<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 1, 1999
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)
----------
170 WEST TASMAN DRIVE
SAN JOSE, CALIFORNIA 95134
(408) 526-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------
JOHN T. CHAMBERS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CISCO SYSTEMS, INC.
255 WEST TASMAN DRIVE
SAN JOSE, CALIFORNIA 95134
(408) 526-4000
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
----------
Copy to:
T. W. KELLERMAN, ESQ.
BROBECK HALE AND DORR
HASILWOOD HOUSE
60 BISHOPSGATE
LONDON EC2N 4AJ UNITED KINGDOM
(0171) 638-6688
----------
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 Aggregate Offering Aggregate of Registration
To be Registered Registered Price Per Share(1) Offering Price(1) Fee
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$0.001 par value per share 438,280 $88.50 $38,787,780 $10,239.97
=============================================================================================================
</TABLE>
(1) The price of $88.50, the average of the high and low prices of Cisco's
common stock on the Nasdaq Stock Market's National Market on November 23, 1999,
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
THE INFORMATION CONTAINED IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY
BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED DECEMBER 1, 1999
PRELIMINARY PROSPECTUS
438,280 SHARES
CISCO SYSTEMS, INC.
COMMON STOCK
This Prospectus relates to the public offering, which is not being
underwritten, of 438,280 shares of our Common Stock which are held by some of
our current shareholders.
The prices at which such shareholders may sell the shares will be
determined by the prevailing market price for the shares or in negotiated
transactions. We will not receive any of the proceeds from the sale of the
shares.
Our Common Stock is quoted on the Nasdaq National Market under the
symbol "CSCO." On November 29, 1999, the average of the high and low price for
the Common Stock was $92.75.
-------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
-------------------------------
================================================================================
The date of this Prospectus is December __, 1999.
<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 Cisco
Systems, Inc. (referred to in this Prospectus as "Cisco" or the "Registrant"),
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.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the Public Reference Room. Our SEC filings are also available to
the public from our web site at http://www.cisco.com or at the SEC's web site at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below and any future filings made with the SEC under Section
13a, 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until our
offering is completed.
(a) Annual Report on Form 10-K for the year ended July 31, 1999,
filed September 28, 1999, including certain information in Cisco's
Definitive Proxy Statement in connection with Cisco's 1999 Annual
Meeting of Shareholders and certain information in Cisco's Annual Report
to Shareholders for the fiscal year ended July 31, 1999;
(b) Cisco's Current Reports on Form 8-K filed on each of October
20, 1999, November 4, 1999, and November 17, 1999;
(c) The description of Cisco common stock contained in its
registration statement on Form 8-A filed January 8, 1990, including any
amendments or reports filed for the purpose of updating such
descriptions; and
(d) The description of Cisco's Preferred Stock Purchase Rights,
contained in its registration statement on Form 8-A filed on June 11,
1998, including any amendments or reports filed for the purpose of
updating such description.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Larry R. Carter
Senior Vice President, Chief Financial Officer and Secretary
Cisco Systems, Inc.
255 West Tasman Drive
San Jose, CA 95134
408-526-4000
You should rely only on the information incorporated by reference or
provided in this prospectus or the prospectus supplement. We have authorized no
one to provide you with different information. We are not making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus or the prospectus supplement is
accurate as of any date other than the date on the front of the document.
2
<PAGE> 4
THE COMPANY
Cisco's principal executive offices are located at 255 West Tasman
Drive, San Jose, California 95134. Cisco's telephone number is (408) 526-4000.
PLAN OF DISTRIBUTION
Cisco is registering all 438,280 shares (the "Shares") on behalf of
certain selling shareholders. All of the shares originally were issued by us in
connection with our acquisition of Calista, Inc. We merged with Calista, Inc.
and we are the surviving corporation. Cisco will receive no proceeds from this
offering. The Selling Shareholders named in the table below or pledgees, donees,
transferees or other successors-in-interest selling shares received from a named
selling shareholder as a gift, partnership distribution or other
non-sale-related transfer after the date of this prospectus (collectively, the
"Selling Shareholders") may sell the shares from time to time. The Selling
Shareholders will act independently of Cisco in making decisions with respect to
the timing, manner and size of each sale. The sales may be made on one or more
exchanges or in the over-the-counter market or otherwise, at prices and at terms
then prevailing or at prices related to the then current market price, or in
negotiated transactions. The Selling Shareholders may effect such transactions
by selling the shares to or through broker-dealers. The shares may be sold by
one or more of, or a combination of, the following:
o a block trade in which the broker-dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction,
o purchases by a broker-dealer as principal and resale by such
broker-dealer for its account pursuant to this prospectus,
o an exchange distribution in accordance with the rules of such
exchange,
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers, and
o in privately negotiated transactions.
To the extent required, this prospectus may be amended or supplemented
from time to time to describe a specific plan of distribution. In effecting
sales, broker-dealers engaged by the Selling Shareholders may arrange for other
broker-dealers to participate in the resales.
The Selling Shareholders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
such transactions, broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with Selling Shareholders. The
Selling Shareholders also may sell shares short and redeliver the shares to
close out such short positions. The Selling Shareholders may enter into option
or other transactions with broker-dealers which require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer such shares pursuant to this prospectus. The Selling Shareholders also
may loan or pledge the shares to a broker-dealer. The broker-dealer may sell the
shares so loaned, or upon a default the broker-dealer may sell the pledged
shares pursuant to this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from Selling Shareholders. Broker-dealers
or agents may also receive compensation from the purchasers of the shares for
whom they act as agents or to whom they sell as principals, or both.
Compensation as to a particular broker-dealer might be in excess of customary
commissions and will be in amounts to be negotiated in connection with the sale.
Broker-dealers or agents and any other participating broker-dealers or the
Selling Shareholders may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act in connection with sales of the shares.
Accordingly, any such commission, discount or concession received by them and
any profit on the resale of the shares purchased by them may be deemed to be
underwriting discounts or commissions under the Securities Act. Because Selling
Shareholders may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act, the Selling Shareholders will be subject to the
prospectus delivery requirements of the Securities Act. In addition, any
securities covered by this prospectus which qualify for sale pursuant to Rule
144 promulgated under the Securities Act may be sold under Rule 144 rather than
pursuant to this prospectus. The Selling Shareholders have advised Cisco that
they have not entered into any agreements, understandings or
3
<PAGE> 5
arrangements with any underwriters or broker-dealers regarding the sale of their
securities. There is no underwriter or coordinating broker acting in connection
with the proposed sale of shares by Selling Shareholders.
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. 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.
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 our common stock for a period of two
business days prior to the commencement of such distribution. In addition, each
Selling Shareholder will be subject to applicable provisions of the Exchange Act
and the associated rules and regulations under the Exchange Act, including
Regulation M, which provisions may limit the timing of purchases and sales of
shares of our common stock by the Selling Shareholders. Cisco will make copies
of this prospectus available to the Selling Shareholders and has informed them
of the need for delivery of copies of this prospectus to purchasers at or prior
to the time of any sale of the shares.
Cisco will file a supplement to this prospectus, if required, pursuant
to Rule 424(b) under the Securities Act upon being notified by a Selling
Shareholder that any material arrangement has been entered into with a
broker-dealer for the sale of shares through a block trade, special offering,
exchange distribution or secondary distribution or a purchase by a broker or
dealer. Such supplement will disclose:
o the name of each such Selling Shareholder and of the participating
broker-dealer(s),
o the number of shares involved,
o the price at which such shares were sold,
o the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable,
o that such broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in this
prospectus, and
o other facts material to the transaction.
In addition, upon being notified by a Selling Shareholder that a donee
or pledgee intends to sell more than 500 shares, Cisco will file a supplement to
this prospectus.
Cisco will bear all costs, expenses and fees in connection with the
registration of the shares. The Selling Shareholders will bear all commissions
and discounts, if any, attributable to the sales of the shares. The Selling
Shareholders may agree to indemnify any broker-dealer or agent that participates
in transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act. The Selling Shareholders
have agreed to indemnify certain persons, including broker-dealers and agents,
against certain liabilities in connection with the offering of the shares,
including liabilities arising under the Securities Act.
4
<PAGE> 6
SELLING SHAREHOLDERS
The following table sets forth the number of shares owned by each of the
Selling Shareholders. None of the Selling Shareholders has had a material
relationship with Cisco within the past three years other than as a result of
the ownership of the shares or other securities of Cisco. No estimate can be
given as to the amount of shares that will be held by the Selling Shareholders
after completion of this offering because the Selling Shareholders may offer all
or some of the shares and because there currently are no agreements,
arrangements or understandings with respect to the sale of any of the shares.
The shares offered by this prospectus may be offered from time to time by the
Selling Shareholders named below.
<TABLE>
<CAPTION>
Number of Shares Percent of Number of Shares
Beneficially Outstanding Registered for
Name of Selling Shareholder Owned Shares Sale Hereby(1)
- --------------------------- ---------------- ----------- ----------------
<S> <C> <C> <C>
Mark Richer............................. 422,347 * 422,347
William MacDonald....................... 6,913 * 6,913
Bruce Tanner............................ 52 * 52
Adrian Sugget........................... 52 * 52
Mark French............................. 4,406 * 4,406
Nick Tingle............................. 4,406 * 4,406
Jess Marinez............................ 52 * 52
Ron Radcliff............................ 52 * 52
-------- ------- --------
Total................................ 438,280 * 438,280
======== ======= ========
</TABLE>
- --------------
* Represents beneficial ownership of less than one percent.
(1) This registration statement also shall 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 Cisco's
outstanding shares of common stock.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
Cisco by Brobeck Hale and Dorr, London, England.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K for the year ended July 31, 1999,
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
accounting and auditing.
5
<PAGE> 7
================================================================================
We have not authorized any person to make a statement that differs from what is
in this prospectus. If any person does make a statement that differs from what
is in this prospectus, you should not rely on it. This prospectus is not an
offer to sell, nor is it seeking an offer to buy, these securities in any state
in which the offer or sale is not permitted. The information in this prospectus
is complete and accurate as of its date, but the information may change after
that date.
-------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where You Can Find More Information............... 2
The Company....................................... 3
Plan of Distribution.............................. 3
Selling Shareholders.............................. 5
Legal Matters..................................... 5
Experts........................................... 5
</TABLE>
================================================================================
================================================================================
CISCO SYSTEMS, INC.
438,280 SHARES
OF COMMON STOCK
----------
PROSPECTUS
----------
DECEMBER __, 1999
================================================================================
<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 Cisco 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 $10,240
Legal fees and expenses 15,000
Accounting fees and expenses 5,000
Printing Fees 5,000
Transfer Agent Fees 5,000
Miscellaneous 4,760
-------
Total $45,000
=======
</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. Cisco'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, Cisco has entered into
indemnification agreements with each of its directors and officers.
ITEM 16. EXHIBITS
<TABLE>
<S> <C>
2.1 Agreement and Plan of Merger and Reorganization, dated as of August 12,
1999, by and between Cisco Systems, Inc. and Calista, Inc.
5.1 Opinion of Brobeck Hale and Dorr
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Brobeck Hale and Dorr (included in the Opinion of Brobeck
Hale and Dorr 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.
(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.
II-1
<PAGE> 9
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 SEC such indemnification is against
public policy as expressed in the Securities Act and therefore is 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, and, where applicable, each filing of an employee benefit plan's
annual report pursuant to 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 the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Santa Clara, State of California, on this 29th day of
November, 1999.
CISCO SYSTEMS, INC.
By /s/ John T. Chambers
----------------------------------
John T. Chambers,
President, Chief Executive Officer
and Director
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John T. Chambers and Larry R. Carter, and each of
them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this registration statement, and to file same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, and any of them, or their
or his substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons on
behalf of Cisco and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ John T. Chambers President, Chief Executive November 29, 1999
- -------------------------------- Officer and Director
John T. Chambers (Principal Executive Officer)
/s/ Larry R. Carter Senior Vice President, Finance November 29, 1999
- -------------------------------- and Administration, Chief
Larry R. Carter Financial Officer and Secretary
(Principal Financial and
Accounting Officer)
/s/ John P. Morgridge Chairman of the Board and Director November 29, 1999
- --------------------------------
John P. Morgridge
/s/ Donald T. Valentine Vice Chairman and Director November 29, 1999
- --------------------------------
Donald T. Valentine
</TABLE>
II-3
<PAGE> 11
<TABLE>
<S> <C> <C>
/s/ James F. Gibbons Director November 29, 1999
- --------------------------------
James F. Gibbons
/s/ Steven M. West Director November 29, 1999
- --------------------------------
Steven M. West
/s/ Edward R. Kozel Director November 29, 1999
- --------------------------------
Edward R. Kozel
/s/ Carol A. Bartz Director November 29, 1999
- --------------------------------
Carol A. Bartz
/s/ James C. Morgan Director November 29, 1999
- --------------------------------
James C. Morgan
/s/ Mary Cirillo Director November 29, 1999
- --------------------------------
Mary Cirillo
/s/ Arun Sarin Director November 29, 1999
- --------------------------------
Arun Sarin
</TABLE>
II-4
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
------ -------------
<S> <C>
2.1 Agreement and Plan of Merger and Reorganization, dated as of
August 12, 1999, by and between Cisco Systems, Inc. and Calista,
Inc.
5.1 Opinion of Brobeck Hale and Dorr
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Brobeck Hale and Dorr (included in the Opinion of
Brobeck Hale and Dorr filed as Exhibit 5.1)
24.1 Power of Attorney (included on page II-3 of this registration
statement)
</TABLE>
II-5
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION
BY AND AMONG
CISCO SYSTEMS, INC.
AND
CALISTA, INC.
AUGUST 12, 1999
<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 Directors and Officers........................................................... 2
1.6 Effect on Capital Stock.......................................................... 2
1.7 Surrender of Certificates........................................................ 4
1.8 No Further Ownership Rights in Target Capital Stock.............................. 6
1.9 Lost, Stolen or Destroyed Certificates........................................... 6
1.10 Tax Consequences............................................................... 7
1.11 Taking of Necessary Action; Further Action..................................... 7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF TARGET...................................... 7
2.1 Organization, Standing and Power................................................. 7
2.2 Capitalization; Title to the Shares.............................................. 8
2.3 Authority........................................................................ 9
2.4 Financial Statements............................................................. 9
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.......................................................................... 15
2.14 Employee Benefit Plans......................................................... 17
2.15 Certain Agreements Affected by the Merger...................................... 19
2.16 Employee Matters............................................................... 20
2.17 Interested Party Transactions.................................................. 22
2.18 Insurance...................................................................... 22
2.19 Compliance With Laws........................................................... 22
2.20 Minute Books................................................................... 22
2.21 Complete Copies of Materials................................................... 22
2.22 Brokers' and Finders' Fees..................................................... 23
2.23 Vote Required.................................................................. 23
2.24 Board Approval................................................................. 23
2.25 Accounts Receivable............................................................ 23
2.26 Customers and Suppliers........................................................ 23
2.27 Material Contracts............................................................. 23
2.28 No Breach of Material Contracts................................................ 24
2.29 Third Party Consents........................................................... 24
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
2.30 Material Third Party Consents.................................................. 24
2.31 Export Control Laws............................................................ 25
2.32 Product Releases............................................................... 25
2.33 Year 2000...................................................................... 25
2.34 State Takeover Statutes........................................................ 25
2.35 Tax Matters.................................................................... 25
2.36 Stockholder Agreement; Irrevocable Proxies..................................... 25
2.37 Representations Complete....................................................... 25
2.38 Knowledge of Breach............................................................ 26
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ACQUIROR................................... 26
3.1 Organization, Standing and Power................................................. 26
3.2 Authority........................................................................ 26
3.3 SEC Documents; Financial Statements.............................................. 27
3.4 Absence of Undisclosed Liabilities............................................... 27
3.5 Stockholder Approval............................................................. 28
3.6 Tax Matters...................................................................... 28
3.7 Approval......................................................................... 28
3.8 Brokers' and Finders' Fees....................................................... 28
3.9 Representations Complete......................................................... 28
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME........................................... 28
4.1 Conduct of Business of Target.................................................... 28
4.2 Restriction on Conduct of Business of Target..................................... 29
4.3 No Solicitation.................................................................. 31
ARTICLE V ADDITIONAL AGREEMENTS.......................................................... 32
5.1 Fairness Hearing and Permit...................................................... 32
5.2 Meeting of Stockholders.......................................................... 33
5.3 Access to Information............................................................ 33
5.4 Confidentiality.................................................................. 34
5.5 Public Disclosure................................................................ 34
5.6 Consents; Cooperation............................................................ 34
5.7 Legal Requirements............................................................... 35
5.8 Blue Sky Laws.................................................................... 35
5.9 Employee Benefit Plans; Assumption of Options.................................... 36
5.10 Escrow Agreement............................................................... 36
5.11 Form S-8....................................................................... 36
5.12 Listing of Additional Shares................................................... 37
5.13 Disclosure Schedule............................................................ 37
5.14 Commercially Reasonable Efforts and Further Assurances......................... 37
ARTICLE VI CONDITIONS TO THE CLOSING..................................................... 37
6.1 Conditions to Obligations of Each Party to Effect the Closing.................... 37
6.2 Additional Conditions to Obligations of Target................................... 38
6.3 Additional Conditions to the Obligations of Acquiror............................. 38
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER............................................ 40
</TABLE>
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<TABLE>
<S> <C>
7.1 Termination...................................................................... 40
7.2 Effect of Termination............................................................ 40
7.3 Expenses and Termination Fees.................................................... 41
7.4 Amendment........................................................................ 41
7.5 Extension; Waiver................................................................ 41
ARTICLE VIII ESCROW AND INDEMNIFICATION.................................................. 42
8.1 Escrow Fund...................................................................... 42
8.2 Indemnification; Cap............................................................. 42
8.3 Damage Threshold................................................................. 43
8.4 Escrow Period.................................................................... 43
8.5 Claims Upon Escrow Fund.......................................................... 43
8.6 Objections to Claims............................................................. 43
8.7 Resolution of Conflicts; Arbitration............................................. 44
8.8 Shareholders' Agent.............................................................. 45
8.9 Actions of the Shareholders' Agent............................................... 45
8.10 Third-Party Claims............................................................. 45
ARTICLE IX GENERAL PROVISIONS............................................................ 45
9.1 Survival......................................................................... 46
9.2 Notices.......................................................................... 46
9.3 Interpretation................................................................... 47
9.4 Counterparts..................................................................... 47
9.5 Entire Agreement; Nonassignability; Parties in Interest.......................... 47
9.6 Severability..................................................................... 47
9.7 Remedies Cumulative.............................................................. 48
9.8 Rules of Construction............................................................ 48
9.9 Consent to Jurisdiction; Service of Process...................................... 48
EXHIBITS
Exhibit A-1 - Form of Certificate of Merger
Exhibit A-2 - Form of Agreement of Merger
Exhibit B - Exchange Ratio
Exhibit C - Form of Escrow Agreement
Exhibit D - Subject Matter of Acquiror Legal Opinion
Exhibit E-1 - Subject Matter of Target U.S. Legal Opinion
Exhibit E-2 - Subject Matter of Target U.K. Legal Opinion
Exhibit F - FIRPTA Notice
Exhibit G - IRS Notice
Exhibit H - Option Amendment
</TABLE>
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<PAGE> 5
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this
"Agreement") is made and entered into as of August 12, 1999, by and between
Cisco Systems, Inc., a California corporation ("Acquiror"), and Calista, Inc., a
Delaware corporation ("Target").
RECITALS
A. The Boards of Directors of Target and Acquiror believe it is
advisable and in the best interests of their respective companies and the
stockholders of their respective companies that Target merge with and into
Acquiror (the "Merger") and, in furtherance thereof, have unanimously approved
the Merger.
B. Pursuant to the Merger, among other things, each outstanding
share of capital stock of Target ("Target Capital Stock") shall be converted
into shares of common stock of Acquiror ("Acquiror Common Stock"), at the rate
set forth herein.
C. Target and Acquiror desire to make certain representations,
warranties, covenants and other agreements in connection with the Merger.
D. The parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Sections 368(a) of the Code.
E. Concurrently with the execution of this Agreement and as an
inducement to Acquiror and Target to enter into this Agreement a certain
stockholder of Target has on the date hereof entered into a stockholder
agreement (the "Stockholder Agreement") to, among other things, vote the shares
of Target Common Stock owned by such person to approve the Merger.
NOW, THEREFORE, in consideration of the covenants and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section
1.2) and subject to and upon the terms and conditions of this Agreement, the
Certificate of Merger attached hereto as Exhibit A-1 (the "Certificate of
Merger"), the Agreement of Merger attached hereto as Exhibit A-2 (the "Agreement
of Merger") and the applicable provisions of the Delaware General Corporation
Law ("Delaware Law") and 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
(the "Merger"). Acquiror as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "Surviving Corporation."
<PAGE> 6
1.2 CLOSING; EFFECTIVE TIME. The closing of the transactions
contemplated hereby (the "Closing") shall take place as soon as practicable (and
in any event not later than five business days) after the satisfaction or waiver
of each of the conditions set forth in Article VI hereof or at such other time
as the parties hereto agree (the "Closing Date"). The Closing shall take place
at the offices of Brobeck Hale and Dorr, Hasilwood House, 60 Bishopsgate,
London, EC2N 4AJ, England, or at such other location as the parties hereto
agree. At the Closing, the parties hereto shall cause the Merger to be
consummated by filing the Certificate of Merger with the Secretary of State of
Delaware, in accordance with the relevant provisions of Delaware Law, and the
Agreement of Merger, together with the required officer's certificates, with the
Secretary of State of California, in accordance with the relevant provisions of
California Law (the time of such California filing, or such later time as may be
agreed to by the parties and set forth in the Agreement of Merger, being the
"Effective Time").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Certificate of Merger,
the Agreement of Merger and the applicable provisions of California Law and
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers and
franchises of Target and Acquiror shall vest in the Surviving Corporation, and
all debts, liabilities and duties of Target and Acquiror 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
Articles of Incorporation of the Surviving Corporation.
(b) The Bylaws of Acquiror, as in effect immediately prior
to the Effective Time, shall be the Bylaws of the Surviving Corporation.
1.5 DIRECTORS AND OFFICERS. At the Effective Time, the
directors of Acquiror, as in effect immediately prior to the Effective Time,
shall be the directors of the Surviving Corporation, until their respective
successors are duly elected or appointed and qualified. The officers of
Acquiror, as in effect immediately prior to the Effective Time, shall be the
officers of the Surviving Corporation, until their respective successors are
duly elected or appointed and qualified.
1.6 EFFECT ON CAPITAL STOCK. By virtue of the Merger and
without any action on the part of Acquiror, Target or the holders of any of
Target's securities:
(a) Conversion of Target Capital Stock. Notwithstanding
any provision of this Agreement to the contrary, 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 outstanding options to acquire Target Capital Stock
shall be equal to that number of shares determined by dividing $55,000,000 (the
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<PAGE> 7
"Valuation") by the average of the closing bid prices for a share of Acquiror
Common Stock as quoted on the Nasdaq National Market for the ten (10) trading
days immediately preceding and ending on the trading day that is three (3)
calendar days prior to the Closing Date (the "Acquiror Stock Price") (the number
of shares determined above being referred to herein as the "Total Acquiror
Shares"), reduced as a result of any Dissenting Shares (as defined below). No
other adjustment shall be made in the number of shares of Acquiror Common Stock
issued in the Merger as a result of (x) any increase or decrease in the market
price of Acquiror Common Stock prior to the Effective Time not otherwise
required by the immediately preceding sentence, or (y) any cash proceeds
received by Target from the date hereof to the Closing Date pursuant to the
exercise of currently outstanding options to acquire Target Capital Stock. All
references in this Agreement to Acquiror Common Stock to be issued pursuant to
the Merger shall be deemed to include the corresponding rights to purchase
shares of Acquiror Series A Junior Participating Preferred Stock, no par value,
pursuant to the Acquiror Rights Agreement dated as of June 10, 1998 between
Acquiror and BankBoston, N.A., except where the context otherwise requires.
Subject to the terms and conditions of this Agreement, the Certificate of Merger
and the Agreement of Merger as of the Effective Time, by virtue of the Merger
and without any action on the part of the holder of any shares of Target Capital
Stock:
(A) At the Effective Time, each share of Target
Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares, if any, held by persons who
have not voted such shares for approval of the Merger and with
respect to which such persons shall have perfected dissenters'
rights in accordance with Delaware Law ("Dissenting Shares"))
shall be converted into and exchanged for the right to receive
such number of shares of Acquiror Common Stock as shall be
determined in accordance with item (i) of Exhibit B hereof (the
"Exchange Ratio"). Each share of Target Common Stock issued and
outstanding immediately prior to the Effective Time that is
restricted or not fully vested shall upon such conversion and
exchange have the same restrictions or vesting arrangements
applicable to such shares prior to the conversion.
(B) At the Effective Time, each Target Option
granted and outstanding immediately prior to the Effective Time
shall be assumed by Acquiror in accordance with Section 5.9 and
thereafter shall constitute the right to receive options to
purchase such number of shares of Acquiror Common Stock as shall
be determined in accordance with item (ii) of Exhibit B hereof.
(b) Cancellation of Target Capital Stock Owned by Acquiror
or Target. At the Effective Time, all shares of Target Capital Stock that are
owned by Target as treasury stock, and 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,
Target's 1999 Employee 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 5.9.
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<PAGE> 8
(d) Adjustments to Exchange Ratio. The Exchange Ratio
shall be adjusted to reflect fully the effect of any stock split, reverse split,
stock dividend (including any dividend or distribution of securities convertible
into Acquiror Common Stock or Target Capital Stock), reorganization,
recapitalization or other like change with respect to Acquiror Common Stock or
Target Capital Stock occurring after the date hereof and prior to the Effective
Time.
(e) Fractional Shares. No fraction of a share of Acquiror
Common Stock will be issued, but in lieu thereof each holder of shares of Target
Capital Stock who would otherwise be entitled to a fraction of a share of
Acquiror Common Stock (after aggregating all fractional shares of Acquiror
Common Stock to be received by such holder) shall receive from Acquiror an
amount of cash (rounded to the nearest whole cent) equal to the product of (i)
such fraction, multiplied by (ii) the Acquiror Stock 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 Delaware Law. Target agrees that, except
with the prior written consent of Acquiror (such consent not to be unreasonably
withheld or delayed), or as required under Delaware 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 Stockholder")
who, pursuant to the provisions of Delaware Law, becomes entitled to payment of
the fair value for shares of Target Capital Stock shall receive payment therefor
(but only after the value therefor shall have been agreed upon or finally
determined pursuant to such provisions). If, after the Effective Time, any
Dissenting Shares shall lose their status as Dissenting Shares, Acquiror shall
issue and deliver, upon surrender by such stockholder of certificate or
certificates representing shares of Target Capital Stock, the number of shares
of Acquiror Common Stock to which such stockholder would otherwise be entitled
under this Section 1.6, the Certificate of Merger and the Agreement of Merger
less the number of shares allocable to such stockholder that have been deposited
in the Escrow Fund (as defined below) in respect of such shares of Acquiror
Common Stock pursuant to Section 1.7(c) and Article VIII hereof.
1.7 SURRENDER OF CERTIFICATES.
(a) Exchange Agent. BankBoston, N.A. shall act as exchange
agent (the "Exchange Agent") in the Merger.
(b) Acquiror to Provide Common Stock and Cash. Promptly
after the Effective Time, Acquiror shall make available to the Exchange Agent
for exchange in accordance with this Article I, through such reasonable
procedures as Acquiror may adopt, (i) the shares of Acquiror Common Stock
issuable pursuant to Section 1.6(a) (provided that delivery of any shares that
are subject to vesting shall be in book entry form only until such vesting
restrictions have lapsed) in exchange for shares of Target Capital Stock
outstanding immediately prior to the Effective Time less (in the case of the
holders of Target Capital Stock other than Acquiror) the number of shares of
Acquiror Common Stock to be deposited into an escrow fund (the "Escrow Fund")
pursuant to the requirements of Article VIII and (ii) cash in an amount
sufficient to permit payment of cash in lieu of fractional shares pursuant to
Section 1.6(e); it being understood that, notwithstanding anything herein to the
contrary, the Escrow Shares (as
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<PAGE> 9
defined below) shall consist solely of shares of Acquiror Common Stock issuable
pursuant to Section 1.6(a) to holders of Target Capital Stock other than
Acquiror, and shall be so withheld on a pro rata basis for deposit in the Escrow
Fund only from shares of Acquiror Common Stock issuable as aforesaid to such
holders other than Acquiror until expiration of the Escrow Fund as set forth in
Article VIII hereof.
(c) Exchange Procedures. Promptly after the Effective
Time, the Surviving Corporation shall cause to be mailed to each holder of
record of a certificate or certificates (the "Certificates") which immediately
prior to the Effective Time represented outstanding shares of Target Capital
Stock, whose shares were converted into the right to receive shares of Acquiror
Common Stock (and cash in lieu of fractional shares) pursuant to Section 1.6,
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
receipt of the Certificates by the Exchange Agent, and shall be in such form and
have such other provisions as Acquiror may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates (or book entries in the case of shares that have not yet
vested) 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 (or a book entry in
the case of shares that have not yet vested in full) representing the number of
whole shares of Acquiror Common Stock less the number of shares of Acquiror
Common Stock to be deposited in the Escrow Fund on such holder's behalf pursuant
to Article VIII hereof and payment in lieu of fractional shares which such
holder has the right to receive pursuant to Section 1.6, and the Certificate so
surrendered shall forthwith be canceled. Until so surrendered, each outstanding
Certificate that, prior to the Effective Time, represented shares of Target
Capital Stock will be deemed from and after the Effective Time, for all
corporate purposes, other than the payment of dividends, to evidence the
ownership of the number of full shares of Acquiror Common Stock into which such
shares of Target Capital Stock shall have been so converted and the right to
receive an amount in cash in lieu of the issuance of any fractional shares in
accordance with Section 1.6. As soon as practicable after the Effective Time,
and subject to and in accordance with the provisions of Article VIII hereof,
Acquiror shall cause to be distributed to the Escrow Agent (as defined in
Article VIII hereof) a certificate or certificates representing ten percent
(10%) of the number of shares determined by dividing the Valuation by the
Acquiror Stock Price (the "Escrow Shares"), which shall be registered and held
in the name of the Escrow Agent as nominee for the holders of Certificates
cancelled pursuant to this Section 1.7. The Escrow Shares shall be, to the
extent possible, vested shares not subject to any repurchase rights, 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
5
<PAGE> 10
such Certificate, there shall be paid to the record holder of the certificates
representing whole shares of Acquiror Common Stock issued in exchange therefor,
without interest, at the time of such surrender, the amount of any such
dividends or other distributions with a record date after the Effective Time
theretofore payable (but for the provisions of this Section 1.7(d)) with respect
to such shares of Acquiror Common Stock.
(e) Transfers of Ownership. If any certificate for shares
of Acquiror Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Acquiror or any agent designated by
it any transfer or other taxes required by reason of the issuance of a
certificate for shares of Acquiror Common Stock in any name other than that of
the registered holder of the Certificate surrendered, or established to the
satisfaction of Acquiror or any agent designated by it that such tax has been
paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary
in this Section 1.7, none of the Exchange Agent, the Surviving Corporation or
any party hereto shall be liable to any person for any amount properly paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(g) Dissenting Shares. The provisions of this Section 1.7
shall also apply to Dissenting Shares that lose their status as such, except
that the obligations of Acquiror under this Section 1.7 shall commence on the
date of loss of such status and the holder of such shares shall be entitled to
receive in exchange for such shares the number of shares of Acquiror Common
Stock and cash in lieu of any fractional shares to which such holder is entitled
pursuant to Section 1.6 hereof.
1.8 NO FURTHER OWNERSHIP RIGHTS IN TARGET CAPITAL STOCK. All
shares of Acquiror Common Stock issued upon the surrender for exchange of shares
of Target Capital Stock in accordance with the terms hereof (including any cash
paid in lieu of fractional shares) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Target Capital Stock,
and there shall be no further registration of transfers on the records of the
Surviving Corporation of shares of Target Capital Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article I.
1.9 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of
Acquiror Common Stock (and cash in lieu of fractional shares) as may be required
pursuant to Section 1.6; provided, however, that Acquiror may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Acquiror, the Surviving Corporation or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
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<PAGE> 11
1.10 TAX CONSEQUENCES. It is intended by the parties hereto
that the Merger shall constitute a reorganization within the meaning of Section
368 of the Code.
1.11 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
Any reference to any event, change, condition or effect being
"material" with respect to any entity or group of entities means any event,
change, condition or effect which (i) is material to the condition (financial or
otherwise), properties, assets (including intangible assets), liabilities,
business, operations or results of operations of such entity or group of
entities, taken as a whole or (ii) would prevent or materially alter or delay
any of the transactions contemplated by this Agreement. Any reference to a
"Material Adverse Effect" with respect to any entity or group of entities means
any event, change or effect that (x) is materially adverse to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business, operations or results of operations of such entity and
its subsidiaries, taken as a whole or (y) would prevent or materially alter or
delay any of the transactions contemplated by this Agreement.
Any reference to a party's "knowledge" means (i) with respect to
any natural person, the actual knowledge, after reasonable inquiry, of such
person, or (ii) with respect to any corporation or entity, the actual knowledge
of such party's officers and directors provided that such persons shall have
made due and diligent inquiry of those employees of such party whom such
officers and directors reasonably believe would have actual knowledge of the
matters represented.
Except as disclosed in the Disclosure Schedule, attached as an
exhibit to this Agreement and delivered by Target to Acquiror simultaneously
with the execution and delivery of this Agreement, Target represents and
warrants to Acquiror as follows. Disclosures made under one section heading of
the Disclosure Schedule may be deemed as disclosure relating to one or more
other sections of this Agreement to the extent such disclosure would be
appropriate in such other section provided that such disclosure is either
cross-referenced or the substance of such disclosure is reasonably evident from
the context.
2.1 ORGANIZATION, STANDING AND POWER. Each of Target and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Each of Target and
its subsidiaries has the corporate power to own its properties and to carry on
its business as now being conducted and as currently proposed to be
7
<PAGE> 12
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 Certificate of Incorporation and Bylaws or other charter
documents, as applicable, of Target and each of its subsidiaries, each as
amended to date, to Acquiror. Neither Target nor any of its subsidiaries is in
violation of any of the provisions of its Certificate of Incorporation and
Bylaws or equivalent organizational documents. Except for the entities
identified in Schedule 2.1 of the Disclosure Schedule, 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.
Target is the owner of all outstanding shares of capital stock of each of the
entities set forth on Schedule 2.1 (each a "subsidiary" and collectively the
"subsidiaries") and all such shares are duly authorized, validly issued, fully
paid and nonassessable. All of the outstanding shares of capital stock of each
such subsidiary are owned by Target free and clear of all liens, charges, claims
or encumbrances or rights of others. There are no outstanding subscriptions,
options, warrants, puts, calls, rights, exchangeable or convertible securities
or other commitments or agreements of any character relating to the issued or
unissued capital stock or other securities of any such subsidiary, or otherwise
obligating Target or any such subsidiary to issue, transfer, sell, purchase,
redeem or otherwise acquire any such securities.
2.2 CAPITALIZATION; TITLE TO THE SHARES. The authorized capital
stock of Target consists of 16,000,000 shares of Common Stock, of which there
were issued and outstanding as of the close of business on the date hereof
8,140,000 shares of Common Stock. Except as set forth on Schedule 2.2, 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 the
date hereof under the Target Stock Option Plan. Attached to or as set forth in
Schedule 2.2 to the Disclosure Schedule is a true and correct list of Target's
shareholders and any persons with rights to acquire Target securities from
Target, which list will be promptly updated from time to time prior to Closing
to reflect any changes thereto (which changes are in any event subject to the
restrictions imposed under Section 4.2 below). 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, and are not subject to preemptive
rights or rights of first refusal created by statute, the Certificate of
Incorporation or Bylaws of Target or any agreement to which Target is a party or
by which it is bound. Target has reserved 6,400,000 shares of Common Stock for
issuance to employees and consultants pursuant to the Target Stock Option Plan,
of which 130,000 shares have been issued pursuant to option exercises, 6,070,000
shares are subject to outstanding, unexercised options, and 200,000 shares are
available for issuance thereunder. Except (i) as set forth on Schedule 2.2, (ii)
for the rights created pursuant to this Agreement and (iii) Target's right to
repurchase any unvested shares pursuant to the Target Stock Option Plan, there
are no other options, warrants, calls, rights, commitments or agreements of any
character to which Target is a party or by which it is bound obligating Target
to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of capital stock of Target or
obligating Target to grant, extend, accelerate the vesting of, change the price
of, or otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. Except for the agreements contemplated by this
Agreement, there are no contracts, commitments or agreements relating to voting,
purchase or sale of Target's capital stock (i) between or among Target and any
of its securityholders and (ii) to Target's
8
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knowledge, between or among any of Target's securityholders. The terms of the
Target Stock Option Plan and the applicable stock option agreements permit the
assumption of options to purchase Acquiror Common Stock as provided in this
Agreement, without the consent or approval of the holders of such securities,
the Target stockholders, or otherwise. Other than pursuant to the Amendment (as
defined below), none of the outstanding options permit any accelerated vesting
or exercisability of those options by reason of the Merger or any other
transactions contemplated by this Agreement. True and complete copies of the
form of all agreements and instruments relating to or issued under the Target
Stock Option Plan have been provided to Acquiror and such agreements and
instruments have not been subsequently amended, modified or supplemented, and
there are no agreements to amend, modify or supplement such agreements or
instruments in any case from the form provided to Acquiror. All outstanding
shares of Common Stock were issued in compliance with all applicable securities
laws.
2.3 AUTHORITY. Target has all requisite 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. 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 to the
extent that enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting the enforcement
of creditors' rights generally and by general principles of equity, regardless
of whether such enforceability is considered in a proceeding at law or in
equity. Except as set forth in Schedule 2.3 of the Disclosure Schedule, the
execution and delivery of this Agreement by Target does not, and the
consummation of the transactions contemplated hereby will not, (i) conflict
with, or result in any violation of, or default under (with or without notice or
lapse of time, or both), any provision of the Certificate of Incorporation or
Bylaws of Target or any of its subsidiaries, as amended, or (ii) conflict with,
or result in any material violation of, or material 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 (a) any Material Contract (as defined in Section 2.27) or (b) any
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Target or any of its properties or
assets the absence of which would have a Material Adverse Effect on Target.
Except as set forth in Schedule 2.3 of the Disclosure Schedule, 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 on the part of
Target or any of its subsidiaries in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby,
except for (i) such filings as may be required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("HSR") and any applicable
foreign antitrust law; and (ii) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not reasonably
be expected to have a Material Adverse Effect on Target.
2.4 FINANCIAL STATEMENTS. Target has delivered to Acquiror
audited consolidated financial statements as at and for the fiscal year ended
most recently prior to the date of this Agreement for Calista Ltd., a private
limited company incorporated under the laws of
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England and a wholly-owned subsidiary of Target ("Calista U.K."), unaudited
financial statements as at and for the fiscal year ended most recently prior to
the date of this Agreement for Calista Inc., a California corporation and a
wholly owned subsidiary of Calista U.K. ("Calista U.S.") and unaudited financial
statements (balance sheet and profit and loss statement) for each of its
subsidiaries as at and for the interim period subsequent to the date of such
annual statements and through the most recent quarter end prior to the date of
this Agreement (collectively, the "Financial Statements"). The Financial
Statements have been prepared in accordance with generally accepted accounting
principles as in effect in the respective jurisdictions of each Target
subsidiary ("GAAP") (except that the unaudited financial statements do not have
notes thereto) applied on a consistent basis throughout the periods indicated
and with each other. The Financial Statements fairly present the financial
condition and operating results of Target and its subsidiaries as of the dates,
and for the periods, indicated therein, subject with respect to the unaudited
Financial Statements, to normal year-end audit adjustments and the absence of
footnotes thereto. Each of Target and its subsidiaries maintains and will
continue to maintain an adequate system of internal controls established and
administered in accordance with GAAP.
2.5 ABSENCE OF CERTAIN CHANGES. Since July 31, 1999 (the "Target
Balance Sheet Date"), except as set forth in Schedule 2.5 of the Disclosure
Schedule, each of Target and its subsidiaries 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 would reasonably be expected to result in, a Material Adverse
Effect on Target; (ii) any acquisition, sale or transfer of any material asset
of Target or any of its subsidiaries except in the ordinary course of business;
(iii) any change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by Target or any of its
subsidiaries or any revaluation by Target or any of its subsidiaries of any of
its or their assets; (iv) any declaration, setting aside, or payment of a
dividend or other distribution with respect to the shares of Target or any of
its subsidiaries, or any direct or indirect redemption, purchase or other
acquisition by Target or any of its subsidiaries of any of its or their shares
of capital stock; (v) any Material Contract entered into by Target or any of its
subsidiaries, or any material amendment or termination of, or material default
under, any material contract to which Target or any of its subsidiaries is a
party or by which it is bound; (vi) any amendment or change to the Certificate
of Incorporation and Bylaws or equivalent organizational documents of Target or
any of its subsidiaries; (vii) any material increase in or modification of the
compensation or benefits payable or to become payable by Target or any of its
subsidiaries to any of its directors or employees or (viii) any negotiation or
agreement by Target or any of its subsidiaries to do any of the things described
in the preceding clauses (i) through (vii) (other than negotiations with
Acquiror and its representatives regarding the transactions contemplated by this
Agreement).
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in
Schedule 2.6 of the Disclosure Schedule, neither Target nor any of its
subsidiaries has any 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 sheets included in the Financial Statements as of
the Target Balance Sheet date (the "Target Balance Sheets"), (ii) those incurred
in the ordinary course of business and not required to be set forth in the
Target Balance Sheet under GAAP and (iii) those incurred in the ordinary course
of business since the Target Balance Sheet Date and consistent with past
practice.
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2.7 LITIGATION. Except as set forth in Schedule 2.7 to the
Disclosure Schedule, 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 subsidiaries or any of its properties or any of its
officers or directors (in their capacities as such). There is currently no
judgment, decree or order against Target or any of its subsidiaries, or, to the
knowledge of Target, any of its directors or officers (in their capacities as
such), that would reasonably be expected to have a Material Adverse Effect on
Target. Schedule 2.7 to the Disclosure Schedule also lists all litigation that
Target or any of it subsidiaries currently has pending against other parties.
2.8 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no judgment,
injunction, order or decree binding upon Target or any of its subsidiaries.
There is no agreement binding upon Target or any of its subsidiaries which has
or could reasonably be expected to have the effect of prohibiting or materially
impairing any current business practice of Target or any of its subsidiaries,
any acquisition of property by Target or any of its subsidiaries or the conduct
of business by Target or any of its subsidiaries as currently or proposed to be
conducted.
2.9 GOVERNMENTAL AUTHORIZATION. Each of Target and its
subsidiaries 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 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 the business of Target or any of its
subsidiaries 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 would not reasonably be expected to have
a Material Adverse Effect on Target.
2.10 TITLE TO PROPERTY. Target and each of its subsidiaries has
good and marketable title to all of its material 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 material
leased properties and assets, valid leasehold interests in, free and clear of
all mortgages, liens, pledges, charges or encumbrances of any kind or character,
except (i) the lien of current taxes not yet due and payable, (ii) such
imperfections of title, liens and easements as do not and will not materially
detract from or interfere with the use of the properties subject thereto or
affected thereby, or otherwise materially impair business operations involving
such properties and (iii) liens securing debt which is reflected on the Target
Balance Sheet. The plants, property and equipment of Target and its subsidiaries
that are material to the operations of their businesses are in good operating
condition and repair, subject to normal wear and tear. All properties material
to the operations of Target and its subsidiaries as at the Target Balance Sheet
Date are reflected in the Target Balance Sheet to the extent U.S. generally
accepted accounting principles require the same to be reflected. Schedule 2.10
to the Disclosure Schedule identifies each parcel of real property owned or
leased by Target or any of its subsidiaries.
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2.11 Intellectual Property.
(a) Each of Target and its subsidiaries 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,
inventions, ideas, algorithms, processes, computer software programs or
applications (in source code and/or object code form), and tangible or
intangible proprietary information or material ("Intellectual Property") that
are used or proposed to be used in the business of Target or any such subsidiary
as currently conducted. Except as disclosed in paragraph (a) of Schedule 2.11 to
the Disclosure Schedule, neither Target nor any of its subsidiaries has,
directly or indirectly (i) licensed any of its Intellectual Property in source
code form to any party, (ii) entered into any agreement requiring Target or any
of its subsidiaries to license or otherwise provide future versions, upgrades or
enhancements of its Intellectual Property in source code form or (iii) entered
into any exclusive agreements relating to its Intellectual Property with any
party.
(b) Paragraph (b) of Schedule 2.11 to the Disclosure
Schedule lists (i) all patents and patent applications and all registered and
unregistered trademarks, trade names and service marks, registered copyrights
and maskworks, included in the Intellectual Property owned by Target or any of
its subsidiaries, including the jurisdictions in which each such Intellectual
Property right has been issued or registered or in which any application for
such issuance and registration has been filed, (ii) all licenses, sublicenses
and other agreements as to which Target or any of its subsidiaries is a party
and pursuant to which any person other than Target and its subsidiaries is
authorized to use any Intellectual Property owned by Target or any of its
subsidiaries, and (iii) other than Commercial Software, all licenses,
sublicenses and other agreements as to which Target or any of its subsidiaries
is a party and pursuant to which Target or any of its subsidiaries 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 product of Target or any of its subsidiaries or are used in
the performance of any service by Target or any of its subsidiaries. "Commercial
Software" means packaged commercially available software programs generally
available to the public through retail dealers in computer software which have
been licensed to Target or any of its subsidiaries pursuant to end-user licenses
and which are used in Target's or its subsidiaries' business but are in no way a
component of or incorporated in or specifically required to develop or support
any of Target's or its subsidiaries' products and related trademarks, technology
and know how.
(c) There is no unauthorized use, disclosure, infringement
or misappropriation of any Intellectual Property rights of Target or any of its
subsidiaries, or any Intellectual Property right of any third party to the
extent licensed by or through Target or any of its subsidiaries, by any third
party, including any employee or former employee of Target or any of its
subsidiaries. Neither Target nor any of its subsidiaries has entered into any
agreement to indemnify any other person against any charge of infringement of
any Intellectual Property, other than indemnification provisions contained in
purchase orders or license agreements arising in the ordinary course of
business.
(d) Neither Target nor any of its subsidiaries is, nor
will it be as a result of the execution and delivery of this Agreement or the
performance of its obligations under
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this Agreement, in breach of any license, sublicense or other agreement relating
to the Intellectual Property or Third Party Intellectual Property Rights.
(e) All patents, registered trademarks, service marks and
copyrights held by Target are valid and subsisting. Neither Target nor any of
its subsidiaries (i) is or has been the subject of any current pending or
threatened 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 or (ii) has brought or
threatened to bring 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 and sale of Target's or its subsidiaries' Intellectual Property do not
infringe any patent, registered trademark, registered service mark, registered
copyright, trade secret or other proprietary right of any third party.
(f) Each of Target and its subsidiaries has secured valid
written assignments from all consultants and employees who contributed to the
creation or development of Intellectual Property owned by Target and its
subsidiaries of the rights to such contributions that Target and/or its
subsidiaries does not already own by operation of law.
(g) Each of Target and its subsidiaries has taken all
reasonably necessary and appropriate steps to protect and preserve the
confidentiality of all of Target's and its subsidiaries' Intellectual Property
not otherwise protected by patents, patent applications or copyright
("Confidential Information"). All use, disclosure or appropriation of
Confidential Information owned by Target or its subsidiaries by or to a third
party has been pursuant to the terms of a written agreement between Target
and/or its subsidiaries, on the one hand, and such third party, on the other
hand, pursuant to which the third party undertakes to protect and not disclose
Target Confidential Information. All use, disclosure or appropriation of
Confidential Information not owned by Target has been pursuant to the terms of a
written agreement between Target and the owner of such Confidential Information,
or is otherwise lawful.
2.12 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any
laws, ordinances, codes, regulations, rules, policies and orders that
are intended to assure the protection of the environment, or that
classify, regulate, call for the remediation of, require reporting with
respect to, or list or define air, water, groundwater, solid waste,
hazardous or toxic substances, materials, wastes, pollutants or
contaminants, or which are intended to assure the safety of employees,
workers or other persons, including the public.
(ii) "Hazardous Materials" shall mean any toxic or
hazardous substance, material or waste or any pollutant or contaminant,
or infectious or radioactive substance or material, including without
limitation, those substances, materials and wastes defined in or
regulated under any Environmental and Safety Laws.
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(iii) "Property" shall mean all real property
leased or owned by Target or any of its subsidiaries either currently or
in the past.
(iv) "Facilities" shall mean all buildings and
improvements on the Property of Target or any of its subsidiaries.
(b) Target represents and warrants as follows: (i) to the
knowledge of Target no methylene chloride or asbestos is contained in or has
been used at or released from the Facilities; (ii) to the knowledge of Target
all Hazardous Materials and wastes have been stored, labeled, handled, released,
treated, processed, deposited, transported, documented and disposed of in
accordance with all applicable Environmental and Safety Laws; (iii) neither
Target nor any of its subsidiaries has received any notice (verbal or written)
of any non-compliance of the Facilities or its past or present operations with
Environmental and Safety Laws; (iv) there have not been nor, to the knowledge of
Target are there threatened or pending any civil or criminal actions, notices of
violations, investigations, administrative proceedings or written communications
from any private party, governmental body or other regulatory authority under
any Environmental and Safety Laws against Target or any of its assets or any of
the directors, employees, officers or agents of Target and so far as Target is
aware there are no facts or circumstances which are likely to give rise to the
same; (v) to the knowledge of Target, none of the Properties is or has been
contaminated with material quantities of any Hazardous Material or any substance
regulated by Environmental and Safety Laws; (vi) to the knowledge of Target
Target is not a potentially responsible party under the federal Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA), or foreign
analogous statute, arising out of events occurring prior to the Closing Date;
(vii) to the knowledge of Target there have not been in the past, and are not
now, material quantities of any Hazardous Materials on, under or migrating to or
from the Facilities or Property; (viii) to the knowledge of Target there have
not been in the past, and are not now, any underground tanks or underground
improvements at, on or under the Property including without limitation,
treatment or storage tanks, sumps, or water, gas or oil wells; (ix) to the
knowledge of Target there are no polychlorinated biphenyls (PCBs) deposited,
stored, disposed of or located on the Property or Facilities or any equipment on
the Property containing PCBs at levels in excess of 50 parts per million; (x) to
the knowledge of Target there is no formaldehyde on the Property or in the
Facilities, nor any insulating material containing urea formaldehyde in the
Facilities; (xi) to the knowledge of Target the Facilities and Target's uses and
activities therein have at all times complied in all material respects with all
Environmental and Safety Laws; (xii) to the knowledge of Target Target and its
subsidiaries have all the permits and licenses required to be issued under
Environmental and Safety Laws and are in compliance in all material respects
with the terms and conditions of those permits; (xiii) Target is not required to
register or meet any obligations under the Producer Responsibility Obligations
(Packaging Waste) Regulations 1997 (as amended); and (xiv) Target has maintained
all records and information required to be maintained under Environmental and
Safety Laws.
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2.13 Taxes.
(a) Target and each of its subsidiaries, and any
consolidated, combined, unitary or aggregate group for Tax (as defined below)
purposes of which Target or any of its subsidiaries is or has been a member,
have properly completed and timely filed all material Tax Returns required to be
filed by them and have timely paid all material Taxes that are due on or before
the Closing Date. Each of Target and its subsidiaries have provided adequate
accruals in accordance with GAAP in their Financial Statements for any Taxes
that have not been paid, whether or not shown as being due on any Tax Returns.
None of Target or its subsidiaries has any material liability for unpaid Taxes
accruing after the date of its latest Financial Statements, other than for
accruals in the normal course of business and consistent with past practice.
(b) There is (i) no material claim for Taxes that is a
lien or charge against or which could result in the sale of the property of or
shares in Target or any of its subsidiaries or is being asserted against Target
or any of its subsidiaries other than for Taxes not yet due and payable, (ii) no
audit of or in respect of Target or any of its subsidiaries being conducted by a
Tax Authority, (iii) no extension of the statute of limitations on the
assessment of any Taxes granted by Target or any of its subsidiaries and
currently in effect, and (iv) no agreement, contract or arrangement to which
Target or any of its subsidiaries is a party that may result in the payment of
any amount that would not be deductible by reason of Section 280G of the
Internal Revenue Code, as amended (the "Code") (or comparable provisions under
foreign or state Tax laws).
(c) To the knowledge of Target there has been no change in
ownership of Target or any of its subsidiaries that has caused the utilization
of any losses, advance corporation tax or other tax relief of such entities to
be limited pursuant to Section 382 of the Code, Sections 245, 768, 768A of the
Income and Corporation Taxes Act 1988 (the "Taxes Act"), Schedule 7A of the
Taxation of Chargeable Gains Act 1992 (or comparable provisions of any foreign
or state Tax laws).
(d) Target has not been and will not be required to
include any material adjustment in Taxable income for any Tax period (or portion
thereof) pursuant to Section 481 or 263A of the Code or any comparable provision
under state or foreign Tax laws as a result of transactions or events occurring
or accounting methods employed, prior to the Closing Date. Neither Target nor
any of its subsidiaries has filed or will file any consent to have the
provisions of paragraph 341(f)(2) of the Code (or comparable provisions of any
foreign or state Tax laws) apply to Target or any of its subsidiaries.
(e) Neither Target nor any of its subsidiaries is a party
to any Tax sharing or Tax allocation agreement nor does Target or any of its
subsidiaries have any liability or potential liability to another party under
any such agreement. Neither Target nor any of its subsidiaries has filed any
disclosures under Section 6662 or comparable provisions of state, local or
foreign law to prevent the imposition of penalties with respect to any Tax
reporting position taken on any Tax Return.
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(f) Neither Target nor any of its subsidiaries has ever
been a member of a consolidated, combined or unitary group of which Target was
not the ultimate parent corporation.
(g) (i) Neither Target nor its subsidiaries have without
the prior consent of FM Treasury entered into any of the transactions specified
in Section 765 of the Taxes Act and the Disclosure Schedule contains details of
all transactions effected by Target in respect of which any consent or clearance
from the Inland Revenue or HM Treasury or other governmental authority was
required or was sought; (ii) Target and each of its subsidiaries are and have
only ever been resident in the country in which they were incorporated; (iii)
Neither Target nor any of its subsidiaries is or ever has been a close company
within the meaning of Section 414 of the Taxes Act; (iv) Full particulars of all
elections made by Target and each of its subsidiaries under Section 247 of the
Taxes Act and now in force are set out in the Disclosure Schedule; (v) Full
particulars of all surrenders made or agreed to be made by or to Target and each
of its subsidiaries under the provisions of Sections 240 and 402 to 412 of the
Taxes Act and of all payments made or agreed to be made by or to Target and each
of its subsidiaries for or in consideration of any such surrenders are set out
in the Disclosure Schedule; (vi) Neither Target nor its subsidiaries has
received any payment in respect of any surrender made or agreed to be made under
the provisions of Sections 240 and 402 to 412 of the Taxes Act which whether or
not as a result of the entry into or completion of this Agreement may be liable
to be refunded in whole or in part. Neither Target nor its subsidiaries have
neither been engaged in or been a party to any of the transactions set out in
Sections 213 to 218 of the Taxes Act nor made or received a chargeable payment
as defined therein; (vii) None of Target and its subsidiaries have entered into
or been engaged in or been a party to any transaction or series of transactions
or scheme or arrangement of which the main purpose of one of the main purposes
was the avoidance or deferral of or reduction in any of their liability to Tax;
(viii) No claim has been made under Sections 152, 153, 154 or 175 of the TCGA in
respect of any asset owned by Target or any of its subsidiaries; (ix) Neither
Target nor any of its subsidiaries has been a party to or involved in any share
for share exchange nor any scheme of reconstruction or amalgamation such as are
mentioned in Sections 135, 136 or 139 of the TCGA; (x) Neither Target nor any of
its subsidiaries has ever ceased to be a member of a group of companies for the
purposes of Sections 178 or 179 of the TCGA and neither Target nor any of its
subsidiaries will be liable to Tax thereunder by virtue of the entering into and
completion of this Agreement; (xi) Neither Target nor any of its subsidiaries
has entered into any transaction or arrangement in respect of which the
provision of Section 770 of the Taxes Act have been or could be applied; (xii)
All documents to which Target and each of its subsidiaries are a party or which
form part of the title of any of Target and its subsidiaries to any asset or in
the enforcement of which Target and any of its subsidiaries is or may be
interested which are subject to stamp or similar duty have been duly stamped and
adjudicated; (xiii) Target and each of its subsidiaries are registered for the
purposes of value added tax and have been so registered at all times that they
are required to be registered and have at no time been treated as a member of a
group of companies for the purposes of Section 43 of the Value Added Tax Act,
1994. Target and each of its subsidiaries have complied fully with all statutory
requirements, orders, provisions, directions or conditions relating to value
added tax including the terms of any agreement reached with the Commissioners of
Customs & Excise, maintain and have at all times maintained complete correct and
up-to-date records for the purposes of such legislation and have preserved such
records in such form and for such periods as are required by the relevant
legislation relating to
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value added tax that are set out in the Disclosure Schedule particulars of each
asset used by Target and each of its subsidiaries in the course or furtherance
of their business being assets to which Part XV of the Value Added Tax
Regulations 1995 applies and in respect of which the period of adjustment will
not have expired before Closing. Such particulars are sufficient to enable
Target and each of its subsidiaries to comply with its obligations under the
said Part XV. (xiv) Target and each of its subsidiaries have complied in full
with their reporting obligations to the Inland Revenue in connection with
benefits provided for any director or employee.
(h) For purposes of this Agreement, the following terms
have the following meanings: "Tax" (and, with correlative meaning, "Taxes" and
"Taxable") means (i) any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, environmental or windfall profit tax, custom, duty or other
tax, governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any governmental entity (a "Tax Authority") responsible for the
imposition of any such tax (domestic or foreign), (ii) any liability for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any Taxable
period, and (iii) any liability for the payment of any amounts of the type
described in (i) or (ii) as a result of being a transferee of or successor to
any person or as a result of any express or implied obligation to indemnify any
other person.
(i) As used herein, "Tax Return" shall mean any return,
statement, report, computation or form (including, without limitation, estimated
tax returns and reports, withholding tax returns and reports, notices and
information reports and returns) required to be filed with respect to Taxes.
(j) Target has in its possession receipts for any Taxes
paid to foreign Tax authorities.
2.14 Employee Benefit Plans
(a) Schedule 2.14 lists (i) all "employee benefit plans"
within the meaning of Section 3(3) of ERISA, (ii) all employment agreements,
including, but not limited to, any individual benefit arrangement, policy or
practice with respect to any current or former employee or director of Target or
any ERISA Affiliate (defined below), and (iii) all other employee benefit, bonus
or other incentive compensation, stock option, stock purchase, stock
appreciation, severance pay, lay-off or reduction in force, change in control,
sick pay, vacation pay, salary continuation, retainer, leave of absence,
educational assistance, service award, employee discount, fringe benefit plans,
arrangements, policies or practices, whether legally binding or not, which
Target or any ERISA Affiliate (defined below) maintains, or contributes to or
has any obligation to or liability for, but excluding worker's compensation,
unemployment compensation and other government-mandated programs (collectively,
the "Employee Plans"). For purposes of this Section 2.14, "ERISA Affiliate"
shall mean any entity that is a member of (i) a "controlled group of
corporations," as defined in section 414(b) of the Code, (ii) a group of
entities under "common control," as defined in section 414(c) of the Code, (iii)
an "affiliated service group," as defined in section 414(m) of the Code, or (iv)
a group of entities aggregated
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under treasury regulations promulgated under section 414(o) of the Code, any of
which includes Target. Schedule 2.14 attached hereto expressly identifies which
of Target's Employee Plans, individually or collectively, constitute an
"employee welfare benefit plan" as defined in Section 3(1) of ERISA
(collectively, the "Welfare Benefit Plans").
(b) None of the Employee Benefit Plans is an "employee
pension benefit plan," as defined in Section 3(2) of ERISA and neither Target
nor any ERISA Affiliate has ever sponsored, maintained or contributed to, or
ever been obligated to contribute to, an "employee pension benefit plan."
(c) None of the Employee Benefit Plans is a pension
benefit plan or other plan of deferred compensation that provides "relevant
benefits" within the meaning of Section 612 of the Income and Corporation Tax
Act of 1988 (as applicable in England and Wales.) and neither Target nor any
ERISA Affiliate has ever sponsored, maintained or contributed to, or ever been
obligated to contribute to, such a plan.
(d) Target does not maintain or contribute to any Employee
Plan that provides health benefits to an employee after the employee's
termination of employment or retirement except as required under Section 4980B
of the Code and Sections 601 through 608 of ERISA.
(e) Each Employee Plan materially complies by its terms
and in operation with the requirements provided by any and all statutes, orders
or governmental rules or regulations applicable to the Plan, including but not
limited to ERISA and the Code.
(f) Target has materially complied with the requirements
of section 4980B of the Code with respect to any "qualifying event" (as defined
in section 4980B(f)(3) of the Code) occurring prior to and including the Closing
Date, and no tax payable on account of Section 4980B of the Code has been
incurred with respect to any current or former employee of Target.
(g) Target is not a party to any contract, instrument,
agreement or arrangement with a "disqualified individual" (as defined in Section
280G(c) of the Code) that could result in a disallowance of the deduction for
any "excess parachute payment" (as defined in Section 280G(b)(i) of the Code) or
subject any such disqualified individual to the excise tax imposed under Section
4999 of the Code.
(h) All reports, forms and other documents required to be
filed with any government entity with respect to any Plan (including without
limitation, summary plan descriptions, Forms 5500 and summary annual reports)
have been timely filed and are accurate.
(i) All contributions for all periods ending prior to the
Closing Date (including periods from the first day of the current plan year to
the Closing Date) have been made prior to the Closing Date by Target or an ERISA
Affiliate in accordance with past practice and the recommended contribution in
any applicable actuarial report.
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(j) All insurance premiums have been paid in full, subject
only to normal retrospective adjustments in the ordinary course, with regard to
the Employee Plans for plan years ending on or before the Closing Date.
(k) With respect to each Welfare Benefit Plan:
(i) no action or claims (other than routine claims
for benefits made in the ordinary course of Employee Plan administration
for which Employee Plan administrative review procedures have not been
exhausted) are pending, threatened or imminent against or with respect
to the Employee Plan, any employer who is participating (or who has
participated) in any Plan or any fiduciary (as defined in Section 3(21)
of ERISA), of the Employee Plan;
(ii) neither Target nor any fiduciary has any
knowledge of any facts which could give rise to any such action or
claim; and
(iii) the governing instruments of the plan provide
that it may be amended or terminated at any time and all benefits
payable to current, terminated employees or any beneficiary may be
amended or terminated by Target or an ERISA Affiliate at any time
without liability.
(l) True, correct and complete copies of all documents
creating or evidencing any Plan listed in Schedule 2.14 have been delivered to
Purchaser, and true, correct and complete copies of all reports, forms and other
documents required to be filed with any governmental entity (including, without
limitation, summary plan descriptions, Forms 5500 and summary annual reports for
all plans subject to ERISA) have been delivered to Purchaser. There are no
negotiations, demands or proposals which are pending or have been made which
concern matters now covered, or that would be covered, by the type of agreements
listed in Schedule 2.14.
(m) All expenses and liabilities relating to all of the
Employee Plans described in Schedule 2.14 have been, and will on the Closing
Date be, fully and properly accrued on Target's books and records and disclosed
in accordance with generally accepted accounting principles and in Employee
Plans' financial statements.
2.15 CERTAIN AGREEMENTS AFFECTED BY THE MERGER. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, unemployment compensation, contractual or
statutory redundancy pay, golden parachute, liquidated damages, damages for
breach of contract or wrongful dismissal, compensation in respect of unfair
dismissal, bonus or otherwise) becoming due to any present or former director or
employee or consultant of Target or any of its subsidiaries, (ii) materially
increase or create any power to augment or augment any benefits otherwise
payable by Target or any of its subsidiaries in respect of any present or former
director or employee of Target of any of its subsidiaries or (iii) result in the
acceleration of the time of payment or vesting of any such benefits. No payment
which will or may be made by Target or any of its subsidiaries to any employee
will be characterized as an "excess parachute payment" within the meaning of
Section 280G(b)(1) of the Code.
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2.16 EMPLOYEE MATTERS. (a) Each of Target and its subsidiaries
is in compliance in all material respects with all currently applicable laws and
regulations and other requirements having the force of law (including without
limitation codes of practice, orders and awards) respecting employment, the
prevention or prohibition of unlawful harassment and discrimination in or in
connection with employment, terms and conditions of employment, wages, hours and
occupational safety and health and employment practices, in connection with all
present and former directors, employees and consultants of Target and any of its
subsidiaries.
(b) Each of Target and its subsidiaries has, in relation
to all present and former directors, employees and consultants of Target and any
of its subsidiaries, withheld all amounts required by law or by agreement to be
withheld from the wages, salaries, and other payments to employees; and has, in
relation to such persons, discharged its obligations in full and is not liable
for any arrears in respect of wages, salaries, fees, commission, bonus, overtime
pay, holiday pay, sick pay, employer pension contribution (and employee pension
contribution where relevant) and any other benefits and emoluments or any taxes
or national insurance contributions and is not liable in respect of any penalty
for failure to comply in any material respect with any of the foregoing.
(c) Neither Target nor any of its subsidiaries is liable
for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for employees (other than
routine payments to be made in the normal course of business and consistent with
past practice).
(d) There are no pending claims against Target under any
workers compensation plan or policy or for long term disability.
(e) There are no controversies or disputes (whether
industrial, trade or otherwise) pending or, to the knowledge of Target,
threatened, between Target or any of its subsidiaries, on the one hand, and any
of their respective present or former directors, employees, consultants and/or
other employees' representatives on the other hand, which controversies have or
could reasonably be expected to result in an action, suit, proceeding, claim,
arbitration or investigation before any agency, court or tribunal in the United
States or in any other jurisdiction.
(f) Neither Target nor any of its subsidiaries is a party
to any collective bargaining agreement or other labor union contract or any form
of agreement or arrangement (whether oral or in writing or existing by reason of
custom and practice and whether or not legally binding) with any labor union or
other employees' representatives or organization concerning or affecting
Target's or any of its subsidiaries' employees nor does Target know of any
activities or proceedings of any labor union to organize any such employees.
Further, neither Target nor any of its subsidiaries, so far as Target is aware,
has done any act which might be reasonably construed as recognition and there
has been no request for recognition from any labor union and no such request is
pending.
(g) To Target's knowledge, no employees of Target or any
of its subsidiaries are in violation of any term of any employment contract,
patent disclosure
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agreement, noncompetition agreement, confidentiality agreement, or any
restrictive covenant to a former employer relating to the right of any such
employee to be employed by Target or any of its subsidiaries because of the
nature of the business conducted or presently proposed to be conducted by Target
or to the use of trade secrets or proprietary information of others.
(h) No key employees or officers of Target or any of its
subsidiaries have given notice to Target, nor is Target otherwise aware, that
any such key employee or officer intends to terminate his or her employment with
Target or any of its subsidiaries.
(i) Neither Target nor any of its subsidiaries has either
given notice of any redundancies to any statutory or regulatory body nor started
consultations with any labor union or employees' representatives within the
preceding period of one year in relation to any of its employees. To Target's
knowledge no circumstances have arisen under which Target or any of its
subsidiaries is reasonably likely to be required to pay damages for wrongful
dismissal or breach of contract, to make any contractual or statutory redundancy
payment or make or pay any compensation in respect of unfair dismissal, to make
any other payment under any employment law or to reinstate or re-engage any
former employee. To Target's knowledge no circumstances have arisen or exist
under which Target or any of its subsidiaries may be required to pay damages or
compensation, or suffer any penalty or be required to take corrective action or
be subject to any form of sanction under the following legislation (as
applicable in England and Wales): Employment Rights Act of 1996, the Trade Union
and Labour Relations (Consolidation) Act 1992, the Transfer of Undertakings
(Protection of Employment) Regulations 1981, the Sex Discrimination Act 1975,
the Equal Pay Act 1976, the Treaty of Rome or any Directive or recommendation
made pursuant to it, the Race Relations Act 1976, the Disability Discrimination
Act 1995, the National Minimum Wage Act 1998, the Data Protection Act 1998, the
Public Interest Disclosure Act 1998, the Working Time Regulations 1998, the
Acquired Rights Directive or any other employment law. To Target's knowledge, no
inquiries or investigations exist, are pending or threatened against Target or
any of its subsidiaries by the U.K. Equal Opportunities Commission or the U.K.
Commission for Racial Equality or other applicable authorities.
(j) There are no existing service or other agreements or
contracts between Target or its subsidiaries and any of its directors or
employees or consultants which cannot be lawfully terminated by three calendar
months' notice or less without giving rise to any claim for damages or
compensation other than a statutory redundancy payment.
(k) Neither Target nor any of its subsidiaries is involved
in negotiations (whether with employees or consultants or any labor unions or
other employees' representatives) to vary the terms and conditions of employment
or engagement of any of its employees, directors or consultants in any material
respect nor has Target made any representations, promises, offers or proposals
to any of its employees, directors or consultants or to any labor union or other
employees' representatives concerning or affecting the terms and conditions of
employment or engagement of any of its employees, directors or consultants.
(l) Neither Target nor any subsidiary has any continuing
obligation for health, life, medical insurance or other similar fringe benefits
or for pensions or any other form of payment to any former employee of Target or
any subsidiary.
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(m) Neither Target nor any subsidiary is under any legal
obligation nor does it have any ex-gratia arrangement nor has it promised to pay
pensions, gratuities, superannuation allowances or the like to any of Target's
or its subsidiaries' employees or ex-employees.
(n) Target has provided to Acquiror a true, correct and
complete list of current payroll of Target and its subsidiaries, including job
description, length of service, age, notice period, commencement of continuous
employment within the meaning of the Employment Rights Act 1996 and salary or
wage rates of each of their employees, together with the maximum amounts paid or
payable as salary and bonus payments for the fiscal year ended September 30,
1998.
2.17 INTERESTED PARTY TRANSACTIONS. Except as set forth in
Schedule 2.17 of the Disclosure Schedule, neither Target nor any of its
subsidiaries is indebted to any director, officer, employee or agent of Target
or any such subsidiary (except for amounts due as normal salaries and bonuses
and in reimbursement of ordinary expenses), and no such person is indebted to
Target or any such subsidiary.
2.18 INSURANCE. Target and each of its subsidiaries have
policies of insurance and bonds of the type and in amounts customarily carried
by persons conducting businesses or owning assets similar to those of Target and
its subsidiaries. There is no material claim pending under any of such policies
or bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable to date
under all such policies and bonds have been paid and Target and its subsidiaries
are otherwise in compliance in all material respects with the terms of such
policies and bonds. Target has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
2.19 COMPLIANCE WITH LAWS. Each of Target and its subsidiaries
has complied with, are not in violation of, and have not received any notices of
violation with respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures to comply as
could not be reasonably expected to have a Material Adverse Effect on Target.
2.20 MINUTE BOOKS. The minute books of Target and its
subsidiaries made available to Acquiror contain a complete and accurate summary
in all material respects of all meetings of directors and shareholders or
actions by written consent since the time of incorporation of Target and the
respective subsidiaries through the date of this Agreement, and reflect all
transactions referred to in such minutes accurately in all material respects.
2.21 COMPLETE COPIES OF MATERIALS. Target has delivered or made
available true and complete copies of each document which has been requested by
Acquiror or its counsel in connection with their legal and accounting review of
Target and its subsidiaries.
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2.22 BROKERS' AND FINDERS' FEES. Target has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement or any transaction contemplated hereby.
2.23 VOTE REQUIRED. The affirmative vote of the holders of at
least a majority of Target Common Stock outstanding on the record date set for
the Target Stockholders Meeting is the only vote of the holders of any of
Target's capital stock necessary to approve this Agreement and the transactions
contemplated hereby, except as otherwise required herein.
2.24 BOARD APPROVAL. The Board of Directors of Target has
unanimously (i) approved this Agreement, (ii) determined that the transactions
contemplated herein are advisable and in the best interests of the stockholders
of Target and on terms that are fair to such stockholders and (iii) recommended
that the stockholders of Target approve this Agreement.
2.25 ACCOUNTS RECEIVABLE. Subject to any reserves set forth in
the Financial Statements, the accounts receivable shown on the Financial
Statements represent and will represent bona fide claims against debtors for
sales and other charges, and are not subject to discount except for normal cash
and immaterial trade discounts.
2.26 CUSTOMERS AND SUPPLIERS. No customer which individually
accounted for more than 15% of Target's gross revenues during the 12-month
period preceding the date hereof, and no material supplier of Target or any of
its subsidiaries, has canceled or otherwise terminated, or made any written
threat to Target or any such subsidiary to cancel or otherwise terminate its
relationship with Target or any such subsidiary, or has decreased materially its
services or supplies to Target or any such subsidiary in the case of any such
supplier, or its usage of the services or products of Target or any such
subsidiary in the case of such customer, and to Target's knowledge, no such
supplier or customer intends to cancel or otherwise terminate its relationship
with Target or any such subsidiary or to decrease materially its services or
supplies to Target or any such subsidiary or its usage of the services or
products of Target or any such subsidiary, as the case may be. Neither Target
nor any of its subsidiaries has knowingly breached, so as to provide a benefit
to Target or any such subsidiary that was not intended by the parties, any
agreement with, or engaged in any fraudulent conduct with respect to, any
customer or supplier of Target or any such subsidiary.
2.27 MATERIAL CONTRACTS. Except for the contracts and agreements
listed in Schedule 2.27 to the Disclosure Schedule (collectively, the "Material
Contracts"), neither Target nor any of its subsidiaries is a party to or bound
by any material contract, including without limitation:
(a) any distributor, agency or manufacturer's
representative contract;
(b) any continuing contract for the purchase and sale of
materials, supplies, equipment or services (including advertising), involving in
the case of any such contract more than $20,000 over the life of the contract;
(c) any contract that expires or may be renewed at the
option of any person other than Target so as to expire more than one year after
the date of this Agreement;
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(d) any trust indenture, mortgage, promissory note, loan
agreement or other contract for the borrowing of money, any currency exchange,
commodities or other hedging arrangement or any leasing transaction of the type
required to be capitalized in accordance with generally accepted accounting
principles;
(e) any contract for capital expenditures in excess of
$40,000 in the aggregate;
(f) any contract limiting the freedom of Target or any of
its subsidiaries to engage in any line of business or to compete with any other
Person as that term is defined in the U.S. Securities Exchange Act of 1934, as
amended, or, other than those entered into in the ordinary course of business,
any confidentiality, secrecy or non-disclosure contract;
(g) any contract pursuant to which Target is a lessor of
any machinery, equipment, motor vehicles, office furniture, fixtures or other
personal property, involving in the case of any such contract more than $20,000
over the life of the contract;
(h) any contract with any affiliate of Target or any of
its subsidiaries; or
(i) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with respect to, the
obligations, liabilities (whether accrued, absolute, contingent or otherwise) or
indebtedness of any other Person, except such agreements entered into in the
ordinary course of business.
2.28 NO BREACH OF MATERIAL CONTRACTS. All Material Contracts are
in written form. Each of Target and its subsidiaries has in all material
respects performed the obligations required to be performed by it and is
entitled to all benefits under, and is not, to the knowledge of Target, alleged
to be in default in respect of any Material Contract. Each of the Material
Contracts is in full force and effect, and there exists no default or event of
default or event, occurrence, condition or act, with respect to Target or any of
its subsidiaries or, to the knowledge of Target, with respect to the other
contracting party, which, with the giving of notice, the lapse of time or the
happening of any other event or conditions, would reasonably be expected to
become a material default or event of default under any Material Contract. True,
correct and complete copies of all Material Contracts have been delivered or
made available to the Acquiror.
2.29 THIRD PARTY CONSENTS. Schedule 2.29 of the Disclosure
Schedule lists all contracts of Target and each of its subsidiaries that would
permit the other party to the contract to terminate the contract or otherwise
would require the consent of such other party as a result of the transactions
contemplated by this Agreement (each a "Consent Contract").
2.30 MATERIAL THIRD PARTY CONSENTS. Schedule 2.30 of the
Disclosure Schedule includes every Consent Contract which if no consent of the
other party to the contract was obtained in connection with the transactions
contemplated by this Agreement would have a Material Adverse Effect on
Acquiror's ability to operate the business of Target and its subsidiaries in the
same manner as the business was operated by Target and its subsidiaries prior to
the Closing Date.
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2.31 EXPORT CONTROL LAWS. Target has conducted its export
transactions in all material respects in accordance with applicable provisions
of export control laws in the country of origin and the country of destination.
2.32 PRODUCT RELEASES. Target has provided Acquiror a Schedule
of Product Releases, which Schedule is attached as Schedule 2.32 to the
Disclosure Schedule. Target has a good faith reasonable belief that it can
achieve the release of products on the schedule and is not currently aware of
any change in its circumstances or other fact that has occurred that would cause
it to believe that it will be unable to meet such release schedule.
2.33 YEAR 2000. Except as a result of errors or "bugs"
contained in data that is generated by third parties and processed by Target's
products, none of the products sold or licensed by Target or by any of its
subsidiaries in the conduct of their respective businesses will malfunction,
will cease to function, will generate materially incorrect data or will produce
materially incorrect results and will not directly cause any of the above with
respect to the property or business of third parties using such products or
services when processing, providing or receiving (i) date-related data from,
into and between the Twentieth (20th) and Twenty-First (21st) centuries, or (ii)
date-related data in connection with any valid date in the Twentieth (20th) and
Twenty-First (21st) centuries, causing a Material Adverse Effect on Target.
Except as set forth in Schedule 2.34 of the Disclosure Schedule, neither Target
nor any subsidiary has made any representations or warranties specifically
relating to the ability of any product or service sold, licensed, rendered, or
otherwise provided by Target (or by any of its subsidiaries) in the conduct of
their respective businesses to operate without malfunction, to operate without
ceasing to function, to generate correct data or to produce correct results when
processing, providing or receiving (i) date-related data from, into and between
the Twentieth (20th) and Twenty-First (21st) centuries, and (ii) date-related
data in connection with any valid date in the Twentieth (20th) and Twenty-First
(21st) centuries.
2.34 STATE TAKEOVER STATUTES. The Board of Directors of Target
has taken all actions so that the restrictions contained in Section 203 of the
Delaware Law applicable to a "business combination" (as defined in Section 203)
will not apply to the execution, delivery or performance of this Agreement or
the consummation of the Merger or the other transactions contemplated by this
Agreement. No other state takeover statute is applicable to the Merger or this
Agreement or the transactions contemplated hereby.
2.35 TAX MATTERS. As of the date hereof, neither Target nor, to
Target's knowledge, any of its affiliates has taken or agreed to take any
action, nor does Target have knowledge of any fact or circumstance, that would
prevent the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
2.36 STOCKHOLDER AGREEMENT; IRREVOCABLE PROXIES. Holders of
more than a majority of the outstanding shares of Target Common Stock have
agreed in writing to vote for approval of the Merger pursuant to the Stockholder
Agreement and pursuant to irrevocable proxies attached thereto as an exhibit.
2.37 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by Target herein or in any Exhibit hereto or in the Disclosure
Schedule, or document
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furnished by Target at the Closing pursuant to Section 6.3 of this Agreement,
when all such documents are read together in their entirety, contains or will
contain at the Closing Date any untrue statement of a material fact, or omits or
will omit at the Closing Date to state any material fact necessary in order to
make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
2.38 KNOWLEDGE OF BREACH. Neither Target nor any stockholder of
Target shall be liable for breaches of representations or warranties under this
Agreement, any Exhibit or the Disclosure Schedule, if (i) Acquiror had actual
knowledge of such breach prior to the date of this Agreement, (ii) Acquiror did
not give written notice of such breach to Target prior to the date of this
Agreement and (iii) Acquiror entered into or performed this Agreement
notwithstanding such knowledge.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Except as disclosed in a document of even date herewith and
delivered by Acquiror to Target prior to the execution and delivery of this
Agreement and referring to the representations and warranties in this Agreement
(the "Acquiror Disclosure Schedule"), Acquiror represents and warrants to Target
as follows:
3.1 ORGANIZATION, STANDING AND POWER. Acquiror is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Acquiror 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 is not in violation
of any of the provisions of its Articles of Incorporation or Bylaws or
equivalent organizational documents.
3.2 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, when
duly executed and delivered in accordance with its terms, will constitute the
valid and binding obligation of Acquiror enforceable against Acquiror in
accordance with its terms. The execution and delivery of this Agreement 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 a benefit under (i)
any provision of the Articles of Incorporation or Bylaws of Acquiror, as
amended, or (ii) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment, order
or decree applicable to Acquiror or its 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 in
connection with the execution and delivery of this Agreement by Acquiror or the
consummation by Acquiror of the
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transactions contemplated hereby, except for (i) the filings contemplated by
Section 5.1 hereof, (ii) the filing, if any, of a Form 8-K with the SEC and
National Association of Securities Dealers ("NASD") within 15 days after the
Closing Date, (iii) any filings as may be required under applicable state
securities laws and the securities laws of any foreign country, (iv) such
filings as may be required under HSR or the antitrust laws of any foreign
country, (v) the filing with the Nasdaq Stock Market of a Notification Form for
Listing of Additional Shares with respect to any shares of Acquiror Common Stock
issued to Target's stockholders pursuant to Section 1.3(d) and upon exercise of
the Target Options assumed by Acquiror, (vi) the filing of a registration
statement on Form S-8 with the SEC, or other applicable form covering the shares
of Acquiror Common Stock issuable pursuant to outstanding options under the
Target Stock Option Plan assumed by Acquiror 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 alter or delay any of the transactions contemplated by this
Agreement.
3.3 SEC Documents; Financial Statements.
Acquiror has made available to Target 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 filings
filed with the SEC by Acquiror since July 25, 1998 (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. As of their respective filing dates, the
Acquiror SEC Documents complied (or will comply) 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 (or will contain) any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading, except to the extent corrected by a subsequently filed Acquiror
SEC Document. The financial statements of Acquiror, including the notes thereto,
included in the Acquiror SEC Documents (the "Acquiror Financial Statements")
were complete and correct in all material respects as of their respective dates,
complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto as of their respective dates, and have been prepared in
accordance with GAAP 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 at the dates and during the periods indicated
therein (subject, in the case of unaudited statements, to normal, recurring
year-end adjustments). Acquiror currently satisfies the requirements to use Form
S-3 for registration of Acquiror Common Stock to be issued in connection with
the Merger.
3.4 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
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Form 10-Q for the period ended at the most recent quarter end prior to the date
of this Agreement (the "Acquiror Balance Sheet"), (ii) those incurred in the
ordinary course of business and not required to be set forth in the Acquiror
Balance Sheet under GAAP and (iii) those incurred in the ordinary course of
business since the Acquiror Balance Sheet Date and consistent with past
practice.
3.5 STOCKHOLDER APPROVAL. Approval of the stockholders of
Acquiror is not required for this Agreement, the attachments hereto and thereto,
and the Merger.
3.6 TAX MATTERS. As of the date hereof, neither Acquiror nor,
to Acquiror's knowledge, any of its affiliates has taken or agreed to take any
action, nor does Acquiror have knowledge of any fact or circumstance that would
prevent the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
3.7 APPROVAL. The Board of Directors of Acquiror has approved
this Agreement. No consent or approval of the shareholders of Acquiror is
required or necessary for Acquiror to enter into this Agreement or to consummate
the transactions contemplated hereby.
3.8 BROKERS' 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 for
which the stockholders of Target may be held directly liable.
3.9 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by Acquiror herein or in any Exhibit hereto, or in the Acquiror
Disclosure Schedule, or any document furnished by Acquiror at Closing pursuant
to Section 6.2 of this Agreement or in any of the filings made by the Acquiror
with the Securities Exchange Commission and listed in Section 3.3 hereof when
all such documents are read together in their entirety, contains or will contain
at the Closing Data any untrue statement of a material fact, or omits or will
omit at the Closing Data to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which made, not misleading.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS OF TARGET. During the period from the
date hereof and continuing until the earlier of the termination of this
Agreement or the Effective Time, Target shall (except to the extent expressly
contemplated by this Agreement or as consented to in writing by Acquiror), pay
debts and Taxes when due subject to good faith disputes over such debts or
Taxes, to pay or perform other obligations when due, and use all reasonable
efforts consistent with past practice and policies to preserve intact its and
its subsidiaries' present business organizations, keep available the services of
its and its subsidiaries' present officers and key employees and preserve its
and its subsidiaries' relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with it, to the end
that its and its subsidiaries' goodwill and ongoing businesses shall be
unimpaired at the Effective Time. Target shall promptly notify Acquiror of any
event or occurrence not in the ordinary course of its
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or its subsidiaries' business, and of any event which could reasonably be
expected to have a Material Adverse Effect on Target.
4.2 RESTRICTION ON CONDUCT OF BUSINESS OF TARGET. During the
period from the date hereof and continuing until the earlier of the termination
of this Agreement or the Effective Time, except as set forth in the Disclosure
Schedule, in the Target Business Plan attached to the Disclosure Schedule and as
expressly contemplated by this Agreement, Target shall not do, cause or permit
any of the following, without the prior written consent of Acquiror (such
consent not to be unreasonably withheld or delayed):
(a) Charter Documents. Cause or permit any amendments to
its Certificate of Incorporation or Bylaws or other charter or organizational
documents, or form any subsidiaries;
(b) Dividends; Changes in Capital Stock. Declare or pay
any dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of shares
in connection with any termination of service to it or its subsidiaries;
(c) Stock Option Plans, Etc. Other than pursuant to a
written amendment in the form of Exhibit H hereto, (the "Amendment") accelerate,
amend or change the period of exercisability or vesting of options or other
rights granted under its stock plans or authorize cash payments in exchange for
any options or other rights granted under any of such plans;
(d) Material Contracts. Enter into any 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;
(e) Issuance of Securities. Issue, deliver or sell or
authorize or propose the issuance, delivery or sale of, or purchase or propose
the purchase of, any shares of its capital stock or securities convertible into,
or subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than the issuance of shares of its Common Stock
pursuant to the exercise of stock options, warrants or other rights therefor
outstanding as of the date hereof;
(f) Intellectual Property. Transfer to any person or
entity any rights to its Intellectual Property other than pursuant to
non-exclusive license arrangements in the ordinary course of business consistent
with past practice;
(g) 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;
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(h) 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 Target's and its subsidiaries' business,
taken as a whole except for sales of products in the ordinary course of business
consistent with past practice;
(i) Indebtedness. Incur any indebtedness for borrowed
money or guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others;
(j) Leases. Enter into any operating lease in excess of
$20,000;
(k) Payment of Obligations. Pay, discharge or satisfy in
an amount in excess of $20,000 in any one case or $40,000 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;
(l) Capital Expenditures. Make any capital expenditures,
capital additions or capital improvements except in the ordinary course of
business and consistent with past practice;
(m) Insurance. Materially reduce the amount of any
insurance coverage provided by existing insurance policies;
(n) Termination or Waiver. Terminate or waive any right
having a value greater than $10,000;
(o) Employee Benefit Plans; New Hires; Pay Increases.
Except as contemplated herein or as set forth in the Disclosure Schedule, adopt
or amend any employee benefit or stock purchase or option plan, or hire any new
director level or officer level employee, pay any special bonus or special
remuneration to any employee or director or, other than in the ordinary course
consistent with past practice in connection with scheduled performance reviews,
increase the salaries or wage rates of its employees ;
(p) Severance Arrangements. Grant any severance or
termination pay (i) to any director or officer or (ii) to any other employee
except payments made pursuant to standard written agreements outstanding on the
date hereof;
(q) Lawsuits. Commence a lawsuit other than (i) for the
routine collection of bills, (ii) in such cases where it in good faith
determines that failure to commence suit would result in the material impairment
of a valuable aspect of its business, provided that it consults with Acquiror
prior to the filing of such a suit or (iii) for a breach of this Agreement or
related agreements;
(r) 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
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or division thereof, or otherwise acquire or agree to acquire any assets which
are material, individually or in the aggregate, to its and its subsidiaries'
business, taken as a whole;
(s) Taxes. Other than in the ordinary course of business,
make or change any material election in respect of Taxes, adopt or change any
accounting method in respect of Taxes, file any material Tax Return or any
amendment to a material Tax Return, enter into any closing agreement, settle any
claim or assessment in respect of Taxes, or consent to any extension or waiver
of the limitation period applicable to any claim or assessment in respect of
Taxes;
(t) Notices. Target shall give all notices and other
information required to be given to the employees of Target, any collective
bargaining unit representing any group of employees of Target, and any
applicable government authority under the WARN Act, the National Labor Relations
Act, the Internal Revenue Code, the Consolidated Omnibus Budget Reconciliation
Act, and other applicable law in connection with the transactions provided for
in this Agreement;
(u) 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;
(v) Year 2000 Compliance. Fail to carry forward in all
material respects Target's Year 2000 assessment and compliance program, as made
available to Acquiror by Target; or
(w) Other. Take or agree in writing or otherwise to take,
any of the actions described in Sections 4.2(a) through (v) above, or any action
which would make any of its representations or warranties contained in this
Agreement untrue or incorrect or prevent it from performing or cause it not to
perform its covenants hereunder.
4.3 NO SOLICITATION. Until the earlier of the Effective Time or
the termination of this Agreement, Target and the officers, directors and
majority stockholder (each subject to applicable fiduciary duties) or other
agents of Target will not, directly or indirectly, (i) take any action to
solicit, initiate or encourage any Takeover Proposal (as defined in Section
7.3(f)) or (ii) engage in negotiations with, or disclose any nonpublic
information relating to Target to, or afford access to the properties, books or
records of Target or any of its subsidiaries to, any person that has advised
Target that it may be considering making, or that has made, a Takeover Proposal.
Target shall not, and shall not permit any of Target's officers, directors and
majority stockholder (each subject to applicable fiduciary duties) or other
representatives to agree to or endorse any 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,
request or any correspondence or communications related thereto and shall
provide Acquiror with a true and complete copy of such Takeover Proposal notice
or
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request or correspondence or communications related thereto, if it is in
writing, or a written summary thereof, if it is not in writing.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Fairness Hearing and Permit
(a) As promptly as practicable after the execution of this
Agreement, at Acquiror's expense, Acquiror shall prepare (i) the notice sent to
the stockholders of Target pursuant to, and meeting the requirements of, Article
2 of Subchapter 1 of the California Administrative Code, title 10, Chapter 3,
Subchapter 2, as amended (the "Hearing Notice"), concerning the hearing held by
the California Commission of Corporations (the "Commissioner") to consider the
terms, conditions and fairness of the transactions contemplated hereby pursuant
to Section 25142 of the California Corporate Securities Law of 1968, as amended
(the "Hearing"), (ii) the application for permit filed with the Commissioner in
connection with the Hearing (the "Application") and (iii) the information
statement mailed to stockholders of Target in connection with the transactions
contemplated hereby (the "Information Statement"). As soon as permitted by the
Commissioner, Acquiror shall mail the Hearing Notice to all stockholders of
Target, at Acquiror's expense, entitled to receive such notice under Delaware
law. Target and Acquiror will notify each other promptly of the receipt of any
comments from the Commissioner or its staff and of any request by the
Commissioner or its staff or any other government officials for amendments or
supplements to any of the documents filed therewith or any other filing or for
additional information and will supply each other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the Commissioner, or its staff or any other government officials, on
the other hand, with respect to the filing. Whenever any event occurs that is
required to be set forth in an amendment or supplement to the Information
Statement or any other filing, Target shall promptly inform Acquiror of such
occurrence and cooperate in filing with the Commissioner or its staff or any
other government officials, and/or mailing to stockholders of Target, such
amendment or supplement, at Acquiror's expense. The Information Statement shall
include the recommendation of the Board of Directors of Target in favor of the
Merger Agreement and the Merger and the conclusion of the stockholders of
Target.
(b) Target shall review each of the Hearing Notice, the
Application and the Information Statement (collectively, the "California
Documents") so that each shall not, at the time the Hearing Notice is mailed to
Stockholders of Target, at the time the Application is filed with the
Commissioner and at the time the Information Statement is mailed to stockholders
of Target and at all times subsequent thereto (through and including the
Effective Time), contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. If at any time prior to the Effective Time any event or
information should be discovered by Target which should be set forth in an
amendment any of the California Documents, Target shall promptly inform
Acquiror. Notwithstanding the
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foregoing, Target makes no representation, warranty or covenant with respect to
any of the information supplied by Acquiror which is contained in any of the
California Documents.
(c) In the event the Permit is not issued within 60 days
of the filing of the Application with the Commissioner, Acquiror shall, at
Acquiror's expense, prepare and file a registration statement (the "Registration
Statement") covering the resale of such shares of Acquiror Common Stock issued
in connection with the Merger and Acquiror shall use reasonable best efforts to
cause such registration statement to become effective as promptly as practicable
after filing and to keep such registration statement effective until one (1)
year after the Effective Time. Any such registration shall be subject to the
normal terms and conditions used in connection with resale prospectuses and
Acquiror shall indemnify Target, its stockholders and holders of options to
purchase Target Common Stock from any liability arising from such registration.
In such event, the term "Information Statement" for purposes of this Agreement
shall refer to the Registration Statement.
5.2 MEETING OF STOCKHOLDERS. To the extent applicable, Target
shall promptly after the date hereof take all action necessary in accordance
with Delaware Law and its Certificate of Incorporation and Bylaws to convene the
Target Stockholders Meeting or to secure the written consent of its stockholders
within thirty (30) days of the issuance of the Permit by the Commissioner.
Target shall consult with Acquiror regarding the date of the Target Stockholders
Meeting and use all reasonable efforts and shall not postpone or adjourn (other
than for the absence of a quorum) the Target Stockholders Meeting without the
consent of Acquiror. Target shall use its reasonable efforts to solicit from
stockholders of Target proxies in favor of the Merger and shall take all other
action necessary or advisable to secure the vote or consent of stockholders
required to effect the Merger.
5.3 ACCESS TO INFORMATION.
(a) Target shall afford Acquiror and its accountants,
counsel and other representatives, reasonable access during normal business
hours during the period prior to the Closing Date to (i) all of Target's and its
subsidiaries' properties, books, contracts, commitments and records, and (ii)
all other information concerning the business, properties and personnel of
Target and its subsidiaries as Acquiror may reasonably request. Target agrees to
provide to Acquiror and its accountants, counsel and other representatives
copies of internal financial statements promptly upon request.
(b) Subject to compliance with applicable law, from the
date hereof until the Closing Date, each of Acquiror and Target shall confer on
a regular and frequent basis with one or more representatives of the other party
to report operational matters of materiality and the general status of ongoing
operations.
(c) No information or knowledge obtained in any
investigation pursuant to this Section 5.3 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the transactions contemplated hereby.
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(d) Target shall provide the following information to
Acquiror at least two weeks after the date of this Agreement: (i) a complete
list of the types of Tax Returns being filed by Target and each of its
subsidiaries in each taxing jurisdiction, (ii) the year of the commencement of
the filing of each such type of Tax Return, (iii) all closed years with respect
to each such type of Tax Return filed in each jurisdiction, (iv) all material
Tax elections filed in each jurisdiction by Target and each of its subsidiaries,
(v) the tax basis of the assets of Target and each of its subsidiaries, (vi) the
tax basis of Target in the stock of each of its subsidiaries (vii) the
accumulated earnings and profits and any loss carryovers of Target and each of
its subsidiaries, and (viii) receipts for any Taxes paid to foreign Tax
authorities. Target shall provide Acquiror and its accountants, counsel and
other representatives reasonable access, during normal business hours during the
period prior to the Closing Date, to all of Target's and subsidiaries' Tax
Returns and other records and workpapers relating to Taxes.
5.4 CONFIDENTIALITY. The parties acknowledge that Acquiror and
Target have previously executed a non-disclosure agreement dated July 23, 1999
(the "Confidentiality Agreement"), which Confidentiality Agreement shall
continue in full force and effect in accordance with its terms. In addition, the
parties agree that the terms and conditions of the transactions contemplated
hereby and information exchanged in connection with the execution hereof shall
be subject to the same standard of confidentiality as set forth in the
Confidentiality Agreement.
5.5 PUBLIC DISCLOSURE. Unless otherwise permitted by this
Agreement, Acquiror and Target shall consult with each other before issuing any
press release or otherwise making any public statement or making any other
public (or non-confidential) disclosure (whether or not in response to an
inquiry) regarding the terms of this Agreement and the transactions contemplated
hereby, and neither shall issue any such press release or make any such
statement or disclosure without the prior approval of the other (which approval
shall not be unreasonably withheld), except as may be required by law or by
obligations pursuant to any listing agreement with any national securities
exchange or with the NASD.
5.6 CONSENTS; COOPERATION.
(a) Each of Acquiror and Target shall promptly apply for
or otherwise seek, and use its commercially reasonable efforts to obtain, all
consents and approvals required to be obtained by it for the consummation of the
transactions contemplated hereby, including those required under HSR and any
foreign antitrust laws. Target shall use its commercially reasonable efforts to
obtain all necessary consents, waivers and approvals under any of its material
contracts 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 antitrust or fair trade law.
(b) Each of Acquiror and Target shall, at Acquiror's
expense, use all commercially reasonable efforts to resolve such objections, if
any, as may be asserted by any Governmental Entity with respect to the
transactions contemplated by this Agreement under the HSR, the Sherman Act, as
amended, the Clayton Act, as amended, the Federal Trade
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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,
at Acquiror's expense, use all commercially reasonable efforts vigorously to
contest and resist any such action or proceeding and to have vacated, lifted,
reversed, or overturned any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent (each an "Order"), that is in effect and
that prohibits, prevents, or restricts consummation of the transactions
contemplated hereby, unless by mutual agreement Acquiror and Target decide that
litigation is not in their respective best interests. Notwithstanding the
provisions of the immediately preceding sentence, it is expressly understood and
agreed that neither Acquiror nor Target shall have any obligation to litigate or
contest any administrative or judicial action or proceeding or any Order beyond
the earlier of (i) the three-month anniversary of the date hereof or (ii) the
date of a ruling preliminarily enjoining the Merger issued by a court of
competent jurisdiction. Each of Acquiror and Target shall use all commercially
reasonable efforts to take such action as may be required to cause the
expiration of the notice periods under the HSR or other Antitrust Laws with
respect to such transactions as promptly as possible after the execution of this
Agreement.
(c) Notwithstanding anything to the contrary in this
Agreement, (i) Acquiror shall not be required to divest any of its businesses,
product lines or assets, or to take or agree to take any other action or agree
to any limitation that could reasonably be expected to have a Material Adverse
Effect on Acquiror or on Target after the Closing Date and (ii) Target shall not
be required to divest any of its businesses, product lines or assets, or to take
or agree to take any other action or agree to any limitation that could
reasonably be expected to have a Material Adverse Effect on Target.
5.7 LEGAL REQUIREMENTS. Each of Acquiror and Target will, and
will cause their respective subsidiaries to, take all reasonable actions
necessary to comply in all material respects 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 by them in connection with the
taking of any action contemplated by this Agreement.
5.8 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, at Acquiror's expense, use its reasonable 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.
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5.9 EMPLOYEE BENEFIT PLANS; ASSUMPTION OF OPTIONS. Assumption
of Options. At the Closing Date, 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 (but as modified by the Amendment)
(the "Target Options"), will be assumed by Acquiror. Schedule 5.9 to the
Disclosure Schedule 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
("Option Holder") including the number of shares of Target Common Stock subject
to each such option, the exercise or vesting schedule (but as modified by the
Amendment) (as defined below), the exercise price per share and the term of each
such option. On the Closing Date, Target shall deliver to Acquiror an updated
Schedule 5.9 hereto current as of such date. Each such option so assumed by
Acquiror under the terms of this Agreement shall continue to have, and be
subject to, the same terms and conditions set forth in the Target Stock Option
Plan and the applicable stock option agreement (as modified by the Amendment)
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 transactions
contemplated hereby will not terminate any of the outstanding options under the
Target Stock Option Plan or accelerate the exercisability or vesting of such
options or the shares of Acquiror Common Stock which will be subject to those
options upon the Acquiror's assumption of the options hereunder. Within 30
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.
Assignment of Repurchase Options. All outstanding rights of
Target which it may hold immediately prior to the Effective Time to repurchase
unvested shares of Target Common Stock (the "Repurchase Options") shall be
assigned to Acquiror automatically in the Merger and shall thereafter be
exercisable by Acquiror upon the same terms and conditions in effect immediately
prior to the Effective Time, except that the shares purchasable pursuant to the
Repurchase Options and the purchase price per share shall be adjusted to reflect
the Exchange Ratio.
5.10 ESCROW AGREEMENT. On or before the Closing Date, the
parties hereto will use their reasonable best efforts to cause the Escrow Agent
(or some other entity reasonably acceptable to the parties hereto) to execute
the Escrow Agreement contemplated by Article VIII in substantially the form
attached hereto as Exhibit C ("Escrow Agreement").
5.11 FORM S-8. Acquiror shall file a registration statement on
Form S-8 (or any successor or other appropriate forms that Acquiror is eligible
to use) under the Securities Act
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with respect to the shares of Acquiror Common Stock subject to options held by
Option Holders within forty five (45) days following the Closing Date.
5.12 LISTING OF ADDITIONAL SHARES. Prior to the Effective Time,
Acquiror shall cause the shares of Acquiror Common Stock issuable to the
shareholders of Target pursuant to Sections 1.3(a), 1.3(c) and 5.9, including
shares of Acquiror Common Stock issuable upon exercise of Target Options, to be
authorized for listing on the Nasdaq National Market.
5.13 DISCLOSURE SCHEDULE. If any action is taken by Target at
the written request, or with the express written consent, of Acquiror which
action by its execution would result in the failure by Target to satisfy the
conditions set forth in Sections 6.1 or 6.3, then Acquiror shall be deemed to
have waived such conditions.
5.14 COMMERCIALLY REASONABLE EFFORTS AND FURTHER ASSURANCES.
Each of the parties to this Agreement shall use its commercially reasonable
efforts to effectuate the transactions contemplated hereby and to fulfill and
cause to be fulfilled the conditions to closing under this Agreement. Each party
hereto, at the reasonable request of another party hereto, shall execute and
deliver such other instruments and do and perform such other acts and things as
may be necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
ARTICLE VI
CONDITIONS TO THE CLOSING
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE
CLOSING. The respective obligations of each party to this Agreement to
consummate and effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by agreement of all the parties hereto:
(a) Stockholder Approval. This Agreement and the Merger
shall have been approved and adopted by the requisite vote of the stockholders
of Target under Delaware Law and any agreements or arrangements that may result
in the payment of any amount that would not be deductible by reason of Section
280G of the Code shall have been approved by such number of stockholders of
Target as is required by the terms of Section 280G(b)(5)(B) and shall be
obtained in a manner which satisfies all applicable requirements of such Code
Section 280(G)(b)(5)(B) and the proposed Treasury Regulations thereunder,
including (without limitation) Q-7 of Section 1.280G-1 of such proposed
regulations.
(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 hereunder shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other Governmental Entity or instrumentality, domestic or foreign,
seeking any of the foregoing be pending; nor shall there be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger or the assumption of the Target Options hereunder,
which makes the consummation of the Merger or
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the assumption of the Target Options hereunder illegal. In the event an
injunction or other order shall have been issued, each party agrees to use its
reasonable efforts to have such injunction or other order lifted.
(c) Governmental Approval. Acquiror, Target, their
respective subsidiaries shall have timely obtained from each Governmental Entity
all approvals, waivers and consents, if any, necessary for consummation of or in
connection with the several transactions contemplated hereby, including, if
applicable, approval under HSR, the Permit for the issuance of Acquiror Common
Stock in the Merger and such other approvals, waivers and consents as may be
required under the Securities Act, including effectiveness of the Registration
Statement, if applicable and under state Blue Sky laws.
(d) Escrow Agreement. Escrow Agent (as defined in Article
VIII hereto) shall have entered into an Escrow Agreement substantially in the
form attached hereto as Exhibit C.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF TARGET. The
obligations of Target to consummate and effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by Target:
(a) Representations, Warranties and Covenants. Except as
disclosed in the Acquiror Disclosure Schedule, (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 it as of the Effective Time.
(b) Certificate of Acquiror. Target shall have been
provided with a certificate executed on behalf of Acquiror by an officer of
Acquiror to the effect set forth in Section 6.2(a).
(c) Legal Opinion. Target shall have received a legal
opinion from Acquiror's counsel, in substantially the form of Exhibit D.
(d) Listing of Additional Shares. Acquiror shall have
fulfilled its obligations pursuant to Section 5.12 hereunder.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF ACQUIROR. The
obligations of Acquiror to consummate and effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by Acquiror:
(a) Representations, Warranties and Covenants. Except as
disclosed in the Disclosure Schedule, (i) the representations and warranties of
Target in this Agreement
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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 them 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 to the
effect set forth in Section 6.3(a).
(c) Third Party Consents. Acquiror shall have been
furnished with evidence reasonably satisfactory to it of the consent or approval
of those persons whose consent or approval shall be required in connection with
the transactions contemplated hereby under the contracts of Target set forth on
Schedule 2.30 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, 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 the United States in substantially the
form of Exhibit E-1 and from Target's legal counsel in the United Kingdom in
substantially the form of Exhibit E-2.
(f) No Material Adverse Changes. There shall not have
occurred any Material Adverse Effect on Target and its subsidiaries, taken as a
whole, since the date of this Agreement.
(g) Resignation of Directors and Officers. The directors
and officers of Target in office immediately prior to the Effective Time shall
have resigned as directors and officers, as applicable, of Target effective as
of the Effective Time, and Acquiror shall have received letters of resignation
(including waivers of claims against Target) from such persons in form and
substance reasonably satisfactory to Acquiror.
(h) Escrow Agreement. The Target and the Shareholders'
Agent (as defined therein) shall have entered into the Escrow Agreement.
(i) 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 G attached hereto
along with written authorization for Acquiror to deliver such notice
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form to the Internal Revenue Service on behalf of Target upon the Closing of the
Merger. Alternatively, Target may satisfy the condition of this paragraph (n) by
delivering to Acquiror prior to Closing certifications from each stockholder of
Target (other than Acquiror) regarding its non-foreign status, substantially in
the form attached hereto as Exhibit G .
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. At any time prior to the Effective Time,
whether before or after approval of the matters presented in connection with the
Merger by the stockholders of Target, this Agreement may be terminated:
(a) by mutual consent duly authorized by the Boards of
Directors of Acquiror and Target;
(b) by either Acquiror or Target, if the Closing shall not
have occurred on or before the four-month anniversary of the date hereof
(provided, a later date may be agreed upon in writing by the parties hereto, and
provided further that the right to terminate this Agreement under this Section
7.1(b) shall not be available to any party whose action or failure to act has
been the cause or resulted in the failure of the Merger to occur on or before
such date and such action or failure to act constitutes a breach of this
Agreement);
(c) by Acquiror, if (i) Target shall breach any
representation, warranty, obligation or agreement hereunder and such breach (if
capable of remedy) shall not have been cured within fifteen (15) 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 in a manner adverse to Acquiror or shall have resolved to do any of
the foregoing or (iii) for any reason Target fails to call and hold the Target
Stockholders' Meeting or solicit written consent from Target Stockholders within
30 days of the issuance of the permit by the Commission;
(d) by Target, if (i) Acquiror shall breach any
representation, warranty, obligation or agreement hereunder and such breach (if
capable of remedy) shall not have been cured within fifteen (15) days following
receipt by Acquiror of written notice of such breach;
(e) by Acquiror if a Trigger Event (as defined below)
shall have occurred; or
(f) by either Acquiror or Target if (i) any permanent
injunction or other order of a court or other competent authority preventing the
consummation of the Merger shall have become final and nonappealable or (ii) if
any required approval of the stockholders of Target shall not have been obtained
by reason of the failure to obtain the required vote upon a vote held at a duly
held meeting of stockholders or at any adjournment thereof.
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
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<PAGE> 45
liability or obligation on the part of Acquiror or Target or their respective
officers, directors, shareholders or affiliates, except to the extent that such
termination results from the breach by a party hereto of any of its
representations, warranties or covenants set forth in this Agreement; provided
that the provisions of Section 5.4 (Confidentiality), Section 7.3 (Expenses and
Termination Fees) and this Section 7.2 and of Article IX shall remain in full
force and effect and survive any termination of this Agreement.
7.3 EXPENSES AND TERMINATION FEES.
(a) Subject to Sections 5.1, 5.6(b), 5.8, 7.3(b) and
7.3(c), whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby (including, without limitation, the fees and expenses of its advisers,
accountants and legal counsel) shall be paid by the party incurring such
expense.
(b) In the event that this Agreement shall be terminated
pursuant to Section 7.1(c)(ii), 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 not to
exceed $250,000 (including, without limitation, the fees and expenses of its
advisors, accountants and legal counsel), and, in addition to any other remedies
Acquiror may have, Target shall promptly pay to Acquiror an amount equal to 5%
of the Valuation.
(c) As used herein, a "Trigger Event" shall occur if any
Person (as that term is defined in Section 13(d) of the Exchange Act and the
regulations promulgated thereunder) other than Acquiror acquires securities
representing 25% or more of the voting power of Target.
7.4 AMENDMENT. The boards of directors of the parties hereto
may cause this Agreement to be amended at any time by execution of an instrument
in writing signed on behalf of each of the parties hereto; provided that an
amendment made subsequent to adoption of the Agreement by the stockholders of
Target 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 Certificate of Incorporation of the Surviving Corporation to be
effected by the Merger, or (iii) alter or change any of the terms and conditions
of the Agreement if such alteration or change would materially adversely affect
the holders of Target Capital Stock.
7.5 EXTENSION; WAIVER. At any time prior to the Effective Time
any party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
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ARTICLE VIII
ESCROW AND INDEMNIFICATION
8.1 ESCROW FUND. As soon as practicable after the Effective
Time, 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 its successor
in interest or other institution selected by Acquiror with the reasonable
consent of Target) as escrow agent (the "Escrow Agent"), such deposit (together
with interest and other income thereon) to constitute the Escrow Fund and to be
governed by the terms set forth herein and in the Escrow Agreement attached
hereto as Exhibit C. The Escrow Fund shall be available to compensate Acquiror
pursuant to the indemnification obligations of the stockholders of Target.
8.2 INDEMNIFICATION; CAP.
(a) Subject to the limitations set forth in this Article
VIII, subsequent to the Closing Target will indemnify and hold harmless Acquiror
and its officers, directors, agents and employees, and each person, if any, who
controls or may control Acquiror 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,
(collectively, "Damages") arising out of any breach of or default in connection
with any of the representations, warranties, covenants and agreements given or
made by Target in this Agreement (excluding Section 2.29 hereto), the Disclosure
Schedules or any Exhibit to this Agreement.
(b) Acquiror and Target each acknowledge that such
Damages, if any, would relate to unresolved contingencies existing at the
Effective Time, which if resolved at the Effective Time would have led to a
reduction in the total consideration Acquiror would have agreed to issue in
connection with the Merger. In no event shall the aggregate liability of Target
and its stockholders exceed $13,750,000 and in no event shall the individual
liability of each of Target's stockholders exceed the amounts set forth in
Section 8.2(d) herein; provided, however, that nothing in this Agreement shall
limit the liability of any Target stockholder in connection with any breach by
such stockholder of the Stockholder Agreement or irrevocably proxy or any
willful misrepresentation or breach by Target or such stockholder of any
representation, warranty or covenant of this Agreement or any fraudulent conduct
by Target or such stockholder in connection herewith.
(c) 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 Acquiror Stock Price.
(d) (i) The Escrow Fund shall be security for part of the
indemnity obligations hereunder. Subject to the limitations in this
Agreement, when entitled to Damages hereunder Acquiror shall be entitled
and obligated to seek and claim the full amount of damages from the
Escrow Fund until exhausted; and
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(ii) thereafter from all holders of Target Common
Stock as of the Effective Time on a pro rata and several basis (based on
their holdings as of the Effective Time) up to an aggregate liability
per holder of Target Common Stock of 7% of the value of Acquiror Common
Stock received by such holders as of the Effective Time.
8.3 DAMAGE THRESHOLD. Acquiror may not receive any shares from
the Escrow Fund unless and until an Officer's Certificate or Certificates (as
defined in Section 8.5 below) identifying Damages the aggregate amount of which
exceeds $100,000 has been delivered to the Escrow Agent as provided in Section
8.5 below and such amount is determined pursuant to this Article VIII to be
payable, in which case Acquiror shall receive shares equal to the full amount of
Damages. All Damages shall be net of any insurance proceeds actually received by
Acquiror that are attributable to such Damages.
8.4 ESCROW PERIOD. The Escrow Period shall terminate at 11:59
p.m. California time on the one-year anniversary of the Closing Date; provided,
however, that a portion of the Escrow Fund, which is necessary to satisfy any
unsatisfied claims specified in any Officer's Certificate theretofore delivered
to the Escrow Agent prior to termination of the Escrow Period with respect to
facts and circumstances existing prior to expiration of the Escrow Period, shall
remain in the Escrow Fund until such claims have been resolved. Acquiror shall
deliver to the Escrow Agent a certificate specifying the Closing Date.
8.5 CLAIMS UPON ESCROW FUND.
(a) Upon receipt by the Escrow Agent on or before the last
day of the Escrow Period of a certificate signed by any officer of Acquiror (an
"Officer's Certificate"):
(i) stating that, Damages exist in an aggregate
amount greater than $100,000; and
(ii) specifying in reasonable detail the individual
items of such Damages included in the amount so stated, the date each
such item was paid, or properly accrued or arose, the nature of the
misrepresentation, breach of warranty or claim to which such item is
related,
the Escrow Agent shall, subject to the provisions of Section 8.6 and 8.7 below,
deliver to Acquiror out of the Escrow Fund, as promptly as practicable, Acquiror
Common Stock or other assets held in the Escrow Fund having a value equal to
such Damages.
(b) For the purpose of compensating Acquiror for its
Damages pursuant to this Agreement, the Acquiror Common Stock in the Escrow Fund
shall be valued at the Acquiror Stock Price.
8.6 OBJECTIONS TO CLAIMS. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such Officer's
Certificate shall be delivered to the Shareholders' Agent (defined in Section
8.8 below) and for a period of forty-five (45) days after such delivery to the
Escrow Agent of such Officer's Certificate, the Escrow Agent shall make no
delivery of cash 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
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the expiration of such forty-five (45) day period, the Escrow Agent shall make
delivery of cash 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 so object in
writing to any claim or claims by Acquiror made in any Officer's Certificate,
Acquiror shall have forty-five (45) days after receipt by the Escrow Agent of an
objection by the Shareholders' Agent to respond in a written statement to the
objection of the Shareholders' Agent. If after such forty-five (45) day period
there remains a dispute as to any claims, the Shareholders' Agent and Acquiror
shall attempt in good faith for sixty (60) days to agree upon the rights of the
respective parties with respect to each of such claims. If the Shareholders'
Agent and Acquiror should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties and shall be furnished to the
Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum
and shall distribute the cash or other property from the Escrow Fund in
accordance with the terms thereof.
(b) If no such agreement can be reached after such 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 or 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 and the Stockholders' Agent's written
objection shall be binding and conclusive upon the parties to this Agreement,
and notwithstanding anything in Section 8.6 hereof, the Escrow Agent shall be
entitled to act in accordance with such decision and make or withhold payments
out of the Escrow Fund in accordance therewith.
(c) Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. Any such arbitration shall be
held in Santa Clara or San Mateo County, California under the commercial rules
then in effect of the American Arbitration Association. Each party shall bear
its own expenses (including, attorneys' fees and expenses) incurred in
connection with any such arbitration, and the fees and expenses of each
arbitrator and the administrative fee of the American Arbitration Association
shall be allocated by the arbitrator or arbitrators, as the case may be (or, if
not so allocated, shall be borne equally by Acquiror, on the one hand, and
Target, on the other hand).
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8.8 SHAREHOLDERS' AGENT.
(a) Mark Richer shall be constituted and appointed as
agent ("Shareholders' Agent") for and on behalf of the stockholders of Target to
give and receive notices and communications, to authorize delivery to Acquiror
of the cash 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 ten (10) days' prior written notice to Acquiror. No bond shall be required
of the Shareholders' Agent, and the Shareholders' Agent shall receive no
compensation for his services. Notices or communications to or from the
Shareholders' Agent shall constitute notice to or from each of the Target
shareholders.
(b) The Shareholders' Agent shall not be liable for any
act done or omitted hereunder as Shareholders' Agent while acting in good faith
and in the exercise of reasonable judgment, and any act done or omitted pursuant
to the advice of counsel shall be conclusive evidence of such good faith. The
stockholders of Target 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.
8.9 ACTIONS OF THE SHAREHOLDERS' AGENT. A written decision,
act, consent or instruction of the Shareholders' Agent shall constitute a
decision of all stockholders of Target and shall be final, binding and
conclusive upon each stockholder of Target, and the Escrow Agent and Acquiror
may rely upon any written decision, act, consent or instruction of the
Shareholders' Agent as being the decision, act, consent or instruction of each
and every such stockholder. The Escrow Agent and Acquiror are hereby relieved
from any liability to any person for any acts done by them in accordance with
such written 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 promptly notify the Shareholders' Agent of such
claim, and the Shareholders' Agent shall be entitled, at their expense, to
participate in any defense of such claim. Acquiror shall have the right in its
sole discretion to settle any such claim; provided, however, that Acquiror may
not effect the settlement of any such claim without the prior written 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 8.7
or any other provision of this Article VIII to the amount of any claim by
Acquiror against the Escrow Fund for indemnity with respect to such settlement.
ARTICLE IX
GENERAL PROVISIONS
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9.1 SURVIVAL. The representations, warranties and covenants of
the parties contained herein shall survive until the first anniversary of the
Closing Date (or, if later, the final resolution of any indemnity claims
hereunder), except that the representations, warranties and covenants contained
in Section 2.2 shall survive indefinitely and the provisions of Article VIII
shall survive in accordance with their terms.
9.2 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
commercial delivery service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with confirmation of receipt) to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
(a) if to Acquiror, to:
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134-1706
U.S.A.
Attention: Vice President, Legal and Governmental
Affairs
Facsimile No: (408) 526-5925
Telephone No: (408) 526-8252
with a copy to:
Brobeck Hale and Dorr
Hasilwood House
60 Bishopsgate
London EC2N 4AJ
England
Attention: T.W. Kellerman
Facsimile No.: (171) 638 5888
Telephone No: (171) 638 6688
(b) if to Target, to:
Mark Richer
2105 Hamilton Avenue
Suite 230
San Jose, CA 95125
Attention: President
Facsimile No: (408) 558-9707
Telephone No: (408) 558-9700
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<PAGE> 51
with a copy to:
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, CA 94304
Attention: David Wilson
Facsimile No: (650) 494-0792
Telephone No: (650) 813-5600
9.3 INTERPRETATION. When a reference is made in this Agreement
to Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available.
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 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, (c) shall not be
assigned by operation of law or otherwise except as otherwise specifically
provided and except that Acquiror may assign its rights hereunder to a
wholly-owned subsidiary and (d) shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
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.
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9.7 REMEDIES CUMULATIVE. Except as otherwise provided herein,
any and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy.
9.8 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.
9.9 CONSENT TO JURISDICTION; SERVICE OF PROCESS. Any action,
suit or proceeding arising out of or relating to this Agreement may be
instituted in any United States Federal court or any state court located in San
Jose, California, and each party agrees not to assert, by way of motion, as a
defense or otherwise, in any such action, suit or proceeding, any claim it may
now or hereafter have that it is not subject personally to the jurisdiction of
such court, that the action, suit or proceeding is brought in an inconvenient
forum, that the venue of the action, suit or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such court.
Each party further irrevocably submits to the jurisdiction of such court in any
such action, suit or proceeding, and irrevocably agrees to be bound by any final
judgment rendered thereby in connection with this Agreement from which no appeal
has been taken or is available. Any and all service of process and any other
notice in any such action, suit or proceeding shall be effective against any
party if given personally or by registered or certified mail, postage prepaid
and return receipt requested, or by personal service on such party. Nothing
contained herein shall be deemed to affect the right of any party to serve
process in any manner permitted by law or to commence legal proceedings or
otherwise proceed against any other party in any other jurisdiction.
[Signature page follows]
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<PAGE> 53
IN WITNESS WHEREOF, Calista, Inc. and Cisco Systems, Inc. have
caused this Agreement to be executed and delivered by their respective officers
thereunto duly authorized, all as of the date first written above.
CALISTA, INC.
By: /s/ Mark Richer
-----------------------------------
Name: Mark Richer
Title: President and Chief Executive Officer
CISCO SYSTEMS, INC.
By: /s/ Larry R. Carter
-----------------------------------
Name: Larry R. Carter
Title: Vice President,
Chief Financial Officer and Secretary
<PAGE> 1
EXHIBIT 5.1
OPINION OF BROBECK HALE AND DORR
November 30, 1999
Cisco Systems, Inc.
255 W. Tasman Drive
San Jose, California 95134
Re: Cisco Systems, Inc. Registration Statement on Form S-3 for
Resale of 438,280 Shares of Common Stock
Ladies and Gentlemen:
We have acted as counsel to Cisco Systems, Inc., a California
corporation (the "Company"), in connection with the registration for resale of
438,280 shares of Common Stock (the "shares"), as described in the Company's
Registration Statement on Form S-3 ("Registration Statement") filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act").
This opinion is being furnished in accordance with the
requirements of Item 16 of Form S-3 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents, the corporate
proceedings taken by the Company in connection with the original issuance and
sale of the shares and a certificate of a Company officer regarding (among other
things) the Company's receipt of consideration upon the original issuance and
sale of the shares. Based on such review, we are of the opinion that the shares
are duly authorized, validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the prospectus which is part of the Registration Statement.
In giving this consent, we do not thereby admit that we are within the category
of persons whose consent is required under Section 7 of the Act, the rules and
regulations of the Securities and Exchange Commission promulgated thereunder or
Item 509 of Regulation S-K.
This opinion letter is rendered as of the date first written
above and we disclaim any obligation to advise you of facts, circumstances,
events or developments which hereafter may be brought to our attention and which
may alter, affect or modify the opinion expressed herein. Our opinion is
expressly limited to the matters set forth above and we render no opinion,
whether by implication or otherwise, as to any other matters relating to the
Company or the Shares.
Very truly yours,
BROBECK HALE AND DORR
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated August 10, 1999 relating to the
consolidated financial statements, which appears in the 1999 Annual Report to
Shareholders of Cisco Systems, Inc., which is incorporated by reference in Cisco
Systems, Inc.'s Annual Report on Form 10-K for the year ended July 31, 1999. We
also consent to the incorporation by reference of our report dated August 10,
1999 relating to the financial statement schedule, which appears in such Annual
Report on Form 10-K. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
San Jose, California
November 30, 1999
