.6, none of the Exchange Agent, the Surviving
Corporation or any party hereto shall be liable to any person for any amount
properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(g) Dissenting Shares. The provisions of this Section
1.6 shall also apply to Dissenting Shares that lose their status as such,
except that the obligations of Acquiror under this Section 1.6 shall commence
on the date of loss of such status and the holder of such shares shall be
entitled to receive in exchange for such shares the number of shares of
Acquiror Common Stock to which such holder is entitled pursuant to Section 1.5
hereof.
1.7 No Further Ownership Rights in Target Capital Stock. All
shares of Acquiror Common Stock issued upon the surrender for exchange of
shares of Target Capital Stock in accordance with the terms hereof (including
any cash paid in lieu of fractional shares) shall be deemed to have been issued
in full satisfaction of all rights pertaining to such shares of Target Capital
Stock and there shall be no further registration of transfers on the records of
the Surviving Corporation of shares of Target Capital Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I.
1.8 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof, such shares of
Acquiror Common Stock (and cash in lieu of fractional shares) as may be
required pursuant to Section 1.5; provided, however, that Acquiror may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Acquiror, the Surviving Corporation or the Exchange Agent with respect
to the Certificates alleged to have been lost, stolen or destroyed.
6.
<PAGE> 13
1.9 Tax Consequences. It is intended by the parties hereto that
the Merger shall constitute a reorganization within the meaning of Section 368
of the Code.
1.10 Exemption from Registration. The shares of Acquiror Common
Stock to be issued in connection with the Merger will be issued in a
transaction exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"), by reason of Section 4(2) thereof. Acquiror
shall use its reasonable best efforts to file, within 30 days following the
Closing, a registration statement with the Securities and Exchange Commission
covering the resale of such shares of Acquiror Common Stock issued in
connection with the Merger. Any such registration shall be subject to the
terms and conditions no less favorable than those used in connection with prior
Acquiror resale prospectuses. Acquiror agrees to use reasonable efforts to
have such registration statement declared effective as soon as possible and to
keep such registration statement effective until 90 days following the last
date after which Acquiror shares are released pursuant to the escrow provisions
of Article VIII.
1.11 Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of Target, 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 Target or Acquiror means any material
event, change, condition or effect related to the financial condition,
properties, assets (including intangible assets), liabilities, business,
operations or results of operations of Target or Acquiror, respectively, taken
as a whole. In this Agreement, any reference to a "Material Adverse Effect"
with respect to Target or Acquiror means any event, change or effect that is
materially adverse to the financial condition, properties, assets, liabilities,
business, operations or results of operations of Target or Acquiror,
respectively, taken as a whole.
In this Agreement, any reference to a party's "knowledge" means such
party's actual knowledge after inquiry of officers, directors and other
employees of such party reasonably believed to have knowledge of such matters.
Except as disclosed in a document of even date herewith and delivered
by Target to Acquiror prior to the execution and delivery of this Agreement and
specifically
7.
<PAGE> 14
referring to the relevant section and subsection of this Article II (the
"Target Disclosure Schedule"), Target represents and warrants to Acquiror as
follows:
2.1 Organization, Standing and Power. Target is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Target has the corporate power to own its
properties and to carry on its business as now being conducted and as proposed
to be conducted and is duly qualified to do business and is in good standing in
each jurisdiction in which the failure to be so qualified and in good standing
would have a Material Adverse Effect on Target. Target has delivered a true
and correct copy of the Articles of Incorporation and Bylaws or other charter
documents, as applicable, of Target, each as amended to date, to Acquiror.
Target is not in violation of any of the provisions of its Articles of
Incorporation or Bylaws or equivalent organizational documents. 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 3,000,000 shares of Common Stock, of which there were issued and
outstanding as of the date of this Agreement, 1,500,000 shares of Common Stock.
There are no other outstanding shares of capital stock or voting securities and
no outstanding commitments to issue any shares of capital stock or voting
securities other than pursuant to the exercise of options outstanding as of
such date under the Target Stock Option Plan. All outstanding shares of Target
Capital Stock are duly authorized, validly issued, fully paid and
non-assessable and are free of any liens or encumbrances created by Target and,
to Target's knowledge, free of any other liens or encumbrances other than any
liens or encumbrances created by or imposed upon the holders thereof, and are
not subject to preemptive rights or rights of first refusal created by statute,
the Articles of Incorporation or Bylaws of Target or any agreement to which
Target is a party or by which it is bound. As of the date of this Agreement,
Target has reserved (i) 500,000 shares of Common Stock for issuance to
employees, officers, directors and consultants pursuant to the Target Stock
Option Plan, of which 500,000 shares are subject to outstanding, unexercised
options, and no shares are subject to outstanding stock purchase rights.
Except as disclosed herein, Target has not (i) issued or granted additional
options under the Target Stock Option Plan or (ii) granted additional warrants
or options to acquire Target Capital Stock. Except for (i) the rights created
pursuant to this Agreement, (ii) Target's right to repurchase shares issued
upon the exercise of stock options granted under the Target Stock Option Plan
and (iii) options referred to in this Section 2.2, there are no other options,
warrants, calls, rights, commitments or agreements of any character to which
Target is a party or by which it is bound obligating Target to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased
or redeemed, any shares of capital stock of Target or obligating Target to
grant, extend, accelerate the vesting of, change the price of, or otherwise
amend or enter into any such option, warrant, call, right, commitment or
agreement. There are no other contracts, commitments or agreements relating to
voting, purchase or sale of Target's capital
8.
<PAGE> 15
stock (i) between or among Target and any of its shareholders and (ii) to
Target's knowledge, between or among any of Target's shareholders, except for
the shareholders delivering Irrevocable Proxies (as defined below) and
Affiliate and Shareholder Agreements (as defined below.) The terms of the
Target Stock Option Plan permit the assumption or substitution of options or
warrants, as applicable, to purchase Acquiror Common Stock as provided in this
Agreement, without the consent or approval of the holders of such securities,
the Target shareholders, or otherwise and without any acceleration of the
exercise schedule or vesting provisions in effect for those options. True and
complete copies of all agreements and instruments relating to or issued under
the Target Stock Option Plan have been 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. All
outstanding Target Capital Stock was issued in compliance with all applicable
federal and state securities laws.
2.3 Authority. Target has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Target, subject only to the
approval of the Merger by Target's shareholders as contemplated by Section
6.1(a). This Agreement has been duly executed and delivered by Target and
constitutes the valid and binding obligation of Target enforceable against
Target in accordance with its terms, except that such enforceability may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting
or relating to creditors' rights generally, and is subject to general
principles of equity. 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, 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 properties or assets. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality ("Governmental Entity") is required by or with respect to
Target in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) the filing
of the Agreement of Merger; (ii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required
under applicable state securities laws and the securities laws of any foreign
country; (iii) such filings as may be required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("HSR"); and (iv) such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not have a Material Adverse Effect on
9.
<PAGE> 16
Target and would not prevent, or alter or delay any of the transactions
contemplated by this Agreement.
2.4 Financial Statements. Target has delivered to Acquiror its
unaudited financial statements for the fiscal year ended December 31, 1996 and
for the one-month period ended January 31, 1997 (collectively, the "Financial
Statements"). The Financial Statements are complete and correct in all
material respects. The Financial Statements fairly present the consolidated
financial condition and operating results of Target at the dates and during the
periods indicated therein (subject, in the case of unaudited statements, to
normal, recurring year-end adjustments).
2.5 Absence of Certain Changes. Since January 31, 1997 (the
"Target Balance Sheet Date"), Target has conducted its business in the ordinary
course consistent with past practice and there has not occurred: (i) any
change, event or condition (whether or not covered by insurance) that has
resulted in, or might reasonably be expected to result in, a Material Adverse
Effect to Target; (ii) any acquisition, sale or transfer of any material asset
of Target 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
revaluation by Target of any of its assets; (iv) any declaration, setting
aside, or payment of a dividend or other distribution with respect to the
shares of Target Capital Stock, or any direct or indirect redemption, purchase
or other acquisition by Target of any shares of Target Capital Stock; (v) any
material contract entered into by Target, other than in the ordinary course of
business and as provided to Acquiror, or any amendment or termination of, or
default under, any material contract to which Target is a party or by which it
is bound; (vi) any amendment or change to the Articles of Incorporation or
Bylaws of Target; (vii) any increase in or modification of the compensation or
benefits payable or to become payable by Target to any of its directors or
employees or (viii) any negotiation or agreement by Target to do any of the
things described in the preceding clauses (i) through (vii) (other than
negotiations with Acquiror and its representatives regarding the transactions
contemplated by this Agreement).
2.6 Absence of Undisclosed Liabilities. Target has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in its
Balance Sheet as of January 31, 1997 (the "Target Balance Sheet"), (ii) those
incurred in the ordinary course of business and not required to be set forth in
the Target Balance Sheet under generally accepted accounting principles, (iii)
those incurred in the ordinary course of business since the Target Balance
Sheet Date and consistent with past practice, and (iv) those incurred in
connection with the execution of this Agreement.
2.7 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency,
court or tribunal, foreign or domestic, or, to the knowledge of Target,
threatened against Target or any of its properties or
10.
<PAGE> 17
any of its 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, to the knowledge of Target, any of its directors or officers
(in their capacities as such), that could prevent, enjoin, alter or delay any
of the transactions contemplated by this Agreement, or that could reasonably be
expected to have a Material Adverse Effect on Target. All litigation to which
Target is a party (or, to the knowledge of Target, threatened to become a
party) is disclosed in the Target Disclosure Schedule.
2.8 Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon Target which has or could
reasonably be expected to have the effect of prohibiting or impairing any
current or future business practice of Target, any acquisition of property by
Target or the conduct of business by Target as currently conducted or as
proposed to be conducted by Target.
2.9 Governmental Authorization. Target has obtained each federal,
state, county, local or foreign governmental consent, license, permit, grant,
or other authorization of a Governmental Entity (i) pursuant to which Target
currently operates or holds any interest in any of its properties or (ii) that
is required for the operation of Target's business or the holding of any such
interest ((i) and (ii) herein collectively called "Target Authorizations"), and
all of such Target Authorizations are in full force and effect, except where
the failure to obtain or have any such Target Authorizations could not
reasonably be expected to have a Material Adverse Effect on Target.
2.10 Title to Property. Target has good and marketable title to
all of its properties, interests in properties and assets, real and personal,
reflected in the Target Balance Sheet or acquired after the Target Balance
Sheet Date (except properties, interests in properties and assets sold or
otherwise disposed of since the Target Balance Sheet Date in the ordinary
course of business), or with respect to leased properties and assets, valid
leasehold interests in, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except (i) the lien of
current taxes not yet due and payable, (ii) such imperfections of title, liens
and easements as do not and will not materially detract from or interfere with
the use of the properties subject thereto or affected thereby, or otherwise
materially impair business operations involving such properties and (iii) liens
securing debt which is reflected on the Target Balance Sheet. The plants,
property and equipment of Target that are used in the operation of its business
are in all material respects in good operating condition and repair. All
properties used in the operations of Target are reflected in the Target Balance
Sheet to the extent generally accepted accounting principles require the same
to be reflected. Schedule 2.10 identifies each parcel of real property owned
or leased by Target.
2.11 Intellectual Property.
11.
<PAGE> 18
(a) Target owns, or is licensed or otherwise possesses
legally enforceable rights to use all patents, trademarks, trade names, service
marks, copyrights, and any applications therefor, maskworks, net lists,
schematics, technology, know-how, trade secrets, inventory, ideas, algorithms,
processes, computer software programs or applications (in both source code and
object code form), and tangible or intangible proprietary information or
material ("Intellectual Property") that are used or currently proposed to be
used in the business of Target as currently conducted or as proposed to be
conducted by Target, except to the extent that the failure to have such rights
has not had and would not reasonably be expected to have a Material Adverse
Effect on Target.
(b) Schedule 2.11 lists (i) all patents and patent
applications and all registered and unregistered trademarks, trade names and
service marks, registered and unregistered copyrights, and maskworks, included
in the Intellectual Property, including the jurisdictions in which each such
Intellectual Property right has been issued or registered or in which any
application for such issuance and registration has been filed, (ii) all
licenses, sublicenses and other agreements to which Target is a party and
pursuant to which any person is authorized to use any Intellectual Property,
and (iii) all licenses, sublicenses and other agreements as to which Target is
a party and pursuant to which Target is authorized to use any third party
patents, trademarks or copyrights, including software ("Third Party
Intellectual Property Rights") which are incorporated in, are, or form a part
of any Target product.
(c) There is no unauthorized use, disclosure,
infringement or misappropriation of any Intellectual Property rights of Target,
any trade secret of Target, or any Intellectual Property right of any third
party to the extent licensed by or through Target, by any third party,
including any employee or former employee of Target. Target has not entered
into any agreement to indemnify any person against any charge of infringement
of any Intellectual Property, other than indemnification provisions contained
in sales invoices arising in the ordinary course of business.
(d) Target is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement, in breach of any license, sublicense or other agreement
relating to the Intellectual Property or Third Party Intellectual Property
Rights, the breach of which would have a Material Adverse Effect on Target.
(e) All patents, registered trademarks, service marks and
copyrights held by Target are valid and subsisting. Target (i) 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 manufacturing, marketing, licensing or sale of Target's
products does not infringe any
12.
<PAGE> 19
patent, trademark, service mark, copyright, trade secret or other proprietary
right of any third party, where such infringement would have a Material Adverse
Effect on Target.
(f) Target has secured valid written assignments from all
consultants and employees who contributed to the creation or development of
Intellectual Property of the rights to such contributions that Target does not
already own by operation of law, the absence of which would have a Material
Adverse Effect on Target.
(g) All use, disclosure or appropriation of Intellectual
Property not otherwise protected by patents, patent applications or copyright
("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.
Except in all cases as, in the aggregate, have not had and
would not have a Material Adverse Effect on Target, Target (i) has obtained all
applicable permits, licenses and other authorizations that are required under
Federal, state or local laws relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants or hazardous or toxic materials
or wastes into ambient air, surface water, ground water or land or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants or hazardous or
toxic materials or wastes by Target (or its agents); (ii) is in compliance with
all terms and conditions of such required permits, licenses and authorizations,
and also are in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in such laws or contained in any regulation, code, plan,
order, decree, judgment, notice or demand letter issued, entered promulgated or
approved thereunder; (iii) as of the date hereof, is not aware of and has not
received notice of any event, condition, circumstance, activity, practice,
incident, action or plan that is reasonably likely to interfere with or prevent
continued compliance or that would give rise to any common law or statutory
liability, or otherwise form the basis of any claim, action, suit or
proceeding, based on or resulting from Target's (or any of its agents)
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge or release into the
environment of any pollutant, contaminant or hazardous or toxic material or
waste; (iv) has not disposed of any pollutants, contaminants or hazardous or
toxic materials or wastes into the soil or groundwater at any properties owned
or leased by Target, either now or in the past, or at any other property that
would result in any assessment or remedial action; and (v) has taken all
actions necessary under applicable requirements of Federal, state or local
laws, rules or regulations to
13.
<PAGE> 20
register any products or materials required to be registered by Target or its
subsidiaries (or any of its agents) thereunder.
2.13 Taxes. Target, and any consolidated, combined or unitary
group for Tax purposes of which Target is or has been a member have timely
filed all Tax Returns required to be filed by them and have paid all Taxes
shown thereon to be due. The Financial Statements (i) fully accrue all actual
and contingent liabilities for Taxes with respect to all periods through
January 31, 1997 and Target has not and will not incur any Tax liability in
excess of the amount reflected on the Financial Statements with respect to such
periods, and (ii) properly accrue in accordance with generally accepted
accounting principles all liabilities for Taxes payable after January 31, 1997
with respect to all transactions and events occurring on or prior to such date.
No material Tax liability since January 31, 1997 has been incurred by Target
other than in the ordinary course of business and adequate provision has been
made in the Financial Statements for all Taxes since that date in accordance
with generally accepted accounting principles on at least a quarterly basis.
Target has withheld and paid to the applicable financial institution or Tax
Authority all amounts required to be withheld. No notice of deficiency or
similar document of any Tax Authority has been received by Target, and there
are no liabilities for Taxes with respect to the issues that have been raised
(and are currently pending) by any Tax Authority that could, if determined
adversely to Target, materially and adversely affect the liability of Target
for Taxes. There is (i) no material claim for Taxes that is a lien against the
property of Target other than liens for Taxes not yet due and payable, (ii)
Target has received no notification of any audit of any Tax Return of Target
being conducted pending or threatened by a Tax authority, (iii) no extension or
waiver of the statute of limitations on the assessment of any Taxes granted by
Target and currently in effect, and (iv) no agreement, contract or arrangement
to which Target is a party that may result in the payment of any material
amount that would not be deductible by reason of Sections 280G or 404 of the
Code. Target will not be required to include any material adjustment in
Taxable income for any Tax period (or portion thereof) pursuant to Section 481
or 263A of the Code or any comparable provision under state or foreign Tax laws
as a result of transactions, events or accounting methods employed prior to the
Merger. Target is not a party to any tax sparing or tax allocation agreement
nor does Target owe any amount under any such agreement. For purposes of this
Agreement, "Tax" (and, with correlative meaning, "Taxes" and "Taxable") means
(i) any net income, alternative or add-on minimum tax, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, environmental or windfall profit tax, custody 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
14.
<PAGE> 21
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 is in
full compliance with all terms and conditions of any Tax exemptions or other
Tax-sparing agreement or order of a foreign government applicable to them and
the consummation of the Merger shall not have any adverse effect on the
continued validity and effectiveness of any such Tax exemptions or other
Tax-sparing agreement or order.
2.14 Employee Benefit Plans.
(a) Schedule 2.14 lists, with respect to Target and any
trade or business (whether or not incorporated) which is treated as a single
employer with Target (an "ERISA Affiliate") within the meaning of Section
414(b), (c), (m) or (o) of the Code, (i) all material employee benefit plans
(as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), (ii) each loan to a non-officer employee in excess
of $10,000, loans to officers and directors and any stock option, stock
purchase, phantom stock, stock appreciation right, supplemental retirement,
severance, sabbatical, medical, dental, vision care, disability, employee
relocation, cafeteria benefit (Code section 125) or dependent care (Code
Section 129), life insurance or accident insurance plans, programs or
arrangements, (iii) all bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements, (iv) other fringe or
employee benefit plans, programs or arrangements that apply to senior
management of Target and that do not generally apply to all employees, and (v)
any current or former employment or executive compensation or severance
agreements, written or otherwise, as to which unsatisfied obligations of Target
of greater than $10,000 remain for the benefit of, or relating to, any present
or former employee, consultant or director of Target (collectively, the "Target
Employee Plans").
(b) Target has furnished to Acquiror a copy of each of
the Target Employee Plans and related plan documents (including trust
documents, insurance policies or contracts, employee booklets, summary plan
descriptions and other authorizing documents, and, to the extent still in its
possession, any material employee communications relating thereto) and has,
with respect to each Target Employee Plan which is subject to ERISA reporting
requirements, provided copies of the Form 5500 reports filed for the last three
plan years. Any Target Employee Plan intended to be qualified under Section
401(a) of the Code (i) has obtained from the Internal Revenue Service a
favorable determination letter as to its qualified status under the Code,
including all amendments to the Code effected by the Tax Reform Act of 1986 and
subsequent legislation, (ii) has applied to the Internal Revenue Service for
such a determination letter prior to the expiration of the requisite period
under applicable Treasury Regulations or Internal Revenue Service
pronouncements in which to apply for such determination letter and to make any
retroactive amendments necessary to obtain a favorable determination, or (iii)
has been established under a standardized prototype
15.
<PAGE> 22
plan for which an Internal Revenue Service opinion letter has been obtained by
the plan sponsor and is valid as to the adopting employer. Target has also
furnished Acquiror with the most recent Internal Revenue Service determination
or opinion letter issued with respect to each such Target Employee Plan, and
nothing has occurred since the issuance of each such letter which could
reasonably be expected to cause the loss of the tax-qualified status of any
Target Employee Plan subject to Code Section 401(a).
(c) (i) None of the Target Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person; (ii)
there has been no "prohibited transaction," as such term is defined in Section
406 of ERISA and Section 4975 of the Code, with respect to any Target Employee
Plan, which could reasonably be expected to have, in the aggregate, a Material
Adverse Effect; (iii) each Target Employee Plan has been administered in
accordance with its terms and in compliance with the requirements prescribed by
any and all statutes, rules and regulations (including ERISA and the Code),
except as would not have, in the aggregate, a Material Adverse Effect, and
Target and each subsidiary or ERISA Affiliate have performed all material
obligations required to be performed by them under, are not in any material
respect in default under or violation of, and have no knowledge of any material
default or violation by any other party to, any of the Target Employee Plans;
(iv) neither Target nor any ERISA Affiliate is subject to any liability or
penalty under Sections 4976 through 4980 of the Code or Title I of ERISA with
respect to any of the Target Employee Plans; (v) all material contributions
required to be made by Target or any ERISA Affiliate to any Target Employee
Plan have been made on or before their due dates and a reasonable amount has
been accrued for contributions to each Target Employee Plan for the current
plan years; (vi) with respect to each Target Employee Plan, no "reportable
event" within the meaning of Section 4043 of ERISA (excluding any such event
for which the thirty (30) day notice requirement has been waived under the
regulations to Section 4043 of ERISA) nor any event described in Section 4062,
4063 or 4041 or ERISA has occurred; and (vii) no Target Employee Plan is
covered by, and neither Target nor any ERISA Affiliate has incurred or expects
to incur any liability under Title IV of ERISA or Section 412 of the Code.
With respect to each Target Employee Plan subject to ERISA as either an
employee pension plan within the meaning of Section 3(2) of ERISA or an
employee welfare benefit plan within the meaning of Section 3(l) of ERISA,
Target has prepared in good faith and timely filed all requisite governmental
reports (which were true and correct as of the date filed) and has properly and
timely filed and distributed or posted all notices and reports to employees
required to be filed, distributed or posted with respect to each such Target
Employee Plan. No suit, administrative proceeding, action or other litigation
has been brought, or to the knowledge of Target is threatened, against or with
respect to any such Target Employee Plan, including any audit or inquiry by the
IRS or United States Department of Labor. Neither Target nor any ERISA
Affiliate is a party to, or has made any contribution to or otherwise incurred
any obligation under, any "multiemployer plan" as defined in Section 3(37) of
ERISA.
16.
<PAGE> 23
(d) With respect to each Target Employee Plan, Target has
complied with (i) the applicable health care continuation and notice provisions
of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the
proposed regulations thereunder and (ii) the applicable requirements of the
Family Medical and Leave Act of 1993 and the regulations thereunder, except to
the extent that such failure to comply would not, in the aggregate, have a
Material Adverse Effect.
(e) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i) entitle
any current or former employee, director, or other service provider of Target
or any ERISA Affiliate to severance benefits or any other payment (including,
without limitation, unemployment compensation, golden parachute or bonus),
except as expressly provided in this Agreement, or (ii) accelerate the time of
payment or vesting of any such benefits, or increase the amount of compensation
due any such employee, director, or service provider, or (iii) increase any
benefits otherwise payable by Target.
(f) There has been no amendment to, written
interpretation or announcement (whether or not written) by Target or any ERISA
Affiliate relating to, or change in participation or coverage under, any Target
Employee Plan which would materially increase the expense of maintaining such
Plan above the level of expense incurred with respect to that Plan for the most
recent fiscal year included in Target's financial statements.
2.15 Employee Matters. To Target's knowledge, Target is in
compliance in all material respects with all currently applicable laws and
regulations respecting employment, discrimination in employment, terms and
conditions of employment, wages, hours and occupational safety and health and
employment practices, and are not engaged in any unfair labor practice. There
are no pending claims against Target under any workers compensation plan or
policy or for long term disability. Target has no material obligations under
COBRA with respect to any former employees or qualifying beneficiaries
thereunder. There are no proceedings pending or, to the knowledge of Target,
threatened, between Target and its employees, which proceedings have or could
reasonably be expected to have a Material Adverse Effect on Target. Target is
not a party to any collective bargaining agreement or other labor unions
contract nor does Target know of any activities or proceedings of any labor
union or organize any such employees. In addition, Target has provided all
employees with all relocation benefits, stock options, bonuses and incentives,
and all other compensation that such employee has earned up through the date of
this Agreement or that such employee was otherwise promised in their employment
agreements with Target.
2.16 Interested Party Transactions. Except as disclosed in the
Financial Statements, Target is not indebted to any director, officer, employee
or agent of Target (except for amounts due as normal salaries and bonuses and
in reimbursement of ordinary expenses), and no such person is indebted to
Target.
17.
<PAGE> 24
2.17 Insurance. There is no material claim pending under any
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 is otherwise in
compliance with the terms of such policies and bonds. Target has no knowledge
of any threatened termination of, or material premium increase with respect to,
any of such policies.
2.18 Compliance With Laws. Target has complied with, is not in
violation of, and has not received any notices of violation with respect to,
any federal, state, local or foreign statute, law or regulation with respect to
the conduct of its business, or the ownership or operation of its business,
except for such violations or failures to comply as could not be reasonably
expected to have a Material Adverse Effect on Target.
2.19 Minute Books. The minute books of Target made available to
Acquiror contain a complete and accurate summary of all meetings of directors
and shareholders or actions by written consent since the time of incorporation
of Target through the date of this Agreement, and reflect all transactions
referred to in such minutes accurately in all material respects.
2.20 Complete Copies of Materials. Target has delivered or made
available true and complete copies of each document which has been requested by
Acquiror or its counsel in connection with their legal and accounting review of
Target. All the material contracts and agreements (as such terms are defined
in Regulation S-K promulgated under the Securities Act) to which Target is a
party are listed in Schedule 2.20 hereto.
2.21 Brokers' and Finders' Fees. Target has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
2.22 Affiliate and Shareholder Agreement; Irrevocable Proxies. All
of the persons and/or entities deemed "Affiliates" of Target within the meaning
of Rule 145 promulgated under the Securities Act and holders of more than 51%
of the shares of Target Common Stock issued and outstanding have agreed in
writing to vote for approval of the Merger pursuant to shareholder agreements
attached hereto as Exhibit C ("Affiliate and Shareholder Agreements"), and
pursuant to Irrevocable Proxies attached hereto as Exhibit D ("Irrevocable
Proxies").
2.23 Vote Required. The affirmative vote of the holders of a
majority of Target's Common Stock issued and outstanding is the only vote of
the holders of any of Target's Capital Stock necessary under California law,
Target's Articles of Incorporation and
18.
<PAGE> 25
Bylaws, or any agreement to which Target or any of its shareholders is a party,
to approve this Agreement and the transactions contemplated hereby.
2.24 Board Approval. The Board of Directors of Target has (i)
unanimously approved this Agreement and the Merger, (ii) determined that in its
opinion the Merger is in the best interests of the shareholders of Target and
is on terms that are fair to such shareholders and (iii) recommended that the
shareholders of Target approve this Agreement and the Merger.
2.25 Representations Complete. None of the representations or
warranties made by Target herein or in any Schedule or Exhibit hereto,
including the Target Disclosure Schedule, or certificate furnished by Target
pursuant to this Agreement or any written statement furnished to Acquiror
pursuant hereto or in connection with the transactions contemplated hereby,
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; provided, however, that (a) for
purposes of this representation, any document attached hereto and any document
specifically referenced in the Target Disclosure Schedule as a "Superseding
Document" (even if not attached hereto) that provides information inconsistent
with or in addition to any other written statement furnished to Acquiror in
connection with the transaction contemplated hereby, shall be deemed to
supersede any other document or written statement furnished to Acquiror with
respect to such inconsistent or additional information, and (b) it is
understood that the financial projections provided to Acquiror represent only
an estimate under the circumstances of what Target reasonably believes
(although it is not aware of any fact or information that lead it to believe
that such projections are misleading in any material respect) and are based
upon assumptions that Target believes were reasonable as of the time such
projections were made. Target does not make any other representation or
warranty regarding such projections or Target's possible or anticipated
operating performance other than as set forth in this Section 2.25.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Except as disclosed in a document of even date herewith and delivered
by Acquiror to Target prior to the execution and delivery of this Agreement and
specifically referring to the relevant section and subsection of this Article
III (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
19.
<PAGE> 26
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 documents, as
applicable, of Acquiror, each as amended to date, to Target. Neither Acquiror
nor any of its subsidiaries is in violation of any of the provisions of its
Articles of Incorporation or Bylaws or equivalent organizational documents.
Acquiror is the owner of all outstanding shares of capital stock of each of its
subsidiaries and all such shares are duly authorized, validly issued, fully
paid and nonassessable. All of the outstanding shares of capital stock of each
such subsidiary are owned by Acquiror free and clear of all liens, charges,
claims or encumbrances or rights of others. There are no outstanding
subscriptions, options, warrants, puts, calls, rights, exchangeable or
convertible securities or other commitments or agreements of any character
relating to the issued or unissued capital stock or other securities of any
such subsidiary, or otherwise obligating Acquiror or any such subsidiary to
issue, transfer, sell, purchase, redeem or otherwise acquire any such
securities. Except as disclosed in the Acquiror SEC Documents (as defined in
Section 3.4), Acquiror does not directly or indirectly own any equity or
similar interest in, or any interest convertible or exchangeable or exercisable
for, any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity.
3.2 Capital Structure. The authorized capital stock of Acquiror consists
of 1,200,000,000 shares of Common Stock, no par value, and 5,000,000 shares of
Preferred Stock, no par value, of which there were issued and outstanding as of
the close of business on February 13, 1997, 662,888,340 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 February 13, 1997 upon the exercise of options issued
under the Acquiror Amended and Restated 1987 Stock Option Plan, Crescendo
Communications, Inc. 1990 Stock Option Plan, Newport Systems Solution, Inc.
1990 Stock Option Plan, Combinet, Inc. Incentive and Non-Qualified Stock
Option Plan, Grand Junction Networks, Inc. 1992 Stock Plan, Kalpana, Inc. 1989
Stock Option Plan, TGV Software, Inc. 1990 Stock Option Plan and TGV Software,
Inc. 1995 Stock Option Plan, the StrataCom, Inc. Stock Option Plan, the Nashoba
Networks, Inc. 1992 Stock Option Plan, the 1995 Granite Systems Stock Option
Plan and the 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 on February 13,
1997, Acquiror has reserved 276,074,204 shares of Common Stock for issuance to
employees, directors and independent contractors pursuant to the Acquiror Stock
Option Plans and the Acquiror's 1989 Employee Stock Purchase Plan, of which
76,912,977 shares are subject to outstanding, unexercised options. Other than
pursuant to this Agreement, the Acquiror Stock Option Plans and the
20.
<PAGE> 27
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 Merger 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 obligation of Acquiror enforceable against Acquiror in accordance with
its terms, except that such enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to
creditors' rights generally, and is subject to general principles of equity.
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 material obligation or loss of a material benefit under (i) any provision
of the Articles of Incorporation or Bylaws of Acquiror or any of its
subsidiaries, as amended, or (ii) any material mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Acquiror or any of its subsidiaries or their properties or
assets. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, is required by or with
respect to Acquiror or any of its subsidiaries in connection with the execution
and delivery of this Agreement by Acquiror or the consummation by Acquiror of
the transactions contemplated hereby, except for (i) the filing of the
Agreement of Merger, as provided in Section 1.2, (ii) the filing of a
registered statement on Form S-3 or other applicable form, (iii) the filing of
a Form 8-K with the Securities and Exchange Commission ("SEC") and National
Association of Securities Dealers ("NASD") within 15 days after the Closing
Date, (iv) any filings as may be required under applicable state securities
laws and the securities laws of any foreign country, (v) such filings as may be
required under HSR, (vi) the filing with the Nasdaq National Market of a
Notification Form for Listing of Additional Shares with respect to the shares
of Acquiror Common Stock issuable upon conversion of the Target Common Stock in
the Merger and upon exercise of the options under the Target Stock Option Plans
assumed by Acquiror, and (vii) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not have a
Material Adverse Effect on Acquiror and would not prevent, materially or delay
any of the transactions contemplated by this Agreement.
21.
<PAGE> 28
3.4 SEC Documents; Financial Statements. Acquiror has made
available to Target a true and complete copy of each statement, report,
registration statement (with the prospectus in the form filed pursuant to Rule
424(b) of the Securities Act), definitive proxy statement, and other filing
filed with the SEC by Acquiror since June 30, 1993, and, prior to the Effective
Time, Acquiror will have furnished Target with true and complete copies of any
additional documents filed with the SEC by Acquiror prior to the Effective Time
(collectively, the "Acquiror SEC Documents"). In addition, Acquiror has made
available to Target all exhibits to the Acquiror SEC Documents filed prior to
the date hereof, and will promptly make available to Target all exhibits to any
additional Acquiror SEC Documents filed prior to the Effective Time. All
documents required to be filed as exhibits to the Acquiror SEC Documents have
been so filed, and all material contracts so filed as exhibits are in full
force and effect, except those which have expired in accordance with their
terms, and neither Acquiror nor any of its subsidiaries is in default
thereunder. As of their respective filing dates, the Acquiror SEC Documents
complied in all material respects with the requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the Securities Act,
and none of the Acquiror SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
in which they were made, not misleading, except to the extent corrected by a
subsequently filed Acquiror SEC Document prior to the date hereof. The
financial statements of Acquiror, including the notes thereto, included in the
Acquiror SEC Documents (the "Acquiror Financial Statements") were complete and
correct in all material respects as of their respective dates, complied as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto as of their
respective dates, and have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent throughout the periods
indicated and consistent with each other (except as may be indicated in the
notes thereto or, in the case of unaudited statements included in Quarterly
Reports on Form 10-Qs, as permitted by Form 10-Q of the SEC). The Acquiror
Financial Statements fairly present the consolidated financial condition and
operating results of Acquiror and its subsidiaries at the dates and during the
periods indicated therein (subject, in the case of unaudited statements, to
normal, recurring year-end adjustments). There has been no change in Acquiror
accounting policies except as described in the notes to the Acquiror Financial
Statements. Acquiror has filed in a timely manner all reports required to be
filed with the Securities and Exchange Commission pursuant to Sections 13, 14
or 15(d) of the Exchange Act during the 12 calendar months prior to the date
hereof.
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
22.
<PAGE> 29
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 revaluation by Acquiror of any of its assets; (iv)
any declaration, setting aside, or payment of a dividend or other distribution
with respect to the shares of Acquiror, or any direct or indirect redemption,
purchase or other acquisition by Acquiror of any of its shares of capital
stock; (v) any material contract entered into by Acquiror, other than in the
ordinary course of business and as provided to Target, or any material
amendment or termination of, or default under, any material contract to which
Acquiror is a party or by which it is bound; (vi) any amendment or change to
Acquiror's Articles of Incorporation or Bylaws; or (vii) any negotiation or
agreement by Acquiror or any of its subsidiaries to do any of the things
described in the preceding clauses (i) through (vi) (other than negotiations
with Target and its representatives regarding the transactions contemplated by
this Agreement).
3.6 Absence of Undisclosed Liabilities. Acquiror has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet included in Acquiror's Quarterly Report on Form 10-Q for the
period ended April 30, 1996 (the "Acquiror Balance Sheet"), (ii) those incurred
in the ordinary course of business and not required to be set forth in the
Acquiror Balance Sheet under generally accepted accounting principles, and
(iii) those incurred in the ordinary course of business since the Acquiror
Balance Sheet Date and consistent with past practice.
3.7 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency,
court or tribunal, foreign or domestic, or, to the knowledge of Acquiror or any
of its subsidiaries, threatened against Acquiror or any of its subsidiaries or
any of their respective properties or any of their respective officers or
directors (in their capacities as such) that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on Acquiror.
There is no judgment, decree or order against Acquiror or any of its
subsidiaries or, to the knowledge of Acquiror or any of its subsidiaries, any
of their respective directors or officers (in their capacities as such) that
could prevent, enjoin, or materially alter or delay any of the transactions
contemplated by this Agreement, or that could reasonably be expected to have a
Material Adverse Effect on Acquiror.
3.8 Governmental Authorization. Acquiror and each of its
subsidiaries have obtained each federal, state, county, local or foreign
governmental consent, license, permit, grant, or other authorization of a
Governmental Entity (i) pursuant to which Acquiror or any of its subsidiaries
currently operates or holds any interest in any of its properties or (ii) that
is required for the operation of Acquiror's or any of its subsidiaries'
business or the holding of any such interest ((i) and (ii) herein collectively
called "Acquiror Authorizations"), and all of such Acquiror Authorizations are
in full force and effect, except where the failure to obtain or
23.
<PAGE> 30
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 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.
3.11 Representations Complete. None of the representations or
warranties made by Acquiror herein or in any Schedule or Exhibit hereto,
including the Acquiror Disclosure Schedule, or certificate furnished by
Acquiror pursuant to this Agreement, or the Acquiror SEC Documents, or any
written statement furnished to Target pursuant hereto or in connection with the
transactions contemplated hereby, 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; provided, however, that for purposes of this representation, any
document attached hereto and any document specifically referenced in the
Acquiror Disclosure Schedule as a "Superseding Document" (even if not attached
hereto) that provides information inconsistent with or in addition to any other
written statement furnished to Target in connection with the transaction
contemplated hereby, shall be deemed to supersede any other document or written
statement furnished to Target with respect to such inconsistent or additional
information.
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, to pay and to cause its
subsidiaries to pay debts and Taxes when due subject (i) to good faith disputes
over such debts or Taxes and (ii) in the case of
24.
<PAGE> 31
Taxes of Target to Acquiror's consent to the filing of material Tax Returns if
applicable, to pay or perform other obligations when due, and to use all
reasonable efforts consistent with past practice and policies to preserve
intact its present business organizations, keep available the services of its
and its subsidiaries' present officers and key employees and preserve its and
its subsidiaries' relationships with customers, suppliers, distributors,
licensors, licensees, and others 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 (x) 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 and (y) any material change in its
capitalization as set forth in Sections 2.2 and 3.2, respectively. Without
limiting the foregoing, except as expressly contemplated by this Agreement or
the Target Disclosure Schedule or the Acquiror Disclosure Schedule, neither
Target nor Acquiror, respectively, 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. Except as set
forth in the Acquiror Disclosure Schedule, declare or pay any dividends on or
make any other distributions (whether in cash, stock or property) in respect of
any of its capital stock, or split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock, or repurchase or
otherwise acquire, directly or indirectly, any shares of its capital stock
except from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service to it or its subsidiaries;
(c) Stock Option Plan. Accelerate, amend or change the
period of exercisability or vesting of options or other rights granted under
its stock option plans or authorize cash payments in exchange for any options
or other rights granted under any of such plans; or
(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 cause a material breach of its representations or warranties
contained in this Agreement or prevent it from materially performing or cause
it not to materially 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 or the Target Disclosure
25.
<PAGE> 32
Schedule, Target shall not do, cause or permit any of the following, without
the prior written consent of Acquiror:
(a) Material Contracts. Enter into any material contract
or commitment, or violate, amend or otherwise modify or waive any of the terms
of any of its material contracts, other than in the ordinary course of business
consistent with past practice;
(b) Issuance of Securities. Issue, deliver or sell or
authorize or propose the issuance, delivery or sale of, or purchase or propose
the purchase of, any shares of its capital stock or securities convertible
into, or subscriptions, rights, warrants or options to acquire, or other
agreements or commitments of any character obligating it to issue any such
shares or other convertible securities, including the grant of options pursuant
to the Target Stock Option Plan, 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;
(c) Intellectual Property. Transfer to any person or
entity any rights to its Intellectual Property other than in the ordinary
course of business consistent with past practice;
(d) Exclusive Rights. Enter into or amend any agreements
pursuant to which any other party is granted exclusive marketing or other
exclusive rights of any type or scope with respect to any of its products or
technology;
(e) Dispositions. Sell, lease, license or otherwise
dispose of or encumber any of its properties or assets which are material,
individually or in the aggregate, to its and its parent's/subsidiaries'
business; taken as a whole, 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;
(g) Leases. Enter into any operating lease in excess of
$10,000;
(h) Payment of Obligations. Pay, discharge or satisfy in
an amount in excess of $10,000 in any one case or $50,000 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;
26.
<PAGE> 33
(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 officer level employee (except that it may hire a replacement for any
current director level or officer level employee if it first provides Acquiror
advance notice regarding such hiring decision), pay any special bonus or
special remuneration to any employee or director (except payments made pursuant
to written agreements outstanding on the date hereof), or increase the salaries
or wage rates of its employees except in the ordinary course of business in
accordance with its standard past practice;
(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 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 business;
(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 material claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any material claim
or assessment in respect of Taxes;
27.
<PAGE> 34
(q) Notices. Fail to give all notices and other
information required to be given to the employees of Target, any collective
bargaining unit representing any group of employees of Target, and any
applicable government authority under the WARN Act, the National Labor
Relations Act, the Internal Revenue Code, the Consolidated Omnibus Budget
Reconciliation Act, and other applicable law in connection with the
transactions provided for in this Agreement;
(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 cause a material breach of its representations or warranties
contained in this Agreement or prevent it from materially performing or cause
it not to materially perform its covenants hereunder.
4.3 No Solicitation. Target and its officers, directors,
employees or other agents will not, directly or indirectly, (i) take any action
to solicit, initiate or encourage any Takeover Proposal (defined below) or (ii)
engage in negotiations with, or disclose any nonpublic information relating to
Target to, or afford access to the properties, books or records of Target to,
any person that has advised Target that it may be considering making, or that
has made, a Takeover Proposal. Target will promptly notify Acquiror after
receipt of any Takeover Proposal or any notice that any person is considering
making a Takeover Proposal or any request for nonpublic information relating to
Target or for access to the properties, books or records of Target 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 or request. For purposes of
this Agreement, "Takeover Proposal" means any offer or proposal for, or any
indication of interest in, a merger or other business combination involving
Target or the acquisition of any significant equity interest in, or a
significant portion of the assets of, Target, other than the transactions
contemplated by this Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Meeting of Shareholders. Target shall promptly after the date
hereof take all action necessary in accordance with California Law and its
Articles of Incorporation and Bylaws to solicit Written Consents. Target shall
consult with Acquiror regarding the date of soliciting Written Consents.
Target shall use its best efforts to solicit from shareholders of Target
proxies in favor of the Merger and shall take all other action necessary or
advisable to secure the vote or consent of shareholders required to effect the
Merger.
28.
<PAGE> 35
5.2 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
properties, books, contracts, commitments and records, and (ii) all other
information concerning the business, properties and personnel of Target as
Acquiror may reasonably request. Target agrees to provide to Acquiror and its
accountants, counsel and other representatives copies of internal financial
statements promptly upon request. Acquiror shall afford Target and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to (i) all of
Acquiror's and its subsidiaries' properties, books, contracts, commitments and
records, and (ii) all other information concerning the business, properties and
personnel of Acquiror and its subsidiaries as Target may reasonably request.
Acquiror agrees to provide to Target and its accountants, counsel and other
representatives copies of internal financial statements promptly upon request.
(b) Subject to compliance with applicable law, from the
date hereof until the Effective Time, each of Acquiror and Target shall confer
on a regular and frequent basis with one or more representatives of the other
party to report operational matters of materiality and the general status of
ongoing operations.
(c) No information or knowledge obtained in any
investigation pursuant to this Section 5.2 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.3 Confidentiality. The parties acknowledge that Acquiror and
Target have previously executed a non-disclosure agreement on January 17, 1997
(the "Confidentiality Agreement"), which Confidentiality Agreement shall
continue in full force and effect in accordance with its terms.
5.4 Public Disclosure. Unless otherwise permitted by this
Agreement, Acquiror and Target shall consult with each other before issuing any
press release or otherwise making any public statement or making any other
public (or non-confidential) disclosure (whether or not in response to an
inquiry) regarding the terms of this Agreement and the transactions
contemplated hereby, and neither shall issue any such press release or make any
such statement or disclosure without the prior approval of the other (which
approval shall not be unreasonably withheld), except as may be required by law
or by obligations pursuant to any listing agreement with any national
securities exchange or with the NASD.
5.5 Consents; Cooperation.
29.
<PAGE> 36
(a) Each of Acquiror and Target shall promptly apply for
or otherwise seek, and use reasonable best efforts to obtain, all consents and
approvals required to be obtained by it for the consummation of the Merger,
including any required under HSR, and shall use reasonable best efforts to
obtain all necessary consents, waivers and approvals under any of its material
contracts in connection with the Merger for the assignment thereof or
otherwise. The parties hereto will consult and cooperate with one another, and
consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions
and proposals made or submitted by or on behalf of any party hereto in
connection with proceedings under or relating to HSR or any other federal or
state antitrust or fair trade law.
(b) Each of Acquiror and Target shall use all reasonable
best efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the transactions contemplated by this
Agreement under the HSR, the Sherman Act, as amended, the Clayton Act, as
amended, the Federal Trade Commission Act, as amended, and any other Federal,
state or foreign statutes, rules, regulations, orders or decrees that are
designed to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade (collectively, "Antitrust Laws"). In
connection therewith, if any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law, each of
Acquiror and Target shall cooperate and use all reasonable best efforts
vigorously to contest and resist any such action or proceeding and to have
vacated, lifted, reversed, or overturned any decree, judgment, injunction or
other order, whether temporary, preliminary or permanent (each an "Order"),
that is in effect and that prohibits, prevents, or restricts consummation of
the Merger or any such other transactions, unless by mutual agreement Acquiror
and Target decide that litigation is not in their respective best interests.
Each of Acquiror and Target shall use all reasonable best efforts to take such
action as may be required to cause the expiration of the notice periods under
the HSR or other Antitrust Laws with respect to such transactions as promptly
as possible after the execution of this Agreement.
(c) Each of Acquiror and Target further agrees to notify
the other promptly of the receipt of any comments from any government officials
for amendments or supplements to any filing or for additional information and
will supply the other with copies of all correspondence between such company or
any of its representatives, on the one hand, and the government officials, on
the other hand, with respect to such filing in accordance with an appropriate
confidentiality agreement between the parties. Whenever any event occurs which
is required to be set forth in an amendment or supplement to any such filing,
Acquiror or Target, as the case may be, shall promptly inform the other of such
occurrence and cooperate in filing with the government.
(d) Notwithstanding anything to the contrary in Section
5.5(a) or (b), (i) neither Acquiror nor any of it subsidiaries shall be
required to divest any of their respective
30.
<PAGE> 37
businesses, product lines or assets, or to take or agree to take any other
action or agree to any limitation and (ii) Target shall not be required to
divest any of its business, product lines or assets, or to take or agree to
take any other action or agree to any limitation.
5.6 Affiliate and Shareholder Agreements. Schedule 5.6 sets forth
those persons who are, in Target's reasonable judgment, "Affiliates" of Target
within the meaning of Rule 145 promulgated under the Securities Act ("Rule
145"). Target shall provide Acquiror such information and documents as
Acquiror shall reasonably request for purposes of reviewing such list. Target
shall use its best efforts to deliver or cause to be delivered to Acquiror,
concurrently with the execution of this Agreement (and in each case at least
thirty (30) days prior to the Effective Time) from each of the Affiliates of
Target, an executed Affiliate and Shareholder Agreement in the form attached
hereto as Exhibit C. Acquiror shall be entitled to place appropriate legends on
the certificates evidencing any Acquiror Common Stock to be received by such
affiliates of Target pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for Acquiror
Common Stock, consistent with the terms of such Affiliate and Shareholder
Agreement.
5.7 Shareholder's Representation Agreements. Target will use its
best efforts to cause each Target shareholder to execute and deliver to
Acquiror a Shareholder's Representation Agreement in the form attached hereto
as Exhibit E ("Shareholder's Representation Agreement").
5.8 Irrevocable Proxies. Target shall use its best efforts, on
behalf of Acquiror and pursuant to the request of Acquiror, to cause holders of
more than 51% of each of: (i) the shares of Target Common Stock issued and
outstanding and (ii) the shares of Target Preferred Stock issued and
outstanding, to execute and deliver to Acquiror an Irrevocable Proxy in the
form of Exhibit D attached hereto concurrently with the execution of this
Agreement and in any event prior to the time that the Information Statement is
mailed to the shareholders of Target.
5.9 FIRPTA. Target shall, prior to the Closing Date, provide
Acquiror with a properly executed Foreign Investment and Real Property Tax Act
of 1980 ("FIRPTA") Notification Letter, substantially in the form of Exhibit F
attached hereto, which states that shares of capital stock of Target do not
constitute "United States real property interests" under Section 897(c) of the
Code, for purposes of satisfying Acquiror's obligations under Treasury
Regulation Section 1.1445-2(c)(3). In addition, simultaneously with delivery of
such Notification Letter, Target shall have provided to Acquiror, as agent for
Target, a form of notice to the Internal Revenue Service in accordance with the
requirements of Treasury Regulation Section 1.897-2(h)(2) and substantially in
the form of Exhibit F attached hereto along with written authorization for
Acquiror to deliver such notice form to the Internal Revenue Service on behalf
of Target upon the Closing of the Merger.
31.
<PAGE> 38
5.10 Legal Requirements. Each of Acquiror and Target will, and
will cause any subsidiaries to, take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on them with respect
to the consummation of the transactions contemplated by this Agreement and will
promptly cooperate with and furnish information to any party hereto necessary
in connection with any such requirements imposed upon such other party in
connection with the consummation of the transactions contemplated by this
Agreement and will take all reasonable actions necessary to obtain (and will
cooperate with the other parties hereto in obtaining) any consent, approval,
order or authorization of, or any registration, declaration or filing with, any
Governmental Entity or other person, required to be obtained or made in
connection with the taking of any action contemplated by this Agreement.
5.11 Blue Sky Laws. Acquiror shall take such steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of the Acquiror Common Stock in connection
with the Merger. Target shall use its best efforts to assist Acquiror as may
be necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable in connection with the issuance of Acquiror
Common Stock in connection with the Merger.
5.12 Employee Benefit Plans. At the Effective Time, the Target
Stock Option Plan and each outstanding option to purchase shares of Target
Common Stock under the Target Stock Option Plan, whether vested or unvested,
will be assumed by Acquiror and any outstanding repurchase right shall be
assigned to Acquiror. Schedule 5.12 hereto sets forth a true and complete list
as of the date hereof of all holders of outstanding options under the Target
Stock Option Plan including the number of shares of Target Capital Stock
subject to each such option, the exercise or vesting schedule, the exercise
price per share and the term of each such option. On the Closing Date, Target
shall deliver to Acquiror an updated Schedule 5.12 hereto current as of such
date. Each such option so assumed by Acquiror under this Agreement shall
continue to have, and be subject to, the same terms and conditions set forth in
the Target Stock Option Plan immediately prior to the Effective Time, except
that (i) such option will be exercisable for that number of whole shares of
Acquiror Common Stock equal to the product of the number of shares of Target
Common Stock that were issuable upon exercise of such option immediately prior
to the Effective Time multiplied by the Exchange Ratio and rounded down to the
nearest whole number of shares of Acquiror Common Stock, and (ii) the per share
exercise price for the shares of Acquiror Common Stock issuable upon exercise
of such assumed option will be equal to the quotient determined by dividing the
exercise price per share of Target Common Stock at which such option was
exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded up to the nearest whole cent. Consistent with the terms of the Target
Stock Option Plan and the documents governing the outstanding options under
such Plans, the Merger will not terminate any of the outstanding options under
the Target Stock Option Plan (other than outstanding options that have been
granted to nonemployee members of Target's Board of Directors) or accelerate
the
32.
<PAGE> 39
exercisability or vesting of such options or the shares of Acquiror Common
Stock which will be subject to those options upon the Acquiror's assumption of
the options in the Merger. It is the intention of the parties that the
options so assumed by Acquiror qualify following the Effective Time as
incentive stock options as defined in Section 422 of the Code to the extent
such options qualified as incentive stock options prior to the Effective Time.
Within 10 business days after the Effective Time, Acquiror will issue to each
person who, immediately prior to the Effective Time was a holder of an
outstanding option under the Target Stock Option Plan a document in form and
substance satisfactory to Target evidencing the foregoing assumption of such
option by Acquiror.
5.13 Escrow Agreement. On or before the Effective Time, the Escrow
Agent and the Shareholders' Agent (as defined in Article VIII hereto) will
execute the Escrow Agreement contemplated by Article VIII in the form attached
hereto as Exhibit G ("Escrow Agreement").
5.14 Form S-8. Acquiror agrees to use its best efforts to file as
soon as possible, and in no event later than 30 days after the Closing, a
registration statement on Form S-8 covering the shares of Acquiror Common Stock
issuable pursuant to outstanding options under the Target Stock Option Plan
assumed by Acquiror. Target shall cooperate with and assist Acquiror in the
preparation of such registration statement. The shares of Acquiror Common
Stock to be issued upon exercise of such options will be duly authorized,
validly issued, fully paid and nonassessable.
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 of Acquiror Common
Stock issuable upon conversion of the Target Common Stock in the Merger and
upon exercise of the options under the Target Stock Option Plan assumed by
Acquiror.
5.16 Employees. Set forth on Schedule 5.16 is a list of employees
of Target to whom Acquiror will make an offer to enter into an Employment and
Non-Competition Agreement substantially in the form attached hereto as Exhibit
H-1 et seq., as applicable. Target shall cooperate with Acquiror to assist
Acquiror in employing such employees.
5.17 Reorganization. Acquiror and Target shall each use its best
efforts to cause the business combination to be effected by the Merger to be
qualified as a "reorganization" described in Section 368(a) of the Code.
5.18 Expenses. Whether or not the Merger is consummated, all costs
and expenses incurred in connection with this Agreement, the Agreement of
Merger and the transactions contemplated hereby and thereby shall be paid by
the party incurring such expense; provided, however, that any out-of-pocket
expenses incurred by Target and its
33.
<PAGE> 40
shareholders (including, without limitation, fees and expenses of legal
counsel, financial advisors and accountants) in excess of $50,000 shall remain
an obligation of Target's shareholders.
5.19 Reasonable Commercial Efforts and Further Assurances. Each of
the parties to this Agreement shall use reasonable commercial efforts to
effectuate the transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to closing under this Agreement. Each party hereto,
at the reasonable request of another party hereto, shall execute and deliver
such other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
5.20 Pulsecom Agreement. Pursuant to Article 4.C. of the Agreement
between Pulse Communications, Inc. ("Pulsecom") and Target, having an effective
date of October 1, 1995, Target shall promptly, and in no event later than the
Closing Date, provide Pulsecom with written notice of Target's exercise of its
right and option to convert the exclusive rights and licenses granted to
Pulsecom in Articles 3(A), 3(C) and 3(D) thereof to non-exclusive rights and
licenses.
5.21 Payment of Target Payables. Acquiror agrees to use its best
efforts to satisfy the obligations of Target as identified in the Financial
Statements as such obligations become due, or if such obligations are past due,
as soon as practicable. Acquiror agrees that as soon as practicable after the
Effective Date, it will satisfy and terminate, or alternatively, assume and
relieve, the personal guarantees of Target's shareholders with respect to the
obligations of Target identified in the Financial Statements.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger.
The respective obligations of each party to this Agreement to consummate and
effect this Agreement and the transactions contemplated hereby shall be subject
to the satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by agreement of all the
parties hereto:
(a) Shareholder Approval. This Agreement and the Merger
shall have been approved and adopted by the holders of at least fifty-one
percent (51%) of each of: (i) the issued and outstanding shares of Target
Common Stock and (ii) the issued and outstanding shares of Target Preferred
Stock.
34.
<PAGE> 41
(b) No Injunctions or Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint or prohibition preventing the consummation of the Merger shall be and
remain in effect, nor shall any proceeding brought by an administrative agency
or commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending, which would have a Material
Adverse Effect on such party. Nor shall there be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which makes the consummation of the Merger illegal.
In the event an injunction or other order shall have been issued, each party
agrees to use its reasonable diligent efforts to have such injunction or other
order lifted.
(c) Governmental Approval. Acquiror and Target and any
subsidiaries shall have timely obtained from each Governmental Entity all
approvals, waivers and consents, if any, necessary for consummation of or in
connection with the Merger and the several transactions contemplated hereby,
including such approvals, waivers and consents as may be required under the
Securities Act, under state Blue Sky laws, and under HSR (other than filings
and approvals relating to the Merger or affecting Acquiror's ownership of
Target or any of its properties if failure to obtain such approval, waiver or
consent would not have a Material Adverse Effect to either party).
(d) Escrow Agreement. Acquiror, Target, Escrow Agent and
the Shareholder's Agent (as defined in Article VIII hereto) shall have entered
into an Escrow Agreement substantially in the form attached hereto as Exhibit
G.
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 Time as though such representations and
warranties were made on and as of such time and (ii) Acquiror shall have
performed and complied in all material respects with all covenants, obligations
and conditions of this Agreement required to be performed and complied with by
them as of the Effective Time.
(b) Certificate of Acquiror. Target shall have been
provided with a certificate executed on behalf of Acquiror by its President and
its Chief Financial Officer to the effect that, as of the Effective Time:
35.
<PAGE> 42
(i) all representations and warranties made by Acquiror
under this Agreement are true and complete in all material respects; and
(ii) all covenants, obligations and conditions of this
Agreement to be performed by Acquiror on or before such date have been so
performed in all material respects.
(c) Legal Opinion. Target shall have received a legal
opinion from Acquiror's legal counsel substantially in the form of Exhibit I
hereto.
(d) No Material Adverse Changes. There shall not have
occurred any material adverse change in the financial condition, properties,
assets (including intangible assets), liabilities, business, operations or
results of operations of Acquiror and its subsidiaries, taken as a whole.
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 material respects (except for such representations and
warranties that are qualified by their terms by a reference to materiality
which representations and warranties as so qualified shall be true in all
respects) on and as of the Effective Time as though such representations and
warranties were made on and as of such time and (ii) Target shall have
performed and complied in all material respects with all covenants, obligations
and conditions of this Agreement required to be performed and complied with by
it as of the Effective Time.
(b) Certificate of Target. Acquiror shall have been
provided with a certificate executed on behalf of Target by its President and
Chief Financial Officer to the effect that, as of the Effective Time:
(i) all representations and warranties made by
Target under this Agreement are true and complete in all material respects; and
(ii) all covenants, obligations and conditions of
this Agreement to be performed by Target on or before such date have been so
performed in all material respects.
(c) Third Party Consents. Acquiror shall have been
furnished with evidence satisfactory to it of the consent or
36.
<PAGE> 43
approval of those persons whose consent or approval shall be required in
connection with the Merger under the contracts of Target set forth on Schedule
6.3(c) hereto.
(d) Injunctions or Restraints on Conduct of Business. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint provision limiting or restricting Acquiror's conduct or operation of
the business of Target and its subsidiaries, following the Merger shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other Governmental Entity, domestic or foreign, seeking the
foregoing be pending.
(e) Legal Opinion. Acquiror shall have received a legal
opinion from Target's legal counsel, in substantially the form of Exhibit J.
(f) No Material Adverse Changes. There shall not have
occurred any material adverse change in the financial condition, properties,
assets (including intangible assets), liabilities, business, operations or
results of operations of Target.
(g) Affiliate and Shareholder Agreements. Acquiror shall
have received from each of the Affiliates of Target an executed Affiliate and
Shareholder Agreement in substantially the form attached hereto as Exhibit C.
(h) FIRPTA Certificate. Target shall, prior to the
Closing Date, provide Acquiror with a properly executed FIRPTA Notification
Letter, substantially in the form of Exhibit F attached hereto, which states
that shares of capital stock of Target do not constitute "United States real
property interests" under Section 897(c) of the Code, for purposes of
satisfying Acquiror's obligations under Treasury Regulation Section
1.1445-2(c)(3). In addition, simultaneously with delivery of such Notification
Letter, Target shall have provided to Acquiror, as agent for Target, a form of
notice to the Internal Revenue Service in accordance with the requirements of
Treasury Regulation Section 1.897-2(h)(2) and substantially in the form of
Exhibit F attached hereto along with written authorization for Acquiror to
deliver such notice form to the Internal Revenue Service on behalf of Target
upon the Closing of the Merger.
(i) Resignation of Directors. The directors of Target in
office immediately prior to the Effective Time shall have resigned as directors
of the Surviving Corporation effective immediately following the Effective
Time.
(j) Employment and Non-Competition Agreements. The
employees of Target set forth on Schedule 5.16 shall have accepted employment
with Acquiror and shall have entered into an Employment and Non-Competition
Agreement substantially in the form attached hereto as Exhibits H-1, et. seq.
37.
<PAGE> 44
(k) Expense Statement. Acquiror shall have received from
Target a statement of all out-of-pocket expenses incurred by Target which are
subject to the limitation described in Section 5.18 hereto.
(l) Pulsecom Agreement. Pursuant to Article 4.C. of the
Agreement between Pulse Communications, Inc. ("Pulsecom") and Target, having an
effective date of October 1, 1995, Target shall have provided Pulsecom with
written notice of Target's exercise of its right and option to convert the
exclusive rights and licenses granted to Pulsecom in Articles 3(A), 3(C) and
3(D) thereof to non-exclusive rights and licenses.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. At any time prior to the Effective Time, whether
before or after approval of the matters presented in connection with the Merger
by the shareholders of Target, this Agreement may be terminated:
(a) by mutual consent of 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 March
31, 1997;
(c) by Acquiror (provided Acquiror is not otherwise in
material breach), if (i) Target shall materially breach any of its
representations, warranties or obligations hereunder and such breach shall not
have been cured within ten business days of receipt by Target of written notice
of such breach, (ii) the Board of Directors of Target shall have withdrawn or
modified its recommendation of this Agreement or the Merger in a manner adverse
to Acquiror or shall have resolved to do any of the foregoing, or (iii) for any
reason Target fails to call and hold the Target Shareholders Meeting or obtain
appropriate written consent of Target's shareholders by March 31, 1997;
(d) by Target (provided Target is not otherwise in
material breach), if Acquiror shall materially breach any of its
representations, warranties or obligations hereunder and such breach shall not
have been cured within ten days following receipt by Acquiror of written notice
of such breach;
(e) by either Acquiror or Target if a Takeover Proposal
or a Trigger Event (as defined in Section 7.3(b)) shall have occurred and the
Board of Directors of Target in connection therewith, after consultation with
its legal counsel, withdraws or modifies its approval and recommendation of
this Agreement and the transactions contemplated hereby
38.
<PAGE> 45
after determining that to cause Target to proceed with the transactions
contemplated hereby would not be consistent with the Board of Directors'
fiduciary duty to the shareholders of Target;
(f) by either Acquiror or Target if (i) any permanent
injunction or other order of a court or other competent authority preventing
the consummation of the Merger shall have become final and nonappealable or
(ii) if any required approval of the shareholders of Target shall not have been
obtained by reason of the failure to obtain the required vote upon a vote held
at a duly held meeting of shareholders or at any adjournment thereof or by
written consent; or
(g) by Target, in the event (i) of the acquisition, by
any person or group of persons (other than persons or groups of persons who (A)
acquired shares of Acquiror Common Stock pursuant to any merger of Acquiror in
which Acquiror was the surviving corporation and shareholders of Acquiror
represent less than 70% of the outstanding shares of the surviving corporation
following such transaction or any acquisition by Acquiror of all or
substantially all of the capital stock or assets of another person or (B)
disclose their beneficial ownership of shares of Acquiror Common Stock on
Schedule 13G under the Exchange Act), of beneficial ownership of 30% or more of
the outstanding shares of Acquiror Common Stock (the terms "person," "group"
and "beneficial ownership" having the meanings ascribed thereto in Section
13(d) of the Exchange Act and the regulations promulgated thereunder), 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, shareholders or affiliates,
except to the extent that such termination results from the breach by a party
hereto of any of its representations, warranties or covenants set forth in this
Agreement; provided that, the provisions of Section 5.3 (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 section 5.18 and to subsections (b), (c),
and (d) of this Section 7.3, whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby (including, without limitation, the fees and
expenses of its advisers, accountants and legal counsel) shall be paid by the
party incurring such expense.
39.
<PAGE> 46
(b) In the event that (i) either Acquiror or Target shall
terminate this Agreement pursuant to Section 7.1(e), (ii) either Acquiror or
Target shall terminate this Agreement pursuant to Section 7.1(f)(ii) following
a failure of the shareholders of Target to approve this Agreement and, prior to
such failure, there shall have been (A) a Trigger Event with respect to Target
or (B) a Takeover Proposal with respect to Target which at the time of the
meeting of Target's shareholders shall not have been (x) rejected by Target or
(y) withdrawn by the third party, or (iii) Acquiror shall terminate this
Agreement pursuant to Section 7.1(c), due in whole or in part to any failure by
Target to use its best efforts to perform and comply with all agreements and
conditions required by this Agreement to be performed or complied with by
Target prior to or on the Closing Date or any failure by Target's Affiliates to
take any actions required to be taken hereby, and prior thereto there shall
have been (A) a Trigger Event with respect to Target or (B) a Takeover Proposal
with respect to Target which shall not have been (x) rejected by Target or (y)
withdrawn by the third party, then Target shall reimburse Acquiror for all of
the reasonable out-of-pocket costs and expenses incurred by Acquiror in
connection with this Agreement and the transactions contemplated hereby
(including, without limitation, the reasonable fees and expenses of its
advisors, accountants and legal counsel) and, in addition, Target shall
promptly pay to Acquiror the sum of $750,000.00; provided, however, that with
respect to Section 7.3(b)(ii)(A) and Section 7.3(b)(iii)(A), 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 or seeking
to advise or influence any Person with respect to the voting of any voting
securities of Target, (iii) forming, joining or in any way participating in any
it group to within the meaning of Section 13(d)(3) of the Exchange Act with
respect to any voting securities 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. As used herein, a "Trigger
Event" shall occur if any Person acquires securities representing 10% or more,
or commences a tender or exchange offer following the successful consummation
of which the offeror and its affiliate would beneficially own securities
representing 25% or more, of the voting power of Target.
(c) In the event that (i) Acquiror shall terminate this
Agreement pursuant to Section 7.1(c) or (ii) Acquiror shall terminate this
Agreement pursuant to Section 7.1(f)(ii), Target shall promptly reimburse
Acquiror for all of the out-of-pocket costs and expenses incurred by Acquiror
in connection with this Agreement and the transactions
40.
<PAGE> 47
contemplated hereby (including, without limitation, the fees and expenses of
its advisors, accountants and legal counsel).
(d) In the event that Target shall terminate this
Agreement pursuant to Section 7.1(d) Acquiror shall promptly reimburse Target
for all of the out-of-pocket costs and expenses incurred by Target in
connection with this Agreement and the 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 Capital Stock, (ii) alter or change any
term of the Articles of Incorporation of the Surviving Corporation to be
effected by the Merger, or (iii) alter or change any of the terms and
conditions of the Agreement if such alteration or change would adversely affect
the holders of Target 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,
10% of the shares of Acquiror Common Stock issued at the Closing pursuant to
Section 1.5(a) (the "Escrow Shares") shall be registered in the name of, and be
deposited with, State Street Bank and Trust Company of California, N.A. (or
other institution selected by Acquiror with the reasonable consent of Target)
as escrow agent (the "Escrow Agent"), such deposit to constitute the Escrow
Fund and to be governed by the terms set forth herein and in the Escrow
Agreement attached hereto Exhibit G. The Escrow Fund (but only up to a maximum
of 10% of the shares of Acquiror Common Stock issued at the Closing) shall be
available to compensate Acquiror pursuant to the indemnification obligations of
the shareholders of Target.
8.2 Indemnification.
41.
<PAGE> 48
(a) Subject to the limitations set forth in this Article
VII, 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, tax benefit received by Acquiror
or its affiliates as a result of such damages, indemnities from third parties
or in the case of third party claims, by any amount actually recovered by
Acquiror or its affiliates pursuant to counterclaims made by any of them
directly relating to the facts giving rise to such third party claims
(collectively, "Damages") arising out of (i) the Confidentiality Agreement and
(ii) any misrepresentation or breach of or default in connection with any of
the representations, warranties, covenants and agreements given or made by
Target in this Agreement, the Target Disclosure Schedules or any exhibit or
schedule to this Agreement. Acquiror and its affiliates shall act in good
faith and in a commercially reasonable manner to mitigate any Damages they may
suffer. The Escrow Fund shall be the sole and exclusive remedy for any claims,
demands, actions or other causes of action brought against Target or its
shareholders, officers or directors.
(b) Nothing in this Article VIII shall limit the
liability (i) of Target for any breach of any representation, warranty or
covenant if the Merger does not close, or (ii) of any Target shareholder in
connection with any breach by such shareholder of the Affiliate and Shareholder
Agreement or Irrevocable Proxy. Resort to the Escrow Fund shall be the
exclusive remedy of Acquiror for any such breaches and misrepresentations
following the Effective Time of the Merger.
8.3 Damage Threshold.
(a) Notwithstanding Section 8.2, Acquiror may not receive
any shares from the Escrow Fund with respect to the indemnification obligations
of the shareholders of Target set forth in Section 8.2(a)(i) unless and until
an Officer's Certificate or Certificates (as defined in Section 8.5 below)
satisfying the requirements of Section 8.5(a)(ii) and identifying Damages has
been delivered to the Escrow Agent as provided in Section 8.5 below and such
amount is determined pursuant to this Article VIII to be payable, in which case
Acquiror shall receive shares equal in value to the full amount of Damages;
provided, however, that in no event shall Acquiror receive more than 10% of the
shares of Acquiror Common Stock issued at the Closing.
(b) Notwithstanding Section 8.2, Acquiror may not receive
any shares from the Escrow Fund with respect to the indemnification obligations
of the shareholders of Target set forth in Section 8.2(a)(ii) unless and until
an Officer's Certificate or
42.
<PAGE> 49
Certificates (as defined in Section 8.5 below) satisfying the requirements of
Section 8.5(a)(i) and (ii) and identifying Damages the aggregate amount of
which exceeds $50,000 (which aggregate amount cannot include any individual
Damage items of $5,000 or less) has been delivered to the Escrow Agent as
provided in Section 8.5 below and such amount is determined pursuant to this
Article VIII to be payable, in which case Acquiror shall receive shares equal
in value to the full amount of Damages in excess of $50,000; provided, however,
that in no event shall Acquiror receive more than 10% of the shares of Acquiror
Common Stock issued at the Closing. 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 the Escrow Shares upon the expiration of twelve months from the Effective
Time; 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 8.7 hereof, are 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 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, with respect to the
indemnification obligations of the shareholders of
Target set forth in Section 8.2(a)(ii), Damages exist
in an aggregate amount greater than $50,000 (which
aggregate amount cannot include any individual Damage
items of $5,000 or less), and
(ii) specifying in reasonable detail the
individual items of such Damages included in the
amount so stated, the date each such item was paid,
or properly accrued or arose, and the nature of the
misrepresentation, breach of warranty or claim to
which such item is related,
the Escrow Agent shall, subject to the provisions of Section 8.6 and 8.7,
deliver to Acquiror out of the Escrow Fund, as promptly as practicable,
Acquiror Common Stock or other assets held in the Escrow Fund having a value
equal to such Damages in excess of $50,000.
43.
<PAGE> 50
(b) For the purpose of compensating Acquiror for its
Damages pursuant to this Agreement, the Acquiror Common Stock in the Escrow
Fund shall be valued at the closing price of Acquiror's common stock as of the
date of such claim.
8.6 Objections to Claims. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such Officer's
Certificate shall be delivered to the Shareholders' Agent (defined in Section
8.8 below) by Acquiror and for a period of forty-five (45) days after the
receipt by the Escrow Agent of the Officer's Certificate delivered to Escrow
Agent (it being understood that the Escrow Agent need not verify that an
Officer's Certificate was also delivered to the Shareholders' Agent), the
Escrow Agent shall make no delivery of Acquiror Common Stock or other property
pursuant to Section 8.5 hereof unless the Escrow Agent shall have received
written authorization from the Shareholders' Agent to make such delivery.
After the expiration of such forty-five (45) day period, the Escrow Agent shall
make delivery of the Acquiror Common Stock or other property in the Escrow Fund
in accordance with Section 8.5 hereof, provided that no such payment or
delivery may be made if the Shareholders' Agent shall object in a written
statement to the claim made in the Officer's Certificate, 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, pursuant to
Section 8.6, object in writing to any claim or claims by Acquiror made in any
Officer's Certificate, Acquiror shall have forty-five (45) days to respond in a
written statement to the objection of the Shareholders' Agent. If after such
forty-five (45) day period there remains a dispute as to any claims, the
Shareholders' Agent and Acquiror shall attempt in good faith for sixty (60)
days to agree upon the rights of the respective parties with respect to each of
such claims. If the Shareholders' Agent and Acquiror should so agree, a
memorandum setting forth such agreement shall be prepared and signed by both
parties and shall be furnished to the Escrow Agent. The Escrow Agent shall be
entitled to rely on any such memorandum and shall retain or distribute the
Acquiror Common Stock or other property from the Escrow Fund in accordance with
the terms thereof.
(b) If no such agreement can be reached after good faith
negotiation, either Acquiror or the Shareholders' Agent may, by written notice
to the other, demand arbitration of the matter unless the amount of the damage
or loss is at issue in pending litigation with a third party, in which event
arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either such event the matter shall be
settled by arbitration conducted by three arbitrators. Within fifteen (15)
days after such written notice is sent, Acquiror and the Shareholders' Agent
shall each select one arbitrator, and the two arbitrators so selected shall
select a third arbitrator. The decision of the arbitrators as to the validity
and amount of any claim in such Officer's Certificate shall be
44.
<PAGE> 51
binding and conclusive upon the parties to this Agreement, and notwithstanding
anything in Section 9.6 hereof, the Escrow Agent shall be entitled to act in
accordance with such decision and make or withhold payments out of the Escrow
Fund in accordance therewith.
(c) Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. Any such arbitration shall be
held in Santa Clara or San Mateo County, California under the commercial rules
then in effect of the American Arbitration Association. For purposes of this
Section 8.7(c), in any arbitration hereunder in which any claim or the amount
thereof stated in the Officer's Certificate is at issue, Acquiror shall be
deemed to be the Non-Prevailing Party unless the arbitrators award Acquiror
more than one- half (1/2) of the amount in dispute, plus any amounts not in
dispute; otherwise, the Target shareholders for whom shares of Target Common
Stock otherwise issuable to them have been deposited in the Escrow Fund shall
be deemed to be the Non-Prevailing Party. The Non-Prevailing Party to an
arbitration shall pay its own expenses, the fees of each arbitrator, the
administrative fee of the American Arbitration Association, and the expenses,
including without limitation, attorneys' fees and costs, reasonably incurred by
the other party to the arbitration.
8.8 Shareholders' Agent.
(a) Sayuri Sharper shall be constituted and appointed as
agent ("Shareholders' Agent") for and on behalf of the Target shareholders to
give and receive notices and communications, to authorize delivery to Acquiror
of the Acquiror Common Stock or other property from the Escrow Fund in
satisfaction of claims by Acquiror, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration
and comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of the
Shareholders' Agent for the accomplishment of the foregoing. Such agency may
be changed by the holders of a majority in interest of the Escrow Fund from
time to time upon not less than 10 days' prior written notice to Acquiror and
the Escrow Agent. No bond shall be required of the Shareholders' Agent, and
the Shareholders' Agent and Escrow Agent shall receive no compensation for his
services. Notices or communications to or from the Shareholders' Agent shall
constitute notice to or from each of the Target shareholders.
(b) The Shareholders' Agent shall not be liable for any
act done or omitted hereunder as Shareholders' Agent while acting in good
faith, and 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.
45.
<PAGE> 52
(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 his duties and exercising his rights
hereunder, provided that the Shareholders' Agent shall treat confidentially and
not disclose any nonpublic information from or about Target to anyone (except
on a need to know basis to individuals who agree to treat such information
confidentially).
8.9 Actions of the Shareholders' Agent. A decision, act, consent
or instruction of the Shareholders' Agent shall constitute a decision of all
Target shareholders for whom shares of Acquiror Common Stock otherwise issuable
to them are deposited in the Escrow Fund and shall be final, binding and
conclusive upon each such Target shareholder, and the Escrow Agent and Acquiror
may rely upon any decision, act, consent or instruction of the Shareholders'
Agent as being the decision, act, consent or instruction of each and every such
Target shareholder. The Escrow Agent and Acquiror are hereby relieved from any
liability to any person for any acts done by them in accordance with such
decision, act, consent or instruction of the Shareholders' Agent.
8.10 Third-Party Claims. In the event Acquiror becomes aware of a
third-party claim which Acquiror believes may result in a demand against the
Escrow Fund, Acquiror shall notify the Shareholders' Agent of such claim, and
the Shareholders' Agent and the Target shareholders for whom shares of Acquiror
Common Stock otherwise issuable to them are deposited in the Escrow Fund shall
be entitled, at their expense, to participate in any defense of such claim.
Acquiror shall have the right in its sole discretion to settle any such claim;
provided, however, that Acquiror may not 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 8.6 or any other provision of this Article
VIII to the amount of any claim by Acquiror against the Escrow Fund for
indemnity with respect to such settlement.
8.11 Pulsecom Escrow Fund.
(a) As soon as practicable after the Effective Time, 60%
percent (in addition to the 10% placed into escrow pursuant to section 8.1) of
the shares of Acquiror Common Stock issued at the Closing pursuant to Section
1.5(a) (the "Pulsecom Escrow Shares") shall be registered in the name of, and
be deposited with, the Escrow Agent, such deposit to constitute the Pulsecom
Escrow Fund and to be governed by the terms set forth in this section 8.11
(without regard to the other sections of this Article VIII) and in the Escrow
Agreement attached hereto Exhibit G. The Pulsecom Escrow Fund shall be
available to compensate Acquiror pursuant to the Target's obligations in this
section 8.11. Acquiror shall have no claim on the Escrow Fund established in
section 8.1 above with respect to the matters set forth in this section 8.11.
In each case where Acquiror delivers an officer's certificate to
46.
<PAGE> 53
the Escrow Agent pursuant to this 8.11, Acquiror shall simultaneously deliver a
copy to the Shareholders' Agent.
(b) During the Pulsecom Escrow Period, in the event that
Acquiror suffers any Pulsecom Damages (as defined below), then upon receipt of
an officer's certificate signed by any officer of Acquiror stating that
Acquiror has suffered Pulsecom Damages and specifying the amount thereof, the
Escrow Agent shall promptly requisition from the stock transfer agent, if
necessary, and deliver to Acquiror, out of the Pulsecom Escrow Fund, as
promptly as practicable, a number of shares of Acquiror common stock (and
cash-in-lieu payments when appropriate) having a value equal to the amount of
Pulsecom Damages specified in such certificate. For the purpose of compensating
Acquiror for its Pulsecom Damages pursuant to this Agreement, the Acquiror
Common Stock in the Pulsecom Escrow Fund shall be valued at the Closing Price.
(c) The Pulsecom Escrow Period shall terminate with
respect to the Pulsecom Escrow Shares upon the expiration of 36 months from the
Effective Time (the "Pulsecom Escrow Termination Date"), at which time the
Escrow Agent shall requisition from the stock transfer agent, if necessary, and
deliver to the Shareholders' Agent on behalf of Target's Shareholders all of
the Pulsecom Escrow Shares and other property remaining in the Pulsecom Escrow
Fund; provided, however, in the event that Acquiror reasonably believes that it
may suffer losses, costs, damages, liabilities or expenses arising from any
notices, claims, demands, actions, causes of action, or recoveries related to
the issues for which the clarifications to the Pulsecom Agreements set forth in
subsection (d) of this section are sought ("Pulsecom Damages"), then upon
receipt of an officer's certificate signed by any officer of Acquiror stating
that Acquiror reasonably believes that it may suffer Pulsecom Damages and
specifying the amount thereof, the Escrow Agent shall promptly requisition from
the stock transfer agent, if necessary, and deliver to Acquiror, out of the
Pulsecom Escrow Fund, as promptly as practicable, a number of shares of
Acquiror common stock (and cash-in- lieu payments when appropriate) having a
value equal to the amount of Pulsecom Damages specified in such certificate.
Any Pulsecom Escrow Shares and other property remaining in the Pulsecom Escrow
Fund after such distribution to Acquiror shall be delivered to the
Shareholders' Agent on behalf of the Target Shareholders. For the purpose of
compensating Acquiror for its Pulsecom Damages pursuant to this Agreement, the
Acquiror Common Stock in the Pulsecom Escrow Fund shall be valued at the
Closing Price.
(d) The Pulsecom Escrow Shares shall be subject to
release to the shareholders of Target prior to the Pulsecom Escrow Termination
Date if Target amends the following Agreements between Target and Pulsecom or
otherwise obtains from Pulsecom written confirmation and agreement, in a manner
acceptable to Acquiror, as to the following issues set forth in (i) and (ii)
below. In such case, Acquiror shall promptly deliver to the Escrow Agent an
officer's certificate signed by an officer of Acquiror stating that such
conditions have been satisfied. Upon receipt of such certificate the Escrow
Agent shall
47.
<PAGE> 54
promptly requisition from the stock transfer agent, if necessary, and release
out of the Pulsecom Escrow Fund, as promptly as practicable, all of the
Pulsecom Escrow Shares to the shareholders of Target at their addresses set
forth in a certificate of the Shareholders' Agent in accordance with their
percentage interests set forth in Appendix B-2.
(i) In the Agreement between Pulsecom and Target,
having an effective date of May 1, 1995 (the "May 1995 Pulsecom Agreement"),
Article 3.E. (regarding Pulsecom's right of first refusal with respect to any
D4 or SLC-96 compatible ISDN product developed by Target that does not follow
the TR-NWT-000397 standard) shall be limited and restricted to grant Pulsecom a
right of first refusal only for the D4 ISDN system.
(ii) In the Agreement between Pulsecom and Target,
having an effective date of October 1, 1995 (the "October 1995 Pulsecom
Agreement" and together with the May 1995 Pulsecom Agreement, the "Pulsecom
Agreements"):
(A) Article 4.C (regarding Target's
right and option to convert certain of Pulsecom's exclusive rights and licenses
to non-exclusive rights and licenses) shall be corrected to indicate that the
exclusive right and license granted to Target in Article 3(C) shall be
converted to non-exclusive upon Target's exercise of such option, such that it
is clear and unambiguous that, upon such conversion, there are no limitations
or restrictions on Target to create and use derivative works of Target's
"Design Know-How" (as such term is defined in the Agreement); and
(B) Article 4.C. (regarding Target's
obligation to provide Pulsecom with such access to Target's design materials
(including all software, software documentation and source code) as may be
necessary for Pulsecom to further develop or have developed the D4 FRX System
components) shall be limited to provide that Target is obligated to provide
Pulsecom only with such Target design materials existing as of the product
acceptance of the following D4 FRX System components: PC Based SNMP Agent, ISDN
FRX and DDS FRX and all bug fixes thereto.
ARTICLE IX
GENERAL PROVISIONS
9.1 Non-Survival at Effective Time. The representations,
warranties and agreements set forth in this Agreement shall terminate at the
Effective Time, except that the agreements set forth in Article I, Section 5.3
(Confidentiality), 5.6 (Affiliate and Shareholder Agreement), 5.9 (FIRPTA),
5.12 (Employee Benefit Plans), 5.14 (Form S-8), 5.17 (Reorganization), 5.20
(Reasonable Commercial Efforts and Further Assurances), 7.3
48.
<PAGE> 55
(Expenses and Termination Fees), 7.4 (Amendment), Article VIII and this Article
IX shall survive the Effective Time.
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.
255 West Tasman
San Jose, CA 95134
Attention: President
Fax: 408-526-4100
Tel: 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, Esq.
Fax: (415) 496-2885
Tel: (415) 424-0160
(b) if to Target, to
Telesend, Inc.
1525 Clay Drive
Los Altos, CA 94024
Attention: President
Tel: (415) 968-6583
with a copy to:
Gray Cary Ware & Freidenrich
400 Hamilton Avenue
Palo Alto, CA 94301
Attention: Peter M. Astiz, Esq.
Fax: 415-327-3699
Tel: 415-328-6561
49.
<PAGE> 56
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 February 18, 1997.
The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
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
specifically set forth herein; 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.
50.
<PAGE> 57
9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of California, without giving effect to
principles of conflicts of law. Each of the parties hereto irrevocably
consents to the exclusive jurisdiction of any court located within Santa Clara
or San Mateo County, State of California, in connection with any matter based
upon or arising out of this Agreement or the matters contemplated herein,
agrees that process may be served upon them in any manner authorized by the
laws of the State of California for such persons and waives and covenants not
to assert or plead any objection which they might otherwise have to such
jurisdiction and such process.
9.9 Rules of Construction. The parties hereto agree that they
have been represented by counsel during the negotiation, preparation and
execution of this 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.
51.
<PAGE> 58
IN WITNESS WHEREOF, Target and Acquiror have caused this Agreement to
be executed and delivered by their respective officers thereunto duly
authorized, all as of the date first written above.
ACQUIROR
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
TARGET
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
<PAGE> 59
53.
<PAGE> 60
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
54.
<PAGE> 1
EXHIBIT 5.1
March 3, 1997
Telesend, Inc.
21040 Homestead Road
Suite 205
Cupertino, CA 95104
Ladies and Gentlemen:
We have acted as counsel for Cisco Systems, Inc., a California
corporation ("Acquiror"), in connection with the merger (the "Merger") of
Telesend, Inc., a California corporation ("Target"), with and into Acquiror
pursuant to the Agreement and Plan of Reorganization by and between Acquiror
and Target, dated as of February 18, 1997 (the "Reorganization Agreement"), and
the Agreement of Merger between Acquiror and Target, dated as of March 3, 1997
(the "Merger Agreement"). This opinion is rendered to you pursuant to Section
6.2(c) of the Reorganization Agreement. Capitalized terms used herein and not
otherwise defined shall have the same meaning given to such terms in the
Reorganization Agreement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of such documents,
corporate records, certificates, including certificates of public officials and
other instruments as we have deemed necessary or advisable for purposes of this
opinion, including the Restated Articles of Incorporation, as amended, and the
Amended and Restated Bylaws of Acquiror and the records of the Board of
Directors of Acquiror relating to the Merger. In addition, in connection with
the Merger, we have reviewed the Reorganization Agreement, the Merger Agreement
and the Affiliate and Shareholder Agreements.
In such examination and review we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such copies; and that there are no extrinsic
agreements or understandings among the parties to the Reorganization Agreement
and the Merger Agreement that would modify or interpret the terms of the
Reorganization Agreement and the Merger Agreement or the respective rights or
obligations of the parties thereunder. As to any facts material to the
opinions hereinafter expressed which
<PAGE> 2
Telesend, Inc. March 3, 1997
Page 2
we did not independently establish or verify, we have relied without
investigation upon certificates, statements and representations of
representatives of Acquiror. During the course of our discussion with such
officers and representatives and our review of the documents described above in
connection with the preparation of these opinions, no facts were disclosed to
us that caused us to conclude that any such certificate, statement or
representation is untrue. In making our examination of the documents executed
by entities other than Acquiror, we have assumed that each such other entity
had the power to enter into and perform all its obligations thereunder and the
due authorization, execution and delivery of such documents by each such
entity.
The opinions hereinafter expressed are qualified to the extent that
(a) the validity or enforceability of any of the agreements, documents or
obligations referred to herein may be subject to or affected by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting the rights and remedies of creditors generally, and (b) the
enforceability of such agreements, documents or obligations may be limited by
general principles of equity, including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing, and public policy,
whether applied by a court of law or equity. We do not express any opinion
herein as to the availability of any equitable or other specific remedy upon
breach of any of the agreements, documents or obligations referred to herein.
We render or imply no opinion with respect to compliance with applicable
anti-fraud statutes, rules or regulations of applicable state or federal law.
Based upon and subject to the foregoing, and subject to the further
assumptions, limitations, qualifications and exceptions set forth herein, we
are of the opinion that:
1. Acquiror is a corporation duly organized, validly existing and
in good standing under the laws of the State of California, has the corporate
power and authority to own, operate and lease its properties and carry on its
business as now conducted;
2. The authorized capital stock of Acquiror consists of
1,200,000,000 shares of Common Stock, no par value, and 5,000,000 shares of
Preferred Stock, no par value. At the close of business on February 28, 1997,
no shares of Preferred Stock were issued and outstanding. At the close of
business on February 28, 1997, 663,422,773 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 February 28, 1997,
77,424,135 shares of Common Stock were subject to issuance upon exercise of
outstanding options;
<PAGE> 3
Telesend, Inc. March 3, 1997
Page 3
3. Acquiror has full corporate power and authority to execute,
deliver, and perform its obligations under the Reorganization Agreement and the
Merger Agreement; Acquiror has taken all requisite corporate action to approve
and adopt the Reorganization Agreement and the Merger Agreement and to approve
and to authorize the carrying out of the transactions contemplated thereunder;
and the Reorganization Agreement and the Merger Agreement have been duly
executed and delivered by Acquiror and constitute legal, valid and binding
obligations of Acquiror; provided that enforceability of the indemnity
obligations contained in such agreements may be limited by public policy;
4. The approval of the shareholders of Acquiror is not required
for the consummation of the transactions contemplated by the Reorganization
Agreement and the Merger Agreement; the shares of Acquiror Common Stock to be
delivered in exchange for shares of Target Common Stock will, when issued as
contemplated by the Reorganization Agreement and the Merger Agreement, be
validly issued, fully paid and nonassessable; and a sufficient number of shares
of Acquiror Common Stock have been duly and validly reserved for issuance upon
exercise of Target Options being assumed by Acquiror pursuant to section 1.5 of
the Reorganization Agreement and such reserved shares, when issued in
accordance with the terms of such options, will be validly issued, fully paid
and nonassessable;
5. The execution, delivery and performance of the Reorganization
Agreement by Acquiror, the execution and delivery of the Merger Agreement by
Acquiror and the carrying out of the transactions contemplated by the
Reorganization Agreement and by the Merger Agreement to be carried out by
Acquiror did not and will not conflict with or constitute a violation under the
charter documents of Acquiror;
6. To our knowledge, no suit, action or legal, administrative,
arbitration or other proceeding or governmental investigation is pending or
threatened to which Acquiror or any of their assets or properties is a party
which seeks to prohibit, restrain or enjoin the transactions contemplated by
the Reorganization Agreement or the Merger Agreement; and
7. There is no consent, approval, authorization, order,
registration, qualification or filing of or with any court or any regulatory
authority or other governmental body (either foreign or domestic) required by
Acquiror or with respect to its assets or properties or otherwise for the
consummation of the transactions contemplated by the Reorganization Agreement
and the Merger Agreement that has not been obtained, except for (i) such
consents, approvals, authorizations, registration or
<PAGE> 4
Telesend, Inc. March 3, 1997
Page 4
qualifications as may be required under state securities or Blue Sky laws in
connection with the offer, sale and registration of Acquiror Common Stock
pursuant to the Merger, (ii) acceptance for filing of the Merger Agreement
together with any appropriate tax clearance certificate by the California
Secretary of State, (iii) the filing by Acquiror with the Securities and
Exchange Commission (the "SEC") of a Registration Statement on Form S-3 (the
"S-3") covering the shares of Acquiror common stock issued to the former
shareholders of Target and the declaration of effectiveness by the SEC with
respect to such S-3, and (iv) the filing by Acquiror with the SEC of a
Registration Statement on Form S-8 (the "S-8") covering the outstanding options
of Target that are being assumed by Acquiror and the declaration of
effectiveness by the SEC with respect to such S-8. Our opinion herein,
however, is subject to the timely and proper completion of all filings and
other actions contemplated above in this paragraph 7, where such filings and
actions are to be undertaken on or after the date hereof.
Whenever our opinion herein with respect to the existence or absence
of facts is indicated to be based upon our knowledge, such expression means
that in the course of our representation of Acquiror in connection with the
Merger nothing has come to our attention that would give us actual knowledge of
the existence or absence of 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 Acquiror ("Transfer
Agent") dated as of March 3, 1997 as to the matters set forth therein, (ii)
relied, without independent verification, on a certificate of an officer of
Acquiror, dated as of March 3, 1997 with respect to certain of the factual
matters set forth therein and (iii) reviewed procedures used by Acquiror and
the Transfer Agent when issuing or authorizing the issuance of shares. We
note, however, that we have not (x) reviewed Acquiror's stock records, (y)
verified procedures used by or obtained records from Acquiror's Transfer Agent
or (z) independently verified that each issued and outstanding share of Common
Stock has been fully paid.
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.
<PAGE> 5
Telesend, Inc. March 3, 1997
Page 5
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,
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 6
Telesend, Inc. March 3, 1997
Page 6
DOC #: 212031
REVIEW PARTNER: JPH
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
Cisco Systems, Inc. on Form S-3 for the registration of 100,340 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 in Form 10-K, filed with the Securities and Exchange Commission. We also
consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
San Jose, California
April 3, 1997
